Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Kotak Mahindra Bank Ltd (NSE: KOTAKBANK) Q4 2026 Earnings Call dated May. 02, 2026
Corporate Participants:
Ashok Vaswani — Managing Director and Chief Executive Officer
Devang Gheewalla — Group Chief Financial Officer
Pranav Mishra — Head of Distribution
Paritosh Kashyap — Head of Wholesale Banking Group
Analysts:
Kunal Shah — Analyst
Abhishek Murarka — Analyst
Jay Mundra — Analyst
Piran Engineer — Analyst
Unidentified Participant
Unidentified Participant
Param Subramanian — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Kotak Mahindra Bank Q4FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashok Vaswani, Managing Director and CEO of Kotak Bank.
Thank you. And over to you sir.
Ashok Vaswani — Managing Director and Chief Executive Officer
Thank you so much. Good evening everyone and thank you so much for joining us. I’m joined in the room with Dewang, our CFO and the other whole time directors Jaydeep, Paritosh and Anoop. As we do each time, I’ll begin with a few opening remarks following which my colleagues will walk you through the financials and the operating performance in detail. There are two things that I’d really like to talk to you about today. Number one, the macroeconomic geopolitical environment and the implications it has across the group.
And number two, the progress that we are making on the core business. Let me start with the macroeconomic environment. In addition to all the headwinds of the previous quarter. Russia, Ukraine, war, US tariffs, FBI outflows this quarter saw enhanced volatility due to the West Asia crisis. The Strait of Hormones has become a significant choke point for India. This has created disruptions in supply chain, significantly increased price of oil and gas and put pressure on the rupee. On the flip side, India’s forex reserves are strong, corporate balance sheets are resilient and the Indian consumer continues to stay invested.
But all of this is going to have an impact, particularly on the inflation front. The extent of impact is clearly a function of how long this continues in the bank business activity continues as normal. Until date we have seen absolutely no sign of any credit stress. In fact, the last quarter was an excellent quarter both from a credit cost and slippages perspective. The year end volatility in the equity and bond markets had an MTM impact across the group. We did see muted activity in our investment bank and continued FPI selling affected our institutional equities and custody businesses.
While the domestic investment flows supported our asset management, alternate assets and retail brokerage businesses. In this context we are taking a watchful stance monitoring leading indicators particularly at the lower end of the spectrum and potential second and third order effects. We are also conscious of the potential impact of a projected lower than normal monsoon cycle this year. Now let me move to the progress that we’ve been making in the core operating business as I’ve been highlighting over the last few quarters.
Playing to the group strengths, we had identified four key customer segments for whom we would build differentiated propositions. We also run certain businesses as product verticals and today we will share with you the progress that we have made against each of these segments. To support this over the last year we launched our mother group brand campaign and other proposition specific campaigns to reinforce. Growth of 16.2% in average debt advances and 14.9% in average deposits. This growth is in line with our stated philosophy of responsibly growing our advances in the range of 1.5 to 2 times nominal GDP growth.
Our discipline was reflected in the Q4 results with healthy NIMs at 4.67%, significantly improved credit costs at 39 basis points and controlled expense growth with cost to assets showing an improvement of 36 basis points on a year to year basis. On a yoy basis Q4 PAT is up 13% in the bank and 6% on a consolidated basis. Book value per share grew by 15% on a year on year basis. Our objective remains to transform the franchise for scale while building a responsible well government bank which generates return of equity in the high teens added with a couple of points of ROE from the subs.
With that let me hand you over to Devang to take you through the financials. Good evening friends. Thank you
Devang Gheewalla — Group Chief Financial Officer
Ashok. Let me take you through the key highlights of the bank standalone and consolidated performance for quarter as well as this being a full year starting with the balance sheet of the bank. Bank’s Balance sheet grew 13% YoY with net advances growing at 16% advances growth on EOP and average basis has been consistent at around 15% throughout the year this quarter. SME and mortgage business continued to be key driver Growing YoY over 18%. Unsecured retail portfolio started showing gradual growth in absolute terms for Q4 which was 1,200 crores as against 517 crores for Q3.
Unsecured mix in net advances has remained stable at 8.9% for last two quarters despite overall book growing at 16%. QoQ advances got impacted by slower growth in corporate banking book on the liability side the total Deposit grew at 15%. YOY led by strong traction in low cost granular deposits. Current account and fixed rate Saving Account grew YoY 23% and 18% respectively taking the CASA ratio to 43.3% as at 31st March 2026. During the year we reduced our reliance on high cost floating rate saving account which reduced by 30% on a yoy basis.
The term deposit growth was at 14% on a yoy basis. During the quarter average current account and fixed rate SA account grew 18% and 17% respectively on a YOY basis and the average term Deposit growth was 16%. We continue to maintain comfortable CD ratio of 86.6% as at 31st March. On 31st March the bank’s net worth stood at 1.35,199 crores. This includes 8,108 crore of Mach 2 market gain on investments which are directly accounted in AFS reserves without routing it through the profit and loss account.
ROE for the quarter is 12.27% and for the full year is 11.08% on total net worth including the AFS reserve. As mentioned above, capital position remains strong at the stand alone bank level. The capital adequacy ratio is at 22.4% of which CET1 itself is 21.3%. The board has recommended increased dividend of 0.65 per share. This is on the 1 rupee share after the subdivision with dividend payout ratio of 4.62%. Now let me come to the income statement and let me start with the quarter performance. This quarter shows profit before tax growth of 17% on QoQ as well as YoY basis.
Q4 performance was driven by NII growth of 4% and significant improvement in credit cost which reduced from 63bps in Q3 to 39bps in quarter four. MIM for the quarter is 4.67% as against 4.54% for Q3. As you know Q4 always have the anomaly of the number of days so if I adjust the benefit from lesser number of days the Q4 NIM remains same as Q3 which is about 4.54% despite full quarter impact of 25bps repo cut which you know happened during December. So this quarter actually saw normalization in NIM and the effect of repo cuts during the year got offset by repricing of deposits as well as continuing growth in low cost granular deposits.
