Axis Bank Ltd (NSE: AXISBANK) Q4 2026 Earnings Call dated Apr. 25, 2026
Corporate Participants:
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Puneet Sharma — Chief Financial Officer
Vijay Mulbagal — Group Executive
Neeraj Gambhir — Executive Director
Munish Sharda — Executive Director
Analysts:
Chintan Joshi — Analyst
Rikin Shah — Analyst
Kunal Shah — Analyst
Abhishek Murarka — Analyst
Mahesh Balasubramanian — Analyst
Mahrukh Adajania — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Axis Bank Conference Call to discuss the Bank’s Financial Results for the Quarter Ended as on 31st March 2026. Participation in the conference call is by invitation-only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents of the proceeding of the call is strictly prohibited and prior explicit permission and written approval of Axis Bank is imperative. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of the briefing session. [Operator Instructions]. Please note, that this conference is being recorded. On behalf of Axis Bank, I once again welcome all the participants to the conference call.
I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you. And over to you, sir.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Thank you, Sagar. We welcome you all to a discussion on Axis Bank’s financial results for the quarter and financial year ended March 2026. We have on the call apart from Puneet, our Executive Director, Subrat Mohanty; Munish Sharda; Neeraj Gambhir and other members of the leadership team.
Financial 2026 unfolded against a complex and uncertain global macroeconomic backdrop. Elevated geopolitical tensions including tariff issues and lately the West Asia conflict continue to disrupt global supply chains, influence capital flows and add volatility to markets worldwide. Indian economy has shown resilience amid this uncertainty so far. In this environment, Axis Bank remains firmly focused on disciplined execution, balancing growth with watchfulness while continuing to build momentum in our chosen areas of focus. We made strong progress this quarter in building a resilient all with a franchise, strengthening our balance sheet, focusing on our customers, improving efficiency and increasing active intensity across the franchise without diluting risk standards. Please Refer to slide three for more details on the House of GPS.
Now let me talk briefly about the progress we have made on each pillar of our GPS strategy. Starting with growth. We sustained the momentum from the previous quarter with strong all around growth across segments. Our total advances grew 6% quarter-on-quarter and 19% year-on-year within which wholesale grew 38%, SME 24% and retail 8% on year-on-year basis. Wholesale banking has evolved from a balance sheet-centric model to an ecosystem-led approach driving diversified high quality growth and relatively strong cycle segments. We have deepened relationships that enhance our share of wallet, improve risk visibility and deliver the planned rack.
Our SME franchise continues to grow strongly. We have built a diversified granular portfolio and have improved our yields through data driven credit decisions, simplified products and digitized operations. In retail our disbursement growth remains strong and risk calibrated centered on credit tested customers, strengthened underwriting discipline and balanced scaling across proprietary and partner-led distribution channels. Moving on to the deposits. We continue to deliver faster than the industry growth in medium to long-term. Year-on-year on MEB and QAB basis, total deposits grew 14% and 13%. Term deposits grew 16% and 15%, CA grew 11% and 10%, and SA grew 11% and 10%, respectively. Quarter-on-quarter on MEB and QAB basis, total deposits grew 6% and 2%, term deposits grew 5% and 3%, CA 7% and 3%, and SA grew 7% and 2%, respectively. Total CASA deposits increased by 7% quarter-on-quarter on a mean basis resulting in 48 basis points improvement in CASA ratio.
Our cost of deposits declined by 46 basis points year-on-year and 4 basis points quarter-on-quarter, underscoring the strength of our funding strategy and disciplined execution. There is ongoing work on improving the deposit quality through deeper granularisation with an emphasis on building more stable liabilities mix to enhance resilience across cycles. Our New to Bank franchise continues to scale with a sustained improvement in quality. Newly acquired customers are maintaining meaningfully higher average balances with NTB average balances of 53% year-on-year, reflecting the continued impact of premium-led sourcing and tighter conversion discipline. NTB product per customer has improved by 24% year-on-year due to better quality acquisitions.
Our Existing to Bank engine has continued to strengthen with our ETB salary book growing 18% year-on-year underscoring steady improvement in corporate salary segment with higher wallet share and customer lifetime value. Burgundy continues to be our driver of premaritization with assets under management up 14% year-on-year. The strength and consistency of our proposition was reaffirmed with Burgundy Private being named India’s Best for Next Gen at the Euromoney Global Private Banking Awards 2025 for the third year in a row. On profitability, we focused on structurally improving the quality of earnings through consistent and sustainable delivery supported by ongoing improvements in operating efficiency.
Our cost to assets declined to 2.28%, down 18 basis points year-on-year through improvement in operational productivity, while we added 400 branches during the year, our total workforce declined by 3% year-on-year driven by technology-led efficiency gains at both employee and branch levels. Our consolidated quarter four financial year ’26 ROA was 1.64% and ROE was 15.15%. On sustainability, we stayed focused on quality, balance sheet resilience, building future-ready technology platforms, and investing in people and capabilities to deliver sustainable outcomes at scale. Our GNPA was at 1.23%, declining 17 basis points quarter-on-quarter and 5 basis points year-on-year, while the net credit cost was at 0.37%, down 13 basis points year-on-year and 39 basis points quarter-on-quarter.
