On the NIM, you had given a very good target of the NIM of 2.8% to 2.9%, but we have lended up to 2.57%. Going forward, you have given the 2.6% to 2.7%. Can we not think of again giving the guidance of 2.8% or 2.9%? Second is what is happening in the West Asian crisis, the war between Iran and U.S.A. and Israel, have you started seeing any impact on our accounts, especially the MSMEs?
We could have done that 2.8% to 2.9%. But considering the prevailing situation and the deposit rate which is still at a very elevated level even in the first month and first quarter of this financial year, we do not see much change happening in the deposit front. So instead of giving 2.8%, 2.9% and showing a very rosy picture and coming down, we thought let us keep that 2.6% to 2.7%. We will watch the situation for Q1 and Q2 and take a call in the third quarter. On stress - as of now, we have not seen any challenge in our book. We had interaction with my exporters and importers of all these affected areas and conducted twice a webinar. We have told them any challenge which comes, we are there to protect them.
In your guidance, I can see that you are building in NII growth of 7% despite the fact that you expect NIMs to be slightly better and credit growth of 12% to 13%. That means essentially you are running down your non-loan assets, but your LCR doesn't have that headroom. So how do you plan to achieve that?
Two things we are planning. One is our CASA growth - in the CASA SB individual, 9.1% growth has happened in the SB individual fund which is a core deposit. Last year entire CASA products of the bank was revamped and more than 40 lakh new quality accounts were opened. Second is the retail term deposit. The bank is putting a lot of focus now. Because of these 2 things, cost of deposit going forward, it will come down. Second important aspect from the asset side is we have started putting focus on mobilization in the RAM portfolio, Retail, Agri and MSME. Almost 20% every quarter, there has been a growth in the MSME front. MSME is the largest contributor and highest contributor in the profitability.
Why would you guide for an NII growth of only 7% when you're expecting NIM expansion and 12%, 13% credit growth?
When we are talking about this growth to happen and it is not that the entire scenario will get changed. When our NIM will be in the range of 2.6% to 2.7%, so I don't think and we should not expect that NII will grow at 10% to 12%. It will not happen. If my NIM is just growing by 10 basis points improvement is going to happen, then definitely the NII also will be in the same range. We are going to revisit. Because of the present situation, we have kept this for the next two quarters. We will watch the situation, how the deposit rate happens in the system and how the credit outflow happens. Based on that, we'll revisit in the month of October.
Mathematically, the guidance, if you were to break down for loan growth will remain at 12%, 13%. And NII, we are saying, will be lower than credit growth. So then mathematically, NIM should decline, right? So how these 3 things tally?
We have kept this NII at 7% as a conservative level because the portfolio under the deposit and portfolio under the asset side, still a lot of things have to happen in the system. Our core RAM growth, RAM share in the overall credit is around 54%. Now in this financial year, we are trying to at least from 54% to 56%, 57%. If that happens, there will be some improvement in our yield on advances. The moment my corporate loan book starts coming down and it comes to around 40% and the RAM share becomes 60%, the lever of the NII will definitely improve. Corporate loan book, every day there is a challenge. There is a uncertainty in the corporate loan book, and that is the reason we can't forecast that my NII can grow at 12% to 13% since our credit growth is happening at 12% to 13%.
On the SMA book and ECL, last quarter we had said that INR9,000 crores to INR10,000 crores was the provisioning shortfall as per the draft guidelines. Now if you had a chance to look at the final circular, does that ECL transition impact remain broadly the same?
For the final number, I think, we just wait for another two quarters, because already we have onboarded the digital platform now, and the modelling is also in place. But I can assure you one thing that, the capital adequacy, which the bank is having and the floating provision, which we have kept, it is sufficient to take care of my ECL requirement, which will start from the 1st April. Absolutely, we don't see any challenge and any the threat on our balance sheet at all.
On the ECL, on a run rate credit cost basis, have you evaluated what can be the impact? You're saying credit cost is below 0.4% is your guidance for FY27. But if you were to implement ECL, how much would the impact be on your run rate credit cost?
Yes, we have roughly calculated. For ECL, let us wait for another 2 quarters. By July, I think we will have a very clear visibility that what is going to happen in our system. But rough calculation which we have done, we are perfectly in line with the capital requirement and the asset quality. Floating provision, we have already kept more than INR2,000 crores, INR2,045 crores. So rough calculation which bank has done, we are able to meet all those things. Actual number, let us wait for some time.
