Capital Small Finance Bank Ltd (NSE: CAPITALSFB) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Sarvjit Singh Samra — Managing Director and Chief Executive Officer
Munish Jain — Executive Director
Analysts:
Shailesh Kanani — Analyst
Shreepal Doshi — Analyst
Pritesh Bumb — Analyst
Ashwini Agarwal — Analyst
Balkrushna Vaghasiya — Analyst
Chinmay Nema — Analyst
Unidentified Participant
Anant Mundra — Analyst
Sonal Minhas — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q3 FY ’25 Earnings Conference Call of Capital Small Finance Bank Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Mr. Sarvjit Samra, the MD, Promoter and CEO. Thank you, and over to you, sir.
Sarvjit Singh Samra — Managing Director and Chief Executive Officer
Thank you, Aldrick. Good afternoon, everyone. I am Sarvjit Samra, Managing Director and CEO of Capital Small Finance Bank. Thank you all for joining Capital Small Finance Bank Limited’s earnings call. We have already uploaded the results and investor deck on the exchanges. I hope everybody had the opportunity to go through the same. Joining me in the call are my colleagues, Mr. Munish Jain, who is Executive Director; Aseem Mahajan, CFO; Sahil Vijay, who heads Treasury and Investor Relations; and Bharti Babutta, who is part of Investor Relations team; and SGA, our Investor Relations advisors.
Let me begin with overview on economy along with the industry post with Market Munish will provide a detailed overview on our business performance. India’s economy has shown remarkable resilience and momentum in recent months, emerging as a bright spot in the global economic landscape. In the second half of 2024, GDP growth was recorded at 6.3%, supported by a robust service sector contributing 55% of economic output. Manufacturing activities also witnessed a surge, with the Purchasing managers index consistently above 57, indicating expansion. Exports, despite global headwinds, reached $390 billion in the first three quarters of financial year 2425, driven by sectors like electronics, pharmaceuticals and automotive components.
Meanwhile, inflation moderated to 4.8% in December ’24, aided by the declining food prices and effective monetary policies by the Reserve bank of India. Credit growth in the banking sector has moderated, with an expected increase of 13% to 15% in financial year ’25. Down from the peak of 20.9% in December 23rd. This slowdown is attributed to regulatory changes in retail and NBSE lending coupled with shift towards corporate credit driven by private sector capital expenditure. The loan to deposit ratio reached 80.4% in first half of financial year 25 reflecting a persistent gap between deposit and credit growth. Elevated LDRs and tight financing conditions are expected to constrain loan growth while deposit growth is projected at 12 to 13% supported by the term deposit repricing and competitive efforts to attract CASA deposits.
Despite these challenges, asset quality of the banking industry has improved significantly with gross net NPAs at 12 years low of 2.6% and 0.6% net NPAs at 0.6% respectively. However, unsecured retail lending including personal loans and credit cards have seen delinquencies particularly among self employed and young borrowers. Profitability in the sector which peaked in financial year 24 is likely to moderate further due to increasing credit costs and high slippages. Overall, the banking sector faces headwinds from external volatility causing financing conditions and evolving credit dynamics. We at Capital Small Finance bank are consistently progressing towards a promising future and have closed the Q3 of financial year 25 with a profit after tax of 34 crores reflecting 18% year on year growth with return on assets of 1.4% scaling from 1.3%. In Q3 of financial year ’24.
Gross advances increased to 6,816 crores registering growth of 19% year on year with disbursement growth of 92% with reduction in GNPA to 2.6% and NNPA to 1.3%. Our deposit continues to be retail centric with CASA of 39.1% and deposits have grown to 8,384 crores with year on year growth of 12% and 8% quarter on quarter growth. These results underscore our commitment to deliver progressive growth while remaining steadfast in our mission to sensible banking for all. As we look forward, we are optimistic towards our growth momentum and delivering value to our stakeholders.
Thank you. I’ll now hand over to Munish who will share detailed overview of our business performance and financials.
Munish Jain — Executive Director
Thank you, Mr. Samra. Good afternoon and warm welcome to all of you. We are consistently progressing post over capital infusion and I am pleased to share the financial highlights for Q3 FY25 advances during the quarter growth is broadly in line with the bank estimate and gross Advances stood at 6,816 crore as on end of December represented by a growth of 19% year on year and 11% on year to date basis during the quarter. We reversed the historical trend of negative growth in advances during Q3 of the financial year and registering a Q and Q growth of 2%. We continue to be a secured lender with 99.8% secured book with around 80% loan book collateralized with immovable property oblique bank FDRs.
Further we are having zero direct micro finance exposure. Fresh disbursement during the Q3FY25 is 737 crore against 384 crore in Q3FY24 with a year on year growth of 92% and for the nine month ending FY25 for nine month FY25 our disbursement is 2081 crore against 1392 crore during the last year first nine months with a YTD growth of 49%. The disbursement constitute 21% to MSME segment 23% to mortgage segment, 19% to agriculture 2022% to NBFC and remaining to the consumption loans including the loan against deposits.
Our advances consisting of agriculture 32% against 35% in Q2 FY ’25 and 37% in Q3 FY ’24 mortgage 27% and the same was also 27% in the last and the corresponding quarter end msme increased to 21% against 20% a quarterback and a year back corporate oblique NBFC lending at 12% against 11%, a quarterback and consumption landing at static at 7% at the end of the current quarter and the same is also 7% at the end of Q2 and Q3 FY ’24 over experience being in the landing business for more than two decades over primary banking approach, visibility of client cash flow identified niche lending segment that is the middle income group segment over conservative LTVS has contributed to consistently maintain a superior asset quality in all the Black Swan events despite the present challenging macro environment. We are having a GNP of 2.67% for Q3 FY ’24 and net NP of 1.35 against 2.97% and 1.53% at the end of December 2024. Our MSAs continue to be on collection and resolution even for the sticky loans and we have almost zero write offs and nil NP selloff during the quarter.
Our slippage ratio for Q3 FY ’25 stood at 1.33% against 1.9% in Q3 FY ’24 with upgrade and recovery ratio of 1.2%. The same is calculated on annualized basis. Our credit cost remain range bound at 0.1% during Q3 FY ’25 and we are maintaining a PCR of 50% plus. SMA1 and SMA2 calculated as a percentage to advances stood at 6% at the end of December quarter and the same was also 6% at the end of December 2023.
