RBI tech embargo arced from defining narrative (Q4FY25, 15 mentions framing FY25 as a 'rollercoaster') to lifted-and-re-launching (Q1FY26) to fully retired by Q3FY26 (1 mention).

So firstly, the question on provisioning coverag e, now it is raised to almost 78%-odd and we are clearly seeing the decline in the slippages as well. So firstly, is this PCR largely the catch-up provisioning on the unsecured wherein maybe the 100% is provided with a lag and not maybe within 90 days? So, is that the fair assumption or this is more like a conservative step to get it in line with the industry average and maybe given this PCR and declining slippages, what would be the outlook on the credit cost?

Hi, Kunal. So, on the PCR, you are right. I think it has improved to 78%. I think PCR, as you know, is the provision which we make on the NPA cas es. Now, with the accretion in the gross NPA itself slowing down, I think that is one of the reasons why it is improving. And I think what we are seeing is that the new book which we are writing in the unsecured loans, it is much more better credit quality. However, the book which has been already become delinquent, the balance provisioning will be required under our policy going forward for the next couple of quarters. So , we will see provisioning for the old book, which is yet to be fully provided. Whereas for the new book, we expect the provisioning to be lower than the existing book.

Got it. And second question is on margins. Given we are in the repo rate cut environment, we have taken initiatives. We have cut the savings rate now almost to like 2.75 and 3.25, plus maybe some tweaking has happened on the TD side. Plus, there will be flexibility to cut sweep deposits as well. So firstly, maybe when you look at it on this cost of SA which is currently at 3.79 considering the rates which are prevailing currently at 2.75 and 3.25, would it be fair to assume that eventually it should settle towards 3% odd and should give like 20 bps advantage on the cost of deposit side and similarly some benefit flowing in from say the sweep deposit, so maybe ideally what is the kind of margin trends which you would look forward to in FY'26?

I think you have given the answer to the question itself, but you are right. I think the way we have to respond to the repo rate cut obviously is through the cost of deposits because that's what the margin is all about, right? So, if I look at the cost of deposits, it's in three broad areas. One is the saving account where traditionally we were paying actually higher interest rate compared to our peers. Now we have aligned the rate to 2.75 through cuts in the SA balances over the last one quarter. And therefore, now we are at the same level as our peers. And obviously, the SA rate cut is on the portfolio, effect is there. As I said, today after the cut, the rate is 3.25 over 50 lakhs and 2.75 below 50 lakhs. So yes, broadly it is in that range, it can come, right? Continuing my thing on the sweep TD, as you know, it's a 6 months product, we offer for CA and SA. But actual cost of the sweep TD is somewhere around 5.5% against the headline rate of 7% indicating that the tenure of the deposit is much lower than 6%. So, the reprising part of that also will become much faster. We have also rationalised the sweep TD rates for current account to 5% with a 150-day bucket. And for the saving account, we have reduced it from 7 % to 6.5%. So, one is the rate reduction. Second is I think the reprising period which is faster, it should help. On the third bucket, which is the normal term deposit, clearly for the chosen buckets, and in line with peers and the competition, we have rationali sed some of the TD rates. Again, our TD maturity, on a residual basis is less than one year, so the reprising also should happen over that period time. So, I guess all this combined should help us to sort of navigate and respond to the repo rate cut which remains.

Thank you. I have a couple of questions. One is on capital management. What, according to you, is the optimal capital level for Kotak, especially since loan growth has come down to 13%, 14% levels now? In a 2-3-year period, where do you see CET1 and what would be the strategy to achieve it? And number two, in terms of the unsecured book and credit card, it's good to see that things are settled down and starting to improve. But just as a diagnosis of what happened over the last 12, 18 months, clearly a couple of bigger peers in the market, their credit card and unsecured performance has been meaningfully better. And what do you think was the delta for Kotak in this cycle? And would it change anything that you do in the coming cycle in those two segments in terms of risk or customer selection or anything like that?

So, let me deal with that question, Anand. First on the capital management, look, there is no doubt we have excess capital and the way we think about capital is that really it pro vides a fortress balance sheet. And when I say fortress balance sheet, it really means that it gives us the ability to kind of deal with any kind of downturns as well as gives us the ability to take advantage of any opportunities that come for growth. So, we have always said that M&A and inorganic activities would be an important part of our strategy. And we continue to look at every single opportunity that comes along. Now, just because we have capital, we are not just going to kind of spend it and waste it. Obviously, any kind of acquisition opportunity that comes up has to make sense from a strategic perspective as well as from a financial perspective. Two is, what are we doing with this excess capital and how are we dealing with it? The key thing is we run our businesses. Devang allocates our businesses at about 15% capital, and he then has excess capital. The way we utili se or invest our excess capital, first call is business, second call is our alternative asset businesses, which historically have given us a very, very good return in the high teens post-tax. Three, we like investments in financial market infrastructure. So, things like KFin, MCX and other such opportunities, we are constantly on the watch to say, do other such opportunities because we think long term, that will provide us great kind of growth opportunities. Moving to your second question on unsecured book. Yes, the overall book, unsecured book fell from about 11.8% of our total advances to about 10.5% of total advances. Our desired state, obviously not in one year, but over a period of time, is to get to mid-teens. And we will continue to grow that. We like the credit card business a lot. And we are redoing our entire credit card business, rethinking of the strategy and aligning it with the broader strategy of getting the right product for the right customer. There are important learnings from what we have be en through. See, we have got to recogni se that at its core, at its core, Kotak is an SME bank, right? That's where our strengths are. We recognise that we are different from our competition in the sense that we are more SME and less a Corp- Sal kind of bank. And therefore, what are we going to do about that? So, I think we have learned some very, very, very important lessons from this painful episode. And we are committed not to making those mistakes again.

