Bajaj Finance Ltd (NSE: BAJFINANCE) Q1 2026 Earnings Call dated Jul. 24, 2025
Corporate Participants:
Rajeev Jain — Vice Chairman and Managing Director
Sandeep Jain — Chief Operating Officer and Chief Financial Officer
Fakhari Sarjan — Chief Risk Officer
Analysts:
Ajit Kumar — Analyst
Viral Shah — Analyst
Piran Engineer — Analyst
Kunal Shah — Analyst
Kuntal Shah — Analyst
Abhishek M — Analyst
Chintan Joshi — Analyst
Abhijit Tibrewal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q1 FY ’26 Earnings Conference Call for Bajaj Finance Limited. 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. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ajit Kumar from JM Financial. Thank you. And over to you sir.
Ajit Kumar — Analyst
Thank you, Darwin. Good evening everyone. This is Ajit Kumar from JM Financial. Welcome to 1Q FY ’26 earnings conference call of Bajaj Finance Limited. On behalf of JM Financial, I would like to thank the management of Bajaj Finance for giving us this opportunity to host the call. From management team today we have Mr. Rajiv Jain, Vice Chairman and Managing Director; Mr. Sandeep Jain, Chief Operating Officer and Chief Financial Officer; and other senior members of the management team. We will have opening comments from the management team post which we will open the floor for Q&A.
With that I would like to transfer the call to Rajiv sir for his opening remarks. Over to you sir.
Rajeev Jain — Vice Chairman and Managing Director
Thank you. Thank you, Ajit. Thank you JM for hosting this call. Good evening all. I have with me my colleagues here. I have the three Deputy CEOs, I have the two Chief Operating Officers here, I have the CRO and as a few of my President colleagues. I’m referred to the certain sections of the investor deck which has been uploaded on the website. I’ll be referring to that. Let’s just jump right over. Let’s go to page four.
That’s one quarter gone by. Overall I would say it’s a good start to the year. A good quarter on volume, assets under management, opex, profitability, ROA and ROE. Credit costs still remained elevated in Q1 as well. Overall AUM growth came in at INR24,789 crores to INR4,41,450 crores. We booked a record 13.5 million loans and added 4.7 million new customers in Q1. Customer franchise stood at 106.5 million. As we’ve just outlined in the AGM as well, we had record 650, 700 people in the AGM today I think in terms of physical presence that we believe that FY ’26 will be a defining year for FINAI transformation. A strategy that we outlined in December or January quarter to the shareholders. And FINAI capabilities, I can just tell you have started to go live across the company both below the iceberg and and soon on the digital assets as well you’ll start to see.
Right back to financial numbers. AUM grew 25%, opex to total income came in at 32.7%, PBT grew 21%, PAT grew 22% and ROE came in at 19% and net NBA came in at 50 basis points. Just some quick points on page five. Geographic footprint stood at — I cover points that I’ve not covered. one to three are covered, four are covered, five are covered. Six, geographic footprint stood at 4,192 locations. Gold loan branches stood at 1,254 locations and MFI-dedicated branches are now 337 branches. We added 85 standalone golden branches in Q1. Active distribution footprint is at just a tad below 240,000 distribution points.
Important point to cover is liquidity and cost of funds. Liquidity buffer stood at just a tad below INR15,000 crore as of 30th, June. Cost of funds came in at 7.79%, an improvement from a sequential standpoint of 20 basis points. In FY ’26 overall we estimate cost of funds to come in at 7.60% to 7.65%. This is not taking into account any further cuts that may come at this point in time. However, on the other hand what you will see correspondingly is that the deposit contribution of the balance sheet may go down to 17-odd percent from where it was 20% to at this point in time at 19%, it will probably go down to between 15% to 16%. It’s possible depending on the growth momentum. So for the next 12 months there’ll be high reliance on NCD, ECB and bank borrowings to ensure we deliver rightful cost of funds to the business.
On panel six, NIM grew 22%, net total income grew 21%. Opex to total income I’ve talked about. We started to deploy AI capabilities to improve productivity. Employer headcount stood at 65,528 and employee attrition in Q1 was 16.9%. Little higher than what it was on a year-on-year basis. It’s higher by 100 basis points. The first term contract staff stood at 44,335. Credit cost. There are five points. I do want to cover all of them here that at a firm level what we see is that consumer leverage continues to remain an area of concern. Company across lines of businesses continues to take several actions across all products to reduce contribution of customers with multiple loans. That’s the single univariate pain point that you have identified which has a significant high bearing on loan loss and provisions. So business by business since January we’ve been pruning. In most businesses we’ve actioned where we would have what we would have wanted to do except in MSME which is still work in progress.
Loan losses still grew by 26%. Came in at 2.02% in terms of loan loss to average AURs. Credit costs are principally elevated in two-wheeler and three-wheeler business which is a winding down business. That’s a good news. It is — the captive book has given us a lot of trouble or continues to give us trouble. It will wind down to virtually 3,500, 4,000 by March 26. MSME business has shown some strength since February so it’s come in a little too suddenly. We’ve taken a whole host of actions to prune business. It’s likely that both these businesses will grow a lot more slowly in the current year starting second quarter.
Point number 20 is important. The overall Stage 2 and Stage 3 assets came in at INR878 crores. You have to keep that in mind that of that Stage 2 assets increased by INR324 crores, primarily on account of these MSME customers to whom to mitigate their short term cash flow issues and to assist them we have begun to offer them restructuring options. So close to INR219 crores of customers were assisted with the restructuring option who were standard account but who are offered restructuring and relevant provision was taken on these clients.
