Ladies and gentlemen, good day and welcome to the Q3 FY25 earnings conference call of the Karur Vysya Bank. We have with us today the management team of KVB, represented by Mr. B. Ramesh Babu, MD and CEO, Mr. J. Natarajan, Executive Director, Mr. K. Chandrasekaran, Chief Operating Officer, and Mr. R. Ramshankar, CFO. 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. B. Ramesh Babu, MD and CEO, to take us through the highlights of the quarter gone by, after which we will open the floor for questions. Over to you, sir.
Thank you. Thank you very much. So, good evening to all of you. On behalf of Karur Vysya Bank, I welcome you all for our bank's earnings call for the quarter three of the financial year 2025. We trust that you, your colleagues, and your family members are keeping well and are in good health. We have uploaded our financial results along with the presentation on our website, and I hope you have had a chance to go through it in detail ahead of this call. I am pleased to mention that the bank continues to have another strong quarter of performance built on our guidance of three metrics: growth, profitability, and asset quality. The bank's performance indicators are in line with our guidance, and the bank is seeing steady and consistent growth.
It is encouraging to note that our team was able to sustain the growth momentum witnessed in the previous quarters, and I am confident that the same will continue in the last quarter of this financial year too. The bank's total business stands at INR 181,993 crores. As of 31st December 2024, we were able to sustain the growth impetus created during the previous quarters, as our total business registered a growth of 3%. The advances stand at INR 82,838 crores, and deposits grew to INR 99,155 crores, with a growth of 3% each, respectively. Our loan book has grown by 14% year-on-year and 3% during the quarter. Under the RAM segment, we have shown a growth of 20% year-on-year and 4% during the quarter. We continue to focus on inclusive growth, and our guidance of 14% growth during the year will hold good.
Retail banking has grown by 20% year-on-year, mainly on mortgages and jewel loans. During the beginning of the current financial year, we have made certain structural changes by merging the branch channel and open market channel, which we were calling it as a Neo. In the first phase, we have implemented this initiative in 244 branches, wherein these branches were able to use the open market channel also for sourcing retail business. This will be expanded further so that all potential branches can use their customer data and support the open market channel for sourcing business. The bank continues to focus on commercial banking business, including MSME, considering satisfactory performance of the portfolio and higher yield and collateral coverage. To ensure consistent growth and best practices under this segment, the bank has engaged one of the leading consultancy firms to support the bank.
After a diagnostic study for a period of three months, the consultancy firm started supporting the bank in its implementation phase in the month of January 2025. The loan book under agricultural banking is also consistently growing, and during the quarter, it has grown by 5%, and the majority of the growth is from jewel loans. We have complied with recent regulatory directives and advisories of RBI, and our rural and semi-urban branches continue to focus on this segment. Corporate loan book has grown by 2% during the quarter, mainly due to our cautious approach in expanding our loan book with lower yields and particularly exposure to certain specific sectors. Further, our focus is more on fund-based exposure of less than 100 crores and non-fund-based business.
Deposit growth continues to remain one of our key focus areas for the bank, and we are aware that the bank has initiated various strategies for deposit growth, including the establishment of a sales acquisition channel for both term deposits and CASA growth. Our total deposit growth was 3% during the quarter. Term deposits grew by 5% during the quarter. We saw an uptick in retail deposits during the third quarter as compared to previous quarters. However, challenges in CASA balances continue to remain, as we saw a reduction in the CASA book by 0.23% sequentially. Our efforts of the branch sales and service team would focus more on deepening the relationships. Initiatives like reconnecting with the customers have been launched in all the branches to address the depletion in the ETB book.
We had indicated that in the previous call that NIM would be above 4% levels in the third quarter of the current year. I am happy to say that we were able to maintain NIM for the third quarter at 4.03% and for the nine months at 4.09%. Our continued journey on shedding away low-yielding corporate advances on one side and focused more on better-yielding granular secured advances in the RAM sector and prudent treasury operations have helped us to retain above 4% levels during the quarter, in spite of a 10 basis points increase in the cost of deposits. The cost of deposits increased by 10 basis points, and the yield on advance improved by 8 basis points sequentially. Yield on investment increased by 6 basis points during the quarter.
