Ladies and gentlemen, good day and welcome to the CSB Bank Q1 FY 2026 Earnings Conference Call hosted by Yes Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please speak to the operator by pressing star 20 on your dashboard phone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Shivaji Thapliyal from Yes Securities. Thank you, and over to you, sir.
Thank you, Ms. Khan. Good evening and a warm welcome to all those who have joined the call. The CSB Bank management is represented by Mr. Pralay Mondal, Managing Director and CEO, Mr. D.K. Devakara, Executive Director, and Mr. Satish Gundewar, Chief Financial Officer. We specifically thank the management of CSB Bank for giving Yes Securities the opportunity to host their result call. The management will first be making some opening remarks, after which we will throw the floor open for questions. I now invite the management to make their opening remarks. Pralay, over to you.
Thank you, Shivaji, and thank you, everybody, for joining the Q1 FY 2026 call of CSB Bank. I will start with the global scenario and then get into CSB specifics. With the global trade being impacted by uncertainty of U.S. terms and tariffs in other countries, though U.S. has announced the new tariffs, individual countries are still negotiating, making the outcome uncertain. This uncertainty is getting reflected in currency, rates, and commodity prices. The U.K. and EU have cut rates while the U.S. Fed continues to hold on its rates. With weakening data in the U.S., it is likely that the Fed will cut rates further in the coming months. Global growth forecasts have been revised downward by measures for the first three months. India's growth has been steady over the quarter.
The series of liquidity measures taken and the rate cuts announced by RBI have brought the rates down on assets and liability both. Transmission has been good so far. Liquidity in the banking system has remained in surplus, supporting the financial stability. The inflation forecast has been revised lower. However, the projections for the next year are above 4%. The deposit and credit growth in the system is evenly balanced right now, with deposit growth on the rise and credit growth on the decline as compared to the previous year. The pattern has impacted the banking sector significantly. We expect the banking sector to stabilize soon, and the liquidity will remain comfortable. RBI may cut rates further in this fiscal year in the wake of uncertain trade negotiations in the U.S.
Now, coming to CSB specifics, on financials, the quarter run by will be recorded as one of the most exciting quarters in our SBI 2030 journey. In view of the challenges it's through, the efforts and dedication we put in what we achieved, I'm happy to share that all of us have successfully migrated to the new CBS Flexcube and rolled out 50 + account systems with 12 within the CBS system, which makes it a 66-account system without losing sight of the balance flows in the bank. It has been an extremely exciting quarter for us from our execution of this long-event transformation journey on the technology side, and all of us have been very, very busy focusing on this particular aspect this quarter because that's on this only that the future of the bank will be rebooted.
Coming to financials specifically, on profitability, net profit for Q1 stood at INR 119 crore, up by 5% year-on-year. Operating profit of the bank grew by 28% on a YoY basis and stood at INR 220 crore. Other income registered a robust growth of 42% on a YoY basis and constituted 19% of total income for Q1 FY 2026. Cost-to-income ratio was lower at 64.70% as on Q1 FY 2026, as against 67.69% a year back in Q1 FY 2025. Despite the interest rate transmission dynamics between advances and deposits in the following rate scenario, NIM could be maintained at 3.54%. We do not expect NIM to go down further from this level. ROA for the quarter ended Q1 FY 2026 stood at 1.03%.
As we know, our bank has a history of continuing to grow the ROAs through the quarters and peaks in the Q4 of the year, and this year also we'll see the same trend. The bank is holding the continuous deposit intact and is continuing with the escalated loan provisioning policy. On the liability side and the funding base, deposit growth momentum continues to be faster than the industry, grew by 20% YoY, and it's an industry growth of around 10%. CASA grew by 13% YoY, and the CASA ratio stands at 23.49%. We have sufficient liquidity buffers and are maintaining an LCR at comfortable levels. We have been efficiently managing the liquidity risk because in Q4 of last year, when liquidity was significantly negative, the bank took a call to manage the liquidity risk carefully.
As that risk is coming down, we now see our CD ratio at around 92%. Average LCR for the quarter has been around 123%. The NSFR ratio is around 120%. On the asset side of the business, net advances grew by 31% YoY, again significantly higher than industry growth of close to 10% YoY. All the verticals have started contributing towards asset growth, with gold, corporate, and SME portfolio registering YoY growth of above 30% at 36%, 32%, and 31% respectively. Retail loans other than gold grew by 19% despite a deliberate moderation on NAV, MFI, and other unsecured loans, and we have been doing it for the last 18 - 24 months. Yield on advances for Q1 FY 2026 is 10.73%. Regarding the asset quality metrics, GNPA and NNPA ratio for the quarter was at 1.84% and 0.66% respectively, as against 1.69% and 0.68% for Q1 FY 2025.
