Thank you. Good morning to all of you, and thank you for taking your time out to attend this call.

I'm happy to start off by saying that many of the initiatives we had talked about a couple of quarters back have started yielding results. In microfinance, initiatives such as rolling out the monthly repayment mode with EMIs till the 15th of the month, which forms around 63% of the book today, focus on acquiring new-to-credit and new-to-bank customers who have lower leverage, and reducing caseload for staff, combined with improved lending discipline in the industry and strict implementation of MFIN guardrails by all the players, have resulted in significant improvement in performance of this book.

The X-bucket collection efficiency on a POS basis has moved up to 99.4% in December, and the percentage of book slipping into NPA over the last few months has seen a sharp reversal. Microfinance today contributes about 8.5% of the total advances, excluding the direct assignment purchase of MFI agri pool that we did in Q3, and we aim to keep this microfinance at around the 10% of the advances level on an ongoing basis.

All other businesses have shown continued improvement. Small business loans, which showed some stress in Karnataka specifically, maybe about 2 to 3 quarters back, has seen a significant improvement.

Overall delinquency in SBL has come back to near normal. Disbursement also has been picking up, and portfolio quality across all parameters have shown good improvement over the last quarter.

This enables us to continue growing this book strongly on an ongoing basis. Other businesses are also doing well, and Jagdish will cover those more in detail.

On liability, we had a 18% growth in deposits in Q1. We had to take the pedal off the deposit growth to prevent excess liquidity in the system.

We ended up with just 7% growth in deposit in Q3, and now need to increase the momentum on deposit growth to support the increased advances growth. Murali would cover steps being taken to bring the deposit growth back to the earlier levels.

The cost of funds has been coming down and presently stands at about 7.13. It's expected to go further down before stabilizing as more of the old deposit gets replaced with lower-priced new deposits.

In terms of capital adequacy, we are placed comfortably at about 20.47% capital adequacy ratio. During Q3, we took some initiatives to conserve capital, such as increasing the IBPC outstanding from 1,250 crores to 2,000 crores, as well as getting about 1,690 crores of vehicle finance covered under CGTMSE guarantee scheme.

This not only supports us in terms of credit cost in the future, but also releases capital to the extent of the guaranteed portion of the principal. With these initiatives continuing into the subsequent quarters, along with better internal accruals that we expect to generate going forward, we do not expect a capital expansion requirement in the first half of the next financial year.

We will review the situation in the second half and take a call at an appropriate time. We have delivered a better than expected ROA of 0.65% for Q3 after taking into account around 29 crores of impact due to the new labor code implementation.

For this one-time impact, the ROA would have been in the range of around 0.8%, and cost-to-income would have been at about 70% level. We have guided for a 1% exit ROA for the fourth quarter, and we believe that we are in line for delivering that.

On advances growth, we have guided for a 15% growth for the year against 12% growth in Q3. That is I'm talking of without taking into account the DA purchase in Q3.

Along with the DA purchase, advances growth has been 16% in Q3. If you remove the DA purchase, it is 12% in Q3, and we have guided for a 15% full year growth, and we believe that we should be in line to deliver that.

Overall, we had a big impact in the income in the last 2 years because my MFI portfolio mix, which was 20% in March '24, was dropping over the last 2 years to reach 8.5% now. There has been a drop in income impact that we have seen over the last maybe 6 quarters or so.

With that kind of coming to an end and the microfinance 8.5% expected to stabilize around the 10% contribution level, and the rest of the portfolio seeing all-round improvement, we believe that we are well-positioned to deliver consistent and improving performance going forward. Thank you, and with this, I hand over to Sridhar.

Thanks, Vasu. Good morning to everyone.

Thank you for joining us today for the Q3 FY26 earnings call of our bank. I appreciate your continued interest and support.

Let me take a few minutes to walk you through the financial performance for the quarter. Most of these details are also available in our investor presentation.

We reported a net interest income of 852 crores and other income of 285 crores, bringing our total net income to 1,137 crores for the quarter. Total net income grew by 8% Y-o-Y and 14% Q-o-Q.

NIM has significantly improved by 43 bps Q-o-Q basis to 6.72% in Q3 FY26 as compared to 6.29% in Q2 FY26. The bank reported a PAT of 90 crores, a growth of 36% Y-o-Y and 273% Q-o-Q.

This is after making a one-time incremental provision of 29.5 crores due to implementation of new labor law codes in Q3 FY26. Return on assets and return on equity for Q3 FY26 were at 0.65% and 6.1%, respectively.

In terms of asset quality, gross NPA reduced by 20 bps Q-o-Q at 2.62% in Q3 FY26 as compared to 2.82% in Q2 FY26. Net NPA reduced by 7 bps Q-o-Q to 0.88% in Q3 FY26 as compared to 0.95% in Q2 FY26.

Credit cost also has reduced to 1.88% in Q3 FY26 as compared to 2.16% in Q2 FY26 and 2.65% in Q3 FY25. Our provision coverage ratio remains healthy at 61.1%, and we expect credit cost to taper down by Q4 FY26.

