Ladies and gentlemen, good day and welcome to Karnataka Bank Ltd Q4 and FY 2026 earnings conference call. We have with us Mr. Raghavendra S. Bhat, MD and CEO, along with the management team. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance in the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Raghavendra S. Bhat, Managing Director and CEO, Karnataka Bank. Thank you, and over to you, Mr. Bhat.
Thank you. Good evening, and thank you for joining Karnataka Bank Q4 FY 2026 earnings call. Karnataka Bank, a bank which began its journey from Mangaluru, a coastal city of Karnataka, has emerged still stronger during the just concluded financial year 2025-2026, thanks to the collective resolve of every stakeholder, every customer, and every employee of Karnataka Bank. The results we announced yesterday reflect sustained momentum, which we have built days after days and quarter after quarter. As your bank continues its journey into its second century of banking excellence, I am pleased to report that we have witnessed meaningful improvement in all the ratios and have delivered on the guidance given during my previous interactions with the investor community, a reflection of the disciplined execution of our strategy and improved operational efficiency.
Before going in detail about the results, let me have the opportunity to brief you about the performance of the bank as against the guidance given earlier. The following are the parameters. Total business, as against the guidance of INR 1,92,000 crores of business, the figure was INR 1,92,118 crores. Gross advances against a guidance of INR 84,000-INR 85,000 crores, it was INR 83,339.92 crores. Deposits against the guidance of INR 1,08,000 crores to INR 1,08,778.75 crore. CASA, around INR 34,500-INR 35,000. The figure was INR 36,559 crores. CASA percentage, we have mentioned as a guide 32%-32.5%. GNPA, whatever guidance was given, less than 3%, it was 2.78%. NNPA guidance was less than 1%, it was 0.98%. NIM, we have mentioned that 3%+. YoY it was 2.88%, but Q4 it was 3.07%.
Cost to income, what the guidance was given was 55%-56%, against which it was 56.34% FY 2026, but in Q4 it was 50.47%. ROA, we have given the guidance of 1%+, against which it was 1.05%. ROE, around 15% we have mentioned. Q4 it was 12.69% YoY. FY 2026, 10.36%. Yield, around 9% was the guidance, against which it was 8.94%. CD ratio, guidance was 75%+. It was 76.61%. Standard restructured guidance was INR 750 crore, it was INR 806.44 crore. I have been highlighting the need for having consistent progress in executing our strategy with greater clarity and direction, and I am happy to note that we were able to deliver on it. I trust you have had the opportunity to review our financial results and investor presentation, which we have shared following the conclusion of the board meeting yesterday.
During my previous interactions, I had outlined our key priorities, namely strengthening growth in the retail segments, optimizing funding costs through a higher CASA mix, and a reduced reliance on high-cost bulk deposits, and sustaining asset quality while maintaining a sharp focus on margins. Our growth trajectory has been robust and ahead of the detailed financial review. I would like to highlight that we have made significant progress across these priorities, which will be evident as I walk you through the financial performance. Before moving on to the business highlights, I would like to take a step back and briefly touch upon the broader financial system. The Monetary Policy Committee in its April 2026 policy noted that global growth has remained resilient while domestic economic activity has also sustained its strength, supported by private consumption, monetary easing, and continued government emphasis on infrastructure-led investment.
Looking ahead, India's macroeconomic outlook remains resilient despite elevated geopolitical tensions and persistent global trade frictions. Strong underlying fundamentals such as steady growth, moderated inflation, and fiscal consolidation provide the economy with the resilience to navigate external uncertainties. However, the war in West Asia, along with the rising input costs driven by higher energy prices and supply chain disruptions could weigh on the growth. The intensity and duration of such conflicts pose risks to both inflation and economic expansion. MPC has highlighted that in navigating through these turbulent times, monetary policy in India will continue to focus on reinforcing price stability while remaining growth supportive. In this context of evolving external dynamics, we remain measured and cautious in our outlook. We will navigate these uncertainties with prudence while closely monitoring the evolving inflation trajectory. Let me now present the business highlights.
Bank has secured its highest-ever aggregate business, which stood at INR 1,92,119 crores as of March 31st, 2026, up by 6% Q-on-Q from INR 1,81,394 crores in December 2025. Gross advances stood at INR 83,340 crores as on 31st March 2026, reflecting a Q-on-Q growth of 8% from INR 77,283 crores as on 31st December 2025. Our overall strategy is to continue our focus on growing Retail, Agri, and MSME, that is RAM, which has grown from INR 49,152 crores as on December 2025 to INR 51,197 crores as on March 2026. On a Q-on-Q basis, Retail, Agri, and MSME segment during Q4 FY 2026 has grown by 4%, while mid-corporate advances have grown by around 13%. In absolute terms, housing, agri, gold, and vehicle loans have contributed around INR 1,547 crores of growth to our retail segment during the quarter.
