INDUSIND BANK LTD (NSE: INDUSINDBK) Q4 2026 Earnings Call dated Apr. 24, 2026
Corporate Participants:
Rajiv Anand — Managing Director and Chief Executive Officer
Viral Damania — Chief Financial Officer
Ganesh Sankaran — Head, Wholesale Banking Group
Analysts:
Rikin Shah — Analyst
Kunal Shah — Analyst
Abhishek Murarka — Analyst
Unidentified Participant
Piran Engineer — Analyst
Jai Mundhra — Analyst
Param Subramanian — Analyst
Jayant Kharote — Analyst
Pritesh Bumb — Analyst
Ankit Bihani — Analyst
Presentation:
Operator
Ladies and Gentlemen, good day and welcome to Anderson Bank Limited Q4FY26 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 touchstone phone. I now hand the conference over to Mr. Rajeev Anand, managing Director and CEO of Innocent Bank. Thank you and over to you Mr.
Anand.
Rajiv Anand — Managing Director and Chief Executive Officer
Thank you and good evening and thank you for joining us today. I’ll start with a quick view on the macro environment and then go into bank specific developments. High frequency indicators suggest that economic momentum remained healthy through February. That said, heightened uncertainty arising from the ongoing conflict in West Asia has tempered the near term outlook. Overall, India’s macroeconomic fundamentals are considerably stronger than during the previous crisis episodes and compare favorably with global peers providing greater resilience against external shocks.
Against this external backdrop, our focus this quarter was firmly on balance sheet resilience and asset quality repair. We will now move to the key highlights for Q4FY26 and then cover business specific progress in and financial performance. During the quarter we remained focused on growing our core retail segments while continuing to optimize the bulk portfolio. Retail deposit mobilization which remains a key priority, saw healthy traction with net addition of 6,800 crores during the quarter. All incremental deposits during the quarter were retail in nature.
As a result, the share of average retail deposits and as per LCR improved to 47.9 from 47.5 QoQ. On the asset side, we maintain a selective approach with sequential growth in vehicle finance, SME and other retail segments. We’re also gradually scaling up our micro loan disbursements as we consciously prioritize risk adjusted returns for the wholesale bank. The Average loan book declined 2% Q on Q. We saw sequential improvement in slippage as well as recoveries across our retail segments. As a result, net slippages were down 37% Q on Q resulting in low provisioning during the quarter.
Annualized slippage were 1.71% versus 2.65% Q&Q. The overall stress book continues to moderate with QQ declines in net npa, net security receipts and restructured book and these trends give us confidence that credit costs are past their peak subject to macro stability and seasonality. Financial outcome for Q4 our pre provision operating profit at 2295 crores remained steady. Q1Q provisions at 1482 crores were down 29% Q on Q driven by lower net slippages. As a result, profit after tax for the quarter was 595 crores versus 128 crores Q1Q capital adequacy remains healthy with CET1 ratio at 16.2%, CAR at 17.48% providing adequate headroom to support growth Leadership Team since the last earnings call we have onboarded our Head of Retail Banking, Head of Global Markets, Chief Risk Officer and Chief Information Officer.
Our leadership transition is now largely completed and the strengthened leadership team brings diverse experience and a strong execution mindset. The Board today has also approved the appointment of Jagdeep Malareddi and Ganesh Sankaran as whole time Executive Directors designate. The Board has also approved the appointment of Nilesh Vikamsi and Ravi Gareth Kipatti as Independent Directors as well. All these appointments are subject to regulatory and shareholder approval. This leadership team reinforces my confidence to execute our strategic priorities and build a resilient and future ready institution.
With this leadership in place, our focus now shifts fully from transition to execution. I will now take you through the highlights of individual businesses in our vehicle finance business maintained a healthy growth momentum from the previous quarter along with showing meaningful improvement in asset quality. Matrix vehicle finance loan book stood at 99,876 crores in growing 2% Q on Q with disbursements for the quarter at 12,600 crores. We saw sequential loan growth across most vehicle categories with our sustained focus on collections and recoveries.
Annualized gross and net slippages for the quarter where 1.94% and 1% respectively have been the lowest in the last several quarters. The full year net slippage was also down at 1.84% versus 2.33%. YoY asset quality improvement was seen across all vehicle categories on a Q on Q basis as well as on a YOY basis. Overall Vehicle finance, one of the key pillars of the bank has delivered another year of robust performance. While we are confident of the medium term growth and profitability outlook for this segment, we remain watchful in the near term given uncertainties around the implications of West Asia conflict.
We remain focused on our strategic objective of strengthening our leadership position across vehicle categories and driving market share gains in the coming years. I will now cover micro loans and other rural focused products in micro loans. Asset quality saw significant improvement in terms of collections from standard customers, fresh slippages and standard overdue books. This validates our belief in the reinforced underwriting models introduced last year. Micronode’s gross slippage reduced to 504 crores vs 1022 crores Q1Q.
