Karnataka Bank Ltd (NSE: KTKBANK) Q1 2026 Earnings Call dated Aug. 13, 2025
Corporate Participants:
Unidentified Speaker
Raghavendra Srinivas Bhat — Managing Director & Chief Executive Officer
Abhishek Sankar Bagchi — Chief Financial Officer
Analysts:
Unidentified Participant
Priyank Chheda — Analyst
Unmesh Shah — Analyst
Mayank Gupta — Analyst
Yashvanth Thippeswamy — Analyst
Chirag Singhal — Analyst
Jayen Shah — Analyst
Rakesh Kumar — Analyst
Sarvesh Gupta — Analyst
Darshan Deora — Analyst
Manish Dhariwal — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Karnataka Bank Limited Q1FY26 Earnings Conference Forum. 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 the conference call, please signal non of data by pressing stardhan0 on the web phone phone. Please note that this conference is winter quarter. I now hand the conference over to the Managing Director and CEO Ms. Shreya Akavendra Esbhat from Karnataka bank who is on the line along with his top management team.
Thank you. And over to you sir.
Raghavendra Srinivas Bhat — Managing Director & Chief Executive Officer
Thank you. Good morning to all and a very very warm welcome to our earnings call for Q1 of FY26. Based on the feedback from last quarter’s earnings call, we have decided to shift the timings of our earnings calls. This was done in a bid to provide sufficient time for our investors to go through our financial results and investor presentation. Both of which have been uploaded post the conclusion of our board meeting yesterday. On a more personal note, after having spent more than 38 years across multiple divisions at Karnataka Bank, I have been given the opportunity of a second Unix to lead the bank in unlock potential that this organization has.
Hence, it gives me great pleasure to participate in this earnings call to convey our vision for the future of the bank and interacting with you all who are one of the most important stakeholders in the growth of this organization. As many of you would be aware, the first quarter of FY26 has been a period of significant transitions for the bank. We have tackled multiple challenges during the quarter. The learnings from which will serve as a foundation to enable the long term sustainable growth journey for the bank. Our mission and vision remain clear and unchanged as we continue to pursue with renewed vigor our commitment to disciplined growth, operational excellence and strategic execution in line with our long term objectives.
Let me present the business highlights. Aggregate business of the bank stood at 177,509 crores. Marginally up by 1.1% on a year on year basis as against Rs. 1.75,335 crore in June 2024. Profit after tax Q1FY26 PAT of Rs. 292.40 crore as against rupees 252.37 crore in Q4 of FY20 quarter on quarter increase of 15.8% There is a decreased impact from that of Rs. 433 crore in Q1FY25. However, it should be noted that in Q1FY20 last year the bank had received an interest income of Rs. 81.32 crores on tax refund and because of which it is not directly comparable.
Further in line with the bank’s commitment to increase pcr, the bank has continued making accelerated provisioning. Gross Advances stood at 74,267.02 crore as on 30 June 2025 reflecting a yoy de growth of 1.6% from Rs 75,455 crore as on 30 June 2024. Our overall strategy is to continue to focus on growing retail AGRI and MSNE where the growth was led by retail, housing and gold loan portfolio with a net book acquisition of Rs 2,327 crore. In the ramp segment the bank has been committed to reduce its exposure to low yielding large bar mid corporates that were opportunistically deployed for better yield than Treasury.
As conveyed during previous calls, we have started replacing IBPC book with higher yielding loans. Around final crores of IBPC advances have been replaced in Q1 in addition to the reduction in NBFP portfolio already initiated during the previous quarters. On a few of few basis, retail advances in Q1 FY26 have grown marginally while mid corporate and large corporate advances have degrown by 3% and 15% respectively. As we move forward, the strategy would be to accelerate retail growth through while also stabilizing our mid corporate and large corporate portfolio with good quality and better yielding loans. Aggregate deposits rupees 1.3242.17 crore as on June 2025 reflecting a yoy growth of 3.16% over June 2024 from rupees 1.79 point.
CASA deposits stand at 30.84% of aggregate deposits as against 30.51% in June 2024. It is to be noted that in absolute terms our CASA deposits have grown 4.28% YoY over June 2024. CASA acrosion remains a focal point for us and the bank has come up with the focused strategies to further improve CASA buildup During the year the bank has continued to focus on shifting high cost bulk deposits to granular and retail deposits of less than 3 crores. Bulk deposits as percentage of total deposits have come down from 6.6% as on 31st March 2025 to 5.4% as on 30th June 2025.
Similarly, bulk deposits as a percentage of term deposits have come down from 9.7% as on 31 March 2025 to 7.9% as on 30 June 2025. As the bank has excess liquidity and with the CRR cut in Q2 the bank by strategy is retaining from accepting costly bulk deposits. Majority are renewed at Alco card rates to rein in cost of deposits. To summarize, while overall aggregate deposit growth has been muted, we have seen significant movements from bulk deposits to granular deposits. Retail term deposits that is less than cakers have seen a significant jump from from 60,134 crore as of June 2025 to 65,786 crore as at the end of previous quarter.
Net year on year accretion is 5,652 crores. Our focused new product development and launches continue to be on track to fill in some remaining gaps in our product offerings. Launches planned in the coming quarters EMI Based Loan offering for Gold loans Pre approved Personal loans for salaried and self employed Surrogate based lending for retail and MSME Supply chain Finance Merchant Payment App Net Interest Income NII at Rupees 755.60 crore in Q1 of FY26 as against Rs 903.36 crore in Q1 FY25 that is a degrowth of 15.36% and Rupees 780.68 crore in Q4 of FY25 Q&Q D growth of 3.21% while Gross Interest income has remained flat during this period owing to a reduction in overall yields.
