Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
THE KARUR VYSYA BANK LIMITED (NSE: KARURVYSYA) Q4 2026 Earnings Call dated May. 07, 2026
Corporate Participants:
B Ramesh Babu — Managing Director and Chief Executive Officer
Analysts:
Jai Mundhra — Analyst
Rohan Mandora — Analyst
Akshay Agarwal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4FY26 earnings conference call of the Karur Vaishya Bank. We have with us today the management team of KVB represented by Mr. Ramesh Babu, M.D. And CEO Mr. Shankar Balabhadra Patroni, Executive Director, Mr. Chandrasekaran, Chief Operating Officer and Mr. Ram Shankar, 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, MT and CEO to take us through the highlights of the quarter gone by. After which we will open the floor for questions. Thank you. And over to you sir.
B Ramesh Babu — Managing Director and Chief Executive Officer
Thank you ma’. Am. Good evening to all of you. First of all, sincere apologies from our side. There is a technical glitch and we have been trying for the last 10 minutes and there’s a disabilities in the call. That’s why we couldn’t. So sorry again once again for all of to keep all of you waiting. So again, good evening and on behalf of Karur Vaisha Bank, I extend a warm welcome to all the participants joining our earnings call for the fourth quarter of the financial year 20. Our financial results and accompanying presentation have been made available on our website and I trust you have reviewed them thoroughly prior to this call.
We are pleased to report that our performance indicators for the financial year 2526 are fully aligned with the guidance provided at the outset of the year. This alignment is a testament to the effectiveness of our strategies and operational discipline. It is particularly encouraging to observe that our performance has consistently surpassed our guidance across three key metrics, Growth, profitability and asset quality. Our growth trajectory has been robust reflecting our commitment to expanding business operations and enhancing value for all stakeholders.
Profitability has remained strong throughout the year, underscoring our focus on prudent financial management and sustained earnings. Furthermore, asset quality continues to be well maintained, reaffirming our dedication to sound risk practices and inclusive banking. The Bank’s total business stands at 2,14,420 crore as on 31st March 2026 as compared to previous year 1 86,569 crore registering a growth of 15%. The advances stand at 98,754 crore and deposits grew to 1,15,666 crore with a growth of 17% and 13% respectively.
With respect to business mix of our Advances portfolio, RAM verticals have grown by 18% year on year 2% quarter on quarter constituting 86% of our overall advances portfolio. Retail loan book increased its share to 27%, agree remained at 25% and commercial book at 35%. You may find a moderation in the growth of advances in the last quarter of the year as we took a cautious call in advances growth considering the geopolitical situations and not to take unwarranted risks in the growth as we had front ended our advances growth comfortably in the first three quarters.
Retail advances increased by 25% over the year 3% quarter on quarter primarily due to growth in mortgage and dual loans. The collaboration we established between the branch channel and open market channel at the start of the year paid off as evidenced by 56% year on year 9% quarter on quarter rise in mortgage loan volumes. Retail JR loans saw a 61% annual increase 5% quarter on quarter. Housing loans grew modestly by 2% reflecting low yields and greater competition due to a management change with our BNPL partner mid year and due to elevated household leverage.
Growth was negative compared to previous year. With operations now stable, we anticipate growth in the current year. The outstandings of our BNPL book is 798 crore as at 31st March 2026. The agriculture book demonstrated a year on year growth of 19%, 5% and quarter on quarter with agri jail loans constituting 91% of the portfolio and other agriculture loans representing remaining 9%. The loan to value ratio for Agri jewel loan stands at 55.59% indicating sufficient margin availability. Our sustained emphasis on enhancing turnaround time and customer engagement has contributed to the agriculture portfolio’s 5% growth during the year.
Despite competitive pressures given both the expanding portfolio and increasing gold prices, we we remain vigilant in maintaining higher margins and have reinforced our monitoring mechanism to mitigate inherent risks as necessary. The MFI portfolio today at 173crores representing just 0.18% of our total portfolio. CG Samvey coverage commenced from 1st April though 1st April. Actually, the real disbursement started in June, so at present the situation has stabilized. Collection efficiency has improved, guardrails have been implemented and guarantee coverage has been secured.
Going forward, we will assess growth under this segment in a measured and strategic manner. The commercial business grew 11.56% year on year but had a flat growth during the last quarter of the year. As mentioned in my previous call, we continue to exit few weaker accounts, consciously conscious of acquisition of accounts both in terms of quality and pricing, allowed few accounts to be taken over by others due to lower pricing which did not fit into the scheme of things for our bank. In addition to this, we needed to be mindful of the impact on this segment due to the geopolitical tensions that started in the last quarter.
Disbursement growth from NTB was 25% during the year and 29% including the ETB customers book. However, in the last quarter utilizations of working capital accounts were lower. To improve the MSME business, we initiated Relationship model to strengthen capacity building and drive sustainable growth in the small Business group segment. With estimated manpower of around 100 relationship managers, already 72 of them are in place. The primary focus of this team would be to source new relationships. The corporate portfolio achieved a growth of 12% over the past year which was de growing up to last year.
Strategic opportunities were identified within segments such as commercial real estate, capital markets and EPC contractors which contributed to this progress. Despite challenges associated with the prevailing interest rate environment, these sectors supported sustained portfolio expansion while preserving the required spread and remaining consistent with the bank’s risk profile. In response to external conditions. Growth was moderated in the final quarter including credit substitutes. Our corporate advances portfolio posted a 20% year on year increase.
With respect to credit substitutes, incremental growth during the year was 969 crores. We had focused ETB customers with an external rating of A and above and were able to offer finer pricing in credit substitutes compared to the loans offer finer pricing. We are able to get a better pricing in the credit substitutes than the loans. The Transaction Banking Group plays a key role in the bank’s digital transformation agenda by providing API first real time banking capabilities for corporates and MSME clients, scalable bulk payment infrastructure supporting Payroll vendor and B2B settlement and automated trade finance and supply chain monitoring workflow.
