South Indian Bank reported a 10% growth in gross advances, standing at Rs 88,447 crore at the end of FY25. In contrast, the bank’s deposits grew at a slower pace of 5.5%, reaching Rs 1.08 lakh crore. The bank’s current and savings account (CASA) deposits to total deposits ratio declined marginally to 31.37% from 32.8% a year ago, although it improved from 31.15% in December 2024.
The bank made a conscious decision to allow some of its bulk deposits to mature, a move that tends to be more costly. According to Managing Director PR Seshadri, “We consciously allowed some of our wealth deposits to get paid off because they tend to be (raised at) higher cost.”
This strategy is likely aimed at reducing the bank’s dependency on expensive deposits and increasing its profitability. By shifting its focus to retail banking and CASA deposits, South Indian Bank can potentially lower its funding costs and improve its bottom line.
The bank’s decision to taper its bulk deposits is a trend expected to continue in the Indian banking sector. With the Reserve Bank of India expected to tighten monetary policy and reduce liquidity, banks may need to reassess their deposit strategies to maintain profitability.
South Indian Bank’s performance highlights the challenges faced by the Indian banking sector, particularly in managing deposit growth and maintaining profitability. As the sector navigates these challenges, banks like South Indian Bank will need to adopt innovative strategies to stay competitive and profitable amidst a rapidly evolving market.