Suryoday Small Finance Bank Ltd (NSE: SURYODAY) Q4 2025 Earnings Call dated May. 09, 2025
Corporate Participants:
Shailesh kanani — Moderator
Baskar Babu Ramachandran — Managing Director
Analysts:
Unidentified Participant
Sarvesh Gupta — Analyst
Akhilesh Singh — Analyst
Deepak Poddar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Surode Small Finance Bank Limited Discussion on Q4 and FY ’25 Earnings Conference Call hosted by Centrum Broking Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Shailesh Kanani from Centrum Broking Limited. Thank you, and over to you, sir.
Shailesh kanani — Moderator
Thank you. Thank you. Thank you Alari. Hello. Good morning, everyone. Welcome to Small Finance Bank Q4 and FY ’25 earnings call. On behalf of Centrum Broking, I would like to thank the management of, giving us — for giving this opportunity to host this call. Today, we have with us the entire top management of Small Finance Bank, represented by Mr Ramchandan; MD CEO; Mr Heman Shah, Executive Director; Mr Kanish, CFO; and Mr Dha, Head IR. I would now hand over the call to Mr Bhaskar Baboo for his opening remarks and then we will open the floor for the Q&A session. Over to you, sir. If there was a lag on the other line, can you please ask someone to call that line? We have joined in-place please. You have joined in? Yes, sir, please go-ahead.
Baskar Babu Ramachandran — Managing Director
Yes. Thank you. Good morning, everyone, and thank you for joining Small Finance Bank Limited’s Q4 and FY ’25 earnings conference call. We appreciate your time and interest today. I hope you 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 bank’s deposit and advances both crossed INR10,000 crores, a significant milestone. The growth was driven by significant momentum in the mortgages and the wheels business on the side. And on the deposit side, it was driven by the retail franchisee as well as digital channels. The microfinance sector is no longer about just loan growth and asset quality, but also about earnings resilience and cost efficiencies. The microfinance sector faced significant challenges, including rising delinquencies and liquidity constraints. Delinquencies in microfinance loans remained high in the March quarter, primarily due to over leverage and the implementation of the garbage is expected to address the leverage issue. Despite these challenges, the collection efficiency of MFA is expected to return to normalcy and credit costs are expected to stabilize by the 3rd-quarter of FY ’26. Let me now provide an overview of Surode’s performance for Q4 and FY ’25. Our gross advances stood at INR10,251 crores, which is year-on-year increase of 18.5% compared to INR8,650 crores. The disbursements were at INR6,989 crores, up just 1% from INR6,919 crores. While the disbursements remain at similar levels as in FY ’24, the wheels and mortgages business grew substantially with disbursement reaching INR1,11,904 INR1,904 crores, an increase of 33.6% from INR1,426 crores. Our deposit base has also expanded and stood at INR10,580 crores, which is a 36% increase from INR7,77 crores. The share of retail deposits now stands at 81.1% as of March ’25 compared to 78.8% a year-earlier. Also, our CASA ratio has improved to 20.9%, up from 20.1% year-on-year. Our current bucket collection efficiency stood at 98.7%. Our gross NPA currently is at 7.2% and the net NPA is 4.6%. The gross NPA stood at INR734 crores and the net NPA at INR457 crores, against which INR460 crores is receivable under CGMFU program. In effect, the CJSMU claimable and existing provisioning cover almost 100% of the GNPA as of, 31 March 2025. Now let’s move on to our financial performance. Our total income increased by 12% year-on-year, rising from INR1,182 crores to INR1,323 crores. Our net interest income NII increased by 15% from INR962 crores to INR1,106 crores. The pre-provisioning operating profit decreased by 14.3% from INR454 crores to INR389 crores on a year-on-year basis. Our cost of funds stood at 7.8%, up from 7.3%. Our cost-to-income ratio stand elevated currently at 70.6%. Our profit-after-tax decreased by 46.8% year-on-year from INR216 crores to crores. We continue to maintain a healthy capital position with a CRAR at 25.8% with Tier-1 capital at 24.5% and Tier-2 at 1.4%, well-above the regulatory requirements of 15%. Our customer-base has grown to around 3.4 million as of March ’25 compared to 2.8 million in March ’24, marking a 21.4% increase. While the banking system faced liquidity challenges in Q4 FY ’25, our bank has been able to manage its liquidity position well-above the regulatory limits and have been able to achieve a credit to deposit ratio of 96.9%. We continue to cover our eligible portfolio under the scheme to mitigate risks. This coverage was initiated in FY ’23 when the NPA in the microfinance segment was at significantly lower levels. This coverage was taken as part of the prudent risk management practices to cover the unforeseen scenario of significant credit losses due to any external market scenarios. Another initiative which was initiated in FY ’25 was to develop our digital capabilities, which has helped us garner deposit through the digital channel. Currently, the deposit sourced through the digital channel stand stood at INR350 crores with over 30,000 granular retail customers and a daily run-rate of about INR3 crores. The digital sourcing channel opens up opportunities and enables us to cater to other requirements to our customers sourced through this channel. To sum it up, our bank has achieved a milestone of advances as well as deposits, costing INR10,000 crores with gross advances of INR10,251 crores and deposits at INR10,580 crores. Our non-IEF book now constitutes over 50% of our total advances. In respect to the IF book, the bank continues to cover the entire regional portfolio under scheme. External scenario in the microfinance sector has had an impact on the bank’s performance during FY ’25 with GNPA increasing from 2.8% in March ’24 to 7.2% in March ’25. Of the gross NPA of INR134 crores, the bank is carrying a provision of INR276.8 crores, including INR14 provision. The portion of GNPA stands at INR457 crores, against which the expected receivable is INR460 crores. The retail asset franchisee, particularly the mortgage and meals business has shown substantial growth in FY ’25, thereby tilting in favor of the non-IF portfolio as a proportion to the total advances now crossing 50%. On the deposit front, there has been 36% growth in deposits, primarily driven by retail franchisee with costs standing at 20.9% and the consistent acquisition of deposits through the digital channel. The Board Bank continues to diversify its portfolio, which is visible in the growth in the mortgages and wheel segment. In addition, the bank has started focus on MSME segment and reasonable traction in this segment in the near-future. Overall, for the bank, FY ’25 had its share of challenges, which is completely mitigated though by CGF immune cover but also its share of opportunities, which is focused growth in the secured assets business and deposit franchise. The various initiatives done by the bank over the past few years, which is investment in credit guarante cover, investment in technology, focus on digital product offerings, both on the deposit side as well as advances front and the targeted focus on MS&A business are expected to drive the bank into FY ’26 and forward. We remain committed to delivering consistent improvement across key business parameters with a strong focus on sustainable growth, asset quality and customer-centric innovation. As we move forward, we are confident in the ability to create long-term value for all stakeholders while staying true to our mission of financial inclusion. Thank you for your continued trust and support.
