AU Small Finance Bank Ltd (NSE: AUBANK) Q4 2025 Earnings Call dated Apr. 22, 2025
Corporate Participants:
Prince Tiwari — Head of Investor Relations
Gaurav Jain — President, Finance and Strategy
Sanjay Agarwal — Managing Director and Chief Executive Officer
Rajeev Yadav — Deputy Chief Executive Officer
Unidentified Speaker
Analysts:
Renish Bhuva — Analyst
Kunal Shah — Analyst
Piran Engineer — Analyst
Pritesh Bumb — Analyst
Anand Swaminathan — Analyst
Nidhesh Jain — Analyst
Nitin Aggarwal — Analyst
Rohan Mandora — Analyst
Pranuj Shah — Analyst
Rahul Jain — Analyst
Ashlesh Sonje — Analyst
Shailesh kanani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to AU Small Finance Bank Q4 FY ’25 Earnings 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 then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Prince Tiwali, Head of Investor Relations. Thank you, and over to you, Mr.
Prince Tiwari — Head of Investor Relations
Thank you. Yeah. Thank you,, and good evening, everyone, and welcome to AE Small Finance Bank’s earnings call for the financial year and quarter-ending, 25. We thank you all for joining the call this evening. On today’s call, on behalf of the management, we have our Founder, MD and CEO, Mr; our Executive Director and Deputy CEO, Sri Utam; our Deputy CEO, Mr Rajiv; and other senior members of the management team along with the IR team. So like last quarter, we’ll start today’s call with a 15 to 20 minutes opening remarks by Mr Gaurav Jain, President, Finance and Strategy, highlighting the Bank’s performance, positioning and outlook. We’ll follow the opening remarks with 40 to 45 minutes of question-and-answers from the participating analysts and investors. For benefit of all participants so that we can take everyone’s questions, we would humbly request everyone to keep the number of questions restricted to and join back-in the queue in case you have further questions. For any data keeping questions, you can always reach-out to the IR team to close the call and we can always come back to you.
With that, I’ll now request Gaurav Jain, President, Financial Strategy to share his opening remarks. Gaurav, over to you.
Gaurav Jain — President, Finance and Strategy
Thank you, Prince. Good evening, everyone. I extend a warm welcome to all participants on this call. We thank you for your continued trust in as we close FY ’25, a year marked by continued transformation and resilience. FY ’25 unfolded against a backdrop of challenging macroeconomic conditions. India’s GDP growth, while still among the highest globally moderated to around 6.4% as per latest RBI estimate. The monetary policy environment remained tight for most of the year with the RBI maintaining a cautious chance amid persistent core inflation pressure.
Elevated interest rates weighed on both credit demand and cost of funds. Additionally, systemic liquidity remained tight for most of the year, leading to increased competition for deposits across the banking system. Evolving regulations also added to the complexity of the operating environment. For a young and relatively smaller bank like AU with a growing but still maturing liability franchise on platform, these conditions are particularly demanding, testing our agility and strategic focus. Yet. Despite these macro and structural headwinds, AU delivered a strong and well-rounded performance across key financial and operational metrics, reaffirming the strength of our retail-centric and granular business model and execution discipline.
We delivered strong growth with our deposit book growing by 27% year-on-year versus banking sector deposit growth of 10.1%. And our loan book grew by 20% Y-o-Y versus banking sector loan growth of 10.8% despite de-growth of 18% in our unsecured book. We delivered an ROA of 1.5% despite significantly higher credit costs in MSI and credit card and after strengthening our provision coverage by making an accelerated provision of INR150 crores.
Our EPS grew by 19% and book-value per share grew by 23%. Now let me talk — talk about our business in some more details. Our deposit base crossed INR1,24,000 crores this year, growing by 27% year-on year. If we take into consideration the fact that we also replaced Fincare deposits of around INR4,000 crores, which Were at higher-cost, underlying deposit growth comes to 30% plus. This growth was delivered whilst optimizing a number of other variables, including managing our cost of funds, which came in at 7.07% versus our initial guidance of 7.2% to 7.25% and controlling our opex and marketing cost. Our branch profitability improved with 49% of our branches, which were in existence in December ’23 becoming profitable in Q4 versus 25% a year back. And all the other parameters like CASA ratio, LCR and CD ratio remain in good shape. We have also reduced our peak deposit rate by 25 bps both on term deposit as well as on savings deposit post the last rate cut by RBI. I think this performance by our deposits business in a tough environment is a testament to the potential of our growing deposit franchise, which we have developed over the last eight years. We have invested in all the key aspects. We established a strong segmented product proposition backed by cutting-edge digital channels with all the cross-sell products capability, including our recently launched AD1 remittance products and comprehensive wealth and insurance distribution platform. We are pan-India distribution with the inclusion of Fincare deposit branches in the South. In FY ’26, we plan to open around 70 to 80 new branches, mostly in the top cities and enable around 75 existing asset centers in district and headquarters to start taking deposits. Now moving on to our asset franchise. Credit demand was slower during the year and the banking systems credit growth dropped to 10.8% in FY ’25 from the highs of 16% last year. In this backdrop, we have performed well with our loan portfolio growing by 20% year-on-year, reaching INR115,000 crores, which is around 1.8 times of the system growth rate. Our growth was led by continued strong traction in our secured segments, which include retail secured assets and commercial banking and form 87% of our total loan book. Retail secured assets grew by 21% and commercial banking grew by 32% year-on-year. Both these businesses performed strongly in FY ’25 with continued strong growth and sound asset quality and we have a long growth runway as we expand these businesses to South India, utilizing Fincare touchpoint. Our retail secured asset book, which includes wheels, mortgages and gold loan as a vintage of over two decades and is a unique combination of scale, growth, high-yield and strong asset quality. We have a very strong right to win in this business with our deep distribution and underwriting expertise in informal segments in semi-urban and rural areas, strong operational processes and collection framework and robust people practices. In commercial banking, we have developed a full product suite and tech capability over the last eight to 10 years and both has scaled consistently with strong growth and asset quality. Commercial banking business is important from a liability franchise perspective as well and generated around INR12,000 crore of deposits. We are moving this business to Mumbai this year, which will provide an opportunity to stitch this business even more closely with our deposit franchise and other asset businesses. On the unsecured book front, our unsecured book degrew by 18% for the year. Microfinance segment continued to face industry-wide deleveraging and our MFI book declined by 17%. However, we believe we are nearing the end of this corrective cycle with continued improvement in collection efficiency, which touched 99.2% in March and 98.7% for the full-quarter. There could be some impact from guardrails coming into effect. However, the industry has been tightening for almost three to four quarters now and it’s a short tenure loan. So we expect positive momentum to continue in the next year. On the regulatory front, in guidelines around responsible lending practices and borrower indebtedness gaps are structurally positive for the industry and will increase industry discipline. Additionally, the CGSMU credit guarantee scheme provides a critical backstop for eligible NFI loans, enabling us to lend more confidently to the underserved segments whilst mitigating downside risk. Nearly 100% of our Q4 disbursements would be covered under the guarantee, taking our overall portfolio cover to 36% by the end of this year. Going-forward, we will aim to have most of our incremental disbursements