Utkarsh Small Finance Bank Limited (NSE: UTKARSHBNK) Q4 2026 Earnings Call dated May. 11, 2026
Corporate Participants:
Govind Singh — Managing Director and Chief Executive Officer
Amit Acharya — Chief Risk Officer
Sarjukumar Pravin Simaria — Chief Financial Officer
Virender Sharma — Head, Micro Banking
Analysts:
Chintan Shah — Analyst
Sagar Shah — Analyst
Shivam Singh — Individual Investor
Rahul Kumar — Analyst
Utpal Saikia — Individual Investor
Bhumin Shah — Analyst
M. B. Mahesh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Utkarsh Small Finance Bank Ltd. Q4FY26 earnings call hosted by ICI. ICA. ICI securities Ltd. 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 then zero on a touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Chintan Shah from ICIC Securities. Thank you. And over to you, sir.
Chintan Shah — Analyst
Yeah. Hi Dipesh. Yeah. Thank you. Good evening everyone and welcome to the Q4FY26 results conference call of Utka’s small finance bank. We would like to thank the management for giving us the opportunity to host this call. From the management, we have Mr. Govind Singh, Managing Director and CEO, Mr. Saju Kumar Praveen Samaria, Chief Financial Officer. Mr. Amit Acharya, Chief Risk Officer. Mr. Sharma, Head Micro Banking. Mr. Saurabh Ghost, Head Consumer Banking. And Mr. Abhay Kataria, our Head of Assets.
Yeah. So now without further ado, I would like to hand over the floor to the management. Thank you. And over to you, Govinda.
Govind Singh — Managing Director and Chief Executive Officer
Yeah. Thank you, Chintan. Thanks a lot. Thanks for hosting this call. Yeah. Thank you everyone for joining our quarter four FY26 earnings call. The fourth quarter of FY26 has been a period of renewed growth. Proof of resilience and cautious optimism. And as a part of industry, we also went through adverse impact of MFI segment. As you are aware, guardrails for a longer period of one and a half years. However, for us, FY26 has been a year of deliberate choices. Prioritizing stability over speed, quality over quantity and resilience over short term.
Expansion growing so that we emerge with a stronger, fundamentally stronger, less cyclical franchise that can deliver sustainable returns over the medium and long term. FY26 began under the shadow of legacy stress and a cautious environment. Over the course of the year we focus on stabilizing, collection, tightening, underwriting and rebalancing the portfolio mix. These actions were designed to arrest deterioration, reduce fresh slippages and created the conditions for a durable recovery. By quarter four of FY26, we began to see tangible green shoots.
Disbursement improves meaningfully, SMA pools contracted, fresh, NPS leakages declined sharply, recoveries and upgradations increased and collection exchanges strengthened. All of which point to the strategic measures taken taking hold concretely. Disbursement improved across both JLG and non jsg segment in quarter four FY26JLD disbursement grew 58% quarter on quarter and 2% year on year while non JG dispersant grew 41% quarter on quarter and 51% year on year. These improvements will expand the portfolio base going forward and reflect a calibrated return to lending activity.
At the same time, our X bucket collection efficiency in the JLD Segment improved to 99.7% in March 2026, up from 98.5% April 2025, the highest level in the last four quarters, a direct outcome of strengthened field execution and targeted collection initiatives. Fresh NP slippages, network recoveries and upgradation reduced to 170 crore in quarter four of FY26, again 710 crore in the quarter four of FY25 and our GNPA ratio improved by 330 basis points quarter quarter and quarter to 77 7.7% as on March.
These are the early measurable signs that our corrective actions are beginning to deliver. A Central theme of FY26 has been structured DE risking over unsecured exposure and a strategic pivot toward secured and higher yield lower risk portfolios. This is deliberate long term shift to reduce cyclicality in the credit cost and create multiple avenues for growth beyond JLG lending. We had consciously moderated our JLG exposure to around 28% of the gross loan book and around 30% including BC JLG as on March 2026, down from nearly 88% and 90% including BC JLG in March 2020.
This reduction reflects both selective contraction of the JLG book which declined by around 10% during the quarter and and a purposeful shift from new flows into attractive products alternative products. As a result, secured lending now comprises 51% of our gross loan book up from 43% a year ago. This structural shift is already changing the risk profile of the bank and will over time enhance stability of margins within micro banking. Our micro banking business loan targeted at graduated JLG customers with proven repayment discipline have shown exceptional traction and BPL portfolio grew 122% year on year year and 40% quarter on quarter and now represent 27% of our micro banking loan book.
