Ladies and gentlemen, good day and welcome to IDFC First Bank's Q4 FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saptarshi Bapari, Head of Investor Relations. Thank you, and over to you, sir.
Thanks, Michelle. Thanks a lot. Thanks, everyone, for joining the call. Today we have with us Mr. Vembu Vaidyanathan, MD and CEO of the bank, and Sudhanshu Jain, CFO and Head of Corporate Center, with us. We will start the call with the discussion on the financials with Sudhanshu first, and then we will have a brief review by Mr. Vaidyanathan as well. Over to you, Sudhanshu.
Yeah, thanks, Saptarshi. First of all, good evening, everyone. Thank you for participating on a Saturday. Let me start with first by putting out some key financial numbers. I will try to keep it short, but nevertheless, let me call out a few key numbers for the year and for the quarter. The balance sheet size as of March 31, 2025, that stood at about INR 3.4 lakh crores. It has grown at 16% on a Yoy basis. If we go and see further components, then deposits continue to grow at a faster pace than advances. Our customer deposits have increased by 25% on a Yoy basis and is now at INR 2.42 lakh crores. Pardon me for that. Within this, the growth in retail deposits was higher at about 26% on a Yoy basis.
CASA ratio, if you see for us, it has been quite stable around the 47% mark, and that CASA deposits have increased strongly by about 25% on a year-over-year basis. If you see average CASA deposits for Q4, the increase is 30%, in fact, on a year-over-year basis. Term deposits in the current financial year have grown by about 26%, and here also the retail TD has grown at a faster pace at about 28%. Happy to report that our branch count has crossed the 1,000 mark. It was 1,002 at 31st of March. We opened about 31 branches during the current quarter also. We have repaid high-cost legacy borrowings to the extent of INR 7,000 crore in this current financial year. The residual book now is, I would say, small at about INR 4,800 crore, and about bulk of it, that is about INR 4,500 crore, will mature in the next steps.
We continue to bring down the credit-to-deposit ratio. That is now down to 93.9%. This was 98.4% at March 2024. If we compute the incremental credit-to-deposit ratio during the last one year, then it's at about 76.1%. If I talk about cost of funds, that was stable around 6.5% for the quarter, and similarly, deposit cost remained stable at 6.38% for Q4 2025. If you see the trajectory for last four quarters, both cost of funds and cost of deposits has been quite range-bound or stable, I would say. If I quickly move on to the asset side, then on the funded assets, we have registered a strong growth of 20.4% on a year-over-year basis to reach INR 2.42 lakh crores. Sequentially, the growth was about 4.7%.
If you go to the presentation and we have given more details on slide 28, the growth was largely led by the mortgage segment, which has grown by 19% on a year-over-year basis. The vehicle loan segment, which has grown at 26% on a year-over-year basis. The business banking, which is largely secured working capital, that has grown at 32% on a year-over-year basis. The wholesale business has grown by 29% on a year-over-year basis. There are certain other businesses which have also grown strongly, albeit coming from a small base like gold loan and credit cards. During the year, we also had a degrowth of 28.3% on the microfinance business because of the challenges going around that sector. Infrastructure book, happy to report, is now sub 1% of the total funded assets.
If I talk of credit cards, which is a relatively newer product for us, the bank has now issued more than 3.5 million credit cards. The book size has reached now INR 7,500 crore at March. The gross spends on the credit cards grew strongly by about 40% in FY25. I'm again happy to report that credit card as a business has turned operationally break-even within four years of launch. If I now move on quickly to the asset quality, the gross NPA of the bank stood at 1.87% at March, and similarly, net NPA is at 0.53%. If we exclude the microfinance book, then the GNPA, in fact, is at 1.63%, and this has improved by 19 basis points on a sequential basis. PCR for us, excluding technical write-off, was healthy at 72.3%. It has, in fact, improved by 347 basis points on a year-over-year basis.
If I talk about GNPA in retail, rural, and MSME segment per se, then the GNPA stood at 1.70%, and the net NPA was at 0.62%. Again, here, if we disaggregate microfinance, then GNPA, in fact, has improved to 1.40%, reserving 1.46% in the previous quarter. The standard restructured book continues to come down for us. That is now, I would say, very small at about 0.18% of the funded assets. If I talk about the SMA1 and the SMA2 portfolio, and again, without microfinance book, that has been quite stable. The number for the quarter is at 0.87%. It's marginally gone up from 0.82 basis points in the previous quarter, but I would say the trend has been pretty stable over the last few quarters. We saw an increase in SMA1 and 2 of MFI book. That has gone up from 4.56% to 5.1%.
This is albeit on a declining base. If we see in value terms on the microfinance, then the SMA1 and 2 pool has declined by 3% on a Q-on-Q basis, and the SMA0 has declined by 45% on a sequential basis, which in a way is indicating a lesser incremental build-up. We have also seen an improvement in collection efficiency during the quarter, and it stood at 99.2% for March 2025, and ex-Karnataka, actually, it is at 99.4%. If I talk about gross slippage now, that also has come down by about INR 18 crore from the previous quarter. It is at INR 2,175 crore for Q4. Here also, we saw two mixed trends. In microfinance business, in fact, it went up. The gross slippage has gone up from INR 437 crore to INR 572 crore.
If we strip out microfinance, the net slippage has, in fact, come down by about INR 152 crore. Similarly, net slippage for the quarter was at INR 1,520 crore versus INR 1,541 crore in the previous quarter. Recovery and upgrades was at INR 655 crore for Q4 2025, as against INR 651 crore in the previous quarter. If I move on to profitability, to start with, the NI for FY 2025, that has grown by 17% on a Yoy basis, and for the quarter, it grew by 15% on a Yoy basis. Excluding MFI, if we see NI, then the growth is about 17%. The net interest margin on AUM for the quarter is 5.95%. We saw a moderation of 9 basis points vis-à-vis the previous quarter, and this is greatly attributable to the microfinance business, where the book has further come down, and hence the NIM has got impacted.
If I talk about fee, then the fee and other income for the year has increased by 15%, and for the quarter, it grew at 6%. The retail fee constitutes the bulk of it, and that's at 92% of the total fees. We continue to moderate on the operating expenses front. In fact, for the full year, the growth has moderated to 16.5%, and for Q4, the growth was at only 12.2%, and it stood at INR 491 crore. Core operating profit, that is NI plus fees, excluding trading gains, that has grown by 17% on a Yoy basis. We have also given data that if we take out microfinance, then based on our internal reporting, this number has gone up by 31%. If I talk of core operating profit for the quarter, similarly, excluding microfinance business, then it has increased by 20% on a Yoy basis.
Provisions for the full year stood at INR 5,515 crore as compared to INR 2,382 crore in the previous year. During the quarter, we have not utilized contingency provisions which we had created in MFI in Q2. That stands at INR 315 crore. The sequential increase in provisions was also primarily due to MFI, and this was in line with the guidance which we had given in the previous earning call. As a result, the credit cost for the full year stood at 2.46%. If we exclude the MFI book and the one toll road hit which we had to take into Q2, the credit cost for the full year was at 1.76%. In fact, for the current quarter, it improved to 1.73%, versus 1.82% in the previous quarter. We have reported a profit after tax of INR 1,525 crore. The profit for Q4, it is at INR 304 crore.
