Ladies and gentlemen, good day and welcome to the Q1 FY 2027 Earnings Conference Call of The Karur Vysya Bank. We have with us today the management team of KVB, represented by Mr. Ramesh Babu, MD and CEO, Mr. Sankar Balabhadrapatruni, Executive Director, Mr. Chandrasekaran, Chief Operating Officer, and Mr. 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 and then zero on your touchtone 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, Sagar. Good evening to all of you. On behalf of The Karur Vysya Bank, I extend a warm welcome to everyone joining our bank's quarter one earnings call for the financial year 2026/2027. Our financial results and accompanying presentation have been made available on our website, and we trust that you would have had an opportunity to review them thoroughly in advance for this meeting. During our Q4 earnings call in May 2026, we had indicated that the outlook for financial year 2026/2027 would remain one of cautious and moderated growth. We also emphasized the need to navigate the evolving operating environment carefully while ensuring that growth is pursued without compromising portfolio quality. Excellence is not a destination. It is a discipline. This quarter's performance reflects the discipline embedded in our business model, risk management, and customer engagement.
We are pleased to report that our key performance indicators are broadly in line with the guidance shared earlier. During the first quarter, we successfully front-loaded our business growth, consistent with our approach over the past few years. Importantly, this growth has been balanced and broad-based, with sustained performance across our three key priorities, growth, profitability, and asset quality. This reflects the continued strength and resilience of our operating performance from the beginning of the financial year. As of 30th June 2026, the bank's total business reached INR 2,27,267 crore, reflecting our sustained growth momentum in the first quarter, with an overall business increase of 6% quarter-on-quarter and a year-on-year growth of 16%.
Advances rose to INR 1,04,680 crore, representing growth of 6% quarter-on-quarter, while deposits increased to INR 1,22,587 crore, achieving a quarter-on-quarter growth at the rate of 6%. The composition of our advances portfolio remained broadly stable during the quarter, with RAM segments continuing to account for 86% of the portfolio and the corporate segment contributing to the remaining 14%. The commercial business segment demonstrated a 6% growth over the previous quarter, driven by higher disbursements in both small business group and business banking group. Business banking group, the quarter-on-quarter, disbursements are up by 45%. The growth came predominantly in sectors like food processing, retail and wholesale trade, engineering, transport operators, and CRE.
Tailor-made products such as GST Surrogate for customers with limited financial data and open-term loan product started during the last quarter are slowly gaining traction in the current year. Small business group relationship model has been extended to 77 branches now from the earlier 75 branches, wherein the primary objective of a relationship manager is to acquire NTB customers, new-to-bank customers. Retail advances increased by 6% quarter-on-quarter, primarily driven by growth in jewel loans and mortgage loans. Retail jewel loans registered a 12% growth during the quarter. Mortgage loans registered a growth of 9% over the previous quarter. Our BNPL book grew by 2% during the quarter. Mortgage-focused branches have been increased from 144 branches to 175 branches this year. We have relaunched our credit card offering to our existing customers and plan to extend it to the new-to-bank customers in the second half of this year.
Loan Against Mutual Funds product is expected to be launched by the end of second quarter, and the integration with the IT has been more or less completed. Overall, the retail assets grew by 23% on a year-on-year basis. In line with the prevailing market scenario, gold prices have witnessed a decline over the last three months. Despite various challenges, the agricultural loan portfolio recorded a growth of 5% during the quarter. Although the monsoon onset has been delayed and supplemental irrigation programs are being implemented, the overall outlook remains neutral. Agri-jewel loans constituted 92% of the portfolio and other agri-loans constitute 8% of the portfolio. The overall LTV is maintained at 63.7% for agriculture gold loans and 56.83% for the non-agricultural gold loans as at the end of June 2026. We closely monitor the LTV levels. Any breach triggers an automated alert to the branches.
The corporate and institutional loan portfolio demonstrated again a growth of 6% during the quarter, primarily driven by the new relationships in segments like commercial real estate, capital market participants, and EPC and infrastructure sectors. Disbursement as well as the growth has been the highest in the last five quarters in this vertical, depicting revival in this segment. We continue to focus on credit substitutes and had a growth of INR 171 crore during the quarter. All of you can recollect a few quarters back, we have told our revised approach for the credit substitutes, so that is the reason we have grown again INR 171 crore during this quarter. We would persist our focus on ETB customers and accelerating A and above on this particular segment for the credit substitutes. The bank's liability business constitutes 54% of the total business of the bank.
Our deposits grew by 6% during the quarter, driven by gains in both retail term deposits and CASA. CASA grew by 9% over the same period. Current Account portfolio grew by INR 1,753 crores, which is 19% over previous quarter. The SA portfolio, that is Savings Account portfolio, grew by INR 901 crores, which is 4% on a quarter-on-quarter basis. Overall, CASA growth was supported by both ETB and NTB segments, with existing customers continuing to play an important role in driving balance growth and strengthening primary banking relationships. We feel that this momentum may continue to some extent here and there. On the CASA growth, NTB customers growth was 31% and ETB customers accounted for 69%. Additionally, more than the anticipated end of the quarter inflows flowed into the current accounts, they have further supported overall deposit growth.
The CASA acquisition team has made significant progress in acquiring premium NTB customers. They contributed 12% for Q1 growth. Retail households continue to be the backbone of our deposit franchise, contributing to 72% of our total deposits. Going forward, our focus is on strengthening retail liabilities while increasing share from non-financial corporates, MSMEs, and transaction-led relationships to drive sustainable growth. Retail deposits increased by 6% during the quarter. We had increased the rates for the special deposit, that is for the time deposits I'm talking, by 40 basis points during the quarter. Our focus was to propel the retail term deposits to fund the advances growth, which we have front-loaded. This has enabled us to have some sizable growth in retail TD, as you see from our presentations. One of the priority areas of the bank is to improve our business with NRIs.
