On net technical slippages inching towards zero, what could be the loan yield uplift from absence of interest reversals next year? And recovery possibility?
In the first quarter when we reported technical impact, gross slippages were INR2,700 crores, they're down to INR1,240 crores. Net slippages were INR1,861 crores, they're down to INR218 crores. In percentage terms, the net slippages are now 0.07%. Effectively, what we had said and anticipated is playing through. We continue to believe that there should not be an economic loss on this portfolio, we'll be able to recover it over time. We do not want to provide guidance or outlook on when this portfolio will get fully recovered. It's going into BAU.
On retail step-up — almost 4-odd percent growth indicated, disbursement growth strong. Should we see double-digit retail growth getting into next year or Q4 phenomenon? On fee income — weak across the board including private banks, how should we look at it going forward?
It's not a Q4 phenomenon. We've shown you last quarter also, we saw a decent acceleration in our disbursal numbers in retail assets. We are looking to grow assets in a RAROC accretive businesses and we continue to push for growth in those businesses. Our investments in technology, digital, etc., we are working with the branches to deepen relationship with our own customers, etc., is helping us accelerate the momentum and we hope to continue to maintain this momentum in the retail asset book. Similarly on fees: As the core businesses grow and as our branch business also grows and with the addition of new branches, we continue to hope to see acceleration in the fee lines as well as we go into the next year.
When do you start recalibration since retail has picked up strongly?
As we speak, the levers in our hand are really the activity levels on the ground on the retail asset side, which is fairly strong, which is reflected in Q-on-Q disbursement growth apart from the year-on-year disbursement growth. So the recalibration in that sense is continuing and is ongoing. You'll see the retail book growth continue to happen as we've seen in the last two or three quarters. The overall ratio of about 70-30, give or take 3% on either side, is where we'll be.
On RAROC argument — since we can't observe segmental RAROCs, if we triangulate ROEs, is it meaningfully lower than 15% or are you targeting different number here?
The aspirational ROE was 18% at the bank level. Given the component outlook we've provided, it's a fair assumption that you can assume that there will be retail/SME ROEs marginally higher than wholesale ROEs. So we don't really want to put a number at a segment level. At the bank level, we continue to aspire for 18% is what we would like to state.
Credit cost line — slippages trending lower, credit cost trending lower. How do you look at FY27 keeping everything constant?
Puneet is not going to give you a guidance and I'm not permitted to give you a guidance. I'll just say that given where we are and given if you look at the trend line and the fact that we have said that we have seen stabilization in some of our portfolios, you can then stretch that trend line. Obviously the joker in the pack is how long this West Asia crisis lasts and what impact it has on India. If we ignore West Asia, then you know where the trend line is going. If West Asia crisis continues, frankly I don't know where this trend line will go because it's very difficult to predict at this stage how long, what sectors, how much the impact would be.
On NII and NIMs: any day-count convention benefit in your NIMs? Has the full 25 bps rate cut from December been passed on your EBLR book? Any residual TD repricing left on your book?
The repo-linked book is 61%, so that would have gotten repriced and the full repricing effect would be in the yields for the current quarter because we transfer repo rate pricing at the end of the quarter in which the rate cut was announced. So, this quarter has full impact of repo rate cut on the 61% of the loan book. There is no day-count representation. We simply follow number of days in the quarter annualized for days in a year. We don't provide the data on residual TD repricing in percentage terms, but we do have some legs left on that lever as we move forward.
At 34% year-on-year corporate growth — what opportunity do you see that others may not? How does this benefit ROA given NIM-dilutive but possibly not ROA-dilutive?
We monitor all of our businesses on risk-adjusted return on capital. There has been no dilution in risk-adjusted return on capital in the current fiscal compared to what we reported last fiscal for this segment. There has been no dilution in risk standards. 91% of this book is rated A- and above, both on stock and flow roughly follow the same pattern, so we've not gone down the credit curve.
Vijay, on wholesale growth color?
On the wholesale side, our playbook remains unchanged. We selectively grow and we are not chasing growth here. We invest in sectors with the strongest cycles and clear micro tailwinds. Incrementally, growth was seen in power, largely renewables, commercial real estate, data centers, NBFCs largely PSL driven, and manufacturing. Growth remains quality led. Both our pricing filters and RAROC discipline are maintained even as we are growing.
Strategy of NII maximization has translated into growth acceleration, but with sharp rise in wholesale deposit rates, do you think it warrants a focus moving back to margins? When do we reach to this 3.8 through the cycle NIM guidance?
We are trying to ensure that we maximize the value for the institution looking at NIM, growth, and obviously the risk profile of what we are trying to do on the asset side. We will continue to optimize them as we move forward. From a product mix perspective, we expect 70-30, 70% is what is retail and SME kind of business and 30% is wholesale, plus-minus 3% or 4%. We have not shifted away from our stance that we expect to deliver 3.8% NIM through cycle.