The PAT for the quarter, as we all know, was largely impacted by the MFI business, and I would say also to some extent because of normalization of credit cost. If I talk about capital adequacy, the bank has maintained strong capital adequacy. That stands at 15.48% as on March 31, 2025, with CET1 ratio at 13.17%. The board, in its meeting today, has recommended a dividend of 25 basis points for FY25. This will be subject to shareholder approval. Post the quarter-end, we had also in the second week of April, we had also announced that the board has approved issuance of CCPAs to two MATI investors. These would eventually get converted into equity to the extent of about INR 7,500 crore. Considering post-conversion into equity, CRAR, that's the total capital adequacy, will be 18.2% if computed on March numbers, and CET1 will be about 16%.
The LCR for the quarter stood at 107% on an average basis, reserving about 114% in the previous quarter. These are essentially the key numbers which I wanted to bring out. Maybe I'll hand over to Mr. Vaidyanathan to sort of say a few words.
Hello, everyone. Good evening, everybody. Nice speaking to all of you. Thank you for being with us on a Saturday evening. From our point of view, I just want to share with you what are the agenda in front of us over the next few years. Before that, I just want to share with you the fundraiser that we did recently. What is it that's going on in the back of our mind? How are we planning for the future? Why did we raise that kind of a large amount of capital?
I must say that indeed, we have seen some reports and reviews saying that, "Look, people have raised 15% or trying to get the bank by 15%. Why was there a need to raise that large amount of capital in the first place?" Now, it's a very fair question. The thing is that if you go back and see large corporations of today, like say, for example, ICICI Bank, which is really a wonderful institution, which is a shining example. If you go back and see what ICICI Bank was in 2000 or 2003, you will realize that the early stages of any bank is like that, specifically for a domestic financial institution converting to a bank. If it had been a normal NBFC, which is already profitable and then getting a bank license, then it can have a temporary period of turbulence just because of raising CRR, SLR.
They'll go through it maybe in a couple of years. This was not that. This was a DFI, which really was not making any money. Its operating profit was 0.5%. Obviously, all of us know that with 0.5%, even if credit cost is 1%, you know that you're not making money at the core. From that situation, how do you take a bank out of a situation like that? If you spend money, you don't have the operating profit to spend money, so you can't fix the CASA. You can't fix the raise retail deposits. You can't fix the structural issues of the bank of not having a diversified liability base. If you don't spend, you can't fix the issue. This was really a hard-to-solve problem.
It was not without reason that all leading analysts at that point of time had really called it a hard-to-solve or almost impossible-to-solve problem. I must say that from that situation, how does a bank come out? The main thing is that you start building a really phenomenal franchise, a franchise that makes it attractive for new shareholders to come in and bring the capital. Because why would new shareholders come in? They would see if they have a strong capital. Sorry, if there's a strong business model. What we built was a really good customer franchise. We have grown the deposits from INR 38,000 crore to INR 230,000 crore in this period or two. As of March, I think it is probably INR 250,000 crore or so. The CASA ratio now we've taken close to about 47%. Branches we've taken to about 1,000 branches.
Loans and advances we've taken to about INR 2.4 lakh crores. You get the drift. By building such a really strong franchise, we got investors to be attracted to the bank enough to give us capital. The second thing that people say is that, "Look, you've been diluting the bank every year for the last five years." It is true. We raised INR 2,000 crores in 2020, then we raised INR 3,000 crores the next year in 2021. Then we raised some INR 2,000 crores after that. Then we raised another INR 3,000 crores the next year. This year, we are now raising INR 7,500 crores. We just thank the markets that the markets found it attractive enough to give us the capital at a premium to the book. End of the day, my apologies for the incoming call. Can't give a mobile phone away.
This was the reason why the bank had raised capital because the bank was not making money. How do you? We found the way to raise capital. Then with the capital, we built the bank. Now, our job is to now, sorry, I was talking about the franchise. I was talking about the CASA ratio at 47%. I told you loans and advances just about INR 2.4 lakh crore. LCR, retail LCR. I do not mean the retail deposits as coming from retail branches. I mean LCR retail. We were 12% initially. Today, we are 63%. At 63%, I must share with you that we are now in line with large private sector banks, large private sector banks, which gives tremendous stability. Our credit deposit ratio has come down from 137% to about 94%.
Basically, in all of these fundamental franchises, we made the bank strong enough to be able to make it attractive for long-term investors. The second thing was that we kept the bank, we kept incremental economics very strong at the bank. I'm happy to share with you that incremental economics are so strong that our operating profit has now touched about 2.3% of the book. Even with a credit cost of 1.2% or so, bank is on the core of the bank profitable. It will not post a loss. Therefore, now the bank has become so bank has come that way, and we made the bank attractive enough for investors to come in. We made the bank attractive enough for customers. We have really good customer propositions. We have for depositors, we have good propositions.
We have good system, good technology, good franchise, and that made the customer proposition strong, which also, by the way, is one of the reasons why institutional investors do come in. Having done that, now our task is that how do we start generating return on the capital? Because capital we raised because that was really the only way to grow a bank which was not making its generating its own return on equity. For a minute, I had digressed to just talk to you about ICICI Bank, which is because we all agree that it's a, I hope all of us agree it's a great bank. If you go back and see in time, the number of shares issued by the bank was 170 crore in 2005 or so. Just four or five years from then, maybe around 2009, it became 300 crore.
Just think about it. The bank raised $2 billion in 2005, $5 billion in 2007. That is $7 billion raised. Imagine that going back in 2005 and 2007. We raised a billion dollars now. One, that was $7 billion. That is how institutions are built because that was equally the same situation I would imagine where the return on equity was low and the bank had to raise capital. See today, when time has passed, look at the kind of institution that got built and is generating its own return on equity of 16%, 17%, 18%, and it is flying on its own, does not really depend on capital to be raised from time to time. I must honestly tell you that this institution was almost pretty much the same situation, early stage, had to raise capital.
Now our job is walk the path and take the return on equity to about 15-16%, then you become self-sustaining. Now, returns. Now, as for returns are concerned, when I say returns, I mean return on equity. Now, we were, like I said, zero. We come to about seven. If you actually strip out the drag cost of MFI, which we think is our request is to request you to look through it, you will actually see that we're probably about seven-ish or so return on equity on the core. Our first stop is to actually move this from 7 to 15. We really intend to do it. We're serious about that. Hopefully, our business model is such that probably give us a return on equity even higher than that. How do we do that?
We think the main thing is that we need to scale. For scale, we got capital, so we're very happy about that, and we feel comfortable about that. Now, the key thing is the situation where if you see the profitability of the bank, there was a significant U-turn in the profit of the bank. Yes. We started with a loss of INR 1,944 crore in 2019, INR 2,864 crore in 2020, then INR 400 crore positive in 2021, then INR 145 crore in 2022, then INR 2,400 crore in 2023, then INR 2,900 crore in 2024. This is just a solid U-curve that happened or a J-curve that happened to profitability. I think it's really very hard to turn companies like that.