As we move forward, we will continue to focus accelerating retail growth while stabilizing the corporate portfolio through high quality and better yielding assets. The bank is committed to reduce its exposure to low-yielding corporate loans that were opportunistically deployed for better yields than treasury. As conveyed during previous calls, we have started replacing IBPC book with higher-yielding loans. IBPC and Food Credit portfolio, which was at INR 4,057 crores as of March 31st, 2025, has been brought down to INR 1,707 crore as of 31st March 2026. Accordingly, around INR 2,350 crores have been replaced during FY 2025-FY 2026. Aggregate deposits as at 31st March 2026, was INR 1,08,779 crores, reflecting a Q-on-Q growth of 4% over 31st December 2025, at INR 1,04,112 crores. CASA ratios stood at 33.61% of aggregate deposits as against 31.53% in December 2025.
In absolute terms, our CASA deposits have grown 11% QoQ from INR 32,829 crores as on 31st December 2025 to INR 36,560 crores as on 31st March 2026. CASA accretion remains a key priority, and we have implemented targeted strategies to further accelerate its growth during the year. The bank has continued to focus on shifting high-cost bulk deposits to granular, that is, retail deposits of less than INR 3 crores. Bulk deposits as a percentage of total deposits have come down from 4.8% as on 31st December 2025 to 4.2% as on 31st March 2026. Similarly, bulk deposits as a percentage of term deposits have come down from 7.1% as on 31st December 2025 to 6.3% as on 31st March 2026.
In line with the strategy, the bank has deliberately reduced its reliance on high-cost bulk deposits and ensured that most renewals are executed at predefined cut rates, thereby enabling tighter control over the overall cost of deposits. Retail term deposits have seen a growth of 2% on a Q-on-Q basis from INR 66,252 crores as of 31st December 2025 to INR 67,648 crores. On YoY basis, retail term deposits have grown by 5%. CD ratio for the quarter stood at 76.61% as compared to 74.23% in December 2025 and 74.38% in March 2025. Net interest income. NII for Q4 FY 2026 stood at INR 843 crores as compared to INR 792 crores in Q3 FY 2026, registering a quarter-on-quarter growth of 6%. On a YoY basis, NII for Q4 FY 2026 stood at INR 781 crores, recording an 8% YoY growth.
Net interest margin stood at 3.07% for Q4 FY 2026 versus 2.92% in Q3 FY 2026 and 2.98% in Q4 FY 2025. Improvement in net interest margin was driven by the bank's focused initiatives in the RAM segment with an emphasis on enhancing yield, alongside a calibrated improvement in CASA and retail term deposits aimed at optimizing the cost of funds. Loan yields. Yield on advances for Q4 FY 2026 stood at 8.78% as compared to 8.71% in Q3 FY 2026, recording a 7 basis point increase. Loan yields will further be strengthened by accelerating retail growth while stabilizing the corporate portfolio through high quality and better yielding assets. Cost of funds. Cost of funds stood at 5.38% for Q4 FY 2026 as compared to 5.46% for Q3 FY 2026, registering an 8 basis points improvement.
The sequential Q-on-Q improvement in cost of funds is expected to be supported by our continued efforts to reduce the dependence on bulk deposits and replacing the same with retail deposits at card rates and focus on CASA buildup. Profit after tax. Q4 FY 2026 PAT was INR 408.19 crores as against INR 290.79 crores in Q3 FY 2026, an increase of 40%. There is an increase in PAT from INR 252.37 crores in Q4 FY 2025, which is a 62% increase for the full year FY 2025-FY 2026.
The bank has achieved its highest ever PAT at INR 1,310.50 crores as against INR 1,272.37 crores with a YoY growth of 3%. Stress assets. Gross NPA percent as on 31st March 2026 stood at 2.78% as against 3.32% in December 2025, thereby showing an improvement of 54 basis points. The gross NPA percent as on March 2025 was 3.08%, which is a 30 basis point improvement.
Net NPA percent as on 31st March 2026 stood at 0.98% as against 1.31% in December 2025, demonstrating a 33 basis points Q-on-Q improvement. Net NPA percent as on March 2025 was 1.31%, recording a 33 basis points YoY improvement. The sustained quarterly improvement in both gross and net NPA ratios reflect the bank's stringent efforts to curb slippage and enhance monitoring efficiency, supported by the functioning of regional collection centers. Credit cost stood at 0.1% in Q4 FY 2026 against 0.11% in Q3 FY 2026.
Slippage was 0.20% for Q4 FY 2026 against 0.47% in Q3 FY 2026. Recoveries for the quarter excluding upgraded accounts stood at INR 150.46 crores in Q4 FY 2026 versus INR 114.18 crores in Q3 FY 2026. Standard restructured advances including related accounts. Standard restructured advances as on 31st March 2026 was INR 806.44 crores as compared to INR 867.95 crores as on 31st December 2025, recording a 7% Q-on-Q reduction.
PCR. In line with the bank's commitment to increase the PCR, the bank has continued making accelerated provisioning, and the PCR, excluding technically written-off accounts, presently stands at 65.39% as of March 2026 as against 61.23% as of December 2025. PCR, including technically written-off, stands at 83.54% as of March 2026 as against 80.90% as of December 2025. Cost to income. For the quarter ended 31st March 2026, cost to income ratio stood at 50.47% as against 58.72% for the quarter ended 31st December 2025. For the full year FY 2025-FY 2026, bank's cost to income was 56.34% as against 60.11% for FY 2024-FY 2025. The bank has implemented various cost rationalization and monitoring measures to keep expenses under control.