TBG remains committed to supporting the bank’s efforts to maintain a diversified portfolio and also to strengthen strategic relationship with leading corporate clients. Our unsecured loan book is at 1.81% of the total advances as at the end of March 2026 which is one of the lowest amongst the peers. Our partnerships for co lending with NBFCs continue to perform well and the loan book under this segment is about 249 crore. We had deliberately reduced the book as it was not ROA accretive As mentioned earlier, as our ramp verticals are sustaining their organic growth momentum, we will keep this o lending as secondary to our organic growth.
The bank’s liability business constitutes to 54% of the total business of the bank. Total deposits grew by 13.31% during the year driven by gains in both retail term deposits and CASA. CASA balances grew by 12% and 3290 crores is the actual growth during this year as against 677 crores during last year, highest in the last 10 years in terms of actual growth. So demand deposits grew by 10% compared to 1% growth in the corresponding period of previous year. Savings deposits grew by 13% with incremental growth of 2,505 crores which is again the highest in terms of the actual amount.
The total deposits excluding certificate of deposits grew by 2.66% on quarter on quarter basis. The subdued growth in term deposits in the last quarter was a conscious call taken. You are aware that we front loaded our retail deposit growth in the first quarter itself with a growth of 5.3%. We also did not go for bulk deposits at the 500 year. Our bulk deposits grew by 9% year on year as against 44% to the corresponding previous period. Certificate of deposits was a tune of 1773 crores were also reduced during last quarter.
This was a determined decision to optimize funding costs given the elevated CD rate during March. As all of you know, it ranged between 7.75 and sometimes 8.5 for three months to one year. These efforts substantially reduced our cost of funds by 9 basis points in the last quarter. All these were taken considering the moderation in advances, growth and need to maintain margins in mind in the last quarter of the year and assisted with this the normal repricing of the rtd. What all happened also that also supported us a lot in the reduction in the cost of funds as well as cost of deposit.
Our approach to focusing on higher balance savings account variants through both branches and sales channels have delivered encouraging outcomes. The average balances for newly acquired customers have demonstrated robust year on year progress in current accounts, savings accounts and overall CASA with an annual growth of 44%. Existing customers contributed a 4% increase this year indicating that there are options available for customers to allocate their funds outside of traditional banking channels.
Overall, the combined portfolio shows consistent advancement in acquisition quality and relationship strength, helping to build a more resilient and balanced CASA franchise. The bank is strengthening its presence outside Tamil Nadu by partnering with institutional clients and state government bodies to capture recurring payment flows which directly enhance deposits and customer visibility. Across these markets, retail deposits increased by 11% during the quarter compared to 8.59% previously, demonstrating the branches focus on attracting stable granular retail deposits for long term stability.
In terms of margins, 2026 year was marked by sustained pressure throughout the year. Rising funding costs and repo rate reductions till the third quarter of the year created ongoing challenges for the banks with respect to net interest margins. We provided a guidance in the range of 3.7 to 3.75 for financial year 2526 at the beginning of the year we improved the guidance in the last call that NIM would be around 3.9 to 3.95 for the full year. I’m happy to say that we were able to maintain a NIM for the full year at 3.9.
If you can look at it 4.11 actually including 1 of the interest from the written off accounts as well as an income tax refund. So if you exclude that it is 3.97 which is literally as per just above our guidance, nims for the fourth quarter was 4.25% excluding 7 basis points interest income from tax refund Income tax refund this represents a 26 basis points increase from the prior quarter primarily driven by 9 basis points reduction in the cost of funds and 18 basis points increase in yield of funds.
The cost of deposits reduced by 13 basis points on a sequential basis as a major part of the deposits repriced during the year. The yield on Advances increased by 16 basis points during the quarter. We were able to stem the reduction by improving our fixed rate loans in our assets portfolio. Our fixed rate loan book which was at 23% in the total book at the end of December has now increased 29% at the end of March 26. NCLR loan book has reduced from 20% to 14% during the same period. EBLR book remained at 55%.
Yield on investment has increased by 19 basis points during the quarter. For the full year yield on Investments was 6.68% showing an increase of 7 basis points from 6.61% of the previous year. We have achieved operating profit of 1,247 crores for the quarter and 4,075 crores for the full year, a growth of 27% over previous year. Our net profit touched a high of 725 crores for the quarter and 2,500 crores for the full year, a growth of 29%. So all of you must be knowing this quarter profit as well as the annual profit are highest in the history of the bank.
Our operating expenses for the quarter is 728crore. Establishment expenses was at 341crores decrease sequentially from 363crores mainly due to lower pension obligations on account of increase in discount rates. Other OPEX increased to 387 crore from 380 crore sequentially mainly on account of increase in rents, repairs and maintenance and channel related fee. So DSA Commission and tech related expenses for full year under review. OPEX had gone up by 2.45% over previous year. For the quarter under review we have provided a sum of 116 crore towards NPM migrations, aging provisions and 7 crores for standard assets.
We had a reversal of 10 crores on release of provisions. Under restructured advances, credit cost works out to 0.45% on an annualized basis we have provided prudentially 163 cores. I repeat 163 crores is a one time towards sectors identified that they get affected due to ongoing geopolitical tensions. So total provisions including standard restructured npa, prudential and floating provisions as at the end of the year is 1747 crore which works out to 1.77% of our advances. Our gross slippages during the quarter was at 187 crore and for the full year it was 744 crore which is 0.75% of our loan book.
Slippage ratio is for the full year. If you can look at it during the second quarter we had some sort of a chunky slippages were there so it comes to around 200 crores. So 744 crores includes the 200 crores. Also SMY 30 plus numbers were at 172 crore as at the end of March 26th which is 0.17% of our loan book reduced from 0.3% of the previous year indicating continued grip over this aspect. With our persistent focus on recovery from technically written off accounts, we were able to recover a sum of 216 crore during the quarter.
Total recoveries during the year is 679 crores. From the written off accounts excluding 139 crores interest recovery which we have got it in one of the quarters earlier quarter as against 638 crores of 2024 25, our gross NPA has come down marginally to 0.75% as against 0.76% of last year. Our net NPA remains at the level of 0.19 and we will continue to maintain net NPA at less than 1% of our loan book. Our standard restructured book is further reduced to 0.41% of our loan book and the book is performing well and we do not foresee any major setbacks slippages from the book.
