Moreover, the bank created a well-diversified portfolio spanning various sectors such as agriculture, MSME and trading, mortgage lending and other products. This diversification not only mitigates risks but also optimises resources. “We have granular balance sheet on both sides. On the asset side, our lending is secured more than 99 per cent,” affirms Munish Jain, chief operating officer & chief financial officer, CSFB. “On the liability side, we are a focussed retail liability franchise with deposits constituting more than 89 per cent of our total liability and 98 per cent of this is retail deposits. Our target segment is clear: ours is a middle-income-group-focussed bank. Our ethos revolve around a simple principle: Our liabilities are our biggest assets. The trust placed in us by our depositors is invaluable”.

Reflecting the target market, the average ticket size for its loan book agricultural loans is Rs12.35 lakh; for MSME’s trading loans, it is Rs18.16 lakh and, for mortgage lending, it is Rs11.61 lakh. CSFB has made strategic forays into three major asset segments – MSME trading, housing and agriculture. It empowers the cash flow needs of MSME traders, facilitating the automation of their working processes and providing credit in its sweet spot range of Rs10-200 lakh.

In the mortgage market, CSFB’s focus is bifurcated between housing and loans against property (LAP). Catering primarily to the middle-income group, the bank provides housing loans for both the purchase and construction of homes, and LAP to self-employed individuals. The bank extends its services to the agricultural sector, offering loans specifically tailored for farmers’ needs of Rs5-25 lakh. 

No surprise then that the bank has grown at a sound clip. CSFB’s advances have increased at a fast clip to Rs5,507 crore in 2022-23 from R3,326 crore in 2019-20. Deposit growth, on the other side of the balance sheet divide, has been equally strong, rising to Rs6,561 crore in 2022-23 from Rs4,447 crore in 2019-20.

Financial performance

While the bank has expanded operations to newer and contiguous regions, resulting in more customers and better operational and business metrics, the expansion led to consistent growth in key financial parameters such as total advances, deposit growth and profitability. “We have been able to sustain a steady growth trajectory while improving operational efficiency”, informs Jain, adding that for instance, “our operating profit has registered a 55 per cent CAGR from 2019-20 to 2022-23”. 

Another highlight of its financial performance is its efficiency ratios. Its returns on assets and equity were respectively 1.22 per cent and 16.62 per cent for 2022-23, increasing substantially from 0.92 per cent and 12.95 per cent in 2021-22.

Besides, its legacy of two decades has influenced the evolution of its credit assessment processes and lending policies. There is a long-standing emphasis on ensuring superior asset quality, which is a testament to the six strategic pillars the bank adheres to. This is reflected in its non-performing assets (NPA) performance.

With a current account to savings account (CASA) ratio of 41.9 per cent, CSFB stands toe-to-toe with universal banks in terms of its deposit base. Moreover, its record of maintaining above 90 per cent renewals even during the pandemic and offering the lowest interest rates on term deposits among SFBs sets it apart. The bank’s performance in terms of cost of deposit can be compared to universal banks at 4.9 per cent.

Led by an experienced leadership team and backed by reputable shareholders, the bank is poised to continue its growth trajectory while maintaining strong corporate governance.

A pivotal part of its growth strategy lies in its loan book’s organic growth, concentrating on secured lending. “Growth is never by mere chance; it is the result of forces working together. And one of our forces is geographical expansion, deepening our roots in existing markets and venturing into new territories,” says Samra.

According to CRISIL’s Research Report, there is significant scope for expansion, especially in the northern, eastern, north-eastern and central regions for both credit and deposits. The bank intends to take up this challenge. Its strategy involves deeper penetration at its home state of Punjab and expansion to adjacent Haryana, Rajasthan and the National Capital Region (NCR). With deposit penetration in the northern region maintaining a steady 21 per cent share of overall banking deposits, the bank sees immense opportunities for further expansion here.

As part of its expansion strategy, CSFB also plans to form business partnerships in states where its presence is currently not as robust. “Through strategic partnerships, we aim to understand new markets, mitigate associated risks, and diversify our offerings and geographical presence,” says CFO Jain. The bank plans to open targeted branches in urban/ metro areas as part of this strategy.

“The significant growth of our advances underscores our dedication to providing our customers with top-notch financial solutions. Our intent as a primary banker is to offer products to our customers with a special focus on rural and semi-urban areas where believe there is a huge opportunity,” notes Jain.

In addition, the bank has its sights set on organic expansion of its loan book with a clear focus on secured lending. In an ever-dynamic and competitive financial-services landscape, it has carved out a distinct space for itself by focusing on creditworthy segments.

The bank is also raising its bar in improving its financial metrics. “We aim to strengthen our operational profitability metrics chiefly through enhancing our credit penetration,” says Jain. “This move is key to boosting our Net Interest Margin (NIM). Simultaneously, we have a strong focus on optimising our operating costs. As we mature in our operations, the proportion of mature branches will rise, assisting us in reducing costs more effectively. This optimisation is already yielding results, with our cost-to-income ratio showing a steady decline. We aim to augment income from non-traditional banking products (NTP), and remain committed to continually enhancing our product and service offerings”.

With a strong balance sheet and capital ratios, the bank’s financials should easily be able to support its growth in advances. CSFB’s capital adequacy ratio stands at 18.87 per cent in 2022-23. Its net non-performing assets are also below market averages, at 1.36 per cent for 2022-23.

“We are committed to accelerating our growth momentum, while staying true to our mission of helping customers prosper,” acknowledges Samra. “The path ahead is full of opportunities. And, we are well-equipped for growth”.