Penetration remains below 515% which gives us significant headroom to scale this product to a much larger share of our customer base while preserving asset quality. To further DE risk incremental flows, we have registered with CGFMU for credit guarantee coverage on eligible JLG and MBPL disbursement with effects on 17th March 2025 45% of our microbank finance book for disbursement till quarter FY26 already covered under the guarantee scheme and counting quarter four FY26 disbursement, 70% of the microfinance book is covered.
This covers material, reduces incremental portfolio risk on new disbursements and supports portfolio stability as we scale higher quality secured products. Diversification beyond JLG has been a key strategic priority and FY26 has seen healthy momentum across our non JLG lending businesses. These segments not only broaden our revenue base but also deliver attractive yields and more resilient collateral profiles. MSME loan book expands by 15% year on year to 4,456 crore supported by the newly started Microlab segment which is delivering disbursement yield of 18%.
Housing loans grew by 8% year on year to 990 crore and our BBG portfolio Business Banking Group portfolio fully secured against immovable collateral grew by 19% year on year. CB and CE SE segment also was indicating the need to look at the mix of new versus used vehicles as the former was significant riskier behavior and therefore the loan book contracted by 1% quarter over quarter to 1090 crore and the share of used vehicles grew to almost 30% in FY26 from less than 15% a year ago reflecting our strategic tilt towards more resilient asset classes.
Collectively these moves are increasing the share of secured assets in the book and improving overall portfolio resilience. On the liability side, our focus has been on building a granular low cost deposit base and aligning deposit growth with disbursement. Total deposits were broadly stable with 0.4% year on year growth and around 3% quarter on quarter on quarter dollar. While retail term deposit grew by 20% year on year. Our CASA deposits increased by 11% year on year and 13% quarter on quarter lifting the CASA plus RTD ratio to 83% as of March 26th from 17% on March 25th and the CASA ratio improved to 24% as in March 2026.
These improvements reflect better quality of account sourcing and a conscious reduction in reliance on bulk deposits in response to the RBI repo rate cuts we have faced. Reduction in interest rate on savings and term deposits remain competitive while optimizing cost of funds. These calibrated repricing have driven a reduction in our overall cost of funds by more than 45 basis points year on year and more than 20 basis points quarter on quarter moving from 8.3% quarter four FY25 to 8.1% in quarter three FY26 and 7.9% in quarter four FY26.
We expect cost of fund to reduce further as pricing continues to take effect. Repricing continues to take effect. We also maintain prudent liquidity buffer. Our CD ratio declined to 83% as in March 2026 from 87% as on March 2025 and we ended the quarter with surplus liquidity of almost 3,000 crore, 3,800 crore and an LCR of 178%. These matrices provide us the flexibility to support calibrated disbursement while preserving balance sheet resilience. Income compression led to elevated cost income ratio for the financial year which impacted the ppop.
If adjusted for interest reversal due to fetched NPA slippages then ppop would be 140 crore. Despite pressure from legacy book leading to elevated credit costs and hence the loss, our capital position remains healthy. We reported a net loss of 188crores for the quarter driven by providing the legacy stress Driven by providing for legacy stress. Our capital ratio stood at 17.7% as of March 31, 2026, comfortably above the regulatory threshold to strengthen the Tier 1 base and support growth future growth, we successfully completed rights issue of 950 crore in November 2025 which which has been helping to to for our capital cushion.
In parallel, we proactively addressed legacy stress through the ARC sale of stress JLG portfolio. This was a deliberate value enhancement decision that improves balance sheet strength and positions the company on a much cleaner footing for sustainable growth. Falling creditors and shareholders on the reverse merger part Falling creditors and shareholder approval obtained in accordance with the process of amalgamation. The second motion petition was filed with the NCLT on April 5, 2026 for the scheme of amalgamation of holding company UCL with and into the bank.
