Ladies and gentlemen, good day and welcome to the Q2 FY 2026/2027 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. Chandrasekaran, Chief Operating Officer, Chief General Manager, Mr. Ramshankar, and Mr. Ramasamy, 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. D. 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.
Yeah. Thank you, Sagar. Thank you. Yeah. Good evening to all of you. On behalf of Karur Vysya Bank, I extend a warm welcome to everyone joining our bank's Q2 earnings call for the financial year 2026/2027. Our financial results and accompanying presentation have been made available on our website, and we trust you have had the opportunity to review them thoroughly in advance of this meeting. The domestic economy showed resilience in the first half of the current financial year, despite continued global uncertainty amidst the conflict. The supply-side pressures were alleviated by proactive policy measures by the government that ensured adequate supply of key inputs. System liquidity surplus surged in September 2026, mainly on account of Reserve Bank of India's swap facilities. Bank credit growth became broad-based and strengthened further.
As discussed in our previous two earnings calls during the current year, we had indicated that financial year 2026/2027 would be characterized by cautious and moderated growth. We had also emphasized the importance of navigating the evolving operating environment with discipline, ensuring that business growth is pursued without compromising on the portfolio quality. We are pleased to report that our key performance indicators are broadly in line with the guidance shared earlier. The business 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 since the year's outset. As of 30th September 2026, the bank's total business reached INR 239,712 crore, reflecting our sustained growth momentum in the second quarter with an overall business increase of 5% quarter-on-quarter and a year-on-year growth of 18%.
Advances rose to INR 111,518 crore, representing a growth of 7% quarter-on-quarter, while deposits increased to INR 128,123 crore, achieving quarter-on-quarter growth rate of 5%. The composition of our advances portfolio remained broadly stable during the quarter, with RAM segment continuing to account for 86% of the portfolio and the corporate segment contributing to the remaining 14%. The commercial business segment continued to demonstrate an 8% growth over the previous quarter, driven by higher disbursements in both small business group and business banking group, so it comes to around 24% quarter-on-quarter, we can say the disbursements growth. The growth came predominantly in sectors like engineering, wholesale trade, commercial real estate, metal products, retail trade, textiles, and transport operators.
Tailor-made products such as GST Surrogate for customers with limited financial data and Open Term Loan product started during the March quarter have crossed INR 450 crore outstanding at the end of this quarter. Small business group relationship manager model is gaining momentum, and this team has added 228 new-to-bank customers during the quarter. Retail advances increased by 5% quarter-on-quarter, primarily driven by growth in mortgage loans and personal loans, sequentially down by 1% over the previous quarter. Mortgage loans registered a growth of 12% over the previous quarter. Personal loans grew by 11% over the previous quarter, driven by secured PL and unsecured business loans equally. Retail jewel loans marginally declined by 1% during the quarter. We did not reduce the pricing in retail jewel loan segment to have a calibrated growth and hence decline sequentially.
The agriculture loan portfolio recorded a growth of 4% during the quarter. The increase in oil prices due to Gulf market crisis, coupled with the moderation in agricultural commodity prices, provided support for the business growth to some extent. Favorable expectation of the monsoon in the third quarter, coupled with favorable growth indicators of the growth in agri inputs, the overall outlook remains neutral. Agri jewel loans constituted 92% of the portfolio and other agri loans constituted 8%. The overall LTV is maintained at 67% for agriculture gold loans and 59% for non-agri gold loans as on 30th September 2026. We closely monitor the LTV levels. Any breach triggers an automated alert to the branches. The overall jewel loan portfolio of the bank stood at INR 32,153 crore, constituting 29% of the total advances.
Our endeavor is to keep the same between 35% of the total advances or 32% in terms of the total exposure levels. Suppose if you look at 32% of the total exposure level, even then we will be at 26%, 27%. If we look at the outstanding, it will be around 29%. So that way, in both the cases, we have sufficient room available for us for the growth in the jewel loan portfolio. The corporate and institutional loan portfolio has grown by 12% during the quarter. The credit demand was seen in the segment like EPC, infrastructure sectors, commercial real estate, capital market participants, and selective CapEx in textiles and NBFCs. Even though the corporate portfolio has been growing well in the last two quarters, the average ticket size of the portfolio still remained at INR 42 crore at the end of Q2.
We continued our focus on credit substitutes and had a growth of around INR 500 crore during the quarter. Our focus would be on ETB customers with an external rating of A and above on this segment. Our YTD growth is 13% in advances. As a word of caution, YTD growth should not be construed and considered as an indicator for the full year growth. We had indicated in the beginning of the year that we would grow by 1%- 2% above the industry growth. With the spurt in credit growth scenario in the industry, we would tread cautiously and look for calibrated growth of 18%- 20% for this financial year. The bank's liability business constitutes to 53% of the total business book of the bank. Our deposits grew by 5% during the quarter, driven by gains in both retail term deposits and CASA.