covered under this scheme and coverage on the overall book will increase to more than 75%. This will greatly reduce volatility of credit costs. MFI remains an important book fulfilling our SNF obligations. While we will remain disciplined in growing this book, we see potential to cautiously scale as the operating environment improves. Our credit card book has gone through a period of recalibration in FY ’25, declining by 19%. We believe the corrective actions we have taken, tightening underwriting, rationalizing credit limits and sharper portfolio monitoring have laid the foundation for more sustainable growth. The segment offers strong product economics and cross-sell potential as we scale our deposit customer-base. We see the credit card business as a strategic lever for both free income and long-term customer stickiness and remain committed to building it sustainably over the medium-term. However, we need to be patient as it will take one to two years for our credit card franchise to turn-around. In terms of our strategic initiatives, we continue to stay committed to our strategy of building a retail-focused bank, primarily serving — serving self-employed and NSME customers with a largely fixed-rate book and a strong deposit franchise. We have consolidated all the businesses except credit card under the leadership of our Executive Director and CEO. Both commercial banking and MFI business will now operate out of Mumbai, which will become the base for all our key businesses lines over the next couple of years with Jaipur focusing more on back-end operation. We will continue to focus on branch expansion, attracting urban deposit customers and driving cross-sell. Tech and digital will continue to be an important driver, both as a channel as well as a team to drive productivity. Over the years, we have already built tech infra to process customer data available through various digital public infrastructure like account aggregator and. We are now working on adding AI layer on-top of our data lake to roll-out various use cases at-scale to drive workflows, automation and cross-sell. This will help drive long-term structure increase in efficiency. Finally, as you know, we have applied for Universal Banking license in September. Our application is under review by RBI. We remain in regular touch with the regulator and we are hopeful for a timely evaluation. In terms of profitability, we delivered profit-after-tax of INR2,106 crores for the year and ROA of 1.5% despite significantly higher credit costs driven by stress in MFI and credit card book. In Q4, we also made an accelerated provision of INR150 crores, primarily in unsecured to strengthen our provision coverage. This provisioning was over and above our provision policy and our coverage on unsecured businesses is now almost 100%. We also did a lot of work this year in improving our operating efficiency and our cost-income ratio reduced from 64% in FY ’24 to 57% in FY ’25. This was driven by tight control on overheads and marketing costs, lower credit card issuance volume and synergies from Fincare merger. As we look towards FY ’26, we see benefits of policy tailwinds with interest-rate cuts, better system liquidity and change in policy stands from neutral to accommodative. Credit growth outlook is also improving and stress in unsecured segment is reducing. However, we are in a new normal environment where post-COVID gains are over, GDP growth is likely to be range-bound and some sort of macro or geopolitical uncertainty could be business-as-usual. In this uncertain environment, we are watchful and not — and are not providing any specific guidance for FY ’26. That said, based on our performance in FY ’25, which was a really difficult year, we are confident of continuing to do well next year. Second-half of the year is likely to be stronger than the first as credit cost in unsecured supplies and cost of funds begin to move downwards. Over the medium-to-long term, we believe our franchise has the potential to sustainably deliver ROA of around 1.8% with business growth of 2 to 2.5 times of nominal GDP. In closing, FY ’25 was a tough year, but we stayed the course. We grew, we corrected when needed and we continued to strengthen the foundations of affordable bank. As we have said earlier, it takes about 10 years to build the bank. We have completed eight years and are confident that the foundations we are laying today will create a stronger and more sustainable AU tomorrow. As a young bank, our business model is well-established, our Our team is vintaged and stable, and we are present across the spectrum for our retail and MSME customers. In this uncertain macro-environment, we may have small hiccups here and there, but we will navigate these challenges and continue to do what is right in order to build a strong and sustainable forever banks. Sanjay, would you like to add anything?
Sanjay Agarwal — Managing Director and Chief Executive Officer
No, Gaurav, I think thank you, Gaurav, but good evening actually. So I think you have summarized well. I would only add that tough times negative did well. You know throughout the year last financial year, GDP was` under pressure, inflation was there, the broken momentum, liquidity issues, I would say very low business confidence and at AU, I would say, our deposits really done very well in terms of building up the liability, the cost around it, the opex around it. Only missing item would be around generality where our CASA would have dipped, but that is general industry phenomenon. I would say our secured retail asset also performed very well in terms of growth, in terms of ROA, in terms of credit cost, little elevated because of the whole not performing upon expectation. OpEx level and everything. I think it’s one of the book that we all are very proud of. Commercial banking again has gone to the size and scale now and they are also performing well in terms of every aspect. I would only say that macrofinance business, again, a right business, maybe at the wrong time, but it’s a very — I would say is fulfill our whole inclusive agenda of banking. It gives us SMS book. It has not negatively impacted us, but of course, we had a high expectation around that book that book should give a 3% to 4% ROA.
But I think it’s gone to its own cyclical cycle. And so this year, I would say quarter three, quarter-four, we are hoping that it will come back to their old numbers. Credit card is more — we have taken a lot of creative actions. We want to understand it more granually. We have hired a very senior guy to underwrite, to understand the portfolio and all those things. So maybe this year we want to go to that learning curve and — but we are very serious enough to build that whole unsecured portfolio, which is so for a high-yield kind of numbers. Other than that, integration is going very well. I would say we also want to focus on gold because Fincare has done that business very well over the years. So we want to capitalize on that business. And of course, recent RBI circular and the whole narrative around is that it favors bank. So you want to capitalize that whole positioning.
Our ROA is 1.53, which is maybe lesser than what we guided you last year, but we have done the accelerated provision of 10 bps. So somehow we want to be really — I don’t want to be very — I want to play around our balance sheet. We want to be very honest on our numbers so that it does not colored. We don’t want to get it colored by the whole aspect around it. So idea is to really communicate to you people very honestly that the spend base is on the NPA so that our provision coverage goes up to a 70% level and its NPA on this unsecured asset gets 100% covered, right? So we don’t want to do anything one-off, you know.
That’s the way we are thinking at AU. We want to treat everything — we want to communicate everything so that it remains a business-as-usual, right? So overall, very happy. I would only say that this year, this financial year looks more — I would say, more in control in the sense that interest-rate prices are now coming down. You know, credit cost, of course remain around 1.3 including the provisions, but should be now on a normalized basis this year, which we are thinking in the range of 75 bps to 85 bps. Next year, it may be on the higher side of the crowd, maybe 85 bps. So we’ll get advantage in our credit cost next year, but NIMs can be in pressure because still the real benefit of interest rates coming down will only get materialized maybe in-quarter three, quarter-four. So we have to handle that headwind around NIMs.