The reverse merger is expected to be completed next few months subject to NCLT proceedings. Operational discipline has been a central pillar of our FY26 response. We expanded our collections workforce for JLG and NBBL to more than 1200 as on March 2020 operationalized a specialized call center for overdue accounts and split larger branches larger micro banking branches to improve oversight and control. Training programs for new frontline staff emphasized our core processes such as center meetings and customer onboarding, ensuring consistent execution across the field.
These structural investments have contributed directly to the improved collection matrices and reduction in SMA and the fresh slippages we reported in quarter four FY26 technology and process transformation have also been critical. Our Utkash 2.0 technology transformation is delivering tangible benefits in automation, productivity and risk control. Digital underwriting capabilities are helping us avoid lending to over leveraged borrowers with 360 degree control. Parameter mapping strengthens monitoring across the trade cycle.
A bank is also in the process of launching new CBS in quarter two of FY27. These investments are not only improving the efficiency but also enhancing our ability to underwrite and monitor risk at scale. We also recognize the importance of our people during FY26. We incurred a one time impact related to new labor codes, LTIP and ESOP grants and other employee benefit obligations in quarter three FY26 and its incremental impact in quarter four of FY26. While this weighs on the near term profitability, it reflects our commitment to compliance, employee welfare and building a motivated, capable workforce to execute our strategy.
Training, productivity initiatives and organizational agility will remain central to our transformation journey. Throughout FY26 we took a range of decisive actions to address legacy stress and position the bank for Sustainable Growth. These included tightened underwriting standards, calibrated disbursement, targeted recoveries and upgradation, selected portfolio resolutions and measures to improve borrower discipline under the new guard list. We have also been proactive to de risking incremental flow through, as we have mentioned earlier, through CGFMU coverage for eligible JLG and MBBL disbursement and by shifting new origination towards secured and high quality products.
We also have taken steps to improve the quality of new account sourcing and to cross sell asset products through our liability focused general banking branches thereby increasing product penetration per customer and including wallet share. These actions taken together are designed to reduce the probability of future steps and to create a more diversified resilient earnings base. We view FY27 as a consolidation year, a period to convert the green shoots and in seen in quarter 4 FY26 into sustainable momentum while continuing to strengthen the franchise.
Our near term priorities will be to sustain improve collection performance, continued calibrated disbursement into higher quality segments, deepen secured lending and accelerate liability mobilization to support growth in the prudent manner in the coming years. We are aiming to force loan growth of 25 to 30% with secured lending comprising around 55% of the portfolio, maintaining NIM of above 8% and delivering a ROE of around 15%. Achieving these targets will require steady execution across underwriting collections, product diversification, liability mobilization and technology Enabled risk management.
While sectoral headwinds and regulatory transitions may continue to influence near term performance, we remain confident that strategic direction we have charted will deliver a stronger, more sustainable franchise over the medium term. In essence, FY26 has been a year of challenge and purposeful transformation. We have moderated risk, strengthened collection, diversified our portfolio, deepen our lively franchise and reinforce our capital base. The quarter has shown that the bank is on the path of recovery and with increase in quality disbursement, better portfolio and deposit mix improve asset quality with lesser fresh slippages and high recoveries, upgradation decline in SMA pool, We will continue to prioritize operational efficiency, discipline, execution and organizational agility.
Our study is not about changing rapid growth at expense of stability. It is about building a fundamentally stronger institution that can withstand cycles, deliver sustainable returns and create enduring value for all the stakeholders. We thank you for your continued support and confidence. With this I conclude. And now we’ll move to question and answer session. Thank you.
Questions and Answers:
Operator
Thank you very much. We’ll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone phone. If you wish to remove yourself from the question cue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Shagar Shah from Spark Capital. Please go ahead.
Sagar Shah
Yeah, first of all, congratulations to the management for posting at least better set of earnings as compared to few quarters. Sir, I had some few questions. My first question was related to our asset quality. On the asset quality you have mentioned the PCR on the bank level of around 59. I wanted to understand what is the PCR that we are holding for secured as well as unsecured. Both of them individually.
Govind Singh
Sure, sir. Amit, you can just mention this.
Amit Acharya
Yeah. Hi Amit. This slide. So if you see on the overall book PCR is 59.3% as you mentioned, on the entire secured book it stood at 38.7% and on entire unsecured it stood around 65.4%.
Sagar Shah
Okay, so 64.5% that you are saying is for. Is it safe to assume that includes MSME unsecured as well as MFI? Right?