Slippages in this quarter has gone up by almost INR800 crores and SMA-2 numbers have come down from INR1,800 crores to INR450 crores, in which measure is MSME and Agri, which has come down. So does it mean that many of these accounts have slipped because you have given only SMA-2 numbers. We would like to also know the overall color on the SMA book?
In this financial year, the slippages is INR2,758 crores and if you compare it with the last financial year '24-'25, that time the slippages was INR3,001 crores. Q4 because of the review renewal that falls in this particular month, the quarter from January to March, most of these MSME loans and Agri loans that comes for the review renewal. In retail, INR439 crores has slipped compared to INR490 crores in '24-'25 same quarter. Agri, it is INR1,069 crores, which was INR1,400 crores. MSME INR1,106 crores, whereas it was INR995 crores. The actual SMA-0,1,2 number is 3.30% without percolation effect, lowest ever. Retail 8.21%, Agri 3.06%, MSME 6.43%, Others 0.28%. Grand total 3.30% for SMA-0,1,2 irrespective of amount.
ECL guidelines have been finalized by RBI. Where do we stand to take care of the additional provisions which will be required? You already said you have got a floating provision additional of INR2,045 crores. Is it to take care of the ECL provisions only?
Our CRAR is 17.74% and CET1 is 13.62%. We have enough cushion to take care of any requirement which will come on account of implementation of ECL from 1st of April 2027. Keeping in view that additional provision which is likely to come, we have already kept more than INR2,000 crores - INR2,045 crores in precise. It is kept for the floating provision that can take care of my ECL requirements or any eventuality which comes because of the Middle East crisis or anything. We do not see any much challenge in implementation of the ECL from 1st April 2027.
Employee cost has gone tremendously down as compared to the last quarter of INR5,089, to INR3,747 crores. Does it mean that in the earlier quarters, a little more provision for the employee cost were taken? What is the reason for INR1,342 crores reduction in this quarter?
One is some additional provision which was kept during the Q1, Q2, and Q3. Some plow back has happened because of the additional thing. AS-15 also, what has happened, bond yield has gone up. Now if it would have reduced, it would have increased my treasury income. Now my treasury income is very subdued in this quarter. So somewhere that impact will be there. That impact has come on the AS-15 positive way. In the Q1, Q2, and Q3, we had calculated as per the yield which was prevailing at that point of time. Now the yield has hardened, so that has affected my treasury income. But that has put me in the gain by the actual calculation which has happened through the actuarial. Total impact of positive impact is INR2,121 crores.
On your provisions, earlier there was a write-back from ILFS and you have not taken it into the numbers. Now other banks this year, this quarter have taken another account, Sterling Biotech in their numbers as a write-back. Have we accounted for the write-backs on these 2 accounts in our numbers now?
Sterling has been factored, madam. Sterling is technically write-off account. So that amount is factored in our operating profit. The ILFS is still it is in the standard provision, it is kept. We have not taken up in our the operating profit. So we will see that maybe Q1 or Q2 depending upon the situation, we will take back in the operating profit.
There was a reversal in your standard asset provision also this quarter. It's a negative number. So what was that for?
That is because of the 7 June circular implementation, the restructuring which we keep it and the account gets upgraded. So those things the reversal happens. NPL also reversal has happened because of the RBI modified guidelines. There was a release of INR727 crores, which was kept in the standard account provision, because of the large borrower account framework under the guidelines of RBI, which the RBI modified that guidelines and it was effective from 1st January 2026.
On the LCR. What was the average LCR during the quarter? And what is our comfort for the next year at what levels do you want to run it?
Around 125% we would like to keep it. And we are at almost at the same level as on March '26, 125%.
What was the adjustment in the employee cost on the yield hardening, the amount?
Total impact of, positive impact is INR2,121 crores.
This portfolio core retail, core RAM and the reported RAM, it looks like that IBPC portfolio is still INR70,000 crore. Is that broadly correct?
No, no, no. It has come down to INR34,049 crores now. Last year almost INR19,000 crores we have shed, and that too in the retail segment, because this was all the low-yielding advances. Despite that, we have grown at reasonably well. So we are going to replenish all those IBPC at whatever is there at the lower range, and around INR18,000 crores to INR20,000 crores further it will be reduced. We want to totally come out of this IBPC business.
How should one look at cost of deposit? Will your cost of deposit keep declining, or they will be broadly stable or they will start moving up?
We are seeing and very closely watching our incremental cost of deposit. There has been some decline happening in the incremental cost of deposit. Second part is that, '24, '25, we had one special scheme - 7.25% and 7.75%, 444-day. Almost 95% of those things also have been repriced by end of the Q4. So the new deposit, which we are garnering it, and that too if it is happening at a lower cost, so we are expecting that the Q1 and Q2, definitely there will be some improvement on account of this in our NII. So maybe around five basis point I am expecting that definitely some improvement it will happen in the cost of deposit side.