The 31 to 90 days past due book declined to 0.9 vs 2.4 Q1Q. With the confidence on the asset quality we are now gradually scaling our disbursements. Disbursements for the quarter were at 5,400 crores up 52% Q on Q. As a result, the pace of contraction of the loan book moderated with sequential decline reduced to 5% q on q from elevated double digit levels over the past few quarters. The decline was largely driven by write offs during the current quarter. The overall micro loan book now stands at 16,782 crores with around 57% of the portfolio covered under the CGFMU credit guarantee including Q4 disbursements which are currently under process of being covered.
Overall, we remain focused on scaling the microloan portfolio in a calibrated manner, balancing risk discipline with our priority sector lending requirements. In parallel, we continue to build a diversified rural portfolio across other product segments with asset quality stabilizing. FY27 will be a year of calibrated growth rather than book contraction in micro loans. Our merchant loan book now stands at 8,042 crores growing 11% yoy spread across 570,000 merchant borrowers. Our affordable housing book at 2,839 crores grew 24% y o y while KCC and other rural loans at 4,385 crores grew 3% q1q.
Together these initiatives position our rural and priority sector portfolio for a more stable, diversified and sustainable growth. We’re scaling our consumer banking assets with focus on overall loan book diversification and a gradual rebalancing towards traditional secured retail products. Our home loan book maintained robust momentum with an outstanding of 6510 crores growing 45% Q1Q. Sorry 45% YOY and 6% Q1Q. We have started investing in multiple subscale secured products and they are showing encouraging trends.
Monthly gold loan disbursements have grown 3x in the last six months and the loan book has now crossed 1000 crores. We should see more momentum continuing as over 500 branches are now enabled for offering gold loans. In contrast, we remain deliberately cautious on the unsecured segments. Personal loan book grew a personal loan book at 10,358 crores degree 2% Q&Q and the credit card loan book at 9,751 crores degrew 5% Q on Q credit card spends for the quarter however, were at 15,259 crores. Consumer spends have grown 4% YoY despite the drop in cards in force due to conservative underwriting.
Overall consumer banking assets at 31,075 crores grew 8% y o y asset quality in this segment has shown improvement with annualized net slippages improved to 4.22% versus 5.42% Q1Q our efforts of increasing share of internal source customers show should support improvement in asset quality metrics over a period of time. SME Banking we are focused on strengthening our position in the SME segment which represents a large structurally attractive opportunity. Under the new leadership, we are upgrading processes, risk frameworks and operating structures to more effectively capture the growth opportunity, particularly from a relatively smaller base.
The loan book now stands at 44,347 crores, growing 1% Q on Q we have also undertaken a detailed assessment of the potential impact of the ongoing West Asia conflict on our SME and relevant wholesale portfolios. At this stage we do not see any material impact on asset quality, however, we continue to closely monitor developments and maintain active engagement with customers to manage risk. Wholesale Banking the quarter saw further refinement of the wholesale banking loan book with the portfolio now reflecting a more granular, balanced and risk calibrated franchise.
On an average, the mid market segment saw marginal sequential uptick while the continued rationalization of the large corporate portfolio led to 6% Q&Q decline in the overall average wholesale banking loan book. The proportion of A and above rated customers and the weighted average rating of the wholesale banking portfolio were at 83% and 2.53 respectively. On the fee side, our focus remains on efficient sources of income with transaction banking fees contributing 66% of the overall wholesale and SME fee incomes.
Asset quality in the wholesale portfolio remains healthy for FY26, gross and net slippages were at 0.29 and 0.24% respectively, remaining stable YOY liabilities. I will now turn to our liability franchise. To begin with, I’d like to welcome Jagdeep Manarade who will be taking over as the head of retail banking. Jagdeep brings over three decades of experience across retail banking, lending, credit operations and risk management. During the quarter we saw sequential recovery in both average and end of period deposits, reversing the declining trend seen over the past three quarters.
These efforts translated into a revival of retail deposit growth with net addition of 6800 crores. Retail deposit accretion was supported by robust new to bank CASA acquisition leading to improvement in the overall retail CASA mix. The share of average retail deposits as per LCR improved to 47.9% versus 46.6% YoY and 47% Q1Q, 47.5 Q&Q. Cost of deposits for the quarter were at 6.07 improving marginally by 2 basis points q on q. The share of CDs in total deposits and borrowings in total liabilities remains steady at 6.2 and 7.9% respectively.
We maintained a healthy liquidity position during the quarter with average LCR at 118%. We have initiated a revamp of operating processes especially in client facing journeys. These steps have started yielding results. The average TAT of account activation for assisted digital account opening journeys were reduced by 80% for savings account in the last six months. The average TAT for account activation of assisted digital account opening journeys on the current account side were reduced by 63% in the last six months.
