Jammu & Kashmir Bank Limited (NSE: J&KBANK) Q1 2026 Earnings Call dated Jul. 28, 2025
Corporate Participants:
Unidentified Speaker
Amitava Chatterjee — Managing Director & CEO
Analysts:
Unidentified Participant
Saket Kapoor — Analyst
Vansh Solanki — Analyst
Sneha Ganatra — Analyst
Sonal Minhas — Analyst
Chinmay Nema — Analyst
Kashyap Javeri — Analyst
Sonaal Singh Kohli — Analyst
Arjun Bhatia — Analyst
Presentation:
operator
SA. Sadies and gentlemen, good afternoon and. Welcome to the Q1 2026 earnings conference call of JK LTD. 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. We have with us from the bank Mr. Amitava Chatterjee Managing Director and Chief Executive Officer along with his management team. I now hand the CONFERENCE over to Mr. Chatterjee. Thank you.
And over to you sir.
Amitava Chatterjee — Managing Director & CEO
Thank you Shruti. Very good afternoon to all of you and a warm welcome to all the participants to join JK Bank June 2025 earnings call. Before starting with the results let me introduce my fellow colleagues from the bank’s senior management who are accompanying me on this call. I have with me the executive director Mr. Sudhir Gupta. Mr. Narjay Gupta, the retail credit and liability head. Mr. Rakesh Kaul, the treasury head, Mr. Rajesh Mallathipu, the Impaired Assets Portfolio Management Head and our new Chief Financial Officer, Mr. Ketan Kumar Joshi. And the Chief Risk Officer, Mr. Altaf Hussain Kira.
We are pleased to share that we have begun the new financial year on a strong note delivering another consistent performance with net profit of 485 crores up by 16.7%. Yui. This is the highest ever net profit reported by the bank for the first quarter of a financial year. The fact that this performance comes in the wake of the new financial year having begun with challenging circumstances especially in our core territories due to the unfortunate and tragic Pahalgam terror incident followed by the heightened tensions and a brief conflict adds further weight to reflects the strength and resilience of our institution, the unwavering commitment of our teams and the continued trust and support of our stakeholders.
Also I would like to emphasize here that in Q1 our profitability has been impacted by a one time impairment provision of rupees eighty seven crores related to our investment in JK Grameen bank necessitated due to erosion of the equity value on account of amalgamation of JK Grameen bank and Ilakayat Dihati bank into a single RRB under our sponsorship in line with the directives issued by the Government of India for phase four of amalgamation of RRBs under the one state one RRB concept. This is a non recurring impact and non reflective of our underlying earnings momentum.
Excluding this this one time provision our net profit growth would be upwards of 30%. YoY historically first quarter has been considered lean for banks across the industry in terms of growth. The bank has registered an above average YoY growth of 12.1% in deposits while all scheduled commercial banks have registered a growth of only 10.1% during the same period as per latest data released by RBI and breaking the trend for of last four financial years we have witnessed a degrowth in deposits in the first quarter. We have been able to maintain deposits at March 2025 levels despite the stable overall deposit levels.
CASA ratio has witnessed a decline on a sequential basis from 47.01% to 45.71%. This reduction has been driven primarily by migration of CASA balances to term deposits for locking in of higher yields prior to the deposit interest rate cut which has just begun. This trend reflects in the growth patterns also with the term deposits having grown by 21.1% yoy against a growth of just 2.9% in Casa deposits during the same period. On the advances front, growth has been relatively muted at just 6.1% YoY with a degrowth of 2.7% in the first quarter though the bank has witnessed almost similar growth in both JKL and ROI at 5.3 and 6% YUI respectively.
However, in Q1 loan growth in JKL which contributes 70.6% of the total loan book of the bank has been 2% whereas the rest of India loan growth has witnessed a degrowth. Even at an industry level, credit growth has witnessed a slowdown with systemic credit growth declining to a three year low of below 9% in May 2025 and being recorded at 9.5% YoY as on June 27, 2025 with marginal growth of just 0.40% for Q1, while the overall muted loan growth is primarily attributed to the corporate loan book remaining almost flat on YOY basis which is reflective of the broad industry trend of deceleration in corporate lending due to rising competition from alternative fund sources such as bond and equity markets.