Moving to the advances book, gross advances grew by 16% year-on-year to 43,268 crores, driven by robust disbursement. The disbursement for the quarter stood at 6,557 crores with a strong momentum across all verticals.

On the liabilities side, total deposits grew 7% year-on-year to 43,668 crores, and our CASA ratio remained stable at 30%, and retail deposits now constitute 73% of the total deposit base. As of December 31, 2025, our capital adequacy ratio stood at 20.47%.

With this, handing over to Jagadesh.

Good morning to you all. On the asset business, for the quarter 3, we have demonstrated a notable improvement compared to the performance in the preceding 2 quarters.

This positive momentum was predominantly driven by the growth in non-microfinance segments and a strategy of risk-calibrated expansion. Also, the shift towards the certain product segment contributed significantly to the overall better results for the quarter.

Let me walk you through some key highlights. On the advances front, we have grown 16% year-on-year and 11% quarter-on-quarter.

This is primarily driven by the healthy uptick in disbursements. Microfinance and micro loan advances includes purchase of agri assets under direct assignment deal of 1,343 crores.

Excluding this direct assignment deal, overall bank advances grew by 12% year-on-year and 7% quarter-on-quarter. On the disbursement front, we have delivered the highest ever quarterly overall disbursement of 6,557 crores, which is a growth of 28% year-on-year and 22% quarter-on-quarter.

Microfinance disbursement has surged 72% quarter-on-quarter to 1,173 crores in this quarter, helping us to maintain a MFI portfolio at around 9% of our overall advances mix. On the non-MFI front, we have delivered our highest ever quarterly disbursements of 5,385 crores in quarter 3, which is a growth of 35% year-on-year and 15% quarter-on-quarter.

Our non-MFI, which is a secured book, now stands at 38,108 crores, marking a 19% year-on-year growth. A small business loans, which is continues to be a largest contributor, growing at 14% year-on-year, and notably, the secured business loans saw a robust 22% year-on-year growth.

On the vehicle finance, our strategic focus remains on the used CVs and used cars. Our used commercial vehicles grew at 23% year-on-year, and used car posted a strong 36% year-on-year growth.

On the affordable housing, we grew at 17% year-on-year and 6% quarter-on-quarter at 5,360 crores. On the MSE book, we grew at 35% year-on-year and crossing 2,000 crores.

Microfinance portfolio excluding DA stands at 3,800 crores, and it expected to grow, driven by the improved disbursements. On the yield and asset quality front, the yield on gross advances declined by 10 bps quarter-on-quarter to 15.63%, primarily due to the lower contribution from the MFI mix.

On the non-MFI yields, it's declined by 9 bps quarter-on-quarter to 14.97, mainly due to the portfolio recalibration. On the asset quality, net slippage is significantly reduced to 2.52 in quarter 3, down from 3.78 in quarter 2.

We reported the lowest net slippages for the bank in the last 6 quarters. Credit costs saw a sharp decline to 1.88% compared to 2.16 in quarter 2 of the financial year '26.

In microfinance, 1 to 90 DPD improved significantly to 2.14, down from 5.40 in quarter 2. This is driven by the enhanced collection efficiency.

As stated earlier for our current financial year, we are in line with our stated advances growth of about 15% year-on-year. This is excluding the DA, driven by the improved disbursements.

Thank you, and I will now hand over to Mr. Murali.

Murali Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

Good morning. Thanks to you all for joining this call.

While the numbers are there, let me take you through some numbers which is very important for all of us to get a grip of things. Last quarter, we did rate tweaking strategically because that was an opportunity available for us as we strengthen the proposition across mass affluent, affluent, and HNI as a segment.

Our cost efficiency in terms of interest payout came through three different things. One is on savings rate, second is on TD rate, and then duration shifting from 444 to 888 as an opportunity.

That has helped us to bring the overall cost of funds down, that is one side. Absolute SA, which was at 6.08 as we started the year on April, is today somewhere at 5.1 as we exited quarter 3.

TD, which was at 8.48, today is at 7.3, which means close to 95 bps on TD on repriced book of 65% of the portfolio. Importantly, shifting the consumer from 444 to 888.

Last quarter, we did close to 1,10,000 customers who had 444 in last 6 months, to be very precise, month-on-month migrating into 888. There's a conscious effort to build the quality in terms of duration, bringing down the price, enhancing the proposition has been our core driver.

Our family banking proposition, which we spoke about, we have now close to 30,000 families of Elite. To expand that Elite as into next level, we are creating a product for mass affluent, which is called Elite Lite, which has gone live, and we are also getting into HNI program called Artha, which should go live today, tomorrow.

The important message what we want to tell is we want to strengthen our relationship management. We want to move from only rate-conscious approach to value proposition.

Third important thing is what more can I do to the consumer. As a proposition, we are strengthening the product, distribution, and relationship, and focused on three clear specific segment.

On NR, our FCNR has gone live. We have crossed 20, 22 million worth of dollar, and we will be launching our pound-based FCNR next week, and we are seeing a good trajectory at this point of time.

