Ladies and gentlemen, good day, and Welcome to Q2 FY26 earnings conference call of Karur Vysya Bank. We have with us today from the management team of KVB, represented by Mr. B. Ramesh Babu, Managing Director & CEO; Mr. Sankar Balabhadrapatruni, Executive Director; Mr. Chandrasekaran, Chief Operating Officer; and Mr. Ramshankar, Chief Financial Officer. 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 this conference call, please signal an operator by pressing 'Star' and '0' on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. B. Ramesh Babu, Managing Director & CEO, to take us through the highlights of the quarter gone by, after which we will open the floor for questions.
Thank you, and over to you, sir.
Yeah, thank you. Thank you, Niru. Good evening to all of you. On behalf of Karur Vysya Bank, I extend a warm welcome to everyone joining our bank's Quarter 2 earnings call for the financial year 2026. Team KVB wishes you and your family advanced holiday greetings. Our financial results and accompanying presentations have been made available on our website, and trust you have had the opportunity to review them thoroughly in advance of this meeting. As a recap of discussion in the last two calls, in the current financial year, we continue to maintain a cautiously optimistic outlook for the second half of the financial year 2026, emphasizing the importance of managing margin pressures and closely monitoring asset quality. We strategically accelerated growth during the first quarter to ensure that our annual targets would be balanced throughout the remainder of the year.
Our current performance indicators are consistent with the guidance previously provided. The sustained inclusive results across all three primary metrics, that is, growth, profitability, and asset quality, underscore the continued strength and resilience of our performance since the year's outset. I am pleased to announce that the bank has achieved a significant milestone of reaching INR 2 trillion in business at the conclusion of the second quarter. Notably, the bank has added INR 750 billion in business over the past three and a half years. This progress demonstrates that management's initiative regarding key metrics is advancing effectively. As of 30 September 2025, the bank's total business reached INR 2,32,160 crore, reflecting our sustained growth momentum in the second quarter, with an overall business increase of 4% quarter on quarter and a year-on-year growth of 15%.
Advances rose to INR 92,724 crore, representing a growth of 4% quarter on quarter, while deposits increased to INR 1,10,492 crore, achieving a quarter on quarter growth of 4%. Both advances and deposits grew by 15% each on a year-on-year basis. Business mix remains the same, with RAM verticals constituting 86% of the business, while corporate banking constitutes 14% of the business. RAM verticals grew by 4% quarter on quarter basis and 19% on a year-on-year basis. Commercial business constituted 36%, followed by retail at 26% and ABG constituting 24%. Retail advances increased by 7% quarter on quarter, primarily driven by growth in jewel loans and mortgage loans. We saw an uptick in buy now pay later loans during the quarter on account of Dashara and Diwali festivals.
The synergy between the branch channel and the open market channel continues to progress well, as seen by a 13% increase in mortgage loans during the quarter. The early booking of assets supports consistent interest income recognition throughout the year. Considering the low yields and increased competition, we continue to lie low in housing loans and vehicle loans. The commercial business segment showed a 3% growth over the previous quarter, though lower sequentially compared with the previous quarter. Disbursements under the small business category grew 35% quarter on quarter. However, lower utilizations in working capital facilities of business banking, the exposures between INR 5 crore - INR 25 crore, we will consider as a business banking under the commercial segment. It has slowed the growth. We expect this to be improved in the current quarter due to GST rationalization, etc.
The agriculture loan portfolio recorded a growth of 4% during the quarter. Agri jewel loans constituted 91% of the portfolio, and other agri loans constituted 9%. LTV of agri jewel loan is 57.72%, indicating availability of sufficient margins. The prospect of a favorable monsoon across numerous regions is expected to contribute significantly to further growth within this segment. We have also set up a jewel loan sales team, which should further improve our growth in this segment. With respect to the corporate and institutional loan portfolio, we had indicated in our previous calls that we would invest in corporate instruments of entities to lock the yields, utilizing these as credit substitutes. This strategy is working out well. Our corporate advances portfolio, including credit substitutes, grew by 5% during the quarter and 7% year-on-year. The portfolio grew by 1% quarter on quarter, excluding credit substitutes during the quarter.
The bank's liability business constitutes 54% of the total business of the bank. I am happy to share that the CASA balances crossed INR 30,000 crore at the conclusion of this quarter. Total deposits increased by 4% during the second quarter, driven by gains both in term deposits and CASA. CASA balances grew by 4% over the same period. Demand deposits and savings deposits grew by 4% each. Additionally, more than the anticipated end-of-quarter inflows into current accounts further supported overall deposit growth. Our strategy to focus on higher balances variant in savings accounts by both branch channel as well as the sales channel is gaining momentum, with savings balances growing by 23% year-on-year under NTB. Similarly, NTB value and CASA also grew by 20% year-on-year.
