Ladies and gentlemen, good day and Welcome to Bandhan Bank Q2 FY 2027 earning conference call. As a reminder, all participant line will be in the listen only mode and there will be an opportunity for you to ask question after the presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Mundhra. Thank you and over to you, sir.
Thank you, Danish. Good evening, everyone, and a very warm welcome to all of you. It is a pleasure to have you with us today as we discuss Bandhan Bank's business and financial performance for the quarter and half yearly ended September 2026. In today's call, we will take you through our business performance, key achievements, and challenges during the quarter. Joining us on the call today are Mr. Partha Pratim Sengupta, Managing Director and Chief Executive Officer, Mr. Rajender Kumar Babbar, Executive Director and Chief Business Officer, Mr. Ratan Kumar Kesh, Executive Director and Chief Operating Officer, Mr. Vinay Jain, Chief Financial Officer, myself, Vikash Mundhra, Head of Investor Relations, and other members of our senior management team. After the management's remarks, we will be happy to take your questions and provide any additional clarity on the quarter's performance and our outlook.
With that, I would now like to invite our Managing Director and CEO, Mr. Partha Pratim Sengupta, to share his thoughts on the bank's performance for the quarter. Over to you, sir.
Thank you, Vikash. Good evening, everyone, and thank you for joining us today. The second quarter of financial year 2027 reflects continued progress in strengthening the fundamentals of the bank. Our performance has been steadily progressing since September 2025, and we are seeing encouraging progress across several areas that are critical to building a stronger, more diversified, and sustainable franchise. During the quarter, we achieved another important milestone in our universal banking journey with the launch of our credit card business. Our four variants, Sparks, Ignite, Flare, and Lumina, have been designed to address the needs of different customer segments, from Gen Z and emerging affluent customers to frequent travelers and premium lifestyle consumers. We believe credit cards will further strengthen our overall customer proposition while creating opportunities to deepen relationships, enhance cross-sells, and derive greater value from our growing customer franchise over time.
During the quarter, our focus remained on maintaining healthy business growth, accelerating deposit mobilization, improving the composition of our loan portfolio, protecting asset quality, and steadily strengthening profitability. I am pleased to share that we have made meaningful progress across each of these priorities. As a result, during the quarter, we have seen significant improvement in our operating profit and PAT. On the asset side, our loan book reached approximately INR 1.5 lakh crores, representing a healthy 13% YoY growth. Growth continued to be led by our non-EEB business, which expanded by 20% YoY, providing greater diversification and multiple growth engines to the overall franchise. An encouraging development this quarter has been the stabilization of the EEB portfolio. Following the moderation witnessed in the last few quarters, the de-growth in EEB has now been arrested.
While we continue to remain prudent in this segment, the underlying trends have improved, and we are hopeful that the portfolio should return to a healthy growth trajectory from here. Our journey towards building a more secured and diversified balance sheet also continues to progress well. The secured portfolio grew 18% YoY and now represents 57.3% of the total advances from 54.9% a year ago. This gradual transformation of our portfolio mix is helping us build a more balanced risk profile while retaining the core strengths of our franchise. Housing is another business where we expect to see an improvement from here. Over the last few quarters, we have undertaken significant changes in this business, including verticalization of the structure and several other changes to strengthen execution. These transitions impacted growth and resulted in some near-term asset quality challenges.
However, with most of these changes behind us, we believe the business is better positioned for growth. Turning to liability, the progress during the quarter has been particularly encouraging. Total deposits increased to approximately INR 173,000 crore, with a strong 4.7% sequential growth without any support from the FCNR deposits. Importantly, this helped bring our net credit-deposit ratio down to 89.5% from around 92% in the previous quarter. Retail term deposits continue to demonstrate healthy momentum, growing by around 17% YoY without any significant contribution from the FCNR deposit mobilization. This gives us greater confidence in the underlying strength and sustainability of our retail deposit franchise. At the same time, I would also like to acknowledge that our performance in savings bank account during the quarter was below our expectations. We saw some balances move out following the recalibration of interest rates across certain savings bank buckets.
While this affected balances in the near term, our approach is very clear. We want to build a granular and sustainable savings account franchising anchored around deeper customer relationships, transactions, and engagement, rather than being disproportionately dependent on rate-sensitive deposits. We believe this is the right approach for strengthening the quality of our liability franchise over the medium term. To do so, we are working on several levers. Corporate salary accounts are an important opportunity, and our customer proposition is becoming broader with products such as credit cards. We are also strengthening our proposition for HNI and ultra HNI customers to specific product offerings. At the same time, our larger objective is to grow the mass banking customer base through granular acquisition and deepened relationships with our existing asset customers through cross-sell and strengthening digital platforms. We also witnessed an increase in bulk deposits during the quarter.
Let me clarify that this does not represent any change in our liability strategy. A significant portion of this incremental bulk deposit was raised at shorter tenures, primarily for liquidity management, while at the same time we reduced relatively higher cost borrowings. Our philosophy on bulk deposits therefore remains unchanged. We do not intend to use bulk funding as a structural source to drive loan growth. It will be used selectively for liquidity and balance sheet management, while our primary focus continues to be on building granular retail deposits. Coming to profitability, our performance during the quarter demonstrates the underlying resilience of the franchise. Despite changes in the deposit mix, increase in the secured advances mix, and moderation in savings bank account balances, NIMs remained broadly stable at 6.1%. Our overall asset quality position remains healthy, with gross NPA at 3.1% and net NPA at 0.9%.
