Suryoday Small Finance Bank Ltd (NSE: SURYODAY) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Baskar Babu Ramachandran — Managing Director and Chief Executive Officer
Kanishka Chaudhary — Chief Financial Officer
Hemant Shah — Executive Director
Analysts:
Harshit Jain — Analyst
Abhay Kulkarni — Analyst
Shailesh Kanani — Analyst
Kamal Mulchandani — Analyst
Deepak Poddar — Analyst
Ashlesh Sonje — Analyst
Anand Mundra — Analyst
Swaroop — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Small Finance Bank Q3 and Nine Months FY ’25 Earnings Conference Call hosted by Arihant Capital Markets 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 4. I now hand the conference over to Mr Harshit Jain from Arihant Capital Markets Limited. Thank you, and over to you, Mr Harshit Jain.
Harshit Jain — Analyst
Thank you. Hello. Good morning, everyone. Welcome to Small Plan Bank Q3 and Nine Months Financial Year ’25 earnings con-call. On behalf of Arihant Capital Markets Limited, I would like to thank the management of for giving us this opportunity to host this call. Today, we have with us the entire top management team of Suraday and Bank, represented by Mr Baboo, Ram, MD and CEO; Mr Heman Shah, Executive Director; Mr Kanishta, CFO; and Mr, IR Head.
I will now hand over the call to Mr Babu for his opening remarks and then we will open the floor for Q&A. Over to you, sir.
Baskar Babu Ramachandran — Managing Director and Chief Executive Officer
Thank you. Thank you, Harshir. Good morning, everyone, and thank you for joining us for Small Finance Bank’s Q3 and nine months of FY ’25 earnings conference call. We appreciate your time and interest today. I, along with my team, wish everyone a very Happy New Year. I hope you’ve had a chance to review our financial results and investor presentation, both of which are available on our website and on the stock exchanges.
The quarter has been marked by slower consumer demand, moderation in growth of unsecured loans and continued challenges to growth in deposit with December quarter witnessing one of the slowest growth in deposits at the sector level. RBI brought down the cash reserve ratio to aid liquidity. Loan growth continued to be higher than the deposit growth. There is an expectation at that rate cut in the near-future that will support the growth of loan books for the banks next year. The microfinance sector guided by HSRO Infant has initiated systemic changes to address concern about elevated stress in the sector. It has come out with revised credit guard rates 2.0 expected to go-live in April 2025 that is expected to address the concerns about over leverage resulting in moderate growth, but leading to a more sustainable microfinance sector.
On our banks update, our deposit franchise continued to grow at the expected pace with year-on-year growth of about 50% and Q-o-Q growth of about 10%. This is primarily on account of sourcing of deposits to digital channel, which is now garnering approximately INR2.5 crores of deposits per day. Our focus has always been to build a retail granular deposit franchise and the retail products including CASA stood at 81% as of December 2024. Our CASA ratio as of December has improved from 17.9% in the previous quarter to 19.5% as of December 8. On the advances front, the wheels business leads a growth in the retail asset segment with about 80% year-on-year growth at 14% on a Q-o-Q basis. With less than 1% GNP, the portfolio has demonstrated resilient asset quality. The mortgage business has also grown about 43% year-on-year and 8% on a Q-o-Q basis.
In the inclusive Finance segment, given the market scenario, we have been cautious and have moderated the disbursements during the quarter. As we have stated in the past, in the areas that we operate, we have seen a behavioral shift in the group lending with most customers preferring to deal with the lender individually, which led the bank to starting the loans as individual loans for the graduating loan customers. We continue to cover our eligible portfolio under the CGFMU scheme to mitigate risks. This coverage was taken as part of prudent risk management practices.
We are focused on improving the key metrics in our inclusive finance business with specific focus on collections and the current trends are encouraging. We are confident of delivering our revised guidance in the current quarter. We as an institution believe in digital innovation to cater to the changing nature of our customers. As a consequence, we have launched, our MSME product, which is completely digital, primarily to cater to our inclusive and customer segment and other small-business segments. We also launched the double deposit, which is a long-term guaranteed return deposit program during the quarter.
Let me now provide an overview of performance for Q3 and nine months of FY ’25. Our gross advances stood at INR9,563 crores, which is a year-on-year increase of 25.8% compared to INR7,600 crores. The disbursements were at INR4,88 crores, up 6.7% from INR4,580 crores in the corresponding period last year. Disbursements remained strong across all segments, particularly in the wheels and mortgages. Notably, the wheels and mortgage businesses business reached INR1,300 crores, an increase of approximately 40% from INR931 crores. Our deposit base has also expanded and stood at INR9,708 crores, which is 49.7% increase from INR6,483 crores.
