Sir, this NMC case is a big case because the 5,000 odd crores, it's not every day that we hear such a big provision and settlement. You'll have always maintained, if I remember right, that you'll will fight this case legally because this has been an old case. So, what has changed? Why did you all take this decision to take such a big hit on your books?
So, Joel, I mean, the Bank's position with regard to the defense has not changed. That's continued, right? So that's the same. But with regard to the settlement, it should be looked into from the point of view of the case that was going on in, I mean, one court and was put on hold in another court. So, because we are not allowed as far as the terms and conditions to give details, but obviously without basis, the Bank won't settle. So, the Bank had a strong basis to settle the case. And between the last discussion and today's discussion, what is material is that the stage of the trial that's important. I mean, the criticality or the stage of the trial is important. And based on that, the decision was taken to settle the case. And rather the settlement amount vis-a-vis the oral claim has been very, very low. So, in that way, it was prudent for the Bank to settle the case based on the trial stage. But we can't discuss with regard to the basis and terms of settlement.
On the credit growth guidance front, any reasons why you're not doing an upward review really, given the general sort of boisterousness in the systems?
So, Ashish, there are two before, in case you have further questions, you can ask later. I mean, look at full year March '26, we had a credit growth of 16.1%, right. That's something very strong. And this quarter, normally, I mean, if you look at historically, our June quarter is slightly slack. But this quarter we have done better than that of the full year last year. So, in terms of the Bank's ability to grow, I think, with a large franchisee of almost 8,400 branches, and you would have seen all segment would have grown in this advance as growth. The Agri has grown significantly, MSME, Retail, and the Corporate growth is in excess of 15% , this time. So, I think the Bank's ability to grow has been much higher now. But the two reasons why, because we have outperformed our guidance both in the March full year and also June this quarter, but we are not revising upward precisely on two counts. One is because as of today also, in case you look at the headwinds prevailing in the entire global economy, also Indian economy is the geopolitical issue. When last time I interacted with all of you, I said our assumption for a resolution is rather we are optimistic, but things are getting prolonged for longer. So, in that scenario, we are not very critically, I mean, very sure about the way the deposit will grow in the future quarters. So, in case we will be certain about the growth of deposit in future quarters, possibly we can see upsizing of our guidance. But as of today, looking into all the factors, I will keep the guidance at the same like 12 to 14%.
This 2020, when this case was going on, the main contention against the Bank was it, you know, the financial arrangements between the bank and the client and lending relationship. So, in terms of internal processes at the Bank, what action have you taken, underwriting. And finally, your comments on margins, it has come down a few basis points?
Okay. So, Piyush, two things you referred about the case, I mean referring to a year. I wish I could discuss more, but there is a bilateral confidentiality clause, which doesn't allow me to discuss further with regard to the basis and the cause of the case and what is that we have done on that. But clearly in terms of the Bank's international operation is concerned, you would have seen March 2021, the international book was, it was almost like degrowing and the contribution was negative. And from that day today, we are almost like from INR 1,05,000 terms the book has almost come to INR 3,00,000 crore now. We have clearly changed the underwriting model, we have clearly changed the governance surrounding, we have clearly changed the processes around that. So, we have strengthened, I mean, the governance structure, we strengthened the, I mean, the risk management structure, the compliance framework. Currently, the CRO and the CCO of the Bank are the group CRO and the group CCO. They have oversight on all these operations. The AML framework has been significantly strengthened over there. Margin is, look, the NII has improved actually at 9.5 %. So, INR 12,500, is a good growth in NII. I mean, in a way, the pricing of the asset liability, we have managed it well, in a prudent way. But obviously, the denominator has increased faster than the growth in NII. So, that is why the margin has slightly got squeezed. But margin last quarter also when I talked to you, I clearly, at that time the margin was in excess of 2.8%. But I had given a guidance of 2.75 to 2.95% and we are right in that band. But the domestic margin is still at 2.93%, which is one of the top quartile number.
