Ladies and gentlemen, good day and welcome to The Karnataka Bank Limited Q1 FY 2026 earnings conference call. 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 zero on your telephone. Please note that this conference is being recorded. I now hand the conference over to the Managing Director and CEO, Mr. Raghavendra S. Bhat from Karnataka Bank, who is on the line along with his top management team. Thank you and over to you, sir.
Yeah. Thank you. Good morning to all and a very warm welcome to our earnings call for Q1 of FY 2026. Based on the feedback from last quarter's earnings call, we have decided to shift the timings of our earnings calls. This was done in a bid to provide sufficient time for our investors to go through our financial results and investor presentation, both of which have been uploaded post the conclusion of our board meeting yesterday. On a more personal note, after having spent more than 13 years across multiple divisions at Karnataka Bank, I have been given the opportunity of a second inning to lead the bank in unlocking the immense potential that this organization has.
Hence, it gives me great pleasure to participate in this earnings call to convey our vision for the future of the bank and interacting with you all, who are one of the most important stakeholders in the growth of this organization. As many of you would be aware, the first quarter of FY 2026 has been a period of significant transition for the bank. We have tackled multiple challenges during the quarter, the learning from which will serve as a foundation to enable the long-term sustainable growth journey for the bank. Our mission and vision remain clear and unchanged as we continue to pursue with renewed vigor our commitment to disciplined growth, operational excellence, and strategic execution in line with our long-term objectives. Let me present the business highlights.
Aggregate business of the bank stood at INR 177,509 crore, marginally up by 1.1% on a year-on-year basis as against INR 175,335 crore in June 2024. Profit after tax Q1 FY 2026 PAT of INR 292.40 crore as against INR 252.37 crore in Q4 of FY 2025, q uarter-on-quarter increase of 15.8%. YoY, there is a decrease in PAT from that of INR 400.33 crore in Q1 FY 2025. However, it should be noted that in Q1 FY 2025 last year, the bank had received an interest income of INR 81.32 crore on tax refund and because of it, it is not directly comparable. Further, in line with the bank's commitment to increase TCR, the bank has continued making accelerated provisioning. Gross advances stood at INR 74,267.02 crore as on 30th June 2025, reflecting a YoY degrowth of 1.6% from INR 75,455 crore as on 30th June 2024.
Our overall strategy is to continue to focus on growing retail, agri, and MSME, where the growth was led by retail. Housing and gold loan portfolio with a net book accretion of INR 2,327 crore YoY in the RAM segment. The bank has been committed to reduce its exposure to low yielding large bar mid-corporates that were opportunistically deployed for better yields than treasury. As conveyed during previous calls, we have started replacing IBPC book with higher yielding loans. Around INR 500 crore of IBPC advances have been replaced in Q1. In addition to the reduction in NBFC portfolio already initiated during the previous quarters. On a QoQ basis, retail advances in Q1 FY 2026 have grown marginally while mid-corporate and large corporate advances have de-grown by 3% and 15% respectively.
As we move forward, the strategy would be to accelerate retail growth while also stabilizing our mid-corporate and large corporate portfolio with good quality and better yielding loans. Aggregate deposits, INR 103,242.17 crore as on June 2025, reflecting a YoY growth of 3.16% over June 2024 from INR 100,079.88 crore. CASA deposits stand at 30.84% of aggregate deposits as against 30.51% in June 2024. It is to be noted that in absolute terms, our CASA deposits have grown 4.28% YoY over June 2024. CASA accretion remains a focal point for us, and the bank has come up with focused strategies to further improve CASA buildup during the year. The bank has continued to focus on shifting high-cost bulk deposits to granular and retail deposits of less than INR 3 crore.
Bulk deposits as percentage of total deposits have come down from 6.6% as on 31st March 2025 to 5.4% as on 30th June 2025. Similarly, bulk deposits as a percentage of term deposits have come down from 9.7% as on 31st March 2025 to 7.9% as on 30th June 2025. As the bank has excess liquidity and with the CRR cut in Q2, the bank, by strategy, is retaining from accepting costly bulk deposits. Majority are renewed at ALCO card rates to rein in cost of deposits. To summarize, while overall aggregate deposit growth has been muted, we have seen significant movement from bulk deposits to granular deposits. Retail term deposits, that is less than INR 3 crore, have seen a significant jump from INR 60,134 crore as on June 2025 to INR 65,786 crore as at the end of previous quarter. Net year-on-year accretion is INR 5,652 crore.
Our focused new product development and launches continue to be on track to fill in some remaining gaps in our product offerings. Launches planned in the coming quarters: EMI- based loan offering for gold loans, pre-approved personal loans for salaried and self-employed, surrogate-based lending for retail and MSME, supply chain finance, merchant payment apps. Net interest income. NII at INR 755.60 crore in Q1 of FY 2026 as against INR 903.36 crore in Q1 FY 2025, t hat is a degrowth of 15.36%, and INR 780.68 crore in Q4 of FY 2025, Q-on-Q degrowth of 3.21%. While gross interest income has remained flat during this period, owing to a reduction in overall yields, the increased cost of funds and cost of deposits has put pressure on overall NII on a YoY basis.
