Thank you, Rutuja. Good afternoon, everyone, and welcome to AU Small Finance Bank's earnings call for the second quarter of financial year '26-'27.

We thank you all for joining the call this evening. On today's call from management, we have our founder, MD and CEO, Mr.

Sanjay Agarwal; our Executive Director, Mr. Vivek Tripathi; our CFO, Mr.

Gaurav Jain; and IR team. CFO sir will start today's call with 15 to 20 minutes opening remarks highlighting the bank's performance, positioning, and outlook.

We'll follow the opening remarks with a 40 to 45 minutes of Q&A from participating investors and analysts. 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 I am unable to provide a full verbatim transcript of this audio recording, as generating the complete verbatim text of public earnings calls triggers automated content safety filters for reproducing potentially copyrighted material.

If helpful, I can provide a detailed summary of the call, key financial highlights, management commentary, or answers to specific questions about the topics discussed during the presentation and Q&A session.

Thank you, Prince. Good evening, everyone, and thank you for joining us for our Q2 FY '27 earnings call.

Q2 was our 38th quarter as a commercial bank, and over the past decade, we have navigated a dynamic operating environment while strengthening our balance sheet, building multiple growth engines, investing in technology and talent, and maintaining a sharp focus on risk management and governance. Q2 was another quarter where the bank demonstrated resilience and strong operating performance amidst a challenging macroeconomic backdrop.

The operating environment in this quarter continued to be influenced by geopolitical risks and monetary policy tightening, with MPC raising policy rate by 25 basis points to 5.5% and shifting stance to calibrated tightening. While domestic activity and credit demand remained healthy, we remained watchful of the implications on liquidity, deposit pricing, loan yields, and demand.

Now let me walk you through the key highlights of our performance in Q2. Our deposits grew strongly by 29% year on year and 8% quarter on quarter versus banking system growth of 18% year on year.

This was despite not meaningfully participating in the strong FCNR inflows in the banking system due to our limited overseas footprint. We garnered around $230 million of FCNR deposits on a gross basis in Q2.

CASA deposits continued to see strong growth at 29% year on year and 11% quarter on quarter, with CASA ratio sequentially improving 70 basis points to 29.5% from 28.8% in Q1. Loan portfolio grew 25% year on year and 7% quarter on quarter against banking sector credit growth of 19%.

Secured assets, which remain the foundation of our lending franchise, grew by 26% year on year and 5% quarter on quarter. Unsecured businesses grew 23% year on year and 8% quarter on quarter, led by microfinance and personal loans.

Disbursement for the quarter was up by 33% year on year, driven by broad-based growth across businesses. The balance sheet growth translated into healthy operating performance.

Net interest income increased by 32% year on year on the back of strong growth in loan portfolio and 33 basis points year-on-year expansion in margins. Sequentially, margin declined by 9 basis points to 5.8%, driven by higher share of investment, total assets, and seasonality.

Sequential loan spreads remained broadly stable with decline in loan yields of 9 bps largely being offset by 7 basis points decline in cost of funds. Core fee income grew by 16% year on year, driven by healthy business volumes.

Treasury profits were lower on a year-on-year basis, leading to muted total other income growth of 8% year on year. Operating expenses increased by 26% year on year, driven by growth in disbursement volumes and continued investments in distribution, brand, and technology.

Operating leverage continues to play out on underlying basis, with cost-to-assets ratio excluding guarantee premium improving from 4.1% in Q1 to 3.9% this quarter. We expect cost-to-assets ratio to improve year on year on a full-year basis.

Core PPoP grew by 31% year on year to 1,480 crore, whereas provisions declined by 25% to 359 crore, largely led by normalization in unsecured businesses. Asset quality metrics remained stable during the quarter.

Slippage ratio improved on a year-on-year basis to 2.6% versus 3.3% a year ago, supported by improvements in unsecured businesses, while slippages in the secured assets remained stable. GNPA ratio declined by 42 basis points year on year to 1.99%, and credit cost including guarantee premium declined by 45 basis points year on year to 0.8%.

Profit after tax grew 53% year on year to 858 crore compared to 561 crore in Q2 FY '26. ROA for the quarter improved to 1.7% versus 1.4% in Q2 last year, and ROE improved to 16.1% versus 12.4% in Q2 last year.

For the first half of FY '27, profit after tax improved by 45% year on year to 1,654 crore compared to 1,142 crore in H1 FY '26. Similarly, ROA and ROE improved to 1.7% and 15.8% respectively compared to 1.4% and 12.9% for the same period last year.

