THE KARUR VYSYA BANK LIMITED (NSE: KARURVYSYA) Q3 2025 Earnings Call dated Jan. 20, 2025
Corporate Participants:
B. Ramesh Babu — Managing Director and Chief Executive Officer
M. Chandrasekaran — Chief General Manager & Chief Operating Officer
Ramshankar R — Chief Financial Officer
Analysts:
Rikin Shah — Analyst
Jai Mundhra — Analyst
Suraj Das — Analyst
Unidentified Participant
Presentation:
Operator
Hello, ladies and gentlemen, good day, and welcome to the Q3 FY ’25 Earnings Conference Call of the Karur Vysya Bank. We have with us today the management team of KVB, represented by Mr. Ramesh Babu, MD and CEO; Mr. Natra, Executive Director; Mr. Chandra, Chief Operating Officer; and Mr. Ramshankar, CFO. 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. B. Ramesh Babu, MD and CEO, to take us through the highlights of the quarter gone by, after which we will open the floor for questions. Over to you, sir. Thank you.
B. Ramesh Babu — Managing Director and Chief Executive Officer
Thank you very much. So good evening to all of you. On behalf of Karur Vysya Bank, I welcome you all for our bank’s earnings call for the quarter three of the financial year 2025. We trust that you, your colleagues and your family members are keeping well and are in good health. We have uploaded our financial results along with the presentation on our website and I hope you have had a chance to go through it in detail ahead of this call.
I am pleased to mention that Bank continued to have another strong quarter of performance built on our guidance of three metrics, growth, profitability and asset quality. Bank’s performance indicators are in-line with our guidance and bank is seeing a steady and consistent growth. It is encouraging to note that our team was able to sustain the growth momentum witnessed in the previous quarters and I am confident that the same will continue in the last quarter of this financial year too.
The bank’s total business stands at INR181,993 crore as on 31st December 2024, we were able to sustain the growth impetus created during the previous quarters as our total business registered a growth of 3%. The advances stand at INR82,838 crores and deposits grew to INR99,155 crores with a growth of 3% each respectively. Our loan book has grown by 14% year-on-year and 3% during the quarter. Under the RAM segment, we have shown a growth of 20% year-on-year and 4% during the quarter. We continue to focus on inclusive growth and our guidance of 14% growth during the year will hold good. Retail banking has grown by 20% year-on-year, mainly on mortgages and loans.
During the beginning of the current financial year, we have made certain structural changes by merging the branch channel and open-market channel, which we were calling it as a NEO. In the first phase, we have implemented this initiative in 244 branches, wherein these branches were able to use open-market channel also for sourcing retail business. This will be expanded further so that all potential branches can use their customer data and support open-market channels for sourcing business.
The bank continues to focus on commercial banking business, including MSME, considering satisfactory performance of the portfolio and higher yield and collateral coverage. To ensure consistent growth and best practices under this segment, Bank has engaged one of the leading consultancy firms to support the bank. After a diagnostic study for a period of three months, the firm — the consultancy firm started supporting the bank in its implementation — implementation phase-in the month of January 2025.
Loan book under agricultural Banking is also consistently growing and during the quarter, it has grown by 5% and majority of the growth is from loan. We are complied with recent regulatory directives and advisories of RBI and our rural and semi-urban branches continue to focus on this segment. Corporate loan book has degrown by 2% during the quarter, mainly due to our cautious approach in expanding our loan book with lower yields and particularly exposure to certain specific sectors. Further, our focus is more on fund-based exposure of less than INR100 crores and non-fund-based business.
Deposit growth continues to remain one of our key focus areas for the bank and you are aware that the bank had initiated various strategies for deposit growth, including establishment of sales acquisition channel for both term deposits and CASA growth. Our total deposit growth was 3% during the quarter. Term deposits grew by 5% during the quarter.
We saw uptick in retail deposits during the 3rd-quarter as compared to previous quarters. However, challenges in CASA balances continue to remain as we saw a reduction in the CASA book by 0.23% sequentially. Our efforts of branch sales and service team would focus more on deepening the relationships. Initiatives like reconnect with the customers have been launched in all the branches to arrest the depletion in the ETB book. We had indicated that in the previous call that NIM would be above 4% level in the 3rd-quarter of the current year.
