Thank you, Sagar, and good evening, everyone, and welcome to AU Small Finance Bank’s earnings call for the third quarter of financial year 2025-26. We thank you all for joining the call this evening.

On today's call, from the management, we have our founder, MD and CEO, Mr. Sanjay Agarwal, our Executive Director and Deputy CEO, Mr.

Uttam Tibrewal, our Interim CFO, Mr. Gaurav Jain, our Chief Credit Officer, Vivek Tripathi, and the IR team.

We’ll start today's call with a 15 to 20 minutes opening remarks by Gaurav Jain, highlighting the bank’s performance, positioning and outlook. We’ll follow the opening remarks with a 40 to 45 minutes question and answers from the participating analysts and investors.

For the benefit of all participants, and so that we can take everyone’s questions, we would humbly request everyone to keep the number of questions restricted to two per participant and join back in the queue in case you have further questions. For any data keeping questions, you may kindly reach out to the IR team anytime post conclusion of this call.

With this, I now request Gaurav Jain, our CFO, to share his opening remarks. Gaurav, over to you.

Thanks, Prince. Good evening, everyone, and thank you for joining the call.

It’s a pleasure to welcome you all to our earnings call for the third quarter of FY26. Q3 marks completion of 35 quarters of our banking journey.

As we near the completion of our first decade as a bank, the foundation we have built gives us strong conviction about the road ahead. With our core growth engines firmly in place and the once-in-a-lifetime opportunity of transitioning to a universal banking platform, we enter the next phase with confidence.

Backed by an execution-led culture, stable leadership team, tech-driven approach, and with robust governance, we are fully prepared to scale responsibly and sustainably. India enters 2026 on a stronger footing than a year ago, supported by a normal monsoon, accommodative regulatory environment, prudent fiscal discipline, and policy stimulus through GST cuts, labor reforms and monetary easing.

This favorable macro setup combined with low inflation augurs well for credit demand despite global uncertainties. System-level growth has strengthened to 14.4% year on year, driven by robust auto sales, healthy MSME demand, and a pickup in commercial and corporate activity.

The deposit environment, however, remains intensely competitive with tight liquidity conditions and systems deposits growing at 12.7% year on year. Amidst this environment, AU continues to deliver strong and resilient performance.

Deposits growth remains strong at 23% year on year, amongst the highest in the sector and 1.8x of the system growth. Loan portfolio grew by 19.3% year on year, 1.3 times of the system growth and nearly 2.5x of the nominal GDP growth.

Secured assets grew by 23% year on year, and unsecured businesses have also started to turn around with a 1% positive growth this quarter, led by MFI. Margins expanded by 25 basis points quarter on quarter to 5.7% from 5.5% in Q2, led by a sharp decline of 22 basis points in cost of funds and benefit from CRR cuts.

Asset quality saw continued improvement, led by ongoing recovery in unsecured and seasonal strengthening in secured assets. Slippages declined by 13% quarter on quarter.

GNPA ratio declined by 11 bps to 2.3% and annualized credit cost for Q3 declined by 41 bps to reach 78 basis points of average assets, with nine-month credit cost at 1.1% of average assets. Profitability expanded on quarter-on-quarter basis, with PAT growing by 26% and ROA expanding to 1.6% for Q3.

On our strategic initiatives, we continue to make strong progress across products, distribution, marketing and technology. On the product side, we launched two new innovative offerings.

The first is an exclusive banking program for chartered accountants in partnership with the Institute of Chartered Accountants of India to offer customized solutions for CAs, focusing on their business needs, personal banking and lifestyle. The second is M-Circle, a tailored proposition for women customers offering curated financial solutions and lifestyle experiences.

On the marketing side, we onboarded Ranbir Kapoor and Rashmika Mandanna as our new brand ambassadors and unveiled our campaign Soch Badlo aur Bank Banao. During the quarter, we expanded our distribution by 100 physical touch points, including 27 new deposit branches to take our total touch points to 2,726.

We further strengthened our governance framework by including three new independent directors, Mr. N.

S. Venkatesh, Mr.

Satyajit Dwivedi, and Mr. Vanni Shankar.

During the quarter, the bank received approval from Ministry of Finance, Government of India, for increase in the foreign investment limit in the bank from 49% to maximum permissible limit of 74%. On the technology front, we are building a bank engineered for scale, intelligence and long-term sustainability.

Over the past eight years, we have consistently and strategically invested 8 to 10% of our OPEX in our technology backbone. Our tech stack today delivers 99.9% uptime, automated disaster recovery, multi-cloud resilience while seamlessly processing 3.5 million plus UPI transactions and 10 million plus API calls daily.

We have modernized AU 01 01 and AU 01 01 Business into auto-scalable, future-ready platforms, while Customer 360 is evolving into a powerful AI-driven engine. Now, we are accelerating AI implementation to embed it across the bank, reshaping acquisition, underwriting, risk, operations and customer engagement as we transition into a multilingual, non-sequential AI-native architecture.

Our enterprise-wide agnostic AI roadmap is progressing well. We are reshaping our go-to-market strategy with digital STP journeys across assets and deposits.

Vehicle partners onboarding for wheels loans is live and additional integrations that deepen STP journeys and partner-led distribution are underway. Our AI-powered gold loan LOS will go live in Q1 FY27, and native AI functionalities across wheels, PL and credit card segments are being built to enable faster decisions with higher accuracy and scalable execution.

A cloud-native real-time data lake forms the base layer of our AI-led decision-making architecture, enabling real-time insights generation directly by business teams, accelerated decision-making. AI-based fraud systems now auto-decision over 60% of alerts and transaction monitoring, and voice bots handle nearly 25% of inbound calls.

