Karur Vysya Bank aims for 18-20% credit growth by fiscal year 2027 by expanding its retail, agriculture, and MSME business. To manage risk, the bank is capping high-value corporate loans at 20% of its portfolio and reducing exposure to non-banking financial companies.
Karur Vysya Bank has outlined a growth strategy aimed at increasing its total credit book by 18-20% by fiscal year 2027. Following a 16% growth in the previous fiscal year, the bank is building on its existing infrastructure and current operational strengths to meet this new, more aggressive target.
Focusing on the Core RAM Segment
The backbone of this expansion is the bank’s traditional strength in the RAM segment, which stands for Retail, Agriculture, and MSME (Micro, Small, and Medium Enterprises) lending. This portfolio currently makes up 86% of the bank's total advances. By concentrating on this area, the bank aims to maintain a stable, diversified lending base rather than chasing rapid, high-risk growth in volatile areas.
Defensive Corporate Strategy
While KVB intends to grow its corporate loan book, it is adopting a cautious approach toward high-value, large-ticket loans. The bank has finalized a policy to cap corporate exposure at approximately 20% of its total loan portfolio. This is a deliberate move to diversify income and reduce reliance on large consortium deals that often carry higher credit risks.
Additionally, the bank is actively scaling back its lending to non-banking financial companies (NBFCs). Exposure to this sector has been reduced from over 8% to roughly 4%, reflecting a strategy to prioritize direct lending over wholesale funding to other financial institutions.
Gold Loans and Funding Dynamics
Gold loans remain a key growth engine for the bank, serving as a low-risk, collateralized product that helps support loan book expansion. On the funding side, the bank faces the broader industry challenge of keeping deposit costs manageable as customers increasingly move savings into higher-interest term deposits. With the current cost of deposits at approximately 5.49%, the management is relying on stable liquidity and FCNR(B) inflows to maintain its funding position.
Risks and Monitorables
Investors should note that while this strategy focuses on lower-risk segments, it is not without challenges. Asset quality in agriculture and MSME portfolios remains sensitive to weather conditions and rural economic shifts, which the bank is monitoring through strict loan-to-value ratios. Additionally, the broader banking sector currently faces pressure from high credit demand coupled with intense competition to mobilize deposits, which can squeeze margins. The key monitorable for the coming quarters will be whether the bank can continue to grow its loan book while keeping deposit costs stable and maintaining healthy asset quality in its core segments.