Tamilnad Mercantile Bank (TMB) is strengthening its focus on secured lending, MSME financing and digital transformation as it pursues sustainable growth while maintaining one of the strongest asset quality profiles in the banking industry, according to the bank’s Managing Director and CEO Salee S Nair.
In his message to shareholders in the Annual Report 2025-26, Nair highlighted the bank’s conservative risk culture as a key pillar of its growth strategy, enabling it to expand its loan book while maintaining prudent underwriting standards and robust asset quality.
Focus on secured lending
The bank said its lending strategy continues to emphasize secured loans, with close monitoring of borrower quality and collateral coverage.
TMB’s gold loan portfolio emerged as a significant growth driver during the year, supported by favourable market conditions and disciplined loan-to-value management practices.
At the same time, the bank is intensifying its focus on the MSME segment, which it described as central to its legacy and long-term growth strategy.
Conservative risk culture
“A defining feature of our approach has been the Bank’s conservative risk culture, which continues to guide our lending strategy. We remain focused on secured lending, with careful attention to borrower quality and collateral coverage. This disciplined approach has enabled us to grow confidently while maintaining one of the strongest asset quality profiles in the industry,” said Nair.
The bank said improved systems, stronger customer engagement and enhanced risk frameworks are expected to support faster growth in MSME advances in the coming years.
Retail expansion with caution
TMB is also expanding its retail loan portfolio in a calibrated manner, prioritizing the creation of robust systems and operational processes before pursuing aggressive growth.
The bank said the approach reflects its commitment to sustainable long-term expansion rather than short-term balance sheet growth.
Technology transformation
Technology modernisation remains a key strategic priority for the bank. During FY26, TMB implemented a comprehensive loan management system and a business rule engine aimed at improving operational efficiency, reducing turnaround times and creating a scalable platform for future growth.
The bank also reported significant migration of transactions to digital channels, helping improve customer convenience while enhancing productivity across its branch network.
Structural changes underway
The lender has introduced centralised credit management centres as part of a broader transformation of its operating model.
The new structure separates business development and customer relationship responsibilities from credit appraisal and processing functions, allowing specialized teams to handle credit evaluation while branch teams focus on customer acquisition and service.
According to the bank, the initiative is expected to improve operational efficiency and service quality over the long term.
Strengthening liability franchise
The bank reported steady growth in current account and savings account (CASA) deposits, supported by transaction banking initiatives, institutional relationships and granular deposit mobilisation efforts.
The objective is to build a stable and diversified funding base capable of supporting long-term growth ambitions.
Expanding beyond Tamil Nadu
While TMB continues to enjoy a strong franchise in Tamil Nadu, it is actively pursuing geographic diversification to reduce concentration risks.
The bank said it is recruiting local talent and building region-specific capabilities to strengthen its competitiveness in markets outside its home state.
Strong capital position
TMB remains among the best-capitalized banks in the country, with its Capital to Risk-Weighted Assets Ratio (CRAR) improving to 33.73% from 32.71% a year earlier.
The strong capital base provides flexibility to pursue future growth opportunities while maintaining financial stability, the bank said.
Management also indicated that selective inorganic growth opportunities could be evaluated once ongoing modernisation initiatives are completed.
Asset quality remains robust
The bank reported healthy profitability metrics, with return on assets (ROA) of around 2% and return on equity (ROE) of approximately 14%.
Asset quality continued to remain strong, with gross non-performing assets (GNPA) below 1% and the Provision Coverage Ratio (PCR) improving to 96.14%.
The bank said these metrics reflect the effectiveness of its underwriting standards, risk management framework and monitoring practices.