Fee income for the quarter grew at 9% sequentially and growth was contributed mainly by distribution income and general banking fees. Other income for quarter four includes loss on account of unwinding of NDF positions coming to the cost Staff cost for the quarter reduced by 100 crore in retirement benefits due to increase in the discounting rate. Q3 staff cost as you know was higher by 96 crore provision on account of the new labor code which was introduced from November 95th. Actual payroll costs without this above retireal movements actually remained flat on a quarter on quarter basis.
Other operating expenditure for Q4 3076 crores up 11% QoQ mainly due to higher marketing spend towards brand and awareness campaign plus uptick in the acquisition related cost during Q4 on asset quality parameters. We improved all parameters across during Q4 with lower slippage and with improved collection efficiency in granular retail segments particularly in retail cv, MFI and credit card business. The gross NPA is at 1.2 versus 1.3 in December net NPA 0.25 versus 0.31 in December quarter with the provision coverage ratio now over 79% at 31st March.
Credit cost for Q4 at 39bps vs 63bps last quarter and slippages at 1018 crores. Visa vis 1605 crores last quarter showing significant improvement due to reduction in delinquencies. Secured book continues to have negligible delinquencies. All this improvement are on account of collection of retail granular accounts. We did not have any corporate lumpy collections or recovery during the quarter. ROA for the Q4 improved to 2.14% with normalization mean and improvement in credit cost. Let me summarize now the full year performance.
The full year 26 saw a total repo cut of 100 basis points during the year. This resulted in reduction in interest income which bank partially mitigated by reducing cost of fund through SA interest rate cut and mobilization of low cost deposits. Full year win for the FY26 is 4.6 against 4.96% corresponding last year whereas cost of fund for FY26 was reduced to 4.67% from 5.10% for FY25. Non interest income as a percentage of total income is marginally lower in FY26 while distribution income grew.
The overall fee income growth was impacted by muted credit card business growth as card issuance activity resume after last year’s embargo. Total opex grew by 4% and we continue to invest in technology with tax spend for the full year at about 13% of the total OpEx. Our cost to assets for FY26 reduced to 2.75% as against 3.02% for FY25 down by 27bps. Credit costs during the FY26 progressively reduced each quarter starting with 93bps in quarter one with 79bps in quarter two, quarter three of 63bps and now at quarter four of 39bps.
ROA for the year is 1.97 as against 2.21% for the full year. While I will cover the overall consolidated performance, Jaideep will take up select subsidiaries performance later. Overall our consolidated customer assets are at 6,16,000 crores and the AUM managed by group is now at 7.47,000 crore which grew 15% YoY and 12% YoY respectively. The 20 AUM of Kotak Mahindra Asset Management Company was impacted by adverse movement in capital equity market in the month of March. The consolidated net worth now is at 1,81,000 crores with the book value of share at 182 which grew at 15% on a YoY basis.
Our capital adequacy continued to remain healthy at group level at 23% with CEP itself of 22%. ROE at the consolidated level stood 11.92% for Q4 and ROA for the quarter is 2.18% Q4.26 consolidated PAT is 5238 crores. This excludes exceptional gain on disinvestment in infina and it grew 6% from 4,924 crores in quarter three of 26. Quarter four of 26 or subsidiaries were impacted by adverse movement in equity capital market and G SEC yield due to the MTM losses on the price moment during the Q4, Kotak Mahindra Capital Company sold this 30% stake in its associate Infina Finance Limited resulting in profit after tax of 1094 crores in the standalone book.
However, since it was also a company at the consolidated level, the PAT on this investment is 185 crore. After considering the carrying value of Infina in the Consol Books post Tech sale, Infina ceases to be associated with effect from 24th March 2026. Consolidated profit for the full year is 19,103 crores versus 19,113 crore or 25 excluding the above gains on stake sales. With this I hand over to Anu to take you through the highlights of the retail businesses.
Pranav Mishra — Head of Distribution
Thank you and good evening. Devang has covered the financial performance for the year. I will now provide update on the retail business. Our retail strategy is anchored around two focus segments the HNI Affluent and the Core India with a strong focus on life cycle engagement across deposits advances supported by group wide products and services. Our high net worth proposition comprises of private bank and the Solitaire program. The private bank manages the wealth of around 60% of India’s top 100 families while Kotak Solitaire continues to gain traction by deepening affluent relationship across banking investments and lifestyle offering driving a superior revenue mix.
We have been awarded India’s best private bank by 2026 by Euromoney. The combined relationship value across the bank and the group representing advances, deposits, demat and investment holdings of private bank and solitaire families stood at 10.8 lakh crore contributed by 66,000 families as of 31st March 2026. Brand recall for affluent segment remains very strong for Kotak for Core India the other engine for us, the Kotak 811 proposition continues to scale well adding 250 to 300,000 accounts customers every month.
It’s a digital first model enables low cost acquisition, low cost servicing while delivering stable granular low cost savings deposit. The quotas 811 savings account now contribute to 12.2% of total savings account booked which grew 32% YoY and 8% quarter on quarter. The 811 app continues to be ranked among the top banking apps in India. At a franchise level, average Deposit grew at 14.9% YoY and 2.3% quarter on quarter in quarter four. FY26 on the retail side, current account strategy remains focused on self employed individuals and business owners, a long standing strength for the bank lending relationship across SME business banking and lab continues to support acquisition and engagement sustaining momentum through quarter four of FY26.
At an overall bank level, average current account balances grew 18% YUI for the quarter the saving franchise delivered steady growth with average Savings balance increasing 10% YoY driven largely by balance accretion from existing customers reflecting strong customer engagement. The average term deposit balances grew 16% YUI with continued emphasis on building a granular and durable franchise. As a result, the CASA ratio remained resilient at 43.3% as of 31 March 2026. Moving to retail advances, growth in quarter four was led by secured businesses such as Mortgages, Tractor Finance, Gold Loan, Unsecured businesses including Personal Loan, Business Loan, Retail, Micro credit recorded sequential growth.
