Operator: Ladies and gentlemen, good evening and welcome to the City Union Bank Limited Q2 FY27 earnings conference call, hosted by Ambit Capital Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please know that this call is being recorded. I now hand the conference over to Jignesh Shial from Ambit Capital. Thank you, and over to you.
Jignesh Shial: Yeah. Thank you, Yashashwi, and good evening, everyone. On behalf of Ambit Capital, I welcome you all to Q2 FY27 earnings call of City Union Bank. We have along with us R. Vijay Anandh, MD and CEO, V. Ramesh, Executive Director, and J. Sadagopan, CFO. We are thankful to the management for providing us with the opportunity. I would now hand over the call to R. Vijay Anandh, MD and CEO of City Union Bank, for his opening remarks. Over to you, sir.
R. Vijay Anandh: Thanks, Jignesh. Good evening, everyone. Heartily welcome to all of you for this con call to discuss the unaudited financial results of City Union Bank for Q2 H1 FY27. The board approved the results today, and I hope you all have received the copies of results and the presentation. Our bank has crossed the milestone of INR 150,000 crores in total business during the current quarter. We had crossed INR 120,000 crore in Q2 FY26, coinciding with the celebration of our bank's 120th year in last year, and we had reached this figure in the span of four quarters. During last con call, we had shared with you our expectations for the current financial year as below. We are very conscious with improving our credit growth through secured lending while venturing into other avenues to achieve the credit growth of 23% above the industry.
R. Vijay Anandh: Our deposit growth is aligning with the credit growth, which is helping us to maintain the desired CD ratios. Expecting the NIM to hover around 3.7% to 3.75%. ROA is expected to remain at our current level of 1.55% plus. Our PAT growth will continue with business growth and better asset quality. For the current quarter, public half yearly year ended, our performance is in tune with our expectations and probably in some parameters we have exceeded our expectations as well. We had registered 26% advance growth in Q2 FY27 year on year, and our advance have increased to INR 72,442 crores from INR 57,561 crores in Q2 FY26. The positive momentum in growth achieved during the start of FY24, 2025 had geared up, and we had achieved double-digit growth in all the 4 quarters of FY25, and also up to H1 FY26.
R. Vijay Anandh: In this Q2 alone, our advances had grown by over INR 4,800 crores, which is over 7% in a single quarter. We have achieved 25% credit growth for the last 3 quarters consecutively. Our core strength, MSME, has increased by INR 2,600 crores, that is from INR 40,262 crores to INR 42,862 crores. And the new segment, secured retail loans, increased by INR 1,134 crores, that is from INR 6,668 crores to INR 7,802 crores.
R. Vijay Anandh: The gold loan has also increased by INR 1,062 crores during the quarter, from INR 20,715 crores to INR 21,777 crores. We have been coming across various news reports regarding the gold loans and various practices adopted. Hence, we would like to spend 2, 3 minutes on this to cover elaborately on such practices adopted by our bank, particularly on delinquency and LTV norms. Jewel loans are secured lending products, which is serving both agri and non-agri financing needs.
R. Vijay Anandh: Agri loan, which is income generation classification, requires appropriate evidence of eligible underlying activity, while non-agricultural lending is completely a consumption purpose, which requires suitable purpose of end use. Bank prioritizes to maintain clear agri and non-agri based on the purpose of the loan, documents evidencing the proof, proper credit assessments, and end-use control. This is aligned with regulators RBI's revised Lending Against Gold and Silver Collateral Directions, effective 1 April 2026. In terms of LTV, under the RBI's harmonized directions applicable to banks from 1 April 2026, the earlier uniform 75% LTV cap has been replaced with a structure based on the loan amount and consumption loans. That is, loan amount up to INR 2.5 lakhs, we can go up to 85% LTV, INR 2.5 to 5 it's 80%, above INR 5 lakhs is 75%.
R. Vijay Anandh: Please note, these are only maximum regulatory limits for consumption loans under the harmonized directions and not recommended lending targets. Generally, consumption loans are considered with the LTV range of 60% to 65% at the time of onboarding. Though the permitted LTV is on the higher side and the daily LTV will be calculated on the last 30 days average gold rate of India Bullion and Jewellers Association. While calculating the LTV on day-to-day basis, the entire interest payable over the loan tenure up to the maturity to be considered upfront, along with outstanding value of the account. Prior to the new regulatory guidelines, which is applicable from 1 April, the consumption loan will be classified as an NPA if the account reaches the threshold limit of 75%.
