Canara Bank’s internal cash accruals will provide sufficient cushion in case it has to provision for infrastructure loans in line with the Reserve Bank of India’s (RBI) proposed norms for project finance, the lender’s managing director and CEO K Satyanarayana Raju said.

The state-owned lender has an overall exposure of Rs 1.10 lakh crore towards project finance. 

“Our annual net profit has grown by 37% to over Rs 14,000 crore in FY24, leaving us enough cushion to meet the additional provision requirements. However, we will need some clarifications,” Raju told analysts in a post-earnings call.

In FY24, the bank posted a net profit of Rs 14,554 crore, up 37.25% from Rs 10,604 crore a year ago.

The RBI, in its draft guidelines issued on 3 May 2024, has proposed that banks set aside a provision of 5% of the loan amount for infrastructure projects at the construction phase. At present, lenders are required to have a provision of 0.4% on project loans that are not overdue or stressed.

“There are a number of clarifications we have sought from the RBI. The draft guidelines, for instance, do not mention the floor price for the size of the project. We do not know yet whether the provisioning will be on the size of the project or on the size of the loan,” Raju said.

On the capital raising plan, Raju said the bank does not require growth capital to meet its credit and deposit expansion during the current fiscal.

The proposed guidelines are unlikely to have an impact on the bank’s margins. “We have started our internal assessment but it is just a draft circular for now and we do not see much impact on our margins and capital,” Raju said.

The Indian Banks' Association (IBA) is gathering inputs from banks and will seek clarifications from the regulator and also request for a roll back on the stringent provisions.