Thank you, Shamsheer. Good evening, everyone, and welcome to the Q2 FY26 results conference call of Utkarsh Small Finance Bank.

I would like to thank the management of Utkarsh Small Finance Bank for giving us the opportunity to host their earnings call. From the management, we have Mr.

Govind Singh, Managing Director and Chief Executive Officer; Mr. Pramod Kumar Dubey, Whole-time Director; Mr.

Sarju Kumar Pravin Simaria, Chief Financial Officer; Mr. Amit Acharya, Chief Risk Officer; Mr.

Virender Sharma, Head Microbanking; and Mr. Saurabh Ghosh, Head Consumer Banking.

Now, without further ado, I would like to hand over the call to the management. Thank you, and over to you, sir.

Thank you, Chintan. Thanks a lot.

Thank you, everyone, for taking the time to join us for our quarter two FY26 earnings call. As we reflect on the second quarter of FY26, it is evident that operating landscape continues to evolve, shaped shaped by both regulatory recalibrations and legacy stress factors.

The quarter was marked by a deliberate shift in strategy, balancing caution with forward momentum. Our focus has remained on strengthening the fundamentals, even as we navigate through transitional headwings headwinds that have impacted certain segments of our portfolio.

One of the more significant development this year has been the rollout of the revised regulatory framework under MFIN Guardrail 2.0, effective April 1, 2025, which limits borrower-level leverage to a maximum of three lenders, induced a structural shift in microfinance lending dynamics. While the intent is to foster long-term portfolio resilience, the immediate consequence has been a slower than expected recovery in the collections sentiment.

The adjustment process has taken longer to stabilize, and overdue accounts have remained elevated, reflecting both the regulatory transition and residual stress from the prior fiscal. In response, we have intensified our efforts to reinforce field-level discipline.

A specialized call center dedicated to overdue accounts has been operationalized, and we have expanded our collection workforce, almost 1,200 as on September '25. Additionally, we we continue to split larger microbanking branches to improve oversight and control.

We are also working on back-to-basics programs to train new frontline staff on core processes, such as center meetings and customer onboarding, ensuring a more robust and consistent execution framework. The overall gross loan book contracted by 2.3% year-on-year, primarily impacted by a sharp decline in the JLG portfolio.

The joint liabilities group, JLG, business continues to experience headwinds, with disbursement slowing as we deliberately shift focus towards strengthening collection rather than prioritizing expansion. This strategic recalibration led to an an approximately 11% concentration contraction in the JLG loan book during the quarter, contributing to a 2.3% year-on-year decline in our overall gross loan portfolio.

However, fresh NPA slippages have reduced significantly during H1 FY26 as compared to the second half of FY25, indicating that our corrective actions are beginning to take take take hold. We remain cautious in this segment, focusing on long-term stability rather than short-term growth.

Despite the challenges in JLG, our microbanking business loans, MBBL portfolio, has emerged as a bright spot. Targeted at graduating JLG customers with strong repayment track record, this segment grew by 39% year-on-year and now constitutes 13% of our microbanking loan book.

With penetration still below 6%, we see considerable headroom for expansion. The MBBL portfolio has demonstrated better asset quality and collection efficiency, and we expect its share to increase meaningfully in the quarters ahead.

Over the past year, the bank has undertaken several structural shift in the in its operations, including the adoption of digital underwriting as a key operational transformation, avoiding lending to overleveraged borrowers with multiple lender exposure, and diversifying portfolio. This structural shift will eventually lead to a fundamentally stronger bank with less cyclic cyclicality in terms of credit cost, and will provide multiple avenues for us to grow beyond JLG loans.

We have we have taken proactive steps to align with this transformation. Our JLG exposure has been consciously moderated to 39%, and including BC JLG, it is 41% of the gross gross loan book as on September '25, down from 88%, including BC JLG 90%, in March '20.

We expect this mix to reduce further over time, as we pivot towards secured lending, which now compromises comprises 47% of our overall loan book, increased from 38% as on September '24, and is likely to increase further. Our non-JLG lending business have maintained healthy momentum, growing by 30% year-on-year and 4% quarter-on-quarter.

With our deepened focus on secured asset businesses, MSME loan book expanded by 33% year-on-year to ₹4,164 crore, while optimizing disbursement yield, which improved by around 100 basis points from 24 12.4% in quarter two FY25 to 13.4% in quarter two FY26. Within this, the micro-LAP segment has shown promising traction, with disbursement yield around 18%.

Given our strong franchise and geographical reach, we anticipate continued growth in this product line. Housing loans also grew by 21% year-on-year to ₹947 crore, supported by improved disbursement yields, up by over 40 basis points from 10.9% in Q2 FY25 to 11.3% in Q2 FY26.