We predominantly at this point of time, we are only focused on giving it to our existing customers, and so is our inward remittance gone live. AD-1 almost through in terms of that, and we specifically launched a product for seafarers, and this is meant for only shippies, and which is started well last quarter end we launched it, and this quarter, we have launched a program for NR also, which is specifically an Elite.

Elite as a proposition is going to be what we want to call as house of Elite: entry for mass affluent, affluent, and then HNI. This is going to be our approach in terms of our specific focus on SA.

CASA, we have some distance to cover. We are coming out with a merchant program as well as asset-centric approach, which we will elaborate later on next quarter.

Now last but not the least, gold loan from the branches, signs are very encouraging, in line with markets. I think we are disbursing close to 100 to 120 crores a month on a steady-state basis.

This should only go up. Presently, we are focused as a cross-sell activity, and at some point of time in the next year, we will have it as a focused activity in terms of new-to-bank sourcing also.

With this, I hand over the phone to Gopi, who will give some treasury insights to us. Thank you all.

Thank you, Murali. Good morning, everyone.

Markets remain extremely volatile, dominated by global trade and geopolitical uncertainties. Indian equities and rupee markets have underperformed versus global peers.

This has mainly been caused by foreign investors exiting equity investments, with further pressure on account of returns being impacted by rupee depreciation. Domestic CPI is expected to remain within the MPC inflation target.

Upcoming budget will be closely watched, with markets seeking further cues for government stimulus to strengthen growth. Government bonds market saw the benchmark 10-year yields stay roughly flat during the last quarter and closed at 6.60.

With overall system liquidity remaining tight and pricing in no further rate cuts, benchmark yields further went up during current month. More recently, RBI has announced steps to infuse system liquidity, with borrowing rate for banks and corporates spiking in the past few weeks.

We continue to be watchful in the near term, with heightened volatility becoming the new normal. Coming to Equitas specific, treasury income stood at 34 crores in Q3 FY26.

Thank you. Back to operator.

Hi, sir. Thank you for the opportunity.

Sir, my question is in the other income line item, do we have any income from sale to ARC or any other one-off income booked there? Because sequentially, it has jumped quite a bit.

This is Sridharan here. Other income includes a one-time ARC income of 28.25 31.52 crores.

Okay. Okay.

With respect to credit cost, sir, if it is possible to share any sort of guidance, how do you look at credit cost for us in Q4 and the year-end because the slippages and most of the book for us, including SBL and MFI, have started performing in line with your expectations? Any light you can shed on that?

As we clearly stated, that net slippages was the lowest among the last 6 quarters, and it was on the downward trend. It clearly indicates that even the credit cost will be on the downward trajectory for Q4.

Okay. Okay.

Got it. TD, lastly with respect to TD repricing, how much of our total book would have repriced as of now, and what quantum of book is left to reprice, and how much in terms of cost of fund one can further expect any sort of decline from here?

That's it. Murali Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

60% of the existing book has got repriced, and another 20 is due for this quarter. Balance will slip into the next quarter.

Already as I said, we have tweaked the rates in line with better than market, and at the same time, in line with RBI, we are one cycle behind. As of now, we have saved 98 bps, as I said earlier, on the new priced book of the existing portfolio.

Got it. Thank you and all the best.

Murali Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

Thank you.

Hi. Just one question.

What is the PCR coverage ratio which you're comfortable with, and what is the trajectory of NIM over next few quarters?

PCR ratio, it's around 67% today. We are reasonably comfortable at those levels.

Around that level is something that we are fairly comfortable with. As far as the NIMs are concerned, we did have a sharp jump in the NIM, basically because microfinance has stopped degrowing, and for the first time, I think actually it grew quarter-on-quarter from a portfolio perspective.

Now microfinance is about 8.5% or 9% of the total book. We expect that to remain at that 9% to 10% level.

That's our stated objective. Because of that, we do not expect a downward pressure on NIM any longer because of MFI going down.

The rest of the book continues to grow well. I think our NIM is more or less where it will be.

Maybe it may marginally tick up a little bit, but somewhere around this range is where we expect it to be.

Okay. Okay.

Other expense in this quarter has increased pretty sharply versus last quarter. What has driven that?

Is that labor codes? There are two things.

One is that there has been an increased disbursement happening in the quarter, which there is a certain amount of cost associated with disbursement. Second is that 29 crore of one-time impact because of the labor code.

Okay. Okay.

If you see, the cost-to-income is 72%, but if that labor code impact is kind of netted out, it should have been 70% actually. That was a big impact in the quarter.

Okay.

Thank you.

Hi. Thanks a lot for the opportunity.

My question is again on margins, given that the cost of funds should trend downwards from here on because we have repriced our term deposits and also rationalized our SA rates. To just in your previous comment, you guided that NIMs [unclear] Should it in fact [unclear] Yeah, hello?

Hey,

the voice is unclear. Can you please repeat?

The voice was not clear.

