City Union Bank Ltd (NSE: CUB) Q4 2026 Earnings Call dated Apr. 27, 2026
Corporate Participants:
N. Kamakodi — Managing Director and Chief Executive Officer
R. Vijay Anandh — Executive Diretor
Analysts:
Jignesh Shial — Analyst
Jai Prakash Mundhra — Analyst
M. B. Mahesh — Analyst
Soubir Samadder — Analyst
Suresh Ganapathy — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the City Union Bank Limited Q4FY26 earnings conference call hosted by Ambit Capital. 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 this conference, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Jigneshrial from Ambit Capital. Thank you. And over to you sir.
Jignesh Shial — Analyst
Yeah. Thank you Bhavind. And good evening everyone. On behalf of Ambit Capital, I would like to thank the management of City Union bank for allowing us the opportunity to host Q4FY26 earnings call. We have along with us the Dr. N. Kamakodi, M.D. CEO, Mr. R. Vijayanan, Executive Director, Mr. V. Ramesh, Executive Director and Mr. J. Sadagupad, CFO.
I will now hand over the call to Mr. Dr. D N Damakodi MD and CEO of City Union bank for his opening remarks. Over to you sir.
N. Kamakodi — Managing Director and Chief Executive Officer
We are all hearty welcome to all of you for this semester call to discuss the audited results of fourth quarter the financial year ending 31st March 2026. I hope all of you have received the results and the presentation. As you all know, it has been 15 years since I was appointed as the MDN CEO of this prestigious institution with over 120 years of legacy. As you all know, as per the regulation in force, I am completing the maximum permissible tenure of 15 years after on the 30th of April 2026. And I have to hand over the responsibilities of this great organization to my successor.
Hence with this investor call I am signing off and passing on the reign to my successor Shri R. Vijayanan who will take charge with effect from 1st May 2026. This concal is my 60th call to the investor community and I am happy to see and interact with some of them since my first con call. My congratulations to my thanks to all of you and special thanks particularly to those with whom we have been traveling over 15 years. At this juncture, when I look back my long journey spanning over one and a half decades, I could relish many moments which are kindling my joy and satisfaction.
If I look back at the performance of the bank during my stint as the MD and CEO, I have done my best and feel satisfied with the level of progress the bank has achieved during this tenure. Of course many more things could have been done, but whatever that has happened in the 15 years is really satisfying and I would like to summarize a few points before I get into the progress of financial year 2026. During this 15 years tenure the bank has achieved many milestones. If you look into the paid UP capital between 2011 and 2026 increased from 41 crore to 74 crore.
Just under 2 times growth which we have achieved without diluting the capital like without burning the capital without much increase in the overall paid up capital. We have done that and we have seen the deposit during the 15 years increasing by 6 times advances increasing by 7 times. Total business increasing by about 7 times. Net profit increasing by about 6 times. The number of branches increasing by 4 times. The total number of staff members increasing by 3 times. Market capitalization increasing by 1815 crore to 19,450 crore which is about 11 times our CAGR of 17% in this 15 years.
And the net worth of the bank increased from 1007 crore to 10,459 crore which is almost 10 times increase with the CIGR of 17% during this period. I take this opportunity to offer my sincere thanks to various stakeholders, shareholders, customers, employees, regulators and everyone who supported the bank and stood with us in this journey which has happened during these 15 years. I also request you to offer this unwavering support to my successor Shri Vijayananda whom I am sure will take the bank to newer heights with your blessings and support and I wish him good luck being the last quarter.
Since I am not going to get this opportunity again, I will go through the numbers and I will hand over the MIC to my successor for sharing the outlook of financial year 27 and beyond and I will be discussing with you the progress which happened during the last year. During this fourth quarter two of our independent directors of the board Sri V and Shivashankar and Dr. Sridhar IH Retire admitted their office on close of business hours of 6th February after completion of 8 years tenure. On the board meeting held on 2nd February 2026, Board of Directors had approved the co option of Srikesh Gurumanyam as additional Director of the Board.
The capacity of the Independent Director who is a Chartered Accountant and seasoned IT executive with expertise in various fields like information technology including Artificial intelligence, risk management and all and shareholders have already given their approval for reappointment through the postal ballot. In the board meeting held today, Board had inducted Shri R. Mohan as additional Director. He’s known faith and he had served the board of the non executive chairman earlier. They will be strengthening the board to take it to the let’s say greater heights if we look into the earlier con calls we had shared with you our expectations for the current financial year I.e.
Financial year 202326 as follows. Like we said we will end up with the high teen growth for the financial year 2026 which will be over and above the industry level growth and the focus will continue to be in the areas of core MSME gold loan and secured retail and we said our growth of deposits will be aligned with the credit growth with the focus on CASA and granular term deposits and we said the effect of CRR will have some positive bias in the fourth quarter along with NIM levels holding up. He also said that the ROI is expected to be let’s say around the Same level of 1.5 percentage what we were having during the first three quarters and our cost to income ratio will be in the range of about 48 to 50% and all we also shared our slippage for the whole year will be about 700 to 750 compared to about 800 crore plus during the financial year 2025.