R. Vijay Anandh: However, as for the current regulation, when the LTV has breached the regulatory requirement, the bank has introduced the SMA flagging of accounts and the event of the breach of the prescribed LTV, the account will be classified as an NPA on 91st day. Generally, we keep 5% cushion for the margin call. That is 70% for the customers, exposures above INR 5 lakhs for the maturity balance above INR 5 lakhs, 75% for the maturity balance from INR 2.5 lakhs to INR 5 lakhs, and 80% for INR 2.5 lakhs. As discussed, whenever the LTV has crossed, the entire list of accounts will be coming under the exceptional item of the trial balance of the branches concerned for necessary follow-up. The customer is contacted for margin calls, notices are sent, interest payment, and for loan closures.
R. Vijay Anandh: If the shortfall persists beyond the SMA periods, the account will be classified as an NPA and bank will go for recovery process. Renewals are permitted only under a disciplined framework. The existing loan must be standard accounts and not in SMA accounts. Renewals are allowed only within the available LTV headroom. The bank currently is not considering any top-up loans.
R. Vijay Anandh: As of 13 September 2026, the outstanding SMA accounts under the gold loan portfolio is around INR 173 crores, representing 0.24% of the gold advances. The gross NPA stood at INR 9.5 crores. Since the percentage is immaterial, I have not given in the percentage. The gross NPA is around INR 9.5 crores. Out of INR 9.5 crores, the moment it became NPA, the auction has gone only for INR 20 lakhs. This means out of INR 9.5 crores, all the amounts have been repaid and only INR 20 lakhs out of the INR 20,000 crore book have gone for auction.
R. Vijay Anandh: This is primarily possible because we have a robust underwriting process, systems are in place, and LTV is well within the control. Now let's come to deposits. Our deposits have grown by 21% and stood at INR 83,893 crores for Q2 FY27 as compared to INR 69,486 crores in Q2 FY26. Our deposit has increased by INR 4,500 plus crores or 6% growth sequentially. Our average CD ratio for Q2 FY27 stood at 86%. The CASA percentage of the total deposits remained constant at 27% this quarter. During the Q1 earnings call, we had anticipated that the cost of deposits might inch up due to tight liquidity conditions prevailed during June and July. Hence, we guided for the marginal drop in NIM. However, contrary to our expectations, liquidity conditions were eased following the measures taken by government by way of FCNR deposits.
R. Vijay Anandh: We have mobilized an amount of USD 69 million under RBI swap, out of which 15 million from new to bank customers. The entire amount swapped into Indian rupees with RBI and deployed for domestic loans. Asset quality. As we had stated earlier, the trend of recoveries over the slippages is continuing for this quarter as well. We have been continuing this trend for quite a good number of quarters, as you would be aware. For Q2 FY27, the total slippages is INR 175 crores, while the total recoveries for Q2 stood at INR 317 crores, consisting of INR 180 crores from live NPA accounts and INR 137 crores from technically written-off accounts, resulting in negative credit cost.
R. Vijay Anandh: During the quarter, the bank sold accounts to the tune of INR 803 crores, comprising live and technical write-off accounts, against which the provision of INR 792 crores has been done against the INR 803 crores bank account sold to an ARC for a consideration price of INR 131 crores. Our gross NPA percentage has reduced to 1.44% in Q2 FY27 from 1.73% in Q1 FY27. Both gross NPA and net NPA in both percentage and absolute terms is reducing quarter by quarter for the last 10 quarters consecutively. When compared to Q1 FY27, the GNPA has reduced from 1.73% to 1.44%, which is 29 bps reduction. Similarly, our net NPA have reduced to 0.48%, which is less than 0.5% now, from 0.9% of the last quarter. From 0.9% last Q2, we have moved to 0.48% to this Q2.
R. Vijay Anandh: The absolute number have reduced to INR 344 crores from INR 513 crores last quarter, Q2 FY26. From Q2 FY26, it was INR 513 crores, we have moved to INR 344 crores this quarter. Overall, SMA2 to total advance stands at 0.67% in Q2 FY27 as against 0.94% in Q1 FY27. In the corresponding period last year, that is Q2 FY26, it stood at 1.34%. For Q2 FY27, PCR with technical written-off stood at 82%, and the PCR without technical written-off has improved to 67% from 63% last year corresponding period. P&L and financial ratios. Our interest income had grown by 27% in Q2 FY27 and increased to INR 2,092 crores from INR 1,653 crores in Q2 FY26. For the half yearly year ended 30 September 2026, interest income had improved to INR 4,077 crores compared to INR 3,258 crores, showing the growth of 25%.