The degrowth in Q1 in our case can be additionally attributed to scheduled heavy repayments in certain corporate loans, selective participation to protect margins and some internal changes taking place which we had indicated in the last call. In terms of sectoral composition, personal finance and agriculture which contributes around 50% of our loan book have grown at 7.4% and 19.9% YoY respectively. Growth in personal finance in rest of India at 13.4% YoY constitutes to outpace Jammu and Kashmir Ladakh growth at 6.8% which is as per our strategy of enhancing our retail base in rest of India. Within personal loans, housing loans have been the best performer at bank level with YUI growth of 9.3% whereas in ROI both housing and car loans have witnessed an impressive double digit growth of around 13% and 20% respectively.
Lending to the manufacturing and financial market sectors has witnessed a YUI de growth with a growth in industrial activity in India slumping to a nine month low in May 2025 and banks remaining cautious in lending to NBFCs. The income statement has multiple positives with the operating income increasing by 9.7%, yoy, interest earned growing by 9.1% yui and other income by 29% yui despite taking a one time hit on account of an impairment provision referred to earlier. While operating expenditure for the quarter shows a 7.7% yuy jump, the major constituent employee expenditure which contributes around 70% of the total operating expenditure of the bank has reduced by more than 4% on the back of moderating retireal costs which we have talked about previously.
As had been forecasted especially for the first half of financial year 2026, NIMS have started contracting due to a faster transmission of rate cuts on the lending side and lagging relief on deposit costs. The transmission of rate cuts has resulted in the yield on advances reducing to 9.35% whereas cost of deposits seem to have peaked at 4.83% resultantly, bank has recorded a NIM of 3.72% for the quarter due to the one time impairment provisions. The annualized return on assets and return on equity have been recorded below our guided range at 1.17% and 14.60% respectively for the quarter.
However, on a normalized basis both matrices remain broadly in line with our expectations. Gross NPA has slightly increased to 3.5% though the increase is majorly on account of a degrowth in gross advances rather than any substantial increase in NPAs. Consequently, NNPA has also slightly increased to 0.82%. PCR continues to be healthy above 90% even though there has been some increase in gross slippages during the quarter. However, the gross slippages ratio is still under control at 1% annualized for the quarter. Also, the bank has been able to drastically reduce the overall sma numbers with SMA 0 to standard advances ratio declining from 15.91% to 9.01% sequentially which has been enabled by the realignment of repayment dates with cash flows of borrowers.
TRIR has been recorded at 15.98 with CET1 at 12.69%. This is without reckoning the the net profits for Q1 which has an incremental impact of 48bps. Though the bank has sufficient capital buffer at the moment, the board has also approved raising an equity and bonds to the tune of 1000 crores and 500 crores respectively as growth capital. Despite compression in NIMS, the measured growth, we remain confident in our strong fundamentals, strategic priorities and with our continued evolution are well positioned to deliver consistent performances going forward and creates long term value for our shareholders. We maintain the guidance for FY2526 given in our March 2025 call.
Barring a downward revision in NIM necessitated by the RBI surprise jumbo rate cut of 50bps in June 2025 its steepest move since emergency 75bps cut during COVID 19 in March 2020 market guidance for 2025-26 credit growth 12% deposit growth 10% CASA 48% NIM 3.65 to 3.70% ROA maintain around FY24.25 levels ROE 16 to 17% GNPA below 3% thank you very much for your time today. We appreciate your continued interest and support. We can start the questions now.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. We kindly ask that you limit your questions to two per person so that everyone gets opportunity. You can join back the queue for any follow up questions and if time permits we can take the additional questions later on. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Sanket Kapoor from Kapoor and company. Please go ahead.
Saket Kapoor
Namaskar sir and thank you for this opportunity. Am I audible sir?
Amitava Chatterjee
Yes, please go ahead.
Saket Kapoor
Yes sir. I’m saket anyway sorry yeah Point is firstly about the other income component. I think so sir. For the March quarter the other income got a boost because of some one of line item to 400 crore. This is now. The number is now to towards 250 crore and year on year there is a gain of increase of around 56. 57 crore. So what should be the key? What are the key component and what one look for this number on a on a recurring basis.
Amitava Chatterjee
You want the entire breakup of other income or you want what has changed?
Saket Kapoor
Firstly, what has changed and what should investors penciling in in terms of this other income line item for the year as a whole or a quarterly basis.
Amitava Chatterjee
See the other income. If I. If I give you the changes that have happened. There has been a decrease in commission exchange income by around 11 crores. But there has been an increase in trading and treasury income by almost 25 crores. There is a decrease in miscellaneous income by 169 crores that was on account of technically written off Recovery reduced by rupees 173 crores. Narsil release of provisions. And this is as far as Q1Q is concerned. And as for yoy the decrease in treasury income by 32 crores that is on account of 87 crores. That impairment that I spoke of increase in technically return of recovery by 45 crores.