Amit Acharya
Yeah, right.
Sagar Shah
But…
Amit Acharya
Second Point four. Sorry, when I mentioned unsecured 65.4% it includes all unsafe including.
Sagar Shah
Right, sir. So only for mfr. What is the PCR that we’re holding? Sir, now
Amit Acharya
It would be 66.3%
Sagar Shah
Only for JLG and for NBBL, NBBL as well as JLG mix then
Amit Acharya
More or less on the same side 66.3%. Because for MBPL and for JLG we do the same kind of tropical.
Sagar Shah
Okay, so is it safe to assume that still some sort of provisioning is still left in the next two quarters for especially for MBPL and JG is concerned because even if you want to recognize 80% provisioning, aging, aging, provisioning. So still some sort of provisioning is left in the next quarters. Right for MBPL as well as jlz.
Amit Acharya
Yeah, it is there. So…
Sagar Shah
Okay, so…
Amit Acharya
Provisioning and some portion on 70% is still remaining.
Sagar Shah
Okay so now next year from FY28 onwards we are migrating to ECL based provisioning. So what I wanted to understand that how well are we prepared for actually model our asset quality towards that? Because over in the ECL model our provisioning has to be more aggressive especially on the SME2 assets. So how already are we have we figured out a model? How ready are we for the ECL transition, sir?
Sarjukumar Pravin Simaria
Well this India beginning is from first April is actually SSDs are exempted. So no, we still don’t have to follow that. I guess it will be sometime before RBI brings us into the habit. Having said that, you know while we have pro forma in there, that we do and even you know honestly the provisioning for the last year in terms of synergies that have happened, I guess our ECL provisioning perhaps you know all the accounting provisioning would be equal to or maybe higher. But your question to be preparedness for India is next year.
It doesn’t apply to us, you know, in terms of statute requirement.
Sagar Shah
Okay, okay, fine sir, my second question sir was related to the MSME portfolio. Our GN2 in the last quarter you mentioned was upwards of 12.5% GNP on the MSME front. So now it considers 23% of your total lending portfolio. So what is the GNP right now and how is the something like still now the real impact of the the West Asia actually conflict is going to have is going to reflect in the coming quarter. So how what is the GNP right now and how well are we prepared to actually face that? Are we facing stress in some of our existing portfolios?
Amit Acharya
Okay, if you talk about retail MSME portfolio, the gross NPA stood as on March 26 at 3.4. And if you see we do fund to a very you know, normal ticket size. So we do not fund like 20 crore or 30 crore kind of borrowers who have some export or larger export limits or the foreign currency exposure. So as far as geopolitical situation is concerned there has been no, you know, abnormal behavior in our portfolio so far which we have been monitoring for last two and a half months when Iran US situation got burst.
So we have a close monitoring on it. As far as it is concerned. There has been no issue or portfolio behavioral change in our portfolio as far as MSME is concerned.
Sagar Shah
Okay, so MSME the JMPA has come down to 3.5 sir.
Amit Acharya
3.4%.
Sagar Shah
3.4 it was, it was at 12.2% you mentioned in the last quarter.
Amit Acharya
Yeah. And this when we talk. I just wanted to add one more point when we talk about this MSME portfolio. Largely it is secured by hard collateral like residential or commercial properties. So there is a you know security available to the bank in case of any defaults.
Sagar Shah
Okay, so just one suggestion sir from my point or from my end. Within the MSME you have around three segments. Within the MSME you have the secured business loans. You have one secured business loan. You have Macrolab also. So if you can just give the break Apache within your 4,456 crore water portfolio that would be very helpful sir to understand that what at what direction the bank is going actually that would be very helpful. Now my third question sir was related to the disbursements and disbursements in JLC have actually are going up for the first time in almost I think in last many quarters actually.
So what is the reason behind the same. Because disbursements have three consecutive quarters of decline now it has moved up to 1310 crores. So where are we exactly finding the value? Have we actually found something like still have you gone tough through the underwriting? What is the new portfolio? How’s the new portfolio doing actually and what changes have you made in an existing underpinning system?
