Ladies and gentlemen, good day and welcome to the Ujjivan Small Finance Bank Limited Q2 FY 2026 earnings conference call. As a reminder, all participant lines will be in telecenter 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, then zero on your touch-tone phone. Now, I hand over the conference to Mr. Pritesh Bumb. Thank you, and over to you.
I welcome you all to the Q2 FY 2026 earnings call of Ujjivan Small Finance Bank. Today, we have with us Mr. Sanjeev Nautiyal, MD and CEO, and the whole Senior Management team of the bank. I would like to thank the management for giving us the opportunity to host this call, and on that note, I would like to hand over the call to Mr. Nautiyal for his opening remarks. Over to you, sir.
Thank you, Prithwesh. Good evening and welcome to our Quarter Two and First Half Financial Year 2026 earnings call. I am happy to walk you through the business and financial performance of the bank for the mentioned period. Please note references will be made to Q2 2026 versus Q2 2025 as YOY and Q1 2026 as QOQ, along with a comparison of H1 2026 against H1 2025. India has remained the fastest-growing major economy, recording real GDP growth for Q1 2026 at 7.8%, coming ahead of consensus estimates of 6.7%. In the recent MPC, RBI has upgraded GDP growth estimates for Q2 and FY 2026 to 7% and 6.8% respectively, while lowering the FY 2026 inflation forecast to 2.6% from 3.1%. This was done in continuation of a neutral stance in monetary policy.
This broad-based growth and recent policy actions like repo rate cut, GST rationalization, and tax cuts bode well for the economy's outlook, external headwinds notwithstanding. The RBI's MPC has introduced a glide path for the transition to the ECL framework. While this is not applicable to SFBs, we have studied the details and remain watchful to any future implications. A change has been proposed through the risk-based deposit insurance framework. We will share any implications once the notification is issued. Coming to the overall business, we have delivered a well-calibrated growth for the quarter by ensuring absorption of excess liquidity, thereby taking our CD ratio to 88%. Total deposits rose 1.5% QOQ, up 15.1% YOY at INR 39,211 crore.
CASA grew 14.9% QOQ and 22.1% YOY to INR 10,783 crore, crossing INR 10,000 crore for the first time, while retail TD plus CASA deposits remained around 71% of our total deposits. Our CASA augmentation efforts are beginning to take shape. The MF distribution will be rolled out to customers in Q3 2026. Incremental rollouts of ASBA and Forex will further drive CASA mobilization. We have proactively reset rates in both TD and SA in various buckets, resulting in improvement of cost of funds by 23 basis points QOQ and 17 basis points YOY. As you are aware, the CRR reduction will be carried out in four phases of 25 basis points, each of which two tranches have already become effective, supporting lower funding costs. We expect further COF benefits coming in the next quarters.
Coming to the asset side, loan origination remained strong this quarter, with the highest disbursements ever of INR 7,932 crore, up 21% QOQ and 48% YOY. For H1 2026, disbursements grew 36% to INR 14,471 crore, led by the continued momentum in the secured loan book. Our gross loan book grew 3.9% QOQ and 14% YOY to INR 34,588 crore, driven by our disciplined approach to diversify asset suite and build a sustainable loan book. This has led to shares of secured loans improving to 47%. With the MFIN guardrails now in place, our microfinance portfolio is stabilizing, showing consistent repayment behavior with Bucket X collection efficiency improving month on month from 99.46% in July 2025 to 99.50% in September 2025. In line with our stated branch addition plans, we added 14 branches in Q2. We shall be adding 11 branches in H2 2026 to expand our network.
These branches will start offering micro-banking asset products from day one, while other products will be rolled out in due course of time. In Q2 2026, we added roughly 1.26 lakh customers in the micro-banking segment and have witnessed a graduation of approximately 32,000 group loan customers to individual loans. The graduation of micro-banking customers to secured product lines such as gold loans, vehicle finance, and micro-mortgages also bodes well for the bank. Moving on to specific asset updates, it is heartening to inform that micro-banking has grown meaningfully during Q2 2026 by INR 277 crore, which is 1.5% of June 2025 base. The group loan book stood at INR 13,106 crore, registering a growth of 1.1% QOQ, backed by a quarterly disbursement of INR 3,131 crore in Q2 2026, up 29.5% YOY and 10.1% QOQ.
On individual loans, gross loan book remains strong at INR 5,464 crore, registering 9.3% YOY and 2.5% QOQ. Disbursements for individual loans in Q2 2026 stood at INR 1,128 crore, up 3.5% QOQ. The growth in secured book is well aligned with our long-term vision of increasing its share, and this grew by 52.9% YOY in Q2 2026. We have already grown 15.6% in H1 and are on track to meet the FY 2026 guidance of 35% + secured book growth. This was on the back of strong growth from the affordable housing and micro-mortgage loan book, supported by MSME and other emerging products with gold loans, vehicle finance, and agri loans. Secured disbursements in Q2 2026 came in at INR 3,701 crore, growing 78.8% YOY and 39.6% QOQ.
