Capital Small Finance Bank Ltd (NSE: CAPITALSFB) Q4 2025 Earnings Call dated Apr. 30, 2025
Corporate Participants:
Sarvjit Singh Samra — Managing Director and Chief Executive Officer
Munish Jain — Executive Director
Analysts:
Sarvesh Gupta — Analyst
Shreyas Pimple — Analyst
Shreepal Doshi — Analyst
Anant Mundra — Analyst
Rishikesh Oza — Analyst
Sanjay Shah — Analyst
Iqbal Singh — Analyst
Pritesh Bumb — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Capital Small Finance Bank Limited Q4FY25 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star and zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sarvajit Samra. Thank you. And over to you sir.
Sarvjit Singh Samra — Managing Director and Chief Executive Officer
Thank you, Aviraz. Good morning everyone. Welcome to Capital Small Finance Bank Limited’s earnings call for the financial year 2425 and the quarter ended March. Thank you all for joining the call. You probably would have seen the financial results and the investor presentation that have been uploaded on the stock exchanges. Joining me today are Mr. Muni Jain, our executive director, Aseem Mahajan, CFO Raghav Agarwal, C Trip Sir Sahil Vijay, Head of Treasury and Investor Relations, Gandhi Bhubhutra from our Investor Relations team and our IR advisors at GA.
The financial year 2025 unfolded amid a backdrop of challenging macroeconomic conditions. While India’s GDP remained one of the highest globally, it moderated to approximately 6.4% as per the latest estimates from the Reserve bank of India. With the global contest, we believe India is well placed. SA. However, on the external front, goods export may continue to face headwinds until there is greater clarity on the global trade and tariff environment. Coming to the bank April 2025 we marked a significant milestone, completing nine years as a small finest bank and 25 years as a trusted financial institution. This journey would not have been possible without the unwavering support of our customers, employees, investors and the regulators to whom we extend our heartfelt gratitude. Turning to our performance despite the economic headwinds during the financial year 25 Capital Small Finance bank recorded a healthy 18% growth in profit after tax. We continue to maintain a strong capital efficiency position and ample liquidity buffers reinforcing our financial stability. Our asset quality saw further improvement with GROSS and net NPAs declining. This process is a direct result of our granular lending approach, strong underwriting, standard disciplined collection and robust collateral coverage which we have consistently kept our net credit losses well in check. Retail deposits remain resilient and continue to form the cornerstone of our liability strategy. Reflecting the trust we have built over the time with the environment remains challenging, but we are confident that our core strengths will help us emerge even stronger as an institution.We look forward to financial year 26. We are encouraged by the emerging policy tailwinds including the prospect of interest rate cuts, improved system liquidity and shift in the policy stance from neutral to accommodative. The outlook for credit continues to strengthen with this positive and evolving macro drop. I now invite Mr. Muni Chan to walk you through Capital Small Finance Bank’s performance for the quarter and the year. Thank you,
Munish Jain — Executive Director
Thank you Mr. Samra and a warm welcome to all of you. Throughout financial year 25, we remain focused on deepening the customer trust, expanding reasonably responsibly and strengthening the foundation of a resilient, agile and future ready institution. With that, let me now take you through the financial highlights for the quarter and Financial year ending March2025. FY25 was marked by. High interest rates, tighten monetary policy and elevated asset quality concern in certain segments. Banking system credit growth dropped to 10.8% in FY25 from 16.3 in FY24. In this environment bank witnessed healthy loan growth with improved asset quality over loan portfolio grown by 17% on year on year basis and 6% on quarter on basis, quarter on quarter basis and reaching to 7184 crore as on 3-31-2025 which is around 1.6 times of the system growth rate. Our growth continued to be led by Secure segment and 99.7% of our advanced book deemed secured and 79% of our portfolio is collateralized by immovable property oblique bank owner prs. The average ticket size of our portfolio the average ticket size of our portfolio stands at rupees 15.9 lakhs with 61% of the portfolio comprising clients with exposure of up to 25 lakhs. Our portfolio is well diversified across segments each of which has successfully been navigated through multiple credit cycles. The composition includes 32% in agriculture against 32% in Q3FY25 and 37% in Q4FY24, 27% towards mortgage against 27% in Q3FY25 and 26% in Q4FY24 and 21% to MSME and trading loans against 21% in Q3FY25 and 19% in Q4FY24. The fresh loan disbursement for the year ended 31st March shown a growth of 38% on year on year basis and being stood at 2,846 crores. Further disbursement for Q4FY25 stood at 765 corrodes. The disbursement constitute 20% to MSME segment, 22% to mortgage segment, 20% to agriculture, 22% to NBFCs and the large corporates and remaining to the consumption loans including loan against loan FDRs. The asset quality remained robust with gross NPA of 2.58% as of 03-31-2025 again 2.76% as of 03-31- 2024 and 2.67% as of 31-2024 with negligible write offs over net NPH reduced to 1.3% as of 03-31- 2025 against 1.4% as of 03-31- 20. 20:24 and 1.35% as of 12-31-2025. Overstated for FY25 stood at 1.41 and for Q4FY25 at 1.65% against 1.45% in Q3 with upgrade and recovery ratio for FY25 stood at 1.12% and for Q4FY25@ 1.38% against 0.95 in Q3FY25 calculated on annualized basis. Credit cost were contained at a lower with 0.12% for FY25 and 0.13% for Q4 FY25 supported by robust collection efforts and minimal write offs. Notably, there were no NPA selloffs to ARCs during the period. SMA1 and SMA2 calculated as a percent of the advances stood at 4.88% as on March 31, 2025 agreed 6.05% in 12-31-2024 over reported deposit. They crossed 8,323 crores this year growing by 11.3% year on year basis. Owing to lower CD ratio and higher liquidity ratios. Bank continued with their calibrated deposit growth. The CD credit to deposit ratio on average basis increased to 81.4% in FY25 compared to 79.0% in FY24. Despite industry wide pressure on CASA due to the shift towards high yield income deposits, Bank’s strong CASA share reflects its robust retail liability franchise. The bank continued to maintain high CASA of 36.9% as of March 31, 2025 against 38.3% as of March 31, 2024. Cost of funds for Q4FY25 and FY25 stood at 6% against a similar number in Q3FY25. Moving to the profitability matrix, pre provision operating profit rose to rupees 48 crores in Q4FY25 registering a 23% growth compared to 39 crores in Q4FY24. For the full year FY25 PPOP stood at 185 crores reflecting a 19% increase from 155 crores in FY24. The profit after tax for FY25 stood at 132 crore and for Q4FY25 