By and large almost all the expectations whatever we shared with you in the earlier con calls for the financial year 2026 were met the same spirit. Whatever we had shared with you during the fourth quarter and the year ended at 31 March 2026. We have registered the highest business growth in the past decades with the growth level achieving about percentage in the total business in the year on year after the financial and after the financial year 2013 this is the highest growth rate. Whatever we had done in between we had let’s say we moderated the growth in a steady fashion which helped us to like say crossed through so many currents which are in the banking industry in the last 15 years like by not participating in the let’s say corporate advances unsecured or retail and all.
In fact one of the reasons like say when we feel, let’s say satisfied with the way of progress in the last 15 years is not because I did something Great or I did something innovative or I did something new. It is more because we had successfully avoided many pitfalls be it the let’s say corporate consortiums or infrastructure lending or unsecured retail and all which had in fact dented the asset quality of the entire banking system. And most of the banks got affected and we were very few banks which stayed clear of those risky sectors and not getting affected because of the many cyclones which are happening in the industry.
And we were fortunate to go through that under the growth is also continuing in the same areas in the composition like be it gold loan particularly focusing on the agricultural gold loan and also through the secured retail or secured MSME and all we have not as decided, we have not ventured into risky areas with lot of fluctuations and all. So we were able to achieve this 24% growth quarter we had achieved last year purely through just focusing on the let’s say areas which we had done in the past, let’s say staying clear of let’s say any pitfall.
That’s one satisfying thing which has come in fact the secured retail of let’s say secured MSME or secured retail like housing loan loan against the properties and all the verticals which we had created and all has in fact increased the capacity helped by the nugen and other Lois software with the processor set and perhaps giving the feeling that the best of CUB is yet to come and probably will be having many more milestone in the years to come under the leadership of my successor. So we have registered about 26% advance growth for the Q4 financial year 26 and it increased to 66,698 crore from the 53,666 crore compared to the same period last year.
As explained earlier, this is the highest credit growth for our bank. We achieved this 25% plus growth rate after almost 13 years. As we said in our last few con calls, the growth is consistent starting from the Q1 and we had achieved a double digit in fact Q1 financial year 25 and we had achieved a double digit growth over the last eight quarters up to the Q4 financial year 26. In Q1 alone our advances have grown by over 5,800 crore. For the full financial year the incremental credit growth is 13,600 crore.
As given earlier our focus will be on core MSME gold loan and secured retail and we will continue with the targeted growth of mid teen to high teen with about 2 to 3% over and above the systemic growth rate. As we had been consistently communicating to all of you on deposit front though deposit growth matched with that of the credit growth, deposits have grown by 23% and stood at 78,308 crore for Q4 financial year 26 as compared to 63,526 crore in Q4 financial year at the end of the Q4 in financial year 25 in fact if you had observed the growth had been granular and through let’s say both the CASA and the retail term deposit we had in fact retired some of the certificate of deposits in the fourth quarter getting substituted by the let’s say retail term deposits.
Our average CD ratio for the financial year 26 stood at 83 percentage. The CASA percentage to the total deposits are stood at 28 percentage and it is the CASA growth is also matching with that of the growth and in fact the average CASA growth is also very much favorable giving us the confidence that let’s say we can increase the growth by few percentage points more than what we had initiated during the earlier period. On asset quality front also supported us which actually help us to let’s say with the confidence maybe go for some incremental, let’s say higher growth rate compared to whatever we had communicated to you all in the earlier con calls.
On asset quality front, the recovery is more than the slippage in the current quarter as well, which is the trend we have been seeing for the last several quarters. For fourth quarter financial year 26 the total slippage is 199 crore and while the total recoveries is 231 crore consisting of 153 crores from live NPA accounts and 78 crore from the technically written OF accounts resulting in reduced NPA figures. Our gross NPA percentage had reduced to 1.91 percentage from 2.17% in the Q3 financial year 26.
The gross NPA has come below 2 percentage mark after 11 years. It was 1.86% for the financial year 2015 and it has come to 1.91 percentage. In the financial year 2016 growth, both gross NPA and net NPA both in percentage terms and absolute terms is reducing every quarter for the last three years on a continuous basis. When compared to the Q4 financial year 23, the gross NPA had reduced from 3.09 percentage which is about 118 basis point reduction. Similarly, net NPA percentage decreased to 68.68 percentage, I.e.
