CSB Bank Limited (NSE: CSBBANK) Q4 2026 Earnings Call dated May. 04, 2026
Corporate Participants:
Pralay Mondal — Managing Director & Chief Executive Officer
Satish Gundewar — Chief Financial Officer
Analysts:
Shivaji Thapliyal — Analyst
Suraj Das — Analyst
Akshat Agrawal — Analyst
Parth Gutka — Analyst
Vibhor Talreja — Analyst
Punit Bahlani — Analyst
Narendra Gandhi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to CSB Bank Limited Earnings Call for Q4 FY26 Financial Results, hosted by YES Securities Limited. Please note 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. Please note that this conference is being recorded.
With that I hand over the call to Mr. Shivaji Thapliyal from YES Securities. Thank you, and over to you.
Shivaji Thapliyal — Analyst
Thank you, Swapnil. Good evening and a warm welcome to all those who have joined the call. The CSB Bank management is represented by Mr. Pralay Mondal, Managing Director and CEO; Mr. B.K. Divakara, Executive Director; and Mr. Satish Gundewar, Chief Financial Officer. We specifically thank the management of CSB Bank for giving YES Securities the opportunity to host their result call. The management will first be making some opening remarks after which we will throw the floor open for questions.
I now invite the management to make their opening remarks. Pralay, over to you.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you Shivaji. And thanks everybody for joining our annual and Q4 analyst call.
So to start with we’ll start briefly on the global economic scenario. As we all know that the West Asian crisis has been continuing for more than two months now and with probability of further escalations remain large, though de escalations cannot be ruled out altogether. Higher crude prices for an unduly long period definitely blows inflation risk. Consequently, Federal open market committee, BoE and EU have kept the rates on hold cautiously with the guidance that they have may have to increase it subsequently. Global growth forecast remains subdued and financial markets are likely to remain highly volatile as a result of higher crude price. Indian growth is expected to reduce by 50 basis points as per certain estimates.
The inflation forecast has been revised upwards and RBI expects the inflation for the next year to be around 4.6%. The deposit growth continues to lag the credit growth, raising the bulk deposits and city rates in Q4. Surplus liquidity since then has reduced rates slightly but they are likely to remain elevated due to uncertainties in the economic conditions. The G SEC yield curve has also moved up sharper due to inflation and CAT concerns. We expect the banking sector NIM to remain under pressure due to rising cost and unabating volatility. We expect the liquidity to remain easy and RBI to stay on hold for longer in this financial year in the wake of impact of domestic and global now coming to CSB specifics.
First of all I want to apologize that my voice is little bad so you know it’s little difficult but hope you can hear me properly. So on CSB specifics highlights on profitability Net profit for FY26 to 633 crores with 7% growth over FY25 and Q4.26. Net profit of 202 crores was registered with a sequential quarterly growth of 32%. Operation profit of the bank grew by 19% on a FY basis and stood at 1085 crores as on 31326. Net interest income due by 17% on a full FY basis 1720 crore and NIU grew by 25% for FY Q4 FY26 versus Q4 FY25. Other income grew by 21% and constituted 21% of the total income for FY26.
Proportion of risk weighted assets continue to be lower compared to the industry in terms of valuation. Book value per share stands at 272 EPS for the year is 36.5 while in in Q4 it was 47.12 ROE for the year stood at 14.14% and for Q4FY26 it was 17.66 percentage. The cost income ratio for FY26 stood marginally lower than the previous FY at 62.53 percentage. NIM for FY26 stood at 3.76% where Q4FY26RE was 3.83 percentage. ROI for the quarter ended 30 month fee 26 stood at 1.53% being the highest among the quarters in FY26. ROA for FY26 stood at 1.29%. Contingency provisions were held intact in the bank is continuing with the accelerated non provisioning policy which will aid the bank in transitioning towards the sale center.
On the liability side the funding base continued to grow. The deposit registered a robust growth of 20% YoY and faster than the industry growth of 13.5%. CASA ratio stands around 20% to aid the liquidity we also have both domestic and FC borrowings based on cost considerations. On the liquidity side bank managed liquidity risk reasonably efficiently. CD ratio stood at 91%. Average LCI for the quarter is at 109%. NSFR ratio was around 1%. Asset growth was quite robust with 27% YoY as against the industry growth of 16%. Yield on advances for FY26 stood at 10.8%.
On asset quality metrics, I think it was a fantastic quarter for us. GNP and NP ratios for the quarter stood at 1.66% and 0.4% respectively with both issues being the lowest across the last four quarters. PCR now stands at 76.38% without PWO. Bank is holding a provisioning buffer of Again on this PCR there is a significant improvement. Bank is holding a provisioning buffer of around 210crores over and above regulatory requirements. On the cap. Capital based CRDF continues to be well above regulatory requirement and stood at 20.66 percentage tier 1 ratio as on 31.3 at 18.93 percentage.
On distribution side, we have network of 862 branches and 832 ATMs as on 3132026 so these are key numbers. Will deliberate this through the call. In conclusion I’d like to say that we conducted FY26 on a strong and positive note delivering consistent growth despite facing significant external challenges and going through a massive take overall internally. This performance gives us strong confidence as we enter the final and exciting scale phase of our SBS 23rd Division which will play out in the next four years and we are fully aligned to our strategic vision. For the fourth consecutive quarter, we outpaced growth of the industry both in deposits and advances.
During FY26, we recorded 20% growth in deposits and 27% growth in advances compared to the industry average of 13.5 and 16.1 respectively. While our corporate portfolio has progressed as envisaged and planned, our calibrated and cautious approach adopted through our same SME, BLG business and unsecured portfolio amidst an adverse operating environment along with liquidation of the loan against security and here the security has been primarily gold as a collateral. As per regulatory prescription, this portfolio had to be run down quite a bit and this resulted in a relatively higher share of gold loans during the year. We’ll discuss this as we go through the call.
