BANDHAN BANK LTD (NSE: BANDHANBNK) Q3 2025 Earnings Call dated Jan. 31, 2025
Corporate Participants:
Vikash Mundhra — Head of Investor Relations
Partha Pratim Sengupta — Managing Director & Chief Executive Officer
Rajeev Mantri — Chief Financial Officer
Unidentified Speaker
Analysts:
Hardik Shah — Analyst
Vatsal Shah — Analyst
Roshny Munshi — Analyst
Vinayak Agarwal — Analyst
Unidentified Participant
Punit Bahlani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Bank Limited Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during the conference call, please signal an operator star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Vikash Mandra. Thank you, and over to you, sir.
Vikash Mundhra — Head of Investor Relations
Thank you, Sejal. Good evening, everyone, and a warm welcome to all the participants. It’s our pleasure to welcome you all to discuss Bandhan Bank’s business and financial performance for the quarter-ending December ’24. We appreciate your time and participation today. We will take this opportunity to provide insight into our operational activities, including any significant achievements or challenges. We’ll also touch on-market conditions, strategic initiatives and any changes in our business environment. To discuss all this in details, we have with us our MD and CEO, Mr Partha Gupta Sar; Executive Director and Chief Operating Officer, Mr Ratan Kumar; Executive Director and Chief Business Officer, Mr Rajenda Kumar; Chief Financial Officer, Mr Rajeev; and myself, Vikash Mundra, Head of Investor Relations, along with other senior management team of the Bank. We’ll be happy to provide you with any clarity required from the current quarter numbers and the way forward. Now I would like to request our MD and CEO, Mr sir, to brief you all on Bank’s performance. Over to you, sir.
Partha Pratim Sengupta — Managing Director & Chief Executive Officer
Thank you, Vikash. A very good evening to you all and wish you and your families all the very best for 2025. At the outset, let me welcome you to the Q3 earnings call of Bank and I look-forward to regular interaction with you in the near-future. First, let me apologize that I developed a bell on my face, so my words may get a little bit jumbled, so kindly excuse me for that. As you all are aware, to the approval of the RBI, the Board had approved my appointed — appointment as MD and CEO of the Bank with effect from 1st November 2024 for a period of three years. Banghan was born as a microfinance institution about 24 years ago. It was an NU at that time that it evolved to an MFI and then to a universal bank and now is transitioning to a rapidly-growing digital universal bank with a focus on enhancing customer experience. And at this stage, let me first acknowledge the contribution of my predecessor, Ghos, the founder of the Bank; Tusri Ratan Kumarkesh, who was the Interim CEO after Mr Ghosh left and the other Executive Director,, who is also the Chief Business Officer of the Bank in managing the Bank during the months prior to my appointment. It is my privilege to lead Bandan Bank and I am confident that together with my team, we will be committed to the execution of the Bundan II strategy. Let me start by giving a brief on my background. So I have been a provisionary Officer in State Bank of India and has been groomed in various fields, both in retail and corporate and I close-up to the level of Deputy Managing Director and the Chief Credit Officer of the Bank. From there I was appointed as the Managing Director and Chief Executive Officer of Indian Overseas Bank and now I have been appointed as the MD and CEO of Bank. I’m proud of the team at Bandan. We have the talent and the experience to deliver. As you may be aware, we have onboarded talent in the various verticals from the best institutions in banking, both private and public sector banks. And together with them, I’m confident that we will achieve the goal we have set for ourselves. Just to add, the success of any organization depends on its people and I’m proud to say that in my experience over the last three months as seen a team which has the passion, commitment and the will to deliver. Since the time I have been here, I’ve undertaken some few strategic decisions and would like to highlight them and just want you all that the steps that has been taken to help the bank for the strength and in its. The first one is the formation of a transformation management team. The dedicated transformation management team will be essential for driving innovations, improving operational efficiency and ensuring the institution adapts the fast-pace changes in technology, regulations and customer expectations. The transformation management team will spearhead the integration of the digital tools and automation streamlined process to reduce cost and enhance customer experiences by implementing personalized services. Additionally, the transformation team will be tasked to foster a culture of compliance, agility and continuous improvement. By driving strategic change and aligning new technologies with business goals, the team would help the bank feature proof its operations and stay ahead of the industry trends. We are appointed a senior advisor, a reputed senior bankers to work with our team and share his wide experience in having driven transformation projects in a large commercial bank. The Transformation management office comprises a cross-functional team, which will report to the transformation committee, which will be