PCR now stands at 80.46% with PWO and 64.52% without PWO. The bank is holding a provisioning buffer of around INR 194 crore over and above regulatory requirements. Out of this, around INR 105 crore is continuous deposit. We have a robust capital base, CRAR of 21.71%, Tier 1 ratio of 19.92%. Low proportion of disclosed stressed assets compared to the industry, which is 4.4%. Shareholder valuation, the book value per share is at INR 258 right now. EPS for the year is INR 27.42. ROE for the year is 10.9%. Live ROE also progressively grows for us quarter on quarter, peaking in the fourth quarter, which again this quarter will be no exception. On distribution, we have a network of 834 branches now and 800 ATMs as on 3/6/25.
In conclusion, I would like to say that our top line, both deposits and advances, has shown strong YoY growth of 20% and 31% respectively. Compared to Q1 FY 2025, our CASA book grew by 13%. All the three asset verticals, which detail including gold loan, SME, and wholesale banking, grew by more than 30% over Q1 FY 2025. On the profitability, while our operating profit grew by 28% on a YoY basis, net profit increase was at 5% due to slightly higher CPAs and resulting closing. However, we have recovered a decent amount subsequently, and we have already recovered a fair bit already in this quarter in Q2 I'm in and expect portfolio quality to improve in this quarter too.
If I look back and review the journey we completed in Q1 FY 2026, I proudly say that the CSB team has done a remarkable job and truly thought span of time during balancing the tech transformation and growth. We have achieved what we have planned for in building the platform for future. We have built a solid foundation for scaling the bank in terms of business and customer experience as we go along. Given the complexities involved in such a massive project, it will take a couple of months more to fully stabilize everything. Once the systems are stable, we'll kickstart the scale phase with a lot of confidence as we'll be in a better position to serve our customers by providing innovative customized products, spreadsheet processors, seamless digital experience, higher operational efficiency, etc. We'll also be benefited at lower cost points and additional revenue streams.
Thus, we'll start the journey of becoming a respectable mid-size bank by 2030, and hopefully, we can execute to reach that mission ahead of our targeted timeline. As I have shown in the past, as a part of our SBI vision, our first spin phase and build phase is expected to get over by the beginning of FY 2027. The real scale phase and the most exciting part of the journey is when we start our FY 2027 beginning. FY 2027, FY 2028, FY 2029, FY 2030, these four years will take the bank to a completely different spectrum. I'm happy to report that based on the technology transformation journey we have done successfully and one of the best which our partners say they have seen, we are actually ahead of curve in terms of what we have planned and targeted.
The rebooting of the bank from our infrastructure capability, systems, processes, technology, people, and products will be complete, and our scale journey will begin starting FY 2027. All of us are excited for that journey. With that, I hand it back for questions. Thank you very much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and two. All participants are requested to use the home assist while asking a question. Please enter the internet and wait for a moment while the question queue is pending. The first question is from the line of Haresh Ghanani from Eastwind Investment Street. Go ahead.
Thank you all for the opportunity. This one is on the non-interest income. Essentially, the last four or five quarters, we have seen an eye-removing slide, and it is the non-interest income which is allowing us to do higher OpEx and still report the growth at the bottom line. However, for some odd reason, the disclosures on non-interest income story have been discontinued in FY 2025 itself. I would appreciate if that is available to the public in general. That was one. Two, within that, if you can add some color on a specific meeting fees and commission line, while in the past, you will get that large part of that is driven by insurance distribution income. Some color on the potential penetration that is still pending as we reach out to all the branches with the agility and skill set to sell insurance.
There is still some room left which can be helpful in FY 2026 in terms of growing the fee income. Lastly, on liquidity, while excess liquidity has come off sequentially, one would have imagined a little more reduction given that our loan book growth is quite heavy. Instead, on the liability, we see that other liabilities have gone up sharply. Some color on that would be helpful.
Go ahead. Last question, I didn't understand. What does it mean?
Essentially, you know when we met last time, the story was that we had a must-access liquidity in Q4 given the situation back then. Now that the liquidity situation has improved at system level, that would allow us opportunities to, you know, kind of normalize the excess liquidity, which will allow us to fund growth without really taking hit on the NIM. The reduction in excess liquidity is quite small. I think about INR 200 crore compared to a loan book which has sequentially grown by a larger extent. There appears to be the case where we are funded in loan growth by increasing liabilities. That, too, is coming not from borrowings or deposits, but there is a staff increase in other liabilities, which has crossed some INR 2,000 crore. I was just wondering what is leading to that increase.
Incrementally, you have hands on to what level liquidity can be pared down without really, you know, stepping into the 5% or 6% kind of liquidity we have usually mentioned.
Got it. Got it. I understood. Let me try to respond to some of these questions. On the NII, which is non-interest income and overall income, as you rightly said, when we met, I had said already that as a bank, we were not very focused on non-interest income in this bank around two, three years back. In the last two years, we have put conscious effort to put focus on non-interest income. It's just a matter of cycle that, including non-interest income and overall income, that other part, which is the interest income, has not been growing very well, which is part of the cycle. As we grow at such a rapid pace, there is some contraction of mean which you can see. As I said before, liquidity given where it was in the fourth quarter, we said that we'll not take any liquidity risk.