Then there are some penal charges for SMA rupees. 12 crores. Increase in the minimum balance charges by around 9 crores. Increase in the income on card business by 7 crores and increase in SMS charges by 5 crores. This is the breakup. If you want a guidance for the future we intend to have a very strong focus on the other income part for the bank. We have been augmenting our treasury and we had a consultant, I mean identified for that and the report it has been now getting implemented. So we have a very robust mechanism to see that we increase our treasury and forex income going forward.
So this will be something which we’ll be looking forward to. There is also some reason I can say that some written off technically written off recovery that was expected this quarter which has not happened in due course it is going to happen. The other thing is why it looks a little bleak is because of the 87 crores impairment that has happened because of the amalgamation of our J.K. grameen bank with the Ilakaya Dehati bank as per the government guidelines so that the bank that we inherited as a sponsor was not doing well. And because of our investment in that amalgamated entity as per the revised guidelines of Reserve bank of India we had to provide for.
Otherwise if you look at. If you exclude that the profit in fact is on upwards of almost 30% yu y.
Saket Kapoor
Right. The second point which you and other banks every bank in this quarterly numbers have alluded to the fact of the compression on the NIM and also going ahead the new normal would be there for the NIMS going forward since the cost of funds is also going to reduce further with the 50 basis cut which is to be implemented. I Think over the coming three months. So taking these factors into account and the current state of economic activities in the country where we are hearing signs of stress, including the tax collection part, including the PMI index, all factors.
So what factors will rather keep the bank’s profitability up and going? The guidance which you gave are these factors not acting as a hindrance or infection to the numbers going ahead.
Amitava Chatterjee
In fact, I should thank you Saket for asking this question. There are certain specific things. There are certain specific things that I want to mention which is apart from the general trend that is there in the industry which is related to our bank. I’ll mention the things, you have to collate them and then you can understand what we are aiming at and what we intend to do. First of all, the position of JK bank is better than most of the other banks because it has a very high CASA ratio of above 45%. Now it is 45%.
It has come down a bit, but then it was not supported with the kind of IT we now have and the IT and technology. Through IT and technology we already have plans to improve our CASA and take it to up to 48%. We have already have a measured plan for this and we are already working on it. So this is one advantage Jammu and Kashmir bank has. So that is the reason why, you see, even if when you talk about compression of the margins, it is hardly noticeable as far as Jammu and Kashmir bank is concerned.
So that is the advantage we have and what we want to do and what we are planning to do to further improve it. Now, as far as the cost of deposits, now, the cost of deposits, we actually can leverage on the position of our CASA by improving our maturity profiles in the bank. This is a conscious decision we have taken. Had we not done that, our NIMS would have been slightly better than what it is today. But we know that even after that, even after taking this conscious decision, the NIMS will still be better than many of the other banks.
So we have that buffer available, that leverage available with us so that we can improve the maturity profile of the deposits that we have. So it is something we are correcting, we are improving the position so that going forward the impact on NIM will be much lower in our bank than any other bank. This is something you can say, a course correction that we have engaged in and we are very confident of being successful in this.
Saket Kapoor
Can I add one more question or join the queue for the follow up?
Amitava Chatterjee
Now that you have mentioned, you can ask the question.
Saket Kapoor
Thank you, sir. Can you give us Some color on the big pipeline especially in terms of the corporate book building up going ahead.
Amitava Chatterjee
See corporate, the pipeline is close to around 5 to 6000 crores. See to be very honest, we are focusing more on the fundamental retail growth in our bank so that it is sustainable. And you know that our corporate, the clients, the generally the clients that we look at, they are very tough on the margins. The demand rates which sometimes banks like us, we are not able to provide. So going forward our base efforts would be to increase our retail portfolio further. Not only in Jammu and Kashmir but with select products in the rest of India.
So that we can have a strong baseline support in the advances. And wherever and whenever we find good opportunities, we will definitely work on the corporate side also.
Saket Kapoor
I’ll join the queue sir. I have couple of them as per the follow up. But I join and listen first. Thank you sir.
Amitava Chatterjee
Thank you Saket.
operator
Thank you Mr. Saket. Sir, the next question is from the line of one Solanki from RSPN Ventures. Please go ahead.
Vansh Solanki
Hi, good day management. I have actually two questions. One is about technical recoveries. So you have just mentioned in your above speech that there was some technical Recovery expected in Q1 but not happened. So is there any expectations about quarter two or a full year or 26 you can give about.
