Shriram Finance Limited (NSE: SHRIRAMFIN) Q1 2026 Earnings Call dated Jul. 25, 2025
Corporate Participants:
Umesh Revankar — Executive Vice Chairman
Y S Chakravarti — Managing Director and Chief Executive Officer
Parag Sharma — Managing Director & Chief Financial Officer
S. Sunder — Joint Managing Director
Analysts:
Chintan Joshi — Analyst
Raghav Garg — Ambit Private Limited
Shweta Daptardar — Analyst
Shubhranshu Mishra — Analyst
Abhishek Jain — Analyst
Vansh Solanki — Analyst
Abhishek M — Analyst
Rajiv Mehta — Analyst
Sonal Gandhi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Shriram Finance Limited Q1 FY ’25-’26 Results Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Umesh G. Revankar, Executive Vice Chairman, Shriram Finance Limited. Thank you, and over to you, sir.
Umesh Revankar — Executive Vice Chairman
Thank you. Good evening, friends, from India and Asia, and warm welcome to all of you. Greetings also to those who have joined the call from western part of the world. To present our Q1 FY ’26 earnings call today, I have with me our Managing Director and CEO, Mr. Chakravarti; Managing Director and CFO, Mr. Parag Sharma; S. Sunder, Joint Managing Director; and Sanjay Kumar Mundra, who is our Investor Relationship Head.
It has been good first-quarter for the year for Shriram Finance under current circumstances. Let us first look at broad economic indicator that has an direct or indirect impact on our business. First is the GDP. GDP for the full financial year was 6.5%, making India the world’s largest major economy and we’re expected to grow on similar growth rate for the — during this financial year. On the inflation, the consumer inflation continued to ease in June, hitting a lower-than-expected 2.10% against 3.34% in March. And we have reached this level — lowest after three — sorry, six years, driven by falling prices of vegetable and food items. India’s annual inflation fell to 20 months low of wholesale inflation to minus 0.13% against 3.43% in June ’24.
Now let us go to RBI policy. The key takeaway from the 2025 RBI Monetary Policy, June 2025 Monetary Policy are repo rate cut by 50 basis point to 5.5%, policy stance change to neutral, CRR cut by 100 bps to 3%, GDP forecast for FY ’26 6.5%, CPI inflation estimates reduced to 3.74% earlier. The rural economy and monsoon, the southwest monsoon has been forecasted 9% above-normal across India. Overall monsoon has been normal to excess in nearly 80% of country’s meteorological subdivisions.
The Department of Agriculture and Farmer Welfare club has released latest data on kharif crop. The data shows area of coverage reached this 597.86 lakh hectare as on 11th July, marking an increase of 37.27 hectare compared to the same period previous year. The rural consumption is poised to remain a bright spot in Indian economy, supporting growth in ongoing fiscal year. The inflation-adjusted consumption growth of 7.1% outpaced the broader economic expansion of 6.5%, reflecting a rural consumption recovery. The GST collection has shown a good growth of INR6.2 lakh crore to INR1.85 lakh crore compared to INR1.74 lakh crore in the previous year. It is a slump in June, back-to-back months above INR2 lakh crores in April and May.
The GST revenue dropped to low-single digit in June, primarily due to low mop up from domestic transaction indicating moderation in economic activity, which could be possibly due to early onset of monsoon. And the auto industry, if you look at the — on the sales side, the total CV sales declined by 0.6% in Q1 ’26 for quarter ’26, which stands at 2.23 lakh against 2.25 lakh units. Within CV, MCV sales recorded de-growth of 2.3%. The number stands 83,638 against 85,590. LCV sales recorded flat sales, which stands at 1.4 lakh unit against 1.39 lakh. Passenger vehicle recorded a de-growth of 1.4%, which stands at 10.12 lakh unit against 10.26 lakh unit. Two-wheeler sales recorded de-growth of 6.2% with sales of 46.75 lakh unit against 49.86 lakh. Three-wheeler sales recorded a flat sales of 1.65 lakh against 1.65 lakh in the previous year. Tractors have recorded a growth of 6.3% with 2.1 lakh unit against 1.98 lakh unit. Construction equipment marginally declined with 28,687 units being sold against 28,902 units.
I shall now ask my colleague, Mr. Chakravarti to take through the operational performance.
Y S Chakravarti — Managing Director and Chief Executive Officer
Thank you. Good evening. I welcome all of you to our quarter one FY ’26 earnings call. And I hope you’ve had the opportunity to review our earnings and the related investor presentation, which has been posted on the website of the stock exchanges. We have registered a disbursement growth of 13.01% year-on-year. Our disbursements in Q1 FY ’26 this year aggregated to INR41,816.75 crores versus INR37,001.65 crores in Q1 FY ’25. Our asset under management as on 30th June 2025 registered a growth of 16.62% over Q1 FY ’25 and of 3.44% sequentially. Our AUM stood at INR2,72,249.01 crores as against INR2,33,443.66 crores a year-ago and INR2,63,190.27 crores in Q4 FY ’25.