Moving on the liability side, the liability mix is positively skewed towards the deposit which constituting 82.3% of the balance sheet and 93.2% of the deposits are retail deposits and 3.5% being the borrowings which is providing us an adequate liability expansion levers. Our Deposit grew by 12% on year to date basis to 8,384 crore at the end of December 2024 which is registering a year on year growth of also 12%. With maintaining a healthy CASA ratio of 39.1% during the quarter Q3 FY ’25 we grew our deposit by 8%.
Operator
Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Ladies and gentlemen, we have the management line connected. Sir, please proceed.
Munish Jain — Executive Director
Yeah, I am just repeating the last paragraph again. Our Deposit grew by 12% on year to date basis to 8,384 crore rupees as of December 2024 which is also yoy growth of 12% while maintaining a healthy CASA ratio of 39.1% during the quarter we grow over deposit by 8%. The cost of funds for Q3FY25 stood at 6% against 6%, a quarterback and cost of deposit being also 5.9% as was during the last quarter. The average credit to deposit ratio for the bank has inched up to from 78.4% on December FY24 to 81.1% in quarter three FY25. We aim to take this ratio to mid to the high 80s going ahead.
Now talking about the profitability pre provisional operating profit has increased to 47 crores against 39 crore in the corresponding quarter registering a growth of 22% and profit after tax stood at 34 crore against 29 crore in the corresponding quarter registering a Growth of 18%. Pre provisional operating profit has increased to 139 crore against 115 crore during the first nine months of the current year with a growth of 21% and net profit for the first nine months has increased to 98 crore against 83 crore during the last year first nine months with a growth of 17%. PAT growth is driven by 22% increase in the net interest income, 20% increase in the net total income and optimization or reduction in the cost to income ratio which is 62.1% during this quarter and the same was 62.8% in December FY ’24.
NIM has increased to 4.3% in Q3 FY25 against 3.9% in the corresponding quarter and over operating margin has improved to 1.9% against 1.8% in the corresponding quarter. Non interest income during the quarter remained at the similar level as at the end of the last year which is 0.73% against 0.77% at the end of the previous corresponding quarter. Non interest Income we are recognizing on cash basis as such certain non interest income. Specifically the penal charges which is valuing around 0.1% was not forming part of the interest income though they are related to this period of Q3FY25 since they are being charged on half year end basis.
Our ROTA has increased to 1.4% in Q3FY25 and return on average advances increased to 2.1% against 1.3 and 2% respectively in the corresponding quarter over. ROE during the Q3 is 10.9% against 10.8% in the Q2 FY ’25. The capital adequacy ratio is at 25.8% at the end of the Q3 FY ’25 and over. LCR is at 239.2% which is giving us a legroom to further improve our CD ratio. Our branch network at the end of quarter stood at 185 branches spread over five states and two union directories. Going forward, we remain committed towards achieving our loan book growth of 20% plus in FY ’25 by capitalizing on the growing MSME mortgage segment and coupled with expanding middle income group segment. Our focus on expansion is nim. NII and increasing fee income will be the key drivers for over targeted ROA. Annualized ROA of 1.4% plus for FY ’25 and further, we intend to expand our ROTA going forward.
The outline strategies initiatives collectively positioned us for a sustained growth and amplified market presence. I’m eager to share many more positive updates with you in the coming quarter. Till then, stay safe, stay healthy. Thank you. Now I request the moderator to take up the Q&A session.
Questions and Answers:
Operator
Thank you, sir. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Shailesh Kanani
Good morning everyone. Thanks for the opportunity. Sir, first question is with respect to in your opening remarks you said that we will be working towards increasing the roa. So can you just point out certain levers which we should play out in next few quarters or a couple of years which would help us to increase our ROA?
Munish Jain
Yeah. We have identified the three levers for over rota expense. First lever being the NIM expansion and the factors which we are considering for the NIM expansion is the expansion over CD ratio. Over average CD ratio for the current quarter as we discussed is around 81.1%. We intend to expand it to mid to the high 80s. So with this expansion we anticipate expansion in the NIM as we move forward. As per the back of envelope calculation, if all other factors remain constant that is over interest spread between the cost of deposit and Z loan advances remain constant with every 100 basis point increase in the average CD ratio. So there is a benefit in the NIM by around 0.04% to 0.05%. So that is the one lever which we have identified and we believe with the type of the liquidity coverage ratio we are having, the type of the capital adequacy ratios we are having, we believe we have enough opportunity, we are fully prepared to expand the CD ratio as we move forward.
So we have identified first lever as the NIM expansion. Second lever which we have identified as is the non interest income. Non interest income which is presently ranging anything between 0.75% to 0.9%, depending upon quarter, which we are Q1 and Q2 or Q3 or Q4 being recognized on cash basis. We intend to expand this ratio by 10 basic points to 15 basic points as we move forward. And we believe there is enough opportunity to continue to expand it as we move forward in the coming years. So that is this and the basic objective, the basic levers within this is now all the financial products have been available and we being having the right set of the number of accounts and the number of customers. So with that thing in sight, we believe there is enough opportunity now available to expand the non interest income.
The third lever which we have identified is the OpEx. Yes, the OpEx lever I believe is not going to be mature in the next one year. The OPEX which is presently we talk about on the basis of the ratio to the average assets is typically in the range of 3.05 to 3.1 to 3.15 or 3.2. I believe for the next one year it will remain in the similar range plus minus 5 basic to 10 basic points. But after the 12 months from now we believe there is a lever available in OPEX which will be helping us to expand Rota after one year. So these are the three levers which we have identified for us and on which we are working to continue to expand over ROTA as we move forward.
Shailesh Kanani
So just a follow up on that. But if I see currently this quarter as well, we have kind of seen a flattish advances growth but the deposit growth has been higher. So on the CDR front how does that help and what is the growth we are targeting in terms of advances to achieve that first lever?