The the increased cost of funds and cost of deposits has put pressure on overall NII on a Y O wide basis. However, both cost of funds and cost of deposit have started showing a QOQ improvement on the back of reduction in CASA which we believe will improve even further in the coming quarters and and help keep interest expenses in check. In conjunction with the added focus on improving the loan book, we should see an improvement in nia during the second half of the year. Next interest margin stood at 2.82% for Q1 FY26 versus 3.54% in Q1 of FY25 and 2.98% in Q4 of FY25.
The fall in NIM is mainly on account of reduction of external loan benchmark rate driven by repo rate cut to 5.5% from 6.5% a year ago 70% of our book is EBLR based thus having an immediate impact on NIM levels. We are expecting a bounce back of advances supported through our focus on CO lending and direct assignment which should see us going back to the previous levels of around 3%. With the improved focus on higher yielding retail and direct to corporate advances combined with the expected easing in cost of funds, we expect NIM to further improve by 10 basis points by the end of the year.
Loan to yields As a result of recent cuts in repo rate owing to reduction in external benchmark rates partially offset by our changes in product mix. Yield on advance for Q1FY26 stood at 9.28% as compared to 9.52% in Q1 of FY25 and 9.43 in Q4 of FY25. As mentioned during the previous quarters, the bank remains committed to its strategy of replacing the bulky opportunistic advances such as IBCC and some NBFC advances with direct to corporate and retail advances. Considering the potential churn to higher yielding segments, we expect to see an improvement of 20 to 30 basis points in the overall portfolio during the second half of the year.
CD ratio for the quarter stood at 71.93% and as compared to 74.38% in March 2025 and 75.39% in June 2024. Gross NPA percentage as on 30th June 2025 stood at 3.46% as against 3.54% in June 2024 and 3.08% in March 2025. Net NPA percentage as on 30 June 2025 stood at 1.44% as against 1.66% in June 2024 and 1.31% in March 2025. While we acknowledge there has been a slight hit to the asset quality on Q basis, we want to assure you that this is a temporary aberration and that the bank has already initiated measures to control slippages and improve monitoring efficiency by intensifying regional collection centers.
While the gross NPA increased by Rs 169.01 crore during the quarter, the Bank’s intensified focus on collections, especially on the retail front, has resulted in a post quarter end recovery of approximately 90 crores from accounts that have slipped into NPA during the quarter. These recoveries will be reflected in the results of the next quarter and we should see improvement in the asset quality resuming again. Graph litigators at 0.53% in Q1FY26 as against 0.59% in Q1FY25 and 0.34% in Q4FY25 recovery for the quarter at Rupees 109.24 crore in Q1FY26 versus Rupees 133.12 crore in Q1FY25 and Rupees 173.91 crore in Q4FY25.
Standard restructured advances including related accounts Standard Restructured advanced to date 888.23 crore as on 30 June 2025 as compared to Rs. 994.77 crore as on 31 March 2025 and Rs 1395.25 crore as on 30 June 2024. This reflects a Q on Q improvement of 10.7% and YoY improvement of 36 point in line with the Bank’s commitment to reducing restructured advances. Provision coverage ratio including technical write offs at 81.11% in June 2025 compared to 81.42% in March 2025 and 77.97% in June 2024 excluding technical rate of PCR improved to 59.18% as compared to 58.18% in March 2025 in line with the Bank’s commitment to improving PCR.
Liquidity coverage ratio as on 30 June 2025 at 200.7% significantly improved from 162.5% as on 31 March 2025 and as against the statutory target of 100%. Cost efforts stood at 5.77% in Q1FY26 compared to 5.83% in Q4FY25 and 5.57% in Q1FY25. The sequential Q on Q improvement in cost of funds is expected to continue in the coming quarters as the benefit of the cut in repo rate materializers. This would be further supported by our continued endeavors to reduce the dependence on bulk deposits and replacing the same with retail deposits at card rate and focus on KRASA buildup credit costs at 0.16% for Q1FY26 as against 0.05% in Q4FY25 and 0.11% in Q1FY25.
Cost income for the quarter ended 30 June 2025 cost to income ratio stood at 58.05% showing considerable improvement as compared to Q4 and full year FY25 numbers of 68.98% and 60.11% respectively. While operating expenses have remained stable, we have seen a significant improvement on a Qoqq basis rupees 646.67 crore in Q1FY26 as compared to 833.89 crore in Q4FY25. This comes as a result of multiple cost rationalization and monitoring initiatives undertaken by the bank in a bid to renegotiate rents and vendor commercials and keep operating expenses under check. With a renewed focus on increasing NII and NIM through our advances and deposit strategies, the bank projects cost to income ratio to come down to around 55% in the coming quarters.
Return on Equity Q1FY26 Return on Equity to Debt 9.58% vs 8.56% in Q4 of FY25 Return on Assets Q1FY26 Return on Assets stood at 0.97% vs 0.81% in Q4FY25 we expect to end FY25 with an ROA between 1.1 to 1.2%. We expect improvement in ROA and ROE in the coming quarters in FY23 supported by accretion in the higher yielding ramp segment and movement from bulk to retail deposits leading to improvement in nia, increase in other income and consequent improvement in profit after tax. Crair stood at 20.46% as on 30 June 2025 in comparison to 19.85% as on 31 March 2025, both Tier 1 and Tier 2 put together.
This covers most of the key financial metrics of the bank. While this has been a mixed quarter in terms of financial performance, I would like to reiterate that we are well positioned and prepared to bounce back. The Bank’s fundamentals remain strong and our commitment to to transparency, customer service and ethical governance remains unwavering. These will continue to be the core values and foundation for the future growth of the organization. I would now like to hand over the call to the moderator for any questions and feedback from our callers that we would be glad to take.
Thank you.
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 the question on telephone. If you Wish to remove yourself from the question queue. You may press star and two participants are requested to use handpicks while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Priyank from Valen Capital. Please go ahead.