The RBI's relaxation on FCNR B interest rate ceilings have enabled the bank to offer more competitive FCNR rates, improving our ability to attract NRI deposits and retain existing relationships. Though leverage facility is not possible for our bank due to our non-presence in the overseas or in Gift City. Our rate strategy continues to be dynamic and market responsive. While we will actively manage deposit costs, our focus remains on balancing TD growth with stronger CASA accretion to maintain a healthy and sustainable funding profile. Regarding margins, we had provided guidance in the range of 3.7%-3.8% for the full year, financial year 2026/2027. I am pleased to report that we could successfully navigate the quarter and maintain our net interest margin at 4.26%. If we reckon one-off item interest recovery of 8 basis points also will be there.
With that, it would become 4.34%. This 4.26% is 1 basis point higher than the NIM of the previous quarter. Despite the repo rate cut by 125 basis points since February 2025, we could improve our NIM over pre-reduction time by effectively calibrating the asset mix and optimizing the yields. The cost of deposits increased slightly by 4 basis points on a sequential basis as rates of deposits were increased during the quarter. We expect 5-10 basis points increase in next quarter. The yield on advances increased by 8 basis points during the quarter and remained at 10.01%. The fixed rate loan book, which was 29% at the end of March 2026, increased to 34% of the total book at the end of June 2026. During the same period, the MCLR-linked book reduced from 14%- 9%, while the EBLR book link remained at 55%.
The support from such mix may come down in the coming quarters. As said in the last call, competition and retention of customers may bring down the yields going forward. We anticipate a reduction of 10 basis points in the yield on advances in the next quarter. What I said is, this is at least not only getting the fresh business, even for the retention of the existing customers, somewhere it is becoming a necessity for us to compromise on the margins. Yield on investments remained stable at 6.83% in Q1, in line with Q4, despite the softening of the market rates during the quarter. Our aspiration is to improve the portfolio yield to around 7% by the exit quarter of 2026/2027.
This improvement is expected to be supported by maturity of lower-yielding securities and their reinvestment into higher-yielding securities, including SDLs, which offer an attractive spread over central government securities. In addition, we are pursuing a calibrated buildup of NSLR investment portfolio, as I mentioned earlier. With the current visibility, NIM may remain at the levels of 4%+ in the next quarter. We are not changing the full year guidance, which would be reviewed at the end of September. The operating profit for the quarter was INR 1,096 crore, reflecting a 36% increase compared to the same quarter in the previous year, but a 12% decline sequentially.
Decline was attributed equally at net revenue level too, due to one-off items like profit on sale of assets, SR recoveries higher in quarter four of last year, and write-off recoveries, higher OpEx level on account of AS 15 in the quarter one of the current year. Net interest income has grown by 32% year-on-year, depicting highest growth in the last five years and 5% sequentially. The recalibrated asset mix and yield optimization have resulted in net interest income growth in spite of reduction in the repo rates over last one year. Non-interest income for the period stood at INR 442 crore, down from INR 616 crore in the previous quarter, by 28% sequentially, which is a reduction of INR 174 crore. Let us look at the breakup of this INR 174 crore .
For that, first thing is the core fee income was down by INR 38 crore as we had profit on the sale of assets of INR 18 crore during last quarter. Recoveries from written-off accounts amounted to INR 103 crore compared to INR 216 crore in the prior quarter, a reduction of INR 113 crore. All of you can recollect that during my initial call itself, I have made it clear. There cannot be any sort of a uniformity in the write-off recovery because many external factors are involved and legal issues are involved. Our efforts will continue in the whole process. Few quarters it can be more, and few quarters it can be low. We are aiming to have a recovery of INR 500 crore to INR 600 crore. That's what I have mentioned. That way, last quarter was good. This quarter is subdued that way.
Investment trading profit were lower at INR 38 crore during the quarter. Previous quarter, we had a one-off SR recoveries of INR 55 crore, which we didn't have this time. All the above have resulted in decrease of net revenue by 6%. Our operating expenses for the quarter stood at INR 769 crore, representing a sequential increase of INR 41 crore. Out of this, establishment cost grew by INR 58 crore sequentially as provision requirement for retirement benefits, AS 15, went up by INR 47 crore. Our OpEx increase sequentially is INR 41 crore and AS 15 increase itself is INR 47 crore. As discount rates fell by more than 40 basis points during the quarter. Normal salary cost increase was INR 12 crore. However, reduction in other operating expenses by INR 17 crore sequentially compensated the higher establishment cost, resulting in 6% overall increase in OpEx during the quarter.
The above factors had an effect on sequential decline in operating profit by 12%. Though there is a sequential drop in the operating profit, the additional gain of last year has more or less been taken care by additional provisioning of INR 163 crore, which we made during last quarter for war. Thus effect on the net results last quarter also was negated or neutralized or nullified. Net profit for this quarter was at INR 756 crore, an increase of 4% quarter-on-quarter and 45% year-on-year. During the quarter under review, an allocation of INR 90 crore was made towards NPA migrations, standard assets and restructured assets, resulting in a credit cost of 0.33% annualized. To recall, we had made a provision of INR 163 crore towards sectors affected during the ongoing geopolitical tension during last quarter. We have retained the same, as things still remain the same.
With respect to ECL provisioning guidelines, the bank has maintained adequate provisions and buffers through floating and prudential provisions over the past few years. The total provisions to advances is at 1.7%, which should take care of the transition, ideally. The ROA for the quarter stands at 2.11%, marginally better than 1 basis point from previous quarter. Gross slippages for the quarter amounted to INR 138 crore, representing 0.13%. If we annualize, it comes to 0.53% of the loan book, sequentially lower from INR 187 crore slippages during last quarter. Though there's a spike in SMA 30 levels from 0.17%-0.22% sequentially, we are confident in our ability to maintain the slippage ratio below 1% levels, as we have previously indicated through ongoing diligent account monitoring. Owing to reduced slippages, improved recoveries and upgrades, as well as write-offs, our gross NPA has declined marginally by 1% to 0.74%.
