Jayant Kharote · Axis Capital
First question is on the slippages. Can you give some color on this quarter's slippages, and there seems to be a slight inch up in commercial banking NPAs quarter-on-quarter — what is the nature of the product? Second, on the ECL framework — timeline on universal license is around February-March, meaning transition to new ECL framework. We are seeing 12-20 bps increase in steady-state credit cost for other banks. Given our books have had some cycles, could we see a higher impact on steady-state credit cost? Third, the INR23 crores one-time provision — is it product tightening or general buffering?
On slippages, Q4 is always a seasonally strong quarter. The right comparison is year-on-year: Q1 last year versus Q1 this year. In all asset classes — secured retail, credit card, PL, microfinance — there is improvement. On commercial banking, slippages are also lesser year-on-year. At a bank level, there is almost improvement of 150 bps. The uptick in commercial banking Q-o-Q is typically SME book, which is business banking book, which will have a bit of uptick in Q1 and then it slows down. On ECL, it will be difficult to quantify at this moment. We are refining our LGD and PD models, working with external agencies. Given the kind of provision we carry in stage 3 assets, it gives us enough comfort. However, the final outcome will depend on policies for accelerated provisioning and write-off. There is greater comfort from Stage 3 which should cover Stage 1 and Stage 2 incremental provisioning. Our retail secured assets and commercial side are largely secured — our LGDs are pretty low compared to what the industry would look like. On INR23 crores, it was alignment of all unsecured products — credit card, MFI, and PL — on the same provisioning lines. There was a differentiation, so we just aligned them all.
Nitin Aggarwal · Motilal Oswal
On unsecured business growth — MFI growth of almost 5% Q-o-Q looks like a strong start. How are we looking at this to sustain over the year? Can you also comment on vehicle business, mainly CVs — how is the credit environment shaping up on that side? On CGFMU — 96% is covered. Do we plan to lodge any claim for losses taken last year? Any color on quantum?
On microfinance, the industry had subdued quarter-on-quarter deceleration and overall degrowth, but post MFIN guardrails, industry has reached a stage where discipline has come in and more players are falling in line. MFIN is projecting about 17%-18% kind of growth. We are just following that and it's visible on the field. Asset quality numbers are holding up — Q1 collection efficiency sustained to 99.5%, just 20 basis points from Q4, very different from last year Q1. On top of it, 96% book is secured under CGFMU. On vehicle side, we have strong distribution in South, UP and newer states in East — that is giving additional volume and we are confident on the customer segment we operate. Nothing unusual in the book — no indication of heightened stress or abnormal slippages in any part of the book. On CGFMU claims, it's an annual process and pool-based coverage. The 2026 coverage for last year — we can claim. It's a 6-month seasoning post NPA, then you lodge the claim. By end of Q2, whatever crystallized NPAs you have for FY26 pool, you will lodge claims. These would typically be realized by mid to end of December. On quantum, it will be part of the overall NPA only. Our coverage of CGFMU on the GNPA portfolio would be slightly lower because some NPAs are coming from more vintage pool, pre-CGFMU coverage.
Akshay Jain · Autonomous
On the 1.8% ROA target — if NIMs are stable-ish, is it fair to think incremental ROA improvement will come only from opex and credit cost? Has credit cost bottomed? Second, ECL norms — can you give an estimate of one-time transition impact and steady-state credit cost impact? Third, disbursements partially benefited from newer geographies — can you share how newer geographies are contributing and how to expect growth from them?
On ROA, we haven't guided for stable NIMs — there's no guidance on NIM. We see scope for improvement both on the opex and credit cost lines vis-à-vis full FY26, and those two line items will take us to our guided range. Sanjay added: other income also has not been up to the mark this quarter, so I believe other income should also come in next 6 to 9 months. We are at 1.7 honestly — not at a lower number — and we are just looking a 10 bps from here. So maybe 2 bps from credit cost, 2 bps from other income or whatever. It's not that big a difference from our stated target. On ECL, Vivek said: it's at a preliminary stage. Historical trend of our LGDs and PDs, especially LGDs on our asset classes are very, very low. We don't expect much in terms of any additional hit on the balance sheet. Closer to end of Q3, we would be in a better position to tell you. By then we will have more working models — we've hired a dedicated team and there is a dedicated external agency helping us build ECL models. On newer geographies, Sanjay: we are more of a north and west franchise till a year or two back. Because of Fincare acquisition, expanding to more East, going deeper into UP and Bihar, we are largely now a pan India franchise. The next 10 year growth should come from all parts of the country. Every state is now contributing — vehicles showing up in Southern market, microfinance widely held across country. We are seeing lot of traction from newer geographies.