Virender Sharma
Thanks. This is Veredha Just to answer your question. There has been as you know that in April 26th MFIN 2.0 guardrails were implemented. The guardrails were implemented and there was a sudden what you call increase in power which led to our focus of more onto the collection side and focusing on of the collections. By third quarter or October, November we had nearly stabilized on our collections. We always had the what you call distribution and the people to do that part. Once the collection in early bucket started stabilizing we started putting the trust on sales back and we are adhering to all the guidelines as specified in MFIN 2.0 guidelines, even industry had seen a upward trend towards the disbursal and FY25 26 portfolio after this is behaving very well with respect to the collections also. So it is. I will say still we are only at a 70% optimum capacity of disbursal and we should be stabilizing in the same ranges right now.
Sagar Shah
Okay. Lastly, what is the steady state credit cost that we are eyeing for FY27 and FY28? FY27, sir.
Sarjukumar Pravin Simaria
So I. Yes, in the previous call we had mentioned about 2.5% steady state, 3.5 or 3 to 3.5 for 27 and 2 to 2.5 in FY28. Will this trajectory of strategies being arrested significantly in terms of SMA going down significantly with the background that the new disbursements are happening under the new guardrail? With the background that we have a cgm if you cover, you know, I guess this is a very conservative number but we will still stick to the fact that it will be around 3% for FY27 to 2 and after FY28 we will do better than that.
Assume the trajectory the way we are looking at in the industry as well is endorsing coming back of the disbursement and the collection being 99.5 plus. I guess this is a conservative number that I’m giving you.
Sagar Shah
Okay, fine. Thank you. Thank you so much and all the best, sir.
Govind Singh
Thank you.
Operator
Thank you. A reminder to all the participants that you may press Star and one to ask a question. The next question is from the line of Shivam Singh, an individual investor. Please go ahead.
Shivam Singh
Good evening sir. I wanted to ask what is the amount that we are going to get back in CG mx? You cover in the last one year that insurance that we are taking for mfi.
Sarjukumar Pravin Simaria
So the way it happens that, you know, I would say, you know the maturity of NPA is as we speak, I think you know, still it’s no, no, not an NPA that the disbursement that we have started while Our portfolios of 31st March 70% is covered under CGMAQ but the maturity of claim has yet not arrived. I guess you know I would, I would hope it doesn’t arise frankly but maybe year and a half it takes, you know, the claim and the settlement. But we are also not even going to into account this credit and therefore the entire numbers that we have said is without even considering the credit at this point because that’s kind of a experience and we don’t want to fit into a windfall gain at the moment the cost of premium is embedded in my P and L and since we don’t have the NPAs, you know from the new book, well it appears to be a cost of premium but we just, you know, protecting our future in terms of any advanced development for future.
So for your question you say that is anything mature as a cgmaq? The answer is probably too early to you know, give a number on that.
Govind Singh
Just to summarize that, you know we have taken the cost of CSMF for last more than a year now, since last quarter four of last year. But we have neither taken accounting benefits and now we have got any claims so far. So only expense have gone part. But in case something goes, you know, to that extent in future we’ll get the benefit. But in current one we have not taken any benefit, only expense have been taken out taken into account
Shivam Singh
How much of our capital was freed up because of that. As I know that the risk weightage is adjusted if we take the COVID
Govind Singh
No, even that has not been done by us. So as I mentioned we have not taken any benefit of any these guarantee scheme. The accounting we have done a very plain accounting where we have not taken any benefit of this. So as I mentioned, whatever is there only expense partner is taken no benefit either in terms of getting any claim or any, any adjustment in the NPA or capital deficit has not been done by us.
Shivam Singh
Okay sir, and regarding our Prime Minister’s comment in the previous few days, what is our stance like? We are trying to grow at 30% and given the nature of the geopolitical situation, are we like what is the segment that we are targeting and how do we ensure that our credit cost does not increase?
Govind Singh
So you see, I mean you are aware that last year has been a year where we could not grow. So we are at the almost same level. So we have real low waste right now from that perspective and we have got a full infrastructure in terms of manpower, in terms of number of branches and the lines of products in our channels. So I think around 30% growth should not be a problem in the normal one and our focus remains on the one. Obviously we understand macronutrients well so that remains our focus area. And besides that, as you mentioned there are various types of lab products which we have been focusing upon, including the small ticket lab and normal lab as well as the BBG products.