In the CE and C CV and CE segment, the loan book rose 16 6% year-on-year to ₹1,144 crore. Notably, the share of used vehicle disbursement increased to around 40% in quarter two FY26 from less than 10% in the same period last year, reflecting our strategic pivot towards more resilient asset classes.

The BBG lending portfolio, entirely secured against immovable collateral, grew by approximately 32% year-on-year. These segments continue to perform well, driven by our disciplined approach to underwriting and risk management, while also enhancing portfolio diversification and delivering attractive yields.

We are seeing much better traction on cross-sell on both sides, assets products, that is MSME, housing, and micro-LAP, through our liability-focused general banking branches, and deposit accounts for our asset customers, essentially more products per customer. This multi-product engagement is enhancing customer stickiness and improving wallet share.

With healthier diversification diversified portfolios and improved underwriting standards, the bank is getting resilient and is now poised for a better trajectory in the second half of FY26. Through a more disciplined lending approach, we are already focusing on streamlining the portfolio growth, while the impact is likely to persist for another one quarter, but the business is expected to stabilize in next few months, and better collection efficiency is anticipated by then.

On the liabilities front, total total deposits remained flat quarter-on-quarter. However, we delivered 10% year-on-year growth in total deposits, driven by strong traction in retail term deposits, which grew by 29% year-on-year and 5% quarter-on-quarter.

Our CASA deposits increased by 17% year-on-year and 6% quarter-on-quarter, resulting in a in an improved CASA plus retail term deposit ratio of 78% as on September '25 from 68% as on September '24. We are consciously reducing re reliance on bulk deposits, while retail flows remain strong, supported by deeper cross-sell initiative.

We intentionally calibrated deposit deposit moderation during the quarter to align with our moderated disbursement pace, maintaining a strategic shift strategic focus on sustainable and consistent deposit growth, driven by a well-diversified and granular low-cost retail deposit portfolio. Deposits growth to accelerate in line with the revival in the disbursement.

In line with RBI repo rate cuts, we have improved we have trimmed interest rates for savings as well as for retail term deposits. These calibrated actions are expected to drive a gradual reduction in our overall cost of funds.

Our CD ratio declined to 79% as on September '25 against 93% as on September '24, and after netting off refinance borrowings from from advances, CD ratio declines to 72% as on September '25, reflecting our prudent liquidity management. In terms of risk diversification, we registered with CGFMU for credit guarantee coverage on our eligible unsecured JLG and MBBL portfolio, effective from January 17, 2025.

Accordingly, incremental JLG and MBBL disbursements from then onwards are getting covered under credit guarantee, which will help de-risk our exposure and support portfolio stability. We ended the quarter with a surplus liquidity of around ₹4,400 crore, which is higher than our usual liquidity requirement, and an LCR ratio of 224%.

We have no short-term borrowings on our balance sheet. On asset quality, we believe stress has peaked.

The X-bucket collection efficiency in JLG segment has improved to 98.7% in the month of September 2025, as compared to 98.6% in the month of June 2025. We have tightened underwriting and reduced exposure to riskier segments.

MFI stress is moderating, aided by calibrated disbursement and improved borrower discipline under new guardrails. We expect asset quality to improve meaningfully from quarter three onwards.

Pre-qualified loans to existing customers with no delinquencies are streamlining field operations and exploring innovation across products like unsecured business loans, individual loans, etc., with enable with will enable us to gain a higher wallet share of our existing customers with strong repayment track records, while preserving credit discipline and robust risk management. With the help of these measures, fresh NPA accretion will start to decline meaningfully in next few months.

However, we acknowledge that legacy stress is still to be provided for, which will keep the credit cost slightly elevated in the near term. This will weigh on our this weigh on near-term profitability as we navigate through this phase, and we carry forward stress from earlier periods translated into and the carry forward stress from earlier periods translated into a net loss of ₹348 crore for quarter two FY26.

Despite the losses, our capacity capital adequacy ratio remained at 17.2% as on September 30, 2025, comfortably above the regulatory threshold. In alignment with bank's commitment to long-term value creation, the bank has successfully raised equity capital for an amount aggregating ₹950 crore for augmenting its Tier 1 capital base to meet its future requirements through the rights issue in November '25.

We thank all our investors for reflecting confidence in the bank's strategic roadmap and future potential. Concurrently, we have also secured all requisite statutory approval for the proposed reverse merger of the holding company with the bank.

With these approvals in place, we are now assessing the the optimal sequencing of petition filing with the NCLT applications. We are also undertaking a business transformation project to make our technology architecture and business processes future-ready for our growth plans.

The bank has already embarked on a on its Utkarsh 2.0 technology transformation project, with several sub-projects already live and yielding benefits. These benefits include improved operational efficiency, higher productivity, automation, and 360-degree control parameter mapping throughout the entire cycle, from sourcing and disbursement to recordkeeping and regular monitoring.

