Utkarsh Small Finance Bank Limited (NSE: UTKARSHBNK) Q3 2026 Earnings Call dated Feb. 02, 2026
Corporate Participants:
Govind Singh — Managing Director & Chief Executive Officer
Analysts:
Deepak Podar — Analyst
Mr. Chintan Shah — Analyst
Avnish Tiwari — Analyst
Sagar — Analyst
Shreya Chatterje — Analyst
Bhumin Shah — Analyst
Ashlesh Sonje — Analyst
Avnish Tiwari — Analyst
Presentation:
operator
Ladies and gentlemen, you are connected to Utka small Finance Bank Q3FY26 earnings conference call. Please stay connected. The call will begin shortly. Ladies and gentlemen, you are connected to Utkar Small Finance Bank Q3FY26 earning conference call. Please stay connected. The call will begin shortly. Foreign. Ladies and gentlemen, good day and welcome to Utkar small Finance Bank Q3FY26 earnings conference call. 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 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. Chintan Shah from Mycici Securities Limited. Thank you. And over to you sir.
Mr. Chintan Shah — Analyst
Yeah. Thank you Rudra. Good evening everyone and welcome to the Q3FY26 results conference call of Utkarsh Small Finance Bank. I would like to thank the management for giving us the opportunity to host their call. From the management side we have Mr. Govind Singh, Managing Director and CEO. Mr. Sadhgumar Praveen Samaria, Chief Financial Officer. Mr. Amit Acharya, Chief Risk Officer. Mr. Virendal Sharma, Head Micro Banking and Mr. Sourabh Ghosh, Head Consumer Banking. So now without further ado, I would like to hand over the floor to the MD sir for his opening remarks. Post which we can open the floor for questions.
Thank you. And over to you sir.
Govind Singh — Managing Director & Chief Executive Officer
Yeah. Thank you Chintan. Thanks a lot. So good evening to all of you and thank you very much for taking time to join us for our quarter three FY26 earnings call. The third quarter of FY26 has been a period of recalibration, resilience and cautious optimism. The operating environment continues to evolve shaped by regulatory transition under MFIN Guardrail 2.0 and the lingering effects of legacy stress. While these dynamics have presented near term challenges, they have also reinforced the importance of discipline, diversification and forward looking transformation. In our business model. We are navigating through a landscape that demands agility.
The regulatory recalibration introduced particularly the borrower level leverage restriction have reshaped the microfinance ecosystem. These changes, while designed to foster long term resilience, have temporarily slowed recovery sentiment and kept overdue accounts elevated. Yet, as we have consistently emphasized, our strategy is not about chasing short term growth at the expense of stability. It is about building a fundamentally stronger institution, one that can withstand cycles, deliver sustainable returns and create enduring value for all the stakeholders. Our approach this quarter has been deliberate. We have chosen stability over speed, quality over quantity and resilience over short term expansion.
The same is reflected in the contraction of our JLG portfolio which declined by approximately 16% during the quarter. While this has contributed to 3.9% year on year reduction in our overall gross loan book, it is a conscious recalibration designed to strengthen collections, moderate risk and lay the foundation for sustainable growth. At the same time, we are encouraged to buy strong performance of our micro banking business loans. MBPL portfolio, which grew by 80% year on year and 38% quarter on quarter now represents 19% of our micro banking loan book. This segment, targeted at graduating JNG customers with proven repayment discipline, has demonstrated superior research quality and collection efficiency.
With penetrance still below 10%, we see significant headroom for expansion and we expect MBBL to become a cornerstone of our micro banking strategy in the years ahead. Operational discipline has been reinforced through several initiatives. We have expanded our collection workforce for JLG and MBBL business to nearly 1300 as on December 25, operationalized a centralized call center for overdue accounts and split larger micro banking consists to improve oversight. These measures are structural interventions designed to embed resilience at the grassroots level. Training program for new frontline staff focused on core processes such as central meetings and customer onboarding are ensuring that execution remains consistent and robust reflecting our improved X bucket collection efficiency of 98.1% in Quarter 3 FY26.
Beyond microfinance, our non JLG lending business have maintained healthy Momentum growing by 28% year on year and 8% quarter on quarter. MSME loans expanded by 24% year on year to rupees 4 to 75 crore supported by our newly started micro Lab segment with disbursement yield of around 18%. Housing loans grew by 13% year on year to 965 crore while our BBG business banking group portfolio, fully secured against imbol collateral grew by 22% year on year. These segments not only diversify our portfolio but also deliver attractive yields reinforce our pivot towards secured assets. In the CE and CV segment.
The loan book contracted by 3% year on year to 1102 crore. However, disbursement yield improved by over 30 basis points rising from 12.5% in quarter 3 FY25 to 12.8%, 12.5% in quarter 3FY25 to 12.8% in quarter 3 FY26. Notably, the share of used vehicle dis in disbursement increased to 35 to around 35% in quarter three FY26 from less than 15% a year ago reflecting our overall strategic pivot towards more resilient and asset classes. This diversification is not incidental, it is intentional. Our JLG exposure has been consciously moderated to around 33% and including BC JLG around 35% of the gross loan book as on December 25th down from nearly 88% and including BC JLG 90% in March 20th.