I want to specifically highlight the strong progress on AI initiatives across Axis Bank. Please refer to slides five to seven for more than this. Through AXIOM, our bespoke AI operating model, we are building an AI-led customer-centric bank that’s transforming the customer touch points, employee productivity and code process at enterprise scale. We are the only ISO 42001 certified BFSI organization globally. I repeat, globally. ISO 42001 is the first international standard providing guidelines for an Artificial Intelligence Management System. We also received the award for Best Gen AI Use Case in Retail Banking at the Retail Banker International Asia Trailblazer Awards 2026.
We have a roadmap for scale up and we expect AI to drive meaningful bottom line impact over the next 18 to 24 months. Our focus remains on embedding AI responsibly, securely and in a way that supports sustainable growth. Our people-first approach has been consistently recognized externally. During the year Axis Bank was certified by the Top Employers Institute, the only Indian private sector bank on the list, and included in the TIME Best Companies Asia Pacific list for the second consecutive year. We were also recognized as one of India’s iconic workplaces by HD Mint and Deloitte, featured among the Best Places to Work by the Hindu and WorkL, and received the ATD Best Award for fostering a strategically driven talent management culture.
Underpinning all of this is our unwavering focus on customers. Through our customer obsession initiatives Sparsh, we are strengthening experience outcomes and simplifying interactions through digitization. Our retail bank NPS has improved significantly since inception and we have retained the second rank in the Kantar Retail Bank Survey for third consecutive year. Our leadership in customer experience, analytics has also been recognized at the Annual BFSI Service Quality Excellence India Summit 2026, where Axis Bank won the CX Data & Analytics Excellence Award and Best Omni-Channel Experience Strategy.
We had strong business momentum in quarter four as a bank with clear intent, the right talent and a strong culture. This positions us well to assert our right to win and to gain more than our fair share across businesses. In an environment marked by uncertainty and volatility, our conservatism is a strategic advantage. The choices we made during the year have strengthened our foundation and enhanced our resilience. As we step into financial year ’27, we are watchful of the ongoing uncertainties. However, we stay confident in our ability to grow in a disciplined and calibrated manner faster than the industry.
With that, I’ll now hand over to Puneet.
Puneet Sharma — Chief Financial Officer
Thank you, Amitabh. Good evening, and thank you for joining us. Before we start discussing the financial performance for Q4 FY ’26 and financial year ’26, I’d like to clarify two items; accounting for the tax item. In financial year ’22, ’23, the Bank acquired Citibank, India Consumer Finance business from Citibank N.A. and the NBFC Consumer business from CFIL, collectively called the Citi India Consumer business on a going concern basis. In accordance with an independent valuer’s report, intangibles excluding goodwill amounting to INR8,714.24 crores were recognized in the Bank’s financial statements. Despite retaining access to and business use of these assets as a prudent measure aimed at protecting our capacity to pay dividends, the Bank opted to fully amortize these intangibles through the profit and loss account in FY ’22, ’23. Further, the bank elected not to create a deferred tax asset in ’22, ’23 on such intangibles nor did the bank consider the deductibility of said intangibles while providing for current tax in the books until the regular assessment for the said financial year was completed.
During the quarter and year ended 31st March 2026, following the conclusion of regular assessment proceedings by the income tax authorities, tax depreciation on these intangibles was allowed. As a result, the tax expense for Q4, FY ’26 and full year FY ’26 is lower by INR2,193.2 crores, which includes reversal of excess tax tax provisions made in prior years amounting to INR1,129.8 crores, a reduction in current year’s tax expense by INR265.85 crores and recognition of a deferred tax asset of INR797.55 crores. This has resulted in the effective tax rate for FY ’26 to become 17.25%.
The next item, voluntary enhancement of the Bank’s provisioning framework for standard assets. During Q4 of FY ’26, the Bank proactively strengthened its balance sheet by voluntary enhancing its prudent provisioning framework for standard assets in line with our conservative risk management philosophy. Based on an assessment of evolving unpredictable macroeconomic and geopolitical uncertainties, the Bank created an additional one-time provision of INR2,001 crores during the quarter. This approach is aligned to our practice to enhance resilience of our balance sheet during periods of elevated uncertainty while maintaining transparency and discipline in risk governance. This action is prudent and precautionary. I repeat, this action is prudent and precautionary in nature and does not reflect any deterioration in asset quality or adverse credit trends in the Bank’s loan or investment portfolio as of reporting date.
Our core asset quality metrics remain stable and within our risk guardrails. The creation, utilization and potential reversal of this provision is governed by a Board approved framework and is calibrated using internal stress testing by the risk function under severe but plausible downside scenarios. Based on our current assessment, this provision is considered sufficient to absorb potential incremental provisioning charge to the P&L even in the most adverse stress scenario modeled for FY ’27. To provide some context, the adverse stress scenario assumes average oil at over USD150 for 12 months, inflation spiking to 7.4% and the currency depreciating approximately 20% over current levels amongst multiple other variables that have gone into the model.
Between the two onetime items above and trading loss in the quarter due to the year end rate movements driven by extraneous factors, the net impact on the P&L of all the three variables combined is net neutral. Moving to the salient features of the financial performance of the Bank for FY ’26 and Q4 FY ’26 across operating performance, capital and liquidity position, growth across our deposit and loan franchise, asset quality restructuring and provisioning. For FY ’26, our operating performance was stable with net interest income fee and operating expense lines. Net interest income at INR56,048 crores grew 3% year-on-year. Net interest margin 3.69% declined 29 basis points Y-o-Y after factoring 125 basis points pass through of the repo rate cut.
