FY26 closed at 12% loan growth vs 13.5% system (below target).

When do you think now you would reach an LDR, say, close to 90% or below 90%, like any time frame? And on agri compliance - two large banks have been asked by RBI to make provisions on a certain agri portfolio because of non-compliance issues, provisions of 12 billion to 13 billion. As we stand today in terms of your agri portfolio, do you think there is full compliance or there could be some issues somewhere? And do you think you would be liable to such provisions in the future?

The first thing you touched upon is the LDR from a timing point of view. I think Sashi alluded to that we are committed on the glide path of taking it towards the downward glide path, and we continue to be in that. But on a quarter-to-quarter basis, it is slightly different. And that's because of the seasonality and the opportunity. And you know that in the recent time period, the further opportunity was also provided with the easing cycle and the credit growth focus in the industry as well as the CRR release, which provided that ample opportunity to do that. So given that, we do expect that over the next 1 year to 2 years, we would be getting down further into the levels that we had previously been there, call it, the 90s or low 90s and so on. And that's the level of confidence we have and the pillars that are required to drive that are in place to do that. The second one is in terms of the agri that you asked about, the regulatory kind of impact, if any. Our regulatory inspection is also complete. And whatever required according to the regulatory requirement, there was about 5 billion or so thereabouts, which have been taken. In the overall context of our book and our results, if you see, they have been absorbed within that, and there is no special and we have had certain other things that were there. And so in future, we need to operate in a model that is acceptable with the regulator. Whatever is that that's an ongoing process of what we do. Any one-time is already subsumed and it is there.

Getting on to the question on LDR and deposit growth in particular. If we want to get the LDRs down and still want to grow loans above the industry average comfortably, then we need to see the acceleration in the deposit growth. Any reason maybe for a slightly slower deposit growth this quarter? And any rundown in the bulk deposits, which have been there in this quarter? And if you can quantify that?

See, let me take this and maybe Srini and Kaizad can add into this if required. Kunal, if you recall, we gave a broad range. Number 1 is there is no regulatory, what shall I say, benchmark or a requirement to meet a loan deposit ratio. Was it there as a bit of a nudge when the outlook was negative or when the system outlook was a little tight, liquidity is tight in the period when inflation was moving up and rates were moving up and there was a little bit of a concern on the credit quality of the system? There were certain preventive measures that the regulator had said that try and ensure that you bring down the LDR or maintain a certain stability in LDR. That was at that point in time. Whether there is a number that you need to meet, I don't think there is any compulsion. But in our own interest, we had given a kind of a glide path wherein we had said that we will come to a certain number in FY '25, which we achieved. We said we will try and be in a range of somewhere between 90% to 96% in the year FY '26, which is what we will be is what we are very confident about. And then maybe by FY '27, by the natural growth and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85% to 90% for FY '27. We continue to believe that this is going to be there. So as regards the kind of deposit growth that is required, I think the pace at which we are growing deposits in line with the top line growth that is more or less matching 11 plus percentage in this year and probably slightly faster, which is what we normally do in the fourth quarter like what we have done in the past should lead us to the kind of range that we have committed to.

May I get into the LDR again, please? So Sashi, please did I hear you correctly when you said 85% to 90% by FY '27? That seems to be aggressive to me. If I look at consensus numbers, it's expecting 13% loan growth and 93% LDR. If you are going to achieve kind of the 90% in the next fiscal year, that suggests a very strong deposit growth number. So if you could help us in this circle?

Chintan, thanks for asking. I've given you a broad range because I don't want to box myself with a narrow range. But having said that, we have been operating in a range of around the 87%, 88% in the premerger level, before the merger. And so when I say 90%, of course, I would have meant somewhere around the plus or minus in that particular range of 90%, maybe around the 88%, 89%, etcetera or it could be 90% to 91% as well. But why I mentioned this, at least the trend lines that we are saying, it can be 96% for FY '26 or a 95. We are all right. At least the direction is what we are looking at for. We just gave a broad one so that we know what -- if we are lucky to really step up growth or the liquidity changes and we have more benign liquidity and no FX operations or FX swaps or open market operations, maybe then it will be wonderful. So that is why I'm saying since I do not know what's going to be the liquidity condition in this, therefore, I gave a broad range. But even if I achieve these kind of directions, directionally going there, that's something that we can achieve. As I said, there is no regulatory number to comply to. It is just a direction that I think we need to achieve for ourselves, let alone the regulator asking us to do.

On asset quality - you've got a unique vantage point, second largest bank in India, could you give us some idea about any pickup in growth momentum, any issues in asset quality, particularly due to the U.S. tariff or in the MSME area? Is growth improving and are there any asset quality concerns more broadly?