Our net interest income in Q1 FY ’26 registered a growth of 12.55% year-on-year. We earned a net interest income of INR6,026.43 crores in Q1 FY ’26 this year compared to INR5,354.47 crores in Q1 FY ’25. Our net interest margin was 8.11% as against 8.79% in Q1 FY ’25 and 8.25% in Q4 FY ’25. Our profit after-tax grew by 8.84% in Q1 FY ’26 over Q1 FY ’25 and by over 0.76% over Q4 FY ’25. We have registered a PAT of INR2,155.73 crores for Q1 FY ’26 as compared to INR1,980.59 crores in Q1 FY ’25 and INR2,139.39 crores in Q4 FY ’25. Our earnings per share for the quarter stood at INR11.46 as against INR10.54 in Q1 FY ’25 and INR11.38 in Q4 FY ’25.
On our asset quality, gross Stage 3 in Q1 FY ’26 stood at 4.3% and net stage at 2.57%. These numbers show an improvement over the corresponding period of 5.39% gross and 2.71% net in Q1 FY ’25 and 4.55% of gross and 2.64% net in Q4 FY ’25. Our credit cost on total assets for Q1 FY ’26 stood at 1.64% as against 1.87% for Q1 FY ’25 and 2.07% for Q4 FY ’25. Our cost to income ratio was 29.29% in Q1 FY ’26 as against 27.45% recorded in Q1 FY ’25. Our cost to income ratio in Q4 FY ’25 was 27.65%.
I shall now request our Managing Director and CFO, Mr. Parag Sharma to inform you about our resource raising activities, after which our Joint Managing Director, Mr. Sunder will brief you about accounting and regulatory aspects.
Parag Sharma — Managing Director & Chief Financial Officer
Thank you, and good evening, everyone.
On the total liabilities, we have close to around INR2,42,900 crores of liabilities broken up into the ECB loans at 13.92% and bonds, ECB bonds at 6.48%. Overall securitization outstanding is close to around 16% of our liabilities. The capital market — domestic capital market at 17.33% and retail deposit has shown a positive uptick at 25.95% and the bank and the institutional term loans at 21% of our liabilities. The cost of liabilities have come down by 7 basis points in the current quarter from 8.95% to 8.88% now and we do expect this to further come down. The leverage stands at 4.15 times versus 4.16 as of March-end number. The liquidity coverage ratio is at 268.74% versus 286.12% as of March.
Overall liquidity continues to be slightly on the higher side, which is covering five months of our liability repayment. We will work towards reducing this liquidity and this has some negative carry that will come down in next four to five months’ time. The fund mobilization for the quarter was slightly muted. The only big inflow was the retail deposits. The incremental cost of fund has come down substantially from March quarter, which was 8.86%, it has come down to 8.37% and we do expect this to further come down. The incremental cost and the overall cost will definitely be reflected. The ALM buckets continue to be positive across all the buckets. And up to one year, we will have a cumulative surplus of more than INR15,000-odd crores.
With this, I hand over to Mr. Sunder.
S. Sunder — Joint Managing Director
Good evening, everyone. The employee count as on 30th June was 79,186 as against 79,872 in the March quarter. The Stage 3 was at 4.53% and the Stage 1 probability of default was 8.82% and Stage 2 PD was 21.35% and the stage — yeah, and the segment was disbursement was commercial vehicle, we did INR16,917 crores, passenger vehicle we did INR8,162 crores, construction equipment we did INR526 crores, farm equipment we did INR1,273 crores, MSME INR6,358 crores, two-wheelers INR3,081 crores, gold INR3,291 crores, personal loan INR2,205 crores, totaling to INR41,816 crores.
So, with this, I hand over to — yeah, we open the floor for the questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Chintan from Autonomous. Please go-ahead.
Chintan Joshi
Hi, thank you for taking my questions. My first one is on asset quality. There is a 40 basis-point increase in GS2 assets. Could you throw some color on where this is coming from? Whether this is seasonal in nature or something we should worry about? And how do you expect that to evolve? And related to that, if you could also talk about your cost-of-risk guidance, what do you think about that for the full-year? And then I’ve got one more on the NII.
Umesh Revankar
Yeah. As you rightly put it, it is more of a seasonal. This time the onset of monsoon was a little early than expected and typically monsoon arrives in the mid-June. This time it was in the last week of May in many parts of the country. So there were some — the business disruption here and there. So that’s the reason Stage 2 went up, but it is very marginal. Our customers normally move between Stage 1 and Stage 2 and they have cash flow mismatch — whenever cash flow mismatches. But what is important is the credit cost. The credit cost did not go up. The credit cost has actually improved. So we need not really read too much into the moment of Stage 2 increase.
And second question was…
Chintan Joshi
The guidance on credit cost.
Umesh Revankar
Credit cost, overall, it will remain under 2% for us for the full year.
Chintan Joshi
Under 2% on AUM plus cash and investments?
Umesh Revankar
Total asset.