Amitava Chatterjee
See there are times when the technical recovery in technical written of accounts they don’t follow the timelines many a times. So something which we were expecting to happen in the first quarter hasn’t happened. So I believe that we also we still have around 250 odd crores recovery expected in technical return of accounts this year. I’m not very sure. I mean I expect them to come in the next quarter but I’m not very sure because at the last moment there are certain glitches which. But then they are all resolved accounts. I mean it’s not that the resolution is still pending.
They are all resolved accounts. So the repayments are going to come. It’s just a matter as to when. Since we hardly have any loan where we are the major lender or the prime lender or the sole lender, they are all consortium advances. So there are many factors which are, I mean which lead on to the actual the recovery when it happens. So we expect around 250 crores more to come this year.
Vansh Solanki
Okay. And the second question is about cost of fund. If I see that you know quarter one there almost 75 weeks decrease in our efforts and also in February there was 25 bit decrease. But if I see in a quarter one it is even three bids. But you have increased the cost of funds by three bids. So is there any reason that why it is not decreased for our bank?
Amitava Chatterjee
I think I mentioned about the course correction that we are having. See first of all the decrease in interest rates passes on to the borrowers much sooner than the effect happens on the bankers as far as the depositors are concerned. So there is a lag that is one thing. Second, I just now said that we are doing some course correction related to the residual maturities of our deposits. So for that reason we have consciously kept certain rates in deposits slightly higher than the market rates of longer maturities so that we can improve our maturity profile.
So that I think will be taken care of by this quarter. So that from next quarter it will be. I mean you will, you will witness a reduction in the cost of deposits as well.
Vansh Solanki
Thank you sir.
Amitava Chatterjee
Thank you.
operator
Thank you. A reminder to all participants. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. The next question is from the line of Sneha Ganatra from Star Union. Please go ahead.
Sneha Ganatra
Please go ahead sir. Just couple of questions on my side. First question is how much are we confident that we would be able to deliver a growth of a 12% considering the visa vis of the Q1 voted numbers? Second question is what are the key reasons? Any reason for the slippages? Any say any major slippages are we expecting either from the corporate or from the retail could guide us? And how do you see the overall your credit cost to be picking kicking up for the next upcoming quarters? Also and fourth question is how do you see the overall cost to income ratio? Any ballpark number you would like to share because considering the little bit fee income and remain muted and you have already given the clarity and how do you see the overall treasury income to be performed over a period of time?
Amitava Chatterjee
First of all, cost to income, this is a one time impact of. I said the amalgamation of the RRBs, the impairment provision that we needed to do that is the reason why it has gone up this quarter. So definitely if you would have listened to the the presentation, we have already said that the employee costs which constitute 70% of our expenditure is coming down. So we have been seriously working on the cost to income. In fact each vertical head has a role to ensure that in his vertical he earns maximum and spends less. That is the guidance given to all the vertical heads.
So cost to income ratio is something which is on the top of our agenda as far as NPAs are concerned. Yes, because of the geopolitical situation that prevailed in this geography. There has been some stress related to the tourism sector and the allied sectors connected with tourism in this area. Even then I do not see. And as I mentioned, the slippages have been less than 1% and the credit cost will remain low compared to other banks as it has been for this bank for the past several quarters. I do not. First of all, there is no major large corporate account which is under any kind of stress at the moment.
So that, I mean, fortunately that portion is no longer a threat to us. As far as credit growth is concerned. 12% is a bare minimum that I have mentioned. I will not be surprised if it is more than 12%. I said the plan is to grow the retail in such a way that retail itself can give us a growth of 10 to 12%. And then we have the opportunities that come our way in the corporate loan book segment which we will be ready to take up. So 12% is something I mentioned is the bare minimum that I expect as far as credit growth is concerned.
I hope I have answered all four questions to you.
Sneha Ganatra
Sir, one, you mentioned that 12% credit growth is bare minimum. We expect that this growth would be coming from within JNK or outside the jnk.
Amitava Chatterjee
See, I have already mentioned before and I am repeating it. My credit growth will come 50% from Jammu and Kashmir region and 50% from rest of India. This is for this financial year. Going forward, my portfolio, I want the portfolio to be 50 50. At the moment it is 70 30. I expect the portfolio to become 50 50. So obviously the growth from rest of India, target for target of growth from rest of India would be higher in the coming years.