at 34 crore that is 18% growth on zero year basis and 21% growth on quarterly basis. Our net interest margin improved to 4.2% in FY25 up from 3.9% in FY24 supported by improved CDC. Ratio Non tax income as a percentage to average total assets improved to 0.9% for FY25 and 1% for Q4FY25 against 0.8% for FY24 and 0.9% for Q4FY24. The non interest income primarily constitute core and stable fee income. Operating efficiency also strengthened with the cost to income ratio declining slightly too 62.3% in FY25 from 62.5% in FY24. Reflecting over continued focus on effective control over ROA has improved from 1.3% in FY24 to 1.4% in FY25 and the same was 1.4% in Q4FY25 against 1.2 in Q4FY24. The capital ratio is is at 25.4% at the end of Q4FY25 and our LCR on average for the quarter is 235.1%. During Q4FY25 we opened 10 new branches bringing over network to 195 branches across 5 states and 2 union territories, enhancing accessibility to rural and semi urban markets. We have 77 branches in semi urban and rural areas and SORO constituting 76% of our total deposit. Going forward in FY26 we intend to expand our branch network by increasing the branch outreach by setting up 20 to 25 branches by expanding outreach in contiguous states coupled with deep penetration in existing market, we also intend to expand to one more stage during FY26. Our endeavor is to organically grow over secured loan book and we are targeting a growth rate of 20% plus by targeting MSME trading, mortgage and agriculture segment. We will continue to expand in secured asset franchise with strong control on asset quality. We targeted roadpack stems and trajectory. Our focus on strengthening profitability metrics shall be driven by improving CD ratio, consequent maintenance around the present level, optimizing operating cost and improving share of the fee income. We believe with our deep branch network underwriting expertise, deeper understanding of our target segment, target list, middle income group segment, we have a strong growth Runway as we expect with this I would request Mr. Samra I will request the operator to open the floor for any questions and answer session. Thank you so much.
Questions and Answers:
Operator
Thank you very much. We will now begin the question answer session. Anyone who wishes to ask a question may press char and one on the touchdown telephone. If you wish to remove yourself from the question queue, you may press star and two participants. Are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.The first question is from the line of Sarvesh Gupta from Maximum Capital. Please go ahead.
Sarvesh Gupta
Good morning sir. Thank you for giving the opportunity. The first question is about your FY26 as well as medium term guidance on ROA and ROE. So the way I look at your performance given the NIMS that we have, the yield that we charge at 11% and NIMS of 4 odd percent. So what is happening is you are largely based out of Punjab. So as you want to show further growth you will have to get out to other states as well. So I don’t see your cost metrics going down. The cost income given the 11% yield that we are doing, our credit cost is also very very low. But there cannot be any improvement of course on that because our SMA is also 4.5percent and it is already. Credit cost is already very low. So how do we sort of increase the ROA and ROE going forward? Because even the deposit growth is amongst the lowest of all the SSDs at around 59%. So how do we. I mean is there a path to increase this? And then what will be the guidance for the same for both FY26 as well as let’s say three years from now.
Munish Jain
So this if we talk about. Firstly if I slice this question into the three parts. As far as our business consideration, we continue to expand our business out of Punjab. And if I talk about for the current year. Current year in the beginning of the year we have 82.7% advances from Punjab which has reduced to 78.8. So in turn our out of Punjab credit market share within our portfolio has increased from 7.3% to 21.2%. So we are continuously expanding our outreach out of Punjab so that we can have a clear presence in all the markets.
Secondly, if we look into our rota and the way forward for the router we are presently having an average CD ratio for the current year being 81.2%. We intend to take it to the our media term basis to mid to the high 80s. And as far as the back of the angular conclusion, with every 1% increase in the CD issue with interest spread that is the cost of deposit and the Z loan advantage. Constant remain constant. There will be a benefit of around four basic points to the nim. So our first driver for the expansion for the ROTA will be over 3D risk pension which is even as 1 for the FY25 it is 81.4% on average basis. That is the first driver available for the ROTA stanchion which will be available for the for the over the next current year slightly for the current year and now for the medium period also the second driver available is over non interest income over non interest income presently for the FY25 is 0.9 which we have improved from 0.8 from the last year. We believe we will be continued the expensive hydraulic in this with all the products being available and I just like to flag over all of the other non interest income is of a stable fee income. So with all the products available so that is another liver available to groot for the medium term strategy that is from 0.9% we looking forward for the expansion of the non interest income. Yes, you pointed it right. The opex given we are in the expanding phase there will be limited of choices available to reduce the significantly reduce the OPEX in its short term to very very long short term basis. On a medium term basis we will start getting some benefit from the OPEX reduction as a percentage to the average assets. So the drivers for the ROTA expansion which we are doing in the current year also which we have done in the last years also and which we intend to do in the coming year also one by further improving the average CD ratio which is 81.4% in current year with the present LCR of 235 with a Catholic ratio of 25% plus. With all these choices available we look to look forward to the medium term basis and non interest income expansion from presently 0.9%. These are the two drivers which is available for Varota and consequent for ROE expansion in a short to medium term basis. And if I come to your next question about the deposit growth as I said as part of our presentation since we have a lower CD ratio so deposit and over deposit being 92.5% being a retail deposit with 36% being capsa and we are paying cost of deposit being 5.9 and cost of fund being 6. So we are following a calibrated growth on the deposit to take care of the need of the credit needs so that we are confident that as and we have a sufficient capability available to grow the deposit to support our business growth and to back our first endeavor is to firstly improving the CD ratio which is 81.4% in the current year and we currently have improved it by 2.4% from 79% to 81.4%. So this is over perspective on this particular points.