Hi, sir. Sir, my question was on margins, given that we have rationalized our deposit rates, shouldn't the margins expand from here, at least in FY27 because we'll still have the cost of funds benefit?

That was my first question. My second question was in terms of SBL, when you say that it is normalized, should we expect the slippages around these levels within the SBL portfolio?

Those were my two questions.

Okay. Okay.

On the first point, let me take that. There are certain drivers in place for expansion of NIM.

One is that the cost of funds is expected to trend down a little bit more over the next 2 to 3 quarters because of the repricing of old deposit to the new deposit. That the cost is definitely expected to go down, which could be one one driver for NIM expansion.

The second driver for NIM expansion is that microfinance is 8.5%, but we want it to be around the 10% level. That 1.5% increase in the MFI portfolio mix could be another contributor to NIM expansion.

On the other hand, NIM contraction perspective, if you look at it, our lending yields, the disbursement yield, is likely to come down a bit, given the overall rate scenario in the market. We may also have to fall in line with that, and there may be some little bit of disbursement yield drop.

That will be the negative side from a NIM perspective. If you combine all of this, that's what I said in the earlier question asked, that from 6.7% that we are in currently, we may expect it to move marginally up a little bit.

Right now, we are not actually in a position to guide exactly where it will go and where it will stop. Definitely, we don't see it going down.

That's for sure. It might marginally go up in the next few quarters.

On the SBL, I'll ask Jaggi to

Yeah. On the net slippages for SBL, if you look at between Q2 and Q3 itself, it has gone down from 2.49 to 1.46 in Q3, okay.

The net slippage is an integration of both the X-bucket and 1 to 90 DPDs. If you look at the X-bucket efficiency of SBL, we are at 99.3, which has improved from 99 from Q2 to Q3.

Similarly, on the 1 to 90 DPDs, also almost close to 100 crores we have reduced in actual value, and in terms of the percentage, it has gone down from 7.53 to around 7.3. Based on the combining both these factors, the net slippages will go down in Q4.

Sure, sir. Thanks.

Just on my last question, on the SBL portfolio, your PCR is around 27%. How comfortable are you with that PCR?

For SBL?

Yeah. We are very comfortable with that this one because the substandard is the one thing actually, and we did some ARC sale, and because of that, it's come down actually.

Okay?

In addition to that, we have not only in terms of comfortable, we are not even putting the provision based on IRAC norms. We have even, let's say an example, in certain DPDs between up to 455, we just require a 25% PCR coverage, whereas we are putting almost close to 75% if it's 455.

We are comfortable with that being a secured book.

Sure, sir. Thanks a lot.

Thank you.

Am I audible, sir?

Yes, you're audible.

Yep, thank you very much for this opportunity, sir. Sir, I missed one number you mentioned.

In third quarter, what is the ARC income you mentioned?

31.52 crores in the other income.

It is included in which line item?

It's line number 34, asset fee income. It is included in that.

Come again?

Line number 34, asset fee income.

No, no, I'm saying in which P&L line item? It's a part of other income?

Yes.

Yes. Yes.

Okay. Okay.

Understood. You mentioned 31.5 crores, right?

52.

31.52 crores, yeah.

Okay. Understood.

On the PSLC, I think this quarter, we were close to around 34 crores, right, PSLC income? How should one look at going into fourth quarter?

Generally, in fourth quarter, PSLC income is generally higher. No,

that is treasury and the PSLC fee income, it's largely treasury income.

No PSLC income. We

have not done any PSLC sale.

Achha. There was none.

It's only treasury income.

Okay. Fourth quarter, any PSLC income we are expecting?

Doubtful because Q3, we actually had to buy agri portfolio from some of the MFIs to meet our PSL agri requirement. We had to actually buy because we are in shortfall.

With microfinance disbursement picking up, we expect that in Q4, our own internal business generation should be enough to meet our PSL requirement. Doubtful that we may have excess which we will be able to sell.

Doubtful.

Okay. I understand.

In terms of your deposits, 100% of your deposit, the transmission has been done on your cost of funds, or is there anything left?

We are closely 65% in terms of repricing of deposits as a book as on December, and maybe Q4 exit, we'll be close to 85% level. That's the outlook.

85% Q4 end. That's the reason you're mentioning that there can be an upward bias on your NIMs?

Slight. It's one of the levers, yes.

Okay. Okay.

Understood. Given the market is doing well and even improvement in MFI, anything on FY27, how should one look at your growth and ROEs?

Yeah. As we mentioned, we should end up with about a 15% growth for this year, and again, I'm excluding the DA, right?

If I add the DA part of it, it might be about 17%, 18% growth. For the minute, I'm taking the DA out because it's just a one-time, one-off transaction.

Without that, we should be ending up this year at about a 15% growth. Historically, we have generally grown between 20% and 25% growth on a yearly basis.

Going forward next year, we should look at anything between

20 and 25. 20 and 20.

ROE, you're talking about exit ROA of 1%, how about FY27 ROA?

We should expect the next year fourth quarter exit ROA at 1.5%.

Fourth quarter exit? Okay.

Okay.

Yeah. Yeah.