Bank is also adopting functional and HR training through AI-led platform, where employees learn continuously and dynamically improving productivity and capability. We will update more on these initiatives in the coming quarters.

As part of long-term succession planning and roadmap for increasing leadership depth in the bank, we also announced two critical changes to our executive leadership. Our Executive Director and Deputy CEO, Mr.

Uttam Tibrewal, on completion of his current tenure as whole-time director on April 18, 2026, will continue in his capacity as Deputy CEO and remain responsible for leading our key business verticals, including retail assets and liabilities. Alongside these responsibilities, he will devote increased time to on-ground engagement to drive growth, strengthen customer relationships, and expand the bank's presence across newer geographies.

Mr. Vivek Tripathi, Chief Credit Officer of the bank, will be appointed as Executive Director, subject to required regulatory approvals.

Vivek has been with us since 2014, contributing across business, credit, and risk in various leadership roles. As Executive Director and Chief Credit Officer, he will continue to provide enterprise stewardship of AU's credit architecture, unifying credit policy and underwriting, portfolio management, collections, legal recovery, and vigilance and fraud control under a single governance framework.

Now let me give some color on each of our businesses. First on the deposit business, our deposit base crossed one lakh thirty-eight thousand crore, growing by 23% year-on-year and 4.5% quarter-on-quarter, reflecting the growing strength of our branch banking franchise.

CASA deposits grew by 16% year-on-year and CASA ratio remained broadly stable at 29%. We have added 66 new fully-fledged liability branches this year and are on track to take new branch addition tally to 80 branches for the year, mostly in urban areas.

With robust acquisition model, distribution expansion, segment-led approach, and a keen focus on productivity and efficiency, we are now seeing sustainable increase in our low-cost granular deposit franchise, which has in turn helped us to reduce our cost of funds. New CASA account acquisition grew by 30% year-on-year for nine months period and crossed milestone of one lakh monthly account acquisition in December.

Cost of funds declined by 22 basis points quarter-on-quarter to 6.61% versus 6.83% in Q2, led by repricing of term deposits and benefit from savings account rate cut taken in October. Cumulatively, we have seen 53 basis points reduction in our cost of funds in FY26 so far.

With effect from 12th January, we have further optimized our savings deposit rates in certain buckets and will continue to monitor the competitive landscape for further transmission of rate cuts. On cross-sell, the bank continues to drive holistic integration across our full product suite, covering cards, payments, insurance, wealth management, trade, and forex, through a specialized vertical focused on deepening customer engagement.

We are seeing encouraging progress, including 90,000 new CASA accounts opened from our retail asset base in Q3, with balances of 160 crores, and a 2,500 crore liability-to-asset cross-sell portfolio by end of the quarter. Wealth and forex services are also gaining traction, with our wealth franchise now serving 2.5 lakh customers and managing 1,900 crore of AUM.

Our 81 business continues to scale well, with steady growth in volumes and transactions and cross-border trade and forex revenues growing nearly 50% year-on-year. Now moving on to our asset franchise.

Overall loan portfolio stands at rupees 1 lakh thirty thousand crore and grew by 19% year-on-year. Our unsecured businesses—our secured businesses grew by 23% year-on-year and 6% quarter-on-quarter.

Unsecured businesses registered a de-growth of 17% year-on-year, but have started to turn around and grew by 1% in the quarter, led by MFI. Retail secured assets, which include wheels, mortgages, and gold loans, form 68% of our portfolio and grew robustly at 21% year-on-year.

Wheels business saw a strong growth momentum, aided by GST cuts and buoyancy in new car sales, leading to growth of 27% year-on-year to reach 43,700 crore. Gold loan business grew strongly by 52% year-on-year from a low base to reach 3,000 crore.

Our mortgages business, comprising micro-business loans and affordable housing, grew by 13% year-on-year to 41,000 crore, in a highly competitive market warranting disciplined underwriting. We are working to increase the growth rate in this segment through distribution expansion and improvement in productivity in the southern markets.

Overall, the retail secured segment will be the main beneficiary of our expanded distribution in the southern markets. Moving on to commercial banking, which forms 21% of our lending business.

It has strong segmental understanding across business banking, renewable energy, emerging enterprises, NBFCs, real estate, and transaction banking. This segment saw a broad-based growth with overall book growing by 25% year-on-year to reach 27,700 crore and non-fund-based book of approximately 10,000 crore.

A significant part of the commercial banking business is self-funded, as this book contributes 8% of overall deposit book and 7% of overall CASA book. Now moving on to the unsecured business.

Our two unsecured businesses of inclusive finance and digital lending are nearing the end of the credit cycle. Our inclusive banking franchise, comprising MFI and lending to small and marginal farmers, has started to turn around with the portfolio growing 2% quarter-on-quarter to reach 6,600 crore.

Non-overdue collection efficiency in MFI improved to near normal levels at 99.3% for the quarter and 99.5% for the month of December, the highest in six quarters. The SMA pool reduced to 1.9% from 2.9% in Q2.

83% of the MFI book is now covered under the CGFMU guarantee scheme, providing protection against any potential credit losses in the future. Our digital unsecured portfolio, comprising credit cards and personal loans, declined 27% year-on-year and 4% quarter-on-quarter.

However, we remain optimistic as credit costs continue to normalize. New card issuance strengthened to 48,000 cards in Q3 versus 27,000 in Q2, and we expect the book to return to growth in the next financial year.

In terms of profitability, we delivered profit after tax of rupees 668 crore for the quarter, with ROA of 1.6%. This included a one-time provision of rupees 20 crore due to impact of the new labor code.

Excluding this impact, PAT for the quarter was 682 crore, up 29% year-on-year. Net interest income increased by 9% sequentially on the back of strong growth in loan portfolio and expansion in margins.