Priyank Chheda
Yeah. Hi team. Thank you for the opportunity and a very good performance in such a challenging time. So my question first is on of course, with the given leadership transition that we are witnessing and I’m glad to see the long term targets remaining intact. What are the near term key targets that bank looks to further change or implement for a betterment of good? Say that there may be some differences in terms of the earlier leadership versus the current leadership. What are the key operating KPIs that board would be judging going ahead or targeting the new company.
Raghavendra Srinivas Bhat
Now as far as growth is concerned, no doubt about it, we had some tough time. We have to face the tough time ahead also. But the key focused areas are there will not be any much change rather than focusing on the growth. Growth in advances is the prime objective of mine and my team. And growth in kata. These are the main two areas which we are focusing on. And since it is already August, I don’t want to change any action plans at this juncture. But wherever corrections are required in between, definitely we will review it and we will come back.
Priyank Chheda
Got it. My second question is on the cost of deposits. In the era where, you know, the large private banks have increase their minimum balances on the star. The large private banks, including public sector banks have cut down their deposit rates. What is stopping us to cut down few deposit rates given that we already have a liquidity surplus? The core P and L that I understand is the issue of the nim. Other than that, I think we have performed very well. How do we plan to address this? The falling NIM can be via deposit, can be via yield.
What would be the strategy for the bank?
Raghavendra Srinivas Bhat
In the last Alco meeting we had deliberated in length how to bring down the cost. We have to increase our ultimately spread and income. Ultimately that matters a lot. After much deliberations, we have reduced the rate of interest on deposits and we have planned for growth in kaza. These are the two important areas. Although of course no doubt monthly mandatory meeting we need to have in addition to that whenever corruption is required, depending upon the market situation, we want to focus that also. And cost controlling is one of our important aspects. I assure you that one is cost control.
Otherwise improvement in the CASA is the only option available to Us that we are focusing on. Secondly to increase the income. The priority as I already highlighted there is a degrowth in advances. We have to focus for the growth in ramp that is Retail, agriculture and msme. That is the focus area ultimately cost control as you rightly said. Definitely we are it is on our target.
Priyank Chheda
Sir, actually I was alluding for the cost of deposits in the retail term deposits. Given that we have such a high granular deposit base and when there is so much of surplus liquidity available in the wholesale market at the times when large banks have undertaken deposit rate cuts on the fixed deposits. What are the plans for Karnataka bank on that front? And given whatever the deposit, given the strategy, how should we look for NIMS quarter on quarter going ahead for rest of the year? Should we end the full year in the guided range of 3.3.5?
Raghavendra Srinivas Bhat
Yeah, that is what I mentioned earlier. In the last also we have reduced the rate of interest on some deposits. Particularly whatever bucket is required which is affecting the cost of deposits. Number one, number two, rate of interest on advances during the current year. We have already revised downward and focusing on the CASA base growth as you rightly mentioned, other banks are focusing on that. Even we are also targeting the same with regard to the cost control method. Reduction in rate of interest with regard to savings bank as well as term deposits in two areas we have already done and as I mentioned earlier we will future we will discuss in length in the alcohol and take a necessary corrective action wherever required.
One more thing I want to add here. Your concern is very much right. The cost reduction in the rate of interest already started showing in the Q1 of this current year. There is a reduction in the cost of deposits. Definitely we will move in that direction. Regarding excess liquidity as you said definitely it is available in the system. But focus area is to grow in quality advances that we are focusing. I hope I answered your question very well.
Priyank Chheda
Very aptly you have answered my last question Before I come back in the queue is on the asset quality front there are two books which historically the legacy book that bank is holding up. One is standard restructured portfolio of 8088 crores. And you have mentioned that 54% of the portfolio requires 30% upgrade. So when is that upgrade coming up? How should we look that book panning out for next nine months or for this year end. That is first part which is on the standard inspected book and the second part is on the technically written off book that we have close to around 3000 crores and that book has been written up to whatever income comes helps banks to reinvest in quarter growth in their soap.
What are the measures that bank is undertaking to recover the accounts where we have technically written off.
Raghavendra Srinivas Bhat
Yeah, our efforts are continuously on. With regard to the reduction in restructured advances which you must have seen in the presentation slide given to you. It is at 888 crores continuous reduction for the past several quarters. We are focusing on that. We are focusing on that in this quarter we are further plans to reduce it to 700 crores from 888 crores.
Priyank Chheda
Sorry, you mentioned 700 crores in the coming quarter itself From.
Raghavendra Srinivas Bhat
No, no. Annual annual from 880. There is a continuous reduction. If you see last six quarters continuously. I think it was around March figure you have.
Priyank Chheda
Yeah, I have that figure in the presentation. It’s coming down. Yeah.
Raghavendra Srinivas Bhat
It’s coming down. There is a improvement and by March end we have a definite target of bringing down to 700 crores. In between some are getting upgraded, some are getting closed also because through whatever mechanism of recovery is there we are, we are 700 crores is the target. We have kept whatever best is possible to recover further. We are at it.
Priyank Chheda
Perfect. And when it comes to the technically written off book.
Raghavendra Srinivas Bhat
Yeah, technically written off balance it was at 3,000 crore. And this quarter where the bank is passing through various changes if you are aware and I have taken over very recently and our efforts will be on that during the first quarter. If you see compared to the previous quarter of last year some figures may not seek well but we are at it with expected recovery from this technical return off during the current quarter that is Q2 we have focused around 38 to 40 crores that will happen in the this quarter only. And ultimately the efforts will be further on to bring it down and it will to the income.
Priyank Chheda
All right, thank you. I will come back in the queue. Thank you for answering all the questions. Looking forward for your. Thank you.
Raghavendra Srinivas Bhat
Thank you. Thank you.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Unmesh Shah from Hanuman Holdings Private Limited. Please go ahead.