Capital is very robust, maybe all-time high and NPA anyway has been coming down. Any other update on capital position?
Last year, we have taken permission for INR4,000 crores CET1 and INR4,000 crores of AT1, INR8,000 crores of capital raising, which we had planned and we have taken the approval from the Board. And we didn't get an opportunity or didn't feel that we should go to the market, and we have not raised any capital last year. Despite that, INR 5,489 crores got matured. AT1 INR 495 crore, and Tier 2 - ~INR 5,000 crores maturity/ exercise of call option was there. With all those things and not raising the capital, our capital position is 17.74% now. The interest, which we were paying on these bonds, that also we have calculated that how much additional gain, which is going to happen because of non-raising of the bond. That amount is coming to around INR 175 crores. That accrual will happen in this financial year. This year also INR 5,890 crores AT1 bond plus Tier 2, they are completing now. And we are not going to raise any capital.
If you have this number in absolute rupees crores for SMA-0,1 and 2.
SMA-0 is INR24,643 crores. SMA-1 is INR13,970 crores and SMA-2 is INR2,922 crores. All put together it is INR41,534 crores which is 3.30% of the total advances. This is irrespective of amount.
On AFS reserves, we have had some, I think, INR500 crores of revaluation, a negative number. What was the change in AFS reserves?
It is only because of that particular asset, which you are mentioning, mainly because of that only the fluctuation has happened. One asset only. What has happened, if you see the March 26, what has happened because of the crisis, market has, deeply it has fall down in that particular day. And we take the figure as on March 26th. So, now it has gone up now. So that is the challenge in the system.
Capital we appreciate that you are very capitalized. But the question is more how it affects your ROA. Will you be able to deliver over 1% ROA?
Yes, yes, absolutely. We have 97% PCR. Stage 3, sufficient release can happen in the system now once the ECL gets implemented. Having 97% PCR, INR2,000 crores of floating provision in the system and 17.74% for the capital adequacy, these 3 things should give the confidence to all the investors that perfectly bank is in a very, very comfortable position. And that too had to implemented in 5 years. We don't require 5 years, I can tell you. We will do it in 1 or 2 years itself.
On NIM. Last quarter you had given that 70% of your term deposit had repriced. Where are we now?
Those special deposits, which I had mentioned in our previous call, that is almost 95% have been repriced in the end of March. But we have not seen much the traction happening or the reduction happening in the cost of deposit, we were expecting that the February and March the deposit rate will come down because of the repo cut and the inflation scenario. But that has not happened in the system. Still the deposit rate is a little bit elevated. So that is one of the reasons why the impact we are not able to see in our NII and the NIM. But incremental deposit, which we are mobilizing in the month of February, March and April, every month, there has been a reduction. Of course, 2 to 3 basis point reductions are happening every month.
This improvement in NIM that you're talking about to 2.6% to 2.7% will mainly be funding cost or it will mainly be the mix shift you're talking about on the loan book?
Both I'm talking. One is the deposit side. And second is the RAM share, which we are planning to increase and the activity which we are doing. Both sides it will improve.
On the wage revision. Finance Ministry has started asking the public sector banks to start the negotiation. So, by when can we and where are we positioned?
The wage revision due itself is the 1st November 2027. So financial year '26-27, it doesn't impact at all. No, we will not start making provisions for this.
Just a clarification on the AS-15 provision number you gave of about INR2,100 crores. Is that the amount of provision that you have reversed in this quarter? So, it was a negative provision which you made in this quarter?
Sir, we have a total provision of INR1,814 crores AS-15 for this financial year. There was a reversal, but now to that extent, it was in 3 digits only. It was up to INR736 crores. First quarter it was INR1,150 crores we made the provision. Second quarter we have again made a provision of INR700 crore. Quarter 3, again we made a provision of INR700 crore. And this time, because of the hardening of the government security rates, there was no need of making further provisions in AS-15. We treat it as a prepaid AS-15 to the extent of INR736 crore, and the balance INR1,814 crores has been booked as an expenditure in the employee cost.
If you can share what is the average yield on your corporate book versus the average yield on the RAM book so that we can get a sense of how much benefit you can get from a loan mix?
Corporate yield on standard advance is 7.55%. And MSME standard advance yield is 9%. And if you see our domestic yield on standard advances, that is 8.23%. So corporate loan book gives us lower than the domestic yield of all the sectors.