Sarvesh Gupta
Okay, let’s say if we increase the. CD ratio this year by 5% then it will lead to around 20 basis point increase in your ROA. And but beyond that. Hello. So if we increase our CV ratio by 500 basis point you can increase your ROA by maybe 20 basis point and then we can also have maybe 10 basis point improvement because of the non interest income. So around 30 basis point increase in ROA we can get maybe in one year or two years. That is well understood. But beyond that sir, you know, since our deposit growth has so A it is low compared to, you know, most of our peers and B I can also see in your presentation that it has come down significantly from pre Covid to post Covid. So what is the strategy? Can it be a more. I mean 13% deposit growth is even large PSU banks at a very large scale are doing that sort of a deposit growth. So at your very small scale. Now how, I mean how are we thinking about 13%?
Munish Jain
As a recap, as far as the rotax tension you said about the numbers I like say just these are the similar numbers which we can consider for a medium term basis. I don’t want to give any timeline to this particular number but these are the numbers which we are also which is the maximum mathematically? Very well feasibility is there. And as far as our deposit franchise is concerned, if you look into our deposit book you will see our deposit is purely retail without current year we have not increased the bulk deposit. Beginning of the year our bulk deposit was 7.5. At the end of the year it is 7.5. We get all of the growth from the retail deposit only and with the very very distributed retail deposit which is around 11% growth and we have calibrated this growth given we want to improve the CD ratio and given the scenario on the asset side. So we cautiously and responsibly grow our advance book to keep an eye on the asset quality. So we believe a better growth rate in the deposit in the current year.
And as I said we intend to grow our loan book by more than 20% in the current year. Keeping in with the present environment. Some positive change in the environment may have a positive implication. But presently as we look into the present environmental, so we’re looking targeting 20% plus growth rate on advances and we believe we will be growing our deposit at a faster rate than we did in the last year. But saying offset, we intend. To grow overseas from 81.4% to the some further higher levels.
Sarvesh Gupta
And the last question is your credit cost is only 10 basis point which is much lower, very low than many other banks. But your sma is quite high. 5,6% is much higher than many other peers. So what is the reason behind it and how do you see the credit cost? What should be the normal credit cost that we should pencil in for your business?
Munish Jain
So if you look into the credit cost on the average assets or their credit cost on average advances over credit cost, which you have been saying as a part of the rota tree is typically credit cost to the average assets which is 0.12 for the current year. If you calculate it on average advances, it will turn out to be 0.18 to 0.2%. If I talk about our historically average credit cost on an average asset basis, we always remain in the tight range of 0.1% to 0.15% except two years which is a coveted year in which this particular number has been bit higher. And that too not on a loss basis but on a required provisioning basis.
We believe going ahead also we want to keep it in a tight range of 0.1% to 0.2% for the current year also and going forward for a couple of years. So we are quite confident to keep it in a tight range of 0.1 to 0.2% as we move forward. And as far as the SMAs are concerned, so the SMA is typically 4 point below 5% presented. I respect your views but sir, we believe in the retail franchise when with the average ticket size of 50 lakhs. So having a SMA which is below 5 is with a huge effort. Yes, we aspire to achieve more but. Yes, but we are quite happy rather with the present SMA number of 1 and 2 put together being below 5% of the total portfolio. And most important things that I like to factor. We have not written off any assets significant written off. It will be written off is less than a crore rupees and no sign off of the bad assets to any ERCs. It is purely full recovery effort based credit portfolio.
Sarvesh Gupta
Thank you and all the best.
Munish Jain
Thank you service.
Operator
Thank you. The next question is from the line of Shreyash Pimple from JM Financial. Please go ahead.
Shreyas Pimple
Hello, can you hear me? Hello?
Munish Jain
Yeah, Shresh, you are audible.
Shreyas Pimple
Yeah, thank you so much sir for the opportunity. I wanted to understand the impact of rate cuts on nims. You highlighted in your opening comments that your name, you want to keep it at a stable level of around 4%. Can you highlight? I mean, what I mean. On the asset side, what is how much portion of the book is, you know, floating rate, how much is the fixed rate?
Munish Jain
Surely if you look into our total portfolio as on December 31, 2025, we have a 55% book which is a floating rate book. The same number was around 61% a year back. So during the period we were seeing an interest rate downward trend. So we increased the fixed rate book for our portfolio and presently over floating rate book is 54.77% as of 31st of March. Within this we have 12% of the book which is a EBL linked book. So we have around 12% book which is a EBL linked base book which has a direct implication of this EBL change. And the linking book is the MCL link which will be dependent upon our cost of funds. So that is one aspect I like to flag. So to counter this particular 12% book which will be impacted directly by the interest rate cuts.
So we have already factored in the encore, has already decided that we have reduced our saving bank rate also by 15 basis points so that we can continue to retain the NIM which is at the retained and improve the NIM from the present level. And presently we are having a minimum of 4.2%. It is not 4%, it is 4.2% presently. So we intend to maintain and improve the NIM from the present level for the current fiscal irrespective despite the fact we are we are anticipating some further rate cuts and the rate cuts impact on the EBL link is immediate basis. Whereas on the deposit it will be with the maturity or a rollover basis. But just to share you with the balance sheet construct, if you look into the balance sheet construct we are typically having 45% of the advances on a fixed rate or other. I will say 55% of the advances of 54.77% on a floating rate.
And similarly on the liability side we are typically having 36 to 38% cast off and 62% of our deposits are term deposits which is a linked with the interest rate. And out of this presentation we are having more than 85% of the deposits with the contractual maturity of around one year. So that also will be get repriced whenever the repricing base and seller will be happening so that we can manage both upward and downward interest rate scenario in a more efficient manner. So that’s the reason we are confident of maintaining and striking the NIM even for the current fiscal.
Shreyas Pimple
Sure, sir. I mean that is very helpful and that gives the confidence second question was on the, you know, growth of the banks. You said that you want to, you know, expand out of Punjab also. See in the other loans in terms of the yields, as in, I wanted to understand. Will you be willing to increase the portion of higher yielding loans in the current book? You know to expand your roas going ahead whether it is in the current geography of Punjab or when you expand out of the geography.