A key highlight of the quarter was the strong momentum in CASA. Current account balance increased by INR 592 crore, representing a 5% growth during the quarter, while savings account balances grew by INR 897 crore, again reflecting a 4% increase over the previous quarter. Consequently, CASA balance increased by INR 1,489 crore during Q2, supported by strong traction in operating accounts, transaction banking relationships. Our CASA growth continues to be relationship-led. Existing customers contributed nearly to 60% of the incremental CASA growth, while new customer acquisition accounted for the balance. That reflects the both deeper engagement with our customer base and sustained acquisition momentum. Retail deposits remained a key growth engine during the quarter. Retail term deposits witnessed healthy traction supported by calibrated pricing actions undertaken to fund advances growth while maintaining a disciplined approach towards wholesale funding.
The bank continued to preserve the granularity and resilience of its deposit franchise, with retail TD contributing nearly 73% of the total deposits, term deposits, and this RTD growing at 6% quarter-on-quarter with the quarterly growth of INR 3,902 crore. The RBI's relaxation on FCNR(B) interest rate ceilings has enabled the bank to source incremental FCNR(B) deposits of around INR 680 crore during this quarter, indicating smaller uptick in the NRI business. Regarding margins, we had provided a guidance in the range of 3.7%- 3.8% for the financial year 2026-2027. These are about the NIM. I am pleased to report that we were able to maintain our net interest margin at 4.26% for this quarter also. If you look at including the one-off recovery, so interest recovery, 8 basis points from the written off accounts, it comes to 4.34%. It was more or less like previous quarter.
The cost of deposits increased marginally by 4 basis points on a sequential basis as rates of deposits were increased during the first quarter, and that way, the repricing of deposits, what all happened during Q2 and the fresh acquisition, we had to pay a relatively higher rate because we have revised the rates in the first quarter. Funding costs are likely to remain up under upward pressure due to RBI's policy tightening, liquidity absorption, and competition for deposits. However, immediate pressure may not be on the bank due to increase in deposit rates as strong FCNR flows still feeding a credit growth. So it may have a effect and likely run like this for next two to three months with the existing rates. The yield on advances increased by 8 basis points during this quarter and remained at 10.09%.
EBLR book increased from 55% to 57% compared to the previous quarter. The fixed rate loan book remained at 34%, and MCLR-linked book reduced from 9% to 7%. As the market is flushed with liquidity on account of FCNR(B) flows, we expect huge competition and pricing from few banks, and it may bring down the yields going forward. So yield on investments dropped marginally by 4 basis points during the quarter at 6.79% from 6.83% of the previous quarter. The marginal dip in portfolio yield during Q2 is partly attributable to the investment mix. Investment mix and mutual fund investment made during quarter two, the returns are computed through NAV appreciation. They are recognized separately, and they do not form part of the interest income. In a recent monetary policy meeting, RBI had increased the repo rates by 25 basis points.
In view of what we have said earlier and some sort of a visibility what we had, and considering our pricing methodology of the loan book also, we may end up above 4% or 4%+ NIM for the full year. The operating profit for the quarter was at INR 1,162 crore, reflecting a 14% increase compared to the same quarter the previous year and 6% growth sequentially. Net interest income has grown by 25% year-on-year and 5% sequentially. The recalibrated asset mix and yield optimization continued to result in net interest income growth. However, non-interest income for the period remained flat at INR 435 crore sequentially. Our operating expenses for the quarter stood at INR 770 crore, representing a marginal increase of INR 1 crore sequentially.
As discount rates went up by 40 basis points during the quarter, AS 15 requirements were lower by INR 28 crore compared to previous quarter. This compensated the increase in core salary costs, which went up by 8% due to DA increase and ESOP-related provisions. Other operating expenses had also remained flat compared to previous quarter. Net profit for the quarter was INR 788 crore, an increase of 4% quarter-on-quarter and 37% year-on-year. During the quarter under review, an allocation of INR 94 crore was made towards the NPA migrations, standard assets, restructured assets, and INR 25 crore additionally, we have provided towards the floating provisions, resulting in a credit cost of 0.43% on an annualized basis. With respect to ECL provisioning guidelines, the Bank has maintained adequate provisions and buffers through floating and prudential provisions over the past few years.