The credit card portfolio remained flat. Sequentially unsecured retail advances constitutes 8.9% of net advances within secured businesses. The mortgage portfolio across home loan lagged grew 18% and 4% via Q on Q. The strategy remains focused on affluent self employed customers to deepen wallet share and drive deposit, cross sell tractor industry volumes moving to tractor industry volume remains strong with 35% YoY growth and 23% YoY growth for FY26 driven by GST curve subsidy support and adequate rainfall and replacement demand while reservoirs carry over support near term prospect IMD’s below normal monsoon forecast for FY27 due to EL Nino adds to some uncertainties while our disbursement growth trade industry trends in quarter we retained our industry leading market position as the second largest tractor financer in the country with 10.9% market share for FY25 26.
Collection efficiencies improved during the quarter and is expected to remain supportive into Quarter 1 FY27 aided by August led cash flow. Gold Loan remains a small portfolio but delivered a strong YOY growth and represents a key area of focus with plan to scale up over next 18 to 24 months. Secured asset growth was supported by robust demand disciplined underwriting and superior credit evaluation with stable asset quality within unsecured lending business loan growth remained steady with continued focus on portfolio quality.
Personal loan balances grew sequentially driven by salaried customers and expanded digital origination journey. Credit performance remained stable supported by tighter underwriting and data driven analytics and stronger risk controls. Disbursements were largely to existing customers while the standard charter personal loan portfolio which you had bought continued to run down credit cards remains a key driver of customer stickiness and engagement. The portfolio has been fully restacked through launches such as Solitaire, AirPlus and Air and Cashback plus delivering segment specific value proposition.
Solitaire continues to scale in the HNI segment while AirPlus and Cashback plus are gaining traction in emerging and mass segment, reinforcing the right product to right customer strategy enhanced by our data models and analytics. This along with moderating delinquencies, better collection and stronger risk model drove sequential improvement in the portfolio quality. Moving to Microfena, the industry advances declined 16% between March 25 to December 25 with a gradual recovery expected in FY27. Our retail micro credit grew 8% quarter on quarter in Q4 driven by new customer disbursement.
Portfolio originated using our risk based underwriting model continues to demonstrate strong performance supporting expectation of further improvement in portfolio quality. Overall unsecured portfolio improved sequentially in Q4 supported by healthier flow rate and improved collection efficiency. We however remain watchful and continue to invest in adequate collection capacity. Investments made over past few years in technology at overall level across retail businesses are now started yielding benefits through lower acquisition cost, lower servicing cost and reduced brand congestion and improved service level.
In summary, our customer centric approach is enabling seamless linkages of savings, investment, insurance and credit across quota ecosystem. Our focus continues to remain on calibrated growth, portfolio resilience and proactive risk management. We continue to closely monitor potential second order impact from global geopolitical developments and El Nino related risk to rural income while maintaining a disciplined data risk approach. I will now hand it over to Paritosh.
Paritosh Kashyap — Head of Wholesale Banking Group
Thank you Anup Good evening friends. We have identified SME and institutional as our key focus segments to drive growth while leveraging the group’s conglomerate structure. The SME franchise book which accounts for 24% of the bank’s advances, anchors the primary banking relationships and delivers scalable balance sheet growth with portfolio diversification. The institutional segment enables capital efficient profitable growth through an integrated wallet approach led by fee based and advisory driven businesses yielding higher ROEs.
The corporate bank contributes 17% of the bank’s total fee income growing at 14% YoY. Cross selling of investment banking and institutional brokerages products adds about 200 basis points to our corporate banking ROE. The commercial vehicle and construction equipment segment is managed as an independent product business within the bank that complements our SME businesses and extends our reach into semi urban and rural markets across logistics and infrastructure ecosystem. We are among the top five financiers in the country in this space with a market share of 5% in CV and 8% in CE segment respectively.
The CVC book at about 46,000 crore up 7% yoyo and 3% quarter on quarter and forms 9% of total advances. The proposition LED approach is translating into deeper engagement and higher wallet share. Now let me take you through the franchise in more detail on the institutional side. This quarter Corporate advances grew 22% YoY while being flat sequentially. The credit substitute book declined 6% YoY but increased 3% sequentially. Growth continues to be driven by granular expansion in the mid market vertical supported by new customer acquisitions.
The book remains well diversified driven by working capital and flow based business and strong cross sell potential in large corporates. We continue to focus more on flow led businesses and profitability through higher cross sell and deeper transaction banking penetration. The trade book showed strong growth, focus remains on client onboarding, deeper penetration and digitization. Iwago, our digital supply chain platform is scaling steadily on strong market adoption. Gate City continues to be an important growth lever for the franchise unlocking multiple opportunities.
The portfolio has shown strong year on year growth. Asset quality across customer segments continues to be robust. Beyond balance sheet growth, our focus is on improving returns through fee led and capital light businesses. Debt capital markets delivered strong volume growth and with banks now permitted to participate in acquisition financing, the addressable opportunity is expanding for us. Collection and payment flows continue to grow supported by technology investments and new CMS mandates including from BFSI and E Commerce clients.
The payments and collections stack was upgraded improving speed, scalability and customer experience. The capital market businesses had a muted quarter with the impact seen across investment banking, institutional brokerage and custody largely reflecting FIA outflows and an overhang on the markets due to the geopolitical tension. We continue to maintain our leadership position across all these businesses now moving on to the SME franchise at its core. Kotak is an SME bank. We have a comprehensive relationship led business proposition across corporate SME, business banking and agri SME segments.
We are driving scalable growth through transactions flow and fee based revenues. The portfolio remains diversified, granular and pan India Total SME advances book of about 1.2 lakh crore grew 19% YoY and 5% quarter on quarter in corporate SME we sustained momentum in new business origination while maintaining stable spreads. This quarter book grew 17% YoY and 5% quarter on quarter. In business banking. Demand for working capital remained healthy across sectors. The secured portfolio grew 24% YoY and 5% quarter on quarter.
