Muthoot Microfin Ltd (NSE: MUTHOOTMF) Q1 2026 Earnings Call dated Aug. 12, 2025
Corporate Participants:
Unidentified Speaker
Sadaf Sayeed — Chief Executive Officer
Analysts:
Unidentified Participant
Mayank Mistry — Analyst
Shubhranshu Mishra — Analyst
Ankit Sonkhiya — Analyst
Jaspreet Singh — Analyst
Nidhesh Jain — Analyst
Rishikesh. P — Analyst
Presentation:
operator
It. It. Ram. Foreign. Ladies and gentlemen, good day and welcome to Q1FY26 Analyst Conference Call for Muthur Microfilm hosted by GM Financial Institutional securities Limited 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 an operator by pressing Star then zero on your touchstone phone Please note that this conference has been recorded I now hand the conference over to Mr. c from JM Financial thank you and over to you.
Mayank Mistry — Analyst
Thank you Avirad Good morning everyone and welcome to the Q1FY26 earnings conference call of Muthut Microfin first of all I would like to thank the management of Muthut microphone for giving us the opportunity to host this call from the management team we have with us Mr. Thomas Mikud John Executive Director Mr. Sardaf Saeed Chief Executive Officer Mr. Praveen CFO Mr. Udish Ullas COO Mr. Gupta AVP Investor Relations I would now like to hand over the call to Mr. Sadhav said for his opening remarks post which we can open the floor for Q and A thank you and over to you sir thank you.
Sadaf Sayeed — Chief Executive Officer
Manant Good morning everyone. Thank you for joining the Q1 earning call from Group Microfinance for financial year 2026. The quarter gone by brings much needed change in microfinance operating environment. This was after a difficult year of financial year 25. This environment changes on the back of improved macroeconomic trends and robust disbursements which happened in Q4 of financial year 25. As you all know the Rabi crop was good and because of the good harvest we have adequate supply of vegetable and food items which brought inflation under control and with good crop also with good disbursement there was good amount of cash flow which was available in the rural indolence and there was money in the hands of the customers that’s why there is an improved trend in overall microfinance macroeconomic operating environment.
Usually quarter one is a slow quarter however, despite the guardrail two that has been introduced by MFIC which was implemented from 1 April the disbursements have been decent in the quarter gone by we have dispersed three 11,026 loans under six different products valuing 1775 crores during the quarter one this is a lower disbursement as compared to year on year around 19.4% lower and around 9.4% lower to the last quarter which was quarter four usually quarter four is the most business generating quarter but considering Q1 is slightly slower quarter, we have been able to manage within the 10% of the disbursement which is a good indication and this despite that the regulation has tightened and there are guardrails of three lenders which have been implemented.
If you look at overall portfolio, our disbursements or our portfolio, the three lender count is consistently reducing. If you look at as a percentage of over leveraged customers in terms of more than 2 lakh exposure, it has come down to just 1%. With the disbursement that we did in the last quarter, our asset under management has reached to around 12,252 crores and our borrower count has reached to 34.1 lakh borrower. This is an increase of just a nominal 0.3% year on year. But important point is that we added 1.1 lakh new to Batut customers in the quarter and we added around 34,000 new to credit customers in our customer base.
During the quarter we opened 27 new branches and we closed one branch. Our overall branch count reached to around 1726 and our expansion was more in newer territory that we have entered in Assam. And we have deepened our presence in Telangana and Andhra during the quarter Even though liberalization of qualifying asset which was earlier requirement of 75% has been reduced to around 60% was announced later. But from the day one in this financial year the focus of Matoot Microfin has been on a calibrated approach towards product diversification. And during the quarter we have introduced three product lines which is loan against property which is micro lakh.
It’s a loan which is between 1 lakh to around 10 lakh. For our customers we have introduced a product which is gold loan. We are in the process of both. The newer guidelines on co lending has been introduced. Just recently we have taken an approval from the board to have a co lending tie up with our parent company where we would be extending gold loans to our customers. We have also introduced another product which is individual loans. It is Microsoft MSME financing. If you look at the approach has been to look at the data in the presentation we have given the breakup last time about the penetration of these customers is from retail lending point of view.
Out of the 34 lakh customers around 12 lakh 37 thousand customers were having retail loan exposure. Out of that around 11 crores of business. Outside was 11,000 crores of business was done through business loan and PM around 8,000 crores of business was done in gold loan business and around 6,000 crores of business which was done in individual loans or in loan against property and mortgage business. So if we look at cumulatively this is an opportunity of around 25,000 crores which if we are able to carefully select these customers we should be able to have at least 20 25% penet because these are all customers who are already having an engagement with us.