Timeframe for achieving 3.8% NIM?
We've said we will get to through-cycle 3.80%, 15 to 18 months from transmission of last rate cut. That's a consistent comment we've offered. We are not moving away from that comment.
PSL full compliance achieved — including PSLC purchases or organic? Also AFS reserves as of March end?
PSL compliance at headline and subsegment levels counts PSLC purchased. We are not organically compliant, but that's been a strategy that we have consistently followed. If you look at our annual disclosures, we've endeavoured to be fully compliant, including PSLC purchases. On AFS reserve, INR254 crores is our AFS reserve on a gross basis at 31st March 2026. It's a negative number.
On NII optimization — overall loan growth strong but NII relatively weak at 1-odd-percent. Larger part of growth coming towards end of quarter? Should we see benefit of growth leveraging in next year? Full year should NII still outpace loan growth?
Business does get booked through the quarter. Quarter 4 is the strongest quarter for the industry as well as us. So yes, there is a gap between MEB growth and average balance growth, which does play through on NII versus growth. I would request you to focus on interest-earning assets growth because that plays through NII, not just advances growth. The last element between the loan growth walk and the NII is the two basis points margin contraction. The book has continued to hold up, so it was not a period-end bump-up for growth that we reported on the advances side.
Pretty strong pickup in retail disbursements and SME — do you see a need to calibrate corporate loan growth from RAROC or ROA perspective? Do we care about the 60% retail, 15 SME, 25 corporate mix or doesn't matter on RAROC?
The RAROCs continue to remain healthy for the wholesale business. We can confirm to you that RAROCs that this business had in FY25 have held up through FY26. So growth has not come at the compromise of RAROC. The book composition at A- and above has stayed at 91%, so we've not seen growth come at the cost of asset quality. There is a finite amount of leverage that a financial institution can have to retain its AAA rating. We will need to manage that leverage ratio for ourselves, as while RAROCs are leverage-agnostic, ROEs are leverage-dependent. Therefore our commentary that in the near term we are optimizing for NII with wholesale growth, but we will look to recalibrate the book back.
Clarification on opex: INR126 crores one-time cost and INR282 crores reversal?
If you look at my comments last quarter, we did call out that we reversed employee benefit expenses no longer payable last quarter. So in the last quarter, the staff cost went down because of the reversal. In the current quarter, we've provided for INR129 crores. It is not on account of what we reversed, it is basically rate movement for employee benefits. The cumulative impact of that as I called out for you was roughly about INR408 crores. Adjusting for that INR408 crores, I had called out the growth numbers on a Q-o-Q basis to be 4%.
On incremental disbursements — earlier conversation about significant tightening of underlying credit filters in last two years, expected to open up as portfolio behaves better. Have we reverted back to where we were earlier or comfortable to hold the stance more open to take a bit more risk?
The growth that we have delivered on disbursement is without loosening our risk filters as on date. We've clearly been prudent and we don't expect to be loosening our risk filters on a go-forward basis.
Buffer provision created this quarter quoting $150 oil price — does that mean if situation gets worse from here on, you would actually be drawing down on these provisions this year itself?
The way we've constructed the provision is it is not a floating provision. There is an underlying identified pool of loans across customer segments, across products. That identification of pool of loans was done pursuant to a framework our risk team set up for stress testing. So these are an identified set of loans. On these identified set of loans, we have an additional standard asset provision of INR2,001 crores. In the inadvertent event of loans from this pool slipping, this provision will get utilized to take care of slippages from this pool. So the short answer to your question is yes, we will draw down on these provisions in the event we see an impact on the P&L in FY27.
Does oil have to go to 150 or just the pool should be impacted?
The 150 comment — the comment holistically I made was even if I take the most stress scenario my risk team gave me, the slippages that I would have would stand fully covered from a provisioning perspective by this standard asset provision we've created today. So I have not at any point in time said that that slippage will happen, asset quality remains stable, but yes, if anything from this pool were to slip related to West Asia crisis, not everything will slip at 150, something may slip at 110. If assets from this pool slip and the slippage is not in the ordinary course of business, this provision will get utilized.
On deposits — deposit taking getting tight for the sector. Is there a potential for deposit rates to rise from here?
We are looking at two different markets. One is the retail deposit market and second is the wholesale or bulk deposit market. In the retail deposit market, banks reduced the pricing by approximately 10 to 15 basis points in response to the 25 basis points cut. To that extent, the transmission was incomplete, but given where the market is, I don't see any further cuts happening. Second, on the bulk deposit market or wholesale deposit market, it's the usual year-end phenomenon. This time that uptick was a little bit more accentuated because we saw sell-off in the bond market. As we transition into this new year, we have seen some softening of bulk deposit rates, but it's a wait and watch.