Suryoday Small Finance Bank Ltd (NSE: SURYODAY) Q3 2026 Earnings Call dated Jan. 23, 2026
Corporate Participants:
Baskar Babu Ramachandran — Managing Director, Chief Executive Officer
Analysts:
Unidentified Participant
Juhi Manwani — Analyst
Deepak Poddar — Analyst
Shailesh kanani — Analyst
Rahul Kumar — Analyst
Presentation:
operator
Sa. Sa. Sa. Foreign. Ladies and gentlemen, Good day and welcome to Surya Tech Small Finance Bank Limited Q3.9M FY26 earnings conference call hosted by Aryan Capital Market Limited. As a reminder, all participants line will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference 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 over the conference to Ms. Juhi from Adyan Capital Market Limited. Thank you. And over to you ma’.
Am.
Juhi Manwani — Analyst
Hello and good morning to everyone. On behalf of Aryan Capital Market, I thank you all for joining into Q3 and 9 month financial year 2026 earnings conference call of Sudha Small Finance Bank Limited today from the management we have Mr. Bhaskar Baburag General, MD and CEO Mr. Heman Shah Executive Director Mr. Karish Chaudhary Chief Financial Officer Mr. Himazvi Dad, Investor Relations Head. So without any further delay I hand over the call to the management over to you.
Baskar Babu Ramachandran — Managing Director, Chief Executive Officer
Thank you Julie. Good morning everyone and thank you for joining us for the Suryade Small Finance Bank Limited Q3 and 9 month FY26 earnings conference call. On behalf of the entire Suryade team, I wish you a happy Basant Panchami. We’re happy to know that we are stepping into our 10th year of our journey taking you through the Bank’s performance for Q3 and 9 month FY26. As of 12-31-2025, gross advances stood at rupees 11,885 crores registering a healthy year on year growth of 24.3% compared to rupees 9563 crores last year. Disbursements excluding supply chain Finance during the nine months ended December 2025 where rupees 6230 crores up 30.2% from rupees 4785 crores in the same period last year.
While the broader microfinance industry continues to navigate through a phase of tighter underwriting and asset quality normalization, we are seeing visible signs of stabilization and growth. Growth momentum remained healthy across key segments particularly in inclusive finance, REITs, mortgages, digital deposits and credit on UPI. On the inclusive finance side, dispersants have largely returned to earlier run rates. With the business now clocking closer to rupees 500 crores per month. Collection efficiency continues to improve with the current bucket for the IF portfolio inching towards 99.5%. As highlighted earlier, a strategic shift from the JLG model towards individual lending continues to gain traction.
Individual loans now constitute approximately 72% of the inclusive finance book, enhancing customer quality and portfolio granularity. Importantly, close to 99% of our inclusive finance portfolio remains covered under the CGFMU scheme, providing strong capital protection during periods of unforeseen industry stress. We cast loan disbursements during nine month FY26 stood at Rs. 2,729 crores reflecting sustained year on year growth. The increasing share of new to bank Vikas loan customer is expected to further strengthen portfolio stability and risk adjusted returns on the retail asset front. Momentum in both the commercial vehicles and mortgage business continues. The commercial vehicle portfolio grew from rupees 1190 crores in December 2024 to rupees 1609 crores in December 2025 registering a year on growth of 35%.
While the series segment had witnessed some stress earlier, we are now seeing clear signs of improvement in collections asset quality trends. Our focus remains on building a granular retail franchise while also selectively scaling commercial equipment financing and used vehicle lending. The mortgage book which includes micro mortgages expanded from rupees 1999 crores in December 2024 to rupees 2778 crores and as of December 2025 growing by 39% year on year. The strategy of focusing on select micro markets and cash flow based underwriting continues to deliver steady and sustainable growth. In addition, our unsecured business loan portfolio is growing at a healthy and calibrated pace which is now clocking a run rate of rupees 20 crores per month with a portfolio crossing rupees 115 crores in the MSME portfolio further strengthening the retail asset mix.
On the liabilities side, our deposit base expanded to Rs. 12,865 crores as of December 2025 reflecting an year on year growth of 32.5% from Rs. 9,708 crores. Retail deposits continue to strengthen with their share improving to 87%. Our CASA ratio stood at 21.2% underscoring improving deposit granularity and franchise depth. Digital continues to be a key growth driver for the bank. Digitally sourced deposits now contribute nearly 30% of of incremental deposit accretion and continue to gain momentum. This channel has enabled us to acquire mass affluent large pool of retail customers at a significantly lower acquisition cost and with high scalability.
Asset quality trends are well within the expected rate as of December 2025 our GNPA ratio stood at 6.6%. The CGFMU cover continues to safeguard the bank’s balance sheet with 100% claim rate on the eligible portfolio since inception out of NNPA of rupees 501 crores as of December 25. Rupees 467 crores are receivable under the various cohorts under CGFMU scheme. Moving to financial performance, NET Total income for 9 month FY26 increased by 3.2% year on year from Rupees 1019 crores to 1052 crores. Q3 FY26 increased by 16.2% year on year from rupees 308 crores to 358 crores.
Net interest income decreased from rupees 862 crores to rupees 782 crores while pre provision operating profit decreased from rupees 343 crores to rupees 277 crores. Our cost of funds stood at 7.7% as of December 2025, same as a year earlier. The cost to income ratio for nine month FY26 increased by 73.6% from 66.4% in the corresponding period last year. Profit before tax for the period stood at rupees 102.2 crores versus rupees 148.7 crores in the year last year. The bank continues to maintain strong capital adequacy ratio of 21.9% well above the regulatory requirement of 15% providing adequate headroom for future growth.
