We have fallen or faltered on business growth, credit growth and the deposit growth then the target numbers given. So especially, my concern is mainly on the credit growth which meant 8.6% for the whole year as against the target or given of 11% to 13%. So going forward, what do you think? I mean, the Union Bank will remain in the territory of 8%, 9% only or would perform well at the 13% to 14% or 15% on the business front, I mean on the credit front. This is my first question, ma'am. And second is there are some of the data point, this NARCL, SRs valuation as per the decision of the RBI. We have taken a profit of INR 787 crores. I think, the revaluation of these SRs are issued by NARCL. So, my question is that whether the entire INR 787 crores has gone into the profit of this quarter or against which some mark-to-market on other SRs has been taken and the Net profit only has been taken. So what is that profit number, which has gone to the P&L account? And the third is, I would like to have some more color on the Treasury operation side.
Yes, So Ajmera ji, as far as the business growth is concerned, yes, we agree that growth has been a bit muted as far as this year is concerned. We have taken a call that we will not give guidance currently, and we will vary the situation as the year goes by and then look at giving our guidance. But we are obviously focused on growth but at the right metrics. So if we are not getting the right yield on our advances, we would not be chasing those kind of advances. In fact, in the last two quarters, we've given up on certain advances where we felt that the yield on those advances did not justify retaining those advances, so that's as far as business growth is concerned. As far as NARCL is concerned, yes, we have recognized about INR 787 crores in this quarter, and that has contributed to our results. As far as Treasury is concerned, we have had a very good year. And we are hopeful that this performance will continue in the current year as well.
So that was 3.55%. So, do you mean to say that we are going to, on an average, maintain now our credit growth, 3.55% or 3.5% in the quarter now?
Yes Mr. Ajmera, I will tell you something on the growth, what is happening actually? If you see our credit growth, the Retail is up 22% okay. And in MSME it is 12% and overall RAM advances growth is around 10%. Large corporates, which we have not grown, we have not grown sincerely. We thought that we will restructure our portfolio, we will allow low-ending advances to repay and we'll go for the balancing of the portfolio, that we have done well in the last year. This year, though we have not given any guidance, but if you see this year, what we are expecting that in line with our GDP growth, which we are expecting it will be around 6% if GDP growth happens and the inflation will be around 3.5 to 4, it will be between that only. So we will try to move with the GDP, whatever the GDP is happening because the growth in this year is not just a very high GDP growth for the current year. So it will be in line with the GDP growth only. And last year, we have grown by 8.62% on a year-on-year basis.
Got it. Okay. Makes sense. And my next question is on margins. I know you have refrained from giving guidance and you're waiting for a better time. But given that there's already been a Repo Rate cut in April and Deposit cost movement is sticky, are the margins headed lower for the next 2 to 3 quarters? Or how do we model that?
Madam, regarding NIM, if you're looking at it, though we have achieved the guidance, which we have told about 2.8% to 3%. As you know, because of the present market situations, we are able to try to minimize the effect of the margin squeeze within our bank. That's what we have been telling that we have been letting go some of the low-yielding advances. So that our margin will be maintained. We try to do the same thing madam, we'll try to manage the margins in the coming days also because the Cost of deposit has not much come down until now.
So just coming back on the employee expenses again. So, I remember that in March '24, we had kind of highest discount rate among the PSU banks. So where do we stand now on March '25 in terms of discount rate for pension and gratuity?
Yes. So on that, we've had discussions with actuary and we have recalculated the numbers. We can come back to you on the exact discount rates, but the actuary, who is a reputed actuary, has reworked the numbers. We've taken some additional provisions in that respect. And now we are quite comfortable as far as the amounts provided for our concern. But we can come back to you in terms of the changes which have been made on the discount.
Okay. And just lastly, what is the outlook you have for recoveries on bad loans for FY '26?
Last year, we have achieved almost INR 15,000 crores of recoveries. This year, the overall portfolio has come down to INR 1,10,000 crores. So, this year also, we are expecting better recovery, but some of the cases which were pending at the NCLT has not concluded. So, this year, most likely, our recovery will be better, we have to see, since we have not given any specific guidance on the recovery because of the macroeconomic condition. So we will come out with the numbers subsequently.