We have had an approach of deep diving into the data and bringing in the best of these customers. We have done that analysis with a data driven approach. We have identified four 40,000 customers which have a credit score of more than 730 plus with us which means the credit bureau score of 730 plus. We are targeting these customers. 35% of these customers are absolutely unique to us. Around 29% of these customers are having us plus one more relationship which is in retail lending. So cumulatively this is around 64 65% of our customer base. This will become our base for our calibrated and careful diversification going forward.
I’m also happy to inform you that recently credit rating agency CRISIL has reaffirmed our long term debt rating to CRISIL A stable. Our MFI grading has been M1 and our code of conduct assessment rating has also been C1, M1 and C1 both being the top notch rating for the organization. With efficient utilization of funds we had adopted a strategy of focusing on using PTC as a source of capital. We have been able to raise 1450 crores during the quarter. The most important feature of this fundraise is that we have been able to bring the cost of fund down by 23 bits.
Our cost of fund for Q1 stands at around 10.79 as against 11.02 in the previous financial year. And mind you this is without the reduction in rate that has yet to be percolated to all the borrowers from the banks. The rate cut benefit will translate further over and above this. For the first time in history of Madhoot microfilm we have been able to bring the incremental cost of borrowing overall to below 10%. Our incremental cost of borrowing has reached around 9.97% and this has been possible because of our calibrated approach of focusing on sources of capital which was cheaper.
We have done PTT transactions at fine rates of 8.8% 8.5%. We have raised almost 890 crores during the quarter through the PPC source. During the quarter our net interest margins have also improved to 11.5% which were around 10.9% in Q4, we have revised our lending rates. Our loans are now available from 18% to 24.85% with a weighted average rate of around 23.5%. The impact of this will be seen in coming quarters coming from Q3 and Q4 as largely book is right now at a lower rate. But going forward the average rate will continue to increase which will also help us improve on our margins.
Apart from that, definitely the cost of fund rationalization as it continues to come down will definitely help us bring the margin better. During the quarter, we have also implemented a comprehensive and robust ECL policy. The new ECL policy takes into consideration macroeconomic indicators such as inflation, per capita income at a state level, an unemployment rate at the state level and GDP growth which we were already considering. This comprehensive approach definitely helps us to build a provision cover which is more robust as compared to the previous ECL policy during the quarter. As you know, last quarter we have created certain management overlay amounting to close to 230crores.
We have utilized that management overlay to write off some of the flows from Karnataka which we anticipated last year. So 132 crores of that has been utilized to write off loans. Another 97 crores of overlay which remains with us has been utilized to build cover on the portfolio. As of today, we stand at a very robust provision coverage ratio of 68.5% for stage three, 8.17% for stage two and 1.16% for stage one. This is a significant improvement year on year where our stage 2 covers were much lower as compared to Q4 or for that matter, if you go by financial year 24Q4, it was around 1.06% in stage two.
We are now at 8% at stage two, which is a decent cover considering the environment. We have almost between the icap and the ECL cover, a gap of around 297 crores. So the coverage is adequate. Overall coverage on our Provision is around 97% if you calculate all the provision against the stage three assets, which is a decent cover. But most importantly, despite all of this robust cover, our credit costs remained at around 4.3% which is within the range of our guidance. Much lower to credit cost as compared to 9.4% for the last financial year. And we feel that as we build more and more newer portfolio, this credit cost will further rationalize.
Our GNPA remains stable at 4.85 and that was our effort to ensure that we utilize the COVID that we have created in the previous quarter to not let the GNPA further balloon and our net NPA increased marginally by 24bps to 1.58% but they remain in a very comfortable position. I’m also happy to inform you that we have understanding from the banks on the covenants which are based on GNP and NETNP and others. Those covenants were in breach for 2500 crore facility but now they are at 750 crores facility. It has reduced considerably and we are in talks with other lenders who will be giving us the waiver for these covenants and these lenders have continued to support us in funding.
We continue to maintain a robust capital adequacy ratio. Our car for the quarter one stand at 27.85%. We concluded the quarter by reporting a modest profit of 6.2 crores prior to the OCI. But if you include the total comprehensive income it’s around 8 crores though it’s a very modest profit. But more importantly it indicates a firm ushering of a turnaround within the operation and the financial performance of the company. We are now better placed and more confident of building a robust, sustainable and well diversified business. A business which is built on strong foundation of data analytics, use of technology, focusing on customer centricity and robust underwriting practice.