Chintan Joshi
Okay, total assets. And the second question was on NII. Is there any kind of fair value gains from parking liquidity with mutual funds? Your peer reported one. I’m just wondering if your reported NII, not the presentation one, but the reported NII, if it is understated for any specific factors, for example, this fair value gain, that would be one question on NII. And the second one would be, there is no direct assignment income in NII, in your management NII this quarter. So I’m just wondering if you could call out one or two main items between the difference between reported and management NII just for the benefit of investors.
S. Sunder
The net gain on the fair-value changes was mainly on account of the profit that we earned on the mutual fund investments. For the current quarter, it is INR134.6 crores. The similar figure for the previous quarter was INR111.27 crores. And as far as the assignment income is concerned since we have not done any assignment deals in the current quarter, no income was recognized. Similar figure in the previous quarter was INR13.60 crores. And apart from that, the interest income only is performing part of the — and the other operating income is also grouped under the — for the purpose of net interest income.
Chintan Joshi
Okay. Okay. So the fair — so the NII is understated by the difference between INR134.6 crores and INR111.2 crores. Is that how I should think about the reported NII?
S. Sunder
The reported NII includes INR134.66 crores for the current quarter and 111.2 crores…
Chintan Joshi
In the presentation, not in the release.
S. Sunder
Yeah, it is included, yeah. What I would suggest is you can reach out to Mr. Mundra post this call and he will give the reconciliation.
Chintan Joshi
Okay. Okay. No other one-off factors in NII to think about, right?
S. Sunder
No, no, nothing, nothing.
Chintan Joshi
Okay. Thank you.
Operator
Thank you. Our next question comes from the line of Raghav Garg from Ambit Capital. Please go-ahead.
Raghav Garg
Sir, hi, good evening. I had some three, four questions. One, first is on the MSME growth front. So I see that your quarter-on-quarter growth has come down to 3.5%, 4% and there is a sudden moderation in MSME business accretion this quarter. You’ve been guiding for around 15% growth overall. So my first question is, why is there sudden accretion? Why is there some slowdown in the MSME growth this quarter? And then the other question is, assuming that or annualizing this quarterly run-rate on MSME growth or do you see a risk to your full-year AUM growth estimate on an overall basis?
Y S Chakravarti
So we are still — we are — sorry, this is Chakravarti here. So we are focused on growing this book. The only reason why it is slowed down — actually there was a slowdown in the demand for — in the first-quarter, because see the fourth quarter festival season, third and fourth quarter festival season, typically demand picks up from the second quarter in preparation for the third quarter festival season. First quarter it’s normally slow, but you will see the pickup in the next two quarters. So we are still on the course for the guidance to meet the guidance numbers.
Raghav Garg
Sir, if I compare this to the quarter-on-quarter accretion in say 1Q FY ’25 at that time it was about 10% in this book and this time it’s 4% and hence the question, which would be growth rate or the sequential accretion has more than half. Where do you see the full year growth for MSME?
Y S Chakravarti
Year-on-year, sequentially, normally three and four quarters are big, you can’t compare. You have to see only year-on-year.
Raghav Garg
Sir, I was looking at 1Q FY ’25, which is around 10% sequential.
Umesh Revankar
Yeah. So as I explained to you, there is a slowdown in the first-quarter, but we are confident that we will make-up for the slack in the second and third quarters.
Raghav Garg
Understood. Fair enough. The other question is that you mentioned that there is some moderation in economic activity, but I think you partly answered that when you said that your sales cost will be under 2%, but I’ll still go-ahead. How is the trucking activity doing on the ground? Are operator cash flows improving? How is the situation at the ground level?
Umesh Revankar
The trucking activity is quite healthy, I should say. See, one of the biggest advantage or disadvantage is the — since the cost has gone up in the last three years, the new customers walking into business have come down. So the existing players have a reasonably good business. Their revenue is good, the freight rates are good and their overall utilization levels are good. So that is not — the situation has not changed for truckers at all. Normally what happens is when there is excess capacity and economies slow-down, then there is a challenge. But this time around, even though there is little slowdown in the economy, since there is no excess capacity, the trucking activities are going on smoothly.
Temporarily, as I was telling you, if there are seasonality because of excess rains in certain location, there could be some disruption and some delay. And that doesn’t really what call create the what call, credit cost. It may — there may be some movement into Stage 2 because of the delay in or mismatch in cash-flow, but that doesn’t end-up with the credit cost. So we believe the demand is good because for us, the disbursement growth was good in CV in the first quarter. And I expect the same to come because the demand from the rural segment is — rural market is really growing.
Raghav Garg
Understood. Those were all my questions. Thank you.
Umesh Revankar
Thank you.
Operator
Thank you. Our next question comes from the line of Shweta Daptardar from Elara Capital. Please go-ahead.
Shweta Daptardar
Thank you, sir, for the opportunity. Couple of questions. Just taking follow the previous participant’s question. So while you mentioned that the operator economics remains undisrupted, but how about the operator cash flows, how are they faring, especially on the UCV segment side?