chaired by me. The second one is the formation of Digital and Transaction Excellence Unit. The bank has created a digital and transaction Excellence unit under the leadership of Executive Director and Chief Operating Officer to enhance focus, efficiency and expertise in managing transactions in transaction banking, payment solutions and digital customer journey. It will also help in augmenting granular deposits and fee-based income through various transaction capabilities, payment products and digital solutions. DTU team will build expertise combining technical, functional and commercial solutions catering to the corporate and consumer segment. The third one is the setting up of a market intelligence team. This team processes and synthesizes unstructured information in the public domain and outside on our commercial borrowers using generative artificial intelligence and large language models. This process helps getting us a holistic view of the new applicants, develop awareness in case of early warning signals and also facilitate taking appropriate risk mitigation steps whenever necessary, which helps to gauge the sentiment about our SME and corporate borrowers on a near real-time basis. The next one is setting up of a credit administration department. This is a strategic step to oversee and strengthen the brand’s credit processes and lifecycle. This team will also handle areas like post-disbursement monitoring, NPA monitoring, review and improvement of underwriting standards, among others, also the entire bank’s lending business across all verticals. This will help the bank’s overall strategic alignment to enhance operational efficiency. I also want to take this opportunity to outline some of the key areas of focus that will guide our strategy and ensure we continue to deliver sustainable value for our stakeholders. Resilient liability franchise. The bank will have a strong focus on garnering stable granular retail deposits. As you will observe, in Q3, our deposit level have been marginally lower. This has been a conscious. We will be endeavoring to drive deposit growth higher than the advances growth to ensure long-term sustainability. We are confident of achieving this objective through leveraging our digital and branch network aided by cross-sell of deposits products across all of our all asset teams. The second one is that to grow asset book with improved secured mix. The bank is focusing on a more secular approach on asset growth. We will focus on the secured mix. We will focus on products like home loan, gold loan, auto and CVNC that is the commercial vehicle and commercial equipment secured book of commercial banking segment. We are also looking to build a strong MSME book as it has a huge potential. We endeavor to achieve a secured mix of 55% plus by financial year ’27. Growth in EV book will also continue elevate at a relatively lower pace. The next is the risk governance and compliance. As carrier bankers, we understand the importance of risk and compliance. We are committed to embedded risk management and compliance into every aspect of our business. This means enhancing its internal frameworks, adopting advanced tools for real-time monitoring and fostering our mindset across all levels of the organization where accountability and integrity take center stage. Our focus is on being proactive rather than reactive, ensuring we stay ahead of potential risks while maintaining the highest-level of governance. Enhancing customer experience. In today’s world, customer is at the heart of everything we do. Our focus is on creating seamless personalized and meaningful interactions at every touch point. We are leveraging customer insights, design products and services that meet evolving needs and expectations, ensuring a consistently superior experience. While digital expansion remains a priority, we are equally committed to optimizing and expanding our branch network to stay closer to our customers. Improvement in asset quality. Asset quality continues to be a priority focus area. As we grow our loan book, we will continue to ensure that prudent underwriting standards and robust monitoring mechanisms guide every lending decisions. Relentless focus by frontline and dedicated collection teams will drive improvement in asset quality through lower sequences and improved collections. Enhanced usage and adoption of analytics along with the implementation of relevant technology tools will aid us in improving loan origination quality and host collections. Driving and improving efficiency. Bandan has a strong employee base. While we hire new talent, it is equally important to upskill and reskill the existing employees waste to enhance productivity and efficiency for which the bank is investing on trading and development and also on cutting-edge technology and digital solutions. It is for the requirement of enhanced customer service and operational efficiencies. Let me now move to the quarterly performance of the bank. In recent times, the banking sector has faced tight liquidity conditions and an extremely competitive landscape for rank deposits. Further, in the current year, the microfinance sector has been facing headwinds and witnessing elevated risk in the portfolio quality. We continue to focus on building the liability franchise and our growth in deposits exceeds the growth in advances. In this quarter, advances book was at INR1.32 lakh crores with a Y-to-Y growth of 14% on the deposit side, deposit stands at INR1.41 lakh