On this entire NMC case, in terms of the disclosure, even in the annual report, we just indicated that this case is pending but in terms of the liability amount given that it was so huge at almost 600 odd million, why there was no indication in terms of the liability which can accrue to us? And on ECL, has there been any change in that ECL quantum? And margins, on the core basis, if we look at it, we have seen yield on advances falling lower than that of cost of deposits. Was there any interest on IT refund during the quarter?
So Kunal, coming to the NMC case, the nature of transaction as I said in my statement, it's a confidential agreement and the case is still sub-judice as far as the other defendants are concerned. So, I am afraid that, we cannot articulate anything on the matter. In terms of the annual report and the settlement that you talked about, the annual report was based on the position at that point of time. The case has gone for advanced trial post-March and the settlement has been done vis-a-vis the court litigation process, both for the Abu Dhabi Global Market court and also the UK court, based on a commercially prudent decision as advised by the legal counsel on the matter. ECL impact, earlier I said, the impact would be 125 bps minus a pullback of 50 bps but both the final guidelines have been issued. The pullback is now almost like 15 bps. So, the impact of the ECL would be almost 110 bps on the CRAR translating into something around INR 12,000 crore. We have the ECL provision, floating provision of roughly INR 2,500 crore for the balance to be spread over. The core income part of the, that is what I am telling. In spite of this condition, when you look into multiple banks' financial results, the NII growth is at 9.5 %. IT refund..... this.....it is something around 300 odd crore, I believe. CFO, what is the number? INR 370 crore.
On NMC, I wanted to check, have you internally fixed any responsibility, any disciplinary action sort of a thing, now that the matter is closed from your end. And secondly, on the ECL, this 125, 110 bps impact, is this gross or net number?
Okay. So, thanks for congratulations. I think the Bank had a strong quarter and appreciated that well. On the NMC, look for any staff side, every bank which is a Government owned bank, it has its own processes in terms of how do you take through all this accountability issue. So, in line with the guidelines that we have in place where the Government owned bank. Again, I repeat, whatever required to be done in terms of the staff, responsibility, anything, either would have been done or is going to be done. I tell you, I give you the absolute impact on this. The net impact on the absolute is roughly around INR 12,000 crore, right. And 12,000 crore, we are holding floating provision to the extent of INR 2500 crore. So almost a INR 9500 crore to 10,000 crore. You have to really give the impact on the capital. And that is spread over for the amortized time.
Firstly, on the interest on IT refund, just a data keeping question. What is the number this quarter? And a second question on the ECL, sir. Some of your public sector peers, the run rate impact they have called out say between 10 to 15 bps. So any reason are you being conservative at 20 to 22 bps?
This question, often we are getting from the analyst. Earlier also, management has articulated that don't see it as a separate line item. It's part of the regular interest income. Depending on the completion of the assessments, we keep getting these numbers. So please consider it as part of regular interest. Yeah. They're stable. That's why the guidance MD Sir has given. It is in line with this.
On ECL, some of your public sector peers' run rate impact called out say between 10 to 15 bps. So any reason why you are being conservative at 20 to 22 bps? And if the cost of risk is going up because of ECL provisioning, shouldn't that reflect in your lending rates as well?
Based on their book and their calculation, I have not read about other banks, what they have said, but I think our numbers are comparable with any other bank on the matter. Rather, we hold our INR 2500 crore of floating provision in the books. Not many banks are holding that provision. So, in that way, our ability to migrate is much better. And secondly, when all the factors we look into, the factor is the capital position of the Bank. As of today, it is almost at 16.3 %. And we do have a plan to raise capital. The impact on the credit cost side that you are referring, we are also at the same range of 15 to 20 bps on the credit cost. See, there are a couple of guidelines on the retail loan while changing the spread, actually. What is the frequency at which you can change the spread or frequency, you can change the spread, in case there is a creditworthiness deterioration therein or a force majeure kind of thing. So, the ECL migration and consequent impact on the pricing, we have to take a call based on the regulatory guidelines at that point of time. But obviously, if the cost is coming to the bank, the bank would obviously like to pass on to the customer to maintain the margin.