Okay. Understood.

Okay. That would be it from my side.

That's very helpful, sir. I wish you all the best.

Thank you.

Hello. Yeah.

Am I audible?

Yes, you are audible.

Okay. One was regarding this our bank looking at the universal bank license.

What is our outlook on that?

We have mentioned this in the past also. By March '26, we hope to be meeting all the requirements of the guidelines of RBI for that conversion.

Based on that March '26 financials, once we know that we are in compliance with the guidelines, then subsequent to that, we may probably end up applying.

Okay. Thank you.

The other thing is that our 90% plus of loan book is concentrated to the South India. What is the plan to geographically diversify, and any timelines for that?

Sorry, our TN as a geography you're meaning 90%? What is that?

South? All the states in South India, right?

You have mostly concentration in Tamil Nadu, Karnataka, AP, Telangana. That and we wanted to expand it across India.

Any strategy and timelines around that?

If you look at the past 2 years, we have reduced our contribution from TN, okay, which was at around close to more than 50%. It has now come down to 44%.

Even we have a clear strategy to reduce further, maybe in the next 3 to 4 years, it will come down to around 36%. South, we don't have a 90% book.

If you see, only Tamil Nadu, we have 44, okay. South, it's around 62%, okay.

Maharashtra is the third biggest state for us in terms of the contribution. It's not 90%.

It's around 60%. That will further come down.

Okay. This new MFI book that we have got, will it be covered by the upcoming central government 8,000 crore MFI credit guarantee scheme that they're talking about, to be coming in April, I believe?

See, we are already covering our microfinance portfolio under the CGFMU credit guarantee scheme of the central government. Currently, what percentage?

Around 50% of our existing microfinance book is already covered under that guarantee. This 50% is the one which is generated after we signed up with the guarantee trust.

Going forward, we will continue to be getting the incremental disbursements in microfinance guaranteed under that scheme. As far as this 8,000 crore scheme is concerned, of course, the details are not in public space just now.

They have not released it. We'll have to await for the details.

In our view, it is not meant for guaranteeing the individual transactions. It's actually a guarantee cover provided to the banks for lending to NBFC-MFIs.

I think that's what people talk about. Anyway, we'll have more details as the government publishes it.

That is not meant for individual MFI transaction guarantee. That's already available under the CGFMU scheme.

Okay.

In the commercial vehicles space, do you see what is your foresight about increase in this segment because of the signs of tailwinds coming in the CV space?

We don't see any kind of tailwinds. Even if you look at the current quarter, we have shown a good amount of traction in our used segment, which is our prime focus.

We'd be growing on that. Even the asset qualities have been better compared to the previous quarters.

Okay. That's it from my side.

Thanks.

Thank you. Thank you.

Thank you.

Hi, sir. Thank you for giving me the opportunity.

My first question was on the MFI portfolio. With the headwinds behind, we've seen disbursements ramping up.

However, we were looking at capping it at 8% to 9%, whereas it is already reached 12%. Will we be a little practical here and look at maybe it expanding to 15%, 16%, given the kind of momentum that we are seeing or the credit demand that we're seeing in that segment?

See, the 12% is because of the addition of that direct assignment purchase of agri pool. We'll have to for all our purposes keep that on the side because obviously, that comes at a lower rate, and it's supposed to be a one-time.

We just did it because we had a shortfall in agri PSL, and hopefully, we should be able to generate our own PSL going forward, we may not do DA further. That's just a one-off transaction.

If you for a minute remove that, our microfinance contribution is about 8.5%, 8.8% of the total advances, and we want to keep it around the 10% level. It may marginally go up in the next few quarters to reach the 10% level.

As far as the thought of increasing it to 14, 15 or anything above that, we do not have a thought on those lines fundamentally because microfinance does come with its own plus and minus, and every time it comes with a minus, it has a impact which is quite disproportionate to its contribution. We are basically wanting to build a bank which is lot more stable and steady in terms of its financial returns and not having too much of volatility around that.

A 10%, we believe, is something where we get the benefit of better yield, but at the same time, if there should be any further trouble in the future, the impact will not be too high on the bank. The rest of the book, which is 90% of the book, which is the non-microfinance, actually, most of our products, practically all our products are quite old in the system.

They are not really new products. Either they are now fully profitable or they are on the way to being fully profitable in the next few quarters.

That way, we don't see any issue as far as profitability is concerned because almost all the products are now quite mature in the system.

Got it. Sir, since you highlighted about the profitability, even the housing vertical is profitable, let's say housing and the used car vertical that we have, which is contributing almost 8 10% of the overall portfolio summing up the two two segments?

Yeah. Used car is quite profitable, and affordable housing, which is actually one of the newer products, it's about 4 4-year, 5-year-old, but it went through the corona phase of small growth.

It's practically a 3-year-old product now, you can say, post corona. Affordable housing was loss-making last year.

This year, it has turned the corner, and it is now contributing profit to the bank. Maybe next year and the year after, it should become fully contributing from an ROA perspective.