Unmesh Shah
Yeah. Am I audible, sir?
Raghavendra Srinivas Bhat
Yeah. Good morning.
Unmesh Shah
Yeah, good morning. Thank you very much sir for giving me the opportunity and welcome to your new avatar And I’m sure that now the things will be smoothened out. We have undergone the turbulence for last quarter as all of us we know sir. The first quarter results are out and what I See that profit no doubt quarter to quarter has 15, 16% gone up to 92 crore. But year on year we find lot of fall from 400 crores to 290 crores. Almost 27% down. That is 1 lakh concern. And second thing, when I see the NCAS of course you have a very eminent board.
You have people, you are also very comfortable with the bank with so many years of experience. So you know I have nothing to say about it. But then NPAs are far high net NPA growth. NPA compared to the peers bank. If you see that is my one question. And second thing, if you see the advantage for this quarter slightly fallen compared to the earlier one. So what my question is how does the bank plan to increase the credit uptake? What is the major strategy or driver for the same? Are you raising by tire one, tire two or you know, capital raised by QIP or other means.
Can you just highlight this as a type of. Sir.
Raghavendra Srinivas Bhat
Yeah. With regard to reduction in net profit even we also have the same concern that how to address that. But sir, compared to Q1 of last year, one specific item of it refund around 80 crores was there during the Q1 of the last year. And of course these are all ultimately net profit has gone down. That is a different issue. But there is one such item, it was 80 crore refund of it is there. That is number one. Number two, with regard to the NPA you have a concern. Even we too also have a concern.
Even my predecessors also. And my priority is also to control the NPA recovery and controlling of trust if any. That is on the prime objective of the bank. And our team is working on it round the clock to see that wherever possible recovery is made. And if you see the NPA movement also recovery is also there. But with regard to the addition and NPA whatever we compare, our more efforts are still required which we will be definitely putting going forward. And after this first Q1 there is a major one account which has NPA has been upgraded.
That is big account of around 90 crores. Recovery has happened and efforts are still on to recover. We have the priorities depending upon the size securities available, the borrowers, all these plans are there meeting the borrowers by our recovery team. Recovery mechanism is very well in place that we will make all our efforts to recover.
Unmesh Shah
Sir, my static.
Raghavendra Srinivas Bhat
Sorry, one minute ratio looks bad. This is my personal view also. And in my capacity as a MD and CEO I have seen wherever book growth is happening, advancer, both deposits and advancers growth is coming when the cost Is controlled yield is very well planned. The all ratios will be good. If as you also mentioned since there is a degrowth in advances the all ratios will rather not comparable. Which here also it has happened. GNPA and NLPA of course depending upon various other factors of provisioning. And all GNPA is particularly when the advance size is good.
That is negative growth or degrowth compared to the mass figure. That is why percentage looks higher. We are aching. Sir.
Unmesh Shah
Can I ask a question? Can you hear me? Yeah. Any plan to carry it uplift till the recent time or still you have to strategize it or you know raising the fund like Tire 1 or Tire 2 or something like that to upload the credit.
Raghavendra Srinivas Bhat
We have good capital adequacy ratio. We do not have plans for raising additional capital right now. But as and when the book size increases are going forward that will be planned properly at the appropriate time. What was your one more question?
Unmesh Shah
Yeah, this is the question only the credit uptake and is there any strategies which you already addressed it? I think.
Raghavendra Srinivas Bhat
Yeah, I have already mentioned. But yes, the focus is on retail growth. Retail and msme. We want to have a definite strategy is there. We are coming out. As I told you, I have taken over charge recently and I have started initiating action wherever correct action is required. I am at it.
Unmesh Shah
Yes, thank you very much sir. And I think you addressed my all questions and we wish you best of luck. I’m in Mumbai sometime if you come we would like to have some one to one meeting also if possible in the busy schedule of yours. And I look forward more.
Raghavendra Srinivas Bhat
Surely I will be looking forward sir all the cooperation from you people also.
Unmesh Shah
Yeah, no, we look forward to any help in whatever way we can. We are with you and we look forward to work with you more. And best wishes for your new avatar which you have taken over recently. And best wishes to you and the bank and all about.
Raghavendra Srinivas Bhat
Thank you.
operator
Thank you. The next question is from the line of Mayank, an individual in Russia. Please go ahead.
Mayank Gupta
Congratulations on being managing director of the bank. As the new managing director going forward, what will be the key focus areas for the bank?
Raghavendra Srinivas Bhat
Thank you. Good morning Mayank. Thank you for your question. I have already highlighted rather than my main focus is growth quality growth particularly growth in liability side casa asset side retail. Retail and msm. These are the focus area to have one is on the liability side growth is to control cost. Other side is have better yield so that there is improvement in the margin.
Mayank Gupta
Okay, that’s it for today.
Raghavendra Srinivas Bhat
Thank you.
Mayank Gupta
Thank you.
operator
Thank you the next question is from the line of Jashwant, an individual investor. Please go ahead.
Yashvanth Thippeswamy
Hi. Good morning. Raghavindrabad. Welcome back. Good morning.
Raghavendra Srinivas Bhat
Good morning. Thank you.
Yashvanth Thippeswamy
Yeah, I mean I understand that you worked with this bank for quite some time and now you understand the culture. I mean I think it would be nice. I mean I would not rather question what has happened because you’re not the know you are not directly responsible for the last year. I mean sorry, last quarter’s performance. Rather from the presentation that has been shared. So I have a couple of questions. So one is with respect to the asset quality. So there I see that there is an addition of 400 crores. And I just wanted to know which are the sector or I mean how many now? I mean what are the number of accounts that contributed this addition and also have you provided for this?