The agree SME business also delivered growth of 15% YoY and and 6% quarter on quarter driven by cross sell and higher fee income through holistic customer engagement. This business is a specialized vertical that also supports our private sector objective. We follow a cluster led strategy to drive deeper penetration and sustained NTB acquisitions across SME businesses. Asset quality continues to remain resilient supported by disciplined underwriting and proactive portfolio management. Investments in coverage process simplification and technology have improved turnaround time, engagement and scalability.
The house bank approach continues to enable cross sell across the bank and Dakota Group now moving to commercial vehicle and construction equipment businesses. The commercial vehicle industry saw strong momentum in Q4 26 with 19% YUI and 12% quarter on quarter growth resulting in 13% YOY growth for FY26 driven by GST reduction and demand acceleration ahead of OEM price hike from April of 2026. We continue to maintain our overall market position with an appropriate customer segment mix ranging from fleet operators to retail.
Stress in the retail segment has begun to ease with recent vintages showing improved delinquency trends supported by tightened underwriting and strengthened collections. The construction equipment industry declined 18% YoY in Q4 and 8% for FY26 due to slower infrastructure execution, tight state finances, muted project awards, extended monsoon and raw material shortages amid geopolitical disruptions. While institutional and mid sized contractors remain resilient, liquidity is constrained for smaller contractors and first time users.
Industry recovery will depend on faster project awards, improved raw material availability and a pickup in government spending. In this environment, our disbursements broadly tracked industry trend while maintaining market position. We will continue to pursue opportunities in the CVCE space through calibrated risk led interventions while closely monitoring the impact of geopolitical developments on economic growth and segment performance across all our businesses. We continue to invest in technology offerings.
We have enhanced functionalities on our unified enterprise portal Fin which is seeing good customer adoption both for transactions and servicing. Our one click working capital dispersals are being well received across corporates and SME customers. I will now hand over to Jaydeep.
Pranav Mishra — Head of Distribution
Thank you. Good evening all. Let me talk about our group companies now. In Q4 26 our subsidiaries reported PAT of 1215 crores contributing 23% of consolidated profits for the quarter. This was against 1,453 crores in Q3 of FY26 and 1382 crores in Q4 of FY25. The Q4 PAT was impacted by negative MTM on capital market linked equity investment and movement in yield in March 26. The power of our conglomerate model is exemplified through focus propositions designed to the customer. As highlighted by Anup and Paritosh earlier, the bank as well as subsidiaries support the distribution of various products and services manufactured by the group, thereby strengthening our one quoted strategy.
I will take you through the performance of subsidiaries now starting with the lending subsidiaries. Kotak’s prime customer assets grew to 44,933 crores up 12% YoY and 4% QoQ with the PAT for Q4.26 being at 240 crores. Again 250 crores in Q3 of FY26 the quarter was negatively impacted by 68 crores on account of MTM on OIS due to movement in yields. Turning to the capital market businesses, a key strategic move this quarter has been rebranding of Kotak securities retail business as Kotak NEO to reflect the power of a bank supported trading platform with unique features such as seamlessly money transfer through one click deposits and instant withdrawals to a lead Kotak bank account.
We also launched NEO Trading account opening journeys on Kotak811 app and opening of Kotak bank savings account journey on the NEO app. Our overall market share increased to 13.5% from 12% on a YoY basis and MTF market share is now at 14% driven by strong pricing and product age. Kotak securities Q4.26 Pact was at 400 crores up 15% YoY with 7% down sequentially on account of negative MTM. As mentioned earlier for capital markets, FY26 was a challenging year with subdued SPI activity in both cash and derivatives segments.
However, our institutional equity business Kiev and the investment banking business KMCC have continued to maintain leadership position in their respective segments. Turning to the asset management business, despite market volatility, quota KMC’s scale has continued to translate into strong cost efficiency and operating leverage supporting healthy margins and steady profitability through the cycle. The average assets under management of Quota Mutual fund for the FY25 26 with 5.7 lakh crores up 22% y o wide the full year Pat grew at 11% over FY25.
Kotak Altner Asset Managers is one of the largest domestic alternate asset managers in India with total funds raised since inception of approximately USD 11.5 billion with up to 15% of the commitment coming from the deployment of excess capital of the group while targeting high teens IRR across strategies. This quarter Kotak Yield and Growth fund kygf raised 4400 crores approximately with Kotak Private bank acting as a sole distributor. Underscoring our distribution strength and in house capabilities of manufacture, we successfully portfolio exits which are reflected in Commerce profitability with FY26 PAT of 292 crores versus 139 crores in FY25.
Talking about life insurance in coded life insurance the gross written premium grew 16.7% YUI and FY26 reflecting good momentum value of new business. VNB grew 51.4% YY in FY26 showing quality of the business mix, VNB margin expanded by 350 basis points to 28.5% driven by higher share of protection and non participation savings products. Embedded value increased by 9% YoY and it is at 19,224 crores. Currently operating Roeb on FY26 was at 16.4% underscoring steady operating performance and capital efficiency year on year compatibility is impacted by GST related regulatory changes absorbed during the year.
Finally, in purpose to compliance with RBI regulatory directions issued in December 25th we undertook two actions. We reduced our ownership in Infina which now ceases to be an associate of the group. With regard to our subsidiary KMIL for operational simplification the business activities of KMIL will now be conducted within the bank, effective. In conclusion, our key strength is a seamless integration of our in house financial products with the bank’s distribution relationships and digital platforms, enabling customers to access a comprehensive suite of solutions through one unified ecosystem.
With full ownership and alignment across the group, we’re well positioned to capture evolving customer needs and market opportunities. I’ll now request the operator to begin the Q and A session.
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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question and to limit your questions to two per person. You may rejoin the queue if you have any further questions. Ladies and gentlemen, we will now wait for a moment while the question queue assembles.