But overall, very happy to see the entire ROE tree. You know, our opex is in well control. Last year it was phenomena. And honestly, from 63 to 56, it’s not an easy. So we had a some kind of, I would say, low-hanging fruits, but we really want to build more distribution, we want to do some kind of marketing activity. So — but idea is to really keep it below 60%, you know, but we’ll see how we do it during the course, because we are all expecting that this financial year we should get promoted to Universal One, so there can be a special effort for marketing around that. So very — I would say, tough time played well.
You know this year we look more confident. So thank you so much, Gaurav. Over to you.
Prince Tiwari — Head of Investor Relations
Yeah. Yeah. Thank you, sir. Thank you, Gaurav, and thank you,. We can go — go to the Q&A now, Renej.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press and one on your touchstone 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’ll wait for a moment while the question queue assembles. The first question comes from the line of Renish with ICICIB. Please go-ahead.
Renish Bhuva
Yeah, hi, sir. Congrats on a good set of numbers during this challenging time. So sir, my first question is actually on the NIM, all right. So post the 50 basis-point of rate cut, we have already seen a large bank sort of rationalizing the car rates. So are we not planning to run-rates in-line with the system?
Sanjay Agarwal
So, hi, good evening. So we already have cut our on our term deposit rates by 25 bps. We already have rationalized our saving buckets, savings around buckets. So we are not giving now — we are the peak rate around is now 7% instead of 7.25% to further go down, we’ll require some more actions from some of some of our competitors because our CASA is below 30%. So — and we are not enjoying a space of around 40%, 45% in that — in that book. So it’s not easy for us to cut rate below 7% as of now, but let’s see how the entire industry plays their whole game in this year and then we’ll take the action around it.
Renish Bhuva
Okay. So I mean, is it fair to assume that we might use this scenario, I mean, in terms of affording higher rates to sort of accelerate the CASA acquisition rather than rationalizing rates. I mean, is that the strategy?
Sanjay Agarwal
No, no. I think at EU, we don’t want to be driven by lot many things which is one-off. We want to build-on our car and car basis we protect basis the brand, basis the services which we offer to our customers. So we haven’t played last year also to be honest because many banks are pricing their account better than us, but we played our — replayed our whole strategy that will play around more around acquisition, building the relationship, cross-selling it. So we want to be in that June than anything else.
Renish Bhuva
We got it. But again, just a follow-up on that. So maybe our cost of fund might not come down, but the 50 basis-point of reporate cut will eventually impact our floating-rate book in near-term, right? So broadly our NIM should sustain between 5.5% to 6% in FY ’26 or how should look at it from current level of.
Sanjay Agarwal
So if you ask me as of now, if you ask me as of now, the next year, the lever is on the credit cost, the challenge is on NIM, you know. So as of now, it’s so difficult to predict whether we’ll go down by-10 bps or 20 bps or 30 bps, you know, but there will be a challenge on the NIM. But you want to add-on something?
Prince Tiwari
Yeah. So just because this question is generally, I’m sure, Ranish, this is the top-of-the-line question for everyone. So maybe I just wanted to take to put some more context into it. So Ranish, if you see our Q4 margins, now primarily like now on the — as far as the Components of the margins are concerned, our cost of fund went up by about 7 basis-points, right? We started the quarter at about 706 and we ended-up at about 714 on an average from Q3 to Q4. But there was also an impact of number of, right? So to that extent, that got negated in this particular quarter. We didn’t really see any impact from the cost of funds, right? But there is also such a rap in the cost of fund side. But on the asset side, we did have a mix change that’s been going on even that there have been — our unsecured has gone down by 17% in the full-year and 10% in the quarter. And MFI is typically a higher-yielding asset. So due to that mix change, we had 5 to 6 basis-points of impact,
Rajeev Yadav
Right?
Prince Tiwari
As far as the rate cuts on the asset side, on the mix because of the NIM side, right? As far as the rate cut impact is concerned, as you rightly said, 30% of the book broadly is a variable-rate book. That impact we haven’t seen as yet because typically it takes about a quarter for the entire impact to come through, so maybe one basis-point, but otherwise, so that’s the breakup of the NIM for Q4. So if you see, we have gone down from about 5.85% to 5.79, right? So now as far as next quarter is concerned, again or next financial year is concerned, again, the same factors are going to play-out. So 30% variable-rate book does get impacted in terms of repricing of the repo rate. Currently 50 basis-point cut if something more happens in higher impact, right? As far as cost of funds are concerned, we have taken a cut on 16th of April, 25 basis-points as said on savings as well as on the term deposits, right? And you know that we are a price-taker in that business given our small finance tax, we are not a universal bank. So to that extent, we obviously have to depend on how the market leaders are doing. Given that we got some space, we have brought down our peak period rate from 8% to 775% and we have brought down our peak saving rates from seven quarter to 7%, right?
Going-forward, we’ll have to see how the market reacts in places that we can take a call. So to summarize, one, is there a yield pressure, the answer is yes, right? Now it also depends on how quickly we can turn-around on the NFI side on how the business mix changes on the positive side going-forward and how quickly the flow-through happens through the deposits on the rate cut side, right? When the rates started going up about three years back, we had guided that it takes about 12 to 15 months for the full impact to pass-through. Same way in this cycle also — in this cycle also, typically you will see maybe six to nine months when you start seeing the impact, as said, Q3, Q4 and for the full impact to go through, obviously, we take 12 to 15 months. So that’s the broad story on NIM. We don’t want to put a number out there because a lot of factors are — as I said, it will also depend on how quickly the rates get transmitted through the system on the deposits.
Rajeev Yadav
Got it. So just — I mean just a broad calculation, let’s say 30% of variable book that’s repriced of 50 basis-points lower, so we will have 15 basis-point of impact and we have already cut our by 25 basis-points. So in a way, we have already that. So then ideally first-half ’26, there should not be any major listening impact. Am I missing anything here?
Prince Tiwari
So it’s not that direct calculation, Renesh. Obviously, there is an impact of the daily averages, right, how the portfolio is moving, how the deposit is priced. So we are not — I mean, we have — as we said in the opening remarks also, we are not putting out a guidance because there are variables. We have told you all the constructs of the NIM, right? Now it’s up to you for. We’ll come back and report to you as we have more data points.
Renish Bhuva
Okay. Got it. Got it. And just a clarification. So Sanjesh, sir has mentioned about credit cost remaining at 75 to 85 basis-points. So that number is for 26 or 27.
Prince Tiwari
So that’s the long-term average that we are talking about that as a bank, we want to position ourselves given the change in the asset mix. That 75 to 85 basis-points is on the total average assets, right? It’s not on loans, it’s on total average assets, right, 75 basis-points to 85 basis-points. And as we said, that’s a long-term average for next financial year, we are expecting that we might be on the higher-end of that curve, given that there is some more credit cost has to flow-through on the unsecured business in the first-half.
Renish Bhuva
So what is the corresponding number for this year?
Sanjay Agarwal
1.3,
Prince Tiwari
1.3,
Renish Bhuva
Okay. Got it. So basically, we are expecting maybe 30 to 40 basis-point of improvement in credit cost in FY ’26 even
Sanjay Agarwal
In the — yeah, on a ROET, on ROT yes.