I’m sure the coming quarters would show the results of the portfolio that we have built and we are trying to build. I think with the ability to diversify and leverage within the organization, within the group, with the multiple group companies who are already offering such products, we will be able to build a robust business. I think I’ll conclude my opening remarks there and I’m happy to answer any questions that participants will have.
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 touchdown telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Subranshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi Sudhav, Good morning. Subranshu here. So a few things really don’t add up here. We still have our customer count at around 34 lakhs and we are going aggressive on new to credit customer acquisition whereas at an industry level and other microfinance players have reported purging of customers. Hence the customer count has reduced and when I add this up to say the three plus customers or four plus customers that number is much higher. So are we not purging customers? Why are we going aggressive on YouTube? Credit customers, that’s the first. Second is we have a big concentration in up.
What are we doing to de risk from up where we would most likely have nascent to credit customers with nascent banking habits what are our plans to de risk from that particular state? Third is that with qualifying assets getting reduced, what are the new products I’m going to launch, Whether they’ll be secured unsecured, what kind of irrs we are looking at, what is the opex increase we should build in? Thanks.
Sadaf Sayeed
Thanks Manshu. Thank you very much for asking that question. Number of questions there. I will answer one by one. Firstly on the customer base in terms of our 3.34 lakh customer, this actually captures the entire customer base. The accounts which are live when we are even writing off or when the accounts are delinquent these are also counted on in this customer base. If you look at customers who are not in NPA their account base is around 29 lakh customers. The new acquisition of customers is essentially from areas where we have entered into more recently. So Andhra, Telangana and Assam.
That is the new customer base that is coming from. While we continue to focus, we have strictly implemented the guardrails which Mpin and Sadhan has recommended. We continue to focus on retaining our existing good customers but at the same time we need to look at customers who are less leveraged and they don’t have multiple exposures. So both strategies go hand in hand. The disbursement if you look at in terms of distribution, earlier we used to have 50% new to Matoot customer, 50% existing customer. But now we have around 38% new to Matut customer and 62% to existing Matut customer.
So already our focus is on existing customers. But more importantly our effort is to increase the wallet share in the base of our good customers. And that is where I said we have done a deep analysis and we have identified among those customers 4 40,000 customers who are having a credit score of 730 plus from the credit bureau. So these are actually cream of the cream customers and they are able to service higher installment and we feel that they are in a higher income bracket. These customers will become basically our pillar for expanding into the other product category.
So we are offering Microlab, we are offering gold, we are offering individual loans and we are basing our product thesis on the base of the Data that we have seen where our customers are already having an exposure with other retail lenders. So that basically on the new product and on the customer base. I think you had another question. Sorry, I missed that.
Shubhranshu Mishra
How do we direct from up?
Sadaf Sayeed
Yeah, correct. So currently if you look at our largest customer bases in Tamil Nadu and Kerala which constitute almost around 42% 43% of our overall portfolio and around 45% of our customer base, our effort is to have around 50% in south and 50% in rest of the country. While as we expand to Assam a good amount of share would be given there. We are also doing rationalization of certain branches where we don’t see that profitability or the operating cost is being justified. So we are also consolidating those branches especially in UP and Bihar. Overall if you look at portfolio has remained a stagnant or come down in UP and Bihar and it will continue to be so as we leverage on more customers.
Out of these 4,40,000 customers, almost 75% of these customers are in south only. So when we build more portfolio with these customers, our portfolio share of the southern states will increase. And of course north especially UP and Bihar will reduce. Because we are not offering more of gold loans and individual loans in those areas. A lap is being offered there. Our markets like Haryana, Punjab, Himachal will also be more of an individual loan market. So I think from that perspective we will be able to balance our portfolio mix. Our long term strategy has always been to have 50% portfolio in south which has really served us well in terms of repayment and as well as the customer satisfaction.
And we will remain on that strategy.
Shubhranshu Mishra
So just wanted to know what is our OPEX increase that we will be building in to bring out the new products?
Sadaf Sayeed
Yes, I think that’s a very important question. And you asked about the opex. In the short run the OPEX has gone up to around 6.9% which is largely because of calibrated disbursement and reduction in disbursement. But in the coming months as we increase our disbursement, this OPEX will rationalize and our strategy for building this portfolio is to utilize our existing branch network. We are not kind of planning to have separate branches for this, but we have a specialized credit underwriting facility for lab. We already have a team which were doing our MSGB business. They will be utilized for underwriting these loans, individual loans.
