Canara Bank leans on higher-yield retail, agri and MSME loans to cushion rate-cut impact

 MD, CEO, and Executive Director Hardeep Singh Ahluwalia 

Canara Bank is strategically adjusting its loan portfolio to safeguard profitability amid faster repricing triggered by interest rate reductions. The institution is increasingly prioritizing high-margin retail, agriculture, and MSME lending while maintaining selective engagement in corporate credit.

With approximately half its loan book tied to repo rate fluctuations, Managing Director and CEO Hardeep Singh Ahluwalia emphasizes that accelerated Retail-Agriculture-MSME (RAM) growth, stricter pricing controls, and enhanced asset quality will be crucial for maintaining margins during the current easing rate environment.

The bank reported a 25.6% year-over-year increase in net profit at ₹5,155 crore for Q3 FY26. Quarterly net interest income saw modest growth of 1.1% reaching ₹9,252 crore, while net interest margins settled at 2.50%. Management anticipates margins stabilizing between 2.45-2.50% in subsequent quarters.

Asset quality showed improvement with slippages contained at 0.64% during the period, representing ₹1,857 crore in fresh NPAs predominantly from agriculture and MSME segments.

The bank substantially expanded its RAM portfolio by 18.7% year-over-year to ₹7,04,041 crore, now constituting 59% of total advances compared to 57% the previous year. This strategic portfolio shift aims to mitigate margin compression as loan repricing outpaces deposit rate adjustments.

Corporate Lending Strategy

While RAM segments drive growth, the bank maintains selective corporate exposure with approximately ₹20,000 crore in sanctioned corporate loans pending disbursement. Corporate credit expansion continues at measured levels, with priority given to return metrics rather than volume growth.

The institution maintained deposit stability despite sector-wide competition, reporting a 30% CASA ratio with ₹4,12,359 crore in low-cost deposits. Savings deposits grew 8.51% annually, while individual savings accounts expanded over 10%. Retail term deposits increased nearly 10%, reflecting stronger retail customer engagement.

Ahluwalia noted that reinforced balance sheet strength and asset quality improvements provide flexibility to navigate interest rate shifts. With provision coverage exceeding 94% and strategic focus on portfolio mix optimization, the bank aims to sustain profitable growth despite margin pressures.

January 30, 2026