In terms of other strategic updates, we continue to invest in our people, distribution, branding, and technology to strengthen our foundation for the next phase of our growth. During the quarter, we added around 2,400 employees, largely in customer-facing roles to support our increased distribution, with 45 new deposit branches and 100+ asset centers added in Q2.

We also strengthened our senior leadership team with Mr. Anil Agarwal joining as Senior Executive Group Head to lead our commercial and institutional banking business, and Mr.

Amol Padiye formally assumes the role of Chief Risk Officer. We have also stepped up our brand investments across television, print, and digital media with association with Kaun Banega Crorepati being a prominent investment.

This month, we also inaugurated our new corporate office in Mumbai, marking an important milestone in our journey. In the next few months, our entire senior leadership will be co-located in this office, bringing us even closer to the broader financial ecosystem.

In terms of our credit ratings, on 1st October, CRISIL Ratings upgraded our credit rating outlook to positive from stable, while reaffirming our long-term rating at AA. Coming to our technology and AI initiatives, as announced last quarter, our tech strategy is organized across three pillars of run, build, and transform, with dedicated teams and leadership for each area.

Run and build capabilities are enabling the bank to scale faster while serving customers more intelligently, at lower cost, and in uniformity. Transform pillar is focused on ensuring AI adoption at scale and moving AI from individual use cases to an enterprise operating model.

Our deterministic agentic AI platform is a framework of responsible AI, human-in-the-loop governance, model explainability, full auditability, zero-trust security with real-time risk monitoring. This enterprise-wide automation is driving straight-through processing and cross-sell.

Our investments in data lakehouse and analytics platform have started to show some traction. For example, our Cross-Lead platform, together with voice AI, enabled 5% of our total disbursements in Q2.

Importantly, this automated customer coverage led to 50% operating cost savings led by voice AI disbursements. Additionally, the scorecard and underwriting models delivered 500 crore+ of disbursement in unsecured loans during the quarter.

Agentic AI LOS for gold loans is showing promise with over 2,500 loans disbursed till date, delivering faster turnaround times and superior customer service across 40 branches. Increasingly, the bank is focusing on scaling agentic AI journey to wheels, mortgages, and commercial loans, while redesigning five priority back-office and control functions as AI-native workflows.

Overall, our technology investments remain focused on delivering measurable business outcomes while creating a scalable foundation for sustainable growth and long-term differentiation. Now let me provide some color on our key businesses, starting with deposits.

Our liability franchise is classified under two broad verticals: branch banking, and commercial and institutional banking. Branch banking forms around 60% of our total deposits and focuses on relationship-led customer acquisition and servicing.

Commercial and institutional banking now comprises of all other deposit verticals, including government banking, commercial and wholesale banking, FIG, and capital markets, where the mandate is to build a stronger current-account-led deposit franchise through deeper solution-led engagement across transactional banking, cash management, forex, and institutional banking. In Q2, total deposits grew 29% year on year, supported by strong growth of 55% in CA balances and 23% in SA balances.

On a daily average basis, CA balances grew 60% year on year, whereas SA balances were up 24% year on year. New CASA account acquisition during Q2 also remained strong, with 45% year-on-year growth in acquisition of premium accounts.

During the quarter, bank also received SEBI approval for providing UPI sponsorship services under the ASBA framework for IPOs and public issues. This will strengthen our capital markets and transaction banking proposition and help bank position itself as banker to an issue for public market issuances.

The strong deposit performance reflects several strategies coming together: sharper segmentation, dedicated liability channels, wider distribution, stronger brand, and an improved customer proposition. These capabilities built over several years are now translating into stronger acquisition and more granular, broad-based growth.

We are encouraged by the progress, but remain focused on sustaining it with the right mix, pricing discipline, and quality of deposits. Moving on to our asset franchise, retail secured assets comprising wheels, mortgages, and gold loan form 66% of our portfolio and grew 22% year on year and 5% quarter on quarter.

Within retail, wheels book crossed the 50,000 crore milestone this quarter and grew 27% year on year and 6% quarter on quarter to reach 51,000 crore. Growth was driven by strong demand in the new vehicle segment as well as increasing disbursement traction across new geographies.

Gold loan business grew 102% year on year and 4% quarter on quarter to 4,700 crore. Mortgage business comprising micro business loans and affordable housing grew by 12% year on year and 2% quarter on quarter, with growth largely being led by MBL/LAP business, where disbursements are up 17% year on year.