Munish Jain
The thing is that if we look into the Q3 historically we always having we always having a negative growth being we are a SHURU specialist that is a semi urban and rural area specialist which have a high dependencies on the rural having high dependency on the agri based acquisitions. So Q3 being a harvesting period which consequent resulting in not having high demand in the advances rather there is a good recovery pattern. So in this particular period also we are able to grow our advanced book by 2%. If I look historically in last year FY24 we degrow in Q3 by 3% and in FY23 we degrow by minus 2%. So we are able to reverse that particular trend. And accordingly over year on year growth. For the current fiscal now it is 19% plus.
So by the end of the March quarter we as we said earlier, we intend to expand our advanced growth on year on year basis to 20% plus so which will be a good lever to expand over CD ratio and Q3. We worked very hard on deposit attrition and we grow our deposit by 8% on quarter on quarter basis which give us a sufficient now the liquidity available to expand our advances as we moving toward the Q4. So with that thing in sight, so I’m confident that we will be able to expand and utilize the level one. And this is also visible from the aspect that over average CD ratio for FY24 was 79% which we have improved to 80.1%. And consequently if we look into our NIM, our NIM for FY24 was 3.9% and in Q3 FY25 we are able to expand it to 4.3%. So with that thing in sight, so we with the historical trends and the type of the opportunity available in the segment we are so we are confident on expanding over CD ratio as we move forward.
Shailesh Kanani
So sorry to hark on this. Just for CDA ratio for FY26, given that you said 20% plus growth on advanced spend is what we are targeting. What would the CD ratio number in your estimate for FY ’26?
Munish Jain
FY ’26 at this stage since we have just we are talking about 20% plus for FY25. For FY26 we have not given any guided sale date. We believe our growth rate will expand in FY ’26. We will give a guidance about the FY26 growth as at the appropriate time in the first call of the year of that particular year. But saying all this we intend to expand our CD ratios to mid to the high 80s in FY ’26.
Shailesh Kanani
Understood. My second question is with respect to geographical concentration. How do we see that predominantly because we are in states predominantly how do we see that diversifying it in future or any plans on that?
Munish Jain
If we talk about the concentration risk, firstly we need to look into whether we are in a monoline business or we are in a secured business. We are purely a secured franchise with the 99.8% being the secured book. And within this more than 80% of the portfolio we have a collateral in the shape of immovable property of the value more than the amount of the loan. So we have ring fenced us from that particular aspect.
Secondly, if we look into the just despite this particular fact, we are mindful of this particular concentration aspect. And we are continually working to reduce our exposure in our home state of Punjab. Statistically if we look into this particular Number as on 3-31-2024 the Punjab agree Punjab advances constituting 82.68% which we have which presently as in December end it is 79.11%. So we are able to reduce it by around 3.5 to 4%.
So going forward as part of our expansion philosophy, as part of our branch expansion philosophy we have taken internal strategic choice that we will be opening majority of our branches out of the state of Punjab so that we can continue to expand in the neighboring geographies also. We always internally call, we want to make now Haryana our next Punjab. So we want to have a deep thick presence in Punjab because our growth philosophy is not just present but to be thickly present since we are a retail franchise on both the side of the balance sheet being in a deposit side or the advanced side. So that is what our thoughts are and we are constantly working towards this particular direction as we are moving each of the way.
Shailesh Kanani
So any particular number we are working for say not in near term but in three to five years time in terms of concentration. Any. Any number we are working with or any targets we are aspiring to be?
Munish Jain
There’s no such ballpark number. I’m just quoting at this point of time but just we aspire to be a multi diversified entity as we are moving in the future and I believe with each passing year we will be reducing our concentration on Punjab on advanced side each of the passing year and with a reasonable good number. Just I shared with you current first nine months we have already done it by 3.5% to 4%.
Shailesh Kanani
Yeah. Just — It’s a last question from my side. Any aspirational ROE for us in terms of target as we see all these three levers, what you highlighted playing out any lever which. Any number which you would like to. Not a guidance per se but any aspirational roe targets that we are working towards. That would be all from my side.
Munish Jain
Thanks a lot. Since we just raised the capital and we are just in the very initial phase of consuming that particular capital. So at particular this point of time since we raised the capital around nine months back so and we are in the process of consuming that particular capital and despite that particular fact we are continuously improving roe and now in the quarter we have a Roe of 10.9 or I can say around 11 so I believe and we are expanding it each of the quarter. If you compare Our Roe for Q1 versus Q2 versus Q3 you will observe we are expanding over ROE as we are moving towards.
So we intend and I believe the type of the growth aspiration we are having and type of the — since we are a profit earner organization and always a profit earner organization so we are having internal accruals which is helping us to build up so we have a sufficient capital available for next minimum two year plus and but our endeavor is to be hit the next capital market when we have ROEs in the mid to the high 80s, my high teens. So that is our aspiration and we are working closely towards that particular direction.
Shailesh Kanani
That’s very useful. Thanks a lot sir and best of luck sir. Thank you.
Operator
Thank you. The next question is from the line of Shreepal Doshi from Equirus. Please go ahead.
Shreepal Doshi
Hi, sir. Good afternoon and thank you for giving me the opportunity. So my question was on fee income side. So that is one of the focus area for us. But if you look at there is. So during the quarter, there is a dip in fee income? So what explains that? And as a percentage of total asset, what is it that we are aspiring to sort of, you know, get to in terms of fee income?
Munish Jain
Shreepal, just as a discussion point, there is no dip in the fee income. The fee income which was 17 crore in Q3FY24 has been increased to 18.17 crore in Q3 FY ’25. So just if we talk about the statistically so the number is like this and if I talk about now for the drill down about it. The fee income which is typically 0.73% in the current quarter which was 0.77% a corresponding quarter we recognize the fee income on a cash basis presently the fee income which is around 0.1% of the asset basis which is accrued and which is related to the current quarter is not being taken to the P and L since we are recognizing and debiting that particular fee income on a half year end basis. So accordingly that fee income of around 0.1% of the asset move to the year move the period from the current quarter to the next quarter. So which is the because of the accounting practice we follow, you will observe the same in Q1 and Q3 always and you will find high number of the fee income in Q2 and Q4. So if we balancing it you will find the different number. So that is the one point I like to mention.