68 basis point in Q4 financial year 26 compared to 1.25% or 125 basis point reduction resulting in 57 basis points on year on year basis Our last CON call we have stated that our overall SMA including our SMA012 put together are in decreasing trend for the past few quarters and total SMA numbers for the Q4 financial year 26 stood at 2.47 percentage compared to 3.68 percentage in Q3 financial year 26 and 5.60 percentage in Q2 financial year 26 showing a sequential improvement and that improvement is also quite substantial and overall SMA2 percentage to total advances had stood at 0.72 percentage for Q3 financial 26 compared to 0.95 percentage in the Q3 financial year 26, 1.34 percentage in Q2 financial year 26 and 1.59% in Q1.
In other words, in Q1 it was 1.59%, in Q2 it was 1.34%, in Q3 it was 0.95% and currently it is like you are seeing it at 0.72 percentage and showing a sequential increase for the last four quarters. So we are seeing this let’s say improved asset quality cycle and perhaps I can even say this is perhaps the best asset quality point in terms of both SME position. Also in my last 22 years of stint in the bank we are yet to see any impact of U S Iran conflict and things like that. We are keeping the fingers crossed and closely monitoring the situation.
So far it has not started reflecting on the asset quality front in our portfolio and in fact it is showing continuous improvement even after the onset of the conflict is giving us confidence. Anyway we are keeping the fingers crossed and monitoring the situation closely for the Q4 financial year 26 provision coverage ratio with technical rate offs stood at 84 percentage which improved from 78% during the corresponding period last year. As we said in our last CON call, we are improving our production coverage ratio without the technical write off every quarter starting with Q1 financial year 25 to bring closer to the industry level.
For the current quarter, PCR without a technical write off improved to 65 percentage compared to 60% during the corresponding period last financial year, I.e. Financial year 25. Our interest income had also grown by 31% in Cuba financial year 26 and improved to 1,856 crore from 1533 crore in Q4 financial year 25. For the full year ended financial year 26 our interest income improved to 6,870 crores as compared to 5,834 crore I.e. 18% growth for the corresponding figure last year. On yield front, our yield Advances stood at 9.8% in Q4 financial year 26 as compared to 9.73 percentage in Q3 financial year 26 showing a marginal improvement by 7% basis point for financial year 26.
The same was 9.75 percentage against 9.7 in the financial year 25. On the cost side, the cost of deposits stood at 5.6% for the current year compared to 5.57% for the Q3. As a result, our net interest margin stood at 3.87% in Q4 compared to 3.89% in Q3. This almost, let’s say hardly about 2 basis point plus or minus and within the narrow band which we said last year during the earlier con calls for the year ended 31st March 2026, the net interest margin is 3.74 percentage which is 14 basis point more than the 3.6 percentage.
Whatever we reported in the financial year 2025 we expect the stable net interest margin for the current financial year 27 with almost let’s say in the same narrow band of maybe 5 to 10 basis point this way or that way. But we hope to maintain that and what we have to now understand is that because of the changes in the calculations of the LCR there are like say the we are getting lot of elbow room in let’s say even having like say even slightly increased credit deposit ratio which will be having some like say positive contribution to the overall margin.
We saw this whatever potential, let’s say increase in the cost or reduction in the yield which may result because of the changes in the economic condition because of the US Iran conflict or whatever it is, some amount of elbow room is available there in managing that the total other income for the financial year 26 increased by 16 percentage to 1039 crore from 898 crore in the financial year 25. With the limited opportunities in the treasury profit it has happened because of the compensating contribution through the other means like the insurance commission processing charges and other fee income.
So our operating profit had grown by about 20% in financial year 26 and increased to 2014 crore compared to 1679 crore in financial year 25 which is aligned with the business growth. The path to growth in the current quarter is 360 crore with 25 percentage growth compared to 288 crore in the fourth quarter last financial year. Our current quarter part is highest so far in the single quarter. If you look back a decade Ago in financial year 14 our path was, let’s say the annual path was 347 crore and the current part is more than that.
Like I said, over a period of time for the year ended financial year 26 we had 1,326 crore against 1,124 crore last year showing an 18% improvement in the private after tax on a year on year basis our cost to income ratio for the fourth quarter improved to 46.15% compared to 48.56% in the Q3 and 49.16 percentage in the Q2 last year. So in let’s say about a couple of basis point decrease for the year ended financial year 26 the cost to income ratio is 47.93% which is in line with our guidance of let’s say 48 to 50% for the year as a whole our return on assets for the Cuba Financial year 26 for the full year is 26.
Financial year 26 is at 1.56 percentage which is at par with your long term average growth over the 15 year tenure. If you had a chance to look into the consistency number over the last 15 years except during the three years of COVID for financial year 20, 21 and 22 we have always been let’s say about 1.45 plus almost in all quarters at least 10 quarters or so it is above 1.5 percentage is what we had demonstrated over the period of time for your reference the summary numbers are given just to give you a look.
So overall the 15 years had been rewarding and to greater extent satisfying though there were things could have been better but the challenge has been to ensure that we don’t get into any pitfalls and like I said we had to greater extent navigated through multiple cycles be it like say Even during the 2008 global financial crisis I was the executive director as part of the system. Then we had our the AQRS gold price crash of 2014 demonetization under the introduction of the GST. So these things were affecting the core sector of MSME which we were supporting but we could manage that.