Concurrently, our focus on low cost deposits to reduce the cost of funds, along with the emphasis on RAM and high-yield portfolios to enhance loan yields, is improving the net interest income and supporting sustained control over the cost to income ratio. Return on equity Q4 FY 2026, ROE stood at 12.69% as against 9.06% in Q3 FY 2026. Return on asset. Q4 FY 2026 ROA stood at 1.27% as against 0.92% in Q3 FY 2026. Liquidity coverage ratio, LCR. As on 31st March 2026, LCR stood at 165.34% as against 186.84% as on 31st December 2025, and as against the statutory target of 100%. CRAR. CRAR stood at 20.07% as on 31st March 2026, of which Tier 1 18.68% and Tier 2 1.39%, in comparison to 19.94% as on 31st December , 2025, of which Tier 1 was at 18.44% and Tier 2 was 1.50%. Products.
We remain on track with our products development and launch initiatives with a continued focus on bridging the remaining gaps in our product offerings. Launches planned during the coming quarters. Agri input loans for tobacco crop. Short-term agri input loans are extended to registered tobacco growers to meet cultivation requirements with digital onboarding and faster sanctioning under a tobacco board tie-up. Programmable CBDC enables the funds to be used only for predefined purposes within a specified time or through designated beneficiary. NFC-based QR payments. Tap and pay facility provided to QR payments. Service-based lending for housing and mortgage loans. Drop line OD for MSME. LAP for MSME. Digital and technology. The bank is leveraging IT investments through modular and faster implementation of solutions. Bank is also exploring leveraging AI tools for improving internal efficiencies, including improving processes.
Few major solutions that are planned for completion in FY 2026-FY 2027 are loan originating system revamp with the collateral management, implementation of DevSecOps operations, HRMS revamp, Treasury revamp, BHIM 3.0. Karnataka Bank's strength lies in its well-established foundation and its readiness to leverage emerging growth opportunities. Over recent periods, the bank has made meaningful progress in expanding its retail and MSME portfolios, rationalizing funding costs, and enhancing asset quality, collectively creating a strong base for sustained growth ahead. Our approach is firmly anchored in execution with the strategic initiatives spanning digital transformation and focused product offerings already gaining momentum. As these initiatives continue to scale, they are expected to translate into steady improvements in margins, profitability, and key return ratios over the coming quarters.
Despite global headwinds arising from geopolitical tensions, volatile commodity prices, and supply chain disruptions, the bank continues to differentiate itself through its prudence, resilience, agility, and strong customer-centric approach. Supported by robust capital adequacy, comfortable liquidity, and a disciplined execution framework, Karnataka Bank remains well-positioned to deliver consistent and long-term value to its stakeholders. Looking ahead with a focused strategic roadmap and improving business momentum, the bank is confident of sustaining healthy growth and enhancing overall financial performance in the periods ahead. To our investors, customers, and well-wishers, I wish to convey that Karnataka Bank is not resting on the strength of a single year's performance. We will continue our efforts in building an institution that is future-ready, customer-centric, and governance-driven. We will continue to honor the legacy of our founders even as we embrace the opportunity in this fast-evolving era.
Thank you for your trust and continued support and look forward to all your continuing partnership as we together write the next glorious chapters in the history of Karnataka Bank. I would now like to hand out the call to the moderator for any questions and feedback from our callers, and we would be glad to take. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Anshul Patel, an Individual Investor. Please go ahead. Mr. Patel, please go ahead with the question.
Thank you. My question is, advances have increased significantly during the quarter. Can you explain the rationale behind this and how it aligns with your funding and liquidity strategy?
You are aware, as I was telling earlier from in the beginning also, since our CRAR was good, I want to increase the advances first. To increase the advances, I need to have the fund. Fund was not the shortage at all. We could meet that funding requirement with the available resources and to some extent, in between some short-term funds, we have met it through the borrowings also. That was not the constraint at all. Yes, Anshul?
That's it for my side.
Thank you.
Thank you. Next question comes from the line of Chirag Singhal with First Water Fund. Please go ahead.
Congratulations, Mr. Bhat and the entire team. This is, I believe, the second—
Thank you.
Yeah. This is, I think, the second quarter with consecutive growth and very good improvement across all the metrics, in particularly this quarter. First question on the guidance. In Q4 clearly, many metrics have seen a significant improvement. I am just trying to understand how much should we extrapolate for the current fiscal. If you can please provide guidance on all the key metrics, advance growth, ROA, credit cost, gross NPA, and net NPA.
Yeah. I was mentioning earlier also in various meetings and forums while meeting you also in person in Mumbai. I was telling that bank on its three R's, we want to grow steadily. Slow but steady, but with some conservative outlook, we want to grow. The overall position I had given, I will stand firm on it with the overall business growth of around 15% and maintaining, we want to have the deposit growth between 10%-15% and advance growth of 15%-20% while focusing on CASA.
We have assured that at 3%+, we want to maintain 33%+ of CASA percentage and all these ratios. Once we do that with a CD ratio of 80%, we are able to meet all what I was mentioning. Maybe it is NIM, maybe it is ROA or spread or GNPA and NNPA level. By and large, we will stick to the stand which I have taken earlier. We will move further.
Yeah. Could you so advance growth 15%-20%? What about ROA and credit cost for the current fiscal?
