Can you name the international NPA account? What went wrong?
We cannot disclose bilateral account names. It was restructured during COVID, upgraded after one year as conduct was good, but continued to show weakness (SMA 1/2). In the international territory it entered CNC - Credit National Crisis resolution process with a 210-day curative period. It is a secured advance with asset coverage above 1, outstanding reduced from 80 million to 50 million euros over the years. We made 40% provision (200 crore on 500 crore). We are hopeful of full recovery.
Fee income is soft at sub-10% YoY. Can you share margin trajectory from 2.91% for next few quarters? And ROA of 1.03% used substantial trading gains - can 1% ROA be maintained without them?
On fee: the bank is focused but cannot give a specific number. Cash management on MSME is progressing. On margin: NIM of 2.91% vs 2.98% (reclassified March) is only a 7 bps cut vs industry average of 17 bps. Full year guidance 2.85-3%; Q2 will be under pressure. On ROA: this is the 12th consecutive quarter above 1%. Treasury gains from OMOs can continue. Prudent provisioning also creates buffer. Full year ROA at 1% is maintainable.
Can you give absolute SMA 1 and SMA 2 numbers separately? Many banks have seen SMA 2 surge.
We give SMA as percentage only. The 0.4% CRILC SMA 1 and 2 consists of three accounts which are government entities or government-guaranteed that routinely move between SMA 1, 2 and standard. Excluding these three accounts, SMA 1 and 2 CRILC book is at 0.10%. Absolute number data will be shared if previously published.
On the airline account - what is the status of the 1,200 crore land parcel that is secured? Is major resolution expected this year?
Sale of large land parcels is always time-consuming. Central Bank is the lead bank and the process is ongoing. Apart from the land parcel, the ECLGS money was already received reducing exposure by one-third. There is also an international arbitration process with strong offset possibility. Multiple processes are running but patience is needed.
Can you provide vintage-wise breakup of the written-off pool (less than 5 years, 5-10 years, more than 10 years)? And is the 2.91% NIM clean or are there one-offs?
On written-off pool vintage breakup: we do not have data here; Lal Singh will provide later. On NIM: there is no other one-off. The income tax refund reclassification from other income to interest income is the only change; this recalibrates the prior quarter from 2.86% to 2.98%. The cut is still only 7 bps either way.
MSME slippages are the bulk now. Can you share CMR-wise breakup of MSME book? And is MSME all secured?
CMR breakup data will be provided separately. MSME is predominantly secured. Unsecured only in small cashflow-based OD products under GST-linked schemes and CGTMSE-covered government schemes. Lal Singh confirmed there is not much unsecured in MSME beyond guaranteed schemes.
Corporate book showed sequential degrowth. Are you letting repayments happen without re-contracting given tight NBFC pricing? How much did you shed in NBFCs? And what is the co-lending book size?
Corporate growth has two factors: seasonal (similar in June 2024) and book realignment alongside bulk deposit reduction. Corporates with strong cashflow are deleveraging, and the bond market offers cheaper rates than bank loans. NBFC book saw some degrowth because fine pricing became very fine - margin-dilutive transactions were let go. But NBFC demand is coming back; full year corporate growth guidance remains 9-10%. On co-lending, the book is less than 2,000 crores currently; we plan a significant uptick as technical and accounting clarity is now in place.
Will provisions rise from this international account? What sectors are you focusing on in MSME and what is the MSME growth target? Any concerns about over-leveraging in unsecured MSME?
On provisions: if resolution does not happen within 210 days we will scale up, but the balance exposure is only 300 crore. On MSME: growth is 13.1% vs 9.8% last year. Focus sectors are CV & CME, supply chain finance, TReDs, and government schemes like MCGS guarantee scheme and cashflow-based smart OD. MSME definition change creates opportunity. Growing at 17-18% is possible. On unsecured MSME: most loans are secured. Unsecured component is very small - mainly GST-based OD scheme and CGTMSE-covered loans.
Treasury income has helped this quarter but if it comes down with NII already under pressure, how will you handle higher provisions?
NII will remain under pressure Q2 as well - this is system-aligned due to asset-liability transition. The BRLLR repricing happened immediately while deposit costs take longer. Q3 onwards NII and margin should be positive. On treasury, OMOs allow banks to offer HTM investments and gain upside. If OMOs continue, there is a good chance of further gains Q2. Prudent provisioning this quarter also creates a buffer.
Provisions rose almost 1,000 crores year-on-year. What is the Q2 outlook on provisions?
Sequentially vs March the increase is only 400 crores. Of that, 200 crores is from the international account at 40% provision. The remaining reflects ageing provisions and some prudential provisioning for accounts showing inherent weakness per auditor guidance. Run rate of 1,500 crores is maintainable but we will see how Q2 pans out.
RAM is now 62.7% vs 57% two years ago. What is your RAM contribution target and timeline?
The bank started at 57% two years back and has been working to retailize. Our plan is to reach 64-65% in 2-3 years. This year it is 62.7% partly because corporate growth is muted at 4.2%; as corporate grows to 9-10%, the percentage may not hold the same level, but the retailization push will continue.
How many quarters for full repo rate cut impact to flow through? When does NIM recover?
Around 70-80% of the deposit book will get repriced by end of September. So positive margin and NII outcomes start Q3 onwards. Q2 will still see pressure both on margin and NII. Full year NIM guidance is 2.85% to 3%.
What are recovery targets for FY26? What is credit and deposit growth guidance? Is there saturation in Agri loans and Kisan credit cards?
