Utkarsh Small Finance Bank Limited (NSE: UTKARSHBNK) Q1 2026 Earnings Call dated Aug. 04, 2025
Corporate Participants:
Unidentified Speaker
Govind Singh — Managing Director and Chief Executive Officer
Analysts:
Unidentified Participant
Renish Bhuva — Analyst
Jai Chauhan — Analyst
Deepak Poddar — Analyst
Hanel Shah — Analyst
Harsh — Analyst
Sagar — Analyst
Anand Dama — Analyst
Anant Mundra — Analyst
Presentation:
operator
There. Sa it it. Ladies and gentlemen, good day and welcome to the Q1FY26 earnings call for Utkarsh Small Finance bank hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Ranesh Bhuva from ICICI Securities. Thank you. And over to you, sir.
Renish Bhuva — Analyst
Yeah. Thank you. Good afternoon everyone and welcome to Utkarsh Small Finance Bank Q1 FY26 earnings call. On behalf of ICICI Securities, I would like to thank Udkarsh management team for giving us the opportunity to host this call. Today we have with us the entire top management team of udkarsh represented by Mr. Govind Singh, Managing Director and CEO Mr. Pramod Kumar Dubey, Executive Director. Mr. Saraju Kumar Praveen Samariya, CFO Mr. Amit Acharya, Chief Risk Officer. Mr. Vivek Kashyap, Head JLG Sales Micro Banking. And Mr. Saurabh Ghosh at Dinderwal Banking.
I will now hand over the call to Mr. Govindji for his opening remarks. And then we’ll open the floor for Q and A. Over to you sir.
Govind Singh — Managing Director and Chief Executive Officer
Thank you, Ranv. Thanks always for hosting this call. Thank you very much all the investors for taking time to join this call. Thank you everyone for taking the time to join us for our Quarter 1 F1 Quarter FY26 Earnings Call the first quarter of FY26 commenced amid the impact of two pivotal forces. First, the full scale implementation of Infin Guardrail 2.0 from April 1, 2025. And second, the lingering impact of elevated delinquencies carried over from FY25. You are aware Guardrail 2.0 introduces caps on borrower leverage level leverage restricting microfinance customers to no more than three lenders.
While this framework is essential for long term portfolio health, it did impose temporary pause in the nascent recovery of collection sentiment that we had observed even in FY25. The immediate effect was that our overdue buckets remain elevated longer than we had anticipated. Initially reflecting both the guardrail adjustment process and the residual stress embedded in the portfolios. While JLG business headwinds are there, our non JLD portfolio sustained good momentum growing 39% year on year and 2% quarter on quarter. The moderation in overall loan growth book was driven almost entirely by the contraction in our JLG book which declined by 7% during the quarter.
Conversely, the share of secured loans within the overall loan book increased to 45% as on June 25 from 35% as on June 24 and slightly to increase further. On the liabilities front, total deposit registered marginal decline of 0.4% quarter on quarter. However, we delivered 18% year on year growth in total deposits driven by strong traction in detailed term deposits which grew by 34% year on year and thus 10% quarter on quarter while our Casa deposits increased by 22% year on year resulting in improved CASA rtt ratio of 74% as on June 25th from 67% as on June 24th.
During quarter one FY26 we intentionally calibrated deposit accretion to align with our moderated disbursement run rate and maintained a strategic focus on achieving sustainable and consistent deposit growth driven by a well diversified and granular low cost retail deposit portfolio. The bank continues to enhance its digital and fintech capabilities through both direct initiatives and strategic partnership contributed to a higher deposit mobilization and cross sell opportunities. We maintain a strong presence through our general banking branches across the top 100 centers of the country predominantly located in metro and urban locations. With our newly launched branches getting matured and ramped up, we remain optimistic about margin improvement and overall business scalability with strategic focus on improving product per customer, higher wallet share, customer 360 degree perspective and digital enablement aligned with our strategy.
Our CD ratio declined to 83% as on June 25 against 93% as on June 24 and after netting off refinance borrowing from advances, CD ratio declined to 76% as on June 25. In line with RBI repo rate cuts, we have trimmed interest rates for savings as well as for retail term deposits. These calibrated actions are expected to drive a gradual reduction in our overall cost of funds. With respect to JLG loan book, we are cautiously charting a path towards long term stability over short term expansion. As we continue to focus more on collections, it has slowed down.