The resultant impact is enhanced customer experience with improved NPS on assisted digital account opening journeys. We progressed on our ambition of unifying our distribution channels to leverage synergy. We now have over 300 vehicle branches co located or merged with branch banking and aim to take this towards 600 over the next six to nine months. These efforts are reflecting in increasing throughput of retail assets and liabilities along with cost synergies. Deposit source from vehicle customers has grown 35% during the year.
We believe AI and particularly Gen AI represents a structural shift for banking comparable in scale if not greater than and core banking transformations of the 2000s and the Internet and mobile banking wave in 2010. At Intercent, AI is a core strategic priority. We see meaningful potential across customer experience, employee productivity and engagement, credit risk management and financial crime prevention. To institutionalize this focus, we are investing in a dedicated AI center of Excellence to drive GENAI adoption at scale.
We have identified 10 high impact use cases across sales productivity, conversational banking, credit underwriting and collections. Some of these use cases are already live and delivering encouraging outcomes. For instance, our internal knowledge management application Indus Compass now has over 3,000 daily users processing more than 15,000 employee queries each day across policies and products. In parallel, our enterprise AI chat platform has seen strong traction with close to 3000 Daily Active Users and 70 interactions per user per day.
Equally important, we are investing in building a AI ready organization. Over 9,000 employees have already completed at least one AI training program and we expect to scale this significantly during the current financial year as part of our long term capability building agenda. I will now hand over to Viral to take you through the financial performance.
Viral Damania — Chief Financial Officer
Thanks Rajeev and good evening everyone. Similar to the last few quarters, my commentary will focus primarily on sequential trends. I will begin with the balance sheet first and then talk about the profit and loss account. The average advances dropped 2% sequentially from Q3 driven mainly by decline in wholesale banking advances and the micro loan book. Average deposit inched up 1% supported by healthy retail deposit mobilization. Average CD ratio was at 82% versus 84.4 quarter on quarter share of average borrowings in total liabilities that remained steady around 8%. Moving On to the P and L, net interest income for Q4 stood at 4371 crores. Net interest margin was at 3.39% compared to the normalized NIM of 3.35% quote unquote. The improvement was driven by a reduction in the cost of funds reflecting lower borrowing and deposit costs. Non interest income at 1714 crores remained broadly stable quarter on quarter. Our operating expenses of 3790 crores was stable quarter on quarter adjusted for the one off impact of 230 crores in previous quarter relating to the change in labor code.
So as a result the operating profit at 2,295 crores remained steady quarter on quarter despite the lower loan growth. EPOP to average loans ratio was at 2.93% versus 2.84% quarter on quarter. The provisions and contingencies figure for the quarter was at 1482 crores down 29% quarter on quarter driven by a reduction in net slippages. We had write off on loans amounting to 1868 crores during the quarter. In terms of asset quality, GNP and NNPA were at 3.43% and 1% respectively and the PCR maintained around 71%.
Slippages have improved across segments. Segment wise NPA movement details are available on slide 24 of our presentation. The SMA1 and SMA2 book at 17 basis points was stable quarter on quarter. Net security receipts that declined to 8 basis points versus 9 basis points quarter on quarter and restructured branches declined to 6 basis points versus 7 basis points quarter on quarter. The profit on tax for the quarter was at 594 crores versus 128 crores quarter on quarter on capital adequacy. We continue to have a healthy capital adequacy and liquidity position CET1 at 16.2% and CRR at 17.48 and LCR at 118%.
With that let me now hand over back to Rajiv for his closing comments.
Rajiv Anand — Managing Director and Chief Executive Officer
Thank you Viral to summarize, our performance this quarter reflects the progress we have made in strengthening the granularity of balance sheet, improving asset quality and driving a more stable retail led growth. With strong leadership, comfortable liquidity and capital adequacy, we believe the bank is well positioned to deliver sustainable value and over the medium to long term with near term growth remain. While near term growth remains calibrated, the trends on asset quality, retail deposits and operating leverage gives us confidence in progressively improving returns over the medium term.
With this we are now open for Q and A. Thank you and over to all of you.
Questions and Answers:
Operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask the question may press star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Everyone is requested to kindly limit the questions to a maximum of two per person. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ricken Shah from IIFL Capital.
Please go ahead.
Rikin Shah
Hi good evening and thanks for the opportunity. Had three questions. The first one is there was a reduction in the banking outlet footprint by about 230 sequentially. So what’s happening there? And while Rajiv you did mention that we should now think about growth picking up versus contraction in the past few quarters but overall for FY27 what kind of loan growth should one expect? So that’s the first one. The second question is if you could share the absolute quantum of AFS reserves as of March 26th and also clarify if there was any impact from RBI’s FX NOP rule and if the impact was there, was it reflected in the 4Q results already?