After that, from INR 2,957 crores, all of you expected us because if the trajectory was like that, you expected us to go further up this year probably and go on from there. It is true that we have not delivered to your expectation or even what we thought we could. Instead of a PAT going up from INR 2,400 crores to INR 2,900 crores upwards, we did a downturn this year. I do agree. It is down to about INR 1,500 crores. I want to share with you that this dip is not that there is any fundamental issue with the bank or the model where it is going to go cutting down this way. No, no, no. The curve is not, you are not heading down this way for the next two years, three years, nothing like that.
You think of this 2025 as a year that this has happened because of microfinance. You think of it that 2026 we will stage a smart recovery, and 2027, 2028, 2029, we should be back to a winning wave. After all, the winning wave of 2019 to 2024 was not a fluke because we had built something fundamentally a strong model that can take us there because that is how strong institutions are built. Think of 2025 as a year that happened to us. It was a microfinance institution issue, sorry, business issue. It happened to every player in the industry who played microfinance. It was an industry issue. We too participated. We suffered. That is, I would say, part of growing up and part of learning the business and learning cycles. I would not even say learning cycles. It is not that we had to learn.
I would say that these cycles are something that are part of life, and we know these happen. In microfinance, it just tends to rear its head every four, five years, and it is something that happened. We were also doing it because it was giving us weaker section financial priority sector requirement. It helped us meet many other requirements as well. Coming back to the point, therefore, how do we take the story from here forward? There are two things. One is we want operating leverage. That will come. For those of you who are concerned that it may not happen or it is not happening, let me share with you that last year, our book, the last year, meaning in FY 2025, our business grew by 22.5%. Basically, loans grew by 20% and deposits grew by 25%. Blend, blend, call it business grew by 22.5%.
Our OPEX grew only 16.3%. It is a big, big, big gap between the two. In fact, that should tell you that operating leverage is playing out. Now, if you see the trend line of OPEX for the last four quarters, you see the numbers. In Q1 FY 2025, our OPEX grew 21.1% Yoy. In Q2 FY 2025, our OPEX grew 17.7% Yoy. Q3, it grew by 16.1% Yoy. In Q4, the quarter just ended, it came down to 12.2% Yoy. This is clearly telling you four or five quarters in a row that our OPEX Yoy is dipping. This is obviously a result of some serious work we are doing with the OPEX front at the bank by using technology, by doing operating initiatives, and so on and so forth.
In the next year, that is in FY 2026, we give or take we'd like to grow the loan book by 20%, deposits by 22-23%, something like that. Let me call it blend, blend somewhere around 22%. Now we want to grow, or we are targeting inside the bank to allow OPEX to grow only by 12-13%. You can see that the bank is putting brakes on OPEX. It is rather leveraging the same balance sheet with the same level of OPEX, growing the balance sheet by 20%, 20%. You can see that if you play the story out the next two, three years, this has to naturally show operating leverage. Therefore, to sum it up, I would like to say that given the bank was not making its own return on equity, you might say, "Why?
You knew this when you merged with the bank, with IDFC First Bank, so you should have known. Of course, I should have known, and I knew. It's not that there's a fact that the bank was sitting on INR 25,000 crore of infrastructure loans. It's not unknown to me. Of course, it's known to me. It is part of the story of the responsibilities we took because we thought there was an opportunity of converting to a bank and all that, and I take full responsibility for that. We were where we were. From there, we have come really a long way. Our deposit franchise is really very powerful. I can tell you that very rarely you would find a retail franchise that would have grown from INR 10,000 crore to INR 200,000 crore retail deposits in six years. It's just really special.
There is something special at the bank, something not so good at the bank because our cost-income ratio is high. We are fixing it. I told you that the way we are reducing the OPEX year-over-year, I read out the numbers to you. The way it's coming and the way we are thinking it will play out next year, you will see this story improving. This is how institutions, in my opinion, are built because you got to raise the capital, and then you got to generate return on equity. Once you generate return on equity, you become self-sustaining. We believe we are on that path. We are genuinely thankful to you that you allowed us to raise INR 21,000 crore of capital in five years. Really, really, to all our institutional investors who support us during this phase, we really want to thank you.
We believe that we will put that capital to good use in the next four-five years, and you will see progressively, you will see progress every year from here on to the next four-five years. We should reach the returns on equity of what good, respectable banks command. We do not make it today, but we believe the path is we are on our way. That is all I have to say in a broad sense, and we will take questions from here on, either about the quarter or about what you felt about the overall story.
Thank you very much, sir. We will now begin with the question and answer session. Anyone who wishes to ask questions may press star and one on their touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and two.
Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rickin Shah from IIFL Securities. Please go ahead.
Good evening, sir, and thank you for the opportunity. Just had one question. Post the implementation of new microfinance guardrails, would you be able to provide some color on how the business trends have changed on the ground, either in terms of the approval rates, disbursements, collection efficiency? That's my only question. Thank you.
Yeah. Hi, Rickin. Thanks for the question. In terms of the MFIN guidelines, which have come in from April, we had implemented it slightly prior to that. These guidelines we have made effective already from February.
To that extent, we also saw some impact on disbursements that came down to about INR 760 crore in the current quarter. Since we have already implemented, we see not further impact as such to come on this front. Got it.
Thank you.
Thank you. We'll take the next question from the line of Xishuan Gao from Shaunfeld. Please go ahead.
Thank you so much for the opportunity and congratulations on the good sales numbers. My first question is on star rates. First of all, what's our blended star rate now? Also, given we have built a very strong deposit franchise over the last couple of years, and we're kind of price-setter within the mid-size banks at least, how are we thinking about leveraging on that in a rate cut scenario?
Do we expect a decent amount of star rate cuts in the coming month or quarters?
Yes. We are also planning to reduce our rates very soon. Maybe in a day or two, you will see the numbers out there. We are trying to reduce, first of all, our fixed deposit interest rates. We are paying probably about 70 or 80 basis points more than the large big four banks on the fixed deposit side. We want to literally go down to their rate. We might see a large cut from our side to go like the peak rate. People have lots of deposit rates, but there is always a special slab which people pay the maximum rate. You will see large banks paying around INR 720-ish or so. We were about INR 790s or so. We want to come straight down to their rates now.
That will be a very big moment for our bank to go there. On the savings account front, also we want to reduce rates. We will, first of all, trim off the accounts we were paying up to INR 100 crore. We were paying certain amounts, which we will now pay only INR 25 crore and onwards. We will let go of the high-value, high-deposit stuff of individual customers. Even on the core star rate itself, we have plans to reduce it from there on. Just to add, this is further to the change which we already did in February, where for INR 5-10 lakh, we have reduced the rate from 7.25% to 5%.
As Vembu mentioned, we are looking for some more cuts, primarily in slightly larger ticket sizes, and we would announce these changes shortly. Mainly coming forward, I'd like to just give one clarification, not clarification, explanation so that it's easy for you to understand. Banks are raising money from two sources. One is CASA, one is term deposit. There are a lot of eyes that are all riveted around CASA right now at this point of time, saying, "When are you going to cut it?" I think not many questions are being asked about fixed deposit. People are not looking at that. We are cutting that very sharply. That is going to be as and when those FDs come up for maturity, either they will come to us at the new rates, or we are happy to let them go.