We are adopting a very well thought technological process. We have done a lot of innovation. We are tying up with an organization which is Genai Artificial Intelligence based technology where based on the personal discussion of the field officer with the client, we will be able to record that and the voice will be converted into text and that text from vernacular would be converted into English automatically. And that will give us the SAM credit appraisal memo. Basically we have to make sure that the during the PD the field officer asks those 10 questions, for example like what is your income, what is your expenditure, is your house owned? And if it’s not, what is the rent you are paying? Things like that.
And based on that a credit appraisal memo would be created. Then there is a centralized credit underwriting team which will analyze that credit appraisal memo and also look at the credit score of that customer. And based on that a decision would be made on those customers. So we have seen this. We have already disbursed certain loans. Under this last month we disbursed around 18 crores of these loans and so far the repayment has been absolutely on time. All the repayment of these loans is 100% digital through ENAC and so far all the enhanced have gone successfully through.
There is not even a single bounce. So that itself will bring a lot of operating efficiency. We will be able to leverage our branches better. Apart from that, the good part about being in Matoot group is that we have a leverage of other group companies who are there. We are already in talks of having a co lending business with Matoot Flamcore where we have identified that lot of our customers are having gold finance business with other companies. So we will focus on those customers and give them customized gold finance facilities within the group where we will have a co lending share where 60, 40 partnership is there.
60% would be on Madhood microfilm book and 40% would be on Sencor book. Similarly on housing finance we have identified customers who are having loans. There are 1 14,000 customers who are having loans outside. We have identified that around 50% of those customers are having loans which are higher than our lap rates. So we will be focusing on those customers to build that in our book. And the customers which are having lower rate of interest, we will be facilitating a BT for those customer with our housing finance company where we will earn some fee income on those products.
So from that income and utilization of our existing branches and tie up within the group company we will be able to significantly rationalize our operating cost.
Shubhranshu Mishra
Right. Thank you. If I can just ask one last question which is a data point. How many customers we bank on a monthly basis which is like how many customers are presented a NAT mandate for. Emi. So the ideal product which is more of a cash collection product there is no we have a NAT mandate signed by the customer but we don’t bank that natch mandate that is only utilized if there is an overdue but if you look at individual loan customers and LAP customers and certain our priyas loan customers we do a NAT mandate for them Banking of natch mandate I don’t have a ready number Odish what is the number for that?
Sadaf Sayeed
So we do around thousand odd cases image processing month on month and plus there is a Digital collection of around. 23 to 25 percentage every month so. That comes relatively comes around the 200. Odd crores of collection.
Shubhranshu Mishra
So Nachman, this EMI collection digital is basically UPI right? No, it’s enacts presentation and this digital collection is for the microfinance customer. Basically the UPI collection balance of cash collection 70% right? Right. Done done done. This is great. Thank you. Best of luck for MP importers.
Sadaf Sayeed
Thank you.
operator
Thank you. The next question is from the line of Ankit Sonkia from Oculus Capital Growth Fund. Please go ahead.
Ankit Sonkhiya
Hi sir. Thanks for the opportunity Sir. Our loan per branch and employee has. Continuously gone down and still we are opening more. So aren’t we looking for sweating the existing branches so that our OPEX ratio comes down? And the second question is when we are going for this co lending model as our OPEX ratio is 6 to 7% right now on the 40% that will go to the parent book, are we getting compensated for this 6 to 7% of operating expenditure that we incur on sourcing of the clients, the branch expenses, the collection etc. So that was the second question and the last question is as our NIM has been below the guidance level and. The OPEX ratio is also higher and. The entire management overlay we have already utilized. So any changes in the guidance for this year in terms of credit cost, NIM and the OPEX ratio These are the three questions.
Sadaf Sayeed
Thanks Ajit. I think firstly on the branch productivity the AUM has been pretty much consistent for us. We closed this year at 12,200 odd crores of asset under management. 100 crore down than previous quarter. But already the growth trend is already being noticed in July and this will continue to grow. As I said we will be rationalizing our branches and also looking at leveraging our existing branches. So of course the AUM per branch will definitely increase going. You will see that in Q2 and Q3 and significantly in Q4 that will automatically result in rationalization of our OPEX currently our OPEX is around 6.9%.
This is largely because of lesser disbursement that we have done during the quarter one already. The trend is that disbursement per month is improving. In the last quarter we were doing around 630640 crores of disbursement. July itself we are seeing around 727 crores of disbursement and in coming months it will touch around 800850 and reaching to around 1000 crore disbursement by September and going forward quarter. So that will automatically rationalize some of our expenses. Apart from that we are not looking at opening many branches. The branch count pretty much will remain the same as we expect by the end of the financial year it will marginally will go up.
