IIFL Finance Limited (NSE: IIFL) Q1 2026 Earnings Call dated Jul. 31, 2025
Corporate Participants:
Unidentified Speaker
Kapish Jain — Chief Financial Officer
Nirmal Jain — Founder and Managing Director
Monu Ratra — Chief Executive Officer IIFL Housing Finance
Analysts:
Unidentified Participant
Chetan Gindodia — Analyst
Shubhranshu Mishra — Analyst
Anusha Raheja — Analyst
Deepak Poddar — Analyst
Suraj Das — Analyst
Abhishek — Analyst
Abhijit Tibrewal — Analyst
Sudharsan — Analyst
Presentation:
operator
Good day and welcome to IIFL Finance Q1FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you. And over to you.
Kapish Jain — Chief Financial Officer
Thank you very much. I welcome Everybody on the first quarter results earnings call for fiscal 2026. On this call I am joined by Mr. Nirmal Jain, our founder and managing director, along with Mr. A.Z. venkatraman, the joint Managing Director of the company. We also have the CEOs of two of our subsidiary companies, Mr. Mullu Akra, CEO of the IAS and Audience alliance and Mr. Venkatesh who is the CEO for IFS. Namaste. My name is Kabir Jain. I am the CFO and as we take it forward, I would like to now request Niman to just take over and give an update on the broader macroeconomic situation, industry update and company strategy for this quarter and going forward.
Nirmal Jain — Founder and Managing Director
Thank you. Sapi Good afternoon everyone and thank you for joining us. The macroeconomic backdrop remains broadly constructive. India continues to demonstrate strong growth fundamentals with stable inflation, improving rural sentiment, increasing digitization and formalization of credit. And for the MBSP sector the growth Runway remains wide supported by rising retail credit demand, digital inclusion, financial inclusion and the robust regulatory framework. However, the operating environment is not without these challenges. So asset quality and MSME lending has come under pressure across industry, especially in the unsecured and micro lab segment reflecting regional volatility as well. Even in our portfolios, NPAs have edged up sequentially but we have acted swiftly by cutting exposure to high risk segment, recalibrating our policies and deploying dedicated collection teams and embedding AI led RD warning systems.
On the global front, rising trade friction, especially the return of carriage records from the US is something we are watching. While near term impact on our customer segment is likely limited, we remain vigilant given the second order effect on inflation. Currency and export link MSME. Yet on the whole Q1 FY26 has been a quarter of revival and reassurance. Our gold loan business has fully bounced back from last year’s embargo reaching an all time high in aum. MSME secured lending continues to be one of our core growth engines and we are exiting the riskier segment. We also strengthened our governance and risk architecture.
We have bolstered our leadership team and double down on tech led execution and innovation. We remain focused on building a high quality compliant retail loan franchise, generating targeted return on equity and fulfilling the mission of financial inclusion with this now I hand it over to our Chair for Kapil’s day to walk you through the detailed financing.
Kapish Jain — Chief Financial Officer
Yeah thank you very much Nimal to take this forward and give you a more detailed update on the quarterly numbers for the quarter. At a consolidated level, IFF Finance reported profit after tax before controlling interest of 274 crore. This is running in a 9% up quarter on quarter and 19% down on a YOY basis. We recorded a pre Provision operating profit of 836 crore. It’s again up 28% quarter on quarter and 31% is down YoY. As you all are aware of last year we also hit by the Gold embargo which is causing this negative shift.
However the momentum is on the upward side when you compare things on a quarterly basis. For the quarter the Consolidated loan AUM grew by 21% and was up 7% quarter on quarter leading to around 83,889. As Nirmal mentioned this is led by Gold which has already surpassed the past embargo limit and we were up around 30% quarter on quarter in the gold AUM and on 85% of IUI to 27,274. If I further dissect the AUM, the retail segment comprises of 98% of the overall AUM which is like home loan Gold, MSME and Microfinance. They all aggregate an upward movement of 21% YUI and 7% quarter on quarter.
Our gross NPA is in line with our guidance and stands at around 2.3% in the large balance sheet. They could be marginal shift a few basis points but it can be in line with our guidance of 2.3 and our net NP stands at around 1.1% and when compared to same time last year it’s a marginal up around 10 basis points. The company maintains a very cautious stance on the MSME and MFI segment and we continue to keep our focus on the recovery collection and as things look better we’d like to see how we can further build up the portfolio.