ROA-
And cost to income.
Yeah. ROA, I was telling 1% +. 1% + may be anything. So 1% +, I will still hold on to it. Right now I am not in a position to tell, but when the ROA was less than 1%, I was telling that 1% +. Today in the Q4 you have seen it is 1% + only. Now also I am telling 1% +. That 1% plus will be definitely towards improvement only.
Okay. And also credit cost and cost to income ratio, because even the cost to income has fallen significantly in Q4. If we try to assume it will remain around these levels for the entire year?
Yeah. For the entire year, cost to income ratio has gone down from 60% + to 56%, which I was by and large telling 55% +. It stood at 56%, but Q4, there was a significant improvement of 50% and the overall efforts will be there on to reduce it further. It will be between 52%-53%. Once this cost is under control and the business is happening, definitely we will improve it further.
Okay. 52%-53% for the cost to income.
Yeah.
Coming to the employee expenses. In Q4, there was a sharp decline on a sequential basis, but there was an increase in other OpEx. If I look at the total OpEx, it is largely flat on a sequential basis. Was there any restatement like one line item has increased significantly and one line item has decreased significantly?
No.
If you could provide the—y eah.
It is not like that. While all efforts are on to reduce the cost reduction is ultimately helping me to improve the overall efficiency. One is working towards the continuous reduction in cost, the other one is improving the income. Here, one time such measures are not there. To some extent, there is an upward movement in the yield that has helped us. That whatever upward movement in the yield has helped us to make accelerated provision also.
Okay. So what will be the expected range for employee expenses for the current fiscal?
See, I will tell you, employee expenses, it cannot be reduced. That part we will agree. But all efforts will be there on to reduce the other expenditure. While employees expense also we will ensure that whatever required only will be there. Improvement in employees cost, it is a difficult task, no doubt about it. The number of employees, whoever is working, whether additional staff is required, all those things are a business plan. I cannot answer that question right now. All efforts will be made to control the cost.
You are saying that the employee expense for entire FY 2026, like the full year FY 2026 employee expense, we should expect a similar number for FY 2027 also, not any significant decline because in Q4 clearly there is a steep decline on a sequential basis.
Yeah. It will be under control, that is my assurance. But sometimes, sudden business expansion and other things, we may require additional manpower also. Taking that into account, it will be duly getting compensated from the business. Need not worry. While expenditure quantum may go up, it will be duly compensated from the increase in the business. Hello? Hello?
Mr. Dama, please go ahead.
Hello?
Sir, my question was on the other income. Other income had sharply risen during the current quarter. Is it more because of the core fee income going up, and if yes, what's the reason? Or is it more about treasury performance which has led to such kind of higher other income for us?
One minute. My CFO, Mr. Vijaykumar, will answer.
Hello. Good evening. Sorry. The other income—
Yes.
—increases on account of fee-based income and also recovery from the technical write-off portfolio. We have a technical write-off portfolio of about INR 2,500 crore.
So during the recovery. Recovery and technically written off account. It is to see when the business grows, along with the interest income, other income also will go from processing charges and other fee-based income. If it is a non-funded commission on bank guarantee, all those improvements will be there.
Sir, is it more cyclical in nature because when you look at the treasury gains, it's about INR 13 crores, but then your fee income quarter-on-quarter jumps to about INR 320 crores to INR 230 crores around there. Last year also, we had a similar situation. Is it a lot of fees, these general banking fees, what you typically bundle up in the fourth quarter, and that's the reason?
Yeah. That's what. Those are processing charges and the recovery from written off account has majorly contributed to the increase in that.
I'm talking about fee income, core fee income. You're just including recovery from bank, that INR 66 crores.
Fee income in the sense, every year there will be income in the Q4 with regard to ATM card. One-time card, it is there. It is every year. In the Q4 it will be there.
Okay. Okay. Sir, you said that you want to grow at about 15%-16%, notwithstanding the macro seems to be deteriorating. Do you see that would lead to some kind of yield pressure going forward in FY 2027? We have already seen sequential improvement in margins. Whether we have seen the peak of margins now, how do you read the how do you basically balance the growth and margins for FY 2027?
See, margin in the sense, unless there is a moment in unless there is a moment in EBLR, it is at the lowest now. If it is moving upward and all, it gets compensated. Otherwise, if the trend is continuing, we will be on the same trend. I feel it is at bottomed out. There may not be any chance it is coming down further. If there is a moment in upward moment, that will also take care of the interest income also. By and large, it is happening to the market. As and when the situation comes, we have to plan accordingly. ALCO is taking care during meeting as and when required. It will work out. We are cost conscious, and we are always working on the pressure of margin and all.
Thank you. Mr. Dama, please return the queue for more questions. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Parth Gutka, 360 ONE Capital. Please go ahead.
Yeah. Hi, sir. Sir, if I look at the slide 24, the number of employees in the first nine months had increased, and in the last quarter, it has declined. What is actually happening here?
See, the number of staff is always going down. Every month it will go down with the superannuation. As and when required, we will recruit the people. In between last year, we have opened around 31 branches. Staffs are required. In between, we recruit also. During the first H1 or up to Q3, we have recruited some people. Again, Q4, there was no recruitment rather. Rather, people retired in three months. On an average, 50, 60 people getting superannuated, and the number will go down to that extent. That is a continuous process. Every month it will be there.