Fee at INR24,444 crores grew 9% year-on-year. Operating expenses at INR39,362 crores grew 5% Y-o-Y, in line with our core revenue growth after absorption of the rate cut and despite lower trading income due to year end volatility. Cost to assets at 2.28% declined 18 bps year-on-year. Core operating profit at INR41,443 crores grew 4% year-on-year. Standard asset coverage ratio at 1.26% increased 11 basis points Y-o-Y, all provisions by GNPA ratio at 166% increased 900 basis points Y-o-Y. Consolidated ROA at 1.46%, consolidated ROE at 13.59%.
Moving to the key metrics for Q4 FY ’26. PAT at INR7,071 crores Q-o-Q growth of 9%, flat year-on-year. Y-o-Y deposits and advances grew 14% and 9% — 19%, respectively. Q-o-Q deposits growth of 6% and advances growth of 6%, net interest income at INR14,457 crores Y-o-Y and Q-o-Q growth of 5% and 1%, respectively. The NIM for the quarter was 3.62%. Fee at INR6,561 crores, Y-o-Y growth of 4%, Q-o-Q growth of 8%, granular fee at 92% of total fee. Expenses at INR10,466 crores, Y-o-Y growth of 6%, Q-o-Q growth of 9%. Adjusted for employee-related provisions in the current quarter due to year end rate movements and variable pay writeback in the previous quarter, the Y-o-Y growth was 5% and the Q-o-Q growth was 4%.
Cost to assets at 2.28% declined 18 basis points Y-o-Y and 5 bps Q-o-Q. Operating — core operating profit at INR10,619 crores largely flat Q-o-Q and Y-o-Y, net credit cost at 37 basis points, down 13 basis points Y-o-Y and 39 basis points Q-o-Q. Net credit costs excluding technical impact at 28 basis points, down 22 basis points Y-o-Y and 35 basis points Q-o-Q. GNPA at 1.23%, declined 17 bps Q-o-Q, 5 bps Y-o-Y, net NPA at 0.37%, declined 5 bps Q-o-Q. PCR at 70% flat Q-o-Q. Consolidated ROA at 1.64%, improved 7 basis points Q-o-Q, consolidated ROE at 15.15%, improved 100 basis points Q-o-Q. Subsidiaries contribute 6 basis points to consolidated ROA and 41 basis points points to consolidated annualized ROE for the quarter.
The Bank CET1 including profits for FY ’26 stands at 14.38%. We have net consumed 12 basis points of capital in the quarter for growth. The Bank has provisions aggregating INR8,244 crores, including the standard asset provision created earlier in Q2 pursuant to the RBI guidance. These standard asset provisions have not been reckoned for regulatory capital computation. Consequently, this represents an additional buffer over and above reported capital ratios, translating into an incremental capital of 53 basis points. This further reinforces the Bank’s balance sheet strength and enhances its ability to navigate uncertainty while continuing to support growth and shareholder value.
We reiterate, we do not need equity capital for either of our pillars. Our pillars are growth and protection. The resolution we have taken today is only an enabling resolution consistent with our practices for the prior years. We may opportunistically evaluate issuing Tier 2 and 81 instruments based on market conditions. Yields on interest earning assets declined 5 bps Q-o-Q cost of funds were largely flat Q-o-Q, the Bank maintains its through cycle stance of NIMs at 3.80%. Cycle measured in terms of duration starting from the last rate cut transmission date.
We’ll discuss the progress on structural NIM drivers. Improvement in balance sheet mix loans and investments comprised 89% of total assets at March ’26. Retail and commercial banking advances comprised 67% of advances at March ’26, declining 471 basis points year-on-year. This is an outcome of the Bank’s conscious strategy to optimize for NII in the short-term. It’s important to note retail disbursements have grown 24% year-on-year and 19% Q-o-Q. This gives us comfort that we’ll be able to rebalance the portfolio proportionality over our planning horizon.
Low yielding RIDF bonds declined by INR5,761 crores year-on-year. RIDF comprised 0.46% of our total assets at March ’26 compared to 0.9% of our assets at March ’25. Quality of our liabilities on March ’26 measured by outsourced to their 28.8%. We continue to remain focused on this variable. QAB CASA at 37%, we’ve seen an improvement of 39 basis points on CASA pricing from FY ’26 compared to FY ’23. The impact of marginal Y-o-Y decline in QAB CASA was offset by the rate benefit across parts of the liability stack. The cost of deposits declined 46 bps Y-o-Y and 4 bps Q-o-Q.
Our fee income grew 4% year-on-year and 6% Q-o-Q, total retail fee grew 2% year-on-year, 11% Q-o-Q supported by the Small Business Banking, Small Enterprises Group liabilities and Cards business. The wholesale fee grew 8% year-on-year. Our wholesale banking coverage group’s fees grew 14% year-on-year, our medium enterprises group fee grew 14% year-on-year. Our transaction banking fee grew 5% year-on-year. Trading profit and miscellaneous income at negative INR538 crores declined Q-o-Q and Y-o-Y, mainly due to MTM losses on investments in government securities, bonds, debentures, shares, etc.