crore with a Y-to-Y growth of 20%, which is higher than the advances growth. The de-growth over the last quarter in deposits is largely driven by the reduction in wallet deposits, which has been taken as a strategic decision. Our share of retail deposits, CASA plus retail term deposits is now 69%. CASA deposits grew 6% Y-to-Y with CASA level share is nearly 32%. We are making steady progress on our diversification agenda, whereby in this quarter, we have grown our secured books by 34%. Y-o-Y improving unsecured mix further to 49%. As we look-ahead, we will continue with further diversification on the asset group through faster growth in secured advances and moderate growth in EV advances. As a result, with an increased share of secured advances, we would expect the needs to moderate in future to reflect the underlying risk without losing focus on the need to achieve our return on assets. The deposit market continued to be competitive, resulting in slightly higher-cost of funds. This along with a faster change in-product mix in favor of secured assets that has impacted yields and together with higher slippages led to the moderation of to 6.9% in Q3 financial year ’25. However, on a Nine-Month FY ’25 basis, NIM still remains healthy and stable at 7.3%. Net total income in Q3 FY ’25 was INR3926 crore, an increase of 28% Y-o-Y. This includes one-off gain of INR538 crore on account of CGFMU payout and INR52 crores received from Assam Government. During the quarter, we also had few one-offs, which our CFO, Rajiv will explain in detail. We are committed to focus on asset quality. While currently credit costs are bit elevated, we stand-by our endeavor to target lower credit cost over the next few quarters. So if you look at the nine months performance, the credit cost has come to 2.8%. Net NPA level is at 1.3%, gross NPA level is at 4.7% and we have technically written-off INR1,266 crores during the quarter. The PCR including the write-off is at 85% versus 70% a year back. In Q3 financial year ’25, the Bank reported a PAT of INR426 crores and Nine-Month financial year ’25, the PAT is at INR2,427 crores, a growth of 12% Y-on-Y. On a nine-month financial year ’25 basis, we reported an annualized ROA of 1.8% and ROE of 14%, which we believe is comfortable considering the elevated stress in the microfinance segment. In a nutshell, I would say we have had a tough quarter, but I would say it is a more challenging quarter, but given the guardrills and efficiencies we have built into our operations, I am confident we will make significant strides in achieving the targets set-in the Abundant II strategy. I now hand over to Rajiv Mantri, CFO to take you through the details of the Q3 financials. Thank you.
Rajeev Mantri — Chief Financial Officer
Thank you,, sir, and welcome everyone to the earnings call. Before I deep-dive into the business numbers, let me begin highlighting the few one-offs that we had during the quarter. In the non-interest income, we had two one-offs, which had a positive impact on our overall P&L. Firstly, we received the claim payout from CGSMU stands for credit guarantee funds for micro units and the total income booked on account of the same is INR538 crores. And yes, sorry, I’ll just repeat that. So in the other income, we had two one-offs. One was relating to the claim payout from CGFMU amounting to INR538 crores, which was accounted as part of the income in this quarter. Second, we received a net amount of INR52 crores against microfinance loans from the Assam government under the Assam scheme. So in the provision line-item, we had two one-offs. First, we did a technical write-off of INR1,266 crores in the EEB portfolio as a result of which an incremental provision of INR336 crores was made during the quarter. Second, there is a provision of INR30 crores relating to non-banking assets, which also was done during the quarter. And last one-off was relating to the staff expenses, wherein we had a one-off of INR166 crores on account of change in accounting policy with respect to ESOPs, employee stock option plans. We do not foresee any such material cost in the near-future for the same. With that, let us move to the business numbers for the quarter. Starting with advances, as at December 2024, gross advances stood at INR1.32 lakh crore, a growth of 14% year-on-year and 1% quarter-on-quarter. However, if we adjust for the INR1,266 crores of write-off done during the quarter, growth in gross advances would have been higher at 15% year-on-year and 2% quarter-on-quarter, respectively. In-line with the strategic plan of product diversification, the focus is on growing the share of secured book such as housing, commercial banking and secured retail products. During the quarter, growth in advances was primarily supported by growth in the secured asset books, which grew by 34% year-on-year. Our secured book now constitutes nearly 49% of total advances. During the quarter, EV portfolio witnessed a decline of 3% year-on-year and 5% quarter-on-quarter at INR56,118 crores as a result of portfolio controls in the wake of elevated risks in the industry. However, if we adjust for the write-off, EV book would have been largely flat on a year-on-year basis. Growth in the non-EV book representing 58% of advances was strong at 30% year-on-year and 6% sequentially. This was contributed by retail assets, which grew at 95% year-on-year. Commercial banking assets, which grew 38% year-on-year and housing, which grew at 19% year-on-year, adjusting