Loan disbursement resulted in decline in JJLG loan portfolio by 7% during the quarter. Though the French NPS slippage is reduced during quarter one FY26, we are working on back to basics programs imparting training to newly inducted frontline staff about central meeting processes and new customer acquisitions, implementing strict training processes and greater client connects through a more disciplined lending approach. We are already focusing on streamlining the portfolio growth while the impact may likely to persist for some time. The business is expected to stabilize in next few months and better collection efficiency is anticipated by then. We are significant we see significant growth potential in micro banking business loans MBBL Considering the large base of JLG borrowers and our MBBL penetration level of less than 5%, MBBL portfolio grew by 29% year on year comprises 10% of our MB loan book.
Focus on graduating better profile DLG customers with good repayment track record. This portfolio is behaving much much better on collection efficiency and asset quality. Accordingly MBPL portfolio is expected to grow faster in faster. Henceforth we are seeing healthy traction in our non JLG loan portfolio. With our deepened focus on secured asset businesses, MSME loan portfolio expanded by 46% year on year to 40 to 4001 crore optimizing disbursement yield which improved by more than 150 basis points over same quarter last year. Within this we are also seeing steady steady growth in Microlab portfolio wherein disbursement Yield is around 18%.
We see good growth potential for this product in our geographies and give our strong franchise housing loan Portfolio grew by 30% year on year to rupees 929 crore. Dispersal yield also improved by more than 40 basis points over same period. Same quarter last year CE and CB loan book increased by 17% year near to 1179 crore. Within this we are focusing on increasing share of used vehicle loans. Its dispersant share increased to 30% for quarter one FY26 which was around 5% during F1 quarter one FY25 we are strengthening our presence in BBG lending. Entire portfolio is secured against immovable collateral.
This book grew by around 48% year on year. We are seeing much better traction on cross sell on both sides asset products that is MSME Housing and Microlab. Through our liability focused BB branches and deposit account for our asset customers essentially more products per customer. The overall gross loan book registered Moderate growth of 2.3% year on year primarily impacted by a sharp decline in the JLG portfolio. However, we expect JLG disbursement to improve in next few months. Also good growth is expected in MBBL portfolio. Additionally we foresee a continued healthy trajectory in the non micro banking segment which largely comprises of secured loans including high yield products.
We expect better loan book growth for FY26 in terms of risk diversification. We also registered with CGFMU for credit guarantee coverage on our eligible ALG and MBBL portfolio with effect from January 17th, 2025. Accordingly, incremental TLB and NBBL out disbursement from then onwards are getting covered under credit guarantee. This cover will further de risk cover JLD and MBPL exposures. We continue to build and deploy higher collection force, also establish a specialized call center, focus exclusively on overdue accounts and implemented stricter oversight of field of processes ranging from centrifuging discipline to effective monitoring and supervision. We continue to split large NBA branches to maintain better control.
With the help of these measures, fresh NPA accretion will decline meaningfully in next few months. Nonetheless, the carry forward stress translates into a Net loss of rupees 239 crore for quarter one F1 26 for US FY26 will be a pivotal year for operation and financial optimization with a strategic emphasis on improving asset quality first while scaling up our focus in profitability driven businesses along with superior customer experience. Despite the losses, our capital adequacy ratio remained at 19.6% as on June 32025 comfortably above the regulatory threshold. Looking ahead to shore up our capital base, we have already embarked with equity fundraise initiatives planning to raise capital in next few months depending upon the capital market conditions and investor appetite.
Concurrently, we have also secured all requisite statutory approvals on the proposed reverse merger of the holding company with the bank. With these approvals in hand, we are now examining the optimal sequencing of petition filing with NCLT application in tandem with the equity range. Our surplus equity position stood at almost 3,900 crore as on June 25 which is higher than our usual equity requirement and LCR ratio of 239%. We don’t have any short term borrowing on our balance sheet. We are also undertaking the Business Transformation project to make our technology architecture and business processes future ready for our growth plans.
While the near term disruption from guardrail implementation and elevated carry forward stress pose challenges, it has also highlighted the strength of diversified franchise, prudent risk management and deep customer connect through decisive actions. Strengthening our collection framework, optimizing funding cost shore of capital and scaling up digital and secured lending initiatives will gradually lay a solid foundation for sustained improvement in asset quality and a steady balance growth trajectory for months ahead.