On the co lending piece we are having a 6040 relationship where only a lead from our side would be passed on where we have identified that our customers, existing IGL customers is having a gold loan exposure exposure outside the rest Entire customer underwriting, assessment of gold, storage of gold and servicing of the customer would be done by mfl the gold loan branch which is a parent company in this our operating expense is next to negligible. Our yield on the portfolio would be sufficient for us. We are looking at incremental benefit from this. Considering our cost of fund is coming down we will continue to have a decent spread on this loan without incurring any amount of operating cost or a very marginal operating cost.
We have also seen in gold loan products the credit cost is very very minimal below 1% or even below 50. That’s most of the time. So that is where we think that it will benefit us in overall cost to income ratio will rationalize because of that on the nim the NIM has already started expanding. We are the guidance that we have given is for the full financial year. We are quite confident that by the end of the financial year we will definitely be within the guidance of overachieved. The guidance the expansion of blim is happening on both the side one on the rationalization of the cost of fund.
As I explained we have already reduced around 23 bits in cost of fund in quarter one itself and this is even before the passing of the rate cut happens. As that benefit of the rate cut is passed to us, we will be able to further reduce our cost of funds and at the same time we have revised certain lending rates and we will have a well diversified portfolio where we will be earning some fee income as well. So overall our NIM will also expand and our profitability will also improve. The third question that you have was on the management overlay.
Out of the total 132 crores and 230 crores. 132 crores of the management overlay has been used for writing off which was the intended purpose. We knew that certain portfolio from Karnataka will flow into NPA and that would be slightly difficult to read in. So which has been utilized to write off those loans. But 97 crores of that provision still remains. However that has been absorbed into overall provision requirement because we have changed the ECL model. If you go back to the old ECL model the provision requirement would have been lesser. So we would continue to have that 97 crores as management over there.
But because the ECL model we have changed, we have made it more robust. We have looked at more aspects on the macroeconomics to be considered for calculating so that there is no volatility in the income. So that management overlay has been utilized.
Sadaf Sayeed
To. Make its provision. On the credit cost side, we are quite confident that going forward the credit cost will reduce. We are seeing a tremendous turnaround in collections where we used to recover around 6 to 7 crores from overdue loans. In the quarter gone by we have recovered around 38 crores from overdue loans which is around 13 crores per month. Kind of a run rate. And if I give you an example of July month we were able to recover around 18 crores. So this number is consistently increasing. But even if we take an average of around 16 to 17 crores also for the balance period, good amount of 150 crores from the overdue loans would be recovered.
And we are seeing good traction everywhere. The collection efficiency is improving and more and more new loans that we do, there would be better recovery on those loans. We have seen that in the vintage curves. The loans that we have originated in October, November onwards, their data quality is much better repayment quality as compared to the loans prior to that. Suppose guardrail, the recovery quality has been much better. So which will automatically translate into a lower credit cost. And we are quite confident that we will be on the lower spectrum of the guidance that we have seen.
Ankit Sonkhiya
Awesome. Very nice to hear that sir. One doubt that I had in this co lending part you mentioned that you will be mainly doing the lead generation. But then the collection and all the. Servicing will be done by the parent. So but let’s say the branch network they will not have in the same area that we have. So how the collections will be done. Won’t it be cost? It will increase cost for them if they come and collect the money from these areas they don’t have branches.
Sadaf Sayeed
Ankit usually the gold finance repayments are bullet repayments and the tie up is based in such a manner that we have pin code basis identified branches that these branches would be able to service these customers. So whichever customers are there within the five to six kilometer radius we will be serving focusing on that branch.
The good part is that Fincorp which is our parent company has around 3 3,900 branches spread across the country and we have around 1,726 branches. So there’s a decent amount of overlap and larger part of these leads, almost 75% are from south where we have a tremendous density. So we should be able to service this customer and would be able to service these customers.
Ankit Sonkhiya
Okay, okay. And one last thing. So let’s say once the customer has taken the gold loan and the bullet payment has been done won’t that customer directly go to Masood Fincor now because they will have the data of the customer and we will not get these repeat customers in the gold. So we have a clear understanding the customer which are source from Matut Microfill will remain Matut microphone customers. We have a concept of UCIC unique customer identification code. So for each customer there is a UCIC which will be there for whatever has come through Microfin and that will remain throughout the journey of the customer within the system.
Thank you so much. Thank you so much and all the best.
operator
Thank you. The next question is from the line of Mayank Mistry from JM Financial. Please go ahead. Yeah hi sir.