Actually, I would not say it is happy to let them go. We prefer customers' rollover. If they have to go, they got to go. This will also be a structural benefit for the bank because we will save interest costs and annuity. I want to just clarify that to you.
Got it, sir. Thank you. Sorry. What is the blended star rate for us right now?
Can you repeat that question? Blended star rate. Blended star rate about 5.7. Star rate. About 5.7. No? It is about 5. For the current quarter, it is about 5.9. As I said, we made some changes in February. The full impact of that would play out into the next quarter. That, coupled with certain other changes which we plan to do, would further bring down the star rates. Currently, for Q4, it is about 5.9% on the books.
We recently reduced rate for the 5-10 lakh bucket from 7.25% to 5%. That should help reduce a few basis points. Like I said, we will further reduce it also from here.
Got it, sir. My next question is on credit costs outlook for FY 2026. You have shown quite a decent material improvement on the SMA-1 and also on the non-MFI portfolio. How should we think about credit costs for FY 2026? Also, are we going to utilize or unwind some or all of that INR 300 crore of the MFI provisioning in FY 2026 when it is all over?
We will wait for, I mean, until this quarter, we did not feel like doing it because the MFI thing is still playing out.
Our experience is that we had already called out last quarter that we expect the peak of provision to come in Q4, which has already come. We expect provisions to come down next quarter and come down quarter after that and so on and so forth. We think of it like a wave that came and went, and this is the peak of the wave that we had this quarter. We are pretty much bang on. Whatever we roughly said, we said we are roughly on track. When this eases out a little more, we will start when we get full confidence that we have seen the end of the wave, we will start releasing it. Got it, sir. Do you mind for us a round of credit costs that you see as of now for FY 2026? Yes.
If you take this number for this year, FY 2025, first of all, it was 2.46. It was 2.46 for this year. The 2.46 included the extraordinary impact of, I shouldn't say extraordinary, but the high impact, so to say, high impact of MFI and that Mumbai entry point, the toll accounts that came because state government changed the rules, etc. All put together, it came to about 2.45-2.46. If you exclude these two events, the MFI and this one, it was about 1.85-1.76. 1.76 this year. Next year, you should expect us to be somewhere in the zone of about 1.85-1.90. I'm sure. Yeah. On an overall basis, you can expect about a 50-digit reduction in credit costs for next year. Over the number of? Over 2.46, which we have come in for this year.
Sorry, just maybe squeezing one last question on margin. How should we expect margin to behave from here? When you also given your salary cut plan or TD rate cut plan, should we expect margin to at least stabilize from here? How should we think about that?
The way we think about it, this year, we're expecting the repo rate to already two repo cuts have come. We expect at least two more repo cuts to come of say 25 each. All put together, there is a certain reduction in the yield on the book, at least in the floating rate side. On the other hand, there is going to be an increase because, sorry, the reduction in our own costs because we're cutting TD rates and also going to cut star rates to an extent. All put together.
Net-net blend blend, we are expecting the NIM to come down to about 10 basis points. All things playing with each other. Over Q4 of over the NIM of Q4 of 2025. Got it. Thank you so much, sir. All the best for the next quarter. Thank you.
Thank you. We'll take the next question from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. Hi. Thanks for taking the question. Firstly, I think on the growth side, you said the overall capital raise would be more towards the growth. If you can suggest maybe with CD ratio of 94%, LCR at 107, and even PSL requirements to be met. Now, maybe how are we looking at the overall growth?
Would we see some leg up on the growth side, or can it still continue to be in this high teens to 20% kind of a range?
Kunal, thanks for the question. As we have guided earlier, we would want to grow under the 20% zone. It could be 1% here and there, but largely in that range going forward as well.
Not changing much towards the capital raise. I think still in terms of the growth, I think earlier also we have been indicating 20% or so. We still continue to maintain that trajectory.
Yes, that's right. That's right.
Okay. Okay. Secondly, anything to read into some rise in the 30 plus in consumer deliverables and the SMA pool, and even some rise in 30 plus in business loans?
Generally, Q4 is relatively stronger with respect to collections, but sequentially, there is some rise out there. Anything to call out for, it's not too much of a worry. If you can also highlight the provisioning coverage on the MFI portfolio, both GNPA and SMA put together.
Yeah. That's a marginal increase, Kunal. If you see, in fact, four-quarter-back number, it was 1.18% for consumer loans, and that is still now at 1.07%. Right? I would suggest not to read too much in this. It's a marginal increase. Of course, Q3 was a festive period also, so some bit of impact has come because of that. Overall, if you see consumer loans down, if you take a four-year four-quarter trend, down from 1.18% to 1.07%, MSME was 1.19%. Even after four quarters, it is 1.07%. I'm talking about SMA-1 and SMA-2.
Vehicles was 1.05. Even after four quarters, it's still 0.94. Credit cards is 1.8. It's come down to 1.53. The mortgages was 0.39. It's gone up to 0.45. That's really fractional. If you see every product category, we, of course, as you know, disclose SMA-1, SMA-2 by product category, by tenor, by vintage. You can see they're all behaving stable. The only problem that we had was MFI moved from 1.71 to 5.10. That's the only one to call out, but that's been called out before.
Sorry, you. Okay. Got it. Coverage on MFI, yeah?
Yeah. Coverage on MFI. During the quarter, we have not released any provision out of that INR 315 crore. SMA-1, SMA-2 put together and NPA, we would have a cover of about 72%. GLPS?
GLPS, are they 100% provided the way most of the other banks have done on the MFI portfolio? Have we also provided 100% on MFI GLP or it is still lower?
Yeah. We have put out the numbers there on the stock, what we are holding. We have not provided 100%, but we are applying consistent provisioning policy over the quarters. As you know, we also have a relatively higher share of CGFMBB coverage on the book. We feel that we are holding adequate provision on that book.
Okay. Okay. One last question on LCR, this new guideline. How much do we see the impact for us, maybe compared to our average LCR today at 107%?
The LCR actually is 117% for the current quarter. This was 114% previous quarter.
As we have guided earlier, our endeavor would be to maintain LCR around this range, about 115% and so on. As Vaidya mentioned earlier, we also have a relatively higher share of retail deposits, right, in the LCR, in the overall deposit composition, right? The runoff factor has gone up, right, by 2.5%. At the same time, we have got some benefit on account of the decrease in runoff on trust and so on. Cumulatively, however, we are seeing a small impact of maybe about 1-2%. That is not material in the overall scheme of things.
Adverse impact of 1-2%. Yeah. Yeah.
And largely coming because, as I said, because we have a higher retailing period. Yeah. Okay. Got it. Yeah. Okay.
Thanks. Thanks. All the best. Yeah.
Thanks so much. Kunal, one question, one comment on the microfinance book.
