Q1 25/26

Jul 22, 2025

Summary

MFI stress and accelerated provisions weighed on Q1 earnings, while secured lending remained strong. Management expects unsecured recovery from Q2, a sharper NPA decline in Q3, and maintains 20% asset and deposit growth targets.

Ladies and gentlemen, good day and welcome to the Jana Small Finance Bank Q1 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chintan Shah from ICICI Securities. Thank you, and over to you, sir. Thank you, Shruti. Good evening, everyone. Welcome to the Q1 FY 2026 results conference call for Jana Small Finance Bank. First of all, I would like to thank the Jana Small Finance Bank management for giving us the opportunity to host their quarterly earnings conference call. From the management, we have with us Mr. Ajay Kanwal, Managing Director and Chief Executive Officer, Mr. Abhilash Sandur, our Chief Financial Officer, and other team members from the senior management. Without further delay, I would now like to hand over the floor to the management. Thank you, and over to you, Ajay, sir. Thank you, Chintan, and good evening to all of you. I will make reference to the investor presentation that we've uploaded. I'll even refer to the page numbers. Let me start by the first page of our application to Universal Bank, which happened on the 9th of June. That's a very important step for us as we broad-base our both product and customer base. I'll swiftly move to page number 3, which gives you a sense of which state has how many branches, and also to give you the information that we've added 8 new branches in quarter 1. We plan to open 70 branches this year. We are conscious on cost, so 30 of these will be new branches, and the balance 40 will be relocations of existing branches so it can serve a wider customer base. First quarter has seen three product focuses from us, which you can see on the right-hand side. One is our ASBA launch. Second is the Solitaire savings account for women. Third is a digital offering called iVanii, which essentially is a soundbox and all the merchants and traders can use on their phones. You really don't need a soundbox. You just use our app and our app converts your phone into a soundbox at zero cost. Overall, we are continuing to see growth in customers. We are ensuring that we are on track to launch our strategic products, and we are increasing our branch network on very specific locations, conscious that it has to give us fastest value. I go to page number 4, and I want to talk a bit about quarter 1. It has been a tough quarter because what we did think originally that the MFI stress was a bump in a hole. Unfortunately, the bump was followed by a pothole. We are more than determined to make sure that we cross this very swiftly, and let me talk about that. First is on secured assets. As you know, when we finished March, we were on 70% of secured. Secured assets, touch wood, is firing very well. When I say firing very well, it means that we will expect 35%-40% growth this year as we have been doing in secured assets for some time. Our margin in the first quarter are steady, so there is no drop in margins. In fact, there is no drop in gross yield for the bank. It continues to be 16.5, and we will talk about that. Our credit cost in first quarter on the secured side and slippages are pretty much in line with expectations, very close to Q4, which is one of the better quarters. Importantly, we did inform that we had invested in increasing our headcount in secured business last year, mainly in micro-housing, affordable housing. We had added roughly about 1,400 people fresh last year. We had hired supply chain people. We had increased some more on the 2-wheeler side. The focus on the entire hiring that we did last year is on improving their productivity. We will see nominal cost growth in secured only when we are hiring a used car and marginal increase about 150, 200 between gold. Big news on secured side is it is running well. We are very comfortable with what we see in terms of what is coming through in credit cost, are gaining share, and cost will pretty much done and dusted for the year. Unsecured, we had all 3 lines working against us for the last 12 months. If you add this quarter, it is now been roughly 15 months. First was the revenue challenge where we saw a drop in unsecured book last year, roughly about 10%. Our book has dropped by another 2.5% this quarter. We do see, given that we are at midst of July, that we should see a flat to slight increase in this quarter. I feel at least one side of revenue, which is seeing the book drop and revenue go down, we will see some improvement in the coming quarter, which is Q2. Our criteria are extremely tight of onboarding, so that is one of the reasons we are not able to grow faster. To our mind, this tight criteria is a short-term pain. We do think till the industry is not completely cleared up, we would like to make sure that we are very on the tight end of our credit criteria for new onboarding. On the credit cost, while we did know that every April is a negative, we continue to see fresh flows. We have seen a pickup of fresh flow to NPA in the quarter 4. We did see a marginal increase in quarter 1. That was not a good thing for us purely because Q4 was not a low flow, so Q1 this year has similar. The way we look at it is Q2, the flow will come down, but in Q3 we see a significant slowdown. For the second line, which is credit cost to meaningfully reduce, it will be quarter 3. We continue putting our portfolio under the guarantee program, and 36% of the unsecured portfolio is under the guarantee program. The third lever here was the cost, because when NPAs started rising and so did delinquency, we had to add people in collections. Those costs have plateaued. If you look at secured or unsecured, we do not see any cost increase following what we see as a current run rate. On the deposit side, we took our time in pushing the deposit out as we did see an interest rate cut coming. Our growth has picked up from May. We have also done pricing cuts on deposits. Exactly it is 8.25% in March. It is now at 7.75%, so we have done a 50 basis point cut. We do expect to certainly meet our 20% target on deposit growth with CASA at 20%, and we would see the cost of deposit pricing getting positively impacted from Q2 onwards. We have already spoken about our branches and about the