Ladies and gentlemen, good day and welcome to the CSB Bank's Q2 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 signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shivaji Thapliyal from YES Securities. Thank you, and over to you, sir.
Thank you, Vomika. Good afternoon 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. B. K. Divakara, 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 good evening, everybody, and thank you for joining the call. Firstly, I will cover briefly about the economic scenario and then quickly move on to CSB specifics. As we all know, the global trade negotiations across various countries have shown significant improvement in the recent past. It gives financial markets some stability and hopes of returning to normalcy in a couple of months. The FOMC has cut U.S. rates by 25 basis points. However, the commentary by the Fed Chairman was more hawkish than expected, leading to U.S. de-appreciation and some correction in the gold prices. Global growth focus remains subdued. Indian growth is expected to add approximately 20 basis points over previous projections due to GST rate cuts and steps taken by the central bank. The inflation focus has been revised downwards. However, the projections for the next year are around 4%.
The deposit growth lagged the credit growth in the system in September 2025, showing signs of credit pickup. The CD ratio for the banking system went above 80%. After around six months. The continuous lag in deposit growth has impacted the banking sector name significantly. We expect the banking sector name to stabilize soon, and we also expect the liquidity to remain easy. Once RBI takes decisions on cutting debts further this financial year. Coming quickly to CSB specifics. On our quarterly financial results for Q2, I feel that we have registered an impressive all-round performance on our YoY as well as QoQ basis, both in terms of top line and bottom line. On the profitability side, net profit for Q2 FY 2026 stood at INR 160 crore, up by 60%. 16% YoY, and 35% QoQ.
Operating profit of the bank for Q2 FY 2026 grew by 39% on a YoY basis and 27% on QoQ basis, and stood at INR 279 crore. NII up by 15% and 12% on a YoY and QoQ basis, respectively. Other income registers robust growth of 75% on a YoY basis and 43% on a QoQ basis, and constituted 24% of total income for Q2 FY 2026. Cost-to-income ratio was at 63.86%. As on Q2 FY 2026, a tad lower than Q2 FY 2025 and Q1 FY 2026. NIM for the quarter improved to 3.81%, up 27 basis points over Q1 FY 2026. ROA for the quarter ended. September. Stood at 1.33%, up 30 basis points over Q1 FY 2026. Bank is holding the contingency provision. Intact and is continuing with the accelerated loan provisioning policy, which will enable the bank to move quickly towards ACL. On the liabilities front. We are improving the funding base.
Deposit growth momentum continues to be faster than the industry and registered an increase of 25% YoY , which is 10% on the industry. CASA growth was 9% YoY , and the CASA ratio stands at 21.17%. We have sufficient liquidity buffers and are maintaining LCR at comfortable levels, average LCR of around 126%. Liquidity on the whole is quite efficiently managed. The liquidity risk CD ratio stood at 88%. Average LCR per quarter is at 126%. NSFR ratio is at 116%. On the asset side, total advances grew by 29% YoY , significantly higher than industry growth of 11.4% YoY . All the asset verticals continue to contribute to the portfolio growth. The necessary groundwork for diversification of loan portfolio has been initiated and will pave way for balanced growth in the days to come. Yields on advances witnessed an uptick of 22 basis points over Q1 FY 2026 and currently is at 10.95%.
On the asset quality matrices, GNP and NNP ratios for the quarter was at 1.81% and 0.52%, as against 1.84% and 0.66%, respectively, for Q1 FY 2026. PCR now stands at 84.14% with PWO and 71.62% without PWO, improving over Q1 ratios of 80.46% and 64.52%, respectively. Bank is holding a provisioning buffer of around INR 199 crore over and above regulatory requirements. Robust capital base is what we have been consistently following, so CRAR of 20.99% and Tier 1 ratio of 19.19%. Low proportion of risk-weighted assets compared to the industry for us, primarily due to the gold loan. Shareholder value creation side, book value per share is at INR 261. EPS for the quarter is INR 36.67, and ROA for the quarter is at 14.46%, which is again a significant improvement quarter on quarter. On the distribution side, we have a network of 838 branches and 810 ATMs, as on September 9, 2025.
In conclusion, I'd like to say that we are approaching our scale journey scheduled for FY 2027, targeting to emerge as a responsible mid-size bank by FY 2030. I had mentioned in my last call that our team's highest priority during the previous quarter was on stabilization of the systems and processes that followed our complex CBS migration in May. Now we have almost stabilized and, in fact, commenced the second phase of the tech transformation with renewed vigor, with majority. Covering of OFSA, OBTFPM, OVDX enhancements, and various other projects we are starting to run, like CMS supply chain. Trade, and all those kinds of surround systems, additional surround systems we are building. In addition to the 52 surround systems, they have already integrated with the. FC, with the FlexScope system, which means that this is one of the major transitions and transformations we have seen in the.