for the IBPC portfolio. Retail asset growth is driven largely by auto loans, commercial vehicle and equipment and gold loans. From a business mix perspective, EV Group lending now constitutes 27% of the total advances, small-business and agri loans at 15%; Commercial banking 26%, housing 25% and retail assets 7% respectively. The bank has also made good progress on geographical diversification, whereby share of advances in the East and Northeast regions have reduced by 14% from around 53% in FY 2022 to 39% by this quarter and it has increased in north, West and South regions by 3%, 3% and 7% respectively over the same-period. The top-five states, namely West Bengal, Maharashtra, Bihar, Gujarat and Madhya Pradesh contributed 59% of the gross advances. West Bengal contributed 23% of advances versus 25% in Q3 FY ’24. I’ll move over to liabilities. As at, 31, 2024, total deposits stood at INR1.41 lakh crore as against INR1.17 lakh crore in the previous year same quarter, a growth of 20%, which is higher than our advances growth. The bank continues to focus on granular and stable retail deposits. The total retail deposit, which is CASA plus retail term deposits grew by 16% year-on-year, of which the growth in the retail term deposits was higher at 26% year-on-year. CASA deposits stood at INR44,735 crores, which has increased by 6% year-on-year. The growth is on the softer side, but it is largely in-line with the industry trend we see on CASA. Within CASA, savings accounts have grown by 8% year-on-year and the bank continues to focus on building relationships across its customer-base, strengthen its value proposition and garner new customers. The CASA ratio stands at 32%. Though the share of CASA has declined on a sequential basis, we have witnessed strong growth of 6% quarter-on-quarter in the retail term deposits, leading to increase in the share of overall retail deposits, which stood at 69% versus 68% in the previous quarter. The top-five states, namely West Bengal, Maharashtra, UP, Odisha and Delhi contributed 65% of total deposits. West Bengal contributed 40% of the deposits versus 42% a year-ago, reflecting the reduced geographic concentration. I’ll move over to collections and asset quality. The bank’s overall collection efficiency, excluding NPA in Q3 FY ’25 was marginally lower at 97.6% as compared to 98.2% in Q2 FY ’25. For the EV book, the collection efficiency excluding NPA in this quarter declined to 97.4% versus 98.1% in the previous quarter. Reflecting the stress in MFI segment, collection efficiency for the non-EV book also declined to 98.3% in Q3 FY ’25 versus 98.7% in Q2 FY ’25. I would, however, mention that the collection efficiency in West Bengal and Assam have largely remained stable at 98.8% and 99.2% respectively over the last couple of quarters. We have, however, seen some deterioration in the rest of India book from a collection efficiency perspective from 97.2% in Q2 FY ’25 to 96.3% in Q3. On the asset quality front, the bank has seen incremental stress this quarter higher than expectation. The gross slippages for this quarter was INR1,621 crores. The increase was primarily in the EB book where it increased to INR1,196 crores as compared to INR752 crores in the previous quarter. Upgradation and recovery was also lower at INR282 crores versus INR304 crores in Q2 FY ’25, resulting in further increase in net slippages. The overall EV DPD pool, which is SMA-0, 1 and 2 was at INR2,118 crores, representing 3.8% versus 3.3% of EV advances in the last quarter and reflecting an absolute increase of INR134 crores quarter-on-quarter. Within this, the SMA-1 and 2 buckets witness upticks. SMA-1 book increased by INR98 crores from INR563 crores, representing 0.9% in Q2 FY ’25 to INR661 crores, representing 1.2%. And for SMA-2 book, it increased by INR113 crores from INR538 crores, which is 0.9% in the last quarter to INR651 crores, which is 1.2% in this quarter. We have, however, seen positive traction on the SMA zero bucket, whereby the SMA zero book has decreased by INR77 crores from INR883 crores, 1.5% in last quarter to INR806 crores, which represents 1.4% in this quarter. This is an early indication of the containment of movement from standard book to DPD book. While these are early days, we are working hard on the collection mechanism to enhance the overall portfolio quality of EB book and we’ll be very watchful of the risk which is there in the industry. Given the higher gross slippages and lower recoveries and upgrades, credit cost for this quarter was higher at 4.1%. Excluding the impact of technical write-off, this would be at 3.1%. For the nine months ended December 2024, the credit cost was at 2.6% and excluding the impact of the technical write-off, it would be at 2.2%. Gross NPA ratio as at the end of December ’24 was 4.7%. Net NPA was 1.3% and PCR excluding write-off was 73.5% and including the write-offs was 85.4%. I’ll move to the profitability. Coming to the quarterly P&L, NII at INR2,832830 crores grew by 12% year-on-year. Sequentially, there was a decline of 4% and that’s primarily on account of the product mix change towards higher secured and the impact of higher slippages. Our net interest margin for the quarter was 6.9% compared to 7.4% in the previous quarter. The sequential decline of 50 basis-points in NIM is primarily contributed by the impact of the change in advances mix towards secured as well as the higher certificates, as I mentioned. On a nine-month basis, the NIM was stable