Umesh Revankar
Used CV segment has been doing quite well. In fact, our growth — disbursement growth is in the UCV is quite good. The resale values have not dropped anywhere across the country. So the value of the asset remaining strong, that helps the customer to not only to earn and also to encash after repaying the loan and he will retain the vehicle throughout with him. So these are all the advantages. So we are not seeing any weaknesses in the trucking market value or in the water revenue earning for second-hand or new. Both are doing quite good.
Shweta Daptardar
Okay. And sir, just taking it further, how has been the color on repossession side or movement quarter-on-quarter?
Umesh Revankar
There is no change in the reposition, most of the companies in the last couple of years have a slowed down or have not repossessed many vehicles, mainly because the resale value being higher, the customers are not defaulting. That is the scenario. So reposition numbers have not gone up. There could be in one or two geographies, it would have gone up marginally, but it’s insignificant considering the all-India position.
Shweta Daptardar
Sir, third question is on MSME. While you did elaborate on the growth momentum, which will be retained but one of the peers has highlighted pertinent concerns on asset quality on MSME and also banks have been highlighting regional challenges. So what has been your experience on the ground as far as delinquency/asset quality is concerned from the MSME side?
Umesh Revankar
Our focus has been a smaller ticket and to trading sector and services sector. We are not really lending into manufacturing sector in the MSME. Therefore, the businesses remains reasonably steady because especially if the wholesalers, shopkeepers, that kind of a segment we are addressing. And we have not really seen much fluctuation in their earnings or cash flow mismatches. So we are looking it as a very steady business and we believe that this will continue to grow as we create more reach. Now MSME lending is there in around two-third of our branches. The rest one-third of the branches we have to reach. We are creating that reach. And as we create a reach, we’ll keep expanding our business.
Shweta Daptardar
Sure. And sir, one bookkeeping question on your disbursements number. Thank you.
Umesh Revankar
Disbursement numbers you want. Sunder? We can give you offline.
Shweta Daptardar
Sure. Thank you so much, sir, for the answers.
Operator
Thanks you. Our next question comes from the line of Shubhranshu Mishra from PhillipCapital. Please go-ahead.
Shubhranshu Mishra
Hi, good evening. So are we looking at the car market, especially at the entry-level, what are the various demand drivers we see through the year during the festive season as well given the fact that we are more rural and semi-urban focused? Are we seeing inventory buildup and entry-level cars? Also, in terms of, LCVs, are we seeing asset quality spikes, any transition of customers to E3-wheelers or any other type of vehicle or any cash-flow challenges there. And really a third question is around gold finance. Given the fact that regulator has now allowed these gold loans for banks which can be unsecured as well, are we seeing some kind of a transition back of agri gold loan customers who came to our fold and will go back to bank? Thanks.
Umesh Revankar
Yeah. See, basically on entry-level car, as you rightly put it, the entry-level car demand, especially new vehicle sales are on lower side. Yeah, on lower side, but the demand for used-car is increasing. The entry-level car demand used to be mostly in the semi-urban and rural market. Now we are seeing there is a shift to a what call higher vehicle, which is compact SUVs. So people are preferring the secondhand compact SUV or new compact SUVs. So the aspiration class are increased — wanting to move-up to the next level cars. So the entry-level car demand has come down and people who are seeking to buy entry-level cars typically go for second-hand cars. So there are what call the entry-level car demand or sales have come down and likely to remain because India is moving for more compact SUV and medium-sized SUV is what we understand from the preference by the buyer.
As far as the LCVs and SUVs are concerned, last year LCV did not really grow much because the previous year, the rural economy was not really expanding or the demand from the rural economy was little less. But since last six months, the rural economy is doing well. We expect the LCV sales to go up. That’s one thing. And also the e-commerce activities are now spreading into Tier 2 and 3 towns. And therefore, I believe and SUV demand will go up. It will grow faster than heavy vehicle is my belief. And the value remains very strong in this market.
As far as the gold loan is concerned, we believe more business will flow in from informal sector to formal sector because there is — there has been little — the RBI new guidelines have been little liberal for small-ticket loans. So we believe that there is opportunity for NBFC and Bank to grow faster and because the more gold loan proposals will move from informal sector like palm broker and money lender to the pharma sector.
Shubhranshu Mishra
Great. Just two more questions. One is still unanswered. What is the — what will be our drivers of car growth in the next two to three quarters? And in terms of MSMEs, how many of our customers have more than three loans, any kind of loans? When we do a PD, they might have a hand loan as well, some of them might have a personal loan, a few might have a credit card. So what percentage of our MSME customers would have three-plus loans?
Umesh Revankar
See, we rarely see our customer-base having more than two loans. Maximum, we’ll have one loan with us, another loan is the gold loan. We have not really seen people having — of course, hand loan is something which we will not know. But a personal loan or unsecured loan is not known because in — we do the scrub in the traded agencies, we don’t come across. So that’s one thing. And you asked on the…
Shubhranshu Mishra
Drivers of growth for our car…
Umesh Revankar
See, basically, we believe the major drivers for car, especially in semi urban and rural area is the state governments have not invested in public transportation in the last five, six years. And therefore, it is making more people buying either their own car or the operators buying the car and operating in the semi urban and rural area. So that is creating bigger demand for the passenger vehicle in these smaller towns. And we are able to grow in that market consistently over the period. Even though last quarter the growth rate was little lesser compared to the previous year. But we feel that growth will come back because there is unmet demand above public transportation not being available for the large population.