I’m happy to say that we were able to maintain NIM for the 3rd-quarter at 4.03% and for the nine months at 4.09%. Our continued journey on shedding away low-yielding corporate advances on one-side and focused more on better yielding granular secured advances in RAM sector and prudent treasury operations have helped us to retain above 4% levels during the quarter in-spite of 10 basis-points increase in the cost of deposits.
The cost of deposits increased by-10 basis-points and the yield on advance improved by 8 basis-points sequentially. Yield on investment increased by 6 basis-points during the quarter. Based on our historical pattern of renewal of deposits and fresh deposit acquisition, we expect moderated raise in cost of deposits by-10 basis-points in the next quarter.
Yield on advances may vary depending upon the policy rate changes, which is expected next month, yield on investments would be in a similar range for the 4th-quarter. Also considering all these factors and taking into any policy rate changes, we expect that NIM will be around 3.85 in the next quarter. Operating profit remained flat at 815 for the quarter as compared to previous quarter. You are aware that for keeping an eye on the long-term growth.
Bank has started various initiatives like recruiting new sales acquisition vertical, branch sales and service executive team for deepening the branches, expanding the branch network, etc. There is a lag in witnessing the business growth in proportion to the expenses spent on such initiatives resulting in lower incremental operating profit. We are confident that the benefits would accrue to us going-forward. We have achieved ROA of 1.74% in this quarter. We had guided that our effort would be to ensure ROA is above 1.65% levels and we are confident to maintain the same going-forward also.
Our gross slippages during the quarter continued to be under control at INR139 crores, which is 0.17%. If we annualize that, it comes to 0.68% of our loan book. With our continued close monitoring of the accounts, we are confident that we will continue to keep the ratio below 1% as guided in our earlier calls. Our efforts on recovery of technically written-off book is continuing to yield results as we have recovered a sum of INR175 crores during the quarter.
Due to lower slippages, recoveries, upgrades and write-off, our gross NPA has come down to below 1% that is 0.83 and we expect that we will continue to maintain at below 21% levels. So for the quarter under review, we have provided INR101 crores towards NPA migrations and INR9 crores towards the standard assets and INR17 crores towards the restructured assets. Apart from this, we have provided prudential provision of INR25 crores as done in the previous two quarters.
Our net NPA has come down to 0.2% and we would continue to maintain net NPA at less than 1% of our loan book. We hold a provision of 44.81% of the standard restructured book. The BNPL book balance of INR977 crores as at the end of 31st December, which comes to 1.18% of our portfolio and it is performing well. Our overall unsecured portfolio to total advances is currently at 2.42%.
Our MFI portfolio stands at INR350 crores as at 31st December 2024. We are taking various cautious approach — very cautious approach in this segment. We have tied-up with four business correspondents as partners and we’ll be mindful in growing selectively in the states where position is relatively better. Our establishment costs were at INR374 crores during the quarter, increased by 5% sequentially, mainly on account of AF15 actual provisions, which were up by INR5 crores compared to previous quarter due to fall in discount rates.
Operating expenses were marginally down by INR2 crores at INR357 crores compared to last quarter. Our cost-income ratio is at 47.27% and we will continue our efforts to it down and to — it will be within 50%. Our car Basel III continues to be healthy and is at 15.91%, providing us comfortable headroom for growth. Our liquidity coverage ratio continues to be well-above the regulatory requirement of 100%. Bank added 25 branches, including 19 light branches during the current quarter and we have planned to open around 22 branches in the 4th-quarter.
Our endeavor is to continue the current momentum to the next quarter. We are mindful of the challenges, particularly on the liability side and are taking every step to increase the low-cost funds and which would also help us in improving our margins. The guidance we had given at the beginning of the year-on the following pattern parameters would hold good for the 4th-quarter also.
Credit growth 14% plus, deposit growth 14% plus, NIM 3.85% for the last quarter, credit cost 0.75%, GNPA less than 2% and net NPA of less than 1%, ROA above 1.65%, cost-to-income below 50%. I am grateful to all our investors, analysts and stakeholders for the confidence and continued support, which we will reciprocate to our better performance in the days to come.