Now I hand it over to Shailesh for the Q&A session.
Shailesh kanani — Moderator
Thank you, sir.
Questions and Answers:
Operator
We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star N1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. 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 comes from the line of Shah from Paras Investments. Please go-ahead.
Unidentified Participant
Hi, good morning. So I wanted to know more on your outlook for FY ’26. We are about to receive about INR460 crores of CGFAU claims against our net NPA of INR457 crores. So are we going to receive this clean in FY ’26? So a lot of the — all of the INR460 will come in the financial year, about INR360 crores is expected to come in financial year — in the current financial year. But what this essentially means is that my entire net NPA is covered under the credit guarantee scheme. Okay. So what would be your outlook for FY ’26 for AUM growth and NPAs.
Baskar Babu Ramachandran
So-far as our overall book growth is concerned, we will continue to work with a guidance of 30% to 35%, something that we have been targeting for the last couple of years. Equally on the deposit side, we expect to grow faster. This is the first-quarter when we have been able to achieve a CD ratio of less than 100% and that’s something that we’ll continue to target. I think the more important part is, one, in secured mix, our asset mix is going to see the shift. So secured mix is like — is something that we’ll target in the range of 55%. And insofar as GNPA and NPAs are concerned, we will target a GNPA of somewhat less than 5%, NPA less than 3% and a credit cost of 1%. GNPA is in 5%, NNPL has been 3% and credit cost of 1%.
Unidentified Participant
Okay. And we are targeting a secured book of 55% for FY ’26. Correct. Okay, okay. And sir, any guidance on ROA and ROEs?
Baskar Babu Ramachandran
So for ROA, we will be somewhere between 1.5%, 1.6 and that translates to an ROE of anywhere between 11% to 12%.
Unidentified Participant
Okay. Okay. That’s it from my side. Thank you.
Operator
Thank you. The next question comes from the line of Sarvesh Gupta from Maximal Capital. Please go-ahead.
Sarvesh Gupta
Good morning, sir. Sir, for the TV MFU, so right now your net NPA and receivable are the same and you are saying around INR280 crores you will receive in this financial year and the remaining INR180 odd crores you will receive in the — in FY ’27, right? And will you write-off these NPA post you receive these claims, so your net NPA will go down to that extent? Yes, please.
Baskar Babu Ramachandran
So the effect of us receiving the claim money will be a reduction in the headline GNPA number. Okay. Okay. And secondly, are you still going to be collecting these return of accounts or are you not supposed to no, no, we are very much supposed to be correctly. We are expected to underwrite a borrower based on the trade guarantee scheme that we have subscribed to. And the credit guarantee scheme actually enjoins us to proportionately return any money that is collected by us towards principal recovery. And those written-off tools, the collections that will happen from that account so what percentage will come to you and what percentage will have to be given back to? So it is in-line with the coverage. So 72.75 is what goes to them and the rest comes and is retained by us.
Sarvesh Gupta
Okay. Okay. And any financial just to clarify, while the entire eligible CSME claim based on various cohorts, we can make only one claim per year.
Baskar Babu Ramachandran
So it depends on what we choose to claim, whether it is in Q2 or Q3. We choose to technically speaking in Q4, we’ll get the entire amount which is eligible to be received in the year. But from a timing point-of-view, may choose to do it in either Q1 plus Q2 or Q1 and Q3. So the amount actually receivable from a cash-flow point-of-view may be different in terms of maybe INR250 crores INR260 crores. But the fact is that they are in net entire net NPA as of 31st March is covered by the eligible claims as and when we make it. And since we have covered the entire eligible portion of CGS revenue starting from the year FY ’23, fairly confident that our claim loan will also be the same as amount receipt. Okay. And on the principal is covered under the this scheme, right, the interest that is not covered, right?
Sarvesh Gupta
Correct. That’s right. Okay. Okay. Okay. And earlier you were paying around 1% for the coverage. Now since we have seen a very bad FY ’25 across the industries, have the premiums gone up for FY ’26? And if yes, then what are those?
Baskar Babu Ramachandran
Perfect. So for the first three years, it doesn’t go up, the rates are locked-in. Based on the portfolio performance and the claims that we make, the rates will go up in the next cycle after the first three years. But having said that, the only presently as per the grid, the — even assuming the worst-case scenario of 15%, which is not the case, the premium will go up from 1% to 1.25%, but it will be anywhere depending upon the percentage of clays?
Sarvesh Gupta
Okay. Okay. And just to get a rough idea against this INR450 odd crores that you are going to receive, how much of premiums have you paid-for this INR450 crores on the INR5,000 crore eligible book?
Baskar Babu Ramachandran
So INR50 crores. It’s not exactly premium paid, it’s a rolling premium. As of March ’25 on the portfolio count, we have paid INR155 crores. Another 1% is payable on the entire portfolio which we choose to cover, approximately say INR5,000 crores INR150 crores payout from a cash-flow point-of-view, which will happen in Q1.
Sarvesh Gupta
Okay. Okay. Understood, sir. Thank you and all the best. Thank you.
Operator
Thank you. The next question comes from the line of Vijay Shah from Shah Family Office. Please go-ahead.
Unidentified Participant
Good morning, sir. Thank you for the opportunity. So sir, my first question is, everyone is taking cover for which I understand there is a cooling period, how could you have taken that in FY ’23 being one of the early ones? So did you foresee asset quality would be bad or I’m just trying to understand the rationale behind this.
