# Canara Bank Navigates Rising Bond Yields Amid Festive Credit Demand Bank balances potential mark-to-market provisioning risks with strong retail loan growth expectations. - **Source:** [mint - industry](https://www.livemint.com/rss/industry) - **Published:** 2026-10-20 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/021eed9b-f5aa-40d1-9219-0a964b48f0f5 ## Bond Yield Volatility Risks Rising government bond yields, climbing from 6.75% in June to 7.38%, create mark-to-market provisioning risks for Canara Bank. CEO Brajesh Kumar Singh noted that the final impact depends on market conditions at the measurement date. While treasury income declined significantly, the bank maintains that the potential impact remains small relative to its ₹30 trillion business. ## Profitability and Treasury Performance Canara Bank reported an 8.4% year-on-year net profit increase to ₹5,175 crore for the September quarter. However, treasury income dropped 68.48% to ₹499 crore, and investment sale profits fell by 87.43%. Despite these treasury headwinds, net interest income grew by 20.39%, reflecting the bank's underlying operational strength and core banking performance. ## Retail Lending Growth Strategy The bank is leveraging festive season demand to drive housing and vehicle loans. Retail portfolios grew 31.61% year-on-year, with the lender introducing processing fee waivers to compete with non-banking financial companies. Management expects this momentum to continue, supported by a calibrated underwriting approach that prioritizes profitability and maintains competitive interest rates for borrowers. ## Asset Quality and Slippages Fresh slippages remained stable at 0.15% of advances during the September quarter. In absolute terms, slippages rose to ₹1,844 crore from ₹1,781 crore in June. CEO Singh attributed this increase to small, dispersed amounts across various segments rather than concentrated stress, reinforcing the bank's claim that gross non-performing assets remain at very minimal levels. ## Strategic Funding via FCNR(B) Canara Bank successfully mobilized approximately ₹55,000 crore through foreign currency non-resident deposits. These funds provide a stable three-to-five-year funding source at costs 100 basis points below market benchmarks. Because these deposits are exempt from cash reserve and statutory liquidity ratio requirements, they offer the bank a distinct cost advantage for future deployment. ## Digital Payments and MDR Regarding the proposed merchant discount rate framework for UPI, the bank anticipates no significant decline in transaction volumes. Most transactions remain below the ₹2,000 threshold, which continues to be free. The bank maintains a focus on digital payment benefits, noting that specific categories like fuel and insurance carry separate fixed charges for processing. ## Guidance and Margin Outlook Canara Bank has retained its FY27 guidance of 11-12% growth in advances and 10-11% in total business. Currently, the bank is outperforming these targets with 17.97% growth in advances. Management expects to protect and potentially improve net interest margins, which stood at 2.55% in the September quarter, through operational efficiency and disciplined underwriting. ## Future Operational Outlook Canara Bank remains committed to balancing credit expansion with strict asset quality controls. By focusing on retail segments and utilizing cost-effective foreign currency deposits, the lender aims to mitigate macroeconomic pressures from bond yields. The bank's strategy relies on maintaining low slippages and high operational efficiency to sustain its current growth trajectory. ## Sources covering this story - https://www.livemint.com/industry/banking/canara-bank-bond-yield-mtm-risk-credit-growth-11792467036668.html — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._