Thank you once again and now we open this discussion for question and answers. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jai Chauhan from Srinetra Asset Manager. Please go ahead.
Jai Chauhan
Good afternoon and thank you for the opportunity. Am I audible?
operator
Yes, you are.
Jai Chauhan
Yeah, so. So I, I just have two questions. One like management provided optimistic guidance for Q1 FY22 recovery but the result showed further deterioration. So what went wrong with the position and how reliable are your current recovery timing?
Govind Singh
Sorry, can I just repeat we couldn’t hear properly. Can you just repeat your question?
Jai Chauhan
Yes sir. So I was saying that management provided optimistic guidance for Q1 FY26 recovery but the results showed further deterioration. So like what went wrong with the projections and how reliable are your current recovery timeline? That was my question.
Govind Singh
Yeah, so you know, in case of. I mean I think we are referring to specialist JLG because that is not. There is no impact on other than any other portfolio in case of jlg there was a, you know, one more point of Guardrail 2.0 of MEMPHIN which got implemented from 1st of April. And I think the industry also expected that there may not be much impact. But in first two, three months time we saw there was a higher impact more than anticipated. That may be true for overall the JLG overall portfolio. So when the initial guardrail came From MFIN they put 4 lender cap and from 1st of April 2025 they changed it to 3 lender cap.
Because of that we saw some more, you can say slippages or little elevated credit cost during this quarter. And you must have seen that that is more or less that is industry phenomena. I think anticipation was that it will not have that much impact. But the impact, actual impact was little higher than what it was there. You must be aware that guardrail they start from the 1st of August 2024 and first tranche was August, then in 1-1-2025 some more changes and final changes happened from the 1st April 2025 and they had a little more impact.
And I mean that is mostly the reason we don’t expect any such thing to happen from MFIN or from any of the regulators. You know, whatever was to be done, that has been done and we have seen the impact so far and now I think you know, of course it’s a, it’s a matter of time but that’s the recovery should have start from. Start happening from here.
Jai Chauhan
Right sir, understood. And so my second question was like the collection efficiency has collapsed right from 96.2 to 82%. Like what specific operational changes are being implemented to restore this discipline and improve collection.
Govind Singh
So there have been strong, a small change or small direction in the overall collection efficiency for sure. You know, even in the expert, there are some decline. And as we mentioned in our, you know, in our opening remarks also I think customer connect and all the overdue customers are. We are able to connect all the overdue customers through various channels right from the. Our own business team goes to field. Then we have the large collection team of more than 800 people, that is the collection team. And then we have also through the call centers, we approach these customers.
So I think the, you can see the efforts have been intensified now and that is also, you know, causing some decline where we are not able to do disbursement to that extent because entire focus is right now on the collections part as far as the JLG is concerned. So we have initiated a lot of new things and the tracking and supervision part has also been improved. We have put a lot of teams which are in place at the regional level and journal level, which is able to track the customers as well as the clients. So I think we have initiated a lot of things as far as the overall collection is concerned and that certainly should yield results in days ahead.
Jai Chauhan
That’s a strong. I say thank you.
Govind Singh
Thank you.
operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Deepak Podar from Sapphire Capital. Please go ahead.
Deepak Poddar
Yeah, I’m audible, sir.
Govind Singh
Certainly. Yes, please go ahead.
Deepak Poddar
Okay. Yeah. Thank you very much for this opportunity. So just wanted to understand first on the provisioning part, now you mentioned that we have seen the impact and going forward, recovery you expect to start happening. So how should one look at credit cost going forward? I mean, currently I think we had about 411 crores kind of a provisioning. So how should one look at incoming quarters?
Govind Singh
So as just mentioned, with the interventions that we are doing in terms of collection, in terms of headcount, in terms of bucketing, you know, focus, I guess the quarter two, by and large will be, you know, the similar type. But quarter three onward, we should see a drop down.
Deepak Poddar
Okay, so for third quarter onwards, we expect some decrease in credit cost.
Govind Singh
Yes.
Deepak Poddar
And is there any timeline by when we can expect some kind of normalcy? I mean, by when we can expect normalcy, credit cost.