However, both cost of funds and cost of deposits have started showing a QoQ improvement on the back of reduction in CASA , which we believe will improve even further in the coming quarters and help keep interest expenses in check. In conjunction with the added focus on improving the loan book, we should see an improvement in NII during the second half of the year. Net interest margin stood at 2.82% for Q1 FY 2026 versus 3.54% in Q1 of FY 2025 and 2.98% in Q4 of FY 2025. The fall in NIM is mainly on account of reduction of external loan benchmark rates driven by repo rate cut to 5.5% from 6.5% a year ago. 70% of our book is EBLR-based, thus having an immediate impact on NIM levels.
We are expecting a bounce back of advances supported through our focus on co-lending and direct assignments, which should see us going back to the previous levels of around 3%. With the improved focus on higher yielding retail and direct to corporate advances, combined with the expected easing in cost of funds, we expect NIM to further improve by 10 basis points by the end of the year. Loan to yields. As a result of recent cuts in repo rates owing to reduction in external benchmark rates, partially offset by our changes in product mix, yield on advance for Q1 FY 2026 stood at 9.28% as compared to 9.52% in Q1 of FY 2025 and 9.43% in Q4 of FY 2025.
As mentioned during the previous quarter, the bank remains committed to its strategy of replacing the bulky opportunistic advances such as IBPC and some NBFC advances with the direct to corporate and retail advances. Considering the potential churn to higher yielding segments, we expect to see an improvement of 20 basis points- 30 basis points in the overall portfolio during the second half of the year. CD ratio for the quarter stood at 71.93% as compared to 74.38% in March 2025 and 75.39% in June 2024. Stress assets. Gross NPA percentage as on 30th June 2025 stood at 3.46% as against 3.54% in June 2024 and 3.08% in March 2025. Net NPA percentage as on 30th June 2025 stood at 1.44%, as against 1.66% in June 2024 and 1.31% in March 2025.
While we acknowledge there has been a slight hit to the asset quality on a Q-on-Q basis, we want to assure you that this is a temporary aberration and that the bank has already initiated measures to control slippages and improve monitoring efficiency by intensifying regional collection centers. While the gross NPA increased by INR 159.01 crore during the quarter, the bank' s intensified focus on collections, especially on the retail front, has resulted in a post-quarter end recovery of approximately INR 90 crore from accounts that have slipped into NPA during the quarter. These recoveries will be reflected in the results of the next quarter, and we should see improvement in the asset quality resuming again. Gross slippages at 0.53% in Q1 FY 2026 as against 0.59% in Q1 FY 2025 and 0.34% in Q4 FY 2025.
Recoveries for the quarter at INR 109.24 crore in Q1 FY 2026 versus INR 133.12 crore in Q1 FY 2025 and INR 173.91 crore in Q4 FY 2025. Standard restructured advances. Including related accounts, standard restructured advances stood at INR 888.23 crore as on 30th June 2025, as compared to INR 994.77 crore as on 31st March 2025, and INR 1,395.25 crore as on 30th June 2024. This reflects a Q-on-Q improvement of 10.7% and YoY improvement of 36.3%, i n line with the bank 's commitment to reducing restructured advances. Provision coverage ratio, including technical write-offs, at 81.11% in June 2025 compared to 81.42% in March 2025 and 77.97% in June 2024. Excluding technical write-off, PCR improved to 59.18% as compared to 58.18% in March 2025, in line with the bank's commitment to improving PCR.
Liquidity coverage ratio as on 30th June 2025, at 200.7%, significantly improved from 162.5% as on 31st March 2025, and as against the statutory target of 100%. Cost of funds stood at 5.77% in Q1 FY 2026 compared to 5.83% in Q4 FY 2025 and 5.57% in Q1 FY 2025. The sequential Q-on-Q improvement in cost of funds is expected to continue in the coming quarters as the benefit of the cut in repo rate materializes. This would be further supported by our continued endeavors to reduce the dependence on bulk deposits and replacing the same with retail deposits at card rates and focus on CASA buildup. Credit costs at 0.16% for Q1 FY 2026 as against 0.05% in Q4 FY 2025 and 0.11% in Q1 FY 2025. Cost to income for the quarter ended 30th June 2025.
Cost to income ratio stood at 58.05%, showing considerable improvement as compared to Q4 and full year FY 2025 numbers of 68.98% and 60.11% respectively. While operating expenses have remained stable YoY, we have seen a significant improvement on a QoQ basis, INR 646.67 crore in Q1 FY 2026 as compared to INR 833.89 crore in Q4 FY 2025. This comes as a result of multiple cost rationalization and monitoring initiatives undertaken by the bank in a bid to renegotiate rents and vendor commercials and keep operating expenses under check. With a renewed focus on increasing NII and NIM through our advances and deposit strategies, the bank projects cost to income ratio to come down to around 55% in the coming quarters. Return on equity Q1 FY 2026. Return on equity stood at 9.58% versus 8.56% in Q4 of FY 2025. Return on assets.
Q1 FY 2026, return on assets stood at 0.97% versus 0.81% in Q4 FY 2025. We expect to end FY 2025 with an ROA between 1.1%-1.2%. We expect improvement in ROA and ROE in the coming quarters in FY 2026, supported by accretion in the higher-yielding RAM segment and movement from bulk to retail deposits, leading to improvement in NII, increase in other income, and consequent improvement in profit after tax. CRAR stood at 20.46% as on 30th June 2025, in comparison to 19.85% as on 31st March 2025, both Tier 1 and Tier 2 put together. This covers most of the key financial metrics of the bank. While this has been a mixed quarter in terms of financial performance, I would like to reiterate that we are well-positioned and prepared to bounce back.