Looking ahead, FY26 is shaping up to a difficult year, but is also a year of strategic recalibration. We are prioritizing operational efficiency, disciplined execution, and operational agility.

For the next two to three years period, bank targets a loan growth loan book growth of around 25% with a well-diversified portfolio with secured lending share lending share of more than 50%. The focus will be on strong asset quality, cost efficiency, and prudent risk control.

The bank aims to maintain a NIM of around 8.5% and deliver a return on equity of about 15%, supported by efficient operations and moderated growth, towards the end of FY28. While sectoral headwinds and regulatory trans transitions may continue to influence near-term performance, we remain confident in this resilience of our franchise and the strategic direction we have charted for FY27 and FY28.

Thank you very much for your patience list listening. Now I now we can move to the question-and-answer session.

Thank you.

It may have a positive impact on the borrower level, their own you can say wellbeing or their livelihood level. As far as our efficiency of operations concerned, I don't foresee much impact because of that.

A slight positive impact maybe is because people will little better off. Otherwise, not much impact of that.

From the hardcore our day-to-day operational angle, obviously, it is good for the people who have got it. Okay.

You have issued a fresh issue and you have issues the rights. In future, are you planning to do more equity dilution or is it fine for two, three years?

Broadly speaking, from our side, the current raise of ₹950 crore is good enough for next 24 months. You can say till September '27.

That is how the plans are from our side. We don't intend to go to market for next two years' time.

Sir. Last question, you said that this JLG is peaked out, from quarter three onwards, we will be seeing improvement in net profit and everything, right?

As I mentioned in my opening remarks also, what we expect that the stress levels, the delinquencies certainly we are seeing them coming down, especially if you look at the month of November also, we have seen them coming down. The trajectory in terms of stress assets, in terms of NPA accretion, in terms of profitability, we do expect that quarter three will be little better than previous quarters, and quarter four onwards, we can see much better trajectory as far as these efficiency ratios are concerned.

Sir. Thank you.

Thank you.

Hello. Hi, sir.

Thank you for the opportunity. Sir, I have a couple of questions, sir.

Firstly, currently we have around 1,100-odd branches, which is higher compared to some of our peers with higher book size than us. Going forward, what is our stance?

Do we continue to increase our branches at around 15% odd kind of growth rate, or do we plan to consolidate and focus on improving productivity?

Certainly, our plan is to more to consolidate. In fact, this year we have not opened branches, and we have, as you yourself mentioned, we have enough number of branches.

In fact, last one year or so whatever new branch we have opened, it is for a better control as far as the JLG business is concerned. Otherwise, our idea is to consolidate because we have a large network of branches across the country now, and we are across the country in all the relevant states, we're already there.

We don't intend to open many branches from now onwards, better to make those branches operationally efficient because we opened quite number of branches during last three, three and a half years. Post-COVID actually, we opened quite number of branches.

Our first focus is right now to make them branches, from the business side, give a sizeable business of these branches, make them more operationally efficient branches. That is a focus.

We may not be opening many branches now, at least in the near future.

Out of the total number of branches currently, how much will be only deposit taking only?

You're aware that we have two types of branches. One we say general banking branches.

These are the branches which are deposit-led branches. Today out of around 1,100 branches, 331 hardcore deposit-led branches.

Obviously, as a bank, even the other branch also can take deposits. From the strategy angle or from the business angle, these 331 branches across the country, which are normally at the large cities, large centers, metros locations, or very prominent places, they are focused for the liability part.

These are 331 branches as on date.

Understood. Secondly, sir, we have faced high employee attrition last one year.

Wanted to understand how is the scenario now?

I think it was not only with us, but it was a industry phenomenon also. You must have seen that part, especially at the entry level, at the lower level, we have seen that part.

We are seeing that specially in this, you can say, this quarter and henceforth, we expect that this will stabilize. Normally, it is higher in quarter one, and that is true for other banks and other financial institutions also.

Ours is not among the that high. Obviously, it is higher than what used to in past.

It is little higher than our past records. We are certainly seeing a better response and the attrition rates are certainly coming down.

I may not have the exact number right now, but these are certainly coming down. We do expect that quarter three and quarter four will be much better from that angle.

Understood. Sir, lastly, a data keeping one.

How much was the impact on yields due to interest reversal?

The interest reversal for this quarter was about impacting in absolute terms about ₹27 crore would have been better off had the slippages for this quarter been not there. It's about ₹27 crore impacting my Q2 results.

Understood. Thank you so much, sir.

I'll fall back on queue.

Thank you so much for the opportunity, sir. My first question was related to the PCR.

What is the PCR on the MFI book that we are holding right now, sir? It's 68% PCR we are holding.