Govind Singh
So as CFO mentioned that, you know, we are certainly seeing reduction in the, in the overall pain. What we can, you know, we can use the word but giving. See, I mean normalcy will can happen once our regular collections reaches 99.5%. I’m talking the X bucket and I mean currently as of it is very difficult to pinpoint. But as you mentioned next three to four months time we should be able to reach that level. That is what is. What is our estimate right now?
Deepak Poddar
No reach that level in the main field you are talking about normalcy level in three to four months.
Govind Singh
Yeah. So normalcy will have two things. One, our collections being on regular basis at 99.5% that is one thing. And maybe 99% upwards. In fact that is what should happen. Plus in terms of disbursement, obviously now the dispersion will not be the type of disbursement which used to happen earlier. But dispersant where we are able to cover portfolio doesn’t regrow and portfolio growth starts happening. I think that is what we expect. That is the second part of second leg of the overall normalcy. Again that is again our anticipation is around three to four months from now.
Deepak Poddar
On a conservative side, by fourth quarter one can expect some normalcy to resume. In terms of credit cost and in terms of growth.
Govind Singh
Yes, both have been collection credit cost, what you mentioned and also portfolio stability and portfolio starting not declining and growing in fact towards the quarter three. And I think that is what we can expect quarter three and quarter four beginning.
Deepak Poddar
And now in the third quarter one month have been passed, I mean July month. So how has been the collection efficiency in micro banking? I mean which has reduced to 82% as of first quarter. So how do you see a collection efficiency as on. I mean in last one month.
Govind Singh
So we have seen almost, you know, entire last four months, you know, even June and July we have seen almost similar type of trajectory as far as GLG business concerned. It has not gone down but at the same time it has not improved significantly. Also I think it’s almost the same trajectory that we have seen during July which was there in the month of June. Almost on the same lines and not.
Deepak Poddar
Gone up also at least not deteriorated. It will not improve much.
Govind Singh
Correct, you’re right.
Deepak Poddar
And how should one look at growth for this year? I mean we expect a single digit kind of a growth, muted growth this year because of all these issues we are facing.
Govind Singh
So growth, you know, as I mentioned we because of little uncertainty still remains there in jd. We are not able to give any specific guidance and JLG because we have seen de growth in the portfolio. So I think yourself asked about the normalcy or when disbursement start picking up or some assessment we have done. Maybe I can give a better guidance on the non JLG part. Non JLG we are sure about, you know certain about 30% plus growth as far as non JLG book is concerned other than JLG JLG, you know, I mean right now giving a special guidance on the growth of JLG will be difficult.
But non JLG around 30% plus is what we can guide to the investors.
Deepak Poddar
Okay, and just one last thing from my side. Now you have started, you mentioned you have started the CGF MU coverage. So how much percentage of portfolio currently we have and how much we intend to cover over the period.
Govind Singh
So as far as intention is concerned we will cover the entire portfolio. I mean it’s a matter of time, you know as and when new dispersion happens this get automatically covered. Almost close to 95% plus because it’s only the direct agriculture which is not covered. And normally for JLG direct agriculture is very small portion indirect agriculture anyway covered. Even most of our micro banking business rules covered under that. So whatever is the new portfolio creating from middle of January that is getting covered automatically under this. I may not have the exact details of, you know, how much we already covered but whatever disbursement are happening from the middle of January under JLG and under MB business loan, they are getting covered under the guarantee scheme.
Deepak Poddar
That’s very clear, sir. I mean that’s very helpful and all the way by. Thank you so much.
Govind Singh
Thank you. Thanks a lot.
operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Hanel Shah who is an individual investor. Please go ahead.
Hanel Shah
Hello sir. Thank you for the opportunity. While I do acknowledge that there is stress in mfi but look at it, our bank, this has been much bigger. Even so, how can can we expect profitability in FY26 or it is a loss here for Jasmine.
Govind Singh
I think right now very difficult to talk about this part unless we see the, you know, what do we say this the JLG portion getting normalized as you mentioned it will take some time. So currently is very difficult to anticipate the the year for. You know, as far as the profitability part is concerned, we will require some more time. Maybe when we come next time, you know, based on quarter two we’ll be able to give a better guidance as far as the profitability and the JLG overall growth is concerned for this financial year.
Hanel Shah
Okay. And second question sir, our operating. Can we expect our operating profit to increase or it is in line similar range for next couple of quarters.
