“This year, time deposits grew 20%, but such growth is unsustainable due to cost pressures. So, we expect deposit growth around 13%,” said B Ramesh Babu, MD & CEO of the bank, in an interview to CNBC-TV18.
On the advances front, KVB is aiming for growth at industry rate plus 2%, supported by strong momentum in its retail, agriculture, and MSME (RAM) verticals. “We grew 20% this year, and that momentum is hard to stop,” Babu said.
Even as the Reserve Bank is expected to lower interest rates further, the bank is focused on defending margins. With 52% of the loan book linked to external benchmarks (EBLR), Babu acknowledged that net interest margins (NIMs) could face pressure. From a high of 4.05%, NIMs could drop to 3.55% in a rate-cut scenario. However, KVB is targeting to maintain NIMs around 3.75%, supported by cost control and higher non-interest income.
Despite these pressures, the bank is confident of sustaining a healthy return profile. It has guided for a return on assets (RoA) between 1.55% and 1.65% in FY26, after clocking 1.73% in FY25. “There are many moving parts, but with the levers we have in place, we believe we can maintain that range,” Babu said.
KVB has also seen success in reshaping its loan book. The bank has reduced its corporate loan share from 40% to 14% over the last two years, with 86% of the portfolio now in retail. Within retail, commercial loans under ₹25 crore account for 36% of the book, offering better margins and more granular risk management.
To support deposit growth, the bank has launched its first-ever liability acquisition channel, hiring experienced talent and setting up dedicated verticals for NRI, salary, corporate, and institutional clients. A branch-led model to deepen existing relationships is also starting to bear fruit.
Cost of funds peaked at 5.76% at the end of FY25, but the bank expects this to decline gradually over the next six months. “We cut our time deposit rates last week and will continue to do so, though with a lag effect,” Babu said, adding that cost of deposits should stabilise as the rate cycle softens.
KVB reported a 12.6% year-on-year rise in Q4FY25 net profit at ₹513.4 crore, with net interest income up 9.1% at ₹1,089.2 crore. Asset quality remained strong, with gross NPAs at 0.76% and net NPAs stable at 0.20%.