Provision coverage, including technical write-offs, remains strong at approximately 87%. Credit cost also remained broadly stable sequentially at 1.8%. The progress we are making across the franchise is also becoming increasingly visible in our earnings performance. Net total income for Q2 FY 2027 stood at INR 3,665 crores, growing 17% YoY, while operating profit increased by a strong 19% YoY to INR 1,556 crores. Profit after tax for the quarter stood at INR 622 crores, which is 5.5 times YoY. More importantly, our return ratios showed meaningful improvement during the quarter, with ROA, ROE improving to 1.2% and 9.3%, respectively, versus 0.2% and 1.8% in Q2 FY 2026. While there is further ground to cover, the direction of movement gives us confidence that our efforts across business growth, balance sheet quality, and profitability are translating into better outcomes.
Our capital proposition continues to provide a strong foundation for our growth aspirations. Including profits, our capital adequacy ratio stood at 18.3%, with the tier one capital at 17.7%, providing adequate headroom to support future growth while maintaining a prudent capital buffer. Our physical distribution network also expanded further, as during the quarter, we added 13 new branches and 14 banking units, taking the total count to 2,001 branches and 4,414 banking units. Overall, I would characterize the second quarter as one of the balanced and steady progress quarter. Deposit mobilization has gathered momentum. Our net CD ratio has moderated. The EEB portfolio has stabilized. Diversification towards secured businesses continues. Asset quality remains under control, and profitability and return ratios have improved substantially. As we enter the second half of the financial year, our priorities remain clear.
We will continue to focus on accelerating granular deposit growth, rebuilding momentum in savings accounts, growing our business in a disciplined manner, maintaining asset quality, and improving operating efficiency. We also expect the actions taken across EEB and housing to increasingly contribute to the growth trajectory in the coming quarters. While the external operating environment continues to require careful monitoring, we remain focused on the factors within our control. Our objective is not merely to grow the balance sheet, but to improve the quality, resilience, and profitability of the franchise as we grow. The progress achieved during the first half of the year gives us confidence that we are moving in the right direction. We will remain disciplined in our execution, prudent in our risk management, and focused on building a stronger Bandhan Bank and creating sustainable long-term value for all our stakeholders.
With that, I would now like to hand over the call to our Interim Chief Financial Officer, Vinay Jain, who will take you through the financial performance and other key developments during the quarter in greater detail. Thank you.
Thank you, sir. Good evening, everyone. Let me take you through the financial and operating performance of the bank for the second quarter of financial year 2027. I will cover the key movements across advances and deposits, followed by asset quality and the P&L for the quarter and the first half. Starting with advances. As of September 30, 2026, our gross loan book stood at approximately INR 1.58 lakh crores, representing a growth of 13.1% year-on-year and 1.8% sequentially. The composition of growth continues to evolve in line with our portfolio strategy. The non-EEB book grew 19.8% year-on-year and now accounts for 66.7% of total advances, highlighting the significant diversification achieved across the franchise. The EEB portfolio stood at INR 52,616 crores. Importantly, after the moderation witnessed in the previous few quarters, the portfolio remained broadly stable sequentially and grew 1.7% year-on-year.
Growth across our diversified businesses remains strong. Retail assets grew 41.9% year-on-year, led by commercial vehicles, construction equipment, auto, and gold loans. Wholesale banking grew 31.6% year-on-year, supported by continued business momentum and continuing deepening of our client relationships. Today, the loan book is significantly more diversified, with multiple businesses contributing to growth. EEB group lending now constitutes 22% of advances, as well at 11%, wholesale banking 34%, housing finance 22%, and retail and other loans at 11%. This gives us a well-diversified platform to pursue growth across different customer segments. Moving to liabilities. Total deposits stood at approximately INR 1.73 lakh crores as of September 30th, 2026, registering a growth of 9.2% year-on-year and 4.7% sequentially. Our core retail franchise continued to expand. Retail deposits comprising CASA and retail term deposits grew 11.9% year-on-year, continuing to grow faster than overall deposits.
Retail term deposits remain the principal driver, growing 16.8% year-on-year. Overall retail deposits constitute 72.7% of our deposit base, with our focus continuing to strengthening the granular and sustainable components of the liability franchise. Our balances stood at INR 46,132 crores, growing 4.3% year-on-year, with CASA ratio at 26.7%. During the quarter, we consciously recalibrated rates across certain savings account buckets, which resulted in a runoff of some higher cost rate-sensitive balances. As a result, period-end saving balances moderated sequentially. On the other hand, current account performance was strong, with period-end balances growing 36.9% year-on-year and 18.2% sequentially. Bulk deposit increased at approximately INR 4,300 crores sequentially or around 10%. However, this movement should be viewed together with reduction in borrowings. During the same period, borrowing declined approximately INR 3,400 crores or 25% sequentially, as we substituted relatively high-cost borrowings with shorter tenure bulk deposits.
As MD sir mentioned, this was primarily our liquidity and funding cost management exercise rather than a change in our longer-term liability strategy. Moving to collections and asset quality, we saw encouraging trends across several underlying indicators during the quarter. Bank level collection efficiency, excluding the NPAs, remained healthy at 99.4% for Q2 FY 2027, improving 36 basis points quarter-on-quarter.
More importantly, collection performance within EEB strengthened meaningfully, with collection efficiency improving to 99.3% in Q2 from 98.9% in Q1 2027. Additional details on collection efficiency are available on slide 22 of the investor presentation. The improvement is also reflected in early delinquency indicators. The EEB DPD pool improved to 2.9% from 3.5% in the previous quarter, with the EEB DPD pool declining by approximately 17% sequentially to INR 1,529 crore versus INR 1,842 crore in Q1 FY 2027. Further details have been provided on slide 23 of the investor deck.