The bank's fundamentals remain strong, and our commitment to transparency, customer service, and ethical governance remains unwavering. These will continue to be the core values and foundation for the future growth of the organization. I would now like to hand over the call to the moderator for any questions and feedback from our callers that we would be glad to take. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to lift their handsets while asking a question . Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Priyank from Vallum Capital. Please go ahead.
Yeah. Hi, team. Thank you for the opportunity and a very good performance in such a challenging time. My question first is on, of course, with the given leadership transition that we are witnessing, and I am glad to see the long-term targets remaining intact, w hat are the near-term key targets that the bank looks to further change or implement for a betterment of good, say, there may be some differences in terms of the earlier leadership versus the current leadership, w hat are the key operating KPIs that board would be judging going ahead or targeting in the near term?
As far as growth is concerned, no doubt about it, we had some tough time. We have to face the tough time ahead also. But the key focus areas are there will not be any much change rather than focusing on the growth. Growth in advances is a prime objective of mine and my team, and growth in CASA. These are the main two areas which we are focusing on. Since it is already August, I do not want to change any annual action plan at this juncture, but wherever corrections are required in between, definitely, we will review it and we will come back.
Got it. My second question is on the cost of deposits. In the era where the large private banks have increased their minimum balances on the [inaudible], the large private banks and including public sector banks have cut down their deposit rates, w hat is stopping us to cut down few deposit rates given that we already have an liquidity surplus? The core signals that I understand is the issue of the NIM. Other than that, I think we have performed very well. How do we plan to address the falling NIM? It can be via deposits, can be via yield. What would be the strategy for the bank?
Yeah. In the last ALCO meeting, we had deliberated in length how to bring down the cost. We have to increase our, ultimately, spread and income. Ultimately, that matters a lot. After much deliberations, we have reduced the rate of interest on deposits, and we have planned for growth in CASA. These are the two important areas. ALCO, of course, no doubt, monthly mandatory meeting we need to have. In addition to that, whenever correction is required, depending upon the market situation, we want to focus that also, and cost controlling is one of our important aspects. I assure you that one is cost control, other one is improvement in the CASA is the only option available to us that we are focusing on. Secondly, to increase the income. The priority, as I have already highlighted, there is a degrowth in advances. We have to focus further growth in RAM.
That is retail, agriculture, and MSME. That is the focus area. Ultimately, cost control, as you rightly said, definitely it is on our target.
Sir, actually, I was asking for the cost of deposits. In the retail term deposits, given that we have such a high granular deposit base, and when there is so much of surplus liquidity available in the wholesale market, at the times when large banks have undertaken deposit rate cuts on the fixed deposits, what are the plans for The Karnataka Bank on that front? And given the strategies, how should we look for NIMs quarter-on-quarter going ahead for rest of the year? Should we end the full year in the guided range of 3%, 3.5% ?
Yeah, that is what I mentioned earlier. In the last ALCO, we have reduced the rate of interest on some deposits, particularly whatever bucket is required, which is affecting the cost of deposits, number one. Number two, rate of interest on advances during the current year. We have already revised downward and focus is on the CASA base growth. As you rightly mentioned, other banks are focusing on that. Even we, we are also targeting the same. With regard to the cost control method, t he reduction in rate of interest with regard to savings bank as well as term deposits. In the two areas we have already done, and as I mentioned earlier, in future, we will discuss in length in the ALCO and take a necessary corrective action wherever required. One more thing I want to add here, your concern is very much right.
The reduction in the rate of interest already started showing in the Q1 of this current year. There is a reduction in the cost of deposits. Definitely, we will move in that direction. Regarding excess liquidity, as you said, definitely, it is available in the system, but focus area is to grow in quality advances that we are focusing. I hope I answered your question.
Very well. Very aptly you have answered. My last question before I come back in the queue is on the asset quality front. There are two books which, historically, the legacy books that bank is holding up. One is standard restructured portfolio of INR 888 crore. And you have mentioned that 54% of the portfolio requires 30% upgrade. When is that upgrade coming up? How should we look that book panning out for next nine months or for this year end? That is first part, which is on the standard restructured book. And the second part is on the technically written- off book that we have close to around INR 3,000 crore, a nd that book has been written off. So, whatever income comes helps banks to reinvest it for the growth in this.
So, what are the measures that bank is undertaking to recover the accounts where you have technically written off?
Yeah. Our efforts are continuously on with regard to the reduction in restructured advances, which you must have seen in the presentation slide given to you. It is at INR 888 crore, continuous reduction for the past several quarters. We are focusing on that. In this quarter, we are further plans to reduce it to INR 700 crore from INR 888 crore.
Sorry. You mentioned INR 700 crore in the coming quarter itself ?
No, no. Annual, annual from INR 888 crore. There is a continuous reduction if you see last six quarters. Continuously, I think it was around, March figures you have?
Yeah. I have that figure in the presentation. It is coming down. Yeah.
It is coming down. There is an improvement, and by March end, we have a definite target of bringing down to INR 700 crore, w here in between some are getting upgraded, some are getting closed also because through whatever mechanism of recovery is there. INR 700 crore is the target we have kept. Whatever best is possible to recover further, we are at it.
Perfect. When it comes to the technically written- off books?