On ECL. In the previous answer you mentioned 15 to 20 bps, whereas I think before that, it was 20 to 22 bps. Which of the two number is the correct number sir? And this is the case, if this is the case, sir, how do we then continue with 1% ROA if there is a 20 bps impact on our steady state credit cost?
Look, there are two impacts. I think I would ask one of the ED to support me. Possibly, I'm not clarifying well. The overall impact is 110 bps on the CRAR. So that is going to spread over. So in case you spread it over four years or five years in whichever manner will decide that is 20-22 bps, is the impact on the CRAR. Then there is impact on the credit cost. Credit cost, earlier we talked about, around 15-20bps impact on the credit cost. Again, computation of the credit cost is going to be evolving rather than the impact on the CRAR because CRAR you know the book has been frozen right. So, credit cost would evolve with regard to the fresh flow of book happening after 1st April 2026. But as of today, as we speak, the impact can be 15 to 20 bps, slightly in those range. Honestly, I don't know. You are asking or somebody was asking, after ECL, whether you are going to price in asset in a manner which will pass on the ECL cost, right? It has to be. It has to be, obviously.
My question is on FCNR. I mean, how much of flows have you mobilized so far and what is the target? And you have already taken ratings for a dollar bond, but you have not tapped the market. So, when are you going to tap that? And also, on the NMC case, the 600 million settlement, I mean, if there's no admission of guilt, so why such a huge settlement?
So, on the FCNR, we anticipated that we'll be raising something around 4 to 5 billion in terms of all the three instruments, FCNR, MTN, and also on the OFCB. So, as of today on FCNR, we have raised almost close to 700 million now and possibly by month end, we'll be crossing 1 billion now, right? So, in that way, we're quite hopeful of our initial target of raising roughly around 4 to 5 billion by the time the window closes, right. You talked about dollar bond. We have, actually, we have the intention of hitting the dollar bond, but then we also look at some right pricing for that, right. So, that's something important. Initially, the market got slightly overrated. So, we are just waiting for the right time before we hit the market. We are ready with everything, but then we'll hit the market the time we think the price is appropriate and right for us. On the NMC case, look, I mean, the case will be looked into from the point of view of the legal process therein. So, as I said earlier in my statement also, this is after carefully considering based on the commercial consideration, I mean, we thought that's appropriate for us to settle the case. And that has been done without any admission of any liability or wrongdoings. So, definitely with basis only would have settled the transaction. But the terms of the settlement are confidential because there is a case and the matter is sub-judice vis-a-vis other defendants. So, in that way, I think that's an appropriate decision for the Bank to settle the case. It's a long legal overhang as far as the Bank is concerned. And rather we're trying to give you a pristine, balance it in terms of a balance and not having any overhang in terms of any legacy issue therein. Thank you.
On FCNR, what kind of leverage are you offering and what is the proportion of own leverage you're giving on SBLCs to foreign banks?
So, we are offering a loan against the FCNR we deposit to the eligible NRI customers, and the scheme has been rolled out. And both types of NRI customers are placing their funds with us directly as FCNR (B) without any borrowings or somewhere they are also taking loan against the FCNR (B) deposits.
Sir, your other income has also fallen quite sharply. Besides this provision, I think that is another impact on your profit and loss. If you could just elaborate on what is there, why it has fallen, what are the pieces that has fallen and what is the outlook there, sir?