Now, I will be glad to respond to your questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and two. All participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from Rikin Shah from IIFL Securities. Please go-ahead.
Rikin Shah
Good evening, sir. Thank you for the opportunity. I have four questions. The first one is on the statement that you made in your opening remarks that the regulator has been tightening certain regulations pertaining to the gold loans. If you could elaborate on what exactly is the requirement and what are the business process changes we have done to comply with those regulations? So that’s first one.
The second question is on restructured provision that we took in this quarter. I noticed that the restructured loan book has gone down. Any particular account against which we have provided?
And the third one is on in your internal estimates, what would be the ECL provisioning impact, if at all there is any?
And lastly, in terms of, sorry, I forgot — I forgot the fourth one. I’ll probably come back-in the queue once I recall that. Thank you.
B. Ramesh Babu
Thank you again. Thanks for the question. And first of all, regarding the dual loan is concerned, all of you would have seen the September ending Reserve Bank of India guideline. So what I mean to say is those guidelines what all Reserve Bank has given, so we are in compliance of that. So that’s what. So that’s why many measures, what we need to see for the documentary evidence, the purpose for which we have given there and all. As I mentioned, we are in compliance of that. That is the intent of my statement.
Coming to the restructured provisions, absolutely, we are not finding any additional stress out of that. So what we thought is, it is prudentially it is better. We create when good times are there, always I mentioned that we should not forget about the bad times. That is the reason as a prudential measure we have provided for that and nothing beyond that, there is no need for any sort of a panicky situation as far as restructured book is concerned, you would have observed that total book itself is around 0.7%. So that too, majority of those accounts, particularly under the retail segment and the commercial segment, they are all backed by security. Even if tomorrow eventualty comes, they become NPA also. In a gap of one year also, one, one and a half year, they’ll be able to recover the money, but the situation will not be there that way.
Coming to ECL, our CFO will respond. Yeah. Yeah. Rikin. See, we — the trap guidelines have been there for almost last 78 months and we have been filing the pro-forma statements awfully for the last three to four years. And it seems — the final guidance had to be given. What we are sufficiently what you have done is last sufficiently covered, sufficient questions have been made available floating provision of almost INR100 crores we had done. And similarly, this year also, almost each quarter we have been providing INR25 crores. So INR75 crores we operate. So based on this, we think we are sufficiently taken care of or any eventuality if ECL comes into play, sufficiently covered.
Rikin Shah
Got it. Thank you. And just to clarify on my first questions, while tracking the end-use for the gold loan is what we have already implemented in our process, is there a requirement from the regulator to convert the gold loan EMIs like gold loan repayment by customers in the EMI format rather than the bullet format and are the gold loans allowed to be rolled over before issuing the new loans? Those are the two extended questions on the first one.
And I just recalled a couple of other clarifications which I wanted was the MFI partnership with a few BCs. You did mention that we are entering in the states where the stress signs are not there. If you could elaborate which are the states where we are venturing into MFI?
And lastly, if time permits, it would be great if you could also talk about what’s the provisioning policy that we follow in terms of when we write-off and what are the provisioning when the loan becomes NPA in different segments? Those are all my questions.
B. Ramesh Babu
Okay. Coming to the jewel loans, what you said is suppose when we are taking a documentary evidence that he is a farmer and he is having the farming activity that itself will ensure saying that we are lending to a farmer and not for any other purpose or speculative purpose. So coming to the rollover of these things, even before RBI started giving these guidelines itself, we have stopped long back the rollover. So someone will have to close the loan and all, they had to take it. So that way what I say, so we are in compliance with the RBI guidelines. That’s what my point is.
Coming to MFI is concerned for partners, but you would have seen that more or less two years back, we have started the MFI business. But with all these things also because they are very cautious in-going through that one, the total portfolio as on-date is around INR350 crores. So what my point is, if we are trying to grow, Telangana is one of the states where the recoveries are good and to some extent that way Karnataka is also recoveries are pretty good that way. And a few districts of Tamil Nadu also, the point is good. So for the time-being, we are not extending much our operations in the Kerala. Otherwise, North and all Bihar, Chandigarh, Punjab, West, we do not have any other operations. Hardly, it is majorly the Telangana, Karnataka and Samil Nadu.