NIM expanded by 25 basis points quarter-on-quarter to 5.7% from 5.5% in Q2, benefiting from 22 bps decline in cost of funds, reduction in CRR, and lower surplus liquidity during the quarter. Core other income saw a healthy growth of 10% sequentially, driven by higher business volume and increased traction in distribution of third-party products.

Operating expenses, excluding impact of labor code, increased by 14% quarter-on-quarter, driven by higher disbursement and ongoing investment in manpower and touch points as we expand our distribution. We continue to target disciplined control over operating expenses, with OPEX by average assets falling to 4.1% year-to-date, as compared to 4.4% in comparable period last year.

Cost-income ratio was 57% year-to-date. Credit costs reduced from 481 crore in Q2 to 331 crore, driven by ongoing normalization in unsecured businesses, seasonal strengthening in secured assets, and enhanced CGFMU coverage in MFI.

To sum up, Q3 marks another quarter of disciplined execution and progress towards our Forever Bank vision. As we head into the closing months of FY26, our priorities are clear, and we continue to focus on growing our deposits franchise, optimizing cost of funds, pushing growth in secured assets, and driving cost efficiency and fee momentum.

I take this opportunity to thank our teams for their commitment and to our stakeholders for their trust. With that, I now hand over to Prince for Q&A.

Thank you, Gaurav. Thank you.

Sagar, we can now open the call for Q&A.

Hello, sir. My first question is on margins.

Can you explain the different moving parts on your margins? Like you explained that, your cost of funds improved by 22 basis points, while yields were down 10 basis points.

This gives us broadly 10 basis points margin improvement. What's driving the balance 10 basis points?

Is it the LD ratio increase? Your LD ratio is already 89%.

How should it move incrementally? Any income guidance on margins?

My second question is on funding mix. This time a large part of your deposit growth has come from non-collapsible bulk deposits.

How should we look at this? Are we facing some intense competition from peers, or hence you are relying on other sources?

How should we look at it incrementally? Lastly on credit costs.

Credit costs came in surprisingly well this quarter. MFI and credit card both saw an improvement.

Any further color on what has improved? Should we expect normalization from next quarter onwards?

Credit costs guidance for the next year? These are my three questions.

Thank you.

Akshay, I'll start off with the first question on margins, right? There are three broad parts.

The first is the improvement in cost of funds, which we have mentioned in our presentation. The second is the benefit from CRR cut, and the third is your lower surplus liquidity during the quarter due to strong loan growth, right?

Now within this, your yields, asset yields have come down, right? The balance is what is reflecting in the margin growth.

In terms of your margin outlook for the future, we don't want to give specific guidelines, but I'll talk about the key moving parts, right? The first one is the continued ongoing repricing of our deposits book.

We think there are still two more quarters to go for repricing of our term deposit book, because the tenor we were maintaining prior to rate cuts was in the 12 to 18 months bucket where the peak FD rate was. We should continue to see repricing going well into Q1 of next year.

Second is not all of the recent rate cut transmission has reflected in this. As we see improvement in liquidity and the competitive landscape around both TD and savings account pricing, we will take actions accordingly.

Then the third moving part is your asset yield. You'll have the latest repo cut impacting the variable book, which is around slightly less than 30%.

That impact will come in Q4. Thereafter, your asset yield will largely reflect the mix.

If we are able to improve the MFI and credit card mix, then that should help on the margin side. I think that's the one on the margin side.

On the bulk side, on the funding mix side, look, one of the ratios that we track is our stable deposit ratio, which is a sum of your CASA and your retail TD and your bulk non-callable. If you look at this as a ratio for total deposits, that has largely remained stable around 80%, right?

I don't think there is any increased reliance on bulk callable deposits. Having said that, liquidity remains tight in the market, and we look at various funding sources and optimize across multiple metrics, including deposit growth, including cost of funds, including liquidity, etc., and see what is the best way to optimize across these metrics.

The third question, Vivek, do you want to take the...

Yeah. Akshay, this is Vivek.

On the credit cost, for secured retail assets, seasonally we always have this improvement in H2. Q3 is a festival season, always there is an improvement in collection efficiencies and reversal of NPAs.

That's factored in there, and we continue to see that improvement to continue in Q4 as well. On unsecured piece, which is credit card and MFI.

Credit card, we called out in Q2 as well that it had peaked, and it started declining. It is now near normalization levels.

If you see its standalone basis, my slippages as well as credit cost is near normalizing level, and which we would continue to expect to remain in that stable zone for coming quarters as well. For microfinance, there are two components to it.

One, the collection efficiencies continue to improve. Exact collection efficiency for the month of December was 99.5% upward, and because of that my SMA pool has reduced significantly from 2.9 to 1.9%.

Plus, since we started taking coverage of CGFU, which is credit guarantee scheme, that coverage is improving month on month. On a quarterly basis, it is now covering almost 80% of assets.

Naturally that gives us the cover. We remain confident that we are on track of what we guided, that for FY26 our credit cost should be in the range of 1%.

We continue to basically look forward to achieve those numbers.

The credit cost for FY26 is 1%? Is it?

Yeah. The full year credit cost guidance that we had given out earlier was 100 basis points on average assets, on balance sheet assets,

on average. On average assets.

Just one point I guess missed on the CD ratios that you are using up your liquidity, which has increased your CD ratio to around 89%. How should we see it moving incrementally?

Yeah. If you see the CD ratio, excluding the refinance, then we are 80%, right?

Which is the way the regulators and the entire system is looking into it, right? I don't think we are somehow seeing this data very seriously in the sense that it won't be against any growth aspiration of ours.