segment launches. I will move on to slide number 5, which shows the PAT of the bank. Our regulatory provision is INR 46 crore. It is lower than last quarter of INR 76 crore. We have increased our accelerated provision to INR 150 crore. This ensures that both gross NPA remains below 3%, net NPA remains below 1%, and we are well capitalized. It is fair to assume that the regulatory provision is lower because we did have accelerated provision done last year, which have been used up. So our PAT is at INR 102 crore. If you add back the accelerated provision, it should look at INR 250 crore. Our gross NPA at 2.8%, net NPA remains at 0.9% with PCR, which is at 69.1% for the secured, which as you all know, is on the higher side. As you do accelerated provision, there are little choices left. You have to provision secured because secured is the biggest portion of our balance sheet. So naturally, when we really want to keep gross NPA and net NPA below 1%, we have no choice but to increase more secured PCR. Then unsecured continues at 89.7%, very similar to what it was in quarter 4. So overall, if you look at the numbers, it has been two, three key challenges here. One has been, of course, the NPA, which has forced us to put some more accelerated provision. It has been the revenue shortfall from a negative unsecured book. Other than those two parameters, which are largely industry specific, though we did think we will get out of this position faster. Raman, who is with me and looks after our microfinance business, will talk more about when we go into Q&A. Those are really the two challenges that we see in quarter 1. Not new challenges, but we did not think that quarter 1 would not resolve it. We continue to put more effort behind it. We would say from quarter 2 now that we would see a significant drop and the book stabilizing in unsecured. I will swiftly move to page number 7. That is the important page we talk about every time. Our affordable housing Micro LAP book is at INR 12,000 crore. We did have an exit on ODFD, roughly about INR 600 odd crore. If you take secured growth, excluding this ODFD, we are at 6%, so we are very steady in our growth. Our big businesses of affordable housing, two-wheeler loans, gold loans are doing very well. I just want to, on this page, just give a clear expectation what we should anticipate when we finish the first half. The total secured advances now show that in Q1 we have done 3%. This should show up to 12%-13% minimum when we finish this quarter. We have small blip in MSME, which has nothing to do with the business. The planned exits happened in one or two of the larger supply chain customers, onboarding got a bit delayed. In MSME loans, which shows a quarter-on-quarter of -1.3, we will probably see a 10%-12% growth as we finish the first half. Overall, very important on this page is our secured business, which is now 71%, most likely will be in the 72%-73% range when we finish first half. Our secured business, which shows a 3% first quarter growth, will show most likely a 12%-13% growth. If our plans and what we see currently works the way we are working, our unsecured advances growth, which is negative 2.5, should at least become zero when we finish the first half. By giving you the expectation the first half, which is very near and very obvious, I really want to reiterate that the guidance given on 20% asset growth, we are certainly on track to meet that in the shape that we've always talked of, which is moving secure to 80%, while we would like unsecured to remain at 20%, which is our plan for some time. I'll move on to an important slide we always talk of, which is slide number 10, where while we do talk a lot of products, our competitive advantage, our operating leverage always has been more business with the same customer. As you can see very clearly from page 10, that whether it is CASA or pre-approved business loans or gold penetration, on every single parameters, there is more and more absorption of multiple products by customers across the bank. I want to now talk of page 11. This is the one we show each time. We have added a new important box on page 11. You can see that INR 2,535 crore of our portfolio was guaranteed till March 2025. The NPA in this book is about INR 6.6 crore, and we should be seeing some recovery from this starting August 2025. The balance, which is the bigger book of CGFMU from July 2026. I really want to flag this off that as we look ahead, we do expect unsecured book to grow, we do expect NPA to get better, we do expect our own recoveries to improve, and we also expect a guarantee to start giving a minor benefit this year and bigger benefits in the following year. We continue providing our or keeping, submitting our books for guarantee program. Right now we have reached 36% of our total unsecured book under the guarantee programs. Our audit shows that we should be closer to 45%-50% of the book under the guarantee program by end of this quarter. I want to then swiftly move on to our deposit mix. Page number 13. We are very liquid. Liquidity is not our concern. We are able to grow very fast. We really put more growth, more focus on growing deposits effective May when we did cut the rates. We first cut from 8.25 to 8.05, and the second cut we did from 8.05 to 7.75, which is in vogue now. CASA quarter-on-quarter is not grown. It is flattish, but we do expect to see a double-digit number for when we finish the first half. I can say that with great amount of confidence because most of that growth we already see in our numbers as we sit here in June. Sorry, July. As we sit here on nearly the last week of July coming up, we would see a double-digit CASA growth for the first half by itself. Time deposits, we can clearly see the pricing is coming lower. Two things you can expect. In quarter 2, when we finish the first half, our cost of deposit should show a drop. Our CASA should show a double digit. We would like to reiterate our guidance for a 20% growth on the business side, on the liability business side. I want to do a quick stop on page 15. Again, on the digital, there is clear focus. We are doing everything digital that comes in our mind. iVanii is a classical example where we have innovated for our customers, where they don't have to spend on sound boxes and can use their mobile phones. There are a lot of other features which are very