Currently, the bank’s focus remains on the RAM sectors—Retail, Agriculture, and MSME—while corporate lending is on hold. In parallel, TMB is investing in building a stronger CASA foundation, which is essential for pricing corporate loans competitively in the future, said Salee Sukumaran Nair, MD & CEO of Tamilnad Mercantile Bank.
In Q1 of this fiscal, the RAM segment accounted for 93.1 per cent of gross advances, up from 92.07 per cent a year ago. The remaining portion of the credit portfolio—classified under the “Others” category—has shown overall negative growth. The bank clarified that this segment primarily comprises corporate credit. TMB is currently limiting its exposure to this area as it focuses on upgrading internal systems and capabilities.
It is investing significant time and resources into building the right systems and processes. On the HR and technology front, it has appointed a series of Relationship Managers (RMs) across all regions and established trade channels. Some of these RMs have already been recruited and are currently undergoing training.
“Until we have the right systems and skill sets in place, we are not actively pursuing the corporate segment. That’s one aspect. The other is yield—corporate lending yields are significantly lower. Before re-entering that space, we want to strengthen our CASA share to support margins. Once these elements are in place, we’ll consider re-entering the corporate space. For now, we will continue ramping up the RAM portfolio,” Nair explained.
He said the bank’s CASA showed a year-on-year increase of 4.51% in Q1 FY26, with the CASA share improving by 34 basis points. CASA was in negative territory last year but has now returned to positive growth. “That growth, though modest, reflects the early success of our ongoing initiatives. CASA cannot be taken for granted—it must be earned continuously,” said Nair, who will complete a year in his role next month.
The bank’s headquarters region has been witnessing increased industrial activity due to the state government’s efforts to attract investments. TMB sees a significant opportunity to drive CASA growth by targeting salary accounts and MSME-linked liabilities. The bank has introduced a Self-Funding Ratio (SFR) tracking proposal to institutionalize this approach.
“With players like VinFast entering Thoothukudi, and our onboarding onto the National Logistics Portal, we’re strategically positioned to benefit from the region’s economic growth,” he added.
Meanwhile, TMB is preparing to re-enter the corporate space through investments rather than direct loans, particularly via the non-SLR portfolio. The bank intends to maintain yield discipline, pursuing only those corporate opportunities that meet its minimum return thresholds.
For FY26, TMB is aiming for more than 10% growth in deposits and around 15% growth in advances.
The bank posted a net profit of ₹305 crore in Q1 of this fiscal, compared with ₹287 crore a year ago, despite a drop in operating profit. This 6 per cent growth was achieved after fully absorbing a government-based incentive of 41.74 per cent in the first quarter instead of amortising it over four quarters. “This decision has impacted both our operating profit and net profit,” he added.
Gross NPA decreased by 22 basis points year-on-year and stood at 1.22 per cent, while Net NPA was at 0.33 per cent.
Ends