Operating expenses for the quarter stood at INR10,466 crores growing 6% year-on-year and 9% Q-o-Q. Adjusted for the one-time items aggregating to INR408 crores, the core growth was 4%. Onetime items comprise increase in staff cost attributable to provisioning for employee benefits of INR126 crores in the current quarter and onetime reversal of accruals of staff expenses no longer payable required to be paid in the previous quarter aggregating to INR282 crores. The Y-o-Y increase in operating expenses is INR629 crores, 36% of the increase is attributable to technology spends, 33% is volume linked expense growth while the balance is BAU expense partly offset by statutory cost reduction. The Q-o-Q increase in operating expenses is INR830 crores. Of this INR408 crores is due to onetime items and staff cost. Operating expenses other than staff were up 7% Q-o-Q, largely driven by BAU volume linked expenses offset by PSLC cost reduction.
Technology and digital spends grew 14% year-on-year and constituted 10% of our total operating expenses. We opened 166 branches in the quarter and 400 new branches in FY ’26. We are PSL compliant at a headline level and at each subsegment level. Net credit cost for the quarter was INR1,146 crores. Annualized cost 37 bps, declining 13 bps Y-o-Y, 39 bps Q-o-Q. The cumulative non-NPA provisions at 31 March 2026 is INR15,473 crores comprising prudent provisions for standard assets INR7,013 crores, restructuring provisions of INR197 crores, standard asset provisions higher than regulatory rates of INR1,733 crores, an additional onetime standard asset provision of INR1,231 crores and other weak and other asset provisions of INR5,299 crores.
Moving to growth across our liability and loan franchise. Amitabh has already discussed the growth in loans and deposits. We gained 20 basis points of market share on our loan franchise and maintain stable market share on a Y-o-Y basis on our deposit franchise. Our loan growth is granular well balanced with retail advances constituting 55% of our overall advances, corporate at 33% and our commercial banking group at 12%. Please refer slides 22 and 23 for details around the quality of our liability franchise and slides on our loan franchise. 73% of our loans are floating rate, 48% of our fixed rate book matures in 12 months. Breakup of the floating rate book by benchmark type and MCLR repricing frequency is set out on slide 14 of our investor presentation.
In Q4 FY ’26 retail disbursements grew 24% year-on-year and 19% Q-o-Q, disbursement growth in home loans was 28% Y-o-Y, 15% Q-o-Q, vehicle loans was 25% Y-o-Y, 10% Q-o-Q, retail agri was 34% Y-o-Y, 19% Q-o-Q. Personal loan growth was 22% Y-o-Y, 9% Q-o-Q. Moving to the performance of our subsidiaries. Detailed performance of our subsidiaries is set out on slides 55 to 62 of the investor presentation. In FY ’26, the domestic subsidiaries reported a net profit of INR2,051 crores, growing 16% year-on-year. The Q-o-Q PAT growth is 9%. The return on investment in domestic subsidiaries was 54%.
Axis Finance, overall assets under finance grew 22% year-on-year of which share of retail plus MSME at 57% of total book versus 54% last year. FY ’26 PAT grew 19% year-on-year to INR806 crores, strong asset quality with a net NPA of 0.36% and negligible restructuring. Provisions made in the quarter to comply with upper layer regulations is INR48 crores. Axis AMC overall quarterly average AUM grew 12% year-on-year to INR3,59,601 crore. FY ’26 PAT stood at INR596 growth, growing 19% year-on-year. Axis Securities PAT stood at INR366 crores. Axis Capital PAT grew 61% year-on-year to INR259 crores.
Moving to asset quality provisioning and restructuring. The slippage GNPA NNPA PCR ratios for the Bank and segmentally for retail, CBG and corporate are set out on slide 47 of our presentation. Gross slippages for the quarter were INR4,709 crores, office retail was INR4,098 crores, commercial banking INR297 and our wholesale banking coverage group at INR314. Our gross slippage ratio for the quarter declined sequentially 48 bps and 27 bps year-on-year. Our gross slippage ratio excluding technical impact declined 31 bps year-on-year — 31 bps quarter-on-quarter and 70 bps year-on-year. For the quarter, 35% of gross slippages are attributed to linked accounts of borrowers which were standard when classified or have been upgraded in the same quarter.
Net slippages for the quarter were INR2,013 crores. Net slippages segmentally were INR1,708 crores retail, INR164 for commercial banking and INR141 crores for our wholesale banking coverage team. Net slippage ratio for the quarter declined 11 bps Y-o-Y, 41 bps Q-o-Q. Net slippages ratio for the quarter excluding technical impacts declined 18 bps Q-o-Q — declined 18 bps Y-o-Y and 32 bps Q-o-Q. Recoveries from written off accounts was INR1,197 crores up 28% year-on-year. Net slippages for the quarter adjusted for recoveries from written off pool was INR815 crores. Segmentally, retail at INR1,041 crores, CBG at INR93 crores. Wholesale banking coverage at a minus INR319 crores. Please see slides 48, 71 and 72 for quantification of technical impact across segments. Technical impact has lost its reporting relevance as it will be in the base period for next quarter’s reporting. Further, the net slippages are down to negligible levels. Hence, we will discontinue this disclosure from Q1 FY ’27.
