note that this conference is being recorded. I now hand the conference over to Mr. Shaptarshiv Pappari, Head Investor Relations. Thank you and over to you, sir.
Thanks, Avida. Thanks, everyone, for joining this call on Saturday evening. Today, we have with us Mr. Lee Vadenathan, MD and CEO of the bank and Sudanshu Jain, our CFO. So we'll have a brief from Sudanshu first on the results, followed by comments from Debya.
So now after that, we will open the session for Q and A. So right now, I'll hand over the call to Sudanshu for his brief.
Yes. Thank you, Patarishi. First of all, good evening, everyone.
I also again thank everyone for joining on our lead evening on a Saturday. I'll try to touch upon the key financial numbers for the quarter. Maybe I'll start with balance sheet components and then move to asset quality, P and L, capital and liquidity in that order. I'll try to keep it brief. And let me start with balance sheet size.
That stood at about INR 3.6 lakh crores at June '25, sorry, and this grew at about 18% on a Y o Y basis. If we now see further components, then we continue to see a strong growth on the deposit front. Our customer deposit in fact crossed the 2.5 lakh crore milestone and was at INR 2.57 lakh crore at June. Similarly, retail deposits crossed INR 2 lakh crore mark. The growth in customer deposits was very strong at 26% on a Y o Y basis.
If we talk about the CASA ratio, that also improved sequentially and touched 48% at June. The Tata deposits in value terms grew strongly at about 30% on a Y o Y basis. Even on an average basis, we saw similar growth for Q1. Term deposits on the other hand was also grew strongly at 21% on a Y o Y basis. If we see term deposits, which is retail term deposits and Kapha deposits put together, they are now 85% of our customer deposits.
During the quarter, we added 14 more branches, and that takes the branch down to now INR $10.16. We also repaid high cost legacy borrowings of INR 2,600 odd crores in the current quarter. Happy to report that the residual stock is just now INR 2,200 crores and majority will mature in this year as well. We continue to bring down the credit to deposit ratio that is now down to 93.4% at June 25, which was at 98.1% in June. In fact, incremental CD ratio for last one year is at 75.8%.
At connected point, the cost of funds for the quarter was at 6.42% and this declined by about nine bps during the quarter. Similarly, cost of deposit for the quarter was at 6.37% and this declined marginally by one bp during the quarter. You would have noted that we have drastically reduced the peak CD rates in this quarter as compared to March. This would reflect by way of lower cost of funds with some lag in the entering quarters. On the asset side, the funded assets registered a strong growth of 21% on a Y o Y basis to reach INR 2.53 lakh crores.
Sequentially, the growth was about 4.7%. The growth in the asset segment was largely led by segments like mortgage, vehicles, business banking, working capital loans and wholesale book. If you go through the presentation, we have given a detailed breakup in Slide 40 of the presentation. Wholesale book grew at a faster pace at 39% on a Y o Y basis, and the growth was about 34% on an average basis at June on a Y o Y basis. Non fund book similarly grew by 25% on a Y o Y basis.
We have given some more color on the corporate funded and non funded book in Slide 38 of the presentation. Very briefly, about 77% of the corporate book is rated A and above and 19% is rated BBB. We continue to also scale up products like credit card, gold loan, education loan, which are increasing from a smaller base. We have now issued 3,800,000 credit cards that depends on the credit card was quite healthy and it grew by about 35% on a Y o Y basis. During the quarter, we also had a degrowth of 37% Y o Y on the microfinance business because of the challenges which we have been seeing around this sector.
MFI book is now at INR 8,354 crores and is at 3.3% undeducted book. I will talk about SMA collection efficiency and some of these parameters on MFI slightly later on. If I talk about asset quality, gross NPA of the bank increased marginally from 1.87% to 1.97% in June. Net NPA correspondingly increased from 0.53 in March to 0.55% for June. Excluding the microfinance book, GNPA ratio increase was from 1.63% in March to 1.7% in June at the bank level.
Provision coverage for the bank continues to be quite healthy at about 72.3%. This has in fact improved by about two ninety six points basis points on a Y o Y basis. If I talk about G and P in the retail, rural and the MSME segment, that stood at 1.82% and increased from 1.71.7% in March. Net NPA similarly increased to 0.66% and was higher by about four basis points from the previous quarter. Excluding microfinance, GNPA for retail, rural and MSME segment stood at 1.48 in the June.
The standard restructured book continues to come down. It is a very small component at about 0.7% of the funded assets, and we feel it adequately provided. If I talk about the SME one and two pool of retail, rural and MSME book at June, that improved from 1.07% in March to about 1.01%. The decline was largely because of reduction in SME one and two of the MFI book that came down from 5.1% to 2.64% in June. In absolute terms, MFI SME pool was at INR $3.15 crores at June 25 and this has declined by 60% post peaking out in December quarter.
We have also seen an improvement in collection efficiency for MFI during the quarter, which stood at 99 as against 98.1% in the previous quarter. On a prudent basis, we continue to hold the contingency provision of INR315 crores on the SMA book and hence no utilization was done during the current quarter. If I talk about gross slippage for the quarter, that increased sequentially by 14% from INR 2,175 crores in Q4 to INR 2,486 crores in current quarter. We have called out that this included about INR108 crores pertaining to one ATM service provider company, which has been recognized as NPA during the current quarter. We have also made 100% provision on this particular case.
The gross profit for MFI business decreased from INR $5.72 crores in Q4 to INR $5.14 crores in Q1. The SME pool as it has come down significantly and that's also reflected through lower SMA zero accretions, which we are seeing. We expect provisions to significantly come down in Q2 on the MFI front. Gross slippage ratio during the quarter excluding Microfinance stood at 3.54%, which was marginally higher than 3.35 business on an average in last four quarters put together. We expect this to improve from here on.
Moving on to profitability. Let me start with NII that grew at 5.1% on a Y o Y basis to INR 4,933 crore for Q1. Excluding MFI I'm excluding MFI because that book has been running has been coming down. Excluding MFI, NI grew by about 11.8% on a Y o Y basis. The net interest margin on AUM for the quarter moderated by 24 basis points to 5.71%.
And the decrease was, I would say, attributed to many components. Of course, there was a pass through of repo, which happened on the applicable book. There was there has been a decline in the microfinance business. At the same time, we have scaled up wholesale business. And also there was moderation in the investment yield as the rates came down.