In the JLG book, sir?

Yes.

I think so it is less than the RBI prescribed limit. I think the RBI's supervision is around 80%, right, if I'm not wrong?

May I know the reason why are we not providing enough actually so that at least we can clear our books before we start our new growth journey, sir?

I guess, not that I recollect if there is any RBI norm to that. In fact, what we are making a provision, over and above the IRAC or the RBI norms.

Our provisioning scale is higher, by the way. That's first kind of an clarity that I thought I will bring here on this call.

Secondly, we have a roadmap of, as I said, policy, when an account goes NPA, we start with 40% immediately, any account being on 91st day, and then it would be 15% each subsequent quarter. There is a run rate rulebook, and as it goes along, I guess, this should be a bit higher in the coming quarter, and you will see a further provisioning coming in terms of cushion as we go along in Q3.

Is it safe to assume that in by Q3 we'll go from 65% to 80% as far as the unsecured portfolio, MFI I'm saying, for the NPA without technical write-off? That's something written on the book.

We'll have to deliberate and then go there. Obviously, as I said that we have a rule in terms of the policies that we have.

In case we choose to do what you just mentioned, that may amount to an accelerated provision. We'll have to look for adequate approvals, and then probably during the course of the quarter decide on that.

Okay. My second question was related to in the unsecured portfolio, almost 80% of our majority of the portfolio is concentrated in Bihar and UP for us actually.

Sir, can you throw some light that what is the situation on ground in both these two states? Is it at least improving?

What is the collection efficiency? How do we see the MFI portfolio going ahead actually?

Do we see some disbursement growth going ahead?

I think generally, we have seen UP and Bihar a good place for microfinance. There are a lot of requirement, you can use the opportunity and there is a requirement, and that's why there is opportunity, and we have seen in past also.

This time during this last, you can say, 18 months' time, we have seen little higher slippages in some of these states. You mentioned some of two states basically where we have a large concentration.

UP, Bihar because our headquarter is in Varanasi, and UP and Bihar, that is where we have started our operations at the beginning. We have large number of customers there.

Even the ticket size is higher in that case, and that is the reason why we have little higher concentration in Bihar and UP. If you look at the ground-level operations, yeah, initially we had little challenges in this geography, and that's why you had seen the elevated NPA levels.

Maybe these have been little higher than from some of the other places. Of late, we are seeing that normalcy is coming, I can use the word.

Maybe if you look at the X-bucket collections, if you talk of say month of November, I think around 99% plus now across, in fact. If you look at Bihar, if you look at UP and the adjoining area, all places it is now 99% plus as per the X-bucket collections are concerned.

It is improving. Certainly, it is improving.

Now see, you also asked about the disbursement part. That is not with us only, that is why you can see that almost 20% to 25% decrease in the overall microfinance number of clients base and the AUM also across the country.

The reason is because of the guardrails, lot of customers became ineligible for disbursement because they might be having some delinquencies with other partners, with other funders. That is why it is a little difficult right now to, you can say, disburse to the extent that used to happen in past.

Now people are also looking at new-to-credit, new-to-bank, and also the cleanup you are seeing for last 15, 16 months' time. Our sense is that of course, I can talk on behalf of how the industry or the sector is shaping.

My sense is next two to three months' time, we should see a almost regular type of disbursement. It's very difficult to predict the exact quantum, but disbursement will become very regular in next two to three months' time.

That is the indication we are seeing from the market or from the ground.

At least that would be for Utkarsh also, right?

That is true for all the players, including Utkarsh. In fact, Utkarsh being a bank, sometimes smaller players might be having some challenge in terms of getting funding also.

For banks or for larger entity, that should not be a problem. My sense is from next two, three months' time, we should see a normal type of disbursement also for JLG book, which was not there for last 15 months or so.

Sir. What is the slippage amount, sir, in this quarter?

Can you please specify, gross slippages?

Yeah. Our CRO will just give the number.

Yeah. Yeah.

The addition in this quarter was around ₹463 crore, and recovery and upgradations were close to ₹48, ₹49 crore. Just one request from my side, sir.

From next quarter, can you please specify the numbers in the investor presentation, including the write-offs and slippages, so that we can have an idea about the GNPA?

Sure. I think there is a movement on slide 30, which tells you about additions quarter by quarter.

You can see slide 30 of the present investor presentation. I think it is already

there. Yes, sir.

In the last quarter, it wasn't, so that's why I was asking.

It has been incorporated now.

Thank you. Okay.

Sir, my last question was related to our secured advances. We have been growing very well in that segment.

Almost 47% of the total loan book is concentrated there. What I wanted to ask in that retail lending basically within the MSME, housing, gold, CV, CE loans, what would be the mix going ahead in the next year actually when we see some higher disbursement growth also in this segment?