Gross slippages for the quarter stood at INR 1,125 crore compared to INR 1,079 crore in Q1, with EEB slippages at INR 655 crore. At the same time, resolution momentum strengthened. Recoveries and upgrades improved to INR 481 crore from INR 449 crore in Q1. After normalizing the INR 119 crore ARC recovery recorded in the previous quarter, net slippage is improved by approximately 14% sequentially, providing a better reflection of the underlying asset quality. Further, during the quarter, we also took write-offs of approximately INR 607 crore, of which INR 424 crore related to the EEB portfolio. Overall quality remains stable with gross NPA and net NPA at 3.1% and 0.9% respectively. Provision coverage ratio remains stable at 71.2%, increasing to 74.3%, including the provision against the SRs, providing a comfortable buffer against potential stress.
Let me now take you through the financial performance for the quarter, where we saw a healthy improvement across our three earning measures. Net interest income increased by 14.54% year-on-year and 1.4% sequentially to INR 2,960 crore, supported by growth in advances and a resilient margin profile. NIM remained broadly stable at 6.1% compared to 6.2% in Q1. This was despite the continued movement in our asset mix towards secured businesses and moderation in savings account balances. Non-interest income delivered healthy underlying momentum. Processing fee income grew by 30% year-on-year, supported by higher disbursement volumes in EEB book. Third-party distribution increased by 26% year-on-year, reflecting continued progress in cross-sell across our franchise. On expenses, operating costs in Q2 stood at INR 2,109 crore, an increase of 15.4% year-on-year.
Importantly, income growth and improved operating performance translated into operating profit of INR 1,556 crore, registering a strong 18.8% year-on-year and 14.6% sequentially. This improvement, combined with stable credit cost at 1.8%, translated into a strong increase in profitability. Profit after tax stood at INR 622 crore, increasing by 23.9% sequentially and 5.5 times year-on-year. The improvement in earnings is also visible in our return ratios. ROA increased to 1.2% from 1% in previous quarters, while ROE improved to 9.3% from 7.7%. These movements reflect the improving profitability trajectory of the bank as we progress through FY 2027. Let me briefly summarize the half yearly results. For first half of 2027, NII net total revenue and operating profit of INR 5,881 crore, INR 7,190 crore and INR 2,915 crore respectively. NIM operating expense to asset and credit cost was 6.2%, 4.2% and 1.8% respectively.
The bank reported a net profit of INR 1,123 crore in H1 2027, registering a growth of 132% year-on-year with an annualized ROA and ROE of 1.1% and 8.5% respectively. To summarize, Q2 was a quarter of healthy and increasingly balanced progress. Advances managed healthy growth. The portfolio mix continued to diversify. EEB collection and delinquency indicators improved. Retail deposits continued to expand, and our funding mix was actively managed. More importantly, this progress is translating into financial outcomes with double digit net interest income growth, stronger operating profit, stable underlying credit costs, and a meaningfully sequential improvement in both PAT and return ratios. Our balance sheet remains well capitalized and liquid, providing us adequate capacity to support the next phase of growth while maintaining financial discipline. With that, I will hand it back to the moderator, and we will be happy to take your questions.
Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question comes from the line of Ankit Bihani with Nomura. Please go ahead.
Thank you for the opportunity, and congrats on the quarter. My question, the first question is on cost of funds and margins. Following the SA rate cut, we have seen our CASA ratio decline 270 QoQ. Now with the CD rates are also rising, how much SA attrition do you expect from here, and how do you see cost of funds and margins through the second half of the year? The second is on the MFI growth. Our MFI book was flat QoQ, while peers are back to growth. Is this something deliberate, and when do you expect the growth to resume? We see that the disbursements have seen an uptick. The third question is on the Bancassurance. Post the draft regulations on the commission cap, what is our assessment? What kind of impact do we see happening?
The fourth one is on the ECL. If you could give the day one ECL impact, and the second is what it means for the credit cost or update going ahead. Those are my questions.
Yeah. On the CASA ground, let me tell you that, yes, ratio-wise, there has been a decline, a little bit of the. While our current account has grown, the savings bank has actually dipped. There are two effects. One is that the Annapurna Scheme, where we are the banker with Indel. That contributes around INR 4,000 crores almost every month. That came in the month of June last quarter, but this time it has come in the middle because of the puja and all these things for the day. Eventually that got drained out. That has affected the CASA a little bit to that extent. Nevertheless, let me tell you that we are focused on the growth of CASA, and the CASA can grow with our digital systems are much strengthened. We are working on it.
Our mBandhan app that has launched, we have already added some more features, and we are making some new products also for the Gen Z, for the affluent segment. The credit card has been launched, which will attract the corporate salary customers. All these steps are being taken, but we are quite hopeful definitely it will increase the CASA ratio for the year. The cost of funds, as you rightly said that, yes, whether the pressure on deposit cost will be there. As of now, we have not felt because the FCNR, while we were not there in the FCNR, and because our leverage facilities were not there. If you look at the entire banking industry for the day, most of the banks have achieved their deposit budgets, for which they are no more interested in the bulk deposit also for the year.
Till now, increase the rates, and we also don't expect that in the very short term that rates will get increased for the result. Cost of funds will continue to be moderated, and we are finding that, yes-
We are making some switch between the bulk deposits and our borrowing, mostly to manage the liquidity and balance sheet management. That will be continuing for the day, but overall, I think the margin pressure, what we envisaged at the beginning that it will between 6.1% - 6.2%, that will remain. We are hopeful that will remain. Regarding the MFI growth, I have told you in the last quarter also that we are prudent. We are not against the growth. We are growing. What you can really appreciate is the quality of assets in the MFI book for that year. The slippages have substantially come down. More so, I would say that the quality of the books, both in terms of the GNPAs, NNPAs, everything, have been improving. The recovery rates are improving.