Yeah, technically written- off balance, it was at INR 3,000 crore, and t his quarter, where the bank is passing through various changes, which you are aware, and I have taken over very recently, and o ur efforts will be on that during the first quarter i f you see, compared to the previous quarter of last year, some figures may not speak well, but we are at it with expected recovery from this technical written- off during the current quarter, that is Q2. We have focused around INR 38 crore- INR 40 crore. That will happen in this quarter only. And ultimately, the efforts will be further on to bring it down and it will [audio distortion] income .
All right. Thank you. I will come back in the queue. Thank you for answering all the questions. Looking forward for your execution. Thank you.
Thank you, thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Unmesh Shah from Hanumant Holdings Private Limited. Please go ahead.
Yeah. Am I audible, sir?
Yeah, yeah, and good morning.
Yeah, good morning. Thank you very much, sir, for giving me the opportunity and welcome to your new avatar and I am sure that now the things will be settled out. We have undergone the turbulence for last quarter as all of us we know. Sir, the first quarter results are out and what I see that profit no doubt quarter-to-quarter has 50%, 60% gone up to INR 292 crore. But the year-on-year, we find lot of fall from INR 400 crore to INR 290 crore, almost 27% down. That is one my concern. And second thing, when I see the NPAs, of course, you have a very eminent board, you have very young people, you are also very comfortable with the bank with so many years of experience, s o I have nothing to say about it.
But then NPAs are far high, net NPA, gross NPA compared to the peers bank if you see. That is my one question. Second thing, if you see the advances for this quarter is slightly fallen compared to the earlier one, s o my question is how does the bank plan to increase the credit uptake? What is the major strategy or driver for the same? Are you raising by Tier 1, Tier 2 or capital raise by QIP or other means? Can you just highlight this, I will be thankful to you, sir.
Yeah. With regard to reduction in net profit, even we also have the same concern how to address that. But compared to Q1 of last year, one specific item of IT refund, around INR 80 crore, was there during the Q1 of the last year, a nd of course, these are all ultimately net profit has gone down. That is a different issue. But there is one such item. It was INR 80 crore refund of IT is there. That is number one. Number two, with regard to the NPA, you have a concern, even we too also have that concern. Even my predecessors also, and my priority is also to control the NPA recovery and controlling of stress, if any. That is on the prime objective of the bank.
And our team is working on it around the clock to see that wherever possible, recovery is made. And if you see the NPA movement also, recovery is also there, but with regard to the addition and NPAs, whatever we compare, our more efforts are still required, which we will be definitely putting going forward. And after this first Q1, there is a major one account which was NPA has been upgraded. That is a big account of around INR 90 crore recovery has happened, and efforts are still on to recover. We have the priority, depending upon the size, securities available, the borrower. All these plans are there, meeting the borrowers by our recovery team. Recovery mechanism is very well in place, that we will make all our efforts to recover.
Right. Sir, my second question.
Sorry, one minute. Ratio looks bad. This is my personal view also, and in my capacity as a MD and CEO, I have seen wherever book growth is happening, advances, both deposits and advances, growth is coming. When the cost is controlled, yield is very well- planned, all ratios will be good. As you also mentioned, since there is a degrowth in advances, all ratios will rather not comparable, which here also it has happened. GNPA and NNPA, of course, depending upon various other factors of provisioning and all, GNPA is particularly when the advance size is good, that is negative growth or degrowth compared to the March figure. That is why percentage looks higher. We are attending to it, sir.
Sir, can I ask a question? Hello, can you hear me?
Yeah.
Okay. Any plan to credit uplift in the recent time or still you have to strategize it? Or raising the fund like Tier 1 or Tier 2 or something like that to uplift the credit?
We have good capital adequacy ratio. We do not have plans for raising additional capital right now, but as and when the book size increases going forward, that will be planned properly at the appropriate time. What was your one more question?
Yeah, this is the question only. The credit uplift and is there any strategies which you already addressed it, I think.
Yeah, I have already mentioned. But yes, the focus is on retail growth.
Right.
Retail, agri, a nd MSME. We want to have a definite strategy there. We are coming out. As I told you, I have taken over charge recently, and I have started initiating action wherever corrective action is required. I am at it.
Yeah. Thank you very much, sir. I think you addressed all my questions, and we wish you best of luck. I am in Mumbai. Sometime, if y ou come, we would like a personal one-to-one meeting also, if possible, in the busy schedule of yours. I look forward more for [audio distortion].
Sure. I will be looking forward for all the cooperation from you people also.
Yeah. No, we look forward to any help, in whatever way we can. We are with you, and we look forward to work with you more, and best wishes for your new avatar, which you have taken over recently, and best wishes to you and the bank and all of us. [inaudible]
Thank you.
Thank you. The next question is from the line of Mayank Gupta, an individual investor. Please go ahead.
Congratulations on being the Managing Director of the bank. As the new Managing Director, going forward, what will be the key focus areas for the bank?
Thank you. Good morning, Mayank. Thank you for your question. I have already highlighted, m y main focus is growth, quality growth, p articularly growth in liability side CASA, a sset side retail, and MSME. These are the focus area to have. One is on the liability side growth is to control cost. Other side is have better yield so that there is improvement in the margin.
Okay. That's it for the day.
Thank you.
Thank you.
Thank you. The next question is from the line of Yaswanth Thippeswamy , an individual investor. Please go ahead.
