Karnataka Bank shifts focus to RAM growth, aims for higher yields

Karnataka Bank reported a Q2 FY '26 Profit After Tax (PAT) of INR319.12 crores, a 9.1% quarter-on-quarter increase from Q1 FY '26. However, this was a year-on-year decrease from Q2 FY '25. Gross advances stood at INR73,644 crores as of September 30, 2025, a slight degrowth of 0.8% quarter-on-quarter. The bank continues to prioritize its RAM segments (Retail, Agri, and MSME), which saw a net book accretion of INR392 crores quarter-on-quarter and a 4% year-on-year growth in Q2 FY '26.

The bank's strategy involves replacing lower-yielding IBPC (Interbank Participation Certificate) book with higher-yielding direct loans, having replaced approximately INR1,455 crores of IBPC advances in Q2. Aggregate deposits were INR1,02,817 crores as of September 2025, with CASA deposits increasing 0.15% quarter-on-quarter to 31.01% of total deposits. Net Interest Income (NII) for Q2 FY '26 was INR728 crores, a 3.6% quarter-on-quarter degrowth, impacted by repo rate reductions.

Gross Non-Performing Assets (NPA) improved to 3.33% from 3.46% quarter-on-quarter, and Net NPA improved to 1.35% from 1.44%. The Provision Coverage Ratio (PCR), excluding technical written-offs, reached 60.22%. The bank aims to improve its CD ratio to 80% and achieve a Net Interest Margin (NIM) of over 3%, with a Return on Assets (ROA) of over 1%.