Hi, good afternoon everyone. Sir, few questions. Ma'am, first your current term is now ending on May 31st. Anything that you would like to highlight if you have up for renewal or when should we be hearing from competitive authorities?
So, Jai, today's interaction we are focusing on the bank's quarterly results. So any queries get in touch with us and we will address those appropriately.
Closing comments
Yes. Thank you, everyone, for joining on this call. As you have seen, Bank has reported a good set of numbers. Particularly on the profitability and the financials. Yes, on the business front, it has been a little muted than our guidance, but that is also because of our conscious call on both on the liability and asset side because of the interest rate. And while we are not giving the guidance for the current year, but I think you'll appreciate that given the current operating environment where there's a lot of uncertainty. We are also looking at some more clarity, and then definitely, we will come back to you and share our guidance on various parameters. It has been our practice every year that we share the guidance. And we have also been performing in line with the guidance over the years. I'd just add that today, bank is very strongly placed in terms of every aspect of the business, right, from sourcing and underwriting collections and monitoring and also on the technology and digital, bank has made a lot of investment. And therefore, given the operating environment to improve, bank is well positioned to leverage the business opportunity and continue to perform. We have continuously been striving hard to add to the stakeholder value, shareholder value. Current year also, Board has already approved the dividend of 47.5% and we hope to look forward to even better performance in the current financial year. Thank you once again for joining on the call.
Sir, on advances, you said that you've gone more on the maintaining your margins. But then going forward, what is our sanctioned book and the proposals under process, especially in the Corporate book, so that we can get some idea of your April-June quarter or maybe first two quarters of year FY26, but are you going in the same direction or the performance on the credit front will be a little better than what we have achieved?
Yes. Ajmera ji, we have already sanctioned book of around INR 37,000 crores and another in pipeline of INR 30,000 crores. So we already have things in the pipeline. And I think in the Q4, what we have seen, the similar kind of growth we are expecting in the coming quarters also. So, it is going to happen in the same trend.
On this SMA-2 numbers, in the last quarter this was very high, INR 5,498 crores, which has come down to INR 1,235 crores. But if you look at both SMA-1 and SMA-2, SMA-1 has gone up almost doubled than the last quarter. So overall situation on the SMA front, where do we stand and out of this SMA-2 of INR 1,235 whether in April, we could improve the numbers or some recovery, which has taken place?
No, no. Ajmera ji, as SMA is concerned, you can see that the overall SMA position has gone down from INR 7,600 crores to INR 3,800 crores. No, that isn't much. So, there are no major names that we want to mention out here. So, there's nothing specific that we want to comment as far as the SMA book movement is concerned.
I had a couple of questions. Firstly, on MSME slippage and even on Agri slippage, we have seen a sharp jump sequentially. And some other banks have also seen a jump. So what exactly happened in the fourth quarter that slippages in these 2 segments have risen for everyone, right? So on a year-on-year basis, they are still okay, but on a sequential basis. And does that seasonality also continue in the first quarter? Because I think last year first quarter also had similar seasonality for everyone. So that's my first question?
So, the higher slippages on the Agri and MSME, this quarter, what we have done is there were a large number of repeated restructured account in the agriculture, we have taken a call. And this is for this quarter only. The trend is not going to continue for the coming quarters. Similar was in case of MSME also, and then we have now fully automated our asset classification also. There is no manual intervention. So they are also from 1 or 2 logics, a little higher slippages has come. So this is for this quarter only. And the trend is not going to continue.
Okay. For both MSME and agri or just MSME? So even in Agri, there were repeated restructure like that?
Mainly repeated restructured was in agriculture only. And SME, as I said, we have implemented fully automated structure for our asset classification. So 1 or 2 logics, which were not there earlier, that has also been implemented. So that is how a little higher slippages has come from MSME.
Okay. So even with the full 50 bps REPO cut that has happened so far, margins can be maintained even with the Deposit cost remaining sticky?
Yes. That's right. Because, if you look at it, the 50-bps rate cut within the REPO, which has happened, this is only because we have around 28% of our credits are under the REPO linked rates of RBI, which immediately has been passed on to customers. But deposit takes time to reprice it, which is happening slowly. We have also recalibrated our deposit rates and we are trying to bring down our Cost of deposits. But it will take time, that's the reason why we are trying to manage the NIMs at the overall level.