Affordable housing loans and micro-mortgages, our housing book remains well balanced between salaried and self-employed customers and has around 94% of loans availed for self-occupied homes. Affordable housing loans delivered strong growth with a gross loan book of INR 7,656 crore, up 42% YOY and 8.3% QOQ. Micro-mortgages continued upward trajectory, with gross loan book coming in at INR 1,094 crore, up 180% YOY and 23% QOQ. Our GNP on the housing book has been steady around 1.1% for the last four quarters, reflecting stability in the loan book. MSME, during the year, the SME business scaled up meaningfully, with the loan book touching INR 2,559 crore, a growth of 69% YOY and 14% QOQ. Working capital and supply chain finance now comprise over 23% of the loan book, thus reflecting diversification and deeper customer engagement.
Gold loans, our gold loan business improved its monthly disbursement run rate to INR 72 crore in the quarter. Our gold loan offerings have expanded to 326 branches to be further scaled up to 400 branches in financial year 2026. The gross loan book stood at INR 412 crore, growing 6X over Q2 2025 and registering a robust sequential growth of 41% QOQ. Agri loans are now available across 298 branches aimed at supporting individual borrowers, farmers. The gross loan book has scaled up to INR 510 crore in Q2 2026, growing 4X YOY and strong sequential 27%. Vehicle loans are now available in 262 branches with focus on funding new two-wheelers. In Q2 2026, gross loan book grew to INR 656 crore, up 150% YOY and 17% QOQ. Disbursements stayed healthy at INR 165 crore, with a robust growth of 117% YOY.
We expect strong demand for two-wheeler loans in Q3 2026 on the back of festivals across geographies. On asset quality, the slippages have started to reduce and came in at INR 278 crore after staying at approximate levels of INR 350 crore for each of the previous three quarters. I am delighted to share that our SME book as of September 2025 is below 2%, reflecting the lowest level since Q1 2025. This drop is driven by improvement in the MB segment. As anticipated, credit cost for the quarter came in at INR 235 crore. We anticipate a meaningful decline in credit cost in the second half. The bank undertook INR 31 crore of accelerated provision in Q2 2026 and maintained PCR at 73%. Additionally, INR 21 crore of floating provision is available as part of other provisions.
The lower ticket secured segment is being closely watched, and due prudence is being exercised to have a tight control over quality. As of now, we do not see any aberrations in these segments. Secured vertical slippage stayed nearly constant at around INR 50 crore for six consecutive quarters. On our financial performance, net interest income stood at INR 922 crore, expanding by INR INR 65.7 crores QOQ. Other income got boost due to higher disbursements and increased insurance penetration. While we reported a steady INR 256 crores other income for the quarter, the share of processing fee and insurance products was 53% compared to 40% in Q1 2026. This segment will continue to improve and contribute to total income. Net interest margin in Q2 2026 came in higher at 7.9% versus 7.7% in Q1 2026, supported by utilization of liquidity buffers.
Loan book yields were at 17.5% versus 17.6% in Q1 2026, with an increased share of the secured mix. We expect NIM to stabilize around these levels for the financial year 2026. Cost-to-income remained stable sequentially at 66.4%. PAT for the quarter stood at INR 122 crores with ROA at 1% and ROE at 7.7%, reflecting gradual improvement. Capital position remains strong with CRAR at 21.4% and is aligned with our planned book growth. In the end, I would like to add that the bank continues to critically evaluate and improve its OPEX and finance cost controls while looking to expand productivity efficiency to support the future growth. Before I conclude, I would like to introduce Mr. Deepak Khetan, who has joined as our Head of Strategy and Transformation. He has, in the past, driven strategy formulation, large-scale transformations, and business outcomes in various organizations.
He last held the position of Head of Retail Business Strategy at Axis Bank and previously worked with Mastercard, Deloitte, and KPMG. Thank you, and I hand over back to Mark for the Q&A session.
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 use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, we request you to limit your questions to two questions per participant. In case of follow-up, please rejoin the queue. The first question is from the line of Renish from ICICI Securities. Please go ahead.
Yeah, hi, sir. I'm the founder and son of the setup numbers. Sir, just two things from my side. One on this non-micro-banking profitability piece. When we look at the yields, which has been static at around 12% for the last four or five quarters, despite introducing new products like micro-mortgage, vehicle finance, etc., though the base is very low, I can understand that. At 12% yield, I'm sure this is the entire non-micro-banking piece. Yeah?
Renish, sorry, can you please just check your line? We are not able to hear you clearly. Could you please repeat the question?
Okay, is it better now?
Hello?
Yeah, yeah.
My first question is on these non-micro-banking profitability piece, right? When we look at the non-micro-banking yields, you know, which are at like 12% for the last four or five quarters, and at this yield, I'm sure non-micro-banking vertical would be not even breaking even. What is the strategy here, you know, in the non-micro-banking piece? I can understand that we have introduced many new products like micro-mortgage, vehicle finance, etc., you know, which is yielding 19%- 20%. Broadly, when do you see this entire non-micro-banking piece start contributing to at least the PPOP level?
Hi, Renish.
Yeah, hi, sir.
Can you hear me?
Yes, yes, sir.