But the COVID was something which unexpected so in those periods we had to do that the digital transformation and all that happened has started giving results. So so far so good. So we have to thank you all in person. In fact I’m coming to Bombay and we have arranged for Thanksgiving dinner tomorrow preceded by the analyst meet when I will be meeting all of you in person. I extend my hearty invitation to all of you to join in person tomorrow for the con call by 5:30 at Grand Ayat BKC. It will be followed by Gattubudar and dinner.
Looking forward to meet you all. Before we get into the question and answer session I request our ED&MDM CEO designate to share his expectations for the financial year 2627.
R. Vijay Anandh — Executive Diretor
Thank you sir. Am I audible sir? Thank you.
N. Kamakodi — Managing Director and Chief Executive Officer
Yes sir. Perfect.
R. Vijay Anandh — Executive Diretor
So in terms of vision for 2627 with respect to advances we should be 2.3percent over and above the credit growth of the industry. However, our focus on MSME will remain same. Gold loans and secured retail will be an additional advancer. MSME proportion will continue to dominate with 55, 60% followed by JL with 30 to 35% and remaining. We are planning to do this through security type. We will focus more on branch led business now that we have thousand distribution brand channels our business through third party on our overall bank book the envisage to be only between 1 to 2%.
Hence our focus on secured products will continue for the year. Our endeavor on CDR continues to be 85 to 87% based on the credit growth we are launching segment specific products for women and senior citizens and we are also enhancing the product proposition in savings in current account with respect to fee income to other income we will be in the range of 55 to 60% as like last year contribution Contribution of fee income to other income. The only thing what we see here is normally we open the branches only on the third and fourth quarter of every year.
Now in the first month we have opened 70 branches. In the first month itself we expect an elevated operating expenses for the current year in the range of 15 to 18% over the last year. This is about what we have planned for the year, sir.
N. Kamakodi — Managing Director and Chief Executive Officer
Yeah, I forgot to add this point of opening our thousandth branch. I’m happy to announce that today morning we completed the opening of the thousandth branch near our headquarter Kumbagona. So we wanted to achieve this milestone before I lay down my office. So what we have done is that every year we open about 75 branches and last year also we opened 75. We closed the year with about 950. So for the 75 branches, the first of branches, about 50 branches we opened in the first month itself in the April itself.
So the remaining 25 will get opened towards the year end. So the point is that like the same pace of 75 branches is what we expected to grow and as Vijayananda said normally like we will have branches getting opened in the fourth quarter and they used to majority of them like say coming close to like say break even in the first year and some of them sleeping into the second year so there will be some changes in that thing but overall level at a macro level they are going to add for our increased distribution capacity which I forgot to tell you.
So with this probably we can get into Q and A like for futuristic questions Janand will answer and for the present and past I would like to answer to that extent if possible and if I am not able to do justice Vijanand will skip in.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue you may press star and two participants are requested to please use handsets while asking a question. Ladies and gentlemen we will now wait for a moment while the question queue assembles. Participants you may press Star and one if you wish to ask questions. Ladies and gentlemen, to ask a question you may press Star and one on your touchstone telephones.
Our first question is from the line of Jay Mundra from ICICI Securities. Please go ahead.
Jai Prakash Mundhra
Hi, Good evening sir. Thanks for the opportunity and many congratulations and for the meaningful career at Union bank and driving the bank to a very impressive height and creating shareholders value. Sir, my first question is regarding gold loan, right? So so far the gold loans have grown at a much faster pace than overall loans and I believe this is not an asset quality issue at all But I just wanted to understand the risk practices here in the sense that let’s say in January Feb from the peak of gold loan prices gold prices have come down by 10 15%.
So how do we manage the risk management for those portfolio which have been originated at let us say 165 rupees a gram of 10 grand gold loan. So if a loan gold loan was originated at 165 rupees whereas it has come down by 10 15%. So how do you. How do you. You know while at the portfolio level the LTV is very respectable, very manageable but how do you manage the risk in those portfolios?
N. Kamakodi
See thankfully we had the like say experience of 2014 when you had similar gold price crash which gave us some. What is that sleepless nights. But ultimately we ended up not missing much but about had to book a loss of about 5 crores or something like that only but we had to go through a painful process of auctioning and things like that so Keeping all those things into account when the let us say gold price crossed beyond say 12,000 rupees and things like that we did not increase the per gram rate beyond that.
So when it went to that 15,000, 16,000 and all we had continued to give at the range of about around 10,000 rupees per gram or we had never crossed 10,300 or something like that. So we have sufficient let’s say cushion built into that gold loans which were issued when the share price was at debt level as we had higher let’s say margin when we gave that loan. So that is not giving us let’s say any concern at this point of time. And even if another let’s say 1015 percentage grosses unlikely like say we will still be having like I said, this is in addition to the RBI given let’s say LTV margins and all we have sufficient cushion at this point of time. So that is not a concern at this point of time.