On the digital assets side, we believe credit on UPA has a potential to be a game changer for the industry. The product allows customers to start with low credit limits and graduate over a period of time based on repayment behavior and transaction history. Our partnership with PAYTM in this space has shown strong early traction with customer onboarding growing exponentially with 2.2 lakh active customers in one quarter. Along with products such as secured credit cards, digital MSME loans and digital deposits, these offerings are helping us build a fully integrated digital banking ecosystem. Our customer base expanded to nearly 3.7 million as of December 25 compared to 3.3 million a year earlier, representing close to 1% of the Indian households.
Our focus remains on serving this base more deeply and meaningfully overall with a largely CGFMU covered unsecured book, a growing base of granular retail assets across EV mortgages and mhl, a strengthening deposit branches and a robust digital infrastructure anchored by products like credit on UPI and digital deposits. We believe Suryadha is firmly on the right path to building a resilient long term institution with improving repayment behavior, disciplined credit process, easing portfolio stress and improvement in cost to income. We expect the coming quarters to mark a phase of stability and consolidation, setting the stage for healthier and more balanced growth in FY27.
Thank you for your time. We’ll be happy to take your questions.
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 your 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 will wait for a moment while the question queue assembles. The first question is from the line of Deepak Podar from Sapphire Capital. Please go ahead.
Deepak Poddar
Yeah, I’m audible, sir.
Baskar Babu Ramachandran
Yes, sir, you’re audible.
Deepak Poddar
Yeah. Thank you very much for this opportunity, sir. So, just wanted to understand first up, I mean across the industry, we have seen in general the gross NPA declining on a quarter on quarter basis. But for us it has increased. So what led to that and how do we see gross NP going forward?
Baskar Babu Ramachandran
Morning, Deepak. So one of the things that we will need to keep in mind is that our entire MFI book is covered under the credit guarantee scheme. So we don’t really look forward to quarter on quarter write offs. All of these will essentially get squared off at the time of us making a claim.
Deepak Poddar
Okay, okay. So basically because of lesser right off, I mean it’s still in the books. And as you would have noted that in Q2, after we got the 340 odd crores claim honored by the credit guarantee fund, we did a major write off at that particular point in time. So our write offs will be co terminus with the claims that get received by us.
Baskar Babu Ramachandran
Correct, Correct.
Deepak Poddar
Okay. Okay, I, I got it. And in terms of your pslc, I mean, how do you see a fourth quarter? I mean pslc, I mean. And what was your PSLC income this quarter? Third quarter.
Baskar Babu Ramachandran
So in Q3 we made about 6 crores as against 10 crores in Q2. But this year has generally been a very rich year for the PSLC market. On an average they were trading at around 2.65 versus 1.9% last year. So at this time it’s a little difficult to predict, you know, what the market demand will be in Q4. But typically in the last two years we have seen that there is an active market towards the end of Q4.
Deepak Poddar
Correct. I mean you have said in the past as well, I mean for fourth quarter generally your PSL’s income would be generally tends to be higher.
Baskar Babu Ramachandran
Correct.
Deepak Poddar
Okay, understood. And on cost to income, I mean you spoke about improvement in cost to income. So any sort of benchmark we have, where we want to reach in how much time.
Baskar Babu Ramachandran
So I think, you know, the first port of call for us will be that in the next financial year we are able to come well below the 65% mark because we would have by Q1 cleared up our non paying book in the portfolio. So that’s where we start the beginning of the year and then see what kind of improvements we are able to do. But the important point to note is that insofar as our corporate costs are concerned, they have remained more or less at the same level over the last four quarters.
Deepak Poddar
So currently I think we are doing around 75%. Right. So next year you’re targeting below 65. That’s a big jump, right?
Baskar Babu Ramachandran
Yes, I think with the increase in the paying book number under 65% would not be difficult for us to achieve.
Deepak Poddar
Okay, understood. And just one last thing on FY27, any sort of guidance you can provide in terms of growth and roas?
Baskar Babu Ramachandran
Well, it’s a little too early as you can see how the market is evolving. Right. But what do we see is that in especially in our MFI business, our X bucket collection efficiency will be back to normal, which in this industry is 99 half. So that will be a starting point for us to, you know, building for the results of FY27.
Deepak Poddar
Correct, correct. And what’s our steady state credit cost in general? I mean now since the we are going towards normalcy rate, entire industry as such.
Baskar Babu Ramachandran
Yeah. So I think with the kind of mix that we have today in our portfolio in the bank, we would want to have a credit cost of, you know, not more than 1%. Around 1%. Yeah.
Deepak Poddar
Okay. Okay, that would be from my side. Wish you all the best. Thank you so much.
Baskar Babu Ramachandran
Thank you, Deepak.
operator
Thank you. The next question is from the line of Shailesh from Centrum Broking. Please go ahead.
Shailesh kanani
Yeah, good morning. Is my voice audible?
operator
Yes.
Shailesh kanani
Yeah, yeah. So I have few questions. Thank you for the opportunity and congratulations on the quarter. So it is encouraging to see that we have seen good balance sheet growth this time around during the quarter. So my first question is on earnings growth. So several peers have reported strong quarter on quarter improvement in profitability. Largely driven by asset quality and recovery in MFI disbursement. Right. So could you outline when we should expect a similar earnings trajectory for Suryo Day?
Baskar Babu Ramachandran
Yeah, I think if you look at this quarter, you know, our portfolio grew by around 7% which translated into an earnings growth of around 20% quarter on quarter as we see it. I think starting Q1 of next year with the entire remaining going out, we will naturally see an uptick in our earnings.
Shailesh kanani
So not fourth quarter, but the first quarter FY27 should be the same as the quarter where there is a substantial jump in the quarter.