Quite comfortable in that sense.

Understood, sir. Thank you.

Just any comments on credit cost for next year?

Okay. Thank you, sir.

Thank you for the opportunity.

Hi, good evening everyone. Congrats on a good quarter.

A couple of questions. One is on the mix of unsecured loans now.

How should we look at that now that the portfolios are seeing some stability on both cards also have started to grow, MFI as well. How should we look at the mix of unsecured loans from here while the overall loan book continues to remain healthy?

Will unsecured lead that, or how is it going forward? I

Think, again, we are working in all direction in a sense for MFI or credit card or, of course the personal loan, right? We are seeing green shoots in MFI business.

These are the first month when book has not degrown. Rather it has stabilized and has grown marginally, and the data says that and the entire ecosystem says that this is becoming normalized.

You will see some sort of growth in the MFI business for next year, but difficult to quantify in this call. We would be ready to do this kind of decision making by April, that how much really we want to grow MFI, but the entire system has been stitched well in terms of guarantee, in terms of branches, the recovery, the energy on the ground is back.

I hope MFI should do better than this year in the coming year. Credit card, I think we want to take one more year to really stabilize it to the core, because we don't want to make mistake again.

Credit card business, we will go for another one year for the re-adjustment and settling down. Personal loan, of course, we are backing big on the whole STP journeys, NTB journeys, existing customer cross-sell and all those things.

The base is so low. It won't affect us in some sense of our growth, but of course in the long run, I strongly believe our PL book will become substantial in terms of overall asset mix.

Sure, Sanjay. The other question is around cost, while you mentioned that bank has been undertaking all the expenses to ensure sustainable growth and building a robust bank, but how should we look at the cost-income ratio now, because we have seen a fairly strong pickup in cost growth this quarter.

How should we look at the ratio over the coming years?

I think we want to be in our original guidance that it should be below 60%, Nitin. If you see our nine-month data is around 57%, and we should not overly read our quarterly data.

We are building the retail franchise, somehow in Southern markets or new product range, require additional people. We are relying big on our tech ability to reduce the cost of operations, and I think AI-led, the entire environment in coming years will eventually allow us to operate on a lower cost-to-income.

I would say that we should read our original where we say that it won't be crossing 60%, and ideally we should be in the range of 56-57%, next year too.

Sanjay, lastly on the RWA growth, which looks a little sharper this quarter, anything to read into this quarter's driven this kind of RWA growth?

Nitin, hi, Prince here. There was, if you see, on the capital adequacy side, there were certain changes in regulations this time, where regulator has now allowed interim profits to be added to the capital adequacy.

On the other side, there were certain capital reductions which have now been risk-weighted, and because of that, while we have got the capital benefit, the risk weights have gone up on some of the securitization transactions that we used to do. It's purely, most of it actually is only a technical adjustment, nothing to read into it.

Specifically, Nitin, just it's on the DTAs and the credit enhancement on securitization.

Yes. All important.

Thank you so much, and wish you all the best.

Thanks, Nitin, thank you.

Thanks for the opportunity and congratulations on a great set of numbers. First question is on the growth outlook for the next one or two years.

I understand what was given.

Yeah. Okay.

Hello?

Jayant,

this is better. Please repeat.

You weren't audible.

Okay. My first question is on the loan growth outlook for next one or two years.

Loan growth outlook for, again...

Within that specifically micro-business loans, that piece is still not catching up to the overall book. How do we read that?

Again, two things. We want to be around 2.25 to 2.5 times to the normal GDP.

This year we are expecting around maybe 8% or 8.5% normal GDP, right? I think anything around 20%, 22% growth overall, we are targeting, right?

That should continue for next year too, because scale will be there, all those things. If anything happens above that, will be the outcome of the, at that time, the whole ecosystem, right?

In that sense, as I already commented that MFI business is now turning around. We are seeing some green shoots.

The entire system is now coming in one direction that, growth will come back. I think it's so difficult to predict the next two years story for MFI.

Overall, we have already said that it won't be above 10% of our overall asset. We want to be in that direction.

We have bought that book because we need to complete our obligation around MSME. The whole reason of MFI was not only to build an unsecured asset.

It was also around to do your certain obligations, right? You have to read in this only that how much you will grow.

Specific guidance is difficult to give as of now.

MBL.

MBL, okay. I think MBL is a small business, we are doing micro-business loans, affordable housing space.

We really want to focus more and more, but somehow it's not easy to build at this scale, the same pace. We will be growing maybe this year around 15-16%.

The idea is to be really in the range of 17-18% next year. It will be supported by our Southern branches, Southern markets, the present markets, and building up some new product lines.

Overall, in my opinion, next year if we perform around 17-18%, and in longer run it may be around 20%, but difficult for next year. Sir, if data on the Fincare branches disbursement run rates, you have been telling us it can ramp up meaningfully.

Is there any progress on that front? We are building up there.

The southern markets are overcrowded, the competition is next level. It's not easy to ramp up, in a quarter or two quarters.

It will take some time. We being a bank, we have an advantageous position.

We know how those markets operate now, how those customers want. We have those ingredients, but it will take some time and maybe in the next 12 to 18-month period, you will fully, will use that space, in terms of growth aspirations.

Sir, if I could squeeze one last question on the opex. We did see a sharp move in this quarter.

We are back to that 4.3% of assets kind of run rate. How do we see again from here?

Do we try to... In the last two quarters, we were able to do much better.

I already commented that if you want to build a franchise, there would be some quarters where you will have additional manpower or you want to push for the growth, right? I think one quarter, two quarters should not be read in sense of permanent cost income going up.