On panel seven, we are, as I said, except MSME, the metric that we’re looking at is not current portfolio. The metric that we’re looking at is what is the 3 MOB, 6 MOB, 9 MOB and 12 MOB of the business since January, February this year. Now if we see improvement, the book itself churns fully, the behavialized maturity of the consolidated book is 22 months. The stand-alone book is 19-odd months. If the early vintage is improved, then it’s just a matter of time, everything will improve. So 3 MOB and 6 MOB we started to see and the principal track there is go back to pre-COVID levels. That’s a high bar that we have set for ourselves, we will get there.
GNPA and NPA stood at 1.03% and 0.5%. Profitability, I’ve talked about ROA, I’ve talked about, ROE, I’ve talked about. Capital adequacy remains strong. Tier 1 capital was at 21.19%. Just two more updates before I go to a few panels later, was the conversion of bonus and split that happened on 16 June 2025. As you’re aware, we’ve done an announcement as well that my colleague, Anup, tendered his resignation as MD and Director of BFL for personal reasons. And Board and upon the recommendation of NRC have noted and accepted the resignation and we wish to place on record our sincere appreciation for Anup’s valuable contribution during his tenure. He spent 7.5 years with the firm and extend our best wishes for his future endeavor.
To ensure continuity, unfortunately, I had said last time that last quarter that this is my last call, but to ensure continuity and to ensure stability of the firm, I’ve had to come back as in an operating role. I don’t want any ambiguity on this. It is till March ’28. Closer to that, we’ll take a view on what is the succession planning. Of course, Board has asked us to create a succession plan, but because we don’t want any ambiguity, given the growing size and complexity of the firm, you will get to know about any change only closer to March ’28.
Quickly for BHFL, balanced quarter. The results were published yesterday, good quarter for them. But there’s intense competitive activity, I’m sure Atul has talked about it. Ill just cover only this panel and intense community activity is leading to pressure on volumes and leading to pressure on attrition. So this level of intense attrition, we have not experienced in building the mortgage business out for the last 15 years. Having said that, I think company did a commendable job. PAT grew 21% and delivered ROA of 2.3%, in line with Q1 FY ’25 and asset quality remained healthy.
Quickly on BFSL. A small company, but continues to make good progress, good quarter in AUM, PAT and new customer addition, delivered AUM of INR6,100 crores. PAT grew 37% and we added 77,000 customers franchise in Q1. So they continue to remain steadfast. We are on course to last year, the company grew in terms of its four-year old company. It should start to come into being as we travel this year. Let’s go to, I’m on panel 29. These are overall financials. I think I’ve covered everything here. There is one question that you may have, which is on the other line item, which looks on a year-on-year basis, 23% lower. It’s mainly last year same time, we had sold, and they had done an NPA sale. This quarter, we have not done any. So that’s the reason you’re seeing that number go down.
Sandeep, any other number that you want to capture?
Sandeep Jain — Chief Operating Officer and Chief Financial Officer
The other number is the net gain on fair value chain where we have INR79 crore of additional gain on account of MTM. That’s one thing. Second, we found quarter one to be very very attractive given that rates were being cut to park money in mutual funds. All the gains on mutual funds sit in this particular line versus sitting in the interest income line when we park money in government securities.
Rajeev Jain — Vice Chairman and Managing Director
As a result, you may see some level of small compression in margin. It’s mainly on account of this. Adjusted for this, the number is flat on a sequential quarter basis. I thought I’ll just make that point. Rest all the numbers have been talked about.
I’ve gone to panel 41. There’s a customer franchise. We continue to make good progress. I think the top of the funnel is extremely important as long as we continue to originate customers through the road even at this size, I think we have the product range to be able to meet all the financial services in each of the consumer. The top of the funnel continues to remain pretty active, ensuring that we have a strong road map ahead of us. I’ve jumped to panel 46. This is the consolidated AUM composition. In general, on a year-on-year basis, you hardly see any movement. We have just organized this in the order of high to low. So mortgage is the largest portfolio followed by urban B2C, followed by MSME. So this is a new frame that you will see. It’s in the order of highest to lowest, highest in mortgages and MFI is the lowest at point at 0.4% of the balance sheet.
Gold loans is now 2.3% of the balance sheet and the largest balance sheet on a consolidated basis remains mortgages at just a tad below 31%. On a year-on-year basis, other than two-wheeler and three-wheeler, which you’re seeing degrowing, there is no composition change in the balance sheet on a year-on-year basis. Actually, if it took even a 3-year view, other than two-wheeler and three-wheeler, which is as a result of winding down, you will not see too much of a change. Maybe 2-odd percent during this period, the balance sheet as more than double.
I’m on panel 49. You see GNPA moving marginally on both sides, but the biggest movement is in 2-wheeler and 3-wheeler. As you can see, on a year-on-year basis, moved from 3.4% to 6.38%. It’s a little confusing number because the balance sheet is winding now. That’s an important point I must make that it’s a number which is but the absolute loan losses basis our estimate and plan were also ahead by INR70 crores, INR75-odd crores in a winding down book. So that’s not necessarily good news. Only as a second line that I would outline is MSME lending that on a sequential basis moved from 1.48% to 1.76%. Otherwise, the impact of rest of the movement is not. As you can see, urban base finance was flat. Urban B2C was 25 basis point movement and so on and so forth. But you see MSME move sequentially from 1.48% to 1.76%, and two-wheeler and three-wheeler moved from 5% to 6.38%.