Based on our internal assessment, we feel we will be able to manage with the provisions what all we have made. If at all something is required, we will be able to take care of that from the earnings what we have. The total provisions to advances is at 1.65%, which should take care of the transition. The ROA for this quarter stands at 2.1%, marginally lower by one basis point from previous quarter. We expect ROA for the full year to be more than 2%. Gross slippages for the quarter amounted to INR 123 crore, representing 0.44%, annualized 0.11% of the loan book sequentially. It is lower from INR 138 crore. SMA 30+ levels remained at 0.22%, same as of previous quarter. 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 NPAs declined marginally by five basis points to 0.69%. Our net NPA reduced by one basis point to 0.18%, and we are committed to maintaining net NPA at below 1% of our loan portfolio. The proportion of our standard restructured loan portfolio has further decreased to 0.33% of our total loans and continues to perform satisfactorily. Notably, a substantial portion is secured by collateral, and we also maintain a provision of 40.1% for this standard restructured loan portfolio. Our CRAR Basel III continues to be healthy and is at 17.97%, providing us comfortable headroom for growth. Our liquidity coverage ratio for the quarter is at 129%, and we would be maintaining this in the range of 115%-120%.
We opened 20 branches, including two branches in the first quarter during the half year ended September 2026. We have planned for opening 50 branches during the current financial year, and we would be completing 26 branches before the end of next quarter and balance before the year-end. That way, major part of the branch expansion load will be taken care of before the December end. As reported in monetary policy statement, going forward, India's macroeconomic outlook remains resilient, supported by domestic demand and strengthening investment despite persistent global uncertainties. The outlook remains vulnerable to geopolitical developments, volatility in global energy markets, and weather-related uncertainties. Weak monsoons coupled with strong El Niño, protracted geopolitical tensions, rising international commodity prices, additional frictions in the global trade, and tightening of global financial conditions could adversely impact the growth outlook.
While we remain mindful of the evolving operating environment, our focus remains steady on prudent calibrated growth, granularized, and to focus on operational efficiency, customer centricity, and disciplined risk management. This approach gives us confidence in delivering sustainable value to all 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 would be between 18%-20% for the financial year 2026/2027. NIM for the full year will be in the range of 4%+ , ROA for the full year will be above 2%. Our GNPA expected to be less than 1.5%, and NNPA will be less than 1%, and slippages will be less than 1% of our outlook. Coming to our cost-to-income ratio also.
We feel that we will be below 45% in the next two quarters to come. This is all from my side, and now I'll be glad to respond to your questions. Thank you.
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 touchtone phone. If you wish to remove yourself from the question queue, you may press star and then 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, you may press star and then one now. Your first question comes from the line of Rikin Shah with IIFL. Please go ahead.
Good evening, sir, and thanks for the opportunity. I had four questions. The first one is on the gold loan asset quality. While for you it seems that it is pretty stable and no problem, but if you look at the bureau data and select players, we have started to see some uptick in the gold loan NPAs. Wanted to hear your thoughts on what you are seeing on the ground. While I do appreciate that the LGDs will be very low, if any, but is there any stress in the gold loans? That is my first question.
Yeah, I will respond on that, Rikin. First of all, good question that way to start with. What we did for the last one and a half years, we have thoroughly strengthened our margin call. Earlier, the branches they were doing on their own, depending upon the LTV seeing and all. We felt it may not work. Now through system, we have digitized all these things. When the cutoff is there, straight away the alert will come, a centralized cell, they monitor with the branches for seeing that either we get a top-up for this amount so that it comes within the comfort level, what we have, or after some time, it can be 15 days or one month, we will proceed for the realization of these jewels.
Luckily, what we found is because the area of operation, what we work, many of these people, they bring the family gold or ornaments of the family members in addition to the normal gold, so they have an attachment to the ornament. When we trigger this auction, this sort of a thing, the need for auctions are very few, and many cases, customers on their own, either they are coming forward for making the top up and all to bring it under the control or they are repaying. That way, for the time being, what we see, we do not find much issues as far as the current margin call mechanism is concerned. We did not find that sort of an aberration, what you mentioned. But we will be mindful of this fact. We will also be careful in further tightening and strengthening our monitoring mechanism.
But sir, if not in your customers, but otherwise, do you see some evidence of stress at all or not really on the ground?
Not really, actually. In fact, if you look at our retail segment, we have brought it down. The numbers also have come down because our rate of interest is relatively 14% that way, and selectively we may give 13%, something like that. The focus is on the agriculture only. This agriculture also, now majority of the people, because below 2 lakhs, RBI has given a dispensation for certification. Otherwise, we are taking the documentation, underlying documentation, what he is doing and all, and the lending is also rather than the value of the jewel. We are going with per acre, how much is there a scale of finance. When all these things we have mentioned, many times this going for a proper need and not for the sake of consumption. That way, to some extent, this part we have not yet seen.
Got it, sir. Second question is on bancassurance income, and I understand last year it was about INR 165 crore for you and contributed about 18%-19% to your fee income. Have you done any assessment of if the IRDAI guidelines get implemented without any watering down, what could be the potential impact on banca income?