valuable on it. I want to move next to page number 19, which is the financials page. Here you can see on the right-hand side yield and NIMs. The yield of the book continues to be 16.5. Our NIMs are lower because a portion of our book, which we have sold in OMO- Investment book were at higher yield, our investment book, and the yield has come down because obviously when you reinvest it, the same yield doesn't exist. But the customer yield hasn't shifted. As we go into Q2, we will see a drop in cost of deposits and cost of funding. That should add to this number. And of course, with unsecured gaining back the 2.5% loss of portfolio, that should also make the NIM better and we should, if all goes well, certainly cross the 7% in a very decisive way in terms of net interest margins. I want to talk of page number 20, and this talks about our credit costs. We have shown it earlier, which is 46 is a regulatory provision. We have done an accelerated provision of INR 150 before declaring a PAT of INR 100. After considering our recoveries and the other income of INR 31, and of course minusing INR 150, which is for a variety of reasons, our credit cost looks at 15. Explanation of gross NPA, net NPA given below. I must say that of the INR 196 crore of credit cost, 90% is used for unsecured assets, only a very small portion has gone towards secured, because the book on the secured side in the first quarter was literally as good as Quarter 4. Marginal drop. You can see our gross NPA and net NPA numbers are on this page and how we have arrived at the number. Clearly, the big addition is coming from the unsecured change in the Quarter 1. I'll move to page number 21. Here you can see net NPA of secured is at INR 165 crore. It's dropped from last quarter. It used to be around 176. So like I said, secured is really working very well for us. Unsecured is well-provisioned, and we continue to hope and we are working towards a drop in Q2, though we will see a significant drop in Q3. You can see our P&L page very clearly here. We have seen an increase of other income in Quarter 1. We normally have better income in Quarter 1. There has been a change in accounting where we have Normally on a PSLC, when we sell, till last year we were using the entire income in the first quarter. From this year onwards, we are amortizing it into four quarters. So there is another 50 odd crore of PSLC sale, which will come in Quarter 2, Quarter 3, Quarter 4, roughly about INR 18 crore each. That's the only change, and other than that, we've had a very good other income, which actually helped us improve our asset provisioning further. As we move on to the balance sheet page, which is page number 19. We continue to have good cash balances, so we are very liquid. For folks who have noticed it earlier on the deposit page, our LCR is at 171. We did speak in the last few investor calls that we would like to normalize our LCR below 200 as the liquidity position improves. We are doing so. Balance sheet, page 23. Sorry, balance sheet page is 23. I am reading off 23 page, my apologies. We continue getting long-term financing from SIDBI, NABARD and NHB. We do take small amounts because, as you know, we are very liquid, so we do not really need to take too much borrowings any longer. Though, given the cost of deposit and the length of deposit, which helps our ALM, we do take small amounts every now and then. That is the guidance page. I think AUM and deposits, we are very confident. PAT, let us give us a quarter. We will talk more about when we reach there, and that will directly impact the ROAs and the ROEs. There is nothing significant change beyond that on which I would like to mention. So I really would like to close now, so that we can open ourselves to question and answers. In closing, I can only tell you that it has been a tough quarter, purely because of the MFI stress. Other than that, we have had a good execution, very clear of growing our strategic path on secured. That has not changed. Customer path has not changed. The digital path has not changed. We finally see light at the end of the tunnel with Q2 being better in MFI versus Q1 and Q3 being significantly different. With that, I will stop and open the floor for questions. Thank you. 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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Manish Oswal from Nirmal Bang Securities. Please proceed. Yes, sir. Thank you. Good evening. Thank you for the opportunity. My question on the margin side, you talk about in your commentary, the margin has not declined, but it has declined from 7.4% to 6.9%. In this quarter, we continue to see pressure on your unsecured book, which has declined at 2-point-odd percent. Today only there is a company similar in the sector declare numbers and both in terms of book that is flat, in terms of NII growth is 7%, and there is a decline in their credit addition to the GNPA. When I look at Jana Small Finance Bank performance, industry players are showing some improvement in the metrics, but in Jana, there is no improvement in the metrics, whether it is NII, whether it is margin, whether it is asset quality. What is your comment on that? There is some green shoot in some players in the industry, but we are not seeing in Jana. What is your comment on that thing? Manish Oswal, fortunately for us, our unsecured book is only 30%. Yeah. If you are comparing to green shoots of somebody who is probably 100% MFI, it could be different. Because at the end of the day, our customer yield is at 16.5%, that hasn't changed. Our book is down 2.5%, and it is possible some dedicated MFI player has seen an increase. But like I said, it is different strokes for different folks, because listen, if I want to grow the book, I have to reduce the credit norms a bit and I can grow the book faster. I've chosen not to do that because I don't think so we are ready for that right now. As you know that if growth is an objective, it certainly can be achieved, but it could be a bit expensive later, and that is not where we would like to be. I would suggest, Manish, that we should look at a comparison for like-to-like players. If you go to our slide and see that the customer really is 16.5 is still the same, it does show you that all the pricing is holding up. Green shoots, right, absolutely. We should expect green shoots, Manish. It will come from