For the existing relationships, a lot of efforts have been initiated for deeper customer engagement at branch levels with our branch sales and service executives. Retail deposits increased by 2% during the quarter. We had reduced the interest rates for special term deposit schemes during the quarter, and the growth was slightly tied compared to the previous growth. The front-loaded deposits growth in the first quarter itself to fund the advances growth, hence it did not affect our CD ratio much, which remained at 83.91% at the end of the quarter. Before going to margins, I would like to share regarding the major recovery of INR 295 crore during the quarter from a technically written-off account. This comprises INR 157 crore of principal amount and INR 139 crore of interest amount. Our interest income is higher by INR 139 crore during the quarter, which would affect the margin numbers.
However, we have excluded this amount for margin calculations in the presentation to give a realistic picture. Regarding margins, we had provided guidance in the range of 3.7% - 3.75% for the financial year 2026. I am pleased to report that we could successfully navigate the quarter and maintain our net interest margin at 3.77%, representing a decrease of 9 basis points from the previous quarter, compared to 19 basis points reduction during the first quarter of the year. The cost of deposits reduced by 17 basis points on a sequential basis, as we had stopped two of our special deposit schemes during the quarter and reduced the rates in the majority of the buckets of our retail term deposits. We also reduced our rates on savings deposits, and sequentially, the cost of savings deposits has come down from 2.61% to 2.53% during the second quarter.
The repricing of the retail term deposits has started from September and is likely to go till the end of the third quarter. To be competitive and to sustain the growth, we hiked the rates of interest at the end of September. Considering this, we expect a reduction of around 10 basis points during the next quarter in the cost. The yield on advances declined by 24 basis points during the quarter. We had informed that 37% of our EBR-R book would be repriced during quarter two, and the same has been completed. Our loan portfolio comprises 54% EBR-R-linked accounts, 29% MCLR-linked, and fixed-rate accounts to now 15%. With the current visibility, as guided during our earlier calls, we endeavor to maintain our full-year guidance of net interest margin at 3.7% - 3.75% for the year 2026 as a whole.
We have taken lots of steps to improve the margins as we weeded out low-yielding advances last year in the corporate portfolio. A similar exercise has been initiated in our retail and commercial portfolios this year. The operating profit for the quarter was at INR 1,017 crore, reflecting a 25% increase compared to the same quarter in the previous year and 26% sequentially, propelled by the recoveries as mentioned earlier. Non-interest income for the period included INR 512 crore, increased from INR 447 crore in the previous quarter. Recoveries from written-off accounts amounted to INR 205 crore, that is INR 344 crore including the interest recovery, compared to INR 78 crore in the previous quarter. During this quarter, sovereign yields firmed up by 20 - 40 basis points across the curve following RBI's shift in policy stance from accommodative to neutral.
Consequently, Treasury gains were limited in quarter two compared with quarter one gains of INR 78 crore, when yields had eased by around 25 - 30 basis points in quarter one. We had guided recoveries from written-off accounts would be like last year, and the recoveries would not be even every quarter, but overall during the year would be around INR 600 crore, which we feel we will be able to achieve. We had made income by way of sale of PSLC certificates amounting to INR 8.5 crore during the quarter. Our operating expenses for the quarter included INR 756 crore, representing a sequential increase of INR 35 crore. Establishment expenses, that is, salaries and allowances remained flat quarter on quarter. Other operational expenses increased by INR 34 crore over the previous quarter.
The cost-to-income ratio for the half-year ended was 44.76%, which remains within the guided range of less than 50%. Net profit for the quarter was at INR 574 crore, an increase of 10% quarter on quarter and 17% year-on-year. During the quarter under review, there was a modest increase in fresh slippages, as indicated during the previous call. Elevated SMA 30+ levels were observed during last quarter due to certain corporate accounts. Fresh slippages for the quarter totaled INR 350 crore compared to INR 188 crore in the preceding quarter. Of this, INR 218 crore, so out of the INR 350 crore what I mentioned during quarter two, INR 218 crore originated from the corporate book. Instead of postponing the issue of distress, we prefer to recognize the know-it-self so that realization efforts can be commenced fast.
Excluding these two accounts, we do not identify any additional concerns within our corporate portfolio at present. To give more comfort, I would like to state that slippages in our non-corporate portfolio have remained the same in the last six quarters. Slippages in our corporate portfolio also, barring this quarter as a one-off case where we saw elevated levels, remain at muted levels during the last five quarters. During the quarter under review, an allocation of INR 250 crore was made towards NPM migrations, standard assets, and restructured assets, resulting in a credit cost of 0.27% for the quarter and 0.4% for the half year. We are sufficiently provided for the corporate accounts that slipped during the quarter. This increased credit cost needs to be considered as a one-time measure for this quarter, and it would return to normal levels from the next quarter onwards.