From that perspective, we did take excess funds, which ensured that we didn't know at that time that liquidity situation would change in the ecosystem. To that extent, we are carrying that cost through, which is to some extent impacting our mean to some extent. That is a correct estimate. Coming to non-interest income kind of a color, insurance income continues to do well. Generally, our PSLC income in the fourth quarter goes up a little bit, and then it normalizes first quarter onwards. Our core fee income, which is typically, if you look at it, if overall non-interest income is 19%, it generally varies between 17% - 19%. Last quarter was 21%, last quarter means Q4. Generally, it's somewhere around 17% - 19%. Core income is around 14% - 15%. We don't keep the PSLC in the core income.
That's why you will see that this quarter, our overall non-interest income has come down a little bit compared to Q4. Coming to your question that would it be sustainable, I think it is going to be more than sustainable because once we have given the technology transformation news to you, you know that next year onwards, we'll start scaling up our transaction banking business and our retail assets business, which are all fee-oriented businesses based on fees based on transactional fees and processing fees and many other fees. That will grow. Insurance is a function of penetration into customers. Next year onwards, we'll start building our customer base significantly because a huge amount of focus will be on customer acquisition. As more customers come in, penetration on a larger base will be higher. We will continue to do well in the insurance business.
We are going to implement after this PMS shared and supply chain systems. Immediately after that, as we're talking, we are working on that. All of that will help in the transaction banking business because we have built up a very good wholesale team and wholesale portfolio. The transaction banking business will also add to fees. I think as we grow the overall basic core book, our fee business will continue to grow, and there is no really one-off on that. We are sitting on a very large, given our size, fairly large asset book, and we didn't max it out this quarter because we know that yields will come down eventually through the year. From that perspective, you will continue to see non-interest income continuing to grow. On your second question, I have already answered on insurance, but we will continue to do well on insurance.
You will see that. On the liquidity question, I agree with you. What I said is also right. What you're saying, let me respond. If you look at our CD ratio this quarter, it has come to 91%. Generally, it was around 83%, 84% in that range, 84%, 85%, 86% in that range. One of the reasons exactly what you're saying we have done is we said that the liquidity risk in the system is lower, and hence, we must start efficiently using the liability better. That's why we said that, you know, with a limited risk on the liquidity side, we will use it better. That's why the CD ratio has gone up a little bit, but we'll bring it down to somewhere between 85% - 90%, but we'll somewhere in that place. Previously, my guidance was between 80% - 85%. Now my guidance is between 85% - 90%.
In that range, we'll keep it at that size of a balance sheet and with the liquidity comfort, which is there in the ecosystem. I've always said that our liability franchise is not yet to that level where we want it to be. That journey will start. We are waiting for the serious migration to happen. After this, the products will get implemented. Next year onward, you'll see the liability franchise growing at a very rapid pace. That will not only help our liability book, more importantly, you will have more customers who will acquire and build the businesses. That's why we are starting to build our retail assets, products, and more retail liability products, current account products, bank products, all these things which are building, CMS, all these things we are building to build that franchise. Till that happens, we are lucky we did depend on SCB borrowings.
We did depend on CDs. To that extent, that support will require for another one or two years while in parallel the liability franchise builds because you know that liability franchise takes two to three years to build. That's broadly what my response to your question was.
That's certainly helpful, sir. Just putting the same request that because the mix of non-interest income is disclosed like we used to do at FY 2024, that would only add to the wonderful plans that we have, and it will add to the confidence. I'll use it with our CFO on this. Okay. The last, I think one was the other liabilities. Is there anything to look into this number? You just didn't share it.
No, see, the other liability you're talking about is this we call INR 600 crore that we issued on 30th June. It is a transitionary barrier because the reconciliation happens after a one-day lag, and then it gets adjusted with our balance with RBI. It is not something which is of permanent nature. It is just a one-day thing, and the reconciliation then happens and it gets settled.
Okay. That's helpful. I hope you will share the disclosures on non-interest income on exchanges or on your website.
Okay. Thank you very much for your question, Haresh. Next, next.
Thank you, sir.
That's okay. Thank you.
Thank you. The next question is from the line of Mona from Garner Capital. Please go ahead.
Hi, can you hear me?
Hi, Mona.
Firstly, I missed your opening remark. Sorry if I'm repetitive. On the slippage base, INR 139 crore, what would be the quantum of unsecured loans out of this, if any? It's a CLCC and FI. Yeah.