Secondly, what would be the mix going ahead in FY27 and FY28 between unsecured and unsecured? How do you see the bank going ahead?

If you look at the bank going ahead, broadly the way I mentioned that we do expect that growth for secured will be higher than the growth for unsecured or for JLG type of growth. For unsecured, the growth may be say around 15%, 18%, and the growth for unsecured can be 15%, 18%, and for secured, it may be in the range of say 30% to 35%, because they are newer businesses and smaller businesses that we have just started.

That is what is expected, and that's why you will see every year the secured is going up little bit and unsecured portion is coming down. That is what we expect.

In terms of MSME, micro-LAP, housing, our focus has been more on the LAP type of businesses where I get a property as a security, I'll put it this way. It can be in multiple forms.

Sometimes even when I'm talking about BBG portfolio, it is 100% secured by the underlying property. We have a bigger focus on that.

I think CE, CV businesses will be moderate growth on our side. We are not looking very hyper growth from these type of businesses.

Wherever there is a property security, I think that will be the bigger focus as far as Utkarsh next two to three years' journey is concerned.

Okay. Fine, sir.

Just last one from me that will we see our net NPA going down since you are saying that the provisioning will go up even in the next quarter? Can we see the net NPA inching below?

Certainly we can assure you that, our net NPA levels will will start coming down on month on quarter-on-quarter basis from now. That you will certainly see from quarter-on-quarter.

Okay. Fine, sir.

Thank you so much and all the best.

Thank you.

Could you split the slippages between MFI and non-MFI segments for the quarter and the last quarter?

Just for a second, yeah.

For JLG business, it was ₹324 crore in the quarter two, and for non-JLG business putting together, it was around ₹134 crore. Okay.

What was it last quarter?

Last quarter JLG was close to ₹330-odd crore, and non-JLG business was ₹122 crore.

Okay. The one question on the collection efficiency, actually what you disclosed in this quarter was mostly around 98.6%, 98.7%.

We are seeing for most of the other lenders actually this collection efficiency has definitely improved in the quarter. Can you throw some light on what exactly is happening over here?

Why isn't improved for us? Hi, this is Virender.

I just wanted to clarify, yes, we were at the two biggest pockets where the delinquency has been higher, which were bigger impacted markets like Bihar. We have seen some correction post our corrective measures, and yes, we were slower in that part of the geography for some period of time, but now we will be at par with the industry in this markets.

Yes, there was some system or limitations earlier, but covered later. Going forward, it will be at par or better off in that markets.

That's what we have seen because there is a slight rebound in both UP and Bihar markets in this month.

Okay. On the disbursement side, obviously this quarter also, I think MFI disbursements have actually gone down.

When do we expect this number to improve or do we expect, let's say, next two quarters to more consolidate around this number and then maybe from FY27 onwards it will grow? As I mentioned, our assessment is that for next three, four months onward, we should see a better in terms of disbursement or at least portfolio will start growing.

As I mentioned, the disbursement were lower because of the guardrails, lot of people became ineligible for disbursement. One thing I'm sure and now the growth what we have seen in JLG will be a moderated growth when we are looking next two, three years' time.

I think maybe around 15% to 15%, 16% type of growth is what we can expect in the JLG business. Okay.

If you look at overall mix of our loan book, can we say that we have sort of reached the bottom out for our MFI share declining in the overall AUM? I think we have almost reached there.

It's very difficult to pinpoint this, but certainly where we are right now, we expect that now portfolio in terms of collection efficiency, as Virender mentioned that we're already seeing almost across now 99% plus for this month and this will certainly grow. In fact, I'm talking across it is 99% plus, overall it is little better than that only.

We expect that collection efficiency is growing. Similarly, we are also seeing traction in the disbursement.

It has not reached to the level where you can say my portfolio is not degrowing. My sense is next one or two months' time, it will reach a stage where portfolio will not come down from there.

That is what we expect as far as the JLG disbursements are concerned. Okay.

If I look at the non-MFI book, is there a target at which we want to grow this business? As I mentioned, broadly speaking, the JLG 15%, 16% type of growth, as there is a range, 2% plus minus.

Similarly, for non-JLG, maybe 30% or maybe little higher than that, that is the that is the type of growth we expect for the non-JLG. Certainly that's why the share of non-JLG will be will keep growing, and share of JLG in the overall book will obviously number number should grow from here, but overall share should share will come down as far as JLG is concerned.

This is the growth rate we expect. As I mentioned, blended growth rate of around 25% or so, that is what we expect for the bank in next, if you look at FY27 or FY28, that is what we expect.

Okay. For the non-MFI book, would I be right in concluding that for past two quarters, our growth rate has been 1% to 2%?

Am I doing something wrong over here? No, nothing.