SMA 30 + levels have come down to 0.27% from 0.6% of the previous quarter, and we are confident in our ability to maintain the slippages ratio below 1% level, as we have previously indicated. In spite of fresh slippages, owing to improved recoveries and upgrades, as well as write-offs, our gross NPA has slightly increased from 0.66% to 0.76%. Our net NPA remains steady at 0.19%, and we are committed to maintaining net NPA below 1% of our loan portfolio. The proportion of our standard restructured loan portfolio has further decreased to 0.5% of our total loans and continues to perform satisfactorily. At present, we do not anticipate any significant setbacks or slippages within this segment. Notably, a substantial portion is secured by collateral, and we maintain a provision of 45% for this portfolio.
The ROA for the quarter stands at 1.81%, slightly better than the previously guided range of 1.55% to 1.65%. Our CRAR, Basel III, continues to be healthy and is at 16.58%, providing us comfortable headroom for growth. As all of you know, the quarter profit of this year and last quarter half year will not be added for the purpose of CRAR. The liquidity coverage ratio continues to be well above the regulatory requirement of 100%. We had opened seven branches in the first half of the year, comprising five light branches and two regular branches. We have planned to open another 21 branches in the current year. We had already issued a statement last month explaining overall exposure of our customers to the U.S. market and the negligible impact on our portfolio on account of U.S. tariffs. The status remains the same.
When we strive to become better than we are, everything around us becomes better too. Paulo Coelho. Our team continues to work harder and has demonstrated spirit in sustaining growth, and we remain confident in our ability to continue this momentum throughout the second half of the year too. I would like to express my sincere gratitude to all our investors, analysts, and stakeholders for their continued confidence and ongoing support. We are committed to upholding this trust through continued strong performance in the future. To sum up, our guidance for credit growth of about 2% over and above the industry growth continues. NIMs for the full year will be in the range of 3.7% - 3.75%. Our gross NPA is expected to be less than 1.5%, and net NPA will be less than 1%, with slippages to be less than 1% of the loan book.
As I told earlier, ROA will be in the range of 1.55% to 1.65%. I’ll be glad to respond to your questions. Thank you. Over to Niru.
Thank you very much. We will now begin with 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. Participants, you may press star and one to ask a question. The first question is from the line of Akshat Agrawal from SMIFS Capital. Please go ahead.
Good evening, sir. Thank you for the opportunity. My first question is on asset quality. Do you see these affected corporate accounts to recover in the next few quarters? How do you see credit costs for the full year? Is it like in the 50 bps range or higher?
Yeah, as I told, if you look at the corporate accounts for the last four or five quarters, the net slippages are in the range of 0.2% - 0.25%. That continues. Even this quarter also, if these two accounts were actually we found, we can absolutely continue for a few more quarters. When we saw some sort of issues are there, we felt saying that it is better we bite the bullet earlier so that the realization will be better. It is consciously a call taken within the bank to upfront this one and all to take it forward rather than actually handling it after a few quarters. If we exclude these two accounts of INR 218 crore, the rest of the corporate portfolio, literally I can say SMA 30 + is currently zero. If we exclude this, again, corporate net slippages will be 0.25%.
That way, we don't feel corporate is going to hit us in the next half year. There should not be any issue. Now coming to the credit cost concerns, credit costs, you see, there are two options for us. First option is being a substandard 15% levy and all. Within the guidance, what all we have given and all of credit costs of 1%, you can continue as and when the maturity happens and all substantially doubtful next year and all, we can provide. No problem at all in that. What we thought, when you have the money, it is better to clean the balance sheet. That is the reason we have sufficiently provided, and the net NPA is at 0.19%. That way, credit cost will be around 1%. It is only on account of one-off call taken.
It should not be generalized saying that credit costs have gone up on account of this. Earlier, what all we have given, it stands within that, maybe here and there slightly up and down because based on this one-time slippage of these accounts.
Thank you, sir. My next question is on fees. Fee income is roughly flat QOQ. Do we expect it to increase going forward? What efforts are we in the bank taking to enhance it?
I agree. Fee income, if you look at it, the asset growth, what all has come, few of the products and the segments where the processing fee is quite nominal. If you can look at the mortgage loans, other things, jewel loans, where the growth has come in the first quarter and relatively in the second quarter, it is these accounts we cannot have very good processing fees. We have grown well, actually. In the corporate, you will get good fees. There, actually, we have grown, but not at the same levels in respect of what we have done in the RAM. This is one part. Disproportionate growth in the advances in the RAM vertical has not allowed us to go with above 1%, above 1% for the fee. That is the first thing.