Baskar Babu Ramachandran
Yeah, when the kind of was planning to start taking the cover, so the entire credit losses projected probably would have been less than 1.5% and the amount that would be on the portfolio also would have been the same and keeping. The reason why we chose to take at that point of time is based on our historical cycles, which for every four or five years for various reasons, one, either it was demonetization, it was there after COVID. So post-COVID, the clear learnings that we had was to really kind of be risk covered undergoing is good, specifically in terms of the inclusive finance portfolio. And when we studied the portfolio scheme in detail and we figured that irrespect of the premium that we pay, for instance, as of now, we have paid INR155 crores and have made a claim, we received only INR40 crores because of the cooling period as you rightly mentioned. We chose to look at it purely, purely as an insurance scheme where there is the amount of money claim is not necessarily to be the only decision, it kind of protects you in terms of an unforeseen scenario. Nowhere in FY ’23 would you have seen a scenario like this with a GNP of 12% or 15% at the sector level. So it was more in terms of risk management and which was not really the first one. We also have kind of people were guiding as anybody required in terms of how the scheme and why we took it. We continue to believe that coverage as available is good specifically in terms of unsecured and more so we address a segment which is low-income households and the risks that they are prone to are varied in numbers rather than pure only income-loss. So that is the reason, Mr.
Unidentified Participant
Understood, sir. And sir, I understand that the total NNTA for IF is INR441 crores and we expect around INR460 crores. So sir, does it mean that we have zero MNPA or 100% PCR so considering the credit guarantee cover that we have in-place, we effectively have a 100% coverage of the. Understood, sir. And sir, my last question, so I wanted to clarify whether you will provide for any part in the next year, which will you know, not take — which will not see your P&L. So like is that right?
Baskar Babu Ramachandran
No. So as per our accounting policies now for the MFI book, the portion which is uncovered, we provide 100% upon it becoming an NPA. So for a INR100 loan, 72.75% is covered, 275% is not covered. So we provide 100% of that INR27 right
Unidentified Participant
Understood. For this uncovered LNP of INR41 crore as of March, there is no P&L rate next year. Great, sir. So yeah, sir, that’s it from my side. Thank you so much.
Operator
Thank you. Okay. Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Sindu Jah from Shakti Investment. Please go-ahead. Sindu, please go-ahead with your question and unmute yourself in case if you are on-mute. Thank you since are you there? Since there is no response from the participant, we’ll move on to the next participant the next participant is Akilesh Sonjay from Kotak Securities. Please go-ahead.
Akhilesh Singh
Hi, team. Good morning. Sir, a few datakeeping questions first. Can you share what was the credit cost and the ROA for your MFI business in FY ’25. So credit — if you look at the credit cost, it will be around 7.5% to 8% and that would effectively mean that we have a ROA of yeah, so and that will mean that our ROA will be somewhere around so basically we around 389 we have delivered and we have a net freight cost of around 170 odd crores. So which means on a balance sheet basis, it will be 1.8% to 1.9%. But KC was talking about yeah, but KC was talking about 87% on MSI portfolio before was power, so which means 25% is our cost, which is 2% to 2.5%.
Baskar Babu Ramachandran
Okay, so only 25% of that INR170 crores would be a mouse for you. No, that 25% what I’m talking about is the entire highest freight cost for us. So if there is a GNP of INR700 odd crores, our freight cost will be around INR140 odd crores. Okay, so this INR170 crores is net of the CGSME recovery which we expect. Is that fair? Yeah, okay. On the selection basis it is 1.7, 1.8% 1.7, 1.8% credit cost you are saying on a and okay, understood. Okay, perfect. So that is one.
Akhilesh Singh
Secondly, can you just tell us the MFI slippages in each of the four quarters of FY ’25, please we specifically go to Q3 and Q4, which is kind of a little more pronounced.
Baskar Babu Ramachandran
It was around INR240 crores of and around INR300 crores in last quarter of the portfolio of around INR21 crores. So broadly, INR750 crores for a year. The last two quarters 70 and INR304, yeah, like 70 understood.
Akhilesh Singh
Okay. Sir, lastly, can you speak — talk about the CGSMU scheme, what makes you confident that the payout will happen? Because if you look at the balance sheet of NCGTC, the cash line there seems to be fairly low. To our understanding, it is very-high. It’s around INR1200 crore around close to INR15,000 crores.
Baskar Babu Ramachandran
So Garthik may have more details about that. So a couple of things here. So if you look at the total premium that they have collected over the years to the total claim payments that they have made till-date, it’s still extreme positive. So one is that. Second, obviously, the initial capital which had been put in is itself completely intact, which is sponsored by the Government of India, Ministry of Finance. And there is a commitment from the Ministry of Finance, especially given the fact that in the — there is — excuse me, there is clear focus on the growth of the growth for the MSME segment. So, and purely this is numbers as we speak. As I said, the premium collected till debt is much higher than the claim payments — payouts made. On that said, we are not going to be commenting on the government’s commitment to fund the unit, micro units as well as in terms of the CGT MSC. We believe that while it is reasonably funded from this point-of-view, broadly there to our understanding is that including CETM as we look at it, premium two claims, one is to two is broadly what they are comfortable with. I think we have paid as of now INR155 crores and you make a payment of INR150 crores, that’s closer to INR200 crores. And if you look at the claims, it’s just a little about 2 times. And this is a continuing premium which you pay. It is not a one-time premium paid. So on the entire book of INR5,000 crores, which you’ll cover now will be around closer to 1% in this quarter. And subsequently on all the disbursements is again paid at 1 points at 0.1, 0.25 depending on the quarter of disbursement. So we are not really looking at it. We are rather looking at it considerately as a INR155 crores is already this kind of a provision made. And even if we had kind of only just put basic rate of interest around closer to INR15 crore INR180 crores is complete?
Akhilesh Singh
Understood. Sir, and I hope I can squeeze in a couple more questions with you allow. If you can speak about the situation on-the-ground in Tamil, you have about 20% of your microfinance book over there. So how are the trends holding up in the last few days? That is one. And you have spoken in your presentation, you have guided for about 30% 35% credit growth. Can you speak about the regulatory comfort around that kind of growth level? Thank you.