Importantly, our golden portfolio has managed to be pretty risk free with strict oversight on parameters such as LTP, price sensitivity and risk metrics, ensuring a healthy and profitable book. We have successfully migrated to the new core banking system with offset jail and all 50 sur system around it on the Oracle side with technology advancement bank is now in a better position to scale up its activities more meaningfully. We are also planning actually we implementing the next three to four months the entire transaction banking systems in form of V on the CMS side and trade side on the core itself on the Oracle we are implementing.
So with all of this together and with the ServiceNow platform now we are building various systems around it and with LMS LOS huge investments in our data center and various other initiatives on the digital side OBDX on the core, I think we are firmly in place to really now meaningfully scale the bank as a full service bank justifying our you know for a full service and scaled bank over the next few years as we now are leveraging the capabilities of the new Post system and Surround systems to launch the full retail product bouquet both on the deposit and assets front and with the new revamp products we plan to meaningfully kick start our retail franchise journey by Q4FY27 and Q1FY28 because that’s where we’ll start seeing the portfolio growing on that side.
Growth in BNG book is also expected to resume once the ecosystem turns favorable, I mean the global ecosystem. We remain firm on achieving the targeted portfolio mix which is envisaged under 2030 as well as 2030 which will continue to strive towards this objective. As advanced growth outpaced deposit growth, as was the case for most of the banks during the year, liquidity management and regulatory ratio maintenance remained challenging, further compounding by tight systemic liquidity conditions which as is now of course little bit. Despite this, we navigated the environment effectively through prudent management of deposit costs and tenors along with optimization of borrowings.
We continue to maintain adequate liquidity buffers and comfortable regulatory ratios, with both cost of deposits and cost of funds declining sequentially. From a profitability perspective, FY26 witnessed a strong operating performance with 19% growth in operating profit over the previous year and a 7% increase in net profit. Q4 FY26 was particularly notable, marking our best performance in terms of slippage control and recoveries. Consequently, we closed the year with lowest NPA levels compared to previous quarters with GNP of 1.66 and NPA of 0.4%.
Non-interest income supported by sustained growth in core FEES increased by 21% over last year despite significantly lesser traction in treasury income due to higher bond yields and constituted 20% of the total income. Net interest income growth remained robust ratioing at 25% YoY growth on a quarterly basis and 17% for the full year. All key financial ratios remain stable and well above regulatory thresholds, delivering this performance in a year marked by significant infrastructure build out and a large scale technology transformation further reinforces our confidence as we transition to the scale of a journey with a clear aspiration to become a mid sized bank by 2030. We have also revamped our organizational structure with a sharp focus on customer acquisition across verticals which will be critical to the success of our region. Leveraging the capabilities we have built, we look forward to progressive and sustained delivery quarter on quarter and year on year.
If I can highlight primarily two points here before we move into the Q&A, there are two primary key things which two or three key things which really make us very confident about the future. Number one, the entire technology transformation which happened with such seamless ability with almost zero challenges as we move into the advanced core system. With so many surround systems it has been really a fantastic experience and as we talk today we have almost zero issues impacting the transition. I think this is like a once in a lifetime experience for us, the entire team came together and did it. I think congratulations to the team.
The second thing is that we have sort of every time performed what we had predicted. And that requires a lot of confidence on what we are doing and in terms of execution, what we have done. For example, when in Q2, I think we are talking about NIM compression and I said that we will improve it in Q3 and we did it. In last quarter there were significant questions, and rightly so, about the quality of the portfolio in terms of GNP and NPS slippages and other things. And I gave exact explanation why it happened and how we will ensure that we take care of it. And we have done it and in a very credible fashion the way the numbers have come out today. So I think the critical part is that what it says in our view is we know what we are doing and we are progressing on the right path and most of the predictions which we gave through the year we have been able to achieve.
With that, I end my initial comments here. Over to you for Q&A.
Questions and Answers:
Operator
Thank you so much. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may click on the raise and icon from the participants tab on your screen. We request participants to restrict to two questions and then return to the queue for more questions to rejoin the queue. You may click on the raise and icon again. We’ll wait for a few minutes until the question queue assembles.
We have our first question coming in from the line of Suraj Das of Sundaram Mutual Fund. Suraj, please go ahead.
Suraj Das
Yeah, hi, Pralay, sir. Thanks for the opportunity. I hope I’m audible.
Pralay Mondal
Please go ahead.
Suraj Das
Yeah, sure. Sir. I had a few questions first, sir. On the LCR, it has been declining over the past two quarters in and probably now in the lowest quarter in the sector. What is the rationale? I mean, why it is declining? And also how do you see the impact of new guidelines on the LCR more broadly? I think. How should one think about this in the context of growth? Because especially in your case, the deposit growth is lagging not just for you, but also for the system, as you highlighted. But in your case, the deposit growth is increasingly, you know, driven by wholesale bulk deposit, which is now almost having 50% of the term deposit versus 20 years a couple of years back. And it has also cost implication. Right. So I mean in terms of this, what is your expectation that this share of wholesale deposit will continue to go up and probably will continue to deliver maybe 20, 22% kind of a loan growth. So that is question one.
Question two is sir, on the gold loan portfolio the number of accounts on the golden portfolio is declining consistently over the past, I mean not just this quarter but also over the past two years coming down from let us say 6, 7 lakhs to now 4 lakhs.
And then, tonnage growth is also hardly there for the industry also. So, so it looks like that the growth is largely driven by the higher gold prices rather than you know, underlying volume expansion. So while you have a LTV cushion but want to know what is your strategy in terms of maybe increase central customer acquisition front here and the last sir, if you can comment on the NRI deposit flow, I mean how it is trending let us say during the March quarter end and if you have seen any slowdown post March particularly because of this West Asia crisis and so and so forth. Yeah, those are my three questions.