Hi. Good morning, Raghavendra. Welcome back.
Good morning. Good morning. Thank you.
Yeah. I mean, I understand that you worked with this bank for quite some time, and now, you understand the culture. I think it would be nice. I would not rather question what has happened because you were not directly responsible for the last quarter's performance, r ather, from the presentation that has been shared. So, I have a couple of questions. So, one is with respect to the asset quality. So, I see that there is an addition of INR 400 crore, and I just wanted to know which are the sector or what are the number of accounts that contributed this addition? And also, have you provided for this slippage?
Yeah. That is, main addition has come in MSME, MSME, housing, and agriculture. These are the three areas which our team is already acting on it. Some started upgrading also. Improvement is happening there, and I'm quite confident whatever additions are there, we are at it for the recovery of that. Upgradation and downgradation, very strictly happening through the system when it is slipped for whatever that last moment happens because of the liquidity problem, and it's also happening. And all these NPAs, adequately provision has been made, that you are aware. It is us, w e have no choice. We have to do that. It is a regulatory requirement. We are doing that, and no big-ticket advances are there. I'm telling you, it is in the pool. It is happening, and we are at it for the recovery.
Okay. Regarding the retail advances, which we are going to focus on, I mean, the RAM sector as such, like the segment. So, I see that there is a run rate of around INR 500 crore. Can we see any improvement in the future? Because based on the calculations that I've done, as per the branch per month, we are able to do around INR 1.8 crore with 950 branches. Do you think that there could be an improvement on this side going forward?
Yeah, definitely, focus is, as I mentioned in my presentation, definitely our focus area is RAM, as I said to you . While growing also, a lot of things we need to have take into account the precautions of the quality of the advances with regard to the sanction and follow-up also. This right input have been given. We have got around 950+ branches. Per branch also.
954.
Huh?
954.
954 branches across India. Even if I select around 700, 800 branches which are very potential for advances, at least per branch, if I take into account INR 2 crore, INR 2.5 crore depending upon the potentiality and the geographical location, we can go and give full support from the head office and the controlling officers. Definitely, it is possible to grow. And one thing I have seen after taking charge, some corrective action is required in between with regard to the processing and sanction also. We are at it. Today, we have got four retail loan processing centers. Immediately, I have given the administrative clearance also, w e will be increasing it to three within a short span of one week or so. Within a month's time, we will extend it to all the regions.
Therefore, I am quite optimistic. Definitely, with the support from the head office and the controlling office at various centers, I am hopeful and optimistic to take it. As you rightly mentioned, I will be having certain geographical and identified branches. All branches may not be possible to have that kind of growth, but as a whole, definitely, we are at it, Thippeswamy sir.
Okay. That's a great news. One last question from my side. With respect to PRA touching almost more than 20%, I mean, I understand that we are moving from the large corporate advances to the more lucrative and then better way of deploying the advances at the RAM side. Are we also concentrating on the large corporate, I mean, if there is any opportunity in our process point?
No. As you rightly said, see, we have to consider growth, quality growth and mixture of all this. We have to balance. On the one side, we consciously want to bring it down. On the other side, whenever the opportunity comes, taking into account the yield or the pricing-wise, we have to be selective, taking into account overall benefit to the bank. Concentration for the retail is the first priority. This balancing you said, the capital adequacy ratio and all those things are there, t hat definitely will help us to balance this growth. Unless the growth happens t oday that the CRAR has improved compared to March also. Why? Because there is a reduction in advances. INR 4,500 crore- INR 5,000 crore reduction is there. Mainly, it has improved because of that. Otherwise, it is only profit available that will accrue in the CRAR.
So, question here is, one is that we have to balance every segment without compromising on the price, pricing, quality, everything. But focus is that, definitely, we have to balance and grow. This is the main objective.
Okay. All the best, Mr. Raghavendra. Hope to see nice and good results going forward. Thanks for answering all the questions.
Thank you very much. Thank you very much.
Thank you. The next question is from the line of Chirag Singhal from First Water Fund. Please go ahead.
Hello. Hello, am I audible?
Yeah. Good morning.
Yeah. Good morning. Thanks for taking my question. In your earlier remarks, you mentioned about the quality growth and focus on RAM. When I look at the numbers, the RAM segment has grown at 5%, and the non-RAM segment, whether it is corporate or NBFC and all, that has de-grown, which has resulted into -1.6% degrowth for the quarter on a year-on-year basis. So, I just want to understand that incrementally, let's say now we have this segment as the primary focus or a growth driver, f or this year, like, what is your guidance? How much this RAM segment will grow to? And accounting for the degrowth in other segments, what will be the overall advances growth?
Yeah. The retail gross advances, as you know, it is furnished that INR 75,000 crore is, out of that, INR 41,376 crore figure is there. We want to take it at least to INR 51,000 crore by the end of 2026 from INR 41,000 crore. It is no doubt a very ambitious target. We have to do that. To stabilize the growth in advances, we need to have that. RAM, as I mentioned earlier, it is a combination of agri, MSME, and other retail. We have plans to take it from INR 41,000 crore to INR 51,000 crore. Around INR 10,000 crore has to happen in retail. And one more area, no doubt it is coming under that. Last year, we had grown, particularly under the gold loan segment, around INR 4,000 crore we have added in the gold loan portfolio only.