I don't exactly remember that number, but broadly, I can tell you that our unsecured book overall is around 3% of the overall book. It's only more than INR 20, INR 25 crores. Satish is looking for that number. It is there, but as a percentage, it is high, but the book itself is 2%. It is not significant, but yes, it has increased. The three businesses, which are unsecured personal loan, the MFI, a little bit of a credit card, and AGRI and MFI, these businesses had a little bit of a slippage, which is around, I think, somewhere close to, I was right, somewhere around INR 25 crores -INR 30 crores. Our largest slippage, to address your question, has been in SMEs this quarter a little bit, and that's primarily due to three, four accounts.
Let me also say that what happened this quarter is because we were very busy on the migration, the availability—because you know that to manage the NPA and to understand everything, we need data every day—so with those data, it was taking a little time for us to complete the account calendary. By the time we got it, we didn't get enough time to manage the NPA well in SME business. As we talk, while SME business had a slightly larger slippage, one or two accounts with INR 25 crores, we have already recovered as we are talking today. There are two accounts where there were some challenges, somebody, the owner died, and something happened, etc., where the next generation is taking over the business. All these are good news in SME, as all these are fully secured, and this will not really go bad at any point of time.
As the business starts going back, this does not worry me. Through the year, this should be able to recover. Otherwise, I think, overall, there is not much of any exceptional slippage in any other portfolio. This has happened only in three or four accounts where already INR 25 crore has been upgraded. That's the answer to your question.
it fair to say that out of this INR 159 crore, INR 25 crore got upgraded so far already?
Yes. Yes.
Okay. Also, just on the unsecured base, is this partly led by a tentatively covered against Kumakri's assets, which is resulting in delayed recognition or something if I'm reading it right?
Which one?
On the unsecured loans, which is, I guess, CL and some of the MFI portfolios probably had some FMDB cover. Is it the delayed recognition coming because there was some cover initially, and now it's above that cover, which is why the recognition?
No, I don't think that is an issue. In general, what happens is FMDB is only in one business, which is in MFI. In no other business, we have FMDB. We have production efficiency-related incentives linked to that, so some costs will come down in case they cannot, but they're trying hard to get it right. Otherwise, if you look at it, we have been consistent in retail loans. If I look at it over the four quarters, five quarters actually, June 2024, September 2024, December, March, and June 2025, every quarter is between INR 23 crore - INR 27 crore. It's not that we have seen any major escalation happening currently. Also, AGRI and MFI have also been more or less similar across the last three quarters. There is absolutely no aberration in any other quarter.
If you look at it, our slippage in June 2024 was INR 103 crore, and now it is INR 136 crore. Out of the INR 136 crore, already INR 25 crore recovered. To that extent, there is no exception in anything anywhere. Yes, we had to see very strange situations in the SME portfolio, which had nothing to do with credit underwriting, nothing to do with trend, nothing to do with any industry situation. It is just pure accidental kind of a situation where somebody died or something happened. We are working with them, and these are all very well covered. I'm not so worried about this slippage this quarter, frankly. Yes, on the resale loans, what goes, a lot of that will not come back. That has been the story for the last five quarters.
Got it. Got it. When I look at your cost of deposit, I understand a large part of it was bulk deposit. Given the sharp decline in rates on the bulk grants, I believe the expectation was the cost of deposit to come down. Yet, I've seen it rising, which is unlike what we're seeing for the rest of the industry in general. How do I read this? I was really surprised to see the cost of deposit rise during the quarter because I would expect on the bulk deposits to reprice at lower levels, right? On your deposits, growth has declined. How do we read this?
No. Mona, you are absolutely correct in your question. You will see that playing out in our portfolio as well from Q2, Q3 onwards. Two things happen here on the deposits. One is that a lot of these bulk deposits and a lot of these businesses we build because a lot of our assets business growth last quarter, because we are not growing at 10%. We are growing at 31%. A lot of this business growth, especially on the wholesale side, retail comes every day. Gold loans come every day, but wholesale SME comes a little bit earlier. To fund that deposit, we had taken a lot of bulk deposits at the end of the quarter, which was in March. By that time, there was no clarity about the liquidity depositions the RBI was looking at.
Given that, that cost in that quarter came only for 10 days, 15 days, 20 days maximum. That cost has taken us through the whole quarter over the 90 days. That partially has done. We have got a few success points increase in cost of funds. That primarily has contributed to this. The other thing which has happened is I was analyzing this, that a lot of older deposits, because before, once we knew that interest rates are going to fall, we stopped taking long-term deposits like three years, four years, five years, etc. We had some deposits which are old, which started maturing and hence got repriced even if it was a lower risk and started repricing at a higher rate than what they were initially booked, their contracted rate a few years back. These two events happened.
Having said that, I think all the, but if we had a parameter by which we could show you how our contracted rates for the last quarter incrementally are, either it's on CDs or it is on bulk deposits, you're absolutely right. We have been better off. What it means is, Q2, Q3 onwards, we'll start seeing a drop in our deposit costs.
Okay. Okay. If you could share, what's the view also facing from a similar perspective on NIM, cost-to-income ratio, and ROA?
Can you speak a little louder, Mona? Sorry, I can't hear you.