The second thing, if you look at it, our other levers of the fee income, like guarantees, these things, compared to last year, the income has gone up by 10% - 15%. The overall issue is, compared to the base, this is relatively lower, which we need to further take it forward. Another big lever which we were talking about is the third-party income. The third-party income also, compared to last year, we may be growing by 10%, 20%, but that may not be sufficient. I agree with you. Earlier, if you see the due point, 1.1 used to be there. Currently, we may be at 0.93 or 0.94. This gap of 14 basis points, what all are there, we need to fix that. One is on account of the higher growth in the retail segment advances, and this is one.
Otherwise, we are on the job as well as the cross-sell, as well as the non-fund-based business.
Very well, sir. On the cost, what kind of, I mean, you have previously guided 50% for the full year on cost-to-income. Do we still expect the cost to increase from here on for investments, pension, actuarial exemptions, and so on?
Yeah, yeah. You see, we have told already very few branches are open. 21 branches are yet to be opened. All branches, what all are there? In addition to that, there are many new initiatives that are there in the pipeline, which we are working. For these new initiatives, we need to take the experienced manpower for that. We need to invest on them initially. From day one, you will not get the result of that. That way, there can be costs we need to incur. Overall, we will try to manage within the cost-to-income of 50% what we have told that way because correspondingly, income is also growing. That way, we will be well within the 50% what we have indicated.
Right, sir. If I can squeeze in one more question, if we think about NIMs from like a monthly perspective, do you see them turning around in October, mid-November, or something in that perspective?
I agree with you, but there are two aspects we need to look at. The deposit repricing will start happening. It started already. It will work. Because the term deposits growth is relatively tepid, we need to increase our term deposit rates by 20 basis points again at the end of September. That way, what we visualize, that's sort of a cost reduction, 17 basis points what we have got for the cost of deposits in this quarter, which we may not be able to get. That is the reason we have indicated around 10 basis points. Coming to the asset side, by the first week of before the 10th, the repricing on accounts of EBR-R has been completed because the last revision was around June 6th. Another issue we can see is a lot of competition we are facing.
Few of the banks are offering some sort of very, very finest rates. While we are willing to forego a few of the exposures at those rates because the rest of the market also will get spoiled, a few of the cases we need to keep the account with them because of the relationship we had with them. On account of the ease, though it looks like we have reached the bottom and all, we'll be able to take it forward from here. There can be here and there on account of the competition, the rates may come down. As we have indicated for the overall whole year, 3.7% - 7.5%. Now, having looked at two quarters, we are reasonably confident we will be above that confidently.
Thank you very much, sir, for answering all my questions. All the best.
Thank you. Thank you, Akshit. Thank you.
Thank you. Next question is from the line of Jignesh from Ambit Capital. Please go ahead. Jignesh, may I request to unmute your line and proceed with your question?
Yeah, hi. Am I audible now?
Yeah.
Hi, audible. Audible, Jignesh. Go ahead.
Thank you. Thank you so much, sir. Thank you so much for the opportunity. I had a list on this, one of two corporate accounts, large corporate accounts that you spoke about, INR 218 crore. That is the exposure that we spoke about. This is something that you identified earlier, and now we are recognizing it. Does this have anything to do with this U.S. tariff thing and all, or is this something which was in-house there in the pipeline? Now you recognize it. Can you give some color on this? What sort of this exposure was?
Absolutely. Jignesh, you have given me a multiple-choice question. It is in the pipeline. If you look at our June SMA 30 +, it was 0.60%. These accounts were there already. In the natural progression, what all have to become, they have become NPA. They have nothing to do with the U.S. because something about the transport, something about rice, these things, these sort of things and all, nothing to do with the U.S. As far as the U.S. is concerned, we have given a clarity saying that we have a minuscule exposure, which we will not have much issues on account of this textile, which we have a major exposure. We have clarified last month by uploading an exchange. These two are nowhere connected with the U.S. and all. These were earlier there. It has come out that. That is the only thing.
Understood. Do you see any impact happening on the growth front because of the tariff part? I understand that NPA part, we are more or less sorted. Do you see that incremental demand, specifically from textile or MSME segment, might get impacted because of this thing? Do you think this will be resolved and this will not much impact our growth estimates altogether?
I'll tell you, when you're talking about textile U.S., let me just brief you after what all inputs, what we have posted in the website. Now, we are again in touch with our exporters. Surprisingly, the orders what they are supposed to get from U.S., many of our exporters are still getting it. The reasons are simple. Suppose if they need to move to Cambodia or Vietnam, majority are based on the polyester. Whereas we are good at cotton. Many of them who wanted cotton, so they need to come here, first thing. Second thing, few brands actually have a relationship for 10 years. Suddenly going to some other country, the brand also may take a hit there. Third thing, first 25% when the U.S. tariff has come, people are able to manage. Second, when tariff comes, a few of the buyers have asked the sellers to absorb 5%.