Above all, many of them are backed by real estate collateral and they are holding a 40% provision for the set book. Our cost to income ratio for the quarter is 37% supported by higher recoveries, interest on income tax refund and lower establishment costs and this is for the quarter and 42% for the full year which is within the guidance of below 50%. Our crop continues to be healthy and is at 18.76% providing us comfortable headroom for growth. There may not be any need to raise money in financial year 2627 for the growth plan as our plowback of net profits will take care of our growth plan.
Our LCR is at 125.47. The share of digital transaction stands at 98%. We have rolled out our new version of our mobile Delight app with enhanced features during the year. I’m happy to say that the rating for this app is 4.8 in Google Play Google Play Store and 4.6 in Apple Store and there are 2.5 million monthly active users for our delight app and 7 million delight downloads for the app. We have achieved an ROE of 2.1% in this quarter and 1.93% for the full year year. I am happy to share that we have declared a dividend of 130% as declared last year and this is subject to shareholders approval of course we need to see so last year we have issued a bonus share so every 5 shares 1 bonus share we have given it.
So this year when we are paying this 130 so the payout will be relatively more because we will be paying on those bonus shares what we have issued. Now let me move on to what we intend to do in financial year 2627 the global financial system faces significant challenges and uncertainty. Geo economic fragmentation driven by tariffs, trade restrictions and industrial policies is reshaping supply chains and fragmenting financial movements. As stated in April2026 monetary policy high frequency data up to February 2026 show continued economic growth led by strong private consumption and investment.
However, conflict in West Asia could impede progress. Increased input costs from energy prices, freight, insurance and supply chain disruptions are expected to limit expansion. The NPC noted that the conflicts intensity and duration along with related infrastructure damage raise risks for inflation and growth. India’s economy remains resilient with strong fundamentals to absorb shocks. It is prudent to wait and watch the changing circumstances and the evolving growth Inflation outlook Considering all the above, the outlook for 2627 remains cautious moderated growth we need to navigate the challenges carefully without compromising on the quality which we have got it all along with lot of efforts.
We expect our credit growth to be 1 or 2% over the industry growth. We have been focusing on margin for the past two years. Past few years Considering the current scenario, we must take a strategic bet on preserving relationships over margins. We need to balance both top line as well as the bottom line. Our ramp verticals would continue to sustain the momentum. With respect to commercial, the relationship manager model approach under small business group would focus on increasing the ticket size in the segment Business Banking team would focus on non fund business and exporters and customers for increasing transaction based fee income in addition to regularly what they do the business under MSME segment, we may need to compromise on margins to some extent in retail assets.
Our main goal is to further enhance collaboration between branches and the open market channel. Over the past year, the bank has established partnerships for affordable housing which will be expanded cautiously. We plan to launch premium credit cards in first year of this year. Lab segment is experiencing strong pricing competition making both customer retention and new acquisition a bit challenging. If you focus solely on maintaining margins, quality might become a concern. Our IT integration for loan against mutual fund is at the SAG end and is expected to be launched in the first half of this year.
Given the uncertainty in external environment, it may be necessary to pursue corporate lending in a risk calibrated approach. Under three substitutes, we will be focusing more non financial services customers for this year. The dual loan portfolio encompassing all verticals accounts for 30% of the bank’s overall portfolio. We maintain an internal cap of 35%. Growth will be pursued in either retail or agriculture segments based on prevailing circumstances as increased expansion in retail would also indirectly elevate the PSL requirements.
We continue to focus on enhanced monitoring to take care of gold price fluctuations. Our credit business mix, tram and corporate would be in the mix of 80 to 20. That’s what we were mentioning earlier, however, it may toggle between between another 5% allowance here and there can be there. Within the liability segment, we will maintain our dual approach of pursuing new acquisitions and strengthening existing partnerships. This vertical has transitioned from traditional deposit mobilization to a technology enabled transaction anchored franchise.
Key focus areas include enhancing transaction banking services, expanding merchant ecosystems through expedited merchant acquisition, and increasing CAFA by leveraging institutional business initiatives. A dedicated MRI channel is planned to be rolled out with respect to margins, we expect that NIMS to be in the range of 3.75 to 3.8 for the full year. Though we are at 4% plus at the exit quarter of this year. So we envisaged a drop in margins due to expected rate increase in the retail time deposits.
So you would have seen that we already increased rates in April 2026 and it will kick in from this quarter itself the higher cost of deposit. In addition to that, we expect a drop in the yields on the advances side due to prevailing competition and to retain the relationships. Considering the uncertainties in the market, there will be fluctuations during the quarter. Our endeavor is to maintain within the above range for the full year. So you can recollect that last year also we have conveyed the same thing when we are giving the full year guidance.
So one quarter can be here and there, but our endeavor is to deliver that number within the full year. So tactically depending upon the opportunities available, we will be taking calls. 1/4 may be low, 1/4 may be high, but we’ll keep in mind the full year. We expect 15 to 20 basis points investment Portfolio Yield enhancement through strategic rebalancing of the htm portfolio during 2627 our duration is relatively low at less than 4 years we will maintain around 4 to 4 and a half years in the medium term portfolio tilted with the yield curve expectation at any point of time our efforts on recoveries will continue and we will take efforts to sustain the momentum.
With respect to branch expansion, we are planning to open 50 branches out of the 38 will be regular and seven will be light and another five they are going to shortlist shortly. So to the extent possible how best we can front load in the first half year we will see that so that we will get the benefit in the second quarter from these branches opened. Our cost to income ratio would be below 50 as we have been continuously planning and we will endeavor to retail that way. GNPA is expected to be less than 1.5% and net NPA to be less than 1% for the full year slippages would be expected to be below 1% of the asset book.
