Corporation Bank makes salary account attractive to compete with private banks
State-run banks are rarely aggressive, especially when it comes to wooing customers away from private sector rivals which are known for pampering corporate clients with extraordinary services. But Corporation Bank is trying to change this perception, and is taking the battle right up to the doorstep of ICICI Bank and Bank by signing with Reliance Industries for its salary account. What’s more, Essar Steel and JK Industries are next in line.
Top officials from the bank said that the move is aimed at improving the share of low cost deposits and margins. SR Bansal, chairman and managing director of Corporation Bank, said, “The bank plans to increase the low cost deposits to 25%. Therefore, we are in talks with corporates like Reliance, JK Industries and Essars to get their salary account.”
At present, the share of low cost deposits is 20% as against 40% in case of commercial banks such as State Bank of India (SBI), ICICI Bank and HDFC Bank. Low cost deposits comprise current and savings account where banks offer just 4% on savings account, and no interest on current account.
The bank, currently under pressure due to rising bad loans and poor demand for loans, aims to improve its share of low cost deposits to 25% from 20% and improve its margins by 25 basis points to 2.25% by the end of this fiscal year.
Among the various benefits that the bank plans on deposits of Rs 1 lakh is Rs 10 lakh accidental cover, Rs 50 lakh of air insurance cover and a 50% discount on lockers. Besides, the customer will have free access to airport lounge, no fee on debit and credit card, no charges on NEFT and RTGS transactions, cash withdrawal limit of Rs 1 lakh from ATM at one go, 50% waiver of processing fee on housing, auto and personal loans.
“Bank is taking various other measures to improve the margins such as reduce expenses, deploy more point of sale (PoS) machines and lower the share of high cost deposits,” said Bansal. In the last six months, the bank has doubled the PoS machines to 60501 which helped it garner attract account deposits of Rs 195 crore.
Meanwhile, the bank appointed IT company Wipro for replacing its core banking solutions (CBS) for a consideration of Rs 400 crore. So far, the bank had been operating on Cobol-based software which was developed in-house but had become outdated, according to Bansal.
The new CBS will run on Finacle software and the first rollout of 50 branches would happen in December. “On implementing CBS, the ease of doing banking with Corporation Bank will improve which in turn will enable us to attract more customers,” said Bansal.
The bank has 2375 branches and about 3000 ATMs. As on June 2015, the company had posted a net profit of Rs 204 crore for June 2015 against Rs 231 crore in June last.