See, as you said, right, the NII growth is almost 10%, whereas the operating profit is almost flat vis-a-vis June last year. So, between the NII and the operating profit is the other non-interest income. And in case you would have seen the treasury income, both for June '25 and June '26, the treasury income in June '25 was almost more than 2,000 to 2,200 crores. Whereas it has gone down to 800 crores because of the market scenario. So last June '25, the G-sec yield, I believe, was almost at 6.10 or 6.13%. And if you look at the G-sec yield in this June quarter, it was almost at 6.78%. Obviously, I mean, the profit is linked with the market movement at that time and now. So that one element has changed with regard to, but we have some other good outcome on the other income in terms of, we have sold PSLC for the first time. I mean, we sold in March some amount, but almost like 270 crores we sold this quarter. That's something, a line item which was not there in earlier quarters. Similarly, the TWO recoveries have also been more than 1,000 crores as compared to something around 650-700 crores last couple of quarters now. So, in that way, the fall in treasury income was compensated well. So, leading to almost like a flat-like operating profit.
On the NMC front, the annual reports made us believe that you are on a strong footing. What really changed and when you say that the recovery action against the principal individual, so this is the main defaulter that will continue, right? And what would be the ECL transition cost which you are calculating for now?
Look two things. I mean, typically, if you look at when there is a litigation and settlement, you can't make a specific provision, right? So obviously, that the prudent, this is as per the legal advice we had and as you know, that we had the best of legal teams from globally and also individual engaged in this case. So, we had buffered the balance sheet in terms of floating provision, but the floating provision, we were keeping it for the ECL because that's going to happen 01st April 2027. So, a scenario where, I mean, on a litigation settlement, you can't have a specific provision and that's as per our legal advice. What is the change between the last annual report and today is the stage of trial and the stage of negotiation therein. Today, the calculation, I think we have almost an impact of roughly around INR 12,500 crores, out of which, as you said, the floating provision of INR 2,500 crores is already there. So again, the floating provision, I mean, the impact would be spread over in, I mean, 4-5 years. So, we are just looking at in terms of basis point, it's almost like 110 bps impact on the CRAR, which can be spread over a period of time. And just to negate that, we have a, I mean, a capital raise plan also we announced last time in terms of both equity and also the Tier 1 and Tier 2, right. So as on today, the Bank's CRAR is quite healthy at 16.30%. So, this is with regard to the impact on the CRAR, but there is an impact also on the credit cost. And the impact on the credit cost can be in the range of around 15 to 20 bps on the credit cost.
Any capital raise in FY27, sir?
We announced last time, actually, two capital raise plan we are carrying. One is a raising 8,500 crore of equity in a medium term, that is March 2028. And that would determine the timing because not immediate requirement, capital position remains healthy. At the same time, we intend to raise roughly 6,000 crores of Tier 2 in this year. I mean, that was an amount actually got matured last year, but we did not raise it last year. So, we are going to raise that in this year, but depending upon the pricing, the timing, everything would be important. So, the bank has a strong raising of capital. At the same time, we are running a very healthy capital position as on today of 16.3%, right. So that is something I think the CET is almost like at 13.90 %. So, in that way, there is no absolute requirement to raise it immediately, but there is a plan to raise capital over a period of time.
Even if you take out this, out-of-court settlement, you know, this one-time 600 million hit, if you see the quarterly result of June quarter, most of these parameters, we have a little bit faltered. Credit growth, deposit growth, business growth, I think after many, many quarters, it is down than the previous quarter. Both our gross NPA and net NPA have gone up in absolute terms, as well as in the percentage terms. And going forward, when we say 12 to 14% credit growth, how do we then plan to achieve that?
So, Ajmera Sir, I will just tell you, I am also slightly disappointed that, I mean, you have not read the numbers particularly. I just tell you why I am saying so I am disappointed. My credit growth for this quarter is 17.4%. My deposit growth is 13.8% global and international is 14.5%. I mean, domestic is 14.7%. These are possibly one of the strongest growth not only for the Bank itself in all the quarters, but the strongest growth possibly in the industry itself when I am comparing with the large peers, large peers. So, the asset quality, the CRILC data, the SMA 1 and 2 more than 5 crore for the book as a whole, consisting of domestic and international. From 0.18 %, it has gone down to 0.07%. The slippages have gone down. A treasury book of, I mean, almost 3,70,000 crore will have some treasury income and that treasury income is 893 crore, which is much less than the same quarter last year of 2,200 crore. So, I think there is not a single parameter in the balance sheet on profitability other than the net profit, which has been shown a decline trend or a lower growth or a lower profitability matrix. These are all very strong numbers.