Renish Bhuva
Okay, okay. Thank you and best of luck, sir.
Prince Tiwari
Thank you. Thanks, Anish.
Operator
Thank next question comes from the line of Kunal Shah, Citigroup. Please go-ahead.
Kunal Shah
Yeah, hi. Thanks for taking the question. So firstly, sorry, again on the credit cost front. So when we look at the accelerated provisioning, that seems to have been done largely towards the GNPAs and making 100% provisioning on the unsecured. But when we look at it overall in terms of the SMA pool as well as when you indicated that 2.0 guardrail is also getting implemented and there is a proportion of book which is linked to it. So would that mean that credit cost over next couple of quarters will still continue to be elevated? I think you made that comment in Q4, post the Q3 earnings, now that credit cost will be elevated in MFI for almost like three-odd quarters. So any change in that guidance post this accelerated provisioning?
Sanjay Agarwal
So Rajiv will tell us Kunal, so the deputy CEO. I think we can comment on this.
Rajeev Yadav
So Kunal, so fundamentally, no near change. As I had said last-time, we expected that the Q3 and Q4 of last year would be the highest-level of credit cost as a quarter basis and then they will gradually decline from a Q1 to a Q2 perspective. Obviously, some degree of accelerated provision that we have taken will be helpful in those quarters. But fundamentally, MFI will take two more quarters to reach a near normalcy as we would see. And I think that should pretty much come from a credit cost perspective in Q3 to Q4 kind of a timeframe. Operationally, what is the one that we drive as a team is we saw that Q2 and Q3 were the worst quarters operationally and Q4 as we had expected in a typical cycle of microfinance, which typically goes from nine to 12 months, we saw Q4 improving.
The only delta in the Q4 quarter was Karnata, which happened out of our sequence. First-nine months, Karnatka was perfect. Even that has been handled well and pretty much is now on its path to normalcy. So as you can see from data, we had a very reasonable quarter-four and with March being exceptional and we believe that quarter one and quarter two operation will be stronger. And from a credit cost perspective, we should see that in Q3 and Q4 of this financial year.
Sanjay Agarwal
So Kunal, just to add-on here.
Kunal Shah
Yeah.
Sanjay Agarwal
Because you know, what we have done this year is around 1.3 kind of credit cost on total asset and we are expecting that our credit cost can be around 85 bps for next year. It’s basis that first two quarters will have an elevated cost on macro finance and credit card, but quarter three, quarter-four, we are expecting strong pullback and that is why the overall cost of credit has gone down, we should go down for the year, right? And we expect our rebook, the secured asset book, commercial banking largely in the same range, but better than this year better than last year, right?
Kunal Shah
Yeah. Got it, got it. So when we look at it for full-year, maybe the MFI credit cost was almost 7.75 and credit card was almost 11%. And now we know that SMA pool is 3.7, maybe almost like say 70 basis-points improvement compared to that of Q3, but this SMA pool will still flow-through. And if we look at maybe the collection efficiency from the SMA bucket, what is the kind of slippage and what is the — if we have to particularly touch upon these two particular segments, not the overall credit cost, then how would it pan-out maybe compared to 7.75% and 11%
Gaurav Jain
Look, I think we have collection efficiency improving across the buckets, right? And as Rajesh je mentioned, March was particularly strong. So we are expecting this positive momentum to continue — continue in the New Years as well, right? So depending on where we end-up with that sort of — that will determine the trajectory of improvement in maybe sort of Q2 — Q2 onwards.
Sanjay Agarwal
Sure. Yeah., just to clarity, credit card like you are seeing around 11% — 12.86%, right, for this year, it should be around 6% to 7% for next year and MFI also should be around 6.5%
Gaurav Jain
. Right. And just to add to that, right, another variable in the mix is the percentage of book which is covered under CGFMU, right? So we would probably have about 25% 36% of the book as on March already under CGFMU with all of the Q4 disbursements being covered under CGFMU, right? So this percentage will only increase going-forward and we expect more than 75% 80% of the book to be covered under CGFMU. So as I mentioned earlier in my opening remarks, this will — this will reduce the volatility around credit cost. So where as we would incur some cost for the scheme, but we will benefit in that time by the downside protection afforded by the scheme.
Kunal Shah
Okay. Got it. Got it. And one more thing. If I can squeeze in. Yeah. Sorry, yeah.
Sanjay Agarwal
You go-ahead,. Go-ahead.
Kunal Shah
Yeah. Sir, the other one was on the universal license. You indicated that you are in communication with the regulator. So what is the kind of timeline which we can draw? Obviously, now the company said they are evaluating. So when can we expect the Universal Bank license? I would say this calendar year this calendar year.
Sanjay Agarwal
Yeah.
Kunal Shah
Okay. Okay. Got it.
Sanjay Agarwal
Decisions would happen, right? Decisions would happen in this calendar year.
Kunal Shah
Yeah. Okay, got it. Got it. Thanks. Thanks a lot. Yeah, and all the best, yeah.
Sanjay Agarwal
Thanks enough.
Operator
Thank you. Next question comes from the line of Piran Engineer with CLSA. Please go-ahead.
Piran Engineer
Yeah, hi, team. Congrats on the performance in this turbulent environment. Just two questions from my end. Firstly, out of this INR894 crores slippage this quarter, how much would be from the wheels portfolio? And what was it versus, say, last quarter?
Prince Tiwari
Okay. So we give — we don’t give individually portfolio-wide data. But having said that, it like we have said in the presentations as well that Q4 was a strong quarter and follow the historical trend. So every business saw reductions in slippages, you know, barring maybe one or two on the unsecured side. So yeah, so we also definitely saw a very strong 4th-quarter.
Piran Engineer
Okay. Okay. And also just a clarification in the initial comments, opening comments, Gaurav said it will take one to two years for the credit card franchise to turn-around. So by that you mean breakeven or what exactly does he mean by that?
Sanjay Agarwal
Yeah, no, no. Of course, I think the expectation around our credit card or maybe unsecured business is to generate at least maybe 4% to 5% ROA, right? So — and the first level to get to that to have the breakeven. So I strongly expect to breakeven by next year, which is the ’23, ’27 and from ’27 onwards, it will start giving us some money, of course, not to have a 4%, 5% ROA in ’27, ’28, but at least give us some kind of positive profit, you know from that year onwards.
Operator
Thank you. MR. Engineer, please rejoin the queue for more questions. Next question comes from the line of Pritesh Kham with DAM Capital Advisors. Please go-ahead.
Pritesh Bumb
Yeah, hi. Hi, good evening team, sir. Two, three questions. One is on the belt deposits. What I see as a trend is that we have grown strongly on deposit despite CD ratio being comfortable. Any strategic intent there?
Sanjay Agarwal
Not really. I think the whole-system was like this. You know the car and car remain under pressure, right? And we also have grown our retail deposits, right. But I think the heavy-lifting has been done through wholesale deposits. So I think our ALM, our CD ratio, LCR all remain very strong. So nothing specific. I think it was the flow of business..
