EEB stress closed: slippages 1,089->1,118->942->690cr, NIM 6.4->5.8->5.9->6.2%, ROA 0.8->0.5->0.4->1.1%.

On disbursements (~INR 10,000 crores, down), how much is from Guardrail 2.0 vs conservative EEB approach, what is rejection rate trend, geographical trends? Also on Slide 21 vintage analysis, why are Q1FY25 and Q2FY25 disbursement vintages still showing ~4% NPA after 12 months?

Q1FY26 EEB disbursals were INR 10,708 crores vs INR 13,721 crores in Q1FY25, moderated by guardrails and Q1 seasonality. Rejections are running at 16-18% from the cross-industry default population (>60 DPD) plus impact of the 3-lender norm and 2-lakh secured exposure cap; geographies like Tamil Nadu, Karnataka, parts of UP and Gujarat are not growing. On vintage, Q4FY24 peaked at 5.2% reflecting the over-leverage cycle and recent vintages will trend down toward ~3% NPA over time.

So the rise in vintage NPA trajectory still seems to be because of the guardrails?

Yes, exactly. Q1FY25 was an exceptional quarter (the best Q1 the bank ever had) so YoY comparison is not apt; sequentially slippages have come down materially as EEB slippages had been double-digit for the prior few quarters and are now improving.

On SMA-0, you started billing on holidays driving SMA up - explain how this works and the industry practice. SMA-1 and 2 also seem to have moved up - is it West Bengal/Assam specific? And when does the 5% Bandhan Plus 3 portfolio unwind?

The SMA-0 elevation is from raising installment demand on holidays (4 holiday-days in April plus more in May), required for product consistency, and is recoverable - mainly West Bengal and some Assam. SMA-1 has been stable and SMA-2 actually improved (INR 480 crores vs INR 510 crores last quarter); the percentage rise is purely because the EEB book degrew. On Bandhan Plus 3, with no new onboarding allowed since April, it should fall to sub 2-3% over the next 2-3 quarters as 12-18 month loans actualize.

On retail and housing portfolios - retail NPAs rose from INR 2.7 bn to INR 3.3 bn QoQ and housing NPAs from INR 7.2 bn to INR 8.1 bn QoQ - what explains these increases?

The retail uptick is from the old unsecured (PL) book of FY22 vintage where no write-offs have been taken; recent vintage is performing better after course correction. Housing NPA reflects certain old portfolio and geography-specific stress that is now trending down.

Given EEB borrowers are very low income, isn't there real risk that the SMA-0 does roll forward? Could you confirm whether it stays in SMA-0?

Data shows SMA-1 and 2 remain stable while SMA-0 was elevated in the same month and is getting recovered, with collection efficiency inching up - the increase is purely the holiday/billing impact and not flowing forward. Management is also rolling out advance collection and QR code-based payments to address the issue.

What is your feedback on industry discipline - some players complain about aggressive behaviour from others - and when do you expect EEB disbursals to scale up?

Most large and medium players are following Guardrail 2.0 since 2nd April and the SRO publishes a quarterly compliance report, so discipline is largely intact. Disbursals should scale up from Q3 onwards as the festive season kicks in, growing in the 10-15% range rather than the historical 30-40% CAGR.

On MFI - have you or the industry hiked yields and processing fees, and any cuts?

No yield hike, no processing fee hike and no cuts either.

On the holiday billing - if a borrower pays every Monday and a Monday is a holiday, won't you collect the next day? Why does it become SMA-0?

Earlier, demand was not raised on holidays so a 48-week loan would balloon to 52 weeks, but now demand is raised on every scheduled day for product consistency. Since culturally borrowers pay only on the due date, missed-day instalments slip into SMA-0 even though they are recoverable; the bank is shifting to advance collection and QR-code remote payments and expects September Durga Puja holidays to also cause a temporary spike.

Given more secured/less EEB mix, will NIM continue to compress sequentially in Q3 and Q4 even with FD effect kicking in? And on competition, in which segments/states is aggressive behaviour seen - underwriting, ticket size or pricing?