Shubhranshu Mishra
Great. And if you can spell out the disbursement split, please.
S. Sunder
Okay. The total disbursement for the quarter was INR41,816 crores. The split between the segments where CV, it was INR16,917 crores, passenger vehicles INR8,162 crores, construction equipment INR526 crores, farm equipment INR1,273 crores, MSME INR6,357 crores, two-wheelers INR3,081 crores, gold loan INR3,291 crore and personal loans INR2,205 crores.
Shubhranshu Mishra
Right. Can you repeat the farm loan?
S. Sunder
Farm loan was INR1,273 crores.
Operator
Thank you. Our next question comes from the line of Abhishek Kumar Jain from AlfAccurate. Please go-ahead.
Abhishek Jain
Hi, thanks for opportunity. My first question on the NIM front. So in this quarter, it declined 48 bps quarter-on-quarter. How do you expect margin to be in the rest of the quarter, say FY ’26 with falling cost of the funds.
Umesh Revankar
See, there is a multiple factors which we feel confident of improving our NIM. First our incremental borrowing cost is at 8.36% and our cost in the book is 8.86%. So there is significantly lower cost we are able to raise resources. We also have reduced our deposit rate that from the first week of August, the deposit rates will come down by around 40 basis-point. So across we feel that the 40 basis-point reduction in incremental borrowing will bring down the cost to us over the period. Even though we have 85% of our borrowing in fixed terms and 15% floating.
So that transition will take some time because the 15% floating, the bank will pass-on immediately whenever there is a reduction in rate, but 85% will take time. So over the six months to one year, we would be able to bring down our borrowing cost and that will be able — we’ll be able to improve our net interest margin. We are confident that we will reach to 8.5% net interest margin for the full financial year over the — by the end of the year.
Abhishek Jain
Okay. And my second question on the credit cost, the guidance is 2.22% to 2.4%. So — and in this quarter ago, basically it is around 2%. So just wanted to understand what is the full-year guidance? Will you lower down the guidance for this number?
Umesh Revankar
Credit cost will remain around 2% for the total assets.
Abhishek Jain
2% for the full year?
Umesh Revankar
Full-year.
Abhishek Jain
Okay. And my next question on the CV side that the AUM growth was 12.3%. So how was the growth you see versus the new CV? And what is the guidance for the full-year?
Umesh Revankar
Let’s see, we have a reasonably good demand coming for CV, especially in the rural market in for used vehicles. Even the new vehicle demand had gone up in the Q4 for us. And also there was some fall-off demand coming in April. We believe that again the demand will come back for new CV post — during Ganesh Chaturthi and that will keep continuing. So — but used vehicle demand will continue to remain because of our strong reach, since we have 3,220 branches across the country and we have a reach and in the used vehicle, many transactions would come to us directly because we have built that brand over the period for more than 40 years.
Abhishek Jain
Okay. And my last question on that in the passenger vehicle side, in this quarter, the industry declined despite that your growth was very much a strong and impressive of around 23%. So just wanted to understand what is the reason behind this? Is it because of the premiumization and that higher ASP because of the change in the mix in the — and you are gaining market-share in this particular? Thank you.
Umesh Revankar
No, we are obviously gaining — I don’t say gaining market-share. This market is virtually is unattended. There are not many players in second-hand car financing, especially in the semi urban rural area and we are able to really grow on that. And also, as I was telling you, there is an increased demand coming from the semi urban rural market because of lack of transportation, public transportation available to them. So we are able to grow.
And also there is one big advantage for us that many of our customers who are — who bought a two-wheeler from us, they migrate to become car owners over the period. They have aspiration and that is a customer, which is in-house customer for us. So there will be a certain percentage of customers of aspirational costs will move from two-wheeler to four-wheeler. So I think that is a ready-made customer within the house for us to grow the business. So we should be able to grow healthy rate in the passenger vehicle, especially in the car segment over the period.
Abhishek Jain
Thank you, sir. That’s all from my side.
Operator
Thank you. Our next question comes from the line of Vansh Solanki from RSPN Ventures. Please go-ahead.
Vansh Solanki
Hello, sir. Very good numbers. I have two questions, namely, the first is that you have also told that there is excess liquidity in quarter four and also you have also suggested that there is a five months price of liquidity as of now. So what are the planning if you say in the quarter two or three years that this will be continue or not? And what about additional borrowing you will take on a quarter two or three, if you can just guide?
Umesh Revankar
No, we will be definitely utilizing the excess liquidity that’s available by slowing down the further borrowing for this quarter and we will bring down from five months to three months, maybe in three to four months from now. But further plan, Parag, can you elaborate on further plans?