as unsecured book grows. It will come as we see Q2, and this should happen in Q2. We should see Q2 certainly NPA getting lower and like I said, significant drop in Q3. And very importantly for us, like I mentioned, our secured growth rate in absolute terms at 12%-13% when we finish first half are the real green shoots because they are more sustainable and longer term, and certainly a safer business that we would like to bank on. Okay. Second question on the cost increase side. 26.4% growth in employee expenses and 7.3% quarter-to-quarter. This cost is mainly annual appraisal, salary revision or there is a further increase of the collection team for the effort? Because the volume growth is not that high, so the cost on employee side bit higher side compared to the even other expenses growth is 4.7%. When you look at the balance sheet growth, only 2.3% only. Yes. I think it's a fair question on cost, which is why, Manish, when we started the first slide itself, I said our cost is going to be plateaued here or nominal increase in secured side because we are kind of fully loaded for the year. Yes, the first cost increase on the people side is the hiring we did in Q4 for collections and Q3 for collection last year. They are flowing through into our cost into this year. There is a salary increase, which we can normally expect. But other than that, there is no other specific cost. On cost increase on the other side, we did have to buy- PSLC certificate some PSLC certificates, which if you see the sale of the PSLC comes on the income line. But if you buy anything, it goes on the cost line. That is a bit of one-off in the first quarter. Sorry, why don't you? Yeah. Other OpEx, there's no increase. The increase is through which, as I mentioned, that's the only OpEx increase over the last quarter. Main increase is coming from the payroll, which is directly linked to the appraisal cycle. Other OpEx is really flat, INR 214 crore to INR 215 crore, so that hasn't changed from the numbers. And the numbers, Abhilash has just put in front of me. So there's no real change there. It's basically payroll. And payroll, like I mentioned earlier, because we had already accelerated our hiring both in collections and our secured business. We are kind of full capacity now, which is why you can see, like for example, affordable housing has seen a very strong first quarter growth. If you probably look at a peer group, it's a 6.5% growth in affordable housing in quarter 1 itself. So you can see the results of higher people equal to higher volume in Q1. And you will see as we go ahead when the cost is flattish, slightly negative, as we go into the various quarters, what we anticipate. The last question I have is a bit of strategic in nature. There are three banks have applied universal bank license, including you. My question to the management team is, we all understand the universal bank license long-term benefits, but the point is, the current focus should be shape the business more profitable because we are growing the balance sheet, but the profit is not coming. I am not talking about the PAT level, I am talking about even NII is not increasing at all. For so many quarters, it is quite flattish from quarter 2 onwards. INR 593 crore was the quarter 2, now it is INR 595 crore. Growth without increase in profit, how can you justify that? Thank you. Manish, I think we should not mix it up. By which I mean is, listen, from last quarter when MFI stress has begun, we have seen the book drop by 10%. When you see a 10% drop in book, roughly about INR 1,000 crore at 25% yield, it is unlikely that we will be able to recover that in the short term from a secured growth of assets. I want to assure you that none of us are growing for the sake of growing. At the same time, if there is stress in MFI, there is little chance that we will make that up from in a 9-month or a 12-month time frame from secured growth, where the margins are of course smaller. As you know very well, this is the right business to grow. As far as universal bank is concerned, it does not change our focus on our business at all. Universal Bank application, as you are aware, Manish, is based on a few criteria decided by RBI, which frankly are pretty much BAU, whether it is gross NPA, net NPA, diversification of asset, net worth, or capital adequacy. Just to make sure that you should not feel that our application of Universal Bank has caused us any reason to do anything different than what we would have done normally. Second, Universal Bank is not a long-term benefit. I would say it is a very immediate benefit moment you get it. It should certainly improve the velocity of CASA and deposits into the bank. It should very immediately change the cost of deposit that we get as a bank. There are some benefits I will not put a number to, whether it is employees or investors or customers at large, or what they think about the bank and its brand, which will have indirect benefits. I really want to clarify two things to you, because if you see our numbers, you can see very clearly that the secured deals have not dropped. The secured business has grown. The only impact on NII is unsecured negative growth. I do not think we should misassume NII growth as anything else. Second, on Universal, I do think it is very valuable as a license to be a universal bank, and it is not defocusing us, and the benefits would be from the day that we are awarded that license. Okay, sir. Thank you very much for answering all my questions. Thank you. Thanks, Manish. Thank you. The next question is from the line of Ganesh Nagarsekar from Bharat Bet Research. Please proceed. Yeah. Sir, my first question is regarding our 2-wheeler book. That is one part of the business that we are growing quite aggressively. Historically, in some of the other peers that operate in this segment, credit costs, et cetera, could be a challenge, right? Wanted to check how we are trying to ensure that the kind of lending that we are doing here is quite secure. I think in one of our earlier interactions, you had mentioned that a lot of the load that cross-sell to the housing clients as well. Is the collateral for the housing used for this as well? Or how do you typically think about that? Yeah. Thanks for the question. Let me first clarify the two-wheeler piece. We operate roughly in 185 cities. Got it. As a bank. When we launched