Secured lending now comprises 50 50% of our overall loan book up from 41% a year ago. This structural shift will eventually lead to a fundamentally stronger bank with less cyclic faculty in credit cost and multiple avenues for growth beyond JLG loans. We are seeing healthy traction on credit on cross sell on both sides asset products I.e. mSME housing and microlab through our liability focused general banking branches and deposit account for our asset customer essentially more product per customer. This multi product engagement is enhancing customer stickiness and improving wallet share with healthier diversified portfolio and improve underwriting standards.
The bank is getting resilient and is not poised for a is now poised for a better trajectory for the period coming ahead through a more disciplined lending approach. We are already focusing on streamlining the portfolio growth on the liability front we delivered 5% year on year growth in the total deposits driven by strong traction in retail term deposit which grew by 24% year on year and 3% quarter on quarter. Our CASA deposits increased by 16% year on year and 3% Quarter on Quarter resulting in an improved CASA plus RTT ratio of 82% as on December 25th from 70% as of December 24th reflecting our conscious effort to reduce reliance on bulk deposits and build a granular low cost deposit franchise.
CASA ratio has improved to around 22% as on December 25 in line with RBI repo rate cuts. We have trimmed interest rates for savings as well as for term deposit across various buckets in a phased manner ensuring a balanced approach to market competeness, cost of fund optimization and overall margin stability. These calibrated actions have driven a gradual reduction in our overall cost of funds by around 20 basis points quarter one and quarter from 8.3% in quarter two FY26 to 8.1% in quarter three FY26 and it is expected to reduce further as repricing takes effect. The bank continue to deepen its liability franchise through focused product segmentation and targeted customer outreach, driving penetration in newer innovative offerings.
The quarter also marks the launch of NIR Services which has delivered encouraging traction within its first month. Alongside product expansion, the bank enhanced service excellence by strengthening digital capabilities to elevate customer experience. The overall strategy remains centered on improving the quality of account sourcing with stronger emphasis on value led acquisition and greater product penetration per customer. We are consistently aligning deposit growth with disbursement pace, ensuring that liquidity remains prudent and sustainable deposit growth to accelerate in line with revival in disbursement which has shown a significant meaningful improvement in quarter three FY26. This pickup in disbursement expected to improve the portfolio base in the coming quarter.
Visa vis supporting the stronger deposit trajectory. Our CD ratio declined to 79% as on December 25 which against 92% as on December 24. We ended the quarter with surplus liquidity of approximately 4,700 crore which is higher than our usual liquidity requirement and LCR ratio of 207%. In terms of risk diversification, we registered with CGFMU for credit guarantee coverage on our eligible JLG and MBBL portfolio with effect from January 17, 2025. Accordingly, incremental GLG and MBBL disbursement from then onwards are getting covered under credit guarantee which will help de risk our exposure and support portfolio stability.
Around 35% of our microfinance book for disbursement till quarter two FY26 is already covered under CGFMU and counting quarter three FY26 disbursement, around 50% of microfinance book is covered. We have tightened underwriting and reduced exposure to riskier segments. MFI stresses moderating aided by calibrated disbursement and improved borrower discipline under new guardrails. Pre qualified loans to existing customers with no delinquencies are streamlining field operations and exploring innovations across products like unsecured business loans, individual loans etc will enable us to gain a higher volunteer of our existing customer with strong repayment track record while preserving credit discipline and robust risk management.
Asset quality remains a critical focus we believe. Stress has treats x bucket collection deficiency in the JLG Segment improved to 19.5% in the month of December 25th up from 98.7% in the month of September 25th, the highest in 3/4 of FY26. Fresh NPS slippages has reduced significantly significantly during quarter 3 FY26 as compared to quarter 3 FY25. These green shoots are indicating that our corrective merge actions are beginning to take hold. Overall SMA pool have also reduced in quarter three FY26. We acknowledge however that legacy stress remains and it is still to be to be provided for.
This has kept credit cost elevated and weight and weight on near term profitability resulting in a net loss of 375 crore for the quarter. However, we see that fresh NPA accretion are declining meaningfully for the few months with asset quality improving further from quarter four onwards as a consequence of these measures. Despite the losses, our capital deficit ratio remains strong at 20.1% as on December 31, 2025 comfortably above the regulatory thresholds. The successful rights issue of 950 crore in November 25 has further strengthened our Tier 1 capital base to meet our future capital requirements, underscoring investor confidence in our long term strategy during the quarter.
The filing of petition with NCLT is completed on December 26, 2025 for approval of scheme of amalgamation of holding company into the bank that is reverse merger. The first hearing has happened on January 15, 2026 and the order is awaited. Our Uthkas 2.0 technology transformation project is already delivering benefits in automation, productivity and risk control. Digital underwriting is helping us avoid lending to over leveraged borrowers while 360 degree control parameter mapping is strengthening monitoring across the credit cycle. These initiatives are not just about efficiency, they are about future readiness. We also recognize the importance of our people.