Pritesh Bumb
See, also the follow-up question was on, say, example REG, we have grown about 16% quarter-on-quarter. It looks like that we’ve done wholesale borrowing in terms of deposits and led to REG where there is no slightly lower spread. So just I’m just trying to think why would you grow a little higher in some of these businesses where the market is so tight.
Sanjay Agarwal
No, no, my friend, REG business is only 3% of our overall assets. No, I know, I know, but this overall is just 3% of our overall asset, right? So we never had an intention to grow REG, you know out-of-the context side and that business is doing well. If you ask me, the real-estate is doing well. Our home loan book is also going to perform well. So it’s a linkage kind of thing for us. And it’s a very granular if we don’t do INR100 crore, INR200 crore kind of funding, right? It is very maybe around INR40 crores INR50 crore kind of funding. So we are doing some last 10 years. So it’s very well-established franchise and we just want to be like this. So I think the correlation between wholesale deposit and wholesale lending, I don’t think is that way.
Operator
Thank you. MR. Bam, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself for two questions. Next question comes from the line of Anand Swaminathan with Bank of America. Please go-ahead.
Anand Swaminathan
Thank you. I have couple of questions. The first question, when you get your Universal Bank license, does this guidance around 2% to 2.5%, the system growth still hold? Why ask this is none of the other universal banks are growing beyond 20% 21%? There’s no doubt about your capacity to grow. Just wanted to understand will there be any self-imposed limit or regulator is okay with you growing 25% plus even after becoming a universal bank? And number two, when do you next expect to raise capital? Would this be discussed financial year or next financial year? Just wanted some clarity on that. Thank you.
Sanjay Agarwal
So Anand, there is nothing as such rule or compulsion from anybody you know to grow in that kind of numbers, neither the regulator has stopped us. It is bases on the — as of now, positioning of us that we are around INR1.5 lakh crore of assets, you know so we are not too small, not too big for next two, three years, we can grow in the range of 25%, right, because — so it’s not related to universal to honest. It’s related to our size. So once we reach maybe around — maybe around INR3 lakh crore or INR4 lakh crores, we might say that we want to grow in the range of 20%, right?
So I think it depends on the size and the opportunity. I personally believe that last three years remained very tough for all of us, you know. Now the entire narrative from the regulators, from the Government of India, entire — I know there are short-term uncertainties, but I see lot many things coming back to Indian economy in next maybe 18 to 24-month period. We are well and we have built-up our franchise and India, you know, our CD ratio and everything has remained so good, honestly. So in this time, if opportunity is there and it’s under our entire matrices, then we will want to grow in the level of maybe 20% 25%.
That’s our — that’s our, I would say endurance, right? This year also we told you that we want to go-around 25%, but if market never permitted us, it just has grown 20%, right? So — but our capacity is there, capability is there, approach is there, product is there. So it just depends how the market behaves. So that is our overall strategy. So it’s nothing that somebody is pushing us or there is an agenda to grow like this. So we will always grow senstably and reasonably.
Gaurav Jain
And Anand, just to add, right, so the 2 to 2.5 times is not that of system credit growth, that’s of the nominal GDP growth.
Anand Swaminathan
Surely got it. Yes. No, thanks, Sanjay. I appreciate the clarification. Just wanted to make it clear and I think it helps the investor base as well to fully appreciate kind of there are no restrictions in your capacity that is driving growth. And that’s why.
Sanjay Agarwal
And for the capital raise, Anand, we want to — to I think want to relate that with our universal license decision.
Anand Swaminathan
So it will be after bank license you get that. That’s when you will decide that that’s what you mean.
Sanjay Agarwal
That’s our that’s our desire.
Anand Swaminathan
Okay, fantastic. Sandee, just in this context, since you’re talking about the macro as well, what is the underground feedback you’re feeling because you speak the most are on-the-ground to the business community And the underlying macro in India is weak as well and there’s a lot of uncertainty with global exports, tariffs, etc. What are you hearing from the ground? What is the feedback you’re seeing? How do you expect again for the business to be made in the next few quarters will help us kind of kind of how things are. Thank you.
Sanjay Agarwal
So Anand, it’s mix, you know, it’s mixed feeling. If you ask me things has looking good from last maybe two months once — and I’ll give you reasons. One, I think regulator has become more, I think more growth-oriented, their body language, generation has helped us a lot. Their action is speaking louder than what they were telling. You can see the LCR norms, you can see the entire liquidity positioning. You can see that they are saying that growth has to come back. The Government of India is also pushing lot many things. I think in last March, their capex has gone up. So I think overall, I would say things are — has coming now to normal level, first of all.
Second, I think the — anything which we were expecting that India will shine and India will grow in the range of 7.5%, 8%, it is not there. So people has now become more rational. People has become more cautious, right? And in this time whoever want to build business is sure about the entire spectrum, right? And so that’s why in our opening remarks, Gaurav were very categorically commented that any kind of Iphoria has gone away. And when Iphoria goes away, the realistic is there, right. Reality is there. So in my opinion, in this sense, we are more safe because we know the reality. So that is coming up. I would say some sectors like real-estate, the tourism, the hospitality, you know, I would say the entire tech, tech-related businesses has been phenomenally well, right? So now as a banker, we need to figure out our zone, our — our positionings are where we want to be in, right, and build our business. So it’s not that it’s very gloomy or nothing is happening, but neither is that it’s very growing or it’s very rosy, right?
So we need to play our inning well. And so overall, I’m optimistic then, you know looking for some excuses and all those things. So that’s my sense. You want to add-on something of you? Otherwise, that’s my sense Anand.
Operator
Thank you. MR., please rejoin the queue for more questions. Next question comes from the line of Nidhesh Jain with Investec. Please go-ahead. MR. Jain, please go-ahead with your question.
Nidhesh Jain
Hello, am I audible?
Sanjay Agarwal
Yeah, hey, good evening.
Nidhesh Jain
Hi, hi, sir. Good evening. Sir, first question is on credit card. What all changes we have made on the credit card in last 12 months and when should we start seeing increase in new credit card sourcing?
Sanjay Agarwal
Yeah. So with this, we have taken a taken complete post correction. So as we commented earlier that we were doing digital underwriting to — for lending the credit card. So now we have put in lot any gated condition to understand customer better in the sense that what is his income level, what is his identity, address kind of stability and all those things. We also have not allowing customer to misuse the card on many of the expense like rent or utility and all those things. So we have — so that also have not allowed our customers — that’s why our spend has come down from INR1,900 or 1900 crore level per month-to now INR1,000 crore level per month, right. And we have also brought in this specialized credit guy from the industry to help us to build underwriting and the portfolio there we also have not want to source through the DSC channels and all those things. We want to really build more on our ETB, right?
So existing bank customers. So these are things we have already done it. That is why the issuance has come down from 40,000 to 45,000 labels now 10,000 car level. But you will see that issuance coming up to the — maybe around 20,000 cards a month maybe post-September, right. So we want to take another two quarters to really make it completely repair, right, and then build it.