LCR would be maintained around 115% to 120%. RBI issued final ECL provisioning guidelines which we are reviewing. The bank has maintained adequate provisions and buffers through floating and prudential provisions over the past three years. With strong asset quality and provisions to advances at 1.77%. We expect minimal impact from this transition. The bank recognizes that environmental, social and governance principles are fundamental to sustainable growth and responsible banking. Our commitment extends beyond compliance, focusing on real world impact through ethical governance, environmental stewardship and social responsibility.
By integrating ESG into our core business strategy, the bank aims to enhance financial resilience while contributing to a sustainable future. Our ESG rating has improved to 68, which implies a strong rating for the financial year 2425. It is awarded by Krizyl. Demonstrating continuous enhancement in non financial performance. We achieved a return on assets of 1.93 for the whole year of financial year 26 and 2.1 in the last quarter. There were one off items for 2026 that contributed to 0.12% to our ROA calculation.
Given the current macroeconomic environment and the anticipated effects on the net interest margins discussed earlier, we expect the ROI for the full year to be between 1.7 to 1.8. Nonetheless, we remain committed to exceeding the expectations to the extent possible. So our primary areas of focus will be to continue to have the focus on the growth, asset quality and profitability. We understand the environment. It will be volatile, but we are prepared to adapt while keeping these core metrics strong.
Finally, I am grateful to all the investors, analysts and stakeholders for the confidence and continued support which we will reciprocate to our better performance in the year to come. Now, I’ll be much glad to respond to your questions. Thank you. Thank you all.
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We’ll take our first question from the line of J. Mundra from ICICI Securities. Please go ahead.
Questions and Answers:
Jai Mundhra
Yeah, hi. Good evening, sir. And congratulations on a strong set of numbers. Sir, first, I just want to reconcile on the guidance part that you said ROI is clear, but this margin you said that. You know, we. Even for the last year we started guiding at 375, 380 but we delivered 397. Sorry, what is the guidance for FY27, sir? On margin
B Ramesh Babu
In fact I mentioned between 3.75 to 3.8. So Jay, in fact thank you first of all for the compliments and now I For this reason 3.75 to 3.8 also I elaborately explained the reasons why we wanted to do Fundamentally, if you look at it, there are few factors we need to keep in mind the cost of deposits though we were thinking saying that the environment will be much easier and all you’ll be able to get that but still there is some sort of a tightness in the market. That’s why you cannot raise the fund so easily as we think that way.
So that is the reason we expect the cost of deposits to go up further retail deposits also and the second thing on the yield. So we have been pretty holding the rates interest rates in the process we find the leakages have become more. Many of the existing accounts and others are offering very finest rates. We are losing now a stage has come getting back these connections will become pretty difficult over a period of time if we still hold these rates so strong. So we may have to concede and reduce the rates for existing customers and also for the acquisition also we have to be in the market though as I said our ETB the disbursements are 29% under commercial so it may taper over a period of time.
That is the reason we need to take a conscious call. Having such a strong NIM is good to have but not at the cost of continuously losing the top line. So that is the reason what we thought keeping all these things in mind. So we may have to compromise to some extent on the NIMS in this year per dry I suggested for 3.7 to 3.8.
Jai Mundhra
Right, sir. And sir, any. Any numerical guidance on the growth part? Sir, at overall level I heard that gold we have still internal scope but what would be the overall book growth?
B Ramesh Babu
You can look at it last year we have conveyed 2% over the industry. So you have seen RBA last data at the end of March. 16.1% exactly. We are more or less 18% now. 18% if you look at our RAM also 18% if we take the corporate which was not growing earlier. Also if we include the paid substitutes it has come out 18%. So what we planned it has come. That is the reason we were relatively a bit slow in our quarter 4 when the pricing was pretty high. So we lied low Otherwise growing in credit is Not a big task.
Now engines are faring well. If you are unable to be inorganically growing also pretty easy you can go for a full purchase and buy that. But the point is for that you need to raise the deposits in such a way pretty costly and that you need to deploy that it is not making any economic sense. That is the reason what we thought. So let us confine to 18% and maintain the margins this year. Also what the guidance I gave is particularly in respect to the credit. So it will be 1 or 2% over the market or industry coming to the deposits is concerned.
It will be derived from the credit growth. What all we are getting because earlier we were looking at the CD ratio now we will look at the lcr. So what all to the extent LCR permits and where we need to be in the range of 115 to 120% we will be mobilizing the deposits that too in a combination where CASA and td. So. So that our cost of deposits are under control.
Jai Mundhra
Right? Sir. Sir and last question is on. Sorry on gold yield. What would be a blended gold yield on? I mean the majority of the gold is agri gold. So what is the blended yield? I mean the gold having higher growth that also has a favorable impact on the overall yield, right? That is. That is correct.
B Ramesh Babu
Absolutely correct. You are right that way. But if you look at it as you are mentioning 91% of our portfolio under agree is gold loan. So that is our 11%. That is at 11% when we are funding it and all and the rest is concerned it’s a smaller amount that way. But if you look at this agree portfolio also everything is not repriced still a part of that, understand nclr. So that way a small portion is below the trade and even if something is more under the retail the average if you can take it, it can be between 10.75 to 11%.
You can take it.
Jai Mundhra
Okay? Okay, understood sir, in this quarter while I understood that There is some 2122 crores of interest it refund that number. That amount is in interest on advances line or where is that? And apart from loan mix change sir, what have what helped in the you know, uptake in the loan yield? Because I’m sorry, it’s sounding
Operator
Muffled. Can you repeat your question please?
Jai Mundhra
Yes sir, my question is where is the 22 crores of interest on ITV fund in which line item and interest income there is in the other interest income. So that’s why when you are talking about him you have excluded that income. The
B Ramesh Babu
Footnote Was there with a star. So we excluded that. So it’s a part of interest only we included that debt
Jai Mundhra
And thank the loan yield. Apart from loan exchange corporate did not grow and retail again view. Was there any other thing which helped in the uptick in the loan yields on a POQ basis?
B Ramesh Babu
Yeah, yeah, I agreed. Yeah. To the extent possible. Suppose few of the low yielding advances which is not making sense for us through the risk reward portfolio. If you are losing those accounts automatically rest of the portfolio the yield will go up.