Govind Singh
So operating profit by logic in terms of disbursement. And sir just mentioned about 30% growth on the non micro banking. So there are two factors, three factors that will lead to better operating profits. One, the growth in the non micro banking portfolio at a higher yield. That should increase your operating profit. Two, your cost of funds are likely to come down. We have already reduced our rates on term deposit and our savings account. You’ve already seen 20 basis point cost coming down on both of these from previous quarter to this quarter. So the cost of funds should lead to further improvement in terms of the operating profit and in terms of cost.
We are steady state. We have done all the platform development. I guess what then is incremental inflation, increase in cost, stability in cost with higher disbursement should see improvement over the next three quarters the PPOP or the operating profit. So that is absolutely the execution plan.
Hanel Shah
Thank you very much sir.
Govind Singh
Thank you.
operator
Thank you. The next question is from the line of Harsh who is an individual investor. Please go ahead.
Harsh
Hi, can you update on the fundraise process. What is the quantum.
operator
Harsh, can you please be little louder.
Hanel Shah
Can you please share an update on the process? What is the. And what are the timelines that we are expecting?
Govind Singh
Right. So if you recollect we mentioned last time we have already taken approval from the board and the shareholders for a fundraiser. 750 crore. I think we will. You know we will intensify the engagement with the potential investors. We are hoping to do that. If not this quarter and maybe early month after that. That’s the timelines we’re looking at. You know we’re just waiting for the results. And then now we will notify the discussions.
Hanel Shah
Okay, thank you.
operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Sagar from Spark Capital, please.
Sagar
Thank you so much sir for the opportunity. My first question was related to provisioning. I wanted to know what kind of provisions are we. What. What is the PCR that we are holding in our MFI portfolio?
Govind Singh
We’ll be holding I think about 62% in MFI and.
Sagar
62%.
Govind Singh
Yeah. Overall after that. Overall unsecured is around just mentioned. Yeah, that is right sir.
Sagar
62% is the PCF for the MFI portfolio.
Govind Singh
Using overall the bank level it is 59. And for JLG it’s around 62%.
Sagar
So is it safe to assume that in the next two quarters we are we will be required to do further provisioning because of the accretion of NPAs because as far as my understanding goes you will need to provide higher for the unsecured slippages. Right.
Govind Singh
So already the process is that you know we provide 40 in the first on NP itself in case of JLD. So that’s why it’s already higher on some higher percentage obviously based on the collections. I mean we’ll have to see what is the additional requirement in on quarter, on quarter basis based on the recovery and this further slippages. So very difficult to you know, anticipate today. But yes, there will be some, some additional provision for sure in next quarters also.
Sagar
Because for the LPAs that are accrued in the MFI portfolio, if we have done provision for 62% then my actually what my point was that you will need to do at least 100% of the. At least you will need to provide 100 for the NPAs that are already there in the microfinance is concerned. So that is what my point was that you will need to do further provisioning in the next quarters because all banks and NBFCs have done in the last 3/4 100 provisioning for the NPS that are accrued actually because of this over leveraging crisis.
My second question was related to our diversification. Yeah, for the diversification my point was the case in the MFI portfolio. The our majority of the advances are coming from B and up. Almost 84% of the the loans are sourced from there. So what are the plans to diversify at least in the JLG portfolio.
Govind Singh
Okay, so broadly speaking, I mean it’s not 84%. I’ll give the exact number details. You know, in some of states, state level, it is not 84%. It is support, it is 69% actually not 84%. But having said so, you know when we are talking diversification we are looking at from two angle. One from the geography and second from the product angle. So you also mentioned that you know our JLT portfolio which has come down to almost 45% of our book right now. You are aware that almost we started almost 100% in 2017. So there is a long, you know, long way we have come to that level and now it is only 45%.
That is one part as far as JSD’s business is concerned. We are working in 11 states, you know, which is northern and central belt and we have seen some diversification. We have gone to Places like Odisha and Rajasthan during last two, three years. And there is some diversification. But more diversification will happen through the. Because we are not going to grow our JLG book to that extent. The major growth will come from the non JLG and which is Pan India. It is not limited or linked to any of the states. In fact where there we are Pan India player, be it msme, be it housing, be it C and CV businesses.
So overall diversification of the geography as well as product is happening on regular basis. And you’ll see that next two to three years time there will be significant. You know I mean from here also there will be significant diversification of portfolio and geography. And that’s a continuous process sir, in our case.