In summary, Axis Bank continues to make progress towards building a stronger, more sustainable franchise. We remain vigilant on monitoring macro, geopolitical environment, inflation, liquidity and our cost of funds along with their impact on our business.
Thank you for your patience. This concludes our opening remarks. We’d be happy to take your questions.
Questions and Answers:
Operator
Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions]. Your first question comes from comes from the line of Chintan from Autonomous. Please go ahead.
Chintan Joshi
Hi, good evening. Thank you for taking my question. Can I start with NII and NIMs? Could you remind us if there is any day count convention benefit in your NIMs? Secondly, if the full 25 bps rate cut from December has been passed on your EBLR book. And thirdly, if there’s any residual TD repricing left on your book, that’s the question on NIM. And then I’ve got a question on the corporate growth. At 34% year-on-year you’re growing your corporate book meaningfully faster than your peers. What opportunity do you see that others may not be seeing? And also could you kind of show us in your the numbers or qualitatively how this has benefited your ROA or is that still left in the future? Because I know it’s NIM dilutive but it may not be ROA dilutive. Just want to understand, how do we observe that improvement of metrics? How do we go about analyzing that bit of growth?
Puneet Sharma
Chintan, thank you for your questions. I’d probably have to respond in parts. So the first part of your question on, have we transmitted the 25 basis points repo rate cut last quarter on our entire loan book. I would request you to look at slide 14 of our investor presentation. The repo linked book is 61%, so that would have gotten repriced and the full repricing effect would be in the yields for the current quarter, because just to recollect and remind you, we transfer repo rate pricing at the end of the quarter in which the rate cut was announced. So this quarter has full impact of repo rate cut on the 61% of the loan book. On the same slide, we’ve given you tenor wise breakup on MCLR and other EBLR, so those will reprice as per the tenors we’ve set out there. I hope that covers the first question.
The second question on the growth and how is it benefiting us on the corporate side, I’ll request Vijay to come in on where he’s seeing growth. But I just want to make sure, we reassure you we monitor all of our businesses on risk-adjusted return on capital. There has been no dilution in risk-adjusted return on capital in the current fiscal compared to what we reported last fiscal for this segment. There has been no dilution in risk standards. 91% of this book is rated A- and above both on stock and flow roughly follow the same pattern. So we’ve not gone down the credit curve. I’ll pause there. I’ll request Vijay to come in on growth.
Chintan Joshi
Just quickly on the NII before we go to Vijay. Is there a day count convention benefit in your NIMs? If you can remind us on that and any TD, residual TD repricing left?
Puneet Sharma
Chintan, there is no day count representation. We simply follow number of days in the quarter annualized for days in a year. So we have no artificial day count convention management as part of our reported NIMs. So the number of days a quarter has, that is what will get annualized. The government securities book follows a 30 by 360 methodology, that is market standard. We follow that for the G-Sec book. So we have no further comment to add on day count convention. It is we have consistently reported we have not changed our methodology on margin competition.
Chintan Joshi
And residual TD repricing?
Puneet Sharma
Chintan, we don’t provide the data on residual TD repricing in percentage terms, but we do have some legs left on that lever as we move forward.
Chintan Joshi
That is helpful. Thank you. Thank you. And, Vijay?
Vijay Mulbagal
Hi, Chintan. On the wholesale side, our playbook remains unchanged. We selectively grow and we are not chasing growth here. We invest in sectors with the strongest cycles and clear micro tailwinds. Incrementally, growth was seen in power, largely renewables, commercial real estate, data centers, NBFC largely again ESL driven and manufacturing. Again as Puneet reiterated, I should also add to that that growth remains quality led. We our both pricing filters and RAROC discipline is maintained even as we are growing. And of course, we use the opportunity of balance sheet to ensure that we are getting reciprocal transaction flows leading to fee expansion and float expansion, and obviously driving on access outcomes which includes corporate salary, Axis Capital Trusteeship, etc.
Chintan Joshi
Thank you.
Vijay Mulbagal
Thank you.
Operator
Thank you. Your next question comes from the line of Rikin Shah from IIFL Capital. Please go ahead.
Rikin Shah
Hi, good evening. I had three questions. The first one is, the strategy of NI maximization has translated into growth acceleration. But with the sharp rise in the wholesale deposit rates that we have seen, do you think it warrants a focus moving back to margins? Just trying to understand, when do we reach to this 3.8% through the cycle NIM guidance that we have earlier provided. So that’s the first one. I will come back with two questions after this.
Amitabh Chaudhry
I just want to reiterate that, obviously we are trying to ensure that we maximize the value for the institution looking at NIM, growth and obviously the risk profile of what we are trying to do on the asset side. We will continue to optimize them as we move forward depending on the policies, the risks that we see and as all of us are aware of what’s happening with West Asia. So you might see in some quarters growth which is more than what we are guiding in the medium term, that we always maintain that from a product mix perspective we expect 70-30, 70% is what is retail and SME kind of business and 30% is wholesale plus minus 3% and 4% here and there, and that’s what we expect to maintain. So and we have not shifted away from our stance that we expect to deliver 3.8% in through cycle. We are working towards this. I mean obviously, it’s a target not easy to pin down on because the interest rates continue to behave in a manner in a shape which is very difficult to predict. Given all of that we are optimizing everything.