Jai Mundhra
My only thing is that going ahead when interest rates were to go up in retail deposit, you can also increase the nclr, right? I mean the competitive intensity is one thing.
B Ramesh Babu
Now it has come down drastically. Suppose 55%,
Jai Mundhra
30%
B Ramesh Babu
Is under now 15% is there. So out of that how much you can play around.
Jai Mundhra
Okay. All right, sir. Thank you and all the very best.
B Ramesh Babu
Thank you, Jay. Thank you.
Operator
Thank you. Next question is from the line of Pritesh Bum from Dam Capital. Please go ahead.
Jai Mundhra
Good evening and great set of numbers and thanks for the insights in the opening remarks. Just two questions. One is on this prudential provisions of 150 on crores. What kind of sectors we will have taken it on and what will be the ticket sizes?
B Ramesh Babu
In fact, we have a few sectors which actually have a risk. When we saw it can be, let us say to some extent textile also we have taken like ceramics, we have taken fertilizers, we have taken chemicals, we have taken that way to some extent these granite, quartz, all these things are also taken. And few other sectors also we have taken. Where it can be a direct or indirect bearing will be there. Those sectors critically they have seen that based on that sector wise a call has been taken how much we need to provide for that.
Based on a portfolio basis. Textile portfolio. Is this some set of working? We have done that. How much is vulnerable, how much is susceptible? These things are seen. So with the different cuts and lifting and all working has been done in consultation with the business verticals Risk has taken a call. So we thought it is worth it to keep that money later repenting for that.
Jai Mundhra
Sure. Just to follow up on that as the ECLVS scheme is now approved by the government we think that most of these accounts will be eligible in that and there could be reversal of these provisions.
B Ramesh Babu
No, we have yet to see if you can recollect you may not be looking at our position in 2020 when these sort of a restructuring provisions have come up. So we were one of the banks who had very tight gating Conditions wherever actual genuine necessity is there, we have permitted few things not for the sake of doing and to postpone the impending problem. We never allowed that. So that was the reason. At that time we were getting a feeling we will have more hits compared to other banks. But we thought it is better to wipe the bullet at that time.
But later hindsight, if you look at it, our restructuring percentage is lowest amongst many banks now also just how the scheme has come out, we need to look at it, we need to work out. But the same principle we’ll try to follow wherever I’m from. Absolutely a helping hand is required. Definitely will come forward. But for the sake of restructuring and to postpone the problem, we may not do so. All these things we need to work and then we need to see. Now it will be too premature to say anything about that.
Jai Mundhra
Sure. Second question was on the 68 book you mentioned that it moved to 29%. Now apart from joint loans, what kind of products would have contributed to that? And from here on, where do you see that mix to end up at?
B Ramesh Babu
I can very well say major portion is fixed rate. Because if you look at the another product, vehicle loans will have to go into that one. But if you look at our vehicle loan portfolio for the last three years it has been coming down. The reasons are many number of times. I was mentioning the pricing at these rates, if you give it, you may be locking in for three to five years. First thing. And second thing, delinquency levels on the fixed rate vehicle book is pretty high. And third thing, upfront commission you have to pay for the dealer which cannot be amortized.
With all these things we stayed away from the vehicle loan book for the time being. As a tactical approach, as and when it makes sense, we’ll go. So with all these things, when we look at it, the majority majority of the portfolio is your loans only.
Jai Mundhra
Got it. And last question will be on write off this quarter. Write off is slightly lower than the usual trend which we have been seeing. Anything to read into that?
B Ramesh Babu
No, you see, the point is we were one of the banks with below 1% gross NPA. We are at 0.75. So provision wise, when the net NPA is around 200 crores comfortably you can provide. But there is no need to go for a write off. That’s why consciously we have gone for a lower write off compared to earlier years. So the ratios are okay. Recovery is going on with all these things, why should you go for an aggressive and accelerated write off? That’s the simple reason.
Jai Mundhra
Thank you. So much and all the best.
B Ramesh Babu
Thank you very much.
Jai Mundhra
Thanks.
Operator
Thank you. We’ll take our next question from the line of Rohan Mandora from Ecuara Securities. Please go ahead.
Rohan Mandora
Good evening sir. Thanks for the opportunity. Congress on good set of numbers. So this is regarding your question on your guidance on yield probably falling in next year. So just want to understand like what’s changing on the ground that will drive this competitive pressure on yields. Because like if you look at the business environment and the liquidity that BHU banks have, that thing has been coming down over the last few quarters. So their ability to price at a very competitive rate would be lower incrementally.
So. So what is that or is it just that you are giving a very conservative guidance to be able to beat that? How should we read on the guidance on the yield? Is there something else that we. That you.
B Ramesh Babu
I’ll respond to each of the points. Don’t worry. So Rohan, thank you very much for them compliments. Now coming to the competition and the yields I can very well say so market has much, much moved ahead as far as the concessional pricing. And we have been holding to our pricing all along. Now a stage has come. Now if we do not budge the good accounts, what all we have, we may have to lose. So now we need to strike a balance between the top line and bottom line. Now tomorrow if the growth is coming only 8%, 9% and if you maintain an ROA and a minimum of 4.25 or 4%, all these things doesn’t make much sense.
They have to go in tandem. So that is the reason what we thought the competition is coming from many partners including few private banks as well as public sector banks. So the point is to extent possible keeping the relationship tax we have been maintaining. Now a stage may come we may not be able to maintain. In that process there can be an exodus of accounts in a particular geography. If a set of people know say that such and such bank is offering such a rate and someone has gone there. There is every possibility along with the term accounts may go out.
So you need to be mindful of the fact that so what is the breaking point between beyond that you cannot go now I somehow I feel the way the market has moved now and all I agree how this starts a pricing risk reward and all theoretically it will not work. But somehow theory is something different from the practice. The practically something what people quote and we are looking at the sanction letters, approval letters also. So naturally when the customer bills you may have to yield. So that way what I said instead of having a future competition I say competition has already come in one or two years back itself we have been holding.
