**Canara Bank to Sell Excess Priority Sector Loans Amid Margin Pressure**
Canara Bank, a state-owned financial institution, is set to sell its surplus priority sector loans in the current quarter to mitigate the impact of declining interest rates on its profit margins. In the quarter ending June 2025, the bank generated ₹1,248 crore in commission from the sale of priority sector loans. Despite this sale, the bank’s total priority sector lending remains at 45.63%, exceeding the regulatory requirement of 40% of total loans, as stated by Canara Bank’s Managing Director and CEO, K. Satyanarayana Raju.
Raju highlighted that the bank has a buffer in its priority sector lending and noted a strong market demand, indicating that the bank may capitalize on the sale of Priority Sector Lending Certificates (PSLC) in the ongoing quarter. Addressing the effects of interest rate moderation, Raju expressed concerns about the Net Interest Margin (NIM) for the current financial year, suggesting that achieving the guidance of 2.75% may be challenging due to a 100 basis point rate cut by the Reserve Bank of India (RBI) this year, with expectations of another cut as inflation has dipped below 3%.
The timing of any further rate cuts, whether in August or October, remains uncertain, and Raju anticipates continued pressure on margins in the current quarter, with a potential slight improvement expected in the third and fourth quarters. Additionally, he mentioned that the planned divestment of stakes in two subsidiaries would provide some financial relief throughout the year. The bank aims to list one subsidiary in the current quarter and another in the following quarter, contingent on regulatory approvals.
Canara Bank has initiated the process for listing its asset management joint venture, Canara Robeco AMC, planning to sell a 13% stake through an initial public offering (IPO). Furthermore, the bank is also preparing for the listing of its life insurance joint venture, Canara HSBC Life Insurance Company, with plans to dilute a 14.5% stake while maintaining majority ownership in both entities to continue generating significant fee income from their products.
In the first quarter ending June 2025, Canara Bank reported a 22% increase in standalone net profit, reaching ₹4,752 crore compared to ₹3,905 crore in the same quarter of the previous fiscal year. The total income rose to ₹38,063 crore from ₹34,020 crore in the corresponding quarter of FY25, with interest income increasing to ₹31,003 crore from ₹28,701 crore in the previous year.
**FAQ**
**What is Canara Bank’s strategy to address margin pressure?**
Canara Bank plans to sell excess priority sector loans and utilize the proceeds from the sale of Priority Sector Lending Certificates to alleviate margin pressure caused by declining interest rates.