The share of retail deposits now stands at 81.2% as of December 2024 compared to 82.5% a year-earlier. Also, our CASA has improved to 19.5%, up from 18.5% year-on-year. Our current budget collection efficiency with a one EMI cap stood at 97.9%. Our gross NPA currently stands at 5.5% as of December 2024. The net NPA is at 3.1%. The GNPA of 2.6% and NPA of 1.1% is adjusted for expected CGFM claim to be made in FY ’26.
Now let’s move on to our financial performance. Our total income increased by 20.4% year-on-year, rising from INR846.1 crores to INR1018.6 crores. Our net interest income or NAI increased by 24.6%, moving from INR691.5 crores to INR861.5 crores. The pre-provision operating profit increased by 5.2% from INR325.6 crores to INR342.6 crores on a year-on-year basis. Our cost of fund funds currently stand at 7.7%, up from 7.3% in the corresponding period. The cost-to-income ratio was 66.4%, slightly higher than 61.5%. Profit-after-tax decreased 41% year-on-year from INR1515.1 crores to INR148.7 crores.
We continue to maintain a healthy capital position with a capital adequacy ratio of 26.9% with Tier-1 capital at 25.3% and Tier-2 capital at 1.6%, well-above the regulated requirement of 15%. Our customer-base has grown to around 3.3 million as of December 2024 compared to around INR2.6 million in December 2023, marking a 26% increase. On the deposit front, we have invested in digital banking infrastructure, which helps us to source digital deposits through various platforms. We continue to focus on widening our reach by adding new branches each year. Our smart banking outlets are present in certain micro markets. These SBOs are customer touch points, which offer all banking services, but have a focused target segment within two kilometer areas.
Our developments in the product portfolio, we launched double drug deposits where the investment is for 11 years and received double the amount for the same duration director. Also, our new launch of MSME loans and the Danish brand offers unsecured business loans using our in-house business rule engines with sanctions granted in minutes and sourced directly by our teams. We remain committed to deliver better performance across all business performance parameters.
I now hand it over to the moderator to begin the question-and-answer session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press R&2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembled. Participants who wishes to ask a question may press star on one now. The first question is from the line of Abai Kulkarni from Asset Management. Please go-ahead.
Abhay Kulkarni
Yeah. Hi, good morning, sir. I have a couple of questions. So our thesis was that the individual book will do better than the JLG, but that doesn’t seem to be happening. Could you just throw some color on that?
Baskar Babu Ramachandran
There is a substantial gap in terms of the performance of group loans much better than it was the GSB. While it has also kind of deteriorated on a comparative basis, still the performance is much better than the JSG. So on — including on the front, even once the slippage happens, the ability to reach-out to the customer one-on-one and collect remains high. While the delinquency went up, the focus in terms of individual customers one-on-one has marginally diminished, which we are now putting a collection for specifically for the customer. We do think that continue — we’ll continue to performed much better than GLG adjusted for operations, which has happened in the last quarter.
Abhay Kulkarni
Okay. Sir, our guidance for last quarter and our performance this quarter, there is a significant gap. So how is the DPD 30 book DPD, I mean par 30 to 90 shaping up this quarter. What do can we expect for the next quarter?
Baskar Babu Ramachandran
Our current bucket collection
Abhay Kulkarni
Mix or last-time?
Kanishka Chaudhary
Yeah. I think one of the challenges for us this quarter has been the collection efficiency on the current bucket, which as we stated a bit while earlier is at around 97.6%, 97.7% and our efforts as a bank are primarily focused on improving the same. An idle scenario for us would be able to be able to achieve 98.5% for the Q4 and that will really determine how much we are able to improve on a quarter-on-quarter basis.
Abhay Kulkarni
Sir, is there any direct or indirect indication or pressure or nudge from RBI or the Ministry of Finance to reduce interest rates in group lending or individual lending?
Baskar Babu Ramachandran
See, there has not been any direct pressure, so to say, but I think the indications are pretty clear that the interest rates have to be reasonable covering our cost and credit losses cannot be passed on in way of increased pricing to the low-income households. So we had — we have not increased the rate even in-spite of increase of 2.5% increase in overall scenario. And we also brought down our individual loans rates which were operating around 28% to 26% couple of months back, maybe around four, five months back on our own with the indications being cleared 1st of August 2024. Now it’s kind of as we speak is approximately six months. There — currently, we do believe that we’ll continue to the pricing at which we are operating at this point of time.