Industry over many years, coming from. A highly legacy system to the most modern system with all good surround systems around it. So this will pave the way for our. Future growth. The results for Q2 reflect a strong momentum, both in terms of business and profitability, signaling the right advancement towards our vision. Our top line, both deposits and advances, showed a strong YoY growth of 25% and 29%, respectively. The improvement in profitability is visible, with a 39% and 16% increase in operating profit, net profits, respectively, over Q2 and FY 2025, whereas Q1 FY 2026, the growth was 27% and 35%. While our NII grew by 15% on a YoY basis, the other income ratio has 75% increased, which I have already mentioned before. As we move forward, the development of a profitable customer franchise is essential for the success of our vision.
We are actively working to align our team's products and processes to support this strategic priority, which will be critical in driving growth. Our key focus will be on rolling out now the retail journey with the systems and processes in place now, and it will enable us to achieve granular portfolio and unlock variable cross-sell and up-sell opportunities. As part of the preparedness, we have already implemented LOS for the majority of the retail assets products. LMS is already in place. Automation scorecards are in place for credit decisioning, wherever feasible. We are enhancing our BIU, which is Business Intelligence Unit. Digitization of loan journey products offerings, like loan-only securities, NQs-based consumer loans, etc., are work in progress. While we remain focused on our long-term strategic priorities, we are equally committed to achieving this year's targets and will continue to work diligently to deliver on those expectations.
Finally, I'll say that. Our five pillars on which we are building the bank for the long term. Starting with governance, compliance, customer orientation, technology, and people and culture, are firmly in place. And I'm very, very happy to report that some of these pillars are getting stronger and stronger, especially, technology, compliance, the culture, and the governance. On the customer service side, with all the support systems we are building, in fact, we got awards two consecutive quarters as the number one bank in terms of best customer complaint management. So these are small achievements at this point of time because the size is small, but we think we'll be able to sustain this based on the technology transformation and the culture which we are building at the bank. With that, I'll stop here and we'll take questions. I'm joined by our Executive Director, Mr. Divakara.
and our CFO, Satish. I've requested Satish to take a lot of questions this time. Because I think he has better grips on numbers than me. Over to you, Shivaji.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone 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. A request to all the participants, please restrict yourself to one question only so that everybody gets a chance to ask questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Akshit Agarwal from Smith's Institutional Research. Please go ahead.
Good evening, sir, and congrats on a strong set of numbers, and thanks for the opportunity. My first question is on margins. What is driving this sharp uptick in yields on advances surging 22 basis points sequentially? Is it all because of higher gold loan growth, or were there higher yields in the segment? Cost of deposit just came down nine basis points. So what kind of deposit repricing is left for third quarter? In terms of NIM trajectory, how do you see it moving in next two quarters? Will there be a continued expansion if there are no further cuts? Do we see exit NIM by Q4 to be above 4%? That was my first question, sir. Thank you.
Akshit, this is Satish here. In terms of, so we have got multiple questions bundled into one single question. I'll try to address one by one. If something is left, then you can again come back and ask a question.
Right, sir.
In terms of the advances yield, we have largely our businesses divided into four large segments, the gold being the largest one with 47% composition in our advances. We have seen not only that the portfolio has increased very strongly, at the same time, there has been improvement in our gold yields as well. So that is also one of the contributors. Apart from that, our wholesale segment has done exceedingly well in terms of the book also has grown very strongly, and we have been able to marginally improve the yields also in the wholesale banking segment. The next larger book is our BLG, that is a Business Lending Group for the SME. There, again, we have been able to maintain our yields.
Basically, with a combination of these portfolios doing well in terms of the top line as well as the margins in terms of the gross yields, we have been able to improve our overall yield trajectory. Secondly, in the overall portfolio, around 38% of the portfolio is only linked to some form of a benchmark, which is either MCLR or EBLR. Whenever the rate cut happens, the impact, especially on the gross yields, is a little limited for our overall portfolio compared to other banks where this external benchmark linked portfolio is much higher. Almost 60% of our portfolio is largely fixed-rate portfolio. We get insulated from there. Coming to the cost of funds, within cost of funds, we have multiple sources of funding. Deposits, then we have refinance. We have also resorted to CD as well as FCY borrowing.