two-wheeler, we began with the first 30 cities, then we took it to 60 cities. I think the last I remember, we have put a stop around 120. We have not even reached the 180 cities that we are available in. When you see growth, it is not about us being aggressive. It is us about going to new cities where the bank exists, and we are introducing a new product. Understood. I am saying this because when you grow fast, you can assume that, somebody is either over-aggressive or taking some light decision on credit, which is why gross NPA has been holding up very well. We have been pacing our growth based on number of cities here, not because we took any credit which is extra. Second is, do we give two-wheeler loans to our good customers, whether they are Micro LAP or affordable housing, or they are even our good MFI customers, our good gold loan customers, savings account? Of course, we do. Roughly 15%-20% of the book is there, and that book is of course advantage because we obviously have more insight into the customer than somebody who walks in as a fresh customer to us. My takeaway for you is, listen, we have seen this book. This business was launched after wave one of COVID. We did see some not-so-good numbers post wave 2. It has been a few years. Our scorecard, which we use in addition to the Credit Bureau for two-wheeler, is our second-generation scorecard. We have had a first scorecard. We have remodified it, made it better. We are on number 2 now. Nothing that we can see in our two-wheeler business is stopping us to say it will grow. It will continue growing, purely because we will expand geographically. We should continue to see good numbers. Nothing should make us feel very differently about it. Understood. Got it, sir. My second question is regarding our CASA. That I notice is kind of growing a bit slowly, and that has been a challenge for us for a few quarters now, despite us having relatively good open branches, et cetera. I think you had also mentioned that you are not looking to just grow that by giving higher rates, et cetera. Broadly, how are you thinking about the CASA piece? I think you mentioned growth starting Q2, Q3, the CASA book will start growing quite well. Incrementally, what are you doing that will change the rate of growth in CASA, and how do you think we should think about that a few quarters down? Good. Listen, first, you are very generous. Our CASA growth is 0% in the first quarter. Yes. Every reason for us to feel not so delighted about it. First is CASA growth was through affluent segments. To attract affluent segments, we launched a series of segmental offers. The last one was Solitaire, which was a specific segment for women. Prior to that, we have launched Legend for senior citizens. We have launched premium banking, and before that, we have launched Exclusive. We have also done NRI, where we have to do a full launch, but that is the last piece it will go in. So series of segmental offers, some specific branch opening, which is why I said we will open 30 new branches this year. We have done similar numbers last year for new locations. And of course, more work. We are well endowed in mobile banking and banking. So I will give you some numbers, and I will give you a sense of why it will be different this year. See, last year, we grew the deposit book by 32%. This is time deposit. We grew CASA by 18% last year. Right. The deposit book grew much faster than CASA book, so CASA percentage came down. Right. Here we want to do a slight reversal, which is we would like to grow CASA at least 25%, and we would like to see time deposit to grow less than 25%, so those are percentage changes. Like I said, we are now in nearly end of July, I would think. We can see that we will at least add 10% to CASA growth for first half. I think that will give all of us enough confidence that we will grow at the 25% range on CASA for this year. Now that the money market is liquid and there is no need for us to be conservative on deposit side, we would not increase our time deposit growth at that pace as we did last year. Understood. You can also see that the LCR, which was around 250 odd percent last year, is down to 170%. So clearly the change in the market liquidity has prompted us to make sure that we try and now save some basis points on callable versus non-callable deposits, which we have also done for the first quarter. So all in all, I would give you comfort saying we are liquid. We are in the right environment to grow because it is a low-cost environment static. Hopefully we get probably a bit more lower cost, if at all. But we are happy where we are, and we would like to see some CASA and time deposit growth, and you will certainly see it by end of September. Understood. Perfect. If I could just squeeze in one last question. I think it has just been a month or so since we applied for the Universal Bank license. Any comments from the regulator till now about any challenges that they may have, any issues that they have, or any comments that you have heard back from the regulator on the Universal license front? There is very active engagement. Okay. There is nothing that we have heard a problem. As you know, they have given a hurdle of who can apply. Right. We met the hurdle, we have applied. We have put a 5-year plan. There is active engagement and there is nothing which tells us now that is anything different than what we knew 2 months back. Understood. That is it from my side, sir. Thank you so much. Thank you. Thank you. The next question is from the line of Shailesh Kanani from Centrum Broking. Please proceed. book, right? We have had issues in terms of book and- Sorry to interrupt, sir. Hello, Shailesh, sir? Yeah. Sir, your voice is cutting. Is this better? Yes, sir. Yeah. My question was with respect to BC book. There is a rundown in the book quarter-on-quarter. Still, the GN or the GNPA keeps on adding. How are we placed over there and can you throw some color on that? Shailesh, the BC book is dropping because the BC book uses the same credit criteria as the bank uses. Which is, if you have more than INR 50,000 unsecured outstanding with any player outside of us, then we are not giving the person unsecured loans. Which makes us very conservative with the 2 lakh guardrail put up by the MFIN. Because that's the norm that the bank would like to use so that we really don't build