A few of the buyers, a few of the sellers have started absorbing 5%. A part is being absorbed by the U.S. sellers because Christmas is there. They need their shelves to be there and all. That way, things are going on well. For the time being, both felt saying that it is going on. Somehow, both the parties feel that within one or two months, this issue will be resolved. Even last two days back also, when we are talking to the people for any additional funding, support is required. Three, four people who are actually having majority exposed to U.S., they are told saying that we may not require, we will be able to manage whichever show.
They do not have a piled-up inventory also with them because tactfully what they did was the piled-up inventory, instead of holding it, take a hit of 5% and all, send it there. Buyer as well as seller, together they are sharing the load, and they are pushing it. For the time being, there is no problem. One more thing also, what we came to know is the manufacturers here, they have in turn gone back to their suppliers. They have told them saying that now that we have to take a hit. Maybe a few months, all of us, we need to bear this. If all of us, we go out of the business, it will be difficult. Can you share a part of this load? Surprisingly, many of the suppliers have come forward to bear this shock, this shock what all is there.
That way, this shock has been passed on to buyer at U.S. and the seller here and sellers, sellers. That way, overall, things are going on well, not that grim as it looks.
Understood. That's really helpful, sir. Secondly, you said Jignesh.
Jignesh, sorry to interrupt you. Your voice is breaking.
Jignesh is breaking. Maybe this is on your phone.
Am I audible now? Is it audible now?
Perfect. Perfect. Perfect. Go ahead.
Yeah, yeah. Secondly, I just wanted to check. You said that 20 bps kind of rate hike you have done on the deposit side. Is it correct, right? On the term deposit.
Yes.
Our EBR-R book, almost 37% of the book has already been passed on. The rate cut has already been passed on. Do we see that, we will see further? I understand for the full year, you are maintaining that 3.75, 3.775. Do you see that compared to last quarter, this quarter, the overall sequential decline in margins had been lower? Do you expect that there will be further steeper margin cuts, or do you think it will be manageable at a similar level? I'm saying sequential decline will be similar, or do you think there will not be that much of a decline?
I think it will be more or less similar. It may not be steeper because, as earlier I clarified, as far as the yields are concerned, ideally, it should have been bottomed out. However, because of the competition, how it pans out, we do not know. That may not be a big hit there. As far as cost is concerned, the 17 bps reduction may not be there, 10 bps. That way, overall, if we can see that this third quarter, either there can be an uptick or there can be the same quarter as what all, second quarter what all is there, we may have to continue. It looks like fourth quarter, normalcy slowly will be restored there.
Perfect. Sounds good. Just one data point, I just wanted to check. You have a material rise in your credit substitute this time. Can you, on the corporate side, there is a credit substitute. I can see it around here in your investor presentation. Can you clarify what is it exactly?
Yeah, yeah. Good question. I'll tell you, earlier, absolutely, we are giving everything under a term loan. Term loan, when the repricing and EBR-R, these things happen and all, these are all susceptible for the rate fall. That way, what we thought, instead, the same corporate, instead of giving a term loan or working capital here, if they have a CP or a bond, something they are issuing there, if we go and book it for one year or two years, at least you are locking the rate there straight. That way, what we thought is the same borrower we would have taken in the normal course, many of them, instead of giving them as a fund-based limit in our books, we are giving other side there. That way we can take care of these rates. We can protect the rates what all are available there.
Understood. Just lastly, we have already done 15.8%, 16%. We are touching the credit growth. Do we see there is further upside to this in the second half? We can go to 16% kind of level, or do you think this is the same level we will be?
I agree with you. If you look at our few products, how they are growing, the momentum is there. The point is the biggest break is the liability growth. Liability growth in the sense that you need to get the correct mix of liability. If that is not coming, overall, only term deposits are growing, you grow at 20%, your existing NIM of 3.77%, all these things will be crushed. We wanted to balance between the NIM quality as well as the growth. That is the reason we thought we may have to mellow down our growth depending upon the liability mix we are getting and all growth we are getting. Once that pipe is working well, we are able to get the funding well, CASA and all these things, growing at 18% should not be a problem for the bank.
Perfect. Perfect. That's perfectly fine for me. Thank you. Thank you so much, sir, and all the best.
Thank you. Thank you.
Thank you. Next question is from the line of Jai Mundhra from ICICI Securities. Please go ahead.