So if I got the question right, you want to know the trend for asset quality and how it is looking. Across segments and even first at the sectoral, you're well aware that the banking industry right now to borrow a term is going through a Cinderella phase where you've got very strong balance sheets when I refer to that from an asset quality point of view. We have the lowest accretion of gross NPAs and net NPAs are at decadal lows. Mirroring this trend has also been reflective on our books. We have seen very low accretion to gross NPAs. And none of the particular portfolios have indicated any stress building up. So I think the economic environment with the kind of GDP growth that one has seen, the kind of consumption growth that one is seeing as well as the wage increases that one has seen on one hand and on the other, the lowering of the interest rates and affordability therefore, going up, including the fiscal benefits that were given. To not take up much time, I would say the asset quality continues at the bank to be pristine. And as we see it, there is no particular segment which is showing any major signs of concern.

On growth momentum, are you seeing things improve generally in the economy?

In the economy, the growth momentum, yes, if you look at some of those indicators that we have seen - take the crop cycle itself, very improved. The sowing cycle has improved over prior year, very healthy water reservoir levels have aided that. The manufacturing PMI continues to be in the expansionary zone with many programs that are coming in. Services sector doing very well on the consumption demand side. If you look at the recent time period for card spend, which is important for you to look at, the overall card spend up 15%, 3.4% sequentially. Within the card spend, when we look at the discretionary category of card spends, the discretionary category spends have grown 21% year-on-year. The non-discretionary, which is the bread and butter normal activity is about 13% up. So that indicates that when the kind of a discretionary spend goes up, people do go and indulge.

On branch productivity and deposits - given the deposit pickup being targeted at close to 90% kind of a number, is the branch vintage and deposit buildup experience from the past sustaining in recent years? Also related to this, the branch expansion run rate - every successive year we are opening lower number of branches. How do you look at this corollary between the branch vintage and the deposit buildup? And do you think that the current pace of expansion will be sufficient for us to sustain that above industry growth rate over the next 3, 4, 5 years?

Okay. So I'll get started with the last one first, which is to do with the branches. Nitin, you can't look at 1-year branch, but you have to look at a trend of what was it, right? So for that, if you look at a 5-year branch trend, I'll give you round numbers of the branch trend. We opened about 250 branches in 2020, 350 in '21, 750 in '22. 1,500 in '23, 900 in '24, 700 in '25. So if you look at this, 250, 350, 750, 1,500, 900, the opportunity space that it provided, we took that and accelerated all within the overall returns framework, right. All through this time period, if you look at our returns between 1.9 to 2, right, in that period. So where there was, we accelerated, and we don't need to do 1,500 or 900 and so on. We can be more modest, but still add to the branches. It is important to add to the branches because currently, we have only a little more than 6% of the country's branch network with us. So that means our branches 9,600 plus is about a little more than 6% of the systems branch, right. And we have more than 11% of the market share of deposits with us. Next is productivity, right? What does it do from a branch productivity? If you look at the per branch productivity, we are now at about INR305 crores or thereabouts on a per branch at an aggregate level. the pivoting point where 4, 5 years ago, where we analyzed what does a branch do in 5 years, 5 to 10 years and 10 to 15 years and so on, when you look at it, where the scaling factor is about the fifth year mark to the 10-year mark, it moves, and it moves about 3 times, between 5 to 10 years, it goes about 3 times up. And then once it goes into 10 to 15 years, 10 times up. these new branches contribute slightly north of 20% of the overall incremental deposits that come, which is very important, right, that these things keep adding accreting as we go along.

First question is on LCR. What would be this quarter? And how it would move post the April 2026 guideline, whether it will move up, move down?

LCR, we reported 116 in this quarter. The new guidelines, we don't expect any material change that can impact us.

On margins itself. It's been almost 9 quarters since the merger, your margins have not gone anywhere. In fact, it is even lower than what you had reported at 3.4%. Are you really confident that you can get this up in the next 2, 3 years?

Suresh, if you think about the margin, the most important lever on the margin is the cost of funds, which various points we have mentioned. And within the cost of funds, there are a few. One is the time deposit repricing, which has a lag effect. We have changed time deposit rates in line with the policy rate change, but not fully, but maybe two-third way, we have changed 125 basis points is what the policy has changed. We have done about two-third into that. We need to see what more. And again, that what's competitively priced, right. So, we are not at a disadvantage anywhere there. And that takes almost 5 quarters to flow in. Part of that this quarter, you have seen 10, 11 basis points change in cost of funds. That is the lag effect of that flowing through, then that continues. Quarter-to-quarter has remained static at about 13%. But again, more than a quarter, if you look at the year, we were at about 7%. Broadly, the industry is at about 6%, 7%. So there is an opportunity space to be that to keep coming down. That is another important lever that provides this cost of funds change. And the third one is the CASA, which again is a customer on the other side more than we creating any action where we need to work through to bring selling within the new customers and better engagement, more products, more retail products.