again an over-leveraged book for the sake of growth. We do see the BC books not growing. The second reason the BC books are not growing is, you know, the larger BCs who had NPA challenges are still focused on collection here. It will be unfair for us to kind of push them for growth when we know that the collection cycle for them hasn't bottomed there. I can see that should bottom out for them also. At least one of them has already bottomed in Q1. The other two I would expect in Q2. Then we will see an overall growth. I must tell you that having learned from the BC experience, we are still continuing with the BC growth and we have the extra guardrails that we have to put around BCs, which was not credit guardrails but slowing down their growth, not letting BCs grow faster than an X amount. That's the additional guardrail that we put from going from here on. I must also tell you that every BC who was our BC before the crisis had NPA challenges continues to be our BC. Which means that they would like to get their money back or what they have lost from customers and they would like to continue the partnership, and we are very fully supportive of it. None of the BCs have said, "Oh, my FLDG is busted, so thank you very much. It's your problem now." They are very actively working on solving the issues. But just on the quality front, 18% GNPA, I understand even if it is a rundown, still the amount is kind of increasing quarter-on-quarter. What do you think when this increase in GNPA will kind of rest and how is the par book over there? Because quarter-on-quarter there is consistent increase still. Yeah, see, their book has run down much faster than our book. As you can see, Right their book was around INR 2,500 crore is down to, give me a second. I think year-on-year 20%. INR 1,500 crore now. Shailesh, they have dropped 30%, we dropped 10%, so their book has dropped much faster. Which is why they are reject. That is one of the main reasons of gross NPA increase. Like I said, there were only three BCs challenged. One has stabilized, which means it is not adding to gross NPA. The other two need to stabilize. Once they do, then you will see the change. Our anticipation is by Q2 you will see the change and we will hopefully see some growth in BC book along with ours. I think they have also got used to a different credit criteria than they were used to in the past. It needs a realignment of what is the amount of rejection rate and where do you focus and whom do you say yes, whom do you say no? Because all of us are used to a much easier credit criteria, which was applied last year. That adjustment factor to my mind is over and you should see Q2 as a BC, a different answer. Okay. Just to conclude this part, what gives them the confidence that second quarter would be better? Are we seeing any uptake? Because I remember fourth quarter also their commentary was in general than the first quarter or the month ending to the quarter was kind of good in terms of pickup and general macro commentary was kind of positive. Any quantitative numbers you can provide which gives us this confidence that the second quarter should be better? Shailesh, I will give you April B0 MFI collections around 96.4%. Yeah. 96.4. May was about 98 point. Nine. 9. And June is 98.8 or 98.7. If you just see the April 3 odd percent drop in the B0, that has kind of been our challenge, which is why we say the significant drop of NPA will only happen in Q3. We will see a drop in Q2 though, but not as significant as what we will see in Q3. And the B0 numbers give us that confidence. On the disbursal side, as we sit here finishing July, this will be the highest disbursal month we have had this year. It is higher than what we had in April, May, and June. That gives us confidence that the book will start turning positive. And Shailesh, I must say even now we are going to remain conservative in the credit criteria we do to onboard customers. I did hear from the other analysts that people are probably showing more growth or faster growth. Our bar will still be more cautious here. Okay. Just the last question from my side. I have seen a huge uptick in terms of term loans to NBFCs on quarter-on-quarter basis. Still it is small in terms of overall scheme of things, but still INR 2,000 crore is the NBFC book now. What is the yield what we get over there? Also on Micro LAP, there are certain pockets which are showing stress. Any color if you can throw on that? First, NBFC roughly around INR 1,987 crore is like 6%-7% of our total book. Second, NBFC has been not a single day delinquent, forget NPA, in the last seven years. So we are very mindful. If you watch our first quarter last year also. First quarter is normally slow growth of assets, and we tend to pick up the NBFC lending in the first quarter, second quarter, and then we slow down Q3 to Q4 certainly because our own lending picks up a lot. So there is no other reason except that we have liquidity, we have good clients. The yield is around 12%. 12%. On the NBFC book. We know our NBFCs because we are in the same business, so we know exactly what our clients are doing because we obviously compete with all of them in the market. Comfortable doing that and purely, we have always said this, we still would say that it is a more tactical answer to the balance sheet rather than a strategic answer. So that view on NBFC has not changed because we have got enough of our own business to grow. So it is more a timing issue. On Micro LAP, listen, we do not see any generic issue, and I would say some people did ask me last time also, MFIs are becoming Micro LAP customers, do you see stress, et cetera? No, we did not see that in the past. We did not see it in the first quarter also, and we are very happy with what we have seen in the unsecured delinquency in the first quarter. So nothing else. In fact, we were happy with the way numbers we did see. We always have some geographies which bother us a bit more than other geographies. We are in 25 states, so not all states perform similarly. There is a lot to do with some execution on the ground. So states where we have a challenge, then we tighten the credit criteria, we look at our processes, we look at our leadership, we make changes. We have done that to a few geographies last year. I will give you the specific names. We did have a small challenge in Odisha, for example, which