I think that’s really all. This is panel 53, just last three panels, which cover portfolio quality. The reason they are stamped white in two-wheeler and three-wheeler is because of the winding down book. While open architecture is also sitting there, but a year ago, the captive business used to do 65,000 accounts. Right now, we’re doing only 35,000 accounts given, as I said, the entire focus is on MOB management or early MOB vintages. We want to be at a design level, half of what we used to be in the captive business. Let me make that point reasonably clear that is really what our intent broadly is. Over cycles, the business used to give a 5% loss rate. We want to run the business at between 2% to 3% loss rate. That’s really what our focus is. So that’s just one point I want to make.
Panel 55, business and professionals. Rightfully, as you can see, this number even in February ’20 was 99%. Right now, it’s at 98.25% current. It has moved little too quickly for a comfort in the last four, five months, and we are navigating through this. Rural B2C yes, it’s not yellow in that sense, but because it’s lower than it used to be earlier. There, the only point I would make is adjusted for Karnataka, which has caused trouble in all rural parts of our businesses, not just rural B2C. And Karnataka, unfortunately, is not a small contribution, it’s 11% of the total balance sheet. So is Maharashtra, which is higher. So is Tamil Nadu, which is higher.
So any of the large southern states see a change like this, it does have unintended impact on the portfolio. We’ve stopped doing some of the businesses. We have cut business by 40%, 50% in Karnataka because for the first time, we are experiencing what I would call political risk, which we don’t know how to navigate. We can’t even stop business, but we can’t also continue business. So it’s a little tricky place. So wherever we are able to prune, we have pruned. MFI, at this point in time, we have stopped and we cut business by 35%, 40%. In two-wheeler urban, rural B2C, even urban B2C, even rural B2B, so we are watching. Rest is all fine. MFI is not yellow, it is green. That’s fine. 100% will have to go down only. So that’s it for me.
Happy to take questions between me and the management team, whatever you have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Viral Shah from IIFL Capital. Please go ahead. Yeah. Thank you for the opportunity, Rajeev, I have three questions. But first to begin with I will say it’s glad to have you back, but just wanted to understand what have been the learnings of, see this transition process we had planned, I would say two to three years back and what is it that incrementally you have in mind as to how to approach this say two, three years down the line so that we see a more smoother transition. That would be my first question. And then I have two to three questions on the business if I may.
Rajeev Jain
Viral, the only point I would like to make is that every incident must have learnings and a course correction plan. There are learnings that you’ve taken. The NRC and the board have extensively discussed this matter and have provided necessary guidance. We have to — I have to go back to the Board and the NRC in the next six months time with a, with a, with a detailed succession planning process is all I would like to comment at this point of time on this point Viral, and I hope you appreciate the sentiment.
Viral Shah
Get it. Very clear, Rajeev. My second question is more for Sandeep. Sandeep on the financial front when I look at say the cost of fund guidance that you have given say now 15 to 20 bps is the reduction that you anticipate for the year. Given that’s the moment that we are seeing from 4Q to 1Q, do we now anticipate say a 5 to 10 bps kind of a NIM expansion on a full year basis versus flat earlier?
Sandeep Jain
I think Viral this question was asked last quarter as well. We had given a guidance on flat NIM for the current year and given the trajectory of rate cuts that we are seeing from RBI we did comment that there could be a 5 to 10 basis point of positive bias on the NIM number. Given that there’s been 50 basis point rate cut in the last round and the 20 basis point overall improvement in the cost of fund that we see in the current quarter, I think we are reasonably confident that probably 10 basis point of NIM expansion could happen by end of the year.
Viral Shah
Got it. And secondly, Sandeep on the say your growth guidance numbers on the non-interest income and also the credit cost for the full year, are they broadly still do you retain them or how do you see them panning out?
Sandeep Jain
So I think on the fee income side we have guided for 13% to 15% for the current year. We did allude in the last year’s — last quarter’s earnings call as well that we have taken significant actions on fees and charges in the previous year which will have a full year impact in the current year. As a result there will be a reset to 13%, 15% number in the FY ’26 outcome that continues to hold true. As far as credit cost is concerned I think 2.02% as a number for the current quarter was 5 basis point higher on a sequential basis, largely flat on a Y-o-Y basis.
We continue to hold 185 basis point, 195 basis point of guardrail for the current year, on a full year basis. You will see a sideways movement probably in Q2 if all goes well and probably a decline from quarter three and quarter four onwards — quarter three onwards. Having said so, I think one of the important driver will be the auto finance vertical which will start to become smaller and smaller quarter by quarter. That itself will start to give 5, 10 basis point improvement towards on the overall loan loss to [Indecipherable].
Rajeev Jain
You want to make that, you know the fee income grew 17% just to add to what Sandeep is saying because the B2B had a much stronger quarter. So that’s where the volume momentum is a little better. Otherwise to the point Sandeep is making overall guidance is of 14%, 15%.
Sandeep Jain
And last year’s quarter was partially impacted by the embargo as well. To the extent on a Y-o-Y basis the numbers are not necessarily comparable. I think 13%, 15% as a number for full year is probably a rightful expectation to have.
Viral Shah
Got it. And my last question Rajeev is for you. So on the SME portfolio you pointed out that we are seeing meaningful stress. Can you point out which sub segment within this issuing this. Is it say unsecured business loans or LAP or term loans and are we also seeing say percolation of stress from unsecured to secured segments like in gold loans and home loans?
Rajeev Jain
Not between unsecured to secured. Anyway it’s a tail effect. The secured gets a tail effect. Let me make that point. That does not mean it won’t come to secured because what we find as I said earlier in the call is that more number of loans is a single univariate driver now and that may include secured and unsecured both or unsecured and secured. But let me just spend two minutes on MSME to make the point. We principally track 17 key industries in MSME. Out of which 13 that we are seeing are exhibiting signs of slowdown and three actually, so in a way it’s all 17. Other than one, three are actually showing contraction.
