The Hindu Business Line : Low CD ratio pulls down Karnataka Bank’s net profit

Mangalore, Oct. 25 Low credit-deposit (CD) ratio pulled down the net profit of Karnataka Bank during the second quarter of the current financial year.

The bank recorded a net profit of Rs 16.35 crore in the second quarter of 2009-10 as against Rs 73.60 crore in the corresponding period of the previous fiscal, registering a decline of 77.78 per cent.

The bank will improve the CD ratio in the coming two quarters, Mr P. Jayarama Bhat, Managing Director and Chief Executive Officer, told Business Line.

The CD ratio stood at 57.8 per cent (against 62.6 per cent last year). This made an impact on the net interest income which stood at Rs 55.42 crore (Rs 120.21 crore).

Mr Bhat said: “We have sanctions to the extent of around Rs 1,600 crore pending to be released. My aim is to increase the CD ratio to 65 per cent by March-end.”

The deposits of the bank stood at Rs 21,582 crore (Rs 18,842 crore) and advances at Rs 12,847 crore (Rs 11,933 crore).

CASA deposit of the bank increased to 22.52 per cent compared with 19.95 per cent at the end of March. “We are sure to take this to 25 per cent by March-end. That will reduce the cost of deposit also,” he said.

Stating that the deposits are getting re-priced now, he said 25 per cent of term deposits will be get re-priced by March-end and another 25 per cent by September 2010. “Within another year, 50 per cent of the deposits will get re-priced. It will have a substantial impact as far as interest paid is concerned. Increase in CASA will make our cost of deposits substantially low. By March end, the position will improve,” he said.

On bulk deposits, Mr Bhat said that bulk deposit ratio is 1-1.5 per cent now. The bank has reduced it substantially in the last one year.

The capital adequacy ratio stood at 12.93 per cent.

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