Given the balance sheet realignment, both loan and deposit growth has been below system in FY26. Now that realignment seems largely done, could you comment on the growth outlook for FY27? Also, staff expenses declined about 9% sequentially - can you quantify the retiral provision impact? And the onetime provisions of INR456 crores - why are they included in PCR rather than contingent provisions?
On deposit growth, looking beneath the surface: CASA growth is significantly above system. Retail term deposit growth is also higher than system. Wholesale deposits were grown negatively during the year, which is a measure of strength. On the asset side, focus segments - gold at 9%, LAP at 8% - have all grown extremely handsomely. Confident of continued traction. Staff cost: we don't want to quantify retiral provisions as they happen through cycles and we treat as BAU. On provisions: no specific portfolio concern; buffer created conservatively for ECL transition. ECL draft guidance allows use of this floating provision during transition.
Can you offer any guidance on FY27 growth?
We have clearly seen acceleration in all chosen areas. Y-o-Y growth was 8% last quarter, now 13%. Traction is building and we are confident of building further from here. Let me leave the guidance at that.
After this onetime provisioning, does it change our credit cost outlook? Will we require lower provisioning, or do we still maintain 45-50 bps credit cost guidance?
Credit cost guidance is not influenced by this action. This action is primarily as a transition into ECL. Credit cost guidance has been 50 to 60 bps in the past and we have done better this year at about 56 bps for the full year. In view of current uncertainties including Middle East and geopolitical issues, we do not want to review or change guidance right now. If situation clears, we will revisit.
On Middle East exposure - particularly on the retail asset side, what percentage of portfolio could be exposed to families based in Middle East?
NR segment is more liability-centric than asset-centric. The asset exposure is not large. Unless job losses and people returning to India, no trouble expected. Post-COVID disruption showed credit costs were reasonably controlled even then. No reason to believe impact would be dramatically higher now.
Does the 50 to 60 bps credit cost guidance continue under ECL regime as well?
That will have to be reassessed. The past guidance of 50-60 bps was stated. We are not changing the guidance just now. ECL, West Asia situation - these are events not yet built into guidance. Will need to be reassessed.
Ignoring Middle East crisis, how does the ECL change provisions for you?
Still too early to assess. ECL guidance came only 2 days back. We are still evaluating full implications. Will come back with a proper studied response rather than a quick answer.
Overall retail book is flat Y-o-Y. Given deposit repricing is mostly done, will you now push the pedal on retail growth?
The drag on retail growth is home loans - the largest single product. LAP, gold, agri, CV/CE, MFI are all growing. On home loans, will remain agile but current market pricing of 7.15% on 15-year loans vs higher deposit rates makes no sense to push. Will revisit when risk-return trade-off is acceptable. Most other retail segments are performing well.
What would be the overall ECL impact based on even the older October 2025 guidelines?
There was a lot of change from old guideline to the draft, but not much change from draft to the final outcome. Will assess full impact and come back. Asset quality is reasonable and robust. Whatever impact will be industry-wide, so given our robust asset quality, our impact should be reasonable.
How does the West Asia war change your growth outlook? And how should we look at margins into FY27 - is there any further deposit repricing left?
On margins: there is still scope for deposit repricing going into Q1 and potentially early Q2 FY27. NIM story is composite - CASA mix, deposit repricing, retail vs wholesale mix, asset yield mix. Multiple levers. Full year NIM lost only about 2 basis points versus last year - one of the lowest in sector. On remittances: currently elevated, unlikely to change unless significant job losses. Middle East likely in rebuild mode. Story not negative at this time. Resident deposits have grown even faster than NR deposits - balance sheet growth is broad-based.
Larger banks are finding it difficult to pass on the December 25 bps rate cut. How is Federal placed? Is there any day count impact on NIMs this quarter?
Day count impact exists but we take it in stride. On rate pass-through: we have to compete in market and pass on rates as required. NIM defense came from both asset yields dropping and costs dropping while maintaining spread. In segments we want to grow, the risk-return trade-off remains acceptable. We are also increasing pricing discipline through RAROC-based tools. Both NIM and ROA are back to pre-rate cut levels, and these are qualitatively better positions than at the peak of the cycle.
As we calibrate business banking growth for yield and asset quality reasons, won't that impact current account growth? And does our CASA target of 36% remain?
Business banking and current account are somewhat connected but not 100%. We can grow current account independently of business banking. CASA target of 36% stays. We are close to 33% now, having moved nearly 300 bps in 12-18 months. No reason not to believe 36% is achievable.
On fee income growth - last year was much better than peers, partly from rationalizing fees. From this base, what are the drivers of fee income growth going forward?
Three key drivers beyond general banking fees: credit card fees, wealth management fees, and trade and forex fees. Cards growing at good clip with more potential. Wealth management journey has just begun - only a few months in. Trade and forex seeing some traction but more to be done. Enough levers to continue driving fees.