We said many things, so I want to call out one particular one. Now, in the microfinance, in SMA-0 book, in March 2024, it was INR 133 crore. In June 2024, it became INR 181 crore. In September, it rose further to INR 267 crore. In December, it rose further to INR 275 crore. You can clearly see SMA-0 was going up. In March 2025, it has come down from INR 275 crore to INR 152 crore. This is a very big development. It just shows that this curve, what we talked about, that the microfinance is peaking out in this quarter and coming down. At least this is corroborated by this very useful information that the SMA-0 has come down from INR 275 crore to INR 152 crore. Hopefully, we will see the back of it over the next few quarters, as we said.
Similarly, if you look at SMA-1 and 2, it was INR 302 crore in March 2024. It had risen all the way to INR 777 crore. Last quarter, it has come down. Sorry, it had gone to INR 501 crore. 169 had gone to 501. Just bear with me. My apologies for that. 169 crore had gone to INR 501 crore in SMA-1 and 2. Now, this quarter has come down to INR 488 crore. The point is that we are clearly seeing that the SMA-0, 1, 2 of the microfinance book is coming down in absolute terms. This should naturally translate into lower credit costs in subsequent quarters. That is what it is. Over to you, Kunal. Back to anybody else.
Thank you, sir, for answering. The participant has left the queue.
We will move on to our next question, which is from the line of Nithin Agarwal from Motilal Oswal. Please go ahead.
Yeah. Hi. Good evening, everyone. And thanks for taking my questions. A few questions. One is on the credit card wherein we have achieved breakeven. If you can provide some color as to how is the revolve rate there and what ROA numbers are we looking at now over the next, say, two years?
You are looking at a very forward-looking question. If you ask us two years, let us say that even on a PAT basis, post-credit cost, you will see this solidly into profits. Today, the bank has achieved in four years, it has reached operational breakeven. You may not, I do not know whether you know, whether you are aware of how quickly cards business breakeven.
If you speak to experts in the industry, they'll tell you it takes quite a while, at least for a fast-growing book. For us, it takes maybe six, seven years or so. I'm very happy to share with you that within four years, our bank has achieved operational breakeven. This was made possible because the bank went digital. We did not have DSAs. We had a very unique and fresh approach towards launching credit card business, where we made the product so good that customers came in rather than we having to chase them through DSAs. That proved to be a big success for us. Therefore, operating on our book, average book for FY2025 is now touched INR 6,000 crore. We have reached operational breakeven. Now, two years to your question, even after loading credit card cost, this will be profitable.
We think by 2028, 2029, this should be really, if I use the word loosely, should be spinning cash. Nithin, just add, even on the credit cost front, in line with our earlier comments in previous calls, we have seen a reduction even this quarter. For the full year, credit cost on credit cards is lower than the previous year. We expect it to further come down into the next year. How much that number is now for FY2025? We are not calling out that number, but we had done timely policy interventions. Some of those are reflected in the SMA numbers and the NPA numbers, which we have been giving out, a slightly longer-term trend. I would say that it is broadly performing on our expected lines. Basically, performing on expected lines.
When we call out, see, once we start going on every individual product credit cost in year two, then sigma it for the whole book. That is why we put it all together and call it 1.76x of MFI. Suffice to say that we are on record in telling you that that is perfectly playing on plan. It is a net of credit cost. Think of it like 27. It should be in the money. A launch year of 2022. You would imagine that five years, including credit cost, this product is making money.
The way this game works, because we've done this business many times before in our lives, at least I have, once you go through the difficult phase of setting up and currying the reward points and credit costs and the technology and the scheme connections and the scale and the collections and the whole architecture, once you go through, it's already gone through the last five years. Once it starts making money, then unless we get it wrong on any new front, which we can't think of today, this will be making steady profits from next year onwards. Or maybe actually next to next year.
Yeah. Right. Got it. The second question is on the retail liabilities cost ratios there. If I look at slide 66, there is a sharp decline in the operating profit as a percentage of average liabilities there.
You mean the loss is reducing?
Yeah. Yeah. The operating profit loss is reducing, yes. Of course, the cost ratios are getting better. What explains this sharp reduction in loss between 2024 to 2025? Otherwise, the prior years, if I look at the last two, three years, they were more or less in a very narrow range. This year, it has come down drastically. When I look at this sharp fall, the guidance on your cost ratios around the liability side does not really reflect that optimism. From 2025 to 2027, we are just projecting a 30% decline from 170 to 140. This year, we have already covered such a big distance. Where is the disconnect that I am missing?
Sometimes it can happen in one particular year that we got a solid improvement this year. We do not promise this kind of massive improvement every year.
The thing is that if you see from in FY2020 to 2021, it dipped massively to 3%. For a couple of years, it was stagnant. It has improved this year. Think of it that the way we have planned a book out, and it is a well-planned one, we feel that this 1.2% will keep on. This 4.2 has come down to 1.2 over the five years. In the next five years, it should become zero. Hopefully, we do, if hopefully a little better. At least that's what we'd like to share. Right. Right. If this comes to one good thing, by the way, Nithin Agarwal noted that whenever we say that liabilities makes losers money, it is very easy to compute how much you're losing also.
All you have to do is multiply the 1.2 by the average retail liabilities for that, and you know it's about INR 2,000 crore. The good news is that even though the book is growing by maybe like 25% per year, which means that the incremental business on this front is really very profitable. Otherwise, you could not see such a sharp dip. We are quite confident that direction is good. The direction is definitely heading towards breakeven. Frankly, if 10 years from launch, liabilities is going to become profitable, just think about it. Other banks have been around for 30-odd years. When we will go past 10 years, liabilities will be throwing back cash, which will help us reduce the cost of funds on the lending side.
When we do that, then we'll start maybe getting to even lower income as a higher income, lower yield customers. The whole model will get more and more similar to other mainstream banks in that sense.
Right. Right. Understand. Last question on the overall cost income ratio at the overall bank level, wherein you talked about that the cost growth has moderated versus the revenue growth. When you guide for a 65% cost income by FY2027, what kind of absolute cost growth are you looking at over the next two years? Which segments, based on the pie chart that you have given in the PPT, which segments will drive that decline? You should expect from us about 12-13% OPEX growth.
Okay. Yeah.
That's the main thing, actually.
While we want to grow the book by maybe 20-odd %, give or take here or there. This is a very material two, three years coming in front of us. Within the segments, if I just look at the slide, which is slide number 63, with segments, is it something that you are more hopeful on this decline? See, frankly, every business has to start delivering more and more operating leverage. More operating leverage will obviously come in credit cards and in retail liabilities. Because see, let's see the cost income ratios. The retail asset cost income ratio is already running 56%, which is pretty good, actually. I mean, and for a bank that puts out SLRs here, etc., on the core of it to have 56% is good.
It will have its own operating leverage because book will grow and will get some operating leverage on its way. Maybe 55 will come down to the around 50s also by that time. To your question about where we'll see the improvement, it is credit cards. Credit cards has come down from 165% in 2023 to 116% in 2024 to 100% in FY2025. It should dip steeply from here next two years to come down to about 75-odd percent. Liabilities should dip from 171% to 140%. Hopefully, I mean, these were estimates we put together about nine months ago. We'll keep monitoring these numbers.