Overall, our bulk deposit composition is a little larger compared to the industry. And across each of our funding sources, we have seen. Signs of reduction in our cost of funds. In fact, what we have seen is that the. Interest rates are far. Fallen much. I would say that sharply compared to the retail deposits. So that has also benefited us. In terms of. The bulk deposits as well as the retail deposits, we have seen that the incrementally that we are borrowing today. We have seen a fall in the cost of funds. So successfully. Basically, that impact has been on both the sides that in this quarter, we have been able to improve our yields. And at the same time, we have seen an improvement in the cost of funds, and that has got an impact on our net interest margin.
Last quarter, we had made a comment in terms of that our NIMs have bottomed out, and that has really played out properly. So at the moment, we are at 3.81% of a NIM. Going forward, probably we will be in this range of about 3.7% to 3.9% for the rest of the year. It may move on a quarter-to-quarter basis. It will be very difficult to really pinpoint exactly what is going to be the NIM for the full year. But for the rest of the year, we feel that we will be in the similar range of 3.7%- 3.9% kind of a number.
So on that NIM, I just want to add that what's happening now, as you know, that the. Deposit, while natural repricing is happening because of tenor and things like that, depending on what is the tenor and we strategically took. Move from a high tenor to low tenor over the last 18 months in the bank, and hence our average tenor has reduced. And it was a strategic call which I took because we knew interest rates are going to fall eventually. That will help us. But. As we know that the fixed deposit rates are not coming down at this point of time anymore. Maybe it's a temporary phenomenon, or Parliament will know because of the liquidity and other various reasons which is there in the system. But yields are falling on the, especially on the wholesale sides and things like that, right?
I mean, there has been a very highly competitive market. Probably that's bringing the growth also back into the system. So from here on, I think broadly the. Repricing that is going to happen on deposits will be above tenor. And the yields on the MCLR have also started kicking in now because. Now it is almost. Six, seven months when the. Time has passed. So MCLR reduction has also started happening. Given that I think it will broadly be in the same range of. 3.7% to close to 4%- 3.9%, that range will be there. And it has exactly played out the way we had told last quarter that our NIM will improve, but now we are seeing it will stabilize at this kind of levels.
Very well, sir. And sir, on fee income, it was very strong this quarter, doubling year- on- year and 80% QoQ. So can we get some color on key drivers, and is it sustainable? And treasury income was very weak. So do we see some recovery going forward?
So in terms of the fee income, we have got multiple sources of fee income. And if you track for the last several quarters, our fee income trajectory has been pretty strong. This quarter also, our disbursement track was very good. Our disbursement during this quarter. Were very strong, and that has resulted in good processing fee income also, which on a year-on-year basis also, the main source of our fee income is processing fee income. That has grown almost 83% as increase. Second is in terms of our insurance business is doing very strong, both in terms of the number of policies, the premium income. And that is the reason that that has also grown very strongly. Other aspects of fee income, because we are now. Well-establishing our wholesale banking business, so transaction banking is the vertical which is also giving us a good fee income.
So across various lines, we have seen that the fee income has grown. And these are all granular kind of fee income, which we expect it will sustain over a period of time. And. Your next question was in terms of the treasury income. So treasury income is again a derivation of what are the yields in the market. And we have seen that during this quarter, we have seen some hardening of yields. And that's why for most of the banks, you wouldn't find much of a treasury income. But we had some treasury income in the first quarter, and this quarter, there was not much of a treasury income. Going forward, based on the yields. We'll be able to. At the moment, it's very difficult to comment in terms of the yield trajectory.
But let's see how the yields move, and this is that treasury income may come in the next quarter.
And if I can just add, I think fundamentally treasury income, obviously it's a function of yield, but in case there are further rate cuts in Q3, Q4, whenever. So I don't see too much of. MTM-based treasury income in Q3 also. So maybe some will come in Q4 if we're lucky. But we are not depending on non-core income like treasury. So. Significantly, almost 80% - 90% of our fees are granular in nature and hence sustainable for the long term. And with retail assets and other businesses going to take off next year, FY 2027, FY 2028 onwards, sustainability of this income will only improve. The other thing I want to mention is businesses like gold loans. Because the short tenor of the business, for example, if we have a book of INR 16,000 crore rough and ready, our disbursement is upwards of INR 10,000 crore. So fees is on. Disbursements.
Similarly, some of the other businesses. We had a very strong disbursement quarter across all businesses, whether it is SME, whether it is. Wholesale, whether it is. Gold, and things like that. So given that, that also helped us in improvement of the processing fees in a big way. So there are multiple avenues. There are 56 +, of course, there are liability fee income. There are other trade TFX fee income, which is also there, which also has done well and will continue to do well. Bank, of course, Satish has covered. So from all of that perspective, I think whatever fee income you're seeing, it may not grow every quarter by 40% and all that, but I think we'll sustain the kind of. At least we can bake in around 19% - 20% of our overall income as fee income safely right now.