at 7.3%, which is within our guided range of 7% to 7.5% for this financial year our net total income in Q3 was INR3,926 crores, an increase of 28% year-on-year. This includes the one-off gain of INR538 crores on account of CGFME payout and INR52 crores from the government as we highlighted earlier. Operating expenses grew by 35%. However, if we net out the impact of the ESOP accounting change of INR166 crores, the year-on-year growth in expenses would be 23%. The increase in the expenses is a result of investment in technology as well as growth in the volume growth for other than EV business. And during the quarter, the expenses — operating expenses to average asset ratio was at 4.2% and adjusted for the one-offs, this would stand at 3.8%. On for nine months basis, the opex to asset ratio was 3.9%. Adjusted for one-offs, it would be 3.8%. Provisions during the quarter was INR1,376 crores. As we mentioned earlier, this included one-offs relating to the technical write-off impact, which was INR336 crores and INR30 crores pertaining to non-banking assets. We have been very prudent in making provisions on the EV portfolio in view of the uncertainty and the stress we are seeing in the MFI sector. Overall, as a result, operating profit for the quarter was INR2021 crores, registering a growth of 22% year-on-year and a net profit was INR426 crores in the quarter compared to INR733 crores in the Q3 FY ’24. The lower profit is primarily on account of higher provisions due to the stress in the MFI portfolio and the impact of the technical write-offs that we had taken. Quickly moving on to the nine months profitability. For the nine months ended December ’24, NII was INR8784 crores, a growth of 18% year-on-year. Net total income is INR11,002 crore, a growth of 23% year-on-year and operating profit at INR5817 crore, a growth of 21% year-on-year. The bank reported a net profit of INR2427 crores in nine months FY ’25 compared to INR2175 crores in nine months last year, which represented a 12% year-on-year growth. Return on assets was at 1.8% and return-on-equity was 13.8% for the nine months on an annualized basis. Lastly, on capital adequacy, the CRAR was at 16.1%, including the profit for these nine months and that increased from 15.6% in the last quarter. On behalf of the management team, I would once again thank you all for participating in this call and we can now open up for questions.
Questions and Answers:
Operator
Thank very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may test star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Hardik Shah from ICICI Securities. Please go-ahead.
Hardik Shah
Yeah, hi, good evening and congratulations, sir, on your appointment and heading this bank. I have few questions, sir. First, I think in your opening remarks, you mentioned that EEV share — sorry, you mentioned that secured share will rise to from currently 49% to 55% plus. So point well taken, sir. Just wanted to check how would you view the share of EV and because I think in your unsecured you have some proportion of the retail unsecured also. So just wanted to check on by FY ’27 and/or maybe FY ’26 and how do you see the EEV share?
Partha Pratim Sengupta
So let me tell you, as a strategy, we are now going secure on all the areas. So our — I would say the focus will be equally on the other segments that is the housing loan segment and the retail segment and especially on the gold loans and also on the commercial loans and the MSMEs. So EV, the — if one thing just I want to tell you that EV is always has been the asset of the bank and will continue to be an asset. But if I grow, say, 1x in EV, I will grow 3 times in the other segments. So that is our very clear-cut strategy and accordingly, we have framed it. And today if you look at our figures also, we have already increased our secured percentage from 42% to 49%. So if we continue with this trend only, this 55% of percentage what we are focusing will be achieved.
Hardik Shah
Right. So sir, I mean 49% going to 55% plus, this is a straight away reduction in the EV book, right? I mean assuming the retail and secured business
Partha Pratim Sengupta
Making it clear, it is not a reduction in the EV book quantum-wise. It is a percentage growth in the other segments much higher than the EV growth. So that’s what I’d say. If I grow 100 in EV, I will grow 300 in the other segments.
Rajeev Mantri
Yeah, just to supplement, what we are saying is that EV book will also grow, but at a more moderate pace and our secured book will grow at a much faster pace. And as a result of it, the mix will increase for the secured.
Partha Pratim Sengupta
Right.
Hardik Shah
Okay. And sir, secondly on MFI disbursement, right? So usually the 4th-quarter continues to be very strong in terms of disbursement. And this year, of course, the situation is very different. How would you look at the disbursement for the current quarter, I mean Q4? Should it be I mean, how would you look at that
Partha Pratim Sengupta
No. So definitely it will not be as aggressive as we have done it in the past. It would be moderated. And we have already — because of the increase in the delinquencies because of, I would say, in the increase in the slippages, we have put in some guardles. So since the gardens have already been implemented, this will obviously lead to some moderation. So in the current year, the disbursement should be much more moderated and definitely it would be not at the same level as we have done in the last year.