So I think LAP and JLG will still remain our key products for going forward. Also we have obviously We’ve done something like gold loan which we think that we’ll be able to grow bigger this year. There are some of the new area also which we started around one to two years time. We think that there should be further growth in that part. As far as the trade cost is concerned. We do understand the statement from the Prime Minister but I don’t foresee any challenge because I think most of our portfolio is for income generation and smaller ticket size.
We don’t foresee much challenge. And anyway I think we are in recovery path and we have got a good machinery as far as collection is concerned. So we don’t foresee any major impact because of that.
Shivam Singh
Okay sir, that was really helpful. And sir, in the secured segment like if there is a default, what is the timeline in which we can get physical control of the asset and auction it off and what is the LTV value of the secured asset that we are lending to?
Amit Acharya
Hi Amit. This side. So normally you know, when we assess the NPA case and bank decides that we’ll have to go on the security route from there various processes are involved and it takes around six to eight months is a period. So somewhere six months, somewhere eight months depending on the situation. But that’s the normal scenario, six to eight months. You are able to dispose of the property completely by inviting the bid under the survey fee. So that is one second is the normal ltv. If you will see on the portfolio side it would be less than 65% around.
It should be there because mostly we do residential property on a loan value at 70%. So on outstanding portfolio basis and including our all portfolio like Microlab, we offer only 50%. We do not go beyond that. So overall it should be below 65 to 65.
Shivam Singh
What is the average tenure of these loans?
Amit Acharya
Average tenure, you see because the lack by smaller borrowers opt for a longer tenure. So the average tenure would be around 12 to 13 years would be the average tenure given. But if you see the entire portfolio largely insecure in Housing and MSME customer takes this loan on an average of 8 to 9 years and dispose of or foreclose the loan within this particular period.
Shivam Singh
And sir, what would be the risk weightage for this loan?
Amit Acharya
So this is when we talk about lap it is 75% is the risk rate largely.
Shivam Singh
Okay sir, thank you so much. I’ll turn back in the queue.
Govind Singh
Thank you.
Operator
Thank you. The next question is from the line of Rahul Kumar from Vicaria Fund. Please go ahead.
Rahul Kumar
Yeah, hi. Thanks. Just one question. What are our capital raise plans?
Govind Singh
So immediately we are not doing any plans for capital raise. I know it is 17.7% but I think this year, this year we should be able to sail through on this capital base. Our idea is to first, you know, focus more on at least when I’m talking, when I say capital raise means I’m not talking equity capital. Obviously we have other means of taking capital like tier 2 capital and sometime, you know, offloading some of the balance sheet items also.
So idea is not to go to capital market this on immediate basis and raise through tier 2 or some other means this time in case there are any shortfall or you know, immediate requirement is there but not to capital markets.
Rahul Kumar
Okay, understood. That’s all. Thank you.
Govind Singh
Thank you.
Operator
Thank you. The next question is from the line of football psychiatry from in. As an individual investor. Please go ahead.
Utpal Saikia
Yeah, thank you for taking my question. Actually my question only is that in the last phone call the management has mentioned key we are targeting for 15 ROE in FY28. I want to, I want to know only are you in in line on that path and also now see what I hope to watch this behind that is the only question from my side.
Govind Singh
Yeah, so I’ll confirm that you know, 15 if you’re looking at 528 and certainly we are there, we’ll exit 528, you know, above 15% capital. Sorry, the ROE. And as far as what is behind. Yes, what is behind us? MDMA has a senior type of provisioning. What is even we have to take for quarter four also the largely above the legacy portfolio. So I mean we are getting. We are creating a new good portfolio because of guardrails also. And also we have got a guarantee cover issued. So we don’t foresee much challenge going forward. And whatever provisioning you have seen off late or maybe this quarter also is largely on account of the legacy portfolio.
Utpal Saikia
Thank you.
Operator
Thank you. The next question is from Bumin Shah from Aquarius amc. Please go in.
Bhumin Shah
Hi. So by when we are planning to reach net NPA ratio of less than 1% and how are we planning to provide provisions for the same?
Govind Singh
Can you repeat the question? It will not hear it properly. Can you please repeat little louder please?
Bhumin Shah
Yeah, can you hear me
Govind Singh
Now? It’s better.
Bhumin Shah
Yeah. By when are you planning to reach net NPA ratio of less than 1%? Because before the crisis, I guess we are the operating of 0.3 to 0.5%. And how are we planning to provide provisions to reach this ratio?