Now, for the last few quarters, there has been only declining, or I would say a reduction in the book growth. This quarter, I can say that we have arrested. Going forward, Q3, Q4, despite all the effects that have been witnessed for the day, we are hopeful that we will be achieving our targeted growth of around 8% to 10%. The disbursements are almost going in that line only for the day. Bancassurance, let me tell you, the proposed changes definitely will create some headwinds, and that is applicable for all the banks, and Bandhan Bank, being a part of the industry, cannot be insulated from that. However, we believe that our business model is relatively well-positioned to navigate these changes.
Given that our insurance business is predominantly retail, and more so we are in the semi-urban and rural areas where the rate of commission is a little bit higher. It has been proposed to be at least 27, 20% higher, and also that we are on the consent-based commission. There is no credit linked insurance till now in our product. At the same time, we have got several levers available to us to meaningfully mitigate the impact over the time. These include our optimization of our product mix, deeper customer engagement, focusing on mutual funds, and along with further diversification of our fee income-based stream because of the wholesale banking is also witnessing a good and steady increase over the time.
We see good opportunities to scale areas such as these mutual funds, the cards, the Forex, and the trade finance, and hopefully we can compensate or we can actually mitigate a large part of the insurance income, the TPD income that will be definitely at a lower scale if this circular is implemented. Nevertheless, as the many insurance industries have represented, we have also given our feedback to the regulator that the cost of import of insurance need to be taken into account. Insurance is not an easy product like any other product to sell. It has got a substantial cost also to acquire the customer, and especially to avoid the misselling. A lot of technology, risk analysis, and every effort has to be made. This also need to be taken and should be compensated in the way of the income.
Let us see what it happens, but yes, we are aware of it and we are working on this. Hopefully, we will not have that much of impact on the entire income of the bank.
ECL data.
ECL impact.
ECL impact.
Ankit, on ECL, our transition impact, we have currently estimated at around INR 2,200 crores, which will go through the capital. It will not have any impact on our P&L. From a capital adequacy standpoint also, RBI has given a window of five years where we can amortize this impact. On a flow basis, our estimate is that our impact will be in the range of 15 - 20 basis points on a quarterly basis.
Okay. Just a follow-up on the bank's insurance income, a few banks have highlighted if the draft norms are implemented as it is, the hit to the Bancassurance could be in the range of 60% odd. Would that be a number to look for Bandhan Bank as well?
No. We have not made a very detailed study because you have to actually make a total product mix and the commission earned on the various products for that year. I think if at all the impact is there for the day, we are gearing it right from now for that year. We will be able to make it up.
Okay. Great. Thank you for answering my question.
Ankit, just one more clarification on ECL. This data that we are providing is based on the March 2026 flow rates. Depending on where the portfolio is in March 2027, this number will change, and we expect that this will be positive for us given the quality of the portfolio that is improving for us.
The DPD pool is coming down anyway.
The DPD pool, the SMA pool is coming down for the day, and so the eventual transition outcome we expect to be much better.
Okay, got it. Thank you.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Next question comes from the line of Jayant Kharote with Axis Capital. Please go ahead.
Hi. Sir, we are noticing fee growth, which is very strong. Is this all linked to the EEB disbursement growth that happened this quarter? Or correct timing to see the sustainability of this fee growth number that has picked up for now.
Yeah. So I think in all the areas, it is in the processing fee. It is not only the EEB disbursement, but disbursement in the retail and other products also, including the corporate books also for that year. The third-party product has also increased YoY around 26% for that year. I would say the quarterly also it has increased by 26%. So that is a good indication. The ERC related income, also YoY has increased by 16%. More so also the treasury income, that is the P&L investment on sales. That has also increased by around 39% quarter to quarter. So I can say that overall, considering everything into account, there has been a quite good impact and good improvement in all the parameters of the other income for that year.
Now we have added the credit card, so that will also give us a little bit of other income. Our new Forex products have also been launched for that year. The new wholesale products are also getting launched, so that will add up to the previous income. That's why we said that, okay, we may face some hit regarding the TPD, but that overall we will be able to compensate through the increase in this other income for the bank.
I'm reading that you're expecting this momentum to sustain the second half as well for processing fees as well. Second, loan growth. So cumulative 3% from the first half. How should we think about the second half? I know well, the growth is coming in. Specifically on the loan, sir, how should we think of the second half?
Yeah. We have made a total year of 14% target, which we have already said at the beginning of the year also for that year, and we will continue to maintain that. We are expecting that we will be able to achieve a growth around 14%.
For 14%, we will have to almost 36%.
Sorry to interrupt you, sir. But your voice is breaking. Can you please check your network? Thank you.
Sorry. For 14%, sir, that means implied growth is almost 6% plus or 6% continuously for the next two quarters. If deposit does not match up, the NIM can come under pressure. Just trying to understand if that is the strategy or I am missing something.
As I said, you see very clearly that we fix our loan growth first, and based on that, our deposit growth will be a little bit higher than the loan growth. That is what we targeted, everybody. To keep the deposit growth rate a little bit higher than the loan growth.
Fair, sir. Just to sum up, I know you have in the past given us a range of ROA. Given that first half is done and now we are looking at probably much better ROA this quarter, how should we think, again, not just one or two quarters, but next four to six quarters, how should the ROA play out if we are able to hold the credit cost?
No further guidance on ROA. That has already been explained in the Q1 for that year. The only thing what you need to see and appreciate is that, yes, we are on the right trajectory and the lower end, what we have said, that 1.20 has already been achieved during this quarter. We will work on to improve the ROA quarter by quarter, and that is our aim and that way we are strategic. There is no further change or no further commentaries on the ROA guidance.