Second point I like to mention the current quarter there is a around 1 1/2 to 2% growth in advances. So there will be some flatness in the fee income related to the advances. And in the next quarter that is Q4 we are anticipating a better growth in the advances. So which will be correspondingly helping us in building up the spectrum fee income. But if I give you the breakup of the fee income if you look into the fee income which is basically 18.17 crore. So we have identified the now the four levers for our fee income. One is the banker lever that I call upselling the banking products. And I also like to mention that in the current period there has been some impact on account of the regulatory changes around the center guidelines in the life insurances which has affected certain fee incomes percentile also and that is the industry level concern not is the notice for the is but that in industry level.
So if I talk about the total fee income that 18.17 all of the fee income is a stable state. Fee income which consisting of a banker income of 8.68 crore which consisting of a loan related fee income of 2 and a half crore which includes the operations and which includes the payment systems and the preparation related fee income of around 4.9% crore and forex and the treasury with forex that is 82 business. Regular forex business is around 80 lakh rupees. So what I’m trying to demonstrate is we are working on all the sides of the fee income and getting penetrated in this going forward in Q4, I am anticipating our fee income to be in the range of 0.85% or rather 0.9% to 1% in the Q4. So that is what we are anticipating for the Q4. So fee income, we are constantly working hard and we are optimistic. But because of some accounting level process which we are following, that there is a movement of some fee income from Q3 to Q4.
Shreepal Doshi
Got it. Got it. And the second question again something that we’ve been focusing on would be the CD ratio. So if I look at the average CD ratio or the reported number has sort of seen some decline on a sequential basis. So how do you see it shaping up in 4Q and over FY26 for us? While I understand you’ve given the target, you know, but. But how do you see it? What. What levels are we sort of or what strategies are we deploying?
Munish Jain
Just for the sake of repetition, I’m again saying that historically Q3 we are always having a higher deposit growth. And since we believe there is enough opportunity available in Shuru for the retail deposit. So accordingly Q3 we deposit growth is 8% and we always see that the Q3 is a bit sluggish for our advanced growth. Or rather we always had a negative growth but in the current period we able to grow it by 2%. So consequently Q3 was over concentration was quite high on the deposit because of the availability of deposit and giving us a sufficient raw material for the future expansion. So that’s the reason there has been a slight decline is visible accountingly that is 82.4% was overseed ratio in Q2FY25 which is reduced to 81.1. So that is a marginal decline is visible. But now with the levers come in sight, the levers come inside and that is available. So even if you look into the outstanding CD ratio at the end of the last quarter was 86.4% and presently outstanding CD ratio being 81.3.
So with that thing in sight, so with the Q4 is always high on advances even if we look into historical numbers that last year also we grew by 8% FY23 also we grew by 8% on quarter on quarter basis in Q4. So we are also optimistic about the current quarter that we already said in the beginning of the call that we intend to achieve 20% plus loan growth in FY current period that is FY 25 with that thing in sight. So we believe in Q4 also we will see some upstream happening in the CD ratio which will be helping up in over lever 1 in ROE. Yes, and but one thing is always there. We always grow our deposit book in a calibrated way. But we also look forward that the sufficient deposits are being mobilized to support over advanced growth. So with that thing in sight we are confident that we do maintain. I’m just seeing the target perspective. We tend to take over CD ratio in FY ’26 to FY ’27 period to mid to the high 80s on an average basis.
Shreepal Doshi
Got it. That is helpful. So just one last question if I can squeeze in. It is like you highlighted earlier to the earlier participant that you want to be thickly present in the state of Haryana and make it the next Punjab. So in terms of product bouquet, which for example, in Punjab we know that agri is something that is having larger share in Haryana. What would be that flagship product for us?
Munish Jain
In Haryana, we are having the two flagship products or other. I would say two buckets which we are working hard. One is the mortgage and second is MSME lending. Okay. We are doing the agri also in Haryana. Maybe in the selective buckets. But in Haryana our biggest concentration is on the MSME segment and the mortgage segment.
Shreepal Doshi
Got it sir. Got it. That is helpful, sir. So thank you so much and good luck for the next quarter, sir.
Munish Jain
Yeah. Thank you, Shreepal.
Operator
Thank you. The next question is from the line of Pritesh from DAM Capital Advisors. Please go ahead.
Pritesh Bumb
Good afternoon. Just couple of questions. One is that the loan mix towards corporate is now 12%. Any cap we want to put on that given that it has risen sharply in terms of percentage from last one, one and a half years?
Munish Jain
Typically, Shreepal — sorry Pritesh. Hi. Good morning. Good afternoon, Pritesh. Pritesh, if we look into the loans to the corporates even though it is 12% of the portfolio which was 11% at the end of the last quarter. So typically there are. We intend to keep it below 15% overall basis as we move forward. But one thing I just like to flag here, we are not increasing much in the count. Earlier when before the Kaplan fusion we were typically lending it up to around 15 crores to 20 crore rupees each of the each of this particular company. And our average ticket size in this type of segment is around 16 crore rupees. Now with the Kaplan fusion we expanded that particular exposure sailing to 40 crore rupees. Still we are conservative. I don’t want to lend more than 40 crore to a single NBFC. But we want to lend to a rightful NBFCs and we are not increasing much of the count.
So if we look into this particular numbers you will be observing our ads has increased from 16 crore rupees which was Q3 FY ’24 to 22 crore rupees. So that is the to the tested customers which we are testing with us and we are expanding over bouquet and test. So that’s the reason. There will be some visibility perspectives, you will find some growth. But overall I just like to flag here. We are lender within this space only to those NBFCs who are a secured NBFCs. Overexposure to the microfinance industry in this particular space on the overall basis is around 1% of our total portfolio. So we are very mindful that we are lending into that segment which are lesser leveraged and which are in the same line of businesses which we know well. So that is our take on this corporate lending and accordingly, we are building up the book.
Pritesh Bumb
Got it. So just follow up on that. So basically that growth is being slightly higher. That also brings down our margins relatively. Given that what I see from your average yields, it is about 11%. But from perspective it could constrain your margins which can move up from the CD ratio perspective. So any threat on that or any parts on that perspective?