This was offset to some extent by the reduction in the cost of funds. The decline in NIM, which I mentioned earlier at 24 bps, in fact, would be 17 bps if it is simply annualized NIM based on month for both Q4 and Q1. Moving on to fee and other income for the quarter, that increased by 8.5% on a Y o Y basis from INR $15.95 crores to INR $17.35 crores in Q1 of this year. The retail fee constitutes most of it and that is 91% of the total fees. Again, if we exclude MFI business, then NII fee and other income put together grew by about 12.2% for the quarter on a Y o Y basis.
We continue to moderate on the operating expenses front. For the quarter, the growth has moderated to 11% on a Y o Y basis. Sequentially, OpEx declined by 1.4% in value terms. Trading gains for the quarter was strong at INR 4.95 crores. We also did some participation in OMO during the quarter and the rest of the gains came because of the decrease in the overall system yields.
Operating profit, including trading gains grew at 19% for us during this quarter from INR $18.82 crores in Q1 to INR 2,239 crores in Q1 of 'twenty six. Core operating profit excluding trading gains improved by 7.8% sequentially to INR $17.44 crores. This was however lower by 6.2% as compared to Q1 of last year. Provision for the quarter stood at INR $16.59 crores as again INR $14.50 crores in Q4 of twenty five, and this was impacted by higher scripages, which I talked a moment ago. Credit score for the quarter, excluding microfinance, marginally went up to about 2% and this was 20 bps higher compared to about 1.8% which we saw for the full year of FY 'twenty five.
I would attribute some bit of an increase to the seasonality factors which kicks in, in Q1. We have reported a profit after tax of INR $4.63 crores. This grew sequentially by 52%. On a Y o Y basis, it decreased by 32%, I would say largely impacted by microfinance business and some increase in provisions in the other segments. Moving on quickly to capital adequacy.
Capital adequacy including profits for Q1 twenty six was at 15.01% and with a CET ratio of 12.8%, including the announced capital raise of INR 7,500 crores, CR, CR and Tier one would be 17.615.38% respectively, if completed on June 30 financial. We expect this fund raise to conclude in Q2 by and we expect all requisite approvals to come in by then. The LCR for the quarter was stable at 118%. This was marginally higher than the previous quarter. With this, I have broadly touched upon the numbers.
Maybe I'll hand over to Vaidya to give his opening remarks.
Hello, everyone. Good evening. Really nice speaking to all of you. Away from what Prudhanshu spoke about, I'll just read some key thoughts about how we think about how we're building the bank.
And that has a bearing, of course, in the long term, medium term and even short term, but more in the medium and the long. Let me just say that the way we think about it, capital is the foundation, is a foundation block. And really, even without capital, even the best of business models, even with good returns, good margins, good everything will go nowhere. So it's foundational. So in our bank, we have a strong capital.
We always capitalize ourselves ahead of time. We just don't want to go low on fuel or on foundation. And this time, as you know, we are with the INR 7,500 crores, that's around the corner. Our capital position is looking very strong. Number two, apart from capital, then we see deposits as a raw material.
If capital is foundation, there's a raw material. So good thing for IDFC Bank is that the capital deposit continues to come very strong. There's a slide somewhere in the presentation about how our cost of our margin we were paying, the premium rather, we were paying over the average cost of funds of the Indian banking system in 2020 and before was two eighty basis points. We are paying more than the banking system. Even in the last five years, we have brought it down to just 60 basis points.
So that's like a two twenty basis points reduction. So this our ability to grow deposits even after dropping the interest rate, I really think it's some sort of a some sort of special capability we have developed on this front, and it is raw material. And this raw material is what we are counting upon or this capability is what we're counting upon to be able to grow the bank, which is currently, say, about INR 2.5 lakh crores, someday to become INR 5 lakh crores, someday to become INR 10 lakh crores. And all within our foreseeable future is within our lifetimes and within our working time is what we can achieve, and all that can happen only with our deposits. So that's the second thing that we have.
The third thing is about what are we focusing upon, what am I focusing upon on a regular basis. Really, it's not about what we're going to post next quarter because if you build a fundamental model, which has a good economics, then the quarters and results will come well. It's only a matter of time. Today, our NIM is about like 5.6%. 5.7%.
5.7% and our fees are about 2%. So 5.7 plus two is 7.7. And our credit cost, we are guiding always, we keep saying two one two formula, meaning like percent loss NPA, 1% net NPA and 2% credit cost. So 2% credit cost actually translates about 1.3% on the credit provisions as a percentage of assets. So you take 7.7% and then you subtract 1.3%, you know you're sitting on a pretty good margin.
And it's only so as we'll discuss later, at our bank, we don't see except the microfinance issue that is there. Other than that, things are broadly holding fine. It's quite good actually, I'd say. Let me say that, therefore, if you're making 7.7% having 1.3% as the credit cost as a percentage of assets, then broadly in a strong economic profitability, the only cash here, which you should be concerned about and which you are, which we will answer later is cost income. So because moment cost income ratio comes right, then the whole stack is going to be very profitable.
So this is on the core economics. Then what else are we what I'm looking for at my end? The thing that is of bother to me is about what percentage of book is retailized. Are we what is that LCR retail percentage? What is our retail deposit coming from branches?
It's about 80% now, which we're feeling good about. What is the TCR, which was which is now touched about 72%, 73%, now we're comfortable there. What is the credit deposit ratio? These are macro parameters. Credit deposit ratio is now such 94 ish odd percent, which I'm pretty sure will come down to the 80 maybe early 90s by end of this year and certainly go into the 80s by next year.
And then we are as good as any other bank. It's taken us maybe seven years to get there from 130%, but we are definitely getting there. So the CD ratio becomes the next item to look at. Then how really good our digitalization is, is FX track strong, is FX track resilient, is FX track contemporary, are we having the latest architectures of being cloud native, microservices, API, etcetera? How good our UIUX is, I really focus a lot on that.
How empowered our people are, how our team structures is, if our expense ratio coming down as in the growth of expense year on year, if our liability loss is coming down, if as a percentage of the book, credit card losses are coming down, is the bureaucracy creeping in, how to keep cleaning our bureaucracy, how to get rid of old thinking or outdated thinking. Some people may have, but all this is maybe developed. These are kind of things and how structurally. So my mind is always, always, always on all structural things and core economics. And then once you build it on these foundations, then the things lies and then economics come.
And honestly, this is how I think about it. I've always told you to think about the banks from the long run point of view and building a universal bank. So these are kind of things that is there on my mind. I must just tell you that I run the bank like that and pushing this in the right direction or what I think the right direction. And because of this approach, then economics will fall in place, and it is falling in place.