Based on our historical pattern of renewal of deposits and fresh deposit acquisition, we expect a moderated raise in the cost of deposits by 10 basis points in the next quarter. Yield on advances may vary depending upon the policy rate changes, which is expected next month. Yield on investments would be in a similar range for the fourth quarter also. Considering all these factors and taking into account any policy rate changes, we expect that NIM will be around 3.85% in the next quarter. Operating profit remained flat at 815 for the quarter as compared to the previous quarter. We are aware that for keeping an eye on the long-term growth, the bank has started various initiatives like recruiting new sales acquisition verticals, branch sales and service executive teams for deepening the branches, expanding the branch network, etc.
There is a lag in witnessing the business growth in proportion to the expenses spent on such initiatives, resulting in lower incremental operating profit. We are confident that the benefits would accrue to us going forward. We have achieved ROA of 1.74% in this quarter. We had guided that our effort would be to ensure ROA is above 1.65% levels, and we are confident to maintain the same going forward also. Our gross slippages during the quarter continue to be under control at INR 139 crores, which is 0.17%. If we annualize that, it comes to 0.68% of our loan book. With our continued close monitoring of the accounts, we are confident that we will continue to keep the ratio below 1%, as guided in our earlier calls.
Our efforts on the recovery of the technically written-off book are continuing to yield results, as we have recovered a sum of 175 crores during the quarter. Due to lower slippages, recoveries, upgrades, and write-offs, our gross NPA has come down to below 1%, that is 0.83%, and we expect that we will continue to maintain at below 2% levels. So, for the quarter under review, we have provided 101 crores towards NPA migrations and 9 crores towards the standard assets and 17 crores towards the restructured assets. Apart from this, we have provided prudential provision of 25 crores, as done in the previous two quarters. Our net NPA has come down to 0.2%, and we would continue to maintain net NPA at less than 1% of our loan book. We hold a provision of 44.81% of the standard restructured book.
The BNPL book balance of 977 crores, as at the end of 31st December, which comes to 1.18% of our portfolio, and it is performing well. Our overall unsecured portfolio to total advances is currently at 2.42%. Our MFI portfolio stands at 350 crores. As at 31st December 2024, we are taking a very cautious approach in this segment. We have tied up with four business correspondents as partners, and we will be mindful in growing selectively in the states where the position is relatively better. Our establishment costs were at 374 crores during the quarter, increased by 5% sequentially, mainly on account of AS 15 actual provisions, which were up by 5 crores compared to the previous quarter due to falling discount rates. Operating expenses were marginally down by 2 crores at 357 crores compared to last quarter.
Our Cost-to-Income Ratio is at 47.27%, and we will continue our efforts to bring it down, and it will be within 50%. Our CRAR, Basel III, continues to be healthy and is at 15.91%, providing us comfortable headroom for growth. Our Liquidity Coverage Ratio continues to be well above the regulatory requirement of 100%. The bank added 25 branches, including 19 Lite branches, during the current quarter, and we have planned to open around 22 branches in the fourth quarter. Our endeavor is to continue the current momentum to the next quarter. We are mindful of the challenges, particularly on the liability side, and are taking every step to increase the low-cost funds, which would also help us in improving our margins.
The guidance we had given at the beginning of the year on the following parameters would hold good for the fourth quarter also: credit growth 14% plus, deposit growth 14% plus, NIM 3.85% for the last quarter, credit cost 0.75%, GNPA less than 2%, and net NPA of less than 1%, ROA above 1.65%, cost-to-income below 50%. I am grateful to all our investors, analysts, and stakeholders for the confidence and continued support, which we will reciprocate through our better performance in the days to come. Now, I will be glad to respond to your 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 1 on their touch-tone phone. If you wish to remove yourself from the question queue, you may press Star and 2.
Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from Rikin Shah from IIFL Securities. Please go ahead.
Good evening, sir. Thank you for the opportunity. I have four questions. The first one is on the statement that you made in your opening remarks that the regulator has been tightening certain regulations pertaining to the gold loans. If you could elaborate on what exactly is the requirement and what are the business process changes we have done to comply with those regulations. So that's the first one. The second question is on the restructured provision that we took in this quarter. I noticed that the restructured loan book has gone down. Any particular account against which we have provided. The third one is on your internal estimates.
What would be the ECL provisioning impact, if at all there is any? And lastly, in terms of, I forgot the fourth one. I'll probably come back in the queue once I recall that. Thank you.
Thank you. Thank you, Rikin. Thanks for the question. And first of all, regarding the jewel loan is concerned, all of you would have seen the September ending Reserve Bank of India guideline. So what I mean to say is those guidelines, what all Reserve Bank has given, so we are in compliance of that. So that's what. So that's why there are many measures what we need to see for the documentary evidence, the purpose for which we have given there and all mentioned. We are in compliance of that. That is the intent of my statement. Coming to the restructured provisions, absolutely, we are not finding any additional stress out of that.
So what we thought is, prudentially, it is better we create when good times are there. Always, I mentioned that we should not forget about the bad times. That is the reason, as a prudential measure, we have provided for that, and nothing beyond that. There is no need for any sort of a panicky situation as far as the restructured book is concerned. You would have observed that total book itself is around 0.7%. So that too, the majority of those accounts, particularly under the retail segment and the commercial segment, they are all backed by security. Even if tomorrow eventuality comes, they become NPA also. In a gap of one year or so, one and a half years, we will be able to recover the money, but the situation will not be there that way. Coming to ECL, our CFO will respond.
Yeah. Yeah. Good evening, Rikin.
See, the draft guidelines have been there for almost the last 78 months, and we have been filing the pro forma statements offering for the last three to four years. Since the final guidelines had to be given, what we have done in the last two years sufficiently covered. Sufficient provisions have been made available. Floating provision of almost 100 crores we had done. Similarly, this year also, almost each quarter, we have been providing 25 crores. So 75 crores we have provided. Based on this, I think we are sufficiently taken care of for any eventuality, for all if ECL comes into play. Sufficiently covered.
All right. Thank you.
And just to clarify on my first questions, while tracking the end use for the gold loan is what we have already implemented in our process, is there a requirement from the regulator to convert the gold loan EMIs, like gold loan repayment by customers in the EMI format rather than the bullet format? And are the gold loans allowed to be rolled over before issuing the new loans? Those are the two extended questions on the first one. And I just recalled a couple of other clarifications which I wanted was the MFI partnership with a few BCs. You did mention that we are entering in the states where the stress signs are not there. If you could elaborate, which are the states where we are venturing into MFI?
And lastly, if time permits, it would be great if you could also talk about what's the provisioning policy that we follow in terms of when we write off and what are the provisioning when the loan becomes NPA in different segments. Those are all my questions.
Okay. Coming to the jewel loans, what you said, suppose when we are taking a documentary evidence that he is a farmer and he is having the farming activity, that itself will ensure saying that we are lending to a farmer and not for any other purpose or speculative purpose. So coming to the rollover of these things, even before RBI started giving these guidelines, itself, we have stopped long-term rollover. So someone will have to close the loan and all they had to take it. So that way, what I say, so we are in compliance with the RBI guidelines.
That's what my point is. Coming to the MFI's concerns for partners, but you would have seen that more or less two years back, we have started the MFI business. But with all these things also, because they are very cautious in going through that one, the total portfolio as on date is around 350 crores. So my point is, if we are trying to grow, Telangana is one of the states where the recoveries are good. And to some extent, that way, Karnataka is also recoveries are pretty good that way. And a few districts of Tamil Nadu also, the point is good. So for the time being, we are not extending much our operations in Kerala. Otherwise, north and all, Bihar, Chandigarh, Punjab, west, we do not have any other operations. Hardly, it is majorly the Telangana, Karnataka, and Tamil Nadu.