Abhay Kulkarni
Okay. Thank you. I’ll get back-in the queue if I have more questions.
Baskar Babu Ramachandran
Sure. Thanks.
Abhay Kulkarni
Thank you. All the best. Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Shailesh Khanani from Centrum Broking. Please go-ahead.
Shailesh Kanani
Yeah. Good morning, sir, and thanks for the opportunity. Just wanted to get some sense in terms of collection efficiency and asset quality, because in-spite of higher slippages this time around, we still continue to have very-high numbers in terms of Stage 2 assets. So any color on that, sir
Hemant Shah
So-so, Salesh, I think wha what we are working on as a team are essentially on 2, 2 pillars. So one is the current bucket collection efficiency and improving the same, like I said a while ago. The other is to be able to improve our efficiency on the 1 to 30 bucket where we do have seen a bit of a deterioration in our collection efficiencies. So the — our work on these two buckets will essentially decide how we end the year and move on to the next quarter for — for the new financial year. So as a team, these are the two buckets that we are primarily focusing on.
Kanishka Chaudhary
So just to add, Shailesh, our core markets, we continue to improve. So Maharashtra, Tamil Nadu are predominant in their core markets. So across the states, we continue to improve, except for Karnataka, again, pockets of Karnataka, so which is — overall Karnata is 12% of our portfolio. The pockets of Karnata is about 7% of our portfolio where we see a stress and it is not improving as we expected. Otherwise, all other states across the country, including UP, continues to improve. UP is the most stressed place where the Eastern UP, Kushnagar,, Kanpur, Gwarpur all relatively stressed for us and also we see the same data in the market. So we have — we have moved our focus — we implemented guidance 2.0 already from November — end of November and we are — we started focusing more on the new two bank recast loans besides our existing customer individual loans. So that should compensate for the growth factor as well as the focus collection and also we will continue to put our efforts on one to 30 bucket like what mentioned.
Baskar Babu Ramachandran
Share is what I think the good news is that at least the current bucket is inching up in terms of collections, likely that we are targeting around closer to around 98 and causing over probably closer to 98.5% in January and subsequently improve at least couple of basis-points on a month-on-month basis. There is certainly kind of stress in terms of that not moving up to 99%, which we expected. But I think 1% to 30% is where we want to put usually the collection effort goes in terms of 90 plus or 61 to 90. But the slippages of 2.5% into 1 to 30 bucket, which is approximately around 30,000 customers for us.
We wanted to put a much larger force in terms of containing that because the slippage once it happens to-1 to 30 generally keeps flowing because of lack of intense focus as it is in the current bucket or in the 90 plus. These 30,000 customers will probably put an additional around 400,000 to 500 collection force focus along apart from the executive who source continuing to collect it in terms of 1 to 30, if you are able to manage it, which we are reasonably confident because the stress as such has kind of peaked out. We are not seeing anymore enabled except for not Karnataka, which suddenly showing signs of increased stress in the last couple of months.
Shailesh Kanani
Okay. Just a follow-up on that because we have been hearing that the collection efficiency has improved. But if I see the par numbers for inclusive finance, obviously on quarter-on-quarter, there is a huge jump from 3.5 to it has gone to 4.6%. So can we see a moderation in the 4th-quarter if what you are saying continues for the remaining part of the quarter, is that a fair assumption?
Baskar Babu Ramachandran
Yes, it will be. How much will it be is not something which we are kind of unable to have clear visibility, but what is clear is that there will be improvement. We would obviously like to see a sizable improvement, but there will be an improvement compared to Q3. But Q4 is not likely to be substantially better in terms of overall numbers, but these slippages will come to — as a percentage will come down compared to Q3.
Shailesh Kanani
Okay. And sir, second part of my question is that we have reiterated in our presentation deck as well that we have kind of implemented the 2.0 in the 3rd-quarter itself. So does that include the three lender cap as well? And where do we stand-in terms of a portfolio or number of customers having more than three or more than four?
Kanishka Chaudhary
So we took a — we implemented three lender cap from December and the new two bank business has — we have taken a drop. So it continues to hover around 20 percentage of the portfolio is four in terms of number of customers and value-wise it will closer to 20.
Shailesh Kanani
So that is
Baskar Babu Ramachandran
Threesh. Take-out. Sorry, yeah, go-ahead.
Shailesh Kanani
Yeah, sorry, sorry. So just to clarify, you’re talking about we have kind of implemented the three cap from 1st Jan, right, 1st Jan, that is 4th-quarter. And we — and we have around 20% falling under that bucket 3 plus.
Baskar Babu Ramachandran
So we have implemented it from 1st of December, which is around 17 months running.