And our medium-term aspiration continues to stay. That is what we had guided, that our medium-term guidance is between 1.6 - 1.8. That is what we are working on.
Perfect, sir. Congrats for a great set of results.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Next question come from the line of Jaiprakash Mundhra with ICICI Securities. Please go ahead.
Yeah. Hi, good evening, sir, and congratulations on a steady quarter. Sir, a couple of questions. Sir, first on SMA book that we show state-wise, West Bengal and rest of India. Assam has seen a little bit of an uptick. I believe there was some floods also during the last quarter. Is that so, or there is something else which is leading to slightly higher uptick in the SMA?
Let me tell you that the four districts were affected and our loan amount is INR 406 crores, which has been brought under moratorium as per the SLBC guideline, and for which we also have made an extra 5% provisions in that year. But let me tell you some perspective on the underlying portfolio quality. More than 96% of the moratorium book is standard as on date, and the balance around 4% only in the SMA zero category. I can say that entire 100% is quite a good portfolio. And importantly, the collection efficiency of this portfolio is also 99.1%, which was also immediately to the moratorium, this was the collection rate. There's been no deterioration in the collection efficiency also.
I can say that the underlying portfolio has been performing very well and before relief measures also, and after the relief measures are implemented, it is continuing to perform well. So no further I can say that there is any sign of stress on EEB in this portfolio.
Right. No, sir, once they become under moratorium or restructured, their DPD freezes, right? So I wanted to know why is there an uptick in the SMA for Assam.
Under various expression in the market.
Yes, sir. If anything we can.
No, sir. In Assam the moratorium effect is not there because what we see is, as sir explained, out of that whatever people have applied, 20% have already opted out. So there also the collection has come
SMA zero has increased in Assam. That is what
It increased from 1.8 to 1.3.
From 1.8.
1.8 - 1.3.
Into minus.
No, it is just because there was some disruption during that period because of the flood. In other districts also, it got temporarily affected. But other than that, our collection efficiency continues to be steady. So it is just a normal passing phase. Because four districts got impacted from moratorium. However, the other districts were also under the influence of flood for some time. So that is what impacted a bit. Otherwise, we should don't hear-
Overall collection business?
Yes, sir. Overall collection efficiency is steady.
Correct.
Okay.
Do you suspect that because of this flood and some disturbance, for overall EEB book as a whole, the slippages that we have seen, INR 65 crores, and also there is some drought in select part of India, select states, Maharashtra, AP, Karnataka. How should one think of slippages in EEB book in the next one to two quarters?
No. Let me tell you that Karnataka, we just have a 1% exposure of our EEB book of which-
Right
the 120 clusters which have been affected, the total exposure is less than 0.5%. It is not going to impact our portfolio. Maharashtra is 2.6% of the total books for that year, and the impacted portfolio is a part of that. That is also not going to impact for the year. Andhra Pradesh also, nothing sir. No major impact on this portfolio. Overall, as I told you see in the Q1 guidance also, the risk call, we have called on all these aspects, El Niño effect and the prudence that we are maintaining in the EEB book that is continuing. I can say today, assure that book quality is very good, and we don't expect any major shake in the quarter or major shock in books for the day. It will continue to perform well.
So sir, slippages ideally should improve, right? Or is this too early to say given whatever is happening on the climate and El Niño piece?
That is what I said. So our projected book of 8%-10%, we will definitely try to achieve it in Q3, Q4.
Okay, sure. Secondly, sir, on your vintage analysis data, this is very interesting, but it is rising only. All vintages in their respective trajectory. When does it actually plateau? It looks like the vintage shows that it goes up and only after maybe 18 months it starts to plateau. Is that how one should read it, or am I missing something?
Sir, explain.
Your loans are 18 months, right? It shows that they plateau out after 18 months. But if you look at the recent vintages which are there, if you compare the gradient.
Gradient.
The gradient is much lower. The MOB-wise, if you look at the data, the slippages in the recent vintages is significantly lower than what you see in the older vintages when they were originated. That is how you should look at that data, that the quality of the portfolio that is being onboarded now is much better than the quality of portfolio that came in the vintages of Q1 2025, Q2 2025.
Yes.
Understood. Okay. And, sir, on your ECL comment, I missed. The number you said is INR 2,200 crore on day one. Did I hear that correct?
Yeah. Yeah, that's right. That's our transition impact.
Right.
That is the transition impact.
As of March 2026 computation, subsequent to that, in the two quarters, the DPD pool has been improving. Therefore, the real effect will be significantly better than what we said, INR 2,200.
Given the significant improvement in the asset quality from March 2026.
The eventual transition effect will be much, much better.
All right.
In the June quarter.
Actually, sir, is this number revised upward? Maybe because earlier there was a draft guideline, and I think we had said around INR 1,200, INR 1,300 crores. Is that the like-to-like number or there is some change? Because if I look earlier, I think what we had said was around INR 1,200, INR 1,300 crore number. That has moved up to INR 2,200 crore. This is, of course, the final guidelines have come. But is this the like-to-like number, or you have taken something else?
No, there is no incremental thing that has happened. This guidance of INR 1,250 crores was given, I think, three or four quarters back when the initial numbers were computed. Yeah. Post that, we had called out that our overall impact will be close to about INR 2,000 crores.
2,000 crores. Yeah.
Understood.
This is only loan loss, right? This has nothing to do with the yield hardening, or does that include some ECL loss also?
No, this is only ECL. EIR is not included here. This is only ECL.
EIR impact will be not much because you see the tenure of our EEB loan is maximum 18 months. So EIR effectively not much affecting us.