Yeah, sorry, if you could share your outlook on the NIM and ROA for this season.
Yeah. For us, typically what happens is, let me take the ROA point first. If we look at it, year on year, our ROA has come down from 1.27% - 1.03%. On a quarter on quarter, it has come down significantly more. That is how it will play out this year, also because our ROA keeps increasing every quarter, and it culminates at a much higher level at the end of the year. For example, last year, in Q1, we were at 1.27%, and we ended the year with 1.79%. This year also, I think on an average, we should be somewhere around 1.5%. That was my guidance, and we will retain this. On the NIM, we have slowly bottomed out now. We will be between 3.5% - 4%.
What gives me this confidence, I'll tell you, I'll do a logic to this, is A, our cost of funds will start coming down because, as you rightly said, bulk and CD rates are coming down, and our bulk is around more than 35%, 40%. From that perspective, it will in a way help us because retail will not come down that much compared to bulk. We think that our cost of funds will start showing better trends. The other thing that will happen is, also, on your previous question, I want to also say that we've tactically moved out some of the current accounts out of our base because we said that we want to gain the proper current account franchise, there's some transaction banking, etc. That also increased our cost of funds a little bit.
Now, through transaction banking, wholesale, and other businesses, we will start building the current account. That will also give us a little better cost of funds. Thirdly, because our EBLR portfolio is around 20%, EBLR plus TV portfolio is around 17%, and our MCLR is the only thing which is around 20%, which will reprice through the year, reprice downwards through the year. Our fixed book is around 60%. Hence, we will have dual advantage on that front that EBLR will not come down sharply and our cost of funds will come down very well. Given that, I'm very, very confident that we will be in the range of 3.5% - 4%.
Sorry, how much was the EBLR that you mentioned?
EBLR is around 7%. EBLR plus TV linked, which from a cost of funds, sorry, cost of interest cost is similar. Sorry, interest expense is similar. When it comes down, the interest rate comes down. It is around 17%.
If I look at your fee line, the total fee line except the treasury gain, are there any one-offs in the last fiscal, not this quarter, but in the last fiscal in terms of accumulation income or something? It looks like fee to assets is settling at a lower level.
Yes. Last year, we had three syndications run so far. We have got a very good wholesale team now and very good quality wholesale business started coming into the bank. That is shown with the kind of growth which we have got both on the corporate banking and the mid-market side this year. In a year when we actually almost ran INR 1,000 crore of DA portfolio, which represented the wholesale part of the bank for whatever structural business we had put. That team, they put C syndication, one more syndication as we are talking we are doing. We are doing those kinds of deals here where, given our size of a balance sheet, we cannot take a INR 500 crore exposure, right? We don't take more than INR 150 or INR 100 or whatever and rest the sales down.
Some of the sales down are happening to larger banks as well, Top 3 banks and Top 4 banks, etc. Yes, we had some syndications since last year. Also, as you know, we are net buyers, sorry, net sellers in the TSLC market. A lot of that stuff we do in the last quarter of the year. That's one of the reasons our ROA and our fee income is significantly higher in Q4.
Got that. Just one last clarification. What would be the income from these three syndication deals for last fiscal?
That we can share. That is too much detail. Yes, I shared as much as I could. We have done three syndication deals and we are working on the fourth one.
Got it. Okay. Thanks so much, and have a good day.
Thank you, Mona. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask questions. The next question is from the line of yours, Dhan Swarya from Dante Capital. Please go ahead.
Yeah. Hi. My first question is regarding the NIM guidance that you just gave. Don't you think your guidance is very wide?
Very what?
Very wide. The guidance is very wide.
Yes, I can only tell you that we live in a world today where we don't know what happens after 21 days. In that kind of a scenario, with global turmoil and global uncertainties, it's better to be safe than sorry later. It is wide. If you want me to be more sharper, I will say that we were somewhere in between of that curve. It will vary from quarter to quarter. If you take for the full year, I am hopeful that we should be somewhere in between of that, which is somewhere around 3.7%.
Sir, can you please tell me if you factored in a rate cut in this? If you have, or what kind of rate cut have you factored in with the NIM guidance, the current NIM guidance?
See, I'm not an economist, so I cannot say in a rate cut, but simply saying I'm reading that given where the inflation is, normalize it for the base asset. Okay. Given that there are enough global uncertainties which we don't know which way it will play out, everybody says that there is a reasonable chance of one rate cut somewhere around between September to November. If that plays out, we have factored that in because we are lucky that our EBLR linked and TV linked portfolio is only 17%. That rate cut, even if it happens, to impact it on MCLR will go to next year. Okay. Next semester, year.
You mean you factored in 50 basis points , right?
25 basis points. 25 basis points.
25 basis points. Okay. 25 basis points. Nice information. 25 basis points. My next question is regarding your loan book cutoff. By the end of this year, how do you think the mix is going to look between gold loan, between all the sort of gold loan, LAF, SME, secured, unsecured? Could you just give some guidance on how you're kind of envisioning the loan book to look like by the end of this year?