Shailesh Kanani
Okay.
Baskar Babu Ramachandran
The three-lender cap as well as the overall portfolio of around capping at INR2 lakh rupees. Our, as you mentioned, 20% of our portfolio on an overall basis is with the four lenders at this point of time. But however, what we do were quite a bit of that obviously, minus the NPA slippages that happened. So it will be closer to around 17% in terms of the current mix. But however, our pre-approved list contains around 6 lakh customers. The focus for Q4 is more in terms of existing pre-approved customer and that around 80% of that qualifies. We have a base of around 6 lakh pre-approved as of now, which includes both customers who have a live relationship with us as well as customers paid and kind of moved on, but excellent in the market in terms of improvement and very good with us obviously with zero delinquency when they exited.
So the quarter-four is more in terms of focusing on this base. So hence the business impact will not be as high, but the fact is that we’ll have to start sourcing new customer and that we are going through the route of new to bank, loan directly. Earlier the cast loan customers are only graduating from the JLG pool. But however the reduction in the team in the center size was better for us to really focus in terms of new to bank VL. We have started that in a smaller-scale now, but the intent is to grow the new to bank customers also through the Vikast route rather than through the GLE route.
Shailesh Kanani
Okay. So we have what two more questions from my side. One is on the LDR front. We have seen a sharp jump-in terms of deposits vis-a-vis advances growth this time around, at least on a sequential basis. So what is our strategy in terms of what is the number we are targeting in terms of LDR by the year-end and going ahead for ’26 as well, if you can give some guidance in terms of growth return profile, anything that would be helpful.
Kanishka Chaudhary
So for deposits, on an overall basis, our growth has been 50% on a year-on-year basis and 10% on a quarter-on-quarter. And I think our growth strategy like reiterated before continues to be the same, which is to focus on granula. I think what has helped us a little bit in the last few months is that our partnership programs on the digital side have finally kicked-in and they are delivering new deposits. Like Bhaska mentioned in his statement, we do about INR2.5 crores of new deposits every day through the digital channels. So we will keep improving and improvising on those so that we do have steady flow of deposits. In terms of our branch network, we continue to focus on putting you know strategic business units wherever required to ensure that we are present in the catchment.
Shailesh Kanani
So the second question with respect to guidance for FY ’26, if you can share some numbers out there.
Kanishka Chaudhary
FY ’26. A little early, I would say, Salesh, we will have an update for everybody at the time of the Q4 discussions.
Shailesh Kanani
Okay. Okay. Thanks a lot. Thanks a lot. Best of luck. Thank you.
Kanishka Chaudhary
Yeah. Thank you.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Kamal Mul Chandani from Investec Capital Services. Please go-ahead.
Kamal Mulchandani
Hello, sir. Thank you for the opportunity. So I was just following-up on the question of the previous participant. I understand that the four lender customers form 20% of your portfolio. So, sir, does that include plus four or total four? Just wanted to first clarify on that.
Baskar Babu Ramachandran
Surioda plus 3.
Kamal Mulchandani
And okay, okay. Got it, sir. Secondly, sir, what would be the par zero number for the IF portfolio?
Baskar Babu Ramachandran
Current portfolio 85 yeah, 895.
Kamal Mulchandani
So par zero.
Baskar Babu Ramachandran
Yeah. The remaining 15 includes anything from 1 to 180.
Kamal Mulchandani
Okay.
Baskar Babu Ramachandran
And obviously, we haven’t written-off anything in the Q3. So to the extent it will be — sorry, even that number is included in the remaining 15%.
Kamal Mulchandani
Okay, sir. Okay, understood. And sir, like in the SMA 30, SMA 60 bucket, what are the resolution rates which we are facing in these buckets. If you could just guide on that?
Kanishka Chaudhary
So on FMA 30, we are at about 35% to 40% depending on the month. And FMA 61 to 90, we are at 45 to 50. Maybe nearly half of the people are getting so SMA is 61 to 90 is higher than 31 to 60.
Kamal Mulchandani
Okay. Okay. Understood. And sir, if you could just guide us like how are you seeing this cycle panning out? We understand that the collection efficiencies have been improving month-on-month. But is it fair to assume that the cycle has peaked or there is some pain ahead? What are the other factors which are contributing, for example, the attrition levels of what you are facing and a center meeting attendance as well. So what are the efforts being done to improve these efforts? And how do you see the overall cycle? If you could just help us understand like some on-ground feedback what you are experiencing experience.