So clearly slowing economy and a drop in credit supply is at one level it’s good because when we used to look at the business loan lending we used to wonder the market is not large enough to be of that size. But so from a longer term standpoint it will give lessons to everybody. Some lessons we also learn in the process. But I must make a point that market is not that large especially for business loans to grow from, pre-COVID the market used to be INR2,500 crore, INR3,000 crore. It’s going to be INR11,000 crores. Right now it’s at INR9,000 crore, INR9,500 crore, INR10,000 crore. Sorry. So it’s, it’s contracting so but that contraction to begin with troubles and then starts to be better. Is the, is the, is the only point I would make. So we are looking at early, early vintages and is going about.
Viral Shah
Got it. Makes sense Rajeev. Thank you so much.
Rajeev Jain
Thank you.
Sandeep Jain
In the same context I think it’s important that we call out MSA business will see one of the slowest growth in the current year. And of course auto finance is initially on rundown mode. These are the two lines of business which are where we are taking actions.
Viral Shah
Got it. Very clear. Thank you so much and all the very best.
Operator
Thank you. Our next Question comes from the line of Piran Engineer from CLSA. Please go ahead.
Piran Engineer
Congrats on the quarter. Actually, my question was kind of answered here, where you mentioned that it’s more to do with economic slowdown. But just to get more clarity on unsecured business loans, are these — how do I think about leverage at that promoter level? Because you might have taken a business loan from you but a personal loan from some bank, etc. How do you think about that? And like any statistics you can share there?
Rajeev Jain
No. The only way to do it is to offer the remediation. That’s why as when I talked about it, we never did restructuring, but that’s the only thing that we can do for a customer who’s honest, who do principally got, if I may say so, leveraged. And mind you, we all know it that MSME is as financial literate as it gets. So the only thing to help him is to — for good guys who are going through intermediate period of stress is to — offer them restructuring. We have done INR214-odd crores. We may do another INR150-odd crores over the next one or quarter and from there on, it should settle down. Not that we never used to do. We used to do in a quarter, INR40 crores, INR50 crores, okay. But that’s the only thing Piran that can be done, tightened lending standards, one. Two, help the customer with restructuring option to reduce this outflow and hope to not repeat it again.
Piran Engineer
Okay. Okay, sir. Fair enough. And also on the B2C side, earlier we used to share metrics on what percentage of the portfolio has three or more lenders. I believe it used to be 7%, 8%, sorry.
Rajeev Jain
4% now and that is what it used to be…
Piran Engineer
Wasn’t it 7%, 8% pre-COVID?
Rajeev Jain
No, no. It was 5.5% and it is down to 4%.
Piran Engineer
And it went up to 11%, 12%, right?
Rajeev Jain
Yes. That we had published. Perfect.
Piran Engineer
So now it’s 4%, okay.
Rajeev Jain
All businesses, this metric is being tracked. The only thing and where we’ve got — partially, if I may say so, a little stumped because, the BL business even pre-COVID used to have 14%, 15% of the customers who have multiple loans. We see this is a working capital loan rather than a consumption loan, a BL loan. So it is very common, and I have done business loan for 30 years. A customer gives a file not in one in three places. So we know that he does take in general. So 14% of customers used to have multiple loans that went all the way to 21%. We have now brought it down to 17%, but — and we are watching it. It is a univariate metric even for BL that seems to be working, leave a consumer loan. So in the card business like multiple cards, it’s multiple loans and multiple business loans.
Piran Engineer
Okay. Fair enough. And just lastly on growth or just in terms of scale-up, in car loans, like what percent I’m just trying to think about our distribution reach right now in car loans?
Rajeev Jain
We are in 50 cities. Go ahead.
Piran Engineer
I thought you said the loan book is very small. I just want to get a sense of the distribution reach and like how big we can become over the medium to long term?
Rajeev Jain
It can be very big. Piran, the issue is used car and new car put together must make 13%, 14% ROE. If it doesn’t make, I can grow the business or new car, it took us five years to get to INR300 crores. You took us only 1.5 years in used cars. It is down to INR200 crores right now, given the pressure in used car in the last six months. New car is holding very well I must say, but there’s very little money to be made. So we have artificially held the business that INR350 crores of new origination a month. It is not allowed to do more than that.
Piran Engineer
Got it. Okay. That’s it from my end. Thank you and wish you all the best.
Rajeev Jain
Thank you.
Operator
Thank you. We have our next question from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah. Thanks for taking the question. Sorry, again, touching upon the leadership transitioning. You indicated that the Board has indicated that over six months, you need to give a detailed succession planning, but at the same point in time, you indicated that to avoid any ambiguity, it will be closer to FY ’28 wherein the plans will be rebuild? Is that correct? So maybe over like 2.5 years, it will just be again like preparing the transitioning, but last time, maybe three years back we made it public in terms of how it is happening. But I think this time, it will be more internal, and it will not be made public. Is that the correct reading?
Rajeev Jain
Yes. As Viral said, what are the learnings, it’s one of the learnings.
Kunal Shah
Okay. But anything with respect to the corporate structuring, maybe it was quite multi layered in terms of, like, say, a lot many changes have happened?
Rajeev Jain
Corporate structure, so Kunal, there are no changes envisaged at all.
Kunal Shah
No changes in terms of the corporate structure which has been planned or maybe which was indicated over the last couple of years.