Yeah. If you look at it, what has happened this year, what we have already reported is 1% is as one-off in the gold, and that has got from NFI and AGRI business. That is something which slowed down, and by that mixed percentage formula, it went to gold. What I see now onwards is wholesale will maybe go up by another 1% or 1.5% or 2% this year. Let's say wholesale is around 23% now. It may go up to 25%. I don't see our NFI, AGRI, and retail going up that much. If at all, it will remain at this level, maybe a few basis points here and there can come down also because our year-to-year journey will start from next year. We won't take risk in this environment at this point of time.
Our SME may go up by 60 basis points compared to where it is today. It is around 13% right now. We should be seeing somewhere between 13% - 14%. I think gold will continue to be where it is. I must mention here one thing that our retail portfolio, what we show also includes loan against securities, which has some gold loan. That gold loan, based on the recent RBI circular, we may have to do differently and categorize differently. That itself will bring down the retail again further, and with that may come back to gold. Gold, for very different reasons, more technical reasons, may go up a little bit. In short, what it means is retail will come down further because of these technical reasons. LAS will come down.
LAS is typically around INR 2,000 crore right now for us, which is around INR 2,000 crore out of INR 35,000 crore is LAS right now. That probably will come down significantly. That may move some part of that to the gold, some part of that will move to the wholesale, and some part of that will move to the SME.
Right. Right. My last question is regarding your sort of exit ROE and ROA. I know you guided for an exit ROA, but if you could just also guide us for the exit ROE for this financial year.
We will aim for, as I said, and this is consistent I've been telling over the years, ROA 1.5% and ROE 15% is something which is like less than better for us. We have to achieve it. We'll aim to do that.
I'll come back in a few. I have a couple more questions. Thank you so much, sir.
Sure. Sure. Thank you.
Thank you. The next question is from the line of Shivaji Thapliyal from Yes Securities. Please go ahead.
Yes. Thank you for the opportunity. A few questions for me. Firstly, on asset quality, traditionally, our book was not so mature, and therefore, it was not really throwing up slippages. Even now, the slippages are, you know, compared with the broader banking universe, it's still under control. Nevertheless, some slippages are transpiring. Where would we put the credit cost guidance for the full year? Where would we put it on a steady pace basis, say, from FY 2027 onwards? That's question one. Secondly, from an OpEx standpoint, you have been making guidance in the past in terms of at least last past, would like some reiteration or maybe some, if there is any further color on how things are shaping up of late in that regard and where the number might end up for the full year this year and where we are probably going to head FY 2027 onwards.
Thirdly, on the loan growth front, we have a small base, and I think growing 20% + has never been a challenge in that sense. Nevertheless, what is the internal aspiration there from a three-year perspective? If you could give us some color on that, those would be my three questions. Thank you.
Thanks. Thanks very much for the questions. I'll go one by one. On the credit cost, general guidance always has been, I'm just repeating like a record, that our GNPA will be less than 2%. NNPA will be less than 1%. And credit cost will be less than 50 basis points. That has been our overall vision till FY 2030. We have been, of course, much lesser than that. Even this quarter, we are lesser. Our guidance for this year is GNPA, NNPA, and credit cost all will be lower than where we are in Q1. That's for sure. Unless, of course, we don't know the global uncertainty on the track terms or reported terms. I'm just not taking that into consideration. If that happens, then we have to recalibrate. Second part of your question is on OpEx by path.
If you look at it carefully, our OpEx by path is going down to 50% by 2030. We hold on to that because our real story will emerge from next year as our liability franchise starts building along with the cross-sell on assets, fees, and transaction banking, and wholesale, and SME, all of it together. The real orchestra will start playing out from only next year and we'll start seeing results FY 2029 onwards. I'm pretty much holding on to that by path of 50% on OpEx side, that's the cost-to-income side. If you look at it, this quarter even, our YoY growth on operating expense is only 12%. We have been pretty conservative in terms of our operating expense at a time when we are massively investing in the technology. To that extent, we are very conscious of productivity and operating cost.
The reason our cost-to-income has gone up slightly on a year-on-year basis, it has come down. On a quarter-on-quarter, it has gone up a little bit. It is, of course, because of the income and other income and everything has come down a little bit. Once the ROA starts going up back to 1.5%, this will itself come down to some extent. The real by path will, the sharp by path will be FY 2028 onwards. We are pretty confident of reaching 50% by 2030. On the loan growth on a three-year basis, I think we'll have a reverse trajectory. With every year growing, our loan growth will only go up. Why? Because even now we can grow faster than what we are growing in loan, let me tell you. Our constraint is liability.