Here we have been implementing and we build our credit on the ECL model and under the ICE impact provision. The the coverage on this overall portfolio stands at around 91%. The assigned loan book currently stands at around $15,061 which is up 3% YoY and more importantly up 18% quarter on quarter. Besides this the cool lending book assets also moved up to 11,565 up 21% YUI and 9% quarter and quarter. Our quarterly average cost of borrowing increased by 34 basis points on a YUI basis and very marginally of around 4 basis points to 9.45 on a quarter.
On quarter basis we’ve been maintaining good and healthy liquidity. If I give you an update, during the quarter we raised around 14,008 crores of borrowing through term loans, bonds and commercial papers and we with the gradually seasoning of the portfolio we could also enhance our direct assignment transactions like we have done historically across banks and including the gold loan portfolio to around 4,489 crore this particular quarter compared to 2,400 crore last quarter. Our cash and cash equivalent stands at around 7,367 crore adequate to not just meet our short term liabilities but also support our growth momentum as we end charging for the particular asset classes we are positive by AUM across buckets and the net giving stands at around 3.4x on an annualized basis the ROE stands at around 7.6.
The ROE has around 1.6%. Our basic earning posture for the quarter stands around 5.5. We are adequately capitalized with the consolidated Capital adequacy standing around 28.4% much higher than the minimum threshold of 15% and individual companies capital adequacy spent around 18.3 for the NBSC, 47.4 for HFC and 28.4. So much for microfinance. In line with our endeavor to enhance our strength on the board both from a governance and supervision perspective we are. Pleasure to have Mr. B.P. Kanungu as one of our board members in the IAS finance. As you would all know he was a former RBI Deputy Governor. We also have Mrs. M.V. bhanumati who was the former Income Tech DG on the board of housing finance company Apple Housing. There has also been meaningful changes on the management side to the critical initiatives like AI and innovation. With this I come to the end of the entire presentation and open the floor for Q and A. Over to you.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for A moment while the question queue assembles. The first question is from the line of Chetan Gindolia from Mahindra Manulife Mutual funds. Please go ahead.
Chetan Gindodia
Yeah, hi sir, just wanted to understand the changes that have happened on the asset quality side in this quarter. So we’ve seen that across all segments other than gold and capital markets, most of the segments both stage one, stage two, stage three, they have all seen deterioration. So can you explain us, you know segment by segment what are the key changes that have happened on the asset quality and commensurately what has been the impact for credit cost in this quarter and how do you see the credit cost going up ahead?
Kapish Jain
I mean asset quality has improved. I don’t think there any stress. And the core home loan also is the marginal difference. So the primary problem is microfinance and then mfme. They’re also unsecured in the micro lab. The small ticket lab. So these are the issues that we have and in Hong we had exposure to the Andhra Pradesh improvement scheme where the project is halted but which are small exposure but other than that it’s not okay. So if you need to look at gold loan which is like almost one third of our business and will go even faster and then the home loan, the core home loan product cost structure is more or less, I mean it’s very small marginal difference but not much. It’s 1.14, 1.31% now. And what we are seeing now is that even the other segments, particularly the MSME and microfinance also things are, I mean the industry wide trend but they’re getting better.
Chetan Gindodia
Unsecured MSME for us is still a largely 4000 crore book and even the secured MSME is a substantial portion of the book. So over here how do we see the banks like going ahead? What sort of provisioning can come from this segment?
Kapish Jain
So if you look at the overall portfolio then. Okay, let me give you the brief. Let’s look at the product by quarter, segment by segment coming.
operator
The management line is not clearly.
Kapish Jain
Hello? Hello, can you hear me?
operator
Yes, better now.
Kapish Jain
Yeah. So 38% is home loan where I mean there’s a small 500 crore portfolio out of which 65% is paying. But that’s where there’s a stress. But other than that that portfolio is being okay. Golden 13% is not a problem. MSME secured, what we are seeing has come down because that micro lap which was, you know to micro canal customers as a cross seller or a very small segment of customers that we are discontinuing the new businesses are not taking place. But then the other, the rest of the portfolio is okay and the micro finance which is about 10%, 11% now I mean that’s also stabilizing across industry.