Got it. I have a last question. There's a sharp increase in employee and Other Opex in the fourth quarter. Any lumpy thing or any big PLI provisions made?
So Mahrukh, as far as the opex is concerned, yes, you're right, there is a jump on an annual basis, we are up only 6%. This is some staff-related provisions which have been made, plus we also did some PSLC purchases in the last quarter. That has added to the cost. In addition, now the CSR spend had to be accounted for. So that is why we can see an increase in the last quarter. But if you see on a year-on-year basis, we are up about 6%.
The PLI provision, you said now you made some provisions for employees. So that's inside of PLI? The PLI component would be how much in employee expenses?
Yes. it's roughly in the range of about INR 250 crores. The provision.
Sure, sir. Additionally, what is the total provision that we have made in the entire year on employees? On the AS-15, what is the total provision we have made, especially for the defined benefit?
Yes. So, for gratuity and pension is roughly in the range of about INR 2,500 crores. The number is INR 2,850 crores. We had a catch-up in the provisioning last year because of the bipartite settlement but this year it is a normal kind of provisioning.
Hi, team. Firstly, one clarification. The implied tax rate seems a bit lower in this quarter. What is the reason there?
Yes. See, firstly as far as the tax provisions are concerned, as you are aware we move to the new tax regime last year and therefore there was a higher effective tax rate last year, which was about 36%. This year, we are at about roughly annualized at about 22%. So yes, there were some additional provisions which had been made in the initial three quarters, we just recalibrated the provisions for the full year. And that's why you can see some dip as far as the effective tax shares concerned in this quarter. But if you see on a full year basis, it is very close to the effective tax rate of 25%.
Secondly, on the loan pricing front, if you want to offset some of the impact which is coming from the Repo rate cuts, do you have any flexibility whatsoever available to modify the spread or cancel any special discounts which are there on either existing or new loans?
No, loan side, we can't do for any existing loan. We'll have to take that decision on the deposit side to reduce the impact of any adverse impact. For new loans, definitely, yes, we can take. But this is only pertaining to repo link rate only. Spread has to be remained fixed as demand by the bank and repo link we can't make any changes. The rate will continue to be the same, unless until there is a change in the risk profile of the customer. Yes. You see if MSME borrower, it is linked to the repo and the risk profile deteriorates then we can change the spread also because the spread is a risk premium basically. So that undergo with the change in the risk profile. Retail loans usually the risk profile is not reassessed on a yearly basis, so it does not undergo any change.
Okay. Sure. Secondly, sir, the interest on RBI. So, the interest on advances, interest on investment, interest on RBI. What is the reason for a decent increase even on Y-o-Y or Q-o-Q basis and how should one see this number?
So, Jai this is basically, a part of our fund management book. So, to the extent, excess liquidity it would either be with the RBI or it will be parked in GSEC. So, it is more a question of how we manage our funds and therefore that would move from quarter-to-quarter and year-to-year.
Okay. Sure. And then, sir, I can understand that you have not given the NIM guidance, but fair to say that if you look at full year basis, this year let us say the NIMs are down by 20 basis points. And on a full year basis, yield on advances are exactly flat. The cost has moved up by 30 basis points or maybe cost of funds have moved up by 20 basis points and 20 basis points NIM reduction. Now you said that incremental Cost of deposit is still on higher side. But at some point of time, it will start to moderate. But the Yield on advances, you have 28% linked to repo, so Yields on advances should ideally fall and then the NIM should ideally fall, right? That is how one should look at it, even if the Cost of funds stays flattish?
Yes. So Jai, in a sense, you're right. But if you look at even our term deposits, right, about 50% of them come up for maturity in the next 6 months. So it will primarily depend on how we re-price our deposits. But yes, broadly, what you say is correct. So, you're looking at it, we are not so much far away from the market. We're trying to reduce it to a larger extent. Bulk is 27%, remaining Retail and CASA is 73%. Yes, I said before that across the entire term deposit book, whether Retail or Bulk about 50% comes up for re-pricing over the next 6 months. About 20%, 25% every quarter.