As you know, I'll answer in two, three parts. First is regarding housing. Housing is already making a decent amount of money, and it's been around for 7-8 years. They are making enough money, and we need to scale it up further. Next is gold. It's a new product, and by next year, we should be in a position to definitely break even there and make some money. Coming to two-wheelers, two-wheelers are going to end up with around INR 1,000 crore book this year. Once it hits INR 1,000 crore at the end of this year, we should be breaking even in two-wheelers. Micro-mortgage has already broken even, so from that, we will make money going forward. MSME is almost in break-even state. I think by the end of this year, MSME also will come into shape. I think. Their profit will be break-even, yes.
Would you like to share any further data? Let's say mortgage, I can understand it would be profit-making since it's one of the oldest products. Is it right to assume that the profitability currently would be less than 2% ROA at product level?
Yeah, we don't want to go into the details of ROA at this stage, ROA, sorry.
Okay.
Yes, it will come to the industry level within the next 2-3 years. That's what we are planning. We are not there still. If you look at the industry level comparison benchmark, we will be there in the next 2-3 years. That's what is our plan.
Got it, got it. A related question on the vehicle finance piece, you know, which is dominantly two-wheeler currently. I'm surprised to see that given it's a new product, despite that our gross NP is starting 2%, PAR is 5%. What is happening in that portfolio? I mean, despite this book not seasoning, the gross NP is already, you know, inking up. Are we changing any strategy product mix here, or what is happening?
Ramesh, in vehicle finance, yes, it is an 18-month-old product. Our GNP of last year book is where the GNP has come from. Even on a 12-month book, the GNP has not crossed 2.5%. It is moving in the right direction. There is not much bump up in GNP we have seen in the last six months specifically. There is some part of the GNP which was pre-2023 book, sorry, 2024 book, which these were locations which we have discontinued. There is some amount of gross NP there, which is almost about 30-35% of the overall NP.
Got it, got it. You're broadly, you're saying new book, let's say six months.
Yeah. Ramesh, we look at Bucket X collection efficiency on a month-on-month basis. It's been hovering in the range of 99%, 99.1%, 98.9% consistently for the last 9 - 12 months. Bucket X collection efficiency being steady and Bucket 1 - 90 being steady in the range of 60%, 50%, there is, you know, increase in slippages is not visible.
Got it. Okay.
Just to add to that, hi, this is Carol.
Yeah, yeah, Carol.
To that, our book grew 17% quarter- on- quarter in vehicle finance. Currently, our book size is around INR 656 crore. We are mainly in the tier one and two cities, and our metro urban percentages come close to around 75%. Our book is holding up at the moment.
Okay. Got it. Got it. No, this is very helpful. Better planning. Thank you.
Thank you. The next question is from the line of Digant Haria from Greenedge Wealth. Please go ahead.
Thank you for the opportunity. My question is on the microfinance piece. I see that we have started growing the loan book as well, and it's reflective in our net interest income, yields, everything. I just wanted to check here that, because you are the most diversified microfinance player, what are the trends you are seeing? Are more and more districts becoming, so to say, lendable, where you can go out and source new books? Is it more like player-dependent, that in some districts we may find growth opportunities, but others may not? If you can just highlight what you see on the ground?
Like we've been discussing in the last two, three earnings calls, there was significant stress in the group loan book. We had called out that there was stress in Gujarat, Tamil Nadu, and Karnataka got added in Q4 of this financial year. Therefore, the slippages that we were seeing were largely from these three. We had also mentioned that there are some smaller states where we were not focused, for example, Kerala and Odisha. In most of the other states, the slippages had peaked out in March, and Karnataka also came back to normalcy. What we are now seeing on the ground is most of the districts are doing fine. Tamil Nadu has started to show 99.5% efficiency. Karnataka is coming close to that. States in the east are doing well, with the exception of Odisha. States in the west are doing well, with the exception of Gujarat.
Gujarat probably will take a quarter or two more. The north has started to grow quite well. If you ask me about specific areas, there are some specific areas in Gujarat and Karnataka which are still not out of the woods yet. However, we feel that in most of the other parts of the country are quite, you know, ready for growth of the next phase.
Okay. Okay. That's really detailed then. Thank you. Just that, you know, say 12 months from now, you know, the next 12 months, we can think of a 15% kind of a growth in the micro, you know, in this whole, you know, microfinance loan book, JLG plus individual loans.
Digant, we can look at H2 as of now. We have been cautious in our growth in H1 because we were still not sure about whether the stress is going to continue longer. In Q2, we started getting the confidence that, yes, there is demand coming in from the market. We feel that H2 will be much, much better than H1 in terms of both disbursement and growth. We see for the full financial year a growth of about 7 %- 8% on the micro-banking book.
All right. Fine, fine. The last question is on our credit cost. I think that has also started declining. That flow, we know that flow has reduced, that we know since the last two quarters that flow has been reducing. At least the stock, we are almost getting done on the provisions on the stock as well.
In terms of provisions, we had also said that, look, Q1 and Q2 are going to be elevated because there was an NP addition happening in Q4 and Q1. Over a period of time, the provisions would start to taper off. You will start seeing this trend in Q3 and Q4 because provisions for most of the book have been done. There is a tail left which will get covered in Q3 and Q4.
Okay. All right. Thank you so much. I wish you all the best. Kudos to your team for being almost the first one to recover from this whole last 1.5 year of stress. Congratulations. Thank you.
