Tamilnad Mercantile Bank Sets Digital Transformation Goals for FY26 Completion

Tamilnad Mercantile Bank aims to complete its digital transformation program by FY26, with a focus on enhancing digital banking experiences and revamping internet banking. The bank has invested ₹150 crore in technology upgrades, including Oracle software and paperless automation of approvals. Net profit grew 6.27% to ₹305 crore in Q1 FY26, with total income rising to ₹1,617 crore. The bank expects to reap benefits from initiatives such as expansion of branch network, upgrading technology, and focus on MSME sector in H2 FY26.

Tamilnad Mercantile Bank (TMB) is aiming to complete its digital transformation program by FY26, with a focus on enhancing digital banking experiences and revamping its internet banking platform. The bank has invested ₹150 crore in technology upgrades, including the implementation of Oracle software and paperless automation of approvals. These investments are part of a broader strategy to improve operational efficiency and customer experience.

In the first quarter of FY26, TMB's net profit grew by 6.27% to ₹305 crore, with total income rising to ₹1,617 crore. Despite a 12% drop in operating profit to ₹412.26 crore, primarily due to the front-ending of performance-based incentives, the bank's net profit rose by 6% to ₹304.89 crore. This was achieved through lower slippages and provisioning requirements.

TMB's credit growth strategy for FY26 includes a focus on the MSME segment, with the bank aiming for a 15% overall credit growth. While agri and retail loans grew by 15% and 28%, respectively, MSME advances remained flat at ₹13,452 crore. However, the bank is regaining confidence in the MSME segment through staff training and the implementation of an automated loan management system (LMS). Additionally, the bank is focusing on trade finance and has developed a business rule engine to better assess creditworthiness and appetite.

On the deposit side, TMB's total deposits grew by 9.38% in Q1, with CASA deposits growing by 4.51% to ₹14,411 crore. The bank attributes this growth to initiatives such as the creation of a transaction business group and an elite services group targeting high-value depositors. The bank is also revamping its internet banking platform and rolling out a customer experience package with 79 services.

To ease the pressure on net interest margin (NIM), TMB has repriced its MSME loans and split its gold loan portfolio into consumption and income-generating loans. The bank expects NIMs to rise and close in the 3.85-3.95% range, with yields also coming in slightly higher than current levels.

In the second half of FY26, TMB plans to reap benefits from the expansion of its branch network, upgrading technology, and focusing on the MSME sector. These initiatives are expected to support the bank's overall growth strategy.

References:
[1] https://www.financialexpress.com/business/banking-finance-achieving-15-credit-growth-should-not-be-a-challenge-3929538/