So now, coming to the provisioning policies, internal policy, what we have, but my point is, if you look at it, the overall net NPA is around INR 160 crores, and we have sufficiently provided for that. So I think there is no point in having a separate discussion on the policy because the board has, we have discussed with them and all. So what we need to do accordingly, we are doing it.
Fair enough. Fair enough, sir. Thank you very much for answering all the questions. Very helpful.
Thank you.
Thank you. Thank you. The next question comes from Jai Mundhra from ICICI Securities. Please go ahead.
Hi. Good evening, sir. And congratulations on a very good set of numbers. Sir, first question, I have it on TWO recovery. Right? So we have done INR 175 crores in this quarter.
Last quarter and the quarter before that was also we did very healthy numbers. If I calculate, I mean, the total TWO book outstanding is roughly 4,700-4,800 crores. We have been writing off also. So that pool may get bigger and bigger. But the recovery percentage, even if I look at this quarter, 175 crores on maybe, let's say, roughly 5,000-odd crores book is also non-annualized 3-4% roughly. So how, I mean, what is your sense as to from a 12-month perspective, this number can be can we do like, let's say, 400-500 crores recovery for the next four quarters, or what could be a more reasonable number for that TWO recovery?
Yeah. Thank you. Thank you, Jai. Thanks for the good question, actually. So what you said makes sense.
You need to see the color of our write-off book because at a point of time, we were having many big corporate accounts, INR 200-250 crores. Many of those things are there. When they have become NPA, we are also in queue along with many other lenders in the NCLT. And how much it comes out and what will be the final realization, so we will not be able to tell. Many of the cases are with the legally. They are going on. Suppose 4,600-something number, what you have mentioned, I agree. So if we exclude all of them where we can lay our hands for the recovery, where security is there, those things we need to go, it will come to around INR 1,800-2,000 crores something maximum. It comes up and all.
What we tried to do was we have strengthened our legal team because even whenever you are trying to go for a SARFAESI also, straight away, immediately, someone will file a suit in the DRT. And it may run for three years or four years. That way, accounts are getting stuck, and we are able to get all these legal hassles completed and all, we can recover the money. We are strengthening our position for the legal in the bank, already strengthened. And likewise, the disposal team also for the assets also, we have strengthened that way. This importance of getting the money back is made known to everyone. That is the reason you are able to see some traction. I feel that with the traction, what we have created, next four quarters at INR 4,500 crores, what you said, it makes sense that way.
400 crores, what you are saying, I think definitely we can think of it can go ahead. We are also planning that way only. Every effort, what we need to put in because this is one area we need to get back our money. So we need to do. One more thing also, Jay, now that you see when the interest rates for the deposits cannot come down and the yields have plateaued and all, when the rates come down, automatically, you may have an impact on the NIM. So that is the reason we started working aggressively on these write-off recovery also. To some extent, it can compensate us overall. We can keep afloat as far as the net interest and non-interest is concerned. So that is the reason. So our focus is there. As you said, 4,500, we can definitely think of.
Right. Thank you, sir.
Sir, a question on fee growth. Right? So, fee and maybe CASA growth, if you can take it together also. What I thought is, of course, there is a challenge on the fee. There is a challenge on CASA growth. But what I remember or what we were trying to do is we had put in a lot of feet on street to boost both these CASA as well as fee growth. And this quarter, I mean, before this quarter, fee growth was more or less similar or marginally ahead of the loan growth only. This quarter, it has come down to 4% YoY. Similarly, while I understand that CASA is a challenge at the system level, but I thought that because we had put in additional feet on street, we would have done slightly better outcomes. So, your thoughts on both fee and CASA growth?
You are very correct.