Munish Jain
If I talk shresh about the overall perspective, we intend to remain in middle income group base lander. We intend to be a intend to retain maintain a secure lending franchise. We believe there is enough opportunity of growth available for a secured lenders in a middle income group for the production credit. That is the three segments which we are specializing in. That is the mortgage, MSME and trading and F3. So we will continue to grow in these three segments as we move forward. Depending upon the state in which we are expanding, our tunnel will keep on moving. What I mean by this say we are now currently we will be expanding in Rajasthan and Rajasthan will be targeting the mortgage market. So we will be putting over higher emissions in Rajasthan for the mortgage market. And now we will be expanding more in Delhi. In Delhi we will be putting a more target on MSME settlement.
Since we not a monolent business product. We are at multi lending products within the middle income group segment. So depending upon the geography and the potentiality available so over product under consideration will be keep on moving. So since we have all the three products available which is needed by the middle group segment. So going ahead we intend to rename these three bank product lender and we intend to expand over name. So yes, we are not intending to enter into unsecured peace. We want to grow responsibly. We want to grow responsibly. Saying all this, we are growth hungry. We are growth hungry and we intend to grow at much faster rates. Yes and we as I said if with the present market environment also we are confident of growing more than 20%.
And I believe the market environment from the more clarity on the tariff world trade will improve and help us improving over group taxaries. So this is what I believe and with this we want to improve over margins both in terms of NIM as well as the rota as you move forward.
Shreyas Pimple
Understood sir. That is. That is very helpful. Just the last question, you said that on the other income part you will be increasing the other income gradually. Can you explain as to exactly what part of other income you will be focusing on? Will it be banker commissions? Will it be operations related to fee income? So what portion are you focusing on?
Munish Jain
As we look into the present other income spec which is available on slide number 10. We are having a very very mixed other income which is from all the segments currently we want to expand both advanced fee income operations related fee income and banker related fee income which may be supported further by some treasury benefits. Because in the last year we made only a peanuts. In the last two years we made only a very very smaller money from the Treasuries. The current year I believe with the type of interested environment which may have a difficult from the NIM side that will be giving us a benefit from the treasury income side. So it will be compensating that particular small group impact on the expansion of the NIM will be compensated slightly by the treasury income also. But saying all this I believe current year we want to intend over customer outreach. We were doing NTDs I mean to say new to bank, new to bank from last year we have start moving to the deepening price that is selling deepening the pricing customer base. So with the deepening drive already being started I believe going forward also we intend to grow all the three pieces may be advanced related fee income, may it be operations that is a payment channels related fee income or may it be banker or commission fee related income that is selling other financial products. So all the three products are in your target segment and we intend to grow all the three as we move forward.
Shreyas Pimple
Sure. So that. That is very helpful. So on the last part on the lcr, the new regulation on LCR do you see any impact of that regulation on the bank? I know the LCR ratio is very high for us around 235% but is there any negative adverse impact
Munish Jain
As far as the over presently calculation and CF we will be. I’m very surprised to see RBI also said there will be impact, positive impact visible on the banking around 6%. And as per our model, as per our position as in 31st of March 2025 with the new MCL guidelines we will be having a positive effect of 6% on the President’s year.
Shreyas Pimple
Thank you. Thank you so much. That was really helpful and all congratulations on the quarter and all the best for the near future, sir. Thank you.
Munish Jain
Thank you.
Operator
Thank you. The next question is from the line of Sharifal Doshi from Equilibria Securities. Please go ahead.
Shreepal Doshi
Hi sir. Good morning and thank you for giving me the opportunity. So my question was on growth side and also on deposit side. So since you highlighted that we are trying to calibrate our deposit growth in such a way that our growth also leads to better asset growth and also our margins remain healthy. So I mean do you think that we should rejig our deposit strategy because there also the growth is soft at 14% for the year. And even on asset side, if you look at in the last three years, our growth has not been more than. 20% in any of the last three years. So I mean maybe a time to look at this strategy little differently on deposit side and therefore benefiting the asset side as well. Just your comments and thoughts on this
Munish Jain
Sripal. As I said we intend to grow faster. Last year also there was because of certain actions and that is a certain stress coming in certain segments and certain macro level factors. There has been a sluggishness in some of the growth in the industry as a whole. As you share industry as a whole growth has subdued from 16.4% to 10.3% for the industry as a whole. So we being part of the industry we grow 1.6 times of the industry. Yes, we believe we had more potential and we had a more capacity to grow and by last year we grow responsibly. So last so that’s what we are seeing and currently we are now fully geared up. All the things are in place. Out of Punjab bookies start growing in much faster way. The Punjab has started contributing good asset quality is in control, liquidity is available, capital is available. Market dynamics especially on MSME start looking good. So with all this thing in sight. So I believe the growth rate in the current year seems to be more than 20%. We are quite confident and we are giving a guidance accordingly for that. On deposit growth perspective we intend to grow, we intend to grow over deposit growth rate from the current year. We can faster rate.
So this is already in the plan and over budgeting are also in towards that direction that in addition to the advanced linked group last year we were working on improving the per branch disbursement matrix. KPI need to look over disbursement has improved by 38% on year on year basis. So we have touched almost 12 crore rupees per branch disbursement to the branch channel average disbursement per year. So currently we are targeting increasing the deposit per branch contribution. So that is the KPI we have internally taken. So I believe so we are also internally on the same track to support the advanced growth and also having a better deposit growth as we move forward. So you will see a better deposit growth in the current fiscal as we move forward
Shreepal Doshi
On the asset side what sort of a mix that will emerge? Because if you look at this year agri has shrunk to almost 30 to 33%. So will it further continue to sort of contrast because as we move into non Punjab geographies where the credit pickup for MSME and mortgage is relatively higher. So will that mix Change happen in FY 2027
Munish Jain
I believe the over change in the current year mix was because that we have grown faster in Ms. Currently we intend to grow faster in MSME and trading book which is presently 21%. We intend to improve this number. So you will see some increase in the ATS also in this portfolio so that we are targeting a bit higher segment but remain within our portfolio. So you will see some ATS also increase in the coming year in the MSME and trading book. So that particular portfolio will grow. And we also intend to grow mortgage but we are not intending to shrink further the agriculture. Agriculture will be hovering around the similar levels for the current year. And yes we want to improve the MHLE maybe taking out from the other nodes.