Jai Prakash Mundhra
So I mean even irrespective of gold loan prices you would have kept per gram gold lending at least at 1100 repeat, right?
N. Kamakodi
Yes. Not only us, almost the entire banking industry it had the discipline and there was no undue competition or in particularly rates when you had, I mean the, the the what goes up has to come down. That’s something which we always like say keep in mind. So when the increase in the price was too sharp we, we all had a right and watch policy. And I don’t think any bank ever gave any let’s say program rate beyond 11,000 and up even 10,500 was something just maximum even at the peak level of 15, 16,000, whatever that happened.
Jai Prakash Mundhra
Okay, great to know sir. Secondly, on cost of deposit and yield on advances, right for this quarter now cost of deposit have reported cost of deposit has increased by 3 basis points. Does this mean that you know if there is no change in the rates in the deposit rates card rate the cost of deposits should start rising or you know there is some something which was unique to this quarter and next quarter we should still see cost of deposits moderating or how to look at cost of deposits now since the New York
N. Kamakodi
See there were some amount of fine tuning when we saw the. What is that advanced growth rate increasing at a much faster rate some amount of 10, 15, 20, 25 basis points that we had to fine tune the rates to ensure that we get retail term deposits as usual with the flow so that we are not stopping the credit growth for not having the deposits per se. But what I have to say is that it gave us a sufficient cushion so that we could even retire the high cost, let’s say what you call certificate of deposits and things like that.
See the one thing, what you have to keep in mind is that the three basis point, five basis point could happen even because of the variations in the average CASA rates and all. These are all finer things you can monitor and control. You have to just report whatever that comes into. But what I can say is that there was no significant changes that happened in between to say that. And in fact that’s why we could almost have incremental PD ratio of 100 percentage. We can in fact let’s say for the still maintaining liquidity coverage ratio we can go for another 3000 crores of advances without increasing the deposits and all.
So that much elbow room is also available. These sort of practical decisions we take depending upon the day to day ALM and the regulations which are prevailing. And don’t read too much into three basis points But What is available to you, you can. It is very much on the table is that on one side you had seen the rates getting reduced by the central bank at the same time you saw the 10 year bond yields increasing. There was dichotomous response with the let’s say liquidity market rate, bank rate and rates given by the central banks and all they are not like going in tandem which they normally used to do during the normal, like say industrial, I mean normal business environment because of so many changes due to the Iran war when you saw a lot of fluctuations in the fleet of capital from one place to other.
Like there are so many factors which were happening but we had, even though like say we had terrifying, let’s say fluctuations and signals in the TV panel the operating level that was absolutely smooth and we did not have any issue and. But how long this calm will continue, whether it will continue like this or whether it is a calm before strike. Yeah, all these things depend upon how long the conflict goes there, whether you will have like a higher inflation because of the oil prices and things like that. So other factors are there. But up to this, don’t read too much into these three, four basis points.
Jai Prakash Mundhra
Similarly on yield on advantage, you know there was a 25 basis point rate cuts even for the last six or maybe 12 months. The yield on advances are only on a yoy basis is only down by 13 basis point in the mix we had higher proportion of gold. So that is what may be helping. But have you passed on, I mean I’m sure you have passed on the 25 basis point and the NCLR book is also has that also been repriced? So assuming no change in the RBI policy rate how should one look at the build on advances improvement?
N. Kamakodi
See you may remember I think in the last con card we said that the passing of the rate was completed somewhere in the month of December. If I remember correct we specifically gave that and that part is through the incremental book. Let’s say for example it’s a new contract and the incrementally the the weighted average yield is let’s say is holding up. And that’s why we are able to have as you rightly said 30% of our book is in gold loan which is in the fixed rate and non agreeable loans are having even double digit yields.
So even though you have only that mathematically speaking only that whatever yield it will be only to that like say 65 percentage of the portfolio or and incrementally the the. The yields are holding up and that’s why we are able to see the margins holding to a greater extent.
Jai Prakash Mundhra
So you did pass on the rates but you may have tweaked the spread side. Is that also help the fund
N. Kamakodi
Repeat the question?
Jai Prakash Mundhra
I’m thinking you would have passed on the rates but the spreads you would have managed better. Right. So that is why the yield did not drop as much apart from the gold loan and exchange.
N. Kamakodi
Exactly. That’s why I said that the the since 30 percentage plus is on the fixed rate maybe about remaining 70 you can perhaps take apart from the other loans and all about say 2/3 would have had that let’s say passing on and that’s why and incremental whatever the 5000 odd crore we booked in the second half since we were able to like say book at the with the enhanced incremental yield overall we are able to maintain the margin.