CASA, if we split the entire issue into two parts, one is acquisition, second one is the retention. So acquisition is concerned the sales team. So they are trying their level best and all. We are able to get some numbers. But the problem is mainly coming in respect of the retention part. So because the existing money, what all is there, either it may be going to mutual fund or real estate, these sort of things, what is happening? So the acquisition totally what all have come is not getting reflected in the overall growth. That is the reason what we are doing. We have divided the whole problem into two parts. One is for the retention.
We have got a servicing team where these people, they are going to connect, reconnect with the customers for the retention and to get back the money from other banks also, wherever that is there and all. So that to protect our existing balance as well as to increase the balance. That is one portion. Second thing, the acquisition is also working on this. So that way, we are getting the money, but the outflow is much more that overall we are struggling. Coming to the fee, there are a few components we need to look at it. While the distribution fee, cross-sell fee, these things are going up, you would have seen that consciously we have reduced our corporate advances. So it has come down by INR 1,000 crores and more than that.
With all these things, ideally, had we grown another 1,500 crores there, and the 1,000 crores we growth is not there, on those 2,500 crores, the fee income what we were getting as a processing fee, others and all, we would have got it. But why we didn't do was actually there are two reasons. Because the limited resources what we are acquiring. So naturally, the security as well as the yield in respect of the retail is much better, particularly in the commercial as well as the retail segment. So we are deploying the money there. That's the first thing. Second thing is the engine and the people operating team who are running on the ground for the retail. If you do not feed them with these resources, if they stop actually functioning, getting back the momentum will become very difficult for us.
So that is the reason, the available fuel, first of all, we are feeding for the commercial as well as the retail and agriculture. So you are able to see 20% growth. There you cannot expect these sort of a fee like corporate what we get the processing fee, other things and all. So there is another dampener. Once we get some sort of a hold on the deposits and the system actually supports getting these deposits and all, we will be back on the corporate again, and we will be able to move forward. So this is what actually they are happening on the fee front.
Understood. Understood. So okay. And sir, is there any connection of this lower PL, BNPL that has slight while it is not a very big proportion anyway, but does that also have a bearing on the fee side also or not? No, no.
That can definitely have a bearing on our NIM because this PL as well as suppose particularly BNPL is concerned majority we will be getting a higher 12% interest with FLDG. But the issue is when entire market is talking about the personal loans that are below 50,000 where the stress can go up and a few banks which are able to see that, we thought saying that otherwise growing there from 1,000 to 2,000 crores and opening up the gate is very easy. Easiest is that. And not only that, when we have got 50 lakh BNPL customers of us, and if you can select 5 lakhs of them and if you start giving personal loans to them, that itself will run to 1,000 crores easily.
But what we thought is this is not the right time to take those sort of plunge because the external environment is not that conducive. So that is the reason we are holding. You would have seen that 1,300 it has gone to BNPL. It has come down to 970 now. This is a cautious approach we have taken. So otherwise, that window is already open for us. Anytime once normalcy restores, we can think of.
Right, sir. And sir, last question is in the month of December, we had reduced EBLR by five basis points. There was no change in the MCLR. And I can see that cost of deposit is still going up. So let us say hypothetically, and you mentioned that cost of deposit will may inch up by 10 basis points more.
Now, hypothetically, if RBI were to cut interest rate, your MCLR will still be going up only, right? While EBLR will, of course, revise downwards, but your MCLR should not be impacted. And the reason if you can mention why did you cut the EBLR by five basis points? Other banks don't seem to have done anything on that front.
So Jay, with regard to the MCLR, the templated formula given by RBI is, yes, you are right, majorly on the cost of deposit. But it's not only cost of deposit, cost of borrowing, operating cost, the negative carry, CRR, all these things after adjustments only we are raising the rate. So even though there is the deposit cost is continuously going up, so there are the chances that the operating cost or the negative CRR increase, whatever is there, that impact always will be there.
Five basis points, the impact always will be there.
That's why Jai, what you said is MCLR. Suppose this reduction even if OpEx comes down also, and the cost of deposit is much more than that, MCLR will not come down. So whereas EBLR is concerned, it's straight case. When RBI cuts, it's straight to process, it may hit us.