Baskar Babu Ramachandran
Yeah. So Q4 will certainly be much better than Q3 even where we stand today. And that’s largely because of the fact that, you know, there has been a steady increase in my paying book. My paying book has increased by around 170, 180 crores in this one quarter itself. So that trend will continue and we see a significant increase in our paying book, especially in MFI in Q4 as well. We have just shared under 99.5 in the X bucket collection and we are very confident that we will be able to reach the 99 half target. You know, beginning channel.
Yeah.
Shailesh kanani
So there’s a good, good probability that the fourth quarter profitability and quarter on quarter basis can be very good. Okay, fair enough.
Baskar Babu Ramachandran
Yeah, yeah. It can be higher than the 36. That we have delivered.
Shailesh kanani
Yeah, yeah, yeah. That is what I was understand, trying to understand. Okay, so my second question is to asset quality. So in line with earlier guidance, there has been a gross slippage. There’s in a moderation. Right. Which you had guided earlier. So can you give the output for fourth quarter, how things are shaping up and also in terms of JLG and INDUS lending statewide performances, if you can highlight any material development during the quarter.
Baskar Babu Ramachandran
So I think one thing that you would have noticed is the shift that we have made from the JLG to the individual loans. Currently if you look at the disbursements in the MFI book, about 80% is for vicar’s loan. And from standing from where we are today, we expect that our slippages will be about 100 crores and thereabouts for Q4. So that would include your JLG, IF and RA both included. Right. Less than 100 crores. Yes. Both at the bank level.
Shailesh kanani
Yeah, yeah, bank level. Okay, fair enough. And any state wise, any, any material development you would like to highlight in state wise in terms of whether improvement in performance or anything like that across the board.
Baskar Babu Ramachandran
All the states are really in stuff including Karnataka. So when we say 99.3 inching towards 99.5 across the board, I think it is closer to 99.5 with no operation of any state being substantially higher or anything. Any state being less than 99.99%.
Shailesh kanani
Okay, great. That that’s good to hear. So my third question is with respect to recoveries. So this quarter around there has been a sharp drop quarter on quarter. So could you help us understand the factors behind this trend and how should we think about recovery performance going forward?
Baskar Babu Ramachandran
Which recovery. Recoveries and upgradations from the GMPA? I think it is only 8 crores this time around. When the book is shrinking. The book as the percentage of customers which you’re collecting is going higher. Earlier the pool was large accretion which meant that upgrades from the recently stripped pool is higher. Since the slippages themselves are coming down, the upgrades are marginally coming down. However, our entire focus is to go back and revisit the entire thing. They’re adding a lot more collection people now that there’s huge stability which has come in. There is no big slippages happening from the current bucket to various other buckets. The good news is that because of that our 1 to 30 collection 31 to 60 have gone up at least 10 percentage as a percentage of the slippages.
So hopefully at this rate I think more than 8 from 8 crores likely that in Q4 it will be closer to around 11 to 12 crores across the cohorts which includes ARC or write off as well as our MPA book. Because the reason I was in the surprise was that there was a sharp drop from 26 crores in second quarter to around 8 crores in the quarter. So I thought I’ll just take some clarity over that. Yes, any recovery out of ARC does not really get reflected here and also any recoveries out of write offs goes towards the income rather than coming towards the upgrades and recovery cr.
Shailesh kanani
Okay, fair enough. The last question from my side, could you highlight some of the key developments and early traction in our credit on UPI offering in partnership with paytm? Any three developed business developments you would like to highlight?
Baskar Babu Ramachandran
There has been a large scale up which is happening approximately around one and half lakh customers is what we are acquiring. The activation usually takes the lag of around two to three months. The portfolio outstanding though small is kind of inching up by around closer to doubling almost every month. 15 becoming 3030 likely to become around closer to 50 to 60. There’s one large cohort of customer granular and average ticket size is currently still less than around about 10,000. The number of customer wise acquiring is closer to 1.5 lakhs per month. And we think that by this year and by March probably around closer to 10 lakh customers would have been approved of which utilization would be around foreclosure to around 2 lakh 3 lakh customers.
Shailesh kanani
What would be our AVM, sir? Currently. Okay, okay, fair enough. Thanks a lot sir. That’s all from my side and best of luck.
Baskar Babu Ramachandran
Thank you.
operator
Thank you. Participants who wish to ask a question may press star and one on their touchstone telephone. Thank you. The next question is from the line of Rahul Kumar from Vaikaria Fund. Please go ahead.
Rahul Kumar
Yeah, hi sir, can you split the slippages in between MFI and non MFI for this quarter?
Baskar Babu Ramachandran
Yeah. So around 105 crores was MFI and the balance is in the retail asset business.
Rahul Kumar
Okay, so this is a gross slippage which you are saying 100 crores.
Baskar Babu Ramachandran
Yes.
Rahul Kumar
Okay, okay, okay. And what are the monthly trends in these slippages now versus what it was?
Baskar Babu Ramachandran
It used to be 60 crores at the beginning of Q1 moved to around 30. Likely that you will see around closer to the 25th of January and hopefully if the trend continues the target is to have less than 20 crores which is used to be what well before the last mini crisis started. So I think we should be back to 20 and probably little lesser in the month of March. But the trend currently likely to be around closer to 27 crores for Jan and probably lesser than 25 and the trend continues it’ll be less than 20 around 20 in the month of March.
Rahul Kumar
Okay. Okay. Second question. If I look at the slippages in the non MFI segment, I think quarter on quarter I see a 40% kind of a jump. What is driving this?
Baskar Babu Ramachandran
Okay, so just to clarify, one correction. So of the 155 crores of slippages that we have in Q3, the split is 116 crores in MFI and 39 crores in the retail asset business. So if you look at the retail asset business on a quarter on quarter basis it’s moved from 36 crores in Q2 to 39 crores Q3. We have had a few slippages in our lab business which we are trying to resolve and regularize before the end of the year.