R. Vijay Anandh: Our yield on advances improved to 9.85% in Q2 FY27 from 9.79% in Q1 FY27. For H1 financial year 27, the same is 9.82% as against 9.73% in the similar period last year. Our yield on investments has also increased from 6.42% in Q1 FY27 to 6.56% in Q1 FY27. During Q1 FY27, we have invested around INR 850 crores in mutual funds, and we have earned an income of INR 12.5 crores, which was shown under other income. In Q2 FY27, we exited the entire mutual fund and moved to interest income earning investments for the better yield and the entire interest accounted under interest income on investments during August 2026, rather than other income in Q1. Because of this, yield on investment increased from 6.42% in Q1 to 6.56% in Q2, and the NIM has increased by 3% due to the same.
R. Vijay Anandh: At the same time, the cost of deposits remains stagnant at 5.56% for Q2 FY27 when compared to Q1 FY27. The cost of funds for Q2 has marginally decreased by 4 bps from 4.78% to 4.74% sequentially. Thus, our NIM has increased from 3.78% in Q1 FY27 to 3.87% in Q2 FY27. For H1 FY27, the NIM is at 3.83% as against 3.59% in H1 FY26. Following the recent changes in policy rates, the bank has started passing the rates to the borrowers. We have around 55% of the loan portfolio linked to the EBLR. However, deposit rates have not witnessed any immediate change as ample liquidity continues to be available in the banking system, supported by inflows under the FCNR deposit scheme. Hence, we project that the NIM will be in the range of 3.85% to 3.95% for Q3 and Q4.
R. Vijay Anandh: The total other income for Q2 FY27 increased by 35%, from INR 259 crores in Q2 FY26 to INR 350 crores for Q2 FY27. For the half year ended, it has increased by 18% from INR 503 crores in H1 FY26 to INR 594 crores in H1 FY27. The increase in other income is mainly due to the sale of technically written-off accounts to ARC and the total technically written-off collection for the quarter amounting to INR 137 crores.
R. Vijay Anandh: During the quarter, we have sold the excess agri by way of PSLC and received an amount of INR 9.6 crores. The operating expenses for the quarter increased by 24%, from INR 455 crores to INR 562 crores. Establishment expenses increased by 25%, from INR 224 crores in Q2 last year to INR 280 crores in Q2 current year. As you are all aware, the bank disbursed the annual wage hike to all its employees during the second quarter.
R. Vijay Anandh: The other operating expenses has also increased by 22%, from INR 231 crores to INR 282 crores. Our operating profit had grown by 35% in H1 FY27 and stood at INR 1,241 crores compared to INR 922 crores in the corresponding period. We have made a provision of INR 245 crores versus INR 160 crores towards tax and bad debts. We have provided INR 120 crores for this current H1 versus INR 110 crores for the last first year half.
R. Vijay Anandh: The bank has made a contingent provision of INR 50 crores during this quarter, specifically designed for unseen economic uncertainties in future. Our endeavor is to build the same in the coming quarters as well, going forward, and to make the balance sheet more stronger. Thus, the PAT stood at INR 416 crores for Q2 as against INR 329 crores in Q2 FY26, which works out to 27% growth.
R. Vijay Anandh: The PAT for H1 FY27 is INR 798 crores versus INR 635 crores in the H1 FY26, showing 26% growth. Finally, on cost to income ratio and the ROA. Our cost to income ratio for Q2 FY27 stood at 45.96% as compared to 49.16% in Q2 of FY26, which is almost approximately a 4% reduction. For H1 FY27, the same is at 45.71% against 48.66% in H1 FY26. Our ROA for Q2 FY27 is at 1.62% when compared to 1.59% in Q2 FY26.
R. Vijay Anandh: For H1 FY27, it is at 1.59% compared with 1.57% last year. To sum up, we are on track to achieve the consistent credit growth of 2% to 3% over and above the industry level and the engine is set now. As usual, the bank will focus always on MSME gold loan segment in addition to venturing into new avenues to keep the momentum and growth.
R. Vijay Anandh: This means our focus on secured lending continues as usual. Our deposit growth is aligning with credit growth, and it will continue. NIM will be in the range of 3.85% to 3.95% during Q3 and Q4. ROA is expected to move above 1.6% plus range. Our cost to income largely will be in the range of 45% to 47% for FY27. Thanks a lot, and open for questions.
Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Suresh Ganapathy from Macquarie Capital. Please go ahead.
Suresh Ganapathy: Yeah, hello. Sir, just I had few questions on this gold loan because there is a lot of talk about it. Now, you are saying INR 9.5 crore was NPA, only INR 20 lakh went for auction. You mean to say the balance INR 9.3 crore, the borrower came, paid the money, and got the jewelry back. Is that the thing?