Rikin Shah
Fair enough, Amitabh. But any comment on when do we think we can achieve this 3.8%. Is it like any time frame that we would like to define?
Neeraj Gambhir
Rikin, thank you for the question. We’ll reiterate we’ve said, we will get to through cycle 3.80%, 15 to 18 months from transmission of last rate cut. That’s a consistent comment we’ve offered. We are not moving away from that comment.
Rikin Shah
Got it. Perfect. The second one is on the net technical slippages now clearly inching closer to zero. Wanted to get a sense on, what could be the loan yield uplift from the absence of this interest reversal due to technical slippages next year? And also is there a possibility of any recoveries that can be achieved in these technical slippages in the next fiscal?
Puneet Sharma
Thank you for that question, Rikin. I think on technical slippages we’ll reiterate. When technical slippages were first reported by us we made two comments, we said gross slippages will decline through the year and net slippages will decline even faster. I’ll request your attention to slide 48 of our investor presentation. In the first quarter when we reported technical impact gross slippages were INR2,700 crores. They’re down to INR1,240 crores. Net slippages were INR1,861 crores, they’re down to INR218 crores. In percentage terms, the net slippage is now 0.07%. Effectively what we had said and anticipated is playing through. We continue to believe that there should not be an economic loss on this portfolio, we’ll be able to recover it over time. We do not want to provide guidance or outlook on when this portfolio will get fully recovered. It’s going into BAU and we’ll continue to operate it as BAU.
Rikin Shah
Got it. And then just the last question, Puneet to your earlier opening remarks that, PSL full compliance has been achieved. So just wanted to clarify whether it is including the PSLC purchases or it is organic ex of those purchases we have achieved full compliance. And also if you could just you know, quantify the absolute amount of AFS reserves as of the March end.
Puneet Sharma
Rikin, thanks for again for that question. PSL compliance at headline and sub-segment levels counts PSLC purchased. We are not organically compliant, but that’s been a strategy that we have consistently followed. If you look at our annual disclosures, we’ve endeavored to be fully compliant including PSLC purchases. On AFS reserve, give me 20 seconds, I’ll just come back to you.
Rikin Shah
Sure. Thanks for answering the questions, Puneet and Amitabh.
Puneet Sharma
INR254 crores is our AFS reserve on a gross basis at 31, March, 2026.
Rikin Shah
That’s the positive number, right?
Puneet Sharma
It’s a negative number.
Rikin Shah
Okay,
Operator
Thank you. Your next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah, so again, touching upon the same question in terms of NII optimization. Last time we indicated that maybe irrespective of the NIM profile, we will still look at NII growth maybe as our maybe the target. And this quarter, compared to that of the overall loan growth it appears to be relatively weak at 1-odd percent. Would it be fair to assume that, maybe larger part of growth is coming through towards the end of the quarter and we should see the benefit of growth leveraging coming through in the next year. And for the full year should we still expect NII to outpace the overall loan growth looking at this NII optimization strategy given that now rates are almost where they are and deposit repricing as you mentioned would be towards the end year?
Puneet Sharma
Kunal, thanks for the questions. Let me again respond to them in parts. Business does get booked through the quarter. Quarter four is the strongest quarter for the industry as well as us. So yes, there is a gap between MEB growth and average balance growth, which does play through on NII versus growth. Please also appreciate that, if you are measuring NII growth in its absolute quarter-on-quarter, there is loan growth number and then there is interest earning assets growth number. So I would request you to focus on interest earning assets growth because that plays to NII not just advances growth. The interest earning assets growth is marginally lower than loan growth as we stand today.
The last element obviously between the loan growth walk and the NII is the 2 basis points margin contraction. That has played through in the current quarter. So that’s the bridge to the growth versus NII walk. To your pointed question on was the growth period end or will we see the growth sustain and have net interest income from that growth, the book has continued to hold up. So it was not a period end bump up that we reported on the advanced side.
I hope that answers all of your questions. Thank you.
Kunal Shah
Yeah, perfect. And a couple of more. So one is overall in terms of the step up on the retail side, so we had seen maybe almost 4-odd percent, the growth you indicated the disbursement growth that has been quite strong. So we should really see the step up now getting into the double digit kind of retail growth getting into the next year looking at the disbursement momentum or this was more like a Q4 phenomena. And then maybe on fee income side, overall relatively weak across the board, including all the private banks in say the single digit kind of a number. So how should we look at it going forward? Would it continue to trail the balance sheet growth? Yeah. Thank you.
Munish Sharda
So, Kunal, hi, this is Munish. First of all, it’s not a quarter for phenomena. We’ve shown you last quarter also, we saw a decent acceleration in our dispersal numbers in retail assets. And in assets, as Puneet and Amitabh told you, we’re looking to grow assets in RAROC accretive businesses and we continue to push for growth in those businesses. Our investments in technology, digital, etc are working with the branches to deepen the relationship with the own customers, etc, is helping us accelerate the momentum and we hope to continue to maintain this momentum in the retail asset group which will eventually start feeding into the overall book growth number.
Kunal Shah
Got it. And on the fee side?
Munish Sharda
Similarly, you’ve seen our fee numbers. We hope to as the core businesses grow and as our branch business also grows and with the additional new branch, etc., we also continue to hope to see acceleration in the fee lines as well as we go into the next year.