Rajeev Jain
None.
Kunal Shah
Yes. Sure. And secondly, with respect to MSME, so you indicated maybe that’s going through this stress. But when we look at it in terms of the recognition where we are and provisioning also, I was just looking at it maybe in terms of the coverage ratios across Stage 2 and Stage 3 is coming off. I believe that it’s because the newer pool, which is sitting in that and which would call for a lower provisioning. But then maybe with the seasoning of the portfolio, do we see again the provisioning requirements going up in the MSME because of the stress we had indicated?
Sandeep Jain
The overall provisioning coverage has multiple assets, including the composition of the overall balance sheet because different products have different coverage ratios. That’s one thing. Second, as Rajeev alluded to, we have done INR219 crores worth of standard accounts restructuring. These accounts generally carry a lower provisioning compared to normal Stage 3 accounts. That has also pulled down the overall PCR number from 53.73% to 52%. So that’s only otherwise, there’s no structural change in the provisioning coverage ratio.
Kunal Shah
Sir, is it fair to assume this restructuring is in SME because that’s the only SME and commercial lending is the only place where in provisioning coverage is coming up. I believe commercial lending is more of a recovery, but MSME is because of restructuring?
Sandeep Jain
Yes, it’s MSME mainly.
Kunal Shah
Okay. Got it. Perfect. Thanks a lot. Yeah.
Operator
Thank you. Our next question is from the line of Kuntal Shah from Oaklane Capital. Please go ahead.
Kuntal Shah
Hi, thanks for taking my call and Rajeev thanks to have you back on the call. So we heard Bajaj has tied up with Airtel and which was supposed to accelerate our customers’ franchisee and increase the reach also. And LRS also talked about 200 million kind of numbers targeted. But when you look at Y-o-Y, our customer addition momentum has slowed down and so as cross-selling, I believe from 3.8% to 3.2% and 3.2% to 3.1%. Can you throw some light on that?
And second is, you said AI is a transformative year this year 2026, but we see insurance, AMC, healthcare, etc., all sitting in parent, broking, distribution, lending, sitting in your company. So how does this work AI strategy in terms of synergies, cost reduction, cross-sell. Shouldn’t it be a common stack and common outcomes and how do you achieve that?
Rajeev Jain
Yes. So Kuntal, 4.7 million new customer acquisition after last two years of record 15 million and 16 million, even I’m a little surprised at time. Thank God [Foreign Speech]. As much in a lighter vein, as on a serious point, I think we build distribution which is able to generate that kind of top of funnel. Mind you in the private sector, there will be only two, three players and we are much younger, who are above 100 million franchise. So and we can see a clear road map yes, this year, we’ll probably end at 120 million. So that’s just one. This will be the run rate Kuntal between 14 million and 16 million plus/minus is how you should pencil the number. We are working on strategic partnerships and so on and so forth. So there’s a lot of dry powder that is being still being built to ensure that we can generate this momentum. So whether it is just let me give you a texture on this as to one is strategic partnerships.
Second is you could you could not take a CD loan approval on the app. You could always say than earlier, the approval that used to be 5% because the risk engine used to be distinct from that of what runs at the store. Now it was a very complex technically very complex architecture, which took us if I may say so a few years to build. We’ve taken 18 months to build that out when it struck us that this can be a large engine that not everybody wants to buy and insta EMI card. Some people may just want to take it a phone — loan for a phone and so on and so forth. It has just gone live on the app for 10%.
Sandeep Jain
We are right now at 15%.
Rajeev Jain
15% of the customers, we foresee that this could give us 2 million to 3 million new customers a year who would take the approval in the app exactly for the same product, walk into the store and out in out in — sorry, so we are continuing to invest in top of the funnel to make sure that it remains active and energized. On the second point, Kuntal, the way the group is organized it, it’s a federal structure. We allow companies to be independent. We allow companies to make their own decisions. Some of the companies, which have larger profit pool are significantly and profit pool leads to investment pool. Investment pool leads to ability to deploy, as I just presented in AGM, 150 people we dedicated on January 1 to AI. Not too many companies would have the profit pool to deploy that level of talent on a given day. So — but we are there to assist group companies and we are assisting them as they travese through their journey on AI. But we will lead the way is what I can reasonably tell you.
Does that answer Kuntal partially, mostly?
Kuntal Shah
Partially, yes. But common, unified super app for what I think makes sense from text…
Rajeev Jain
Okay, so let me make the point. If you, if you’re on, if you’re an Apple now, if you go to share market on the app, you are seeing very tightly integrated and in the next three months it would have completely — you will be able to see a portfolio on a static basis in the app. BALIC has gone live on our app. See, our app to that extent will be the — is the super app, if I may say so, because it will have ending this year, 90 million customers. It has a distribution infrastructure and in the process of working with the respective group companies, we are elevating the standards, if that is what you mean, indirectly. Let me make that point.
It has helped elevate BFSL. They didn’t have this infrastructure of this scale. With BALIC over the last nine months, you’ve done the same thing. So we are working company by company. We’ve gone open architecture on home loans let me tell you. If you go to our app, you will actually see that we offer five home loan companies, not just group company. You’ve gone open architecture. So it is, I don’t, I never use the word super app, but my ambition or our ambition as a firm in 2020 was always that. But I always told people, you don’t make super app, you become super app. I think there is a distinct difference.