And the final question is on asset quality. So of course the slippages have come down but we clearly had more room to bring down the net NPA ratio further. But instead we have seen the provision coverage marginally going down sequentially. So when do you expect to reach your earlier guidance of 50 basis point of net NPA ratio? Is it going to be a lot more gradual or we can take some accelerated write offs and reach there which you were earlier guiding to. Thanks.
Rajiv Anand
So let me take the first. Let me see if I can remember the questions. First is on business correspondent those 200 odd outlets. It’s just a function of optimizing, rationalizing some of these centers. As a result of this we have basically sort of reduced 200 of those locations because they had become unviable as per the work that we have done. The second question. Yeah, credit growth. The second question was around growth. What I have been talking about over the last couple of quarters is that 2627 should see us grow broadly in line with market and that’s really what we are working towards and I think the foundations now are in place for us to be able to do that.
The other couple of questions I would request viral to.
Viral Damania
I didn’t cover the other two. The AFS reserve was negative 50 crores. I just want to highlight that our AFS book is not that large. It’s quite small in the context of the overall investments portfolio. So it’s a small number. Negative 50 crores on EFS itself. The second question you had was on the net npa. Now just want to highlight of the entire quantum. First of all you’re seeing a sequential decline, right? It’s gone down from 3300 to 3169 crores. Important to highlight 50%. More than 50% of that is from the vehicles business.
Less than 25% is now from the microfinance business. So in terms of residual risk, right. The cfd, the vehicles portfolio, you will not see that much of credit loss resulting from that net npa. It’s important to understand the constituents of that net NPA as we complete about the risk sitting there. But yes, it would be a gradual reduction. You’re not going to see a immediate write off there. We want to be consistent. We’ve been sharing that over the last few quarters that we would want to be consistent on our policies on site.
No. Plus that’s certainly not impacted us too much. The only thing we’ve seen is the effects volatility impacting our other assets.
Rajiv Anand
The impact of the RBI requirements were not material. I mean it was in tens of crores.
Operator
Thank you very much Rick and I’ll request you to come back for a follow up question. Next question is from the land of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah, thanks for taking questions. So post this guidance of almost system average credit growth in terms of roa. How should we look at the step up getting into FY27 and FY28? Looking at where do we see margin settling down? We saw some improvement on the core names and when we look at it in terms of fee income. So fee income particularly on the retail side was slightly weaker. I understand it’s because of the cards looking at the breakup of the proportion. But 1.2% fee, how should we see it scaling it up and maybe towards like 1.5 odd percent how much of time it would take so particularly on the roa led by whether it would be more led by names and fee or it would be more like a cyclical credit cost which can aid the ROI improvement.
Viral Damania
So let me answer that. So let’s take the current ROS base we are at 45 basis. So our journey to one we are looking at that coming in equal contribution both from the credit losses and from operating profit. So that’s the first split of how we get there within operating profits some improvement on nim, much more on fees and much more on expense. So that’s how I would bridge it because the expense base we’re looking at controlling that and as the asset size starts growing that’s where we will see some optimization.
So broadly that’s really how we are looking at the concept. Get back to the 1%.
Kunal Shah
Okay, so more it will be F income and what will actually drive that? Because this quarter it’s been like better growth in terms of disbursements across the products but still not reflecting in terms of the overall fee. So is it like once we resolve the card it gets to that level or there will be more contribution? If you look at the breakup on retail and wholesale also it appears to be pretty sticky out there. Yeah.
Rajiv Anand
So there is no your comment on fees is fair, but I think that really is the opportunity for us to go after multiple lines of fee businesses. Your point on cards is fair but also there’s been a lot of work that’s happening in terms of optimizing some of the fees that we are charging our customers. In some cases somewhat lower than industry levels, some increased decrease in locker fees for example. There is from a productivity perspective we can do more on sale of insurance and mutual funds and other such investment products.
There is work that is happening on the transaction banking side to be able to now start adding new lines of business like the capital markets piece. And finally we have a new head of sales in in treasury as well to be able to significantly increase franchise fees on the FX side as well. So there are multiple levers, you know, all are work in progress and slowly but steadily we should see better fee incomes as we go forward.
Operator
Thank you very much Kunal. I’ll request to come back. A request to all the participants. Kindly limit yourself to two questions per participant. Next question is from line of Abhishek from hsbc. Please go ahead.
Abhishek Murarka
Yeah, hi Rajiv and team, congratulations for the quarter and we can see the course correction happening. I think just in terms of your comment on loan growth, you said broadly in line with market and foundations are in place to achieve this. What is your internal assessment of market growth? And within this, how do you see the mix of wholesale retail SME moving? Because you’re rationalizing one part, not really growing some parts and then really growing some parts. So how do we see the overall mix changing?