Pralay Mondal
Thank you so much for the questions. So let me cover one by one. On the NCR we ended average at around 109%. And what I can say is that as we are talking today, while I can’t give that number, it is significantly better compared to that at that point of time. And, and we all know that March being a year quarter, the kind of deposit rates which were in the ecosystem. And as we rightly said that our bulk deposits are around 50% and our TASA ratio is slightly on the lower side. We had to play tactical on this one and said that what is the LCL level on an average you are comfortable with? Because we could have easily taken it to 115% but cost we have to pay for that visa is when you balance it out and you know that the same deposit if you take it in next quarter you have to pay a lower cost.
So given that we said that we’ll keep it somewhere around 110%. We targeted 110. We ended with 109 because in the last moment something happened because we wanted to be efficient, okay? But at the same pace, let me tell you L is not our function at this point of time because we are significantly higher than these levels at this time and NSFR is around 122% which also gives comfort that we are on track on that front.
Coming to the related question on wholesale deposits, yes it is around 50% of our overall term deposits. It is a tactical play because we all know and I’ll talk about it a little bit that how we are building our liability franchise now because without a core system, without all systems and solutions, building something is difficult and will carry a cost of building that, so. Which you didn’t want to do that, so now we’ll do it in a proper organic way. But tactically, it played out because this is a tactical stuff.
On the wholesale side, if you look at our year on year deposit cost coming down is significantly higher cost come reduction in in wholesale deposits. If I remember correctly our deposit cost came down by 9% but on the wholesale side it came down by more than 20, 30 basis points one or even more. So effectively tactically it plays out. That cannot be a strategy. But these are all tactics and we locked in ourselves only for short period of wholesale. We are not locking ourselves of five years, four years, three years. We have not rocked in too much I don’t think at all beyond one year. It has been between six months to one year. So to that extent this tactical play will play out. But yes, the wholesale deposit cost is slightly higher than the retail cost deposits. But incremental cost reduction in part deposits is better than the retail deposits. So this has helped us in our management of cost of funds in the short term in a tactical way. So this has not played against us in our execution strategy.
But yes, we have to build the liability. And before I move to the golden let me tell you what I mean on the liability side because eventually the main job the bank has is to build a good liability franchise which will help us in our quality asset growth as well. So with the core system calling in now almost every quarter we are launching three products on the liability side itself as a talking we launched Smart Buy current account, Smart Buy savings account with you know, very good features and it has already started doing for us we launch Freedom account, okay? So, there are various products which we want to launch every quarter because now we have the system to launch. We so far we didn’t have the system to launch on the current account side with the transaction banking, CMS and supply chain and trade, all of this coming together it will help us in going to both wholesale as well as the semi customers and also to task customers which will help us in building our granular long term customer franchise.
And also what you’re doing is so far we didn’t do it because it didn’t make sense. But now with these products in our arsenal we will. We are launching the sales machinery for especially for current accounts and also for savings account in the metro markets. And, and this is the strategy which will play out effectively. The liability franchise builder process starts now. Okay. Also as you know that LCR new guidelines, one of the guidelines which is the guideline of the task Trust association, clubs and societies and in that. Because of that, 40% new regulation task will also be NCR friendly.
So to that extent we have created a separate vertical on task headed by a very senior person will work across wholesale retail and SME. And this you will also see a significant growth in this task segment. Other guidelines because our itself is very low and now penetration is still in these very high levels. I’m not saying that’s a good thing to happen. This is something we want to improve significantly from here. But again tactically it has not taken away too much of LCA from our side at this point of time. So that to that extent tactically we are on the right place. Having said that the main job will to build the liability franchise.
Now next question on gold loans very relevant point which you mentioned number of accounts gone down and tonnage growth not happening. But let me tell you these are two different points for us. Number of accounts went down before and also going on and the reason for that is on the regulatory guidance before there was some challenge which has been now changed again favorably. But there’s regulatory guidance where below two and a half length. Okay. There are some challenge in getting gold customers whether the collateral issue now that has been clarified no problems. But once we moved into the larger ticket size I we realized that overall for the bank that is better in the long run and also the risk with respect to LTV, etc., is much better there because there what we have seen is that high value customers only take the loan they need.
And if you need 100 rupees loan you will give that tonnage what is relevant for you. And hence typically when prices goes down tonnage will go up and when prices goes up tonnage will go down as the ticket size increases to beyond 10 lakhs and things like that. And given our cost and other issues, etc., we also move slightly on the higher end of the curve on the gold loan side. And hence our number of customers have come down the tonnage growth of course it has gone down because as I already explained that people takes what they need because we are not attempting that segment where they are giving their last kind of a savings on the gold to take some consumption loans.
Most of our loans go into productive usage and from that time from that perspective I think tonnage growth will go up on the gold prices see if at all ever gold prices coming. So that’s on that there is no risk at all in the golden portfolio. We have done our analysis. While he will ask the question while you are touching gold I’m just saying that our LTV is pretty low, especially because our very large portfolio is on the agri side, which is not governed by the 75% LTV. So given that perspective, I think we are sitting off fair bit of margin in terms of risk. Even another 10% fall in gold prices will do nothing to the portfolio. So to that extent we are fairly convinced.
Having said that I said before again I am saying this is a tactical play or eventual play is to bring gold down to 30% of our portfolio by 2030. Out of that, at least 5% of the 30% will be working capital loan. And and we have just launched a product which is for targeted towards working capital SME backed by gold as a collateral. So this should be around minimum 5% of our portfolio as we go to 30% and hence it will be 25 plus 5 by 2030. Rest around 30% plus will be on the wholesale side, around 18% will be on the SME side and rest will be on the retail side which will be within 20 to 24 months. So that we are firmly at that game. And one of the other things, because you didn’t ask that, but let me answer that question also because that question may come later on by somebody that our gold portfolio increased to by around 7 percentage in the mix from around 45, 46% to around 53, 54%. So but the funny thing here they will see that on the retail side the retail portfolio has exactly decreased by that means.