So these are the. So I think going forward, I mean this part we had a total loan lock provisions of over 5 crores on a consolidated basis which is a little higher than what our guidance and expectations were last quarter. So we were talking about the guidance I think 2.5 to 2.7%. But we might end up if you see the first quarter trend, hopefully even if it be a conservative it will be around three and a half percent or so.
Chetan Gindodia
Thank you.
operator
Thank you. The next question is from the line of Shubhranshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi. So three questions. The first one is gold loans. What is the onboarding LTV that we have on the gold loan right now? Second is in terms of housing finance, is the CLSS too acting as a demand driver or it is too tedious in terms of operational challenges. Third is around securitization in IFL Samasta it’s been coming off. So are we facing issues in securitization or you know people asking for more cash collaterals? Any changes in covenants especially in IFL Samastav from our raw material providers. Thanks.
Kapish Jain
So the basically LTV in gold loan is range from product to product. So we incentivize our customers to take a lower LTV and get benefit of lower rate of interest. Also the yield has slightly improved in this quarter. If you see the first slide which is slide I think two, the yield is just 17.6 when we restarted that’s 17.8 and is now 18.2. And our LTV on the portfolio level is 66 but at the time of giving loan is around 70 75. Then there are customers who can come and revise or can do the top of loans if they want to.
But since the portfolio level we are around 66% right now. And second because see the disbursements are slow. So the new loans are also the portrait building up at this pace. But in Q1 still we did a direct assignment of 700 crores and sorry 1100 crores in total of a DA. And MFR8. Compared to 178. So actually quarterback Samasta we did a fairly good amount of sell down of pool assets by way of direct assignment.
Shubhranshu Mishra
Any cash collaterals being asked?
Kapish Jain
No, in the DA there’s no cash collateral DA happens without cash collector only PTCs happen with cash college VA has not been there. So now maybe the MODU probably can address the TLSS2 issues. As far as TLSS2 is concerned, you’re absolutely right.
Monu Ratra
It’s operationally cumbersome. But as last time also, we did pretty well on that. We’ve already given subsidy to 1600 people, which we have done. So I think we got the hang of it. It took us a while, but we’re pretty confident that this will act as a very good demand engine for us going forward. So we’ve understood the nuances of it. And we’ve already got subsidy for 1600 people. And this time the government is pretty swift. Once you upload everything, the subsidy is coming pretty promptly.
Shubhranshu Mishra
Right. And this salaried formula that we do in home loans, these are from Cat A companies, Cat B companies, Cat C companies. What kind of salary levels, income levels are we speaking about?
Kapish Jain
Yeah, yeah. So typically this former salary for home loans is typically in many different companies. I will not say super cattle company. But B or C companies where people are in the down the order in. The hierarchy of the occupation they are in. But these are absolutely in B or C category employees, companies.
Shubhranshu Mishra
Average incomes of those customers.
Kapish Jain
Now if we talk about the metros. And other places, the average household income. Will be upwards of 50,000.
Nirmal Jain
About 6 lakh rupees per annum. Certainly in the range of constitution.
Shubhranshu Mishra
Understood. And a foil at the point of origination.
Kapish Jain
The DVR at the point of origination is below 50%.
Shubhranshu Mishra
Right? Right. I’ll come back in with you. Thank you so much.
Kapish Jain
Thank you.
operator
Thank you. The next question is from the line of Anusha Raheja from the Lalan Docha. Please go ahead.
Anusha Raheja
Thanks for taking my question. Actually said that for the politics, can we anticipate increase cost of 3.5%? So does we do we implement that going ahead for the next two quarters the asset quality or the NPS will continue to be on a higher side.
Kapish Jain
Your why was not completely there. We heard 3.5 is something that you mentioned. Can you repeat your question?
Anusha Raheja
We are anticipating credit cost of closer to 3.5% for the current fiscal. So how do we anticipate for the next two quarters? MSME and on the microfinance the NPAs will remain and the slippage will remain on the higher side.
Kapish Jain
I’m saying that if you look at the first quarter trend, which to our mind is a highly elevated cost, then Also it goes to 3.3.5%. But we believe that things will get better, much better in the Second quarter but more so in the second half of the year. And we should be able to end the year at a lower, not 3.5%. So sorry, I mean I just want to correct it. I think going by first quarter trend, if you just work out those numbers then it goes up there. But hopefully things will not be as bad throughout the year.