We're not doing anything wrong. Maybe it was a little slower in the initial phase, and we have seen in past also.

As I mentioned here also, we expect that this will pick up in this quarter onwards. Normally, our quarter one in past also has been little slow, and we expect this to pick from here.

We are not looking any additional type of products. You are aware that these are the type of products we are having.

Our idea is to scale those products and where the property-backed products in the asset side are our prime focus from our side. Obviously, we are doing gold loan also.

Even we are doing the secured credit card also, backed by fixed deposits. We are also doing housing.

We are doing BBG where again we are doing the business banking group. We are doing small you can say working capital loans or term loans for the MSME segment or SME segment.

I think these are some of the segments which we have chosen, and our idea is to grow these segments only. That's all.

Thank you.

Thanks for taking my question. Have we done any ARC sales in this quarter?

Not in the bulk side, but we had one NBFC borrower account with us, Aviom India Housing, which we have sold to one of the ARC, India SME Asset Reconstruction Company, in this quarter in the month of September. What would be the gross value for this asset?

How much provision we would have made?

The outstanding was around ₹24 crore, and we had already provided fully for it in the previous quarter itself, and in this quarter we did that ARC transaction. Okay.

What would be our cumulative write-offs that we would have done in the last maybe two years? See, since inception of the bank in the last two years.

Last financial year, we did we last financial year, we did around ₹224-odd crore of write-off, and in this particular H1 till H1, we have done ₹366 crore, out of that 311 came in in the this quarter only.

Okay. Historically what is our recovery that we get from write-offs?

From this cumulative amount also what kind of recovery are we expecting and over what time frame can we expect that recovery?

Normally, it obviously depends upon the type of class of assets also. If it is JLG, then we have seen in past it ranges from 12% to 15% 12% to 20% 20% type of recovery, I'm talking once from the write-off book.

Even in case of demon book, we get even some recovery today also, so that is how it happens. For the other asset classes, the recovery rates are higher, sometimes it may go 35% to 40% also for the other asset classes.

Blended may be around 20% or so, if you look from that perspective. Broad number will be around 20% from the write-off books.

Can we expect a similar recovery from the assets that have gone into write-off last couple of years?

Certainly yes. In fact, obviously, it's too early to talk about this part, but in past, for example, in case of JLG, we never had a collection team.

Now there is a focused collection team. The results can be better also.

Obviously, we are yet to experience that part, but that's my expectation that results can be even better this time because of the dedicated collection team for JLG portfolio also. Even for other unsecured loans, we have a dedicated team, results may be even better also.

Perfect. Lastly, can you share a credit cost guidance?

Because we are clocking around ₹1,300, ₹1,400 crore of NPA provisions in the last couple of quarters. Just wanted to understand whether this run rate is likely to continue or how is it going to

be? As we just mentioned about the collection force headcount that we have increased, in fact, we have increased from a level of 400 to 1,200 headcount now, and with improvisation in terms of improvement, overization, both in terms of the disbursement being happening in the new book, all that combined effect, our credit cost is certainly going to be far better in Q3, and almost normalization from Q4 onwards.

What is your sustainable credit cost guidance? Normalized number?

I guess we'll give a guidance once we have completed due or Guardrail 2 in fact, embedded by Q3 results, and that would be a better time to give a guidance for subsequent growth.

Okay. Fair enough.

Thanks a lot.

Yes, because we had headquarter in Varanasi, UP, we have a initial concentration in Uttar Pradesh and around and the northern part. If you look at today, we are across the country, we are in 27 states and UTs, and all the South states including Pondicherry and the place like even Goa are covered by us, in Andhra, we are in Telangana, Kerala, Tamil Nadu, all places are covered by us.

Obviously, it was in the second phase. First phase was more towards the north and followed by west.

We have more than 50 branches right now in southern states. 46 branches are in the southern states.

In fact, other than JLG, we are doing all type of businesses from that area also. I'm doing LAB business, I'm doing MSME business, we are doing affordable housing also, and obviously liability side we are doing all businesses.

Gold loan we are doing from that area. South also we have started big way.

Obviously, we are there in eastern part of the country also, like Odisha and West Bengal and those states. The footprints, yes, it might have taken a little longer time, but we are currently all-India player with little skew in favor of maybe west and north because there we had started as far as our operations are concerned, those are started early.

We are across all-India player now. Thank you.

Please go ahead. Thanks for the opportunity.

I want to understand your JLG portfolio. Out of the gross NPA, which is around ₹2,276 crore, out of that, how much is the JLG portfolio?

The entire NPA of the JLG, is it unsecured or somehow it is covered under the CGTMSE?

As far as security is concerned, we mentioned in my opening remarks also, from January 17 of this year, our new portfolio of JLG and microbanking business loans, entire unsecured loan is covered under the guarantee scheme. Today it may be around ₹2,000 crore plus, around 25% of our portfolio is covered under the guarantee scheme because it has just started.

