| The Karur Vysya Bank Limited | ||
| Rating reaffirmed at 'Crisil A1+' | ||
| Rating Action | ||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||
| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the certificates of deposit of The Karur Vysya Bank Ltd (KVB).
The rating continues to reflect the bank’s comfortable capitalization and stable retail resource profile, and improving asset quality, and sustenance of healthy profitability. These strengths are partially offset by the small scale of operations, albeit growing, and exposure to geographical concentration risk. |
Analytical Approach To arrive at the ratings, Crisil Ratings has considered the standalone business and financial risk profiles of KVB. |
Key Rating Drivers - Strengths Comfortable capitalisation and stable resource profile KVB has comfortable capitalisation metrics as indicated by common equity tier I (CET-I) capital adequacy ratio (CAR) of 16.3% (8.3% higher than the regulatory requirement), and overall CAR of 17.36% as on June 30, 2025. The networth to net non-performing assets (NPAs) coverage ratio improved to 73.2 times as on June 30, 2025, from 71.9 in fiscal 2025 and 33.7 times in fiscal 2024.
The bank's overall deposits increased by ~18% on an annualized basis, reaching Rs 1,06,650 crore as on June 30, 2025, up from Rs 1,02,078 crore as on March 31, 2025. The bank has cultivated strong relationships with depositors in semi-urban and rural areas of Tamil Nadu, Andhra Pradesh, and Telangana, which together account for approximately ~72% of the total deposits as of June 30, 2025.
The current and savings account (CASA) ratio has inched up marginally to 27.48% as on June 30, 2025, as compared to 27.27% as on March 31, 2025, although it has declined from 30% as on March 31, 2024. Nevertheless, the bank has a stable term deposit base, with retail deposits (the deposits below Rs 1 crore) constituting ~69% of its term deposit base as of June 30, 2025. While the high proportion of retail deposits enhances the stability of the bank’s resource profile, maintaining the CASA deposit ratio will be crucial in further strengthening the overall deposit profile of KVB.
Improving asset quality and sustenance of healthy profitability The asset quality has been on an improving trend with GNPA and NNPA at 0.7% and 0.2% respectively, as on June 30, 2025, as compared to 0.8% and 0.2% as on March 31, 2025 (1.4% and 0.4% as on March 31, 2024). This improvement largely stems on account of healthy recoveries along with reduction in the share of corporate loan book over the last few years.
The corporate book as a % of total advances has reduced from ~19% in fiscal 2024 to ~14% in fiscal 2025 as well as in the first quarter of fiscal 2026. Moreover, the NPA of corporate segment stood at 0.7% as on June 30, 2025 as against 0.8% as on March 31, 2025 and 0.9% as on March 31, 2024.
The overall credit cost on average assets has improved to 0.4% (annualised) in the first quarter of fiscal 2026, from 0.6% in fiscal 2025 and 0.7% in fiscal 2024. Moreover, the bank has also been maintaining healthy provisioning coverage ratio (PCR) of 71.0% as on June 30, 2025. The net interest margin (NIM) (as a % of average assets) has also remained healthy at 3.5% (annualized) in the first quarter of fiscal 2026, although it has declined from 3.8% for fiscal 2025, owing to increase in cost of deposits. The operating expenses (as a % of average assets), however, decreased to 2.4% in first quarter of fiscal 2026 as against 2.6% in fiscal 2025 and 2.7% in fiscal 2024. As a result, the return on assets (RoA) has improved marginally to 1.7% in fiscal 2025 as compared to 1.6% in fiscal 2024 and stood stable at 1.7% (annualized) in the first quarter of fiscal 2026.
Going forward, the return on assets may see some decline owing to compression in net interest margin, however will likely sustain at healthier levels. Any significant impact on the earnings profile due to any unanticipated slippages and, therefore, credit costs remain a key monitorable. |
Key Rating Drivers - Weaknesses Small, albeit growing, scale of operations with geographical concentration The banks’ gross advances and deposits grew by 13.5% and 15% in fiscal 2025 to Rs 84,491 crore and Rs 1,02,078 crore respectively as on March 31, 2025. Further the advances and deposits grew to Rs 89,374 crores and Rs 1,06,650 respectively as on June 30, 2025. However, the bank has a small share of around 0.5% of deposits and advances in the overall Indian banking system as on June 30, 2025. The bank also has limited reach, with 888 branches and 2,226 automated teller machines (ATMs) and cash recyclers as on June 30, 2025.
Moreover, operations are concentrated in South India, particularly Tamil Nadu. As on June 30, 2025, about 42% of advances and 55% of deposits were from Tamil Nadu. The financial risk profile therefore remains susceptible to adverse changes in the economic and business environment in the region because of the small scale and high regional concentration in operations. |
Liquidity: Strong KVB’s liquidity coverage ratio (LCR) stood at 135.12% as on June 30, 2025. The bank maintained excess statutory liquidity ratio (SLR) of 6.26% as on June 30, 2025. Liquidity also benefits from access to systemic sources of funds, such as the liquidity adjustment facility from the Reserve Bank of India and access to the call money market. |
Rating sensitivity factors Downward factors
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About the bank KVB, set up in 1916, is a private sector bank headquartered in Karur, Tamil Nadu. It has a network of 888 branches, primarily in south India, and 2,226 ATMs and cash recyclers as on June30, 2025. It provides both commercial and consumer banking services. Gross advances and deposits stood at Rs 89,374 crore and Rs 1,06,650crore, respectively, as on June 30, 2025. In the first quarter of fiscal 2026, net profit was Rs 521 crore on total income (net of interest expenses) of Rs 1,527 crore, against Rs 459 crore on total income of Rs 1,413 crore, respectively, in the corresponding period of the previous fiscal. |
Key Financial Indicators
*annualised |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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