That's the momentum we have picked up.
Right, sir. If I can just squeeze in one more question. So OpEx growth was very high. Driven by non-staff expense. While cost-to-income ratio looked okay, cost as a percent of assets increased to 4%. So with technology transformation now broadly complete with focus on stabilization and branches just increasing by four in the quarter. So what's driving this elevated OpEx, and how do we see for the rest of the year? And in terms of the branch ramp-up, I mean, will we resume like 100 branches a year kind of thing for next year with slow branch expansion this rest of the. Second half?
So I'll take this one. So see, I think. Satish, correct me if I'm wrong, I think we are somewhere around 22% - 23% OpEx growth. On a year-on-year basis, okay? On a year-on-year basis, which is pretty powerful course because when you are growing the balance sheet by 27%. To INR 50,000 crore, that 22% kind of a growth in OpEx. Is powerful course. And let's not forget that we are investing into the bank at this point of time. And full payback will start happening FY 2027, FY 2028 onwards. So the cost income, as per our previous guidance, will be between 60% - 65%. For another year or so. After that, it will start coming down, and FY 2028 onward, it will sharply start coming down. So. Given that perspective, I think. We are. On the operating cost side, I think we're 22% quarter- on- quarter, okay?
So yes, it is slightly high. Also, let's not forget that some of these. Technology costs are also OpEx costs. They're not all of it as CapEx. A large part of this is OpEx. Not large, a fair bit of it is OpEx, including the MCs and all, which have started kicking in for some of the stuff. So typically, somewhere around 8% - 9% of our overall OpEx will always be technology because till we start picking up the income and leveraging the systems. So I think it is sort of powerful course because on a year-on-year basis, yes, operating cost is around 35% growth, 22% is quarter- on- quarter. But I think we've stabilized that. On the branch.
We will add around 50% - 60% branches at this point of time on an average every year because we are pretty much reaching the critical mass of around 1,000 branches, which we wanted to reach and then take a stock of situation. And then we'll think from there. So we are thinking about around 50% - 60% branches every year.
Very well, sir. And thanks a lot for answering all my questions, and congrats again for a good set of numbers.
Thank you.
Thank you. The next question comes from the line of Mona Khetan from Dolat Capital. Please go ahead.
Hi. Excuse me. I hope I'm audible.
Yeah.
Yeah. So firstly, again, on the fee side. If I could understand how much is the contribution of.
Sorry to interrupt you, but when you're speaking, there is an airy distance. So can you please make sure that. You are speaking in a better network area?
Is it better?
Yes, ma'am, it is better.
Okay. Yeah. So I was on the fee income part, where I wanted to understand. The contribution of processing fees to this overall fee. The reason I'm trying to harp on this is because at 2.8% of assets, it's way higher than what we see in the industry, even for some of the large banks. And also, does it include any syndication income as well this quarter?
Mona, probably I heard. No, as I said before, 80% - 90% is granular and sustainable. Maybe we may not be able to grow this much because I answered your question partially by saying that disbursement has been very high this quarter and fees are a function of disbursement. And also, let me tell you that because the regulatory. Guidance on. Repleasure has. Kicked in for the banks, we have taken a very conservative view. So we have started reducing that portfolio. And that will see that our retail has come down. One of the reasons I've already disclosed before, that retail includes a fair bit of the repledger business, which used to call it loan against security. Okay? Now, once we're replacing that portfolio and our conservative view is. Of the RBI policies interpretation is that we'll like to bring down the portfolio.
As much as possible by April, and we are not rebooking any. On renewal, we are not renewing anymore. Okay? So it will run off on its own, and it's already started running off. So we have got a growth of 37% on gold loan. In spite of the fact a fair bit of run-off has started happening on the repledger business, where you don't get much fees. And what we are replacing it is by granular businesses where the fees are much higher. So that is one. Secondly, I think our TFX business has started doing extremely well. Because of transaction banking on the wholesale side, I think we have started getting a lot of business now. And some of the other granular fees, so again, and treasury fee is not there. So primarily, it is granular fees, and it is sustainable.
On your specific question on syndication, we are working on some, but this quarter, we have not done any syndication.
Okay. And if I could understand, out of this INR 3. 43 crore or so, what is the component of processing fee?
We don't give breakup, as I said it before also. We don't give detailed breakup on this. We don't disclose these numbers.