The duration on the investment book has gone up both sharply QoQ and YoY. Curious to understand the thought process in the context that the next potential rate action by the Central Bank could be a rate hike, not imminent, but eventually. While the increasing duration aids the coupons right now, but in the future, it can result in MTM losses.
Okay, duration has gone up. Typically, you would have seen this quarter the peak yield was almost at 7.13 - 7.14, I believe. Obviously, at a higher yield, the Bank would like to have a bit of, what you can say, investment over there, just to take upside of the yield movement. And precisely, that is the reason, why the book also would have seen an increase. But this book has been spread out in three components, AFS, HTM and also the FVTPL. So, if you look at this component therein and the yield has now moved down to 6.75 or 6.80 kind of level. So, you would have anticipated the upside on those investments which we have made at a higher yield. At the same time, we have position in terms of all the three books in a manner where any impact of a rate hike consequently the yield going up, the Bank is adequately protected in that count. So, it is a very prudent decision to add bit of duration just to take advantage of the rate movement and which has come right for the Bank in terms of the subsequent yield movement.
Happy to see that you have de-grown your corporate loans by 7% and still the overall loan growth is strong. Could you talk a bit more about the competitive intensity in the corporate loan segment? And also if you were able to shift some of the customers from the T-bill to MCLR rate in the quarter?
You are right, the corporate loan growth has been very strong but YTD there is a, I mean, that is the only component in the advances book you would have seen there is a bit of de-growth. Otherwise, sequentially, all the advance book, whether it is Agri, Retail, MSME, there is a YTD positive. So rightly so, that is best strategy, wherein we wondered that in the corporate book itself, the non-MCLR link, which can be any benchmark link, considering the elevated cost structure on the deposit side, we are trying to move them upward in that way. And that precisely resulted into letting go, some of the very fine priced assets. So, you are right on that, the strategy is bang on that, I mean, taking advantage of the change in interest rate structure in the industry and moving bit of non-MCLR book into be it an MCLR or near to MCLR book in that way.
Commission exchange brokerage fee income, it is down almost 47% YoY. What is dragging that down? And on FCNR, if you could just talk about how much of the funds you have already mobilized, what is your target? And more importantly, if you provide self-leverage on your balance sheet, how does that impact your margins and NII and PAT?
So, on FCNR(B), up till now, we have raised in excess of USD 600 million. And in terms of providing the facilities to the NRI depositors against their deposit, we are facilitating them with the loan against the FCNR (B) deposit. Apart from this, the normal NRI deposit flows are also there where the depositors are not opting for the loan against the deposit. We aim to get into the total flows of in excess of USD 4 to USD 5 billion, ballpark figure of USD 5 billion, which comprises of all three components, FCNR(B), OFCB and ECB routes also. So, you know, in terms of the Indian book, the deposit, Rupee deposit cost of these FCNR(B) deposit is quite competitive. We are offering the Rupee deposit rate of around 6.5 - 6.4%. And this will be our landed cost for Rupee resources. When the NRI depositors take loan against deposit at the overseas jurisdiction, they are provided by the overseas branches, according to their own cost of funds, thus resulting in leaving margins at that end also. So, at both ends, the business is resulting in the margins.
Just taking ahead Kunal's question, just one simple question. Right on, on the NMC case. So why were we, why did we have to settle? Secondly, I understand core margins sequentially would have gone up right. Adjusted for interest on IT refund. Third, if you can just quantify the one time impact in your staff cost. And lastly, what would be the sustainable impact due to ECL?