Mayank Mistry
So just one question. I think it was partly answered by in the previous question but wanted to know. I will see in Q in this quarter we are already in the lower end of our guidance at around 4.1% of credit cost costs and like the collection efficiencies are also improving given that we had extra provisions in previous quarter. Mainly expecting that the Tamil Nadu book might start, you know might start showing some deep in collection efficiencies but seems like the situation has actually turned out pretty positive. So is it possible that, I mean Most of the MFIs, even others are largely seeing the declining trend in credit cost.
So I am assuming that even at 4.1% in this quarter this trend should be declining from here on. So what is the take on the remaining quarters on credit cost? And you already said that we should we will try to maintain at a lower end of the guidance but is it possible that it might even turn out even lower considering that we are already in the lower end?
Sadaf Sayeed
Yeah man, very apt question. Actually we would definitely be at the lower spectrum and could be below our guidance as well. We didn’t want it to revise the guidance because we just issued the guidance in Q1 at the beginning of Q1 the financial year. We will monitor this. I’m quite confident that coming quarters the credit cost would be comparatively lesser. And as you have correctly interpreted for the whole financial year, definitely since we are already at the lower spectrum, it could be below what we have guided also. But at the moment we would want to see how it pans out.
We are quite positive and the trends are quite positive. The collections are improving, disbursements are improving. The new products that we are doing, there is a good offtake of those products. And also we are seeing that the repayment trend among the customers that we have identified with the higher credit score, the repayment is holding good. So all of these translates into better quality of portfolio and lower credit cost. Definitely we are confident that we would be at the lower spectrum. But this can also turn out to be significantly lower than what we have guided. And our AUM growth would also be above what we have guided.
But we would want to watch this trend to continue for at least one or two quarter before we change any of our guidance.
Mayank Mistry
Okay sir. And all the best. Thank you very much.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Jaspreet Singh from VA Capital. Please go ahead.
Jaspreet Singh
Yes, it’s Ritri. You’re audible. Good morning Suzakh. Any restriction on fund flow from the banks which NBSC MFIs are facing? So that’s a very good question. Actually we are not seeing any restrictions from banks. Banks are focusing on, I think the larger set of NBSCs first. And the most important aspect that I wanted to highlight is that there is a marked change in the way NBFCs are looked at now since the new Governor has taken over. In fact, very recently in Delhi the Department of Financial Services had organized a symposium of NBFCs which is for the first time such kind of interaction with the honorable Finance Minister was organized and in which the Finance Minister very candidly said to the banks that NBFCs play an important role and they should support it.
And we are seeing that translation into action. And most of the banks, most of the public sector banks which were away from action for some time are coming back and lending. We have active conversation. We have just done a large largest PTC transaction for us in a single go with the State bank of India. Around 500 crores of PTC transaction that we have done. Apart from that there is a good amount of funding that is available. We are quite choosy about the. Now that there is growth momentum with us we should be able to draw these loans as well and would be able to utilize 1450 crore is what we have borrowed.
We definitely have more in hand. Praveen, you want to elaborate on that?
Sadaf Sayeed
Yeah. So I think from the company side liquidity is not a concern as of now. So we have more than 30002000 crores of liquidity available in the form of refund, some investment in G SEC through HQL as well as sanctions which is unknown. So on on the liquidity side it’s been perfect. And like the public sector banks have started coming back. They have been slightly slow especially in the last couple of quarters which they are coming. Like CEO has confirmed we have very recently done a large deal with sbi. Similarly we see momentum picking up in terms of fresh sanctions as well as disbursement.
So overall we don’t see any challenge in liquidity. We will be, we are, we have enough liquidity to manage the growth that we are talking about. Plus I think the NCD market and the CP market also started becoming more active especially from last couple of months. So that flow also will start coming to the sector.
Sadaf Sayeed
As you know the transmission of rate in the CP market happens faster and so has in the PTC market. So the rate cut that has come in has been transmitted through PTC to us. So we are doing deals in PTC stays at 8.5, 8.8 kind of a rate and we are able to get that benefit from our overall cost of fund. We have done some market use like for private sector bank, the first BTC transaction for hsbc, first BTC transaction for DBS we are trying to do. So all of these transactions are happening. There are DFIs who are looking at BTC transactions and there is also active interest from foreign banks to lend to us through the ECB route.
So we are utilizing all sources and in terms of availability of the capital and in terms of our liquidity there is no concern. Okay, okay, sounds good. And what is the bottleneck in increasing the disbursements immediately that you’re facing right now? So the current bottleneck if you ask me, was because the Guardrails 2 which was introduced in April. So in the field it takes a little bit of a time for people to understand and kind of ensure that their sourcing pattern changes according to the guidelines we have implemented. These guardrails from the day one so initially resulted in higher rejection ratio which of course resulted in higher operating cost and lower productivity.