Okay. Sir. My second question is, what is the impact of ECL guidelines on the net worth, and what would be the increase in the credit cost run rate post the implementation of the ECL guidelines?
Yeah. We have got adequate capital adequacy ratio, number one. I believe there are guidelines which have now come, which is available to spread over to the next five years. We have studied the impact also, maybe around 1%, 1.5% overall will be there. Even that also available for the next four, five years. That will be spreading out, means 25 basis points, 30 basis points. We have sufficiently taken care of that.
Thank you. Mr. Gutka, please return the queue for more questions. Next question comes from the line of Yash Dantewadia, with Dante Equity Research. Please go ahead.
Yeah. Hi. Congratulations on a good set of numbers. I really appreciate the way you've increased your PCR by 400 basis points. I'm pretty sure the bottom line number would have looked much, much higher if you would have done it at the pace that you've done it in the previous quarters, which is only 100 basis points. This sort of acceleration, where are we aiming to reach by, let's say, in the next four quarters in terms of PCR? Or are you happy with where we are?
See, it is a continuous process. As and when the quarter comes, do the business and how we are working with the efficiency in working, we will decide then and there. Don't think otherwise. We are very carefully moving forward. As you only said, it is very good, very well provisioning has been made. We do understand our responsibility, working, taking all precautions. We will take care for the time being. Yes, it is there. Going forward, we will be there.
You don't have any number in mind in where you would want the PCR to be by the end of this next coming financial year?
We want to increase 1% every quarter. That number still I'm holding on. What that last quarter we have done more. That is why I said while moving forward, as and when the requirement will be there, we will take appropriate decision.
Thank you. Mr. Dantewadia, please return to queue for more questions. Next question comes from the line of Priyank Chheda with Vallum Capital. Please go forward.
Yeah. Hi, sir. I would request you to note down the questions because I won't get chance again.
You are asking questions five minutes, 10 minutes, what?
Sir, operator won't allow me.
He will allow, don't worry. Your questions are always interesting questions. He will allow, don't worry. Don't—
I know.
—have some restrictions also.
Thank you. I will link the story. There were two, three surprises which I will note it down. I would like to call it out. One was gross slippages came down significantly in quarter four at INR 147 crores versus a run rate of INR 250 crores, INR 300 crores. What has been the reason for that? This leads to maybe our interest reversals because lesser slippages leads to lesser interest reversals.
So what has been that quantification or what has been that contribution in the interest income, which ultimately leads to NIM going higher because it needs benefit. If you can link these three aspects together. First, on what has been the slippage rate, why the slippages were so low? What should be the normal run rate? Should we read more to it? What leads to how much was the interest reversals contributing to the overall income of Q4? That is my first question.
Yeah. You are asking the question, should I answer generally, or you are—
Yeah, you can answer one by one.
Yeah. With regard to slippage coming down, I was mentioning earlier also, and our focus on the day of taking over charge, I was telling, I want to control the stress. The main area of controlling SMAs and CMAs and recovery under restructured advances efforts. Continuously, best efforts have been put my team, and because of that, stress has come down both under SMA and CMA. Interest reversal and all, it is a regular phenomena. Some account during the course will be added, interest reversal will happen. When it is getting upgraded, it will be reversed. I cannot answer that. I can get the date. Right now I am not having. But it is a day in and day out. Regarding the slippage, yes, we will further increase our efforts to improve the quality. That was the main focus. I assured our investors earlier also.
Now also I stand by it. We will see that slippage is stopped. For that, two, three reasons. One, our CRMD team in Head Office, CRMD team in all the regional offices, ARMB at all the centers, all these are putting their best efforts to recover. That is number one. Number two, selection of borrowers at the entry level. That also we have a focused attention, and I want my team at all 15 centers and the loan sanctioning center at head office that whatever may be there, quality cannot be compromised. With all these things put together, definitely going forward, further we will improve as far as recovery is concerned. Recovery, I mean, I will not restrict it only to NPA. Recovery under restructure, recovery under stress, recovery under CMA, whatever. That is the reason for improvement.
No problem. Second surprise for sure was on the employee cost, so never in our history we have seen an employee cost less than INR 300 crores at least for last 13, 14 quarters that I can see. First, I understand it's because of the actuary revaluation which CFO sir had mentioned. What would be that fluctuations of the team that leads to this? The reason why I'm asking is that all else on a full year number, what should be that number? Because it was INR 1,500 crores in FY 2025. We are strengthening our team, branches, sales office, and the retail branches. So what should be that cost of employee that you are budgeting out for full year in FY 2027, given that there are so much of variations that comes through because of the actually valuation? That is on the question of the employee expenses.
This question is very difficult to answer. Why? Because it all depends upon the field movement. It is all because of geopolitical situation, country's monetary policy, so many other factors. But as far as we are concerned, we are always working on monitoring the cost every now and then. Definitely, I will assure that you have asked. You know everything. Again, you are asking this question. No problem. We will assure you that with this, definitely we will take care of this. We are always leveraging cost to all other things. The cost control, as I told in the beginning itself, controlling cost and improving the overall efficiency and increasing the prepaid income and other things. We will work on it, Priyank.