Our net NPA remains steady at 0.19%. We are committed to maintaining net NPA levels below 1% of our loan portfolio. The proportion of our standard restructured loan portfolio has further decreased to 0.37% of our total loans and continues to perform satisfactorily. Notably, a substantial portion is secured by collateral. We maintain a provision of 41% for this portfolio. Our CRAR Basel III continues to be healthy and is at 18.61%, providing us comfortable headroom for growth. Our liquidity coverage ratio for the quarter is at 123.61%. We would maintain this in the range of 115%-120%. We opened two branches during the first quarter. Though we have planned for opening 50 branches during the first half of the year, we would be completing 25 branches before the end of this quarter and the balance before the end.
Our efforts are very serious. The external factors like availability of a proper premises and other logistics and agreement, these things are taking some time. We are on the job. The first quarter of the current year has provided a strong start to the financial year. While we remain mindful of the evolving operating environment, our focus on prudent growth, operational efficiency, customer centricity, and disciplined risk management gives us confidence in delivering sustainable value to the stakeholders. I would like to express my sincere gratitude to all the 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 1% or 2% over the industry growth will be continued for the rest of the quarters. NIMs for the full year will be in the range of 3.7%-3.8%. Our GNPA is expected to be less than 1.5%. Net NPA will be less than 1%, and slippage is to be less than 1% of our loan book. Just as a word of caution, YTD growth, this first quarter growth should not be considered as an indicator for the full-year growth at the same tempo. As I said, we plan to front-load in the first quarter and to some extent up to the second quarter. We will take it forward.
Now I'll be glad to respond to your questions. Thank you all.
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 then one on their touch-tone phone. 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. Again, to register for a question, please press star and then one .
Your first question comes from the line of Jai Mundra with ICICI Securities. Please go ahead.
Yeah. Hi, good evening and congratulations on a great quarter, sir. Happy to hear from you on maintaining or slightly revising at least Q2 NIM guidance. Good to hear that. Sir, I just wanted to check on growth guidance. You maintain 100- 200 basis points above system-level growth. Just that the system-level growth itself has moved from last quarter to now around 18% types. That is, I wanted to check, sir. Fair to say if system remains here, we will still be higher than system. That is, I wanted to check, sir, first.
No, Jai. Thank you for the compliments. Agree. Jai, agree, because our intention is 1%- 2%, we thought, but system has moved much early. Now we need to look at the texture of the growth of the system. Suppose if the system is growing more in the corporate, because earlier, corporates were moving towards the fixed income, that is treasury and CDs and all. Now that the bank's interest rates have been good, they are moving towards that. As you know, earlier, our corporate used to be 45%, we have brought it to 14%. That way, going back to again corporate for the purpose of our system growth, will defeat the purpose of the whole exercise we have done in the last few years.
That way, we will look at this. If under the RAM, if the system is growing, we will try to be 1% above that. If the system is growing well in the corporate, then we have to be more cautious in looking at that, not to commit our earlier mistake.
That is very clear, sir. Thanks for that. Secondly, sir, on SME loan growth, this quarter-over-quarter loan growth has been healthy, but if I look at YoY loan growth, earlier we were around 20%, then we moved to 18%, and now it has come down to 12%-13%. You have sort of seems to have made a course correction when last quarter you said that, "We may possibly look to grow more versus looking too much into rates." Are you seeing any, let us say, disturbance which is constraining the loan growth in SME segment? Or it should again come back to usual 18% types loan growth? That is the question mark.
Good question, Jai. In fact, you see, last quarter, you would have observed our growth was flat in our commercial segment. The reasons were many, because we didn't want to grow in the last quarter, last few days, and second thing, there was a pricing competition also there. We didn't want to be there in that race. Now that that is over, first quarter is again the normal that way. We have gone for that. Other than looking at some sort of a pricing competition here and there, we look at it as it is, demand is there. If you look at the NTB and ETB together, the disbursements growth over last year, it has come to 45% in this commercial segment.
With this, few of the accounts where we are not comfortable, either quality-wise, asset quality-wise, or pricing-wise, we were liberal in allowing them to go. Despite that, we are able to get a growth of 6%. With that, we are reasonably okay that we'll be able to grow at 18% for this year. It should not be a problem. Last year, last quarter was an aberration. If you take out the Q4 of last year, overall, our growth will be again 16%-17% last year also.
Right. That is correct answer. On this commercial, if you can specify how much would be ECLGS disbursement that we have done so far and how much could be the sanctions?
No. ECLGS is concerned, we are receiving many requests. We are just looking at in such a way, suppose if a unit is already struggling and if they want to take an ECLGS and all, because not on account of this war and other things and all, then there is no point in further risking, the money may not come back. We are looking at those sort of aspects. We have got number of applications, we have got it. Currently, if you look at it, INR 75 crores has already been disbursed, and there are many applications in the pending. This growth, what all you have seen in the quarter four, is nothing much on account of ECLGS, and that will come in the next quarter.
Want to say anything on this?
Coming to these disbursements also, as we were mentioning, 2,232 customers have applied. One second. You put. Our ED will respond on the ECLGS.
Jai, good evening. Under ECLGS, in commercial segment, around 2,232 customers have applied till now. We are screening the applications, and till now, during Q2, INR 140 crore has been disbursed. Under corporate, similarly, we found that 176 units are eligible, and we have disbursed till now six only, but to the tune of INR 80 crore, sir. Everything in Q2. Out of these 176, maybe 100 may be eligible. The eligibility has to be seen as to the real requirement as prescribed by the RBI.
Right. Thank you, sir. I have, sir, last two questions. One is, sir, on gold loan. If you can specify the, let's say, blended yield for gold loan portfolio, including retail and agri put together. I just wanted. Yeah. That is one.
I'll tell you, majority of the portfolio is under agri only. This retail is a smaller portion. Overall, if you can look at it, you can think of between 11%-12%, we can think that can be the yield we can get it. That's what we can think. One more thing you need to keep in mind, agri will also have the benefit of PSL also. Sometimes it may go to 11.25% also, which we are not factored in what I have told.
Right. Last question is, sir, last time you had mentioned that cost of funds will go up and yields, you will also look at customer request, et cetera. Cost of funds have gone up, but yields have also gone up, right? It looks like while delivering 6% growth on a QoQ basis, front-loading business, you still have managed to get higher yields, right? Either the environment seems a little bit more supportive, right, than you must have thought at the beginning, in the last quarter. Is that broad understanding correct? That you can still charge maybe slightly remunerative yield, while still delivering growth. That was the understanding.