we now see is behind us. We had a minor blip in a few districts in Gujarat. It is now behind us. We certainly did go slow in Karnataka in Q1 given all the external factors that were happening. We did see a small blip in the smaller loans in Karnataka. Again, we have addressed that, but nothing which is a larger Micro LAP issue of something that should cause us to be cautious or change criteria or be anything harder. I must also tell you that our third generation scorecard for affordable housing and Micro LAP, that is the scorecard which is used in addition to using Credit Bureau, will go live next month. So if at all we would have an even better book going forward because our new scorecard is obviously much better than the last scorecard too. Very well. Thanks a lot, sir, and best of luck. Thank you, Shailesh. Thank you. The next question is from the line of Rahul Kumar from Wakaria. Please proceed. Yeah. Hi. Sir, for the unsecured business, what were the SMA 1 and 2 for this quarter? Can you tell us the corresponding figure for the last quarter as well? While the folks dig out the number, do you have a follow-up question or any other question other than the unsecured book? Actually, I had one more data question, but also wanted to know the split of the slippages and provisions between the secured and unsecured, which we have done for this quarter. Yeah. So, like I said, 90% of all the provisions have gone to unsecured, 10% has gone to secured. That's the easy one. In terms of slippages, we are nearly flattish to Q4 on secured. On unsecured, the deterioration is roughly about 15%-20% over Q4. That is mainly coming out of the April D0 of 96, 10 flowing in. Those are the two quick points. Having said that, as you know that since we have been providing very regularly accelerated provision, we are well-covered on the provision side, which you can see in the PCR numbers. Thank you. Okay. Sir, do we also have the similar figure for the write-off for between secured and unsecured? Yes. Give me a second. Just one sec. Abhilash, our CFO is here. He will just tell you the numbers. Sure. Sure. Sir, meanwhile, actually, also wanted to understand what proportion of our book is actually repo-linked, and how much have we have already passed in terms of spread? Sorry, can you repeat the question? What proportion of the book is repo-linked? How much were the Very marginal proportion is repo-linked, because we do give the customer at the end of 39 months to choose whether they want to continue fixed or they want to do a repo link. I would think less than 20% would be repo link. 6%. Sorry, 6%. Abhilash is correcting me, is repo-linked. External benchmark link. T-bill linked. 6% is the number. Okay. 94% is. Yeah. On the write-offs, roughly about INR 100 crore on unsecured and about INR 10 crore on secured. Okay. On the tech write-offs. Okay. And sir, if you look at the NIMs for this quarter, we have seen that it has declined 50 basis points, while our yields have broadly flat or just 10 basis points down and the cost of fund is broadly flat. Why has the NIMs declined 50 basis points? Which is why I did try, but maybe, Abhilash, you can help me. Go ahead, Abhilash. When we sold the investment this quarter, in the quarter one, we booked a profit of almost INR 49 crore as trading income. When we sell these investments, the high-yielding investment goes off, and when we purchase again, the yields are low. That will give an impact on the overall NIMs, because when you calculate the NIM, it also includes the investment book. That is the reason there is a drop in NIM, whereas we have booked a INR 49 crore upfront income as a trading income in the other income for the last quarter. So three things happened, AFS, HTM sale, and OMOs. That gives us an opportunity to book this INR 49 crore, so they are nothing else but that. Okay. Will these NIMs improve from Q2 just because of us buying different yields, different securities? No, the securities are lower yield. So what should happen in Q2 really is our cost of fund should come down, our unsecured should grow, and our NPA should go lower. As you know, all these are high yield. At least unsecured is very high yield, so getting NIMs back up to where it were in Q1 or rather, Q4 would be very easy. The positive side is repo book, roughly about 6%, secured hasn't seen any drop in yields, which is 70% of our business, so we should not see any other impact from a yield perspective. Our biases should improve in Q2. Okay. Okay. That's all. Thank you. No worries. Thank you. The next question is from the line of Somil Shah from Paras Investments. Please proceed. Hi, sir. Good evening. Sir, since last three, four quarters, we are doing accelerated provisions just so that our NNPA remain below 1%. I would like to know till when we will continue doing this, and as this accelerated provisions which we are doing, there should also be reversals for this, right? We are not seeing any reversals. You are absolutely right. The problem is like this. Normally, if your slippage is stopped, then the actual provision is just helping you change the percentage. Right now, what we are facing is accelerated provision, as some of it is already being used up by slippages. Once the slippage is slowed down, then the accelerated provision will just be a bunch. When will it slow down? I think it will certainly slow down by Q2. It will be lower than Q1, and Q3 will be lower than Q2. For no other reason, our slippage will be lower here. I think those are the real. In a normal circumstance, say there was no MFI stress, then we would need not put so much accelerated provision. Then hitting the 3%, 1% mark would have been far easier. Now we are complicated with two things. One is there is an MFI slippage. We did think before the Karnataka issue began in Q4 that we have probably seen the worst. Unfortunately, it did continue in Q4, has continued in Q1. Now we are seeing Q2 decline, and we expect Q3 there a significant drop, because then we would have covered up all the April flows. Yes, accelerated provision will decline certainly because we will have less slippages, and then we do not need to put so much money to reach the 3%, 1%. Yeah. But then if we are seeing this as an accelerated provision, if you feel that out of this only 50% is going to come back, then this should be a normal course of provision, no? Why