All right. Understood. And sir, lastly on exit ROE, you said there is no further guidance, but the earlier guidance holds, right? Are you saying that there is no guidance at all?
For the Q4 ending, what guidance we gave, 1.2% to 1.4% range, that remains.
Right.
Beyond that, there is no guidance which we are giving at the moment, but our medium-term aspiration to reach 1.6% to 1.8% still holds. It is just the timing which we need to see.
Right. No, that is clear. And lastly, sir, on NIM, because there are multiple moving parts. Till last quarter, we were a little bit wary because of the elevated cost of funds, and I think that has cleared out in this quarter also. Now you have, I don't know, liquidity keeps on changing, but you have at least some tailwind from repo rate. So how should one think about and your EEB book has also started to grow. How should one look at the NIM for the next two quarters?
This quarter, the effect will not be there because you see, as per our policy, we implement the repo rate effect from the first date of the next quarter. October guidance and if any further guidance comes in December, that will be implemented from 1st January in respect of the existing loans. Yes, for the new loans that are getting sanctioned and disbursed, the new rates are applicable. I can say Q4, you will see a positive impact on the NIM, but that may come. We have to see the deposits also, cost, how does it trigger. But yes, definitely some tailwinds are there in the Q4 for that year. But Q3, I can say largely it will be unimpacted because of this repo change.
Right. And lastly, sir, if I can ask one more question on OpEx. Last quarter, we had said that OpEx may remain elevated because you need to invest in technology, et cetera. Last quarter, of course, there was some gradually related one-off, but if I look at YoY, the OpEx growth is 15%, which is broadly similar to AUM growth. How to look at OpEx growth? Will it be higher than-
OpEx, the guidance, I think the guidance at 4.2 OpEx to total assets remains. There is no change in that. Yes, Q1 made there has been a little bit increase for the year because the cost made for the year. This quarter, we made that we could, I say, cut it down because one of the major platforms or one of the major systems we have just replaced, and we have got a new system that has given a benefit of almost INR 50 crores. I think 12 and-
INR 12 crores per quarter
crores per quarter. 50 crores per year. That is the effect we have got this quarter. Our investment strategy continues to be as it is, and we are spending on the various technological innovations and other upgradations. Overall guidance at 4.2 we have given, that remains.
Sure, sir. All the very best, sir. Thank you so much, sir.
Thank you. Our next question comes from the line of Rahul Kumar with Vaikarya Fund. Please go ahead.
Yeah. Hi. Just one question on this PSLC cost. Where are we on that journey? I think last year we had, I think INR 240 crores of PSLC cost, and we had guided that we are going to reduce it through appropriate loans mix.
Yeah. You can see that there is no incremental cost of PSLC this quarter for that year. It remains at the same level for that year, and as we have said that our guidance remains the same. This year, the cost will substantially come down. Next year, it will be almost neutralized, will be almost zero. After that, we will be not getting PSLC. That is our midterm trajectory in the PSLC segment. We are almost right on that track.
Okay. Broadly, for FY 2027, how much reduction in this cost will happen?
That 30-
INR 120 crores will be our cost on a full year basis on PSLC.
31 crores per quarter, it is almost coming for it.
Okay. Understood. Second question, I think you initially mentioned that the NIMs will be in the trajectory of 6.1-6.2. What is the assumption of repo rate increase you have taken in this?
That is what I said that you see, for the current year, there will be not much impact. Only in the Q4 January onwards, the new repo rate will be applied to my existing account, which will be around 49% of my loan book for that year. That impact, we have to calculate. But definitely not major thing that will happen this year for that year. As regarding new loans that are getting disbursed, the new loans that are sanctioned, it is coming with the new repo rate. But as you can say that almost 50% of my loans are in the fixed rate, so that remains unimpacted.
Yeah. Understood. Thank you.
Thank you. Next question is from the line of M B Mahesh from Kotak Securities. Please go ahead.
Good evening, sir. Just a few data-gapping questions. One is on the NII side. From a yield perspective, where are you on this portfolio right now? And have you taken any rate actions even in this portfolio following the increase in the repo rate?
No, we have not increased the rates. Currently, we are around 21%. This portfolio is giving a 21.69%, the total loss of it.
Okay.
As of now.
And this book will not increase?
No increase in that. Yeah.
Book will not see an increase in it.
We increased the rates in February. The new origination rates were increased in the month of February at a-
After that, there is no increase.
Yes. After that, we have not increased anything. The current origination rate that we have is in the range of 23.5%-23.9%.
Okay. This question has been asked multiple times, but from a portfolio perspective, if there is a 25 basis points rate change, the transmission of 25 basis points will be what, 60%, 70% of that given the composition of the loan portfolio? Or is it a different number?
No. See, our variable portfolio, the market-linked portfolio is 50%, which is linked to repo. So 25 basis points transmission, once it happens, it will translate to what, 10 - 11 basis points-
7%
on our earnings.
The rest of the portfolio, it is dependent on whether you take action on the MFI.
Will not have any impact.
No, we are not taking any action. As of now, there's no plan to increase the rate on the MFI.
Perfect. Second one is on the employee headcount, which is now, it's been at about 75,000 kind of a mark. When do we see that kind of resulting in some more flattish costs on the employee expenses line as well? Because that is still growing at 20%.
One thing is that, you see the new Code on Wages has been implemented, so the effect of that continues and will continue this year also for the year. That is because, especially in the EEB segment, about most of the employees, we have to give them the wages as per the new Code on Wages. That is one of the major reasons for increase in the 20%. Actually, we are trying to increase the productivity per employee. If you look at my employee headcount, so it has been more or less stable at 35,000 for the year, over the last three quarters.