I fully agree with you, it is slowly becoming a tightrope walk in the sense that to retain them, talking about the relationship, how long you are there, all these things will work to some extent. They may give an allowance of 0.5% or something like that. Beyond that, if the market is coming down, actually others are offering, it becomes difficult for us. You may have to offer a lower yield. That way, if you come down from the ticket size, suppose if it comes down to INR 50 lakhs, INR 40 lakhs, INR 60 lakhs and all, your yields may be good, but then you require lot of labor, running, maintenance, monitoring, all these are also required.
Over a period of time, what we try to do, when our average ticket size used to be around INR 40 lakhs, slowly we have brought it to INR 65 lakhs, INR 70 lakhs. What we thought is, instead of adding so many smaller accounts, at least with higher, a bigger ticket size is there, number of accounts will be handful and all we will be able to manage. Now we are trying to balance these two, and accordingly, as I said, few accounts we may have to leave or we may have to concede, reducing the yield. This quarter we will see. Based on that, next quarter, that is, this con call is there, we'll be able to give a clarity on where we are and what we want to do.
Right. That is very helpful, sir. Thank you, and all the very best.
Thanks, Jai. Thank you.
Thank you. Your next question comes from the line of Pritesh Bumb with DAM Capital Advisors. Please go ahead.
Hi, sir. Good evening. Congrats on a great set of numbers. Just couple of questions. One is on this recovery interest, which you have mentioned, about INR 24 crore. Similar interest was in last quarter, but we had also reported a high recovery from return of asset or recovery NPA, but this time it is not there. Anything I am missing? Because there seems to be not that much of large recovery reported.
It depends on the account to account. It's not something there may be some cases where principal recovery will be more, interest recovery may be less. Okay. Sometimes it'll be more. It's not something which will be common in each of the cases. Anyway, for all our discussion purpose, we are excluding that interest, even this NIM of whatever, 4.24% which you have mentioned, is excluding that interest amount.
Right. That is clear. Just wanted to check that if anything anywhere included in that. That's very clear. Second was on--
No, Pritesh, what you said is correct. Had it been there, it would have reflected in the rate of recovery. That is a factor which is a difference between the last quarter and this quarter. True. It has come in interest and not in the rate of recovery amount. True.
Correct. Sir, second was on credit cost. We've seen another quarter of being a very good credit cost. How do you think about credit cost, given that our asset quality is quite good, but we are going to face some disruption in terms of ECL? If you tie up both, how do you see this ongoing credit cost from here on?
No, agreed. If we split this issue into two parts, ECL. ECL still working is going on. As you know, two years back itself, we have provided INR 25 crores each quarter, INR 100 crores we have provided. That way we have a safety net as far as that is concerned. If at all something balance here and there, with the numbers what we have, we will be able to manage. ECL should not majorly hit us for two reasons. One is our SMA numbers are good, more or less, not only now, for the last few years, four, five years, three, four years, if you can look at it. We had a focus on the quality of the book and all. That way we feel it should not hit us too much.
Now, coming to other credit cost, what you said is correct. Our focus is on the recovery, not only recovery at SMA level and above all slippages. All these things, when we look at it, credit cost, though we indicate 1%, I somehow feel it can be much lower than that.
Correct. Sir, another question was on write-off pool. What we've seen in last few years, that we used to do a decent write-off, but if you look at last year versus FY 2025 and this year's run rate, which is from Q1. Every year, the pool of write-off is shrinking by about 20%. The active write-off pool, which I'm talking about. Eventually, we'll see a lesser write-off pool going ahead in the years, which actually contributed to about 15%-20% of profitability. How do you think in that perspective, if I look at next two, three years, what will replace that 15%, 20% in our income levels?
Correct. There are two aspects here. Suppose if the write-off pool may come down, but the NPA what all is there, if that is recovered, any upgrade will support us, though not up to PPOP, it will be coming up below PPOP, and the provisioning will be released. Even if provisioning is released, the need for further provisioning may not be there, and it will go into credit. That way, it may reflect either above PPOP or below PPOP, and finally, it will reflect in the ROA. First thing. Second thing, all along, people may have certain apprehensions saying that with the write-off only we'll be able to cross 1.6%. If this quarter, the difference between last quarter and this quarter is INR 113 crores on account of write-off lower. But despite that, we are able to get an ROA of 2%+ .
Which gives us some sort of a confidence to us. Even if write-off recovery is not there over a period of time this much, in a due point, if you look at it, even if 25 basis points, it comes rather than 40, 45 basis points, then your ROA will not come down by 1.8%, 1.9%. That is one part. Second part, if you look at it, there are few levers which are available to us. One is we have been mentioning that our non-fund business. We have been trying for the last one year. If you can look at it, the numbers for the non-fund business, the income started showing. First quarter also, compared to last year quarter, the guarantee business income is up. Though the first quarter this time the TPP income is not as expected, we need to work on that.
If the TPP income also works and this non-fund also works, these we can slowly take over this what all we are going to have a reduction in the write-off. In addition to that, if you look at it, we are trying to work on the CASA also. CASA, if we have to seriously work on that, there at least 10, 15 basis points, if they get the benefit in the cost of deposits, 10 basis points there and 10 basis points in the other income, these 20 basis points will offset this reduction in the rate of recovery. That way, on a steady state basis, that plus provisions what all are going to be released after the PPOP all together, there should not be much shocks on the ROAs concerned.
Sure, sir. Sure. Very last question. I think last quarter you had announced your desire to step down with a two-year period. Any discussions on the board for next I mean, too early, but a lot of banks have also been transitioning management. Any discussions on that point?
Yeah. Absolutely. Board is already abreast of this. They are looking at it. At the appropriate time, call will be taken, and there will be sufficient time for the transition and for the handholding and for grooming also. You need not worry on that count. Board is equally aware. They are serious about this.
Sure, sir. Thank you so much, and all the best, sir.