That’s question number one. Question number two is in terms of your ROI target, I guess we are still sticking to the 1% exit in FY27, but I think the visibility of that is much, much better now. So how about a medium term aspirational target? Right? So where do you wish to eventually reach? If you can talk about that and a third one, I’ll just slip in on asset quality. Just in terms of mfi, how much more normalization is there to go in terms of slippage? Because on an absolute basis also it’s a relatively high number and disbursements wise they are still lower than Q1 26 and we are definitely capacitized to do much higher disbursements.
So how do we see the trend going forward? So those are the three questions. Thanks
Rajiv Anand
So Abhishek, thank you for your kind words. Question one was where do we see industry growth? I think industry growth for this year should be everything one needs to caveat with, subject to how the West Asian crisis plays out. But I think notwithstanding that caveat, I think we should see 13, 14% growth. I think broadly speaking we are give or take 60, 40 on retail to wholesale. One of the things I mentioned is that within wholesale we are diving up on the more granular businesses, mid corporate SME etc.
And taking some money out of the very large corporates. And so therefore while the overall numbers may remain more or less the same, but I think the proportionalities internally within that will change. I also mentioned the fact that on the retail side we have already started to see growth on the more traditional retail asset businesses, home loans, gold loans, etc. And I think that is something that we will continue to build on as we go forward. If you remember the conversation that we had, the conversation I had with all of you really was to be able to convert Indusind bank into a much more universal bank with a predictable profit franchise.
And that’s really what we are really working on at this point in time. And like you rightly said, I Think some of that work is slowly but steadily beginning to show up in the numbers as well.
Abhishek Murarka
Where could it settle at? Or the 14, 15% SME, where could it get to? I mean, just some broad contours would help.
Rajiv Anand
Sorry, on the SME side itself, is that what you’re saying?
Abhishek Murarka
Yeah, just a mix. So let’s say retail is at 50, SME 14 and 15 and wholesale 35. That’s the broad mix. Wholesale Remains where it is on an absolute basis is what I guess you try to indicate. And what…
Rajiv Anand
No, no, no, no. I had actually added, you know, some part of, I mean, SME is a bit complicated. Some of it is sitting in retail, some of it is sitting in wholesale. But broadly speaking, that we will take money away from the very large corporates and put that into, into the mid market and the SME franchise is the point that I was making. So therefore, while the Overall numbers of SME wholesale will remain around 50, but the composition within that will change somewhat.
Abhishek Murarka
Okay,
Operator
Thank you. Next question is from Nainav Chintan from Autonomous. Please go ahead.
Unidentified Participant
Hi, thank you for taking my questions. Can I just get a little bit of detail around kind of how, how much can large corporate shrink further? And a couple of detailed questions on kind of your average CASA balances growth in the quarter. How much was that you gave the average deposit growth as 1%. I’m also after the average CASA growth, if you can give that, and also any one offs to flag in the NII line this quarter or can we take this as a very clean NII line? And my final question is on, on provisions.
You know, you said that say half of the journey from 45bps to 1% ROA comes from provisions. You know, that kind of suggests that provisions will be, you know, below will be something like 90 basis points of assets. Is that a fair postcode for you? Thank you. Hello?
Rajiv Anand
Yeah, sorry, we were on mute.
Viral Damania
So let me first answer the point on average CASA growth. So quarter on quarter, we’ve not really grown CASA. It was 30.2 in Q3, 29.8 in Q4. But again, important to understand the constituents, Right. The retail book that’s really been growing, we’ve seen some degrowth on the wholesale book. So the mix is important to highlight on provisions. The other important thing to understand is also the growth in the loan book. Right. So far this year the denominator has been fairly static. In fact, it’s been coming down, slippages have improved and therefore the numerator is going to be fairly Controlled over the next three to four quarters, the denominator is really going to start going up and therefore we will see that showing up in the effective credit cost on loans and assets going down.
So that’s really the math on that. I Think your question.
Rajiv Anand
Can I ask Ganesh to take the question on large corporate degrowth?
Ganesh Sankaran
I think your question was how much we are anticipating large corporate further degrowth. I think I don’t want to put a number on how much we are expecting. I think the way to think about it is we will be dialing up our mid market, our commercial bank, large corporate. In the very top end of the large corporate which is particularly the conglomerates, we may see some degrowth. I think that is how we would like to look at it. I think it is early days but I think directionally we are guiding that we will look at better growth or higher growth or more than proportionate growth in the middle market.
Rajiv Anand
So to answer your question, we expect the overall book to grow.
Unidentified Participant
Okay. But that’s what large corporates have done, minus 25% year on year. You know, is there another 10% to go, 20% to go or smaller numbers on your margin?