Sneha Ganatra
And regarding you mentioned on the deposit side you’re focusing more and the tech related would be able to. You would be able to focus on this. So what are the tech related expenses you would like to incur that will also have an impact on the cost to income ratio? Anything you can just share on that front.
Amitava Chatterjee
On the technology front, we have already done most of the investments that were needed to take the bank to that level where it can compete with any other bank in the country. So there are very few things which requires major expenses. So the expenses on it will not have that impact. If I look at the return that we expect from those applications, that will be much more than the expenses that we make in it. So expenses in it will not be a threat to the cost to income ratio.
Sneha Ganatra
Okay, got it. Thank you.
Amitava Chatterjee
Thank you.
operator
Thank you. A reminder to all participants, anyone who wishes to ask a Question may press star and one on the touch tone telephone. I repeat, anyone who wishes to ask a question may press star and one on their touchtone telephone. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our next follow up question is from the line of Saket Kapoor from Kapoor and company. Please go ahead.
Saket Kapoor
Yeah, thank you sir. Over the last year there has been significant investment that has been planned by the corporate in the region of Jammu in particular. So in all these investment agreement and the investor need are, are they inclined to have our bank inclined to have any share on the lending program or they can arrange the funding for the projects from any any of the banks at competitive rate?
Amitava Chatterjee
Very. Again a very good question Saket. Thank you for that. See a lot of investments are happening in the Jammu region. You are right. Especially in the Kathwa belt. There are two aspects to it. One, I have made it very very clear to the UT government here that any clearances that they give for any project to be set up they should always give us an opportunity as Jammu and Kashmir bank to participate in all the projects that happen in any region in Jammu and Kashmir. So we would definitely want to be a part of all the viable projects that are started in this region.
That is as far as the intent is concerned. Now since most of these investments are happening and the promoters do not happen to be from within the state, they are mostly from outside the state. So they already have banking arrangements with their banks, where they are banking with in their core activities or outside Jammu and Kashmir. So when they come here, they already come here with their lines ready with the banks they are already banking with. So there I think I have been trying to get connected with the banks they are banking with. And I have got very good responses from most of the banks who have funded projects in Jammu and Kashmir.
And I think there is no issue, no problem for us to get share in all these projects. So I am very hopeful for getting shares in almost all the projects that happen in this region.
Saket Kapoor
When you had, when you alluded to the fact that you spoke to the banks who have lended to the project. So how will we get we’ll get the our PI when they have already tied up with their existing relationships with the other banks. I did not get the correlation, sir.
Amitava Chatterjee
I think you wouldn’t have asked this question if you had known my background. So I have been in this industry for long enough to understand how to get our share from a consortium. And there is hardly any bank in the country with their project finance teams who would not agree to give me a share. So I mean this is something I don’t think I need to boast about, but that is the truth.
Saket Kapoor
Okay. When we, when we look at it as the, as the enabler for every aspect in banking today, people are not visiting branches, they are, they are, they are bank. They are doing the transaction, sitting at their workplace with the Internet enabled services. So over the, over the last few years when you, I think so sir, you are at the helm for, for now sometime. What, what have been the major changes and major investments which you have brought about in the IT infrastructure? And, and how are the bank, how is our bank going to benefit from it, especially from.
In the recognition of stress in the NPA generation? How fast are we to get the alerts in the system that things may turn murkier for us for an account? So if you could just go from there.
Amitava Chatterjee
Okay. There are three aspects to this. One is the bank at the moment is fully equipped in two areas. One, it’s core banking which at the moment we have the latest version of the core banking solution that we are using. The second is the customer interface that the mobile app that we have is perhaps one of the best and most user friendly apps that I have seen at least till date. If you are specifically asking about what are the steps that have been taken? Well, to enlighten everybody here, we now have the entire loan journeys of the bank starting from retail, agri, corporate, msme, everything.
End to end digitization is complete. It’s been rolled out now and we have created. Now the structure has been changed so as to enable this end to end digital journeys. We are also planning to have BRE journeys going forward so that all our products can be delivered through this end to end loan journeys. And we are also in the process of introducing the customer relationship management and data analytics as well as AI into our IT systems so that I mean at least one part which you mentioned to identify the stress in the system and take corrective actions and get the alerts as quickly as possible so that we can work on them and prevent the slippages from happening.
So all in all, I think what I had mentioned earlier, also our vision, the entire bank’s vision at the moment is to take this bank to a position where it can be called an IT bank, IT LED bank.
Saket Kapoor
Can you explain the BRE journey? I am unable to decode this.