Rahul Kumar
Okay, okay, okay, okay, got it. And correct me if I wrong, I think you mentioned the target for Q4 slippages is below 100 crores. And this is for the overall book.
Baskar Babu Ramachandran
Yes. 100 crores for the bank as a whole.
Rahul Kumar
Okay, okay, okay. And what would be the split in that between this JLG and non jlg?
Baskar Babu Ramachandran
Yeah. So for if as a whole it will be around 75 to 80 and around 20 odd crores or less, little less for the retail asset business.
Rahul Kumar
Okay, okay, okay. And okay. And the last question which I have is if I look at our credit cost for this quarter I think 41 crores versus 40 crores in the quarter two despite our slippage is actually reducing from you know 155 crores to sorry 200 crores to 155 crores.
Baskar Babu Ramachandran
Yeah, yeah. Actually in Q2 we had about 24 odd crores of write back after we received the CGFMU claim. Right. But that was a one off for Q2 which you will need to keep in mind to check the movement.
Rahul Kumar
Oh, okay, okay, okay. Got it. Understood, understood. And another thing you mentioned was the non MFI slippages will also reduce going forward from 40 crores in the last quarter to less than 20 crores in the Q4. So what is driving that?
Baskar Babu Ramachandran
There is one large incentive iCore plus account in lap which slipped on a temporary basis. So that was created aberration cv. There was a marginal reduction in terms of recovery which is back in the last quarter towards the end. So that trend would continue. So given that we are kind of projecting this and overall MOFI likely to be around shade less than 75 max 80 and remaining around 20 to 25 max would be from the retail assets. There was a little bit of a slippage higher in the micro mortgage segment primarily due to Karnataka which is back 50% of the 4% GNP and the micro mortgages are paying book that’s month on Monday but still continue to be in NPA and which we may not proceed really under surface C and they will get regularized over a period of time which is not likely to be there for the point of.
Rahul Kumar
Okay, okay. So to summarize it, the microlab issue which was plaguing in Karnataka is driving this, you know resolution in that is driving this reduction in the non MFI slippages.
Baskar Babu Ramachandran
The slippage has stopped and the recovery has marginally kicked up. A good thing is that 50% of the 4% GNP in the micro mortgages book which is approximately around 550 crores is paying book. That’s month on month. They pay one installment but probably still have an outstanding of around two or Three installments. So we are reasonably hopeful that will get normalized to regular more than at least one or two quarters.
Rahul Kumar
Okay, so what are the monthly trends. Over here in the non MFI slippages. Over let’s say last few months, 7. To 8 crores per month. Sorry, which is what?
Baskar Babu Ramachandran
7 crowds? 6 to 7 max. 8. Any of the months it’s what you’re saying that multiplied even at the same run rate it’ll be around closer to 20 crores for Q4 grossly pages.
Rahul Kumar
Okay. Okay. And what was it in the last quarter? I mean let’s say November or December.
Baskar Babu Ramachandran
Number. December. Around 8 to 9 crores. 10. 10 crores.
Rahul Kumar
Okay. Okay. Okay. Thank you, I’ll join.
operator
Thank you. The next question is from the line of Arvind from Capital Land. Please go ahead.
Unidentified Participant
I have a couple of questions. The first is on the DFME claims. Now that we have a good timeline of the slippages and some idea about slippages month on month this quarter. When do we expect to make that claim next financial year? That is my first question. And the second question is on the cost of funds. While the industry has shown a more significant drop quarter on quarter, about 2530 basis points, we have only had improvement of what, 10bps. So in spite of the very healthy growth in cast out quarter and quarter. So how do we see it going.
Forward on the CGFMU multiple cohorts for next year? 3. So we will time it out in terms of first and second and probably even third quarter. But the largest chunk would be claimed in the Q1 which may be around closer to 250 to 300 crores. The rest of it would be timed for Q2 and Q3. As far as the cost of funds reduction over to kc.
Baskar Babu Ramachandran
Yes. So you know, up until this quarter, given the kind of growth in the long tenure retail asset book, we have been trying to raise quite a bit of five year money. Five year, five year money. Which today is about 1/3 of our overall deposit book. Right. And which is the reason why you don’t see a significant drop in our rates on a quarter on quarter basis. Even though in time deposits across tenors we have, you know, drop rates anywhere between 25 to 50bps. Even our savings account for the lowest bracket we have reduced rates.
So at a point in time we will move to raising money on the shorter tenors in a. In a slightly larger proportion and that will reflect the reduction in our cost of funds over time. And given that we are sitting on a very healthy sort of a grade to deposit issue compared to the peers. Do you expect to sort of reduce the cost of SAP in particular going forward to kind of optimize the nims? See we are actually reviewing it every month and for example in Q3, in all the three months of Q3 we have gone ahead with reductions in our TD rates across buckets and somewhat in SAR as well, especially you know, the larger ticket sars which for us was not making economic sense anymore. And we have indeed moved away from quite a bit of large ticket saar business. So that optimization will continue. The rates will not see a very sharp drop on a quarter on quarter basis but it will continue to reduce. Over the next couple of quarters. Consciously we are focusing that at least a significant, reasonably significant portion of a deposit specifically linked to the mortgage financing will be from five year deposits. So entire last quarter we continue to pay a marginally higher rate on the five year consciously and that’s why there has not been a substantial reduction in terms of 30, 40 basis points. But if we choose to really turn that and in terms of start focusing on the short end of the deposit the overall cost may come down but given that margin it has overall has come down.
Our focus is to have at least a 20 to 30% of our overall term deposit base in the range of five year plus.
Unidentified Participant
Okay Warren, thank you very much and all the best. Thank you.
operator
Thank you. The next question is from the line of Jaspree from VA Capital. Please go ahead.
Unidentified Participant
Good morning. Am I audible?