Our first question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah, hi, thanks for taking the question. So firstly wanted to understand the NIM outlook and particularly our rate action. We have raised TD rates and we are almost 30 basis points higher than the peers. Now the pig deposit rates are at 6.8. So what is the thinking behind that in terms of maybe increasing the rates and given this scenario, maybe what would be the outlook on nims? So that’s the first question. Secondly, on unsecured we have been flat on a quarter on quarter basis in terms of the proportion.
So should we now expect the growth to pick up in line with the or maybe better than the overall advances growth and the proportion to inch up? And on corporate, many of the players are participating in the corporate lending and they are indicating that Rauc is still holding on. But we have not seen that much of growth coming through in the corporate lending. So what is leading to a relatively slower growth than the peers on the corporate side? We not participating very actively out there. Yeah. Thanks
Ashok Vaswani
Kunal. Thanks. Let me cover the deposits and unsecured retail fees and maybe Paritosh you can cover the corporate one. Look, on the deposit side it is a function of putting many, many propositions out and many many segments that we are going after. So on the one hand you have something like 811 which as Anup kind of mentioned is already nearly 13% of all our total Saabh book growing at about 32% per annum. Right. That’s no cost. Granular deposits at a higher rate. The 6.8% rate is more targeted towards the senior citizen kind of segment and positioning our book for the future.
So we are seeing how that kind of goes and then we will adjust over a period of time on the unsecured retail like I’ve been mentioning Kunal for the last couple of quarters in the first. Sorry
Kunal Shah
Just on this TD then outlook on margins would be should we see the pressure going forward because we have raised the TD and there won’t be any obviously on the yield side not very sure if there is too much of benefit that flows in. So deposit repricing would also be over and we are raising the rate. So there we pressure in margins on maybe pressure on margins in FY27.
Devang Gheewalla
So Kudal hi Devang here. So if you have seen the TD rates which we are increasing are for the longer duration. So the effect of the increase in the TV rate in the cost of fund and then impacting NIM will be gradual and you know if I look at it in the current year the NIM drop was close to 36bps. So we expect on the NIM will be reducing next year but the rate of reduction will be much lesser and far more gradual as I explained based on the tenure profile of the td. Yeah. Also remember at the same time we are growing also the CAR and Saabuk growth which has picked up if you have seen in the last two quarters.
Right. So we expect some of them also to offset the increase in the rate of td. Yeah,
Ashok Vaswani
Sorry, yeah. On the unsecured retail Kunal, like I’ve been mentioning last couple of quarters we’ve stabilized the businesses and we have four businesses under that. Right. We have PL Cards, Business Loan and mfi. Mfi. We are back to disbursements and that kind of business is actually growing quite nicely. Quarter on quarter. MFI grew about 8%. Right. Business loans has also grown quite nicely. PL is picking up traction and doing quite well. Cards has been flat quarter on quarter and we’ve got the whole product stack now in place and now it’s a matter of pushing through momentum like I’ve mentioned for about the last two quarters that in the first instance we will be looking for growth on a rupee crore kind of basis and then on a percentage basis I’m not going to hold back secured growth just to get a better unsecured ratio.
This is about each business doing the right thing for it and the ratio is a kind of fallout. So unsecured as a whole Q3 grew about 560 odd crores and Q4 grew about 1200 crores and that kind of Momentum we’ll continue to see. Now having said that, obviously the West Asian crisis is something that we are monitoring very, very, very closely. Like I said, I’m seeing no stress right now. But clearly the bottom end is the first area that gets affected. So some level of tightening at the bottom end we have done to make sure that we don’t face any kind of credit issues going forward.
On the corporate side.
Paritosh Kashyap
Yeah. Kunal. Hi, Paritosh. Kunal. We grew corporate banking book by 22% year on year on Q4 we did not grow the book because as you know in the March month the short term interest rates go up substantially high. And what we did was if the, because the short term lending book that we carry as part of the wholesale business there we were not really getting the right margin and hence we did not roll over that book and which is what is reflected in flat growth in the wholesale businesses in that quarter.
But that’s more of a March phenomenon which is normally every year we see similar situation but we continue to focus on wholesale businesses and that’s a very strong franchise for us and we will continue to build that business going forward.
Kunal Shah
Got it. Thanks. Thanks. And all the best. Yeah,
Paritosh Kashyap
Thank you.
Operator
Ladies and gentlemen, in order that the management is able to address questions from all participants in the queue, you are requested to please restrict yourselves to two questions only. You may rejoin the queue if you have any further questions. Our next question comes from the line of Abhishek Murarka from hsbc. Please go ahead.
Abhishek Murarka
Yeah, hi. Thank you for taking my question. So one question on the. YOY number and I’m talking about averages. So if I look at a YOY number the numbers look good, they are going up. But if I look at QQ it’s, it’s actually coming off. And I guess the YOY is also helped by a favorable base in 25. So my question is now to accelerate or reaccelerate the SA and TD growth, do you think a rate, deposit rate increase is needed apart from what you have already done? The second question regarding the average current account is that directly correlated with corporate loan growth?
Because every quarter where there’s been sharp growth we’ve seen a sort of increase on a sequential basis. And this quarter it’s become a little more. And I’ll just squeeze in a third one just in terms of ECL transition. Have you got an impact that you can share the transition impact and whether provisions will be high on a run rate basis after the transition? These are my three questions.
Pranav Mishra
I’ll take the Third yeah, so hi, this is anoop here. As Ashok spoke about, you know at a aggregate level if you look at at the deposit yoy there has been a very strong growth and you know it started off of course by we bringing down the SA rate and still growing. I think that’s the important point to note that during the year we now our rates are similar to the other large players. Keep that in mind. And with that we continue to grow our SA group very granularly driven by the affluent and the high end customers in terms of SaaS and also the core 811 which is growing at a very very steady rate.