We already said you that our cost to income ratio should be less than 60%, and this nine-month is also around 57%. Ideally, we should be here only for next 12 to 18-month period, but we are putting lot much effort to reduce the cost through tech adoption.

AI is enabling us a lot, and we want to give you more color on this by April or maybe by July, in the next quarter calls, how we really want to use these tools to have an impact on the cost.

Great. Thank you, sir, and all the best.

Thank you, sir.

Hi. The first question is on MFI credit cost in particular.

A sharp drop coming in and obviously the overall GNPA and SMA book is further down. Was there any benefit of recoveries and it should be managed at this level of 1.3-odd percent, or the steady-state MFI credit cost should be relatively higher?

Kunal, Vivek here. There are, as I said, three components to it.

Obviously our collection efficiency has improved sharply. Our overall book coverage of CGMFU has gone up to almost 83%, which incrementally, if you look at in the last two quarters, almost 100% of the disbursement is 100% covered.

Incrementally it's going up, right? Including SME book coverage is going up.

The large reduction of credit costs happened on account of lower slippages and higher coverage of guarantee. Third, there was a marginal amount of the previous provisioning which was there on this portfolio that has been utilized because things are normalizing there.

Got it. Secondly, with respect to ROA, we are again at almost 1.6-odd percent now, and there are levers available, maybe OPEX, we could see it coming down, plus maybe some cost of deposits advantage can continue.

How are we looking at the overall ROA trajectory? What are the further levers available in the near term?

On cost of deposits, maybe on the bulk side, how much has actually got repriced, and was that the major benefit in the cost of deposits, or it was to do with the savings cut?

Kunal, I think on the deposit, Gaurav already answered that. Basically it's a function of both.

Definitely savings account cut did play a large role because we had taken some cuts on the third of October, and TD continues to reprice. I think in the beginning also when the interest rate cycle started reversing, we had said that it takes about 14 to 15 months, or 12 to 18 months for the entire deposit book to reprice.

I think that's what Gaurav articulated, that we probably expect two more quarters of term deposit repricing to continue. Again,

that's the only thing was maybe since the bulk proportion is high, was that the element of bulk repricing in the quarter, or it was pure even supported by retailing?

I think it was, it will be in line with the composition of the book. I don't think there is anything specific to read there, right?

Got it. Yeah.

On the overall ROA, I think we have been pretty clear for quite some time that, as a bank we do believe that we have the potential to deliver a 1.8% kind of ROA on a very sustainable basis. Obviously we had also said that it takes about a decade for a bank to come up, and we are already 35 quarters down.

Give us, I think, four, five more quarters for us to just get our initial investments done, just get the franchise up and running, and then from there on operating leverage will play a role. As you rightly said, margins, there is some more room to go.

I think for FY27, we had earlier guided that our endeavor will be to try and reach 1.8. We continue to maintain that.

Okay. Thanks.

That's helpful.

Hi, this is Vivek from ICICI. Just one thing again on the mean side.

Obviously post merger immediately we were at 6%. Now we are at 5.7.

In a normalized scenario, ideally mean should settle at 6%. With Universal Bank conversion naturally, we will be tapping more credit tested quality customers, especially in MSME business banking and maybe other accelerated products.

Where do you see mean settling over next couple of years? Also the reason for asking this question is that to understand how are we placed on the asset yield side, right?

We might continue to benefit from the falling deposit rates for next two three quarters. If upside yield drop is not arrested, in some quarters it will start getting in.

Just wanted to understand from a medium to long-term perspective on indirectly.

Thanks, Anish. Maybe I'll try and answer and Gaurav can chip in.

See, on the interest rates, as well as on the margins, I think we have commented earlier as well, that it's basically an outcome. I think we look at business by business, and most of our businesses continue to hold on because of the 70% being fixed rate book.

We continue to hold on to the yields. Of course, you can't really compare post-merger FinCare margins because at that time MFI was almost 8% of the overall mix and the unsecured was much higher.

I think since then the mix has changed, right? Taking cognizance of that, I think we are now at about 13.8.

As Gaurav said, some bit of 25 bps December rate cut, repo rate cut repricing is still to come into the next quarter. Apart from that, we don't really see yields going down very significantly barring some mix change, right?

I think we are holding on to yields on the vehicle side, we are holding on to yields on the gold loans, we are holding on to yields on some of the other businesses. MFI will start to grow, commercial banking is okay.

I think it's more a function of mix from here on, post Q4, than anything else. In the longer run, yes, you are right that probably if the bank decides to move into...

I don't think we have fundamentally anything changing on our business model for next three to five years. I think we have been vocal enough on our calls that despite universal, we continue to build same segments.

I think we have the idea is to scale up in each of the segments. There's a lot of opportunity.

From a half a country, we want to go into a pan India. Expand in vehicle financing, expand around the entire mortgage business, the gold loans can grow multifold, the commercial banking can continue to grow.

I don't really see any concerted effort on the bank's part. Yes, if we are going up to a better credit quality customer and there is some amount of yield sacrifice, like in the commercial banking, that will also be reflected in the credit costs and the opex, right?

You will see a commensurate benefit. I'm not really sure if there will be a compromise on ROA per se, because of the margins, if anything at all.

Got it. This is very helpful.

The last thing, earlier we used to give segment-wise ROA breakup. Now obviously we have stopped that.

At least in terms of, let's say, product-level profitability, is there any product which is still loss-making? I don't know, credit cards might be one, but any other product which is still having a drag on the overall productivity level, and hence, cost income, maybe cost to asset is still elevated.

I'm sure it is still lower than the guidance, but compared to, let's say, other banks, it is still elevated. Hence I'm asking this.

No, I think we haven't discontinued anything. We used to give product-level profitability or ROA tree every annually, right?