Just wanted to delve on this deposit growth part. It was an interesting color that you said that the granular retail has grown, but slightly bulkier retail hasn't. Is there any sort of a data point that you can share in terms of the growth or the mix in the 2?

as far as the rate of growth is concerned that you asked about the categories, certain other categories that you wanted. Yes, I mean, if you look at the institutional types, they were in the mid-single digits, right. The institutional type of deposits, mid-single digits. That's what we see. And within the retail branch, the non-individuals were much more modest. I think it was again a little more higher single digit. And the individual individual within the branches were in the solid double-digit growth.

Going back to the branch addition question - are you still looking to grow or add about 5%, 7% branches this year and in FY'27, or what are your near-term plans?

Yes. To answer in short, 5% to 7% implies 500 to 700 branches annual. I don't believe that, that kind of branch addition in the near future. We'll evaluate as we go through the annual planning process and come back at some point in time, but it would be of a good order.

On credit cost - if I look at your net slippages, ex of the agri part, let's say, look at the net slippages in the 9 months or last few quarters, around 30, 35 basis points. Write-offs are holding steady at INR3,200 crores roughly a quarter. So why is the underlying credit cost around 55 BPS and not coming off?

Abhishek, a couple of things. One is the slippages. If you're looking at excluding agri slippages, it's 24 BPS in the quarter, prior quarter was 23 bps, prior year was 26 bps. So order of magnitude, call it, 25 basis points. That is the kind of a slippage in a quarter, right. That's what you're seeing. The second thing is that credit costs also, you have to look at it, including the recoveries because when you write off certain loans as it progresses through some of the delinquency buckets, then you get it in the form of recoveries. And net of recoveries, if you see, we are at about 37 basis points or thereabouts. And when you look at, again, last quarter, last year, order of magnitude, very similar within a few basis points, 5 basis points.

Overall, card receivables are pretty stable. If I look at the data that comes out in RBI, the spend market share for you is doing well, CIF market share is doing well. So why is it not reflecting in the receivables? Is it just transactors running down, or is it something else?

No, actually, great question, Abhishek. I think if you really look at it, the segment that we are patronizing is more the middle and upper middle segment. Therefore, slightly higher-end cards is what is in our portfolio. The proportion of that is large. And a large part of that, over a period of time, as you know, the credit card, what shall I say, the behavior has also changed over a period of time. Today, we look at it not as net receivable from a revolve perspective, from an asset perspective and an earnings perspective, we are looking at it as an enabler for our liabilities or deposits. Srini has mentioned in the past, and that is something that we are extremely proud of, the spends in the cards actually provide a significant portion of our deposit momentum. Today, 20% to 25%, maybe in the mid of 20% to 25%, I can say, is the range at which, out of the total deposit basket, the kind of momentum that you're seeing, whether it's on the healthy balances and what it contributes to total, it's somewhere around that 20, 25. So the credit card focus today is more not from a net receivable basis, but from a transactor basis.

On your loan growth broad guidance of above system next year - I just wanted to understand when we are saying we'll grow above the system, what is our range of assumption for system growth? Because we are seeing some acceleration in the system growth itself where we are moving from this 11 to 13 band to maybe closer to 13, 15. If we were to move in that band, would we have accounted for that kind of system growth and we say we can grow above that pace?

So our understanding as of now is next year, we expect system growth to be between 12% to 13%, when you look at nominal GDP and the credit growth that's required to support nominal GDP. So if we're talking about 12% to 13%, we are talking about a couple of percentage points above that going into the next year. We see distribution on the retail side, you've been seeing over the last 2 quarters coming up, our positioning also in the MSME space, given our geographic coverage as well as our suite of products that we have out over there and the wholesale piece, which you would have seen in this quarter again coming back. We do believe that we have the customer segmentation to be able to grow at a couple of hundred basis points over system growth next year.

On a broader 3-year or 4-year question - we have seen products like mortgage getting a lot of competitive intensity. PSU banks being well capitalized are probably being more aggressive in vehicle, increasingly auto. Do you see this competitive intensity eroding profitability for the larger players over the next probably 3 years?

See, we are addressing competition only through relationship and not through pricing. Mortgage product, as you've seen that in the last 12 months, we are not leading through a mortgage product. We are leading through relationships where the mortgage product could be a fulcrum around which we can operate. Same with auto. I do want to let you know that our auto loans are almost a little more than 80% self-funded, which means the customers when they take auto loan, we want their liability accounts, we want them to have balances in that and the loan self-funds itself for the most part within the balance sheet. So it is about relationship offering, and that is part of the engagement in the branch, and it's not just a product and a loan balance sheet building approach.

Not for HDFC, but probably for broader system - are you seeing that aggression in the auto segment from the public sector or maybe the broader system aggravating in the last couple of quarters?

Yes. We've seen it not only in auto, but also in the home loan product. So these are two products where we have certainly seen some amount of, if I may say, a bit of irrational pricing, but irrational pricing has never sustained. It will play itself out and bury itself in a couple of quarters on the outer side, if not earlier.