Of course, this microfinance has disturbed the equation. We were going very strong. We were making a loss. We moved to 2,900 crores of VAT. Microfinance disturbed it.
I take full responsibility for But just let me say that it came our way. But barring that one incident, otherwise, like fourteen, fifteen years now, we've not given you talk. And therefore, all of you have been with us for a long period of time, we'll agree with that. Now that's how I think about it, the bank, universal bank, long term, long term, long term, and that's how we're building the bank. Now the next thing is about growth.
So as far as growth is concerned, if all of these things fall in place, then how does growth come? Let me I've said this before, but I'll just say this for context that India is a large market. We are a small player. And from INR 2.5 lakh crore, it's we can keep growing for a while. And let me just say that in 2010, if I just put back the history of two instances put together and take it combined, Our retail book in 2010 was as all of you know was like as good as zero, like INR900 crores sorry, INR94 crores.
It took us ten years to get to INR500000 crores. It took us three years to get from INR500000 crores to INR1 lakh crore. It took us three more years to get from 1 lakh crore to 2 lakh crore. And you see how things change. So that is another three years, I mean, now as in twenty twenty five, June.
So I'm talking about the retail, MSME, agri, rural, part of the machine. Now and I'm not saying that again in three years, it's going to double. I'm not making the statements to you. And that's we'll have to see the market and how it grows, etcetera. We have no market share numbers.
We have no such target. We just play according to the merit of the ball. But what I'm trying to say is that we play with discipline, things can grow over a period of time. Now the good thing is that this whole book has now come off of INR 2 lakh crores of the retail, rural, MSME, agri, that book. Now on that front, the asset quality is holding quite well.
I caveat the microfinance. Amit, I just want to just for a second, digest to just share with you that some people have raised their question at us saying that, hey, guys, why do people keep taking on microfinance? You're as responsible for it and you build it, not that someone has built it for you and something. I must say that, yes, it has happened certainly under my leadership to be very precise. And I'm 100% responsible for it.
So the reason why we flag microfinance is not because of of the fact that as if it's someone else's job. It is it is our job. The reason why we flag it is so that we can pinpoint where the issue is. So that's what it is. So let me just say that we take full responsibility for the whole book, including this piece and certainly this piece.
Now coming back to the point. So we coming back to the point about asset quality. So we say that you can see that, look, it's been like fifteen years. We've not given any shock in asset quality. Our growth in fee has always been two.
Net ten year has always been one. Our credit cost to cost, if you take a combined period for the whole period, it's always been around 2%. Even now around 2%, even now for this year also, we would take the guidance for 2%, I think, assumption, two or 2.25% or something like that. Yes, something around that. Something around that number.
And earlier, of course, we said as the year has been coming along, we've been touching it up a year or there, but nothing fundamentally. It's not like we moved it around by a material amount of basis points. So what I'm trying to say is that it's running at 2.2%, that is gross to net one and credit cost 2% for like fourteen, fifteen years now. In between, our capital position is higher also, it's like 2.3%, 2.4 at some point of time, but give or take in that zone. So that is that.
Last year, I'd say, probably second last because I want to cover P and L later. But staying on asset quality, the one important thing that we are doing, if you see the presentation put out, you'll find that we give really a lot of disclosure on asset quality since a long, long time. For example, we also share what is the extent of what is underwriting norm with which they're building the book, what is the basic fundamental philosophy of cash flow based lending and how we underwrite it. We're also sharing what is the check bond percentage. Then the next part of the funnel is if that's a mounting, what is the collection percentage out of the check bond.
We share that information. We share that trend for three years that are stretched every quarter. Then we say, okay, from collection percentage, whatever don't collect becomes SMA. So we share SMA percentage. Next, we share SMA by product.
Next, we share SMA by product by quarter. Then we show after SMA comes NPA, we share NPA. And then we show NPA by product. Then we show Vintage graph. The reason why we go to this level of debt is that there is complete clarity, there's complete transparency about every product in terms of asset quality and we show credit cost also.
So we don't hide our gross on net asset quality by writing of loans. We clearly show credit cost also. So all I'm trying to say is that we keep it very clean, crystal clear to you. And if you have doubts, of course, you can ask us even later in the call. Now finally, I would say that what is our short term view and so on and what's the and if you say short term meaning like what is the one quarter, two quarter view and what is the one year view and let me say what's a bit longer view than that.
When you take shorter term view, sort of say, right now, it's probably the it's things from outside because on one hand, the repo rates have come down, they pass it on to customers. 50 basis points have happened last quarter, we got to pass it on this quarter. So you can see that, that is an immediate hit to the income line. We have the Microfinance book has shrunk, so it shrunk by a good INR 5,000 crores. So that has shrunk the income line.
That's the other negative. The deposit rate, we have dropped sharply, but that, in fact, will come benefit will come longer term. But right now, it's not yet fully translated to the P and L. So that's still a negative. So it's all negative, negative, negative and on all these three fronts.
So but good thing is that all of these things will reverse because when you look one year ahead, you will have found that the entire fixed deposit of a bank would have got repriced materially. I think Sudhanshu shared some numbers with you and we have dropped it quite sharply. And that will so the cost of funds will come down naturally, structurally come down because of cutting fixed deposit rates so much. And then MSR will find its bottom finally. The repo rate is cut, is cut.
I mean, they already passed it on. So what I'm trying to say, you'll find a contra of all of these things playing out and what is looking very pinched today, when you're coming in three, four quarters or not, things will look better, obviously. So this is how structural is playing out. So the way we think about it is that we're building it for the long run. One quarter, two quarter, you have to I would request you to look it through even when we're discussing with the other private equity investors who are coming in, we were discussing with them five, six months ago.
I commented the same to you as to what I'm telling you same to them, what I'm telling you. I told them, listen. This is this is an issue coming up for two, three quarters because of reasons three reasons I told you. And I told you, please look through it. Just look through it because if you're investing for two years, three years, five years, you can look through or you should look through one or two quarters, but certainly, I'm not promising anything better than that in the short run.
But you wake up three quarters, four quarters now, hopefully, not hopefully, I think reasonable confidence will look things will look better. But one thing is that we are not going to give you credit shock. We are not giving you of course, we gave you one on microfinance. Do feel that I do regret that. But other than that, very long we haven't.
And we don't give you growth wise is coming. Deposit is growing. Governance shock, don't give you. We don't give you corporate governance shock. We don't give you disclosure shock.