Munish Jain
Yeah, yeah, sorry. Pritesh, just a data point perspective. If we look into our yield on our advances portfolio it is around 11.25 to 11.35 presently and if you look into our yield on the corporate book it is also around 11.05 to 11.15. So we are not significantly away from what we are getting on the portfolio basis. So I am not seeing any challenge with this portfolio buildup on over margins since they are very nearer to each other. I can’t always have a very equal nearer to a very same but it are very very nearer to the portfolio level yields on our corporate yield basis. If you look into the presentation page number five the yield on our corporate book is 11.06% as per as of December and over total Yield is around 11.2, 11.28 or 11.3. So they are not, they are very nearer to each other and so they are not posing any threat to our margin expansion with overseas expansion we are very mindful of it and accordingly we are taking a step further.
Pritesh Bumb
Got it sir. Another question on asset quality Generally we see slippages moving up. That’s the trend which we have seen in last couple of years. Also we see upgrades moving up in the same quarter but with changing macro do you see there is a threat that the upgrades may not come in and we may face some asset quality issues? Is there anything like that?
Munish Jain
Up to now the information available and the situation at the ground. I’m talking from the capital Small Finance bank perspective we are not sensing any such problem. Even if we look into the statistically our slippage ratio for the Q3 is 1.33% and our upgrade ratio is 1.2% in the Q3 we are may able to bring them very nearer to each other and Q3 is always a period in which you all we always see some higher slippages and Q4 we will always find some higher up gradations. So as one date situation at the ground we are not seeing any such challenges and we are committed to maintaining the superior asset quality as we move forward.
Pritesh Bumb
Only last question related to that is the PCR orientation. Last quarter we had done some slightly higher provision and put it into our PCR being higher like 51% but this quarter since that a little bit of PCR though we understand there is seasonality to asset quality but what is your orientation on PCR now from here on?
Munish Jain
So typically we have our internal guidance that we will not let the PCR slip below 50. And in the event the PCR slip below 50 after application of the regulatory provision, we could go ahead and made the digital provision and even if you look into the quarter end, current quarter end over PCR is more than 50% it is almost a similar number which we had of the last quarter plus minus few basic points plus minus few basic points will be always happening. So we are committed to keep the PCR above 50% despite the fact all the book will be having a collateralized and we intend to continue to maintain a stance that till older NPAs shall be carrying 100% PCR which is typically, which is typically 4 year plus book we are creating a folder older book we are creating 100% PCR. So that is the stance we are continuing to maintain as we move forward as well.
Pritesh Bumb
So just a suggestion from our side is that I think you should consider increasing a PCR in a phased manner even though it does not orient or it does not warrant to increase such. But I think you should move it towards 60 given that the environment is very challenging and you know very you know volatile. So it will always help for investors to get confidence on that.
Munish Jain
Pritesh, noted and I will take up to the respective decision making body and try to work towards this particular thing but thanks a lot for the advice and we appreciate the concerns.
Pritesh Bumb
Yes sir. Thank you so much. All the best.
Munish Jain
Thank you, Pritesh.
Operator
The next question is from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead.
Ashwini Agarwal
Hi, good afternoon. Very encouraging set of results. Congratulations. Just a quick question. You’re coming up to you know one year of listing in a couple of months and full year results out. Have you put up a dividend policy? I. I haven’t seen one. That’s why I’m asking.
Munish Jain
So typically we being a capital high capital intensive organization, capital consumption organization we follow a philosophy that we will be paying a dividend but not very high numbers in this. But your advice is well taken. I just check with my sectorial team that if there is some policy available to make it in a public domain so but just like to mention we being in a growth oriented organization presently in the. I will call it a growth phase of the life. So at this stage we want to keep consume the capital for the growth rather than paying it rather than completely distribution. But we also understand distribution is very critical and we fully acknowledge that fact. So noted. I will check with my sectorial team to see what best we can do on this.
Ashwini Agarwal
Yeah, my suggestion sir would be just a suggestion obviously it’s for the board and for the. The management decide would be a certain percentage of net income on a consistent basis. Obviously, exceptions will apply, but if you can sort of think about it and let us know whenever you discuss it, that would be great.
Munish Jain
Thank you. Noted. And it’s a good choice, good option. I we will discuss it to the respective decision making body and keep this thing in mind sentiments and cost so all other aspects and try to reach up to a decision on the metrics.
Ashwini Agarwal
Because this will also help you optimize your ROE faster and I mean access to capital will not be an issue so long as your metrics look good. So again just a suggestion from my side but congratulations on pretty good number.
Munish Jain
Thank you Ashwini ji. Thanks a lot Ashwini ji and thanks for appreciating us.
Operator
Thank you. The next question is from the line of Balkrushna Vaghasiya from Axanoun Investment Management. Please go ahead.
Balkrushna Vaghasiya
Good afternoon, sir. My first question is related to the QoQ jump in SMA 1 and 2 with 100bps. So is there any indication or how do you read into it?
Munish Jain
Typically — Balkrushna, good afternoon. So typically if we look into historically always Q3 and Q1 we will find some sort of jump in the SMA1 and SMA2 but despite that particular jump even if I talk about the absolute basis we are still 6% SMA 1 and 2 put together. So which is also very lower number. But yes I agree there is a slight jump. It is not an indication of any particular stress building up. That is the typically how the historical timelines also say even if I look into my last year December number, my last year December number SMA 1 and 2 were 6% which we are able to contain it to around 5% by March. So we are also confident and very working hard to again bring it back to the similar levels because we have internal targeting it to keep it around 4.5% to 5.5% that is the internal target we have kept that we want to bring it and keep it in that particular range.
So it is not any early signal because if you look into the other matrixes, whether you look into the collection efficiency matrix, whether you look into the GNPA matrix, whether you look into the NPGNPA write off matrix or to NPS LF matrix you will sense there is no such stress building up. This is one of the mathematical change and because of the particular period and the difference is only 1% 5 to 6 optically just it looked 5 to 6. That is the 20% jump. But that is a behavioral, that is a thing which is happening always at the end of the Q3 those you look into the published available Number and in Q4 you will find we are able to improve it every year and this year also we are committed that we will be able to improve it by when we meet next time over the call for the Q4.
Balkrushna Vaghasiya
Okay, my second question is regarding There was a recent report in the news regarding this meeting of some small finance bank officials with the rbi wherein it was suggested by the RBI to look into mergers with some bigger banks and particularly those small finance banks who have particularly geographical concentration or stress scenario do we have any. Did we have any meeting or do we have any update here?