Right. And sir, just a small clarification to the Rikin's question on gold loan circular, that circular is clearly in effect now. And there is no, let us say, I mean, it has already been implemented, and there is no negative, let's say, implication on either growth or maybe customer acquisition or, I mean, asset quality should not be challenged. But this does not impact, or there is no remaining impact out of the circular, right? Is that the way to look at it?
Jay, I will give you some more clarity. See, there are at least three or four points of the recent advisory circular that isn't applicable to our bank. For example, engaging a third party for sourcing business, that we are not doing it. All the business is done only through the branches. And if you leave alone, other important areas where the spirit behind whatever the directives and advisories are, particularly on the scale of finance, that should be accepted process. And the identification of a farmer, the documentary evidence that it should be required. And third is the end use. So all these things, the bank has put in place a proper process model for before two years, and we have been implementing it. And the latest one is the rollover of the account.
So earlier, the banks have the habit of rolling over the account by collecting only the interest amount. That also RBI says that its evergreening is not possible. That also we stopped not now, even two years back itself. So whatever the regulatory directives, advisories on in the spirit of the guidelines, everything that bank has implemented and through validated process.
One more point, to further clarify. See, we see the agricultural growth is 5% quarter on quarter.
Okay. Right.
We see my risk-weighted assets just come down by 2%, mainly account of higher gold loans which we did during the last quarter. It clearly says that the tempo is going on.
And we are not in the subvention model. So we are giving a direct agricultural loan without subvention.
We do not have any loan, Jay, which is under subvention where we need to claim the subvention.
This is not there at all.
Okay. Understood. Great, sir. That's all from my side. Thank you and all the way.
Thank you, Jai.
Thank you very much.
Thanks.
Thank you. The next question comes from Suraj Das from Sundaram Mutual Fund. Please go ahead. Mr. Das, your line is unmuted. Please proceed with your question.
Yeah. Hi, hi, hi, sir. Thanks for the opportunity. So just a few questions have already been answered. Couple of questions. The mortgage, the loan piece has been going well for you for last so many quarters. If you can give some color around this book, I mean, how do you see the growth going ahead? And also, what could be the average LTV in this book? The second question is on the SME side. The SME customers, the book is again growing well.
The customers that you are acquiring, do they open current account with you also, or is this just the asset side customers and then don't have any kind of liability or something like that?
Sorry, sorry, Suraj, that SME question, can you repeat once again, please?
Sir, I'm saying that the SME customers that you are acquiring, do they also open current account with you?
Okay. Understood. Yeah. These are two questions?
Yes. Yeah. Thanks.
Thanks. Yeah. Coming to the LAP concern, you see, majority of them, they are going for the lower. If you look at it, the ticket size is below one crore, and to some extent, bigger accounts come up also three to four crores, it goes there. But the purpose for which they are taking and the cash flows for servicing the loan, this is the main criteria we are looking at it.
Security definitely is needed. But in addition to that, cash flows as well as the service ability, ability to service, this is the key we are seeing. That's why if you look at it, it may be done by any vertical. Overall, if you look at it, the stress under this portfolio is absolutely dismal and minimal. So the onboarding, what all checks and balances are required that we have thoroughly strengthened. So that's the reason. So we can say that because second thing is, if you see the percentage is going up by 20%-30% that way and all, so it is not that way we need to see because the base itself is low, the percentage is high. If the base is high, actually compared to the potential what all is available, what our growth is absolutely doable and all we can do.
That's why it is not a cause of concern at all as it is for us. Coming to the SMEs concern, now actually suppose if someone is availing a term loan and there is no working capital loan, naturally he requires a current account for making his tax payments, all these things and all. But suppose if someone is also having a working capital account, you may ask for a current account, but what will prompt him to keep the money in current account without rate of any payout of rate of interest and other side for the same money paying interest in the cash credit? We'll ask them. But it is difficult actually, impractical for us also to insist that you maintain a current account and keep some balance in that. It is nothing but penalizing him.