Raghavendra Srinivas Bhat
Yeah, that’s the main addition has come in. Msme. MSME Housing and agriculture. These are the three areas based. Our team is already acting on it. Some started upgrading. Also improvement is happening there. And I am quite confident whatever additions are there we are attached for the recovery of that upgradation. Is upgradation and downgradation very strictly happening through the system when it is slipped for whatever that last moment happens because of the liquidity problem and also happening and all these NPS have been adequately. Provision has been made that you are aware which is we have no choice.
You have to do that. It is a regulatory requirement. We are doing that and no big secret advances are there and I am telling you it is in the pool. It is happening and we are at it for the recording.
Yashvanth Thippeswamy
Okay. And regarding the retail advances which we are going to focus on. I mean the RAM sector such like the segments. So I see that there is a run rate of around 500 crores. And I mean can we see any improvement in the future? Because based on the calculations that I’ve done as per the branch per month we are able to do around 1.8 crore with 950 branches. So do you see that there could be an improvement on this side going forward?
Raghavendra Srinivas Bhat
Yeah, definitely focus is as I mentioned in my presentation. Definitely our focus area is Ram. As I said you while growing also a lot of things we need to have taken to account the precautions of the quality of the advances with regard to the sanction and follow up also this right input have been given. We have got around 950 plus branches per branch. Also if it 954 branches across India. Even if I select around 700800 branches which are very potential for advances at least per branch. If I take into account 2 crores to 0.5 crores depending upon the potentiality and the geographical location we can go on.
View full support from the head office and the country officers. Definitely it is possible to grow. And one thing I have seen after taking charge some corrective action is required in between. With regard to the processing and sanction also we are at a. Today we have got four retail loan processing centers. Immediately I have given the administrative clearance. Also we will be increasing it to three. Within a short span of three. One week or so. And within a month’s time we will extend it to all the regions. Therefore, I am quite optimistic. Definitely. With the support from the head office and the controlling office at various centers.
I am hopeful and optimistic to take it. As you rightly mentioned, I will be having certain geographical and identified branches. All branches may not be possible to have that kind of growth. But as a whole definitely we are achieved. Swami sir.
Yashvanth Thippeswamy
Okay, that’s a great news. And one last question from my side. So with respect to PR touching almost like more than 20%. And I mean I understand that we are moving. I mean from the large part advances to the more lucrative and then better way of deploying the advances at the ramp site. So are we also concentrating on the large corporate. I mean if there is anything, any opportunity, you know, passes by.
Raghavendra Srinivas Bhat
No. As you rightly said. See, we have to consider growth, quality, growth and mixture of all these. We have to balance and consciously taking into. On the one side, we consciously want to bring it down. On the other side, whenever the opportunity comes, taking into account the yield or the pricing wise. We have to be selective. Taking into account overall benefit to the bank. Concentration for the retail is the first priority. This balancing, you said the capital electricity ratio or all those things are there. That definitely it will help us to balance this growth. Unless the growth happens today, that car has improved compared to market also.
Why? Because there is a reduction in advances. 4,500 to 5,000 crores reduction is that mainly it has increased, improved because of that. Otherwise it is the only profit available that will accrue in the share. So question here is one. Is that we have to balance every segment without compromising on the price, pricing, quality, everything but focus is that definitely we have to balance and grow. This is the main objective.
Yashvanth Thippeswamy
Okay. Yeah. All the best. All the best, Mr. Raghu. And hope to see a nice and good result going forward. Thanks for answering all the questions.
Raghavendra Srinivas Bhat
Thank you very much. Thank you very much.
operator
Thank you. The Next question is from the line of Chirag Singhal from First Water Pine. Please go ahead.
Chirag Singhal
Hello. Hello. Hello everyone.
Raghavendra Srinivas Bhat
Yeah, good morning.
Chirag Singhal
Yeah, thanks for. Good morning. Thanks for taking my question. You. You know, in your earlier remarks you mentioned about the quality growth and focus on ram. When I look at the numbers, the RAM segment has grown at 5%. And the non RAM segment, whether it is corporate or MBHC and all that has regrown which has resulted into minus 1.6% degroote for the quarter on a year, on year basis. So I just want to understand that incrementally. Let’s say now we have this segment as the primary focus on a growth driver for this year. Like what is your guidance? How much this ramp segment will grow too? And accounting for the degrowth in other segments, what will be the overall advantage? Growth?
Raghavendra Srinivas Bhat
Yeah. The retail gross advances as you know it is furnished there. 75,000 is there. Out of that 41,376 crore figure is there. We want to. We want to take it at least to 51,000 crore by the end of 26 from 41,000. It is no doubt it is a very ambitious target. We have to do that to stabilize the growth in advances. We need to have that ram. As I mentioned earlier, it is a combination of agri, MSME and other retail. We have plans to take it from 41 to 51. Around 10,000 crores has to happen in retail.
And one more area, no doubt it is coming under that last year we had grown particularly under the gold loan segment around 4,000 crores. We have added in the gold loan portfolio only because of certain whatever constraint which we could not move on there. And now because RBA circular also has come. You also must be aware we have plans to grow and gold loan growth has already started which is more secured one and we want to grow there also. These are the main plans. When I said the growth in retail, these main areas housing MSME and some other areas, wherever the potential is there, we will be definitely planning to grow.
Chirag Singhal
Yeah. So when I look at the gross advantage breaker, the retail MSME agreement totals to 47,000 odd crore. So did you mean this number will increase by 10,000 crore during the current system?
Raghavendra Srinivas Bhat
We have internally planned. And any one is making good the figure which has already gone down. Added to that the recovery during the year that will be additional required. Third one is our growth strategy which we need to increase the size of our book. Taking into account we have AOP of 89,000 in the book approved plan. Whether it is 89,000 maybe looks little bit aggressive, but at least adding 7,000 to 8,000 crores of advances will definitely take us to a newer height. This is this much. I can definitely, I have no plans to revise it down while making full efforts to achieve the target.