You can’t say I want to be super app. You have to do a set of things over a long period of time. So like government services has just gone live. You can access a whole host of government services. I think ending July. Ending July, whole host of government services you can access on the app. Now that’s really what Alibaba and when I, when we looked at in 2020, we never talked about it. That’s what we looked at that Alipay was offering a whole host of government services integrated. So Aadhaar ID to — sorry ONDC. We’re now doing 30,000 orders a a month on ONDC. So. So I think we will become super app one day if we stay at it, you know, so.
Kuntal Shah
Does it mean you will tie with more fintech which a lot of customers in payments in moving money from. Profit pools or nothing like that. Because you are.
Rajeev Jain
No. No such thing. No.
Kuntal Shah
Okay. Okay, thanks. Thank you.
Rajeev Jain
We remain focused on financial. Thank you.
Operator
Thank you. Our next question is from the line of Abhishek M from HSBC. Please go ahead.
Abhishek M
Yeah. Hi, good evening and thanks for taking my question. Good to have you back, Rajeev. So the first one is going back to SME. Can you give some color on the book, how much of it is unsecured, how much of it is professional loans? And is — are those the parts where you’re seeing basically maximum stress? Also, what are the credit actions you have taken? So any examples you can give that will help us understand what’s happening. And the third is just — is it going to remain slow or there are subsegments or some other segments there which can accelerate — which you can accelerate going forward?
Rajeev Jain
As I said, Abhishek, at this point in time, it will remain slow only. I think, as I said, 17 industries we track, 13 are showing slowdown and three are showing contraction and the credit supply has got choked. So it’s virtually a perfect storm in a way and it’s come to a sudden — let me make the third order point, that it’s come a little too suddenly. So that itself doesn’t prepare you for it. But it is what it is, thankfully, we are reasonably diverse. In that, let me tell you, to the point you asked a rightful question that — just go to Investor deck, MSME portfolio is 60. Just go to — INR50,000 crores.
In that, principally, doctors is INR15,000 crores. Even there, we are seeing pressure. Let me tell you. So this segment did not trouble us even in COVID actually. I mean they went slow, but they never — this segment is also suddenly troubled at INR52,000 crores out of that — what you see on panel 46, the INR15,000 crores is doctors. It’s virtually a $2 billion business. We’ve run that for 15 years. It has been always been 99% current kind of portfolio. So — but that problem is smaller than MSME. Let me make that point. The BL problem is a little more pronounced. But what we are doing is as I said, early MOB from bounce to 3 MOB to 6 MOB to 9 MOB. And that is not just for I will reinforce the point. That is not just for SME for across businesses since February, I would say we are going hammer and tongs. And we don’t care about what does that mean to growth. We are — we have to just — this is what has to go all lines, 3 MOB, 6 MOB, 9 MOB and 12 MOB has to go below pre-COVID.
Abhishek M
Okay. How much would be the total unsecured in this book in the INR50,000 crore?
Rajeev Jain
INR50,000 crores is entirely unsecured. The mortgage sits in mortgage and so on and so forth. So if you see in the panel you see BH — BFL mortgage. Right? So you see INR27,000 crore so and so on and so forth. So the classification is exactly as it is.
Abhishek M
So. Yeah, sorry, sorry. Please go ahead. Sorry. The other observation I had is that since it is mostly unsecured, typically when you see an unsecured GS2, GS3 provisioning it jumps from 40%, 50% in GS2 to around 70%, 80% because you know A lot of it flows forward, but in MSME it’s 42% going to 49%. So there’s not much provision build up that’s happened in the book when it’s flowed forward from GS2 to GS3. So is it safe to say that that buildup will happen given that most of the forward flows are unsecured?
Sandeep Jain
Abhishek, that’s what I was trying to clarify earlier as well. Because the number of customers who have been or amount of customers who have been restructured from Stage 1 and have been accordingly classified as Stage 3 has actually pulled down the provisioning of Stage 3. This customers have high probability of revival and that’s the reason why those customers were chosen for restructuring.
Rajeev Jain
That is exactly…
Abhishek M
Understood. Okay, got it, got it. The second question is on growth. So if I put all the comments together. So a, BHFL has also indicated slightly slower growth this year. Obviously MSME is slowing. Two-, three-wheelers will remain slow. So are there any other segments where you’re looking to pick up slack or do you think 26 by nature is going to be a slower year and then you get back to your medium term growth trajectory in ’27. So ’26, you will probably underachieve or be lower than that growth trajectory. So how are you thinking about this?
Rajeev Jain
I would wait for one more quarter, Abhishek, before we give you a very clear view. Right now I would hold between 23%, 24% but we would have also have a clearer view as we as we complete Q2. So just hold your breath for Q2 and number. [Foreign Speech] But you guys are used to guidance now on decimal. So I’m talking. I do manage expectations. So we’ll…
Abhishek M
Okay, okay, thanks so much. Thanks.
Rajeev Jain
Thank you. Thank you.
Operator
Thank you. The next question comes from the line of Chintan from Autonomous. Please go ahead.
Chintan Joshi
Hi, good evening. Thanks for taking my question. So can I come back on the NII? Like if I see this quarter 4.8% growth in NII, 5.9% growth in AUM. So implicitly it’s a 10 basis point NIM decline. You highlighted this mutual fund investment is that the liquidity buffer which has gone down 20% that’s been parked in that mutual fund investment that’s causing this NIM decline. And how long will you hold that on the book?
Sandeep Jain
Yeah, you’re bang on Chintan. I think the liquidity buffers were deployed more in terms of mutual funds in the last quarter. And the mutual fund income goes and sits in a separate line item which is made given a fair value change. Adjusted for that name was largely fattish on a Q-o-Q basis.