Shreepal Doshi
Got it. So one last question was on you know the kind of margins that we see to happen in FY26 and you know just comments on ROA for FY26
Munish Jain
We at this point we closed the last fiscal FY25 at 1.4 ROI and we are continuously improving ROE from last many years 4, 5 years tendencibly FY26. We also intend to further improve the ROA at this stage. I don’t intend to give any number to this. Even the market dynamics on the interest rate environment is too uncertain. But one given all this but we are kind of we are giving a guidance of improvement in ota. So how much improvement in OTA will be depending on the market forces. But we are confident or improving the rotor again in FY26. So that is what I want to say. Whatever we earned in FY25 we intend to improve the rotor further in FY26.
Shreepal Doshi
Thank you. Thank you sir. Thank you so much for answering.
Munish Jain
Thank you.
Operator
The next question is from the line of Anant mantra from my temple capital. Please go ahead.
Anant Mundra
Hello. Thank you for the opportunity sir. We’ve had a slightly slower growth in agri this year. So is it because you know we are well penetrated in Punjab and the opportunities to further mine are fewer and that’s why agri has been slow or is there any other reason attributable to this?
Munish Jain
Anand, the basic factor there is no contraction in agriculture book. Agriculture book on a standard basis has improved on a percentage basis. It has contracted. So the reason for this percentage is the growth in the Abdul segments and some post in Haryana. We are not doing agree in other part of the country that is other states. We are doing agree primarily in Punjab and some portion of Haryana. But we are seeing some opportunity coming up in the current year. Again now in the agree. So as I said earlier agree portfolio we are not looking forward for any further contraction. We will be believe that we will be retaining at the present level. So there was a contraction. There was a contraction coming for the reason of the other segment need to be grew at a faster rate. Now I believe agriculture will be matching up with the overall growth rates maybe and retaining its share which is around 32% in the range of 30 to 31 to 32% or 30 to 32% is what we intend on. 31 to 33 is the type of the range we believe agriculture will remain. So it’s just we were a bit cautioned on agriculture in the last year and now with all the things in place now everything is settled. I believe agriculture will be can we are confident on agriculture growth as well as we move forward. But by saying all this, since our outer Punjab book will be dominated by MHME and mortgage and the outer Punjab book as I said earlier has improved in the current year from 7.3% of the total portfolio to 21.2%. I believe we will be continue to see a further improvement in this metrics and consequently growth higher percentile toward mhm. Anand, are we audible?
Operator
Yes sir, Anand is audible. I’ll take up your next question
Munish Jain
Please.
Operator
Which is from the line of Rishikesh from Robo Capital. Please go ahead.
Rishikesh Oza
Yeah. Hi. Thank you for the opportunity. Am I audible?
Munish Jain
You are fully audible.
Rishikesh Oza
Thank you. So sir, net NPA which is currently around 1.3% and we had earlier targeted that we would bring any net NPA below 1 as a criteria for universal license banking license. So given that our normal credit cost around 0.1 0.2% will we need any additional credit cost for this year?
Munish Jain
Yes. As a principal guidance we intend our target line was to bring it to around 1% to the 1% level in the current fiscal that is FY26 to be digital for the universal bank intelligence. So we believe in the current year we are able to improve it by 10 basis points without any additional credit cost. So I see. We will be able to contain it by a big percentile by natural recovery effort based which is a recovery asset. Based on the slippage ratio we are able to compare the slippage ratio for FY25, the slippage ratio for FY25 which is 1.41% and it was 2.14 in FY24. So it is able to contain our scape ratio by 1 basic point 100 basic points which was 2.4 in FY24 to 1.41 in FY25. So this contraction in the trip is shown that year. So the recovery typically taking this land. So I believe we will be having some natural tailwind benefits on of this on over net NPS and basis this we intend to make it below 1% level and for any additional provision requirement if any needed will be evaluated at that point of time in the broader spectrum and as looked by my FX body over my board of directors. So that is what we believe. But we are on that direction and accordingly the slippage as well as the has reduced and and with the reduction slip and ratio in the last financial year I can sense a better outback in PH in the current year as a natural consequence.
Rishikesh Oza
Okay, thank you.
Operator
The next question is from the line of Anand Mundra from my temple capital. Please go ahead.
Anant Mundra
Hello. Am I audible?
Munish Jain
I think we lost the line. So I thought you heard what I said or you missed something or I said repeated.
Anant Mundra
No sir I come I heard you so that’s okay that that part is done. So I wanted to check on what our deposit share is out of Punjab. Could you give some color on that?
Munish Jain
I can try to share all this thing from the rather than from Punjab. I will just share you one data which will be of data of interest for you. We are having 36.4% deposits from a rural area. We have 39.5% of the deposit from a San Diego area and we have only 24.1% deposit from the urban area. So over deposit franchise is granular Size of the saving bank Account has increased by 1000 rupees during the current year which was around 41,000 has increased to 42,000. We improved the average ticket size of current accounts also which was 1 lakh 21 lakh which was around 1 24,000 which was around 1 lakh 27,000 last year has improved to 1 lakh 40,000. So as an intent over intent is to be continued to be granular and deeper deposit franchise. So saying all this so Punjab and Haryana presently and going forward will be going to be over a larger deposit market. So that is what I try to intend to say.
Yes on advanced side we are starting moving out of Punjab but Punjab is going to be dominating for our deposit and it has been presently 91.95% against 93.89 a year back.