Baskar Babu Ramachandran
I think post-COVID, there has been a big drop-in terms of center attendance and we move to the loan individual and the logical step. Customers cannot continue to be in the center mode for a period of seven years and eight years. And if they borrowed from three lenders, even assuming that they borrowed from three pending three meetings depending on our minimum, which is what is monthly, but more than that depends on whether it’s short nightly has really kind of in our view, has not really been very effective. How much of our efforts are really being taken to kind of increase the center? There has not been any market growth in our understanding. It continues to be around 78% in terms of attendance.
Our focus was in terms of move to individual loans so that you kind of certainly meet the customer as long as it — and many around 60% of the customers pay on their own through both digital meals directly through our bank account remaining around 40%, which is the bonds which happens on the date of presentation. It is one-to-one contact. So we are not really putting in all efforts to revive back the focus itself on JNG is substantially diminished and even the new-to-bank customers we are now acquiring through the loan, which is a direct loan — direct lending to the customer. So probably no, it will really give away, but I take is that individual loan growth even to the inclusive finance customer will be on the rise rather than continue to be on the JLG center-based lending.
Kamal Mulchandani
Okay. And what are the attrition levels which we are facing?
Baskar Babu Ramachandran
Yeah, on a mathematical basis, approximately around 60% to 65% at the field-level. But however, if you really take the percentage of overall employees in our 5,500 in terms of inclusive finance, it’s around 60% of the employees are more than one year. The churn happens in terms of the infund, which is people joining and leaving the. So mathematically computed 670, but does not really mean that we have a new force every two years saying that 50% attrition, then 100% at rates. That is not the way. The 50%, 60% of course at this point of time, which is more than one year experience in the bank.
Kamal Mulchandani
Okay. Okay. And like any commentary on your side on the entire improvement in the collection efficiency cycle, like do you think that the stress has peaked out or it would take a couple of more quarters? Because like even if you assume that Q4 would be strong, again, the Q1 and Q2 could be potentially a weaker quarter in terms of disbursement growth. So — and also the new guidance would be implemented again. So in your opinion, do you feel that the stress could further increase in Q1 and Q2 of the next quarter — of the next year or the cycle is mostly peaked out and incremental accretion to the SMA buckets would be slower from — going-forward? Like what’s your take on that?
Baskar Babu Ramachandran
At an overall level, if only when we see around closer to 99% collection at the industry level, you could really then come to a conclusion that this test has peaked out, which is not what is being seen at the industry level. Some of the individual lenders kind of seeing collection efficiency of 98.5% or 99%. But what we understand at the overall industry level, it’s still at 98 and little more than that. And once that movement happens to 99%, that would be the signal in our limited view that there is a peaking of the stress is otherwise even after the deterioration has happened, even today the collection efficiency is not anywhere closer to 99% at the industry level. The good news is that at least it is from April onwards when there is a deterioration by a couple of basis-points month-on-month, that trend has arrested at the industry level, which means October was better than September and the number probably a little bit of a dip. December was a little better. And January, as we really speak across, people are seeing a stabilization. So I think the pain if you have to extend this collection efficiency into the peaking of the stress, it’s kind of going to last at least for two quarters.
Kamal Mulchandani
Okay. That’s it from my side, sir. Thank you so much for the responses. Best of luck.
Baskar Babu Ramachandran
Thank you. Thank you.
Operator
Thank you. The next question is from the line of Deepak Podha from Sapphire Capital. Please go-ahead.
Deepak Poddar
I’m audible, sir. Yeah, thank you very much, sir, for this opportunity. Sir, just given on the commentary that you mentioned, I mean, stress kind of has reduced and even we are seeing a trend of stabilization. So will it be safe to say that 3Q would be our bottom performance and from here, quarter-on-quarter, we should see improvement in our performance overall at a company-level.
Baskar Babu Ramachandran
So Q4 will continue to be stressful. It’s not — whatever has flown in will cut the collection challenges will continue. The stabilization of any quarter, which is what we’re seeing in Q4 will reflect in a substantially better performance in Q1 onwards. And also there is a moderation which is happening at the industry level, which means that high stress customers are not getting funded. The problem with that funding is not just the deterioration of the quality or the performance of the individual, but any over-leveraged customer then has a spillover effect in terms of the center and sometimes in terms of the entire micro locality. So that moderation combined with the garbage which will kick-in from April for the entire industry, likely that we will see a Q1, which will be better than Q4, but Q4 may not be very substantially different from Q3.
Deepak Poddar
Okay. So 4Q would be similar to what we have achieved or what we have shown in 3Q and from first-quarter onwards, we expect better performance, right?