Should we just assume INR 1,300 crore-INR 1,400 crore as a normalized run rate right now? Or is this also going to increase as we go forward?
As of now, we don't expect this cost to go up further. So you can assume this to be at the same levels, at least till the fourth quarter of this year.
Yeah.
Okay. Last question. In the remarks that you mentioned earlier, you said Maharashtra is approximately 2% of the loan book, right? The total loan book.
No, EEB portfolio. EEB.
As said on the EEB book. That gets-
Maharashtra. Can you just reconfirm the numbers, please? Maharashtra is 2%, or is it a number higher than that?
It is 2.2% of the EEB portfolio, not the entire book.
2.6%. 2.6% of our EEB portfolio, that is INR 52,000.
Okay. So far, you have not seen any actions on the ground that worries you. Is that how you are looking at it?
Sorry, what was the question? Can you come again?
Are you seeing any worrisome reaction from the borrowers in some of these parts?
No. As of now, no. Because what they have said is they want us to implement the FPC, the Fair Practices Code on collection. That we anyway are doing.
We are anyway-
We are anyway following that. We do not see a major disruption in Maharashtra as of now. Although it is only in September and October they have come up with this. We will see if anything comes up.
Not much major impact.
Our takes are also less and impacted.
Okay.
Around 1 point.
Perfect. Thank you.
Thank you.
Next question comes from the line of Jignesh Shial with InCred Capital. Please go ahead.
Thank you for the opportunity. Just quickly on your non-interest incomes. We are seeing this processing fee and third-party income growing at somewhere 30% sequentially and 26% sequentially. Can you explain how is it happening to you, and this is growing at much faster pace compared to your own asset growth. Can you throw some light on this?
Yeah. The first thing is that you see our business last, if you just compare, it is a 30% growth YoY. The main reason is that you see last quarter also, it was a muted performance for the bank. We could only post a profit of INR 112 crore with a ROE of only a 0.20. From there we are steadily increasing, steadily growing up. As we grow steadily, there will be an increase in disbursement. As the disbursements are happening, the processing charges are being taken.
Understood.
And also in the EEB segment, February, the basic charges were increased by 25 basis points, that has also impacted positive.
Understood. This is directly linked to your disbursement growth. This similar kind of run rate is expected to continue during second half as well, correct?
Actually, will continue, yes.
Yeah. Okay.
Better run rate.
Better run rate. Understood. That is helpful. Secondly, just quickly on this assets portfolios, we are seeing the wholesale has been growing relatively at a faster pace, followed by other retail, compared to housing and EEB portfolio. If I see the overall mix, how will you be placed on fixed-
So, as I said that was our strategic decision. I think when I joined also in the first earning calls also we gave that we will not depend too much on the EEB segment because of the experiences that we had. We made a strategic decision that it should be secular. Our asset distribution today, we have already achieved it. It is 33% in ED, and 33% in wholesale, and 33% in retail and housing. That has been, and we want to maintain that. Again, I am telling you that the growth rate, yes, in order to achieve it, because the ED which was at a much higher percentage earlier for the day, it has now come down to 33%. That has been compensated by the growth in the wholesale banking also for that.
Going forward, we would like to have or maintain the same percentage in respect of the distribution of our assets.
Understood. And, mix between fixed and variable, and within variable, EBLR, MCLR, some just ballpark idea. Is it possible?
50% is fixed almost. 48% is fixed, 52% is variable, of which 49% is repo-linked and 3% is MCLR-linked.
Okay. That's really helpful. Thank you so much, and all the best.
Thank you. Next question comes from the line of Nitin Aggarwal with Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Hi. Thanks for the opportunity, and congrats on the results. Sir, again, a question on the wholesale book and while we have achieved the diversification goals with book now coming in a little higher than the EEB book also. But is that ROA dilutive also? If you can therefore touch upon how the ROA is in this book and likewise even in the retail book also. Yeah. Sorry.
Let me just tell you. One thing is that the ROA from the EEB has always been good and it is continuing at the same level. Whatever the improvement in the overall bank's ROA you are seeing is largely influenced that there is definitely an increasing ROA from the wholesale book. We are now more focusing on the fee-based income from this book. It is not only vanilla interest income, but it is more on the fee-based side for which various products are being launched. Going forward, I can say that the ROA from this particular segment will improve, and which will have a real positive impact on the overall ROA income of the bank. EEB book has been doing well in the past also, and it is continuing to do now also.
Right. On the similar lines, sir, on the retail side, with some of the products still being subscale with book size of 2,000-3,000 crore. Where are we on the profitability journey in terms of break-even points and the profitability?
ROA, you see, retail, we have started just two years back. Till now we are not ROA positive. But the amount of losses, that much I can say, the negative ROA is gradually reducing. Retail is a business, it depends on scale, and as we achieve that scale for the year, we will definitely see a retail positive also ROA. But the plus point is that we are now seeing quarter by quarter, the negative ROA which was there is gradually getting reduced. I think, say another two, three quarters, probably we will push retail also into the positive track zone, and going forward it will be only an increasing ROA. Overall, these two decisions, yes, it has taken some time, but these were strategically needed.
First of all, not depending on one segment, it affects into a lot of at risk when something, events like corona or something like happens. This decision is necessary because more so you are a universal bank, and you have to take the confidence from the depositors also. Now this strategy is definitely paying us dividends.
Right. Lastly, sir, on the ROA guidance, which we maintain for Q4. Now with 49% of portfolio being repo linked, do you think that there is a possibility that we may do better than that guidance as the portfolio benefits from the repricing?
I think I made it very clear there is no change as far as committee on the guidance, number one. Number two, I think Vinay and Vikash have told that our aspiration remains 1.60. So if something is better, then definitely we will be more nearer to our aspiration level.
