What was the interest reversal this quarter versus a similar number in 4QFY24?
During the quarter, we had INR69 crores as interest reversal. We will get back to you on the year-on-year comparison as we don't have the exact details on hand.
What sort of impact do we expect on our deposit cost after the rate cut on SA, and can you guide on cost of deposits for FY26?
We have reduced interest rates on both savings bank and term deposits effective from 1st May, with around 30 basis points reduction on the highest term deposit bracket from 8.05% to 7.75%. The transmission on deposits will not be immediate as it depends on maturity and renewal, but for advances around 40% of our book is EBLR Repo-linked where transmission has already been passed. Some effect will be there for the first 2 quarters but will be well managed going forward.
On West Bengal SMA-0, 1, and 2 performance - what is the trend in the current month?
Two days back, the slippages percentage has actually come down, so we are seeing marginal positivity compared to March. Looking at SMA position at March end vs December end, there is improvement and the overall SMA book for EEB shows some reduction.
We are doing about 4% credit cost on annualized basis. How does that move over the next 2 quarters given near-term slippages on EEB book?
We don't give specific guidance on a quarterly basis. Due to risk in the EEB segment and tightening of criteria from 4 to 3, it's natural to expect continued stress for the next 2 quarters, albeit with some marginal quarter-on-quarter improvement. By Q3, we expect some sort of turnaround to happen.
On incremental disbursement, are we taking CGFMU insurance or have we discontinued it?
At present we are not taking it. We are evaluating actively whether it is beneficial at this point - there is a threshold value beyond which if quality goes bad it makes beneficial for us. We are not averse to it but evaluating at what stage to look at it.
How much has the margin pressure been because of interest reversals on slippages this year?
That is a small amount.
What will be our proportion of advances in Karnataka and Tamil Nadu?
Tamil Nadu has a share of less than 1% of EEB advances and Karnataka is 1.1%, so both are very negligible. The DPD book is also low and collection efficiency is around 97% in these two states, so we are not much impacted. Additionally, banks have been excluded from the regulations in both these states.
What will be our fixed rate book percentage?
Around 55% of our loan book is at fixed rate.
Out of the 45% floating rate book, how much is MCLR linked and how much is EBLR linked?
55% is fixed, and of the balance 45%, EBLR linked Repo is 41% and MCLR linked loans is just 4%-5%.
On MFI customers where 8% are GNPAs, what percent are actually paying some EMI amount?
Overall, from our 8% GNPA number, close to 25% are paying us some amount. Some amount comes through 1 EMI or less, but some amount keeps coming from our GNPA book. In March, we collected around INR80 crores from this book.
On the SMA book for EEB portfolio in West Bengal, why is there a slight increase in SMA-0 and given disturbances in some districts in April, how is collection efficiency affected?
The increase is because the last 3 days of the quarter were holidays in West Bengal, so demand raised during that period could not be paid by borrowers, but most accounts have been eventually corrected. In Murshidabad district which had disturbances, about 88% of accounts are regular as of April with NPA at 4%, SMA-0 at 6%, and SMA-1 and SMA-2 at 1% each. Total outstanding is INR2,151 crores with only INR91 crores classified as NPA.
Given recent originations show 3.5-4% NPA, what gives confidence that EEB credit cost will come down to 2-3% over the longer term?
Recent vintages show improvement - FY25 figures came down from 2.8% in Q1 to 1% in Q2, 0.1% in Q3, and 0% in Q4. The DPD book is also coming down sequentially with INR223 crore reduction. We have implemented our own guardrails plus MFIN guardrails which will impact growth for 1-2 quarters but contain stress, and we have kept guidance of around INR5,000 crores incremental growth in the EEB segment for FY26.
Is the INR5,000 crores figure the EEB disbursement or net AUM growth for FY26?
It is the net AUM growth of the EEB portfolio for FY26.
Which are your worst performing states dragging down EEB collection efficiency to 98.2%, and when do you expect normalized disbursal levels during the year?
States not performing well include Maharashtra, parts of Gujarat, Tamil Nadu and Karnataka. The first quarter is going to be muted, from quarter 2 onwards disbursal should pick up, and by the end of quarter 3 we should hopefully have a normal year-like quarter, with stabilization over Q3 and Q4.