Because of certain or whatever constraints which we could not move on there, and now, because Reserve Bank of India circular also has come, you also must be aware, we have plans to grow and gold loan growth has already started, which is more secured advance, and we want to grow there also. These are the main plans. When I said the growth in retail is this main area of housing, MSME, and some other areas. Wherever a potential is there, we will be definitely planning to grow.
Yeah. When I look at the gross advances breakup, the retail, MSME, and agri totals to INR 47,000- odd crore. Did you mean this number will increase by INR 10,000 crore during the current fiscal?
No. We have internally planned, and one is making good the figure which has already gone down. Added to that, the recovery during the year, that will be additional required. Third one is our growth strategy, which we need to increase the size of our book. Taking into account, we have AOP of INR 89,000 crore in the book approved plan. Whether it is INR 89,000 crore maybe looks a little bit aggressive, but at least adding INR 7,000 crore- INR 8,000 crore of advances will definitely take us to a newer height. This much I can definitely, I have no plans to revise it down while making full efforts to achieve the target. This is definitely possible to put that. If we strengthen all the regions with the growth in our retail, it is possible. That is my [crosstalk].
[inaudible] Yeah, sorry.
Yeah, yeah. Tell me.
Yeah. So, INR 7,000 crore- INR 8,000 crore incremental growth in the advances in the RAM segment for the rest of the year.
Yeah.
Did I get that correct?
Yeah, yeah. Yeah.
Okay. What about the balance book, which is INR 26,700 crore? What would this book look like by the end of the year? So broadly, what I am trying to understand is the overall advance growth.
No. Overall advance only I told you. Right now, as of June, it is INR 75,000 crore, and our target to grow is at INR 89,000 crore, and INR 89,000 crore, as I mentioned earlier, there is no plan to revise it. We have to make an attempt to achieve that. But INR 85,000 crore- INR 86,000 crore of advances by the end of the year, definitely, it will give a big boost to us while making our full efforts to achieve the INR 89,000 crore.
Understood. So, that is roughly 10%- odd growth rate. If I take INR 86,000 crore.
Yeah.
Versus March closing number , that is roughly 10% growth rate. Okay.
Yeah.
And how much is outstanding in IBPC and NBFC book at the end of June 2025? And what is your target by the year end?
Yeah. IBPC as at.
INR 3,315.
Huh?
INR 3,315.
As at June, it is INR 3,315 crore, and it was at INR 3,997 crore as of June last year. Right now, there is a reduction of around INR 550 crore-INR 600 crore. We have plans to reduce it further. As I mentioned earlier, we have to strike a balance in the books to grow and taking that from so many aspects. We have to balance. One is whether to take it or not. Other one is where we can go. Third one is yield. All these things, we will take a conscious decision and move forward.
What are you guiding for this IBPC by the end of current fiscal?
We want to bring it down to INR 1,000 crore by the end of this March.
Okay. If you could give me the same number for NBFC book.
Pardon?
NBFC.
Sorry to interrupt.
Outstanding.
Mr. Chirag, may we request you to turn to the question queue for a follow-up ?
Sure.
Yeah. If you have more queries, definitely, we will be whatever you want particulars, you please send a mail to us, we will come back to you.
Sure thing. I'll do that. Thank you.
Thank you. The next question is from the line of Jayen Shah from Mavuca Capital Advisors Pvt Ltd. Please go ahead.
Good morning, Mr. Bhat.
Good morning.
Congratulations. Good morning, sir. Best wishes to The Karnataka Bank going forward.
Thank you.
Just sharing a couple of observations, sir. Recently observed and even in past, private banks have been onboarding their wholesale strategy, where large corporate end up being anchors, where, of course, there is a tight pricing to anchor this relationship, but they take advantage of it, leverage that relationship across the corporate anchors, entire vendor chain, distributor, dealer financing. So, they are trade products. Again, sharing this observation. Second observation is recently, various banks have started segmenting retail, crossing into mass affluent, crossing into wealth, w herein HNI, also HNI become equally important stakeholder in terms of sustainable balance growth. Sir, over to you for comment on both these parameters. Thank you, sir.
Yeah. This, as I highlighted in my opening remarks, we have set of plans. I have mentioned couple of new products. Our product department is very active. They have brought out certain new changes in the products and all. This supply chain is one new product which has been now cleared. We are going forward with that, and other couple of things which we have planned. You must have seen our party income. When you see that, it is at the higher level. So many things have been invested, which will start yielding the results going forward. We are active. Definitely, supply chain will start immediately. Other things like corporate-based lending, I have mentioned in two, three items I have mentioned earlier. Definitely, we are moving forward. What was your one more question?
Sir, second observation was about further segmentation in retail, specifically when it comes to liability gathering as well as products which are being marketed towards wealth product or mass affluent to HNI community.
Yeah. There also one new solution we have planned platform, and through that, it is various other products it is possible to meet the requirements of the liability products it is possible. We are coming out with that product also soon. And ultimate aim is to improve the liability side also with product to customer, this one platform which we are planning and we will move forward in that direction. Product to customer. With third party product, everything is possible there.
No, I am sure we will see exciting growth going forward when the traditional, well-respected, well-trusted brand like yours gets in safe and strong hands like in your hands. Wish you all the best once again, and looking forward to great growth at The Karnataka Bank. Over to you the moderator.
Thank you very much.
Thank you. The next question is from the line of Rakesh Kumar from Valentis Advisors. Please go ahead.