We don't give any shock at all on all those fronts. Just sit you can sit peacefully to us and help us build a good, high quality, customer friendly, universal bank, in the league of the other, maybe three or four high quality banks out there and probably do stand among one of them as a good bank that you can be proud of, we can be proud of. So that's what I'm thinking about over and above what I was going to say. So that's about it.
Thanks, Vedya.
Abidat, I think we can now open the session for the q and a.
Thank you very much. We will now begin the question and answer session. Session. And The first question is from the line of Siswan Gao from Schwanfield.
Go ahead. Just on slide 52, thank you for giving the breakout of the maybe just wondering what is the max for max number on the other than MFI slippage in first quarter of FY twenty five. Other than MFI, the slippage is $19.72 crores, right?
So it's across the various product lines which we have.
We, of course, saw an increase of about INR $3.50 crores from the previous quarter, but I also mentioned that we had one corporate case, an ATM service provider company, which slipped into NPA during the current quarter. Rest of the slippage, I also said, is slightly attributable to seasonality. It sort of comes in, in Q1. So and it's across products, so it's difficult to sort of single out any particular product where we have seen this increase.
Okay.
And what's the what's the number for first quarter twenty five for the other the MFI signature?
That was 1,603.
No. That's fourth quarter twenty five.
Well, can't But for q one of last year q one of last year is what you're asking.
We'll just get that number. But But since then, I would say while we sort of receive that number, but since then, I would say the economic environment has also changed. So that may not be the right comparison. But whatever it is, if you can get it, it will Yes.
Got it. Thank you so much.
Thank you. The next question is from the line of Param Subramaniam from Investec India. Please go ahead.
Yeah. Hi. Thanks for the question. So firstly, on asset quality again. Right?
So if we see across product segments in this quarter, there is an increase from the NPA levels and also the SME levels that you've called out. So anything specific you want to highlight? You know, a large peer of your peers called out, you know, steps in MSME segment. So anything you want to highlight because the the delinquency levels seems to be up. Yeah.
No. So we have seen as I said, we have seen a general increase. Of course, we are watchful of certain segments. And so essentially, some part of stress could sort of be there in the rural segment in certain states. We are watchful of that.
But having said that, we are also seeing collection efficiency improvement in some of those states. So there is nothing which as such, which I want to single out or call out.
You mean Karnataka.
Yes, Karnataka. But it's a general increase.
I have also said that the slippage ratio, if you see for the current quarter, is only marginally up with what we saw in last four quarters of FY 'twenty five. So we are firstly not very concerned, but we continue to be thoughtful.
Okay. Your concern, say unsecured and SME because one of your, you know, peers have called out that there is rising delinquency here. And also in this quarter, I see higher, you know, delinquency in the credit card portfolio. So anything there?
Credit card, of course, it has been very range bound. Of course, we saw some increase during the quarter, but I would say that it has remained quite stable over a period of time. Even credit cost has been quite range bound.
To your other cost $1.03 $2.09.
On credit credit card, we moved to 1.76% last year.
Yes, the sequentially marginal increase, but it has come off from June. So to that extent, as I said, it is quite range bound. To your other question of unsecured MSME, of course, there we have seen credit cost, which is broadly similar to the overall credit cost, which we just quoted a while ago of about 2%. So we have seen some increase, but it's not material.
But clearly, it's probably in the lines of whatever we've been guiding in terms of credit cost, except for microfinance, of course, you point out. Other side, you can see the numbers. Of course, I mean, like H2, H1 all put together, like around 2% this year, what I guided for?
Yes. Yes.
So I'm saying, at an overall level, we should come at a credit cost of about 2%, 2.05%. This is broadly what we had guided earlier as well. And on unsecured and SME, as I said, we are also seeing a similar kind of a credit cost in Q1. So think of it like a little more this quarter, but coming down in Q3, Q4, stuff like that. I mean, in the sense that we are not seeing anything for us to call out that, oh my god, who is going become 2.5 or something like that?
I mean, I know a few other calls you heard as where people have raised issues to you and all that. We we haven't seen anything material like that to call out to you.
Okay. Thanks a lot. Really, Puri, just one last question.
So on margins, there are a lot of moving parts from here. Right? So, like, the enterprise coming down, there are actions we are taking on the funding cost side. So how to think about margins from this quarter also?
So we would see definitely some more impact coming into Q2 because of the rate transmission, which is yet to happen completely.
But as Vedya mentioned that down the line, we would also see benefits from SD reduction coming in. And that should reflect in cost of funds coming down more sharper in coming quarters. So we feel that by Q4, margin should broadly restore back to what we posted last quarter. And but only caveat there is there could be still some rate cuts, which could sort of kick in. So my comment is caveat to that extent.
But we are broadly hopeful that margins would, to a great extent, sort of restore that.
Yes, because we've got the fixed deposit rate quite sharply. You may have noticed it. So we were earlier paying 7.8%.
We were paying 7.9% to percent.
Some at the at the peak of the peak rate when when the when the money was tight, I think, in March or something. Yeah. And now we brought down to 6.75% as the peak rate. Yeah.
Which is almost a reduction of 115 basis points.
And in the one year, one day bucket, we brought it down to like almost as a big bank, plus 15 basis points or something like that. So let's think about it that we are just five years old, six years old, and we brought our rates down to the big banks league. So these things will help the bank actually.
Thanks a lot. Thanks, Rajya. Thanks for the answers. All the best.
Thank you.
Thank you.
The next question is from the line of Anand Dhama from MK Global. Please go ahead.
Hi. Thank you for the opportunity. My first question is on your capital raising. You raised them from the final call obviously the capital is yet to come. Any covenant changes which have happened in that?
And is there any risk that basically this capital, particularly from the investor side, not talking much about the regulator, but is there any risk that you see from the investor side that possibly this capital might not come or there could be a delay in that? Is there any risk that you see?
Well, we are not seeing anything at this point of time. Not at all.
Not at all. Okay.
Yeah.
Sure. And secondly, on your, you know, credit cost, so where do you see your overall credit cost settling for the full year? Secondly, your cost income ratio also has come down in this quarter to about 69%.
Obviously, business, there will be some growth which will actually picking picking basically during the year and because of recent ESA cost and possibly might go up. So where do you see your cost income ratio settling over next three quarters? And also, if you can give a guidance on the overall trade cost for FY '26.
As of trade cost, we discussed earlier I mean, this is mainly I I had a slight profit to run through, like, six two to two point o five, I think, for this year. On the call, we said 2.05.
That's the best guess as we can see today. And what is the first question?
Yes, cost income.
Cost income. No, no, the number of number you're seeing, 6.9%, is actually it has treasury income also into it.