During the quarter we incurred a one time impact of 9 crore due to new labor law codes, LTIPS and ESOP grant etc pertaining to employee benefits obligations. While this has waived on near term profitability, it reflects our commitment to compliance and employee welfare training programs. Productivity initiative and organizational agility remain central to our transformation journey. Looking ahead, FY26 is shaping up to be a year of strategy calibration recalibration. We are prioritizing operational efficiency, disciplined execution and organizational agility for the next two to three years. The bank targets loan book growth of 25 to 30% with a well diversified portfolio with secured lending comprising more than 50% by the end of FY25.
We aim to maintain a name of around 8.5% and deliver a ROE of around about 115%. As mentioned in the previous calls, also supported by Efficient Operations and moderate growth with sectoral headwinds and regulatory transitions may continue to influence near term performance. We remain confident in the resilience of our franchise and the strategic direction we have charted for FY27 and 28. In conclusion, quarter three, FY26 has been a quarter of challenges but also a progress. We have moderated risks, strengthened collections, diversified portfolios and reinforce our capital base. We’re building a bank that is resilient, disciplined and future ready.
The trajectory we are shaping is one of the sustainable growth and long term value creation. We thank you for your continued confidence and support. With this, let us move to question and answer session. Thank you for patience listening.
Questions and Answers:
operator
Thank you very much. We’ll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the attached tone 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’ll wait for a moment while the question queue assembles. Our first question is from the line of Deepak Podar from Sapphire Capital. Please go ahead.
Deepak Podar
Yeah, I’m audible sir.
Govind Singh
Yes, yes you are audible. Please go ahead.
Deepak Podar
Yeah, thank you very much for this opportunity, sir. So just wanted to understand now on the credit cost. I mean you mentioned though near term challenges are there but over the period you expect improvement and even the stress in MFI book is reducing. So what’s the steady state credit cost we are looking at and how should the credit cost trajectory we look at in coming quarters in fourth quarter and in FY27.
Govind Singh
Yeah, hi, this is Junior CFO FY27 and even FY28. I guess we are looking at around three to three and a half percent credit cost because we will have GNP, NNP ports at a tolerable level. 28 certainly will be under 2.5% of credit cost. This is part of the, you know, measure that led us to believe that with the pen going behind us be lag on the back of the.
Mr. Chintan Shah
Sorry to interrupt you sir, but there seems a lot of disturbance in the background.
Govind Singh
Let me repeat that. Hello.
Mr. Chintan Shah
Yeah, please repeat.
Govind Singh
Yeah, Sir. Yeah, I was saying we are looking at a credit cost of three to three and a half percent for the coming year. And FY28 2.5%. Yes, that. And what about ROE and ROAS for both of this year?
Mr. Chintan Shah
I guess we would. As we mentioned, you know Govindji mentioned that for 28 it’s something that we are mentioned the guidance of ROE of around 15%. And that could be again it’s a two year guy, you know, 28 guidance and ROA for around 1.75%.
Deepak Podar
So at 15% ROE you are looking at ROA of 1.75% rate.
Govind Singh
That’s right.
Deepak Podar
And what about next year? FY27.
Govind Singh
FY27 could be around 10ish. That’s the, you know, number we’re looking at which is roe.
Deepak Podar
No, so I missed that number.
Govind Singh
10. 10. 10% roe. 10% roe. Okay. Okay. So gradual improvement will be As I said, 20 will be the back to normal years. 28 is the normal year that we are looking at. Right. 27 also we are looking for profitability in 27 itself. The trajectory will go back to profitability of good old days at 24 in 28.
Deepak Podar
Understood? Sure, sure. I think that would be from my side all the way. Best. Thank you.
Govind Singh
Yeah, thank you.
operator
Thank you. Our next question comes from the line of Avnish Tiwari from Vikarya Change llp. Please go ahead.
Avnish Tiwari
I can you articulate the level of 21? You will be comfortable before you come for next capital raise. And right now it’s like 17.1. I saw from your.
Govind Singh
No, it’s 20.1.
Avnish Tiwari
The currently our capital is 20.1 is 17.1.
Govind Singh
That’s right.
Avnish Tiwari
I’m actually focusing on Tire 1. It’s 17.1. So until what level you can go as you will grow, you consume capital. So till what level you can go before you have to raise capital again.
Govind Singh
I think at least for next 12 months we don’t have to go to market, you know, for capital. This will be because you know, I mean as you mentioned, worst is over. We’ll, you know, back in the trajectory of profitability next quarter. Next, I mean quarter one of next year. So capital, you know, some, some support for capital will come from there. So our, our estimate is that for next 12 months we may not, we need not go to market for capital.
Avnish Tiwari
And do you have in your modeling like what the minimum it will reach before it, like what’s the lowest it will go this tier one in your planning cycle? 12 months, you don’t need to raise capital but if you grow you will consume some capital, right?
Govind Singh
Yeah. Typically you know this overall we will be in the range of 17 to 17.5% from this 20. I mean that is, we don’t want to go below that. And I mean though we don’t have any specific number for quarter one. Sorry, tier one, but around 15% of tier one. Around 17.5% of overall capital. That is what we intend to be, you know, do not go below that level.