you are mentioning it as accelerated provisions? Because, see, as a shareholder, even this quarter when we are seeing your presentation, you are mentioning INR 252 crore of that if we add accelerated provisions. So, as a shareholder, we feel that these accelerated provisions will come back to us maybe two quarters or three quarters down the line. So two things. One is we have to for sake of giving transparency, have to define what is regulatory and accelerated, which is why we put them as very separate measures. Two is when we did start accelerated provision last year, no? At least in our head it wasn't clear that we'll continue using it into this year, which is where the case has ended up being. Otherwise, we would have not need to put so much accelerated provision for sure even in the first quarter. Very difficult to predict last year what would happen this year. Otherwise, like I said, it would not been so much. I don't know a better answer. How can I put an accelerated provision which says, okay, out of this accelerated provision, so much will get used and so much will get unused. Probably we'll have much more clearer path when we see Q2 and we see it like the final MFI stress is better down. Then it'll be easier for us to define and say, "Okay, this one is making ratio below one. Don't see use of it. Mm-hmm. And if that we are- Yeah. Sorry. Continue. See, there is no better way of us putting this as transparently as reported. I think going forward is guarantee money coming in, less need of accelerated provision. And third is more recoveries by the bank in general because typically when delinquency improves, then people get more focused on recoveries. When you are busy trying to stop B0 from flowing, then you do not have as much time for recoveries. I think three things should change nearly simultaneously, and we should see that from Q2 onwards. Okay. So basically, once we get the Universal Bank license, say maybe one to three quarters down the line, this accelerated provisions, you will not be doing it? First, accelerated provision is good in a stress environment. It shows that we have enough buffer. I would rather build the buffer and release them later rather than start with a less buffer. I know that we do talk of 3% and 1% for Universal Bank, but very importantly for both you as an investor and me as a CEO, it is good to have some buffers when there is a stress environment going on. If we do not use the buffer, we will gladly release it. It is a timing issue, right? I do not do accelerated provision and let net NPA become 1.2. I do recovery and bring it below one. That means I can declare more profits, provision less, and then I give time to solve it. What we are doing now is rather than giving it that time, we are upfront putting up the cash and then saying that time will solve it. That time will be visible to all of us because we have been doing this for some time. As you know, we did trade code last year. We put 150 million, 450 closed accelerated provision. It will be visible. We were hoping it to be visible early this year, but it has not happened. I think we just need a bit of patience. What I am trying to say also is suppose I get Universal Bank and MFI stress continues. There is no point of me not trying to give extra buffer provisions if I can see the stress in the environment. I would still do it. Mm-hmm. Okay. My final question, sir. Our NIMs have come down drastically. As the previous participant also asked you, it is at 6.9%. Where do you see NIM stabilizing in this current year? We see around 7.2%, 7.3% being the NIM, including the first quarter, 6.9. Okay. Because in previous calls, I think you were mentioning 7.8%-8% NIMs. I mean, we can achieve for this year. Can. So it is- I think our guidance for NIMs. I have not given a guidance on NIM, though I must have said it on the call. Let me tell you this. Let's say we grow INR 1,000 crore of unsecured in the next nine months. Net growth. We will be back to 7.8%. That is all it takes. Okay. NIM is a function of how much 24% asset you are putting on there. Our NIM challenge, like I mentioned, we have been tracking it since last year. We have not seen a drop in NIMs on secure at all. All you are seeing is a drop in unsecured book. Second is the interest reversal when you have NPAs. Those are the two reasons why NIMs have come down. The moment those two change, your NIMs go back up. For us, the issue is just solving the MFI NIM issue. Nothing on the secured side, which will grow very rapidly, is telling us that there is any NIM challenge coming in our secured book. It is very easy. You just add up INR 1,000 crore to my unsecured book, and you will see the NIM will just shoot up. That is it from my side. Thank you and all the best. Thank you. Bye-bye. Thank you very much. Due to time constraints, that was the last question. I would now like to hand the conference over to Mr. Ajay Kanwal for the closing comments. Thank you, and over to you, sir. Thank you so much. Thanks, everyone, for attending and your questions. I hope we have addressed them. In closing, I just want to tell a few things which are very important. First is Universal Bank is very important. It is a very big change for the bank, and we will continue focusing and making sure that we do everything that we can to get a positive response. Second, MFI did foxed us. We didn't anticipate MFI will continue longer. We do remain conservative on MFIs. We are conscious that our remaining conservative may give us a bit of less income, but I would rather have that solved today rather than for income grow my MFI book and then regret again next year. So we as a management team think that is the best and safer path and a more longer-term path to go by, and that won't shift. Third, our secured book is doing extremely well. We continue to grow that handsomely. It is performing very well. We do think that this MFI stress is only making us feel that the faster we move to an 80% secured with the balance unsecured book as guaranteed, I think we will be in the best position as a bank. It does mean that we will have a few tough questions from you folks, which we have had in this quarter and the last quarter. But rest assured, we are very determined to make sure that we do build a very strong and resilient bank. Thank you so much. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.