Got it. Sir, the second question was on the vehicle finance segment.

There, our strategy is to scale up the used CV segment and used car and not do new commercial vehicle broadly. However, if you look at, that segment was going through turbulence in terms of asset quality trends.

How are you seeing that shaping up in the coming quarters with respect to asset quality trends as well as on the business momentum trade from our end?

If you see the vehicle finance, both on all parameters, the Q3 has been good, and we expect the same in Q4. Even if you see the X-bucket, it has improved from 97.5 to 98.5, and also the DPDs, considerable reduction has been done, and the same is with the GNPA as well as the credit cost.

We don't see any kind of stress as far as the vehicle finance has been concerned in Q4 also.

Got it. Will we look at increasing our disbursements in this category or especially in the used CV and used cars?

That's our main focus. We'll be increasing our disbursements in used commercial and used car segments.

Okay. Just one last question to add here.

What is our broad range of yield in used CV and used car?

Around 17%.

That is for used CV?

Used CV is 17, and used car is also in the same range.

Got it, sir. Got it.

Thank you so much for answering my questions, and good luck for the next quarter.

Thank you.

Hi, team. Good morning.

Ashlesh here from Kotak. Sir, firstly, on your opex, how are you internally thinking about opex?

What should be the drivers from here on? What are you internally projecting for it?

Opex is something that we have discussed in the past. Most of our cost, I think we have mentioned in the past also, is all of fixed nature.

There's only some small amount of the cost which is a variable linked to the business. To that extent, yes, the cost is kind of, it's a given.

Our cost-to-income will come down as the business grows and the bank grows. The cost-to-income will come down as we leverage the existing investment in cost by doing better business.

As we have mentioned, this quarter, it was around 70%, but for that 29 crore impact of labor code, minus that, it would have been 70. We expect next year, maybe by third, fourth quarter, we should expect this to go down to around 65% level.

That will principally happen just as the driver will principally be basically the growth in the business of the bank. The growth should be the driver to bring down the cost.

Understood. Secondly, on the cost of SA and cost of term deposits, just a clarification.

I think you indicated that the incremental cost of SA is 5.1 and TD is 7.3. Is that correct?

Murali Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

Correct. As of now.

As of now, SA is 5.1. We will go through one more iteration in coming February.

It's a continuous exercise.

Okay. The disclosure on the presentation says cost of TD is 8.1%?

Murali Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

That is of the full book. This is on the repriced book.

You expect that 8.1 to eventually decline closer to 7.3? Is it?

Murali Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

Correct, as you renew the existing book. Normally renewals happen at 60% levels, 30%, 40% move into alternate assets.

As it reprices, the same book will become into 60% level at this pricing point.

Understood. Lastly, this microfinance direct assignment which you have done, can you just walk us through what were the evaluations which you have done at the time of the transaction?

What is the quality of the book? What is the regional mix, et cetera?

Okay. We did it with about six counterparties.

Fundamentally, all the portfolio that we purchased will have to be MFIN guardrail-compliant, which is all that three lender, 2 lakh rupee, all that norm, plus they should not have any overdue at the time that we purchased that asset, it should be in X-bucket, and it should have had, on a 2-year loan, it should have completed at least 3 months; on a 3-year loan, it should have completed at least 6 months of term. Those were the criteria that we used for acquiring that asset.

The yield on that asset, I can give you an idea on that. The yield is approximately 10.75% on that asset.

I think we purchased about 1,300 and 50 crores or so. Around 1,350 crore is what we purchased.

The overall yield is around 10.75%. None of the portfolio includes any exposure from Karnataka.

We just ensured that we excluded Karnataka and also Gujarat because Gujarat traditionally has been always having issues. Karnataka recently, you know that it's been going through issues.

These two states, we excluded. These are the parameters that we used for that.

Understood. Just last clarification, this one, the collection responsibility does not lie with you on this book, right?

No, it doesn't. We have a collection agreement with the originating company, and they will continue to do the collection and pay it to us.

Understood. Thank you, sir.

Thank you.

my question is partly answered. In terms of term deposits, we've of late seen a scramble for deposits happening across the system.

Your cost of deposits at 8.1% means even if the rates go up a little, you still having cushions in terms of reducing deposit rates. Is my understanding correct, number one?

Number two, are all your deposits non-callable when it comes to bulk deposits?

Murali

Vaidyanathan (Senior President and Country Head - Branch Banking, Liabilities, Product and Wealth):

Close to 92% of the bulk deposit is 1-year duration and non-callable. In terms of book, see if you see last 2 years, we have been totally going heavy on 444 days.

Now we are replacing that 444 days with 888 days with a lower, as I said, total book arbitrage is 90 bps. This will continue in that direction only.

Anyway, the projection is there is one more rate cut. It may not happen in Feb, but April.

As and when the rate cut happens, we'll follow and catch the graph.

Excellent, sir. The other question is on capital.

As of now, you're comfortable on as far as regulations go with 16.6%. If growth were to come and you were to maintain your credit ratings as well, you may have to raise fresh capital.