Thank you, Digant.
Thank you.
The next question is from the line of Suraj Das from Sundaram Mutual Funds. Over to you.
Am I audible?
Yes, sir.
Yes, Suraj. We can't hear you, Suraj.
We request you to please unmute your mic.
Can you hear me now?
Yes, you are audible, sir.
Perfect. Okay. Sure. The question is, sir, on the individual loan book, on the individual MFI loan book, if you look at the PAR numbers, especially in Maharashtra, I think that number is slightly inching up. Is there anything to read into it in terms of how do you look at the number? The group loan is doing well, but I think Maharashtra PAR 0, PAR 30, even PAR 90 on the individual portfolio is inching up for the last four quarters, three, four quarters.
Not much to read. If you look at it, Suraj, the NPA remains at below 2%. The PAR is in the range of 4%. Yes, is the PAR looking elevated at this time? Yes, compared to group loans, it is looking slightly elevated. In individual loans, the collection efficiency as well as the flow to NPA is slightly slower as compared to group loans because a lot of collection happens in SME 0, 1, and 2. In terms of slippages, this trend is showing up consistently for three or four quarters. We don't see any incremental stress in Maharashtra in individual loans.
Okay. Currently, I think that number is 5.5, which was 3.5 two quarters back. Do you think that number will, let us say, normalize in a couple of quarters because of this collection thing?
In Maharashtra, the overall PAR is 4.2%, and the NPA is 1.9%. The SME book is about 2.2%.
On the individual portfolio specifically, I was asking assays.
Yes, this is for the individual portfolio. Overall PAR of 4.2% and GNP of 1.9%.
Okay. Sure. That is part one. Second question was more on the risk weight side. If I look at the risk weight number, that has gone up by 9% QOQ versus 4% loan growth. Is there anything to read? What is the rationale here? Your microfinance portfolio has not grown in that sense. Your overall growth was 4% versus microfinance portfolio is 2% QOQ. While your MSME loan and affordable housing has grown higher than the overall growth, those are, I think, housing and loan against property loans, right? What is the rationale of RWA growing faster than the loan growth?
Hi, Suraj. Brijesh here. In this quarter, where the RWA and the risk weight has come down by 141 basis points. Out of that, 55 basis points was mostly contributed from some of the operational aspects like off-balance sheet adjustments, some rating related to our institutional borrowers, which will reflect over the time. It will get automatically adjusted. Effective RWA utilization was 86 basis points, which is commensurate with our loan growth of around INR 1,300 crore. We expect the RWA to remain at a similar level, looking at the estimated loan growth as well as the profitability and the PAT accrual, which is estimated PAT accrual for the next two quarters.
Sure. Understood. Yeah, I think those are my two questions. Thanks.
Thank you. The next question is from the line of Rajiv Mehta from Yes Securities. Please go ahead.
Yeah, hi. Congratulations on good numbers. My first question is on the collection efficiency in September at the bank level. It's been a good uptick on a month-on-month basis. I believe there is no seasonality at play because last year there was no such uptick in September versus August. Is there something to read into in terms of can it be a sustainable trend for Q3, Q4? Is it a function that you were able to recover a lot of overdues in the month of September? Can you just comment whether the September uptick is sustainable in the coming months?
Rajiv, the collection efficiency that you see increasing from 97.2% - 98%, this is a weighted average of non-delinquent SME and NPA book.
Correct.
As the NPA book starts to slow down, the weighted average collection efficiency is expected to improve going forward also.
Is there any color on whether the SME collections in micro-banking in particular, where you have a larger 1 - 90 DPD pool, is also improving given the effort that we put to ensure that pool doesn't flow forward?
Yes, Rajiv. In fact, that was the strategy for Q1. We had discussed it in the past that, look, when delinquencies start to go up, the best pools to focus are 1 - 90 and 91 - 180 because that is where the incremental slippages would happen. Therefore, to manage stress, what we had done was over-managing collections in SME and early NPA book 91 - 180. The collection efficiencies have been very good in our SME book. That is reflecting in our improved slippages.
Okay. My second question is on margins. You've given the outlook that margins will remain broadly similar in the second half. My question firstly is on each side. When I look at your micro-banking yield, it's flat. In the previous quarter, you had that 14 basis points of one-off impact. We have not seen an expansion because of that absence. Plus, the slippages were also lower in this quarter. Disbursements are going strong. The question is, where did the micro-banking yield improve on a Q1Q basis? Second is on the deposit side. When you look at the average bulk deposit pricing right now versus the prevailing market rates, is there any scope for further downward repricing? On the retail term deposits, I see a sharp decline in the absolute deposit base.
How do we manage the traction of retail term deposits given that we want to grow at 20% at the bank level? That is the biggest pool of deposits for us.
Rajiv, if you see, the NIM has improved by 20 basis points, coming at 7.90%. Our micro-mortgages book is growing strong. The micro-banking has just about beginning to spread its wings, you know, coming back into the growth trajectory. The vehicle finance has been doing well. It is a high-yielding book. The housing side also has, for the last two quarters, shown improvement and has maintained the higher yield than it was maintaining in the previous two quarters or so. Overall, what we are seeing is that the yield on our portfolio is actually maintaining itself. Of course, the repo cut notwithstanding. The repo cut is actually applicable to only 17% of our book, which is MSME, which is on repo rate, and the FIG partial book of which is on repo rates.