Chintan Joshi
And how long will you hold this position? This duration of…
Sandeep Jain
I think that was specific for quarter because as the rates were coming down the mutual fund results were far, far better compared to government securities. So we moved money from government securities to mutual funds, locked those gain and then we have move back the investment into government securities and T bills which is what we normally do.
Chintan Joshi
Why should this go back up? Because if it becomes liquidity buffer again it will go into GSEC which is also lower, lower NIM. So why should there be a — is it just denominator…
Sandeep Jain
What you see as NIM some is [Technical Issues] sitting somewhere else.
Chintan Joshi
Then the second one was on MSME. You gave some numbers, 2.5 went to 11 and then came down to INR7,000 crore. What were you talking about? Are these monthly disbursements you’re talking about on MSME.
Rajeev Jain
Yes. Of business loans as published in Bureau. Yes.
Chintan Joshi
Yes, monthly disbursements. Okay. And can you, do you have a view on why this is happening that because we haven’t heard any of the other kind of banks talk about it. You’re talking about it as a clear pain point not just for yourself but also the industry. So just wondering, if you have some visibility on like is it the customer group that NBFC started versus banks or is it something specific that is that you are seeing?
Rajeev Jain
Look, business loans we’ve done for 18 years. We have seen other than one lender in the private bank space who has done this consistently. We are the only two lenders who have done this consistently over the last 18 years. This is a business which is two steps forward, one step backward. Two steps forward, one step backward. That is how the nature of the business is. So there is, there’s nothing to read in the business. We did we — is it, is it a little bit of over exuberance? And this segment takes, unfortunately. Let me make that point.
This segment does take what is offered. It is as I used the word politely that it is as financial literate as it gets. So it is leverage that you should read as a principal driver. So but it’s come a little. It didn’t — It didn’t come. It didn’t come slowly. Came a little too suddenly is the only point I would make. We are also a little surprised by it.
Chintan Joshi
I mean it’s primarily unsecured. So I suppose that’s why the banks aren’t talking about it. But like you know what do you see as the turning point then like you know what causes it to kind of improve? Because the slowdown that you talked about on the macro is very broad based. We can see it in a lot of lot of economic indicators and it is quite, it’s already slowed down quite a lot. So I’m just wondering incrementally how does this evolve over the next kind of six, nine months?
Rajeev Jain
I think as I said Chintan earlier, we are just focusing on early mob as the portfolio churns. This will improve. That is the only way. And that’s why I said this is likely to grow probably single-digit. Now AUM may grow 15-odd percent as Siddhant is saying but in terms of disbursement growth we are going to be flat/lower for the rest of the year.
Chintan Joshi
Okay, and the final one perhaps you know, for Sandeep, could you just give us some sense of how much of the rate cut has passed through the liability side already and some color on the asset side as well. But asset is slightly easier liabilities where I would like some color.
Sandeep Jain
So the liability side very clearly NCD has seen almost 90 basis point of improvement in rates. We are borrowing NCD at 8% corridor. We are now borrowing between 7% and 7.1% mostly. That’s one, so clear pass-through has come in but that’s for incremental right? So old books it’s at old rate only. Banks, we have 85% of the bank money is on external benchmark rate that has seen transmission as we speak today. Full transmission of 100 basis points and the balance 15% of bank monies are on MCLR where partial transmission so far has come.
CPS get repriced very quickly. It’s market driven instrument all depends. It all depends on liquidity, position, etc. We have seen 80 basis point, 90 basis point improvement in CP rates as well in the recent times. So pass-throughs have started coming in liabilities. But because the library book also needs to churn, the overall improvement that we have seen in quarter one is 20 basis points. The pass one assets also is moving in tandem. So all the customers who are variable in nature if they are linked to repo or extra benchmark they have seen the full pass through. If the customers are linked to Bajaj FRR, they are seeing the pass-through as the cost of fund for the companies easing out which is how banks transmit MCLR cuts as well. As a result of that the margin for quarter one remain broadly same as quarter four — quarter one remain broadly as quarter one — quarter four.
Chintan Joshi
Okay. So the NIM improvement is now driven by the better liability transmission as we go forward?
Rajeev Jain
Yes, yes, yes, yes. Just to reinforce the point. That’s why the decision even on slowing down deposits so that whatever gains we can accrue.
Sandeep Jain
In fact that’s an important one. I forgot to make that point. Deposits, we were originating almost INR1,400 crores, INR1,500 crores of deposits on a monthly basis, retail deposits. We were paying probably 70, 80 basis point higher than — higher than the monies that we are borrowing through a combination of bank and NCDs. We have priced now retail deposit exactly the same price as the NCD and bank money is for us. As a result, the volumes have come down for now. It’s at one-third the volume where we were earlier. But we are quite happy at this point in time because the idea is also to ensure that we proactively take care of NIM pricing as well for the customers. In that context, bringing down deposit at this point in time seems a rightful option for us to pursue. The number has come down on contribution basis from 20% to 19%. On a consolidated balance sheet this will go down to probably 16% by end of this year.
Chintan Joshi
Thank you for all that color.
Operator
Thank you. The next question is from the line of Abhijit from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah, thank you for taking the question. I stepped away from my desk for a couple of minutes. So let me know if any of my questions is a repetition. I can look up the record. So two things I want to understand first a clarification. Rajeev sir, you said AUM growth guidance of 23%, 24% versus 24%, 25% that we guided last quarter. So is it factoring in the lower guidance given by Bajaj Housing Finance yesterday?
Rajeev Jain
As I was saying, [Foreign Speech] don’t read anything into it. Wait till Q2 end. You know, we’ll also have greater clarity.