Yeah, agreed, but still it's in a fluid stage. What comes out finally, we do not know. But whatever it is, we also did a back of the envelope working on this. Now that the LI and all few cases that drastically it's going to come down, maybe 60%, 70% also can come down in a few cases. We worked out based on of [25, 26], how much it can come down. We saw. It will come down, but the good thing for our bank is The insurance penetration, LI penetration is concerned, we are at around 1.6%. We also worked out in another way. To make up that lost ground, what is it we need to do?
What thing we need to do is, if we can bring up the penetration to around 3.8%- 3.9%, we'll be able to make up this sort of a thing. Now we need to work closely on this particular aspect, how actually this sort of a penetration can go up so that overall, we'll be able to make up the commission, what all we are going to lose there.
Got it, sir. If I put it the other way around, about 50% is where you need to recoup and which is where the penetration needs to go up from 1.6 to almost doubling. Right? About 50%
Correct
is what you need to recoup. Got it.
One thing also, I will tell you, Rikin. The proposed framework offers some scope also. Suppose if you look at it may create scope to reassess our bank's product mix, particularly across protection, rural and underserved markets, health, property, engineering, large corporate segments. These things, if you look at it will give us some more opportunity. That is why closely we are reworking on this, how to change our products' mix, focus, and above all, penetration also. If you look at our penetration, it is skewed. Few of the geographies, it is 2.2%, 2.3%. Few geographies, 0.9%. All along we did not focus on that penetration percentage.
Now, closely, if you can work with analytics based on existing policies, what all are there, what profiled customers are taking, how to filter them, and on a focused basis, we work with the partners and all we focus on that. Somehow we will be able to make it up. I agree, a problem is a problem for everyone, including for us. The only thing is, with this, we will be able to overcome the problem in the months to come.
Got it, sir. Noted. The third one is an extension to this only. I mean, you have done a very solid job on managing and improving the margins. But if I look at the non-core income, which includes the treasury and the recoveries from write-off, it is still a substantial proportion of PBT and ROA. Wanted to hear your thoughts on how much resilient you think this can be and how many years visibility do you have that we can continue to maintain this? This includes both recoveries as well as the treasury contribution.
Rikin, had this question been there three years back, then my response would have been something different. Now, if you look at the DuPont of the Q2, the treasury income constitutes 0.06. Not only now, even first quarter also 0.06. First thing. Second thing, our write-off recovery, which used to be 0.65 and above all, 0.8, 0.9 also used to be there. Now if you look at it, overall the write-off recovery for this quarter is 0.21. On an average, if you find our slippages are in the range of INR 400 crore-INR 500 crore, and next year, if they are available for the recovery, and even if you assume around 60% you are going to recover out of that, we will be able to get.
Still, we have a pool of around INR 2,500 crore where assets worth is there. From that also, we will be able to get that. Now, suppose for any reason, as you mentioned, this 0.21 in the DuPont may become 0.11. 10 basis points may come down. Even then, the 2% what we have, we will be more or less at that level. What we are indicating earlier was 1.8+ . Earlier we were dependent on this write-off recovery to some extent. Last quarter and this quarter, without much dependence on them, on a business as usual normal case also, we are able to get 2%. That implies, shows the inherent strength, what we have developed over a period of time.
Got it. Very clear, sir. Thank you for that clarification. The last question is more of a data keeping. Between your floating and other contingency provisions, what is the total stock of these provisions? Is it around INR 390 crore now?
I have given you the percentage, 1.65% of the total advances we have as provision.
Is this in addition to the standard asset and restructured loan?
Yes, absolutely. In addition, because now that there are many unknown unknowns are there, we have provided something for them more also. ECL also, two years back, we have provided contingency provision also, we have provided INR 100 crore. That is why we thought due to uncertainties, which can be used in any way. When good times are there, you need to think of the bad times, if at all they may come up and although you exercise utmost caution to take care of these eventualities, we provided INR 25 crore during this quarter.
Got it.
It includes standard provisions also. Overall provisions.
No, the INR 25 crore is standard separately also there in addition to that.
Overall is 1.65.
1.65 includes standard. Correct.
Got it. So x of that would be about 1.2 or something.
Yeah, 1 to 1.24.
Got it. Perfect. Thank you very much, sir. All the best.
Thanks, Rikin. Thank you.
Thank you. Your next question comes from the line of M.B. Mahesh with Kotak Securities. Please go ahead.
Hey, hi.
Hi, Mahesh.