I think the cost of deposits that the steps that we took from April to August are only now beginning to show their effect. The September quarter saw only the major impact that we did in the month of August. Only a partial effect of that has flown into this quarter. The coming quarter, we are likely to see a better cost of deposits coming into our books. Therefore, we feel that the NIMs at around 7.90% thereabouts is very much possible, is very much on the cards for our bank. Hope this addresses your issue.
Hello, sir. Clear about that. I had a specific question on why the micro-banking yield did not improve Q1Q. Second was, how do we manage the retail term deposit traction? Would we need to start to not cut pricing aggressively here because the absolute deposits have fallen pretty sharply. We are also aspiring for much higher levels of growth. We'll require those deposits to flow in for us. In that context, growth versus margins, that's the whole paradox here.
Okay. On the term deposit side, as we explained in the last call, we had a gush of liquidity sitting on our books. In this quarter, we flushed out the liquidity because of which the CASA was focused upon. Therefore, the kind of growth that we had and the room that we had over the CD ratio, because we were at 85% or 86% in the previous quarter, we had enough room to grow our loans on the existing set of deposits. It was a pure play on not taking high-cost deposits and managing with the existing liquidity that we had, and also simultaneously flushing out the excess liquidity that was sitting inside. Of course, now we will be seeing the growth coming back because that's the way we have modulated our team members. Therefore, there is no challenge. There is no hiccup.
It was a conscious call to actually be flexible in terms of the situation in which we were. Term deposits is all about that. We are seeing the growth coming back because that's how we are now playing our game. On the microfinance side, please. Yeah.
Sorry. Okay. Now, regarding micro-banking yield, what you are asking, it is stable at 22%. We have not changed any rates. We assume till the year-end, it will continue to be the same. Okay. Now, over to Mr. Hitendra. He'll answer on the deposit.
On bulk TD and retail TD, we had an opportunity to source bulk TD at a lower rate. We had almost 67 basis points lower than a retail TD. We focused slightly on a bulk TD. However, our focus continues to be retail TD. Also, if you look at maturity versus sourcing, we had almost a benefit of 108 basis points on the sourcing side, maturity sourcing side on the retail side. Retail TD, we can scale up whenever we want. It was a strategic call. It was not something which we had not anticipated.
No, this is clear. Thank you. That's a plus.
Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Sir, Abhishek, please put your line on mute.
Hello, am I audible?
Yes, sir. You're audible.
Yes, Abhishek.
Hi, hi. Congratulations for the quarter. Just picking up from Suraj's question, actually, if you see the IL PAR, in two or three states, it has gone up, right? I think in Karnataka, Maharashtra, West Bengal, it has gone up. The thing is that the weighted average looks good because, you know, in the other states, you're doing okay. Any risk that you see in IL, especially in the context that, you know, over the medium to long term, you want to increase it from 30% of the book to 45% or so? Any early learnings or anything from these three states? What's the real reason for this PAR going up in the IL portfolio?
Abhishek, PAR has gone. There are only two states which, for the last three quarters, have not shown a better PAR or a better NPA behavior.
One of them is Karnataka, which, as we all know, had external issues. Therefore, the PAR was elevated. Otherwise, Karnataka always had an NPA below 2%. Currently, the NPA is about 4.8% and PAR is about 7.4%. It is an external reason. There are two other states where PAR and NPA have not shown a significant improvement. One is West Bengal and the second is Bihar, which you are not seeing in the top five states. It's a smaller state for us. In West Bengal, we have, you know, kind of been calibrated in our growth. We have not been growing much. In Bihar, we have actually seen a flat book growth. It's not been increasing again. Our focus areas have been Maharashtra, Tamil Nadu, Haryana, and these are the areas which are doing well for us.
Nothing in terms of the product construct or the underwriting or the income levels of the people. I would say, related to Karnataka or West Bengal or Bihar, it is more like geographic areas not showing improvement as against the product construct or the income assessment.
Okay. You're not feeling compelled to modify any of these, you know, any of the features of the product or underwriting based on what you found in West Bengal or Bihar? Or even actually, even Maharashtra, your numbers from 1Q versus this has actually deteriorated a little bit, the PAR 30 and the PAR 90.
Yeah. You know, some little bit of improvement, iteration, we can keep seeing over the quarter on quarter, but not much to read in terms of the asset quality per se. There are only two areas which, as I said, West Bengal and Bihar, where we are not seeing any growth as well. It is a flat book growth.
Okay. Fine. In terms of your overall credit cost, your full-year guidance of 2.3%- 2.4% remains. Your first half, even if I remove the, you know, the accelerated provision, it's around 270 basis points . The second half should be around 210 basis points or lower. Is that something you are envisaging? Where is that improvement? GL, of course, but are all the write-offs pretty much over in GL? Can you give some sense on how you expect to achieve this 2.4%?