So the first quarter because there was a sudden unexpected hedge of the microfinance also and because the trend suddenly Karnataka and some of the states has worsened. But you know, if you really look at it then in the last few weeks RBI has got more accommodative stand liquidity has eased and there’s an impetus to growth and this the impact will come or will be felt by the industry and MSME maybe a little bit after a lag. So I believe that things will get much better from here in the second half. But as things stand probably the first quarter has been little.
Much worse than what we expected in terms of credit cost and primarily for MSME microcurrent.
Anusha Raheja
Okay. And so on the AUM growth side, if you can just give some color on the gold loans we are, we are seeing a strong growth coming in there. On the home loans I think the growth is slightly, you know, slightly tangled. But on each of the segments if you can just, you know, give some color, how do we anticipate a um growth, you know for the folio and and some color on each of the segments as well.
Kapish Jain
So you’re right, golden growth has been much stronger than. So that is at least one positive news is that segment is doing better than probably what we would have anticipated or guided. First quarter was flat and first quarterly traditionally historically flat. And also we were recalibrating our underwriting policies, exiting and consolidating some of the segments of businesses. So it grew only by long term but only some annualized basis we can.
Nirmal Jain
See for big teams is what we should see at the end in India.
Kapish Jain
Yes. Otherwise I think maybe 15 to 18% growth is what should be very.
Anusha Raheja
And so lastly. And the lastly I think on Q1Q basis we have been seeing a dip on the margins in the spread side. So was it purely because of the fact that there could have been interest rate reversals on the, on the NP accounts or was it something, you know, additional related. Related to margin.
Kapish Jain
Yeah. So prime business reversal on you see the higher elevated NPAs and the provisions. Obviously the impact is going to be just also.
Anusha Raheja
And what is the broader call that we expect? You know, margins for the folio. How do you anticipate that number moving.
Kapish Jain
And Micro Lab and Microfenil. But I think that this, all these sectors, all these segments of the business are getting better and interest reversals will also reduce. And next in the second half should be much better. But things should start getting better from now.
Anusha Raheja
Okay, thank you sir.
Kapish Jain
Thank you.
operator
Thank you. The next question is from the line of Deepak Podar from Sapphire Capital. Please go ahead. Mr. Deepak, are you there?
Deepak Poddar
Hello? Am I audible?
operator
Yes, yes.
Deepak Poddar
Okay. Okay. Thank you very much for the opportunity. So just first of all I just wanted to understand or given your credit cost outlook is now 3 1/2 percent. So what sort of ROA we are looking at for this year? I think we were targeting closer to 3% as per previous call. Now given higher credit costs, what sort of revised outcomes we should look at?
Kapish Jain
So we were looking at I think three and a half percent ROA.
Nirmal Jain
3% close to 3% ROA. That, that’s what we mentioned in the last call.
Kapish Jain
So the credit cost might submit from 2.5, 2.7 level. If it goes up to 3% partly we should be able to meet now interest rates from this quarter probably see a reduction in the borrowing cost and maybe more so in the second half as lot more loans come for anyone and loans come at an over 8. And as the volumes grow, particularly in golden business, we used to see some benefit in cost to income ratio also. So I mean at this point in time it’s too early to change the guidance or expectation on roa. But we have to watch how things progress from here.
Deepak Poddar
So we still maintain 3% kind of ROA. I mean we want to maintain that.
Kapish Jain
Yeah, you should maintain that.
Deepak Poddar
Okay, okay. And in terms of overall growth, I think you mentioned 15 to 18% on the AUM growth we are looking at on a console level, right?
Kapish Jain
Yes, 50, 80%. I talked about home loan custom level should be higher, maybe 20% or between 20 to 25%. Around 20%. Actually the micro finance will be slower but around 20% we still bar and we expect gold momentum to continue. So on a console level 20% would be a good estimate.
Deepak Poddar
And 15 to 18% was for homeless. And the three problem areas that you mentioned about MFI, MSME and small ticket Lab. So what percentage of our book currently forms?
Kapish Jain
So if you look at the businesses that we have actually slide 5 is given. So MSME that we discontinued this unsecured business is 2.4% and the last is 3.1% of total books. So they are about 5% microfinance. Is 10%. But microfinance I think because with the. I think the policy support, RBA support, credit guarantee or whatever the growth, we are not discontinuing that business. The business degrew in the first quarter but I think in the next three quarters it will have some for the full year.