Govind Singh
Yeah, sure, sure. I think FY28 is what we expect that we should be reaching this range and one obviously through reduction in the overall NPA we are recovering whatever are the NPA past whatever is percentage possible. And certainly as you can see that we have been providing also for the NPA in past also and now we have gone to almost below 3.5% also. So idea is to recovery as well as providing for during next whatever is the balance NPS are there in next few quarters. So our estimate is that, you know quarter FY22 should be NP NET NP in the range you just mentioned.
No less than 1%. Within 1%. Yeah.
Bhumin Shah
Okay.
Govind Singh
3.3 is our FY20. You know net NP FY26 is 3.3 and idea should reach around below 1% by FY28.
Bhumin Shah
Thank you.
Operator
Thank you. The next question is from the line of Karen Roy, an individual investor. Please go ahead. Kiran sir. Please go ahead. Kiran sir, can you hear me? Kiran sir, please unmute yourself and go ahead. As there is no response, you move ahead. Reminder to all the participants that you may press star and one to ask a question. The next question is from the line of MD Mahesh from Kotak Securities. Please go ahead.
M. B. Mahesh
One question on the non unreprised lippages it has been running still higher 4 odd percent. If you could just kind of tell us what os driving this number.
Govind Singh
Yeah. Hi Mahesh, Amit, our CRO is just about to respond to you. Yeah.
M. B. Mahesh
Yeah, no it was
Amit Acharya
If you see the non MFI space or retail space wheels has been you know one of the problem area for us in the past which we are trying to address. And if you see the collection efficiency or the resolution percentages across the buckets. In the last three, four months since November onwards we have controlled the NPA percentages but yes, we need to bring it down drastically. But the resolution in the earlier buckets so flowing into NPA bucket of the SMA1 and we have tried to arrest it and which we have done successfully second is that the portfolio mix movement so the past more than 12 months we are trying to move away from new and doing more of the used. So if you see the disbursement percentage contribution of the used on the overall portfolio you will see it hovers around 12%. Whereas from last seven to eight months disbursement you will see the native has moved to close to 30%. So 30% around the used business is being done. And also we did a lot of portfolio analysis last year and we did a lot of policy and other parameter intervention.
This is the portfolio analysis and if you see the last 18 months disbursement including new or used whatever the bank has done the disbursement post October 24th the last 18 months the new portfolio is performing pretty well as compared to the earlier portfolio. The NPA levels hovers below 2% post 24 portfolio created. So we are contributing in the overall Otherwise if you see the other portfolios like your housing or lab or even microlab portfolio or our BBG which is a working capital portfolio.
Again all these backed by hard collaterals like residential or commercial properties. So they are under you know, tolerance level. Wealth has been the contributor in the overall retail lending which you will see in at least another 2/4. This would also be in a very, very under control.
M. B. Mahesh
Perfect. Sir, going in your opening remarks you had mentioned a PPOP number which is adjusted for I think the. In terms of the interest income reversal that number was 140 crores. Did I hear that correctly?
Sarjukumar Pravin Simaria
That’s right. That’s right. We had a 59 crore of P pop and we had a reversal during the whole year all four quarters combined of 81 that adds up to 140. This is pure reversals on the slippages that happened during the quarter.
M. B. Mahesh
On interest reversal.
Sarjukumar Pravin Simaria
On interest reversal due to slippages that go into the quarter that you reverse the last three years three months income. That’s right. My.
M. B. Mahesh
So that that number is 140 crores for the quarter If you adjust your slippings interest.
Sarjukumar Pravin Simaria
No, no, it is 140 crore for the full year.
M. B. Mahesh
And, and in your assessment this number for next year how are you looking at it? If you have some sense of it.
Sarjukumar Pravin Simaria
No, if. If you know The trajectory of collection efficiency as we are seeing, you know, remains and the disbursement going around, you know, in the new guardrail. I guess this reversal should be arrested. It’s a combination of your standard book going to GNPA which you lose the interest which so by and large I guess your steady state interest income though not visible now but that should find its revival in the. In the coming quarters next four quarters. So the reversal by you know the nature will be less. We will see that as actual, you know the book that the interest accrual actually has to happen will be returning back.