Anant Mundra
Got it. So sir when we mentioned that Haryana is going to be the next Punjab for us, I’m guessing our deposit because you’re very strong in in deposit franchise in Punjab. So what is the comfort that we are getting that our deposit franchise will be as strong in Haryana as well. When we grow there,
Munish Jain
That is comfort. We are getting is the two or three side of comfort. First comfort is the deposit mix we are getting from Haryana. That is from the share of the tasa. Second is the growth coming from Haryana. If you talk about we have declined 2% from Punjab. That whole of the majority of that is coming only from Haryana. And Haryana is started contributing from all the metrics from that particular site. So we are confident as you move forward. Haryana is presently constituting having only 20 branches out of total 195 branches presently and current year we intend to add 10 more branches in Haryana to make it over 30 branches which make us eligible for the government business also in Haryana by end of this year.
So which will be helping us further in garnering a better retail deposit. With that we will be able to have a better customer connects. So that’s the way we call making Haryana our next Punjab.
Anant Mundra
Got it. So. So you mentioned CASA is quite good there. So what is the CASA in Haryana?
Munish Jain
It is almost at the bank level. So we have bank level around 36%. Haryana will be also around the similar or it’s slightly higher level.
Anant Mundra
Okay and so you mentioned you’re opening 10 branches in Haryana. So and what is the overall target that we have for the entire bank?
Munish Jain
We intend to open 20 to 25 branches or say 20. Around 25 branches.
Anant Mundra
Okay. And so Haryana is 10 and how much would be within Punjab out of this 20? 25 branches.
Munish Jain
So instead of giving any right any number for the state specific, so Haryana we being we make up one to intend to make it 30. That is your start point. So that is a reason so that we are eligible for certain additional benefits from Haryana. So we’re targeting 10 for Haryana. The other branches will be mix of Punjab depenetrating in Punjab, entering into other states. And we also intend to enter one more state during the current year.
Anant Mundra
So if I look at the SMA1 and SMA2 both you mentioned that it is below 5%. But if I see the trajectory, I think last last year it was about 3.5 3.6% and it is going up. So doesn’t that worry us because our credit cost is quite low and any shoot up that is happening in SMA will further lead to gross NPF lows and could you know further increase our sales cost which is quite low.
Munish Jain
If you look into The SMA number, SMA number FY25 was 4.46 and presently is 4.88. So I see the few basic trends up and down So I will not term it as an increase, since even if you look into this increase, this is not an increase which we can sit here on a face that is not even a one percentage, that is not even a half percent increase. So that is a slight change. So we give you a number, so. So there is no alarm signal or worrying signal coming out of this. At least what we see out of it. So it is all. I read it as a similar number. So some percentage based up basic point change is not a thing to be worried about. This is what we internally believe.
Anant Mundra
No, I was actually comparing from FY23 number where it was about 3.5, 3.6. So probably that could have been an exception, I don’t know. But from there it appears quite nice.
Munish Jain
Those were the years when there was Covid related repayments. Restrictions were also there for a longer period. So restructuring provisions were there. So those were those years. Then there are a lot of other additional benefits which may be coming up pouring out from the last period. So last year was one of the year in which there’s a full price proper year, no benefits for repayments. Currently it is the second such year. Second, two and a half such years. So comparing metrics, if we look into FY24 versus FY25 we are almost at a similar level. I will not say I will take a similar level they said because the delta between 2 is not even a 50 basic points.
Anant Mundra
Got it. Got it. And so one final question was that you guided that. You know our NIM typically expands by 4 pips if the CD ratio expands by 100 bps. So for this calculation what kind of rate cut have you already factored in
Munish Jain
For this particular calculation? The calculation is based on a simple math. That is the interest spread that is a difference between cost of deposit and interest on cost of deposit. Union advances remain constant. Any change in that particular spread will have a different implication. So this particular thing is just pure plain vanilla. What will be the benefit of NIM of the CD ratio expansion? The other factor change that is a change given some contraction in the industrial level changes if any happen future. That is a separately. So that is the additional bonus or additional benefit which is available in the balance sheet other than the other interest related aspects. So that. That is what I’m trying to clarify. So that is an additional benefit which is available other benefits or. And oblique challenges which is available for all other people like us will remain constant.
Anant Mundra
Okay. And sir, would it be possible for you to give the PCR breakup across segments agree mortgage MSME and trading and the other segments.
Munish Jain
At this stage I’m not handy. I will ask my IIT my team Bharti. She will connect back to you and share this number.
Anant Mundra
Okay. Thank you sir. That’s it from me.
Munish Jain
Thank you Anand.
Operator
Thank you. The next question is from the line of Sanjay Shah from Pranishta. Please go ahead.
Sanjay Shah
Hi, can you hear me
Munish Jain
Fully audible?
Sanjay Shah
Thank you. Thank you. Congratulations on a very consistent. Set of numbers as you’ve been reporting over the last several quarters Just a question not in the now in the near but over the medium term it could be three years, four years but where do you think you can take your rota to return on total assets Effectively how much can you compound your book over a three to four year period and rota?
Munish Jain
Sanjay, you I think asking me about my bucket list so I am on an earning call and talking about my bucket list may not be advisable by my peers But I think you are asking purely my bucket list and what I wish and what I believe our model we can take it instead of devoting any number if I give you the guidances or the way forward of the things if you look into a present data tree you will see we’ve been 4.2% NIM with 81.4% CD ratio if we look into with the interest spread that is a marked difference between cost of deposit and Z loan advances being 5.2 to 5.5 with that we are typically having 4.2 million if I believe that 4 basis point increase is happening over a medium term basis over a year if the 5.2 to 5.4 is remain in that same range with a 100 basis point change and we intend to take the CD ratio to mid to high 80s I don’t never said we want to cross 90 we want to make it mid to high 80 so we have a legroom available for 7 to 8 basis points so which will be giving us some benefit and it is not a year it is in sub couple of years which will be required so that is a one dotax pension tree available secondary available is about the non interest income which present is 0.9 which we are continuously improving which was 0.6 in FY23 which was 0.8 in FY24 which is 0.9 in FY25.
If I talk and with the deepening drive with the customer profile touching almost 8 lakh 7.85 lakh to be precise with over deepening drive with all products being placed I believe this number has a very high opportunity to move it further if you look into the various other universal commercial banks you will find this number to be in the range of 1.25% to 1.35% and if we try iron out the trade finance since we are not in a trade finance this number will be 1.1% to 1.25% so we have a sufficient option available. We have a sufficient opportunity available to expand it.