Kanishka Chaudhary
So in terms of slippages, we may see a slight improvement, you know, but that does not necessarily mean that it will have a similar impact on the results in terms of the credit costs, right? So we will continue — because we will have a little bit of deterioration and increase in the NPA, which means slight reduction in core income as well. So our main focus right now is to be able to ensure that our slippages for Q4 are lower than what we have seen in Q3.
Deepak Poddar
Okay, okay, understood. And something on the credit cost, I mean, in the nine months, I think we — our provision stands at around INR152 crores. So for this entire year, what is the range of credit cost we are looking at?
Kanishka Chaudhary
Yeah. So I would say that we are looking at somewhere around 1.5%, 1.6% in terms of credit cost on a balance sheet basis for the full-year.
Deepak Poddar
1.5%, 1.6% on annual basis also that — so that effectively means our 4th-quarter credit cost would be much lower as compared to what we have seen in 3rd-quarter, right
Baskar Babu Ramachandran
This 1.5 is talking about is at the balance sheet level. So just make it into loans level, INR200 crores.
Kanishka Chaudhary
Yeah. So if you look at a nominal basis, we will be somewhere around INR250 odd crores on a full-year basis, 2003.
Deepak Poddar
No, it’s 200 to 250.
Kanishka Chaudhary
So 20. So 220 to 250 is the range that we have in mind for a full-year.
Deepak Poddar
Okay. Okay. And just lastly on the secured book, I mean, what is the percentage of secured book we have in our loan book? And what’s the thought process, I mean, over next two, three years, how we would like to trend it.
Kanishka Chaudhary
So our focus continues to be growing the secured book at a faster clip and that has been the case in the first 3/4 as well. If you look at our share of secured loan book, it is around, 40%, 46% and that percentage will continue to improve. We are trying to achieve about 48% of secured book by the end-of-the financial year.
Deepak Poddar
How much percent?
Kanishka Chaudhary
48%.
Deepak Poddar
And in over next two years.
Kanishka Chaudhary
No, by the end-of-the financial year, we would like to have a 48% secured book.
Deepak Poddar
Yeah, by FY ’25 end, right?
Kanishka Chaudhary
Correct.
Deepak Poddar
And over next two years, what would be our thought process there?
Kanishka Chaudhary
We are comfortable with around 50-50 for the reason that 50 — our entire portfolio of IEF is covered by CGSW and we’ll see a marked improvement. The intent is to really take it by a couple of percentage points year-on-year basis. So likely to have a 50-50 or little better on the secured front by end of FY ’26. So if you have to take it a two-year point-of-view, I think it will be around 7% to 8 percentage, probably the tilt will be 55 secured and probably 45 unsecured so to see.
Deepak Poddar
Okay, okay. I got it. I got it. That’s pretty clear. I think that would be it from my side. Thank you very much. All the very best to you.
Baskar Babu Ramachandran
Thank you very much.
Operator
Thank you. The next question is from the line of Ashlesh from Kotak Securities. Please go-ahead.
Ashlesh Sonje
Hi, team. Good morning. Sir, firstly, can you talk about the collection efficiency across different regions? Where-is it best and where-is it worst? You also mentioned that stress has increased in the last two months in Northern Karnataka. So what exactly is the cause of the issue here and what are you doing to resolve it?
Baskar Babu Ramachandran
So overall, I think across except for Karnataka, where we have around 10% of our portfolio and probably around Eastern UP, where overall UP exposure for us is around approximately 5%. So even within Karnataka, the stress is showing up in the Northern Karnataga, but there are a mix of factors. I think as Yam Fin and Sajan are pointing out, it is a presence of large number of unregulated lenders, which is creating stress, which is spilling over to the regulated lenders. And there has been intervention guidance from various authorities, including local authorities and the spread — the collection efficiency has dropped quite a bit to around 95.5% as far as KA1, which is our Northern Karnataka. The rest of the places are — and, which is a very, very small state for us is around 96%. I’m talking about the December figure. The rest of it is all-in the same average around 97.7% to 98% and the best of efficiency at this point of time is coming from Maharashtra as well as in terms of Madhy Pradesh and.
Ashlesh Sonje
Got it, sir. And secondly, can you quantify the microfinance slippages for this quarter and the previous one, please.
Baskar Babu Ramachandran
INR220 crores.
Kanishka Chaudhary
So out-of-the total INR270 crores that we have had for the bank as a whole, around 240 will be for microfinance in this particular quarter.
Ashlesh Sonje
And can you share the number for the previous quarter as well?
Kanishka Chaudhary
So for the previous quarter on an overall basis, I think we did around 170 of slippages at the bank level, of which around 150 odd would have been for microfinance.