Is there any thought on timelines for that or is there a minimum capital adequacy that you'll go to and then have to definitely raise capital?

See, we have an internal guideline that as soon as we touch 20%, we should start looking at how to beef up capital. Generally, we do not want our capital adequacy to go below 18% against the regulatory requirement of 15%.

We really do not want it to go below 18%. Right now, it is 20.47% or so.

As we mentioned in the presentation as well as in my opening comments, there are various ways of conserving capital other than just raising fresh capital. We are working on all of that, like IBPC, where you shed assets in favor of other banks, and then we do the CGTMSE, especially the vehicles we have done that.

I think we have done 1,600 and 50 crores or so of vehicles which we got guaranteed under the CGTMSE. Under that scheme, I think what percentage of principal gets released from capital?

Almost 80% of the principal of the transactions covered under CGTMSE gets released from capital requirement. We did that.

Going forward, we will continue to keep getting the vehicle finance incremental portfolio also covered under CGTMSE based on whatever is eligible. That will again release a good amount of capital going forward.

Our gold loan now is started to pick up. Now in second quarter, we had a gold loan book of 400 crores.

It's almost come to 600 crores in the third quarter. That is something again we are pushing for growth by introducing it in more branches going forward.

That will come again with no capital requirement. Our affordable housing is growing, and again, that has a much lower risk weightage compared to every other business.

There are various drivers for capital conservation, and that's something that we are focusing on. At the end of it, in our view, first half of next year, we will not require capital.

We will be comfortable with whatever we are doing. Second half, we will review it, based on our internal accruals and what's the level of capital adequacy we are sitting on.

We will do a review probably in the second half. The objective from our side clearly is to postpone capital raise as long as possible, given our current market price scenario.

We would like to postpone it as far as possible and try and ensure that we do not compromise on growth, but manage capital through a variety of instruments available to the company, to the bank.

Yes, sir. I can see that, sir.

In fact, in the last quarter, despite the growth, your capital adequacy, CET1 ratio has actually improved. In terms of the CET1 ratio, you talked about total capital adequacy.

CET1, do you have any kind of guidelines in terms of where you won't go below?

Regulatory requirement CET1 is 7.5%, 50% of the 15%. That's the regulatory.

I think we'll be fairly comfortable on CET1. We'll never go anywhere near that regulatory floor.

Right, sir. I was looking more at the rating rationales, which said 15% was one of the rating rationales which said, in terms of credit rating.

That was my angle.

Because our internal accrual also should start coming in. Last year and the first two quarters of this year was very poor on internal accrual.

That's also expected to start generating, P&L from this quarter. Third quarter itself, we have delivered some 90 crores.

Going forward, that should also help. Overall, I think we should be comfortable on CET1 also.

Okay. All the best, sir.

Thank you.

Thank you and thanks for the opportunity, sir. Just a couple of questions.

First, as I understand it correct, our deposit repricing will be gradual. We expect this to fall down.

How do we see yields moving up because obviously we don't want to do more of MFI loans, which are in the high yield category. How do we see yields moving, or I understand this time it is also because of the buyout portfolio.

Anything on the yield side if you can guide us?

Yeah. If you look at the advances yield, because of the portfolio recalibration, you can see the small reduction bps.

If you look at the disbursement yield, okay, which is going to be a significant factor, in Q2, our disbursement yield is at 15.78, whereas in Q3, our disbursement yield is 16.22, where 40 Overall asset book. Overall asset book in Q2 is 15.78, whereas in Q3 is 16.22, even after the recalibration whatever we have done.

It's almost close to 43 bps increase in the disbursement yield.

That is also because you had seen an MFI surge, right? Disbursement had picked up for MFI, which you want to cap it below 10%.

If incrementally if the overall growth will be, your disbursement growth will be in line with your MFI growth will be more or less in line with other businesses growing, then do we see this kind of movement happening in yield again for Q4 on onwards?

Not only on the MFI book, even if you look at VF, we had a increase of 22 bps, and SBL 5 bps, and AF, which has been a growing book, it has been increased by 25 bps. Fairly, I can able to say maybe we will be maintaining or it will be on the upward side.

It will not go down.

Okay. Understood.

Secondly, on the SBL side, now if we see that sequentially, the disbursement had more or less remained flat, right, if I see it correctly. Y-o-Y, there is a 1% kind of a decline.

How and obviously, we have seen this trend happening for almost like similar number for almost like last five quarters, I see it in your PPT. Can you give some color on what is this SBL loan?

Which geographies are you doing it further? It is unsecured piece, right?

It's not secured one. It's not LAP, right?

How are we seeing traction happening in SBL? Can you give some color on that?

That will be helpful. Obviously, coverage remains very low on this.

Any volatility in this can impact our provisions and all. Just some clarity on SBL overall as a portfolio.

Yeah. First, I would like to give a clarification on the overall book.

We have only that microfinance is an unsecured. Otherwise, all other books is a secured book.

Small business loan, it's an 100% secured by the property,

okay.