Now we need to relent now coming to the public sector bank what we said Agreed. Even though if you look at it, many of them are not in the 85% CD ratio. Also the earlier concept of CD ratio has gone out now to some extent and everyone is looking at the LCR2NCR route. How much is their ammunition with each one we do not know. Naturally if everyone loses their ammunition if the pricing goes up, it will be good for us also then we will be able to comfortably give a better guidance. If you can look at the last quarter then we felt saying that the things have improved on our own.
We made the guidance of 3.9 to 3.95 market didn’t demand for that. Despite that we did it. The same is the case here. When we see bright spots saying that we will be able to command the pricing what we want it and all definitely will come back and we’ll revise our guidance.
Rohan Mandora
Sure. Thanks. On the risk of losing these accounts is to which category of bank? Large 5 banks or any other cohort as well.
B Ramesh Babu
No, no, let us not talk about that. Competition is competition. It can be from any corner. So that’s why I do not want to name any bank in this.
Rohan Mandora
Sure. Secondly, in terms of the on ground activity within your borrower set in the past two months given the environment where we are so if you can just share what is the business momentum there? What kind of an impact are you seeing in the sectors where you started creating provisions? Some color around that would be helpful.
B Ramesh Babu
Yeah. If you look at it actually textiles is one sector where you find saying that we have some sort of an exposure particularly in our backyard. I can say tiruppor is there. So they had the problem of tariff issues and when tariff issues have come out now and all suddenly other issues have come out now like not getting the vessels, these things. Now suppose if they feel the US government is refunding the tax that also uncertainty is there whether they’ll get a part of the refund or not. Because these refunds are going to come to the importers where the importer will be willing to share that fund or not.
They do not know. Now if you look at the sector also accepting the government section all others are able to pass on the higher pricing to the rest of the buyers. But government is concerned they are unable to pass on because the buyers are not accepting that way sharing to some extent happening in addition to all these things they have take a cut on that. But the logistics is a problem. Now with all these things, few uncertainties have prevailed. Otherwise it can return to a good position. So spinning is doing well.
And garments, all these things is a problem. That way textile to some extent can have a problem. But a silver lining is during COVID when whole world has stopped. Next two years we didn’t had much problem. That’s why we are keeping our fingers crossed the same day we’ll be able to crossover this time also there should not be a problem like other sectors. What I was mentioning saying that it can be quartz, granite and chemicals. These sort of things are there, which is a major part. But let me tell you what is the indirect effect of this.
Suppose really on account of the gulf for the inflation, both of these things and all it will have a bearing on many our portfolio majority. If you look at wholesale and retail trading services, food processing is there. So if the demand comes down, naturally, their utilizations will come down. As I was mentioning in my guidance, we started seeing the lower level of utilization in the working capital, 2 to 3%. It is down in across the sectors. Many sectors it is there. So on one side though we feel bad, the top line is coming down.
Other side we are pretty happy because someone not needing the money, they are taking the money and redeploying someone there getting back the money will be very difficult. But here we are happy. So you are continuing with the reduction in top line. But they have the discipline to maintain. So that way we cannot straight away say that this sector will get impacted. It is absolutely dynamic situation. We need to see. But to the extent possible, what we can visualize, our risk department can visualize.
We visualize and we did it. If at all. If everything goes on well and the war is over, business as usual, we’ll be reversing the provision. It’s within the bank only and not left it outside.
Rohan Mandora
Sure. And lastly, what was the cost of incremental term deposits currently? And I missed credit cost.
B Ramesh Babu
Yeah, we have launched a product for 7.2%. So we need to pay something more on the senior citizens also. So that way, if you look at our overall portfolio, the serial system deposit works between 27 to 30% of our total deposits. So a blended way, if you look at it, even if you assume majority of that is coming there also it will be between 7.2 to 7.5. That range it can be at the max.
Rohan Mandora
And the guidance on ROI and credit cost
B Ramesh Babu
ROI I mentioned, it will be between 1.7 to 1.8. With all the reasoning what I have given credit cost I can think around less than 1%. We can think of. Thank you. Thanks.
Operator
Thank you. Next question is from the line of Akshat Agarwal from Smiths limited. Please go ahead.
Akshay Agarwal
Good evening sir. Thanks for the opportunity. And congrats on another strong quarter. Income. It saw a strong contribution even excluding the core fee income component which was very strong. So this increased to 336 crore. So can you help break down the drivers for that if possible.
Jai Mundhra
Sorry sir, can
Operator
You come closer to the microphone please. Your voice is not clear.
Jai Mundhra
We have our own third party products. What we call it as insurance function. We get some cutting off insurance for its customers. That we had a very good income lasting. Apart from that we had the recoveries from the SRS also. But also we had around 28 in
B Ramesh Babu
Fact few more heads also. I’ll tell you, our processing charges also have gone up by 18%. And as I was mentioning, our third party income also has gone up. And I can say this year the non fi base that is guarantee business which we started focusing last year we could see an uptick there. The income has come up there also. So that way few of the smaller things which we started taking they are supporting us. So this can be one of the sources. Because our plan is in the we cannot have the right of recovery.
It can be one year or two years. So our plan is how this a part of of these 52 basis points and the due point what you are getting under the write off how you are going to compensate through other income. So that finally the ROA at the end will have to come. So in that anxiety we started working. We need to see but it is a long way to go that way. But few levers which were not working earlier work this year. So that way we are able to support this other income levers
Akshay Agarwal
Very well sir. Thanks for that. And while asset quality was robust there were some higher slippages in the retail and commercial segment this quarter. So is it all seasonal or there’s some West Asia, some slightly higher due to that?
B Ramesh Babu
No, no. I can say that it is not West Asia effect has not yet come into this one. But what we thought actually which are on the borderline where the activity is relatively low. So instead of we waiting for the time to get that it is better. You front load that one and absolutely recognize that as an MPA your chances of recovery are relatively better. So proactively few of the accounts where these sort of weakness we found out we did it. So that is the reason you can find this sort of a number. But whatever it is in my guidance when I was mentioning when total whole year is 140 out of the 220 crores which are the three corporate accounts in the second quarter we had, if you exclude that one, it will be around 500 crores.