Baskar Babu Ramachandran
Yes sir.
Unidentified Participant
Bhaskar sir. Good morning. Good morning. I had been observing your bank for last five years and you were very prescient in taking cgfmu. The IPO timing was perfect and then moving out of JLG was a very good move ahead of the industry. But somewhere I feel that operationally things are lagging behind. I don’t know, maybe it is management bandwidth or lack of talent or whatever. I don’t understand that because things are not flowing into the numbers yet. And. This is what I want to understand what is happening. Are we lacking somewhere in the management bandwidth?
Baskar Babu Ramachandran
Good question. So I put it this way. Banking I think is a little long haul journey. We are pretty clear even when we really started this precisely also gets reflected in our taking a hit in terms of PBT which is by closer to even 25 to 30% by going for a cover of CGFMU when the projected credit losses was not more than 1% and absolutely 99.6, 99.7% collection at that point of time. So we’re clearly conscious of the fact direction setting generally takes a iteration and a reiteration fairly confident that I think what we went through in the last two years as you would see the management bandwidth has kind of stayed on which is through the course We’ve seen the up and then one down and then as we are recovering we are very very clear that we are not really almost an assumption the future may be worse than the past.
We are kind of put our guardrails which reflects in terms of little reduced profitability in terms of maintaining an excess liquidity in terms of maintaining higher than required substantial higher than required capital adequacy but all of that when the what we really kind of are confident now and hopefully will play out quarter on quarter in this substantial quarters in the future is that have the foundation strong in terms of for instance moving to a JLG to individual it is not press of a button and say all of us will do individual MSME first round was not a success what we called as the teenager loans we paused we didn’t kind of knock off the product and when digital railings are very strong now we have around closer to 110crore book with par of less than around one and a half percent.
I think all of this now it is time for us as a bank to put all of this in action in terms of as we would call it strategic hidden strength to play out and fairly confident that with management substantially in place for the last not we have kind of recruited in the last one year it took around three years for a complete alignment. I think it is not the superstars who create great performances it is aligned management team and fairly confident as I’m just hopeful fairly confident that this will play out as you would see in quarter on quarter it will be steady but every quarter planning that is better than the previous quarter.
Unidentified Participant
I think in the previous quarter also somebody mentioned I think Himadri mentioned that. Next two quarters and then there would be a decline in credit costs which. Will add another 50 crores to the pad.
Baskar Babu Ramachandran
So I don’t know projections are not right or I don’t know what is not coming together to give confidence in the numbers. No it will I think you would see the slippages have come down for instance in the slippages we can kind of provide only 20% of the total recovery. We provide up the entire 23%. So kind of take as it really required 77% is covered by CGF from your remaining 23. Your choice of even raise provisioning only 10% and we said we’ll have to take it. We take it on quarter on quarter. Fundamentally if you look at it, I would rather leave the financial number which is emanating out of it. The slippages from 60 has become say 40, 35.
35 is now closer to around 25. Hopefully we’ll be not saying it’ll become 0 but around 20. It’s back to where we really started and continue to focus in terms of reducing at least by a crore every time. And the CGFMU is the time lagged one. So it took around two years for the first claim and thereafter hope by the way in which probably it is projected now our claims will be substantially higher than the slippages that will happen for FY27. In the if book you will see it playing. I would put it that this quarter fundamentally with the way we are looking at internally is far, far stronger than the previous quarter.
Not just by the bottom line numbers which is emanating out of it, but reduced other income in terms of pslc, reduced slippages, increased the business momentum and the clarity in terms of what the slippage has to. So exactly I am talking about this clarity.
operator
Sorry to interrupt. We would request you to please join the queue.
Unidentified Participant
Okay.
operator
For follow up questions. Thank you. Thank you. Thank you. The next question is from the line of Amber from Senior Capital Management. Please go ahead.
Unidentified Participant
Yes, hi. My questions are actually around CGFMU but on a broader level I would like to basically carry forward with the previous questioner’s comments that every quarter we get this feel good message from the management that in the next quarter things will be okay, we are on the right path, everything is fine. But I think it’s taken a lot longer than the market can bear. So I would like to really get some honest commentary from the management on because this reduces credibility. If we keep hearing quarter after quarter that in the next quarter it will be okay, but then we still come up with a really, you know, very ordinary set of numbers.
Then there is some. I think more introspection needs to happen. But anyway let me get to the question. My question is for CGFMU for this 467crores which is expected to be claimed. Approximately how much premium would have been spent by the bank?
Baskar Babu Ramachandran
250 crores.
Unidentified Participant
Sorry, how much?
Baskar Babu Ramachandran
250 approximates cumulative for all these. Cumulative 250. 250 crores? Yep. Premium. Okay, so roughly 45, 46 paisa for a rupee of claims. Right. This also includes claims which have already been made by us. So we had a claim of about 340 crores in Q2. We had a 70 crore claim prior to that and 30 crores last year. So. So the 250 crore that Bhaskar talked about is the cumulative clear premium that we have paid ever since we subscribed to the program since FY22.
Unidentified Participant
Okay. So on a basis of pesa per rupee insured, we are still talking around the 25 paisa. 24 paisa to the rupee of insured, right?
Baskar Babu Ramachandran
Yeah. Yeah.
Unidentified Participant
Okay. Okay. And what is the expected like timeline for the actual cash coming in? I think it was 18 months if I’m not wrong.
Baskar Babu Ramachandran
Right. For a new cohort. Yes. But for example, we now have three cohorts running because we have been subscribing to this program for three years. So our next expected claim is in Q1 of FY27.
Unidentified Participant
Okay. Q1 of FY27 which is in about maximum six months. Okay. And then my second question is for CGP FMU. Suppose you guys make a claim and the claim is paid out and then the underlying loans, because I’m guessing you’re still trying to recover them, the underlying loans come good, then what happens? Do you have to give part of this money back or what happens then.