Munish Jain
As a part of the today’s press we since these are sensitive information but I can say we were never part of any such discussion with the regulators we are never being part of any such discussions as we talk and even if I look into that particular article if I just talk about the article the article was putting in a message on the lenders with the unsecured piece and just to mention over unsecured buy is 0.2% I’m not talking even 2 I’m talking about 0.2% so that whole of the article was concentrating towards that segments with a higher unsecured ties. This is also news to me as part of the we came to know from the press we but we are never being part of any such discussions or any such things. We haven’t heard it earlier even.
Balkrushna Vaghasiya
Last question so how does so you have some Kisan credit card exposure so how does that work and how do you see the delinquency or DPD in those segment and if the default occurs how do you recover those advances?
Munish Jain
So typically we are being a lender in the agriculture loans or other the KCC loans from last 20 so we being a lender in this space also as like any other product in the middle group segment that is a target segment of 5 lakhs to 25 lakhs and over average ticket size being 12.5 lakhs in this particular segment and over segment lending is typically to the progressive farmers and to the farmers in which we can confide upon on the specific geographies in which who is cultivating ideally three crops in a year but minimum two crops and he is cultivating one of the crop as a MSP crop and these particular all of the landing is done this is the need based assessment I.e. after taking two variables I.e. what is the land under cultivation and what is the cropping pattern is adopted. With these two variables we assess what is his expense need and what is the debt obligation he can meet with these two outcome of these two minimum of that is the credit facility which we give to that particular borrower.
Additionally we typically take collateral that is in addition to the primary security in the shape of the legal mortgage on the piece of the land which is typically two times or I can say with a 50% LTV so with over close follow up and over strong knowledge we being in this particular product now from 25 years just a matter of product. I’m saying we have never sold any NPA asset from the agriculture loans and neither right of material. Our cumulative Write off of 25 year of the overall portfolio including the agree will be less than 1 crore. With that thing in sight we are quite confident and presently also the number is available on Slide 5 of our presentation that all also of the agriculture so the things are not showing any signs of stress.
Balkrushna Vaghasiya
Okay, thank you. So you guys are doing great job in the current scenario considering current environment. Good luck for the next quarter and year.
Munish Jain
Thank you. Thanks a lot. Thanks for appreciating.
Operator
Thank you. The next question is from the line of Chinmay Nema from Prescient Capital. Please go ahead.
Chinmay Nema
Good afternoon sir. Could you share which products have contributed to this 5 to 6 increase from 5% to 6% in the current quarter?
Munish Jain
Chinmay, there is no specific product, it is across the product as I said it is the timing based behavioral of the ground level people. So the decline increase is only basically one basic point. So I will say 1% only of the portfolio within the 1% of the portfolio and it is not screwing towards any of the product. It has a quite mixed combination both from the MSME mortgage and the consumption lending and all the products togetherly contributing. So there is no any stress as on date. We are not witnessing or we are not seeing any trend that there is any stress is building up from any of the segment. So this is almost equally spread over all the product markets we are having. And I’m just reiterating this is the historically Q3 based data flow and the increase is very minus it is just a 1% increase. I’m just retreating. So yes we are used to keeping our SMAs at the lower numbers and we are well committed towards that.
Chinmay Nema
Got it sir and just wanted to understand what is the. What is our provisioning policy in the SMA buckets? Because I mean I understand this is technical in nature but this doesn’t reflect in the credit cost. So how should one look at that?
Munish Jain
The provisioning in the banking industry is governed by the IRAC norms that is the IRAC norm published by the Reserve bank of India and the presently provisioning policies is applicable in respect of the substandards and the NPA book on the SMA being in any of the SMA bucket these are typically called the standalones. On the standalone loans the provisioning policy as per the present regulatory framework that is dependent upon the which segment it is from 0.25 to 1% depending upon the sector it is that provisioning is made on a portfolio level basis so which we are also following whatever is a regulatory guidance on the same and which is being followed by all the industry even we are following the similar guidelines.
Chinmay Nema
Fair enough. And sir, just wanted to understand on the NBF on our NBFC loans could you share the typically, what is the interest rate at which these NBFCs lend out further, and what is the credit rating of these NBFCs?
Munish Jain
So typically, if I talk about Chinmay, we are very, very selective about this NBFC lending we are typically lending to those NBFC who are not high leveraged. We have put our internal matrix that what should be the maximum debt equity ratio of the target NBFC which we are lending to. We have a hurdle rate, we have a hurdles, we have four or five hurdles which are kept internally. One hurdle is the leverage ratio they are maintaining. Second is what is their write off percentage which they have. The other one is the what is the minimum they should be having a minimum capital and the capacity to infuse the further capital. And fourth more important we typically lend to those NBFCs who are in a secured on lending activities and if the particular NBFCs are in a multi line of business activities we typically lend for that asset creation which is secured asset creation.
So with all this thing in sight and we are not lending below the investment rated NBFCs. So that is the way how which we land in this particular piece. So typically we look forward for the larger NBFC that is with the AZUM of 300 crore plus. So we are typically put a lot of internal learning based checks. So over if you look into this particular portfolio also you will find that over total portfolio is 845 crore. Out of this these are the basically lending to the and you will find the total count will be less than 40. So we are very selective in this particular portfolio and consciously selecting in this particular piece first. So we are not a lender to the NBFCs who are in onward unsecured lenders. We are lender only primarily to the mortgage and MSME based NBFCs.
Chinmay Nema
Got it sir. And this one last question. The disbursement in the current quarter is around 737 crore but the quarter on quarter loan book growth is about 98 crores. Is there something to read into this?
Munish Jain
The basically thing is that as I said earlier, Q3 is typically a inflow quarter since we have a 75% of the branches in a semi urban and rural area and in semi urban and rural area irrespective of the segment or class of the class set, you will find these have a direct or indirect dependencies on this particular high cash flow which is coming into the market. So in this particular period you will find even if you look into our portfolio you may have observed that our agriculture book despite a disbursement of out of this around 2, we disbursed another 150 odd crores during the quarter has been degrown from 2340 crores to 2199 so this is a particularly in which we recover lots of things which are coming to us as part of the KCC recovery. So that’s the reason I always said Q3 being a cash flow, heavy cash flow coming in the shuru, we always capitalize in the way for deposits and growth on advances are always muted. So this period we worked hard on disbursement, heavy on MSME and mortgage which help us bringing out the growth also.