Just a couple of questions. Hi, sir. A couple of questions. One is, when you look at the corporate and SME demand today, if you just kind of break up between how much of it is essentially just kind of a drawdown of working capital that one is seeing on the ground for, let's say, some kind of Middle Eastern crisis and stuff, whether those things have settled down versus genuine CapEx-led expansion that you're seeing. Or is it a substantial part still kind of a takeover of loans that one is seeing on the ground? If you could just kind of highlight what you're seeing in both corporate and SME side, sir.
Yeah. In fact, frankly, if I had to share, Mahesh, the corporate, what we say, it is literally the MSME of big banks.
Yeah.
Because our average ticket size, even still INR 48 crore- INR 49 crore. That is also more or less a commercial only, but for the sake of convenience, we have split them as corporate. Now, if you look at it, ideally we would have felt very happy if our working capital utilization goes up, in turn, the top line goes up. Our working capital utilization for the last one and a half years is in the range of 76%-79%. It is not going up. Same level it is there. Now here, when our textile portfolio is 5.5% is there, where major portion is there. There, we have further analyzed this particular portion. We look at it where U.S.-based exports are there. There, the utilization is around 55%-56% only. They have not used. We spoke to a few of them.
They felt saying that wait and watch, they do not want to actually spend more on the working capital. Regarding the CapEx, what you mentioned, we are not finding as far as the types of customers and the sectors we are handling, nothing much CapEx we have seen. As for the textile and these sort of companies also, if you see, they also do not want to go for a modernization as yet as our customers are concerned, though structurally, there is a small issue as far as the labor shortage is there. If they spend money on the textile modernization, their dependence on the labor may come down, but because of the many uncertainties outside what is happening, including U.S. tariffs and other issues are there.
Many of them, for the time being, they do not want to invest on the CapEx and working capital utilizations also have come down. They are going for a wait and watch mode. Agreed. Few of them, these U.S. and [E.U.], these sort of FTAs have come up, but it is yet to take off that way. The reason simple is U.S. is concerned, the volumes will go at a stretch, the same model. Whereas U.K. is concerned, different countries, different products, different buyers, and they have to make arrangements with each one of them, and the pricing will be different. That is slightly a long drawn process for them. That way, why if we split these people into different lot. The top notch, if you look at it, the spinning is concerned.
The upstream operations spinning and ginning is concerned, our total portfolio will be 40%. Midstream manufacturing will be around 22%, where weaving, dyeing and integrated and downstream, particularly where it is going to hit hard, that is these finished goods, apparel, these sort of people and all. That comes to around 38% of our textile portfolio. Luckily, when we are continuously engaging with them, though CapEx is not there. Earlier, immediately after COVID also, when we had problems with the textile also, we did not have any problem at all. We have come out. That way, the sensible customers are more sensible. They do not want to go for this sort of a thing, neither for the utilization nor for the CapEx.
It also gives us a comfort saying that though we are missing the benefit of the top line, it gives us a comfort saying that they are managing their portfolio much better than what we expected. Overall, we did not find CapEx and working capital utilizations also so much. What all we are getting is from the fresh acquisitions, it can be the new to business or takeovers. These things are happening. Even if we take over from other banks, we are not compromising on the rigor and the quality of the accounts, what we need to get, so that it should not add problem to us.
Perfect. Thanks for this. The second question is, have you made any changes to the gold loan portfolio yield in the current quarter, and where is it standing right now?
Nothing. Because the same 10.75, what all is there, agriculture is going on. In respect of retail jewel loan are 14%, but depending upon the value and this need, all these things. Some discretion has been given to the operating teams that way. Other than that, for the time being, we are continuing that. Let us see how we can run that.
Perfect. Last question, sir. Just a bookkeeping question. What was the recovery from written off for the quarter?
Quarter is INR 82 crores. INR 82 crores it has come that way. Yeah.
Okay.
No, sorry. It is INR 79 crore.
Similar to the last quarter.
Sorry. It is INR 82 crore, sir. Sorry. INR 82 crore.
Thank you.
Mahesh, I need to tell you earlier, a few of them had an apprehension that if written off is not there, what will happen and all, how ROA will come. At that time, our written off used to be INR 150 crore, INR 200 crore, INR 220 crore. With this INR 82 crore also, we are able to show an ROA of 2.1% and INR 25 crore we have provided also for this contingency. After that, our ROA is 2.1%.
Perfect. That is great, sir. Sir, one last question, if I may. One of the reasons you have been growing slow on the housing versus LAP was that you felt that housing, the dropout rates for those portfolios after origination was very high because there was heavy takeover. You are not seeing the same in mortgages for some reason. Whereas if you look at the industry, mortgages is actually growing faster and we keep hearing that even here, the refinancing is as high as what you see in the mortgages. What explains the stronger growth for you in the LAP portfolio as compared to the mortgages side for the housing loan side?