Avnish Tiwari
Great. And this tier one of 200433 versus your net worth. If I look at your balance sheet, what explains the difference? If you can give me broad high level idea what items creates that difference.
Govind Singh
Yeah, but I guess the network that you are looking maybe from the financial is the net worth. That is RBI computed. You know there are risk weightage and haircuts out there. The book net worth is 3000 crores as we speak.
Avnish Tiwari
Correct. So what are the three major haircuts which is for the RBI calculation accounts.
Govind Singh
That’s basically risk weightage by products. That goes. There is a formula for each product, you know and that becomes the reason for haircut. That’s the CRRR computation by RBI. Generally you would have around say 70, 80% of the network which will be equal to CRR network.
Avnish Tiwari
Got it. Now coming to this component. So last quarter you had about 426 crore of slippages and your collection efficiencies have materially improved for you. So what is the kind of monthly run rate you are currently running at this 19 and a half collection efficiency. But you do have an SMA pool which is about 240 crores. So how much is a monthly you are experiencing in December or in January, whichever data you have.
Govind Singh
So there has been a significant change and I mean positive change. I mean October was little, you know, tough month for us and we saw, I mean it was almost the similar level of quarter two, the efficiency. But from November onwards we have seen a significant improvement in you know, what we call x bucket or zero DPD. So it has not been below 99.5% in any of these months, say November, December. I mean that is a range, it is above 99.5% overall. So we have seen a good improvement. And in fact this, this quarter, you know the, I mean some of the negative impact in terms of stress level or in terms of provisioning or in terms of profitability.
Some impact got, I mean higher impact got because of the October where there are series of holidays and you know the collection got little impacted for that particular month because of, you know, you are aware that three large festivals are there during that period. So that explains the reason for, you know, you can say little poor October for us. But if you look beyond that in terms of overall collections, in terms of disbursement, in terms of expert collection, I think on all parameters things have improved significantly. As I mentioned, it has not been below 19.5% in any of the.
You know, any of the periods after that. And in fact January has been even better than that. So we are expecting that we are almost, you know at the normal level of 99.6% plus right now and which continues to be there.
Avnish Tiwari
Got it. And do you have number like monthly basis. Sorry, go on.
Govind Singh
And obviously the slippages, you know also come down because of that. You know some of the numbers. If I look at, you know JLG October slippage is 1 to 90 worth around 370 or 8 crore. By January it has come down to 160 crore. You can imagine the. You know, the. The. The numbers have really significantly come down. So that is a change on consistent basis.
Avnish Tiwari
This is a JLV1 to 90 pool you just mentioned.
Govind Singh
Yeah. JLG1 to 94. Yeah.
Avnish Tiwari
Okay. So significantly reduced between the crore.
Govind Singh
Significantly, significantly. You know, even 1 to 30. Because October we had a challenge. It was almost 170 crore. Nowadays below 50 crore actually. So. And normal course may, you know, 50 crore. You know, you are able to manage on your day to day operations. Also this is. I can use the word near normal as far as the stress level in JLG is concerned.
Avnish Tiwari
Got it. So only the thing you have to take care of is the existing SMA pool and existing and net NPA which you need to provide net NP have.
Govind Singh
Taken care of that. Wherever there has been partial provision. I said that is what. Because these are almost normal numbers for. I mean for any microphone institution or any SMB. Yes, but we need to take care of where also we are. We are you know, finding improvements. But yes, that is. You are absolutely right.
Avnish Tiwari
Okay. You also did this ARC sale of two accounts. Can you explain what are they? They are like which full stake will belong to.
Govind Singh
Sorry. This quarter are you able to see any ARC sales because.
Avnish Tiwari
No, no. Nine months only. I saw. So maybe this is.
Govind Singh
Yeah, nine months is there. It was done in the previous quarter. There’s an 11 crore of income on other side other income line which is in realization from sale of abnormal security.
Avnish Tiwari
Right, right. These were like which segments these accounts belong to. Were they retail, wholesale? It was one of the NBFC portfolio, AVM Housing finance. So that was one case and that is where we did one ercc. And in the current book you have on this NBSC portfolio, what are your observations in terms of any account which is in the. In the monitoring phase or anything?
Govind Singh
No, our power one is zero forever. NBFC book. Entire book is on zero power Power one, I’m talking par one, not any that part. So there’s not been single day par in any of my NBFC book today.
Avnish Tiwari
And is there any rating change in any of these NBSCs?
Govind Singh
It keeps on changing. Let me say negative side, not the positive side. So there has been one case of. There is one NBFC where they have been downgraded to double B. And except that if you will see by choice we do not, you know increase much of the NBFC portfolio and we are maintaining below 8% foreign for last more than 12 months the entire portfolio and our portfolio the close to 70% is up to rating A and above. Companies only got it. Which NBFC was there to show downgrade to triple V. True cap was the company.
Avnish Tiwari
Thank you, very helpful and wish you really best.
Govind Singh
Yeah, thank you.