But sir, because it's such a material part of your ROA, if you could start giving some clarity as part of the presentation on your fee bit as well, I think that will. Clear a lot of doubts as to where this is coming from.
Don't have doubts, Mona. Don't worry. Okay? I said this is granular, so it's okay. Your doubts will be clear. Like a lot of people have doubts that last quarter when I said that our NIM has bottomed out, but we have proved it, right? So have some trust on us. It is granular. Okay.
Sure. But I mean, this kind of number, we don't see in the industry. Even for, say, standalone gold finances, we barely see any material fee lines. So. It's a little hard to digest. Secondly. On the ECL transition. Just some quick thoughts from you. Also, if you could share the 012 book for the SLA 012 for the entire book, if possible, that would be useful.
So Mona, Satish, here. So the bank policy on NPA, the provisioning policy that we follow for non-performing asset is much more accelerated compared to the RBI guidelines. And over and above that, also, we carry some contingency provision which we have specified in our earlier calls. So. Carry a substantial amount of additional provision compared to what the current norms suggest. And we have been also submitting our proforma financials, which are based on. IFRS norms, index norms to RBI. So from that perspective, if we see. And the draft ECL guidelines also talk about. Various minimum base level provision, especially on. The SMA book and all that. At the same time, we have some excess provision. So largely, our assessment is that one will set off against the other, and there wouldn't be any material impact to start with. When these ECL guidelines come into play.
Even now, these are draft guidelines, and the banks have submitted their suggestions to the regulator, and the final guidelines are yet to come in. So at this stage, it will be too premature to really quantify in terms of what is the final impact that is going to come. But our initial assessment suggests that that impact is not going to be material for our book.
And also, Mona, if I can just add that. SMA book, I mean, whatever stage you want, stage two, whatever you call it, you must understand that we have a large gold portfolio in that, right? So. If you go theoretically and put exact numbers to the SMA book, primarily based on gold loans. That will not give the real picture. And even if you take the real picture, theoretically, what it is, it has no materiality of that impact is easily covered by our contingency provision. Okay? Having said that, obviously, once this rule kicks in, we'll not have large SMA books in gold because if you can collect on 80th day, we can collect on 30th day also. Okay? So from that perspective, depending on. What the priority of the bank is based on regulation, we'll do it.
So we are still not seeing any major impact on ECL based on our internal calculations yet. But let the guidelines get formally formed up, and then it will be a better time to discuss that.
Sure. Sure. Noted. And also, we had. Three MSME slippages last quarter. And so. Is it fair to understand the two of them have already been recovered? And just some color on that from your side.
Yeah. No, so I had said last time that one of the. Two slippages which we had last time was more technical in nature. So within the first 10 or 15 days of the quarter, we already recovered somewhere. A large amount of that. Right? So to that extent, and that's where you're seeing that our. NPA numbers and. All of that stuff has looked a little better. And this was where we're quite comfortable and confident. And I don't know whether I told it in the last analyst meet or not, but I think I told that we will be able to recover because one was a little more technical in nature, which happened. So from that perspective, yes, we have recovered one of the two slippages which happened last quarter. The other one was conversations going on, and we are pretty positive about it.
Okay. So there were two accounts that slipped last quarter.
Yeah. Yeah. Yeah, that's right.
And just finally, on the.
Got it.
Got it. And just finally, on the PCR, there was a sharp rise. So is it more driven by higher provisioning requirement for unsecured loans or unsecured delinquencies, or how do we read the rise in PCR?
So if you see our in the overall portfolio, our overall unsecured portfolio is, I would say, less than 3%. We have a very small portfolio, say, MFI, personal loan, education loan. They are very insignificant portfolios, so it is not on account of that. But as a bank, we have taken a call to accelerate our provision on some of these accounts. So it was a management decision to accelerate this provision, and that is the reason the PCR has improved.
Sure. Thank you and all the best.
Thank you.
Thank you. The next question comes from the line of Vansh Solanki from RSPN Ventures. Please go ahead.
Hello. Am I audible?
Yes.
Yes.
Yeah. Good evening, management. My question is on net worth. Even after having the INR 160 crore of profit, my net worth is increased approximately INR 50 crore- INR 60 crore only. So is there any one of our due to revaluation reserve or something like that, why my net worth is not increased?
So. If you remember, last year, the RBI implemented these new investment guidelines. So earlier, the AFS portfolio, any MTM used to directly go to the P&L. Now, that AFS portfolio, any MTM goes to AFS reserve. And AFS reserve forms part of the Tier 1 capital. So this quarter, the yields have gone up, and that's the reason that any kind of MTM pluses and minus go and sit into the AFS reserve. And that is the reason that. The profit has grown sharply, but the impact gets muted at the capital level due to the MTM which goes into the AFS reserve.