Wonderful. My last question.
Sure.
We had a target of INR 85,000 crores books to be ended by this year, and we are close to it. There is no doubt about it. We are nearing the target. When it comes to the way to achieve this target, and when I see the composition within the book, 65% of the incremental growth has yet been coming via corporate and not via retail or MSME. In fact, MSME has yet remained flat and incremental growth via retail to the total loan book is yet slower and lower. What is your thought around what more needs to be done for us to see that firing out? If you can further bifurcate in terms of what are the key milestones that we should think of it that these would be X, Y, Z things needed for you to achieve 15%-20% advances growth.
I will answer in a different way. Earlier also, like you, so many people have asked me this question. Last year was a difficult year for us. I admit that INR 78,000 crores of advance has come down to INR 71,000 crores. If you look at from INR 78,000 to INR 83,000, that is not a growth at all. If you take into account from INR 71,000 to INR 83,000, that is substantially good growth. Why I am telling this, agree and retail has not grown. Because somewhere I have told you also regarding though our intention is to reduce the bulk advances. Why? Because yield is low. Grow in retail and mid-corporate. Somewhere, otherwise, you will ask the question, "Why you have grown negatively?" We have to balance those acts also.
By taking that into account, all these retail segments which have de-grown while the advances de-grown from INR 78,000 to INR 71,000, retail also has de-grown. When I joined, my team said, "There is no growth in the retail and mid-corporate. There is a need of the hour." I understood that. What is the time available at my disposal? I joined on July only in studying one afterwards October onwards, this retail trade center started. Retail trade will not happen overnight. It will take time. Bulk advances, yes. Four, five parties can contribute larger amount. But I am not interested there. Growth has to happen in this sector only. Taking that into account, if you ask that question now because it shows to you are right also. For me, growth should come from retail and mid-corporate only.
Going forward, consciously, we will reduce the bulk advances and we will grow in retail and mid-corporate. This is the only answer I can give. Earlier also, so many investors you were asking, but you were not believing me to that extent. I was assuring you, we will do it. We will grow it. As you rightly said, INR 83,300 and odd, though it is not INR 85,000, still I will say, I told in the earlier meeting also, in Q3 meeting, yes, we have got lot of proposals on hand. As at March, we had INR 2,000 crores of sanction but pending for disposal. It has not happened for various reasons. It started happening post-April. Advance is positive. We are positive. We will grow.
No, wonderful. We always have a high confidence in you. Just last thing. This was a question also earlier asked but not clarified. Recovery from technical return of book. We have booked roughly INR 190 crores in the other income, and the TW outstanding book is around INR 2,500 crores. Any target or any thoughts around what should be this recovery that we should pencil in for the coming year? Along with that, if we are recovering INR 200 crores, would we have a higher provisioning done to fasten up our PCR ? Yes, we have done that. What should be the number that we should think of provisioning requirement or a credit cost on the P&L for FY 2027? Two questions. Recovery from TW book number and provisioning impact on P&L for FY 2027.
Regarding recovery, I will tell you it is not only for recovery. It is to the business. Our aim is think big, aim high, don't compromise on quality. We will work on that principle. That principle applies even to the recovery also. I have traveled across India to meet my regional team. 13 regions I visited personally. Two regions I have addressed through the video conference, and the team is optimistic everywhere, and the team is geared up. With regard to the growth in business, growth in recovery. Growth for the business also target. There is a target for recovery also. What quantum, what number? Our aim is always to recover 50% of the book of NPA, 50% of the technical written off. What happens? We have to wait and see because we are working on it. This is a highly ambitious target, I know.
Unless and until, as far as recovery is concerned, if we are not ambitious, we are not able to justify or recover. Therefore, ambitious target we have kept. Whether it is possible? Yes, I was telling earlier also. You are not believing me now also, I know that. We will make all efforts to do that. It may look very big, but yes, our people on the ground are charged up. I am hopeful next quarter we will resolve this question. As a follow-up question you are asking, I know that. Even then, we will make our all best efforts.
Thank you. Mr. Chheda, please rejoin the queue for more questions. Next question comes from the line of Sarvesh Gupta with Maximal Capital. Please go ahead.
Hi, sir. So two questions, sir. Firstly, on the NIMs. I think we had a lot of book which was linked to G-Sec. If you can just break up the book into various EBLR or G-Sec, what is the mix of our book? Secondly, sir, on the employee expense, if the CFO, sir, can give us the data for how much was the gratuity related, because yield increased so that pool would have gone down in one quarter. What was that impact specifically, if you can share that number? Thank you, sir.
Yes. CFO, can you share that? One is G-Sec percentage.
For both the questions, we will share the information later on. Is this the main, your requirements? Right now, we do not have it.
Okay, sir. Sir, broadly on the NIM side, we have crossed 3% and I recall that a large part of the book was related to G-Secs, and G-Secs have been actually hardening. Given that sort of a thing, because earlier we had a negative impact on our results because the G-Secs was—
Oh, yeah.
— before the repo rate. What is the outlook, sir, for next year NIM?