So wherever they do not have a cash credit account, that is working capital account, definitely we maintain the current account and all. So we'll use that for operating purposes. Okay. See, in the working capital accounts also, generally they operate in the working capital account, but wherever the retail traders, for example, we are giving POS machines, QR code, all these things, naturally he has to operate through current account only. So in such cases, they will run the current account and then frequently they transfer to CC account.
Sure, sir. Got it. Thanks. Thanks so much. That's all from my side. Yeah. Thank you. Thank you. Yeah.
Thank you. The next question comes from Pritesh Bumb from DAM Capital Advisors. Please go ahead.
Hi, sir. Can you hear me? Yeah. We are able to hear you. Please go ahead. Yeah. Good evening, sir. Sir, two questions.
One is on the NIM outlook. You mentioned that in Q4, you could see NIM coming down towards like 3.85%. But can you give some outlook in FY26? How do you see the NIMs? Should it stabilize there? Can it come about 4% again? Of course, you have given some commentary around the RBI cutting rates and the impact on margins. But any levers we can pull it, pull the NIM up?
Pritesh, it is too early to talk about next year because the position has become so dynamic. What is going to happen at this stage, we do not know because what will be the cost of deposits, how the yields move, what RBI cuts, all these things, so many permutations, combinations are there. That's why get assessment of one quarter at the most, the visibility we'll have.
But one thing I will tell you, man. You yourself have responded. The rates on the deposits will not come down, and the RBI is going to cut down the rates. Even then, if it has to be above 4%, the only one way it will be above 4%. Our current, suppose, let us say, unsecured is at 2.4%. I had to make it 10% or 15%. Is it wise? Because taking too much of risk on the book straight away when the rest of the industry is struggling with its unsecured and all at the wrong time for the sake of protecting the NIM, do we need to do that?
Or we need to lie low at this stage till such time normalcy comes back and all, then we have our own sources as far as the BNPL, other things also for the unsecured going forward to take it forward. So that's what the time will tell. Maybe after the March results, we'll be able to have a better understanding. At that time, I'll be able to guide you on what is our thoughts on the next year NIM.
Sure. Just to follow up on that, sir, when you guided to maintain your ROA at about 1.65%, if NIMs is an uncertainty because if you look at the new point, your credit cost is already very low, the cost efficiency is there, and fees is doing relatively okay, then what gives you the confidence that your ROA will be maintained at about 1.65%-1.7%?
It is pretty simple.
If you look at it, the provisioning, there is a stage where we may not be able to make further provision because you see the net NPA, what all is there, INR 160 crore. If really, if you are serious, you can provide in one quarter itself and get out of that. So currently, INR 25 crores prudentially we have provided, more or less last year four quarters and this year three quarters we have provided. In future, it may not be required. Also, if the board takes a call, those things may not be required that way. So likewise, many of the prudential provisions what we have been making. So a stage will come where the bank and the board gets a confidence saying that if any eventuality comes tomorrow, the bank will be able to absorb the shock sufficiently, not a problem at all.
At that time, we can definitely either prune down or reduce or stop the provision that will straight away flow into ROA only. So that way, 1.65 getting an ROA should not be a major issue. Got it. That's very clear. The last question was on corporate book. We have been shedding it down, but what will be that inflection point where you'll stop shedding it and grow? I mean, is it the spread which is, because you mentioned in previous calls also, that the spread is not that great to continue corporate, but what will be that inflection point for you to again start growing or not degrow the book from here on? Absolutely. Inflection point was yesterday. Why I'm telling you this point is we are willing to grow, but the point is we need to have a businessman mindset.
When I am getting INR 100, this INR 100, where should I deploy? If some sort of an avenue where I'm getting 10% fully collateral parent company coverage is coming up and all, the capital risk is low and all. So these sort of avenue is available. Second side, actually, someone says, "You give me at 9%," and absolutely it is a higher amount and all, it's NBFC. All these things someone is talking. So then naturally, I need to take a call where I need to deploy the money. Suppose on the retail side where the scope becomes absolutely limited on the pricing front, collateral front, all these things, then if I have huge money which is beyond the requirement what I can deploy in the retail, definitely that money will go into corporate. So it's a tactical, timely investment pattern what we have taken. It is not sacrosanct.