So actually, if you strip it out, you'll find the cost income has gone up this quarter.
So No. It has marginally come down from 75.4% in Q4 to 73.8%. But still, it's higher. As we know that it's still impacted largely by the top line impact, which is sort of coming through.
But of course, on the operating expenses, we have been able to contain OpEx to a great extent.
See, once again, if you see the cost to income ratio, it does like it notes two components, cost and income. So on the cost on the income front is where we are seeing, as you can for the reasons we discussed, the composition change, micro brands going away, that this is a good high yield book and repo rate coming from passed on to customers, FDA is not passed on, etcetera. That is where income, which we believe will self correct over the next few quarters. But the cost as such, so in other words, income has got impacted, but the cost as such is coming down for the bank.
And you can see Y o Y growth for the bank is only 11%. So this is very good that the bank balance sheet is growing by 20%. And cost is going up by 10%. You can see that the bank is really or 11%, bank is doing some real work on cost front. And operating leverage is more than coming in.
And a lot of transformation are helping demand. So you can see that, that is why the cost income is kind of elevated, but I mean, of course, lesser than last quarter, but elevated. But it will come down. It will come down.
And just to add, Anand, while we are seeing this top line impact where NI and fee has just grown by 6% on a Y o Y basis, but because OpEx has grown at these levels, our core PFOP has improved sequentially by 7.8%, right?
This was declining for last two quarters, I would say. But at least we feel that we have been able to edit the decline, and this would continue to sort of inch up from here on quarter on quarter.
As for the treasury gains, I'm sorry, agree that basically it's one off, but I think that should continue during this year as well, right, as a defect will be coming off. And then once you are I think that's Pressure pressure, we can never be sure of the right now.
No.
No. Pressure, can never be sure of in life. You can generally speaking, how can nobody can ever be sure of pressure. Right? It's just like one of those things that happens to a life.
So then for full year, what's the cost income ratio that I mean, the core cost income ratio that you would look at in FY '26?
It's difficult to guide because there are too many moving parts. But but but by q four, definitely, as things improve, this should come down. But it's sort of difficult to pencil out a number as such. Because by that time, we know that we discussed earlier.
Right? The income should the margins should look better for the reasons we discussed, and cost is anyway, they keep it very tight. So, naturally, cost and commission by q four should start coming down.
That's very helpful. Thank you.
Thank you. The next question is from the line of Rohan Mandora from Securities. Please go ahead.
Good evening, Thanks for the opportunity. So I just want to understand on the slippages, the seasonality part, what will be the quantum of that in this quarter? Sir, we just called it up, right?
It's difficult to of course, it's difficult to quantify that, but that usually, I would say, some bit of seasonality comes in Q1 and then the collection efforts are slightly muted and so on, right, at the start of the year and so on. Typically, Q4 is a strong quarter in that sense.
So it's difficult to quantify seasonality as such, but we, of course, expect slippages to sort of come off from here on.
Sure. And while you alluded to the fact that the slippages increases overall for the cross segments of products, but any customer cohort or any category of customers where we are seeing an increase in slippages? Or is there that a certain customer has left where there are multiple linked accounts? Any any color around that?
Sir, nothing of that sort as such. But see, if you take out that ATM service provider, then the increase is about 200 crores for the quarter. Right? I think. And sequentially, if we take out that ATM services, it is about 9.5%.
So while it has increased, but we feel that it's not that kind of a bit. I mean, large increase which has come through, some bit of, of course, increase is there. But if you see from a slippage ratio point, right, which I mentioned earlier, right, that's quite stable, right, at about 3.5%, and that was a similar trend which we saw in last year.
Sure. And nothing even on the vintage analysis perspective, it's well across cohort?
No. Nothing nothing access to call out.
Sure. And sir, what was the outstanding ESS result?
Outstanding ESS result. We'll we'll just get that number.
Thank you.
Thank you. The next question is from the line of Himanshu Kaluja from Aditya Venas and Life AMC Limited. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Just few questions at my end, particularly on the OpEx front, given this year, we see most of the banks are showing improvement on the operating expenses growth because this is the one lever where banks can play around. Can you help me understand over the medium term, not in FY '26, but in FY 2728, how do you expect the operating expenses growth versus your advances growth?
And where do you cost income ratio to settle over the medium term? So that's my first question.
So, Himanshu, thanks for the question. So operating expenses, we will continue to sort of moderate, and it should in the range of about 11% to 12% that kind of growth in near term as well. And we have already guided on cost to income ratio of 65%, which we are targeting for FY 'twenty seven.
Our still hope and belief is that we should try to come in there. So we will try to ensure that we exercise diligence and proper controls around the operating expenses.
But some of the events are also changed since then. So just keep a word of caution there, Kancho, because it's microfinance. This the reformation meetings will happen.
Yeah.
So just keep an eye out on that. All of you also I mean, wants to also I would I say that he was. Keep an eye out on that. But we are at least attempting to go in the direction.
The thing to but to your very specific question about what we expect the OpEx growth this year, next year, year after that, at least internally, we may be thinking about it. If you remember, when we spoke about this last quarter or last quarter of year, quarter of before that also, we've guided that we expect this year to this year, I mean, 26% to be around 13%. Karsten Lansi, 12 to 13%.
That's we have guided.
I know.
But it looks like we're going to not go replay also. Like it looks like Q1 has been on 11%, unlikely we're going to so think of it like we're doing slightly better than what we must have guided before on the OpEx front. I don't mean cost income. OpEx, OpEx, because, like, like you said, it's in our hand. Now 2027, '28, at least the way we are thinking about building the bank, we think more like, like, 12% or so. So 13%, probably there.
So you do you you expect around 600 to 800 basis point is there where you can have the OpEx growth lower than the advances growth? Is that the right understanding?
That's how we are thinking about it. Yeah.
Yeah. Sure. So second is on the MSI Because if you go and go up by about the 1818%, and if OpEx grows by, say, 12%, 12%, I should say.
12 probably.
Yeah.
So that's how we're thinking about it. Yeah. I mean, what we're facing is twelve, thirteen, but we're trying to do 12, actually.
Sir, second question is on the NFI business. Probably given this NFI, the proportion of the mix, which is there probably has come down over the one year, and it may not go back to the earlier levels as well.
What is the given the given this is an implication on your overall margins, how do you how much of the permanent damage do you expect on the margin front? How one should see a more normalized because once this pass through of the report rate will happen and even on the deposit side as well, what is the pretty normalized margins one should expect going ahead? Thanks.