Jai Prakash Mundhra
Right. And second last question on ROA. Right. So we have delivered very stable 1.5, 1.55% kind of an ROA and maybe 1.56 this quarter. When do we achieve the next level sir? I mean the growth is now come back very very strongly margins hopefully as you said should be more or less stable. So when do we go to the next level? Let’s say 1.7 1.8% ROA is. I mean what would be your sense for the next year?
N. Kamakodi
Technically speaking it is a futuristic question for which Vijayananda before handing over the MIC maybe I can say one thing. The like you have started seeing in your Dupont analysis the operating profit margin has started holding up and we had to go for extra provision for NPA because we had, I mean honestly Speaking somewhere around 201314 we decided to have our net NPA always above 1 percentage because keeping it less than 1 percentage was not giving us elbow room to maneuver things and it was giving us extra mental pressure to manage and that was reasonably good compared to the like peers in the sector.
That was the time when that a two hour and all started and things were much worse for the industry as a whole and we wanted to use that phase to have higher things. So now since the industry environment has changed when stage by stage when we had to. As you know during the COVID period there was the CPU ratio increased by about one percentage more than normally. We used to have two which has come down substantially. That two in fact increased to 3% during the COVID period. The data is already there with you.
And the recoveries were also not happening because of the quotes were not functioning. So because of that last two three years we had to make substantial provision to continuously reduce the grass NPA and the net NPA percentage. And thankfully because of the recoveries more than the slippages and also making more corrosions we are able to have the torrent ratio also improved. So since it has reduced maybe after it reaches further down maybe we will get some extra elbow room. Even after making provisions for your ECL provisions and all there will be some cushion which can improve roe. But it is not fair on my part to explain further over to Janan please.
R. Vijay Anandh
Absolutely sir. I think we should exit this year with at least 10 bits more in ROE. So we should be there between 1.65 to 1.66667. That’s the number Probably We will plan basis the retail income deliverable and cost income coming down. That’s the endeavor to get there.
Jai Prakash Mundhra
Okay, great, great sir. And last question sir on your association.
N. Kamakodi
One minute. As we are talking looks like the ECL provision has come particular has come. Looks like it has now asked the banks to adjust in the opening balance itself in the reserve so that no impact on the P and L. And since we have 20 percentage plus I don’t think the ECL provisioning requirement may not be there in the future which is also a good news which we just we are receiving. Go ahead
Jai Prakash Mundhra
Sir. The last question is sir, on your association of course after limiting the executive role, I mean sorry, what is the plan ahead? Do you intend to be there as a. As a non executive director or. You know that is not confirmed as yet or how. How do we see that transition. Thank you.
N. Kamakodi
See I mean I’m like say honored by this question and how like say in fact board also let’s say expressed it asked me to like say ask for my comfort to join the board in the non executive capacity which have like say I said I mean I’m honored for that offer. So it depends upon the regulatory comfort looking into the comfort of the regulator at appropriate time a call will be taken in future whatever time frame on getting the acceptance you have on the. On the comfort of the regulator we will be taking a call on this front.
At the same time Borders asked me to be the let’s say I post link pushing the post. They have offered me an honorary position as the chairman of the Cuban bank the foundation which is the. What is that CSR arm of the bank. The oversee the implementation of the CSR projects and all in recognizing the position. And the same was offered to my predecessor also and he continued for the my predecessor and Guru Sri Balasubramanya. So he continued as Indian CEO. When I took over in 2011 as Indian CEO he was the non executive chairman of the board after he had to retire after completing this eight year tenure or whatever the regulatory 75 years or whatever.
So after 70 years or something regulatory whatever. 70 years or whatever 70 years at that point of time. So after that board offered him the position of City bank foundation and he had like relinquished that position to me. So post my and like say the laying down the office as Indian CEO of the bank I’ll be like say I’m honored to take the position of chairman Citizen bank foundation and any non executive in the bank or the board and all it depends upon the regulatory comfort getting a. Once we get a positive feedback we’ll take a call on board will take a call on that.
Jai Prakash Mundhra
Right. Very clear sir. Thank you. And all the very best. Thanks a lot sir.
Operator
Thank you. Ladies and gentlemen, to ask a question you may press star and 1. Our next question comes from the line of MB Mahesh from Kotak Securities. Please go ahead.
M. B. Mahesh
Thanks a lot. Been amazing 15 years that you have given us. Trying to understand the bank and the sector in detail. Just two questions from my side. One is internally at the board level do you have an upper limit on how much of gold loans can the bank take and has there been any change recently? Number one. And the second question when you look at the demand for SME loans that you’re seeing on the ground if you could just kind of give us some color as to is this just simply Working capital utilization that is going up, taking advantage of raw material prices, cash flow mismatches.
What is the nature of the demand that you’re seeing on the job? Or are you doing much higher balance transfers as compared to what you did earlier? These are my two questions. Thank you.