As we said, we are not changing our guidance on credit cost. It will be in the range of 2.4%. H2 is going to be better than H1. That's, again, something that we had told in the last call as well because the bucket provisions were seen in the first half as compared to the second half. In terms of write-offs, H2 write-offs are going to be significantly lower. Most of the write-offs that we have done over the entire write-off pool that we have done, I think only INR 2 crore comes from vehicle finance. Everything else comes from micro-banking only. H2, I think the same trend will continue with much lower write-offs and mostly from micro-banking.
Okay. How much of the PAR 90 pool do you expect to write off now in MFI?
The write-offs normally happen when there is a full provision taken on any account. It's very difficult to say what % will be written off. You can take a thumb rule of about 1.2% - 1.3% for the second half.
From the gross loan book PAR 90, out of the gross loan book PAR 90.
Yeah. No, from the total micro-banking, not group loan.
Okay. From the total micro-banking. Okay.
That's right.
Got it. Okay. Thank you. That was my question. Thank you and all the best.
Thank you. The next question is from the line of Shreepal Doshi from Equirus. Please go ahead.
Hi. Thank you for giving me the opportunity and congrats to the entire team for a good quarter. My question was, firstly, if you recall, like the last couple of quarters, we've also seen issues pertaining to attrition as one of the reasons for elevated credit costs or even collection efficiencies being impacted. How has that trend shaped up, let's say, in the last quarter? What are we doing in terms of measures to curtail it, particularly the lower-level attritions?
Hi, Shreepal. See, from the attrition perspective, we have everything under control. We are not seeing any kind of reasons why we need to worry on the attrition front. It is flat from the last quarter, and we are taking care of our loans as usual.
What is it like at current levels, at loan officer level or lower hierarchy level?
Yeah, we are at an annualized attrition rate of around 20% now.
Okay. Okay. In any particular states where it would be elevated or where the issues are more prominent?
We are not seeing anything particularly, it's sort of flattish.
Got it. The other question was on the disbursement side. Post the implementation of guard rails, what are the disbursement ticket sizes for new group loan customers as well as what are the ticket sizes for the customers that we move up from, let's say, group loan to individual loan category? That's the second question that I had on the ticket size for these two post the, let's say, guard rail being implemented when you don't have more than three lenders to a particular customer.
Okay. Our group loan ticket size is hovering around close to INR 64,000. GL to IL graduation. IL ticket size is almost constant at close to INR 1.3 lakh for the last two, three quarters.
That would be the average number. What would be the range, basically, for the, let's say, relatively vintage customer in group loan? We go up to INR 80,000 or is it more than that now?
As per policy, we go up to INR 1.25 lakh. For customers who are third cycle and above, the average ticket size is close to INR 80,000.
Okay. In the IL category?
IL category, average, as I mentioned, it is INR 1.3 lakh. The customers who go to higher cycles, the average ticket size moves up to close to INR 1.5, INR 1.6 lakh.
Okay. What would be the higher range here? Let's say, the bracket in terms of the higher versus higher?
Yeah. As group loan, it is up to INR 1.25 lakh. In individual loan, the highest ticket size possible is INR 3 lakh.
Got it. In individual loans, just one last question here. Do we really monitor the end-use being business or is it not closely monitored?
Both GL and IL are purpose-based loans. IL, we have various purposes, including business loan, livestock loan, home improvement loan. Similarly, in GL also, it is purpose-driven loan. LUC is done 100% for all the loans, and based on that only, the PSU classification happens. LUC happens for all cases by a bank employee.
Got it. The last question was pertaining to a data point. Could you please give out that CD book number because it's not given in the presentation?
Asking about TD book, you're saying?
CD, CD, certificate of deposit.
CD. It is INR 411 crore.
All right. Thank you. Thank you so much, and good luck for the next quarter.
Thank you.
Thank you. The next question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Good evening. Thanks for the opportunity. Sir, just wanted to understand in terms of book mix, this year, maybe we'll end up somewhere between 50/50 in terms of micro-banking and non-micro-banking given the growth. What would be a comfortable range in medium to long term? How should we see that for FY 2027-2028?
Shailesh, as part of our five-year strategy, we have contemplated that our secured book would be in the region of 65% - 70%. The remaining would be the unsecured part. As we go along each year, the proportion of the secured book will continue to grow faster than the unsecured part.
Okay, that's fine. The second question was with respect to our return of pool. What would be that amount? Also, in terms of recovery from that bad debts, if you can give some color, how can we expect that because that pool is on the higher side?
The pool that we have, you know, there are two pools here. One is the written-off pool, which we have written off post-COVID. There is a sale of assets that we had done. Put together, this is about INR 750 crore. We expect anything between 15% - 20% recovery from this pool during this financial year.
INR 150-odd crores, you're saying 15% - 20% out of that?
That's right.
My third question was with respect to our second-half performance.
Sorry to interrupt.
Yeah.
Due to time constraint, I request you to please rejoin the queue.
Oh, thanks. Thank you.
The next question is from the line of Ashlesh Sonje from Kotak Securities. Requesting participants to limit the questions to one per participant. Thank you.
Vision coverage which you have specifically for microfinance, including any NPA provisions.
Sorry to interrupt. Sir, could you please reconfirm your question?
Hi. Just one question on MFI. If you can share the provisions which you are carrying specifically for microfinance, including NPA provision as well as any other provision buffers which you have. Secondly, if you can just explain this additional slide which you have added on page number 22 of the presentation, the line chart which you have added.