If you look at small business loans quarter-on-quarter, if you see in the current financial year, our disbursement at Q1 is at on an average per month is 440, whereas in Q2 is 575, whereas in Q3, our average disbursement is 612 crores. Why we couldn't able to see the year-on-year growth, which the underlying reasons is because of our Karnataka and certain product segment where we have recalibrated in SBL in the between the Q3 and Q4 of the last financial year.

Now it's almost coming back to normalcy. We can see the upsurge in the disbursement in SBL as well, and the numbers that I mentioned, if you look at, it will be on the upward trend.

Okay. Can we expect this that Q4, this 600 crores quarterly, what kind of trend So not only Q4, overall for next year, say, what monthly trend or run rate, that we talk about the disbursement for SBL that we will be comfortable with?

The numbers that I mentioned, first of all, is the monthly average, okay. For the next year, we are looking at advances growth of at least a 20-plus in SBL.

Automatically, the disbursement number will be on an upward movement compared to the current numbers.

Understood. This will be a So as I understand now, this is a LAP loan.

What will be the tenure of this loan overall around?

Average, it will be around 7 to 8 years.

Understood. Understood.

Fine. That's helpful.

Finally, on opex side, as you said that major of these expenses are remaining fixed in nature, very limited amount in variable one. You're gradually planning to bring it down from, say, 70, which is excluding that one-off of labor code thing.

So 65 is the target that you are your target, for overall what over what period are you targeting this 65% kind of cost-to-income?

Yeah. So 4Q exit next year, we should be there around 65% mark.

Okay. Okay.

This full year itself, we are targeting this, right, for the next year itself?

Next year, yeah. As also MD clearly said, no, when the more the fixed actually, the income goes up, no, the percentage will come down.

That's the

Yeah. Understood.

That's what I was asking. I got that point.

Finally, on credit cost, what kind of trajectory are we looking for for next year? Because as I understand, our major ROA improvement or 1.5 exit what we are talking about 4Q, obviously credit cost decline will be one of the major driver.

What kind of credit cost trajectory are we looking for, say, FY27, just broad range if you can give some color on that?

Between

1.5 to 1.7. For the full year, and currently, we are at what, 1.8, right, 1.88?

For the quarter, okay. In Q4, it will be around less than 1.5.

What I mentioned is for the year, entire year.

Entire year should be somewhere in the range of 1.5 to 1.7.

Yes.

Perfect. That's quite helpful, sir.

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

Thank you.

Thank you for the opportunity. My question was related to our CV books.

A lot of players are actually talking about that there is a noise, there is a stress which is emerging into the CV portfolio. Are we seeing any signs of that in our new or maybe used CV portfolio?

I've

clearly indicated even in on my earlier response, we are seeing a improved asset quality compared to Q2 to Q3 in all aspects, not only on the net slippages or the credit cost, but also on the 1 to 90 DPD as well as on the X-bucket. We hope the things will be better in Q4 also.

Then the players who are actually witnessing that kind of a stress operate into a different segment or a different geography altogether?

See, in our case, as Jaggi mentioned, the large part of our book is the used commercial vehicle. I think the used commercial is doing quite well.

In our case, used commercial vehicle also, we are really the focus is only on the small operators. I think at that level, the small commercial vehicle, light commercial vehicle, individual owner or owner with just one or two vehicle, I think that segment is doing quite well, and we are not seeing any stress on that segment.

If you want to compare with the market and other players, their portfolio might have a lot of, a different profile of borrowers. New could be a good contribution to them possibly, and maybe the heavy commercial could be again a large contribution to them possibly.

Those might be the differences that you might probably see. In our case, the focus is largely on the small and light commercial vehicles and in the used category.

In that segment, we see the experience is pretty good. Not only now.

We have been doing used commercial vehicle now for almost 15 years, and we've never really had a serious issue on the portfolio quality in the used commercial vehicle segment.

Sir, secondly, I just wanted to understand how should we look at our overall credit growth and deposit growth for FY27, now that the microfinance has also started turning positive and I think the SBL, the vehicle financing book is delivering strong growth? Should we get into a 20% kind of a zone of growth next year?

Next year, as we mentioned, our growth should be in the range of 20 to 25. It should be definitely above 20, that's for sure.

The deposit growth will be in line with that. Typically, it should be about 2% to 3% higher than the advances growth.

Okay. Third, sir, any ECL impact that you have worked on, and because, your PCR is still below 70%.

You used to have 70%, then you brought it down to about 66%, 67%. Any ECL working that you have already done, how you're going to take that impact if you can just talk about that?

We have done ECL working based on the draft this one of RBI, and most of ours is secured book and other thing, we'll have a positive this one on the ECL, not on the negative, as compared to the IRAC norms.

Thank you. Thank you, sir.

Thank you.

Thank you. Thanks all of you for dialing in and giving us a good insight of what's happening in the market and also asking us questions which will help us to think as we go forward.

As we sign off, I can only reiterate that I think the issues of microfinance is clearly behind not just us, but the industry, and going forward, let's hope for, better times for all of us. Thank you, and wish you all the best.

Bye.