Thank you. Thank you, Pritesh. Thank you.
Thank you. Before we take the next question, a reminder to all the participants, you may press star and then one to ask a question. Your next question comes from the line of Suraj Das with Sundaram Mutual Fund. Please go ahead.
Yeah. Hi, am I audible?
Yeah, you're audible.
Yeah. Hi, sir. Thank you for the opportunity. I have four questions. First, on the CA growth. I think CA growth has picked up pace over the last couple of quarters to double digit, and this quarter it was 15%, 16%. Just wanted to check if there is anything lumpy here which is probably driving this incremental growth and hence may not be sustainable going ahead. Do you think that the CASA here can continue to go up? That is question one.
Okay. I agree. In my inaugural address also, I have mentioned clearly. Agreed, there are different types of distance have come up, this quarter end flows have also supported there in that. Every quarter, whether that will be coming or not, we will not be knowing. That is the reason, as I said, that on a steady state basis, what we have planned, it will come up. There can be few flows which have come into the account, which may go out also. Overall, our focus will be there on the CA to maintain this CASA ratio. At least what all we have over and above that.
Okay. You would like to maintain this double digit kind of a growth in CASA? In CA specifically?
Our aim is to be that only, because then only we will be able to reduce our cost of deposits by 5- 10 basis points. Our intention is to do something on the CA as well as SA both.
Sure.
We are absolutely serious as far as deposits are concerned. That we have front-loaded the time deposits after giving some sort of a higher pricing and FCNR also when we are working on this. The serious focus for us, all of us in the bank is CASA and SA. We'll work on that this year.
Sure. Sir, last quarter, you have also tweaked some of the TD rates, specifically I think greater than INR 3 crore bucket, and also there is FCNR that you are highlighting. Can this lead to, let us say, higher cost of deposit in coming quarter? Because this quarter there is some QoQ uptake in cost of deposit. What is your view on cost of deposit?
Yeah. That is the reason I have mentioned that some sort of a hike will be there in the cost of deposit, because the further repricing what all are happening in the next few quarters also, few of them are lower bucket also are there. They also get repriced. What we thought, either CA, SA or TD, overall, if we are able to make money, intention is to get into CA and SA. Priority is CA, next is SA, and next is TD. If we are unable to get CA and SA to the extent possible, declining TD and distributing the growth of TD is suicidal. The reason is, if we are able to make money out of that also, we should not miss the opportunity.
You would have seen our overall yield on advances has come to 10%. With this TD growth also we are able to maintain 4%+ on the NIM front. That is why we thought saying that, we will mobilize the TD and we'll focus still on CA and SA. This repricing what you said, that may have some sort of a bearing for next few quarters, and we need to live with that. That is the reason still I mentioned that till second quarter, I cannot give any sort of a commitment on finally the ROA, sorry, NIM, 3.7%, 3.8%, what I have mentioned. Once this quarter we will see, we'll have a clarity, then we will take a call on that.
Okay. Sure. Sir, third question is on MCLR tweaks that you are doing. Wanted to know, is it applicable only for the incremental loans, or is it also applicable on the existing loans as well?
MCLR loans? Okay, understood. Yeah. MCLR.
The interest rate tweaking that you are doing on the card rate basis side.
Correct. At the time of repricing only that gets affected. In respect of an EBLR, which are linked to repo, our cash credit, if few of the loans get immediately cash credit loans, next day it will be implemented. Term loans will be implemented at the time of repricing. MCLR, when the interest reset date is there, at that time the revised rate will come up, not immediately.
Okay. Sure. The last question on the retail loan growth side, I think after many quarters, at least there is some positive traction on the BNPL segment this quarter. Are you now comfortable with overall environment on the BNPL side? Will this growth now? Catch up with the overall growth?
I understand, for the last six to eight months or one year also, we are comfortable. The reason is simple. At any point of time, the cohort loss, when we see with the partner, though they have given a FLDG of 5%, the cohort loss has not crossed 3.5% at any point of time. How we are mindful of the fact of the risk and guardrails and all, our partner Axio is also equally interested in maintaining these things. There was a small organizational change in Axio. Axio was taken over by Amazon. Amazon was having a small share in the Axio. They found value in Axio after seeing all these arrangement what we have.
Amazon has fully taken over Axio. That it is 100% owned, those sort of internal adjustments are happening. Once all these things are over, then we'll be back to business. We have not reduced this business on account of any discomfort. It is because the organizational structure is undergoing in Axio. That's why we laid low. Any time with the season, this Dussehra, Diwali coming up and all, we can be back to the normal.
Okay, sure. Perfect, sir. That's all from my side. Thank you.
Thank you. Thank you very much.
Thank you. Your next question comes from the line of MB Mahesh with Kotak Securities. Please go ahead.
Good evening, sir. Just a few questions. One, on the provisions line, can we have a breakup of that number?
On the provisions? Hi, Mahesh. One second [audio distortion].
Sir, while we get the answer for that, just wanted your feedback on the decision to increase the fixed rate portfolio in your book. If you are seeing cost of funds kind of rising, just trying to understand why are you pushing for a higher fixed rate?
Yeah. I agree with you. The point is, the fixed rate loan is at a high rate. Suppose 11% we are charging and 15% we are charging, even if 20, 30 basis points is happening here, we need not worry on that. Tomorrow, when this FCNR funding comes off, and OFCB comes, and market is awash with liquidity, and then automatically rates come down, then you cannot reduce. When we are giving a loan of one year, and the next three months, for any reason, the rates come down, you are insulated for the next one year with this rate.
Okay.
Okay, coming to provisions.
In fact, we have given the breakup in page 24 of our presentation, Mahesh. The INR 90 crores provisions what you have made during the quarter comprise of NPA provisions of INR 68 crores, provision for [crosstalk].
Okay. I'm sorry. Perfect, sir. Last question. There has been a decent pickup in the lab portfolio, but lack of pickup in the housing loan portfolio. Just trying to understand, in the lab portfolio, these are commercial real estate. What kind of properties are you getting more success in this product?