Okay. In terms of PCR, Ashlesh, we have 80% provision cover on micro-banking.
Any other standard asset or containing provisions there along with that?
Standard asset. Standard asset is about 0.5% that we keep on all the standard assets.
Okay, got it.
On your question on the slide, this is nothing but, you know, after guardrail 2.0 implementation in April, we were just trying to show that, you know, as per MFIN guideline, also, loans cannot be given to customers who are 60 DBD. Though in Ujjivan, we follow 30 DBD, it is stringent compared to what the MFIN guideline says. Internally, also, we have guidelines around customer trade behavior, and based on that, we accept or reject loans. Internally, based on customer repayment history, if customers are up to 30 DBD and between 30- 60 DBD, we can still lend. What trend shows is that in the last four quarters, five quarters, the percentage of loans which is going to customers who are over 30 - 60 DBD in their previous cycle, the percentage of loan there is below 0.5%. Actually, much below 0.5%.
That says that we are not encouraging customers who are not having good repayment history in the previous cycle.
Understood, sir. Thank you. Those are all the questions I had.
Thank you. The next question is from the line of Anan Dama from Emkay Global. Please go ahead.
Yeah, most of my questions are answered. I had one question around the, I think, during the admission, you had suggested that you had exposure to microfinance borrowers who, in turn, were employees of the Tirupur-based textile corporate. Any stress that you have seen in that portfolio? I think that was about 2% of your overall microfinance borrowers as such.
We have not seen any initial trend as of now. In fact, our repayment behavior in the Tirupur belt has not shown any decline. We have been watching Gujarat very closely. We've been watching NCR very closely. We've not seen any decline in the repayment behavior till now.
What explains basically the surge that we have seen in the entire portfolio, particularly in the state of Karnataka? Is it still to do with that audience, or are there additional things which have actually happened because of which the, yeah.
Nothing new, Anand. It is actually showing a very good improvement over the last two quarters. In fact, we are very close to 99.5% bucket-wise collection efficiency in micro-banking, even in the state of Karnataka. We have seen improvement in bucket-wise collection efficiency, improvement in slippages, and the portfolio is coming under control now.
The PAR portfolio is not.
Which is largely over.
That is basically the fresh test, though. Yeah, the problem is that your PAR portfolio is still going up, right? That could keep the credit costs higher in the state of Karnataka. You have Bihar elections now and then maybe West Bengal elections next year.
If you look at it in terms of SME bucket, early NPA, and late NPA, the portfolio in Karnataka, which had gone into delinquency post the ordinance, had to go through collections as well as recognition of NPA both ways and credit cost. In the last earnings call, we said that 33% of our incremental slippages in the quarter were coming in from Karnataka because Karnataka was going through a lot of pain. This quarter, we have seen that number coming below 20%. There is a significant improvement in the Karnataka portfolio. The early delinquency has more or less come back to normalcy. There is NPA recognition and credit cost recognition, which will happen during these two or three quarters, Q2, Q3, Q4. I think by then, things will come back to normal.
Lastly, that we expect a universal bank license to come through. Any additional OpEx that we are already incurring in run-up to that license? How should we look at the overall OpEx growth or OpEx ratios in FY 2026 and FY 2027?
Anand, our application is with the Reserve Bank of India. They are evaluating and assessing our application, its contents. The matter rests there. As we said earlier, we will await the decision of the RBI. As far as expenses or additional expenditure that we will need to do, I think nothing changes immediately as we become a universal bank. Of course, there will be some matters which will gain immediate attention. That will be about signages, our email addresses, all those kinds of letterheads. Those will be taken care of once we get a positive decision from the Reserve Bank of India. The other expenses or the investments that we will do are part of the general strategy that we have chalked out, which is agnostic to any outcome that we may get from the Reserve Bank of India. Not much expenditure, if at all there is.
Yes, there will be some, but it is nothing of note or of materiality. This is okay.
Lastly, if possible, if you allow me, basically, just wanted to check.
Sorry to interrupt.
The impact that you have.
Sir, due to time restraints, I request you to please rejoin the queue.
Sure, sure.
Requesting participants to limit their questions to one question per participant. Thank you. The next question is from the line of Abhishek Tandon from Bowhead India. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just a question on credit cost. You know, going into fiscal 2027, just fiscal 2027, your secured book, you know, obviously will keep increasing. I guess there the credit costs are pretty low because a big part of the secured book is affordable housing and FIG. I guess you have very low credit costs. Microfinance would also be on a strong footing in fiscal 2027. Is the assumption of, say, a credit cost of 1% in fiscal 2027 a variant? That's an assumption, would you say?
Abhishek, we'll come back on that, whether we want to take any assumptions for FY 2027 as of now. What we can surely see is the credit costs, you know, this cycle would not extend beyond quarter four of this year. Therefore, we'll see much better normalcy in the next financial year. I would also like to add here that we have started monitoring the book that we have sourced in the last 12 months, and it is showing much better quality than the one which we had previous to that.
Okay, thank you so much.
Thank you. The next question is from the line of Sagar Shah from Spark PWM. Please go ahead.