Nidhesh Jain
So second question is on cost-to-income. So last year, we have done phenomenal job on cost-to-income and probably we would have curtailed a lot of cost, we would not have invested the way we were investing in the past. So how do you see cost-to-income panning out over from a medium-term perspective? And do you see that when we will get leeway from a P&L, you will start investing for future in terms of branding, etc, the way we were doing in the past.
Sanjay Agarwal
So, largely, we haven’t stopped any kind of investment to be honest. I would only highlight three key items. One, maybe marketing costs. So we deliberately hold it because we want to now tied-up with our universal license in days so that it helps us there. Second, expansion, last year, we got the expansion from FinCare, so we want to build more businesses through that distribution. And third, of course, tech. So we have taken some pause in our tech expansion so that we really understand because not many things are coming intact on a daily basis. So other than this three, we haven’t have any kind of specific, I would say, say actions to really manage our costs. Rather we were very — I would say this year — this year onwards, that’s why I was so hopeful to say you that my cost-to-income might not be around 57% this year, but should not go above 60% also because we want to build more distribution.
We want to do some kind of tax — tax investments so that we become — we remain future-ready, right? So other than that, I think on marketing and again will be tied-up with our universal license June. So yeah.
Operator
Thank you. MR. Jain, please rejoin the queue for more questions. Next question comes from the line of Nitin Agarwal with Motilal Oswal Financial Services Limited. Please go-ahead.
Nitin Aggarwal
Yeah, hi, good evening, everyone. I have few questions, sir. Yeah, hi, sir. So a few questions. Firstly, on the ROA guidance that we have for FY ’27, so, you gave this guidance like last year and we had a very turbulent FY ’25 and there’ll be some impact of new guardrail in as you mentioned. So how comfortable do you feel to meet this guidance? Do you foresee any risk to this or you think that the risks are evenly poised. So what’s your assessment on that?
Sanjay Agarwal
I mean, good question. So last financial year, which is now ’24, ’25, we struggled with both the credit cost and the NIM. Still, I would say our performance is as per the guidance. We have accelerated our provisions by-10 bps, which was much required. So of course, lending at 1.53 instead of 1.6. So we really performed last year also as per the guidance in my opinion. Second, this financial year, I believe credit cost will be more in control, rather we can have challenge on NIM, right. But I think you know that interest-rate cycles are now coming down. We are well-prepared in terms of anticipating the Indian economy and its effect, you know.
So next year, which is, 26 ’27, I’m pretty sure that whatever we have guided you in a year back should get utilized. But I don’t want to again hold myself to around that guidance. It’s our end right. But these are things because if you see our ROE — ROA sheet, we are around 5.7, 5.8 this year too. We are around — our other income is around 1.8. It will go further up because we are spending our cross-sellability through other product lines. Our cost-income is around 4.25. It might have — might stable here, right, might not go down for a couple of years. But I’m seeing huge you know again I would say reduction in my credit cost from 1.3 to 0.85, 0.9 next year. It’s further going down 0.75 maybe in ’23 ’27. So I think put all together, if you put all the maps in-place, we are above 1.8, right? So — and of course, now there will be a market challenges, there would be many things which may be unknowns, which we do not know as of now , but we need to play our innings, right? And — but I think you would appreciate that whether the bank has the capability, bank is on the right track, you know, bank is not under any kind of pressures or any kind of issue, which we are not able to solve. It’s our business numbers, which tend this here and there, but we largely remain on course. And then of course, the universal license.
Nitin Aggarwal
Right. And so, this second question is any color likes to what would our LCR be factoring in the — like a revised LCR guidelines that came in yesterday? I’m asking because AU Bank is relatively lower and should like any benefit on that should be very much the
Sanjay Agarwal
New guideline, I think we haven’t done our working, but it is close to 120. Sorry, want to get around?
Prince Tiwari
Yeah. So these guidelines are better than drop guidelines and I think we are just evaluating, but it should be neutral to positive impact on us.
Sanjay Agarwal
But we are fine with that LCR because again, we are doing our business, you know many of our banks know their own risk management. So as for our risk management, anything around 115 120 is good enough for us. So for me, Nitin, because we need to build our own risk management around that, right? But we are not expecting any negative impact from the guidelines, right. Right. But the entire LCR expectation from AU bank is around lower what market operate side. Yeah.
Operator
Thank you. MR. Agarwal, please rejoin the queue for more questions. Next question comes from the line of Rohan with Equirus Securities. Please go-ahead.
Rohan Mandora
Good evening, sir. Thanks for the opportunity. Sir, firstly, the 30 basis-point Q-on-Q decline in incremental yields that we’ve seen. So did it have any component of year-end discounts or in the secured business or is it purely a function of a change in loan mix
Prince Tiwari
In-quarter 1/4? Or that’s on the disbursement, right, Rohan?
Rohan Mandora
Yes, on the. Yes, on the disbursement.
Prince Tiwari
That’s more a function of mix, nothing else. There is obviously some amount of year-ending on the secured side. So there might be a slight element of that, but I think it’s largely a function of mix.
Rohan Mandora
Sure. Okay. Secondly, on the wheels, the growth that we’ve seen in this quarter. I just want to understand how did the growth shape up across sub-segments on wheels?
Prince Tiwari
So I think this quarter we saw some strong offtake on the tractor side, given the — seasonally the rains has been good. So I think this quarter the tractor definitely outperformed. Even on the used vehicle segment side, I think we — we have picked-up. So yeah, I think that everything else broadly were there. New car sales were a bit flattish, but I think on the used side, on the tractor side, two-wheeler we have gone deliberately slow, so we haven’t really pushed that product.
Rohan Mandora
Sure.,
Prince Tiwari
You want to add-in.
Sanjay Agarwal
So overall, Q4 was flat, but the second-half of March, there were some traction towards vehicles as we saw in the industry. So that has contributed. Otherwise Q4, as such, what we expect from Q4 as a buoyancy was not there, it was flattish and we saw the all sales numbers also, but I think second-half of March was some was there. Is that the
Rohan Mandora
Lastly on Slide 11, the credit cost that we are given segment-wise, what is the denominator used here because if you have to compare it across the last three, four presentation that you’ve given, how should we look at that number?
Prince Tiwari
So, everywhere we have used the gross loan portfolio or the AUM, which you can — the average of that, the average AUM for the period, right,
Rohan Mandora
For the quarter.
Prince Tiwari
For the quarter or for the year and the AUM or the GLP gross loan portfolio, you can find on Slide number 38,
Rohan Mandora
Right? So for FY ’25 when you’re giving this as 11% for credit cards or 7.75% for MFI, so it would be average of March versus March or December versus March? Just understand.
Prince Tiwari
This is for the full-year since this is for the full-year, right? This credit cost is for the full-year. So you would have taken the average of all the 12 months.
Rohan Mandora
Okay, fine. Sure. Thanks. This is all from my end.
Prince Tiwari
Thanks, John.