Hardik Shah
So just to add,. Having said that since EV by and large quarter-four
Partha Pratim Sengupta
Is the largest quarter for us in terms of disbursement. We are expecting sizable amount of renewals. They are also, as we said, we will implement the guardrails, but the numbers will obviously be available for us to renewal for the good-quality customer borrowers.
Rajeev Mantri
Yeah, we’ll be very calibrated in the strategy on how to grow on the EV considering the risk in the segment.
Hardik Shah
Right. But it should still be better versus 3Q, right, wherein we have done some INR12,000 crores.
Partha Pratim Sengupta
So it is a likely. Yeah. Yeah,
Unidentified Speaker
Definitely, because as the MD sir has said, we are going for a balanced growth as compared to the EV, that growth will move faster. So definitely we will disburse in the EV book in this quarter and we are expecting a little growth, but not as compared with the last year.
Hardik Shah
Right. Sir, on MFI slippages, right, EV slippages. So we have — you know, we have seen some improvement in SMA zero, but SMA-1 plus 2 is more or less stable. How should we look at the NFI slippages in Q4 and maybe Q1 when tighter guardrails come into picture. So would you be — I mean, would it be fair to assume maybe the similar forward flow to from SMA to NPA until the time we get more comfortable in the external environment or you think we have reached to a level wherein SMA to NPA may should start seeing some improvement?
Partha Pratim Sengupta
So let me tell you that slippages still is a matter of concern. So maybe the level of slippages could not be 1,196 what we have witnessed in Q3, but it will be substantial. So the thing is that not much improvement in the slippages may not be INR1,200 crores, maybe a little close to INR1,000 or maybe like that. But slippages, we are seeing the trend. But at the same time, as you are witnessing, you see that our SMA zero book is improving. So towards delinquency, that percentage is coming down. But those which have already slipped to SME 2 likely chance that most of them would be actually be sleepy, likely chance is that because we have also put some guardrails whereby these borrowers may not get an additional finance at least from us. So there are chances. So we are taking that calculated risk, but the trend is reversing, that trend is also we are witnessing. So we are expecting Q1 of next financial year would be probably a much, much — we will a much, much lower slippage.
Rajeev Mantri
So I think just to supplement, as MD sir mentioned, the SMA zero bucket, we’ve seen slight improvement. Having said which, I think the risk in the industry does continue. So that will have an impact like we’ve seen this quarter. So I think that impact would come through and I will be continuously monitoring how the DPD markets actually move.
Hardik Shah
Sure, sir. Last question, sir, on OpEx. So if I adjust this ESOP adjustment, even then the opex growth will be around 22% roughly and which is clearly higher than the loan growth and maybe NII — maybe the top-line growth. Given the phase where we are in terms of capacity building and you know investment. This opex growth will continue — may continue to remain at maybe this adjusted level of, 20% 22% and higher than loan growth. Will that be a fair assumption?
Partha Pratim Sengupta
So if you look at the opex growth, you’ll find that already, the growth on account of HR that is the salary and other allowance on the account of, this has already almost stagnant. It’s only a INR12 crore crores compared to the previous year. Just if you remove that ESOP accounting, the main — the main growth is on — due to that INR166 crores one-time accounting. So the growth is — because you see one year back, we were creating the systems. So we have to take new talents, take new people and also we have to invest a lot on technology. So these things will now give you the return. So maybe say another two quarters or so for the year, you will get a much, much more return and then the percentage growth will be much, much lower. Investment with technology will continue to grow and so that we cannot avoid because if we want to remain in the present banking scenario, we have to make a lot of investments in technology that will continue to grow. In respect of other expenses, I think that will be moderated, that will definitely come in because productivity will also increase.
Operator
Ladies and gentlemen, we have lost the connection for the current participant. We will move on to the next participant. The next question is from the line of Vasal Shah from Nightstone Capital. Please go-ahead.
Vatsal Shah
Hello. Congratulations for your appointment. So I wanted to know the average maturity of our EV portfolio
Partha Pratim Sengupta
Maturity on
Rajeev Mantri
EV book
Vatsal Shah
Of our EV portfolio.
Partha Pratim Sengupta
So it is mainly two years. The maximum is two years that was average, one-half. Our average is around 18 months. So it varies from one year to two year.
Vatsal Shah
Okay. And if you refer to the slide which is plus two and three, so is it a percentage of borrowers or is it a percentage of our AUM?
Partha Pratim Sengupta
And the percentage of AUM?