Yeah. First of all, thank you for the opportunity. Good evening, and congratulations to the management for showing such a resilient set of numbers, actually, in such an environment. My one question, sir, would be in terms of individual loans. Individual loans, as compared to the March 2024 year-ending, actually, they have been relatively on the flat side. It means I'm talking of the individual loans. Individual loans have been shown very negligible growth, actually. My question is that, considering that we are nearing to the bottom of this crisis, a micro-banking crisis, and you would have got filtered out some good-quality group loan customers also after the one-year debacle, actually.
Is it safe to assume in the next six months, in the next two quarters, our individual loan growth actually will grow better, actually, than the, obviously, the group loan growth due to the better filterment of the group loan customers? Will we get such good-quality customers? What are you seeing on the ground, actually?
IL definitely has been our growth engine in microfinance in the last three or four years. We want to grow this business. IL is mostly, for us, it is group loan to individual loan graduation, though we focus a little bit on open market acquisition as well. When we started this year, at that point of time, the industry was still going through a crisis and further fueled by the Karnataka issue as well. We were a little slower and cautious in the first quarter. Though individual loans have done better than group loans in terms of growth in the first two quarters of the year, going forward in the next two quarters, you will see individual loans doing much better, much better than group loans, and overall in absolute values as well. As was rightly mentioned, we have good customers where the repayment history has been excellent.
Their income levels are high and eligible for graduation. In the next two quarters, you will see individual loans doing better than what we have done in the first two quarters.
Okay. I got the answer. Thank you. Thank you so much, sir. Happy Diwali and best of luck for the next quarters.
Same to you.
Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capitals. Please go ahead.
Good evening, sir. Congratulations on a good set of numbers. Most of the questions have been answered. Just one question on the cost of points. We have seen a 30-basis point decline in this quarter from the previous quarter. How do you see this going forward? Are there some levers because of which we will be able to reduce it? Given that we have done high consumption in this NCD, going forward, we'll be sort of increasing the rates again to capture more of this for our high growth ambition on the advances side.
Yeah, hi, Surbhesh. We had taken rate cuts in both FDs and also savings accounts between April to August. We have seen some of the benefits flowing in the second quarter. We expect further benefits to flow in as the repricing happens for the fixed deposits. Those benefits will keep coming, and we expect to see better numbers in the next two quarters.
Where do you want?
So, I'm.
Yeah, sorry. Go ahead.
Sorry, please carry on.
Yeah, basically, where do you expect this sort of a number to settle down eventually?
What we cannot is very difficult to give an exact number, but what we are seeing, TD repricing will happen, so cost of fund will go down from here. The CASA repricing has happened, so CASA book is already repriced, okay? Cost of fund has come down there. TD, as we go along, whatever increment TD is booking, they're booking at much lower cost.
Okay.
Yeah, we are sourcing at roughly 7.38% now, TD average cost.
Understood.
To conclude, we expect to end off the year with around 7.1%, something like that. Yeah.
Around 7.1%.
Yeah, right, right.
On the secured book side, your yield is around 12%. Do you see this increasing, or do you think that this is what it can achieve? We are adding the other products, which have got higher yields. Overall, how do you see the non-microfinance book yields behaving in the coming quarters or years?
The non-micro banking yields will go up a bit because of the newer segments which we have launched, which are higher yielding, like micro mortgage, around 19% +. Gold loans, in the range of 15%. Vehicle loans in the range of 20%. With the contribution increasing in the non-micro banking book, overall, the yields for this book is expected to, you know, go a little upwards.
Any number that you would want to reach there?
No, it's difficult to put a number to this. It depends on the book mix and how the products perform. Maybe here and there, but a little uptick should happen.
Okay. Thank you, sir.
Thank you.
The last question is from the line of [crosstalk] from Retail Investor. Please go ahead.
Hello, am I audible?
Yes, you are, sir.
Yes, please.
Yes, sir. My question is that, your last four quarters, what I am seeing, from your financing, that is your main business, you are incurring a loss continuously. What was the reason and how are you going to control that? Due to this, even though you are showing your net profit is positive, due to other income, your main business is showing the negative portion. How is your cost of fund or all these things going to make or bring you in the positive area?
Sorry, could you please repeat the question, Surbhi, once again?
My question is that your financial means, whatever your cost, your deposit and interest you are paying and your expenses are there. From that, last four quarters, you are showing a loss. Your profit is coming from the other income. Due to that, your net profit is positive, but your OPM is negative for the last continuous four quarters. My question is clear or I require more elaboration?
No, we are not able to understand the question, sir. We'll connect with you offline and maybe take this question, sir.
Okay.
What I just want to highlight to you is that our pre-provision operating profits have been, you know, coming across and they have started to grow sequentially as of now.
Okay, so.
Yeah, we'll connect with you and take it offline as well.
Okay, thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. I now hand over the conference to the MD for the closing comments.
I once again thank all the participants for their time and interest. We at Ujjivan Small Finance Bank remain focused on delivering on our guided numbers while we build an enduring institution. I wish everybody a happy Diwali in advance. Please reach out to our IR team for any queries that you may have. Thank you once again.
On behalf of Ujjivan Small Finance Bank, that concludes this conference. Wishing you all a happy Diwali. Thank you for joining us. You may now disconnect your line.