Credit growth guidance maintained at 11-13% for advances and 9-11% for deposits. Slippage ratio guidance: 1 to 1.25%. Credit cost guidance: below 0.75%. Recovery target: exceed 10,000 crores for the full year. On Agri: 16.2% growth this quarter vs 9.1% same quarter last year. Momentum continuing; expect 14%+ growth going forward.
Is 80%+ CD ratio sustainable? What steps are you taking to grow CASA deposits in a falling rate environment?
CD ratio of 82-84% is sustainable with excess SLR of 6.5-7% and healthy LCR at approximately 120%. On CASA: we have come out with innovative products, digital offerings, and product bundling. CASA growth of 5-5.5% is consistent and above large peer system growth. CASA percentage at 39.33% is top quartile among large peers.
What is EBLR-linked loans percentage? What is exit FY26 NIM target? And where is corporate demand coming from for the rest of the year?
BRLR book is 30-35%, MCLR is 45-48%, fixed 6%, T-bill 7%, G-SEC 6%. Full year NIM guidance is 2.85-3% - H2 much better than H1. On corporate pipeline: sanctioned but not disbursed is 30,000-35,000 crore; under consideration is 25,000-30,000 crore. Demand from renewable energy, data centers, road projects. H2 is busy season and rate differential between bond market and bank loans will narrow.
What is the loan book mix by benchmark? How much of the 100bps repo cut has flowed through? How much cost of deposit can fall in Q2?
BRLR is 35%, MCLR 45%, fixed 6%, T-bill 7%, G-SEC 6%. On repo pass-through: retail EBLR already fully passed on. MCLR has had one cut but further cuts will follow deposit cost moderation. Term deposit duration is approximately one year; 3-4 months gone so 70-80% will reprice by September. Expect 15-17 bps cost of deposit reduction by Q2 end.
On the international NPA account, 210 days ends this financial year, so with 40% already provided and state backing, is there a very positive chance of full resolution without any loss?
Yes, absolutely. The account has a lot of state backing in the international territory. Resolution within 210 days is possible; if that happens the 40% provision will be reversed. Currently there is a standstill condition under the curative process. As a prudent measure under domestic regulation we classified as NPA, though the international framework does not require it during the standstill.
Recovery was slower in Q1. What is the recovery outlook and any pipeline for NARCL or ARC sales?
Average run rate on recovery and write-off excluding one-offs is roughly 750 crores per quarter. June is typically lower (same in June 2024). Subsequent quarters will be much better. On NARCL/ARC: we do not have much in the pipeline. Focus is on strong internal recovery mechanisms. Full year recovery target including TWO is to exceed 10,000 crores.
Standard asset provisioning was 320 crores despite corporate book running down - should there have been a release? What is the rationale for this incremental provisioning?
A couple of accounts with inherent weakness were flagged by auditors for prudential provisioning above IRAC requirements. Accounts that repeatedly move between SMA 1/2 and standard also warranted additional provision even if IRAC basis did not require it. Incremental standard asset provisioning of 5-600 crores was made against these accounts. After releases the net is 324 crores.
Is there any risk of further international book stress given global events? Is this international NPA the start of a trend?
Absolutely not. This account was under monitoring for long as it was a restructured account. The mid-office maps every global account. There is no other account currently showing SMA 1/2 signs. No challenge on the international NPA position.
With retail and MSME growing fast, will slippages from seasoning of personal loans and MSME increase? Is MSME mostly secured?
Retail slippage ratio is below June last year level despite denominator growth. Personal loan legacy book has some incremental NPA but the book is not large enough to be a concern. MSME is almost entirely secured - unsecured component very small, covered by CGTMSE guarantee. CV & CME, supply chain finance, TReDs are focus areas. Slippage ratio in retail and MSME well within threshold.
L2 maturity book is down 4% QoQ - is this from OMO operations or the 5% sell-out under new investment guidelines? When does repo pass-through work - T+1?
We took advantage of OMOs and earned good profit. Repo cuts are passed on immediately and ALCO meets every month on a fixed frequency.
Staff provision was 800 crores last year and is now close to 1,000 crores. Should this be the run rate going forward?
The discount rate has gone down, which is why the AS-15 provision requirement has gone up. It depends on further rate movements.
How many more repo cuts are you expecting? Will 10-year G-Sec touch 6%? What is RAM yield? Are the corporate book reductions mainly fine-priced PSU/AAA loans replaced by CPs and NCDs?
House view is one more 25 bps cut expected towards end of calendar year, not in the next policy. 10-year G-Sec at 6% depends on Fed rate action too; if Fed cuts then possible. RAM yield is approximately 9.5%. On corporate: correct - fine-priced corporate and NBFC transactions were let go as margin-dilutive. Core corporate growth is actually much stronger than 4.2% headline.
Is the 64% RAM target for this year-end? What is the digital and staff expenditure plan? Any subsidiary monetization?
The 64-65% RAM target is 2-3 years out, not this year. This year at 62.7% because corporate is muted; as corporate catches up to 9-10%, the percentage will settle differently. OpEx and CapEx are normally tagged at 10% of operating profit and can go up to 15% if required. Hiring plan is 15,000 employees this year at operational and relationship levels. Branch expansion plan is 300 new branches this year following 250+ last year.
Domestic yields are down 15 bps QoQ. How does yield behave in near term with remaining repo cut impact full quarter? And overseas NIM improved from 1.70% to 1.75% despite global rate moderation - why?
BRLLR repricing was only for one month in Q1; full quarter impact comes in Q2. Margin guidance: 2.85-3% full year with Q2 still under pressure. Cost of deposit expected to moderate by 15-17 bps in Q2 through deposit repricing. On overseas NIM: peak was 2.23%, it has settled around 1.70-1.75% which is stabilized. Earlier Fed cuts already priced in; the 5 bps move is transient.