Chinmay Nema
Understood sir. And so just a request, if you could add in the gross NPA numbers on the product level in the presentation that would be great. But that’s it.
Munish Jain
From my gross NP number is there in our presentation of all the comparative numbers on slice number five seven.
Chinmay Nema
Sir, I’m referring to on the product level. So gross NPA for agriculture, mortgage, MSME.
Munish Jain
We are depicting net NPA and we are also publishing that we are not writing of anything but still in the space demand we will see what best we can offer in the interest of the information available. Point is noted and we will see what best we can do on it.
Chinmay Nema
Thank you, sir.
Munish Jain
Thank you, Chinmay.
Operator
Thank you. [Operator Instructions] The next question is from the line of Ashish Shah from Business Match. Please go ahead.
Unidentified Participant
Hi, good afternoon sir. And congratulations on the set of numbers. Sir, I have two questions and both slightly long term which is three to five years out. You know our bank has had a phenomenal competitive advantage in terms of CASA which has led to this low cost of funds over a long period of time. Is that a threat to us over the next three to five years? Like what do you plan and how do you see it sustaining?
Munish Jain
If we look into the CASA franchise, if I talk about FY20 we were having a CASA of 36.3% and then if you go to the FY21, 22 and 23, we retained it in the range of 40 to 41%. Then we see a slide as per the whole of the industry has been slighted by 20% and we also slide it by around 8 to 9% and we settled it down around 38% in FY24. Now during the current year we keep it around 37 to 38%. That is the range we are keeping it for the CASA franchise. Now if we talk about the CASA franchise versus overall NIM expansion or that particular aspect, firstly we being a retail franchise with the target of the middle income group. If I talk about this, we have a average ticket size in the saving or the CASA account of around 42,000 rupees. So rather than having a chunky casa, I’m saying we have a widespread CASA or my every ticket has facilitating toward the middle income group segment.
Our various practices like over Fiji digital approach, over relationship bank banking approach, holistic product suit, ground level presence. That is I can say we call it internally carpeting approach over the just being present. We want to be thickly present. Being part of the ecosystem are helping us in maintaining the right matrix of the CASA going forward. CASA is a matrix, which will be industry driven. Yes, we can perform better and we intend to perform better than industry. Yes, we will be continue to be driven by how the industry, how the macro environment look like. I just like to flag the thing. If you look into the presently over CASA is basis the saving bank rate which is presently we are paying the 3.5% only. It is not that we are paying some different saving out rates to attract this CASA. So it is 3.5% saving bank rate based CASA.
So with that thing in sight we are able to perform it and we are now a liability sourcer from last 25 years. And we believe we will continue to perform better than what the industry is doing. Just macro factors. If it is coming in the market. You are talking about a long vision so that’s why I’m not in a position to give you any number for that. But we are committed to perform better than what the industry will be performing. But we have built up in a lots of levers internally with the increasing CD ratio the NIM expansion will be coming and which will be helping us to have all the levers available to continue to grow the rotas. The next liver after one and a half year the OPEX liver will come into play which is present at 3.15 on the average asset basis. So that liver is also going to play one and a half year down the line. So with those all levers. So I believe there is a lot of new levers are available to offset any of the contingencies coming in one or another stated lever.
Unidentified Participant
Okay, so that’s very helpful. And so the second question is on leverage, you know, where do you see that over the next three to five years?
Munish Jain
Typically if we look into the present balance sheet, if you look into the present balance sheet over advance Is at around 6,816 crore. Again a net on fund of 302 crore with typically 5 times advances to the balance sheet or to the net worth. Whereas if we look into the any of the secured lender I will not be in a position to compare myself with the unsecured ties. So if you look into any of the secured banker you will find the balance sheet lever is typically 10 times or so and the advanced lever is typically 7 times. So I am treating presently at 5.2 times. So I have a huge opportunity, a huge unconsumed capital which I want to consume as we move forward giving us enough opportunity to grow and without worrying about the capital. So that’s what we see. But going forward we are very conscious about the levers that we believe that we need to remain a rightfully balanced capital, not excess capital, not under capital.
Unidentified Participant
Sure, that’s very useful. Sir. If I could squeeze in one last question, sir, on Haryana, you mentioned that you intend to do mortgage and SME, not agri. So any thoughts on that? And a related thing to Haryana, you will be also having a deposit franchisee from Haryana, correct?
Munish Jain
Let me clarify. I said we are considerating heavy on MSME and mortgage in Haryana and we are doing agriculture in the selective belts of Haryana. We never said we are not doing a green Haryana. We will be doing a green Haryana in the selective belts where we find the customer of the agriculture customer what we look forward for. So that is what we do. Yes, Haryana. Haryana we internally call. We want to make our Haryana our next Punjab. The perspective is the how deep we are there in Punjab and how we are deep in the balance sheet of the individual account. Is you purposefully using the word balance sheet of the individual person. We want to be similar outfits in Haryana so that particular family is maybe having both asset liability all financial relationship with us so that we are very we are able to prove being their complete financial solution provider.
So what — how we are build up ourselves in Punjab now we have targeted Haryana to make us make it over next Punjab over next couple of years. So that is how we look into Haryana. And we are also very conscious that we need to continue to sow our seeds for the future expansion. And accordingly say Haryana we are targeting for a bigger expansion. So we are already sewing over seeds in the other states where we can continue to sensitize us so that those states can become a growth driver as we move ahead. And presently we are in the five states and two junior territory and we intend to expand every year by adding one or two states.
Unidentified Participant
Thank you very much and all the best.
Munish Jain
Thanks a lot.
Operator
Thank you. The next question is from the line of Anant Mundra from Mytemple Capital. Please go ahead.
Anant Mundra
Hello, Good afternoon sir. Thank you for the opportunity. So just wanted to understand. So on the LCR it has always stayed high and it continues to stay high for us. Is this because of a low CD ratio or is there any other reason why we have higher LCR?