Deepak Poddar
Okay, okay, I got it. And now that RBI has allowed us to open new branches. So any branch expansion plan we have.
Kapish Jain
Laid out for us as of now the existing branches still are below their full capacity. So first we want to focus on the existing branches in this quarter. And once we see that they are stable and they in terms of the profitability, they get back to the level we expect them to be at that time. We can take a next year.
Deepak Poddar
Sure. And just one last final thing now that I mean this. We had this quarter some impact of guardrail also. I mean that got implemented from April and I thought for now on an absolute basis one should look at quarter on quarter provisioning declining. Is that a trend that one should look at going forward?
Kapish Jain
Yes, actually you know there are some unexpected things that keep happening but even. But what we have seen is the ups and downs. So now that things are getting stabilized in microfinance which is one big problem area and also in msme, I think the quarter decline I expect second half to be much better because signally just takes off the interest rate trend seems to be down. The benefit will come after some time, maybe after a few months. So hopefully second half thinking much better. But yes, quarter over quarter we should see declining trend.
Deepak Poddar
Fair enough. That could give. That gives a good sense. That’s it from my side all the way back. Thank you so much.
Kapish Jain
Thank you.
operator
Thank you. The next question is from the line of Cl VI key from NICO Asset Management. Please go ahead.
Unidentified Participant
Questions on your asset quality. So for the exposure to the. The beneficiary. Hold on. What do you call it? The Andra B LC in terms of the npr, how will you guys manage it? And also will you guys get any kind of any resolution with say the government?
Kapish Jain
Yeah. Hi Theo. So I’ll just. This beneficiary led construction. First of all, just to give you a perspective, the total AUM is about 500 crores. At a loan book level it’s about 400 crores. And so it’s a very small amount in terms of the total AUM at a HFC level also or at the level of the group as well. So it’s a very mild exposure. And we are only if you will see we have already been able to have about 20% of our customers prepaid the loan and already whatever hit we had to take. And 65% of the customers are below 30 DPD, so they are anyways paying and 19% have already gone to the MTA.
So we’ve already taken the majority of the hit what we had to. The rest of the people are paying. This was a seven year product. Over two years have already gone by. So I don’t see any a major impact of this. And now we in on the ground also we see things getting back on track in terms of the overall development of these projects. So we should see things better from here.
Unidentified Participant
Okay, then there are two segments that you guys discontinue, right? So there’s no disbursement for this quarter. So in terms of the exposure that’s existing, do we expect to see this exposure eventually becoming npl?
Kapish Jain
No, not so our connection, you know, infrastructure and apartments remain. So you know, I don’t think that just because we are discontinued so there will be more MPLs. But you know, these are the. Okay, I’ll tell you what is the. Because we did a lot of analysis on this. So on the face of it they have a higher yield, they should take care of the risk. But they also have higher operating costs and then they basically are hugely intensive and they are very volatile because these are the bottom of the pyramid where they are vulnerable and not resilient.
So the total portfolio of our overall broader loan portfolio is about 5%. What we recently and what we have done is that actually we have increased our force for collection in this. So we have a care repeated team which is focused on collection of these discontinued businesses. So the yield trend will not change because of discontinuity. But already we have threats that we deal with and we will recover material that we can.
Unidentified Participant
Okay, one more question on my end if you don’t mind. So in terms of the NPL currently. At 2.3%, why are we at expecting for the next two to three quarters?
Kapish Jain
You know, we want to keep GNP at less than 2% on the whole. So our target will be to get there, you know, in the last 2, 3/4 may be larger than that, but otherwise we want to get back to, you know, the FY23 level. And then there have been in different regions from like golden was last year. But our target is to bring it below 2% by the end of the year.
operator
Thank you. Okay, thank you. Thank you. The next question is from the line of Suraj Das from Sundaram Mutual Fund. Please go Ahead.
Suraj Das
Yes. Yeah. I think most of the question have been answered. Just one question in terms of this short term lab. I mean micro ticket lab is the problem any geography specific or you are seeing this pain across the states. I mean in respect to the geography. So that’s just one question from myself.