Rajiv Anand
No, we are more or less done there as far as the degrowth. The point that you are making that we are more or less done. Understood.
Unidentified Participant
Okay. And Nim was keeping right? That was my final one. Nim was clean in the
Viral Damania
No. 1 timers in this quarter.
Unidentified Participant
Excellent. Thank you.
Operator
Thank you. Next question is from the line of perennial engineer from CLSA India. Please go ahead.
Piran Engineer
Yeah. Hi team. Congratulations on the quarter. Just going back to the credit cost question. So apart from mfi, what would be the driver of credit cost improvement from current levels? And MFI also probably should just be maybe 200, 300 crores more. Right.
Viral Damania
So again if you look at the slippages data for this quarter, the reduction is happening across our portfolios. It’s not only the micro finance which has dropped. We’ve seen a drop both in consumer as well as vehicle financing. And therefore the improvement will be across sectors, not just microfinance. You’re right about your point that the absolutes on microfinance is a much smaller number. The improvement really will come across the three large segments that I talked about. Microfin, consumer and vehicle finance.
Piran Engineer
But veerad in vehicles. Your net slippage ratio is like 1% if I heard you correctly in the opening comments.
Viral Damania
One is.
Piran Engineer
I mean historically what’s this number been like for Indusind Bank? I would expect 1% to be a pretty good number. And a lot of improvement seems unlikely. Just speaking as an analyst.
Viral Damania
Yeah, but again the denominator important to understand that the asset book continues growing, the slippages are dropping and that’s how you then have to translate that into freight cost. That’s the point I’m trying to make.
Rajiv Anand
At the moment the asset books are growth is relatively muted and so therefore to some degree all these percentages are a bit skewed. So I think two things are happening is the point that Veena is making. One is anyway slippages have reduced and add to that as growth begins to come, these numbers will start to look better.
Piran Engineer
Understood. Okay. Second was on just your deposit and funding cost sort of movement. Now your cost of deposits has fallen only 2% QoQ and cost of funds has fallen 12bps Q OQ.
Viral Damania
That’s again an effect of the balance sheet. Right. If you look at total balance sheet that’s grown and therefore that cost of funds average has dropped more than what you see on the cost of deposit life.
Piran Engineer
Okay, so you’re taking equity also in this in the denominator.
Viral Damania
That’s correct.
Piran Engineer
Got it. And just. Sorry, just on the deposit cost thing. 2 pip.qoq when our CASA was largely stable. Does this mean that our TD repricing is almost over now? Because Last quarter we reported a much better decline.
Viral Damania
I think that’s fair to Say that the repricing that journey is pretty much done.
Piran Engineer
It’s pretty much. Okay, so now got it. Good. Okay, fine. Yeah, that, that’s it from my end. I’ll take any follow ups later. Thank you and all the best.
Operator
Thank you. Next question is from the line of Jamundra from ICICI securities. Please go ahead.
Jai Mundhra
Yeah. Hi sir. Good evening sir. Questions? One question on your growth. So now we are aspiring for system level growth and we see that large corporate may remain in consolidation mode. That would mean that effectively retail plus SME may have to be more than like 17, 18% plus. At the same time you see macro which may have some implication on SME growth and maybe vehicle growth along with that. So far deposits while they have been stable retail deposit, but there’s not material growth there. So would you be comfortable in growing considering these constraint on SME vehicle along with dialing up deposit to achieve towards the systemic level growth?
That is the question. Thank you.
Rajiv Anand
Across the system we have a little under 2% market share. So therefore we do believe that this franchise is certainly worth more than the 1.7 odd percent market share that we have. And so therefore given the team that we have given the process systems controls that we are now putting in place. I do believe that we will be able to at least start to grow in the vicinity of where the market is to the point that you are making that if the macroeconomic environment as you envisaged begins to play out, please remember that market level growth will also come down.
And so therefore to that extent, I mean if that begins to play out, we will also calibrate growth as appropriate.
Jai Mundhra
And your liability side reset has already happened, right? So you are whatever you bulk deposit is more or less steady but there is no liability reset that is still pending. Right. So your, I mean that liability side reset is already over
Rajiv Anand
From a pricing perspective, yes. But I think from obviously proportionalities are something that you need to consider as well. Meaning that we have some way to go to catch up with peers in terms of the ratios of the current account relative, the overall ratio of retail plus SBC as compared to peers etc. And so therefore while there may not be necessarily a great deal from a repricing perspective, we do hope that as proportionalities improve towards more retail, we may be able to get some benefits on overall cost of deposits as we go forward.
Jai Mundhra
Thanks Rajiv, all the very best.
Operator
Thank you. Next question is from Subrahmanian from Envistech India. Please go ahead.