As far as the break of this concerned, Sarju or Amit... Around ₹1,850 crore is the JLG portfolio of NPA out of ₹2,274 crore.

Okay. Sir, can you give me an idea that out of that standard JLG portfolio, how much amount is under stress?

That is under the special mention account, SMA-3?

Overall 5% is under SMA-0 plus 1 plus 2 overall of the portfolio, plus 23% is in NPA.

Sir, 5% is in SMA-0 and 23% is NPA?

No, no. From SMA-0 plus SMA-1 plus SMA-2, all three put together 4.8%.

SMA-0 plus 1 is 5%, and SMA-3?

Including SMA-3.

Including SMA-3? Yeah.

Yeah.

Overall of the SMA advance is 5% of the overall JLG portfolio, correct?

Yeah. 4.88% to be precise.

4.88%.

Sir. Thank you.

by FY28, what kind of credit costs and what are the margins which we are assuming, if you could throw some light on that? Thanks.

Whatever the disbursement that are happening from January, it is CGMFU insured, and the new disbursement is also happening under the cleaner, less than three lender rule regime, as we call Guardrail 2. With this combination, and the normalization of collection efficiency should be very, very evident as this both the factors combined.

We are looking with secured and unsecured composition, a max credit cost of up to 2% on a steady-state basis.

Sure. Anything on the margins on that front?

There are a couple of factors here. One, as we take the benefit of repo rates, we presume the cost of funds will go down, which will contribute to the NIM.

We also have the revival, the disbursements, and whilst all the slippages get normalized, so that should add, and with the growth in the retail book at a higher yield. In fact, as earlier mentioned, our two, three products have given us almost 40 to 100 basis points higher I already begin to see higher yield.

If I take combination of all combined, we should be looking again sometime FY28 at 8.5% NIM is what our execution plans are.

Sure. Sir, on this CGFMU scheme, also now you mean to say from January 17, 100% of our incremental disbursements are via CGFMU.

If you could just help us understand the math, how does the scheme mechanics exactly work? How much has to be borne by us, and how much is the premium to be paid, yeah, some working on that would be helpful.

The entire disbursement which is eligible for the scheme, we are taking cover for that, and normally we have seen that 93% to 95% of our disbursement is covered under the scheme, that is part one. Overall premium cost would be in the range of 1% to 1.2% of the AUM per annum.

That is the cost which is expected.

Also, sir, once Sorry.

Overall what will be reimbursed by the agency? The whatever will be the economic loss, 3% first will be borne by the lender, and for balance 97%, 25% will be borne by us, and balance 75% will be borne by the agency.

Overall, we can say 72% to 73% will be reimbursed by the agency.

Understood. Just for an hypothetical example, if ₹100 is the disbursement, and of that if 10% is the GNPA, means the slippages, of that 3%, matlab so 10 ka 3%, that is 0.3 will be borne by us, and the remaining 9.7 will be shared, 75-25?

Correct. Correct.

That's a fair idea.

Okay. Sir, yeah.

Sir, is there a maximum there would be a maximum cap, right? Of the ₹100 maximum like 10% or 15% GNPA will be borne by them?

What is that cap on this?

15%. 15%.

15% of the portfolio. Okay.

Okay. Sure, sir.

Sure. That way is this largely then basically helps us maintain our credit cost well within range for the MFI.

Non-MFI, sir, what would be the, sir, our credit cost for the non-MFI portfolio, the non-JLG portfolio this year for first two quarters? If you could break the credit cost for first half into JLG and non-JLG.

For this quarter, the non-JLG credit cost stood around 2.3%.

That's an annualized number, right?

Yeah. It was little higher because of the challenge in the wheels business, actually must have seen that, this quarter two was little challenging.

We are, obviously, we are making more efforts towards that also, it was little elevated for the wheels business, actually, and that's why it is looking little on higher side for this quarter,

too. What would be that number in Q1, sir?

In Q1, it was around 2.2%. Acha, it's okay, 10 bps higher.

Yeah. Sure.

Sir, just one last question from my side. From the PAR 1, an MFI account slips into becomes a 1-plus, how much percentage of that flow-forward comes to how much of that flow-forward goes to 90-plus?

Once an account becomes 1-plus, how like ₹100 becomes 1-plus, then so like typically 60, 70 flows into 90-plus or 30, 40, or what could be that number, any rough estimate? Typically,

there would be three buckets after that: 1 to 30, 30 to 60, and 60 to 90. Every bucket will have its own collection efficiency.

So 1 to 30 normally would have a collection efficiency of 50% to 60%, then 30 to 60 would have collection efficiency of 40% to 50%, and again in 60 to 90 our collection efficiency is in the range of 55% to 65%. That is how it we try to manage, and the balance will flow into 90-plus.