See, I I thought I'm not sure if we discussed during the call or not, but, like, 5.8 ish or so is what we expect Q4 to be, correct, Arun?
Yes.
Slightly higher, but only caveat, which I said, is also contingent on repo any more repo rate cuts, which will sort of come through.
So but for now, let us say, Q4, we're thinking like the 5.8 ish. Now next year will be next year, we'll have to see how it plays out. There's so many moving parts. But that's how we think about our business model.
That's why in the earlier example, right, at the opening part of the call, when I said when I'm trying to draw up the ROE three for the bank, I told you about 5.7% actually. I said 5.7% and then I said 2% for fees, that's a 7.7% and I said 1.3% credit cost. That was a stack speaking to you saying that that's how we're thinking about the bank. Now it all comes down to cost into ratio. But that we answered earlier that as we even play out, we think by Q4 should look better.
And just to add, and that's why we expect the pace of decline to sort of reduce because the book has already come off significantly. To that extent, the impact on NIM because of NFI should be slightly lower. Because we have have lot lot coming down there.
Yeah. But once this segment will normalize, will you will you start doing this piece again? What this piece again in FY twenty seven?
It's important question. Let me answer that. So, Rajya, now let me answer that. So the answer is yes, we want to grow it.
So this business, of course, after every eight years, seven years, it has its own cycle. Agree with that. The but with every cycle and every learning, next part of the cycle stretches out longer because people learn. In this case, our own thinking is that probably, probably the bottom out at about INR 7,000 INR 100 odd crores. It's currently about INR 8,000 INR 100 crores. Right, sir?
Yes.
Yes. Like there. And then from there on, whether industry growth will keep we'll probably keep in line with the industry.
Because, see, let me make it simple to you that this is a really good franchise we have built. It's a really, really good franchise. It's not just because this major incident happened in mind. I have no intention of shutting it down or closing it until that. It's a really good business.
We have people on the ground. We have built fantastic relationships, processes, technology, systems, reaching out the bottom of pyramid, weaker section financing, weaker section PSL, SMS, PSL, there are so many benefits. So you've got the way you think about it is that we got to do two things so that we protect ourselves. There are many benefits already told you. What we need is protection.
So protection is we take a CGM cover and then, you know, maybe have and and watch it very carefully.
Yeah. Sure. Sure. Thanks a lot.
Sir, just a suggestion, the way you have put in the disclosures around the asset quality, earlier in the earlier presentations in the previous quarter, you also used to disclose a lot on the cost side also, say, some of the segmental wise as well. If you can incorporate some of those because I think if I have glance it carefully, you have not put this the such disclosure this time on the OpEx front. If you can put it back, it would be very helpful.
No. No.
In fact, it is there. We have given cost income segment wise in the presentation. Maybe I'll just
from CLSA. Please go ahead.
Yeah. Hi, team. Thanks for taking my question and congrats on the quarter. I just had one question on repo pass through. So let's say the repo rate was cut on seventh or eighth June, when does that pass through happen on your EBSR book?
So that pass through to a great extent will happen in q two on on on the June cut. And I would say some bit of repo transmission for the earlier cut would also have an impact in q two.
No. No. Okay.
But does it happen, say, after three months or gradually within three months?
No. No. So I'm saying let me further clarify. So I'm saying, generally, say, a report is changed in a particular month.
There is a cycle. So if a customer loan will get reset once in three months. So it depends on when his last change happened. So that's how the transmission will happen through the quarter. So hence, we saw some bit of repo transmission of the February and April cuts in in q one.
And as I said, because of the three month criteria, some bit of spillover could happen into Q2. But June would essentially come largely in Q2. So that's how the repo transition will happen.
Okay. Okay.
So even the April transition transmission has not fully happened then because someone due date could have come, let's say, on fifteenth May. So for that guy, it's only for half the quarter, half of one. Is my understanding correct?
Yeah. So I'm saying someone whose last reset was in March would have completely got reset in q one.
Somebody where last reset was in April, a loan was taken in April, for him the transmission will happen into the next quarter. So it depends on the cycle when you have sort of availed the loan and that's as far as the existing loans are concerned. For the new loans, of course, that transmission would be immediate and depends from bank to bank in terms of how you want to sort of price the loans in terms of lending.
Understood. So then so, Suvanshu, then my question is now if we are 5.7% NIM, we want to go in the next three quarters to 5.8.
Obviously, two q will be lower. How much more do we need to cut our TD rates by to reach that?
No. No. We we we assume where we are currently.
So that alone is enough to go back to 5.8. Just the the deposit maturity pattern is enough to take us to 5.8.
It's not the thing because capital is also coming. No?
Oh, so so you're that the deposit okay. Okay. Fair enough. Yeah. Got it. Got it.
Okay. Yeah. That was it from my end. Thank you.
Thank you. The next question is from the line of Jay Sarote from Axis Capital. Please go ahead.
It is a more qualitative question on credit growth. Very few of the banks have been able to manage this growth in one q. I wanted to understand June, July trends and if there are any segments that you wanna call out that can drive the recovery from two q onwards. And also general credit environment, are you seeing any stress buildup in any segment which wasn't there in 4Q?
So we actually put out how this growth is coming.
So if you take a full one year Y o Y, you could see that INR22000 crores has come from business finance, which is basically wholesale banking loans, business banking, working capital, CVC, etcetera, etcetera. So that's INR22000 crores. And then INR5200 crores is coming from vehicle loans growth and INR8400 crores is coming from mortgages growth. Mortgage is basically home loans and loan in this property. So these are the three levers that have materially contributed to the growth because the total growth is INR44000 crores.
Out of INR44000 crores, we are explaining INR23000 plus INR5200 crores plus INR8400 I think that together, it will come to INR80 crores, if you do the math. So that's what it is. Now in terms of credit, I think Suraj answered it earlier, but I'll say it again, that broadly if you see SMA data of almost all products, they're all quoting like similar like what it was in the prior quarter. And you can see that also. So interest rate, one family of products, let me say, within every product family, say, MSME, there may be seven or eight products.
Within that, one product will be higher, one product may be low. For example, in consumer loans, there is also vehicle loan, consumer loan, education loan, credit card, gold loan, everything is there. Out of this, something may go up, something may come down. But broadly, broadly, all put together, like the zone we talked about, like the two ish or 2.05, which is not any materially different than what we said before. So it's 10 basis points there.
So that's what it is, actually. So I mean, they could be interest based on up and down, but we are not calling out anything specific to assume that there's a concern in that.