And third, that is the OpEx OpEx, which we believe will remain constant for current year or maybe for one more year, and which is around 3.1% to 3.2%, which is the range we are maintaining for some period. Now I believe for the maybe for a shorter period, it will remain in this tight delta. But ultimately, with the model which we are talking, with the mature branches mixing, moving up, and when we will be drying up the NIM expension and the OPEX expansion or earning pension, this particular driver will come into the play from 3.05, 3.1 to 3.2. The client has to be there. And if you look into the industry average, the guy who will be crossing the similar type of model with the retail franchise, you will know. What sort of cost income ratios these guys are paying and what sort of non opex ratio to the average assets they are playing. So I believe this is a third play which is available. So with these three available with a 1.4% data being presented I believe the opportunity on my bucket list to see it growing is phenomenally high. But those are. But we need to. I just want to be very honest up front that we are a growth hungry and we don’t want to be a stable state entity we want to be a blended entity for a period for some while as we move forward but in a blended while also we are able to improve the rota and we are maintaining this category that we intend to improve the rota which is passing here despite the fact we are a bland entity and with the growth higher branch. So I believe the extension in the rota over a medium to the long term basis the levers are phenomenally high. My apologies, I’m not really in a position to share the number since in my. I’m constrained to share the writing numbers please.
Sanjay Shah
No, no, that’s fair, that’s fair. I guess one of the reasons why everybody’s asking about the deposit growth is because we can completely and fully understand the fact that you have sufficient lever to improve upon the credit deposit ratio for probably a year, year and a half and as you rightly said you don’t want to go beyond the 90s. So I guess indirectly, directly we’re all wondering what the longer term trajectory can be but we completely understand and respect what your response is. So thank you very much.
Munish Jain
Thank you Sanjay.
Operator
Thank you. The next question is from the line of Iqbal Singh from ifm. Please go ahead.
Iqbal Singh
My question is what is your preparedness for the universal bank license and when we can expect that.
Sarvjit Singh Samra
I just want to say it in this way I as a representative of my board I can say is to take the boxes to be eligible for the universal commercial bank at this point of time with the scale we are having I believe my apex ready my board will be deciding the factors when to apply for the universal bank but one thing is we are quite ambitious and we are quite the universal bank transition is the one part which is quite encouraging for me and my whole of the team which will be keeping us quite motivated saying all this. I just like to flag 12 points if you look into the business model on which capital small finance bank is earning the arbitrage between SMB and UCB from the earning and the growth perspective the three arbitrage one being up to 50 lakhs there has to be 50%.
Up to 25 lakhs there has to be 50% portfolio. We are way ahead of it. We are 61% plus 75% need to be PSL. Our model is PHL driven. Third, higher capital adequacy. We are already having a 25% capture. So even in the transit period or in the imperial period. So our board decides when to apply for the ucb. The over growth rate and over asset return matrix will continue with similar targeting. This converting into universal bank will help us in further expansion of the router by having a better access to the retained lower cost deposit. So with that thing in sight, we intend to tick all boxes in the current fiscal as we guide in the last calls. So and the next call will be taken by our tax body my booth after evaluating all the situation existing.
Iqbal Singh
So when you are expecting that your slippage which you have done a very good job in FY24 which was 2.4% and as an FY25 it is 1.41 and when you can expect because this is one of the hurdles that you have to be less than 1% slippage. So where can do you do you expect in FY26 you are able to do that to have the slippage less than 1%.
Munish Jain
It was just clarification 1% is not the slippage ratio which is required. 1% is a net NP ratio which is required which means.
Iqbal Singh
Yeah, sorry, sorry. Yeah, yeah sorry.
Munish Jain
Which we have already 1.3. I believe we are intending with over growth with our recovery efforts over internal target in the current fiscal to pick that box. Yes, it is linked with a lot of macro factors. You know land macro factors. Just with the present macro factors being remain constant or some improvement. I believe we are internally targeting to tick the boxes as we discussed earlier in the calls. Earlier calls we intend to tick all boxes in the current year FY26.
Iqbal Singh
One more additional question. How much spend is there on a digital transformation or digital onboarding of any metrics of revenue or income?
Sarvjit Singh Samra
As far as if you talk about Iqbal, we typically have a decent spend on the IT based spend whether be a security related or the infra related or the other territories. Just a proxy to this. We have 88% of the transactions done presently through a digital mode which was around below 50% 4 year 5 year back. So even if I talk about FY22 post the COVID 19 started this number was usually to be 7071. We currently come 88% of our present transactions are purely the digital platform. So we are constantly spending and constantly evolving on a digital front. But I just like to very upfrontly fly with bond. We are a fizzy digital entities. We are a semi urban and rural area specialist and the middle income group specialist entity. So there are a lot of such play. We require a human connect. We are available digitally for all the transaction and 88% of the transaction is. Testimony to that. But we are proudly saying we are a Fiji digital entity where both the digital and the physical faces will be available to our present and prospective clients. And since all of the lot of Suru India started projecting on a UPI but for the lending practice or for the deposit practice they still expecting a physical fees. So we are available both physically and digitally in all the channels. And that’s what our philosophy and over outreach program is.
Iqbal Singh
Thank you sir and once again congratulations for presenting a wonderful numbers better than the expectations of the market. Yeah.
Sarvjit Singh Samra
Yeah. Thank you.
Operator
Thank you. The next question is from the line of pritesh bump from DAM Capital Advisors. Please go ahead.
Pritesh Bumb
Hi sir. Good afternoon. A couple of questions. Yeah. Sir, have we done any REIT cuts already after the repo rate cuts? If yes, how much and which products
Munish Jain
I make a question. Okay. Sorry Prish. We have done rate cuts. We have done a rate cut in our saving bank deposit rate by 15 basic points which will be effective from 1st of May and it has been cut already been cut. We have cut over bulk deposit term deposit rate on a non callable bulk deposit rate which has already been effected. So these two cuts we have already implemented done over the month after the present last rate cut on the current month only to help us retaining and retaining the pencil names the SA deposit cut. Now what we you know give to our customers. 4 I believe it was 4% I missed what you said. No, it was 3.5%. Now we will be offering 3.35. On the savings side it was 3.5%.