Mr. Chintan Shah
Thank you, thank you.
operator
Our next question comes from the line of saga from Spark Capital. Please go ahead.
Sagar
Yeah, thank you so much for the opportunity. And now I have some few questions. Sir, my first questions was related to our deposit growth. Actually in this quarter. Our deposit growth sequentially has actually been declined. So what are the reasons for the same. May I know actually, is this a very low sequential growth? That was my first, that was my first question.
Govind Singh
Yeah. So normally in deposit growth, you know, as I mentioned in my initial speech also we, because you know there had been less deployment of money because of, you know, degrowth of microflance. Our fund requirement was very, very low. And what we did, you know, we have, you can say restructured the whole liability business in sense. There are more than 2,000 crore of institutional term deposit. We have repaid and we have not renewed those cases. Whereas our retail term deposit in CASA has gone up, you know, by, by almost same amount. So the idea was not to increase because as I mentioned we are Almost more than 4,500 is my liquidity cash, you know, as on the 30th of December.
So we don’t want to increase our deposit base but we are changing the mix of deposit from institutional to retail. In fact that is what we have done during this period.
Sagar
But sir, you have borrowed more 400 crores in the quarter sequentially. If you see, I understand that because of the lack of asset growth, the deposit growth is very epic. I understand that. Then what was the need for increased incremental borrowing sequentially? Actually over 400 crores. 424, 114.
Govind Singh
I’ll just check. But this must be, you know, some treasury transactions, you know, for maybe on the balance sheet date but otherwise we are not into borrowing at all. I mean there must be some transaction done by treasury for, you know, some, you can say some counter transaction, maybe give me a few minutes, I think I’ll be able to respond to that also. But we are not into borrowing at all. In fact, not today. For few years now we have not borrowed anything the market it might be some transaction, you know, violated transition on those one or two days.
You know, that is the only reason might have one day or two days. But otherwise you don’t require this at all because.
Sagar
Okay, I got your point in that you can give the clarity later actually because that will be however that will have a negative bearing on the cost of funds. And that was my concern. Now my second question is what is the JNP and PCR or on our JLG and our CV portfolio.
Govind Singh
Yeah. So on JLG portfolio our overall PCR stands around 68.5%. And on TBC portfolio the PCR is around 34% being the secured portfolio. So that is how it is. Okay, so the SMA, the NPA of 24, 5%. So we have provided around 68% of the assets. Right? 68% of the assets. So in the, for in the next few quarters are we, are we looking to provide 100% of that?
Sagar
Yeah. So see we, we have the policy where once the on jlg, especially once the account turns into npa we provide provides higher than the prescribed norms as per IRAC and we have been following this for years. So as per those norms a little higher provisioning we already do as per the IRAC norms and we follow that and we’ll keep on increasing or you know, every quarter when the bucket movement happens the 15 gets added in the each of the buckets. So that is how the provisioning will keep on increasing.
Govind Singh
And you write off after every. After 365 days, correct? Yeah. Okay. For 365 days. You’re right. Okay. So it had in the, in the, in the micro banking portfolio, what is the exposure of Utskarsh plus three lenders right now what is portion? What is the percentage of the assets. Plus three lenders? We are more than three lenders is close to 7% now in our own portfolio. So out of 6,046 crores, so around 7% is at Utka plus three. So around 423 crores, right? Yeah. Yeah.
Sagar
Okay. So and what is the asset quality on that means how does the MOOC shaping in that front? Sir, can you provide a color so.
Govind Singh
One plus is 25 close to 25%. No, no. What was happening one year back December. It was 2525 which has come down to 7%. Yeah, it has come down to 7% now.
Sagar
Okay. And in the other unsecured retail lending your actually incremental debt increment singer decline year and year. If you talk of CE and CV portfolio from 1:7 it has come down to 57. From housing it is from 1:02 till this come down to 78 and around for for MSME it has also relatively coming down and but as. As compared to micro banking it is actually it has been almost 2.4 in the disbursement growth. I’m saying like business loans and JLG obviously the disperse ones have been coming down. So your other retail lending is also actually not.
Is not going right now. So when you talk of ROE of 10 for FY27 and 15 for FY28 which is in line with some good banks. So which segments actually are you are exactly going to help you in that. In that metric. And related to that question what is the. How is the title underwriting is going to shape and what how is that helped you actually in the other segment and how it is going to help in the future.
Govind Singh
So in. In terms of product. You know so yes, I mean when. I mean there is a big focus on the collections and JLG in the interim period now we are seeing a good traction as far as the non JSG disbursement is also concerned. It is improving month on month basis. I mean I mean just broad numbers. Obviously we can. We don’t have detailed number but if you look at you know when we talk of October last year we have around 800 code disbursement but by November we have around thousand code. It’s a. It’s a mix of all these things.
11 code in the month of December and you know January had been more than 1200 codes. So there is a. Now I think we are back on the track as far as the disbursement and we are seeing a month on month increase. That is one part. Second part is that you know the lab lab in various form has been our key product. Like we mentioned small lab. I mean lab. When I say micro lab it is around you know where the Sweet spot is 8 to 10 lakh type of cases. So that is what we have been doing.