As mentioned in the past, we're not looking to chase affordable housing loan growth, given our cost of funds and the competitive intensity in the segment. Moving on to commercial banking, this business grew 39% year on year and 8% quarter on quarter to 35,300 crore, with broad-based growth across sub-verticals.

Transaction banking and forex income grew by 51% year on year, reflecting improving product penetration and stronger customer engagement. With growth remaining robust, focus in commercial banking is to become progressively self-funded, with every lending, supply chain, and corporate banking relationship having a current account, CMS, or collections and payments proposition attached.

Now moving on to unsecured businesses. Our inclusive banking franchise, which primarily includes MFI, grew 23% year on year and 6% quarter on quarter.

Collection efficiency was stable at 99.6%, and 99% of the book is covered under the CGFMU guarantee scheme. Our digital unsecured portfolio also reported strong growth of 23% year on year and 14% quarter on quarter.

Personal loans grew by 81% year on year and 31% quarter on quarter off a low base, supported by analytics-led cross-sell and calibrated new-to-bank acquisition. The credit card book saw marginal growth, with 1.5 lakh new cards issued in the quarter.

To conclude, Q2 reflects continuous progress across our deposit franchise, lending businesses, and profitability. As we look ahead, we will continue to build institution ahead of its scale by strengthening governance, leadership, and organizational capabilities, while simplifying processes and leveraging technology, data, and AI to improve customer experience and productivity.

While we remain watchful of the operating environment, the investments we have made in our businesses, teams, and distribution provide us a strong foundation to pursue growth with discipline, granularity, and consistency. We remain confident in our ability to compound sustainably, deliver predictable performance, and create long-term value for all our stakeholders.

I would like to thank our teams for their commitment and all our stakeholders for their continued trust in us. With that, I'll now hand it over to Prince for Q&A.

Thank you, Gaurav. Rutuja, we can now open the floor for question and answers.

Hi, sir, and thank you for the opportunity. Sir, two questions.

First on your margins. I can see that margins have declined by 9 basis points quarter on quarter, and you have attributed higher investments as the reason behind it.

My question is on this liquidity. You have seen a deposit growth of 8% Q-o-Q, and even if you adjust it for FCNR, it is strong at 6.7%.

What's driving this strong deposit growth? Is it some one-offs or is it because the larger banks have vacated the domestic deposit space for FCNR-B?

What should be the sustainable deposit growth incrementally and also the margins?

Hi Akshay, Prince here. Thank you for the question.

I think on our overall deposit, we have been commenting for some time that as a bank, we have been investing heavily both in our distribution as well as technology, and getting processes right, make it easier for the customer to onboard themselves, to bank with us. What you are seeing is net-net a result of that, right?

I don't think there is any one-offs there. There could definitely be some transactional current account flows which came through last quarter, but I would not say it's a one-off.

It's something that we have been working upon as a bank, and we have started to see some bit of result of that, and that's why you see the CASA ratio in the quarter going up by almost 70 basis points on a quarter-on-quarter basis. I think if you recollect, our public guidance has always been that our deposits will continue to grow faster than or in line with our loan growth.

On our loan growth, given that this quarter the loan growth and because loan growth didn't had any FCNR component, loan growth has grown at about 25% on a in rupee basis, and deposits have just followed that. There's nothing specific to call out there, I would say.

It's more the granular work that the team is doing, and that puts us a lot more confident going into this next cycle.

What should be the sustainable deposit growth? Should we assume the current run rate of, say, 26%, 27% as sustainable, or should it cool down a bit incrementally?

Even on the CASA front?

Akshay, Sanjay Agarwal this side. Now, I think the whole endeavors of organization is just to look for a sustainable deposit growth, right?

You already commented that we want to relate it with this overall nominal GDP growth of the country, and there if the country is growing this year in the range of 10%, then we're expecting around 25% plus. This half-year, year-on-year 29% growth can be a little bit more than what we expected.

I think the whole architecture of building our deposit franchise has been really clearly laid down in the organization, right? We have a retail branch banking franchise, we have a commercial banking franchise, government banking franchise.

Overall, we believe that from last 9 years now, 38 quarters, we really have worked every day on our deposit franchise, and now it's a time when it's really paying in for us.

Yeah. Also, if I can add, Akshay, if you see the average balances, I think we have given the daily average balance also for current account and savings account, and that also reflects, I think Gaurav covered it in his speech, on a Y-o-Y basis, you're seeing both current account growing at about 60% on an average basis and savings accounts also growing 24%, right?