Kunal Shah
Okay, thanks. Thanks. Yeah.
Operator
Thank you. The next question comes from the line of Abhishek Murarka from HSBC. Please go ahead.
Abhishek Murarka
Yeah. Hi, good evening. Thanks for taking my question. So my first question is again on growth. So now since we are seeing a pretty strong pickup in retail disbursements and SME looks good as well, do you see a need to calibrate your corporate deposit growth just from a RAROC or ROA perspective? That change in mix will drive your P&L and make it look better. So do you see any need to calibrate that corporate deposit growth? And if not, then do we really care about the 60% retail, 15% SME, 25% corporate kind of mix or does that not really matter because on a RAROC basis you’re generating pretty much similar returns. So how do we think about this?
Amitabh Chaudhry
So on the liability side, I think we are seeing an institutionalization of the deposit base. Obviously, as a bank you would like you talking [Speech Overlap].
Abhishek Murarka
Deposit. Sorry, sorry, my bad. Yeah, I meant corporate loans. Yeah. The Whole question was about the loan mix and corporate loans. My bad, sorry.
Puneet Sharma
Abhishek, thanks for the question. Let me, let me respond to the RAROC question first, because that lead into the second response. See RAROC continue to remain healthy for the wholesale business. We can confirm to you that RAROC that this business had FY ’25 have held up through FY ’26. So growth has not come at the compromise of RAROC. The book composition at A- and above has stayed at 91%, so we’ve not seen growth come at the cost of asset quality or origination quality as we speak. The theoretical question that you asked is as long as RAROCs hold up well, why bother between a mix of wholesale and retail? The challenge is that, there is a finite amount of leverage that a financial institution can have to retain its AAA rating.
We will need to manage that leverage ratio for ourselves and consequently RAROCs are leverage agnostic, ROEs are leverage dependent. So as we look to manage the max leverage that we can work with, within a capital structure that we are comfortable with, we ill need a balanced book. Therefore our commentary that in the near-term we are optimizing for NII with wholesale growth but we will look to recalibrate the book back. That should hopefully give you a full color of our thinking behind RAROC ROE and book composition.
Abhishek Murarka
Yeah, sure. And by when do you start decalibration? Because it’s been a while since retail picked up but now it has, it seems to have picked up quite strongly.
Vijay Mulbagal
So, as we speak. I mean, the levels in our hand are in our hands are really the activity levels on the ground on the retail asset side which is fairly strong, which is reflected in Q-on-Q disbursement growth apart from the year-on-year disbursement growth that you are seeing on the retail asset side. So the calibration in that sense is continuing, it’s ongoing. So from our perspective, you’ll see the retail book growth continue to happen as we have seen in the last two or three quarters. And like Amitabh mentioned, the overall ratio of about 70-30, give or take 3% on either side is where we’ll be. So from our perspective, that’s what we are doing. What’s in our control is continued focus on making sure that we are in front of the customers and getting the business, which you can see on the retail disbursement side is happening and which Puneet also reiterated is happening quite strongly.
Abhishek Murarka
Sure. Okay. And the second one is on opex. Can you please clarify, what I got is there’s a INR126 crore onetime cost and a INR282 crore reversal was it or it was a cost again?
Puneet Sharma
Abhishek, if you look at my comments, last quarter we did call out that we reversed employee benefit expenses no longer payable last quarter. In the last quarter your staff cost went down because of the reversal. In the current quarter, we’ve provided for INR129 crores. It is not on account of what we reversed, it is basically rate movement for employee benefits. In one quarter we had a negative which is the prior quarter. In the current quarter we have a positive. Therefore, the numbers have moved in opposite directions. The cumulative impact of that as I called out for you was roughly about INR408 crores. Adjusting for that INR408 crores, I had called out the growth numbers on a Q-o-Q basis to be 4%. I hope that clarifies.
Abhishek Murarka
Got it. Yeah. Yeah, got it. All right. Thank you so much for answering the question.
Operator
Thank you. The next question comes from the line of Adarsh from Hinam. Please go ahead. Adarsh, your line is unmuted, please proceed with your question. As there is no response from the line of current participant, we’ll move on to our next question. Our next question comes from the line of M.B. Mahesh from Kotak Securities. Please go ahead.
Mahesh Balasubramanian
Puneet, just two questions. One is on that RAROC argument that you present. Since we can’t observe segmental RAROCs for the company and we can kind of see only the ROE side of it. If you were to kind of triangulate and see what the ROEs looks like, is it meaningfully lower than a number like 15% or are you targeting for a different number here?
Puneet Sharma
Mahesh, thank you for the question. I think the aspirational ROE was 18% and at the bank level. Given the component outlook we’ve provided, it’s a fair assumption that you can assume that there will be retail ROEs — retail SME ROEs marginally higher than wholesale ROE. So we don’t really want to put a number at a segment level. At the bank level, we continue to aspire for 18% is what we would like to state.
Mahesh Balasubramanian
Okay. The second question is from the credit cost line. Now that we are seeing slippages trending lower and credit cost trending lower, keeping everything else constant, how do you look at FY ’27?