Once our liability franchise starts building up, because based on bulk and based on CDs and based on FQA and based on whatever little bit you are doing on the retail side, etc., you cannot have a sustainable growth on the asset side. Additionally, as the retail part of the franchise starts growing, we are pretty clear that wholesale and SME also have to bring in liability because they have a cash funding target, especially on current accounts, especially on low-cost funds, etc. Once that starts playing out, we will be able to grow faster because multiple products will start playing out. Like last year, our wholesale started. SME has been growing, going on for the last two, three years. Retail part of that story will start next year, and gold will continue to grow as it is growing.
Given that, suddenly we're seeing, if you look at consistently this year, SME, wholesale, and retail, all three grew by 30% +. This has never happened to the bank. When I say retail, I include gold in that. Three franchises, each of them growing 30% +, shows that we have the sustainability, and now we have caught the rhythm of building that business. Our caution comes on the liability side, and we are fully focused on that. Once we build that, our credit growth, which is right now somewhere between 20% - 25%, safely, and maybe about 25% also if our liability allows us, then next year onwards, as our liability franchise becomes better, we will move better growth on asset side. We are pretty focused. We don't have a capital issue. We have enough. Our CRAR is on the higher side.
From all aspects, growth is not a problem for us.
Thank you.
Thank you.
Thank you. The next question is from the line of Executive D.K. , an individual investor, phase IV. Go ahead.
I think most of my questions have been answered. Thanks for the opportunity too. I just wanted to ask regarding the ROA guidance. Previously, it was like in the range of 1.5% - 1.8% for the entire FY 2026. Right now, you just mentioned that you will be touching around 1.5%. I mean, are we having 1.5%? Is it essentially reducing the guidance a bit?
Can we ask further questions? What I said was 1.5% ROA and 15% ROE is our lifetime beta. We cannot go beyond that. If we have an opportunity, we need to hire them that. Having said that, we all know the environment we are in today. Not only us, if you look at the entire ecosystem, there are challenges in the ecosystem, and there are known unknown challenges and unknown known challenges right now, which are mostly coming from global uncertainty. Given that, I think we'll be happy to be around 1.5% this year. Our guidance on 1.5% - 1.8% is for our SBI 2030 journey.
I'm 100% confident that we will achieve that vision of 1.5% - 1.8%, and maybe we'll be closer to 1.8% as our retail assets and other franchises start picking up and our overall cost of funds, sorry, cost-to-income starts coming down, and we leverage the branches and our franchise betas. Our guidance of 1.5%, 1.8% in the past also is over SBI 2030, which is the, again, the glass path or whatever, rice path, whichever way we look at it. This year, given the overall global uncertainty, 1.5% is something which we should achieve and we'll be happy about it.
All right. Thank you so much.
Thank you. Thank you.
Thank you. The next question is from the line of Yas from Dante Capital. Please go ahead.
Hello.
Hi, Yas.
Hi, sir. My question is mainly regarding your gold loan yields. How do you see your gold loan yields moving from here?
Our gold loan yields typically have been between 11.5% - 12%, depending on which product we're looking at. Because of the regulatory guidelines now that have come, which are now very clear, it's no longer draft, no longer any guesswork. It's very clear, black and white. We know what business we can do, what business we cannot do. I think our higher yielding businesses will grow a little more because the loan against securities business, which was more the pleasure kind of for businesses, comes slightly at a lower yield. From that perspective, I think we should not see a fall in yield on our gold loan. I think we should be somewhere around 11.8% in that range we started.
Yeah, my last question is regarding your cost of funds. What kind of exits in cost of funds do we see by Q4? How do we see this number? You said it's going to come down, but do you have an estimate that you can share?
Very difficult, boss. You know the way situations are evolving, one day the yields are 6.2, 6.3, one day it is 6.5, 6.6. How do I know which way it is going? Broadly, the way we are looking at it, I think from the current level, our 20 basis points drop is minimum which we can aim for in my view.
Right. As far as this technology platform and whatever you've been working on in the last, maybe I think around two years if I'm not mistaken, what is it going to kind of help us the most in? What percentage of our collections are online today without the help of physical connections, basically?
I'll answer the second question first. Our CIO is sitting here. I'll invite him to give you some broad perspective of what we have done and what we plan to do and how it would help because he and his team have worked very hard. Let him also talk to you on this call on what we have achieved. Of the collections thing, I can tell you is that while I understand the digital collections and all that, of course, we are invested into that. We are into telecalling collections, all of that together. Our overall retail book is very small, which requires all this stretch to process collections and all that. That is very small today. We are building this capability, but the opportunity itself is small.
Given on the credit card side, because we don't have our own credit card product, we do it through Jupiter and all that. They have their collections set up, which they do, which has all online and everything, and offline, of course. We cannot do recovery with our online. Given that, we are preparing for ourselves, but we don't have that portfolio size to test that as much. We are building that. SME and wholesale and those kinds of businesses, you need mostly legal, technical, all those kinds of things to collect. That's where our legal teams are very strong. Our primary recovery and collection on the SME and wholesale side is handled in our offline mode and on management kind of thing. That's the way it works. On the technology, I'll just say one line and then I'll hand it over to Rajesh.