This is definitely possible to do that if we, if we strengthen our all the regions with the growth in our retail. It is possible. That is my 13 second.
Chirag Singhal
Yeah, sorry.
Raghavendra Srinivas Bhat
Yeah, yeah, yeah.
Chirag Singhal
So 7 to 8,000 crores incremental growth in the advances in the RAM segment for the rest of the year. Did I get that correct?
Raghavendra Srinivas Bhat
Yeah, yeah, yeah.
Chirag Singhal
Okay. And what about the balance book which is 26,700 crores. What would this book look like by the end of the year? So broadly what I’m trying to understand is the overall advance route.
Raghavendra Srinivas Bhat
Now overall advance only, I told you. Right now as of June it is 75,000 and our target to grow is at 89,000 and 89,000. As I mentioned earlier, there is no plan to revise it and we have to make an attempt to achieve that. But 85 to 86,000 crores of advances by the end of the year, definitely it will give a big boost to us while making our full efforts to achieve the 89,000 crores.
Chirag Singhal
Understood. So that is roughly 10% odd growth rate. If I take 86,000 crore, that is roughly 10% growth rate. Okay. And how much is outstanding in IG50 and nbsp book at the end of June 25 and what is your target by the year end?
Raghavendra Srinivas Bhat
Yeah, IBPC as at 3315. As at June it is 3315 and it was at 3997 as of June last year. Right now there is a reduction of around 550600 crores. We have plans to reduce it further. And as I mentioned earlier, we have to strike a balance in the books to grow. And taking into account so many aspects we have to balance. One is whether to take it or not. Other one is where we can go. Third one is yield all these things. All these things. We will take a conscious vision and move forward.
Chirag Singhal
Yeah. So what are you guiding for this IBTC by the end of.
Raghavendra Srinivas Bhat
We want to bring it down to 1000 crores by the end of this March.
Chirag Singhal
Okay. And if you could give me the same number for nbse book.
Raghavendra Srinivas Bhat
Pardon.
operator
Mr. Chair, may we request you to turn to the question queue for a follow up?
Chirag Singhal
Sure, yeah.
Raghavendra Srinivas Bhat
If you have more queries. Definitely we will be whatever, whatever you want. Particular you please send a mail to us. We will. We will come back to you.
Chirag Singhal
Okay. Thank you.
operator
Thank you. The next question is from the line of J. Shah from Movaga Capital Advisors Private Limited. Please go ahead.
Jayen Shah
Good morning Mr. Bhatt and conversation. Good morning sir. Best wishes to pure Karnataka bank going forward.
Raghavendra Srinivas Bhat
Thank you.
Jayen Shah
Just sharing a couple of observations sir. Recently observed and even in past private banks have been onboarding their wholesale strategies where corporate, large corporate end up being anchored. Where of course there is a tight pricing to enter this relationship. But they take advantage or they leverage that relationship across the corporate anchors entire vendor chain distributor, dealer financing. So that’s great for us. Again sharing his observation. Second observation is recently various banks have started segmenting retail crossing into mass affluent crossing into wealth wherein HNI UltraXNA become equally important stakeholder in terms of sustainable balance growth. Sir, over to you for comment on both the parameters.
Thank you sir.
Raghavendra Srinivas Bhat
Yeah. This as I highlighted in my opening remarks. We have set of plans. I have mentioned couple of new products. Our product department is very active. They have brought out certain new changes in the products and all this supply chain is one new product which has been now cleared. We are going forward with that and other couple of things which we have planned. You must have seen our cost income when you see that it is at the higher level. So many things have been invested which will start yielding the result going forward. We are active definitely supply chain we will start immediately.
Other things like surrogate based lending. I have mentioned in 23 items I have mentioned earlier. Definitely we are moving forward. What was your one more question?
Jayen Shah
The second observation was about photo segmentation in retail. Specifically when it comes to liability gathering as well as products which are being marketed towards wealth products or affluent mass affluence to HNI community.
Raghavendra Srinivas Bhat
Yeah. There also one new solution we have planned platform and through that it is various other products it is possible to meet the requirements of the liability provider products. It is possible. We are coming out with that product also soon and ultimate aim is to improve the liability side also with product to customer. This one platform which we are planning and we will move forward in that direction. Product to customers with third party products everything is possible there.
Jayen Shah
No. I am sure we will see exciting growth going forward when the traditional well respected, well trusted brand like yours gets in safe and strong hands like your in your hands. Wish you all the best once again and looking forward to great growth at Karnataka Bank. Over to you the moderator.
Raghavendra Srinivas Bhat
Thank you very much.
operator
Thank you. The next question is from the line of Rakesh Kumar from Valentus Advisors, please go ahead.
Rakesh Kumar
Yeah, hi, can you.
Raghavendra Srinivas Bhat
Good morning.
Rakesh Kumar
Thank you, sir. So if I’d like, you know, just going slightly into power. So like, you know, there are a couple of developments that happened and product design and wholesale vertical had also left. So what actually happened? What went wrong all of a sudden apart from the MD and ED exiting from the system. So like, you know, because of shareholders and like, you know, investor at large would like to know that, you know, what is happening actually.
Raghavendra Srinivas Bhat
So see, anyone leaving the organization is depending upon their personal choice. But as long as they are here, they have trained sufficient number of people, backup people are there. And you are talking about wholesale.
Rakesh Kumar
Wholesale vertical head and the product design head.