Kapish Jain
Yeah. So typically we’ve seen more stress in. Andhra Pradesh as one bigger piece which we saw and the second was the upcountry Maharashtra but we had larger exposure in Andhra Pradesh. So AP has been a bit of a stressful. I would say top two states would be Andhra Pradesh and then Maharashtra outside Mumbai. Smaller cities of Maharashtra.
Suraj Das
Okay, sure. Thanks.
operator
Thank you. The next question is from the line of Navneet, who is an individual in Besta. Please go ahead.
Unidentified Participant
Hi sir, My question is. Sir, I believe you’ve surpassed your AUM which was there prior to the RBI embargo. So December 24th is the reference. December 23rd, the reference point I’m taking. However there are some. Your pre operating profit, pre provision operating profit is much lower. I believe your other income, you know before the embargo used to be in the range of 50 odd crores per quarter which is now in single digit crores. And your operating expenses have also gone up a bit. So if you can just talk us through this.
Kapish Jain
Yeah, you’re right. So there are two reasons for this. Two. Three reasons for this. As a portfolio in the initial first or two quarters we built at a slightly lower rate of interest. Two last year also we gave several increments as normal to the existing people. So not only we retain all the people, we also gave them normal salary increment as the existing increases in all the costs as you’re aware of. So every year for similar kind of profit, you’re aware of these sent up in higher volume. Secondly, in the cell loan business the significantly higher loan losses and provisions are coming from msme segment of the business which when the gold was embargo period we had grown that at a fairly good pace.
And that has come under stress across the industry. So that has contributed significantly to lower profits.
Unidentified Participant
So sir, if you can talk a little bit about your other income. It’s in single digit crores per quarter right now and it was averaging about 50, 57.
Kapish Jain
Okay. The other income is 30.
Unidentified Participant
Yeah. The consolidated. Consolidated. You’ve reported 6.5 crores of other income in this quarter. And it’s been ranging in this, you know the line below. Total revenue from operations, 6.5 crores in this quarter, 3.1 crores in the March quarter. 12 crores in the June quarter last year. This number used to be in the 50, 60 and maybe even 90 crores range prior to the embargo. So I was wondering what since you’ve already surpassed the aum, what is the difference?
Kapish Jain
No, so one is that the insurance companies which we cross sell used to give us marketing. Just give me a minute.
Unidentified Speaker
Yeah.
Kapish Jain
Hello? Yeah, hello, can you hear me?
operator
Yes, yes, yes sir, we can hear you.
Kapish Jain
Yeah, so I think the fee structure for the insurance company has been negotiated separately. So there are certain things which they used to support by way of marketing support. But now that comes as part of commission itself.
Unidentified Participant
Okay. So going forward this will be the new normal. We’ll earn lesser.
Kapish Jain
Other income debate on its own though sometimes when there are certain capital gains or certain IPO that come by then quality. But yeah, what you’re saying is right, that’s understood. But what will happen is that the fee and the commission income, what you see above will grow faster because you know that is 12.6 in a flat quarter of Q1. So a part of income will get reflected there. So you see the two C lines above the free and collection income from other commission, other 94.9.
Unidentified Participant
That’s right.
Kapish Jain
So you know the some part of this income will get reflected there.
Unidentified Participant
Understood. Okay. That’s all I want to understand.
Kapish Jain
That has gone up significant. I mean that has gone up in the Q1 or Q4.
Unidentified Participant
Understood. Okay. Right. Thank you so much, sir.
operator
Thank you. The next question is from the line of Abhishek from hsbc. Please go ahead.
Abhishek
Yeah, hi, can you hear me?
Kapish Jain
Yes.
Abhishek
Yeah, hi. So my first question is gold loans. Now we’ve surpassed the levels we were at, you know, when, when the ban came into effect from here. Would the growth normalize or would you still continue to see this kind of QOQ growth? How are you thinking about the business now and when does it normalize? If not this quarter, maybe next quarter or by year end.
Kapish Jain
I think growth should continue and actually we are just catching up. So if you look at our disbursements per month, then they are not exhibiting the highest IC at least in next 2, 3 quarters we should see the growth continuing.
Abhishek
Okay. Because I think this kind of growth, so disbursement requirement in gold will be much higher than the net book growth, which means that you’re borrowing more and it’s also pressurizing your cost cost of funds. So is it, I mean why continue to grow so fast?