Sure. Thank you so much. I wish you all the best.
Thank you.
Thank you. We'll take the next question from the line of Anand Swaminathan from Bank of America. Please go ahead. Thank you.
I think I had a couple of questions. First, on the capital side, can you just give us some color on what was the thought process behind using the CCPS as route? More importantly, are there any other riders or structures, securities attached to this that investors should be aware of? That's my first question.
Yeah. Let me talk about the terms. CCPS was maybe a choice made among the few other choices available. It probably made the investors more comfortable to come to this route because the conversion was linked to the stock price prevailing in the exchange. Meaning that the way the contract is done is that after we allowed them, first we have to wait for regulatory approvals right now and shareholder approvals before they subscribe to it. That's when the money will come in and the subscription will happen.
The terms of the contract are that if the stock stays above INR 60 for a period of 45 working days, trading days, then it automatically stands converted. To make it clear, therefore, we do not have to really exactly wait for 18 months and all that stuff. If all goes well, within 45 days of allotment, it might just stand converted. In the interim, they will get an 8% return. This is what we could negotiate or this is what we could get best because we were in the process of raising capital. I earlier described to you why I needed that large amount of money and why we are going for big stakes. That explained earlier. For raising that money, these are the terms we could get. We thought these were really good terms because it makes the bank bulletproof.
There are so many issues going around the world. Off late right now, there is an issue in India, Pakistan, all that. It has made us totally at peace in this environment. Sure. That makes a lot of sense. About some lock-in periods and other options or securities, just so that we are clear on anything else around this structure. There are no other significant riders to call out. It is 8%. Stock stays VWAP of INR 60 for a period of 45 days. It converts. That is all there is to it, mainly.
Okay. That is very clear. Thank you. Why not increase the growth target? Why this 20% target? There is a lot of runway. Stellio scale is too small. Can you explain that also, please? You could, but it all comes with its own. We just find 20 is a nice, stable number to go with.
It's comfortable. Our engine can easily deliver it, comfortably deliver it. We don't have to strain any credit norms. We don't have to be aggressive at all. We don't have to relax any credit criteria. We don't have to play any false shots. We don't have to launch any major new businesses. It's comfortable. Of course, when we put out the number of 20 initially, we were always conscious of capital. Of course, now we are more comfortable. We were always conscious of capital. That's when we talked 20. 20 is a nice number. If you can just stay on the pitch and deliver consistently without any credit cost problem, unfortunately, I hope all of you will agree, including microfinance, including the toll, all put together in the most, let me say, difficult of years, it is still only 245.
I mean, only the reason is very low. I'm just saying it's a good number in the context. The point I'm going to say is that if you want to come down, if you want to keep tight credit control, credit cost control, then without playing a false shot, probably it's a good percentage to go with.
Sure. Thank you for that. On the second question around deposit competition, just wanted to get your thoughts around what is happening there. Because even two, three months back, the assumption was that it's a very, very tight market, very difficult to get share. Suddenly we see all banks kind of racing against ECZ to cut SAR rates, TD rates. A lot of things are happening.
One side, it could mean that the loan growth outlook is coming down, or it's just that people have figured out the elasticity on the customer side is not that much. Just wanted to understand what you are thinking on this front. Especially at this pace, will it continue? Let's say there is another 50-75 basis points cut. What kind of deposit rate beta should we assume going forward? See, the way we are playing this,
we are playing this simply to our need. We are really not so first and are not exactly keeping a very close eye on who's cutting how much, etc. Of course, we keep an eye because of the same market. We are more particular about what we need.
We are clear we want to grow this because if you want to grow loan book by 20, we want deposit book by 20 for sure, minimum. If you want to fix a little bit of credit deposit ratio, we need to grow a little more than 20. We have to pay back some bonds. We still have INR 5,000 crore of old bonds, high-cost bonds. We have about INR 25,000 crore of bonds we raised after the merger. There is nothing to do with legacy, our own borrowing. They are not high-cost, but still they have to be paid. We are focused about what amount of funds we need to pay the bonds and to grow the book. We price ourselves keeping that picture in mind. That is one thing. The second thing is that we believe that the capabilities we are building, it is not only rates.
Of course, people talk about rates all the time. One thing IDFC First Bank has built really good, which is I think among the harder things to build. Rates is an easy stroke of a pen. The harder thing to build is building customer experiences. You trust me on one thing. You can go and check any branch, talk to people, talk to customers. The experience layer that bank has built for customers, the culture we built within the bank, the technology layer that we built so that the experience layer at the call center, our app, our branches, our VRM, that one to build, the UI, UX, the design, the aesthetics of it, all this, and the culture of being soft with customers, it's very hard to build such things. Our bank has built that. I am just connecting back to this earlier conversation we were doing.
It's very, very hard to build that. Our bank has achieved major success on those fronts. Rates is one component. We'll use them as a judicious mix of the two to just take what we really need. Sure. That's exactly what I wanted to understand. Based on your modeling and experience with your customers, you're comfortable with defending the CASA ratios. You don't expect these rate cuts to impact CASA ratios. Yes. We think we'll maintain it. That's why we are not exactly going and cutting SAR rates immediately. We are cutting it every rate. Because end of the day, money is money. Whether we cut every rate and get the P&L, or we cut SAR rates and get P&L. We are choosing to cut every rate and get the P&L.
SAR also we will touch, but we will do it, like I said, I earlier told you what are the actions we will take on SAR. For example, on savings account, it is true. Your earlier comment on elasticity, I did not answer that, but I will say it now. For example, 0-5 lakh, we cut it straight to 3. I do not think people expect us to go that far by cutting from 7 to 3. We did one shot. We did that. We do keep an eye on elasticity, and we keep an eye on service.
Sure. That is very clear. Lastly, on LDRs from the current 93%, where do you expect to settle down, and what do you think is your steady state?
Yeah. We should come down to our wishes at late 80s.
Okay. 20% loan growth and 22% deposit growth.
That should be the next two, three years, generally, in that range.
If you notice how the bank's funding has been done, borrowings, let's take only borrowings, okay? Borrowings as a percentage of total liabilities was about 45% or 46%, or maybe 48% at the time of merger. Today, it has come down to only 11%. Means we are reaping all the borrowings and running the bank from deposits. It has now come down to 11%. Now, 11% is good. It is meeting the bench of many other banks now, many good large banks also. We know one large bank, to the best of my knowledge, so it is on record, so I should be careful. We think ICICI Bank is something like about 6.5% or so, which means the borrowings are even lesser than us. Our ambition is to go there.
We keep an eye on these things at this point of time. When we will raise more deposits, we'll keep returning borrowings to become a more deposit-funded bank. We don't want to be a bank that's borrowing money. We want to be a bank that funds loans by deposits, not by borrowings.
That's very clear. Appreciate it. Thank you.
Thank you. The next question is from the line of Payroll Engineer from CLSA. Please go ahead.
Yeah. Hi, team. Congrats on the quarter. Most of my questions are answered. I just have a couple of small ones. Firstly, in MFI, what was the write-off we did this quarter versus last quarter?