Right. Got that, sir. Thank you so much.
Okay.
Thank you. Next question come from the line of Pritesh Bumb with Elara Securities. Please go ahead.
Hi, sir. Good evening. Sir, just a couple of questions. One is on deposit growth. We've lagged a bit on the deposit growth side, and now the industry also has a tailwind on FCNR, which I think we did not have that much. How do you think on the deposit growth side?
First of all, you see, this quarter actually it is very difficult to compare with the industry because industry got the advantage of the leverage of the FCNR which we did not have it. I can tell you, to be very frank, is that, we probably need to, as a percentage growth, we need to grow at a much faster rate that we do admit for that year. While our 10% growth, we are seeing it or we are witnessing it almost every quarter, YoY basis for that year. We are focusing on it, and we are focusing more on the digital aspect of the deposit. And we are taking some deposit strategies also to improve our CASA. I hope that this will pay the required results. Going forward in the coming quarters, definitely the growth will be better. This much I can say.
But expense is again on the retail, where I can say that the performance has been quite good. If you look at our balance sheet from years back or before that also, we were around 67%-68% in the retail. I think from there we have already reached 73%, so almost 6% growth on the retail. The focus will continue to be on the retail, while some of the good corporate deposits, if it at all comes and at an acceptable rate, definitely. As I have said in our earnings call also, that speech also, that we are not only depending on the interest rates anymore. Interest rates is not a way beyond our USP. It is more so the customer satisfaction in banking with Bandhan Bank. That's our aim. The processes will be more, I would say, seamless.
The time taken to execution of the service, that will be much faster, and deposits will be safe and secure. That is one note I can say, that in all the cyber crimes and all this cyber fraud, what you have been hearing for that year, we have made a very, very good improvement. At least nine states, as I can tell you that today, nine states have given me an appreciation letter for the work we have done in Bandhan Bank in curbing the cyber fraud. So that gives a lot of confidence to our customers and the depositors that, yes, their deposits are safe with Bandhan Bank. That will carry a message and definitely this will help us in the growth of the deposit. This is one of the areas where we are giving tremendous focus.
Sure, sir. Sir, second question was on your loan mix. I think, you did mention about 33-33-33 between wholesale, retail, and EEB. But within that, home loans has been particularly not that great of a growth. In a rising rate cycle, do you see that you can get some opportunities in terms of growth? Can that help?
Yes. Home loan is definitely, as I told you that there were some corrections that were needed. If you look at our home loan history, it is mainly because of acquisition of the Gruh Finance, so first. But as I told you that Gruh Finance was an NBFC, they were indebted to the lenders. We are a bank, we are indebted to our depositors. So the risk-taking capabilities or the risk mitigations, they cannot be same as in Gruh Finance and as in a bank for that year. But somehow or some other reason, anyway, those changes which were needed were made a little bit delayed. So I think last October onwards, we have tried to make those changes, and I think by April, May, the changes were made. So three, four major changes I can say.
First of all these HFC centers has been transformed into branches, and they have been brought under our branch banking with regular follow-ups, regular segregation of the duties, onboarding, underwriting, and operations that have been made. So all these changes, what have been made, yes, definitely it has led to some dislocation because changes need to be accepted with the time. As we all know that we have certainly, definitely adjusted to the changes also. But now I can say that these changes have definitely surfaced some of the things also which we need to get it corrected for that year. That also we have done it. So this has impacted the business. Let me admit to you, yes, home loans, we should have done much, much better. It has impacted the business till Q2. Probably one more quarter we have to see the impact.
Q4 onwards, definitely we will be on that trajectory and there will be a good growth in this segment for it.
Sure, sir. Lastly, you have given guidances on ROA. Appreciate that. Basically, just wanted to check what will drive that ROA. Will bulk of the improvement will come from provisioning improvement or OpEx or is there any scope for margin improvement as well?
The three we have clearly explained for the day. You see on the overall assets, we are expecting a 5.8%. That means the overall NIM, if it is, we can keep it around 6.1%-6.2%. That ROA on the overall assets will be around 5.8%. On the other income, where we are growing steadily and quite fast, that will be contributing around 1.5%. So the net total income will be contributing 7.3%. The operating expenses, as I told that it will continue to remain at 4.2% for that year. And that gives us our operating profit ROA at around 3.1%. The provisions, a little bit of improvement in the credit cost we are expecting. So currently from 1.8%, it may come down to 1.7%, and if it happens, the provisions ROA impact will be 1.2%.
So if you can take into all these factors, the PBT ROA will be around 1.9% and the PAT ROA will be 1.4%. So this is the outer guidance, what we have given. So we have given a range between 1.2% - 1.4%. So 1.2% we have already achieved. So this guidance is what we are now aiming at.
Thank you so much. Ladies and gentlemen, due to the time constraint, we will take the last question from Ankit Bihani with Nomura. Please go ahead.
Yeah. Thank you for the opportunity again. So my question is on the interest income side, where we have seen the other interest income see a decent jump. Is there any interest on IT refund in this line item?
No, nothing. No IT refund.
Okay. So yeah, that was it for me.
There is no extraordinary income in our interest income portfolio. There is no extraordinary or one-time income.
Okay, great. On the impact of the monsoon drought, what I understood correct, the geographies that are impacted currently, our exposure is quite limited there, so we do not see any impact, right?
It is very low.
Okay. Great. Okay. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.
Yes, thank you for joining the call. We appreciate your time, engagement, and valuable questions during the discussion. Thank you for your continued interest in Bandhan Bank, and we look forward to our ongoing interaction. Thank you so much.
Thank you so much, sir. Ladies and gentlemen, on behalf of Bandhan Bank Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your line.