Operator
Thank you. Next question comes from the line of with JPMorgan. Please go-ahead.
Pranuj Shah
Hi, thank you for taking my question. So a couple of ones. So one is at what level will you be comfortable in growing your MFI book in-line with your overall loan growth? Because if you’re guiding for 20% to 25% perhaps loan growth, then starting from second-half of FY ’26, could we see MFI book growth materially pick-up for the share to increase from the current 6% level? And also in that context, in FY ’26 in particular, how will you look to manage your PSL compliance on SMF and the weaker section? Yeah. So that’s the first question. And second one is that even with you doing CGSMU across most of the incremental disbursals, does that initial guidance that you had said that you would want to maintain a 3% coverage on your overall MFI book still hold-on incremental disbursals? Thank you.
Sanjay Agarwal
I think very good question. So I think we will continue to have 3% credit cost provision irrespective of our coverage or under this government schemes. But by this year end, we expect 80% of our book to be covered under the scheme. So I think by what just Gaurav commented that we want to protect our future from any downside risk from the credit cost of this business and that is why we are more bullish now that this is not a very — I would say it’s a very important strategic change, which we have brought in the macro finance book. So that is there. But overall, we have already said that unsecured piece won’t be going above 15% and in that, credit and MFI will not go about 10%. So we want to be in that numbers from maybe the next couple of years.
Prince Tiwari
Yeah. And, if you see the secured business, even in this year has grown by 23%, right? The commercial doing 30% plus and retail secured doing about, 21% 22%. So honestly, even if the other businesses, the unsecured businesses, which you mentioned, they were down 17%. If they are just neutral also, we should broadly start scaling up, right? So we don’t really need to be very aggressive on those businesses to achieve a 20% 25% kind of range.
Pranuj Shah
Chris, just a follow-up on that. You are saying that your overall loan growth remains in that 12% to 25% range in MFI, I’m assuming gradually goes from 6% to 10%, then you’re saying that perhaps after second-half, like if you see the system stabilize, you are not against growing MFI credit card book at a 25% 30% range also given the system.
Sanjay Agarwal
Yes, but with the cap of overall 10% of our overall book on MFI, maybe another 5% on unsecured, that’s the overall cap.
Prince Tiwari
Yeah. And it’s a long runway, Pranuj, because MFI currently is about sub 6%, right, and the other businesses are also growing at about 25% 20% 25%. So for MFI to jump from 6% to 10%, they’ll have to grow at like 40%, 50% clip, right, which I’m not really sure is something that we are envisaging. So I think the growth on the MFI will be very measured, if I can say that way.
Pranuj Shah
Okay, got it. Understood. And the PSL requirements is this provide some
Prince Tiwari
We are compliance this year, we are compliant this year. So FY ’25, we are good on all our sub-segments as well as on the overall PSL. For next financial year, it will be more a function of how the disbursements pick-up and how the book behaves.
Pranuj Shah
So how much percentage this year SMF has been done by book?
Sanjay Agarwal
50%. Yeah. So 50% our SMA book obligation has been done by microfinance book.
Pranuj Shah
Okay, got it. Understood. Thanks a lot.
Operator
Thank you. Next question comes from the line of Rahul Jain with Goldman Sachs. Please go-ahead.
Rahul Jain
Hi, thank you. Can you hear him?
Sanjay Agarwal
Yeah. Yeah, hi,.
Rahul Jain
Yeah, hi, and team. I think congratulations, it’s been a tough year for you all. And despite that numbers have been decent, just had a few questions. Maybe just to start with the credit cards, the loan-loss provision guidance, which you said this is through some residual pain that you’ll clean-up in the first-half. But in this quarter, you already made 150% — sorry, INR150 crores of provisions. So how much more is left or maybe if you can just share more color on SMA-1 or SMA-2 book in the credit card space. So that’s one. Second is, I’ve had another question on NIMs, but let’s just discuss this first before I move to the second question.
Sanjay Agarwal
Yeah. So Rahul, as you — like you know, this year, due to the accelerated provision on credit card book, it is around 12.5% kind of credit cost and I expect credit cost of credit card on a — on a very normalized basis should be in the range of 5% to 6%. Next year, this financial year ’26, ’25, ’26, I expect my credit cost on credit card should be around in the range of 6% to 7%. So the idea is to bring my credit cost — credit cost assumption on a book level on a — now on a normalized basis from this year onwards, you know. So that’s why we have done this accelerated provision, so that the normalized credit cost would be there on our balance sheet from this year onwards. So I don’t think that any specific provision is required from here onwards to really our — any additional credit card costs.
Rahul Jain
So the first-half would mainly be — any elevated credit cost that might be there would mainly be because of the MFI and lower recoveries in your secured retail asset business, which is seasonal in major. Is that a fair assumption?
Sanjay Agarwal
Yes. Yes, yes, sir. So okay. I think already still are very early days, honestly, we are just talking on 22nd April, you know. So March has been very promising in all aspect, be it recoveries and around secured assets or be recovery around macrofinance or credit cards. We as a team has pulled up not many good things in March, you know. So still to — I won’t able to comment that how the quarter one, quarter two can be, but an overall yearly basis, Rahul, I strongly believe that our credit cost will be substantially lower what we have done in this whole financial year, you know
Rahul Jain
Got it. Makes sense. And accordingly, the slippages that we had in this quarter, can we say that we are now at the peak and therefore the walk is behind us and even in the first-half itself, we should start seeing the improvement because the collection efficiency in the MFR business has almost normalized as in the presentation. Credit cards is getting to the normalized run-rate. So fair to assume that slippages have peaked in this quarter,
Prince Tiwari
Again, Rahul, honestly, I’d love to say that and we’d all want to. But as we said, it’s a Q4 right now and there is definitely always a year-ending phenomena that plays out. And as you rightly said earlier in your question that Q1, Q2 typically has a seasonal impact. So honestly, I would like to resolve my comments on that and just meet it out. But definitely, I think in all the businesses, we have seen an improvement in slippages and hopefully, you know, we can come back to you. If there is no major heat wave or other things, then hopefully we should be there, but let’s just wait out for Q1, Q2. Some seasonality always plays out. I don’t want to really comment on it
Rahul Jain
Makes sense. And the third question is on the margins. So your wholesale deposits and your floating portfolio by and large is similar in terms of the proportion of your respected portfolios. We’ve seen a sharp reduction in the wholesale rates in the market. So your commentary still remains the same on margins that first-half will be — will be under pressure because of the EBLR linked portfolio, et-cetera. But this is similar to what we had heard from you all-in the 4th-quarter questions when the RBI has taken some measures to bring the rates down in the wholesale market. So what’s making us so cautious that the margins will still remain under pressure in the first-half. Technically, the pressure should be easier or lower after the RBI measures and not the same as in the fourth — in the 3rd-quarter, I’m sorry.