We have started the goal besides the lab in form of msme, HL Retail Lab and even the. When I talk about BBG this is Also lab code product. So LAPP is certainly going to be a you know large product from UDGAR side going forward also. And the growth because these products are having a very low base right now and we expect that we will be you know growing much, much faster than even the JLG and micro banking type of you know books. Those are with us so largely laps driven by you know in various things.
You know as I mentioned Microlab and other things is what we’re focusing upon. Besides obviously we’ll we have a belief in you know micro banking part also largely from starting with JLG and then going to individual lending also.
Sagar
Okay. So in our housing of 965 crores outstanding portfolio, how much is affordable housing? Sir?
Govind Singh
Should be the, you know we are present right now more than 80 centers and the majority of them are covered under Tire 2 Tire 3 centers. So if what we call affordable housing is up to 25 lakhs or 30 lakhs of the loan amount and that should constitute around 30%.
Sagar
30%. Okay. And one, you didn’t answer one question sir. What is the GNP of our CNCV loan? Sir, you mentioned about PCR.
Govind Singh
Yeah.
Sagar
As on December it was 12 point. I think 12.2% was the gross NPA as on December 1. Commercial equipment and commercial vehicle loans putting together.
Govind Singh
Yeah.
Sagar
So are we drawing, are we running down that portfolio sir? Because it is also from compared to 25, 9 month FY26 is down also by around more than 10%.
Govind Singh
Yes. So what we have done, you know we are not growing that group right now and we have done a few changes in the underwriting, underwriting and process part and we are seeing that the portfolio that we have created during last maybe for 12 to 15 months it is behaving properly. Their old portfolio where we had done a lot of changes. So and that’s why growth may not be there because you know whatever are the collections we are trying to keep with dispersion within that level only we have done quite a number of including the, you know we are doing lower ticket and higher yield second vehicles also in the same segment we have stopped some of the geographies where we are finding it.
You know the, the delinquency higher and we are seeing good results for this and I mean our expectation is next one quarter or so we should see the decline, start decline of stress level or the NP level for wheels also especially as I mentioned whatever new portfolios have created during last three odd months it is behaving very well. This is the Older portfolio where we. In which we have made a lot of changes. Now we have created a separate team to take care of that also. In fact after jlg, I mean this is one segment where we had little challenges which we are addressing right now.
And we are seeing a good traction for few months in that also.
Sagar
And this is a completely secured portfolio.
Govind Singh
Yeah.
Sagar
Against the hypothecation of the vehicle. So asset Bank Finance. Okay. Okay, fine sir, I’ll now have some few questions. I’ll take it offline sir. Thanks so much.
Govind Singh
Thank you. Thank you.
operator
Thank you. Our next question comes from the line of Shreya Chatterjee from Ageless Capital Finance. Please go ahead.
Shreya Chatterje
Thank you sir for taking my question. I have two questions. One is regarding your cost to income ratio. Where do you see it going forward in FY27 and FY28? And what will be the share of your JLG versus non JLG portfolio in FY27 and 28?
Govind Singh
I’ll take this. Yeah. So cost to income ratio you would. Obviously since you asked for 2728 you must certainly understand that the income, the denominator given the slippages is low and appears high. We are looking at a cost to income ratio somewhere around 75% kind of, you know which is 110 today bringing it down to say 57% in FY28. So trajectory will come down from 110 to say 6,575 to 57 in FY28. We are looking at doing the same, you know, at the same cost. Higher top line. We’re not interesting in this. We are not going to anything in extension in terms of branches.
So it’s productivity and at the same cost, higher disbursement and lower cost that we’ll just see as you know the cost to income ratio coming down.
Shreya Chatterje
So more branches would be added. Sorry, no branches would be added Just for productivity going up. Yeah.
Govind Singh
Just to add that, you know during since 21 after Covid we had opened quite a number of branches. Currently we have more than 1100 branches across the country. 331 we have general banking branches around 770 plus branches which are the micro banking branches. So we have enough network of branches in 27 states and UT and many of the product line and in fact we don’t intend to go for new product lines also through branches because we have enough number of product lines. So our idea is, and that is what you know we have been discussing that we will not add branches right now other Than in case we have to split some branches.
We are a large branch of micro banking. Otherwise we don’t intend to open new branches. And most of the, you know we’ll have limited number of branches where we are operating for our MSME or HAL or for wheels. And those businesses, wherever we have to expand we’ll try to open, you know we add those locations from the existing branches for those businesses also. So that is the idea. We understand that this will, you know will be able to get us big cost optimization also because I don’t have to open, I don’t have any additional cost other than the manpower cost for opening new locations for my existing businesses.
So that is what we expect. You know, once my cost of funds comes down in next two years time also my cost of operations will come down through this strategy. That is what we are you know working on right now.
Shreya Chatterje
Yeah.
Govind Singh
To your second question. GLG I think should be around 30% of the portfolio as we go along. Somewhere around 30 or mid 25 to 30 only the JLG portfolio.