Amitava Chatterjee
BRE is the branch Business Rule engine. Business Rule engine is something which, where there is a minimum manual intervention. All the inputs in the loan journey is captured from either directly from the financials available from the borrower or from the systems. I mean the data that is available universally. So through that the system itself gives you an indication of how much loan can be given to that particular borrower. So this is something which is being used by most of the fintech companies as well as banks now. It reduces the manual intervention and. And I think the lack in capacity of handling loan proposals is being taken care of by the business rule engine.
Saket Kapoor
Two more points firstly on the card business. Yes ma’, am. I will join ma’.
operator
Am. Thank you. Sir, sorry to interrupt. We have more participants in the queue. The next question is from the line of Sonal from Prescient Capital. Please go ahead ma’. Am.
Sonal Minhas
Hi sir, this is. Am I audible?
operator
Yes sir, you’re audible.
Sonal Minhas
Hi sir. Thanks for giving me time. Sir, My first question is with regard to, let’s say one or two year old guidance for your gross npa. I see the credit card being low, I see the slippery is being low. But the opening amount is fairly significant. Just wanted to understand what are we doing? This number of around 3600 odd crores. What is the direction for this number?
Amitava Chatterjee
If you want to know what steps we have taken. Well, we have taken very significant steps where the loans of 25 lakhs and above will not remain with the branches anymore. We have created special impaired assets branches, we call them IAPM branches where all loans above 25 lakhs from the branches would be transferred. And these units will be specialized outfits to take care of loan recoveries and loan resolutions only. See the portfolio loan portfolio that we have now majorly constitutes of small value loans that need focused attention. Small value, I mean below 1 crore. So that is the reason we have created zone wise IAPM branches where they will be taken care of exclusively.
That branch will not do any other work other than loan recovery and loan resolution of impaired assets. So this is the process that we have devised. This is a new thing that we have started only this financial year and going forward I expect lot of recoveries happening in accounts which otherwise we could not focus on because of the other work pressures in the branches. So that is a step that has been taken. So I believe a lot of recovery in the existing accounts are going to happen this year. And second, I do not feel that the have a tendency to slip that much.
The slippages will be contained, recoveries will happen. So automatically the overall NPA position is bound to improve.
Sonal Minhas
Got it sir. In that light, just wanted to also understand what have we done to reduce the SMA0. Is there a fair bit of playoff tech there? SMA0, SMA1. I’m just trying to understand what steps have you taken to reduce the numbers there as well.
Amitava Chatterjee
In fact very happy to say that SMA zeros have come down by more than 50%. I mean which used to be very, very high for this bank. So it was not a very difficult task. The identification had been done. What we needed to do was to align the repayments, the EMI dates of the borrowers with their cash flows earlier it was not there. Traditionally the EMI dates were the last day of the month or the second last day of the month and essentially the cash flows, cash inflows used to happen on the first week of the month.
So we have now the repayments with the cash flows. So that has resulted in SMA SMA zeros at least. So most of the accounts were perineally sma. They would not default but they will remain SMA because the repayment won’t come within the time it was supposed to come. Now that the EMIs have been aligned with the cash inflows, that problem has been solved. That is one other than that the SMA2 and SMA1 that we have. The advantage now that we have is the technical nature of the SMAs are gone now whatever SMAs now we will be, I mean we will be looking at are the actual SMAs.
So now we have a better chance of focusing on the recovery of these handling of these SMAs. Initially the overlap was there and we were not able to actually identify the accounts which we needed to focus on. So both ways it has been advantageous for us.
Sonal Minhas
Got it sir. Wanted to ask you for our guidance around credit cost or slippage. So are you expected to see similar numbers for the next two, three years or this is something which is building a new book because of which the base is little.
Amitava Chatterjee
See it is very difficult to keep it at zero where it has been. I mean this bank because of the.
Sonal Minhas
1% maybe that’s a better number.
Amitava Chatterjee
It has been close to zero for quite some time. So 1% will be what I am looking at essentially because we have a very strong focus on the recoveries, number one. Number two, we still have some amount which can be recovered in the technical written of accounts and reversal of provisions can happen. So all these things collectively put together I think we will be fairly around 1% only. I don’t see the credit cost going beyond 1% in the near future.
Sonal Minhas
Got it sir. So I have a last question. I’m a little new to the call. Just wanted to understand what all type of loans do we categorize under the financial market set. What gets categorized under this set? Because the NPAs are also hired.
Amitava Chatterjee
It’s only loans to NBFCs. It’s only the loans to NBFCs.