N. Kamakodi
When you said you’re trying to understand the bank maybe I think in 15 years is a long time to understand. I think I hope you have like say that part is through because you have been interacting for quite some time and thanks for all the support and interaction. Whatever we had see on gold loan basically like the 30 to 3132 itself is like say we are almost at the upper band. Even if it is what is that sweet keel. You will not be able to take beyond a couple of cups or so. Like you need limit for everything.
Maybe there could be that one or two percentage here and there like say increase. Let’s say it’s not that. Don’t ask. You said you have. You said you. You have upper limit at 30. Why are you at the 3132 1? So that the 1 or 2 percentage fluctuations could be there but when it crosses 30 at least we have to take it with a pinch of salt is the approach which we keep for the gold loan and this is something which we have to accept on the MSME front. The growth is because of the combination of all the factors which you mentioned.
In fact you may recall when the RBA policy statement was given out it in fact talks about the capacity utilization of the economy has in fact increased. I mean which went to about 70 percentage post Covid. You will normally see capacity expansions happening in the. Let’s say when it crosses let’s say 84, 85 percentage and all you are able to see things reaching there and we could see let’s say many of these units are like say reaching their near capacity level. They are going for expansion utilization of the CC limit and also transfer of balance transfer.
All these things are happening. And in fact when you compare that with the lowest SMA level which you are seeing particularly in this geography where we are having our significant portion of our exposure. It’s a combination of all the factors which you mentioned.
M. B. Mahesh
Just one clarification. When will you start tightening the filters on underwriting? As in what will it take for you to decide saying that things on the ground is starting to get a little bit more riskier than before. Given that we know where the fuel prices are and we know that there will be some impact on demand, what will it take for you to tighten the belt on that front.
N. Kamakodi
One numerical number will be your SMA numbers first part. Second thing will be the anecdotal feedbacks which you which you get from the customers see day in and day out. Like say when we are at. Or even when I am at the central office at least every day, let’s say we will be having not less than like say four or five customer interactive interactions. When people who meet us will be of reasonably maybe not a very small one. There will be medium level thing and all. So we will be under. We sit in our office or we go visit the branches and all.
And during the reviews the anecdotal the combination feedbacks from the feedback from the anecdotes which we get from our branch managers when the customers we meet day in and day out coupled with the SMA numbers what we are seeing we will get a feel. That’s how over the last 15 years to greater extent. Whatever I had felt during this interaction I have shared with you all during the town call. So the common sense says that you have to enter into the tougher period because of like say your inflation or global pressures or things like that.
And we are closely monitoring the situation, keeping our eyes and ears on the ground to get the feedback. So basically like. But one thing which you have to see very clear is particularly the business loans. Whatever we are giving they like say for example there could be finer let’s say changes in the filters and all. Whenever the features which what we are trying to fit is like every borrower we give at least we should be convinced that like they have sufficient resilience to run over through multiple business cycles.
Maybe like that the incremental maybe 1 or 2 percentage extra may come because of this economic cycles and all the filters what we keep is basically the lecture they are what is that business cycle agnostic because we need when we give loan. Maybe it looks the figures are rosy maybe six months down the line. If the economic cycle downturn, if at all it happens, it is going to affect all the existing customers also. So the filter whatever we are we keep will not. Okay, we go with some extra caution.
That is one thing. But at the same time we have to be very clear that unless happens and all in other cycles and all the underwriting and all like we normally look into multiple business cycles and not just for like one or two down downturns through which you are passing through.
M. B. Mahesh
So one last question. What proportion of the loans would now be covered under the CGD MSC scheme or any other scheme? Of the government.
N. Kamakodi
It’s very minuscule. Do you have the data with you? I don’t think it is going to be more than 3.4 percentage.
M. B. Mahesh
And you think It’s not useful to take a source?
N. Kamakodi
No. See, there are multiple things. One like a. When you ask for the most of the customers when you deal with they are happy with giving extra collateral and taking loans with the lesser rate rather than paying bcgtmse premium.
M. B. Mahesh
Okay. Sorry Jaran. Sir was saying a number. I just wanted to just take a note of that, sir.
N. Kamakodi
Mostly around the 2 to 3 percentage
M. B. Mahesh
Perfect. Perfect, sir. Okay. Thank you, sir.
Operator
Thank you. Our next question comes from the line of Soubir Samadder from Axis Capital. Please go ahead.
Soubir Samadder
Yeah, hi sir. Am I audible?
Operator
You are audible so you may present.