Sagar
Okay, so can you quote that what is the share of secured to unsecured that you are eyeing in the next two to three years? Sir.
Govind Singh
So currently we are on a 45 percentage secured. And I think this maybe if you look at medium term plan I think because JSB portfolio is coming down and others are very limited unsecured. So at least we can expect in medium term this mix will go to around 50, 50. If you look at 2 to 3 years horizon you know our secured will be more than 50% going forward also.
Sagar
Okay, my third question was related to the leveraging of the existing branches. In the last three years we have significantly expanded our network in terms of branches. So but still the utilization of the of the branches, utilization of the employees is still very low as compared to the industry. So whatever. What are our plans to scale up because that will lead to operating leverage that will only scale your roe. So what are the plans to actually leverage our existing branches so that the at least sell. Very important point sir.
Govind Singh
You know I think our entire focus is right now as you mentioned about diversification that is one part and second on the operational efficiency. So this year other than buying a very few branches which are, you know basically split branch for jlg, we are not opening branches. Our idea is that we have enough number of branches which right now and you mentioned that during last two, three years we have opened many branches. So a large, you know we can say manpower base and we have a large network base right now and we have a good client base also and that is what we have started.
In fact we have a big focus on the cross sell right now. I also spoke when I gave the opening remarks with big focus on the cross sell part so that our customers are able to get more, you know accounts and more products from us. So There is big focus on that and you’ll see a big change because of that. Without expanding the network, I think we’ll be able to give more. We will be able to expand our balance sheet and that is what will visualize that. In fact, when we have to expand our other products like say MSME or Housing.
In fact we keep expanding to newer locations without opening a branch. So that is also keep happening on regular basis. So you see that, you know this, the operational efficiency part will play a big role as far as medium term, next two to three years trajectory, two to three years balance sheet, next two to three years performance of the bank is concerned. Sir, that is a focus area for us right now.
Sagar
Okay, fine sir, got your point. My last question was that what was what is the PCR that we are eyeing for the MFR portfolio by the end of FY26?
Govind Singh
I guess you may consider about 10 percentage more. Of course as we said that as normalization happens and we have the collection efficiency for the interventions, we are done, it should be plus 10% from where we are.
Sagar
Okay, thank you. Thank you so much and all the best.
Govind Singh
Thank you sir.
operator
Thank you. A reminder to all participants, you may press Star and one to ask a question. The next question is from the line of Anandama from MK Global. Please go ahead.
Anand Dama
Thank you for the opportunity. In your presentation it shows that your collection efficiency excluding the prepayments has dropped to 82%. Which states are basically contributing this is it the Uttar Pradesh, Bihar or there are other states like Karnataka where you have some presence and where you are seeing dropping correction activity.
Govind Singh
So in our case, you know there are, there is some pocket where we might have challenged them. And just to talk of Karnataka, actually we are not there in south at all. I mean we are not in Karnataka, we are not in Tamil Nadu. And all these were, you know, impact of guardrails only and I mean the resultant reasons coming out of guardrails. So there’s no specific state per se. There might have been some pockets where we might have challenges. So for example some portions of in the Bhagalpur in Bihar or some portion of near Gorakhpur in up.
So there might have been some elevated, you know you can say collection issues in some of the pockets but there’s no, you know there is no geography specific state specific in our field. Unlike in some, some players it might have been because of some of the state where there have been specific challenges. In our case largely it is because you know the impact of guardrail too.
Anand Dama
In these pockets also is it more of economic distress which you are seeing at the borrower level plus the empty guardian or there is something more to it because I think we are also getting closer to the elections. So what basically explains the pocket wide stress that you are seeing?
Govind Singh
So sometimes it may be specific to some entity. Also suppose you have some, you know, issues in terms of local level issues or sometimes we might have some staff issues or the distance from your branches issue. So those might, you know elevate these things. And in some pockets last year we had seen there used to be a Karja Mukti, you know, Vian or Andolan. What we say we had some impact in some pockets of Bihar and the Gorakhpur and that belt of up. So these are very, you know, small isolated things. But sometimes you know they have an impact for a longer period.
Sometimes some pockets again there will be some specific issue because of the, you know, some natural calamities or those types. Again those are the isolated things. So those might have the region sometimes maybe this operational issue with the entity. Also as far as elections are concerned, as I mentioned in past also and I think elections have never impacted the DLD part and especially in the places like UK and Bihar and we don’t foresee any challenge or anything. You know, on account of this. What generally happens because of election some there may be some restriction on the local or you know, operational part, you know, movement of cash and those type of things get little impacted during that period.