There's no... because there are so many moving parts, we give it with the annual results.

I think you will again see that with the March financials coming up. I'm sure you'll have a chance to go through the quarterly-based profitability.

Okay. Would you like to highlight any loss-making...

Sorry to interrupt,

Anish, obviously digital banking is still, continues to be a loss-making or hasn't really broken even, and that's what Sanjay indicated, that will take about one more year to stabilize that business.

Okay. Yeah.

Hi. Just two questions.

One is data keeping: are we 100% provisioned on MFI today? The provision coverage?

Pritesh, Vivek here. Since we, as I said that my guaranteed portion is increasing, we provide for only on an uncovered portion, right?

Let's say on 100 rupees loan, if the guarantee cover is about 72 and a half percent, let's say about 27 and a half percent is uncovered, you provide on that. It works that way.

It doesn't... the provisioning policy, right, governed by the provisioning policy.

Sure, got that. Basically before the CGFMU portfolio, that would be 100% and CGFMU portfolio, whatever goes into NPA will be according to the formula which is applicable.

As Vivek said, it's primarily driven by the provisioning policy, always, right? For MFI at 90 DPD, we provide 50%, and then every month we provide another 15%.

That by 180 days, we are 100% provided. Anything which is 100% on the open exposure, PCR will be a function of where exactly the book is, or what's the vintage of the NPA book.

The second part, as Vivek said, is what percentage is already covered by CGFMU and not be making any provision on that. On the open exposure, we will provide as per the provisioning policy.

Got it. The second question is on this slide 30.

Basically you've given a growing distribution footprint and given a color on how things can move in FY26. Given that there is some penetration left in wheels and MBL, is it safe to say that growth will be driven by these two segments in next year, given that the ticket sizes also is higher?

Yep. I think that's what we have been saying, wheels even today has grown about 27% year on year.

We do believe that 25% growth in wheels is something that we should be able to do. I think in mortgages as well, as Sanjay said, while we are the largest player in that segment at that ticket size, but we do hope that we are taking a lot of effort with the Southern franchise coming in, that current growth rate of 13-15%, we can scale it up to at least 17-18%, over the next two to three years.

Yes, they will be the drivers. Yeah.

Apart from that, there will be gold loan and... Yeah.

What I was trying to make sense is that if growth is driven by wheels and MBL, relatively yields will be lower in the segments compared to what we've done in some parts. Of course, you're growing gold and MFI next year, but the ticket sizes are smaller.

I just wanted to check your combination of how things can be in yields versus growth perspective.

I think the asset mix will largely remain the same, right? If you look at the composition of it today, about 67% is retail secured, yeah, and then you have wheels, which is about 34% of that, which is we disclose is growing at 27%, right?

Wheels will continue to grow at that clip over the next 12-18 months. Gold obviously, from a very low base, there's the opportunity is to multiply that book multifold, and that's what we are driving for, right?

There the yields are in the around the 16% range. Then the rest of the book, if MFI picks up, then that will sort of the degrowth of MFI mix will stop, right?

Whether or not it can contribute positively on the mix we will see. The degrowth that is coming from adverse mix of MFI will become lower going forward.

Overall, I think the way to think is your asset mix will continue to be the same, and as Prince articulated in one of the earlier questions, over the next two, three years our business model remains the same, right? Same segments, same customers, similar geographies, etc.

Sure. Thanks so much.

Thanks. My

Hi. Good evening and congratulations on a good quarter.

My question is on MFI asset quality. We have seen sharp rise in gold prices.

Is the recent improvement in repayment behavior broad-based across the MFI book, or is it largely driven by borrowers with access to products, secure products such as gold loans? The reason I ask is our gold loan book has grown by around about 700 crores on a QOQ basis.

While the book accounts for just 2.5% of our overall loan book, it has contributed 12% of the incremental growth in this quarter. Is there any overlap between gold loan and MFI book customers?

Ankit, the MFI recovery is a very, very broad-based recovery, and it is not in the one lender's book. If you look at the MFIN data, it would reveal that it is across the industry.

Gold loan is... there is the overlap between the gold loan and MFI book would be very, very minimal, and it is an independent asset class, right?

The correlation of somebody borrowing from gold loan and repaying unsecured loan, very, low chances of doing that. The credit environment, right, because of the MFI guardrails, have changed.

The borrower at the village level have understood that until there is a disciplined repayment, getting a further loan and getting a bigger loan would be challenging. Hence there is an improvement in the credit culture itself so far.

As you know that the industry is driven by a lot of events. We hope that no event takes place in the future which derails this credit cycle.

It's across states, the recovery is across states, across districts, and as we have given month-on-month data as well in terms of collection efficiency. I don't think there is anything one-off there.

There is minimal overlap between both the segments, right?

Gold loan, we are just growing because gold loan, see our base was very, very minimal, right? AU historically never used to do the gold loan business, or we used to do very limited, just as a cross-sell in the branch banking.

It is primarily an asset class that we acquired from FinCare, and once the acquisition happened and we saw the opportunity and the process and the systems that they had, I think we just are trying to ensure that we start doing or start implementing those from a larger set of branches and build that business from a very, very low base. You're seeing a sharp growth.

Sharp growth is from just a 2,000 crore book, in a 1 lakh 30,000 crore loan book. Yeah,

but if you look at the incremental growth, just 2.5% of your overall book is contributing north of 12% of the incremental growth. I was just asking on that.

Maybe. That's clear, right?

Because the book has grown by 50% year on year. It will contribute oversized, in terms of incremental growth.

That's what we are saying.

Yes, and we are actually serious about our gold loan book. We want to grow that book.

Gold loan industry has grown by north of 100% year on year basis, right? Banks are the worst beneficiary.

