Billionaire Prem Watsa-backed CSB Bank, with a 53% share of gold loans in its total portfolio, is cautious now on lending against gold jewellery after the West Asia conflict, which led to a sharp price correction in the yellow metal. The bank expects gold loan expansion to slow from the 53% growth seen in FY26.The retail-heavy lender is, meanwhile, seeking to focus on wholesale and small business loans, managing director Pralay Mondal tells Atmadip Ray. The Kerala-based traditional lender, having completed its digital transformation, now plans to harness its technology spine to spread its offerings bouquet. Edited excerpts:
Would geopolitics slow credit expansion?
It's too early to say that. We don't even know what is happening or how long this will continue. But given the situation, I think everybody will be a little more cautious in certain sectors till a clarity emerges. Especially where there is export related stuff or supply chain concerns. Having said that, there are other areas where things can grow. Especially areas which are doing well. Credit growth last year ended with around 16%. I think it will remain in that kind of a range-13% to 16% or something like that. It's very difficult to say. But small banks like us will remain cautious.
CSB recorded 26% advances growth in FY26. What is your guidance for this fiscal?
Being a listed bank, we can't really give exact guidance. But I think we will be in the same range because we are on a small base. So we will be somewhere between 25% and 30%. If it was a very optimistic scenario, I would have said on the higher side of that. But we are not so sure what's happening globally. A lot will depend on the ability to garner deposits. That is something which will determine how much credit growth will happen.
Do you expect a moderation in the gold loans business this year given the directional volatility in gold prices?
We don't know where the gold price will go. The global uncertainties do impact gold loan prices. So we will remain cautious... We are also very cautious in terms of loan-to-value (LTV) ratio, you know. What happens is, when prices are high, people play more aggressive LTV games, with expectation that momentum will continue. And when the price is trending downwards, people shift to more conservative LTV. We also do the same thing. Though it should be the other way around if there is a long term perspective, and this happens as the tenor is low and hence the trend matters. But eventually when prices go up, LTV will come down which could be the case in the current global uncertainty but not necessarily one can time the market. Hence, we remain conservative on LTV when prices have dropped.There is another reason why gold growth will slow this year. Let me explain. The RBI had come out with a policy last year by which the re-pledger gold loan had to be paused and rundown, and eventually at the end of tenure of that portfolio it will completely run down. So we ran off almost ₹1,700 crore of this re-pledger book, which was classified as working capital under retail loan. That book was replaced by retail gold loans and both had gold as collateral. Effectively, overall loan book mix in the bank, which had gold as collateral was below 50% and not 53% as reported for above explained reasons. So effectively our retail loan book had come down by an equivalent amount, thus showing higher equivalent growth under gold loan. That technical correction is a one time activity and will not happen this year as the base has changed now. So naturally, even if nothing else changes, gold loan growth will come down.
Will the gold price correction impact your portfolio quality?
Our LTV typically remains between 60% and 65%. And we want to keep that cushion. So if gold prices come down further by 10%, we should be fine with the portfolio quality. Besides, a large portion of our gold loan book is classified under agri category. The regulatory norm of 75% LTV is not applicable for agri-gold loans.
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It's too early to say that. We don't even know what is happening or how long this will continue. But given the situation, I think everybody will be a little more cautious in certain sectors till a clarity emerges. Especially where there is export related stuff or supply chain concerns. Having said that, there are other areas where things can grow. Especially areas which are doing well. Credit growth last year ended with around 16%. I think it will remain in that kind of a range-13% to 16% or something like that. It's very difficult to say. But small banks like us will remain cautious.
CSB recorded 26% advances growth in FY26. What is your guidance for this fiscal?
Being a listed bank, we can't really give exact guidance. But I think we will be in the same range because we are on a small base. So we will be somewhere between 25% and 30%. If it was a very optimistic scenario, I would have said on the higher side of that. But we are not so sure what's happening globally. A lot will depend on the ability to garner deposits. That is something which will determine how much credit growth will happen.
Do you expect a moderation in the gold loans business this year given the directional volatility in gold prices?
We don't know where the gold price will go. The global uncertainties do impact gold loan prices. So we will remain cautious... We are also very cautious in terms of loan-to-value (LTV) ratio, you know. What happens is, when prices are high, people play more aggressive LTV games, with expectation that momentum will continue. And when the price is trending downwards, people shift to more conservative LTV. We also do the same thing. Though it should be the other way around if there is a long term perspective, and this happens as the tenor is low and hence the trend matters. But eventually when prices go up, LTV will come down which could be the case in the current global uncertainty but not necessarily one can time the market. Hence, we remain conservative on LTV when prices have dropped.There is another reason why gold growth will slow this year. Let me explain. The RBI had come out with a policy last year by which the re-pledger gold loan had to be paused and rundown, and eventually at the end of tenure of that portfolio it will completely run down. So we ran off almost ₹1,700 crore of this re-pledger book, which was classified as working capital under retail loan. That book was replaced by retail gold loans and both had gold as collateral. Effectively, overall loan book mix in the bank, which had gold as collateral was below 50% and not 53% as reported for above explained reasons. So effectively our retail loan book had come down by an equivalent amount, thus showing higher equivalent growth under gold loan. That technical correction is a one time activity and will not happen this year as the base has changed now. So naturally, even if nothing else changes, gold loan growth will come down.
Will the gold price correction impact your portfolio quality?
Our LTV typically remains between 60% and 65%. And we want to keep that cushion. So if gold prices come down further by 10%, we should be fine with the portfolio quality. Besides, a large portion of our gold loan book is classified under agri category. The regulatory norm of 75% LTV is not applicable for agri-gold loans.