Abhijit Tibrewal
Got it.
Rajeev Jain
Right now, as Sandeep likes to say, it’s not guidance, it’s assessment. The assessment is what we published in as part of Q4 holds.
Abhijit Tibrewal
Got it. No, sir, the reason, the only reason I was asking is in the past we have seen that whenever certain segments have shown stress like what you’re seeing in maybe MSME and two-wheeler, we have consciously slowed down which we have shared. So I mean are there other levers in other product segments that we can flex to deliver on the assessment that we made in the last quarter.
Rajeev Jain
Earlier also question was asked, I mean gold loan is adding net INR2,000 crores of even a quarter now let me make a point. Auto still adding. So there are the LAP, CV, tractor, affordable home loans we are building that’s bringing to add INR75 crores, INR80 crores of volume per month. So we have, see in the last three years, I just want to reiterate that in the last three years we launched all that that we wanted to launch. And now the entire focus is on optimizing and ensuring that they start to deliver the goal with which they were set up which is to generate diversification and to deliver profitability.
So no more investments are being given to any of the new lines of business. We have, we have, we have given them enough investment capital. Now they have to deliver goods and which they are all committed to or at least are committing to deliver. I have some of them sitting in front of me. That’s not making the point. We have enough, we have enough firepower to be able to generate the AUM growth. We have to balance it with profit growth. That’s the only point Abhijit I would make to you.
Abhijit Tibrewal
Got it sir. So the second question I had was about this, this working capital loans/business loans. I think you yourself acknowledged that every such MSME business owner, right typically gives out these files to three, four lenders. We have heard from multiple DSAs in the past that there was a time and not very long back where I mean if I were to just quote them, right, [Foreign Speech]. So what I’m trying to understand is now that you acknowledge that this storm was sudden and which is where we are slowing down, I’m just thinking aloud here that if everyone starts rationing credit in business loans/working capital loans, do you think that we might again kind of get into some kind of a credit cycle in this segment? But the reason I ask is we saw that in all unsecured, all other unsecured segments earlier be it credit cards, microfinance?
Rajeev Jain
No. The only difference I would make this is a customer between INR7 crores to INR15 crores of turnover. So he is not the — he is not the credit card and he’s not the consumption loan customer. I think it’s just extremely important for you to note that. He had the ability to borrow let’s say INR60 lakhs, INR70 lakhs and pay INR60 lakhs, INR70 lakhs. This is not an average self-employed customer. This is INR7 crore to INR15 crore plus/minus customer who can over leverage at times but who need not fall. So the flow rates will not be like a, if you are eluding — let me make that point clearly. It’s not like STPL conversation. Okay? This is a. It’s a much better customer quality. That’s the nature of the customer.
That’s why we are offering. We don’t offer restructuring in our consumption loans because if he flows, he flows. Here is a business person who needs to tide over and that’s why we are offering restructuring option. We used to do earlier, used to do lesser, now we’re doing more so and we have latitude available to do so and we need to help that customer because he’s a good customer. So it’s very different from your the past what we’ve seen STPL or credit card customer or PL customer.
Abhijit Tibrewal
Got it sir. And then just a related question because you spoke about leverage even building up in this customer segment where you said, I mean turnovers between INR7 crores — 70 crores, INR7 crores to INR17 crores. Just trying to understand. Just trying to understand. I mean we saw that in a small ticket earlier, right? And now even businesses with higher turnovers kind of showing that over leveraging stress. So if all of this is because of weak macroeconomic slowdown, what is it telling us now about the health of the MSME segment in India?
Rajeev Jain
You know as I said it’s come little too suddenly, Abhijit, wait for one more quarter. We’ll have lot greater clarity is all I would say. I think you’ve discussed MSME is the next frontier today quite a lot. So it’s not that amplified to be given that much time. It is an issue but not — I mean our bar is very high. We are watching, let me tell you. Just let me make one point that I’ve not made so far. We are watching offers data on these customers. That’s not necessarily giving you a good picture is the only point I would leave you with. It’s a biased sample. I am looking at those, those who are bouncing, how is their performance. So to be fair, while I made that point earlier, it’s a biased sample. The biased sample is not stating a good story. No, no. I was just making to a point to Fakhari. If you have a point to make you can make on full portfolio.
Fakhari Sarjan
So I’ll just add to what Rajeev has. Been saying and I know that we’ve discussed MSME a lot. So two things as we’ve talked about. Macro is shrinking. 13 out of the 17 industry segments are shrinking. Credit supply, even when you look at credit deployment reports of RBI across these industries are shrinking. As a result of that what could be tending to happen is these business are facing a higher working capital cycle requirement. At the same time, given the stress that has been coming through with their repayments, banks are slowing down lending to them particularly in the unsecured space. So it has created a perfect storm. We just need to ride through this as Rajeev said, continue to watch the vintages, continue to take action in terms of people who are demonstrating leverage levels or affordability levels in terms of their cash flows or debt servicing capabilities and take corrective action, that’s all.
Abhijit Tibrewal
Got it. This is very useful. Thank you so much.
Rajeev Jain
Thank you, Abhijit.
Operator
Thank you.
Rajeev Jain
Are we done for the day?
Operator
Yes. That would be our last question for today. I would now like to hand the conference over to Mr. Ajit Kumar for closing comments. Over to you, sir.
Ajit Kumar
Thank you, Rajeev sir, Sandeep and Bajaj Finance team. Do you want to make any closing comments before we conclude.
Rajeev Jain
No. Good night is the only closing comment. It’s a long day. Thank you, all. Thank you, all.
Operator
[Operator Closing Remarks]