And that is basically what we did is the loan against security which was nothing but gold has moved from this side to that side. And hence if you add it up and say that what is our portfolio means where gold is a collection, it has remained below 50%, okay, but because this is regulatory reasons, we moved that business from this side to that side more on the retail side. And from that perspective I think the gold growth which you are seeing around 53% year on year is slightly artificial from that perspective. And obviously we don’t see that growth next year.
And if you continue to grow at the level side, we are growing at a bank level on the asset side, provided we can grow the deposit franchise, you will start seeing some of the other businesses will grow much faster on the NRI deposit flow which you asked that question, very relevant question for us because I think we are around 1560 percent of our deposits at this point of time. It’s not good. We can do better. So we have created a very clear, strong vertical with a very senior person driving it right now. We applied for our rep office representative office in Dubai. By now it would have been probably been operational also. But because of the West Asia crisis we have asked for an extension of the because we are not able to do anything there at this point of time. But we have finished most of our legal paperwork, etc., and we have finalized the CRO Also CRO means Chief Grave Office Officer and.
And also we have created a separate vertical within the bank now focusing primarily on NRI business. Obviously in the short term there has been little bit of a disruption flow on the NRI flow. NRI flow in the bank right now. But these are short term kind of things. In the long run we think that we should be. At least 20% of our deposits or liability must come from NRI and we have created a separate vertical structure for this. So, I hope I could answer most of your questions.
Suraj Das
Yeah. Yes sir, I think that was very elaborative. Just one follow up sir. So this LCR coming down is because of wholesale sorted tenure deposit, you know, impacting the denominator of the LCR?
Pralay Mondal
Yes. And also what we are saying is was we are you know having higher LCL in a margin. Pounds of control is very high in the end in the last 20 days, 15 days, one month of the year where you know that cost will come down post March then no point. Right. So that’s the reason we tactically said we targeted 110 but we achieved 109. So somewhere something slipped.
Suraj Das
Right, right. Sure. Thank you so much sir.
Pralay Mondal
They’re much higher right now.
Suraj Das
Got it sir. Thank you so much.
Operator
Thank you. We’ll take our next question from the line of Akshat Agrawal of SMIFS Institutional Research. Akshat, please go ahead.
Akshat Agrawal
Good evening sir. Thank you for the opportunity. Sir, my first question is on your scale strategy. So sir, as we enter into the scale phase of SBS 2030 strategy from this year onwards, could you please update on the progress of the retail transformation on the asset side, when do you expect growth to be growth to meaningfully pick up in retail and SME? And what kind of numbers should we expect in FY27?
Sir, my second question is on fee income side which picked up strongly. So wanted to understand the key drivers. So like last quarter PSLC income was missing. So has this come back this quarter and was there any syndication fee in this? In the numbers this quarter And a related question on cost sir, were there any material PSI LLC related costs which were largely absent in 3Q which were charged in 4Q. And did you see any headcount reduction? And how should we think about the cost to income ratio trajectory? Can we see it move below 60% in FY27? So those were my three questions. Thank you.
Pralay Mondal
Thanks Akshat for the questions. Starting with the retail assets, we are fast focusing on retail liability because we our retail strategies is very very clear that for assets which are earning assets and the way we define them are businesses like commercial vehicles, commercial equipments, healthcare, so this and subsid inventory funding. Okay. Because this also goes in and to some extent auto loans. But that’s a construction business that at least it’s secured. So these are the products where we would grow beyond our liability franchise which means to dealership through various places including our internal customers of course. Okay. And any other product which is on the consumption side will do it on the back of a liability franchise. And primarily it will happen by cross selling to our existing customers.
We have limited set of score existing customers and hence we are primarily focusing on new customer acquisition this year onwards to have a meaningful growth on that set of. Also we have been very cautious on the unsecured side of the business for the last two, three years. And this has helped us well because there our delinquencies are same as the markets. But because our portfolio is coming down it is helping us in managing our slippages and managing our credit costs. So prudent decisions were taken. So now simple strategies build the retail assets on the productive assets. And this year you will see that those products which has grown and what has deep grown are products which are unsecured in nature. Also there was a cycle on MFI and with the monsoons not being predicted very well for this year so far, whatever we have seen, we will not take the risk on agri business also that much.
So given all these I think you will not see a meaningful growth on the retail asset side. But we’ll create the dry gun powder there by creating a good liability franchise which means basically more customers to whom will sell the retail assets. Our meaningful growth in retail assets will start from FY28 onwards. I’ve already explained it but I’ll personally mention it that our retail assets growth this year has been negative primarily because of the loan against gold Security. As we say loan, I mean security. That portfolio has come down from more than 2000 crores to around 300 crores. And that was a regulatory mandate and that we compensated on the golden side, which I already mentioned, that’s why you’re seeing a negative growth. But core retail assets have not grown negatively.
In addition to this, we have launched two products in retail assets. One is the school fee financing which is a very good product. And the second one is again it’s called LAS but loan against security. But this security is now mutual funds. Eventually we’ll do and other things, insurance and all of this. Okay. So these two products also are very safe products at this point of time and it requires capability which you have built already. So these two products will also see some traction in the bank going ahead. So that is about retail assets.
Now coming to your question on fee income, I confirm there has been no syndication fee in Q4. Okay. And frankly PSLC premium was very very low in Q4. I mean this year which is exceptional. Actually we never felt it will be so low so we didn’t book much. I mean we booked some but it was significantly lower than what we do in Q4 of last year. Significantly, but significant. Okay. And also as we all know, which is a market phenomena happened with all banks that the MTM gain which you had in Q4 of last year in fees was significantly higher. And this quarter obviously there was nothing okay, if at all there was an HFT, there had been some something we had to compensate for.