Yeah, hi. Good evening, sir. Congratulations on the quarter. Sir, I wanted to get this adjustment right. Let us say this quarter we had one lumpy recovery. Part of that has come in NII, other income. Let us say there are lumpy slippages. I just wanted to understand, sir, of this lumpy recovery, how much has flown to NII? You have given the NIM adjustment, but how much of that has gone into it? It looks like it has gone into income on investment and how much it has gone to other income. Similarly, on these two, let us say one-off kind of corporate slippages, how much have you provided just to get the, you know, let us say the one-off, just to get the normalized NII and the normalized provisions if you have that bifurcation?
Yeah, Jai, in fact, as we have mentioned in the presentation, INR 139 crore has gone into the interest income. INR 156 crore has gone into the written-off recovery.
Right.
Okay. These two are over. Now coming to this INR 218 crore, of these, what all we have become NPA, I think INR 186 crore has been provided out of that as a provision because luckily, it's a great convergence for us. Both of them, coincidence is there. Both of them have come in the same quarter. We thought it is better we appropriate that so that at least the future is clean and safe. INR 186 crore of the INR 218 crore has already been provided there. These two are like that. That way, we have balanced it.
Right. That is very helpful, sir. Sir, of this other INR 259 crore of fee income, except the core fee, one, sorry, how much is the total TWO pool apart from this INR 156 crore? If there is a treasury, if you can quantify? Treasury gains, we didn't have anything in this quarter. Last quarter, we had around INR 78 crore. This quarter, we didn't have. To give a correct number, INR 344 crore is the total recovery for this quarter. Out of this, INR 205 crore is coming under other income. INR 139 crore coming under interest income. Right. In the other income, it was only INR 205 crore, right?
Yeah, 205.
Got it. Treasury is zero?
Yeah, zero. The treasury didn't make any sense, Jay, because the rates are up and down. That's why we lied low.
Correct. Correct.
We had not zero. It means we had around INR 6 crore, not material compared to previous quarter.
Negligible.
Negligible.
Right. Right. Right. Sir, on ECL, while we have a decent INR 200 crore contingent/countercyclical provisions, if you have done any rough maths, and we also have the lowest net NPA and a very decent PCR, if you have any initial comment as to do you need to make any additional provision as you transition, this is the rough guidelines.
In fact, Jai, what all you have said, the same comfort I also have because INR 200 crore what we have there, and second thing is the decent and the finest NPAs what we have. This will sail us through comfortably. There should not be much problem because once the final guidelines come, we can arrive at. You see, we are one of the banks which we have started one and a half years back itself with the ECL. We are so prepared that way. What all is there would be ideally sufficient, but we will look at it. Anyhow, glide path also they have given for five years. We may or may not use all those things. That should not rock the boat of the bank. That's what.
Right. Sir, did I hear correctly that you said that you have raised the term deposit rate by 20 basis points, but you expect 10 basis point decline in overall cost? Is that what you said, cost of deposit, or what was that?
Correct. I'll clarify how it works. Actually, we may have increased to 6.8%. There are many deposits of the last year, about 7%. They just repriced to 6.8%. That way, when they reprice, we will get a benefit of the 10 basis points reduction in the overall cost. That's what we estimate.
Sure. Sir, while I believe there are a lot of moving parts on margins, and you've kept the margin guidance intact, assuming there is no further rate cut, the cost of deposit declines by 10 basis points, and let us say yields more or less have settled because there are no further rate cuts, this should be a commensurate increase in NIM, assuming similar competitive intensity, right? Is that the way to look at it?
We only mentioned that there are many moving parts. Which part moves, how fast, we do not know. That is the reason we still maintain the 3.7% - 7.5%. Above all, suppose you see when people think of the worst quarter, second quarter, we are at 3.77%. We have given for the whole year 3.77%. That way, first quarter, second quarter, we may be better off that way. For the time being, that's why, Jai, this year is the only year where we are asking some element, some amount of some flexibility for us because where what goes, we are unable to know. We are with you all. What all is the best for the bank, we will be trying to do always.
Right. Lastly, sir, the gold loan growth, have you changed? I mean, the growth has been phenomenal across industry and for you as well. After the final guideline by RBI, have you changed any product tweak? The LTV you mentioned is there, which is very comfortable, but have you made any product launch, new product launch in the gold with the revised LTV? That is the question. How do you see the growth and the proportion of growth at gold loan at 28%? Is that the upper limit or it can still rise?
No, no. In fact, there's a lot of demand for the jewel loan. There is no doubt in it. As we said, we have increased the rates also. Agriculture has been made 10.25%, and retail has been made 11.4%. Both of them, we have made fixed also. Still, a lot of demand is there. What we say is we didn't bring out any new products. Second thing also, I'll tell you, the rigor what we had when earlier guidelines were issued, the same rigor we are trying to continue now also. That way, we are putting so many checks and balances when the original guidelines have come. After that, a lot of controls are there, centralized team, concurrent audit team, and everything digitally doing and all. The margin calls, everything we are continuing the same way.