So now coming to the provisioning policies, internal policy what we have, but my point is, if you look at it, the overall net NPA is around INR160 crores and we have sufficiently provided for that. So I think there is no point in having a separate discussion on the policy because the Board has — we have discussed with them and all. So what we need to do accordingly, we are doing it.
Rikin Shah
Fair enough. Fair enough, sir. Thank you very much for answering all the questions. Very helpful.
B. Ramesh Babu
Yeah. Thank you.
Operator
Thank you. The next question comes from Jai Mundhra from ICICI Securities. Please go-ahead.
Jai Mundhra
Hi, good evening, sir, and congratulations on a very good set of numbers. And sir, first question I have is on PW recovery, right? So we have done INR175 crores in this quarter and last quarter and the quarter before that was also we did a very healthy numbers. If I calculate, I mean, the total TWO book outstanding is roughly INR47 crore INR4,800 crores and we have been writing-off also so that pool may get bigger and bigger.
But the recovery percentage, even if I look at this quarter INR175 crores on maybe, let’s say, roughly INR5,000 odd crores book is also non-annualized 3%, 4% roughly. So how — I mean, what is your sense as to from a 12 months perspective, this number can be? Can we can we do like, let’s say, INR400 crores INR500 crores recovery for the next four quarters or you know what could be a more reasonable number for the TWO.
B. Ramesh Babu
Yeah. Thank you. Thank you, Jai. Thanks for the good question actually. So what you said makes sense. But so you need to see the color of our write-off book because at a point of time, we were having many big corporate accounts, INR200 crore, INR250 crores, many of those things are there. When they have become NPA, we are also in queue along with many other lenders in the NCLT. And how much it comes out and what will be the final realization. So we will not be able to tell many of the cases or with the legally that are going on. Suppose a 4,600 something number what you have mentioned, I agree.
So if we exclude all of them where we can lay our hands for the recovery, where security is there, those things we need to go. It will come to around INR1,800 crore to some extent, INR2,000 crores, something maximum it comes up and all. So what we try to do was we have strengthened our legal team because even whenever you are trying to go for a surfacee also, straight away immediately someone will file a suit in the DRT and it may run for three years or four years. So that way accounts are getting stuck and we are able to get all these legal completed and all, we can recover the money.
So we are strengthening our position for the legal in the bank, already strengthened. And likewise the disposal team also for the assets also we are strengthened that way. So this importance of getting the money back is made known to everyone. That is the reason you are able to see some traction. So I feel that with the traction what we have created, next four quarters at INR00 crores what you said, it makes sense that way. INR400 crores what you’re saying. I think definitely we can think of, it can go-ahead. We are also planning that way only. Every effort what we need to put in, because this is one area we need to get back our money. So we need to do.
One more thing also, Jai, now that you see when the interest rates for the deposits cannot come down and the yields have plateaued at all when the rates comes down automatically you may have an impact on the NIM. So that is the reason we started working aggressively on these write-off recovery also. To some extent, it can compensate us overall, we can keep afloat as far as the net interest and non-interest is concerned. So that is the reason. So our focus is there. As you said, INR400 to INR500 we can definitely think of.
Jai Mundhra
Right. Thank you, sir. Sir, a question on fee growth, right? So fee and maybe CASA growth, if you can take it together also. What I thought is, of course, there is a challenge on the fee, there is a challenge on CASA growth. But what I remember or what we were trying to do is we had put in a lot of feet on-street, right, to boost both these CASA as well as fee growth. And this quarter — I mean, before this quarter fee growth was more or less similar or marginally ahead of the loan growth only. And this quarter it has come down to 4% Y-o-Y. And similarly, while I understand that CASA is a challenge at the system-level, but I thought that we had — because we had put in additional feet on-street, we can — we would have done slightly better outcomes. So your thoughts on both fee and CASA growth.
B. Ramesh Babu
And you are very correct. CASA, if we split the entire ratio into two-parts. One is acquisition, second one is the retention. So acquisition is concerned the sales team. So they are trying their level best and all, we are able to get some numbers. But the problem is mainly coming in respect of the retention part. So because the existing money, what all is there, either it may be going to mutual fund or real-estate, these sort of things, what is happening.