Are Maharashtra and Gujarat at close to 96% collection efficiency in March, and is there anything localized causing the problem?
March collection efficiency was slightly better at 96-96.5% for Maharashtra and Gujarat, Tamil Nadu was 96%, and Karnataka similar at 96.5%. Primarily it is the same overleverage issue at pan-India level, and Bandhan + 2 relationship for us is at 92% which is much higher than counterparts. There have been localized disruptions like Murshidabad in the last 2 months but these don't continue for long.
After implementation of the new guardrails in April, has there been any change in collection efficiency?
Collection efficiencies for April have remained stable. The impact of guardrails has been more on the disbursal side with the 3 lender norm. We don't see collection efficiencies dipping in April apart from 1 or 2 places previously discussed.
On the ROE decomposition - margins are 7% today and you indicate the number will be down by about 20 basis points. Is that correct? Are peak ROAs 1.8% implying ROEs around 14%?
As secured mix increases over the next 3 years, NIMs should come down by another 50-60 basis points, but other income should increase by another 20 basis points or so to offset some impact. Costs will increase by 10-20 basis points over the next 2 years as we invest, then efficiencies should kick in. Credit cost is where we should see big reduction, leading to ROA reaching 1.8% to 1.9% over the next 2 to 3 years from current 1.5%.
Have we taken the full impact of RWA decline or is there some loan book where lower risk weights are yet to be applied?
Following the RBI February 2025 circular, a large part of our EEB book across group lending and SBAL fulfils the criteria and we have taken the benefit in RWA calculation. The change from 1st April for lending to NBFCs should give some further benefit, which is not yet included in the March CRAR of 18.7%.
Of the non-EEB slippages of INR3.5 billion, how much was from home loan and wholesale segment?
Wholesale segment slippages ratio is very low at only 0.6% in Q4, while housing finance slippages was 2.3% with a major part from legacy GRUH Finance acquired books. On housing, while gross slippage was 2.3%, on a net basis it was around 0.6-0.8% annualized, with INR70 crores of net addition on gross slippage of INR180 crores.
On opex growth - is the higher growth primarily because new businesses are opex heavy plus investments in people and processes?
There are 2-3 key pieces - newer secured businesses require investments in people, technology and the right talent. We have core banking system upgrade and are focusing on systems like loan origination with state-of-the-art LOS providers like Salesforce. Plus distribution network branches to drive deposit growth.
On the SMA-0 increase in West Bengal from 0.9% to 2.3% - has that rolled back? What is the current level?
30th and 31st being holiday demand dates caused SMA-0 to elevate from 0.9% to 2.3%. We collected 92.7% of the billed amount, and of the 8.3% that got forwarded, we collected 95% within the next 7 days. So that one week collection has already come through and this is a one-timer.
Looking at next year specifically, would it be reasonable to say ROA will be under pressure given investments and operating profit profile reduction?
In the current year, Q1, Q2 was good and Q3, Q4 was comparatively bad, with overall ROA maintained at 1.5%. This year it will be the reverse - Q1, Q2 will be a little bit bad, but Q3, Q4 we expect to be good. By Q2 most problems will be addressed, so 1.5%-1.6% can be maintained for this year.
On operating profit as a percentage of assets at 3.3-3.4% - how does this evolve over next year given mix shift bringing margins down and continued investments?
Full year ROA was 1.5%, Q3 was 0.9% and Q4 was 0.7%, largely impacted by elevated micro slippages. Once the microfinance cycle turns, we expect relief, and as new capabilities provide higher other income, we will reach 1.8% to 1.9% ROA over the next 2 to 3 years on a glide path.
What is the yield on microfinance portfolio versus non-microfinance portfolio currently?
The differential between the two yields is roughly around 10%. EEB is around or upwards of 20%, and non-microfinance is around 10%.
What has led to the negative tax in this quarter?
Two aspects accounted for - one is the deferred tax asset on ESOP roughly around INR61 crores, linked to the ESOP accounting impact of INR166 crores in the last quarter. The second is release of an old year's income tax provision linked to assessment completion. In total, about INR87 crores between these two items.