Loan growth: 12-15% (Q1) -> 10% (Q2) -> 8% (Q3) -> 13-15% (Q4).

Congratulations for the splendid bottom line figure and upcoming share purchase deal. My question is regarding the elevated NPA. On which account the elevated NPA came from? And I want to know the structure of the share sale deal. I mean, the share sale deal is only limited to the sale of the shares from the existing shareholders who came to rescue in the time of crisis or will it involve any further preferential allotment to the incoming buyer?

Coming to your first question, in terms of elevated NPAs. I would just like to reiterate our gross NPAs remain at 1.6% and this was also 1.6% last quarter and 1.7% in the quarter one of last year. Similarly, our net NPAs continued to remain 0.3% this quarter, which was also 0.3% last quarter and 0.5% in the quarter one of last year. So our NPAs as a percentage has actually not increased. Actually, if you see our loan growth has been only say 5% growth. And despite, this as a percentage, it has remained the same. So we are not seeing the elevated NPA issue at all. Coming to your second question on whether the transaction would be only a secondary transaction or any primary. As of now, this is a transaction where they would be taking 20% share only from the State Bank of India and other banks who came in at the time of the restructuring of the Bank in March 2020.

I thought of asking an update about RIDF. We were expecting INR 25,000 crs to be matured this financial year. So any update on that, sir?

Not INR 25,000. I think we shared with you this RIDF deposit. There would be a repayment, which would be in the range of around INR 8,000 crores - INR 9,000 crores. And this is exactly what we have shared. RIDF deposit has come down by 16%, which is like INR 7,000 crores in last one year.

I want to know regarding the credit growth. In the previous analyst meet, if I am not wrong, you guided at least 12% credit growth, right? But in the first quarter, the credit growth is not up to 12%, I believe, right? So, then from which quarter you expect the credit growth to speed up to meet your target?

So, first quarter you know is one of the slowest quarters in the economy, always. And that's why if you see the credit growth for the banking industry in the first quarter is also in the single digits. Last time, we also shared with you that we would like to see a credit growth between 12% to 15%. But at the same time, we would be focusing only on that credit growth, which will also give us the profits. So, I think the profitable business growth was the key message which we gave last time. Quarter 1 was a muted growth, but I think we are quite confident the way the interest rates in the market has come down. There has been an improvement in the GDP. And I think some of the challenges in terms of trade negotiation would also be cleared in maybe next few days. Then I think the overall credit growth in the economy would further pick up, and we would be able to participate in that credit growth. But definitely, I would again like to reiterate, our focus would be on a profitable credit growth. Because just by growing credit without making profit would not be good for any of our stakeholders, especially on the investor side. But I think we are quite confident that, that we would be able to achieve this kind of credit growth in the future.

Whatever credit growth is, at 12% to 15% or in between any figure of that, the credit growth would be supported by your raising deposits? Or would your capital position or fund position can easily accommodate that credit growth of 12% to 15%? I mean, are you targeting the credit growth through only raising the deposits or raising of capital is needed?

So basically, there are two aspects of credit growth. One is the Deposits, another is the capital. Capital we have sufficient. If you see our CET ratio is 14%. So 14% capital ratio is very good in terms of supporting the credit growth. But whenever we would be growing on the credit, it would also be supported by the deposit growth, which we are confident to raise is not an issue. Like if you see our Branch Banking Deposit has grown by 20%. So depending on the requirement, we would be able to raise deposit. So either deposit or capital is not a constraint for the loan growth. We would continue to grow.

On slide number nine, which gives the breakup of provisions. So we have collected INR 338 crores from SR. And now I think the book value is zero. Is this number same as provisions for investment, which is minus INR 345 crores? I mean, is this number the same? I mean, whatever recoveries that we are getting from SR in this quarter and next quarter or incoming quarters, that would be come down as negative provision line item?

Jai, this is Niranjan. That's right. So whatever recoveries, cash flows we get from the ARC, either as redemptions or excess recoveries, that will flow into the provision for investments as a write back.

Niranjan or Prashant sir, if you have any ballpark number for, let's say, for the next 9 months, how should one look at? For this run rate of INR 340 - INR 350 crores, is this a normalized run rate or there could be some material changes there?

I think this is by and large the run rate kind of thing. So we are looking for something around, say, INR 1,200 crores to come from the Security Receipts for the full year.

While I understand that you are not a party to the secondary transaction which is happening, but if you can suggest a timeline, I mean, this was the proposal went to RBI, for example, in May beginning, we are mid-July. What is your best sense in terms of timeline of their approval from RBI? Does it involve anything from your end?

So, Jai, I think fundamentally, if you see, the transaction was announced in the first week of May, and as per our understanding, application has gone by the May end. So we are expecting, in view of the past experiences, that maybe approvals might be coming in the month of September.

You were giving one detailed backup of slippages into various retail products, which is now missing in this deck. If you can provide specifically the slippages, an absolute number for PL and credit card, or if you can suggest some direction there for Q1?

So, PL gross slippage is actually trending in the range of about, let's say, about INR 225 crores. And credit cards would be in the range of about INR 180 crores. PL slippage has seen a reduction from 240 handle to about 220 this quarter. So, it's important to call. And so is cards, which also is trending down with every quarter.

There are certain players who are already showing, even in these early days, some signs of a degree of indiscipline, either on pricing or on credit standards, because it seems a lot of players are looking at certain segments which are not very high yield. Is that something that can play a spoiler? And if we are unable to manage external forces, if competition is really hard, what else can you do at P&L level to protect your ROAs? Because ROAs are already razor thin. Can LDR go up from 87 to 90-95 or what are the other levers?