Yeah, I agree with you. First of all, for the housing, there is huge demand for the housing. No doubt in it. The pricing is still not supporting us, 7.5%, these sort of rates they ask. Even if, because we wanted to process it faster, even if someone is paying 8.5%, because there is no foreclosure charges, within six to eight months, we started seeing straight away we're getting an RTGS money from other banks. There we are helpless. We understood we are putting in the whole labor, but we are unable to reap the benefit for the next five years or 10 years. When we cannot offer it at 7.5%, that's one thing. Second thing, if we do not have any other avenue to deploy the money, naturally we need to go for that.
When on the other side, resources, there's a constraint, you are raising TD and all, there is no logical sense for going in for 7.5%, 8%. With that reason, still, we are not going ahead with this one. Still, if you can recollect, this quarter, INR 160 crores, wherever we find the yields are above 8.25%, 8.5%, still we are growing, but we wanted to lie low on the housing because there's a huge competition with the public sector banks who are offering the finest pricing. Now, coming to the lab portfolio is concerned, it is a combination. Personal also is there, majority will be commercial. Here also, we have created four years, five years back itself, a technical evaluation cell in the bank, first time in 100 years.
This cell, even if the lower level, someone takes a property and a valuer gives it, a centralized cell is created, it will come here, they will look at the marketability of this particular property. If they feel that is marketable, then only it will be considered. They'll also look at similar locality, what is the pricing going on for this. If for any reason any valuer has given a higher pricing than this, we have a provision for a haircut at centralized level. They will reduce it, and that only we will reckon for the purpose of our LTV norms. That way, many measures we have taken.
Not only that, last few years, the properties against which we have financed, if we look at them, the disposal of that is relatively better compared to the five years, 10 years back what you have got the properties. Our focus is on two prong now. One is on the cash flows, second thing is on the property. Both we are addressing so that the future is safe.
Okay. Just one clarification. These are running in crores, lakhs, or they are running in tens of crores? What is the sweet spot of this portfolio?
On an average, you can say, because wherever branches many of them are doing, it comes into lakhs and below INR 1 crore. I can say on an average, the ticket size comes between INR 2 crores - INR 3 crores.
Okay, perfect. Perfect, sir. Thank you.
Thank you.
Thank you. Your next question comes from the line of Parth Gutka with 360 ONE Capital . Please go ahead.
Hi, sir. Thanks a lot for the opportunity. Sir, you mentioned that we would be opening around 50 branches this year. In FY 2026, we opened around 13 branches. How are we thinking in terms of OpEx growth or cost to income or cost to assets? Yeah.
Agreed. The cost to income, the cost side, it may go up, but if you can recollect at a point of time, our cost to income used to be 50%+ . Progressively, we have brought it to between 45%-50%. Last few quarters, you can look at it between 40%-45%, though one quarter is below 40%, that's an aberration. Between 40%-45%. If we look at the cost, something is going to come up. If I had to defer this one, it will be an injustice because the future, we are going to stunt the total growth what our bank is going to have. It may have a bearing of 0.5% to 1%. It gets normalized over a period of a few years, the next two years, once this branch starts becoming break even.
That way, even if these things are there, it may not cross our 45%-50%, usually the bracket what we indicate for the cost-to-income ratio. 41.74% may become 42.5% or 43%, something like that. It will not have much issues as far as cost is concerned. One more thing also you need to understand, 32% increase in the net interest income. Other side, the income is going up, our cost is concerned, it has not gone up by 32% even this year, this quarter also. Disproportionately to some extent income is growing, it will also support us in maintaining a proper cost-to-income ratio.
Okay, sir. Thanks a lot.
Thank you.
Thank you. Your next question comes from the line of Anand Dama with Nuvama. Please go ahead.
Sir, thank you for the opportunity, congrats for the great set of results. Sir, on gold loans, I have a question. One is in how do you see the growth in that segment? We have seen the prices moving up and down. Secondly, any signs of asset quality concern building up around in that portfolio, either for you or for any peer set that you can see?
Thank you, Anand. Thanks. First thing is regarding the jewel loan. Agreed, because we are, again, careful about this particular point of the LTV. That is the reason we look at not going overboard as far as LTV is concerned. We have totally strengthened our margin call mechanism within the bank. A team has been formed. Whenever these things are there, immediately we are working with the people and all, we are trying to get that. That way, with our 60%-65% overall, what all LTV is there. Currently, we didn't find much issues, though as you said, the gold loan prices have oscillated here and there. As and when we are approaching for the margin, we are getting it, either they are closed. Simple point is, it is not a gold biscuit.
It is the ornament at home where some sort of an attachment for the family is there, that also acts as a hook for getting it released. Currently, if you look at it, the asset quality-wise, what we had earlier, one year, 1.5 years back, more or less it is going at the same level, nothing much to worry on this count. We have totally strengthened onboarding as well as monitoring mechanism. Above all, the growth numbers when you ask. We have earlier indicated saying that our internal indication is between 30%-35% of the overall portfolio, or 32%, if you can say, of the overall advances gold loan can be. Even this quarter also, if you look at it is coming to around 30%. That way, still we have a 2% provision is there to grow.
Though provision is there, we are not gung-ho and going overboard. We are trying to grow in various verticals. This perfect example is this quarter. Literally, you would have seen every vertical has grown by 6%. Only agriculture has grown by 5%. That way, earlier corporate used to be 1% or 2%. We have diversified other verticals, other products, everything is coming up. No overdependence on gold loan. Even if that is there, we will ensure that 32% or 35% gold, what they have mentioned, we are well within that always.
Sir, secondly, you have increased the MCLR rates just today. Your cost of funds, your cost of deposit also has gone up. How should we look at margins for the full year? You keep guiding about 3.7%, 3.8%, certainly you're clocking far higher margins. What's a realistic margin that we should basically look at for next nine months?
That's why the near-term visibility for MD is one more quarter. That is the reason I have mentioned saying that next quarter it will be 4%+ , though we have initially mentioned 3.7%, 3.8% that way. Let us complete the second quarter, because two months back only we gave this sort of a guidance. Another quarter, if you look at it, then we'll have a clarity. Then after the second quarter, I'll be able to come back with some more numbers. One thing you need to keep in mind, Anand, that the downside is minimal and upside is there. That way, if we are going to move to 3.6% and 3.5%, that's a cause of concern. We are not on that trajectory, and we are trying our level best to manage the portfolio, product mix, all these things and all.