Some further compression is expected in Q2 but stabilization should come in H2 driven by improving slippages and offsets from non-interest income (already +33% YoY) and CASA-led cost of funds improvement. EEB has bottomed sequentially and is expected to start reversing marginally next quarter then more significantly thereafter, while secured share is already at 52% giving headroom to grow EEB.

Given the secured/EEB yield gap is large and rate cuts are happening, is cost of funds improvement enough or do you need a structural CASA shift? Is further H2 NIM compression a fair assumption?

Focus is now shifting to CASA garnering this quarter after the prior quarter's TD push (which raised INR 4,200 crores in 40 days), and a CASA mix change will further reduce cost of funds. Industry portfolio is down 13-14% YoY and active loans down 16-17% so no player is materially aggressive; the new 60-40 NBFC-MFI qualification criteria opens up individual/non-microfinance loans which need to be watched.

Now that the qualifying criteria has changed, will there be further tightness on the individual MFI loan side rather than the group EEB side?

NBFC-MFIs can now do 40% non-micro business so there may be aggression in individual loans (similar to SBAL); these currently have no guardrails but the industry is likely to introduce guidelines for this segment given prior leverage experience.

On credit cost - has anything changed in your guidance that H1 would be elevated and H2 normalize?

Guidance is unchanged; Q1 came in slightly better than Q4, Q2 should be a little better and a more significant recovery is expected in Q3-Q4 with the full-year credit cost target of around 2.5% maintained.

Margins declined 30 bps QoQ and loan book declined 2.5% QoQ - what explains net interest income being flat on a QoQ basis?

Cost of deposits improved 19 bps from savings rate cuts and slippages declined sequentially from INR 1,748 crores to INR 1,553 crores, both supporting NII despite the loan book decline.

Of the INR 1,550 crores slippages, how much was from MFI/EEB?

INR 1,089 crores of the slippages were from the EEB segment.

On the vintage book, Q4FY25 disbursements of INR 151 bn are showing 0.1% NPA already - if a borrower misses 3 instalments they would just be NPA after disbursement; is this a collection issue?

It is largely cross-linkage NPA - a co-borrower or another linked loan defaulting drags the entire portfolio - and is a marginal phenomenon being focused on in recovery. There may also be Jan-disbursed 12-month loans that have completed 6 months elapsed.

Looking at the past 2 quarters, SMA-1+2 was around INR 10 bn and tech write-offs ~INR 10.5 bn this quarter (almost all EEB) - is the entire SMA-1/2 flow going into NPA and being written off?

Of the INR 10.5 bn write-off, ~INR 9.5 bn is EEB; technical write-offs only happen after a significant vintage and recovery effort, so nothing recent gets written off - it is older vintage portfolio.

Investment yields seem to have increased ~70 bps on a sequential basis despite a declining investment book - what explains the sharp jump in calculated yield?

On a period-end basis the book has declined but on average basis it has actually gone up, and the Bank built up the trading book with substantial fee income from treasury this quarter; sequential yield actually softened from 6.6% to 6.45%.

On EEB group loan disbursements - is it mostly to existing customers or open market acquisition? And which geographies are you slowing/comfortable in?

86-87% is to existing borrowers and 13-14% to new borrowers, broadly consistent with the historical 85/15 mix. Strongholds remain East/West Bengal, Bihar, Assam and UP; growth is challenging in Tamil Nadu and Karnataka due to the 3-lender guardrail and political interference, while Partha Sengupta added that out of 4,400 banking units 3,100 are operating well.

On full-year FY26 disbursement/AUM growth target?

EEB is targeted at 5-8% growth for FY26 with H2 compensating for a muted H1, while non-EEB is growing 26-27% so overall AUM growth target is 15-17%.

On term deposit re-pricing duration and how fast deposit cost cuts will show through?

Savings and TD rates were cut in April; savings impact has flowed through (19 bps in Q1) and full TD benefit will materialize by next March since 60-70% of deposits sit in the 1-year bucket. Term deposits had 20-30 bps reductions in April and June with further impact visible from Q3 onwards.