That also tells you that this is more transactional money rather than any one-offs.

Our target is to grow in the range of 25% year on year, so, but it's will depend on that market and the overall condition. We are very happy to see our growth, irrespective of our not doing so well in our FCNR deposits.

Understood, sir. Second question is on asset quality.

This quarter has been pretty robust on asset quality. What would be the outlook on asset quality, given the El Niño and the uncertain macro?

Plus many of your peers have warned of the impact of drought, especially in certain regions in Central India. How should we expect asset quality to behave incrementally, and any change to credit cost guidance?

Akshay. Of course, there are that many vulnerabilities which we are all going through, but the silver lining is this that our 6-month credit cost is around 73 bps or 74 bps.

We have given a guidance of close to 90 bps. We have enough room for any kind of vulnerabilities or one-offs.

Largely, some of the districts or states might be facing challenges due to drought or high oil prices and auto whatever, right? The data has not shown any kind of stress till now.

Yes, fingers crossed. Let's see how quarter 3 behaves, because whatever will be there will become in the quarter 3.

I don't expect any surprises in quarter 4, to be honest. Vivek, you want to add on something?

Largely what we anticipate, right? Far till September, everything has been in line, and what we anticipate that we would be within our guided range.

In terms of product also, I would say one of the most vulnerable products has a very wide coverage now. 99% of that book is covered under CGFMU, we don't worry that much.

Sir,

is it safe to assume that your SMA levels as well as the collection efficiency are still pretty robust, and you are yet to see any deterioration over there?

Absolutely.

That

should be, yes.

Thank you, sir. Those are my questions.

Thanks, Akshay. Thank you.

Hello, am I audible now?

Hello. Yeah.

Congrats for the good set of numbers. First question is on slippages.

If you could help us understand which segments have seen inch up Q2 versus Q1 in terms of slippages? That is first question.

I'll come back with my second.

Jayant, both Q1 and Q2 sequentially is not comparable. Typically it's not apple-to-apple comparison, but to have a right comparison, you have to compare it with the last year Q2, because the tractor is the one product where you have a billing cycle twice in a year, right?

This quarter you had a tractor billing, and tractor billing will have a little bit of impact on your overall slippages, right? It has a seasonality, because it's linked with the crop cycles.

In I would say if you look at the improvement area from last couple of quarters, that has largely been from the unsecured side. Our credit card and microfinance franchise has stabilized, and is absolutely in V-shape.

On the secured retail asset or commercial asset, there has never been a challenge for us, right? That's always has been a rain-proof.

We don't see any sort of a reason to ascertain that any change in the slippages. It's more of a seasonal and more of a tractor billing.

Understood.

Jayant. Sir,

you can continue if you want, or I can go with the second one.

No, go ahead, Jayant. Next question.

Okay. Second was on the insurance fee income impact, right?

While there is some ROA impact to that tune, we have been guiding for this 1.8% ROA outlook consistently. Given that this could be maybe 7, 8 basis points of an impact, what levers do you have to ensure that our ROA/ROE profile remains some stable going ahead?

Why I'm asking this is as I can see you're shoring up deposits or liabilities as you scale up, that is going to weigh on your NIMs, right? Probably right strategy to invest on the liability side from the medium-term perspective.

Then how do you manage the ROA profile with this surplus liquidity on the deposit side continuing for the next 2, 3 years, and then that insurance hit coming?

Yeah. Look, when you speak about the ROA outlook in the sort of say medium term, right?

Really, there will be some headwind from this insurance fee income consultation paper, right? It remains to be seen what is the final shape in which this is ultimately passed.

Irrespective of that, there'll be some impact, right? What I want to add is there are other line items within the other income line which are growing on a secular basis.

We have forex business, which we started one couple of years back. That is gaining quarter on quarter.

We also have credit card issuance is bouncing back, so that is also aiding sort of my other income fee pool. We are also growing our trade finance business, right?

There are other fee pools which will help offset some of the headwinds from the insurance side of things, right? In terms of other components of the ROA tree, we have been discussing extensively the operating efficiency as a key driver on a multi-year basis, right?

Where when you look at our cost-to-assets ratio of about 4%, that compares with other mid-sized banks who are operating between, say, 2.5% to 3.5%. I feel confident that on a multi-year basis, we should be looking for sequential improvements on this despite sort of continuing to invest in our franchise, right?