M. B. Mahesh
Okay, perfect, perfect. And what will be outstanding stock? If you look at your collection that you’re seeing today. If you could just kind of give a color on how much of recovery that you are currently seeing of the stock of bad debt which has been written up.
Sarjukumar Pravin Simaria
Written off collection. If I really and I’ve done this back of the envelope try to say that, you know, in my P and L whatever is the credit for write off versus you know, the write off number on inventory, it works out to 12 to 14% recovery.
M. B. Mahesh
That is not case as yet. It continues to remain in the same range.
Sarjukumar Pravin Simaria
That is right. But I just want to add Mahesh here that we have this headcount for collection that we ramped up primarily to arrest from expertise to sma. Now that normalization has already happened or maybe a quarter more to worse than that, if that actually goes the way we are looking at, then the allocation of that headcount at least, you know, some decent 30% kind of an headcount will then be issued state for collecting the writer for npa. And therefore, I presume in the sense that in the exhibition plan the right of collection should be better off in the coming years because that extra collection force should now get allocated to collect the legacy of the MP or the writer.
M. B. Mahesh
Perfect. And just one last question. Assuming that you are able to grow next year at 25 to 30% adjusting for the commission machinery that is sitting there, any sense on how much of OPEX would be required against it?
Sarjukumar Pravin Simaria
How much of
M. B. Mahesh
Opex? OPEX operating expenses
Sarjukumar Pravin Simaria
Only for the collection team, you’re saying?
M. B. Mahesh
No, no. I’m just saying in your sense, given that you have built some machinery around all the other assets, is it safe to assume that the OPEX is going to be meaningfully lower than the loan book? Just trying to understand some direction between the past investment made versus the growth that you’re likely to see in the book next year.
Sarjukumar Pravin Simaria
So you know, whatever the. I mean as I said that one way to look at is this collection force one normalization happens, you may tend to. Yeah, but I guess the idea is to go on the right of collection. So even if it were to continue the cost, I guess the delta will be in multiple people in terms of retaining them, taking their cost and getting a credit on the P and L line for the NPA collection that I just mentioned to you.
Govind Singh
So Mahesh, I may not have exact numbers, but it will happen in two parts. First part is that I have got a cost and I expect that I should be able to raise, you know, 20 to 30% growth in the in the portfolio with the same cost. So that is one thing will happen. Second, suppose I have around 1200, 1300 people who are hardcore collection people only our expectation and that is what is happening right now. The Cost may be around 25 to 30%. You know whatever the amount they bring. So suppose they bring in 1 lakh rupees, their cost may be around 30,000.
I’m again a ballpark number. So and because we have a large school, you know which needs to be recovered and we have seen in first two, three years time. I mean you’re able to recover the chunk thereafter. It is one person, two person only. So idea is that at least for next one, one and a half year let us keep this team there and whatever you know is there cost at least three times of that I’ll be able to recover from this collection team. So these are two numbers. I don’t know the exact number the way you expect but this is I think how it will happen.
Viren, you want to add something? Yeah.
Virender Sharma
So it is in the last quarter we were we collected close to 50 crores from this NPI and write off pool with this 900 odd people at that time in the field. So which is close to some 20% of the collected value from this pool. So this vertical or this connection will continue to be stable for at least next couple of quarters which will give us an upside on that side
Govind Singh
And Mahesh indeed on the other side because our the caseload has actually gone down significantly in the range of now 330 to 350. Our expectation is that I’ll be able to build as I mentioned an additional 25 to 3030 portfolio with the same cost. So I may not, my cost may not go down but my income and my top line will go up by around 25 to 30% with the same cost. I think that is what.
M. B. Mahesh
Yeah, so that’s what we are asking. Thanks a lot. Thank you.
Govind Singh
Thank you.
Operator
In the interest of time we’ll take that. That was the last question for the day. I now hand the conference over to the management. Closing comments.
Govind Singh
Thank you. Thank you ISEC team for this and thanks all the investors for your continued support. As you have seen I think things have changed significantly during last few quarters and we expect that next few quarters would be a significant improvement in the trajectory. And as we have mentioned that for FY28 at least in the next two years time we should be back to 15% ROE and good return overall. Good all KPIs. So thank you for your support and keep exploring and keep talking to you. Thank you.
Thanks a lot.
Operator
Thank you on behalf of ICICI securities limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.