So the acquisition totally what all happen is not getting reflected in the overall growth. That is the reason what we are doing, we have divided the whole problem into two-parts, so two-parts. One is for the retention, we have got a servicing team where these people, they are going to connect, reconnect with the customers for the retention and to get back the money from other banks also wherever that is there and all. So that to protect our existing balance as well as to increase the balance. That is one portion. Second thing, the acquisition is also working on this. So that way, we are getting the money, but the outflow is much more than overall we are struggling.
Coming to the fee, fee, there are few components we need to look at it. While the distribution fee, cross-sell fee, these things are going up, you would have seen that consciously we have reduced our corporate advances. So it has come down by INR1,000 crores and more than that. With all these things, ideally had we grown another INR1,500 crores there and this INR1,000 crores regrowth is not there.
On those INR2,500 crores of fee income what we were getting as across others and all, we would have got it. But why we didn’t do was actually there are two reasons because the limited resources what we are acquiring. So that’s really the security as well as the yield in respect of the retail is much better, particularly in the commercial as well as the retail segment. So we are deploying the money there. That’s the first thing.
Second thing is the engine and the people operating team who are running on-the-ground for the retail. If we do not feed them with these resources, if they stop actually functioning, getting back the momentum will become very difficult for us. So that is the reason the available fuel, first of all, we are feeding for the commercial as well as the retail and agriculture. So you are able to see 20% growth.
There you cannot expect these sort of a fee like corporate, what we get the processing fee, other things and all. So that is another dampener, Once we get some sort of a hold-on the deposits and the system actually supports getting these deposits and all, we will be back on the corporate again and we’ll be able to move forward. So this is what actually they are happening on the fee front.
Jai Mundhra
Okay, understood. Understood. So okay. And sir, is there any connection of this lower PL, BNPL, and that has slight — while it is not a very big proportion anyway, but does that also have a bearing on the fee side also or not?
B. Ramesh Babu
That can definitely have a bearing on our NIM because this PL as well as suppose partner BNPL is concerned, majority will be getting a higher 12% interest with. But the issue is when entire market is talking about the personal loans that are below 50,000, where the stress can go up and there are few banks which are able to see that, we thought saying that otherwise growing there from INR1,000 crores to INR2,000 crores and opening up the gate is very easy. Easiest is that.
And not only that, when we have got 50 lakh BNPL customers of us and if you can select INR5 lakhs of them and if you start giving personal loans to them, that itself will run INR1,000 crores easily. But what we thought is this is not the right time to take those sort of plunge because external environment is not that conducive. So that is the reason we are holding. You would have seen that INR1,300 it has gone to BNPL. It has come down to INR970 now. This is a cautious approach we have taken. So otherwise, that window is already open for us anytime once normalcy restores, we can think of.
Jai Mundhra
Right, sir. And sir, last question is, in the month of December, we had reduced the EBLR by-5 basis-points and there was no change in the NCLR and I can see that cost of deposit is still going up. So let us say hypothetically — and you mentioned that cost of deposit will may inch up by-10 basis-point more. Now hypothetically, if RBI were to cut interest-rate, your MCLR will still be going up only, right, while EBLR will of course revise downwards, but your MCLR should not be impacted. And the reason if you can mention why did you cut the EBLR by-5 basis-points? Other banks don’t seem to have done anything on that front.
M. Chandrasekaran
Yeah. Jai, with regard to the MCLR, the templated formula given by RBI is, yes, you are right, majorly on the cost of deposit, but it’s not only cost of deposit, cost of borrowing, operating cost, the negative carry, CRR, all these things after adjustments only, we are arriving the rate. So even though there is — the deposit cost is continuously going up. So there are the chances that the operating cost or the negative CRR increase or whatever is there, that impact always will be there. 5 basis-point the impact always will be there.
B. Ramesh Babu
And that’s why, Jai, what you said is MCLR, suppose this reduction even if opex comes down also and the cost of deposit is much more than that MCLR will not come down. So whereas EBLR is concerned, it’s straight case when RBI cuts, it’s straight to process, it may hit us.