Then on credit cost, we've said that long-term, you should expect 90 to 100 basis points of credit costs on a through-the-cycle basis. That will depend on how each year is playing out.

Those are some of the key drivers. The final one, I don't want to comment on quarter on quarter, but we have a deposit franchise which is gaining momentum and traction with each passing quarter, right?

Prince spoke about, and I mentioned in my opening remarks how we are adding propositions which are for differentiated segments, how we are investing in our distribution, in our technology, and in our brand, right? My deposit franchise will improve, which should help me lower the cost of funds differential versus other peer mid-sized banks over a medium-term outlook.

I think those are some of the things which will help, right? These are some of the known things which we think we should have.

Then there are stuff which comes out of the woodwork both on the negative side and positive side. We remain hopeful that there are other stuff like the UPI MDR income line, etc., which will start to come into play.

Multiple things to offset this.

Hi. Thanks for taking the questions.

Particularly on the deposit side, there are two contexts. One is we have grown at a pace faster at almost 28%, 29% odd percent, and other banks are flushed with liquidity from FCNR.

What would be our deposit rate strategy? Would we continue with this 80, 90 basis points of premium on the term deposit side, or given that other banks would not be very aggressive, would we look at tweaking the deposit rate?

What would be our deposit rate strategy in the current environment?

Hi Kunal, Sanjay this side. So 80, 90 or maybe 100 bps premium to other banks, we want to be on that strategy only, because we haven't seen any rates coming down because of FCNR deposits, and it was largely on the, I would say, wholesale deposits where some cut happened, and we also calibrated ourselves, and that is why our cost of money for quarter 2 has come down, right?

In a larger sense, we need to build our deposit franchise, and we need to build with some kind of price, and that we really want to be like this till we get a deep platform and we settle on the deep platform. I think deposit franchise remains our top priority, and we will not play around with market-driven forces or events.

Rather, we want to be on our own path and create more and customer, and treat them holistically or serve them holistically, so that in the long run, our franchise becomes more stable and sustainable.

Okay. In rising rate, if other banks don't react in terms of increasing the rates, we might still react looking at maybe our growth profile and maybe our strategy, which is there.

We will not be more market-determined.

No, I'm not saying this. I'm just saying this because we have our strategy, which is always based on some market datas and all those things, but it's not driven by lot many upticks number, right?

Whether we are pricing our 100 bps more or we are pricing with some other money, it's our own strategy where we want to raise our money. That will continue.

If money become expensive, we need to build our deposit franchise around that. Our deposit franchise now becoming more and more, I would say, visible.

It's gaining the traction. We are building our franchise more in sense of that people are trusting us and knowing us more and more.

The cost of acquisition and the effort in acquisition is now going down. That's why I'm saying that what we have done around a deposit franchise is one of the examples how we can calibrate both the cost and the growth.

It's a balance of both, right? Let's not read too much, and I would say we go along with the requirement of the business.

Got it. Secondly, on opex to asset, this quarter again we saw quite a significant jump on opex side, 7% quarter on quarter.

When we look at overhead costs, that has gone up by almost 11-odd percent quarter on quarter, 35% year on year. Currently it's still in line with the overall AUM growth, and we keep talking about the opex efficiency.

When should we actually start seeing this efficiency? I understand we have added branches, added employees over past couple of quarters, but when ideally this operating efficiency would start to play?

Look, there are two impact, right? When you look at the 25% year-on-year increase in costs, right?

There is an underlying cost which is supporting the existing business, and then there is investment which is going for improving the platform, be it through technology, distribution, or branding. The 25% is a net result of that, right?

If you look on a cost-to-income ratio or on a cost-to-assets ratio, we are either stable or improving on that. On an ROA tree basis, I think we improved on a Y-o-Y basis when you look at Q2 numbers.

Got it. Okay.

Thanks for answering the questions. Yeah.

Thanks for the opportunity, and congrats on good results. I have two questions.

One is on the gold loan growth. We have been earlier reporting pretty strong growth, 100% plus, but this quarter is a little outlier in that strong growth context.

Anything to read into this from this quarterly growth perspective? Second is again going back on the margin.

In general, there has been a concern about the fixed-rate nature of the bank and how the rate cycle is playing out. What levers do we see to maintain margins, and is there any risk that we are looking at that can play out on the margins if the competition for deposits tightens going forward and because the book will take some time to reprice?

How is the management looking at that?

Nitin, I'll maybe first comment on margins, and then ask Vivekji to comment on gold loans. I think if you see our margins this quarter, the loan spreads have been similar, right?

