Canara Bank Management Discussions

GLOBAL ECONOMY

The global economy remained volatile in FY 2022-23. The first half of the financial year witnessed multi-decade high level of inflation rates across countries due to supply chain disruptions and elevated energy prices following Russia?s invasion of Ukraine. This resulted in aggressive monetary policy tightening by global Central Banks prioritizing price stability over growth. As a spill-over, the emerging market economies were affected by trade downturn, capital outflows, heightened pressures on currency, elevated inflation, steeper rate actions and eventually a growth slowdown. Apart from these, sporadic news of resurgence of Covid-19 variants in different parts of the globe kept the global economy on the edge.

In the second half of FY 2022-23, the global economic outlook turned somewhat positive amid moderation in inflation imprints on normalisation of supply chain mechanism, easing in energy prices and strengthening demand outlook from reopening of Chinese economy. However, continued geo-political tensions, still high inflation levels and concerns over possible global slowdown due to lagged impact of monetary tightening continue to weigh on global growth outlook. Taking into consideration these prevailing global economic conditions, in April 2023, International Monetary Fund (IMF) has revised downwards the global growth projection for 2023 to 2.8% from earlier estimate of 2.9%.

INDIAN ECONOMY

Indian economy remained resilient in FY 2022-23, on the back of robust domestic demand conditions, rebound in contact-intensive services sector, revival of manufacturing and investment activities amid Government focus on capex and a resilient agricultural sector with support from synchronized fiscal& monetary policy measures. However, the slowdown in the global growth momentum had a reflection in domestic economy also and India?s real GDP growth for FY 2022-23 is estimated at 7.0% as compared to 9.1% in FY 2021-22, as per second advance estimate of national income.

Sector wise, agricultural sector remained resilient while improvement was observed in manufacturing sector and investment activities. Services sector witnessed a strong rebound in the second half of FY 2022-23 driven by pent-up demand for contact intensive activities such as tourism, retail trade, hotel, entertainment and recreation. However, growth momentum moderated in the external sector due to global headwinds.

The headline inflation eased in the later part of FY 2022-23 to 5.66% y-o-y as on March 2023 from the high of 7.79% in April 2022 on easing in food inflation and moderation in fuel & light inflation. For the year as a whole, headline inflation stood at 6.7% for FY 2022-23 and RBI has projected headline inflation at 5.2% for FY 2023-24, with risks evenly balanced amid expectation of robust Rabi food grains production and easing cost conditions.

Noting resilience of growth momentum of Indian economy along with Govt.?s focus on capex, many multinational organisations have projected Indian economy to be the fastest growing major economy in the global arena and to be a key driver of global growth in FY 2023-24. IMF has noted India to remain a relative

"bright spot" in the world economy with a growth rate of 5.9% in FY 2023-24. On the other hand, RBI has projected a growth rate of 6.5% for the domestic economy for FY 2023-24.

OUTLOOK FOR 2023-24

Growth outlook for Indian economy remains positive in FY 2023-24 supported by favourable domestic factors like resilient domestic demand conditions, easing inflationary pressures, revival of investment activities, capex-led growth driven by Production-Linked Incentive schemes and rebound in services sector along with a resilient agricultural sector. Though downside risk remains from weakening external demand, fading of pent up consumer spending and lagged impact of policy rate hikes on aggregate demand. However, the fiscal and monetary policy measures by the Government of India and RBI are expected to remain growth supportive in FY 2023-24.

From credit growth perspective, there is a positive outlook as well, in line with expected resilience of the domestic economy and favourable domestic factors. Credit growth is expected to remain in double digits amid sufficient capital buffers, improving asset quality of Banks and deleveraged corporate balance sheets.

The Bank will continue to focus on achieving greater growth in business along with profitability. On the deposits front, the Bank is giving thrust on shoring up of CASA while consciously reducing the reliance on bulk deposits. On the advances front, Bank focuses on a balanced advances portfolio with proper mix of retail, agriculture, MSME and corporate credit. Need is to focus on best-in-class customer service, be it in retail segment or in Corporate Banking. Strategic focus will also be on strengthening risk management framework with focus on compliance & proper implementation of systems and procedures.

The Bank takes adequate efforts for NPA management with ardent credit monitoring, containing fresh slippages and strengthening recovery efforts. The Bank will continue to strive for process and product improvements in view of changing customers? and industry requirements. In the coming years, Bank envisions to be the "Best Bank to Bank with" in the Banking sector, both in terms of optimum business growth and excellent customer service by leveraging technology and creating value for all stakeholders through inclusive growth.

CANARA BANK IN 2022-23

Canara Bank has recorded robust business growth in FY 2022-23 with record 86.76% y-o-y growth in net profit to 10,604 crore with major thrust on balanced growth, optimal resource mobilization, robust fee income, expanding retail assets, including agriculture, housing and other retail segments, and improving asset quality.