Sir, do you see increased competition? I mean, right now, the competition level could be lower than unsecured credit, for example. Do you see that returning in q two and q three?
Should that have any effect? Or, basically, I'm trying to understand what is not is it a demand issue? Is it a supply issue? Or or is it just everybody waiting till the bureau scores point to a better macro numbers?
No.
No. Let's let's get a get a question clear, if you don't mind. So are you trying to understand are you going about growth? Are you asking asset quality? Because I need to answer more precisely.
Yes. Actually, I'm trying to understand for unsecured credit. There are two players who have reported decent growth at scale, but most of the system still doesn't seem to be there. So we are trying to understand if it's still that asset quality comfort at the system level, not specific to to IDFC, but more from a system level because you would be seeing it in the competition levels that you face on the street.
Yes, yes.
So the if you of course, you know that some members have talked about higher credit cost and something here or there. But I already answered this question maybe a few times, and we are not seeing a material call out or as a call out on the credit quality front. Because asset quality is holding good. Gross NPL is still 1.95%, net is still, I think, point 56% or something. And then the credit costs are already publicly announced.
Already said the number is going to 2.05% or something like that. And maybe let's call it 2.5 just to be that is a close estimate at this point of time. So nothing material to call out. Now in terms of how we expect the how we are seeing in the market and so on and so forth, sometimes we should be careful when we see the market, and therefore, we should double and triple check our numbers. For example, the credit cards.
For many quarters now, some institutions have been pointing out some credit issue, but we are not seeing anything in credit cards, and we've been reporting our numbers publicly for the last many, many quarters. In fact, we specifically call out credit cards as a product, and we call out what is the gross net, etcetera. So we watch, but we should be confident about what we're doing also.
Understood. Thank you.
Thank you. The next question is from the line of Jay from ICLP Securities. Please go ahead.
Yeah. Hi. Good evening, sir. Sir, I mean, if we we you're giving the Kata number together, which is, like, 30% Y o Y growth. If you would have the number separately for car and car in rupees crores for this quarter and maybe Y o Y Q o Q also, just to get an understanding of the growth in car and car separately?
Jay, thanks for the question. So we are broadly getting a similar growth in car as well. But the car as a proportion is still smaller for us, right? And that's about 15% of the total charter. But of course, endeavor is to increase this Kapha proportion as we sort of go along.
If you see for players who have been there for long, this ratio is typically higher at about 25%, right, of Kapha or or Kapha as a percentage of total deposits, the ratio is more around 14%. For us, that ratio is around the seven and a half, 8% mark currently. So, Raj, so So we have work to do basically on the current account.
And actually, see, like we are lower, let's just say, on the car front as compared to the what it should be. But in the industry, generally speaking, building car is a harder car.
But we certainly have feel that we should because we are a good bank, tech is good, reach is good and so on and so forth, We believe that we should be able to get we're least trying to get to industry numbers.
Yeah. Sir, I was trying to understand the star movement in the last, let's say, one or two quarters. A lot of banks have got started drastically. Right?
And we are now have a significant advantage over peers in terms of user card rates. Has that flown in, you know, dramatically in the balances? Because that was not visible just by looking at the number in total. So that was the idea to understand, you know, of course, if we are, let us say, sacrificing a bit on cost, are we getting the throughput the desired throughput?
So I was asking think so.
Mean, I I do think because enterprise look our growth is very strong. So, see, in a as in management and anything, it's very difficult to see what is hitting right for somebody. It's a combination. It's a brand. It's a tech.
The UI, UX, it's a very, very good mobile app. If you don't have the bank account, it should really test out a mobile Our tech stack is very good. So the our public presence is in the sense is good. So there are so many things that are going where our culture is good, service levels are good. The service rate is also good.
So we it's very difficult for us to pick what is working for a bank, but something is working. The combo is working somewhere. So so in fact, we've got the FD rates. The reason why, why we cut FD rates more like sharply and meaningfully is that as and when we cut the let's say that one year goes forward goes ahead and our entire fixed deposit balances of, say, about a lakh of crores gets repriced downwards, okay, let's call it like 9,100 basis points. Can you imagine what a material benefit it will be for the bank in the subsequent years in 'twenty seven, 'twenty eight, 'twenty nine and 'thirty, I mean, assuming we can maintain this kind of rate?
So because it is a structural advantage. So that's how we think about cutting FD rate because we will see the benefit of it in subsequent years because it's structurally come down. Size is in our hands. We can cut it anytime we want. We just want to make sure that that there is enough money in the bank, that we pay off all our bonds.
We still have to pay 30,000 crores of bonds, not high cost, but we already finance everything. So we pay off everything with this money, and it's still cheaper than our many of the other borrowings.
Right. No, sir. I was just looking at the timing of if if if we want to cut star rate, then maybe this is the time.
Right? I mean, star rate by the peer banks has come down to historical low levels.
And the But high many of the peer banks have not cut the FD rates, our rates, see our rates. If you take one year, one they are like like in the zone of the big banks, other banks haven't cut it that way. So people have chosen to cut one or the other or moderately cut both.
We have sharply cut our fixed deposit. I mean it all comes back to the same thing. Contributes to cost of funds. But cutting edge is structurally cut it.
Right.
And then just on margins, right? So this quarter, let's say, we have a decent 65% fixed rate book where the impact would have been very smaller except for the mix change. And, you know, let's say, basis point yield compression has actually resulted in 25 basis point yield reduction. Right? Because there's not too much change in the cost of funding at all.
Right? Similar things could happen in q two. Right? The the remaining 50 basis point yield impact comes, and then there is no material change in the cost of deposit and maybe the similar earning outcome. Is that a decent mathematics?
Yes, yes, of course. I think you got it right. That's why we pointed out that next you could have a situation where we where you remember at the beginning, I pointed out that your Q1, Q2 will go through this phase where income will come down and cost of funds will not have come down proportionately. But we are mentally factored in because we're building looking ahead. And when we look Q3 or Q4, things will even out.
That's why we said this as Suranshi said earlier, like 2.850.8% heap expected clawback. But Q2, we expect our NIM to come down.
Right. And last question, sir. We are now a large bank.
Right? And one of the past one of the fastest growing. On the board side, just a small observation that we have one executive director, which resembles, you know, some of the small private banks, whereas the large private banks have, you know, multiple EDs. So when do you think we would hit that we would that that time would come when, you know, we may have more than one ED? Thank you.
Thank you. We'll think about it. We do think about these things at the board. So we'll think about this one also.
Thank you. The next question is from the line of Harsh Modi from JPMorgan. Please go ahead.