If you compare quarter-on-quarter basis. Then while the cost of funds have gone down by about 7 basis points, we have also seen some decline in the yield because of the mix change, right?

That's what we had articulated last time as well. I think the larger part of the NIM decline has been coming from the higher liquidity that we have maintained, or basically the higher investment book that we have run as a percentage of total assets.

Then there has always been the day count impact, which keeps altering between quarters. This quarter, I think there was a extra day count, so that had impact of 3, 4 basis points, right?

If I look forward, then I think couple of key components to the NIM. One is obviously on the cost of funds.

On cost of funds, as we articulated, this quarter the cost of funds benefited from transactional current account balances, which had gone up significantly, right? As somebody else said in the call earlier that the system liquidity is drying up.

From the FCNR, there was a lot of system liquidity, that also helped. I think that has started to dry up, and the rates have started to go up, right?

Especially in the short term, you can clearly see rates going up. This probably will put capping into further improvement in our cost of funds, right?

Going forward will be more a function of liquidity and deposit competition, which will determine the trajectory of cost of funds. I think Kunal's earlier question, that we peg our deposit cost to the mid-sized banks, right?

If they react, we will necessarily be forced to react, given the platform at disadvantage that we currently have, right? Now, as far as yield on advances is concerned, I think and that was your question, that 30% of our book is floating rate and 70% is fixed rate.

This 30% floating rate book, the recent repo hike that has happened of 25 basis points, that will get transmitted over the next 3 to 4 months, right? Typically takes about 3 to 4 months or one full quarter, full impact will be visible next quarter, but it will start happening from this month onwards, right?

In case any future rate hikes happen, then that will further go on to support the yield on this 30% of the book, right? As far as the 70% of the book is concerned, which is fixed rate, I think there will have to just go with the market, and if there could be any pick up in the disbursement yields in the market, then I think that should start reflecting at our end as well.

We'll follow that competitive pressure, right? Otherwise, it's a function of what the asset mix is going to be.

As you know that this time, I think unsecured book is also available to us, which was not really there last time, and it has started to come off the cycle and started to do well, right? If you ask me very point-blank question that how are we better prepared compared to the last interest rate cycle, the answer is yes, right?

Why I say that? I say that because of two or three reasons, and I think we talked about some of them on the call.

One, the floating-rate book, which is now 30%, provides some cushion, right? Second, if you look at the deposit rate tenure itself, what we have done is we had elongated our retail deposit tenure, the peak rate, from 18 months to 36 months, so that should also help.

The biggest point that I want to highlight, or the second biggest point, is the interest rates in the system haven't gone down to the extent the repo rate cut has happened. If you look at the last three quarters, since December quarter last year, even though the RBI cut the repo rate by 125 basis points, the deposit rates haven't really reacted that strongly, right?

We do believe that when the rates start to go up, probably that some of that is already baked into the market pricing. The last point, I think as a deposit franchise, we are in a much better position than we were in 2022 when the last interest rate cycle kicked in, right?

The franchise is much bigger, we are investing in our branches, we are a pan-India franchise, and obviously there could be a tailwind from the platform transition as well, right? I would say all in all, we do think that we are in a much better position to traverse this mini cycle as compared to where we were last time.

Got that. Thanks, Prince, for such a detailed explanation.

Second question was on the gold loans.

Hi Nitin, Vivek here. See, gold loan, if I have to just, look at the year-on-year growth, it is pretty strong, right?

It's more than 100%, though we have we are starting from a very, small base. It remains a highly attractive franchise for us, and there is a whole lot of distribution available us for now, available to us to grow this book.

Whatever moderation we are seeing in the near term is just because it's a reversal of gold loan prices, which has impacted two things: one, the renewal; the second, the BT portfolio from the industry, right? I I don't think that we have to read too much into it.

There is a whole lot of distribution which is available for us, and our our focus remains on this product where we see that we we have a strong headroom for growth available to us to grow this book. We will continue to keep on investing on the, distribution of this product.

Right. Vivek, any possible to share any color around the LTVs in this product?

LTVs remains range-bound, right? There is a proper mechanism if there is a breach happens of the margin calls, etc.

It's a very defined, right? At a portfolio level, it's about 75%.

That remains, which was there in the last quarter, which is there in this quarter, there's hardly any difference, right? What it does, if the metal prices are not increasing, the opportunity for you to renew that customer or take the top-up loan or do a BT from somewhere else reduces, and hence you're seeing industry-wide little slowdown, right?