Pritesh Bumb · DAM Capital Advisors
Employee base has declined after a long time — is this an outcome of AI efficiencies, capacity building, or a pause after Fincare reorientation? Second, on MFI credit cost — a few years back the thought was MFI will be a 3% credit cost business structurally. Any change after CGFMU coverage? Third, on gold loan — LTV, IRR, new customer acquisition, tonnage addition?
On employee count, the May month was the first month when we actually decreased manpower from April. That is one-off — backend people, we are not growing at all because operations, accounts, finance are being taken care of by AI. But as we expand in newer markets, new geographies, new products, we will want to hire people for front-ending. There is a clear-cut benefit of AI in terms of count of people and managing risk. AI is helping us a lot there. On MFI credit cost, when we said 3% it was three years back when we acquired Fincare. After the guarantee came in, the entire business model has gone through a change. We are now building up cost around guarantee every month. So 3% is not the right optics now. The credit cost around the guarantee and whatever is left out — so it may be 2.5. But it's in the same range; the contour, shape, form has changed. Gaurav added: instead of building up buffers, we are securing protection on that book. On gold loan, Vivek: the gold loan business came with Fincare's expertise. Fincare had rural distribution from microfinance branches and capability to do gold loan in Southern geographies. We scaled it up across North-West region. For us it's scaling from a low base. Distribution is in place — valuer, operations team, origination team. It's a very simple business — you manage fraud risk, the rest the product manages. Majority of book is less than INR5 lakhs, average ticket size is around INR2.5 lakh. More than 80% today is a rural book. The book portfolio IRR is about 15.5%.
Anuj Singla · JP Morgan
On unsecured growth — after a long time we are seeing revival. Any targets we have set for ourselves given the momentum, where can this portfolio ramp up over next one to two years? Second, on FCNR — US leverage becoming a constraint for many players. What target are you looking at for FCNR and how does the costing compare with borrowing in Indian wholesale market? Third, technology expenditure as part of total opex?
On MFI, it's difficult to give guidance because industry has just started to revive after six to eight quarters of degrowth. We'll see how this sustains. We expect to continue growing this book because it's important from a PSL perspective. Sanjay added: we have kept a cap on MFI. We publicly announced it could go up to as high as 10%, because our requirement of SMAs is also 10% and we want to do small marginal farmer obligation through this book. Now book shape is completely changed because of the guarantee — well-diversified. Fincare gave us this ability — the team was available, very experienced team. We are not seeing this book as what will increase our ROA significantly; this is more about doing your obligation and having the inclusion piece in place. On FCNR, we have increased our FCNR rates to 7.4-7.5% and we believe because of our brand and acceptance we will raise some money. But we are not targeting a specific one because if you don't have leverage, it's difficult to convince the customer. Overall, if Indian banks get $70-$80 billion in this bucket, overall liquidity should improve and cost of money should come down. We may not be directly benefited but will have overall benefit from the industry initiative. On technology expenditure, it's close to INR1,000 crores. Around 12%-13%.
Ashlesh Sonje · Kotak Securities
First, on renewable energy book that has grown 120%+ Y-o-Y — who are you lending to? Project developers or component manufacturers? Second, on PL — the growth has recovered well. Customer profile in terms of NTC or salaried, ticket size, and sourcing — cross-sell vs. open market? Third, on appointment of Yogesh Jain as Deputy CEO — how do you expect to share responsibilities at very senior leadership level?
On renewable energy, the book is largely concentrated around developers — specifically KUSUM C component and KUSUM A component. Typical project size is between 2 megawatt to 5 megawatt. We started three years back in Rajasthan and then grew to Gujarat, Maharashtra, bit of MP and couple of other states. It's a government-supported initiative where there is an incentive to developer and discoms. PPAs in this segment are much more attractive and there is capital subsidy to developers. On PL, this book is 100% as of now towards our existing bank customers. Majority would be liability customers, some would be asset customers. It is based on existing relationship — we run scorecard, transaction scorecard, derive the pre-eligible pool and run PL offer basis our analytics. Incrementally we do want to source new-to-bank customers but that share is very small. So far existing book is 99% ETB customers. On Yogesh as Deputy CEO, Sanjay: the whole idea is to build a very sustainable bank. I've been leading this bank for 10 years and know that I won't have infinite years. The process has already started at Board level — not to rush at the last moment, let's create leadership at different zones. Vivek is on the call, Yogesh is on the call, Uttam is on the call. All three gentlemen have ED and Deputy CEO positions. Yogesh is 16-17 year vintage, Vivek is 12-13 years, Uttam is 20 years. As of now, Yogesh will be taking care of tech and other functions which Board will assign him in times to come. AU should be run by professional leadership in times to come and remain forever kind of banking mindset.