That way, let us see this quarter, give us this quarter. At the end of the quarter, we'll come back what can be there for the next quarter.
Sure, sir. Sir, lastly, have you shared the FCNRB deposit mobilization guidance? What is the kind of ECLGS that you have disbursed till now, and what is the target that you have?
ECLGS, our ED has already shared. Again, he will share it. Coming to FCNRB, as you know, we do not have a branch in the Gift City or any foreign office. The handicap to some extent is there on the leverage front. That way, big ticket, we may not be able to get that. That is the reason we are focusing on the smaller ticket cases, below INR 1 million or below INR 50,000, these sort of things. Also you would have seen our pricing is at 7%, which is a decent pricing that way. Now that we cannot have those sort of benefits and all, we started giving this 7%, and we are actively activating all the branches and all the connections what we have to get that. We will see our current base before this launch of this scheme is around INR 130 million under FCNR.
We will try to either double it or triple it, what all is possible, because it is a great occasion for us to increase the number of NRI customers. These customers will stay with us for the rest of the business also. That way, we are taking it as a positively, and we are trying to push that to get the maximum benefit out of this. Coming to ECLGS, our ED will respond.
ECLGS, in fact, during the Q1, nothing much happened. Just INR 10 crore disbursement. That also is to a few people only. Total, we have got 2,232 applications who have applied in Jan Samarth Portal for the commercial group. Out of which till now, we have disbursed around INR 140 crore. Remaining are under screening. Here, as far as the eligibility is concerned, as per the RBI directives, we will have to screen and only those who are eligible can be given. The corporate business also, there are some eligible accounts we have taken out, but applied numbers are only 54, and disbursement of INR 80 crore has happened till now. The eligibility amount will be seen, and then disbursement will be made.
Overall, whoever is eligible and whoever is in requirement d ue to the temporary mismatch in their working capital due to the West Asia disturbances, they will be definitely given. This is what our approach is regarding ECLGS, strictly as per the RBI directives.
Thank you, sir. Thank you.
Thank you, Anand. Thank you.
Thank you. Your next question comes from the line of Gaurav Jani with PL Capital. Please go ahead.
Thank you, sir. First question, sir. On your corporate and SME, that makes up for about 49%. Just wanted your detailed kind of comments as to how are we looking at the impact of the overall conflict on mainly the SME space and basically our exposure of commercial plus corporate, which is about 50%. For the system, what has happened is that's not kind of visible as of now. Probably if any, that could come through in Q2 or Q3. Just wanted to kind of pick your brains on this.
Sir, I fully agree with you because we were also equally worried about this particular fact saying that which may hit us a lot on the war front, this sort of a thing. When we seriously look at this sort of a thing, like few sectors where actually we are deeply involved, that is the textile sector, we can say, and that is overall 5% of our total portfolio is under the textile and that may be hit. That's what we thought because exports will have an impact on that. In addition to that, the ceramics also will have some sort of a problem, and the logistics also will have a problem. Under the textile, if you look at it, different sub-segments are there, like ginning and spinning, weaving and dyeing, processing, man-made, all these things we have seen that.
When we looked at these things, overall when we speak to them, they feel the number of orders have come down to some extent, agreed. They feel it will not hamper them a lot. Many of them, when we were trying for any additional requirement you require, you come, and they said that, "No, we may not require much on account of this." That is the reason they have not come for additional funding also. That gives us some sort of a confidence saying that the problem is not much on account of textiles. They are equally hopeful of few things like these U.K. and other, Sorry. E.U. EU FTAs, what they are expecting. That may create some sort of a scope for them for moving forward. U.S. is concerned, some orders are coming, but the flow has come down.
Rather than this, the major problem what textile sector is facing now is the shortage of labor. Those who used to come from other states like Bengal and Bihar, those states, it has slowly started coming down because those states are moving well. That way, we need to look at it. In addition to that, other sectors are also there, like pharma, fertilizers, chemicals, automobiles, and hotel and restaurant, and gas and fuel distributors. These cases also, we have seen that our exposure is not that great into those sectors other than the textile, which may have a material impact on the overall book. Having seen all these things, last quarter, what did we do? We have assessed where we can have some sort of a hit over a period of time, and accordingly, we have provided INR 163 crore, up-fronted that provision last quarter itself.
That way, if at all any sort of a shock, unforeseen and unknown comes, we are safely insulated. As on date, if you look at it, nothing is reflecting in our SME numbers also, both in the sentiment of the people as well as in the numbers. That is good. Another factor also I will tell you, we were a bit equally worried. The working capital utilizations may go up because out of desperation, when the orders are not there, they need money. It can be for maintaining the show or whatever it is. Surprisingly, our working capital utilization is running between 77- 80 only. There is no spike in that. Any of the pointers when we look at it, which way gives some sort of a feel to us that some stress is creeping in, we didn't find as yet anything on those lines.
Very helpful, sir. Thank you on this. Secondly, also wanted your thoughts on if any impact could be there on your gold portfolio because of the impending risk of El Niño, given the rainfall deficit. How should we kind of think of that?
Agreed. Suppose if the agriculture gold loan is a clean loan you have given a Kisan credit card, then to some extent, because we cannot blame the farmer also, there is a postponement of this thing. They may try to postpone. Whereas in respect of the gold loan, two factors play. One is the sentimental value for the gold attached because the family and all these things will be there. That's why they will try to redeem the gold loan and take it back. For any reason, if they are unable to do that also, you have a backing of the gold, and our average, if you look at it, the LTV is around less than 65%. You have some sort of a cushion, 35%. Even if there is a reduction in the gold prices by 10%-15%, we feel sufficiently we are insulated.
That way, 92% of our portfolio agriculture is backed by gold. If you look at it, the effect of El Niño will be minimum on the bank.