The reappraisals, mystery shopping, all these measures, what we are supposed to do, we have been doing that way. No additional product. The existing itself, what all is there, the demand is coming up and all, even if we have increased the rate. That way, the momentum is there. As we said earlier, the maximum cap can be between 30% - 35%, and we are at 28%. Still, we have room to grow. There should not be a problem. We are growing majorly in the agriculture as well as in the retail segment, the jewelry component. Next thing also, now if we look at our LTV, there are no accounts above 75 now. All accounts are below 75 LTV.
Sure. Sir, this rate, how much was it earlier? Aggregate 10.25% and retail 11.4%?
9.75%. 9.75% used to be there. 10.25% it has become. Likewise, the personal segment, how much it used to be? It used to be 10% or something like that, Jay. We have made it 11.4%.
Sure. Very helpful, sir. Thank you. All the very best.
Thank you, Jay. Thank you.
Thank you. Next question is from the line of M.B. Mahesh from Kotak Securities. Please go ahead.
Good evening, sir. A couple of questions. One, sir, just a housekeeping question on this INR 274 crores of provisions. Can we just have a breakup of that, sir, between loan loss and others?
Provisions breakup.
Mahesh, please, one second. Just provisions breakup, we are giving you.
Sir, there is a slide also.
A bit slide is there.
Slide is there for the gap and all. Just one second.
Okay, I missed it.
Yeah, yeah. Provisions and contingencies, I'll tell you. INR 261 crores on account of NPA. Out of that, as I said, that INR 186 crores on account of these two lumpy accounts, and all rest is normal. Standard assets, INR 10 crores we have provided. Restructured advances because repayments are there, upgrades are there, INR 18 crores we have reversed. The non-perform, I said not this one.
No, correct. Only these three items.
These three items, yeah.
Perfect. Sir, the other question is pertaining to what was asked in the past by Jay as well. This retail provision, while I understand it doesn't have an impact for you personally, given the levels at which you are, do you still have to make higher than what you thought in terms of provisions, or we can continue at the levels at which we are, assuming slippages are where it is today?
You are talking about which provision? ECL provision?
ECL. ECL. Yes. ECL.
No, Mahesh, we have done that. Earlier, we were knowing when RBI will come out with these guidelines. Now a date also has been given. Something will come out. It is for a rainy day. It is better. Suppose if we are hand to mouth, we are unable to reach our ROI of 1% and all, doing all these things makes sense. When absolutely are comfortable for a rainy day, it is better we leave it. Once we get a clarity on that, then we can take a call to how much to reverse, how much to appropriate.
Do you think that we need to materially alter the provisioning levels at which we are today?
Correct. Absolutely. Absolutely.
Okay. Perfect. Second question, sir. On these corporate loans that you continue to wind down, it's now down to one of the lowest levels that we have seen in many years. Since what level are you comfortable?
No, in fact, Mahesh, let me be frank with you. It is not the question of any vertical now. A stage has come. Even in a vertical, we are looking at a product which gives us the better yield, risk-adjusted better yield it will give. Suppose if you look at our retail segment slide, so home loan may be secure and safe, but our growth in the quarter is only 1%. 1%. We have, so our current focus is to take care of the risk and the margins. Tomorrow, suppose corporate itself is giving the highest margins as well as the risk-free or risk-mitigated return. We do not mind keeping the money there. Second thing, if unlimited amount of flow of deposits are coming, CASA just like that, whatever, somehow post-COVID when we have come up and all, you need not worry.
Anyone asking even the corporate also 8%, 7.5%, 7.75%, you can go on lending. The money is limited now. That money, if I do not deploy it properly, every vertical, every product we are looking at, ALCO also, where it has to go, is it going to maximize the yield overall or not? Otherwise, we have more or less brought down a few of the products in a few segments altogether. Vehicle loans, you see, we have brought it down. Until and unless someone is very close and attached to the bank and all for so long, we will give it. There is no attachment to any vertical or a product. Wherever bank makes money and risk-mitigated way, then that product and vertical will get the money. Second thing also, you see, corporate compared to last two years, it started growing.
The same way instead of putting the money there, we are getting a better yield in the substitutes there. We started putting the money there. If you look at it overall, the corporate growth is quarter on quarter 5%. Which is more or less like other verticals. We cannot say that corporate is not degrowing. The way corporate used to grow has undergone a change.
Great point, sir. Thank you.
Thank you. Thank you, Mahesh. Thank you.