But now that system is set, now people have understood what kind of customers they should source to ensure that it goes through. So the productivity has automatically improved. We were disbursing around 630 odd crores previously. We are now disbursing around 727 crores in July. And we are most likely to improve that to 800 to 850 and by the end of this quarter around close to 1000 crores. And going forward for the balanced six month period in northwest of 1000 crores per month. So that is the trajectory we are seeing with the diversification of other products.
Also, I think the new product line will ensure that we continue to kind of cater to those customers better. Okay, all right. My last question is that in this kind of environment where there has been some problem in the recovery and implementation of the cartridge has taken some time to get adopted in the system. Do you think banks or small finance banks have advantage against nfi? Nbsc? So if I see in the current environment, the share of NBFC MFI is consistent and improving. But at the same time small finance bank are looking elsewhere, mostly in the secured space.
So definitely I think we have more space to operate. I think more importantly because of these guardrails, people who have well established customer base, they would be able to retain those customers. There is less scope of new entrants coming in. And also at the bottom there would be a little bit of a consolidation and winding down. So that will also help. If you look at overall industry, the leverage customer were around 20%. They have come down to around 8% which is more than four loans. And this is happening from conscious implementation of guardrail and some of the loans which were available from smaller MFIs, those are winding up.
So I think there is enough and more for both SSMBs and nbsp MFI to operate. But I think nbsp MFI with the 6040 guideline, which is commerce, it has put us on an even keel with the small finance bank and we would be able to utilize this customer base to offer more products to our customers. Just like Wonderful.
Jaspreet Singh
Thanks.
Sadaf Sayeed
Thank you. Thank you.
operator
Thank you. The next question is from the line of NITESH Jain from Investecheck. Please go ahead.
Nidhesh Jain
So thanks for the opportunity. The first question is what is the quantum of interest income reversal in this quarter or interest income write off that we have taken from the interest income line item?
Sadaf Sayeed
The interest income is around 36 crores of write off.
Nidhesh Jain
Sure. And secondly, how is the expected collection efficiency trends for the month of July?
Sadaf Sayeed
July is improving. Every month the collection efficiency is improving. It’s 99.2%, 99.3% in terms of overall ex budget collection. The important aspect is that collection efficiency in states like Karnataka where it had dipped significantly is improving. And we have given a specific slide for Karnataka. If you look at the 0 + far which reached to a peak of around 15% has now reduced to around 8% and there is a sharp decline there. And collection efficiency has which has been down to around 83% reached to 87% it’s now touching closer to 90%. And end market in Karnataka remains at 99% if you look at that way.
And overall collection efficiency is also improving.
Nidhesh Jain
Sure. And so what is the expected efficiency which used to be, which we used to see in normal times? I’m just trying to understand how far we are from normalcy. 99.79 9.5. Okay, so we are 99.3 quite close to that.
Sadaf Sayeed
We should be very close to normal. And I think the important part is that the recovery from the overdue books needs to continue to come. And this is what we are seeing that overall our collection efficiency in terms of recovery from overdue is improving significantly. If you look at one of the charts we have given quarterly, we have been able to recover 38 crores which was usually around 6 to 7 crores per quarter. And per month, sorry, around 18 crore per quarter. So it has already more than doubled. And in the month of July we were able to recover 18 crore on standalone July month.
So this should definitely continue to improve the productivity from a field officer which is a collection officer standalone dedicated for overdue loans which was around 65 to 70,000 earlier it has now reached to around 1 lakh 50,000 per month. So that improvement will definitely help us improve the overall collection efficiency.
Nidhesh Jain
Sure. Over to collection efficiency, how do we measure it? Is it on 1 to 90 DPD collections or it is written of collections.
Sadaf Sayeed
That you’re talking about all due whatever. Whether it’s 90 plus if it’s a new installment versus whatever the recovery is there. And one installment we don’t club the installment if there are three installment overview.
Nidhesh Jain
Okay. Okay. Thank you. Sir, that’s it. Performance.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press start and what to ask a question. The next question is from the line of Prithviraj Patel from Investec. Please go ahead.
Unidentified Participant
Yeah, so my question was on the attrition. Attrition ratio. So what, what is the attrition rate. Right now for Muthutin compared to the industry Also if you can give a. Sense of what is happening at the employee level.