Rajeev Mantri
AU, AUM.
Vatsal Shah
Got it. Okay. And lastly, on the yield side, so what is our yield on the EV book? I mean, what yield do we operate at?
Partha Pratim Sengupta
And the disbursement yield is 22.95%.
Vatsal Shah
Okay. And are we seeing any downward revisions in terms of the yield currently?
Partha Pratim Sengupta
22.95% at the time of the disbursement yield.
Rajeev Mantri
On an average the yield for the quarter was about 20.3%.
Partha Pratim Sengupta
Yes,
Vatsal Shah
20.3%. Okay. And on a two to three-year basis, so we are going to shift our portfolio from unsecured to secured. And along with that, the MFI yields also are going to get dipper due to the guardrail rule coming up. So how are we looking at our NIMs shaping up in the next two, three years because most probably it will take a hit.
Partha Pratim Sengupta
Yes. So you see in any — none of the universal banks give such a high NIM. I think, the current of NIM also 7.3 is not for an universal brand. So we have to accept that, number-one. Number two is that as we go more secular and we do more secured business, this NIM is definitely going to be moderated. So that trend is also visible right now also serving 7.3 say it has come down to 6.9% during the quarter. So that will be a little bit more moderated in the coming quarters, no doubt on it. But again, having said so, our focus is to see that our ROA remains as close to 2%. That is our focus. So that will be achieved through more quantum of business. So we have to increase our liability size and at the same time, we need to increase our asset size. So that will only give us the demand also control the. So these three steps actually will give me an ROA of around 2%. So that’s what we are aiming. The NIM, if you look at I would say as an individual item, yes, it is definitely going to be moderated in the future months.
Vatsal Shah
Got it. That was helpful. Thank you.
Operator
Thank you. Ladies and gentlemen, before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Rosh from CLSA. Please go-ahead.
Roshny Munshi
Hello team. Good evening. Thank you so much for the opportunity to let me ask a question. I just wanted to understand that you mentioned putting in some rails. I just wanted to check if we are currently aligned with the two-plus one member rule in MFI or is that something that’s gonna come in for us from April 4 onwards?
Partha Pratim Sengupta
So the industry is still doing three-plus one but we are doing plus one. So that is one. Ours is a little bit tougher than the industry. Number two is the industry is giving a DPD of 60 days, whereas we are taking it as a 30 days. So we are not giving any loan to a borrower who has a record of a 30 days diquity. So these are some of the things apart from that, we are lying in the industry that the of a borrower from all sources, including unsecured loans should BE-2 lakhs. So the cap is kept at 2 lakhs. So these are the already, so which will definitely moderate and which will only give us good-quality of advances, that much I can say.
Rajeev Mantri
And Rosti, if you look at Page 21 of the Investor Day, we have mentioned that based on the rub of our portfolio, almost 92% of our portfolio of EV is Bundant plus.
Partha Pratim Sengupta
Yes.
Rajeev Mantri
As a policy, we always follow that. But after taking loan from us, some people can go to other lenders and take a loan and that’s what reflects what the other portion could be. But it is just less than about 8%, which is greater than plus 2.
Roshny Munshi
Understood. Thank you so much. And if you could just mention what the interest reversal for this quarter has been like
Rajeev Mantri
Interest reversal revenue data will come back on that point.
Partha Pratim Sengupta
We’ll come back. But one minute, I think we have because there is a slippage there.
Rajeev Mantri
Yeah. So the interest reversal for the quarter was around INR69 crores.
Roshny Munshi
All right. Thank you so much. Thank you so much.
Operator
Thank you. Ladies and gentlemen, you may press and one to ask a question. The next question is from the line of Vinayak Agrawal from Jefferies. Please go-ahead.
Vinayak Agarwal
Good evening. Thank you for the opportunity and congratulations on your appointment. I have two questions, sir. So, you said that the share of secured loans will continue to inch up from current levels of 49% to 55% and NIMs as a result will moderate. Could you also comment on how this will impact credit cost in FY ’26?
Partha Pratim Sengupta
And I cannot cost that credit cost has very little to do with the secured or unsecured advances. Credit cost is more dependent on two factors. One is your total advances and the loan-loss provision. So what we are very clear that we want a growth in the asset portfolio. So maybe it may be in the form of secured assets, but we want growth in the asset portfolio. And number two, we want a reduction in the slippages. So if we can achieve a reduction in slippages, our provisions for loan-loss will also come down. So that will definitely improve our credit cost. So we have a general target of achieving a credit cost of 2%. That’s why we are now working at it.