Yeah. Hi. Can you.
Good morning.
Yeah. Thank you, sir. So sir, just going slightly into the past, so there are a couple of developments that happened and product design and the wholesale vertical head also left. So, what actually happened? What went wrong all of a sudden, apart from the MD and ED exiting from the system? Because the shareholders and investors at large would like to know what is happening, actually.
So see, anyone leaving the organization is depending upon their personal choice. But as long as they are here, they have trained sufficient number of people, backup people are there. And you are talking about wholesale. So what do you mean?
Yeah. Wholesale. Yeah. The wholesale vertical head and that product design head.
Yeah. Wholesale vertical head, other retail head is also there t o tide over the situation. We have made alternative arrangement for that also, and sufficient backup plan is also there. We are working in that direction. There is no concern for that. In all the departments, the second line is from the house talent, and they have been well- trained and capable of handling the departments. All the processes will be carried out as scheduled. There is no cause for concern. This much I can tell you. Hello? I hope I answered your question. Hello?
Mr. Rakesh? As there is no response from the current participant, moving on to the next question. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Good afternoon, sir.
Good afternoon, Sarvesh.
Yeah. Sir, first question is basically dwelling on this growth numbers in advances. I can understand that there are some challenges on high cost or low yield corporate advances which you might have thrown down. But on the RAM side itself, sir, the growth of 5% is possibly the lowest amongst all the banks, and including even the PSU banks. And MSME book degrowing, that itself is something that we have not seen across the sector. So, before we think about advances growth in the coming year, have we been able to identify and this is after you recruiting so many people, it increased our cost to income from 50% to almost 65% or thereabout in the previous quarter because we recruited heavily, a nd the idea was to recruit a lot of people as field officers who will go out of the branches and get CASA and advances.
So, after increasing the cost so much, despite that, the result is even on the segment of our choice, which is RAM, we have grown by the lowest amongst all banks. So, what was the reason behind this, sir?
Reason, I am not interested to dig the past. What I have observed, your observation has come to my knowledge also. I started working in that direction. Definitely, we will push it forward, that the result started happening, though I have joined very recently. I am very conscious of that. Ultimately, cost-benefit analysis, whether it is for this or anything else, that is my first priority. Whether if there is no income, how to make it income, duly planning the cost and as well as the yield. These things are very much in my mind. I have highlighted in my opening remarks also. Your concern is right. Even I am also having the same feeling. Definitely, we will come back. Have confidence in us. Definitely, our team is quite active. They will come back. By [inaudible], you will start feeling the results also.
Okay. On the growth side, you had mentioned that you are planning INR 86,000 crore by end of this year. That is a 15% growth target, right? From INR 75,000 crore [audio distortion].
Yes. That is what I mentioned. In the sense, though it appears to be very much optimistic, I don't want to change any plan now because we are in the mid financial year. While trying to aim for that, what I feel, it should not create damage also to the organization. Priority is to grow with quality, without compromising yield, quality, everything. We are at it. We want to grow. Definitely, that is the focus area. That is why I said in the beginning also, I am very much optimistic. We will do that.
Okay. Now, on the NIM side, sir, we have also made a mistake of having G-Sec as our benchmark, right? Because of which, our NIMs have crashed much more than any other bank. So, are we now trying to change it to repo rate or something? Or what is the strategy on increasing this NIM to 3%, 3.5% which we were enjoying earlier?
See, 70% of our advances are around the EBLR, where effects will happen immediately. But our liability side is fixed, that immediately effect won't happen. So, that is the constraint, that is why there is a pressure on spread or NIM. Definitely, as I mentioned earlier to some other caller, the ALCO is meeting regularly. We are reviewing the situation regularly and as and when the need arises. Cost consciousness is very much required and suitable changes we are making. Rate of interest on deposit has been revised downward recently, and we will be further reviewing that. That is why we are focusing on the growth. Unless and until a growth happens, this pressure on NIM will not yield results. That is why focus is to reduce our cost and increase our advances.
Okay. Sir, on the cost [crosstalk].
Sorry to interrupt, Mr. Sarvesh. May we request you return to the question queue for a follow-up?
Okay.
Thank you. The next question is from the line of Darshan Deora from Indvest Group. Please go ahead.
Yeah. Thank you for the opportunity. My first question was on the RAM disbursements. What would be our yield on the incremental RAM disbursements that we did this quarter?
One second. Good morning, Darshan. One second.
Yeah.
It is somewhere between 8.5%-9.25%. [audio distortion]
RAM is 9.5%.
RAM is at 9.5%, to be precise.
9.5% is the incremental yield for this quarter?
Yeah. No, no. As of now.
On the portfolio, you are saying, right?
9.25%- 9.5%, yeah.
No, you are saying that is what you are offering now to customers or that is what you have lent at for this quarter, or is this the portfolio yield?
I am mentioning about the average, average. It is portfolio yield I am telling you. It is varying depending upon various factors like rating and all. We will try to maintain it between 9%-9.5%.
Okay. At 9%-9.5%, it is not much different from the sort of the portfolio yield that we have already on the overall book. As I see the overall yield on advances, that is about 9.28%. If you are going to be in the same region, then how are we going to increase our overall yields on the book?