Sonal Minhas
Okay sir and can you just highlight the nature of NBFCs there? Is it MFI? Is it HFC? Is it like.
Amitava Chatterjee
It’S a mix of all we avoid unsecured loan NBFCs. Other than that I think secured loan NBFCs are good enough who are well rated.
Sonal Minhas
Okay, so all these, this loan of 10,600 crores, this is largely secured.
Amitava Chatterjee
It’s only secured.
Sonal Minhas
Okay, so for secured then the NPAs are a little higher. That’s why I wanted to understand and.
Amitava Chatterjee
That the NP that you see, the NPA that you see is the legacy of ilfs which we are in the process of recovery.
Sonal Minhas
Understand? If you were just to consider last two to three years, what percentage of book would we have written off completely like would be a percentage of book that we’ve written off in fact in.
Amitava Chatterjee
The last two years. Previous year, before this we had not written off anything this year I think we, we wrote off around around nine, two years in the last two years I think 850 crores is the amount that we have written up.
Sonal Minhas
Got it. So roughly 1% less than 1% less than 1% and this is last two years combined.
Amitava Chatterjee
Yes.
Sonal Minhas
Got it sir. Thank you. I’ll call back in the future. Thank you.
operator
Thank you. We kindly ask that you limit your questions to two per person so that everyone gets an opportunity to join the question session. The next question is from the line of Chenmay Nema from Prescient Capital. Please go ahead.
Chinmay Nema
Hi sir, I just wanted to follow. Up on the previous question related to infrastructure. So could you talk about the how the product wise or loan category wise underwriting compare to the industry standard. So basically how much of it is scorecard based and automated? How much of it requires. Intervention? And if you could also talk about what are the areas of improvement that you see over there?
Amitava Chatterjee
I would like to say that apart from a little bit of agri advances agree loans and that is also not because that we do not want to digitize the entire journey but because the land records in this UT is still not digitized. So in the absence of that we are still not able to digitize the entire agri process agree loan process. Other than that all other loans whether it is personal finance, trade, agree financial market services infra manufacturing, everything, all the loan journeys we have now end to end digitized. So there will hardly be any manual intervention as far as the loan journeys are concerned.
Chinmay Nema
So I mean I just get that. But I mean I just wanted to understand that the legacy NPAs that we are carrying, that we are carrying on the book operationally. Just wanted to understand what has changed from the time when those loans were under.
Amitava Chatterjee
See, you would have noticed in the last, I should say eight to nine quarters the legacy NPAs have steadily come down. I mean it used to be close to 12, 13, 14% sometime back and it has come down. I mean I’m talking about gross NPLs. It has come down to 3% now the recoveries that have happened and if you also analyze the provision, write back that has happened during this period because of these recoveries, the aging provisions and all, you would realize that there has been a very strong focus of the bank on recovering the legacy loan NPI accounts.
It will continue though the low hanging fruits may not be there anymore. We would need more focused processes and we also come out with from time to time we come out with one time settlement schemes. So through that also even this year we had a fairly successful OTS scheme. Only that we had to extend the repayment period because of the event that happened in Palgam. Because of that some people had problems in repaying in time. The deadline was the 30th of June. That is the reason I said in the beginning itself some repayments in NPAs as well as CWOs would not happen before June because we had to extend the time period because of obvious difficulties people were facing.
So I would say going forward these are going to come down steadily. When I say that the NPA guidance is less than 3%. Primarily I look towards recovery in the legacy loan accounts containing the slippages happening from happening and also some robust recovery in two.
Chinmay Nema
Understood, sir. Got it. Thank you.
Amitava Chatterjee
Thank you.
operator
Thank you. The next question is from the line of Kashab Javeri from eiml. Please go ahead.
Kashyap Javeri
Just one bookkeeping question. What is the recovery number included in other.
Amitava Chatterjee
Okay, you want to understand what was the recovery amount for this quarter?
Kashyap Javeri
Yes.
Amitava Chatterjee
It is 74 crores.
Kashyap Javeri
We didn’t catch that number. What is included in the P L Other income the recovery from.
Amitava Chatterjee
That is 74 crores. 74 crores.
Kashyap Javeri
Sure. Thank you so much.
operator
Thank you. The next question is from the line of Sonal Singh Kohli from Bow Head. Please go ahead.