Otherwise as as long as your operations or any impact on the collections part is concerned, part is concerned we don’t anticipate and in past also we have never seen that.
Anand Dama
Right. The second my question was that is it possible to get your C plus render portfolio in terms of borrowers and also the overall outstanding loans.
Govind Singh
24 to 25% of our customers have. More than three lenders. So our plus three
Anand Dama
in terms of portfolio, how much it will.
Govind Singh
Terms of. Portfolio also is in a similar similar. Range, not much difference.
Anand Dama
And of this A plus lenders portfolio is it possible to tell us like what is into SMA and how much is into nps?
Govind Singh
No, at this point of time it. Will be difficult to say but it’s. Certainly more than whenever the number of lenders are lesser.
Anand Dama
Sorry I didn’t take you sir.
Govind Singh
So Anand, I can share the details with you. Maybe I don’t have exact full details right now but I agree that we have the experience where you know number of lenders. There is a direct correlation between these two things. We have seen it many times in past also during last almost now it is one year in fact first August the garden put in place and wherever there are more number of lenders it has impacted badly. But I don’t have the exact data right now with me. I’ll certainly share with you offline after this.
Anand Dama
And sir, third is do you see any stress in the CVC segment? Obviously your portfolio is pretty small but still in that segment are you seeing some investors?
Govind Singh
So for last around the year we saw some, I mean not the way we have seen in some of the things like jlb. But yes it was little higher than usual. You can say we had seen and we had taken corrective actions. Also we have put little higher. Two things we have done. One we have reduced our, you know the rather three things we have done, we have reduced our overall disbursement. In fact we used to disburse almost 30 to 60 crore. Now it is in the range of 20 to 25 crore per month. So we have reduced that part.
Some of the pockets where we thought that this may be vulnerable we had stopped disbursement in those places altogether and we have in fact some of our sales team people were also moved to that so that you know before it goes out of hand we should be able to control that. And another thing that we have done, we have focused more on the second hand vehicles or used vehicles which I spoke in my opening remarks. Also it used to be almost 5% or so till one year back. Now it’s almost 30%. They are the, you know the, the losses because LTV is lower.
In that case the losses, propensity of losses is much lower. So I think these are some of the things we have done so that you know it doesn’t go out of hand as far as the wheels business is concerned.
Anand Dama
Thanks a lot.
Govind Singh
Thanks Anand.
operator
Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The next question is from the line of Anant Mudra from my Temple Capital. Please go ahead.
Anant Mundra
Hello. Thank you for the opportunity. So we’ve seen some other lenders give a commentary that there is some stress appearing in the MSME segment. And for us I think that’s the second largest portfolio. So just wanted to check what has our experience been in this vertical.
Govind Singh
So our experience is there is not much so far, you know and largely because in case of our MSME it is largely secured portfolio. You know these are all against hard questions, collateral. I again don’t have exact number but almost 95% of portfolio is a secured portfolio. As far as MSME is concerned, a very limited portfolio is unsecured there and we have not seen much change. I mean there are maybe some fractional change but any significant increase or in delinquencies or you know, overdues that we have not seen so far in msme. I think we just mentioned to previous caller Anand that you know besides JLG where we had seen little higher uptake was the wheels in all other businesses.
I think things are looking under control. Maybe few basis points here and there. That’s the only difference.
Anant Mundra
Got it, Got it sir. And sir, sorry if I might have missed this out but did you call out what was the expected collection efficiency in July for our JNG portfolio?
Govind Singh
I think we have not mentioned that but it was at the same level of June. 98.6% was our expirit collections efficiency for July also.
Anant Mundra
Okay, that’s it.
Govind Singh
Someone. Thank you, thank you, thank you.
operator
The next question is from the line of Hanil Shah who is an individual investor. Please go ahead.
Hanel Shah
Hello sir, thank you for the opportunity once once again sir. So how do we see FY27 if you can guide us a little bit or since FY26 is in profitability or due to JLD issue.