Jai Mundhra
Right. And sir, just a small clarification to the question on gold loan circular that circular is clearly in effect now. And there is no, let us say, say, I mean it — I mean it has already been implemented and there is no negative, let’s say, implication on either growth or you know maybe customer acquisition or mean, asset quality should not be challenged, but this does not impact — or there is no remaining impact out of this circular, right? Is that the way to look at it?
M. Chandrasekaran
But Jai, I will give one more clarity. See, there are at least three or four points of the recent advisory circular doesn’t apply applicable to our bank, for example, engaging the third-party for sourcing business that we are not doing it. All business is done only through the branches. And if you leave alone, other important areas what the spirit behind whatever the directives and advisories are, particularly on the scale of finance, there should be accepted process and identification of a former, the documentary evidence that it should be required. And third is the end-use.
So all these things bank has put in-place a proper process model for — before two years and we have been implementing it. And the latest one is the rollover of the account. So the earlier the banks have the habit of rolling over the account by collecting only the interest amount. That also RBA says that it’s air greening, it’s not possible. That also we have stopped not now even one or two years back itself. So what are the regulatory directives, advisories on in the spirit of the guidelines, everything that bank has implemented and through validated process.
Ramshankar R
One more point to further clarify, see, you see the growth is 5% quarter-on-quarter, okay. Right. Really see my risk-weighted assets, which has come down by 2%, mainly account of higher gold loans, which we did during the last quarter. It clearly says that the tempo still is going on. And we are not in the submission model. So we are giving a direct agricultural loan without. We do not have any loan, Jai, which is under subvention where we need to claim the submission. This is not there at all.
Jai Mundhra
Okay, understood. Great, sir. That’s all from my side. Thank you and all the best.
B. Ramesh Babu
Thank you, Jai. Thank you very much.
Ramshankar R
Thanks.
Operator
Thank you. The next question comes from Suraj Das from Sundaram Mutual Funds. Please go-ahead. Mr. Das, your line is unmuted. Please proceed with your question.
Suraj Das
Yeah, hi, hi, sir. Thanks for the opportunity. Sir, just a few questions has already been answered. Couple of questions. The mortgage, the lab piece has been going well for you for last so many quarters. If you can give some color around this book, I mean how do you see the growth going ahead? And also what could be the average LTV in this book?
The second question is on the SME side. The SME customers — the book is again growing well. The customers that you were acquiring, does they open car account with you also or is this just the asset side customers and don’t have any kind of liability or something like that?
B. Ramesh Babu
Sorry, sorry, Suraj, that SME question, can you repeat, please?
Suraj Das
Sir, I’m saying that the SME customers that you were acquiring does also the open current account with you.
B. Ramesh Babu
Okay. Understood. Yeah. These are two questions.
Suraj Das
Yes.
B. Ramesh Babu
Yes. Thanks. Thanks. Yeah, coming to the lab is concerned. You see, majority of them, they are going for the lower. If you look at it, the ticket size is below INR1 crore and to some extent, bigger accounts come up also INR3 crore to INR4 crores, it goes there. But the purpose for which they are taking and the cash flows for servicing the loan, this is the main criteria we are looking at it. So security definitely is needed.
But in addition to that cash flows as well as the serviceability, ability to service, this is the key we are seeing. That’s why if we look at it, it may be done by any vertical. Overall, if we look at it, the stress is under this portfolio is absolutely dismal and minimal. So the onboarding what all checks and balance are required that we have thoroughly strengthened. So that’s the reason.
So we can say that because second thing is, if you see the percentage is going up by, 20%, 30% that way and all. So it is not that way we need to see because the base itself is low, the percentage is high. If the base is high, actually the what compared to the potential what all is available, whatever growth is absolutely doable and all we can do. So that’s why it is not a cause of concern lap, as it is for us.
Coming to the SMB is concerned. SMB is concerned, now actually suppose if someone is availing a term-loan and there is no working capital loan, naturally he requires a current account for making his tax payments, all these things and not. But suppose if someone is also having a working capital account, you may ask for a current account, but what will prompt him to keep the money in current account without rate of any payout of rate of interest and other side for the same money paying interest in the cash credit. So we’ll ask them. But it is difficult actually impractical for us also to insist that you maintain a current account and keep some balance in that, it is nothing but penalizing him.