Sadaf Sayeed
Yeah, so I think usually Q1 is a quarter. You see a slightly uptick in the attrition rate because both the appraisal of the performance appraisal people look at opportunity and also certain people that we don’t want us to continue with us. There’s a grading that we do. There is a meet expectation, exceed expectation and needs improvement category. So needs improvement category is automatically put on a performance improvement plan. Kind of a guidance that they should look out. So considering that the attrition rate has been quite reasonable in terms of around. It has been around 26% annualized for the year.
The important part is that what we had done few initiatives to reduce our attention rate that has really shaped up well. So one initiative that we had taken was to focus on more female field officers, the relationship officer. We now have around,300 female employees out of which around around 1100 are female field officer. And we are proactively comparing the performance of both female and male officers. We have seen that the collection efficiency in these centers which are managed by female officer is 2% higher than the collection efficiency of the male officer in the same territory.
And productivity is almost same. Both are disbursing around 11.8 lakhs of business. Around 12 lakhs of business per month. And in terms of accretion, their attrition rate is significantly lower as compared to the main field officer. Apart from that, we had created some residential facilities wherever there was higher attrition. That has also helped us to reduce attrition. I think first quarter, as I said is slightly a difficult quarter to major attrition. But I think going forward it should significantly reduce further.
Unidentified Participant
Okay, sir, thank you. That was really helpful.
operator
Thank you. Participants who wish to ask questions may press star and one now. Participants who wish to ask questions may press star N1 at this time. The next question is from the line of Rishikesh P. Say an individual investor. Please go ahead.
Rishikesh. P
Thanks for the opportunity. I joined late to the call so maybe I missed a few details. I had a question that you Know, in the previous conference call, management had mentioned that they were expecting that this year could be exceptional going forward and were expecting like 5% credit cost for FY26 and 2% ROI and 10% ROA. So is that guidance intact or has it changed? Looking at the current scenario, so in.
Sadaf Sayeed
Terms of credit cost, we have an improved number. So we have given a guidance of 4 to 6%. We are within the guidance, but we are at the lower spectrum of around 4.2%. And definitely what we are looking for the remaining part of the financial year with the improved collection and diversification of the products. We anticipate that the credit cost would be within the guidance or likely to be below the guidance as well, which automatically would mean that the return on asset and return on equity will definitely improve. That is there on the operating cost also definitely the operating cost will rationalize and it will be within the guidance that we have given of around 6.2%.
On the growth side, we are anticipating a positive revision. But before revising the guidance, we would like to wait for one or two more quarters. We are seeing that trend in Q2 already in the first month and what we have devised as a strategy. We are quite confident that in terms of growth and in terms of credit costs, both we will be able to outdo the guidance. But before revising you will watch out one or two more quarters.
Rishikesh. P
But what exactly went wrong in this particular quarter? Because we see that the loan book is quite so far it’s almost flat. So is it really like is the scenario that break in the economy that you are not seeing not gaining the confidence to lend faster or at a good pace?
Sadaf Sayeed
If you compare to our peers, definitely we are among the ones who are lend. And if you look at from like disbursement for a quarter four, we are just down by 9.4% as compared to quarter four. Disbursement in the Q1. Q1 usually is a slower quarter for lending entities. Usually considering that plus the guardrails which were implemented this Guardrail 2.0 of ENFIN came into effect from 1st of April. That also had an impact on certain rejection ratio. But despite that we were able to disburse around three 11,000 loans and we are quite confident that we would be able to do more business.
Already in the month of July we have seen increase in business by around quite a 15 to 18%. This will further improve in the month in August and going forward also it will continue to improve. So we are quite confident of building a robust portfolio and meeting our growth guidance and over achieving our growth guidance.
Rishikesh. P
All right, sir. Thank you so much.
operator
Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Sadaf Syed for closing comments.
Sadaf Sayeed
Once again, thank you very much for participating in the call with us. As I said, our focus is on diversification. Our focus is on building a robust underwriting model and use of technology. We will be utilizing our existing branch infrastructure and our customer base to offer more diversified products to our customers and also looking at acquiring newer set of customers which are falling within that liberalization of qualifying asset criteria. And with that we would be moving to build a diversified balance and sustainability book which will help us to ensure that we have consistency in our earning and consistency in our growth.
We have put in all the necessary pillars that are needed for this. From a robust ECL model to a well established technology in place to underwrite and source business. At the same time a robust collection practices which is helping us to recover more from the overdue loans. I hope in the long run this will definitely help us improve on our performance and we are looking to outdo our guidance in the coming quarters and we wish to have this continued support from all our investors. Thank you on behalf of entire management and.
operator
Thank you on behalf of GM Financial Institutional securities limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Sadaf Sayeed
Thank you.