Agreed. The second question is on the CDFMU part.

Could you shed more color on the kind of premium that we pay and recovery? Is it slightly delayed?

As far as I know, it takes a year or so for the money to get recovered. Can you shed some more light on the operational part of the CGFMU?

Ankit, I think we can take it offline because that's a very operational procedure. As far as the guarantee piece is concerned and the repayment is concerned, that's very, very well defined.

If you are well, your processes are well defined and if you file properly, it comes automatically. We have a very different experience as far as our guaranteed portion, as far as guarantee book is concerned, not only from CDFMU, across in terms of claims, right?

Okay. Thank you.

hi, sir. Thank you for the opportunity.

Just one thing wanted to clarify on margin side. Previous 25 bps has been passed on and the impact will be visible in 4Q, or that's already been sorted?

I just was a little confused out there.

The December rate cut? Yeah.

The December rate cut will get passed on over a period of four months, right? I think December was the first month, and when we said Q4, the impact will be there because three of the months are falling in next quarter.

Understood. That's only 30% of your book gets impacted, right?

Rest is all fixed?

About 30%. About 30%.

Understood. Second, just wanted to understand more on the growth part.

Just correct me if I'm wrong. MFI is seeing a stability and we are seeing a growth coming back in next year.

On credit card front, we still want to wait for one more year before getting more aggressive into that particular segment. Is my understanding correct?

The growth has to be coming up from the secured segments, rolling out of the secured segment. That strategy remains the same, correct?

Yeah. If you ask me in overall perspective, we believe we are stronger in our retail asset strategy where we mortgages, gold loan will take the front seat.

We want to push our system engine there as much as possible. Commercial banking is more or less settled, depends on how the Indian economy behaves.

The way we have performed this year, we strongly believe that it will continue. MFI has come back, but we don't want to give you any guidance because still only one quarter has passed away with seeing that whole green shoot.

We want to take more time, but my overall belief is this that industry can grow 10 to 15% next year. How much we will grow, we will decide on the course.

Credit card, it will take some more time because we are seeing some, I would say, encouraging results of our action taken over the period. We want to be really patient enough so that we don't make mistake again.

PL, yes, again, lot much has happened through analytics, CPL, credit engines and all those things. We want to focus more on ETB.

The NTB journey also has been unveiled. I believe PL will see different numbers next year.

Understood. Just adding up to this one.

PL is for us a separate product. It's not that credit card linked PL, right?

No, PL and BL come under the same team, but it's a different product class.

We are confident to grow PL book incrementally next year?

Yes. It was not any issue around PL.

PL is a small book. We have re-engineered entire team, processes, approach, and quarter four also should see some better numbers around that book.

PL, BL, we are focusing as a normal business in course. Yeah.

That was my understanding, sir. Thank you so much and all the best.

Thank you.

Thank you.

Hi. Thanks for taking my question and congrats on the quarter.

First question is on the OPEX movement quarter on quarter. Could you give some broad color on the various segments that are driving this so that we can understand this a little better?

Because I can see both employee OPEX and non-employee both are up significantly quarter on quarter.

I'll give you the drivers, right? There are two drivers.

One is the 20% quarter on quarter increase in disbursement, business volumes, credit card issuances, etc., right? That also comes at certain variable cost, right?

One of the components is that business volumes-related component. The second component is your headcount and touch points, wherein we have been very clear over the past few quarters that we are growing our distribution, especially leveraging the footprint that we bought through FinCare.

For example, we are doubling our wheels penetration. We have hired sales, credit collection people there.

We are opening 18 new branches this year, we have hired people for that. We have also increased the intensity of salespeople in existing branches, we have hired people, right?

That's the second component. The third, and maybe not so significant for the quarter, was some, typical promotion expenses, which come with, your Diwali and all of that in your debit cards, credit cards.

Finally, we started the marketing campaign, Soch badlo aur bank bhi, right? That's also contributed to some uptick in expenses.

Those are the main parts.

Thanks, Shora. Very clear.

Maybe apart from the promotional one, the others are more or less BAU, right? Because we are talking about more growth from here on.

Yeah. To look, growth comes with, as we say, some of it is directly related, and the headcount cost, you should look at that as a down payment on future growth, right?

We will not need as many people going forward, because we are building capacity for next year this year. Fair enough.

If I heard you correctly, 56-57% cost to income broadly for next year is where we... Look, we're not giving you specific guidance beyond calling out two things: we'll be lower than 60% and we'll be lower than 4.3% cost to OPEX, which we were last year, right?

This year we expect to do better, and every year incrementally the operational leverage from scale and all the tech initiatives and other overhead control measures that we are taking will continue to improve both cost-income ratio and the cost by OPEX, right? I'll leave it at that.

Fair enough. Just one last question, a little maybe for Sanjay sir.

Sir, a lot of your peers, NBFCs and mid-sized banks, have raised a lot of capital recently, and everyone is pretty positive on growth picking up next year. From a competitive landscape, how are you looking at things?

Do you see any pressure that can develop? Because we are talking about, largely talking about increasing our margins, our growth, etc.

Is there any risk from that? Yeah.

No, you have a right question in my sense. We are a 30-year-old now franchise, right?

We have seen all the competitive landscape over the period. Of course, if fresh capital is coming in in banks or in NBFCs, they will also push for the growth.

I think it's not about their capabilities and their positioning. It is more about our capabilities in terms of building up the product, distribution, people, understanding the risk around it.

I think what we are expecting that, for next maybe four to five years, AU growth rate in terms of 2.5, 2.25 to normal GDP should be there, because of the product range we have. We have retail asset, we have commercial banking, we have a digital asset, we have cross-sellability.