Again, after it flows into 90-plus, collection continues, and we have, as we mentioned, more than 20% being collected from that amount in next 24 months. Right, sir.

Sir, what's the write-off policy for 90-plus for the JLG portfolio?

It is, post-NPA recognition, the account should have passed more than 365 days, then it qualifies for technical write-off.

Sure, I think that's it from my side. Thank you for the detailed answers, and I wish you and the team all the very best for the future quarter.

Thank you. Thank you.

From March, it has gone up to 4 to now 4.4%. Basically is it because of the wheels portfolio or still the stress in the JLG is emerging, sir?

JLG is largely cuz I think earlier my colleague mentioned about the total provision, out of which almost 90% belongs to the JLG book. Likewise, this is largely attributable to the JLG delinquencies that we are seeing in Q2.

What exactly has happened that in the month of February and March collection efficiency for zero bucket in JLG had improved substantially, but again after implementation of the Guardrail 2 from April onwards, collection efficiency declined a little bit. That's the reason it is 4.4, but in Q3 we have seen that again we will be back to the normal.

You'll see by Q3 onwards, it should be in the range of what we saw in the month of March.

My next question related to that is out of our MFI portfolio, we have a lender-plus-three portfolio in us? Lender-plus-three-plus would be 16%, 16.8%.

So 16.8% and lender-plus-three includes Utkarsh, right? That means more than three lenders, including Utkarsh.

Correct, correct.

That is 16.8% of the portfolio. That comes up to around, sir, it's out of our ₹8,271 crore, almost more than 17%.

Still that portfolio, what is the collection efficiency in that portfolio, sir?

This portfolio includes all the buckets customers, few of them are already into NPA or they are into the SMA bucket.

Almost you can say out of that ₹1,300 crore portfolio, how much are into NPA, sir?

This would be, you see, it would be a little higher on the overall book of MFI, obviously, because these are the borrowers who got out of the guardrails, obviously their repayment behavior got changed drastically after implementation and others. This portion would be around plus-four I would tell you rather, plus-three is under control, but plus-four would be around 25%, 26%.

Lender-plus-four?

Yeah. That means around five lenders, right, including Utkarsh?

Yeah.

How much that is? 25% of the portfolio?

Of that bucket, not the overall portfolio. You asked out of that portfolio how much would be in the...

Out of the MFI portfolio, right, that I'm saying, sir?

No, no, no. The portfolio of Utkarsh plus four lenders, which my colleague just told you that 16% comprises of such nature, out of that 16% portfolio, 25% borrowers are under NPA.

Out of that 16%, 25% are those basically? Yeah.

25%. How is that portfolio performing in terms of collection efficiency including arrears?

I think we may not have the exact data right now, but trend we have seen, there is a straight inverse relationship between the number of borrowers and the portfolio quality. Higher the number of borrowers, that we have established, I don't have the exact numbers right now, but wherever we have Utkarsh plus four, five, six, in fact, there we have seen the stress, NPA, and SMA is higher than our normal loans.

Fine, sir. Last question, what is the net NPA of the secure portfolio, sir?

Gross and net NPA?

Just 1 second, let me see.

Sure, sir. Sure.

Actually, we track product-wise rather than secured and unsecured, because many products have secured as well as maybe a little bit of unsecured.

Okay. I think so your MSME, housing, and CV is mostly secured, right?

95% plus you have mentioned in the investor presentation, sir.

Correct, yeah. Yes, yes, absolutely.

Yeah.

Broadly speaking, as I mentioned, that we have still seen some stress, obviously quarter three we still looking into the stress of past because Guardrails started from last 14, 15 months. Some of the stress has already been covered, some is yet to be covered.

Still there may be a little challenges in quarter three, obviously, not the type of things we have seen in past, but little challenges, because we still have to provide for some of the delinquency, some of the NPAs. We do expect that quarter four onwards should be much, much better from that perspective, from the profitability and overall growth and quality of book angle, quarter four onwards should be much, much better.

Sure, sir. Thanks for the details.

All the best for the coming quarters. Thank you.

Thank you.

Thanks, everyone, and thanks I-Sec for organizing this. Thanks all the investors for your questions, your responses, and your, you can say confidence in the team Utkarsh.

As I mentioned in the beginning itself that we had some challenging time for last four to five quarters, but we are coming towards the end of that period. As mentioned, we have committed to bounce back, and we have seen that things are started improving, and next two quarters will certainly critical from our side also.

We have proper plans and good plans in place, and I think execution is right now, and you should see much, much better performance, much, much better traction from Utkarsh going forward. Once again, thank you very much to all of you for joining this call, and look forward to interacting with you on regular basis.

Thank you.