Payroll, I'll take that question. If you see, we have not specifically called out the number, but if you see slippages, right, MFI is about 25-26% of the total slippages for the quarter.
On the write-off also, it's broadly around that range. No, but so that you can give a more straight answer. The credit cost of the full year, credit cost of the full year for microfinance is about 10.5%. Yeah. That's the most straight answer to you.
Okay. Okay. Fair enough. Secondly, our CASA ratio of 46-47, what's the mix of CA and SA?
Sorry, repeat the question. The CASA mix of?
Sorry. No, no. The mix of CASA. How much is current account in that 46%, and how much is savings account deposits? In the average CASA ratio? Yeah. I'll give you the average on your end. CA as a proportion of our customer deposits would be about 7-8%.
Okay. And almost 40% SA? Yes. That's correct. We're building a SA franchise. No doubt about it. We're building it. It's coming well.
The thing is that our SAR is going so fast, CA is finding a tough time catching up with it. What would be the, let's say, roadmap out here to get it to, say, your larger bank's average of 13-14%? The thing is that our SAR is going so fast that really, CA is also a difficult franchise to build because, as you know, the whole ecosystem, you got to tie up the whole flow of cash and all that. In absolute terms, our CA itself is growing by about last year, CA Group, what percentage amount to? CA is growing at about 15-20%. I'll just give the exact. As we speak, I will try to retrieve the number for you. The short answer is that we also are building a very good CA franchise.
We've developed a really good—it may not have caught your attention. We keep talking of loans and all that. It may not have caught your attention. In the cash management business, we built a really good franchise. We have current account deposits of something like about INR 4,500 crore that we built. We are really tech ahead on that. Any clients who are using our cash management services are now beginning to talk about it. That is a very good way of building our current account franchise. We're building that.
Got it. Got it. Okay. That's it from my end. Just one humble request would be if we could move our results from Saturdays to a weekday. I mean, most of the—none of the large global banks anyway keep results on weekends. On weekdays, you'll also get a lot of foreign investors dialing in.
How does it help, actually? Just help us understand, 10 seconds only. How does it help if you move it to a working day?
I mean, firstly, most people are sell-side analysts, buy-side analysts, etc., are not working on weekends. The second thing is that I am pretty sure most of the foreign clients based out of London, US, etc., would not be dialing in and would rely on a third-party service like a sell-side note rather than dialing in live, right? I think we will try. That is right. We will try next time onwards. Maybe we can—I will talk to Sudhanshu. Maybe we will try for Fridays or something. That would be really helpful.
Yes, please. Yeah. We will try for Fridays because we would like to have a non-trading day so that we can be more confident about our data and all that stuff. We will try for Fridays. Thanks for the thought.
Yeah. That's true. That's true. I mean, if you can, that would be great. I'm sure you'll find a way to protect the data. No, it's a good input.
No, thanks. Really, really thank you for that.
Payroll, this is the data point that you had asked. CA has grown by about 21-22% on a year-over-year basis. As Vazir said, of course, our endeavor would be to take up this growth or increase the CA proportion in the total mix.
Okay. The ballpark time frame for this would be like 7-8% to, what, 10% in two-three years? We haven't really thought that. I mean, we think about CA all the time, but we haven't put a number to it. Maybe we'll have a better thought. We'll give a more thoughtful answer next time.
Okay. Sure. Sure. That helps.
That's it from my end. Thank you and wish you all the best.
Thank you. Thank you.
Thank you. We'll take the next question from the line of Maaruk Adajania from Nomura. Please go ahead.
Yeah. Good evening. Congratulations on your capital raise. I had a few questions. Firstly, what would be the maturity or average duration of your term deposit? It's 13-15 for most. What would it be for you?
Yeah. It would be a similar range for us, Maaruk.
It will be 13-15. Okay. Okay. What would be—what is the—would you be able to share any proportion between your low value and high value savings? Say below INR 1,000,000, what would be the savings? And above, how much? Roughly any proportion?
Maybe we'll keep some numbers out shared for you something next time.
We're not prepared for that. We're not prepared with the question or data for that question.
Okay. Perfect. Also, just on MFI, how has the April collection efficiency turned out?
I think March, as we have reported, we have seen much improved numbers. That statistic continues in April.
Okay. April also remains good.
Yeah. We can share the numbers also. Just give me a second. Yeah. Maybe I'll talk it out. Collection efficiency, as we would have noted, it was 99.2% for March month. Ex-Karnataka is at 99.4%. We have seen a good rebound in the last, I would say, a month or so. The same trajectory is broadly holding up in April. At 99.4%, it takes us back to what it was in Q4 of 2024. Let's just say it's normalizing. It's getting closer.
After the scare it has given us, we never want to call the end of the problem till it's behind. I read out the SMA numbers to you earlier. SMA zero number, I read out SMA one and two numbers to you. In absolute terms, it is dipping.
Got it. I have a broad question on OPEX. Of course, you gave many details on this and the last few calls. OPEX now will be a key lever of ROA. Going ahead, credit card will be the key driver, right? It's not as if you would be cutting commissions or cutting other OPEX in other loan segments, right? Because that will be very volatile, right? You may have to increase it if competition rises in a loan product. It will largely hinge on credit cards, correct? Is that the correct takeaway?
No, no.
Credit card is one of the business lines. If your question is, how are we going to cut this kind of cost? Is that your question? Because we are talking of regressive card.
You are thinking about a 12-13% growth in OPEX over the next two years, year over year? Yeah. The problem is that you may be able to control it in the short term, right? If competition rises, then you may have to incur more OPEX because of the segments you operate in. How sustainable is this? How confident are you that this is going to be achieved? Of course, you have shown a good reduction in OPEX growth over the last two quarters, no doubt. Going ahead, how confident are you of 12-13%?
See, the best proof is the proof of delivery.
Four quarters ago, five quarters ago, we told you in one of these calls, you meaning not to your question, but one of the analysts, we had mentioned clearly that we will bring down costs because people were worried that our cost was growing at 27%, 28%. That was a phase that the bank was growing and all that. The best proof of delivery, we brought down, as I read out the numbers to you, that how it has come down from 20s to the 12 now. Next year, again, 12-13, we talked about it. We really are serious about it. We are working on it. If your question is that how will you deliver this kind of low OPEX growth and still grow the book, if that is your question, let me just say how we are going about it.
There are two ways we're going about it, Maaruk. One is that there is a set of operational cost cuts that are going on. Operational cost cut is something that Sudhanshu drives personally, meaning under his leadership, he has a dedicated team which is meant for cutting costs. They look at item after item in the organization, what the size of the SMS is going out, can we reduce it to two SMSs and one, people can plan travel early, plan four days in advance rather than booking on the fly, those kind of things. There are long lists of OPEX for the bank. They keep cutting one by one by one, and they keep getting some realization of benefits. We do get some INR 150 crore of cost cuts through that process every year. The second way how we do this is by transformational projects at the bank.