But this once the yield comes up.
Yeah. So that is all temporary because ultimately, it is not a realized gain or loss. Only this will flow into the P&L only when the realization happens. So this will keep happening based on the yield movements of the AFS portfolio.
Yeah. And the another question is on my TD and incremental cost of borrowing. What is our highest rate of TD as of now?
So term deposit, anyway, all that is in public domain. Somewhere around 7% is our highest rate of taking term deposits. That is all in public domain.
Yeah.
Yeah. And we have also decreased the borrowing by INR 1,000 crore from INR 5,000 crore-INR 4,000 crore approximately. So is it just. Strategically in nature, or we have got so much term deposits in our bank so that we. Repay the borrowing, which is a higher. Cost of borrowing? That is the reason for that?
No, no specific as such reason. Ultimately, it's the ALM management based on what is the demand, and we don't want to. Take. Deposits or borrowings. And keep it in, say, government securities and things like that. But overall, in the borrowing, there are two components of that. One is our refinance borrowing, and the other is our SCY borrowing. So some of the refinance borrowings have matured during the quarter, and that's the reason that the overall borrowings probably have seen a fall. But overall, from an ALM perspective, we manage that effectively in terms of whether we want to go in for borrowing or for deposits.
Okay. Yeah. And. Just on the credit cost part that we are taking so much additional provisions continuously from last one to quarter at least. So what the management is looking for a full year credit cost, like from quarter three and four onwards, we are going to. I mean, we are deciding not to take additional provision or our provisions will be continuing in line of 0.5, 0.6 credit cost?
So let me take this. So our generally PCR has always been in the between, say, 70%- 72% in that range historically. And that's where comfort zone, 70%- 75% is what I have guided also in past. Because of these one or two specific slippages which happened last year. This PCR went down to 64%, 65% in that range, which was not comfortable to us. So we looked at opportunity to. Raise the PCR back to. Around 70 %- 73%, which is our comfort zone. Once we have reached there, like CD, our comfort zone is 85 %- 90%. Now we have reached around our comfort zone. I think we'd like to sustain in this kind of. Zone at this point of time. And on the credit cost, I think. See, GNP has come down by two, three basis points.
NNP has come down quarter- on- quarter from 66 or something to 50, 52. And credit cost has remained quarter on quarter similar, 53 basis points. I think we will probably we are trying very hard to get some recoveries done and bring it down below 50 basis points, but it will probably remain in the range between 40 - 50. That's what our attempt is at this point of time.
Okay. Yeah. So the GNP and PNP also reduced. Then also our PCR is approximately 72% as of now. So can you just say that from quarter three and four onwards, the credit cost will not be higher as much as the quarter one and two in the second half, I can say?
No, it will not reach there because what has happened is. Some of the unsecured loans and MFI and some of these other portfolio had slipped. And though that small portion of our portfolio, because we had started reducing this portfolio size sometime back. But still, nevertheless, they continue, right? So from that perspective, I think this year, anything around 40 - 50 somewhere, we position ourselves at.
Okay. Thank you. That's from my side. Thank you and all the best.
Thank you.
Thank you. The next question comes from the line of Shivaji Thapliyal from YES Securities. Please go ahead.
Yes. Thank you for the opportunity. I have two questions. I would like to sort of. Get a sense of how the bank is going to look like on a steady-state basis. From an asset quality and from a growth perspective. I mean, firstly, on growth, we have a small base, and we are growing faster than the system. So how far out into the future. Are we going to grow at a. Relatively faster pace? And what kind of CAGR can we really expect from a. Maybe. Three-year standpoint? That is one question. And secondly. I think we have obviously grown. Quite healthily. On the gold loan front, and maybe we are still piloting on retail in other areas. But nevertheless. Where can the steady-state sort of slippage. Ratio settle at for the business model we are trying to build? And what will be the steady-state credit cost.
For that business model? Those are my two questions. Thank you.
Thanks. Thanks, Shivaji, for your questions. Firstly, on the growth front. It will be primarily driven how. Well we can build our liability franchise because growing on the asset side is not challenging for us at this point of time because we already have a strong lever in gold, and gold growth is not going anywhere. The wholesale, especially the real wholesale, which is the corporate banking at mid-market or commercial banking, is growing at a hectic pace because the base is very small there.