The housing loans, as we earlier said and all, we cannot compete with this pricing. The whole process, many of the accounts, few of them we had to lose also because there is no prepayment charges there. Even then-
Correct
we are comfortable we are giving it, because otherwise that yield is going to pull down the whole portfolio for us. That is the housing loan. Coming to mortgages also, our growth would have been much better than what we had here also. There is some sort of a poaching is happening. Few banks, they are offering a lower rate, and they are giving it. There are two options for us. We also straightaway reduce and give it, or we need to leave it. When you retain that one, suppose if there is a geography where many other customers are there, others are going to know this, then whole portfolio under the mortgage also gets repriced. Under these circumstances, what we thought, even top-line wise also, it is better we leave it.
The net effect of this is, you see a subdued relatively market what you are talking, the mortgage growth is relatively subdued. Had we retained those accounts also without leaving them, our growth would have been much, much better
Perfect. Thank you. Thank you, Ramesh.
Thanks. Thank you.
Thank you. The next question comes from the line of Parth Gutka with 360 ONE Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity.
Thank you.
Sir, my first question is, why has the RWA gone up-
Sorry to interrupt. Parth, sir, your voice is quite modulating.
Yeah
We request you use handset.
Yeah. Can you hear me now?
Yes. Please go ahead.
My question is, why has the RWA gone up so sharply during the quarter?
It is just marginally it has gone up. It has become 58, though we were trying to make it 65, so that if we can increase that risk at all, automatically the yields also will go up, we will be able to do that. But basically, the reasons are few. We took exposures on NBFCs selectedly. These cases, if our bank's name is not cited, that will carry 150% risk weight. It will take some time for them to make these adjustments and cite our name. Corporate growth, what you have seen, fewer corporates what we have grown also. That will add something to the risk-weighted assets. That is first part. Second thing is the personal loans, consumer credit, what we call as per RBI's nomenclature, secured and unsecured.
This has gone up by INR 9 crore, INR 10 crore, INR 19 crores, but there also 125% risk weight is there. Next point is on the unhedged foreign currency. Few amounts what all are there, we had to provide for that also. All these factors, what all are there. Likewise, corporate also, we have given in our slide, double B, what all are there. But even if we are financing double B, because the pricing, these things are there. If they are fitting into our norm, security, these things, only we are doing. These things, when we thought we will take these sort of exposure to that extent, RWA has gone up and all. Nothing, no aberration beyond this.
Sure, sir. Thanks. My second question is, though you explained about the housing portfolio and the switch to or focus on the LAP portfolio, we are also witnessing that the vehicle portfolio is also trending down. Should we expect this to continue going forward?
Yeah. In fact, last one and a half, two years also, I have been mentioning the same point. Vehicle financing, there are two components. One is a fresh vehicle, second one is a used vehicle. We are not yet there in the used vehicle. We are working on that particular project, and we may be able to get that. The reasons are simple. The used vehicle portfolio, that is the market, has gone up, then yields are relatively better. Whereas in respect of the normal vehicle loan portfolio, first thing, it's a fixed rate, and again, the rates are so low. In addition to the dealer commission upfront, you have to pay. How many years the loan will run, you can apportion, you do not know. The delinquency levels are relatively high, and the capital requirement risk weight is 150%.
Once, even if you repossess, what value you get on the vehicle is not known. Keeping all these points in mind, when the other side, there is some sort of a tightness as far as the deposits and funding is concerned. Second thing is, when you are able to deploy that money in a relatively safer asset like a gold loan and many of the mortgage loans where your realization is relatively better. We thought, after looking at all these products, it's a tactical call taken by us. This money, it is better we place in mortgages and jewel loans. Even if few corporate, where actually the strength is pretty good, and though the ticket size is INR 45 crore, INR 50 crore, INR 75 crores and all, we felt that way. We started going for that. But it is only, as I said, tactical call.
Tomorrow, if the economics and commercials undergo change, we can come back because digital-wise, system-wise, everything is in place. For the time being, we wanted to be aside when such a huge competition is there. We should not be there in the crowd. That's the only point.
Okay. Sir. Fair enough. My last question, sir: considering we would be focusing on the corporate loan growth as a tactical call for the next couple of quarters, you also alluded to the fact that cost of deposits is inching up. You have guided for a 4% plus margin, but should we expect the margins to trend down from the current levels of 4.26%? That is my last question, sir. Thanks.
Yeah. That you can expect. The reasons are few. Last year October, we started converting our gold loan portfolio from MCLR to fixed. By end of September or first week of October, that entire repricing is over now. They have moved to higher rates as well as fixed also. That you will not get the benefit of the repricing at fixed rate now on that, first thing. Second thing, corporate, even if we are booking, the overall the yield is 9%+ only. That way, overall, if you look at it, the yields here and there, three, four basis points it may come down. But in the meanwhile now, our EBLR book is around 56% is there. Out of that, 35% is the working capital. Working capital, next day itself, we started repricing the 25 basis points. Rest will get repriced in a quarter.