I think as we spoke about the overall deposits it’s a mix up between looking at the affluent, looking at the core and building the granularity around it. And we are quite satisfied with the way that’s progressing. At the same time as we said some of the TD and so on and so forth, we want to build a slightly longer tenure TD so that because if you think about this whole TD it moves between a cycle of the floor and the ceiling and we believe it’s time to lock in on the longer end of the curve on td.
As our CASA is growing quite rock solid on the car part it has been a as Paritur also spoke about we are fundamentally very strong on self employed. So as we provide our combined solution between advances deposits and all the products we believe the strength is showing up quite well and whether it is wholesale or retail that’s far more stickier for us. That would be my response to the overall CASA and the deposits.
Paritosh Kashyap
Anup I’ll just add just one point on the Q4 Ka see you recall we keep talking about it in every quarterly investor call that as part of the wholesale business we have lot of our focus on transaction banking has been consistent and we have been growing our penetration with both SME retail and corporate customers on the cash management businesses which helps us increase the corporate and consumer bank current account current account balances incrementally. Our capital market businesses get us lot of deal car.
So Q3 we had substantially large deal car sitting in the balance sheet on quarter end and hence Q4 car may look little muted but that’s because of one large deal car sitting in Q3.
Devang Gheewalla
Let me take the ECL question. I think yes, finally the ECL guidelines are out and I think it is more or less same as the draft version. So based on the computation which we had done on the draft version ECL guideline on 31 December the impact of the ECL on the net worth is about less than 2%. It’s not material. And given our capital pollution, we don’t expect on an ongoing basis as well the impact to be material. On the ECL part
Abhishek Murarka
2% of
Devang Gheewalla
Less than 2% of net worth one time effect
Abhishek Murarka
That is on the
Devang Gheewalla
Other transition and then on ongoing basis also it’s not material.
Abhishek Murarka
Okay, got it. Thank you for. Thank you for the answers and all the best.
Operator
Thank you. Our next question comes from the line of J. Mundra with ICICI Securities. Please go ahead.
Jay Mundra
Good evening sir. Two questions. First on nim. So Devang, if I heard you correctly, you mentioned that yoy NIM may so still have a downward bias. But I was thinking that this year we had, you know, the entire rapport rate transmission, our share of unsecured retail also declined quite meaningfully. And going ahead now that that share has broadly stable at least in percentage terms and the rapport rate impact has already gone your SA which is a fixed plus floating, those headwinds are also receding.
So I mean apart from this, what is it that, that that could make the downward pressure on them? I was thinking that maybe your worst phase of NIM is probably over. So what am I missing? Or, or if you would like to, you know, provide an outlook on the name.
Devang Gheewalla
Yeah, so I think Jay, as I said, At 40 odd percent of CASA, my 60% is still the term deposit. And the term deposit tenure for the current TD was about nine to 12 months which we are now obviously elongating it as we go forward as explained by Anoop. And obviously we also increased the TD rate for that. So as I mentioned, while yes there will be a NIM reduction, but it will be far, far more gradual and lower than the current year. So to answer your question, it is largely because of the TD rates which may slightly move up towards the second half of the year.
Therefore it will be gradual as well as lower than the current year. That’s the answer to that. Yes, it will be offsetted by obviously the increasingly unsecured build up as well as the casa, which we do.
Jay Mundra
Sorry, you said first half, second half. Sorry, I missed that. Did you say
Devang Gheewalla
Second half of the year?
Jay Mundra
No, sorry. What is second half of the year? It will change the direction, the new trajectory or how is it
Devang Gheewalla
So directionally the name as I said, will gradually go down and the reduction will be towards the second half of the year. That’s what I’m saying.
Jay Mundra
Okay. Secondly sir, on credit cost like this year we have reported around 65 basis point, full year impact and this quarter slippages have been phenomenally good, less than 1%. And you’ve been mentioning that, you know the drag from unsecured has been coming off. So how to look at credit cost going ahead? Because I believe as you mentioned that the ECL impact will be taken through network. So I think ECL will not have any bearing on your FY27 credit cost. I would believe so. How should look at one, how should one look at credit cost for FY27?
Devang Gheewalla
So I think let us look at the credit cost on a steady state basis without before acl. So clearly the efficiency in the credit cost has come in the retail segment which is largely commercial vehicle retail, microfinance, personal loan, credit card. Right. So as we move forward we will obviously be continuing with our good work of increasing collection efficiency as well as tightening the underwriting norms. We remain watchful on the credit cost on the commercial retail business and some ruler business because there could be some seasonality which would have come in Q4.
However, we are far more comfortable on the credit cost reduction on the MFI credit card and personal loan going forward.
Operator
Thank you. Our next question comes from the line of Piran engineer with clsa. Please go ahead.
Piran Engineer
Yeah. Hi team. Congrats on the strong set of numbers. Firstly, just a clarification on this NIM thing. Devang you’re talking talking about full year FY27 versus full year FY26. Right? That’s
Devang Gheewalla
Not versus exit
Piran Engineer
FY26.
Devang Gheewalla
No, no, that’s correct.
Piran Engineer
So versus FY26 it should be flattish, right?
Devang Gheewalla
As I said, it will be slightly. It will be range bound.
Piran Engineer
Huh. Okay. Because I think people here are getting the impression that versus exit numbers it is going to go down. I think that’s the message that got painted.
Devang Gheewalla
But anyway,
Piran Engineer
Full year. Okay, got it. Okay, so my first question is just on the business banking and corporate SME books where we’ve been growing quite fast. What are the average yields and credit costs now like in this business?
Paritosh Kashyap
On we do not give the yields on the corporate book but we don’t really have a any significant SME.
Piran Engineer
Sorry,
Paritosh Kashyap
Yeah, I’m talking about corporate SME. There is very, very low, I would say very very small amount. Part of the book is in our SME category and we have actually been recovering money from some of the old cases. So I would say as of now the book is absolutely clean.
Piran Engineer
But okay. My main question is is this ROA kicker a NIM kicker or not these businesses.