So wherever they do not have a cash credit account that is working capital account, definitely we maintain the current account and all. So we’ll use that for operating purposes. Okay. See, in the working capital accounts also, generally they operate in the working capital account. But wherever the retail trades, for example, we’re giving pass machines, QR code, all these things naturally he has to operate through current account only. So in such cases, they will run the current account and then they transfer to CCFO.
Suraj Das
Sure, sir. Got it. Thanks so much. That’s all from my side.
B. Ramesh Babu
Yeah. Thank you.
Ramshankar R
Thank you. Yeah.
Operator
Thank you. The next question comes from Pritesh Boom from DAM Capital Advisors. Please go-ahead.
Unidentified Participant
Sir, can you hear me?
B. Ramesh Babu
Yeah, we are able to hear you. Please go-ahead.
Unidentified Participant
Yeah. Good evening, sir. Sir, two questions. So one is on the NIM outlook. You mentioned that in Q4, you could see NIM coming down towards like 3.85%. But can you give some outlook in FY ’26? How do you see the NIM? Should it stabilize there, can it come about 4% again? Of course, you’ve given some commentary around the RBI cutting rates and the impact on margins. But any levers we can pull the NIM up?
B. Ramesh Babu
Pritesh, it is too early to talk about next year because the position has become so dynamic. What is going to happen at this stage, we do not know because what will be the cost of deposits, how the yields move, what are they cuts, all these things, so many permutations, combinations are there. That’s why get assessment of 1/4 at the most the visibility we’ll have.
But one thing I will tell you, when you have responded, the rates on the deposits will not come down and the RBA is going to cut-down the rates even then if it has to be above 4%, the only one-way it will be above 4%. Our current suppose, let us say unsecured is at 2.4%. I have to make it 10% or 15%. Is it — why is it because taking so much of risk-on the book straight away when rest of the industry is struggling with this unsecured and all at the wrong time for the sake of protecting the NIM, do we need to do that or we need to lie low at this stage till sustained normalcy comes back and all, then we have our own forces as far as the BNPL, other things also for the unsecured going-forward to take it forward. So that’s what the time will tell. Maybe after the March results, we’ll be able to have a better understanding at the time I’ll be able to guide you on what is our thoughts on the next year NIM.
Unidentified Participant
Sure. Just a follow-up on that, sir. Then you guided to maintain your ROE at about 1.65%. If NIMs is uncertainty because if you look at Adu point, your credit cost is already very low, the cost efficiencies there and fees is doing relatively okay. Then what gives you the confidence that your ROA will be maintained at about 1.65%, 1.7%.
B. Ramesh Babu
So it is pretty simple. If you look at it, the provisioning, there is a stage where we may not be able to make further provision because you see the net provider debt to NPA, what all is there INR160 crore, if really if you are serious, you can provide in 1/4 itself and get-out of that. So currently INR25 crores prudentially we have provided more or less last year four quarters and this year 3/4 we have provided. In future, it may not be required also if the Board takes a call, those things may not be required that way.
So likewise, many of the prudential provisions what we have been making. So stage will come where the bank and the Board gets a confidence saying that if any eventuality comes tomorrow, the bank will be able to absorb the shock sufficiently, not a problem at all. At the time, we can definitely either prune down or reduce or stop the provision that will straight away flow it ROA only. So that way 1.65% getting an ROA should not be a major issue.
Unidentified Participant
Got it, sir. That’s very clear. The last question was on corporate book. We have been shining it down, but what will be that inflection point where you stop shedding return grow? I mean, is it the spread which is — because you’ve mentioned in previous calls also that the spread is not that great to continue corporate, but what will be that inflection point for you to again start growing or not de-grow the book from here on?
B. Ramesh Babu
No, absolutely. Inflection point was yesterday. Why I’m telling you this point is we are willing to grow. But the point is we need to have a businessman mindset. When I am getting INR100 rupees. This INR100, where should I deploy. If some sort of an avenue where I’m getting 10% fully collateral, pirate sector coverage is coming up and all the capital risk is low and all. So this sort of revenue is available.
Second side, actually someone says you grew me at 9% and absolutely it is higher amount and all it’s NBFC, all these things someone is talking. So then naturally, I need to take a call where I need to deploy the money. Suppose on the retail side, where the scope becomes absolutely limited on the pricing front, collateral front, all these things, then our — if I have huge money, which is beyond the requirement what I can deploy in the retail, definitely that money will go into corporate. So it’s a tactical timely investment pattern what we have taken, it is not.