Munish Jain
Typically presently we are under leverage entities and we are having a lower CD ratio also. So with these two variables and we have a very static stable retail deposit. So basis that we having a high LCD or lcr. But the thing given the LCR ratio high and plus over average CD ratio being high we believe which is giving us a right opportunity to expand the CD ratio as we move forward. And we are doing it also historically and we will be able to it will be helping us to expanding over to meeting over aspiration of advanced growth on one side and over rota growth on the other side.
Anant Mundra
Last quarter you had mentioned that our MFI NBFC exposure around 5560 crore. What is it for this quarter end Q3 and is there like in the corporate side do we have any GNPAs or what would be the SMA 1, 2 bucket on the corporate side?
Munish Jain
In the corporate side there is no additional NNPA or thing has come over the last one and a half to two years. There may be some older cases which is there since we are not writing off. We are working hard to recover. There is no such pain coming in that particular segment. Even SMA1 and SMA2 are very mini. Almost negligible in that particular bucket. And if I talk about our MFI exposure as I said earlier, our presently MFI exposure is around 1% of the total balance sheet or the total advances. So we are very mindful and almost very negligible exposure to the MFIs.
Anant Mundra
So it’s about 68 crores advances around 6,800 crores. So 68 crores, that’s the correct number.
Munish Jain
It is bit more than that. We have slightly more than that number. So we typically keep it around 1 to 1.25%. That is the total number we are having. So I mean to say not a negligible outstanding in this and not any higher concentration or higher. We are not skewed towards MFIs. We are keeping it that way only. Okay. Similar philosophy Anant ji secured franchise in within your on BFC also we are chasing those NBFCs which are in a secured lending franchise.
Anant Mundra
Got it. Got it. And sir, one final question. Have we activated as the facility on the liability side for our customers?
Munish Jain
Anant ji, since that there are certain things which are in the regulatory thing. So we have completely ready. We have in principal approval. We have everything. Good. Good to. We’re just waiting for the final go ahead from the respective regulator and we are targeting. We are making our best effort to get that file moved. The thing is that we understand the type of. So I just want to say this on this particular page. But we are in a completely ready stage. There is nothing pending to be done on Capital bank side.
Anant Mundra
So it’s pending with RBI or is it pending with sebi?
Munish Jain
Not with rbi. There is nothing pending with RBA on this.
Anant Mundra
Okay. All right. So that’s it from me. Thank you.
Munish Jain
Thank you.
Operator
Thank you. The next question is from the line of Sonal Minhas from Prescientcap Investment Advisors LLP. Please go ahead.
Sonal Minhas
Hi sir, this is Sonal. Am I audible?
Munish Jain
Yeah, Sonal, you’re fully audible.
Sonal Minhas
Great to get reconnected. Sir, I had two questions. First one was on the end npa. Net NPA for the agriculture loans. If I compare this quarter to quarter three FY24 we see a trend where the net NPA is going up from 1.57 to 1.94. If you could just give some subjective commentary on this because the loan book is kind of pretty much constant. So what’s happening here?
Munish Jain
Sonal, if you look into the agriculture over outstanding at the end of your comparing it now by September basis this, our agriculture outstanding has reduced from 2340 crores to 2199 crores. If I talk about the value of the my NPA number in this that is almost constant given the reduction.
Sonal Minhas
I’m comparing to Q3FY24 sir.
Munish Jain
Q3 FY ’24 so if I talk about. I was just sharing I just heard you said 1.77, 1.77 was the number of September.
Sonal Minhas
1.57.
Munish Jain
Typically if I talk about the quarter in the current quarter there is no increase in the GNPA in the agriculture almost insignificant increase the increased number is just consequent to the reduction in the base. Even if I talk about so the increase there is no increase in the current quarter we witness in agriculture and even if you look into the last period so our agriculture growth we are being bit conscious on the agriculture growth and now we believe there is a good opportunity will be coming and we will accordingly look into the same so there buildup of any problem here it is the base effect which you can see is visible but otherwise in the current quarter I’m reiterating there is no incremental NPA or my outstanding NPA has not increased even with more than 1 crore in the whole of the agriculture portfolio.
Sonal Minhas
Got it. So basically nothing much to double click here.
Munish Jain
Nothing at that.
Sonal Minhas
Understand that sir. Second question I wanted to understand like for agri loans do there are gold loans? There are agri loans, Are there agri loans which are backed by gold and what is it that we have an exposure? Just wanted to understand that a little bit more?
Munish Jain
Sonal we are not there in agriculture gold loan the agriculture loan against the gold we will be having insignificant exposure I will say even less than 10 crore. So we are not in the gold based agri lending we are purely productive and need based and depending upon the land and the cultivation and the cropping pattern is adopted as I shared earlier. So we are in that particular lending cycle not just taking a gold and lending so we are not in that particular product. This we take gold as a collateral in the event of some eventuality but that particular value is almost insignificant not even 0.1% or 1% even.
Sonal Minhas
Understand that, sir. And in terms of working capital loan, project finance loan, the machinery loan, the category that you have are there some are there some builder loans here which are bucketed under this side Loans to builders, loans to real estate developers?
Munish Jain
So we are not much in the that particular business. Those particular business will be there which we have known them well. Very not a very high port very, negligible portion in that particular space. But if there is any such business which we have done, it will be bucketed under MSME and trading. Provided those gentlemen are eligible as msme. If they are not eligible at msme, they will be under corporate loan. So. But if there are. But we are not much in this particular business. This is not our target segment. We are not a bigger lender to the housing land developers or the real estate developers. So we will be may not maybe having very 1, 2, 3 clients like this which we know well and which have history and a very limited values. So. But we are not targeted lender in the real estate developer business. That is never our preferred segment. Neither is another. Up to now even we are. That is never our preferred segment. Average ticket size of this case is only 20 lakh rupees.
Sonal Minhas
I got it. Yeah. That. That explains. Got it. So that’s it for myself. Thank you.
Munish Jain
Thank you, Sonal.
Operator
Thank you. Ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to the management for the closing comments.
Sarvjit Singh Samra
Yes. Thank you everyone once again for joining us today. We are committed to deliver progressive growth and value to our stakeholders. Look forward to connect with you again in April for Q4 and yearly results. Thank you.
Operator
[Operator Closing Remarks]