It will help everybody, because we must understand that we are coming often because of the system where you cannot add one more product, then the system doesn't work. What we had in Marvel, our premium liability product I tried to introduce, it could not be introduced properly. We didn't have transaction banking products. We didn't have CMS. We didn't have trade. We didn't have supply chain. Our mobile banking, net banking were functional. On our OBDS, we are moving at a very different level. Our entire digital ecosystem, our ServiceNow platform, everything what we are doing is very different. Our data centers today are having two data centers along with two NDR, which are most service-related and the best places. We are on an 11G on Oracle platform on the database. Now we are on 19C, which is the database. 11G is not even supported.
That kind of a transformation we're doing. It will help every business. On the wholesale side, it will help transaction banking. On the treasury side, also, it would help transaction banking and some of the other systems we are implementing. It will help the maximum in retail acquisition of new customers, STP onboarding, creating various services, various products. Why should a customer come to me if I'm not able to give personalized STP, different kinds of services with a good onboarding system and processes? We have created an ecosystem around it through our VRM, which is Virtual Relationship Management. All the systems are there. We have contact centers. We have created everything. We're just waiting for this connectivity to happen to the technology. Once SME, it will help in a big way.
We are going to launch our new corporate net banking in the next six to nine months, which will help us in a big way, both SME and corporate banking. Of course, retail assets, LMS, LOS, all of that stuff was not in the bank before. I mean, how could we run a retail asset business without these products, without this system? All of these are now going to be functional. Given that, it will help retail the maximum in my view. Gold loan is a functional business. This is most trash and shill. Systems and better efficiency does help. We are also working on a new acquisition platform, which is digital. I think we are going to make significant investment there to upgrade it because our main focus will be on customer acquisition in retail because liability franchise has to build up.
We are going to launch various current account products now, now that we'll have those systems and processes. Once we have the corporate net banking in place, it will be a different way altogether what kind of current account we'll do. That's a flavor on what we are planning to do on the business side, okay? Requesting Rajesh Choudhary, who's our CIO , who has led this entire tech transformation for the bank, to give a five-minute snippet on what we have done and what we plan to do and how it will help the bank. Over to you, Rajesh.
Thank you, Pralay. I think you covered quite a lot. In a quick summary, what we have done is we have overhauled the entire technology ecosystem in the bank, setting up four data centers, putting new core banking, which just went live in the month of May, along with 50-plus different surround systems. It has been a massive transformation, and that's what all the partners who have been working with us tell us, that they haven't seen something of this kind. Of course, there are a lot of core banking transformations which keep happening. However, so many systems going live together is something very unique. At this point of time, we have got systems in place for the business. We are now ready to create products and build capability for doing business for all the respective business lines.
We have also built capability to do the right compliance and the right regulation work. There is a significant amount of regulation work we have to deal with. Our cybersecurity, information security, we have to ensure that the entire ecosystem is safe for our customers, for our employees, and for the banking industry as a whole. We have put all the elements in place. With respect to channels and with respect to payments, everything is overall. We have got everything brand new, and we are ready to deliver it to our customers. We will keep optimizing this. We will keep investing further. The major overhaul has been done, and we are all geared up to do more and more business from this.
Yes, around the regulatory reimbursement, we have a new reference system, and given the new compliance system, almost everything is very congruent in the bank from a technology perspective. Yes.
Yes. One last question before we drop out. Could you just give me the secured versus unsecured breakup of the book currently?
Unsecured can be seen in two ways. Retail unsecured is only 3% of the overall bank's book. When you look at secure, some of the unsecured businesses are the best secure businesses. If you do business in Tata or if you do business in Gendar, which you have done, by the way, they are more secured than secure businesses, actually. If I give you that ratio, that may not be the right representation. What do you think?
Sure. The retail one is more convenient.
Retail one is 3%, and SME, you almost never do unsecured business. That's broadly what it is.
Out of the entire, you said you've recovered INR 25 crore, and you think you're going to recover more, right? That tells me what is.
That will happen for a year. The rest will happen for a year because the business has to restructure. The point is they're all secured businesses where, when collapse, right? The money will not go anywhere. Obviously, SME, how you run the business is you don't immediately call back the loan and say, "Give me the money or I'll sell your property." You have to help them in rebuilding the business. That's what we are doing. These are recoverable. That's the point I'm making.
Thank you. Thank you so much for taking all my questions so patiently. Have a great day.
Thank you. Thank you very much. Thank you, Yas.
Thank you.
Thank you. Ladies and gentlemen, as that was the last question for the day, I will now hand the conference over to the management for the closing comments. Over to you, sir.
Thank you very much. We had a wonderful conversation, and thanks for patiently listening to us. Look forward to our next quarter analyst call again. Thank you very much. Have a wonderful evening.
Thank you. On behalf of Yes Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your rooms. Thank you.