Parag Sharma
So in n fact, that is it. We’ll bring down our borrowing than in next three, four months. And in fact, looking at options of higher costing debt to be repaid, that is what we will focus upon. But I don’t think much to add there. We look at the opportunities wherever the cost of fund is lower, those only sources will be looked at and the borrowing will be moderated. And overall liquidity, we always had the objective of maintaining three months of liability repayment into liquid asset that will continue. But as of now, yes, it has to be come down from five to three.
Vansh Solanki
And the second question is about yield if you can specify for each segment for [Indecipherable].
S. Sunder
Okay, you can just be in touch with Mr. Mundra, he’ll be able to help you out offline.
Vansh Solanki
Okay, okay. Thank you, sir. Thank you.
Operator
Thank you. Our next question comes from the line of Abhishek M from HSBC. Please go-ahead.
Abhishek M
Yeah, thank you. So the first question is on cash position again. If I look at the total outflows in your ALM statement, your three months liquidity, I think works out to roughly INR20,000 crores. So, basically this outstanding INR25,000 crore of cash position plus maybe some part of investments which you would be counting towards this. This should come down to 2025 eventually or how should we think about it? Where should this balance be ideally for a balance sheet of, say, today’s size?
Parag Sharma
Yeah. So what we are saying is right, we will bring it to three months of liability repayment. If you’re looking at the ALM, there can be some bulk repayment, which can be there in subsequent — particular months because of the bullet repayment of entities what we have would have but what a steady-state number will be at around INR18,000 crores to INR19,000 crores of the liabilities in three months is what we normally plan and that will be the number we’ll be targeting to maintain.
Abhishek M
But that INR18,000 crore, INR20,000 crores, sir is cash only, right? So not cash plus investments? Which one should we think about?
Parag Sharma
Yeah, it will be — normally what we do is it will be bifurcated into both cash and investment. Investments are with mutual funds only, liquid schemes on mutual funds, or…
Abhishek M
So the question actually really sorry, is that cash plus investment today is INR38,000 crores, INR39,000 crores. That INR39,000 crores should come down to INR20,000 crores.
Parag Sharma
No, we should not look at the balance sheet number because that will also include — I will not count everything as liquidity because that will have SLR component, that will have lean mugged component also. Which is free from any encumbrance is what we count for liquidity purposes.
Abhishek M
So how much is excess? Like what will you eventually run-down? Is it INR10,000 crores?
Parag Sharma
It will be close to around INR10,000 crores, which will run-down.
Abhishek M
INR10,000 crores. And what time-frame, sir? Because last three, four quarters we’ve been having this conversation and there’s a big negative showing up in NIM.
Parag Sharma
So it went up in the month of January is when we did large borrowing, particularly December-end and January is when we did. And we said it will take three to four quarters for — two to three quarters for this to come down. So as of now, we are pretty confident that next three or four months is what we will target and look at lower borrowing and also if possible, if we are able to repay some high cost is what we will target.
Abhishek M
Okay. Understood. Sir, second question is on NIM. Umesh sir, you said 8.5% NIM for ’26. So is it full-year ’26 or is it by fourth quarter of ’26 which one?
Umesh Revankar
By fourth-quarter.
Abhishek M
By fourth-quarter. Okay. So, the average NIM would be around 8.2%, 8.3% or so for the year, for the full-year.
Umesh Revankar
Yeah. And it depends. If the third and fourth quarter is bigger, then the average can be different. So we would aim to reach 8.5% by the year end.
Abhishek M
By the fourth quarter. That is the quarterly target. Average can be — average will be accordingly. Okay. Okay. Third question, sir, is on GS2 going up. So this quarter, almost 9%, 10% Q-o-Q increase in overall GS2 and if you look at some individual segments, it’s even higher. Does this mean that next quarter we should see the forward flow into GS3 from this? And therefore, your credit cost can go up or are you seeing like fairly good recovery potential in whatever is flowing forward? Okay, if you can talk about that a bit.
Umesh Revankar
So, most of your customers are a known customer or where we can reach and our executives are in touch with those customers. We are confident of rolling back most of the customers. It may be a temporary cash flow mismatches, which we’re confident that we’ll be able to reach out to them and address the — their challenges and we’re able to recover. So I don’t really see that flowing into GS3. Normally people who go for GS1 to 2 come back to one sometimes or zero bucket. So that effort is always on and the activities and actions are taken accordingly. And especially on the vehicles and all, we go for repossession so that we address that issue fully.
Abhishek M
Actually, the forward flow is building up. So last quarter it was 6% Q-o-Q. This quarter is 10% Q-o-Q. So at some point, it will start spilling over into GS3, which has not happened so-far. So that’s why I’m just wondering.
Umesh Revankar
The actions we take the immediate action, there is always a follow-up and there is touch with the customer directly. So we are not dependent on outside — outsourced agents for reaching to the customer. We have in-house executors who will to the customers.
Abhishek M
Thank you. And this quarter write-off would be around INR500 crores roughly, just the number if you can share.