Kapish Jain
Because no, see. Okay, I’ll just little correction. First of all I will be able to do co lending and direct assignment at a faster pace and therefore I don’t see that the cost of funds will start easing now hopefully because it’s given our beneficial volumes and we should be now the industry wide if you see that there has been a growth in this business, stronger growth in bank last year and MBS also so we are just trying to catch up at least partially if we grow it faster okay we maintain the growth momentum because of the market the even if there’s a slightly higher interest cost as we have seen last quarter was hypothetical I’ll come back to reality on this but that is more than made up by operating cost leverage advantage and again because our operating cost will not go up in the same proportion and plus the Yield here is 18% is a fairly good yield to take care of.
Then coming back to cost of fund last year we were I mean last last quarter we had to pay slightly higher cost of funds because in the beginning of the quarter equity was sized. It was only towards the end of the quarter that we saw the new monetary policy. RBI is stepping into ease in equity breaking down interest rate in Kara and that impact we are seeing in this quarter and we are negotiating with banks but on the cost of fund probably you will see still after the lag of a quarter but I think liquidity has eased and we don’t see any big difficulty in maintaining the pace of growth by borrowing or more than borrowing by DA in co lending.
Abhishek
Okay okay. The second question is actually to Venkatesh on MFI so can you give some sense on how much was the disbursement in 1Q and where do you see disbursements next quarter quarter after and similarly in terms of credit cost is there any write back or utilization of some contingency buffer or anything or is this like a clean credit cost and how do you see that for the next two three quarters? When do we start seeing a sharper improvement in that number?
Kapish Jain
Thank you Abhishek. Our disbursement in the first quarter would be around 1300 crores and our provisioning remain the same. What we it continues to be the same from what we were provisioning around in the quarter four.
Abhishek
And going forward how do you see disbursements from this quarter onwards?
Kapish Jain
I mean if you look at most of the collection things are almost settling down in barring I mean again if it’s been raining in some pockets so slight disturbances are there but we hopefully that dispersals will pick up post this settlement. Normally towards this Festival season we have the biggest jump and predominantly if you look at microfinance has been the. It’s always been the second half of the year game. Actually most of the dispersals happen now.
Abhishek
So okay. Next quarter, what is the based on the growing rate. Yeah, we are looking.
Kapish Jain
See we did around that 1300 odd. Crores in the first quarter. It should hover around that 1800 to 2000 crores in the second quarter and it should pick up from there onwards.
Abhishek
Okay, great. And what about credit cost? So how do you see that in 2Q and then 3Q? What kind of improvement do you also when do you expect it to normalize?
Kapish Jain
See, I mean we have always given that post Covid, the credit cost has slightly moved up. Credit cost for the full year will. Be around 6 to 7% kind of a thing.
Abhishek
Okay. For the full year, yeah. Okay, so I think this quarter you’re at 8% annualized. So then it should normalize pretty quickly from here.
Kapish Jain
Yeah.
Abhishek
Okay, third question is actually. Yeah, yeah, no thanks. Thanks, that’s clear. The third question is from your slide 20. So I think what you have given is the MSME secured loan breakup. If I look at Microlab in Home Finance and I look at the part in Samastar, both of them have very similar average ticket size and almost similar yields. But if you see the NPA, they are far apart. In Somerset, 3.5%. In Microlab home finance is 15%. So is there any fundamental difference in those two portfolios or customer profile difference or what makes the asset quality experience so different? And the book size is also similar, right? Roughly 20% each.
Yeah, that’s the question.
Kapish Jain
So I think Abhishek, it’s captive customers and the Micro Lab is cross sell. Yes. So actually the Micro Lab has been approaching new customers or the customers who have track record in the microfinance business. Whereas. Yeah, so Micro Lab is, I mean Samasta is a cross sell customer where the customer already has a portfolio and they get additional load. And when we look at Micro Lab then these are new customers. These are basically customers who based on their track record, based on their big capping. So what has happened is that where a customer has already a microfinance loan and a good track record and our connection people, our salesforce are already in touch with them then I mean it’s a smaller portfolio but that’s where we have done better.
Abhishek
Okay, but both are secured, right? Both are secured.
Kapish Jain
So. Okay. Yeah, these are secured but you know, these are small value properties. So repurchasing them Selling them is a deadline can happen and ultimately they reduce the losses. But if they’re impacted by the cash flows then the. Obviously it’s recognized as npa but they are all secured by residential or commercial property.