So given all this, if you look at Q4 last year on fees and Q4 this year on fees, overall fee is actually lower. Okay. But the core fees, what I mean by core is non PSLC and non treasury our fees are higher which is the core fee which is more difficult for us because that sustainable over a period of time. So in a very worst case scenario we have done well and 21 still is not a bad number. When we did that syndication we didn’t have much from PSLCN we didn’t have. We had only negative on the, on the other side, on the Indian side.
So given all this I think Fincom is a good, good story here. Like our credit cost line that coming to the cost, yes, there was a significant increase in Q4 over Q3. But again this is very tactical in nature because most of us CSR the initiatives played out in the last quarter of the year and hence that is a one time kind of a cost which happened which generally gets over the year. But this time it got little bunched up in the last quarter of the year. That’s why from Kim February, to give for cost to enter it was not for any other reasons.
And on the head count increase we had an increase of around 525 people in the head count over a base of 7700. So it’s not even 8% increase in head count. But the cost increased little more than that fairly I mean because this year we invested into high cost and high quality resources in wholesale banking. Our wholesale banking franchise move from a barely double digit number of relationship team to a 80 plus relationship thing. We’re also now investing in the transaction banking franchise. So all of these things together the cost of some of the people who we have got and they are expected to obviously reduce the cost to income the bank they’re supposed to get much more income. So hopefully this will play out for us.
On the CTI I always said that we begin 60 to 65 till FY end of FY27, FY28 onwards the operating leverage will kick in. Because all said and done, the technology thing has just come in now. So 2528 onwards we’ll start seeing the operating leverage across branches, across products and across the technology investments which have done still FY27 end. Our CTI will remain between 60 to 65 and we are somewhere in the midway around 62%. So, that’s what your four questions. Thank you.
Akshat Agrawal
Very well sir. Thanks for the detailed answers. Just a follow up on the SME growth, what kind of growth we expect this year and I mean when, when should it pick up meaningfully?
Pralay Mondal
Yeah, so SME and lab together we call BNG which is Business Lending Group. So that grew we around 2 to 3% last year, year on year basis. And this is something we did very consciously because we saw a very strange year last year, the first half of the year actually and it’s still going on is the tariff related issue. But the tariff related issue got overpowered by the West Asia crisis which also impacts in a way the not only exports now anymore, it’s also supply chain and not always the SMEs have the kind of a staying power a large corporate or even sometimes a mid corporate has. So given that given the size of our balance sheet, we didn’t want to take a risk. We always did it whether it was a personal loan, whether it was not in MFI and then we did it in SME last year.
We deliberately focus on SME portfolio growth but the same team worked very hard to get the portfolio quality better and that has helped us in the Q4 coming this year. Till we get clarity on this West Asia prices, and hopefully it can come in this quarter or maybe next quarter. Who knows if that will clearly decide what is the level of acceleration we want to put on the SME. But as we are talking we are investing more into people in SME because this thing will come and go. But eventually the 2030 commitment of around 18% of SME portfolio into the book remains right and it is now around 11%. So a significant road map is there for SME. But we will accelerate only when we feel comfortable in terms of risk. But whatever happens we will single digit growth is given and hopefully it will be back to that 28% growth in the next two years.
Akshat Agrawal
Thank you very much sir. I will rejoin the queue. Thank you.
Operator
Thank you so much. We have our next question coming in from Parth Gutka of 360 ONE Capital. Parth, please go ahead.
Parth Gutka
Yeah, hi. Can you hear me?
Operator
Yes please.
Pralay Mondal
Yeah, Parth.
Parth Gutka
Yeah, hi. Thanks a lot for the opportunity, sir. So first, what is the impact of ECL on. On the day of transition?
Pralay Mondal
Yeah. Is this the only question or, can I…
Parth Gutka
Yeah, yeah. So I have one more. I’ll take it up after this.
Pralay Mondal
Okay, so I will give a one-line answer to this for Satish to respond in details. At a high level what we understand is, you know there are various smaller components there but the large impact items are the stage two, especially on the SMS side where there are two parts. One is the 5% and one is the 1 1/2 percent, the gold loan. Okay.
And, and also that is on the large impact item on the negative side and on the positive side we’ll be able to or we have to now write back the contingency provision of 105crores and is enter 210crores which I said, which are well above regulatory capital that can be subtracted from the. Or that should be subtracted from whatever is going to come additional because of these provisions which you have to take. So at the margin there could be some very, very marginal impact. The calculations are being done and on that I’ll hand over to Satish to answer this question technically.
Satish Gundewar
So we already have a ECL model in place because we report our numbers as per IFRS for the purpose of Fairfax. However, that model we are reviewing completely based on the revised ECL guidelines. So that work is currently underway. However based because our model was prepared some time back, maybe over a period of time has also changed on that model. So we can not know what happens once this entire model refresh happens. It is still one or two months away when we have the full model.
Nevertheless, basis the model that we are using currently for our IFS reporting and basis the portfolio which we had as a December 25 computed what is the impact and that probably we can call it as a transition impact because as per the guidelines, the transition impact will have to be taken on first April 27, whereas the benefit of capital adequacy ratio we can differ for a bit of four years. But that transition impact is not a significant number for us at the moment. And this considers the fact that and we had that advantage because not only on NPS that we have been making aggressive provision, but even on standard assets we had this had issue provision created at the time of COVID 105 crores which will now get subsumed into the overall provision that we hold.
So that benefit we have got. And because of that the transition impact is not a significant number at all subject to in case there are any significant changes which happen to the model. So I would not completely say this is the impact and this is what will happen because the work is currently underway. Once we refresh that model and then run that model on 31st March 2026 numbers then we’ll have but all along we have been validating the numbers and that impact is not very significant for us.