Okay. Sir, just taking your point forward. What you meant, I think, was from an asset quality standpoint. What I also wanted to ask is would gold loan growth also be impacted by El Niño?
Yeah. I'll tell you, suppose that is impacted, it is not only for KVB, it is for the whole industry. The guidance, what we have given is 1% over the industry. If whole industry is coming down, KVB also will come down, still we'll be 1% above that. That way we'll be in line with industry. El Niño is not specific only for KVB. That way we are insulated.
No, sir. The reason I ask you, sir, almost about a third of our book is gold, which is why. Got your point.
I agree with you. Now, not only third, if many other banks, if you look at in the South, the growth is like this only. It may have an impact, I'm not disputing. One solace is the overall tonnage of many other banks, including NBFCs, if you look at it, the tonnage has come down over a period. Last two years, if you look at it, the gold prices have gone up. If earlier someone has given two ornaments, now with one ornament, what all amount he wants, if he's able to get, second ornament, he took it back. The tonnage, what was released last two years back, that may be helpful for them to bring it back to acquire a fresh loan now.
Next crop, something going on well and all, they may redeem and they may close this loan. That way, they have some sort of a gold which was redeemed from the banks earlier, it is there with them.
Understood. Sir, just last two questions from my end. One is just going back to the point on OpEx, right? Safe to assume that your OpEx growth versus your loan growth, the significant differential that we saw in the previous, that is FY 2026, that differential will sustain in the coming years or how should we look at it?
You see, OpEx last year, we have opened 13 branches. This year, 50 branches we wish to open. Few more maybe spending on the IT also may be required, which you cannot postpone. IS is also required, information security. These things where you need to mention, you need to do that. Growth wise, we will not compromise on that. You must be seeing our yields what all are there, and the NIM what all is there for the last two to three years trajectory if you see. More or less, we are trying to maintain this sort of a thing. That way I feel that the parity what you have seen, here and there can be a gap, but we will be able to maintain a higher trajectory for the income compared to the expenses.
Okay. Sir, what I meant to ask you was, 2024 to 2026, the loan CAGR was about 15%, versus OpEx CAGR was only about 6%. That gap is what I wanted to kind of check with you for the next.
No, I agree with you, what you are saying. Last year, the spike in the staff strength, which used to be 7,000, it has reached 9,500, and last year it was more or less stagnant. The numbers didn't change. We thought, one year, let us focus on the productivity of the existing staff and then take it forward. This year, because there's a limitation beyond which you may not be able to get the productivity from them, you may have to take some manpower. That way the costs can go up. Even if all this goes up also, it will be, as we said, that between 45-50 we have indicated the cost-to-income ratio and the ROA. With all these things, don't worry on this count.
Finally, the ROA, what we said, we will try to deliver, and we'll be within those limits. All this will go into that one. If this is going up, where else, what else we need to do, we will see that, and we will try to get the ROA what we have planned.
Sure. Just last question, sir, from my end. You did mention about the likely one-time impact of ECL. On a sustainable basis, how do you see this impact coming through over the next one year?
Okay. As Ramesh explained, sufficient buffers have been created over the last two years, either through way of floating provisions or through accelerated provisions. In fact, all these total provisions works out to around 1.7% of our advances. Okay. Given these buffers and strong asset quality of the bank, we expect the transaction to have a limited impact. If you talk about on a steady state basis, it depends on various factors like the eventual portfolio mix, including how much will be the share of gold loans, how much will be unsecured lending, how much will be CRE. What are the asset classes where the expected loss rates and regulatory flows also differ.
Hence, what I say, it will be premature at this stage to indicate any normalized credit costs under the new regime. Anyway, we have got time till another 10, 11 months are there. We'll let it roll. Yeah? Okay.
Okay, thanks. That is it from my end. Thank you so much.
Thank you.
Thank you.
Thank you. The next question comes from the line of Subramanian with IHS Capital. Please go ahead.
Congrats for the good set of numbers, sir.
Sorry to interrupt, sir. May I request you to use the handset mode, please?
Can you hear me?
This is slightly better, sir.
Yeah, sure. My question is on the macro. Currently, the daily banking liquidity is at comfortable level in the range of INR 1.7 lakh crore. In the last six quarters, it is at comfortable level. If it stays same, does it help in easing cost of funds, which you mentioned, like you are going to look for deposits, in the system level, if the liquidity is comfortable, does it going to help in easing cost of funds?
No, we cannot say that way. The reason is cost of funds have two components. One is the deposits, what we are taking. Second one is the borrowing. There's a limitation for you to borrow. Because LCR also we need to see CD ratio to some extent we will see. With all these things, the focus on deposits will continue. Though the liquidity is there in the market, if it is not translating to deposits and not coming into the banking system, still you will find some sort of a difficulty. Borrowing because there's a limitation, beyond that, you cannot borrow. Borrow in the sense that wholesale you can borrow. The CDs, suppose a bank like ours, I had to borrow INR 10,000 crore is the limit. The market may be awash with liquidity, but I may not be able to borrow that money.
That way, liquidity per se will not transfer into the deposits, and it is the mindset of the customer. If he prefers, there are some other revenues are available to them other than a bank deposit to get a higher yield, the money may go there. Whereas, suppose if the money is going into the capital market, you may say that has to come back to the banking system only. That may go into few banks where who are actually dealing with the capital markets, the accounts and all maintaining and all that may go. We are concerned 72% of our depositors are household. We may not get the benefit of the capital market inflows, what all are coming. We need to get our retail. We will still focus on the retail only.
liquidity in the market is there, it may support us, but to the extent what you want as a deposit, it may not work out.
Okay, sir. Okay. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we will take that as our last question for today. I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments.
Thank you all for your patience and for asking the questions and going through our numbers. That shows the interest, what you have. We will raise to your expectations, and we will sustain the performance, what we are doing. Thank you very much once again to all of you. Thank you.
Thank you, members of the management.
Thank you.
On behalf of--
Yes. Please go ahead, sir.
On behalf of The Karur Vysya Bank, that concludes this conference. Thank you everyone for joining us, and you may now disconnect your lines. Thank you.