Baskar Babu Ramachandran
See, one, the growth is going to be predominantly driven by like last year, if you look at it both in our mortgages and CV portfolio, the growth was approximately INR1,000 crores, INR500 crores each in each of the portfolio. So even if we do not increase the disbursement run-rate what we had in Q4, not even the March run-rate, the average of the Q4, we are likely to kind of have an increase in the secured portfolio, which is both mortgages as well as in CV of approximately closer to INR1,500 crores. So on a IN 10,000 crores around 15% to 20% is going to come on the overall asset — on the advances from these two products. What we are really projecting from our microfinance improved infinance portfolio is just about a 10% growth, predominantly driven by-10 lakh pre-approved customers that we have, which fit-in well into guardrails too. Of course, a little bit of slippages happens post funding in terms of what in our own analysis, more than the amount the people borrow based on their capability more than the amount. If the number of lenders go beyond a point, which is four or five, there is clearly a correlation in terms of higher stress. That is on account of probably an ability to service multi-lenders. Ability to service a few lenders for even higher loans, which are longer tenor is much better. And those people generally who take higher loans do have a very visible and solid cash-flow driven business. So we have — however, that said, we are not really kind of using any of that data. We will stay and comfortable we implemented the Guard rail 2 in November deciding from November and December 500%, we will continue to do it till we see complete stability. We have introduced banks — bank branches driven MSME product, which is digital, digital in terms of decisioning of meeting the person and doing a CPV in terms of disbursements, a small portfolio at this point of time, but this seems to be a good one in terms of acquiring granular CASA in and around the catchment areas of the banks, whereas I’m only kind of focusing on liabilities. This is liabilities through assets. As of now, it’s holding goods, a small portfolio run-rate of around INR10 crores. We are not really accelating there, but it will be an organic acceleration and targeting around INR30 to INR40. Between these, we are lucky to have around INR2,000 crores, which is 20% and our inclusive finance portfolio from existing pre-approved, we will be defocusing on acquiring new customers at least for the next couple of quarters, certainly for the next two quarters. So that’s the plan in terms of a 25% visibility. And then other products like FIG and supply-chain financing at around INR250 crore supply-chain financing mostly for A and our customers through the text platform. We’ll continue to do that rather than taking any risk in the supply-chain financing at least for this year. So that’s a broad plan for 30% and what has to be kept in mind is 30% the guise of a very small advances book of around INR10,000 crores. So we do believe that the regulator will be reasonably comfortable.
Akhilesh Singh
Understood. And on the other question on Tamil?
Baskar Babu Ramachandran
So as of now, we are not seeing any massive disruptions. So this year, so-far well in control, we had 99.1 percentage current market efficiency. So we don’t see so-far no peer visible signal. So-far, so good.
Akhilesh Singh
Thank you for the elaborate responses, sir. Thank you.
Operator
Thank you. The next question comes from the line of Shailesh Kanani from Centrum Broking Limited. Please go-ahead.
Shailesh kanani
Yeah, good morning, everyone. Sir, just wanted to understand few things. So we had done a loan sale to ARC and it was a secured portfolio, predominantly your HL and MAP portfolio. But it speak — it resulted in significant loss. So what factors contributed to Steve in the transaction? So Salesh, if you look at the ARC book that got sold, we had a principal outstanding of around INR80 crores and net of NPA provisions, it was around INR50 odd crores. And so essentially on that INR50 crores, we got around INR31 odd crores — INR30-odd crores as purchase consideration and that was largely split into 75% valuation for mortgage and 25% valuation for PV. So just to elaborate further on this, so I was under the impression that the secured book would get a better existing realization. So net book-value was INR52, yes. So that was after COVID provision, right? Still it was 80 in general outstanding, right?
Baskar Babu Ramachandran
Correct. So still isn’t the realization it is on the low-side? Yeah. Having regard to the kind of assets that we have and it’s more affordable on the mortgage side and CV, it’s largely refinanced vehicles. So — and most large — and almost predominantly it was the old book more than three years-old. So that’s the kind of that determine the kind of pricing that we have received. So earlier, we kind of did mortgages in the IN 10 lakh to INR15 lakh and that mean not the micro mortgages. Regular mortgages within 10 lak to 15 in states like Madhya Pradesh, not agri, but rural belts. So it is a segment which we defocus and completely kind of exited. So that small residual book which we had, we thought it is better to kind of take it off to ARC and continue to have all the book unmanaged and which is on the current book, we kind of target a less than 1% GNPA for the year in mortgages and probably much lower in the CE book. Okay. So more likely enough.
Shailesh kanani
Okay. So one more thing I’ve noticed in the FIG book vis-a-vis last quarter, we have seen us some slippage of their growth. A small amount of around INR11.7 crores anything to read on that? What is that?
Baskar Babu Ramachandran
Yeah. So we had one loan to ABM financials and that particular name has currently got into NCLT and the CIRP process. However, as things stand today, so we have provided 100% as a matter of caution and conservatism. But as given how the thing is progressing, we expect substantial realization and a provision back-in due course. So our FIG book continues to be growing, right? Even in this year, FIG book has gone to a decent size.
Shailesh kanani
So if you can give some color on that, how is the quality over there and any other accounts where we are seeing some early signs of stress?
Baskar Babu Ramachandran
No, so typically we tend to do door-to-door tennis of one year with one month reset are fairly conservative in the kind of name selection. And overall on a portfolio basis as a policy, we try to see our FIG book is somewhere in the range of 10% to 12%. So given all of those factors, we do not expect accidents like these to happen. I mean, we haven’t ever had a credit cost in our FIG business all this while. So this is a rare one-off cake. We are fairly conservative in name selection and most of these people have businesses somewhere we can — where we can look at as well. So that ensures that we are fairly conservative in our selection.
Shailesh kanani
Yeah. Just last question from my side. So we have seen as a year recent healthy on deposit growth. However, when I see quarter-on-quarter as well, there has been a sharp jump-in borrowings, right? So what is this driving this? I think we had some funds which are supposed to be kind of replenished. Is that the same? And what is the cost of borrowing now for those funds?