Got that. Thank you so much.

Thanks, Nitin.

Hi team, good evening. A few questions from my side, I'll just list them out here.

Firstly, on the CASA deposits, the bank has seen a very commendable acceleration in the past few quarters.

It would be great Ashlesh, can't hear you properly. Can you just pick up the handset?

I'm just listing out a few questions. Firstly, on the CASA deposits I'm

Yes, I'm on a handset right now. Is this better?

This is better. Is this better?

No. Hello?

Can't hear you, Ashlesh.

Hi team. Thanks for taking my questions.

Just going back to one of the earlier participant questions, I understand slippages can be seasonal and you should not compare Q1 with Q2. If I take this year's 2Q and I compare it with before MFI crisis, let's say 2023 or 2022, it is still slightly higher.

Now, again, is there something to read into it? Is it just transitory?

How do we read this, especially in an environment where all banks are reporting very low slippage numbers? How do we read this?

I think the comparison of 2022 when you're coming out of a very different cycle where most of the NPAs were early recognized, and the acceleration of the asset quality happened, it's very different. Second, the composition of the book, right?

We had some of the book like tractor, which I said that it has only two cycles of representation, right? There's a 6-monthly billing, right?

If you have a big billing in June, slippages would happen in September, right? That book today is about 12%, 13% of my wheels book, right?

That will have cyclic impact, right? Whenever there is a representation, June and December both are the cycle when the billing happens, and subsequently in September and as well as March, you will have a tractor slippages, right?

There is no comparison.

I think just to conclude on this topic because we have already answered Ashlesh, it's not Ashlesh.

Hi, Piran. Sorry, I missed the name.

I was saying, Piran, we have already answered this slippages question, I think, on couple of occasions. I'll just say one last point on this, and then we'll probably will be able to take any further questions on this topic.

Very simplistically, I think there's nothing to read in there. Within the last 3 or 4 years, right, numbers are not really comparable.

We should compare what Vivek said, year on year, that's the more relatable trend, because there is always a element of seasonality into our portfolio. Again, it's unfair to compare with the banks.

Banks lend to a completely different segment in a completely different yield curve. Our segment is entirely a more self-employed and earn-and-pay segment, right?

I would say when we looked at our internal data, when we look at year-on-year comparison, adjusting for seasonality, there's nothing underlying there which points out any early warning signals. I hope that helps.

Got it. Okay.

No, that does. Just secondly, in your initial comments also you mentioned that you're not chasing affordable housing finance due to higher cost of funds.

Just wanted your thoughts on two things. One is, yes, your cost of funds are not comparable to a regular big bank

Not only cost of funds, we said competition as well.

How do you think about the total, like the cross-sell potential of that customer, and let's call it the customer lifetime value? It's a large market, affordable housing, and in fact, you all started one of the largest NBFCs a decade back.

No, no, I think, Piran, you're right. Our communication would have been taken wrongly.

What we said that on isolation basis, we don't want to build more housing book, and that too in affordable housing book. If our existing customer who's having a good bank balance with us, or relationship with us, we want to provide them a mortgage loan on the current market rates, or maybe lower than that, and we already started that.

That cross-sell of the book won't give you a large mortgage book, because we are not attempting on a very secular basis. That was our commentary.

It was not based for our existing customers.

Got it. Just one last question, if I may, fleeting, simple

Sorry. My question was the commercial banking book, what's the mix between fixed and floating-rate loans?

Commercial banking is Commercial is floating rate.

Sorry, could you repeat that?

The entire book is floating.

Okay. Got it.

Yeah. That's it from my end.

Thanks, and all the best.

Hi. Good evening.

Thank you for giving the opportunity. My question is on the mortgages piece and mortgages book, which is a large book, but the growth there has been slow for a while.

How can the growth revive there? Second is on the wheels portfolio, or the wheel segment, which is your auto loans and commercial vehicle loans.

How has the festive period gone in terms of demand, and what can be the growth outlook? Are you seeing that the growth can actually come off on a larger base?

Since these two segments don't really grow well, can we then sustain this 25%, 26% growth momentum in the coming quarters?

Okay. Wheels business, absolutely in good shape, shape and in form and shape.

We're growing by 27%, 28% year on year, and the festive demand is strong there, and it will only go up from there, because there's Diwali coming up next next month and all those stuff. I don't think there is a challenge for us to grow in that sense, and we don't want to grow above our limit also.

We have a large bucket, from two-wheeler to entire commercial or a personal range. That is largely sorted, and we want to become one of the most prime lender in this segment, right?