Shreya Chatterje
And so what about the NIEMS going forward since you are increasing the share of retail deposits and CASA deposits. How do you see the NIM going forward in FY27 and 28?
Govind Singh
So 20 we have indicated around 8 and a half percent type of name as I mentioned because our cost of fund is expected to go down from here and we have already seen a little reduction and when our fixed deposit also had repriced this will further go down. So that is one part and as I mentioned the operational efficiency on multiple counts because we launched Our Transformation Project 2.0 where a lot of things getting automated and we’ll get benefits of that. And plus I mentioned we are not going to open branches but do expect that you know 25 to 30% growth of in the balance sheet in next two years time and annual growth in balance sheet.
So without adding much in terms of manpower. In fact even we had enough manpower for middle and senior management at the bank level. Whatever manpower is required will be at the front left front line only. First two levels only. So my cost of funds, cost of fund will come down, my cost of operations will come down and overall efficiency will go up. And that will, you know that will compensate for the, for the differential. So our exponential expectation is in the range of 8.5% or so name if you look at the towards the end of FY28.
Shreya Chatterje
Got it. Thank you.
Govind Singh
Thank you.
operator
Thank you. Our next question comes from the line of Bhumin Shah from Aquarius please go ahead.
Bhumin Shah
Yeah, good evening. So when can we start our gross area growing? Can we expect that in quarter four?
Govind Singh
Can you just repeat. We could not hear properly. Can you repeat the question please?
Bhumin Shah
Yeah. So when can we start seeing the growth in terms of the aum? Can we expect that in a quarter four or quarter one?
Govind Singh
No, no. As far AUM growth is concerned we’ll see from this quarter itself. In fact in January also we have seen a. I mean good growth maybe around close to 250300 crore of of AUM growth. I mean at least on pre write off basis we should see a good growth in the quarter four. Because now our JLG is also growing. I mean because the pain is over. JLG is growing, Microbank is overall growing and other portfolio also growing. So we should expect a good growth in quarter. I mean very difficult to define what is a good growth but we should have, we should have a reasonable growth in quarter four and obviously quarter will be much better from that perspective.
And quarter this growth is expected all segments including the JLG segment where we are you know de growing for many quarters now.
Bhumin Shah
Okay, so are we expecting any lower loss on PVT basis for quarter four or it should be green.
Govind Singh
So quarter four. I mean maybe it is a little too early to talk about the numbers. We do expect that, you know the as I mentioned the provisions are coming down significantly. The portfolio growth is, you know is going to happen. The the balance sheet will grow from here and all the ratios will improve significantly. But what will be the final, you know the number in terms of PBT or pat? I think it’s very difficult to tell today.
Bhumin Shah
Okay. So I’m just asking if it is will be in positive or negative. Can we give color on.
Govind Singh
But it may be difficult today to you know because we are still in the middle of this. Only one month is over. I think two months are there and we are, we are seeing that, you know there should be. The trajectory should be much much better from here onwards. That is what I can tell today.
Bhumin Shah
Sure, sure. Thank you.
operator
Thank you. Our next question comes from the line of Ashleshonji from Kotak securities. Please go ahead.
Ashlesh Sonje
Hi sir. Good evening. Going sir. Firstly a few questions on the MFI portfolio. This 99.6% collection efficiency roughly that you’re running at in January. Do you expect any disruption to that in February or March? That is one. And along with that if you can share the microfinance lippages in the quarter and the PCR for the entire MSI book. Including JLG and individual.
Govind Singh
Okay as far as PCR will I’ll just ask Sadhguru and Amitra but one thing I’m sure at least now you know the way we have seen cycles and we have seen month on month because now we not I mean this may be monthly, you know against demand but we are tracking this on daily basis and our our experience it should not go below 19.5% from now onwards. That is what we can I mean assure all the investors now because we have seen all these things after that. The geographies where we are present and we don’t see any disruption coming in because of the stability of all the activities normally in quarter 4 GFM are normally better ones so we don’t expect any disruption coming on so we are hopeful of quite a stage stable collection efficiencies as also we have a decent attrition is under control and the manpower there so we are hopeful of continuing with the same numbers in that sense and the PCR coverage is close to on the JLG book is close to 68.3.
Ashlesh Sonje
He asked including MBBS so the entire MB book as on December 25 PCR structure 69% yes. And along with that if we can also share microfinance slippages while you do that let me ask one more on the MFI book the disbursements in the JLG book are was still weak in this quarter. Do you expect that also to pick up? And secondly the MBBL portfolio is seeing good disbursements. Do these MFIN government apply to that business as well?
Govind Singh
Your first question no. MBB GLG portfolio will also start seeing a positive turn and that has started happening in this quarter so we will see a book growth over there because that’s what we are looking at number one. So MBBL is a slightly different product where we the guidelines are different and it’s an individual credit assessed program so it is not a program which is governed through that MFI guidelines but more of a credit and business model which is that’s how we assess the customer on a FYR based thing so it doesn’t come under that part of the business.