Baskar Babu Ramachandran
In the same proportion. So three fourths of the money goes back to the credit guarantee fund and one fourth of the money is retained by us and and is a credit to the pnl.
Unidentified Participant
So okay, so on a defaulted loan you can only cover maximum 3, 4. And if it comes back, then you have to give three, four back. Is that the logic?
Baskar Babu Ramachandran
Of course. Yeah.
Unidentified Participant
Okay, understood. All right, that’s it for me. I wish you the best of luck.
Baskar Babu Ramachandran
Inputs are taken surely kind of will do it. There are certain things as an organization, for instance a ticket size, if it choose to really marginally inch it up even by 20% instead of around 75,000 in if profitability will do really kick in. So from a as a bank, which we still think that we are young at nine years, just completing today and entering the 10th year, some of the mechanisms including say tech, whatever we put it, took long time to really play out. And when Credon UPI really scales this way, so some of this gets rectified.
The only input which we sincerely take is in terms of too long is not too good. Thank you very much for your frank input. Thank you.
Baskar Babu Ramachandran
Okay, well, thank you and all the best.
operator
Thank you. The next question is from the line of Batsal from Astral Mind Capital. Please go ahead.
Unidentified Participant
My Question was around the fundraise which you are planning to do. So is it still like you’ll be obviously raising the fund below book value. Which will be like. And you are raising around thousand crores. So it will dilute the shareholders by like around 40%. Right. So have you thought about why this fundraise is needed and like the timing. Have you like explored other opportunities of. Why where you can raise the fund?
Baskar Babu Ramachandran
Ideally this should be an enabling resolution taken on a continuous basis. There is no intent for us to raise money at this current price. We don’t really. We don’t really require. We always been as you would see it is not just about the last year. Right from our inception as a micro finance company we believed that as long as our unsecured is substantially higher, even closer to 40 or 50% capital adequacy should be more than 20% irrespective of what the regulator requirements. So we do not really require any capital that we require. It will be purely from a point of view of a growth capital to making sure that we are about 21 22% and the timing is not necessary.
We need an enabling one to keep. Otherwise it takes around a month and a half too. And this is purely purely enabling. No intent to raise money anything at this price in the immediate run at all. We still have a large number tier 2 capital ever we require it on an instant basis. And also like we have grown as. An institution but that has clearly not reflected in the shareholder wealth that has been created. So is the management aligned towards creating.
Unidentified Participant
Shareholder wealth or like I want to. Understand what is your perspective on this?
Baskar Babu Ramachandran
The answer obviously is going to be in the affirmative. But that said, I think the previous two speaker speakers also have given what it takes. So fundamentally when you do some things on a long haul basis, it does not necessarily reflect on an immediate basis but the inputs taken. Certainly I think we are. I would say that more than giving a feel good feeling fairly confident as we stepped on into it the last two years was in terms of the more getting out of the whole thing unscathed and which fortunately we have been able to do it.
While we will not be making any comments in terms of how the whole thing played out for us, it is looking stronger fundamentally. And that’s one thing which we as a management team will need to look at is that while all stakeholders, the one stakeholder where we are not really kind of did justice in the last five years specifically has been in terms of shareholders. Not that we will work anything specific only towards that But I think good growth, fundamentally strong and hopefully to hear from all of you that we did really do the job which have been interested with by the shareholders.
Unidentified Participant
All the best. Thank you.
Baskar Babu Ramachandran
Thank you.
operator
Thank you. The next question is from the line of Vedant from Artha Energy Group. Please go ahead.
Unidentified Participant
Hi, I actually have a follow up and my questions are related to the ROE itself and the QIP along with the shareholder wealth that is being that the lack of which is being created. So I just wanted to understand the. Management’S strategy to improve ROE and the steps that they have to take in place. Especially since we have a QIP coming up, maybe near term or future term.
Baskar Babu Ramachandran
As I said, the capital rate is an enabling provision. So we are not kind of going to dilute anything at the cost of our shareholders. So whenever there is an opportunity comes and we will be right in place and we always raise money much ahead of our requirements. So it’s pure, pure enabling. So to the extent the other thing would be hypothetical in terms of roe, we said there will be run rate will be closer to around 11% in Q4, 10% above and probably closer to 11. And first let’s achieve that. And I think at the end of Q4 when we give a guidance, we really kind of look forward to giving more meaningful and robust one which is achievable.
One learning out of that. Every time you give a projection in a very, very volatile market like what it was last year, you kind of want to project something and it doesn’t really play out. Certainly for last year, one which we didn’t really play out to the way we wanted is the slippage. Yes, it was looking normalized but it kept on happening. But hopefully it will reflect in terms of our recovery back fairly clear that when we get a three year from recovery, our intent is to return back as much as possible just as it were our own credit losses.
So 24% will come to us. I think that what you will see which will fundamentally move the ROE needle to upwards of around 11%. But that is as we see Q4 is where it is pretty clear. Once you have done that, I think far more clarity in terms of what is to guide for FY27. So give us, give us some time till one more quarter for us to commit in terms of what the steady state would be at least in terms of 27 and 28.
Unidentified Participant
Got it. All right, thank you.
operator
Thank you, thank you. The next question is from the line of Rahul from Bake area front. Please go ahead.
Unidentified Participant
Yeah, hi, can you Tell us about the NIM trajectory over the next couple of quarters.
Baskar Babu Ramachandran
So I think from where we stand today, we expect the NIMS to be around 7 and a half to 8%. As we have seen, you know, our paying book has increased in this quarter and we see that Trend continuing in Q4 as well.
Unidentified Participant
Okay, okay. And how have our yields on the paying book moved, you know, in this quarter?