Parth Gutka
Sure, sure sir. Thanks a lot for the answer. My second question is on the gold loan portfolio, the ease had been coming off over the last at least from Q4FY24 to you know, Q4FY25 the earnings had been coming off. But over the last three four quarters, you know, again, you know, the EBS increased by around 30 to 40bps the portfolio level. Is this largely because of the gold loan that we have been, you know, or, or the new vertical that the working capital against gold loan that we have started. Is that the right understanding?
Pralay Mondal
Yeah. So let me explain this. So we are not aggressively pursuing gold on the way we are doing before because we are now looking at larger ticket sizes. Okay? And hence we said that we must maximize returns to a great extent because we realized that lot of these customers who are coming to us are coming from various NBFCs and other other institutions where they are paying higher than what we were asking for.
So we said that, you know, this is an opportunity where we do not want the growth and we are getting the growth. So let us try and maximize the returns in terms of yield and they will ask for the so that means we are actually underpricing us so far in this business. So it is more of a discovery for ourselves. Okay. It’s not that it happened only in that portfolio which just talked about the working capital, but also in the other other portfolio as well. So overall that strategy has worked out well for us.
Parth Gutka
Thanks. Thanks a lot for answering the question.
Operator
Thank you Parth. We’ll take our next question from Vibhor Talreja of Nest Amplifier. Please go ahead.
Vibhor Talreja
Hi. Thank you for the opportunity. Am I audible?
Operator
Yes, please.
Vibhor Talreja
Okay, thanks. Hey, this question is more from a long term perspective. This is probably your sixth year in CSB and from the start I think the idea was to grow liabilities which somebody asked and you answered that it has taken its time and on the retail assets and the business has done well and we have been beneficiary of gold prizes. But on the retail etc, I look at last four years, five years, it has been a fairly teepid growth than what we would have thought through or planned for. And even now, if I understood correctly what you said was that this will pick up in the Q4, FY27, Q1 FY28.
So, if you can give me a color of why exactly it is taking so much time. Is it because the market exists? There are NBFCs who are able to capture at that small base reasonable pool of assets and profits. But somehow despite our liability advantage, we have been able to do fairly little on the retail side except the golden ware which has been a meticulous execution benefited by the increase in gold prices.
Pralay Mondal
Yeah, so I will just explain. We are a bank. So as a bank we don’t want to address a retailer’s business like NBFC. Because I have also been the board of NBFCs before like HDB and Access Finance. But the way NBFCS does business is little different to how a bank does business. And there was a time when I used to handle both the bank and assist together when I was in HDFC Bank. So the whole approach is different when you’re in a bank. Here we are not here to build asset book. Here we are to build a franchise where liability comes first and assets follows and in the process liability also goes because AMIS and the other things happen in the record. So that’s the approach we are taking.
And hence even if it takes the high road and the long term, eventually what it does is. Eventually it fills a franchise which is a compounding growth story. But in a. In a NBC kind of a framework, it is a slightly different strategy which is different to how a bank operates because bank operates from process. So given that perspective, you are right that we took little time. And there’s a reason for that. The reason is that our core system migration for whatever reasons are got little delayed in terms of decision making which for system will go for and when we’ll go for that. So we started the core system migration for various reasons. Internal reasons only in FY25. Okay. FY24, the decision got taken. FY25 we got delivered by May 25th. And then we are along with the sound systems.
And then in a very quick and record time we are able to roll this out. So primary reason is. And look at it this way, without a proper post system because we are on Marvel which can’t do much. We and I also realized over a period of time the. In the. The shortcomings of Marvel where. Where used to run before the core system where you really cannot launch new products. You cannot have various functionalities. And hence our entire story of the bank from a retail franchise is starting now. Frankly speaking, because the core system only is now stabilizing or stabilized. Now we can launch launch products. We will launch sales team. We tried one sales team before.
Then we realized in the absence of products customers comes but they don’t give balance balances and those accounts becomes inactive. So there’s no point. And definitely you cannot cross sell them anything. So given this, the retail journey is starting now. That’s the honest answer. And we know how to execute it and take it forward. So I’m pretty confident that we are not shifting the goal post from FY30 to FY32 or FY33. We are saying that if you have lost two years in taking the decision on the core system for whatever internal reasons, we will work harder to make up for that plan. And by FY 2030 we’ll deliver fortunate products. So that’s a real answer. Hope this clarifies.
Vibhor Talreja
Thank you. All the best.
Operator
Thank you so much. We’ll take our next question from Punit Bahlani of Dolat Capital. Please go ahead.
Punit Bahlani
Yeah. Hi sir. Am I audible?
Operator
Yes, please.
Pralay Mondal
Yeah, Punit.
Punit Bahlani
Thank you sir. Just on your NIMs. I like the reported names were flat QQ and you know advances growth at 9% QQ and deposit growth. But it does it the NII growth is only 2%. Is this some day count convention or what am I missing here Sir? That’s the only question I have.
Pralay Mondal
So, NII growth year on year was quarter on quarter is lower. But AR on year is 25%. So your question is more on quarter on quarter, you’re saying?
Punit Bahlani
Yeah, quarter on quarter. Like how do I reconcile this? Because the loan growth has been 9% and NI growth is only in the range of 2%. So something I’m missing or.
Pralay Mondal
No, but if NE has dropped by 2%, 2, 3 basis points. Okay. And quarter on quarter asset book has grown by how much? Quarter on quarter asset book growth is 9%. Growth with a name drop off 2 basis points. Okay. I mean there is nothing here which will act differently. Right. So I’m sure mathematically it will not look like that on a foreign country. This is this thing. But on a year on year basis it’s 25%. So maybe we can do the maths once.
Punit Bahlani
Okay. Okay, sir. Yeah, thanks.