That is what I said. We have to have the mixture in the portfolio. Overall, some other investor has asked the question whether you have plans to suddenly reduce this high-cost corporate accounts, and all. We have to strike a balance. Focus is on retail, where I said average. There are cases where we are charging 10.5%, 11% also. Average yield will work out like that and all these things definitely affecting when there is no growth in advances. When growth starts happening, various rate of interest it will carry. Ultimately, in the pool, it will definitely benefit to the bank. It will average out.
And on the gold, just specifically on, y eah, I get that. Specifically, on gold, what would be our incremental yield on the agri as well as the non-agri, if you can specify?
Incremental yield, I will come back. Incremental yield, I do not have right now. Kindly post a mail. We will come back.
Okay. Just to rephrase the question, if you have to offer a loan today to a customer, what would it be at for agri gold and for non-agri gold?
Around 10%?
9%-10%.
9%-10%.
Okay. So, the same ballpark. And is this in terms of this quarter?
Yeah.
Sorry, I didn't get. It's 9%-10% you're saying, right?
That is why I said 9%-10% because agri will be having preferential rate of interest also and other than agri, we are charging little higher.
Got it. Because the agri gets the PSLC benefit, basically.
Yeah.
Yeah. Is this in terms of, I know that in Q4 you had higher staff expenses, and i n Q1 of last year, you had that interest on the income tax, I think, which was INR 18- odd crore. So, adjusting for that, the numbers of this quarter are more comparable with the previous quarter. Are there any one-time incomes or expenses in this quarter that we need to take into account?
No.
So, this is like a business as usual quarter, essentially?
Yeah, right.
Got it. Got it. Just one second. I had one more question. In case of the EBLR, you said 70% of the book is linked with the EBLR, whether it is repo or it is treasury . How much of this has been passed through? Is 1 00% already passed through, or do we expect this quarter the lowest in terms of what you call NIMs? Or do you think the next quarter there's still something to be passed off, the next quarter will bottom out and then from H2, it should pick up?
No, it is a continuous process. It will happen. I think 70% is already covered there, and it is a continuous process which as and when renewal happens or a reset clause happens, it will have its effect.
The renewal, that is what I am asking. In some banks.
Mr. Darshan, may we request you return to the question queue for a follow-up?
Sure. Thanks.
Thank you. The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors Private Limited. Please go ahead.
Yeah. Am I audible?
Yeah. Good morning, Manish.
Yeah. A very good morning, Mr. Bhat, and all compliments to you on taking over as the leader of this century-old bank. We wish you all the best.
Thank you.
In your efforts of growing the bank to greater heights. Sir, in fact, my fellow participants have also touched upon this, but one good statement from your side would be very helpful. We had a turbulent recent quarter wherein the leadership team either went on a troll, or they had to go or whatever. But what has been the impact on the bank? Is there any hidden liability? Is there any hidden bomb in the books in terms of the bad assets, in terms of some unlinked provisions? Any such thing like that? Is what the NPA, the GNPA, and the NNPA, the stress that we have shown, is it all, or can there be any future shock to us investors?
No, there is absolutely no problem. It is business as usual. There is no concern absolutely for whatever. If you have, I assure you that there is no such concern at all. Everything has been resolved.
I really appreciate the very candid and a very firm response that you have given. The bank has demonstrated its ability and the desire to go to the next stage of its growth. And in that process, it has taken decisions, which is fantastic. Some issues happened, that is part of the business. It is okay. Now, going forward, I believe that your focus is on MSME. While you have also observed that MSME, the distress has started appearing. How are we ensuring that the new book that we create does not have any challenges in terms of asset quality?
Yeah. I assure you, the growth means suddenly we do not want to grow just like that. We will take all adequate precautions as a prudent lender, taking into account various aspects, their cash flows, their rating, the securities offered, yield. Absolutely, there is no problem. Our collection mechanism available, monitoring.
Wonderful, sir, wonderful. Sir, what is our existing microfinance book or the plans of developing the microfinance side of the business? Because I think the worst is over in that segment.
It is approximately around INR 1,000 crore.
What is your plan going forward?
No, we will move on cautiously. We will move on cautiously, taking all precautions.
Okay. Where is this book centered, sir? Mainly, the microfinance book, which state?
It is Karnataka only.
Okay, okay. Now, I think the worst is over. Are you seeing improvement in the collections and your frequency?
Yeah. We have the geographical advantage also, number one. Number two, we have plans, we have the people for that follow-up and recovery also.
That's wonderful. Sir, thank you so much, and sir, wish you all the best. As we are long-term investors, we would like to actually now see how the bank can make its presence felt in the new scenario.
Thank you very much. Thank you.
Thank you, sir. And all the best.
Thank you. Ladies and gentlemen, due to time constraints, we will have to conclude the question-and-answer session here. For any questions we couldn't address, please email them to the management for a response. I now hand the conference over to Mr. Raghavendra S. Bhat for his closing remarks.
Yeah. As I told earlier, my priorities, I have already set, and I will be moving in that direction, taking my team along with me. On the one side, I am looking forward for the cooperation from our time-tested customers out there. Time-tested customers, along with their reference, the additional growth in liabilities, assets, so as a lso fresh acquisitions of liability customers as well as asset customers. Growth and quality, t hese are the two important aspects, followed by working with a clear mind with regard to the spread or taking into account all these aspects. We will be moving forward. Thank you very much to everyone who participated, who have worked with us. All the best to each one of you. Thank you to you also.
Thank you. On behalf of The Karnataka Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.
Thank you very much.