Raghavendra Srinivas Bhat
Yeah, wholesale vertical head. He’s a. He’s in other retail head is also there to tide over the situation. We have made alternative arrangement for that also and sufficient backup plan is also there. We are working in that direction. There is no concern for that in all the departments. The second line is from the house talent and they have been well trained and capable of handling the departments. All the processes will be carried out as scheduled. There is no cause for concern. This much I can tell you. Hello. I hope I answered your question. Hello?
operator
Mr. Rakesh. As there is no response from the current participant. Moving on to the next question. The next question is from the line of Sir Vesh Gupta from Maximal Capital. Please go ahead.
Sarvesh Gupta
Good afternoon, sir.
Raghavendra Srinivas Bhat
Good afternoon, sir.
Sarvesh Gupta
Yeah, the first question is basically dwelling on this growth numbers in advances. So you know, I can understand that there are some challenges on high cost or low yield corporate advances which you might have thrown down. But on the RAM side itself, sir, the growth of 5% is possibly the lowest amongst all the banks and including even the PS2 banks and MSME book be growing. That itself is something that we have not seen across the sector. So before we think about advances growth in the coming years, have we been able to identify. And this is after, you know, recruit me recruiting so many people.
This increased our cost to income from 50% to almost 65% or thereabout in the previous quarter because we recruited heavily and the idea was to recruit a lot of people as field officers who will go out of the branches and get. So after increasing the cost so much. Despite that, the result is even on the segment of our choice which is ram, we have grown by the lowest amongst all banks. So what was the reason behind this, sir?
Raghavendra Srinivas Bhat
Reason? I am not interested to dig the pulse. What I have observed, your river observation has come to my knowledge also. I started working in that direction definitely we will push it forward that the results started happening. Though I have joined very recently, I am very conscious of that Ultimately cost benefit analysis. Whether it is for this or anything else, that is my first priority. Whether if there is no income, how to make it income, duly planning the cost and as well as the yield. These things are very much in my mind. I have highlighted in my opening remarks also.
Your concern is right. Even I am also having the same feeling. Definitely we will come back. Have confidence in us. Definitely our team is quite active. They will come back by Q and you will start feeling the results also.
Sarvesh Gupta
Okay. And on the growth side, you had mentioned that you are planning 86000 crore by end of this year. So that is a 15% growth target, right? From 75000 crore.
Raghavendra Srinivas Bhat
That is what I mentioned. In the sense though it appears to be very much optimistic, our plan was different. I don’t want to change any plan now. Because we are in the mid financial year. While trying to aim for that, what I feel it should not create damage also to the institution. Priority is to grow with quality without compromising yield, quality, everything. We are at a we want to grow. Definitely that is the focused area. That is why I said in the beginning also I am very much optimistic. We will do that.
Sarvesh Gupta
Okay. Now on the name side, sir, we have also made a mistake of, you know having GSET as our ebay as our benchmark, right? Because of which our names have crashed much more than any other bank. So are we now trying to change it to repo rate or something? Or what is the strategy on increasing this NIM to 3.3.5% which we were enjoying earlier.
Raghavendra Srinivas Bhat
See our 70% of our advance brother around EDLR where effect will happen immediately. But our liability side is fixed that immediately effect won’t happen. So that is a constraint. That is why there is a pressure on spread or nim. Definitely this one. As I mentioned earlier to some other caller, the ALPO is meeting regularly. We are reviewing this situation regularly and as and when the need arises, cost consciousness is very much required and suitable changes we are making. Rate of interest on deposit has been revised downward recently and we will be further reviewing that. That is why we are focusing on the growth.
Unless and until growth happens, this pressure on NIM will not yield result. That is why focus is to reduce the cost and increase the advances.
Sarvesh Gupta
Okay.
operator
Mr. Savesh, may we request you to turn to the question for a follow up. Thank you. The next question is from the line of Sarsandiora from Indresh group. Please go ahead.
Darshan Deora
Yeah, thank you for the opportunity. My first question was on the RAM disbursements. What would be our yield on the.
Raghavendra Srinivas Bhat
Incremental RAM disbursement that we did this quarter? One second. Good morning Darshan. One second. I t is somewhere between 8.52, 8.5 to 9.25. RAM is at 9.5 to be precise. 9.5 is the incremental yield for this quarter. Yeah. No, no. As of now on the portfolio you are saying, right, 9.25 to 9.5. 9.5. Yeah.
Darshan Deora
No, you’re saying that is what you’re offering now to customers or is that. What you have lent out for this. Quarter or is this the portfolio yield.
Raghavendra Srinivas Bhat
I am mentioning about the average? Average. It is all portfolio yield. I am telling you it is varying depending upon various factors. Various factors like rating and all. It will be. We will try to maintain it between 9 to 9.5.
Darshan Deora
Okay, so then at 9 to 9.5 it is not much different from you know, the sort of the portfolio yield. Right. That we have already on the overall book. If I see the overall advances, that’s about 9.28. Right. So if you’re going to be at. The same in the same region, then. How are we going to decrease our overall yields on the book?
Raghavendra Srinivas Bhat
That is what I said. We have to have the mixture in the portfolio overall. Some other investor has asked the question whether you have plans to suddenly reduce this high cost, sorry corporate and all we have to strike a balance. Focus is on retail where I said average. There are cases where we are charging 10.5, 11 also average yield will work out like that. And all these things definitely affecting when there is no growth in advances. When growth starts happening, various rate of interest it will carry ultimately in the pulls. It will definitely benefit to the bank.
It will average out.
Darshan Deora
And on the gold. Just specifically on. Yeah, no, I get that. Specifically on gold. What would be our incremental yield on. The agri and as well as the non agri? Should it specify.
Raghavendra Srinivas Bhat
Incremental yield? I will come back. Incremental yield I don’t have right now. Kindly post a mail. We will come back.
Darshan Deora
Okay, my chance to rephrase the question. If you had to offer a loan. Today to a customer, what would it be at for gold and for agri gold and for non Agri Gold?
Raghavendra Srinivas Bhat
Around 10%. 9 to 10%. 9 to 10%.