Ashlesh Sonje
Okay. I think the total was about 129. Okay. If you can come back on the given
Baskar Babu Ramachandran
That 273 till last this one GNPA added was around 270. There has been no write-up, so it is a gross slippages across. No ARP sale, no. I mean write-off. So INR270 is the entire thing has it made-up. So currently we are at around INR520 crores in terms of GNP
Ashlesh Sonje
At an overall basis —
Baskar Babu Ramachandran
An overall basis
Ashlesh Sonje
Are you hoping? Yeah, perfect. Sir, and lastly, if I look at Slide number three, sorry, slide number 23, you have given the Par 30 plus across MFI, non-MFI and overall. If I look at the 31 to 90 numbers specifically, that is shown as 4.6% for MFI and 5.4% for non-MFI, right? So I would expect the overall the bank-wide number to be between 4.6% and 5.4 but it seems to be at 4.1 is there any wrong is there any mistake in my thought process here I am looking at 31 to 90 the orange bars. But
Hemant Shah
It doesn’t include this retail asset, does it include some of the assets like FIG and some of the assets like partnership lending card. So that is why there is a difference. So this retail asset is purely mortgages, CVs and micro home loan and JLG and.
Ashlesh Sonje
Okay. Got it. Perfect. Those are all the questions I had. Thank you.
Operator
Thank you. The next question is from the line of Abai Kulkarni from Asset Management. Please go-ahead.
Abhay Kulkarni
So how is our secure book shaping up? Are we seeing any signs of stress there? What is the outlook?
Baskar Babu Ramachandran
I think wheels as of now continues to be a sub 1% GNPA without any write-offs without any ARC sale. So we expect that it will continue to grow substantially at a less than 1% GNPA in the foreseeable few quarters for sure.
Abhay Kulkarni
And affordable housing have more than 3% of gross NPL.
Baskar Babu Ramachandran
Yeah, it is. So certain resolutions are expected. Of course, this is without any of the resolutions which has happened. The good thing about LAP is that even if it spins over into 90 plus, it is secured by underlying strong asset. So in Q4, we are expecting to see some resolutions and we have strengthened our legal collections, so which will kind of ensure that at least closer to — the net slippages overall may not really be higher than the recoveries.
Abhay Kulkarni
Okay. And sir, CGSA new claim we will make sometime in June ’25, is that correct? And it will depend on what is our gross NPA in March ’25.
Baskar Babu Ramachandran
Can I hear.
Kanishka Chaudhary
So technically we can — we now have three live cohorts under the CGFMU program. So for the coming financial year, we can actually make two claims, right? So one for the ’22, ’23 cohort and then for the ’23, ’24. So we are yet to decide you know the manner in which the claims will be made by us. The intention will obviously be to ensure that the maximum amount of eligible claims are made by us during the year.
Abhay Kulkarni
Okay, thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, to ask a question, you may press star and one now. The next question is from the line of Anand Mundra from My Tample Capital. Please go-ahead.
Anand Mundra
Hello. Thank you for the opportunity. Sir, on a quarter-on-quarter basis, our gross NPA, net NPA slippages, even the par book has gone up. However, our credit cost for this quarter is lower than Q2. So I’m just not able to understand how the credit cost has been lower this quarter.
Kanishka Chaudhary
Yeah. So like we have indicated, so for the portfolio, which is covered under the CGFE payment program, which is a little about INR380 crores out-of-the INR530 crores, we were thus far maintaining about 50% of loan-loss provisions. However, as allowed by the provisions of RBI Circular. We are not maintaining provisions on the guaranteed portion, which means that our effective provision being carried from here on is around 27%. So we have had a one-time release to the extent of INR102 crores in this particular quarter.
Anand Mundra
Okay. Okay. And sir, are the premiums that are payable for this guarantee, are they dynamic in nature?
Kanishka Chaudhary
No, so they get decided at the start of the year, which is known as the base year and the premium is 1% on the crystallized portfolio, that is the portfolio that we intend to ensure for the entire year. And additionally, we also pay premium on a pro-rated business on a pro-rated basis on the new business in course of the year.
Anand Mundra
Okay. So when would the premiums get finalized for next year?
Kanishka Chaudhary
That will be at the end of March ’25.
Anand Mundra
At the end of March ’25. All right, all right. So I’m guessing that — I mean, is that like a bilateral negotiation or there is some formula which,
Baskar Babu Ramachandran
No, there is no negotiation involved. It’s for us as a bank to decide how much of the portfolio we intend to ensure. And like we have said previously as well, right now, 98% of our portfolio is insured. We ensure all our new unsecured business under the program and we shall continue to do so.