If you ask me, the overall packaging of a franchise is so strong that there would be a competition, but we should lead in that competition space. I believe that team has the capacity, potential, purpose, energy to do this.

We are doing it honestly. It's not that there is no competition as such as of now also.

Still we are growing in the north of 20%. I think we are building.

We have already built a very strong foundation, and we have a, I would say, a very tight, very sharp kind of execution mindset. It's not only about growth; it's also how you grow.

The quality of OPEX, the quality of asset, the quality of team. If you have to judge, AU, you have to judge in a holistic way.

Thank you, sir. Fantastic.

All the best. Thank you so much.

Thanks.

hi, sir. Thanks for the opportunity, and congrats on good quarter.

Sir, two questions. One, what is the proportion of book below rupees 1 lakh?

I understand we have got 25% of Saurabh. Related to that, do we plan to further take Saurabh cuts?

Because our close competitor has gone down to 6% for more than 1 million.

No. Again, below 1 lakh is a very small amount, because it does not affect only a below 1 lakh depositor.

It is a full stack, right? We have taken one position that we want to build our deposit franchise on the product and the whole service levels rather than marketing or higher rate.

It just what now, six to nine period. I'm very happy that the competition is following us, because that's the right way to build our deposit franchise.

We have other means to really manage this traditional requirement. Further rate, I can't comment as of now, because it depends on entire liquidity position, how the repo rate works in times to come, overall our requirement.

I'm very happy the way we have really managed our entire matrixes of deposit franchise, where we have a very solid quality book, then we have a CD ratio of around 80%, we have a cost of money around 6.84, and 24% growth. If you ask me the overall growth matrixes, I would say I really want to say thank you to my team, that in spite of such an intense competition and a tight liquidity, they are able to perform with these numbers.

Okay. Sir, I just wanted to check on your cards portfolio.

We had Zenith, we had Zenith Plus. I understand you have massively cut rewards on Zenith.

Do you plan to do so for Zenith Plus also, given that we are not...

My friend, I think the team is not there, and it's too operational question. Overall, we want to build this.

Overall, we want to build a credit card book. It will take some time.

Team is taking lot many decisions so that we get the right metrics, the right product in the right way. Give us some more time to really comment more in detail about our credit card business.

Thank you. Thank you for that.

Hi team, congrats on the quarter. Firstly just getting back to the MFI thing, is collection efficiency stable from here on?

Credit costs will be at this 30 bps or so level or below? Because incrementally everything is moving to CGFM.

Is my understanding correct?

See, I think, Bhavik, we can't benchmark anything in one quarter. In fact, explain that, through the cycle it would be...

Piran, my apologies. Piran.

It's a game of collection improvement and collection efficiency, how much coverage you have from credit guarantee, and also from the recovery point of view from your existing written-off book. That if it continues to improve, my recovery has improved, let's say in Q3 and continued to improve in Q4, it should remain in a zone, but pointing out to...

Plus I said that there is a marginal utilization of some previous provision which was done on this specific book, because the environment now looks very, very different. In a more benign way, it should hold through the cycle.

It should hold what we guided earlier.

83% book is covered under guarantee. See, I think, the way you should look at it, I think we have been saying that all along, that 83% book is now covered under guarantee and we have paid a guarantee fee for that, right?

By the end of March, hopefully we'll have almost 95-95% of the book covered under guarantee, right? With the improving asset quality, or even stable asset quality, I think one of the lines that we have said in that slide, slide number 18, is that if you look at the portfolio which has been originated from this last calendar year, which is January 25 onwards, that forms 75% of the book, and the collection efficiency there is 98-99.7%, right?

In the zero DPD. If it's 99.7% kind of collection efficiency and 90% plus book covered under CGFMU, then it's logical to assume that the credit cost should be, in range bound unless something dramatically goes wrong.

Correct. Current level is kind of here to stay, as long as...

Plus or minus here or there, right? Broad range you can say, right?

The exact number, it will be difficult for us to say, but as Vivek said, yeah. Got it,

got it. This next question for Sanjay ji.

Sir, aapne bola, you mentioned that the regulator looks at CD ratio ex-refinance. Just wanted to understand, is the CD ratio now even a focal point anymore for RBI, or are we seeing...

Not really, not really. Fine.

I think it's about how prudent we want to run our bank, right? Let's not bring regulator in every discussion, right?

CD ratio is an important one, right, to really run a very sustainable and prudent banking franchise. What I want to say that, because I get a refinance, and refinance is a very structured loan, which we get a definitive time period, and which we create some assets.

In those assets, we don't have a risk of deposits, right? The risk of deposits is 80% of the book, which is the CD ratio of 80%, right?

I think the idea is to tell you that how solid we are in terms of our approach. It's not about regulator pushing us, or they are talking about us.

It's about how we want to really build ourselves on a self-governance basis.

No, sir. I'm just asking, has the regulator also taken a more benign approach to the CD ratio?

I

don't want to comment on that. Again, I'm saying you, I don't want to comment on that.

I want to say that it's a self-governance, than a regulator-led governance? Because we believe at a bank that it is about us to really build a bank rather than looking towards a regulator to say us good or bad about our ratios?

Because we run a bank, right? We know about what ratios are good for us, and we should be around those ratios.

Got it. This borrowing book has also increased by 2,000 crores quarter on quarter.

That is mostly refinance?

Yes.

Got it. Okay.

That's it from my end. Thank you, and all the best.

Yes. Thanks, sir.

Thank you.

Yeah. Thank you.

Thank you, Sagar, and thank you all the participants, investors, analysts for taking time out on this call. In case you have residual questions, you can always reach out to the Investor Relations team.

Thank you so much. Good night.