Pritesh Bumb
Right. And so on the asset side have you done any rate cuts? Any pass on has happened already on.
Munish Jain
As I said, we have presently 54.77% footing book out of this 12% being a EDR linked. We have done the pass out on the EDR is done automatically in the beginning of the month in which the EDR cut so last year cut has already been passed and the current April month ebir cut will be factor from 1st of May. So that is for the 12 11.74 or I can say around 12% of my total portfolio which will be moving on this particular ebird detail benefit on MCN it is constant. We have not reduced the MCL on the current month and I’m not sensing mcl. So that is what we are here. On the other 88% of the book or 88.25% of the book there is no interested change which we have entered in.
Pritesh Bumb
Got it sir. Any so you mentioned that you may look to move to a new state but wanted to also check if you are introducing any new product or starting any new product in the bank.
Sarvjit Singh Samra
We typically intend with a simple philosophy that we want to be the primary banker of the customer and to follow the middle and group segment customer to achieve that we keep on evolving on our product. So since on the landing page we believe we have almost all the products just fine tuning of the products keep on happening. We recently launched a business class production in the last quarter so similarly fine tuning of the product which we are doing and we will continue to do depending upon the new geography where we are going. New customer segment which is coming and new opportunity to address and to ensure that customer set is coming. So with the overall guiding force we want to be lending to emergency segment secure lender and for the production credit that is who is doing the businesses agriculture or taking care of its housing needs to achieve this particular thing.
Any evaluation is key but is required. We continue to do it and it is a regular practice which will be keep on doing and we are doing it and we’ll continue to do it.
Pritesh Bumb
And last question is that you mentioned about the mix going ahead especially in FY26 which means that the corporate mix will be down in FY26, right? Basically it will grow less than 20% then only the mix will come down and other mix will move.
Munish Jain
Maybe may not be the only the corporate corporate is present. We have a total 20% loans in consumption and the corporate book together. I believe going forward we intend to grow MSME and this 1% or 2% growth in MSME may be coming out from other loans or maybe some other segment. So I’m not saying that it will be necessarily there is because we are not we have interpolated internal limits that we don’t want to go more than 15% in the large corporates so we are well below that limits. So we have our internal thresholds for each of the products especially for this type of products. We are presently very mindful of what we are lending and we are lending very responsibly and we will continue to lend in a responsible environment.
Giving a very very micro level cut of my FY26 I’m saying is not feasible. Just our endeavor is to increase over MSME and trading book and mortg as you move forward and we see an opportunity also in that. So it may be coming from my corporate, it may be coming from my consumption, or it may be coming out slightly. For my agriculture.
Pritesh Bumb
Okay, sure. Thank you so much. All the best.
Munish Jain
Thank you. Thank you.
Operator
Thank you. The next question is from the line of Rudransh Kalra from MBA Investments. Please go ahead.
Unidentified Participant
Hello.
Munish Jain
Yeah. Hi Rudra.
Unidentified Participant
Hi. My question is what would be your loan mix in terms of like gold loans, housing or NAP vehicle loans and so on and so forth. You could explain that at the end
Munish Jain
Surely. If you talk about the firstly the lab business which is we typically call a loan against property loanliness. Property will sit under the mortgage book. Presently we are having 27% mortgage book. It will be having around 12 to 13% lab business which will be primarily to the MSME clients. So this will be typically we can call it a business lab. We can call it a MSME base client business which will be around 12 to 3.5% in the pitch the business. If I talk about the gold loan auto loan personal loan business which is typically we are talking about that particular business will be around 3 to 5% of the total portfolio. So these two things put together will be around 7.5%, 18.5% that is the delta we typically maintain 7 and a half percent, 20%.
So in this, in this particular tight range you will find all these type of lending which you are mentioning. But I want to mention we differentiate lab because LAP also include the money which we give to the MSME against the property and which is used by him for his businesses. So we internally which is being categorized under the mortgage loan piece and the three loans which we mentioned gold loan, personal loan, auto loan are being categorized under consumption. Another loan you if you refer over slide 5 of the presenting as a presentation
Unidentified Participant
And what do you think when you think you know your gross NPAs should be under 2.5 and the net NPA should be under 1 like what timeline do you think that would be, you know, achievable.
Munish Jain
So on the GMPA we are already 2.5658 so we are almost 2.5 now. So it is just if I talk about slightly basic points difference six basic points. We are talking about 2.5. We are typically 2.58. So we are already hitting we are almost 2.5 levels. So we just. We are working hard to contain it below 2.5 level rather so that is what we are and from the net NP level giving in view the macro environment factor. There are a lot of macro environment factor in play for the asset quantity. But we are able to come out very very strongly in all the black swans historically. So it’s making us a better confidence that we intend to touch bring down the net. And as we move forward in the current fiscal as well, we’re intending to reduce both GNP and N. In current fiscal
Unidentified Participant
And one last question. Are you guys focusing on gold loans and why and why not
Munish Jain
You ask home loans
Unidentified Participant
Now
Munish Jain
We are not focusing on gold loan we being buy over dme. We are a production and lender for a middle income group. Gold loan is a specialized play with a specialized checked of customers over expertise is a middle income group for a production led business. So we are lesser in a consumption and business. We do hold on to the client who is over availing either of our main products and he want a second or third product as a gold loan. Gold loan as a product is available but it is not being sold as a first product.
Unidentified Participant
Is this a value added product but like no mainstream goal to focus on gold loans? Right?
Munish Jain
That’s right. That’s fair to do.
Unidentified Participant
All right. All right. Thank you so much. I wish you guys the very best. Thank you so much.
Munish Jain
Thank you.
Operator
Thank you. This would be the last question for the day. I would now like to hand the conference over to management for closing comments.
Sarvjit Singh Samra
Thank you everyone for joining the call today and for your questions and all the support through the years. In case you have any further questions, kindly reach out to the IR team and we’ll be more than happy to respond. Thank you once again. Have a good day.
Operator
On behalf of Capital Small Finance Bank Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines. SA.