Anand Mundra
But the pricing would be 1% only.
Kanishka Chaudhary
Pricing will be 1%.
Anand Mundra
So that has been finalized even for next year.
Kanishka Chaudhary
That’s the program parameter and it stays fixed for the first three years of the program
Hemant Shah
For one complete cycle, the premium continues to remain 1% plus the GST component obviously. And apart from that, it will — after that, depending upon the payout, claim payout and otherwise, it will be decided. The grid is already something which has been provided part of the notification. The range depending upon the payout will vary from either 1% to a maximum of 1.25% as it stands as of now.
Anand Mundra
Got it, got it, sir. And sir, one final question. All the — and all this — in the secured portfolio, all the lab, Micro lab products that we have, are they all surface?
Hemant Shah
Yeah. Absolutely.
Anand Mundra
All of the. All the alright. All right. Thank you, sir. That’s it from my end. Thank you.
Hemant Shah
Yeah.
Operator
Thank you. The next question is from the line of Swaroop, an Individual Investor. Please go-ahead.
Swaroop
Hi, sir. Thank you for the opportunity. Sir, my first question is, sir, despite being covered for 90% — 95% of the book for quite some time like past two, 3/4, last in Q2, we have written-off around INR82 crores, sir. Also in slide number 15 of this quarter, we have highlighted that IF portfolio, INR440 crores is the total VNPR. Of that INR380 crores is eligible under CGFMA. Likewise INR60 crores gap still being made?
Kanishka Chaudhary
Yeah, the balance is essentially, you know, loans which are covered under the previous ACLGS program. So they are not part of the CGFR new program cover.
Swaroop
Then what about like earlier quarter write-offs are INR82 crore write-off, but this was being like covered for 95%
Kanishka Chaudhary
Yeah. So write-offs are also covered under the program and these are technical write-offs only. So we will we will be able to make a claim in respect of these under the program as well.
Swaroop
But then the INR380 crores should increase right sir, although if — although if you do not mention also it has to increase right, sir, even though if you do technical write-offs?
Kanishka Chaudhary
No. So the INR380 crores is what we have on-book right now. So that doesn’t include the write-offs. The technical write-offs which are eligible for cover under the claim under the program will be over and above the INR382.
Swaroop
But the guideline states that the — for the — for being eligible to claim, it has to be GNPF for a period of six months. So even if we want to make a claim in Q2 of FY ’26, so out of this — like GNPA of INR440 crores is completely eligible for claim. Apart from this, the technical write-offs also should be eligible for claim right?
Kanishka Chaudhary
Yes, absolutely. So the technical write-offs will be eligible for claim as well.
Swaroop
Sir, then my question is, see, it should be far bit higher number, right, sir, along with — if we consider the technical write-off and along with the current GNP?
Kanishka Chaudhary
Yeah. So currently, what we have shown in the investor deck is basically the on-book portion of the NPAs, which are covered under the program. They don’t include the technical write-offs, which, which are otherwise covered under the program.
Hemant Shah
Hi, you are seeing a G&P of INR440 crores, right? Four minus INR60 crores, which is not eligible for claim. So 440 minus INR60 is INR380 crores is as of now what we are saying as of now. So I cannot predict next quarter’s GNP, right? So today as of December if I have to claim today, which is not allowed, which is allowed only after six months. So as of today, if I have to claim, so if I can only claim INR440 minus INR60 crores, which is INR380 crores, against which I would receive an amount of INR280 crores. So INR380 crore I can claim as of today’s GNP. INR60 crores, I cannot claim. INR60 crores includes LCLGN part and an older part, very small older part, which is not covered under PSLU.
Swaroop
I understand, sir, but earlier for the past five, six quarters, we have written-off close to INR250 crore-plus, sir. So that process would be technically included also.
Hemant Shah
Out of whatever we are — we have written-off — out of which only INR50 crores were such written-off, which is in CGSMU scheme. Whatever we have written-off in last three, four, those are not under CGSMU scheme. So that is why we had written-off. And out of that entire written-off category for last three, four quarters, only INR50 crores I understand is under scheme, which KC was mentioning is eligible to claims, which we have not included here, which is over and above this three.
Swaroop
Understood, sir. Thank you, sir.
Hemant Shah
Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Baskar Babu Ramachandran
Thank you very much. Thanks for taking time and participating in our call. We look-forward to kind of delivering the guidance which you have given for the overall year and we put in our best efforts to deliver the same. Thank you very much for your support. Good day.
Operator
Thank you. On behalf of Arihant Capital Markets Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.