Paritosh Kashyap
So we look at corporate SME, as a ecosystem banking, we look at how we can provide banking to, you know, in addition to banking, sell more products to them, which is trade transaction banking. Take care of their exports, remittances and also provide banking from our private banking to their families and etc. So on an overall basis we look at the ROE for the customer on a holistic basis and on that front it is working well for us.
Piran Engineer
Understood. Secondly, our distribution fees were down. Y o y. What has driven that?
Devang Gheewalla
I think the distribution fee largely includes the insurance premium and there was some impact of the commission income, right? Yes. So that basically the impact. There were some changes in the GST rates as well, which you know, which has happened. So that has also impacted the distribution fee income.
Piran Engineer
Got it. And just lastly, one more theoretical question. If we acquire an 811 customer fully digitally now, let’s say he scales up over three, four years, has a decent. He’ll become right with a relationship manager, etc.
Unidentified Participant
Sorry, sorry, I.
Devang Gheewalla
He lost your voice. Can you repeat please?
Piran Engineer
Yeah. So just a conceptual question on how, how you all classify 811 today. If I’m an 811 customer, I’ve joined you all digitally. Three, four years later, I scale up, I have a balance of say 5, 10 lakhs. I’ll become a branch customer. Right.
Ashok Vaswani
1/2. 811 is first of all the primary target market for 811 is Core India. We acquire digitally, we service digitally and we cross sell digitally. If the customer wants a different kind of account or wants to make investments or whatever, the customer can do it on the 811 app, no problem. But there’s no question of taking a customer out of an 811 proposition and putting that customer into a branch proposition. If the customer wants an rm, yes. He can open an account in the branch, he’ll get an RM and the RM will do everything that the branch wants.
But as far as 811 is concerned, it’s digital acquisition, digital servicing and digital cross sell.
Pranav Mishra
And if I just add up, think about it as one engine is running on unit economics and the other is on value economics.
Piran Engineer
Yeah, no fair. That’s why I thought that when the customer becomes more valuable, you would want to have not just a digital relationship but also more personal relationship. No, it’s a question
Ashok Vaswani
Of what the customer wants as opposed to what we want. If the customer wants a digital relationship, that’s it. If he wants a personal relationship that was available.
Piran Engineer
Understood? Understood. And just lastly, you know, this year was a very strong year. For tractors, the OEMs. But we’ve not really participated in that growth. So just why.
Pranav Mishra
So see on Traktor, we continue to remain a very large player. This is a business we have built over many, many years. We continue to. We are the number two player here. But in a competitive rate, there are times where we don’t want to buy business. So to that extent we have stayed focused on building it for long term sustainability. And it’s a very strong focus for Kotak and we are inherently very strong at it. But we don’t want to be price leaders.
Piran Engineer
Understood. Okay. Yeah, this is it from my end. Thanks and wish you all the best.
Ashok Vaswani
Thank you.
Operator
Thank you. Ladies and gentlemen, we request that you please restrict yourselves to one question only. Our next question comes on the line of Ankit Bihani with Nomira. Please go ahead.
Unidentified Participant
Yeah. Hi, good evening and congrats on the quarter. So my first question is on lcr. So our NCR ratio has been running close to around about 135% and is well above peers who are comfortable at 115 to 120. So what is the need to keep this level of excess liquidity and wouldn’t if we bring it down, could provide some support to margins as well? And my second question is on yield on investments. That seems again lower than peers, largely on account of your GZEC portfolio being skewed towards shorter tenure.
Why is the composition like this? Yeah, those are my two questions.
Devang Gheewalla
So LCR for the year end, you are right, it is looking higher. But if I look at average LCR during the year, it is around 120, 123 sort of number. So that’s the first thing. At the year end it is higher on the investment book. Yes, we had short term portfolios and some excess SLR which we have sort of unwounded the position. That’s the reason why you see the reduction in the investment position.
Unidentified Participant
So why was this done? So basically, generally, whichever banks have seen their STM portfolio accounts for around 70% of their investment portfolio. So why was it other way around for us? Any rationale on that?
Devang Gheewalla
No, no. So historically, if you have seen we have a higher trading book compared to the HTM book compared to the peers. So that gives us the flexibility to make decisions based on the price movement. So this has been the case historically with us compared to peers. And this time given the yield movements, we have decided to reduce the trading positions and therefore you are seeing the introduction in the investments.
Unidentified Participant
Okay. And on the lcr, just to clarify, the Disclosure that we made that shows 134% but that is on console basis. So. But however we don’t disclose LCR basis standalone. Right. If one has to look historically out as standard.
Devang Gheewalla
Yeah. So roughly as I said, LCR at this time alone is at the level which I just clarify to you, it is normally between 120 and 125.
Unidentified Participant
And that is the average number.
Devang Gheewalla
Yes.
Unidentified Participant
Okay, thank you.
Operator
Thank you. Our next question is from the line of Nitin Agarwal from Motilal Oswal. Please go ahead.
Unidentified Participant
Yeah. Hi, good evening. Thanks for the opportunity. I have two questions. One is around the margins. If I look back, Kotak has always been regarded as a bank with a very high risk adjusted margins. I simply mean like net interest margins minus credit cost by risk adjusted. But over the recent years with that margin compression and with the rise in credit cost, we somewhere has kind of like lost onto this leadership. So how do you internally look at it? How do you benchmark versus the peers? Because even for next fiscal we are talking about some moderation from here and credit cost has been ranging around 60, 65 which is also a tad higher than the peers.
So how do you look at this equation? That’s first question.
Ashok Vaswani
So I guess you’re right. What really happened was that in the first instance the whole microfinance industry went through a massive downturn. That is an industry kind of issue and being part of it, we took some hits there. Secondly, the unsecured portfolios, particularly in personal loan and card went through a credit kind of cycle. Now we have been saying for the last couple of quarters that our credit is improving and as Devang highlighted in Q1, our credit costs were 93 basis points and we’ve ended Q4 at 39 basis points.