I'll give you an example of that if that helps you. The two of them put together make the full story. For the example, the second one is supposing we are getting calls at the call center. We were getting 1.1 million calls. Now, when we said that, "Listen, the customer base is going up by 20%, now 1.1 million calls will become 1.3 million, become 1.5 million, become 1.8 million, this way the bank will forever keep expanding." We ran some transformation projects, looking at every reason why customers are calling us, then messaging them that information upfront so that you do not call us, or figuring out some cultural, etc., etc. We brought down calls from 1.1 million calls to 800,000 calls when the customer base went up by 20%.
When you cut calls at 300,000 calls a month, straight away that number of lesser employees, less number of space, less number of premises. These are transformations. Similarly, if you centralize an entire activity, if you introduce robotic process automations, if you introduce bots that speak to customers rather than human beings calling customers, call centers calling collection agents calling customers. In many cases, bots are calling customers and collecting money by just sending a UPI link. These are transformational projects. We do both of these to cut cost. We are not doing something that is cutting the muscle of the bank and we are going to suffer in the long run. We do not do those kind of things. We are building a bank for the long run. We never do things which are unhealthy for the bank.
Got it. Thanks a lot.
I had just two data keeping questions. In case you can share the full year MFI pitch, that would be great.
The full year MFI, sorry? The MFI?
Slippage. Slippage. Sorry.
Find out Sudhanshu's account. Maaruk will give you that number offline.
Okay. Thanks for the call.
We called out the credit cost. End of the day, just think of slippage.
Y eah. 10 and a half. Yes.
Yeah. We would call that to you. That is the most straightforward number we can call out to you. We think next year it will come down. I mean, not think. We reasonably certainly come down.
Okay. Perfect. Thank you.
Thank you. Ladies and gentlemen, we will take this as a last question for today, which is from the line of Jay Mundra from ICICI Securities. Please go ahead.
Yeah. Hi. Good evening, sir. Thank you for the opportunity.
I have a few questions, sir. First is the MFI proportion, where do you think it should settle? I mean, of course, it has been reducing. At the same time, we have also increased the proportion of CVSMU. Where do you think it should be settling as a percentage of overall loans? We expect it to further come down because overall loan growth, we are talking of 20%. Given that the industry is still going through, I would say, some pain or still settling down, we feel that the MFI proportion may come down to about 3-3.5% into the next year. We are very cautiously monitoring this portfolio.
Sure. Sudhanshu, if you would have the proportion of fixed rate book and floating rate loan book, just a ballpark number will also do.
Yeah.
We have about 61% of the book which is fixed rate. We see 39% is floating. Within that 39%, about 30% is linked to repo. The rest is linked to MCLR, TBIZ, and so on.
Sure. Sir, in your opening, I mean, one of the questions you answered that consumer loan, the uptake in 30 BPD plus marginal is only 8 basis points. Anyways, the broader trend is improving. If you combine this with the loan growth in this segment, the loan growth has been moderating. QOQ growth has come down even sharper. Is there anything to read? I mean, you have tightened the underwriting here. That is why the growth is low and the uptake is more visible. Even it is also, I mean, how to think on this? It's marginal.
I mean, if you see the trend line, it's come to 4-5 basis points every quarter will go up and down. But they're all marginal things. The important thing to see the trend, every product, if you take mortgage, like about 40-45 basis points you see, it's the SMA one and two. Every other product, vehicles, MSME, consumer, credit cards, okay, let me take credit cards separately. The vehicles, MSME, consumer, they're all like 1%. Stable. Quarter after quarter after quarter. So we're feeling comfortable about all these things. We only have to watch out. We should watch out more and more carefully for the environment. What happened to Karnataka? Whether it should happen to any other state? What is the impact of that on the book?
How should our strategy be with regard to lending to the state at all if it becomes more difficult to lend to those markets? These are things we have to constantly watch out for. We will play as it comes. Excluding MFI, other businesses of the bank are all doing very well. I mean, they were always well, to be honest. Like we said, 14, 15 years has never bothered us. It is still not bothering us.
Right. Sir, the fee growth, if I look at fee growth XY, that is slightly negligent, 6-7%.
Mr. Mundra, I am sorry, sir, your voice broke. Can you please repeat your question? Or maybe use your hands if—
Sir, talking about growth, we had said that we put together growth at 14 and a half. It is tracking that line. Combined is also tracking that line.
Within that, the core fee growth seems to be lagging in single digit. I mean, any reason? This 14-14.5% trajectory, there is no change in that. Sorry, we could not hear you that clearly. Yeah. If you see fee to total assets for the full year, that is at 2.09%, right? It is quite healthy in that sense. A quarter-on-quarter movement could be a function of the disbursements in a particular quarter and so on. We feel that we should be able to grow fees at around 14-15% even into the next year. Sure. Lastly, just an observation, sir. I mean, I tried to calculate the runoff rate for the non-operational deposit for the bank. It is straight 40% for the last multiple quarters.
I mean, it looks—would you gain anything based on these revised guidelines only because there is a change in the non-operational deposit runoff, I mean, cool-off, or that benefit is not there in the sense because the already runoff rate seems like 40% only? As I said, we have a small benefit which is coming off, for example, on trusts and so on, because runoff has been reduced from 100% to 40%. On the contrary, we also have an impact because of the runoff increasing on retail deposits where we have a higher proportion. There is some also impact coming on because of valuation of, I would say, government securities and so on. Combination of all of this, we would have a small impact, about 1-2% in the LCR issue. In value terms, it's quite manageable.
Sure. Last question, sir.
You had mentioned about 15% ROE as maybe first milestone. Would you have any timeline for maybe 1% ROE for that?
Thank you. We should be very careful with this. Yeah, at least we're trying for end of this year, right, Sudhanshu?
Yeah. We're trying to get there. Yeah. Try to get there by end of this year, fourth quarter. I use the word try to because it looks like we'll get there, but we'll always watch out carefully. Looks like, looks like. That's what we're shooting for. Can we conclude, friends? It's been a while. Maaruk, can I close the conversation?
Sure, sir. Thank you very much. Ladies and gentlemen
, wait, wait, wait, wait. Let me just give a closing comment. Thanks very much, everybody, for being with us on this Saturday evening.
I have to just say that I'll conclude by saying that we are truly building a long-term institution. The reason I say that is that we do request you to look through one or two quarters of this microfinance issue more because, of course, credit costs will come down quarter on quarter. Still, the PAT impact, you do not expect a Yoy growth on PAT, at least not in Q1. For Q2 onwards, hopefully, we should start delivering Yoy growth meaningfully. Secondly, I would say that, do look through one or two quarters. This is exactly what we requested even the investors who were incoming to told them that look through one or two quarters. We are building a long-term bank. That is one.
Two is that in building the long-term bank, while all of us are focused on ROE, ROE, which we are, but our true big focus is building a quality franchise, customer experience, customer friendliness, culture, brand, technology, system. Those things are under the radar. You can't see them. But they are actually contributing to building a long-term franchise. That is the way we think about it. We request you to just stay with us while we build this out. Surely, it is coming out. It's coming about and coming up and coming about. Yeah. Thanks very much. Good night, everybody. Thank you, everyone. Thank you.
Thank you very much, sir. Thank you. Ladies and gentlemen, on behalf of IDFC First Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.