Abhishek
Got it. Okay. Okay. Thank you. Thank you. Those are my questions and all the best.
operator
Thank you. The next question is from the line of C.L. vicky from Nico Asset Management. Please go ahead.
Unidentified Participant
Can I clarify on credit cost, I can’t hear clearly. What is the expectation for full year?
Kapish Jain
As we, I think we’ve been discussing that the credit cost will moderate from the first quarter level. So I think the full year we were expecting 2.5, 2.7 but might end up at around 3% at this point. That’s probably the best estimate at this point in time.
operator
Thank you. Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good afternoon sir. Thank you for taking the question. Just two questions. I don’t know if they have been covered earlier. I joined a little late. This micro lab portfolio that we have in our housing finance subsidiary, we should be able to leverage sarkc, right? For this micro lab portfolio again, I understand.
Kapish Jain
Yes, very much. Yeah. So Moishe, I was trying to understand.
Abhijit Tibrewal
Is if we can leverage RFC for this micro lab portfolio and also I mean is the quality of collateral and the size of the loan good enough to really leverage surface C and try for recoveries? That was my first question. The second question is to manager. So just trying to understand what happened in gold loans in this quarter. Very, very strong growth. So compliments to you for that. But what I’m trying to understand is usually the golden growth that one usually targets in a year has come in the first quarter itself. And we are seeing very, very strong growth in gold loans in this quarter across the industry.
So in your view what really happened in this quarter which led to such a high sporting gold loans?
Nirmal Jain
So if you notice microfinance, NBFC microfinance loan portfolio has gone down from something like 4,30,000 crores to 350,000 crores. And also there several days of strip in the unsecured portfolio. So many of these customers, MSME Enterprises, probably they would have been earlier reluctant to unite their gold now that they have more source of funding so they might be taking gold loans. That is 1, 2 gold prices have been firmed. So basically the loanable value also has gone up against the gold. So that is the second reason that I would believe. And thirdly, even the economic momentum has been improving the growth momentum in the macroeconomic environment, the human demand.
So there’s slight improvements. I think we’re seeing good traction. We have reason for the government growth to be strong across the industry.
Kapish Jain
Abhijit, answering you the question of the. Collateral and the surface fee execution. These are collaterals very much Surface fee is executable and which we have started doing it expeditiously now. So in that way they are pretty secure and we have given it against the residential house Lori and so every. Business which we have discontinued. So the AEM is also dropping quarter on quarter. So we should be able to handle this in the subsequent quarter.
Abhijit Tibrewal
Thank you. That’s also my side and I wish you.
Kapish Jain
Thank you.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management. Hello. Yes, I saw. Okay. Okay. So the next question is from the line of Sudharshan from Prosperity Wealth Management. Please go ahead.
Sudharsan
Thank you for taking the question. So my question is on the untitude. So in previous call you mentioned those come under insurance scheme. So is there any possibility of reversal in coming quarters?
Kapish Jain
Yeah. So in the insurance scheme I think of October 1st that started getting covered. So this is a prior notes which have become bad. 1, 2. Yes, there is a recovery possible and some recovery will happen. But you know the vehicles our main interest, you don’t get the first 3% of loss and you get 75%. So basically you get 75% minus 3% of the overall portfolio. That is how. So you get only part reimbursement. But yes, for the loans that are covered that will happen. But as I said that I think our portfolio started getting covered about six, nine months ago.
Since the loans perhaps it may not be under cover.
Sudharsan
Okay, okay, understood. And on your gold portfolio you mentioned your Q1 growth momentum with continue for upcoming quarters. So how long this is going to continue like you have reached, I think 47 percentage. Is it gonna continue till your peak 60 or is it like.
Kapish Jain
As of now it looks good to continue. I mean as I said there are several factors working for it. So maybe next one or two quarters. Two quarters. We see momentum continuing and very difficult to forecast.
Sudharsan
Okay, thank you.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to management for the closing comments.
Kapish Jain
Thank you very much ladies and gentlemen for your time on the call today. With this we come to the end of our quarter one earnings call. However, for any further question you can always reach out to our investor relations team and we’ll be happy to assist. In providing any further clarification on our reserve numbers. Thank you very much.
operator
Thank you for joining us. And you may now disconnect your lines.