S. Sunder
Yeah. For the current quarter, it is INR448 crores and provisions are INR838 crores totaling to INR1,286 crores.
Abhishek M
Got it. Got it. Thank you so much. All the best. Thank you.
Operator
Thank you. Your next question comes from the line of Rajiv Mehta from YES Securities. Please go-ahead.
Rajiv Mehta
Yeah, hi, good evening. Congrats on good numbers. See, my question again is on the flow rate. So flows from Stage 1 to Stage 2 are happening, but they are being — they are not moving forward into Stage 3. And so for example, in this quarter, as you said because of onset of early monsoon and some disturbance getting created, you did see incremental new flows from Stage 1 to Stage 2, but the existing Stage 2 pool never flowed forward into Stage 3. So can you explain why the flow rate between Stage 2 and Stage 3 is much lesser despite the outside disturbances and what all collection actions and mechanisms are being taken when the account flips into Stage 2? And also whether any remediation is offered to the customer who has moved into Stage 2?
Umesh Revankar
So normally we meet the customer, address this issue and sensitize him in improving his credit score by bringing him back to Stage 1. That’s the first step we take. If we feel the customer has a permanent mismatch, then we will resort to repossession. If you look at our total asset book, 65% is passenger and commercial vehicle. Another 7% is the two-wheeler. All this can be repossessed and we can sell and either collect the money from the customer, make it nil or we can sell the vehicle. So we have immediate liquid-able asset in our hand. Therefore, it doesn’t flow into Stage 3.
Rajiv Mehta
Okay. But no remediation in terms of change in the loan structure or anything of that sort.
Umesh Revankar
We can’t do that. No, no, certainly we can’t do that.
Y S Chakravarti
Sorry. Also, it is not really needed because it’s a temporary mismatch of cash flow. The customer is not a defaulter, mutual defaulter. It’s a temporary mismatch and those come back and pay you. So it’s not really case for restructuring.
Rajiv Mehta
Okay. So the same logic makes you confident that — confident that the current Stage 2 will also not forward flow so much into Stage 3 going-forward?
Y S Chakravarti
Exactly. We have seen this even worst of times, we have seen the customers skipping a couple of installments, but then start paying the current installment. So I mean it’s an it’s an experience we have seen over last 30, 35 years.
Rajiv Mehta
Okay. Okay. And the second question is on the growth in the CV financing portfolio, which is predominantly used, right? So now the traction is being maintained at 3% to 4% Q-on-Q and 12%, 13% Y-on-Y. But I was just wondering because in the last two, three quarters at least, the price appreciation or the resale prices have not gone up, but your traction of growth continues. So is it now more volume-driven in the recent quarters and less value-driven and if it is more volume-driven, then has there been any changes in the way you are sourcing on the ground and whether any lending policies have been kind of slightly relaxed?
Umesh Revankar
No, it’s both value and volume both because what happens is we — the loan which are sourced four years back are getting matured now and the new loan is given. So definitely there will be an increase in value year-on-year every year in-spite of the new vehicle prices not going up in the last year. So that’s one thing. And second, our reach has always going up. If you see last year also we added 165 branches. This year also first-quarter we added five branches. So as we create more reach, we are able to grow our business.
And the other most important factor is, the smaller lenders are not able to grow their business because they are not able to raise the liability side. So we are able to raise liability and therefore, we are able to take market share from the market. For example, there are around 9,000 small NBFCs and many of them do not have any ability to raise resources to get their leverage on the balance sheet. We are able to do that. So there’s always a — what we call our ability to grow in the market and maybe take the market-share also from the small lenders.
Rajiv Mehta
Okay. Just one last thing, sir. Your fee and commission cost line has been growing at 30%, 40% Y-on-Y for the last three, four quarters. So why it is growing so fast, the fee and commission cost line. And employee cost this quarter was higher versus previous quarter, there was a jump of 7%, 8%. Did we run any scheme incentive scheme, which we generally run on in a quarterly format?
Parag Sharma
See the staff cost has increased primarily on the increment that were due in the current year, April ’25. And also the annual bonuses which were paid. So this is the main reason for the increase in the staff cost. And the fee and the commission income you are talking about?
Rajiv Mehta
No, cost.
Parag Sharma
Okay. The commission expenses, okay, it is primarily our commission paid to the deposit agents, as there has been an increase in the deposit inflow in the first-quarter of this financial year, there has been some increase in the cost.
Umesh Revankar
Almost double on the deposit cost.
Rajiv Mehta
Yeah. Thank you. Thank you so much and best of luck.
S. Sunder
Thank you.
Operator
Thank you. Our next question comes from the line of Sonal from Asian Market Securities. Please go-ahead.
Sonal Gandhi
Yeah, hi, sir. Sir, my first question is on the NIM. So just wanted to check, have we reduced yields in any of the products or the yields continue to remain the same as last year?
Parag Sharma
The yield has been stable similar to the last year’s period. There has not been any increase in the yield.
Sonal Gandhi
So the entire impact is just because of negative carry-on NIMs.
Parag Sharma
Yeah, correct.