Pralay Mondal
Because if you look at it, our yields has fallen little bit in Q4. And cost of deposits or cost of funds has gone up slightly which has impacted any. I’ll tell you what has happened. In spite of a significant, significant improvement on the quality of the portfolio which is the GNP and NP and credit cost. Okay. Still if NIM has fallen then the difference between a cost of funds and yields is little more than what it meets the eye. Based on only the two basis points on the name, I think that’s where you will find us.
Punit Bahlani
Okay. Okay. Is it — I’ll discuss this offline. Thank you, sir.
Operator
Thank you so much, Punit. We’ll take our next question from the line of Narendra Gandhi of Dante Equity. Mr. Gandhi, please go ahead.
Narendra Gandhi
Am I audible?
Operator
Yes, please.
Narendra Gandhi
Yeah, Hi. I just wanted to know if your CTO is on the call.
Pralay Mondal
CTO is not on the call, but you can ask me. I obviously will not know as much as he knows, but I’ll try to answer.
Narendra Gandhi
No, actually it was regarding this recent AI related cyber security threat that even our FM kind of, you know, came in, came online and spoke about. Just wanted to understand if there are any implications on the new update that we’ve just rolled out and with regards to anthropic and a lot of banking softwares are sort of already said to be under upgradations now in the next two years. And since we just rolled out our software, I wanted to understand if you’re up to date with that or not.
Pralay Mondal
Yes, certainly. Any other questions? I’ll respond to this.
Narendra Gandhi
No, I do. So I’ve been, we’ve been talking for the last two con calls and I’m really glad that you’ve been able to deliver in the 1.5 RO and the 15% ROE. I think a lot of analysts were very skeptical in the last quarter about you delivering on those numbers. And you kind of told that you’re going to make sure, you know, you end the year above 15% ROE. And I think for the quarter you’ve done around 17 to 18% ROE, which is a great number. So congratulations on that.
And other than that, just wanted to kind of understand what are we targeting for the next year in terms of loan growth? I think you said 25% if I’m not mistaken. Please correct me if I’m mistaken. And I think ROA and ROE wise, I would like to know where are we targeting because I think the cost income should start coming down from next quarter onwards. Right. So these are my questions.
Pralay Mondal
Sure. And then, I just respond on the cloud entropy which you are talking about the intermittent thing. See advantage of working in a small bank is we all have to know everything. Okay, so there’s an April 27 circular from RBI which is, which gives us a certain guidance to the banks and within that there has been a advisory of what are the things the banks needs to put together as a directional imports and update board within two months of that, which is by the 27th of June. And whenever the board meeting happened before that, what is advised is either ITSC or SB on board. Okay, so we’ll do it most probably. ITC chairman Saxon is a practitioner and he is extremely good and he understands the subject very well. Of course, if you understand this very well as well, including our security CISO also understands it very well.
So between all of us and I will also be involved in this because this is too critical and tools, I’ll not say strategic but too critical thing not to have an eye on and not to have a grip on this. Okay, so we are, we have started working on this based on the guidance also I believe that some of the largest banks in the country is also, you know, working on seeing that how the entire guidance is there for the entire system because this is not where. It’s not a competitive land step. It’s about the banking ecosystem not only for India but for the whole world. I think different countries are talking to each other also to understand because this, not only the banking system but the cyber security, there are much larger implications of this beyond this banking ecosystem. So I think there is a lot of clarity will evolve on this over a period of time. So right now we are doing what the April 27th circular from RBI says. And we’ll update the ITSC slash board by before 27th of June.
Narendra Gandhi
And just one question regarding this. Are we expecting our, you know a cost to income which we’re expecting to come down from next quarter onwards? Are you going to say that might be delayed because of the cost that might come with regards to this particular notification? Because obviously this is going to come with added costs, right?
Pralay Mondal
So let me put it this way. Right now I think we are talking about frameworks and ways to do it. Because I don’t think that there is complete clarity in exactly what is to be done. Will there be a cost, what will be the inputs, how this will get shipped out, etc. We have to figure this out. It is evolving scenario both globally as well as in India. So is to be mature to answer on this one. But I just want to clarify one thing. I never said cost into income will come down from next quarter. I said it will remain for FY18, FY27 at the range of 60 to 65. Hopefully somewhere around where we are FY28 onwards it will start drastically coming down. And by FY30 we should be significantly lower it.
Narendra Gandhi
It’ll stop going up this year onwards is what you saw, right?
Pralay Mondal
So, what I’m saying Mr. Gandhi is we cannot respond on something where is no clarity to anybody in the world. Forget about us or in the ecosystem. So let it’s a evolving story. Let’s figure it out what it is and how it is to be worked out. It’s too premature to answer that.
Narendra Gandhi
Right. Understood. Yeah.
Pralay Mondal
On second question, this one I can answer with more clarity which is on the loan growth. Yes, a loan will be completely deposit. Depends on the deposit growth what we have. We have the ability to grow at similar or even faster rate than what we have grown last year. Even if our golden growth comes down, it may happen but it all depends on at what cost, what deposits comes and how the liability franchise picks up. And this year onwards we will significantly focus on CASA acquisition. The CASA acquisition will bring in customers. The balances will start growing only at one year after that. So from that perspective. I think loan growth will be a function of our MD team to build the liability franchise. But Yes, I think 25% is something.
We’ll be disappointed if we don’t do that part that much at least on the ROI. ROI, you’re right. We have delivered what we promised in Q3, same thing we delivered what we promised in Q2 on NIM and same thing we delivered what we promised on asset quality last quarter in this quarter. So you can see we’re consistent there. Coming to next, coming to next year prediction. I think our overall range of somewhere around 1.5% and overall range somewhere around 15% of ROE that will sustain. I hope this answers.
Operator
Thank you so much. We have a follow up question coming in from Akshat Agrawal. Akshat, please go ahead with your question.