Param Subramanian
Good evening. Thanks for taking my question and congratulations on the improvement in profitability in the quarter again I just wanted to check on the 60 basis point guidance for net NPA. When do we plan to achieve that Again?
Viral Damania
I think, I think we mentioned that in the previous quarter as well that that’s a target. We don’t have a due date kind of saying okay, we will get there by this date. That’s the journey we want to get to. But yes, the journey it’s not going to happen like immediate next few quarters.
Param Subramanian
Okay, fair enough. Okay. Secondly on deposit growth, right. So this year we have not grown deposits because we’ve not been growing. The balance sheet retail deposits is also minus 2% and since we didn’t have to grow, you know, we took the opportunity to cut our rates. But going into next year do you think you’ll have to say these rates again to garner retail deposits? Because if you plan to grow mid teens, retail deposits are still growing at say minus 2%. Yoy
Rajiv Anand
We’ll see. I think if you look at our deposit rates compared to our larger peers, we are already paying is somewhat premium to the big three or four banks. So we’ll see how this plays out.
Param Subramanian
Radiv I wanted to understand what exactly changes for retail deposit growth to pick up.
Rajiv Anand
So there are multiple things, somewhat some internal, some external, meaning that we’ve made some organizational changes, structural changes, changes in incentive plans, changes in goal sheets, etc. For our branch banking folk. We have integrated the CFDP as I spoke about in my opening commentary, and there is a clear mandate from them to be able to grow their deposits. There is a mandate even to in our microfinance businesses to be able to get more than what we are getting today. As we grow our retail asset businesses as well, I do believe that will trigger a virtuous cycle of more cross sell, more engaged customers and therefore better balances.
We are also working on improving our digital capabilities, which is, I think it is fair to say that we have a little bit of way to go as compared to peers. And I do believe that in an environment where flow of funds is so quick and so efficient and so frictionless, having strong digital capabilities is an absolute imperative. So therefore we are improving our digital capabilities as well as we go forward. So there’s a whole bunch. I mean I also spoke about the fact that at the very basic level, current account opening, current and savings account opening itself, we have made a transformational shift in terms of customer experience.
We are also working on repositioning the brand which we will hopefully do sometime in July, August of next year. So there’s a whole bunch of things that are happening which gives me a great deal of confidence that both from an input and output perspective, we should be able to do much better going forward.
Param Subramanian
Got it. Thanks a lot. Just one last question. So there is a, you know, why sharp increase on other assets in the balance sheet. Is that ridf?
Viral Damania
And if so, if
Param Subramanian
You could. Yeah, it’s a combination.
Viral Damania
So you’re right. Partially, yes. 3000 crores was ridf. The remaining is really grossing up of the balance sheet with the FX volatility. So revaluation of FX contracts where we are hedged from a risk perspective. But you have two contracts which gross up the balance sheet. So that’s really explaining the OOL movement.
Param Subramanian
Okay, okay, got it. And if you could broadly talk about your psl, say how you are positioned because the MFI book is sharply down as of the end of the year.
Rajiv Anand
So we met all up. We have met all our PSL requirements including subcategories for the year 2526. Thank you. That was the question.
Param Subramanian
Sorry. Yeah, it’s not that you will have higher RIDF installments. Next is what I wanted to.
Viral Damania
So this year’s PSL we met so we’re not going to have more ridf. Having said so, the RIDF target for shortfall of the past year that’s not fully done yet. So we still have another 2,000 crore left in terms of the demand. It’s not come through yet but that’s. But as far as pay sal goes for this financial year, having met the targets, we will not have incrementally target on RADF coming in next year.
Param Subramanian
Got it. Thanks a lot. Thanks for answering all my questions on the best. Thank you.
Operator
Thank you. I request to all the participants, can you limit yourself to two questions for participants? Next question is from 9th of Jan Karote from Access Capital. Please go ahead.
Jayant Kharote
Thank you for the opportunity sir. First question is on the LCR if you can help us. What would be the release under the new norms for LCR for you and the follow up to that would be what is your internal comfort level, comfort level on LCR or is there a board approved floor of LCR which you would like to maintain?
Viral Damania
So LCR I think at 118, that’s the stable level. I don’t think we’re going to see much delta there. Very marginal there. The range we would operate between 115 to 120. That’s pretty much the range we’ll be working within. And that’s really our internal tracking. Any
Jayant Kharote
Release from the new norms?
Viral Damania
No, nothing significant.
Jayant Kharote
Okay. Second question is on the merchant loan book. We do see a very healthy uptick over there, almost 10% TOQ after almost four quarters. Is this strategic and would we see something similar over the next four quarters in this book?
Rajiv Anand
This is a book that we are very passionate about. I think it’s a business that that can be scaled quite significantly from here. We are investing in both people technology within this space and I think in this franchise we can do a lot more. So I don’t want to comment on whether the rate of growth will be the same but it is a business that we certainly want to grow not just over the next three to four quarters but over the medium term.