And this year, whatever you have seen the growth on the wholesale side, which is around 28%, 29% on a year-on-year basis, is actually happened in spite of the fact that our entire DA portfolio has come down to only INR 60 crore right now, which will eventually not be there at the end of the year, which was more than INR 1,000 crore at some point of time. So in spite of this fact, and LCPD and all these portfolios also come down significantly. And our financial market book also. Maybe will start growing again, but we have not grown this year so far. Which is the NBFCs and all of that, which used to be a large part of our book. So we are realigning the entire corporate banking book in a different way.
And hence, growth in corporate banking will be higher than what you are seeing right now because of these noises which are there in the system. On the SME side, we have been a little cautious in the last one or two quarters because of various ecosystem. The deals which are being talked about, etc., with the exports coming under some kind of a pressure. So we are watching that space. And because. Growth is anyway coming, so we have turned a little cautious on that side. But once we have clarity on the deals and the exports and some of the SME markets, we will get back because we have the levers to press that growth again. On the retail side, we are now having the systems now. So next year onward, we'll start building the retail, both on the liability and the asset franchise and the customer acquisition.
So the real part of the retail bank will start next year, if you ask me, because on the systems we had, we couldn't have built those kind of businesses. Now we have it. Now we can build it. And. So from an overall perspective, growth of around 25%- 30% is a no-brainer for us from the asset perspective, but it will be constrained by. The liquidity and the other. Situation in the ecosystem. Because we have to balance between LCR, we have to balance between NIM and growth, etc. So that will be the constraint. So if you are able to build up a good deposit franchise, we'll be able to grow easily between 25 %- 30% for. Sustainable future. I don't know what is future, but at least 2030, we will be able to grow because.
Some of the levers on growth with larger base, those levers will become bigger accelerators for our wholesale, retail, and SME. So that's on the growth front. The second question was. Credit cost. I think credit cost, we have given a long-term guidance. Between 40 - 50 basis points. Sometime it will be higher, sometime it will be lower, but broadly, we'll be in that range. Because now with some of the businesses, wholesale, SME also being a material part of the book, one account there, one account there can swing a small balance sheet. But generally, on a yearly basis, we should remain between 40- 50 basis points. And that has been my long-term guidance for a very long time.
Thank you for those responses.
Thank you, Shivaji.
Thank you. The next question comes from the line of Yash Dantewadia from Dante Equity. Please go ahead.
Hi. Am I audible?
Yeah, Yash.
Hi. So congratulations on a great set of numbers. What I'd like to know is. I'm sorry, I missed the first element of the call. Have you given a trajectory for the. Cost-to-income for the next financial year?
I think we have always given that we'll be between 60 %- 65% in that range. I think we'll remain there between 60 %- 65%. But FY 2027 onwards, it will start coming down sharply.
Right. And. With our cost of funds, how is that going to move. Especially if you're factoring in one more rate cut?
Two things will happen there. One is the long-term borrowing book will start eventually coming down on the repricing. And the deposit cost, because if there's a rate cut, if there's enough liquidity, it's also a function of liquidity. If there is enough liquidity in the system, then because we are a little more wholesale funded, we'll get more benefits in the short term. Though that's not our strategy. Our strategy is to build a retail franchise. But in the short term, it is benefiting us. Having said that, I think the cost-to-fund trajectory will now go down because of the repricing of the deposits because the fresh deposits are not coming down any further. I discussed this in the beginning of the call. And this will be in line with what the yield drop will happen on the EBLR and the MCLR portfolio.
MCLR portfolio will happen irrespective of the rate cut because it is still. Going through the 100 basis point rate cut through the MCLR. It is halfway through. And if there is one more rate cut, then EBLR portfolio will also get impacted. But the good thing is that our fixed. Rate business is around 60%. And EBLR and MCLR together is around 39%, 40%. So to that extent, our impact will be slightly lesser. So on the balance, I think between cost-to-fund. Reduction and. Reduction and yield reduction, it will be sort of moving in parallel line to a great extent.
Right. Also. Look, I think most of our loan growth. Is obviously coming from gold loan currently, right? And obviously, gold loan prices, I mean, gold prices have done very well in the last two years. So that has obviously been a driver for us to disperse more amount of money. You said gold loan growth is not going anywhere. I heard that particular statement. Let's say gold prices don't move and stay consolidate around here. Are we still expecting the momentum to continue? And if not, where is the next leg of growth going to come for CSB Bank other than gold loan? Where else are we focusing and putting our energy towards?