Sure, Harsh. So on the first part, I think some of what you said is already got reflected in the way you look at our loan growth this year. So, for example, if you look from a Y-o-Y standpoint, we are operating in the range of 5% to 6% loan growth. Wherever we believe that the pricing is not conducive or is not meeting the risk filters that we believe are relevant. We are not going after that growth. So if I were to look at, let's say, a spectrum of prioritization, there is, of course, profitability and then there is growth. What we keep trying to work is to find a good balance between the two equations with, I would say, a sharper focus on improving the profitability. The second is from a margin standpoint, we will continue to see redemptions in our RIDF book. Second is on our ability to drive cross-sell and consequent opportunities from a fee. I think we will continue to work hard on that aspect. And the last is I think and which is also important, is to continue to be very disciplined on our cost. And when I say cost, these are both operating costs and that we have already been able to pull back the growth, which are single-digit growth for the last, I would say, two or three quarters on a Y-o-Y basis. But importantly, also the credit cost. We are already operating at a PCR at 80%. Our view is that slippages should also start trending lower from here on at a gross level and therefore what net goes into the GNPAs. So while in the immediate term, even if you were to assume that there might be some pressure on the margins, our expectation is that we will continue to work through our operating cost structure as well as credit cost and look to cross-sell from a fee line. Structurally, as we look to exit fiscal 26, we should already have levers that indicate that Net Interest Margin is on an improving trend and not on a declining trend.

The final question on the market competition, which segments you are letting go in terms of growth to protect profitability?

So, Harsh, let me break this again into three parts. First, if you look at the Corporate segment, the Large Corporate segment, I think there is opportunity not only from banking, but their access to capital markets as well. So to that extent, if we find that the opportunities are wafer-thin on margins, we will not pursue. That's number one. Number two is when we look at our retail, now retail, if I break that retail book while at a blended level we are operating at a much higher yield, what's happening is that we need to also grow that book faster. But it's just that at this point in time, unsecured has been effectively de growing for us when I just look at, let's say, the personal loans portfolio and it is de-growing for reasons well known already. So, we do expect that as the Asset Quality metrics on unsecured now are already stabilizing to already showing early trends of improvements, we can look to also improve that particular book. But just to respond to your specific question, it is essentially the Large Corporate to Mid-Corporate, upper end of Mid-Corporate, where I think we do see very, I would say, shrinkage of margins. And on the retail, I think there are products like home loans, auto loans, which in any case, we have been on a bit of a de-focus over the last 4 to 5 quarters.

My question is on your long-term outlook for ROA. You have had this target of reaching 1%. So, in the current quarter, of course, it's 0.8%, but aided a lot by the treasury line. So what is the structural outlook on ROA, especially given the slightly subdued outlook on NIM in the near term because of the systemic rate cuts? Does that 1% target get pushed? And if so, to which year? And what are the levers that you see that the Bank is having to reach that 1% ROA?

I think what we shared earlier also that we would be aspiring for a 1% ROA in FY '27 and say by FY '30 would be in the range of 1.5%. We are quite confident and we are on track of achieving that kind of number. You are right - the current 0.8% is mainly supported by the treasury income. But at the same time, this is always a combination. Either you will be getting a better ease on your loan side or if the rate of interest is coming down, you get an opportunity to make some money on the treasury side. But fundamentally, going forward, I think the lever for us is definitely in terms of NIM expansion, which would be mostly happening through the profitable loan growth, as well as in terms of reducing our Cost of Deposits. That is one part. The second is also in terms of continuing to work on improving the Non-Interest Income. And at the same time, I think the measures we have taken for controlling the cost, we will continue to do that. The other part would be definitely in terms of the credit cost. The credit cost, which currently we have seen, I think we have reached almost a peak. In some sectors, it has already started improving. So I think going forward, we are quite confident that credit costs would also start coming and also with the measures on this part. And especially when the RIDF balances would also start repaying. Already, we have seen 16% balances on RIDF has come down. We are going to see further reduction in the current year. And I think by FY '27, the RIDF balances would be less than 5% of our Total Advances. So I think all these things together, we are quite confident to achieve that 1% ROA by FY '27.

In fact, I was harbouring that question when Sir was responding to this. It's like, at 1% ROA, what is your assumption of NIM for the Bank?

So we will be operating at about a 3% handle for a 1% ROA.

So this, sorry to belabour on this point, so this 1% ROA target is the exit quarter of FY '27 or average for FY '27?

I think as of now, we are looking for 1% ROA for exit of FY '26 and the average for FY '27.

I wanted to understand the math around the RIDF. So, for FY '24, it was INR 44,000 crores what you had given in the PPT. Now, y-o-y you have mentioned a kind of INR 7,000 crores decline? My calculation indicates from last quarter, it was already at somewhere around INR 36,000 crores. So how much has been the decline in this quarter? And if it's not the fall in RIDF, I mean, how much is the impact of the borrowings which have supported our NIMs, because the Q-o-Q NIM maintenance is something not other banks have been able to do.

RIDF, the balance that we had was in the range of INR 37,000 crores, as of March. And that number, as we look at closing, is lower at a net level by about, I think, INR 300 crores. So we have, we continue, we are ballpark in the same range. I think the only, I mean, there is some play of the recoupment, that redemption that we would have seen in the previous months, previous quarter's closing stock was at a lower yield. And what has gone out, which is a nominal number, has gone out at a higher yield. To that extent, there is also some play from a basis point, but it may not be as material. If I look at, let's say, Yield on Advances, Yield on Advances last quarter to this quarter, we've seen about 15 basis points of reduction. And if I look at our Cost of Funds, we've again seen about 15 basis points of reduction. So that 15 basis points largely comes from about 20 basis points of reduction in the Cost of Deposits. And that's getting reflected in, therefore, quite a comparable net interest margin structure for June quarter.