Amitabh Chaudhry
Mahesh, Puneet is not going to give you a guidance. I’m not permitted to give you a guidance. I’ll just say that, given where we are and given if you look at the trend line and the fact that we have said that, we have seen civilization in some of our portfolios, I mean you can then stretch that trend line. I mean obviously the joker in the pack is, how long this West Asia prices last and what impact it has on India and that’s why one of the reasons why we made this provision just to protect ourselves. But if we ignore West Asia, then you know where the trend line is going.
If West Asia crisis continues, frankly I don’t know where this trend line will go because it’s very difficult to predict at this stage how long, what sectors, how much the impact would be, what India will be able to manage, not able to manage, what the inflation would be, etc. So we’ll be watching the space closely and that’s why even if as we have grown in the wholesale side, you will see that from a strategy perspective, we have not sacrificed our asset quality at all. We are very, very careful where we are giving this money out. And same applies to retail. While we’re seeing disbursal growth, we’re being very, very cautious about while we are growing we want to be very careful where we grow.
Mahesh Balasubramanian
Okay. Thank you. Just one clarification, on the incremental disbursements that you’re doing, one of the conversations that we’ve had previously is that there was significant tightening of the underlying credit filters in the last two years and that was expected to open up as the portfolio starts behaving better over time. Have we reverted to back to where we are earlier or are you still kind of comfortable to hold the stance that you’re more open to kind of take a bit more risk than before? Thank you.
Puneet Sharma
Mahesh, thank you for the question. The growth that we have delivered on disbursement is without loosening our risk filters as on date. We’ve clearly been prudent and we don’t expect to be loosening our growth — our risk filters on a go-forward basis. Sorry Mahesh, was I audible or did I miss or did you miss me please?
Mahesh Balasubramanian
I got the answer. Thank you.
Puneet Sharma
Yeah. Thank you. Thanks, Mahesh.
Operator
Thank you. The next question comes from the line of Mahrukh Adajania from Tara Capital. Please go Ahead.
Mahrukh Adajania
Hi, good evening. I just have two questions. You talked about your buffer provision you created this quarter saying that if, seeing quoting $150. So does that mean that if indeed the situation gets worse from here on, you would actually be drawing down on these provisions this year itself because you’ve not drawn down on your earlier contingency provisions, that’s why asking. So that’s my first question. And my second question is that, just in terms of deposits, right, deposit taking, basically it’s getting a little tight for the sector, though deposit growth for the sector has moved up, loan growth has moved up even faster. So given that dynamic, is there a potential for deposit rates to rise from here? So these are my two questions.
Puneet Sharma
Mahrukh, thank you for the questions. I’ll take the first one and then request Neeraj to come in on the second. The way we’ve constructed the provision is, it is not a floating provision. There is an underlying identified pool of loans across customer segments, across products. That identification of pool of loans was done pursuant to a framework our risk team set up for stress testing. So these are an identified set of loans. On these identified set of loans we have a additional standard asset provision of INR2,001 crore. In the inadvertent event of loans from this pool slipping, this provision will get utilized to take care of slippages from this pool. So the construct of this provision is very different from the INR5,012 crores we were holding for expected credit losses. There is a clear utilization against pools that get impacted by the West Asia crisis. So the short answer to your question is yes, we will draw down on these provisions in the event we see an impact on the P&L in FY ’27.
Mahrukh Adajania
Okay, but for that does oil have to go to $150 or there’s no such thing. It’s just that the pool should be impacted.
Puneet Sharma
Mahrukh, It’s — look, the $150 comment and I want to contextualize this because you picked up one part of the comment I made. The comment holistically I made was, even if I take the most stress scenario my risk team gave me, the slippages that I would have would stand fully covered from a provisioning perspective by the standard asset provision we’ve created today. So I have not at any point in time said that, that slippage will happen, asset quality remains stable. But yes, if this, if anything from this pool were to slip related to West Asia crisis, not everything will slip at $150. Something may slip at $110. If assets from this pool slip and the slippage is not in the ordinary course of business, this provision will get utilized.
Amitabh Chaudhry
Mahrukh to answer your deposit pricing question. I think we are looking at two different markets. One is the retail deposit market and second is the wholesale or bulk deposit market. In the retail deposit market, banks reduced the pricing by approximately estimated 10 basis points to 15 basis points in response to the 25 basis cut. So to that extent the transmission was incomplete. But given where the market is, I don’t see any further cuts happening. Second, on the bulk deposit market or the wholesale deposit market is the usual year end phenomenon that we see in the last quarter — last month of the quarter we see some kind of an uptick in the bulk deposit rates. This time that uptick was a little bit more accentuated, because we saw sell off in the bond market. We saw higher yields in the CD market and that kind of transmitted back into the bulk deposit market as well. As we transition to this New Year, we have seen some softening of bulk deposit rates, but it’s a wait and watch. Liquidity in the system is good but really the question is what happens to the crude oil prices to the currency, etc, which is what the market is reacting to.
Mahrukh Adajania
Okay, thank you. Thanks a lot.
Operator
Thank you. Ladies and gentlemen, we take that as our last question for today. I now hand the conference over to Mr. Puneet Sharma for closing comments.
Puneet Sharma
Thank you, Sagar. Thank you everyone for taking the time this evening. If any questions remain unanswered please feel free to reach out to Rahul or myself. We’d be happy to take them offline. Thank you and have a good evening.
Operator
[Operator Closing Remarks]