Baskar Babu Ramachandran
So one thing that we need to be cognizant of is that, you know, in our individual loan book we have, we did a repricing somewhere around July, August last year. And that higher price 28% book is running off and getting replaced by the book at current pricing of 26. So even though the paying book is increasing, there’s a rate impact associated with it. At current levels, yields are around 17.5%. And, and also given the fact that the share of retail asset is slowly inching up, we would like to see that there’s not a big compression in the yields from where we are today.
Unidentified Participant
Okay, okay. And have you sort of increased the yield for the, you know, on the disbursement and MFI segments?
Baskar Babu Ramachandran
No, not at this particular point in time. We are constantly evaluating whether there is a need for increase in pricing across risk bands. But at this particular point in time we have not raised our rates in these nine months.
Unidentified Participant
Okay, okay. And in terms of AEM mix between MFI and non MFI, I think currently we are at 45%. So let’s say over next two, three quarters what kind of mix we are seeing and what kind of growth in MFI we are seeing now.
Baskar Babu Ramachandran
So I think the number will go up a little bit once we do a write off and then the paying book comes in. There is also our new product which will kick in. So the retail asset book will continue to be a little over 50%, but MFI will also improve a little bit from the current 45.
Unidentified Participant
Okay, okay. Okay. And I think you mentioned that you’ll be doing a claim in Q1 and you have three cohorts running. So in the Q1 claim out of this 465, how much would be the claim amount?
Baskar Babu Ramachandran
I would say somewhere closer to 400 crores. 350 to 400.
Unidentified Participant
Okay. Okay. And this is for the loans which were disbursed in 2024.
Baskar Babu Ramachandran
Correct.
Unidentified Participant
Okay, okay, okay. Okay. And if, if I look at the, you know, the labor code impact for you, I think it, it’s pretty low compared to, if I see the comparison to the peer group in this industry. So can you can you just help us understand that?
Baskar Babu Ramachandran
Yeah. So even in our current, you know, salary structure, the fixed, the basic pay or what is called wage in the new definition is closer to 48%. Right. So we are actually very closer to the 50% threshold that the new loss peaks off. So and as a result the impact for us has been quite modest. If we were to really, you know, reach that 50% number, we would possibly need to have an impact of not more than 6 to 7 lakhs of compensation per month. Right. So that’s just about the impact we are likely to see.
Unidentified Participant
Okay. Okay. And in terms of overall opex, if we look at next few quarters, what kind of OPEX growth which we are targeting.
Baskar Babu Ramachandran
So like I said a while ago, with the increasing share of the paying book, we would like to see that our CTI goes below 65%. Currently the CTI is a little elevated because I’m still carrying almost 800 crores of non paying book. Right. Once that is replaced and the paying book increases, I will see a natural improvement in my cost to income ratio. And currently we are looking to reach that 65% as a first port of call.
Unidentified Participant
Okay. Okay. So this is the exit for next. Year which you are targeting.
Baskar Babu Ramachandran
Yeah.
Unidentified Participant
Okay. Okay, Got it. Got it.
Baskar Babu Ramachandran
We didn’t want to give any projections for FY27.
Unidentified Participant
Okay, thank you.
Baskar Babu Ramachandran
Thank you.
operator
Thank you. The next question is from the line of Chinmay from TCN Capital. Please go ahead.
Unidentified Participant
Hi, good morning sir. So my question is that could you. Give some color on the recovery rates in the 3290 book? So basically that 1.9% at the moment. How much of this you see flowing into the NPA bucket and how much. Of it could be recovered? Some sense around the flow rates.
Baskar Babu Ramachandran
Not very clear. Were you able to hear it? You want to understand 30 to 90 recovery rate and what is the expected flow from 30 to 90? Yes, yes. Okay. So we have improved significantly on the SMS buckets collections recovery. Now we are heading as high as the 65 to 60 percentage on 31 to 90%. On MSI side and on retail we are completely intact. Nearly 90% of the portfolio gets collected. So the flow rate is minuscule. On retail though it looks elevated on. SMA bucket however it doesn’t flow much. And there is another segment within retail, our partners which is lending card per weekweek where the flow is higher. Flow is 40 to 45 percentage. Under the to 90 bucket that’s a smaller portfolio on retail assets, maybe 100 portfolio. Yeah. But the key takeaway is, you know, in our SMF buckets, especially in the MFI business, our collection efficiencies have improved significantly and that’s largely on account of all the efforts that the team has put in. I mean just as an example, in the 30 to 60 bucket the collection efficiencies have moved from 40 to 50 plus. So and that trend continues.
Unidentified Participant
Got it, got it. And secondly I just wanted to confirm that the, the medium term credit cost. Guidance is around 1%. Right. But like, like is there a, like a sharp improvement expected on a quarterly quarter basis and like the coming quarters when the return to the normalized level or is that something a little out in the future?
Baskar Babu Ramachandran
Out in the future? I think very good thing is that we’re real kind of without any other things. So 60 becoming 30 becoming closer to 25. I think we’ll take this quarter as a real very key thing in terms of really seeing what it is not just in terms of increased efforts around resulting in the fundamental quality of the portfolio increased substantially. Specific in terms of if closer to around 99 point I think the GNPA remaining out of the last one year generated portfolio in IF is less than probably around 0.2, 0.3. The intent is to really see it including which is more than 10 months mob.
Where is it going to be? Can it stabilize it on point three? I think we will have far more clarity to kind of give future projections in the end of the 1/4 because the whole, the whole thing is to see where the trend which is declining in terms of delinquency continues and stays at 20, which is what we used to be. I think that’s the first port of call. Once we reach there will get kind of manner for clarity for us to delete conferences. It becomes like almost crystal gazing.