Now that Venkat has moved on from CFO role, what functions will he oversee?
The CFO role has been separated from Venkat, not given up. Mani will be the CFO reporting to Venkat who has now been elevated to ED level. Venkat oversees CFO, IT, Operations, Vigilance and many other support functions.
Is the entire IT favorable orders have been considered in this quarter or will more come through in Q1?
Total refund of approximately INR1,500 crores has been accounted for. Three parts: interest on refund = INR456 crores (one-off), tax provision reversals = INR115 crores roughly, and balance approximately INR900-950 crores directly to balance sheet as excess tax paid. All INR1,500 crores reported have been accounted for in this quarter.
Given current conditions, would you delay building riskier segments like LAP, personal loans, credit cards, MFI?
Nothing has changed in our plan. No reason to rethink or reevaluate. We began building MFI last quarter in a small way. Cards continue to be built. Plans remain unchanged.
What is your internal policy limit on gold loan portfolio?
Gold loan portfolio is currently around less than 14%. No hard outer limit set, but within risk appetite. If it approaches 20%, will reevaluate at that time. No ceiling at this stage.
On gold loan practices - gold prices have varied significantly. Do you calculate gold prices on a daily basis or use an average, and is there a cap?
Two mechanisms: take the lower of last 30 working days average gold price and previous day's gold price. In times of extra volatility, we also reduce the LTV. In March when increased volatility seen, margins were increased. Current gold loan portfolio LTV is below 54%.
Does the cost to income guidance given at Strategy Day still hold?
Adjusted for one-time items, we are in the 53% range this quarter. Guidance was always to remain range-bound in 53-56% range with some quarterly seasonality. No reason to change guidance. Done slightly better than guidance for the year but will keep guidance as is.
Where are we on the asset mix journey from low to medium yield? Any medium-term targets?
This is a medium-term journey. From March 25 to March 26, low-yield book dropped from 52.2% to 49.8% - about 2.5% movement. Mid-yielding segment moved similarly. High-yielding book - cards, MFI, PL - also growing. Still in the journey, haven't reached destination yet.
Corporate spreads appear to be improving - is corporate a growth avenue for next year? Low-yielding book is still 50%, housing cautious - is corporate more positive for growth?
Within corporate, focusing more on mid-market rather than very large corporates - over 75% of NTB acquisitions last year were mid-market. This gives yield uptick. Corporate also allows better revenue wallet share through trade forex, current account, CMS. Self-funding ratio has gone up in corporate. Comfortable growing at early double digits but focus is on cross-sell and profitability rather than just book size.
Branch expansion has been lower this year. How critical is branch expansion for sustaining CASA growth and liability mix improvement?
In H1, deliberately went slow to bring more science to evaluation of existing network and future planning. Completed rebranding, new branch design, and network restructuring study. Now more comfortable - added 39 branches in Q4 alone. Plan to launch about 100 branches in FY27. Branches are important in liability strategy. Also focused on improving productivity of existing network.
Strong operating leverage with cost-to-income falling and ROA improving to around 1.36%. What are the drivers to take ROA above 1.5%? Any execution risks?
Caution: without one-off items, ROA is 1.24%, not 1.36%. Journey towards higher ROA continues. Three key levers: liability mix and cost, asset mix and yield, and fee growth. Cost is a fourth potential lever in 12-18 months. Started at 1% ROA three quarters back, now at 1.24%. Objective is to continue expanding NIM, fee-to-assets, ROA and ROE.
What is the LCR for the quarter and what levels do you plan to maintain?
LCR is 119. Comfortable with 115 to 120 range.
On the MSME and business banking side, are you seeing any stress customers talking about coming up for restructuring?
Based on current portfolio behavior, no reason to report any stress. Slippages remained at 0.74% which is in an acceptable range. SMA-1, SMA-2 show no stress building. Always an evolving situation but nothing to report as of today.
The floating provision made this quarter - is this more towards ECL than asset quality?
Absolutely. Floating provision has nothing to do with asset quality. Asset quality remains absolutely robust with no deterioration. This is primarily as a transition to ECL.
LCR has fallen below 120%, down almost 20 percentage points Y-o-Y. What is the Board level threshold and comfort level? As growth accelerates, will LCR need further support?
Currently operating at about 120%. Comfort zone is 115% to 120%. We have consciously brought it down from 135-140% earlier - higher LCR is a NIM destroyer. A conscious call and quite comfortable with this range. Regulatory requirement is 100%.
Credit card book growth is 23% Y-o-Y, moving differently from industry. What is the growth in interest earning assets? Is transactor growth 30-35%?
Assumption on transactor growth is correct - it is pretty robust because bulk of organic credit cards are issued to existing customers. Transactor percentage is growing. Interest-earning book has also seen some growth but more growth is on the transactor side than the revolver side.