Baskar Babu Ramachandran
So what we have essentially done is that the SLTRO money which came to us for four years at 4% that has gone out. It was around INR750 crores. What has also happened is that short-term money in the form of IBPC which typically used to come to us at six-quarter, six half or a six-month and that has also run-off given the stress in the MFI book. So what we have essentially done is replenished all of that with funding lines from Nabad. We have basically got three and three and five-year money floating-rate at 8.5% from Nabad.
Shailesh kanani
Okay. And just last question. On the SME book, in terms of Q-on-Q performance, it still remains a Par 30 book remains kind of sticky, right? Any color on that?
Baskar Babu Ramachandran
Which book did you refer to, Salesh? Hi, okay. She said it as of now, I think March looked good across 99% plus collection efficiency on current. April has not been maintaining the same momentum and it is not any particular state which showed up across-the-board, there has been almost a 50 basis 200 basis-points reduction. This is on March had we really projected, the book would have been much less stickier in terms of 1 to 30 bucket, but that did flow-in the month of April. And hopefully that is purely a one-off month and this month is not showing any of those signs. But if only if it stabilizes at 99 and above, but preferably in the 99.5% range, then you are likely to see a healthy book across other higher buckets. As long as it doesn’t happen, then the success continues to be there. The focus is what we now kind of created a separate collection team for one to 30 call them recovery officers, but multi-initiatives where we try. The fact remains in the customer, the person who is sourcing and servicing them for long. Even in the 1 to 30 bucket, that seems to be far more effective. And it’s better also to kind of let them off in terms of chasing the GNPA customer and the specially force. The question to ask is that where should the overlap be between handing over the GNPA customer and at the time well before that for at least one month-to 45 days during the transition and hopefully in the various bucket. As of now, yes, things are from the 1 to 30 bucket is a little larger than our comfort zone and we kind of have to wait-and-watch in this quarter. But hopefully with the guard coming up, there could be some indirect express which will be created by the adjustment of the cash flows which the customers are used to, but from a medium-term to long-term discipline, this will be very, very useful because the Guard 2 also states that companies cannot — and one of our loans cannot be given to people with more than 5,000 in default in the 60 plus bucket. So that also will hopefully will bring in discipline because otherwise, irrespective of the default to other institutions, if a particular institution is comfortable in terms of the requirement, they were kind of going ahead and funding and hence the customers are in a position to choose to not to pay one or two and to pay one or two institutions. Hopefully, this will bring in that discipline as well. So just to add,, if you see the par increase is 6%, which is nothing but your GNPA. If you only talk about less than 90, it is more or less same. So whatever GNPA is in this quarter, that 6% that has increased from December. If you see 6% increase is only because of GNPA, which is an effect of current bucket of last quarter. So what we can — and also another thing, we have not written-off anything. So par is looking high. So once we get CGF claim and from Q1 onwards, so Q1 would be another effect of Q4, which is much better than Q3. So you can see once we do write-off and once we do from Q1 and Q2, par should come down. So it is not par as such, it is only GNPA, which is going up here.
Shailesh kanani
Yeah. Thanks for the answers..
Operator
Thank you. The next question comes from the line of Anand Mundra from Ample Capital. Please go-ahead.
Unidentified Participant
Hello. Thank you for the opportunity. Sir, what would be our credit cost for the year and for the quarter for the non-MFI book?
Baskar Babu Ramachandran
Yeah. For non-FI for FY ’25, you’re talking about or FY ’26. FY ’25, what was it for FY ’25 for the non-MFI book was 0.3%, 0.2% to 0.3%. And how much was it for this quarter? Because we’ve done some sale to ARC. So I’m guessing it would be slightly elevated this quarter or extra provision. So there is no extra provision as such for ARC sale. Whatever we have done till Q3, for the purpose of the ARC sale, we essentially used our floating provision. So we did not take any additional provisioning to the extent for that book.
Unidentified Participant
Okay, okay. So we fully consumed the floating provision that we had on the. We have some INR37 odd crores still remaining on our books. We consumed about INR20 odd crores for the purpose of this transaction. Got it, sir. And sir, you — just a follow-up to what you mentioned to the previous participant, the collection efficiency in April has seen a slight dip as compared to March. Is that correct?
Baskar Babu Ramachandran
Yes. So historically, April and May are the low months, both for our collections as well as disbursals. So indeed we are better of a trend. But typically there is a 100 bps drop. We didn’t drop 100 bps overall. So indeed we did better business than March in April. So that way we are bucking the trend and hopefully we should hold-on to it in May.
Unidentified Participant
Okay. And sir, so in the guidance that you mentioned, what kind of credit cost are you penciling in for this year? So we are considering a 1% credit cost on a net basis for financial year ’23. However, if you add the CG from a premium, which is also technically a credit cost, that you can kind of had another 0.5% on the overall advances. We’re likely to kind of make our CGFM premium payment or closer to around INR78 crores to INR80 crores. Even on INR10,000 crores, you can say that another 80 basis-points.
Baskar Babu Ramachandran
So we are talking about in the range of INR1.75 to 2x to 2 percentage as a credit cost. Got it, got it, sir. But sir, like 1% credit cost is kind of the best that we can expect across cycles. Is this like — I mean, are you assuming this to be this year to completely normalize and not have higher credit cost? So things are evolving, so it will be very kind of a difficult or it will be sort of not be right to kind of call-out. The stabilization has to be seen for a six months we get. So in fact, since April was little as in May — sorry, March kind of come to any conclusion in terms of extrapolation I would think that it will be able to resist that and see a clear trend for a couple of months. What is really coming out is that this trend, if you can may call a crisis is much sharper and pronounced than we have seen anything in the last 15 years. This happened across states would not be triggered by any specification even and probably the go back I think in the fundamentals has been higher leverage on multi-institutional borrowings, not just the amount as a leverage, the number of lenders — the lenders from whom they have taken loan is probably would have cost all of that. So I would rather think that we probably will let us see this trend for three, four months before calling out in terms of any projection. But what we have done from our risk management is that the focus will be only on pre-approved 10 lakh customers, of which 2.5 lakh customers, our existing customers, 7.5 lakh customers are the one who has paid and have exited and have not shown any proclivity in terms of taking loans the market, but trying to kind of getting in touch with them and giving them — closing it out, that would be the focus. It is not going to be getting new customers at all, including in branches where we opened in the last one and a half year. We would say put another focus only on new to bank, loan customers, is customers with excellent track-record for at least period of two years with others. So that would be the focus to go. But is something which we can call-out probably after a couple of months probably by around June, August. And just to add, so if you see our Q4 slippage is 300 days, the number is 300. Now if I take a base-case scenario of next year’s total slippage of INR300 crores INR400 odd crore and after CGSEs, if I may have to make 25% of INR400 crore, which is INR100-odd crore, 100 odd crore and another INR1,020 crore, INR10 and 20 crore over a advance of around INR10,000 crore to INR11,000 crore is 1% to 1.1%. So that’s broadly our guidance, 1.1%. But as Sar mentioned, this is as of now what we are predicting. We will come back with the in Q1 as well as the situation goes.