No, as I was telling in the beginning, if you have seen, I am working on that 3% + NIM. I will be working on it. It has come down. If you analyze our earlier data, it has come down to as low as 2.72%. It is improving, no doubt about it. We do not have any G-Sec linked advances. We have EBLR, treasury bill related, majority of that, under that, around 60%, 65%. MCLR, some portion is there. Some old, small portion is base rate is also there. To be very frank with you, base rate is 0.31%, MCLR 5.59% than 2026 March. EBLR linked to G-Sec 2.31%, EBLR linked to T-bill rate 55%. This is the component.
Okay. Sir, linked to G-Sec and T-bill, right?
Yeah.
There we should expect a positive impact if the yields are hardening.
Again, it depends upon the market forces.
Thank you. Mr. Gupta, please go ahead. Mr. Gupta, please rejoin the queue for more questions. Next question comes from the line of [Vishwanath] Thippeswamy with — a Retail Investor. Please go ahead.
Yeah, it is Yaswanth Thippeswamy. I am just correcting the operator.
Good evening, Mr. Thippeswamy.
Good evening, sir. I hope everyone is doing good. Congratulations. I know in the middle of the management crisis last year, you have joined and you have showed that what you are capable of. Kudos to Team Karnataka Bank. They have put in a lot of effort to make sure that they are capable and they are able to deliver it. I want to also congratulate the board of directors for bringing in you and having confidence in you. I am also pleasantly surprised. I am surprised that there is a lookout. We have appointed, we have nominated and we are getting the executive director from outside. My first question is, have we looked out for internal talent who I am pretty sure that there could be lot of experienced guys who are around.
Considering the last year's experience, where we have brought in people from outside and because of their work cultural differences, we had difficult times in managing and then we had to overcome that. That is my first question. My second question is with respect to the West Asia conflict. Considering that, are we still planning to expand the number of branches this fiscal? That is my second question.
Yeah. Good evening, Thippeswamy- ji. Yes, your both relevant questions, difficult to answer, but I will assure you that the recruitment of ED has been taken based on the need arisen at a particular point of time. ED was there earlier. ED was not there for the first around nine, 10 months. It was a process required by. Based on the, sometimes need arises based on the requirement. That is one thing. Secondly, it does not mean that, as you rightly said, talent is inside. No doubt we are not ignoring the talents. As and when the time passes, you will come to know. We are not ignoring, we are hand-holding, we are training, we are grooming them up. They will come up in the ladder. Definitely, yes. Regarding this agreed and all which you said cultural difference, I do not want to talk now.
Earlier also I have told the past is history, present is reality, future is the requirement. We will work according to that. Therefore, yes, that is one thing. Secondly, your question with regard to the geopolitical scenario, your plan to open a huge number of branches, whether there is any change. This is like business plans. This is also a plan, and in between, if such things arise, we will make time course correction and depending upon the market requirements, our growth, and requirement, all these things will be planned at an appropriate time. Corrective action also will be taken with regard to whatever guidance we have given. In the guidance branch also has come. We will take appropriate decision at that time, but definitely we will not put the bank into some problem. Do not worry about it. That is my assurance.
Thank you, Mr. Thippeswamy. Please return to queue for more questions. Next question comes from the line of Vinay Nadkarni with Hathway Investments Private Limited. Please go ahead.
Yeah, just one question. Most of my questions have been answered. Just want to know the disbursements that you have made. For FY 2026, what is the figure? Total disbursement?
Pardon?
Disbursement.
Loan disbursement right now. Last year we had repayment of around INR 26,000 crores for the entire year, around INR 26,000 crores. And you can calculate INR 26,000 crores with that figure.
Plus INR 5,000 crores.
Huh?
INR 26,000 crores plus INR 5,000 crores.
INR 26,000 crores plus INR 5,000 crores. INR 31,000 crores, INR 32,000 crores.
Okay. I will send you a mail to get a breakdown of the corporate and non-corporate also from that.
No problem.
Thank you very much.
Thank you.
Thank you. Next question comes from the line of Pranay Dhelia with Panchatantra Advisors LLP. Please go ahead.
Sir, first of all, many congratulations on a much better performance than what any of us could have imagined. You have actually rewarded the shareholders with the trust that they reposed in you, and now we have to read this performance.
Good evening, Pranay-ji.
Good evening, sir. All I'm asking you, sir, is that we've seen a sharp reduction in cost of manpower this quarter, sir. Year-over-year as well as quarter-on-quarter. Has this bottomed out or will we see further reductions?
Further reductions I cannot tell because as I told you, it all depending upon the requirement. We will optimally use the staff resources. Definitely, yes. We have got plans of expansion, additional manpower required. Appropriate time we'll plan appropriately. By doing so, we can cut the cost. That is the only answer I can give now. Otherwise, cost control, leveraging it with the business requirements and all, taking every moment will be we are cost-conscious.
Okay. Thank you, sir, and many congratulations once again. As shareholders, we are wanting to see the bank grow at this pace.
Thank you.
Thank you very much.
Thank you.
Thank you. The next question comes from the line of Saket Kapoor with Kapoor & Company. Please go ahead.
Yes, friends. [Non-English content], sir. I hope I'm audible.