Unidentified Participant
Awesome. Got it. Thank you.
operator
Thank you. The next question is from the line of Avnish Tiwari from Waikria Capital. Please go ahead.
Unidentified Participant
Hi. Most of my questions have been answered. Can you articulate your growth in MFI paying book, how it moved let’s say in Q3 September versus December and how do you see with the current disbursement rate it moving in Q4 it is. Back to what it was. It kind of declined. I think it was around closer to 5000 crores, kept going down to around 4344. So ask Casey to kind of elaborate it.
Baskar Babu Ramachandran
Yeah. So on a Q on Q basis our paying book has increased by around 180 crores. And given the collection efficiencies that we have in you know, especially in the current bucket, we expect that trend of the increase in the paying book to continue.
Unidentified Participant
And what was the paying book by end of let’s say December 2025. And how much are the typical repayments you are getting from your paying book?
Baskar Babu Ramachandran
Like we said in the bucket, zero. For MFI business, our collection efficiency is around 99.4. So that’s the kind of flow rates we have. And we are quite confident that we will be able to reach, you know, 99.5 by January. So which means that we will have a flow rate of not more than half a percent.
Unidentified Participant
Okay. So one can take a half a percent flow rate from the paying book. That is current book. Yeah? Yes.
Baskar Babu Ramachandran
Yes, current book. But there will be some natural repayments also, right? The loans getting completed because you have 500 crores of disbursement and these two number one can subtract to get an increase in paying book.
Unidentified Participant
Right. So what is the normal repayments which like normal loans closure or long normal payment.
Baskar Babu Ramachandran
Yeah. So you will see that on an average the paying book will increase by around 100, 120 crores in IF. In a month.
Unidentified Participant
Okay. And the Vikas loan?
Baskar Babu Ramachandran
No, if includes Vikas loan. So if you look at the bank as a whole, my paying book will increase by around 250. Between 250 to 300 crores in a month.
Unidentified Participant
Got it. As a bank as a whole, right?
Baskar Babu Ramachandran
Yes, bank as a whole. And around 120. You said 180. Which number you said for the if book. About anywhere between 100 to 120 crores per month for MFI.
Unidentified Participant
Got it. Thank you and wish you very good.
operator
Yep, thank you. The next question is from the line of Swaraj Dev, an individual investor. Please go ahead.
Unidentified Participant
Hi sir. Good afternoon and thank you for the question. Am I audible?
Baskar Babu Ramachandran
Yes. Yes sir.
Unidentified Participant
I just. Most of my questions have been answered. I just want a qualitative feedback from your end with respect to asset quality. And our ROI guidance also. So basically if you look at, look at it, we have been building an ROI guidance of. We have revised our ROI guidance twice right now. I’ve been following for the past couple of quarters and right now it’s at. 1.1 and even gross NPA we are. Sticking to less than 5% and net NPA less than 3%. So taking everything into consideration, I understand internal targets for the sales team could be different and would be higher. But however, for the investors of your. Bank, what do you feel is a. Realistic figure that we can achieve by. Quarter four of this year, sir.
Baskar Babu Ramachandran
See, I think where we’re probably not able to, not able to clearly get on the code E5 is it where there is an increase in the GNPR and impact on either the capital or in terms of our P and L will be very close to zero after having provided for the one at the end of the last year when our projections have not given end of the last year, just About December of 2025 or 24, it looked like the slippages were coming down but didn’t happen in the first quarter. That I think was an impact that we are carrying in terms of a higher GNP of 6.6 or a net NP of around 4.3 since we don’t write off and as Kasem explained so that whatever gross flow with net flow which happens will reflect in our GNPA because we cannot write off whatever is claimable at a CGFMU till we get the payment.
Otherwise they’ll have a choice to do that on a normal basis. So that timing, hopefully as I said next year onwards the claim will be substantially larger than the slippages, net slippages that will happen and we intend having that. And in fact it will even come to a point where the premium that we pay will may be higher than the claims that we will be making in the cohort. This was not taken from a perspective in terms of multiples of premium that we’ll collect. This was to protect ourselves in an event like this which we didn’t obviously forecast will happen in two years time.
So that will with respect to that will continue to be covering our entire eligible CGFMU under the CGFMU code. So the slippages will be lower. And yes, our guidance on that went down and that had an impact in terms of our ROA guidance itself. It was from a business point of view. While the disposal everything was higher than what we projected, the sippages did take a toll in terms of C and L. Consequently in terms of the GNPA and ROA and also in terms of our cost to income, I would say that Q4 as we kind of guided is around closer to 1.1% on the lower end and Roe of 10 is the first thing that we would like to achieve before we really project for the subsequent courses.
Unidentified Participant
Yes sir, thank you. And I just wanted to understand how. Confident are we internally on this ROE. 10% and ROA 1.1% by Q4.
Baskar Babu Ramachandran
Give us time and hopefully we’ll be able to get our better rate and we’ll kind of. Obviously we’re confident port but this is purely in terms of what we saw in Q3 and Q2 sorry, Q2 and Q3 and this trend should continue because across the industry also there has been huge stability, not just us seeing it and we’ll come pretty confident of going towards 10 and ROA of around closer to.
Unidentified Participant
Okay, so thank you. That would be it from my end. All the best.
Baskar Babu Ramachandran
Thank you.
operator
Thank you, ladies and gentlemen. That was the last question for today and I now hand over the conference to management for closing comments.
Baskar Babu Ramachandran
Thank you very much. And your inputs, valuable inputs, are taken in the right spirit and hopefully we as a bank will make all our stakeholders proud by doing things fundamentally strong and as well as kind of making sure that we’re keeping up to all the guidance that we give. Thank you very much.
operator
Thank you. On behalf of Aryan Capital Market Ltd. That concludes this conference. Thank you for joining us. And now you may disconnect your lines.