Unidentified Participant
Got it. That’s it from my end. Thank you.
Operator
Thank you. The next question comes from the line of Juneja from Fortuna PMS. Please go-ahead.
Unidentified Participant
Hi, sir. Thank you for taking my question. I have two questions. One is about your cost-to-income ratio, clearly, you are spending more to build your teams. Want to request some color where you are spending and what kind of you’re building? Second is the question on your digital deposits. The run-rate now is a fairly healthy daily. I want to see if you think this is a sustainable run-rate going-forward? It looks sustainable because it has been kind of growing consistently from around crore to 2.5 crores to 2 to 3 and the kind of profile we are seeing is that we are not seeing any bulky deposits coming from there. The average size of the deposit is just about a lakh and the credit profile of the customers are coming in is far, far superior and different.
Baskar Babu Ramachandran
So it looks like they are digitally savvy 30 to 40 years and are probably taking across various other SMBs and other institutions which are available on the digital platform. Completely done. And we see that while the rate would have been a driver for many of the in terms of acquiring digital, the convenience is another factor which will start building up. So the premium — the difference in the pricing premium may not be 100 basis-points as it is now at this point of time. But the overall cost of mobilizing of that, including everything is around approximately 60 basis-points. So maybe a consumer insight, the customer the product with a small value and they foreflows the term deposit and basis the convenience, they will end-up putting a higher-value. So it’s more the process how easy it is in terms of consuming the product and accessing money whenever they want that is a small component. It’s kind of currently around INR60 crores per month incremental deposits because obviously we have just started a four, five months back. So that we don’t have any insights in terms of the renewals, but it’s going to be — even at the end-of-the year, even at this run-rate, it will be substantially around 10% to 15% of our overall term deposits. So what mobilizing is predominantly term does that answer your question,?
Unidentified Participant
Yes, sir, but I also wanted to understand your investments in people and other costs that you are building. It will be stabilizing in terms of employee expenses, if you look at it between even the Q4 and Q4 of ’25, the increase is at least about INR7. It is time to also rationalize in terms of we have done a huge investment intake around closer to INR200 crores moving from profile to and which was what gave us its ability in terms of our entire MSME journey is a one-minute pre-accrual journey. However, we follow it up with a CPV and a visit in-person to ensure that we can build a solid portfolio before we really scale it up.
Baskar Babu Ramachandran
So those are the investments that we also introduced a secured credit card will be rolling out now full-fledged. We see good traction there and exactly to the point that most of the customers who come through the digital route are showing the generation in terms of blocking their limit and looking at the secured pay credit cards. So some of these things will scale without a proportionate increase in manpower and hopefully our technology investments will come into play doing that. We also introduced new mobile banking and Internet Banking specifically mobile banking, which we believe is one of the best-in-class in terms of convenience for the customers the feedback we have even before we really kind of want to get the feedback on a very formal basis. So hopefully, these investments will play-out on an employee side, the intent is to probably keep it around just about main investments will go only towards the front-end, business customer-facing people. And on the back-end on the support option, it will be more of just the same and with an increase of probably around 3% to 4% cost increase. Just to add, so what you are seeing is CTI is little high because of course, one is cost, like Sir mentioned. Secondly, what you have seen is an FST yield had come down because of non-paying book, which had resulted in a lesser revenue and also our interest cost went up. One FLTRO, which was a low-cost borrowing gone out and also interest overall had gone up. So if you see net interest income had not substantially contributed. And also other income, which is one of the major things which is also related to your disbursement. Last year, the disbursement was lesser, that had not contributed. So overall basis, your income growth is lower than your cost growth. So that is why your CTI had went up. But what we are projecting once next year the income should be there and we are moving to a little secured mix and cost would be rationalized and corporate costs should give us a leverage.
Unidentified Participant
Thank you very much. Yeah.
Operator
Thank you. The next question comes from the line of Rakesh Kumar from Valentis Advisors. Please go-ahead.
Unidentified Participant
Yeah, hi, sir. Thanks. So just on CGFMAU further to better understand this thing. So we have total CGMFU cover for INR4,936 crore amount by our portfolio. And against the INR628 crore gross NPA number, we are eligible to get INR460 crores number basically. Correct, man? Correct. And this claim that we have received of INR32 crore in the first-quarter FY ’25. So when the claim was made and it was received in first-quarter, so when the claim was made actually the claim was made also in the first-quarter and we received it in the same quarter. Is it? Okay, because I was hearing because RBL management is also quite, you know, and going for this scheme quite you know progressively from here on. But they said on the call is that it takes around two to three years to actually receive the entire claim and on the rolling basis, this number keeps on adding and all that. So I was just curious to understand that when the claim was made and so you are saying it was made in the same quarter and the — so when this NPA occurred against which we got the INR32 crores, it’s a pretty kind of well-designed scheme. It is not something which you cover and then becomes an NPA, you kind of press the plug and then you take it.
Baskar Babu Ramachandran
So it is purely a credit guarantee. It is not something which kind of pays up for itself as soon as you kind of take a cover and becomes a NPA. So the waiting period is approximately one year — one year minimum, okay so I will not be able to comment about other bank’s comfort or discomfort in terms of we have not — we took it in FY ’23. So we did not even anticipate a credit-loss of more than 1.5% and we do the — we’ll continue to do it and that’s why we have chosen not to really do any selective coverage even in the year when we took. So it is 100% eligible CGF when we were decided to take it as a bank, we at the robust and that’s the reason and we’ll continue to do so.