Sonaal Singh Kohli
Thank you for this opportunity and congratulations on good numbers. Sir. Broadly my question Is regarding your credit cost. When you talk about one person credit cost, are you talking generally speaking from a longer term perspective based on the industry experience, Are you speaking specifically based on what you’re seeing today from next 12 months perspective? Because both could mean very differently. One would mean that, you know, generally speaking at some point of time credit cost will go up 1% across cycles. While one would imply that, you know, like other banks we also started seeing like some of the banks would go to really bad NPL because of their mix.
We also expect, because of certain, you know, signs which we are seeing, we also expect the credit cost to become 1%. Thank you.
Amitava Chatterjee
Thank you. In fact, your question is very, very pertinent. In fact what I have answered is based on this bank specific, the experience that I have had over the past six months looking at what has happened in this bank for the last, I think 6, 7, 8. Yes, you are right. Industry trends might change it. But then I have a belief that the resilience of the UT of Jammu and Kashmir has been much more because of the adversaries that this UT has faced over a period of time. So the trend, the consistency that I expect from, from this UT regarding this particular aspect, I think I can safely agree with what has happened in the last few quarters.
But then as you say, it cannot be said as a general thing because the cycles do happen, the industry related issues do come up. In fact, even after what has happened in the last quarter and the kind of stress that I could see in the, in the book, it makes me furthermore confident that we’ll be able to keep it to the guidance level.
Sonaal Singh Kohli
What I was referring to was that 1% seems very high specifically speaking in the near term, you know. So my question wasn’t that would it be much higher than 1%? The question actually implied that 1% of the things will be high in the context of what you have seen in the bank versus other banks, you know, so far. So that’s what I’m definitely find of 1% credit.
Amitava Chatterjee
I said below 1%. In fact, I did not say 1%. I said it would be below 1%. The it will be below 1%. It, it could be around 50 to 15 to 20 bips this year. Okay, understood.
Sonaal Singh Kohli
That’s what I was wondering that what has happened in this.
Amitava Chatterjee
No, no, no, I didn’t say 1%. I said it will be below 1%.
Sonaal Singh Kohli
Right. Just 15, 20 basis points is what we expect this year. And sir, what kind of skippages do you see going ahead? Do you see the slippages in the near term increasing. By any chance based on what’s happened in Jammu and Kashmir compared to the quarter one by some.
Amitava Chatterjee
Some SMAs have. Have. Have creeped in. If you look at the SMA2 numbers, it has gone up. But then through the UTLBC we have proposed to the UT government to notify this area because of this disturbances created in the last quarter as a disturbed area. So that we can implement the master circular related to restructuring of Reserve bank of India. And the government has agreed and the note has already been put up. I think in a few days we’ll have the notification. So we will be able to rephrase or restructure these accounts. Of course we will be doing it very selectively.
It’s not for everybody. We will do it for selective accounts only. And I am very sure we will be able to keep these accounts standard. There is one more aspect to it. Since this was announced, this proposal for notification at the utlbc. There is a general tendency of people to wait and watch. And maybe if people, some people, even if they were in a position to repay, they have held it back. So that might have resulted in slight upward movement in the SMA2 and slight increase in the NPAs this quarter. But it is too small to be worried about at the moment.
That is what I can say.
Sonaal Singh Kohli
Sir. How is the tourism activity right now in Jammu and Kashmir? Has there seen any arrival?
Amitava Chatterjee
Three things actually I would mention. One is the introduction of the Bande Bharat Express. The second is the Amarnath Yatra. And the third is a very strong support of the governments by. By having events in Jammu and Kashmir regularly. Like. We have had several parliamentary committees happening. Where. I mean in one parliamentary committee there were 31 parliamentarians who had come and visited this. Visited Srinagar also. Very recently we had the Supreme Court justices conference here. So promoting the fund fact that people can freely and safely come to Srinagar has been one of the focus areas of the government.
Both the UT government as well as the central government. So I believe, although it is still muted. But I believe after the Amarnath Yatra is over, I believe the tourism will pick up again.
Sonaal Singh Kohli
Thank you so much sir for a detailed reply. Wishing you all the best with all the initiatives you’re taking.
operator
Thank you. The next question is from the line of Arjun from Bohad. Please go ahead.
Arjun Bhatia
Yeah, my questions have been answered. Thank you.
operator
Okay. Thank you sir. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Amit. To Mr. Amitwa Chatterjee for closing comments. Over to you, sir.
Amitava Chatterjee
Thank you very much, Shruti. And thank you all the participants for joining in today. For any further questions or queries, you can contact our investor relations guest. Thank you very much. Have a good day.
operator
On behalf of Jammu and Kashmir bank, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you. Thank you.