Thanks, Ashok. That's very useful. Just, you know, if you can enumerate a bit more on the lessons in terms of, was it customer selection, was it some processes , collection, and what would change in the current cycle, that would be useful.

No, the lesson, and you compared us with some of the large peers as well. I think one, as Ashok was mentioning, is we had consciously tried to do certain test und erwriting in order to be able to cross -sell more to our existing base. In hindsight, probably that those percentages, the exposure to that segment going forward will keep much smaller such that the risk is contained. And this is something we have already taken action well before the embargo itself, but we will continue with that. The second is, smaller ticket size credit card limits. Those have larger risk. That again we had addressed before the embargo itself, but we will continue with that as well. Our S olitaire proposition is an affluent proposition. That will help us to get affluent clients who inherently carry lower risk as well. You were then comparing the portfolio with larger peers. You know, as you are aware, our credit card portfolio has been traditionally a much smaller portfolio. And we had gone really slow during the COVID period. And you probably are aware that vintage books perform significantly better. So, our portfolios are newer books which have been built more recently post the embargo. A nd therefore, those will naturally carry higher delinquencies. So, that was a fact, not because of our post -COVID book, which would therefore, it doesn't reflect underwriting. It just reflects the nature of mix of the book and the fact that our credit card portfolio is much newer. But the policy we have written, it was pre -embargo itself. And what we have rolled out post -embargo is a much tighter policy on many of these factors, with much lower target loss rates.

Good evening. Thanks for taking my question. My first question is on the quarter P&L on the NII line. So, in the PPT, we called out that we have seen the margin expansion quarter-on-quarter. There is also a loan book growth quarter-on-quarter. So, you know, 1% Q-o-Q NII growth doesn't tally with that. So, can you take us through the math for that?

The NII of last year included the interest on income tax refund which was there almost Rs. 142 crore. If you refer our slide on Number 9, it gives you. That is one of the one-off item which was there. It was part of the NII. So, if you actually sort of remove that, then you should look at the impact of the growth in respect or NII. Sure, I was explaining the Y-o-Y part. The Q-o-Q kind of what happens is that the March, there is always the effect of the number of days. What happens is that because of the 31st March and February be ing a lesser number of days, it gives you the kicker in terms of the NIMs improvement, which is there marginally. But that is what creates this issue every last quarter of the year.

Perfect. Thanks, Ashok and Shanti. Just one more question, if I may. Any number around growth that you have called out average advances growth of 18% for this year. So, you know, any number around growth that you want to call out for next year in terms of guidance?

So, you know, true to our philosophy, we have always said, look, we will grow assets somewhere between 1.5x to 2x nominal GDP growth. Frankly, that's a risk appetite statement, right? If the economy is, you know, if you are growing assets faster than 2x times nominal GDP growth, one has to ask the question, are you taking on too much risk? And if you are growing lower than 1.5x nominal GDP growth, then you ask the question, are you leaving money on t he table, right? Because this is not about a day in the sun or a quarter in the sun. It's all about a sustainable franchise, which is really something our customers admire. And therefore, we target somewhere between 1.5x to 2x nominal GDP growth. That will continue into Fiscal Year 2026 as well.

Hi, team. Congrats on the quarter. Actually, most of my questions are just follow -ups on previous questions. Firstly, for what Kunal asked about cost of SA deposits, from the 3.79, do we assume it goes down to 3 or do we just assume it goes down 25 bps quarter-on-quarter?

So, hi, Piran. I think 3.79 includes, besides the fixed rate SA, also the floating rate SA cost. So, while we have taken actions on the fixed rate SA to reduce the rates to 2.75 and 3.25, the floating rate SA rate remains as of now. But I think it all dep ends upon what the balance of that in the SA which will remain. So, when I answered the question, it was more from a fixed rate SA perspective that it would be around 3%. The floating rate SA will be based on the MCLR rate and as well as the quantum of suc h deposits as we go, MIBOR sorry.

Understood. Okay. That's pretty clear now. Secondly, again, just following up on Param's question, the 1% NII growth, but NIM being up. Now, we get that there is this number of days effect other banks have also mentioned it. But if I look last year, right, our NIM was up 6 bps Q-o-Q, but we still had a good 5%-6% NII growth Q-o-Q with about 5%-6% advances growth or customer assets growth.

So, I think that is what, Piran, I was saying when I was explaining that last year, last quarter, and if you refer Page 9 of our investor presentation, it included almost the income tax interest on refund of Rs. 142 crore, as well as the tax credit of Rs. 200 crore, right? So, in the NII, you had Rs. 142 crore. Again, just to take you, the interest on income tax refund is not considered for the NIM calculation because it is on the earning assets. But when you look at the NII, it includes the Rs. 142 crore of that.

Got it. Okay, that's useful. And just lastly, if I may squeeze in. This jump in OpEx Q-o-Q, that's just more seasonal due to PSL purchases, etc. PSLC purchases or is there anything else to read into?

Yes, there is PSL purchases. You are right. Having said that, look, once we got out of the embargo, it was important that we came out strongly. And we came out strongly with the brand campaign, as well as restarted the engines on credit card acquisition and 811 customer acquisition. Like I said again, you know, this is not about a day in the sun or a quarter in the sun. We are trying to build a solid franchise and therefore, it could have been so easy not to spend on the brand campaign and improve the expense. But I really want to build a long -term sustainable franchise for our shareholders. And that's what we are going to do as we go about it.