Govind Singh
So sir, I’m broadly speaking, you know as I mentioned we are, we are not giving guidance only because JLG uncertainty has not gone away completely. But if you look at a medium term horizon, certainly the way we have done our lives liability franchise, in fact currently we are restricting our liabilities just to not to take too many liabilities because our asset growth has been little lower. So that franchise is working very well. Our asset franchise other than JSG everything is working very well. Even within JSG MVPL franchise is working well and we have got some other high yielding products like Microlab and those type of things also even when we talk about used vehicles in wheels business that is also giving better yield.
So I think and we have seen good improvement in the yield overall in msme be it msme, be it housing also. So you know, in medium term we expect that, you know we should be able to give a, you know, 15% plus type of ROE if you look at next three years horizon or so we are confident of giving, you know that type of ROE on an overall basis and a good growth of around 25 30% what we expect. If you look at a medium term horizon this year I think is little difficult because of reality issues.
Hanel Shah
Okay. Can I ask one more question
Govind Singh
please sir, all yours.
Hanel Shah
Thank you. Okay sir, since we have registered with CG mfu are we required to make provision in future society situation arise or how means can you throw some light on that?
Govind Singh
So I think the way process operates, maybe the CFO can see from if I’m not correct, the provision is required to be made upfront. In fact in case of all gas guarantee schemes as and when the guarantee, you know, claim become mature, you get claim money and then you have to net off from the provision you have made. So first time you have to make the provisions. That is my understanding.
Hanel Shah
Okay, but thank you for the opportunity.
Govind Singh
Thank you sir.
operator
Thank you. A reminder to all participants, you may press star and one to ask a question. Wait for a moment. The next question is from the line of Harshad from who is an individual investor. Please go ahead.
Harsh
Hi sir, I wanted to understand. So as your secured loan book shrinks, what is the realistic margin number that one can expect at a normalized level? Because if it’s already shrunk quite substantially but currently of course there are interest reversals which are happening at a normalized level. What would your margin number be?
Govind Singh
So one is that I think our unsecured will certainly come down, secured will go up. But within secured also there are some little better yielding or high yielding products. And also in terms of cost of fund is coming down, operational efficiency improving. So again I mean what we can estimate on a medium term basis our margins will improve from here and which has really come down. You know in past we were in the 9%, 9% plus. But I think you know, 8.5% plus margin should not be a problem. I’m talking NIM should not be a problem in medium run.
Again I’m talking of medium run, it’s not for this year. I want to make it very clear. This is for the median when look at two to three years from here close to eight and a half percent name should be possible with the, with the, with the change of mix. That’s important. Change of mix. But because we’ll get the operational efficiency, we’ll get cost of fund decline and overall, you know, overall benefits of scale. So I think that is what we expect.
Harsh
Okay, yeah, very clear. So with regard to your recovery, you said that Q2 onwards you will start to see recovery. Because you blamed Mfin for Q1 FY26 Q2 should start to see recovery. But you are also saying credit costs will remain elevated. Can you give us some perspective on what’s happening? Are recoveries expected in Q2 or Q3 onwards. What should one see?
Govind Singh
As you mentioned, whatever NPA we have. Seen in the past, in the last. Year, Q3, Q4 and again in Q1. So incremental provisioning would be required to be done. So even when the incremental slippages is on the lower side, we’ll have to provide for NPA which is not being collected. So that’s why there will be some. Lag in terms of NPA gross slippages and in actual credit cost in the quarter.
Harsh
So despite the recovery, you will still see a larger credit cost overall and therefore a credit cost will largely remain flat in Q2. Is that right understanding and the right way to look at it?
Govind Singh
Yeah. Yes. Yes, that’s right.
Harsh
Understood. Thank you so much. That’s all for me.
Govind Singh
Thank you.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Renish Bhuva
Yeah, thank you everyone. Thanks a lot for joining our investors call. And we have clearly mentioned currently, yes there is a stress in JLG portfolio which we are working on and we are confident that it’s a matter of few months from where things should become certainly much better from where we are today and our all other verticals including the non JLG part and the liability part working really well. We are seeing a good traction in terms of operational efficiency. Part is concerned cost of funds are coming down. So I think overall while currently it might be a stress scenario but if you look at the medium term horizon, I think we should be able to do much better on all counts in terms of all the KPIs, all the parameters.
We expect to do much better. So again, once again thank you very much for joining the CALL and NHN team. Thank you very much for hosting us. Thanks a lot.
operator
On behalf of ICICI Securities Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your line.