Unidentified Participant
Understood, sir. So this INR460 crore is what we are expecting to expect to receive. So like this claim was made, what is the vintage of average winters of this claim the credit card not as easy to get on probably an offline connect that we will explain entire previous new scheme. But if we wait till Q3, assuming that we don’t want to make any claim for Q1, Q2, Q3 and only in Q4, we make the claim and we kind of get all of it, probably get closer to around INR300 crores. So just because the question was just to understand get the visibility of the money being received in FY ’26 or ’27 it was just to that — just to take that.
Baskar Babu Ramachandran
So yes. So out-of-the INR460 odd crores that has been shown, our reasonable belief is that if we make claims in Q1 and Q3, we will get somewhere around INR350 odd crores in the current financial year. Got it. And second question related to this topic itself. So we had made INR53 crore expense that we had debited to P&L in FY ’24 and around INR70 crores to INR73 crore in FY ’25, we are showing that we have made a total claim — we have a total expense of INR155 crores. So the remaining amount when it was done, so INR155 crore is the cash that we have paid till now. What P&L shows is a little amortization. So INR155 crore, whatever INR30 crore that will be amortized in coming years.
Unidentified Participant
Okay. So the cash outgo, cash-out? Yeah. Correct. Cash, cash outgo has happened. Yes. But you are showing in the P&L as an expense of only INR53 crore-plus INR22 crore. No, INR53 plus 70 last year. Next year, 70 and 50 last year, INR130 odd crores and 155. So this INR25 will be amorted in coming years. So as the next year expense will also be amortaged over the tenor of that product. No, got it. So the remaining amount, the INR25 odd crore, is that — is there a provision made in the P&L because you are showing that this amount has been expensed. This amount has been paid to other parties. So is there any — is there any debit to the P&L of this remaining amount or not?
Baskar Babu Ramachandran
No. So what I’m trying to tell you that 155 is the cash outgo and as per accounting policy, it is an amortization. Amortization, okay. So now it is like the same way you debit one — you purchase one asset of, let’s say, INR100 crores and you amortize for five years, right? INR100 is the, 20 years is the P&L expense for five years. So that is how it is, INR155 crores till now is the cash outflow. Till now INR130 crore is accrued in P&L, next INR25 would be accrued in coming year — coming next year. So what we so what we have paid so-far is that INR53 plus 22, that said we have paid. So remaining amount will be going for the next two years or three years, maybe five years now in a amount. Correct. So just to clarify, we have paid around INR150 odd crores till-date. We have accounted and taken a hit in the P&L for INR130 odd crores out of INR155 crores. The balance INR25 will be taken in the current financial year.
Unidentified Participant
Okay. So you are saying in the slide number 23 is that as of March ’22, why the bank has paid cumulative premium of INR155 crores. So that is a correct statement to make? Wrong a statement to that?
Baskar Babu Ramachandran
No, that’s the correct statement because the premium is paid-in advance at the beginning of the period. Like we have taken life cover of like we take our own employees. I pay INR1 lakh insurance for a period of one year and that is from the month of January 2025. While I would make the payment of INR1 lakh to the insurance company, which is not reimbursable in the normal-course, I will account for only that 25% of that INR1 lakh as an expense in the P&L because that is an insurance premium paid-for that particular period. The amount is paid upfront, even in any credit — any insurance policy, I make the payment, I take it on 31st of March, it’s available till 31st of March next year. I will expense only one day as an expense for that year and the remaining will go towards the next year. But the amount I to make the payment is at the beginning. So it is amount paid-for covering a period of time and amortization is happening based on the period for which that insurance cover is available. So the that 125 is right. 122 is right, I would think that probably will kind of come back-in terms of expand it. Yeah, I think we’ll have to discuss it more. I think because the number has not been experienced or not been provisioned, then I don’t know-how can we write this question. Yeah, we will simply state that what we paid is INR155 crores. What we accounted for INR120 crores, in-line full disclosures made in-line with the accounting policies.
Unidentified Participant
Sure, sure, sure, sir. Sure, sir. Sure. So that was I needed to clarify sir. Thanks a lot, sir. You can reach-out to us. Yeah.
Operator
Thank you. The next question comes from the line of Deepak from Sapphire Capital. Please go-ahead. Yeah, I’m audible, sir. Yes, please.
Deepak Poddar
Yeah, sir, thank you very much for this opportunity. Sir, just wanted to understand now you mentioned that — I mean, we have provided 100% coverage on our IF portfolio, right, after considering this CGM FU, right now so this NPA will not have any impact on provisioning for this coming year FY ’26, right?
Baskar Babu Ramachandran
You’re correct. That’s correct. Your understanding is correct. And now we are expecting a slippage of around INR300 crore and INR400 crores in FY ’26. So considering a INR100 crores slippage per quarter and you will provide around 27.5% on that. So a provisioning of INR25 crore INR30 crores is what we can expect from first-quarter. Will that be a fair assumption? Yes. It will not be. The first-quarter will not be any substantially different from Q4. So it will be better, but not in September 50% or 60% down and we are expecting the benefit of 99% collection efficiency in current bucket in March to come over in terms of Q2 and taper off towards Q3 and Q4.
Deepak Poddar
What you have said around the number is the slippages for the entire year, but not going to promotion. We’re sliding from 40-35, ’25, 20 approximately that way. So can you just repeat, what is this 40 25, 30 ratio? Yeah,. So if you see last quarter Q4 the slippage was around INR300 odd crores. So what we’re just trying to say next quarter would be better, but not substantially better. Maybe if I am — for an assumption, if I take a INR200 odd crore of slippage, I have to make a provision of INR50-odd crores for first-quarter. Next quarter, if the slippage is around to INR150 odd crore, I have to make another INR30 odd crores.
Baskar Babu Ramachandran
What we are trying to say it will slide down, let’s say, INR50 35 30 25. In this way, it will be INR100 odd crore, not like INR25 crores each for each quarter. Okay, 50, 35, 30 and 20. So that comes to around INR50 and 130, 135 crores. If we are not giving any guidance for any quarter. What we are trying to explain is the international guiding scale and not equally across the four quarters.