Darshan Deora
Okay. So the same ballpark and just in terms of this quarter. Yeah, sorry, I didn’t. It’s a 9 to 10% you’re saying. Right.
Raghavendra Srinivas Bhat
That is why I said. Yeah, 9 to 10%. I said why? Because agree will be having preparation rate of interest also and other, other than agree we are charging with higher.
Darshan Deora
Got it. Because we agree with that the PSLC benefit basically.
Raghavendra Srinivas Bhat
Yeah.
Darshan Deora
Yeah. Now is this in terms of. I, I know that you know. In. Q4 you had the higher staff expenses and in Q1 of last year you had that interest on the income tax, I think which is 80 odd cross. So adjusting for that, the numbers of this quarter are more comparable with the previous quarters. But are there any one time incomes. Or expenses in this quarter that we need to take into account? So this is like a business as usual quarter essentially.
Raghavendra Srinivas Bhat
Yeah, correct.
Darshan Deora
Got it, got it. And just one second, I had one more question. In case of the ETLR, 70% of book is, you know, linked to the ETLR. Whether it’s reports treasury. How much of this has been passed through? Is 100% already passed through or do we still exist quarter the lowest in terms of what you call gains or would you think that next quarter there’s still something some to be passed out? The next quarter will be the, will be the bottom out and then from H2 it should pick up.
Raghavendra Srinivas Bhat
No, it is a continuous process. It will happen. I think 70% is already covered there and it is a continuous process. As and when the renewal happens or reset clause happens, it will have its effect.
Darshan Deora
So the renewal that was asking for, you know, like some bank.
operator
Mr. Darshan, maybe request to return to the question group for a follow up?
Darshan Deora
Sure, sure.
operator
Thanks. Thank you. The next question is from the line of Manish Dhariwal from Fitusha Capital Advisors Private Limited. Please go ahead.
Manish Dhariwal
Yeah. Am I audible?
Raghavendra Srinivas Bhat
Yeah. Good morning, Manish.
Manish Dhariwal
Yeah, very good morning Mr. Bhatt and all compliments to you on taking over as the leader of this century old bank. And we wish you all the best. Thank you. Efforts of growing the bank to bigger height and greater heights. Thank you, sir. In fact my fellow participants have also touched upon this. But, but one good statement from your side would be very hustle. We’ve had a turbulent recent quarters wherein the leadership team either went on its own or they had to go or whatever. But what has been the impact on the bank? Is there any hidden liability? Is there any hidden bomb in the books in terms of the bad assets, in terms of some provisions, any, any, any such thing like that? It is what the, the, the ncaa, the GNPA and the nnpa.
The strength that we have shown is it all or is there. Can. Can there be any future shock to the. To US investors?
Raghavendra Srinivas Bhat
No, it is. There is absolutely no problem. It is business as usual. No concern absolutely for whatever. If you have. I assure you that there is no such concern at all. Everything has been resolved.
Manish Dhariwal
I really appreciate a very candid and a very firm response that you’ve given. So see, the bank has demonstrated its ability and the desire to go to the next stage of its growth. And in that process it has taken decisions which is fantastic. Some issues happen. That’s part of business. It’s okay. Now going forward I believe that your focus is on msme. While you have also observed that msme, the business has started appearing. So how are we ensuring that the book, the new book that we create does not have any challenges in terms of asset quality?
Raghavendra Srinivas Bhat
Yeah, adequate. I assure you the growth means suddenly we don’t want to grow just like that. We will take all adequate precautions as a prudent lender. Taking into account various aspects. Their cash flows, their rating, the securities offered yield. Absolutely. There is no problem. Now a collection mechanism available, monitoring.
Manish Dhariwal
Wonderful. Wonderful. And so what’s the. What is our existing micro finance book or the plans of developing the micro finance side of the business? Because I think the work is over in that segment.
Raghavendra Srinivas Bhat
It is approximately around 1000 crores.
Manish Dhariwal
Also. What is the plan going forward?
Raghavendra Srinivas Bhat
No, we will move on cautiously. We will move on cautiously taking all precautions.
Manish Dhariwal
Okay. So where is this book center? Sir, mainly the micro science book. Which state.
Raghavendra Srinivas Bhat
It is? Karnataka only.
Manish Dhariwal
Okay. Okay. Okay. So now I think the worst. I think is over. Meaning are you seeing improvement in the connections and your frequency?
Raghavendra Srinivas Bhat
Yeah. We have the geographical advantage also, number one. Number two, we have plans. We have the people for that follow up and recovery also.
Manish Dhariwal
That’s wonderful. That’s wonderful. That’s wonderful. So thank you so much and wish you all the best. As we are like long term investors, we would like to, you know actually now see how the bank can make its present self in the new scenario.
Raghavendra Srinivas Bhat
Thank you very much. Thank you.
Manish Dhariwal
Thank you sir. Thank you. And all the best.
operator
Thank you. Ladies and gentlemen. Due to time constraints we’ll have to conclude the question and answer session here. For any questions we couldn’t address please email them to the management for a response. I now hand the conference over to Mr. Raghavendra es Bhatt for his closing remarks.
Raghavendra Srinivas Bhat
Yeah. As I told earlier, my priorities I have already set and I will be moving in that direction taking my team along with me. And on the one side I am looking forward for the cooperation from our time tested customers. Are there time tested customers along with their reference the additional growth in liabilities assets. So also fresh acquisitions of liability customers as well as asset customers growth and quality. These are the two important aspects followed by working with a clear mind with regard to the spread or taking into account taking into account all these ascribes.
We will be moving forward. Thank you very much to everyone who participated who have worked with us. All the best to each one of you. Thank you.
operator
Also thank you on behalf of Karnataka bank limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.
Raghavendra Srinivas Bhat
Thank you very much.