Jayant Kharote
Do you see this becoming a sizable part of the loan book over the next two to three years?
Rajiv Anand
Let me answer that question slightly differently. I mean I think today if you look at the our micro finance business, I mean it’s broadly speaking 75, 25 microfinance to BSS which is our Bharat Superstore business, the plan really is to convert this into a more rural business where microfinance then effectively becomes 50, not because it’s going to degrow but because we’re going to add new products within that franchise to be able to grow that franchise and to be able to serve the community there through multiple Micro Lab, for example is an example of another product that we will add there.
But fundamentally, I mean the rural business is something that we want to grow not just on the microfinance or BSS side but with more products.
Jayant Kharote
Thank you sir, if I could just squeeze one last question regarding the lcr. If we are, let’s say not able to match the loan growth with the retail deposit number, are we open to tapping into CD and higher cost or is it growth the primary aim over here?
Rajiv Anand
I think we, given the fact that we have not grown for a year, I think it becomes very clear to me and to my board that we need to start getting back into growth mode now. If the industry grows at 12 or 13% and we grow 11 or 12%, I will not be deeply disappointed. But I think fundamentally we need to get back into growth mode.
Jayant Kharote
That’s very clear. Thank you and all the best.
Operator
Thank you. Next question is from line of Prates. Pam from DAM Capital Advisors, please go ahead.
Pritesh Bumb
Good evening. So the risk weight assets was sharply down by about 300 basis points. Anything to read into that? And with 16.2% CET will we still looking to raise any capital.
Viral Damania
So on the RWA question, two factors playing there. One is the drop in the loan book, right that directly translates on credit RWAs. Second, we’ve also run optimization on the book. So things like quantum operating portfolio, the market risk calculation, etc. We’ve seen some uptick from that as well. So that’s really helping us maintain and lower the absolute rws.
Rajiv Anand
To the second question boss. We have accreted capital in this quarter and so therefore our capital position has become stronger than where it was the previous quarter. This level of capital is more than enough for us to be able to support growth at least over the next one year. So yes, there is no plan to raise capital anytime soon.
Pritesh Bumb
And lastly Rajiv, you mentioned about the macro environment, the West Asia crisis. Our portfolio generally very aligned to the macro environment. So any early assessment on from a book perspective where we are linked to this oil and gas value chain and asset quality related to vehicle finance and SME.
Rajiv Anand
So we have, as you can see this whole theater is evolving literally on a day to day basis. But we’ve already done two iterations where we looked at the entire portfolio across all our businesses. At this point in time we are not seeing any, any significant hot spots or you know, across the entire portfolio. But I do believe that as if this crisis continues and the physical ability to move oil and gas is constrained as it is today for a longer period of time, it is I think inevitable that maybe, I don’t know, two quarters from now we will see some impact on portfolios.
But like I said, I mean it’s a wait and watch mode at the moment.
Pritesh Bumb
Sure. Thank you. Thanks for answering those questions. All the best.
Operator
Thank you. Next question is from nanof. Ankit Biani from Nomora. Please go ahead.
Ankit Bihani
Yeah, thank you for taking my question. I just wanted to ask. So the employee cost has declined sequentially even if I exclude the new labor code impact. If you could highlight something on that. And the other question was on the deposit growth front, how do you see a system deposit growth panning from here on and could that be a constraint on loan growth going ahead? Because as of March end we are running at a 16% yy loan growth. So where do you see it settling in FY27? Thank you.
Viral Damania
I think comp is also, it’s a factor of some of the churning that we’ve seen through the course of the year. I don’t think it’s been a substantial movement quarter on quarter. It’s actually flattish. But yes, it’s been flat to lower. Yes. And you’re right, the one off was the labor law impact last quarter.
Rajiv Anand
So simple answer to your question is will deposit growth be a constraint to credit growth? Absolutely. I mean I think that in a sense is a basic tenet of banking that we will be able to grow only to the extent that we are able to raise deposits given all the various constraints around LCR, LDR, etc. Is concerned. But having said that, I think it does look like we will see slightly lower levels of credit growth in the current year. Especially given the macroeconomic environment that is currently playing out.
But like I said, it’s a wait and watch mode. Things are changing literally on a day to day basis.
Ankit Bihani
Thank you.
Operator
Thank you very much ladies and gentlemen. We will take that as the last question. I’ll now hand the conference over to Mr. Rajeev Anand for closing comments.
Rajiv Anand
Thank you for your interest in Indusin Bank. I appreciate the time that you have spent with us. Thank you once again.
Abhishek Murarka
Thank you very much
Operator
On behalf of Indusan Bank Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your line. Thank you.