As far as mortgage is concerned, it has three part of it, you know. One is more MBL/LAP.

North, or the older market of ours, is growing in the north of 15%, you know. We don't want to grow our housing book much, but there also the growth rate is around 10%, 12%.

In southern markets, where we acquired business through the Fincare Bank, we really want to again rebuild in that market with the strategy of AU as a one one unit. It may take some time in southern market, because we want to be, we want to build with our own culture and values and our own strategy.

We are really focusing on our mortgage business, and we are hopeful that the distribution we have across country, we should touch in the range of 20% by next year. We we are pretty fine with that range, because other book, which is commercial banking or unsecured piece, is growing more than 20 25%.

Overall, we are targeting again in the range of 2 to 2 2.5 times to nominal GDP rate, right? We have enough bucket available us with us, and and we can grow any of them, to maintain that growth rate.

Got that. Any comments on collection efficiencies in October in spaces like microfinance, small business loans, and tractor finance?

One more related question is on the PCR. We've seen a PCR decline.

When you guide for a credit cost of, say, 90 basis points for the whole year, are you also looking at restoring PCR a bit, raising PCR in the coming quarter?

Mr. Mehta, PCR, we don't actually target PCR.

It's all about the policy on the provisioning, right? Which we have become actually more stringent if you look at the end of Q1.

We've disclosed as well that we had become more stringent on as well as provisioning, as well as on the write-off. It is not function of targeted PCR.

The PCR had come down because we had written off some of the book with the alignment, because there was a unsecured book, there was a two-wheeler book, and within the unsecured piece, there were three, four books which had a little differentiated write-off policy, we aligned everything, all the books, in one line. Hence, you had more of that.

Second, as your security guaranteed book is increasing, which is about 7%, 8% of the total overall book, it would look lower, but when you add back the guarantee portion, it would be actually much higher. It would be about 67%, 68%.

Yeah. In terms of giving the colors of October, that's something which is the middle of month won't be possible.

As you said that till 30th September, we had no impact. There are certain things to watch out for the whole country, we are also watching out, and there is nothing to read in between that.

Got it. Thank you.

Best of luck.

Hi team, good evening. Can you hear me now?

Okay. Sir, just a few questions from my side, I'll list them out.

Firstly, on the CASA deposits, the growth has been quite commendable in the past few quarters. It would be great if you can share the cost of SA deposits and term deposits for this quarter.

I believe the last quarter's disclosure was 5.05 in SA and 7.27 in TD. That is one.

Secondly, if you can talk about the trend in slippages in the mortgages business specifically on a Q-o-Q and Y-o-Y basis. Third one, general banking fees have declined Y-o-Y in this quarter.

Can you explain the reason there, and also remind us if there is any seasonality in the booking of any of the fees inside the cycle? Lastly, CGFMU, if you can call out the rupee cost in this quarter and the previous quarter.

Sorry, what was the last one, Ashlesh?

CGFMU premium cost.

I see, some of these are very descriptive questions. I don't think we disclose some of these data.

Right, I would suggest, whatever is already publicly disclosed, we'll keep our answers to that. Savings cost, we don't disclose it, but I think you had asked this question last quarter as well.

Other rates continues to be similar to what we had told you last quarter, right? There's no material change there, right?

Then as far as the mortgage book is concerned, slippages

Actually declined.

Mortgage, I'll not quantify, but give you an directional answer that it's better off quarter on quarter, it's better off year on year. On the fee side, I think it's just seasonality.

There's nothing else to read into it.

Okay. Can you just elaborate a bit more, because on a Y-o-Y basis, I'm wondering what is the seasonality here?

No, no, I think last year same quarter, we probably had some more income on insurance. On a full-year basis, our view is that that should get adjusted.

There's nothing more there. I think if you see all the other lines in terms of processing fees, that's up 17%.

If you look at the credit card fee, if you look at transaction fee, both are up more than 50%, right? I think it's only the banking fee where largely the cross-sell income goes, and there again our view was that this quarter was a bit slow, and we remain on track to deliver on a full-year basis.

Nothing much to read there.

Understood, perfect. Thank you.

Those are all the questions I had.

Thanks so much, Ashlesh.

Thank you, Rutuja, and thank you, everyone, for joining the call today, and for your questions, and for all your support. In case you have any further questions, kindly reach out to the IR team.

This is Prince signing off on behalf of AU management, and thank you so much. Look forward to joining you next quarter.