Canara Bank Projects Stable Margins, Strong RAM-Led Loan Growth for 2026

Canara Bank is poised to maintain stable net interest margins (NIMs) and sustain strong credit growth, driven by its robust performance in the retail, agriculture, and MSME (RAM) segments. In a recent statement, MD and CEO Hardeep Singh Ahluwalia outlined the public sector lender's strategy, emphasizing disciplined pricing and a continued focus on high-growth areas. The bank's positive outlook is supported by its recent financial performance, which has seen its market capitalization reach approximately ₹1,33,973.52 crore and its share price gain nearly 63% over the past year.

RAM Sector Fuels Credit Expansion

The primary driver of Canara Bank's growth has been its RAM portfolio. The bank has surpassed its own guidance of 10-11% overall credit growth, achieving a rate of 13.59%. This expansion is overwhelmingly powered by the RAM segment, which itself grew by an impressive 18.70%. This strategic focus has led to a compositional shift in the bank's loan book, with the share of RAM credit increasing from 57% to 59%.

Within the RAM portfolio, the performance is broad-based and strong:

• Retail Loans: This segment has seen exceptional growth of 31.37%.
• Housing Loans: A key component of the retail book, housing loans have expanded by over 17%.
• Gold Loans: The gold loan portfolio has recorded a significant 30% increase.
• MSME Loans: Lending to micro, small, and medium enterprises has also grown at a healthy rate of 13.74%.

This performance indicates strong traction across all key non-corporate segments, which typically offer better spreads and lower risk concentration.

Outlook on Net Interest Margins

Despite competitive intensity in the sector, Canara Bank's management expects net interest margins to remain stable. CEO Hardeep Singh Ahluwalia projects that NIMs will likely stay within the 2.45% to 2.50% range in the near term, provided there are no further policy rate cuts from the central bank. This stability is anticipated even as the bank navigates the repricing of its deposits. According to the management, about 17% of the bank's bulk deposits are yet to be repriced, which remains a key factor influencing the margin trajectory. The bank has absorbed margin pressures from previous rate cuts, where a significant portion of its repo-linked loan book was repriced downwards faster than its term deposits.

A Cautious and Disciplined Corporate Lending Strategy

While the RAM sector is the primary growth engine, Canara Bank maintains a cautious and price-conscious approach to corporate lending. The growth in the corporate loan book has been more subdued, around 7-10%, reflecting the bank's strategy to avoid taking on exposures at the cost of profitability. Management has repeatedly emphasized being "mindful of the pricing" in the corporate segment. The long-term strategic goal is to achieve a 60:40 loan composition between the RAM and corporate segments, further de-risking the balance sheet and improving overall profitability. The bank continues to see a healthy pipeline of corporate proposals but will only pursue opportunities that meet its pricing criteria.

Gold Loan Portfolio: A Low-Risk Growth Avenue

The bank's gold loan portfolio has emerged as a significant contributor to its growth and stability. The total portfolio stands at approximately ₹2.21 lakh crore. This is divided into ₹1.48 lakh crore for agricultural purposes and about ₹73,000 crore for retail needs. CEO Ahluwalia highlighted the dual advantages of this portfolio. Firstly, it has minimal slippages and very low Non-Performing Assets (NPAs), making it a secure asset class. Secondly, the retail portion of gold loans can be used to generate fee income through Priority Sector Lending Certificates (PSLC), adding another revenue stream.

Financial Health and Key Performance Indicators

Canara Bank's focus on profitable growth is reflected in its key financial metrics. The bank's Return on Assets (ROA) has improved and is currently stable at 1.13%, a level the management expects to maintain. This indicates efficient use of assets to generate earnings.

Future Outlook and Conclusion

Looking ahead, Canara Bank is confident of carrying its growth momentum into the final quarter of FY26 and beyond. The management expects the strong performance in RAM lending, coupled with improving operational efficiency and stable return ratios, to continue supporting its earnings. The healthy pipeline of loan proposals and a continued focus on disciplined pricing are expected to ensure that asset growth remains robust.

In conclusion, Canara Bank's strategy of prioritizing the high-growth, better-yielding RAM sector while maintaining a cautious stance on corporate lending appears to be delivering positive results. With stable margins, strong asset quality, and consistent growth, the bank is well-positioned to navigate the competitive landscape and create value for its stakeholders.