On a book of 1 lakh crore, 500 crores per year. The 0.5% slippage is absolutely reasonable.
Akshay Agarwal
Right? Sir, thanks a lot for answering my questions. All the best.
Operator
Thank you. Next question is from the line of MB Mahesh from Kotak Securities. Please go ahead.
Jai Mundhra
Good evening sir and congratulations. So just a few questions. One is what is the contribution of recovery of return of income in the non interest income line? Sir,
B Ramesh Babu
It is this quarter if you look at it is 182 crores. And overall if you look at it including interest, all these things, 670 crores. What I said that was the number actually. So it is a shared better than the last year number what we had.
Jai Mundhra
Correct. And in page number 19 that corporate banking you have been consistently increasing the share of triple B. Just if you could just kind of give us some clarity as to what is your thought process on this. Getting into what appears to be some weakness on the. On the economic side.
B Ramesh Babu
No, no point is simple. What we did is we studied the past portfolio. It can be double B, triple B, double A, what all is there and the gating conditions with which we are taking those accounts. Not every triple B. We may not take every double. We may have taken few double B also. But all these consciously we are looking at our gating conditions. Whether we will be able to manage past. When these accounts when we have taken are they working well. So we will be able to manage these accounts keeping all these things in mind, the risk as well as the business.
They have taken a call if continuously if you confine to AAA and double A. So naturally there’s a fierce competition for these accounts and all. You will not be able to make any money. And second thing, when the cost of deposit is not coming and the yields on this has come down so literally you will not be able to recover even operating cost, leave it on the margins. So that is the reason why we thought. Second point, if you look at it, we have been consciously trying to increase our risk weighted assets to total assets.
You can see that average is between 57 to 55 to 58 only going on. So there is still a room available to us which we can take it up to 65 over a period of time. For that I’m not saying we will take the wild risk. It is an informed call we need to take. So along with the risk with the past experience, what we have
Jai Mundhra
Is the default risk that you are seeing today. Is it any different from let’s say a. A rated portfolio?
B Ramesh Babu
In fact, it’s a very good point. What you mentioned at various levels including md we are continuously in touch with the customers. We are talking to them every day across the segments, understanding what is happening. Surprisingly, Even today, last 15 days when I am talking, not even a single customer has given any pessimistic view saying that it is going to crash. I have a problem. Nothing in fact, above all, if I am asking any support is required funding wise, none of them have come forward saying that situation definitely will come.
For the time being we can manage so that way. So it is only we are visualizing this can happen and all. But on the ground, the confidence of the customers, if you look at it, they are pretty confident as they were earlier.
Jai Mundhra
Perfect. Just one clarification is retaining existing term deposits. Is that a problem that you’re facing on the ground? Which of the two is a bigger issue right now?
B Ramesh Babu
No, no. I tell you retaining is definitely. We are able to maintain around 70, 75%. Definitely we’ll be able to roll over. That is not a problem. The 20, 25% also when we go deep into that one deeply we delve into that one. We are fine finding if they have an alternate investment revenue like a real estate or something else or settling. And so otherwise people are willing to retain the money. And fresh also started coming into the bank that way. So that way it’s coming. But the required flow what we wanted.
So the way it is not there. That forced us to increase the pricing which last year also if you can look at it, we have front loaded for the first quarter. That bailed us out throughout the year for some and second quarter. We wanted to adopt the same strategy this year. So we are focusing both on the fresh as well as retention. The retention also every day what is the renewal percentage? Our teams are looking at it that too division wise, granular. They see wherever something is not happening, they are seeing.
So it’s a two pronged approach. Both we are working on that.
Jai Mundhra
And last one final clarification wage provision for the next five years. You will start making for it during the course of this year.
B Ramesh Babu
I tell you it is yet to start. Actually because IBA has not yet formed the committee. They had to start that way. And all once we have some certificate clarity we can start doing. But recently last year only we have completed the whole thing and all. So once that read, the day starts November. That starts from then onward it is what making a provision rather than doing it now itself. For the sake of comfort. I’ll tell you, you have seen that the contingent provision, floating provision, other provisions, everything what all we have put in.
And above all this war is not going to be permanent. As and when the proposed war comes to an end, you have another 163 crores also buffered with you. With all these things coming up, these sort of smaller shocks here and are there the bank has become so robust to take these sort of a shock. It should not be a problem.
Jai Mundhra
Thanks a lot.
B Ramesh Babu
Thank you. Thank you. Mahesh. Thanks.
Operator
Thank you. Next question is from the line of Akshayani from HDC Security. Please go ahead.
Jai Mundhra
Hi, thank you for taking the question. My question is on gold loans for last two years we have increased the mix from 25% to currently. So until where would we be comfortable? And also you know what would be our outlook on gold loan going forward? Especially the prices don’t move up slightly declining
B Ramesh Babu
Going forward? No. Good, good question. Actually it’s a great pertinent question. Also it is a so topical now what I say our internal limit where internally risk wise. Because not now initially itself and gold prices were not moving up itself proactively. What we thought we need to have a product level concentration limit. We thought 35% can be ideal. But still conservatively we have been maintaining between 28 to 30 as you mentioned now. So it can go up to 30 to 33. Because depending upon the opportunity, what all is there bring it down.
Or if we find any other product which is worth giving and it is supporting our risk reward, we may go that there also. But the increasing pricing and these things. When you say we have introduced a very robust monitoring mechanism for the margin call. And above all if you look at it when the January and February when the gold price have gone to 1 lakh 60,000 also also 16,000 if you can say 10 grams. And we never crossed 12 to 13,000, 12,500. So that way itself the market price to our price there is a margin gap of around 20, 25% in addition to that.