So, NMC case, I mean, we have to differentiate the, the credit engagement and the case itself, right? The settlement has been done based on the case. I mean, the case that was going on against the Bank in Abu Dhabi Global Market Court, in a similar case, which was pending but on hold at the UK court. So, you have to differentiate the credit engagement and the litigation that was going on. So the settlement has been done based on the advanced trial nature of the code, based on the legal advice to clear an overhang which was there for long. Core margin, last time also, when we had a 2.83 or 84%, I believe, on the NIM, I guided the market at 2.75%. And so look, in terms of the pricing of asset liability, the NII growth tells you about the pricing of asset liability that we have prudently managed, but obviously the asset growth has been higher so that the NIM is getting impacted, right? So, in terms of the core NIM and look, we are on a higher international book and the international will operate at a much lower margin of 1.4 or 1.5 % therein. Staff cost has gone up. In fact, this vis a vis March but if you look at the staff cost compared to the June, it is below that level, but over March, is because of the AS15 provision, which again tracks the yield movement. The overall impact is 110 bps on the CRAR. So that is going to spread over. So in case you spread it over four years or five years in whichever manner will decide that is 20-22 bps, is the impact on the CRAR. Then there is impact on the credit cost. Credit cost, earlier we talked about, around 15-20bps impact on the credit cost.
On gold loan. So QoQ, there is a dip in both retail gold as well as agri gold. Of course, there were new rules which have had come in, but any color there? And on LCR, last quarter was our LCR was also 127%. During the quarter, we had LCR release. You would have heard from bulk deposits. Why did we not sort of see the LCR going up like other banks?
No, no, actually, I mean, there are two heads in the advances in gold loan and the corporate loan slightly. There is a, I mean, YTD negative, whereas remaining all is YTD positive. So this is typically seasonal, in terms of demand scenario. Right. So I mean particularly in the corporate loan book, we see, either we allow some of the fine price asset to go or there is an inflow coming because of the corporate. We are now getting cash because of all these, I mean, release of their payment from different agency or different company. So it's typical seasonal. There is no strategy therein. We are growing at the same pace at which the gold and the book, in terms of asset quality continue to be strong. You actually see, on a liquidity solvency front, we need to maintain LCR. Actually, that is what we can't maintain, a very high LCR because then that would drag on your income and the yield. So earlier also I said, we want to maintain at 120 % kind of a level.
On the margins. If I heard correctly, you mentioned last quarter, core NIMs were around 2.83 or 82% and which has come down to 2.77 %. Is that correct? And what gives you the confidence that we can arrest it at 2.77% and not go down below our 2.75% guidance?
The last quarter, the NIM was higher than 2.77%. I mean, the two points actually at that time itself I had given a guidance of 2.75%. And so look, in terms of the pricing of asset liability, the NII growth tells you about the pricing of asset liability that we have prudently managed, but obviously the asset growth has been higher so that the NIM is getting impacted, right? So, in terms of the core NIM and look, we are on a higher international book and the international will operate at a much lower margin of 1.4 or 1.5 % therein. Now it has improved slightly. So, the domestic NIM more particularly, it is at 2.93% in excess of 2.90%. And when I talk about the domestic NIM or even global NIM, you would have made comparison across many of the banks. In that way, we again say it's a top quartile. So, in that way, we are quite confident that we maintain the margin going forward, and the guidance range continues to be 2.75 to 2.95%. So, two things you said, right? One is on the asset side because last two quarters, we have seen on the pricing on the asset. I'm talking about non-repo linked loans. It has been slightly, we are able to price in better particularly non MCLR corporate book, we are able to take them to near to MCLR or at MCLR. So that's a upside there in the books already. On the deposit, continue to be elevated. But one positive would have seen that the bulk deposit rates or the CD rates had gone down post the announcement of the FCNR (B) scheme. So, in terms of the incremental bulk deposit, I think the average cost is now lower than that of March now. So considering those two scenarios but the asset continue to grow faster, actually asset growth of 16-17% would put pressure on margin and also on the capital adequacy which we are managing it well. So considering those scenarios, I think still we are upbeat that we'll be in a position to hold on to 2.75 to 2.95%.