Soubir Samadder
Yeah, Hi. Thanks for taking my question, sir. So a few minutes ago you said that with the new ACL regulations coming in, the banks would have to adjust through the opening balance itself and not through reserves and hence not much incremental provisions will be required on the ECL front. However, the flow rates have been unchanged. So I was wondering if at this point you would be more comfortable sharing your view on what would be the impact on the steady state credit costs. Yeah, that’s all
N. Kamakodi
See at least view. Fortunately, this difficult question I have asked and what I have to say is that the. If you had a chance to look into that 15 years figure what we have given in your. In our presentation, you can say in fact it is there in terms of like the credit cost post. The credit cost is there post. After accounting for the recoveries from the return of assets the NET provision in 2010, 11 it was 0.41, 0.15, 0.25, 0.5, 0.4, 0.5 it was 0.09 in 2425 and 0.04 in 0.2526 and all like it is at the average works out to about 0.6 or so over the period of last 15 years.
Now with the let’s say improved underwriting based on the AI and the improved, let’s say LOS and all, my expectation is that at least there has to be 50 percentage reduction in this number in the next average of the next 15 years or so. But individual years there could be operations as you move forward.
Operator
Thank you. Our next question comes from the line of Suresh Ganpati from Macquarie Capital. Please go ahead.
Suresh Ganapathy
Yeah, hi. Thank you and congratulations Dr. Gamabody for a very eventful stint at City Union bank for the past 15 years. And best wishes for all your future endeavors. Sir. It’s been a pleasure knowing you and interacting with you. My question is to Mr. Vijay Anand, the new CEO. Sir, what made you take this decision to join this bank? I mean you’ve been with RBL for about. For a long period of time. You have worked in it, HCI and other institutions. How do you see City Union Bank’s culture here? How is it different from other organizations? Because you are of course stepping into big shoes now. So we just wanted to know your perspective and your take. Having spent now almost couple of years with the bank.
R. Vijay Anandh
It’s been wonderful Sir. I’ve completed two years. It’s almost 25 months. I think first of all I hate from this town and I come with 28 years of experience. And last 15 years I think I was in Bombay. From Bombay I moved to Kumbakonam. The major reason why I took up is when I was interacting with Dr. Samakoti and the board, I fully got convinced. I fully got convinced. Why should I be here? I think my wavelength, my. My passion of what I wanted to do was absolutely matching with where doctor Wants to take this bank to the next level.
How he wants to take the bank to the next level. And I felt that Getting Into this 120 year old legacy institute which is an impeccable track record and with the beautiful board, I didn’t even think twice for sure. Culturally I know that I will fit because I hail from this part of the sound and my mother. Thank you. Is of course same what I speak here while so combination of factors I think made me to move here for sure.
N. Kamakodi
Yeah. Suresh. Just adding to what thing. I think this question you should have reserved for the get together tomorrow.
Suresh Ganapathy
It’s a busy reserve season sir. So I’m not sure whether I can make it. But yeah, for whatever it is. I mean we just thought it would be great to take his perspective and Yeah, I mean his family and everybody is relocated to Kumagonam. How is he handled those dynamics? Because these things are also at times important from fitting to the organization perspective. Right. Moving from Mumbai to Kumbagonam.
R. Vijay Anandh
Yeah, Yeah, yeah. My parents stays in this part of the town so.
Suresh Ganapathy
Okay. Okay. That’s very clear. Thank you. Thank you sir.
Operator
Thank you. We have no further questions.
Ladies and gentlemen, I would now like to hand the conference over to Dr. N. Kamakori for closing comments. Over to you sir.
N. Kamakodi
Yeah. Thank you all for attending this call and special thanks to Suresh Mahesh and all because Suresh and all Perhaps we have been in touch more than 15 years. I think even I remember the interaction we had in one of my travel to airport in the car itself. You all had been I think almost I think everyone you had been supportive of us over the period of time. And because of you all like I had a satisfying like say experience with the bank. And I thank you all for all the support you have given and I am sure you will be continuing with the same support to like say Mr. Vijayana. I look forward to meet you all tomorrow in person where we can discuss some more numbers and more than that, it’s a get together time when we when we meet and exchange the good memories whatever we had over a period of time.
I thank Ambit for organizing this for over many years now. And I once again looking forward to meet you all tomorrow Mumbai by 5:30. Anybody, let’s say who had not received the invitation or let’s say given RSVP kindly get in touch with Mr. Jay Raman whose number is given in the the presentation or or with Raghu whose number is given in the presentation and so that to confirm your presence which will help us to organize things better. And with this I think I have completed a big responsibility and it had been let’s say monkey is off my back. It’s a moment of relief and because like over the period of time handling like things like the I mean I was in fact like say telling like had I known it is going to be having so much weight probably I would have thought multiple times before taking tar.
But at that point of time I was not aware that it is going to be so challenging and all but the your support and the God had given extraordinary blessings so that all the efforts, whatever we took, we were able to see results now and then A few times we had like a minor accidents and bruises but there was no fracture or bigger injury.
It had been very satisfying tenure. And with that satisfaction I once again thank you all and looking forward to meet you all tomorrow. Thank you.
Operator
Thank you on behalf of Ambit Capital. That concludes this conference. Thank you all for joining us. You may now disconnect your lines.