And just to add in MBBL the credit underwriting is separate from the business and the sourcing team so it is led by a national credit head and the full fledged zonal regional area manager credit manager structure is there for each and every case. The credit guy goes and conducts the personal discussion and assessment of income and expenses and then he does the entire underwriting and the eligibility part also. So it’s very separate from the business.
Ashlesh Sonje
Got it sir. In this staff cost which has been quite high. Do you know that your ex bucket collections and SMA book in microfinance have declined quite materially. Do you expect the staff cost to also decline meaningfully in the next quarter?
Govind Singh
So, so I want to break in two parts. One part is, you know, when I’m talking about my overall cost, this cost has gone down, gone up, you know, in recent past because one, there are some additional cost involved, there are some incentive costs involved, there is a collection cost involved also. And our sense is that, you know, the cost for JLG will not go down. I’m talking employee cost for a simple reason. Because now we have a collection stream. In fact our expectation is that you know, I should be able to, it will stabilize here only but I should be able to get a much better collection because now, you know, one portion is taken.
I mean my normal collection has got stabilized. So we are focusing in through a big way indeed in the write off and NP collections. Power idea is I’ll not try to control cost on the employee for JLG or for mb. Rather I’ll try to get you know, revenue of these, these people which is expected much, much better. You know, in terms of pnl, in terms of overall trajectory, it should good, it should play much better for us. And I mean it’s difficult to talk of numbers only but at my sense is on each month basis my collection from NPA and write off will go up significantly from here.
So my cost of employee may not go down because of that region. And one more thing, what will also happen as well, our portfolio number will grow. As Viren just mentioned, we have seen in the month of January that portfolio has first time actually grown after almost. My sense is almost 12, 13 months gap. So we have started growing that portfolio also.
Ashlesh Sonje
Understood sir. And last question from my side on the liability side, the cost of term deposits which you report for nine months FY26, that is higher than the 1H number. What is the reason for that one. And along with that if you can just give the MSI slippages number please.
Govind Singh
So one of the reason, if you know that we are reducing the institutional side of the borrowing side, they generally are short term at lower fund. Once you reduce that, your coverage of TD becomes retail which comes at a bit higher rate, you know. So that’s long term and that that’s necessary because even when we are moving from unsecured secured from ALM point of View also we need to do more retail and keep that stable. But the impact largely comes because you have drastically or as you know the decline in the institution very significant calibrated thought process because basically this well then pickup will go back to that that.
Ashlesh Sonje
Bucket of lowering but at the moment.
Govind Singh
That’S the reason for the cost being a bit elevated given that the short. Term fund that we have taken also. That we have at the moment stop. Taking you want also you wanted this.
Ashlesh Sonje
Slippage is in micromanage combined JLG plus individual is also if you can share.
Govind Singh
This you need for quarter three.
Ashlesh Sonje
Yes sir.
Govind Singh
Yeah so it was close to 266 crores. No JLG was 272 crores out of 426 crores.
Deepak Podar
That includes individual also.
Govind Singh
Will confirm you I am just not able to figure out.
Ashlesh Sonje
Thank you very much.
Govind Singh
Yeah sure we’ll do that. Yeah thanks. Thank you.
operator
Thank you. Our next question comes from the line of Avish Tiari from Viaria Change llp. Please go ahead.
Avnish Tiwari
Hi in your micro finance NPH how much of power by CB SM and for that do you intend to make some provision or keep it as it is because it’s covered under guarantees.
Govind Singh
So we close to 50% of portfolio is covered under that price now because we started around a year back and within one year my current portfolio and it is for both for JLG as well as for business I mean individual business loans around 50% of portfolio is covered and currently we don’t take any benefit of in terms of you know from the provision angle we may provisioning as as there is no provision there is no cover coverage at all and we are not taking any benefit of that so and that we continue to you know that is all you can say use as our policy will not take advantage of that whenever you know something happens we’ll have to look at that part but currently we are not taking any benefit of that.
Avnish Tiwari
The 50% of your book is what was the 751cr how much of them how much of those are covered by.
Govind Singh
There may not be any significant number. I don’t have the exact number right now but I can share separately also you can message us will separately share because you know our most of our NPR for the for you know for for from the legacy book. So in our new book anyway NPA levels are very very low and we are seeing those and if you look at mob 891011 we obviously there will be some NP but then B numbers are very low. These are most of the our you know NPAs are from the legacy book but I don’t the exact breakup right now in front of me.
Avnish Tiwari
Okay.
operator
Sorry to interrupt you sir but if you have a follow up question please. Ladies and gentlemen, as there are no further questions I would now like to hand the conference over to the management for closing comments.
Govind Singh
Thanks Chilton. And thanks everyone for joining this call. And as I mentioned, you know we are in the right trajectory right now. We have seen good traction, good growth. In all aspects, in all parameters and that is what is expected to continue from here in terms of disbursement, in terms of bringing cost of fund down from bringing cost of operations down and growing our conventional joint JSG book as well as the new book that we have started. So that is what we’re expecting and that is how we have seen January month also. So this trajectory will continue. And thanks very much for your this patient’s listening, this interaction as well as for your support. So look forward. Yeah. Thank you very much.
operator
Thank you on behalf of ICICI Securities Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.