With this, to some extent, it may offset what all we think it may go down. But whatever it is, as I mentioned earlier, we envisage and visualize some sort of a competition can be there in the pricing, and we may have to quote a lower pricing also to retain our existing customer, because every customer we cannot leave and lose, and later getting them will become very difficult. It is only a conscious call we have to take depending upon a case. In these cases, next three to six months, if this sort of a pricing pressure is there, we may have to reduce this rate and we may have to take a call. Keeping all these things what we thought is, we will be able to maintain a NIM of above 4% we said. So 4.26% retention, that I cannot say anything on that.
But 4% and above, I can assure. Earlier what we said is it will be 3.8%, 3.9%, those things we were mentioning. Now, confidently, next two quarters also we will be able to cross 4%. To that extent, I can assure you.
Sure, sir. Thanks a lot.
Thanks.
Thank you. Your next question comes from the line of Jai Prakash Mundhra with ICICI Securities. Please go ahead.
Yeah, hi. Good evening, sir, and thanks for the opportunity, and congratulations on a very strong quarter. Sir, first, few questions. First, again, sorry, on this two, on NIM only. So you mentioned why you have revised, but this is still slightly lower than what we are doing right now, and you also explained a few reason. But, sir, on gold loan, what would be your blended tenure, even if the rates are fixed, but what will be the, let's say, blended tenure of this product for you?
Now, agriculture is concerned, it can be between six months to one year. It depends upon the seasonality and the crops what we are getting. Whereas retail is concerned, it can be between around six months, we can say.
So, sir, while the product is still fixed, but the tenure is, let's say, six to nine months only, right?
Correct.
Every month, at least 10% of the portfolio will reprice, right? I mean, in a quarter, at least 33%-50% of the book will reprice on a higher rate if you want to.
No, understand, Jai. Here only you have to understand. Earlier, suppose what all rate 9.75% we were doing, it has been repriced to 10.75%. Now, even if it is repriced, it will be repriced at 10.75% only. It will not become 11.75%. That 1% additional benefit what we were getting earlier, you will not get that. It will get repriced, but 10.75% only you will get. And fresh business you are booking, at 10.75% only you will get it. And above all, the competition also we have to see. So that way, every month on the reprice, 1% what we were getting additional, you will not get it now.
Okay. Understood. And sir, do you see any scope to improve the pricing on gold loan? Like 10.75% PSU banks do not charge, or maybe they are much below 9%, but what is your sense? Do you-
No, understand, because we have a limitation, internally placed limitation of 35%, all these things when we thought. That is the reason we made our retail gold loan 14%. Off late, if you see this slide also, you start seeing the numbers coming down because few of the banks, out of their anxiety, they need to grow. So they are giving a higher LTV, lower rate and all. In the whole process, if we still try to increase these rates, there can be a rundown in the existing portfolio. Those customers, once we lose them, we may not be able to get them back also. That's why very calibrated way we have to run this and this portfolio.
Right. Understood, sir. This is clear. Secondly, sir, I think in your opening remarks, you mentioned that because basis is 1.65% of non-NPA provisions, we have taken care of the ECL transition impact, whatever is that number. Is that understanding correct?
Correct. Rough calculation, what we have done, maybe it will take another one and a half months for us to have a further clarity on that. Otherwise, internal calculation shows what all we have provided various provisions. This will take care of that. There should not be a big hit on account of ECL. That's what the understanding what we have.
Right. And sir, just to break up this 1.65%, correct me if my maths is a little bit wrong, the ECL would be around INR 225 crore outstanding, and RSA could be another INR 200 crore, and rest will be maybe West Asia plus standard assets provision. Is that the bifurcation broadly correct?
What you said is West Asia provision, what all is there, you said in the month of March we have done. First year, INR 100 crore ECL we did. Next year, contingency also we have provided INR 100 crore. Now, INR 25 crore we have provided for that. Restructuring 41% of the INR 373 crore already is there. All these provisions, what all are there, they get straight away subsumed into this ECL. That way we have enough levers available to take care of this.
Right. Sure, sir. On a recurring basis also, if we sustain this SMA number and less than 1% kind of a slippages with this kind of a secured book, even the run rate provisions may not have a material impact, right? Is that understanding also correct?
That's what all of us wish. Our intention is absolutely not only the PPOP, because PPOP you must be seeing we are 3%+ . At a point of time, 2.3%- 2.4%. 3% consistently we have been able to do. If what all we are getting up to PPOP, if we are able to reduce that leakage in the bottom, then automatically it will flow into ROA.