Hi, Ravi. Thanks for the call. Definitely, it seems like your asset quality is holding much better than peers on the delivered numbers. But is there any are there any early warning signs, let's say, three or six months from now, if we do end up getting some sort of weakness, what may be the possible areas where which could lead to slightly higher NPL stresses on your book?
So what would be a material number, Harsh, that you would worry about?
I'll answer the question accordingly. Would you say five basis points would bother you? Would you say 10 or 20? At what stage would you say that you should have called out?
Like, say, 50 bps.
How much?
Then the 50 bps then the five-zero?
Yes. No, no. We don't think there's anything that's moving the bottom like that for us.
Had you said five bps or 10 bps, would say, yeah, maybe some product can, for example, if you think of a rural market and you find that, okay, you got the MFI business. Now are there any other business that can give you a little more higher credit cost than the other? Yes, like I told you, 24% something will give more, something will give you less. So would you say can the numbers change the five basis points, 10 basis points? Yes, of course, we are running a bank, anything can happen.
But 50 basis points? No. No. No. We don't think like that at all.
I mean, that that is our we don't think we'll give you that kind of a surprise.
Right. So incremental is very limited, five, ten basis points. Because there is a bit of a diatomist here. We have multiple banks, NBSCs, big and small, saying that there are some degree of risk.
They're watching certain segments. We're gonna send me some CV, some microfinance is an ongoing issue. But your commentary seems to be reasonably sanguine. And, definitely, a lot of it has to do with your underwriting and the standard. But I'm just trying to figure if there is a risk three or six months down the line, which may be growing.
But as a market, we are not fully aware of No. I think it's for you.
No. I I generally believe your concern is a valid concern because if we give you a 50 bps shock, like tomorrow, if we came back to you end of the year and said, oh my god, it's not going to be 2% or two zero five, not going be two fifty five, right? I'm thankful to you that you gave me a number so that now I know what ballpark what is your benchmark of a material movement?
You call it 50. Now do we think any product of the bank will take us at loan? The answer is no. Do we expect our H2 to be in a credit cost average book? In fact, we think it be better than H1.
We think it's too like Q2 could be like probably in zone, Q1, Q2 could be probably similar, I'd say, in terms of give or take. But Q3, Q3, actually, we feel at this point of time that frankly, we've not gone very wrong with our numbers for the last many, many years. We model this all the time and keep projecting forward. We've not gone wrong in the past. Our own benchmark say that Q3, Q4 should only be better.
We don't expect it to like go the other way around. Your concern is can 210205 become 255? No, we don't think so. So we'll watch since I see that you are concerned. So we are seeing other people's numbers, other people's commentary.
We don't have those commentary to give because we are not seeing data to suggest anything like that.
Great. Thank you so much for that.
Yeah. Thank you.
Thank you. The next question is from the line of Vishal Biraja from Bandhani and C. Please go ahead.
Hi. Just a small thing, but, again, a GMC is on the home loan as well as lab. On a frequency basis has increased by about 14 to 15 bits. Could you give us a chance to why is this happening? How is it going up then?
Margin it's a marginal increase.
Home loan. Home Home loan, in fact, has come down. I I like to the the let's point to page 47. We want to see how it has gone up, where has it gone up actually. It's so pointing four is the gross NPA.
Yeah.
The point five two is the net NPA for home loans. Correct?
Yeah.
Yes. Yes. Exactly. So my question is from 70 bps to 84 bps on on a single Okay.
Okay. Or or even the last quarter to 70 bps.
Okay. Not on my sheets. I'm not able to compare. But, really, there's nothing to call out.
Also, maybe the book is probably slowing down. It's not we're not growing it that much. So think of it like that. But nothing like when we see nothing that should materially bother you in home loans. And anyway, home loans are the most stable thing.
It is not it doesn't it doesn't disturb us. Home is any stable. Right? No. Neither for us nor for anybody in the whole system, home is doing any trouble. They don't bother about it.
Fair enough. And my second question is on the MSME side. Is there a change in the pace of disbursement on the MSME front? I mean, I am assuming last year also largely indirectly the M and A financing.
So if you combine the both, is is there a change in pace of disbursement or anything that you can write? Because lot of banks and lot of industries have been highlighting some sort of stress or potential stress on the solution.
I know. We said this many times in the call that's come about. There are other people that seem to send the I mean, pointing out some concerns.
Well, we also want to be very, But we are not seeing any material slowdown or anything like that. But you see for our numbers, as I speak, Sapirshi points out to me that the overall business finance book, which has wholesale loans, wholesale loans has grown, but the rest of the book is muted only. Anyway, it's not growing dramatically, as you can see. If take quarter, you take a quarter, so you see March 25, the business financing book is 9,700 crores, the CVC is 7,500 crores and other MSNB long tail is 14,000. If you you can do the math offline, but basically, you can take these numbers together.
Then in June 25, it's 8,300 sorry, 332,000. If you add them up, give or take. Maybe just it's in flat.
Yeah.
It's in flat.
Fair enough. Thank you. Thank you, Raj.
Yeah. Yeah.
You. Ladies and gentlemen, due to time constraints, that was the last question of the day. I now hand the conference over to Mr. Vijay Nathal, MD and CEO, for closing comments.
Yeah. Thank you very much for staying up this this long and participating with us. I I want to just assure you that we'll be careful except microfinance. We don't have anything to particularly call out. Like I said, there are some 25 product lines, something will go, something will come down.
But broadly, give or take, we are in zone. We are in zone of where we said. We discussed many times, many callers ask these questions. I wanted to say that I would still say, so I think we're in zone. One of the callers specifically mentioned Harsh, I think, mentioned clearly what is the material moment, is that 50 basis points.
I want to assure you we are not thinking anything that line. If you heard it from anywhere else, maybe you can reflect closely, but we don't have anything to call out like that at all. Ten, fifteen basis points can always happen. We are running a business can happen always, but nothing particular we're talking about. We are like I said in the beginning, we are very focused on building a quality brand, quality bank, good journey, good system, good technology.
All these things will eventually play out in the way the bank will come about. So that's what it is. So look forward to seeing you next quarter and but look forward to material improvement from us, let me say, by Q4. Basically, that's when the whole or maybe Q3, Q4, that's when the economics change because of the funding cost changes by that time.
Yes. Thank you, everyone.
Thanks very much. Bye.
Thanks. Thanks, everyone, for joining. Thanks.
Thank you. That concludes this conference. Thank you for joining us, and you may now disconnect your line.