So once the normalcy in the business comes up and all, suppose let us say one more thing, if you are going to raise a deposit at 8.1% for a sir. If you lend it at 9% after CRR, SLR and all, it will not make much sense for us. So that way, 9.25, if we had to land, we need to sufficiently look at it whether I cannot land elsewhere. So that instruction point, very difficult to tell as and when there is an absolute Chinese wall on the other side on the RAM, then ultimately the funds will move this side.
Unidentified Participant
Got it, sir. Thank you so much for answering all the questions.
B. Ramesh Babu
Thank you.
Ramshankar R
Thank you. Thank you. Thanks.
Operator
Thank you. A reminder to all the participants, if you wish to register for a question, please press N1 on your touchstone phone. The next question comes from Abhijit Vara from Axis Mutual Fund. Please go-ahead.
Unidentified Participant
Thank you for taking my question. Sir, first of all, congratulations on a very good set of numbers, especially in challenging macro. So the first question, sir, is on capital. Just wanted to check even though risk-weight assets density has gone down, the ratios have not improved. In fact, they have come off. Why is it so?
B. Ramesh Babu
Yeah. Thank you, Abhijit. Thanks for the compliment. No, we need to understand one thing as far as the CRA are concerned, so the earned profit of the last 3/4, we will be clubbing for the purpose of CRAR only in the March. So rest of the period you may be earning, but it will not be counted. During this process, the profit what all was there up to March of last year, that will be reckoned and the net owned funds what all is there and the assets are going up, naturally there can be a depletion, but all these things will be made good in the month of March, if you can — that is March quarter. If you can look at the past performance also, it will be on those lines.
Unidentified Participant
Sure, sir. Got it. Sir, the second question is on cost-to-income. Sorry if I missed your earlier comments. Can you please help us understand how to look at growth trajectory for the cost as such, opex?
B. Ramesh Babu
Sir, cost, if you look at it, there are two aspects we need to look at it. One is employee cost and second thing, other expenses. Employee cost, what we did, we understood it two years back and the liabilities is going to be a big stop for the bank and all. That’s why we invested in the last one year something on the sourcing team, acquisition team for the liabilities, which comes to around 1,200 to 300 people.
Likewise, we also felt saying that the branch level servicing and engaging with the customer is equally important. Otherwise, retention will be very difficult. We have taken low-cost resources of around 1,600, 1,700 at the branch level also. So these people, they are coming and all settling down, they need to understand the bank, they need to start doing their job seriously. So these 3,000 people in the last 2,800 people, I can say that in the last one, 1.5 years, that has had a bearing on the employee cost.
Coming to other expense also, if you look at it, lot of branches, five years, we didn’t open many branches and last two years, 2.5 years, we started opening the branches. This year also we plan for around 80 branches, something like that. Already few branches have been opened, we will try to do it in the 4th-quarter. So when the branch is opened, you are incurring a cost and you will need to run for more or less two years to get a breakeven. But if you do not invest today, tomorrow, there’ll be absolute darkness and all you will not be able to get the value out of that. So that is the reason few of the costs front-loaded and we are taking it.
So correspondingly, expecting on the other side in the income side may not go up particularly earlier also I mentioned about the corporate when it’s not growing, the processing fee, all these things we are not getting. So this is what is the balancing we are doing. But with all these things also, we have indicated that we would like to maintain our cost-income ratio at around below 50%.
Unidentified Participant
Sure, sir. That’s very clear. Thank you for answering all my questions and all the best for future quarters.
B. Ramesh Babu
Thank you, Abhijit.
Ramshankar R
Thank you. Yeah.
Operator
Thank you. Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments.
B. Ramesh Babu
So once again, thank you all for the you have taken and the interest what you have shown in coming to the call and asking us questions and all. So as I mentioned in my initial inaugural remarks, so we are on-the-job and what best needs to be done, continuous team, we will try to do and we will try to meet the expectations. Thank you very much and good day-to all of you. Thank you.
Operator
Thank you. On behalf of Karur Vysya Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.