Yeah. So if you look at gold prices, only gone up in the last one or two years. But if you look at sustainability of our gold growth over the last three, four years. Take aside the FY 2021, 2022 because that LTV thing was there, that 90% - 75%. Our sustainability of the gold growth has been uniform, okay? Maybe a little bit more, but not more than 5%, 6%. But what I see in the ecosystem is ecosystem has grown by 120%. We have still grown by, say, 36%, 37%. When ecosystem was growing much lesser, we are all still growing at that rate. So we do a very. Planned kind of an activity by which what we have done is we have brought down our LTV because we do our sensitivity analysis, and accordingly, we bring down our LTV.
So we are not chasing the growth on gold loan based on where the markets are. Our tonnage growth on a year-on-year basis is 4%. But I have this theory that tonnage growth will come back once gold prices start going down because ultimately, the customer will need that much money for his cash flow or for his working capital or whatever. And a lot of gold businesses started happening, gold loan business on the SME side and working capital side and just not for consumption reasons. So the flavor of the gold businesses, gold loan businesses changing. And I think we are playing to that to a great extent because if you see our number of accounts have come down, but our overall. Business has gone up significantly, especially if you look at the growth.
That is a sign that a huge portion, like the tonnage growth that you pointed out. You also pointed out that the number of accounts have not grown in line with the disbursements. Do you think that's a sign that our loan growth is coming from rallying gold prices, hence people are borrowing more?
No, no, no. Probably I could not explain it properly. Please hear me again. I am saying that the tonnage growth has grown, but customers have not grown. What it means is tonnage per customer is also growing at a time when your. Values are going significantly higher. My theory here is like this, that a customer needs INR 100. He will give lesser tonnage when he gets at a lesser. Grams of gold he has to give. But if he needs that INR 100, when prices come down, he will give more gold. So that's the segment we operate. We don't operate. That's why we are growing at a similar kind of rate where we are growing before. But the market has grown to 130%, 120%. We have not changed that growth. Coming to your, will it impact our growth?
Answer is no overall because even if prices come down and our LTV is very good, so we are not taking any risk on the LTV. Hence, even in a difficult situation where industry which is growing at a very fast pace, in case there is a risk, we will be actually having a risk-free kind of a portfolio, and hence we can continue to grow. That's one. Second, we are not dependent only on gold loan business, right? Our wholesale is growing, which I just explained. Our SME is growing. Our retail is start growing from next year. Asset growth is least of my worries at this point of time.
In retail, where are we going to focus?
Retail primarily will focus on vehicles, CV, CE, lab, loan against security and those kinds of businesses. Now our agri portfolio has stabilized, so now we'll start building our agri portfolio again, which is KCC, tractors, those kinds of businesses. We are still not comfortable that much with the unsecured business, and unsecured will do primarily in-house on our existing customers, which we'll start building. So that's where the plan is. Basically, productive assets in retail where we have our end-use understanding.
That's right. Where do you see our gold growth by 2030 as a total percentage of our AUM?
Gold?
Gold loan portfolio as a total percentage of our AUM by 2030.
Yeah. So there, I have changed slight view on this one. Previously, I used to say it is around 20%, but a new segment is coming up in gold business, which we want to address, which is the SME segment. And that's why when I said ticket size is going up, not by value, but by the requirement of the customer. What it means is. Now. Not going into house or not going into consumption, not going into there's a specific end-use which people are taking through gold loans for the higher ticket size, which are INR 5 lakh, INR 10 lakh, and things like that. And that is a segment which is evolving right now. And given that, I would say that that's almost like SME business with a loan against security, okay?
With a cash flow, but you don't need to adjust that value that cash flow because you have a collateral. So that is a segment which is coming up, which we are especially going to focus on now because I think that's a very, very good segment. The yields may be slightly lower, but that's a good business to be in. So I think we should be somewhere upwards of 25%, but below 30% is what our plans are in gold loan by 2030. Especially because I think this 5%, 7% incremental mix will happen from this particular SME kind of a segment who will use gold as a collateral.
Right. I will come back in to you. I have more questions, but I'll come back in to you.
Thank you. Ladies and gentlemen, we'll take that as the last question for today's call. I would now like to hand the conference over to the management for closing comments.
Okay. Thank you. Thank you for your. Participation, and thank you for a great set of questions. I believe that we had a very, very good quarter. But I'm more excited, more than this quarter, with the kind of. Technology transformation journey and completely rebooting the bank again. The kind of work which has happened on the technology side is. Kind of giving us a lot of satisfaction and happiness. And we hope that we can build the. Bank in a very different trajectory, including franchise businesses and retail SME and wholesale. And gold, of course, remains as a key product for us. So thank you very much for participating and look forward to seeing you again in next quarter. Thank you. Have a good evening.
On behalf of YES Securities , that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.