We feel very good about where we are from a credit cost perspective on our unsecured book. Now we are back in the microfinance business and we are back to growing cards, back in the business of growing personal loans. And the early delinquencies on these kind of portfolios all look very, very, very much in the acceptable range. So effectively the kind of stress that we saw on the credit cost line during the first three quarters the year is effectively behind us.
Unidentified Participant
Right. And any interest on it refund this quarter?
Ashok Vaswani
No, no interest, no refunds on it this quarter.
Unidentified Participant
Okay, sure. And the other question is on the cost ratios. Now we have done a commendable job in terms of controlling the overall opex and for the last two years while the revenue lines were under pressure. So Any, any like indication as to how much of improvement do you see foresee on the cost to asset line over the coming years? How much room we further see in terms of improving the operating leverage from where we are?
Ashok Vaswani
So look like I’ve always said that there are three pillars of my strategy. Number one is the focus segment, number two is the product verticals and number three is the automation and digitization of Kotak. And the automation and digitization of Kotak is the power of that is demonstrated by the cost of total assets. And as you can see during the year that has come up by 27 basis points. We will continue strongly at this effort to continue to automate and digitize the company as much as possible to be able to take out cost.
In fact, now with the technology embargo behind us, with the credit cost issues behind us, a lot of my attention and focus is really on going to be getting cost efficiencies in this coming year.
Unidentified Participant
Sure. Thank you so much sir. Wish you all the best.
Ashok Vaswani
Thank you.
Operator
Thank you. Our next question is from the line of Param Subramanian with Investec. Please go ahead.
Param Subramanian
Hi, good evening. Thanks for taking my question. Most of them have been answered just on two lines, the fees and opex. So this year both, you know, the growth has been soft 5% on fees, opex has grown 4%. I understand it has something to do with the unsecured fees not growing as well. But how to look at both these lines going into next year.
Ashok Vaswani
On the fees side, honestly what has affected us most significantly has been our credit card book. Right. Our credit card book has been relatively flat and therefore we have not seen the kind of kick up in fees like Anoop mentioned. Credit card is a business that we are spending a lot of time and we spend a lot of time rejigging the entire product stack so that we have the right product for the right kind of customers. So right from a solidaire card for the affluent customer to a cashback card for the everyday customer.
With this product, right product, right customer in place, we are now getting ready to kind of really step up acquisition volumes and spend volumes and enr volumes. Of course, the West Asian crisis and stuff like that is something that we’ve got very, very conscious of. And we’re not going to do anything that is going to get us into trouble. But we have put building blocks into place to grow the credit card business. Generally speaking, the other fees are doing pretty, are doing pretty okay and we expect to see normal growth.
And particularly, I mean if you focus on what Jaydeep mentioned about our ability to now really get the products of the subs sold into the customer base of the bank both physically as well as digitally. We should see progress. That is something that we are working on as we speak and hopefully that will start showing some results soon.
Param Subramanian
Ashok, just a follow up if I can. Would it be fair to say both fees and OPEX grow in line with the balance sheet or is there some operating leverage that could play out next year as we saw this year?
Devang Gheewalla
Let me take this. Obviously if the fees have to increase there will be acquisition cost related to the volume. Right? But if I look at the OPEX cost which has been achieved is largely in the payroll and the staff cost line which is a fixed cost reduction, which is more of a permanent reduction. So I think what will happen essentially is that as we grow the fee line, variable costs associated with the volume may show some increase but in line with the growth in income. However, we will continue to focus on the fixed cost reduction as well going forward which we have been doing for last one year.
And that obviously will continue to result in cost to asset going down and improving the roa. So ROA will improve through fee as well as cost reduction, fixed cost reduction, both.
Param Subramanian
Thank you so much. All the best. Thank you.
Operator
Thank you. Our next question comes from the line of Prakash Sharma from Jefferies. Please go ahead.
Pranav Mishra
Thank
Param Subramanian
You and congratulations
Pranav Mishra
On the present. I just wanted to take a quick update. What’s the status of this? Sorry to interrupt Prakar,
Operator
But your line is not very clear.
Unidentified Participant
Is it clear now?
Operator
Yes.
Unidentified Participant
Thank you. So I just wanted to check if there is any update on this Panchola branch related case and if there is any charge taken into the PNL this time. And in any case has this been any implication on the way the rates rate increases have been done. The second question is on this 100 crores reversal of staff cost. You’ve had just wanted to check that a couple of other banks have had an increased provision because of the rate change and impact on the retirement benefits. Whereas you have had a write back.
Could there be any clarification on how this divergence happens within the same environment Broadly. Thank you.
Pranav Mishra
Okay. Anoop here, I’ll take the Panchkula. This is the matter is currently being investigated by law enforcement agency. Therefore it would not be appropriate to say anything at this stage. The directorate of enforcement is investigating the matter. The preliminary FIR reviews a set of embezzlement in terms of the funds from revealed that there is nexus between officials of the corporation officials of bank and private persons and there have been certain arrests which have happened. We are cooperating with the relevant authorities.
That’s where the position today stands on Panchkula. In terms of specific provisions. We have overall adequate provisions. So there is no specific conversation on specific provision on the matter. But as a bank we do carry adequate.
Devang Gheewalla
On your question of 100 crore liability, I think it is what the way it works is that we have pension and graduate liability both which are discounted at the rate by the actuary. And as you know the discount rate actually has gone up during the last quarter. So others may not have the pension liability relating to the IBA staff. We have that and therefore we are seeing the reason because of the increase in the discounting rate. You are getting a right back basically.
Paritosh Kashyap
Thank you so much.
Operator
Thank you ladies and gentlemen. We will take that as a last question. I would now like to hand the conference over to Mr. Ashok Vazwani for closing comments. Over to you, sir.
Ashok Vaswani
Thank you. Thank you very much for joining us on this Saturday evening. I look forward to again chatting with you for the next quarter results. Thank you so much.
Operator
Thank you. On behalf of Kotak Mahindra Bank. That concludes this conference. Thank you all for joining us. You may now disconnect your lines.