So once the normalcy in the business comes up and all, suppose let us say one more thing. If you are going to raise a deposit at 8.1% for a senior citizen, if you lend it at 9% after CRR, SLR and all, it will not make much sense for us. So that way, 9.25, if we have to lend, we need to sufficiently look at it whether I cannot lend elsewhere. So that inflection point, very difficult to tell as and when there is an absolute Chinese wall on the other side on the ramp, then automatically
the funds will move this side. Got it, sir. Thank you so much for answering all the questions. Thank you. Thank you.
Thank you.
Thank you.
Thank you. A reminder to all the participants, if you wish to register for a question, please press star and one on your touch-tone phone.
The next question comes from Abhijith Vara from Axis Mutual Fund. Please go ahead.
Thank you for taking my question. Sir, first of all, congratulations on a very good set of numbers, especially in challenging macro. So the first question, sir, is on capital. I just wanted to check, even though risk-weighted assets density has gone down, the ratios have not improved. In fact, they have come off. Why is it so?
Yeah. Thank you, Abhijit. Thanks for the compliment. Sir, we need to understand one thing as far as the CRAR concerned. So the earned profit of the last three quarters, we will be clubbing for the purpose of CRAR only in the March. So the rest of the period, you may be earning, but it will not be counted.
During this process, the profit what all was there up to March of last year, that will be reckoned, and the net owned funds what all is there. And the assets are going up. Naturally, there can be a depletion, but all these things will be made good in the month of March. If you can, that is March quarter, if you can look at the past performance, also it will be on those lines.
Sure, sir. Got it. Sir, the second question is on cost to income. Sorry if I missed your earlier comments. Can you please help us understand how to look at growth trajectory for the cost aspects, OpEx?
So cost, if you look at it, there are two aspects we need to look at it. One is employee cost and second thing, other expenses.
Employee cost, what we did, we understood two years back, and the liabilities is going to be a big step for the bank and all. That's why we invested in the last one year something on the sourcing team, acquisition team for the liabilities, which comes to around 1,200-1,300 people. Likewise, we also felt saying that the branch level servicing and engaging with the customer is equally important. Otherwise, retention will be very difficult. We have taken low-cost resources of around 1,600-1,700 at the branch level also. So these people, they are coming and all settling down. They need to understand the bank. They need to start doing their job seriously. So these 3,000 people in the last 2,800 people, I can say that in the last one, one and a half years, that has had a bearing on the employee cost.
Coming to other expense also, if you look at it, a lot of branches. Five years we didn't open many branches, and last two years, two and a half years, we started opening the branches. This year also, we planned for around 80 branches, something like that. Already a few branches have been opened. Rest, we'll try to do it in the fourth quarter. So when the branch is open, you are incurring a cost, and you will need to run for more or less two years to get a break even. But if you do not invest today, tomorrow, there will be absolute darkness and all. You will not be able to get the value out of that. So that is the reason few of the costs we have front-loaded, and we are taking it.
So correspondingly, expecting on the other side in the income side may not go up. Particularly earlier, also I mentioned about the corporate when it's not growing, the processing, see, all these things we are not getting. So this is what is a balancing we are doing. But with all these things, also, we have indicated that we would like to maintain our cost to income ratio at around below 50.
Sure, sir. That's very clear. Thank you for answering all my questions and all the best for future quarters.
Thank you, Abhijit. Thank you.
Yeah.
Thank you. Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments.
So once again, thank you all for the pains you have taken and the interest what you have shown in coming to the call and asking these questions and all. So as I mentioned in my initial inaugural remarks, so we are on the job and what best needs to be done, continuous team, we will try to do and we will try to meet the expectations. Thank you very much and good day to all of you. Thank you.
Thank you. On behalf of Karur Vysya Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.