Thank you. Next question is from the line of Yuvraj Choudhary from Anand Rathi. Please go ahead.
Good evening, sir. Just have one question. We talked about INR 295 crore recovery from a large account. This account, are we the sole lender or was it in a consortium sort of lending?
No, we are the sole lender here.
Okay. Got it. Do we expect any such lumpy recovery maybe in any coming quarter?
No, for the time being, we cannot. We have a good pool and a variety. Many of the initiatives we are taking on many of the accounts. That is the reason if you can look at my March call. We have told saying that we will be able to get the number of last year INR 600 crore, but it may not be evenly we will be able to get, but in different quarters, we will be able to get that. Here and there, that is there. No lumpy accounts are there, but we will be able to get the money what all we thought by March.
Got it, sir. Very helpful. Thank you.
Thank you. Thank you, Yuvraj.
Thank you. Next question is from the line of Pritesh Bumb from DAM Capital. Please go ahead.
Yeah, hi, sir. Good evening. A couple of questions.
Sure.
One, yeah, just a clarification. This recovery was part of a regular pool of return of accounts, right? We were supposed to do about INR 500 crore, INR 600 crore this year, and that is the part of this?
Correct. Perfectly correct.
Absolutely. Second question was in terms of growth. You gave an answer earlier in terms of loan growth outlook. Given that there is a pent-up demand which is coming in vehicle loans, some parts happening in consumer as well, do we see between in the retail, we see further mix change in the second half?
Vehicle loan is concerned, there may not be a change. The reason is very simple. Our past experience has shown, anyhow, the higher capital adequacy you have to maintain, the risk rate is high. The second thing, the fixed rate it is, when the interest rates are low, you will be locking in for three years or five years. The third thing, the delinquency levels are high. The fourth is when a delinquent account is there, repossessing the vehicle and disposal, then there, the loss given default is relatively high. Suppose if we do not have any other better product where you can deploy and get more value and more money, then you may have to go to vehicle loan.
Based on our past experience, what we thought was maybe let us put the money in other products, and as and when we exhaust the avenues in other products, then we will come to the vehicle loan. For the time being, there can be a spike in the vehicle loan demand. It may not be there in our bank. Coming to the consumer segment loans, you would have seen a slight uptick during this quarter in our consumer loan segment. We have a good reserve there. Our buy now pay later program with Axio, so what all is there with Amazon, we have created more or less 9 million customers there.
These 9 million customers, if you apply different filters through analytics and all, if you bring it down, even if you get 100,000 or 200,000 customers for the personal loan, these are all tested a lot compared to someone on the road we are going to finance them. We are thinking of that. Once it works, we will be able to work along with our partner on a co-lending basis, which will work well. That is a better risk-mitigated way and to a known customer than an unknown person. These two can grow. We are working on that. Vehicle loan will not work, and consumer loan, this way, it will work.
Got it, sir. Last question, in terms of jewel loans, how is our gold pricing done? What I wanted to understand is the mechanism because the prices are moving up quickly. What period reset happens as a price?
Yeah, more or less every 15 days, we can say we will reset the loan, but relatively slightly, we are conservative also. We are totally not giving that way because we do not know what all has gone up, how fast it will come down also. We sufficiently keep some sort of margins. The good thing is with these sort of margins as well as the pricing also, we are able to grow well. We do not want to be caught on the wrong foot there. That's why there are a few divisions of the bank. Divisions comprise of 50 branches, 60 branches. Their divisions, LTV of the gold loan portfolio is below 50%. Below 50%. That would be the case earlier. Someone has mortgaged or pledged three ornaments. By the time of renewal, he may be taking one ornament out.
With two ornaments, he's able to get the money there. That way, overall, if you look at it, it will work well, but we need not go tweak and give higher LTVs to book the business. The only thing we require is a service.
Got it, sir. Just again to reclarify that, every 15 days, we reprice?
Around 15 days, we look at what is the market and all. Scientifically, we have a team there and all. They will look at it, and accordingly, they'll change per gram rate, what all is required. Based on that, we'll be advising the branches, and we'll input in a system also so that anyone coming from that day onwards automatically, they'll be getting the same rate irrespective of the location of the branch.
Got it, sir. Thank you so much. All the best.
Thank you.
Thank you very much. I would now like to hand the conference over to Mr. B. Ramesh Babu, Managing Director & CEO, for closing comments.
Once again, thank you all for the interest all of you have shown there and all. Diwali is in the offing the next two days that way. Happy Diwali to all of you and your family members. Thank you very much again for the encouragement and the guidance from all of you. Good day to all of you. Thanks.
Thank you very much. On behalf of Karur Vysya Bank, that concludes this conference. Thank you for joining us, and we will now disconnect your lines. Thank you.