Karur Vysya Bank (KVB) has said that the bank is on a transformation path from branch-led operations to multichannel-driven operations as the old private sector bank seeks to sustain its growth momentum in total business and profitability.

The bank, which reported a record profit of ₹1,106 crore and strong numbers across several parameters for FY23, expects margin pressures in the next 2-3 quarters as its cost of deposits may go up by 40–50 bps. However, it hopes to sustain its performance. Also, it is not required to raise any capital, though it may review the decision a year later.

B Ramesh Babu, MD and CEO of KVB, discussed the bank’s transformation journey after opening its 800th branch and first digital banking unit in Chennai. KVB is planning 35 new branches during this fiscal.

He said multiple channels and new units have been created to shore up the deposit base and grow the advances.

Babu said more than 77 per cent of its deposits are below ₹1 crore, indicating the granularity of its deposit structure. The top 20 depositors make up just less than 5 per cent of its total deposits “Our dependence on the bigger deposits is not there, and that is the strength of the bank,” he added.

Multiple channels

All these years, these deposits were mostly mobilised by branches. With the growing need to serve existing customers and bring in more, KVB has created multiple new channels. It has created a retail liability sales force, which will have “feet on the street” (FOS) staff. “We have taken people from various banks. We have already hired 500 people in the last 3 months and will increase the number progressively, said Babu.

KVB plans to hire 1,300 FOS over the next 12–18 months. They are entrusted with the task of meeting people and garnering new accounts, mostly current and savings accounts, corporate salary accounts, government businesses, third-party products, etc.

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The objective is to grow the share of CASA to 40 per cent, over 3 years, up from 33 per cent now. “An increase in CASA share will lead to a reduction in our cost of deposits, and we will be able to offer better rates for our borrowers,” he added.

On the advances front, KVB has already taken steps to bring in granularity to manage the book in case of sudden stress. As a result of its initiatives, it has brought down the corporate loan book to 21 per cent now from about 40 per cent earlier. It has also broken down this portfolio into corporate and commercial, wherein above ₹25 crore loans will come under corporate and sub-₹25 crore advances will be under the commercial category, which is focusing mostly on MSME and trade segments. Now, the commercial portfolio accounts for 32–33 per cent of the book.

Since the bank is keen on targetting MSMEs and trading units, it has created the KVB Smart unit, under which it has relationship managers to constantly engage with prospective customers who may require loans in the range of ₹5–10 crore. It has also set up business banking units and is planning a business correspondent (BC) model before opening branches.

It plans to hire 5,000 BCs by December this year. These are like mini branches; once the transaction levels grow, we may open a branch there. Overall, we feel a dedicated channel will drive better growth for commercial loans,” said Babu.