Right, sir. Sir, any thought process on induction of an additional ED? Right now, we have one ED, but you have around less than two years, so I was just thinking when do we see the new ED?
No. Second ED, another ED, we have not even thought of, not required. Board is equally abreast of looking for the successor. They are working both internal as well as external candidates and all. A search committee has already been formed. They will work on that. Sufficient overlap will be there between the current MD as well as the successor also. There should not be a problem. Second ED, we have not even thought of.
Okay. Understood, sir. Okay, sir, and lastly, sir, on these 50 branches, any thought process on where would these branches be? Let's say, what would be the branches which is outside Southern India? That is the last question, sir.
Yeah. We are seeing the potential for the liability business. Wherever potential is there, we are trying to see. Even within South also, there are many geographies and new districts which are formed. So where our market share is relatively low compared to others. So where our presence is required, we are focusing, not for the sake of opening. And after that, our focus is on the Maharashtra as well as Gujarat. These two states we are working on that. Once we more or less saturate these two, then we will move forward towards the central part as well as the North also. North, though we have a division, and up to Panipat we have branches. So which locations, how to go ahead and we will go. After that, we will come to East. So currently, South and next is Maharashtra and Gujarat. Together we are working on them.
This year we will be opening few branches in both these states.
Understood, sir. Last data question, sir. If you have the number for AFS reserves for end of Q2 and maybe the end of Q1.
That-
That will be all-
We will share with you. Now, readily I do not have it. Our people will share with you, okay?
No issues. Thank you and all the very best, sir.
Thank you, Jai. Thank you.
Thank you. A reminder to all the participants. If you wish to ask a question, you may press star and then one. Your next question comes from the line of Rohan Mandora with Equirus Securities. Please go ahead.
Good evening, sir, and congrats on good set of numbers. Sir, just on NIMs, you had indicated a couple of quarters ago that if competitive pressure is there, you will look to reduce the yields. Now, with an expectation of repo hikes around 75-100 basis points over the cycle, and we are on the yield side at around 10.1%, this is the peak which we have seen at around 10.2% on the yields on assets. Going into FY 2028, is there a scope that you will look to offer some discounts to customers? How should one think on your yield trajectory as the repo cycle plays out?
Rohan, do you feel are we in such a luxurious and comfortable position to think of 2028 now? Because nowadays we are living day to day, what is happening, what is the competition, and these things when we are looking at it, maybe at the most, the visibility we are getting for three to six months. Having tread the path so carefully and cautiously when we have moved from 0.3% to 2% ROA to 2.1%. We are mindful of all these facts that way. When that situation comes, if really we need to reduce the margins to retain the customer, and we may have to compromise on the margins also overall for the sake of growth, we may have to take a call.
Currently, we do not want to compromise on the margin currently because that's why I said 18%-20% growth is coming. You can grow for 24%- 25% also, but then immediately you need to grow in time deposits, all these things and all. Or corporate, INR 100 crore- INR 200 crore cases and all you have to take. Then again, we'll be going back to our corporate model of 40%. That's why we do not want to absolutely meddle the business model what we have. And giving these concessions and all, it's all need-based and the competition. If really warranted, we will give, and if we are comfortable enough in growing elsewhere, we may be leaving those accounts also, and we'll grow elsewhere with a better yield and with better granularity.
Got it. So sir, we can assume right now that competitive pressure is not that much, and we should be able to trend in a good way that we have been doing in the last few quarters.
I cannot say competitive pressure is not that much. Pressure is there. It is for our operating teams, because of their relationship and engagement, they are able to manage these NIMs and all. A stage may come, account-wise, here, there and all, we may not be able to manage that one and all. At that time, we have to take a call for reduction or leaving. But I can say till date, we are able to successfully manage this yield management and all. That's why we are able to succeed.
Sure, sir. And sir, within the EBLR portfolio, what is the mix of repo and other benchmarks?
No. No other benchmark. Everything is linked to repo only. Nothing else is there.
Got it. Sir, on the FCNR advances, what is the outstanding portfolio, if you have done any?
FCNR advance?
Leverage.
We did not do that because we do not have any foreign offices there. We did not go for that. It is all organic.
Got it, sir.
Yeah, sure.
Thank you.
Thanks.
Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Ramesh Babu, MD and CEO, for closing comments.
Thank you all once again for going through our presentation and asking pretty in-depth questions and all. That shows the interest what you have towards our bank. Thank you very much, and we will strive further to sustain and to meet the expectations of all the stakeholders. Thank you once again, and happy Navratri to all of you and your family members. Thank you.
Thank you. Ladies and gentlemen, on behalf of The Karur Vysya Bank, that concludes this conference. Thank you everyone for joining us, and you may now disconnect your lines.