Akshat Agrawal
Thank you for the opportunity again. Sir, on margins, would you say NIMS have largely bottomed out and what kind of trajectory do we expect from here if not quantitatively, at least qualitatively. And what were the drivers of the yield compression? Was it just higher share of wholesale lending because gold yields increase on the portfolio level? Or was it coming from the full impact of the December repo rate cup flowing through P and L and the MCLR repricing? That was my first question. So I have one more.
Pralay Mondal
Please go ahead, please finish everything. I’ll answer together.
Akshat Agrawal
Yeah, and on the SMA book, of the 10 to 11 accounts that slipped last quarter’s, how many accounts have been upgraded or recovered during this quarter and how many I mean are pending which could affect the asset quality or credit cost upside next quarter? And should we expect most of these to be resolved by 1Q or there’s benefit to 2Q as well. And lastly sir, on the levers to ROA roe, we have talked about it a bit but just to understand like because this quarter 1.5 ROA was due to low credit…
Pralay Mondal
No, we didn’t hear, we didn’t hear the last line. Please can you repeat it?
Akshat Agrawal
Yeah, so just one more question on the ROA ROE medium term levers. Well you did talk a little bit about it, but this quarter was due to very low credit costs. So going forward the credit cost will slightly move up and because we will have better retail growth and fee income. Fee income — yeah, go ahead sir.
Pralay Mondal
Yeah, I think I’ve understood your question though is breaking but I think I got a sense of your question so let me try and answer that. If you don’t get the answer you ask. Yeah. So on the margins the general guidance which I have given always it will be 3.75 to 4 somewhere in between we are right in the mid of it somewhere around 3.82 or something like that. So I think it is very difficult to predict in basis points to go up or go down but it will remain in the range of 3.75 to 3.8.
Having said that, I am not so sure it has bottomed out or not because of two reasons. One is our own internal portfolio. The business mix will start gradually changing. I don’t know whether it will happen in the next year or next quarter, but over a period of time it will happen. And whatever business makes changes leading to any interims free change in name will get compensated on the RVA side by fee and process to those customers. Because in unlike gold in gold for the high ticket size we’re planning to do some plus site in wholesale SME and some of these businesses where your yields are lower. We because transaction banking we are going big time into that.
We expect cross sell and also we expect liability which should bring down our on a on on a long term basis to bring down our cost of fund. So there some internal noise here and there but eventually it is building up a franchise and hence eventually we’ll look at a name which is similar or higher but entering there could be some noise there but we’ll remain try to remain between 3.75 to 4 on the yield compression. You’re right 2, 3 things happened and you only answered some of them which is with 150 on the beams portfolio it immediately impacts and on wholesale business it impacts depending on the mcl, how it is moving and what is the tenor of the MCL with the customers. So now everything is almost played out. BNG plays out in instantly and on wholesale it is sort of played out almost and hence we could see a completion both on the wholesale side as well as on the in terms of yield compression which has happened. So I think that answers the yield compression side.
Coming to your question on SMA book we don’t give this level of details in our past disclosure so it is very difficult to give answer because you have asked for a very granular question but at a high level for your comfort I want to tell you that I was looking at the presentations on SMA almost every business, another bank, quite level or SM has constantly been improving and as we are talking on Q for the SMA group is lowest in the last five quarters. Okay.
Akshat Agrawal
I think sir, just to interrupt. Sir, actually I was asking about the 10 to 11 accounts it slipped last quarter on the SME.
Pralay Mondal
No, no, it is not right from a customer perspective also and from a disclosure perspective. But you can obviously understand that some of them will get upgraded, some of them will get recovered and. And thankfully some of them has got upgraded decisively because some of them were. I said in last quarter itself that because we are going through a migration some of the MIS, etc., got little delayed because of which happened and more technically so to that extent, yes, some of those accounts are related to that obviously where else it will come from but exactly how many, how much where we don’t get that level of details and you cannot appreciate that. But yes, you’re right it is obviously coming from the existing portfolio or existing slippages.
And in the medium plant and ensure that the golden portfolio comes down, etc., it’s not coming down immediately in terms of percentage and levers for ROI. ROE is basically cross sell to lower yielding product. Because why should we do a business where it is lower ending if we do not have a visibility of ROA in that business, right? I mean we are not doing here business only for top line. So. So if we strategize to build a business it’s an entry entry strategy whether it is in wholesale SME or in retail and eventually the ROA tree will play out out there. So in the transition this way, that way somewhere it can happen and that will be managed because the Gold portfolio is not coming down in just one year’s time from a 54% to a 30% and we’ll get the time to manage this.
So I think we should be able to manage between ROE and ROE and you will see that. And this year also let’s not forget that we had to we delivered this result this quarter in spite of the most difficult scenario on the fee business, especially on the treasury side. So the upside on this nobody can see the future, can predict the future.
But we had taken a large book on the alpha side which you could probably one time during the period when RBI came out with the regulation from HTM to AFS hoping that we will leverage that last year. But instead of leveraging the other way nobody said that from 6.6 it will go to 7.1. Everybody thought it will come to 6.1. So eventually that will pay out once the crisis gets over. So hopefully on a full year, this is next year, there’s a significant leverage there on the ROA and automatically on the ROA side. So. And also with capital consumption going high, that’s more technical. And no more maths. Obviously, RO naturally will improve, but that thing I think you guys will factor in. So that that’s broadly the answer of your questions.
Akshat Agrawal
Very well, sir. Thank you very much. And all the best.
Pralay Mondal
Thank you so much.
Operator
Thank you so much. Ladies and gentlemen, that was the last question for today. On behalf of CSB Bank Limited, that concludes today’s conference call. Thank you for joining us. And you can now click on the leave icon to exit the meeting. Thank you all for your participation.
Pralay Mondal
Thank you very much. And look forward to everybody joining the call again in Q1 this. Thank you. Have a good evening.
Operator
Thank you so much.