So we also maintain a margin internally on this price. What all is there? So more than 75% we will not lend for the retail and agriculture also if you look at it hardly 80, 85% we will give it. So with all these Things with the market price, what all we have, we are having a margin of 2030 to 40% on that. And above all, if you look at our LTV, we many times mentioned 45, 50, 55. We also monitor another way. What is the portfolio above 75%. So that can be a portfolio which can be having a problem.
If really gold prices crash by 40%. As I said, the gap between these two 40% is there. So that is absolutely minuscule. About 75%, 80% portfolio. Actually what all we have is absolutely minuscule is less than 1% or 11 1/2% of the total portfolio. If that be the case, when we have referred things everything we have formalized. And having a grid managing these sort of shocks should not be a problem. That is why in a risk mitigated way we are going and next thing the way the demand what we have is comfortably.
If we reduce the pricing from 11% to 9.5% or 9%. Reaching 40% is just a cakewalk for us. The very reason why we made it from so below 10% to 11% is to have a check on this. So that we should not cross his 35% any point of time. So in a measured way we will grow with that reason. While strengthening the internal mechanism. What we have it can be including the mystery shopping or increasing the number of checks. What we have on the quality and totally digitized the total loans and centralized audit teams to look at what is happening.
And all agriculture and all we are looking at the end use also from centralized with all these things. So compliance angles as well as bridge candle and pricing angle. We are trying to manage the portfolio in a better way. So that we’ll have an absolute control.
Rohan Mandora
Understood. Thank you for answering.
B Ramesh Babu
Thank you.
Operator
Thank you. Next question is from the line of JNT Case from Access Capital. Please go ahead.
B Ramesh Babu
Thank you and congratulations on a great set of numbers. So what is the amount of weeds provision reversal this quarter that you have taken? Which provision? Employee expenses. You would have had benefited from the yield hardening? Yeah, yeah. But I tend to agree. So if you look at it last quarter, if you look at its employee provision. So as 15 we have provided 21 crore. This year it is 2 crore. Okay. Pension payments and all more or less the same level continuing. So that way I can say around less than 50 crore benefit would have been what on this employee accounted a hardening of the yields
Jai Mundhra
50 crores in fourth quarter or.
B Ramesh Babu
15 crores in the fourth quarter? 15 crores. Okay,
Jai Mundhra
Thank
B Ramesh Babu
You for that. So
Jai Mundhra
Second question is on the margins again the. The retail deposit hike that you have taken how much? Only. Only that specific hike that you have taken in this quarter. What is that in basis points impact on earnings
B Ramesh Babu
That will be known in the next quarter. The reason is we started in April so we need to watch and wait how it is working there because every deposit wanton is coming it will not go into that particular scheme and this foreign it may not go. So we need to wait and watch for this quarter once then only we’ll have a full view on the incremental cost, what we are paying and what will be the bearing on the that is the reason I was telling when I was giving the NIM guidance It can be a two pronged approach.
One will be on the cost of deposits can go up yield. I cannot wait for the deposit cost how much it comes by the time my exodus, other accounts would have been completed. So these two are independent. I need to work on the advances front giving concessions and at the end of the quarter we’ll be knowing how much loss is there on account of the yields, yield and advances and how much of the incremental cost we need to pay on the cost of deposit. But this whole map, this whole deal when it is working and all the machine.
That’s why we thought saying that we may be landing between 3.7 to 3.8 on the NIM at the end.
Jai Mundhra
Sir, if I could just rephrase this question is it roughly 30% of your book is where you expect the repricing to happen and this will happen around 7.2 blended what is the current?
B Ramesh Babu
I’ll tell you the repricing book if you look at it, we had to split that into two parts. Suppose if I say. Let us say 30% of the book is getting repriced so 25 to 30% last quarter Q4 we had the majority repricing but why you are able to see the major benefit of 16 basis points there in advances and yields Also this year, this quarter we don’t have that much of benefit and if you further dissect that one, we see the deposit which are 7.25% and above they are coming to around 14% of the total deposits.
If at all we are able to retain all these deposits at a lower rate we will be able to get the benefit of that and rest of the renewals what all are happening, we may not get much benefit.
Jai Mundhra
Understood, sir, that is very clear. And lastly sir, more from a growth perspective. Why is that guidance 1 to 2% this year versus 2% last year. I understand the macro setup. But if the macro continues to be benign, should we assume we can again do an 18 odd percent? Or is this more of a capital constra that keeps you around that 15, 16, 17. Okay,
B Ramesh Babu
You say capital constraint. You see how much we are plugging back at a point of time. Our annual profit used to be 250 crore. Now it is. We have just added a zero to that. So with that 18% of the capital adequacy something is there. That two major portion is a tire one straight away with a risk weighted assets of 55% there is a constraint for capital there. So comfortably next two years you can grow not a problem at all. Only thing what we thought is as we said it is a benign environment outside when to grow.
It’s pretty easy to understand when to lie low and take a careful call. That requires some sort of a care. So that is the reason we thought all along we have proved and we have been doing is the right time. We have to be prudent not to be aggressive. So that if we may get additional income by way of yield on advances that should not offset by credit cost in the provisions. That is the reason what we thought. Let us continue this way. Okay, thanks.
Jai Mundhra
The last one last question. The ECL transition I get that one time impact could be absorbed. But what is the steady state credit cost impact? Ongoing. Ongoing credit cost impact.
B Ramesh Babu
Some more time is required. Reasonable have come. They were pretty busy with our results and all. So once you work out some sort of a clarity is there we’ll be able to share that.
Rohan Mandora
Thank you sir.
B Ramesh Babu
Thank you. Thanks.
Operator
Thank you ladies and gentlemen. We’ll take that as the last question for today. I now hand the conference over to Mr. B. Ramesh Babu MTN. CEO for closing comments. Over to you, sir.
B Ramesh Babu
So thank you all for taking out time and to be in our call the questions what you have asked that shows the interest what you have. So definitely whole team is geared up what best is possible. We will always try to deliver that. Thank you for the guidance and the support. Once again, thank you all.
Operator
Thank you on behalf of the Karur Vaishya Bank. That concludes this conference. Thank you for joining us and you may now disconnect your lines.