Prince Tiwari
Also as I said in the first question, primarily, there was an impact of higher-cost of fund, the cost of funds moved by about 7 basis-points during the quarter. But as I said, that got negated for this quarter because of the number of days, right? So there was a definitely offsetting factor there. That might not be available in the next quarter. So to that extent, there’ll be — that impact is still to play-out and that’s where we are cautious. But otherwise, I completely agree with you that given the steps that the regulators have taken, the kind of liquidity measures that has been infused and the fact that we have already taken impact on both the savings as well as on the term deposits and hopefully wholesale prices — wholesale deposits start pricing much lower.
We are confident or we are hopeful that as we progress further into the year, we’ll be in a much better position, given that 70% of our asset side is still fixed-rate and typically liabilities gets priced earlier. But as I said, we still — I would like to reserve again the guidance to see that how the flow-through happens.
Sorry, I just have a correction right. On the credit card stuff, right, so next year, you know, our credit cost is going to be elevated in the first-half. And in the second-half, it will probably start approaching towards most — more normalized level that ji mentioned of 6% to 7%, right? But as a result, my full-year credit cost on credit card will remain elevated above a normalized level.
Operator
Thank you. Thank you. MS. Jain, please rejoin the queue for more questions. Next question comes from the line of Ashlesh Sanjay with Kotak Securities. Please go-ahead.
Ashlesh Sonje
Hi, team. Good evening. Sir, first question is on asset quality. Last quarter, I remember you had indicated some elevated slippages in the small transporter segment within vehicle finance, especially in SCV and LCV. Wanted to check with you how is the situation there in that portfolio as of now? And secondly, if you can share some color on collections in the microfinance portfolio in the month of April, whether that 99.2% number in March has gone down to, let’s say, 96% 97% or it is still holding up, let’s say around about 98%
Unidentified Speaker
Yeah, I’m here. So first of all, for the small transporters, small commercial vehicles, you can say that loading vehicle, the situation has improved. The collection has improved throughout the Q4 and more of was a good collections and good efficiency there.
Prince Tiwari
And even on the MFI side, whatever early trends that we have seen, I think things are holding up, but Rajeev, do you want to comment on?
Rajeev Yadav
So Ashlesh, obviously, March is always one of the strongest months. But as you know, this was coming out of a credit cycle, so it’s not necessarily meaning that this is a normalized state. So I am fairly confident that Q1 will be better in Q4, you have the breakup of all the numbers across quarters and Q4 was 98.7%. So I expect clearly Q1 to be better and — and we are tracking April quite well at this point of time even to the earlier months.
Ashlesh Sonje
Thank you. Sir, if I can just squeeze in one more question. On the SAR rate book, can you just break-out what proportion of the SAR book is — is it is with depositors who have balances below 1 lakh, below INR3 lakh, below INR5 lakh, if you can do that? Thanks.
Sanjay Agarwal
I hope this is too operational so
Prince Tiwari
Actually we can we can you know you can write to us and we can respond to this, because this is we don’t have this data breakup at time.
Ashlesh Sonje
Okay, sure, thanks a lot.
Sanjay Agarwal
Yeah, thank you you.
Operator
Thank you. Next question comes from the line of Sailesh Kanani with Centrum Broking. Please go-ahead.
Shailesh kanani
Good morning, everyone. Thanks for the opportunity. Sir, my question is with respect to MFI. First of all, we have around 16% of our book, which is impacted by the guard rails. So in cases the customers are regular and. Then load product in the industry is moving towards that. What is our view on that?
Prince Tiwari
, you are not very clear or audible. Can you just repeat the question?
Shailesh kanani
Sure. So my question is, is it better now?
Prince Tiwari
Yes.
Shailesh kanani
Hello.
Prince Tiwari
Yeah, yes, yes.
Shailesh kanani
Yeah. So approximately 16% of portfolio is impacted by guardrails, right? So in cases where these customers are kind of regular in repayments, are we considering transitioning them to an individual loan product because incrementally industry is also seeing a momentum towards that. So how are we viewing that?
Gaurav Jain
So Sheilish, individual loans is a — is something which we have to strategically debate and come back and see whether we sort of want to migrate to that as a general microfinance proposition because it’s not just about the impacted customer, it’s not a broader construct. I would just say that we are working with our customers . We have — these customers have been well-educated over the last one or two quarters for the guardrails which have been launched and what we were transitioning to. My personal belief is that the people who are still good with us and not delinquent or NPA, you know, even if they are impacted, a lot of them are in — are having capability or conviction to repay their loans. So generally, we’re not seeing at least as we are tracking April, an impact on the industry guardrail changes at this point of time.
Prince Tiwari
Yeah, just to clarify further on that, Shalesh, we don’t do — we only do joint lending JLG model today. We don’t do individual models on the microfinance portfolio.
Shailesh kanani
Yeah. Yeah, I’m over of that. I was just thinking — I was wondering if we are considering that as a product.
Prince Tiwari
Not just to react to the situation, but improving business model thinking and as obviously, there is a learning and improvement that we need to make out of this over leverage cycle. So the model will evolve, but I wouldn’t say as a reaction to a guardrail impacted customer. So — and microfinance models typically evolve over a few years, they don’t they don’t — they’re not reactive to a situation because ultimately there are a large number of workforce customers and there’s a lot of signs behind what has been built over the last two decades. So I would say some evolution would happen and we’ll work that through over in this financial year.
Operator
Thank you. MR. Kanani, please rejoin the queue for more questions. Next question comes from the line of Pritesh Bham with DAM Capital Advisors. Please go-ahead.
Pritesh Bumb
Hello, can you hear me?
Prince Tiwari
Yeah, Pritesh.
Pritesh Bumb
Yeah. So one question was on the home loan NPA side. So that has been inching up a bit. Now it is more than 1%. Anything on that because we see a little bit of NPAs there.
Prince Tiwari
Yeah. So some NPAs have come through the transition — as you know that we had a merger, you know last year and used to do this business. So we have seen some transition NPLs, but you know, hopefully we should get back-in control going-forward. So I think yield is also very-high on that book. So this kind of outcome.
Pritesh Bumb
So if I want to take a follow-up on that. So are we changing anything in terms of tenure of the mix, the approach to that business or as to which one, right? Which one? Maybe the home loan side, are we seeing the transition there towards more high-ticket size, more better?
Prince Tiwari
No, no, no, we want to be in the affordable housing space. And EU was doing as a structure, we were doing more of I would say, I would say a high-end customer in lower low-income growth, you know, and was going more low-income growth in the southern side and in this whole transitioning, you know that there are always a challenge around team retention and all those things, but it’s not that high. The absolute amount is very low so not to worry so we will bring entire practice of AU in those markets also.
Shailesh kanani
Got it. Thanks so much. That was my question. Thank you.
Operator
Thank you. Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Prince Tiwari for closing comments.
Prince Tiwari
Great. Thank you,, and thank you everyone for joining the call today and for your questions and all the support through the years. In case you have further questions, kindly reach-out to the IR team and will be more than happy to respond. We are signing off on behalf of AU management. Goodnight.
Sanjay Agarwal
Thank you so much.
Operator
Thank you. Thank you. On behalf of AU Small Finance Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you