Deepak Poddar
Yeah. Okay. Okay. Okay. I understood the trajectory. Okay. That’s very clear. And overall, for the entire year, you mentioned credit cost of 1%, including the CGMFU benefit, is that the right understanding?
Baskar Babu Ramachandran
Yeah. No. So what we had mentioned like rightly you mentioned INR100 crores and INR110 odd crore of provision for a full-year, which means 1% odd on advances, which excludes the CGSMU claim. So rightly, you have your state right INR400 odd crore, if there is a slippage, INR100-odd crore, I will take INR300 odd crore has to be gone by, let’s say, CGSMU. So it excludes CGSMU claim receivable. If I have to include CGSMU, the total cost would be, let’s 4%.
Deepak Poddar
Understood. So if I have to consider INR100 crores to INR110 crores kind of provisioning for this FY ’26, your ROA outlook should have been much higher than 1.5% to 1.6%. So where-is the disconnect? Because at INR100 crore INR110 crores of provisioning, your ROE would be much higher, right?
Baskar Babu Ramachandran
No. So another thing that we are guiding also the secured mix will grow up. So currently we have a secured mix of 50%. Next year we are projecting around 55% where the effective yield difference is nearly 6%. So which — so secured mix going up and CPI keeping same and provisioning INR110 crores, what we are projecting is 1.4% to 1.5% of ROI. So your NIMs will have some pressure because of — because of your secured mix going up. Yes. NIM will have NIM will come down.
Deepak Poddar
Okay. I think that would be it from my side. All the best to you. Thank you so much. Thank you. Thank you.
Operator
Thank you. The next question comes from the line of Sarvesh Gupta from Maximal Capital. Please go-ahead.
Sarvesh Gupta
Sir, thanks for the opportunity. And some color on the wish your voice is not audible. Is that better now? Yes, please go-ahead. Yeah. So sir, firstly, wanted to get some color on the existing situation in Karnataka. I mean, we saw that it was basically similar other space till December that I think there was a spike in February and then most players have reported a sort of reassumption towards normal normalization of March onwards. So what is your experience and is it going to sort of linger on for a very long-time or does it look like resolving much faster as it has piped up also in a short period of time? Good thing is that there is no disturbance on the field in terms of collections, that pressure is not on. But however, there has been a slippage which happened, it takes time for customers to come back. It doesn’t really bounce-back in the very next month. Even the collection efficiency, which is of current bucket, which excludes people who have already slipped into weather buckets has not really bounced in March. In April, it was.
Baskar Babu Ramachandran
So again, I would kind of say that we both come and we’ll have to eat and watch as of now, nothing on-the-ground, nothing really fed. But we’ll let it give it a couple of months-to see if there is any impact at all. Similar to Karnataka before calling out that all as well and it has bounced back. So the — there have been no disturbances reported is a good thing, which means that we can really go visit the customers between 9:00. to 6:00 and in a regular basis and those customers will continue to pay. So it does not come back to anywhere closer to 99% in terms of current bucket collection efficien. It’s still kind of 300 basis-points lower compared to the other states. The impact is 8% of the portfolio, not enough for us. And secondly, on the guardrail too, so what has been the impact yield is this financial year that we have seen almost 40 odd days have passed. So how do you assess the impact of that rail to on your — on your disbursement growth as well as credit costs? So we have implemented it in November and we saw a drop of 50 percentage business in new to bank customers, then we are promoted from group to individual new-to-bank customers, new to bank Vikas loans were started the — from the month of December and we started scaling up significant scale-up of new to bank. Loans started. As we speak, previous month was disbursals were more than March month. So we are growing on disbursal. We don’t see any challenge. Whatever hit we had to take, we took it in the month of November. November and December, we took the hit. In February onwards, it’s sort of normal in terms of against your disbursement growth plans. Yeah. The number of customers has come down, which will be a natural follow because JLG is virtually kind of new to bank JLG is zero almost. So the margin is only 5%. But new to bank customer, if you really meet the customer as a true and the five of them apply for a loan and four of them get rejected, we will not be able to fund the other one as well in a group model. So in the new to bank with us loan model, it’s a customer who is being given on individual basis. So if you approach five, given or four get rejected on guard rise and one can still be funded if there is on the guard, give an individual loan. So we are seeing some traction on the new to banking customer and the portfolio is holding good as of now. So since it is new to banks with our strong away coming and individual, again, I think the newer period of six months and probably a portfolio of at least around INR250 crores to call-out in terms of the behaving much better than portfolio. So are you seeing some impact on the slippages side also because you were alluding that the export collection efficiencies had dropped in April. So what I mean, is that more related to the sort of the weather or is it also to do with the guard rail 2? No, not with God rail because it got implemented across the sector only from April 1st. So you won’t have seen that impact immediately in that month looking for a loan and didn’t happen. It was no more than on the entire base, no more than 5%, 6% of the customers take a loan in a month. So it’s unlikely that would have been the impact. We don’t know the exact reasons for us to really call-out. But usually April is a little than March and there is certainly a heat impact, it is not like probably last year where heat wave was called out across well before we would see any impact. But this time it doesn’t seem to be the heat wave impact what we are not certainly present in many parts of North, but even in the other has been across the state, it was slower by a percentage. And I think might also be neither right nor of both on the side to say that the one month will become the projection for what will happen in the quarters. But the good thing across-the-board is that there has not been any local disturbances reported in any significant manner. So hopefully, the ability to get-in touch with the customer stays intact and the challenge that has to addresses in terms of attrition. So if you have retention of good well-performing employees is high and the ability to keep in touch with the customer is data-driven, scientific and real. So we do think that my customers who are going to slipped into the higher buckets will continue to be paying customers even if not on a regular basis. So April trend probably is not neither March nor April, probably should be extrapolated to say whether it is always good or whether it is still slipping.
Sarvesh Gupta
Understood, sir. Thank you.
Operator
Thank you. Thank you very much. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing comments.
Baskar Babu Ramachandran
Thank you for participating. I look-forward to your continued support and confident of delivering a result of far more robust and sustainable than FY ’25. Thank you very much.
Operator
Thank you, sir. Ladies and gentlemen, on behalf of Centrum Broking Limited, that concludes this conference. You may now disconnect your lines. Thank you. Thank you.