[Non-English content]
Yeah. Sir, categorically, as specified by all the speakers earlier, these are definitely commendable results at the backdrop of what looked very drained out earlier. But for investors and even a layman like me, sir, just to take into account, if we do a comparison on an annual basis, it is only this employee cost part that has significantly made a difference to the operating profit. Correct me there, sir, because if we look at our interest income, the operating cost, and the employee cost part that we had posted an operating profit before provision of INR 1,827 crore for FY 2025, this has risen to INR 1,974 crore. So it is the difference in the lower employee cost that has been harping, as seen by all the investors who have been asking the question.
We would like to understand, sir, what should be the general range for the employee cost, and sir, how are you seeing the current year in terms of how this operating profit number will shape up, taking into account our disbursement target, the existing loan book, the recoveries, all the factors that you have just explained to us. How should this line item expand on a quarter-on-quarter or year-on- year basis? Some more color on the same would suffice.
It is not quarter-on-quarter or half yearly or half yearly. It is on a monthly basis. We have this time changed our strategy that growth should come every month rather. Out of the growth percentage, we said 5% into three, that growth out of that first three months 5%, next three months 8%, next three months 9%, next two months 10%, last 14%. If I analyze the history of our bank for the past 10 years, the growth has come mainly in H2 and more percentage in Q4. Taking that into account, we have bifurcated business plans in such a way that first H1, the growth percentage will be around 39% of the additional growth has come in first H1. H2, it should be 61%.
The bifurcation, as I told you, we are working on that month-on-month, and full efforts are there already started. Regarding employee cost and all, as I told you beginning and to others also, it is very much guarded, cautious decision is taken. Employee's cost is not possible to reduce. But how to optimally use the existing resources, team has really worked hard. The team has delivered. With that maximum utilization of the staff, the result has come. The cost in the trial balance figure may look down, but as I mentioned to the query in other cases, on an average, monthly staff members, resignation, retirement, VRS, superannuation, everything will be there.
Taking that into account, on an average 350 - 400 people are retiring. To the extent required, only we will recruit, because lot of IT spending is happening. We are trying to move to this additional load taken over by the IT. All these are planned. Continuous efforts are on. Therefore, cost may look little reduced, but we will utilize it optimally. I will put it other way. Thank you very much.
First, what should be the operating profit trajectory for the bank on an annual basis on the base of now INR 2,000 crores? How should we investors sentiment in taking into account the current environment also and the type of degrowth which we may expect because of the oil prices and the other geopolitical issues? On this basis, how confident are you, first of all, we will be approaching growth and what should be the number on the operating profit that we should work on?
That, see, I'm confident only. But a certain external situation, how can I predict now? As and when the situation comes, we will take appropriate decision at that particular time how to reverse or how to address that issue at an appropriate time, because Prime Minister of India himself has given a statement. He is cautioning everyone. With all that, things are getting managed. We also in the bank, we will try to manage best. That is the only answer I can give at this juncture. Because external forces, we have no control rather. We have to adjust ourselves to change that situation. We will do it. Definitely, we will do it. Last year was also not a better year for us. Still we have done fairly good, though not very good.
Thank you. Mr. Kapoor, please we shall take your follow-up questions. Next question comes from the line of Umesh Kantilal Shah, an Individual Investor. Please go ahead.
Good evening, sir. Thank you very much for giving me an opportunity to pose the question before you. I am an individual investor, and also my corporate company also invested in the Karnataka Bank. First, let me congratulate you for set of numbers you definitely post, which was beyond our expectation. Also the NPA is another thing which I have been always been telling and you are assuring me, which coming in the line with lot of par with the good banks. So for that, congratulations.
Good dividend also you have given. Sir, my only worry is now the situation in the Middle East. Are we dependent on the deposit from the Middle East like other Kerala Bank or other thing, or how are we protected or insulated if such situations are there? Because as you a number of times said, no one can say what happens tomorrow. No one knows. I agree with you, but still, if you can some highlight in this sort of situation on the Middle East in the deposit and other things which we are dependent to what extent and how we can insulate it from the same. Thank you very much, sir.
Good evening, Umesh-j i.
Yeah, thank you.
As you yourself asked the question, you yourself answered also. My job you made it easy, rather.
Thank you very much.
With regard to the depositors from Middle East or whatever, in a way it good I should not say. All banks are trying for getting good NRI deposits and FCNR deposits, but we have a little portfolio, not sizable portfolio there. We have majority is local domestic deposits only. Domestic deposits also, see, the situation when externally affects, it affects internally also. That is not in our control. But with regard to your specific question of the deposit from Middle East, it is not sizable one, and we will not be affected much. That much only I can tell you.
Thank you very much, sir. I got your answer.
Thank you.
Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question and answer session. I now hand the conference over to the management for closing comments.
Yes. Thanks to all the investors who have posed the question and whatever best we have presented our case, number one. Number two, still if there are any clarification required, I assure you that feel free to seek the clarification. We will try to give the best clarification to you, number one. Number two is, yes, lot of people have spoken high about the result. We assure that we will work still hard. And thanks for reposing the confidence on the bank also. I need your support going forward and whatever these plans are there, we will try to come and connect with you, and definitely we will work up to your expectation. Thank you. Thank you one and all.
Thank you. On behalf of Karnataka Bank Ltd, that concludes this conference. Thank you for joining us. You may now disconnect your line.
Thank you.