Sonal Gandhi
Okay. Second one, so what is your strategy on deposits going ahead? Because [Indecipherable] still raising it. If you could just tell us what is the landed cost of deposits that you’re raising, what is it as compared to NCDs and bank borrowings?
Umesh Revankar
See deposit if you look at our growth in the first quarter the growth has been around 10% Q-on-Q growth in the sense that is grown by 10%. Portfolio has grown by 10%. And whenever we announce the rate reduction, there has been more inflow to lock into longer duration by the depositor. So we have again reduced the rate from the first week of August by 40 basis-points. So effectively, our cost for the deposit interest-rate annually comes to 7.6% now from — which was around 8%, plus 8.5% in the beginning of the financial year. So there has been significant reduction in the interest rate.
So the total cost of deposit, including the cost is stands at around 8.8% in the books now. It will go down to around 8.4%, 8.3% from the next maybe August, yeah, after the next quarter, it will be around 8.3% total cost. And when compared with other liability, it will be much cheaper because bank borrowing will be still higher than that.
Sonal Gandhi
NCDs, sir?
Umesh Revankar
NCDs rate is lower.
Parag Sharma
NCDs rate now is running at around 7.5%, 7.80% range but that is the incremental borrowing rate.
Sonal Gandhi
So sir, my question was more that why are we focusing more on deposits because we are already carrying exception.
Parag Sharma
Now, incremental rate for deposit will be 7.5%, 7.60%, but it will be in-line with what we are doing in capital market. So not much of a difference there.
Y S Chakravarti
See, the thing also is Shriram as a group, see, we look at depositors because there have been — there are depositors, generational depositors who are with us. And most of our deposits, almost 55% of our deposit is from senior citizens. So we as a philosophy, we wouldn’t mind if it costs 10, 15 bps more than what we can get from the market also. So that’s a call that the — that we have taken consciously.
Parag Sharma
Diversity.
Y S Chakravarti
And also it’s a diversification of our portfolio — borrowing portfolio also. And the deposits are sticky.
Sonal Gandhi
Right. Sir, the other question was on fee income. So we’ve seen decline in that line item. So if you could just explain what exactly happened there.
Umesh Revankar
So, I think last quarter…
S. Sunder
Yes. In the last quarter number, we had received a collection commission on account of the RDA transaction, which was amounting to INR170 crores, which is not there in the current quarter.
Sonal Gandhi
Okay. So, this is like about 0.25% of disbursements is something we should look at going ahead.
S. Sunder
I think there is no linkage between the disbursement and this one. This is more to do with the assignment transaction that we had done a couple of years back.
Sonal Gandhi
Okay. Got it. Got it. And sir, just two questions more. One was on personal loan. We have seen about 24% decline in disbursements. So — and even I don’t know if I got that number correct, but in construction equipment from INR2,180 crores, it’s down to INR526 crores. So is it because of higher delinquency in this segment in construction equipment that we’ve become a little more cautious in terms of sourcing is there anything else that we shouldn’t too much into this number?
Umesh Revankar
No, construction equipment is basically the construction activities slowed down much earlier-than-expected because of early onset of monsoon. So most of them got postponed. So you will see a bigger demand that will come in the month of August and September, mostly in September. So it is just a postponement and we also felt that that it is better we wait for the right time to increase our construction equipment of disbursement.
Sonal Gandhi
Is it a personal loan?
Umesh Revankar
Personal loan, there is no de-growth.
Sonal Gandhi
I’m looking at the…
Umesh Revankar
It has gone up. Yeah. No, no, we are — our focus on personal loan is not diluted. It is continuing.
Sonal Gandhi
Okay. Maybe I’ll take this offline. Thanks. Thank you so much.
Operator
Thank you. Our next follow-up question comes from the line of Chintan from Autonomous. Please go-ahead.
Chintan Joshi
Hi, thank you. Just wanted to follow-up. You said that 8.5% NIM will be an exit NIM for FY ’26, but previously you had said 8.5%, 8.6% will be the full-year NIM. So which one is it? Just want to get this right because there’s obviously a big difference between the two guidances.
Umesh Revankar
8.5% for full-year. When I say exit we will close the year at 8.5%, 8.6% I said.
Chintan Joshi
Yeah. Yes, okay. So just want to — okay. So that is an exit NIM. It is not for the full-year average.
Umesh Revankar
Yes, yes, yes. But see, our effort will be there to improve the margin by reducing the borrowing cost. As we are able to reduce the borrowing cost, the gap marginally will improve.
Chintan Joshi
Thank you.
Operator
Thank you. Ladies and gentlemen, we’ll take that as the last question for today. I now hand the conference over to Mr. Umesh G. Revankar for closing comments.
Umesh Revankar
Thank you. Thank you for joining this call. As many of you said, we had a good quarter — first quarter and second quarter should be much better is what we believe because of the good economic condition in the rural market and since we are having a large presence in the SMAs of rural market, we should be able to perform much better. So I wish you all the best and we’ll meet in the next quarter. Thank you.
Operator
[Operator Closing Remarks]