Vinayak Agarwal
And secondly, sir, if you look at the collection efficiency, we’ve seen a dip for the month of December versus September. Could you please explain what is driving this? And what’s your outlook here?
Unidentified Speaker
That would be an attraction. So I’ll take that. So the collection dip that happened in-quarter three and compared to quarter two was marginal, specifically in certain geographies of UP, Tamil, Maharashtra and Gujarat Paras. But what we have seen is in the month of January, the collection efficiencies have been better in comparison to December month. So the — so you will see that SMA zero also came down in the month of December and that traction is also happening in the month of January is what we’ll see. So like we said, there is what we see in terms of the go-forward, the elevations will start slowly taping up and the bucket delinquencies will come down in due for some time.
Rajeev Mantri
And Vinaik, just on your previous question, as we see this stabilizing, the industry this, our credit cost expectation in the near-future will be around 2% overall for the portfolio. And by FY ’27, with the shift in secured, I think we expect it to be between 1.5% to 1.6%.
Vinayak Agarwal
Yeah. Thank you so much.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Jay Prakash from LNP. Please go-ahead.
Unidentified Participant
Hello, is it audible?
Operator
Yes, sir, you’re audible.
Unidentified Participant
Thank you so much. Thank you. So I want this current scenario as per current scenario. This ordinance has to be calm out now. So today and tomorrow, I think probably we’ll get this the blueprint of that but scenario what is happening? So have you taken some precautions or have you taken some steps towards that how to tackle this
Partha Pratim Sengupta
So if you can look at it so if you just look at it, our Anataka portfolio is only INR740 crores out of a total EV portfolio of INR56,000 crores. So it is very, very small and only 13% of which is now delinquent. So it is more or less as we have been telling that what is happening in the rest of India, apart from Bengal and, the trend is almost in-line with that. So we do not perceive any major risk-on account of the legislation that may come. We will wait for the legislation is coming. But as of now, because our portfolio is very, very little, it is only INR740 crores out of INR56,000. And also the delinquency trend is more or in-line with whatever is happening in the rest of the country. We are not very much concerned about it. But nevertheless, we will definitely look what are the legislations, what are the terms of legislations, what it is coming and how it is going to impact us.
Unidentified Speaker
If I can add that the legislation is mainly towards unregulated RE and whatever in terms of the regulated RE, obviously will adopt that. Our portfolio is much smaller there and what we have done as a proactive measure is to prioritize ensuring that we work towards protecting our portfolio and looking at in the growth if needs to be so, but look at ensuring the portfolio is protected.
Rajeev Mantri
And out-of-the INR740 crores, the group lending piece is only INR400 crores,
Partha Pratim Sengupta
Only I mean lending INR400 crore microfinance by definition is only INR400 crores.
Unidentified Participant
Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Puneet from Macquare Capital. Please go-ahead.
Punit Bahlani
Yeah. Hi, thanks for taking my question. Just wanted to know what how much slippages are there from the EV book in Q2? Like if if you could give comparison between Q2 and Q3?
Rajeev Mantri
1196 is from EV book, okay? Yeah. Yeah. So the slippages in the EB, which is group plus is INR1,196 crores in this quarter and in the last quarter, which is Q2 FY ’25 was INR752 crores.
Punit Bahlani
Okay. Also, sir, your SMA zero has declined, but your SMA has increased. So just wanted to get some colors of like since do we expect more forward-flows into the Stage 2 book has the stage-3 peaked, what are you seeing? Like the credit cost like — I know you guided for FY ’26 2%, but just for a Q4 guidance, do we see like incremental slippages declining, especially from the EV book? Any color on that?
Partha Pratim Sengupta
So we are expecting an incremental decline in the incremental slippage, no doubt on it for the day. But as I’ve said that the greatest comfort is that the SMS zero book is declining, that means tendency towards delinquency is coming down. That is the greatest comfort for the day. SME 2 to, I think a majority of them would think that we are already taken into account for that year. But going-forward, again from Q1, we expect that this cycle just should be reversed and the slippages would be much, much less.
Punit Bahlani
Okay. Got it, sir. That’s it from my side. Thank you. T
Operator
Hank you. A reminder to all the participants that you may press star and one to ask a question. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.
Rajeev Mantri
Thank you. So I’d like to thank all the investors and everyone who joined this call and would like MD sir to say something.
Partha Pratim Sengupta
Yeah. So this was my first investor call after taking over the charge of of Bank. Thank you all for participating. And to all the investors, I can assure that will continue to grow from strength-to-strength. Thank you all.
Rajeev Mantri
Thank you all.
Operator
Thank you. On behalf of Gandan Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.