R. Vijay Anandh: Good evening, sir. Yes, sir, you are absolutely right. Out of INR 9.5 crore, only INR 20 lakh went for auction. This means INR 9.3 crore, customer came and paid the entire money.
Suresh Ganapathy: Okay. Do you do short-term loans in gold? Do you do more than nine-month, 12-month kind of loans? Is it bullet, EMI? What is the structure?
R. Vijay Anandh: Broadly, it is a bullet, sir, because it is based on the harvesting season.
R. Vijay Anandh: As I mentioned in the note, sir, we do the LTV also upfront. In terms of consumption loans, we give it both bullet and non-bullet. To answer your question, bullet will be more in consumption loan also.
Suresh Ganapathy: Okay, but is there a difference in the behavior between a bullet loan and a non-bullet loan by the consumer? The consumer wants a bullet loan because he gets a lot more amount of time to repay, or the behavior is the same between EMI and bullet loans.
R. Vijay Anandh: We haven't seen any characteristic change between a bullet and non-bullet, sir. Predominantly, as you know, it is always end-use related.
R. Vijay Anandh: We also know why the customer is going for bullet and non-bullet. 99% of the loans as we speak today are bullet, and we haven't seen any characteristic change between these two.
Suresh Ganapathy: Okay. You don't even assess the income of the borrower. He just comes and gives the gold, and you give a loan directly without even-
R. Vijay Anandh: No.
Suresh Ganapathy: taking the income or CIBIL score? Yeah.
R. Vijay Anandh: The complete credit assessment is done. We pull out the bureau. We also check the customer's past behavior, if any. Predominantly, we see because it is mostly thin credit line for these customers. Hardly you get one or two trade lines. We check the credit behavior. We check the credit score. Most importantly, we do the end use assessment for this.
Suresh Ganapathy: Okay. Do you finance NPA?
R. Vijay Anandh: Sorry, sir. Predominantly, it is rural or semi-urban branches. Branches of the distribution centers, almost we have 250, 260 branches as we speak.
R. Vijay Anandh: The branch meet the customer, understands why this loan is for, what this loan is for. Then there is a central credit operating at Kumbakonam for us. When the bureau score is pulled, the customer bureau score is seen, and beyond certain amount, it has to come to central office. If there are no deviations on that, then we take a call.
Suresh Ganapathy: So do you finance NPAs in gold loans or no? That is a strict no. The customer is an NPA in some other. Yeah.
R. Vijay Anandh: No way, sir. Also, we do not do top-up loans. Even for my own customer, I do not do top-up.
Suresh Ganapathy: Okay. So you do not see any risk here? There are a lot of talks about the fact that if there is a sharp correction in gold, there can be some problem. I know there is an LTV cushion, but based on your experience, the customer behavior in general, because system is financing 25% of gold NPAs. NPA customers who are financing, who are being financed by these gold loan guys in the system. You do not see a problem of stress there in the system or think this is how it is, and there is a lot of cushion here, even if gold prices correct.
R. Vijay Anandh: Sir, my personal view is if we can correlate the end use of the loan to the customer, I think we are in a much safer spot. Probably if you do not know where the money is going, then I think this needs to be questionable, sir.
Suresh Ganapathy: How do you even check the end use, sir, here? Because the guy can take the loan and do whatever.
R. Vijay Anandh: End use, normally we know the type of client who walks into the branch predominantly is for urgent medical expenses or urgently he needs to pay his son's, daughter's school fees or college fees, they got the admission. So we do the PD with the customer. We spend 5 to 7 minutes with the customer in the branch. That's why I said the branch is a distribution center for us. We spend some time, and mostly you will agree, in the rural and semi-urban, we know the customers also. Why does he need? It's a interior for his home. Suddenly he wanted the money, or he wants to do some patchworks in the home, or it's a margin money for his home loan or something. Medical expenses, yeah. The next biggest thing is medical expenses urgently for him. Who doesn't have insurance?
R. Vijay Anandh: We also check if he is asking for medical, does he have insurance? So we do all these cross-checks, and then we take a call accordingly.
Suresh Ganapathy: And, sir, a final question on loan growth and deposit growth. Look, you have had a very good loan growth this year, or rather for the last 4 quarters, and deposit growth has also been very strong. Generally, I know there is some liquidity which has come because of FCNR for everybody in the system, but deposit growth constraint seems to be the biggest constraint for the banking system. Now, do you think in next year, say, I'm looking 12 to 18 months forward, FY28, you can sustain this kind of a 20% deposit growth? That looks very challenging considering the competition, and rates are also going up. So you think you can sustain these kind of numbers?
R. Vijay Anandh: So 20% in the next 2 years, I think I would be doubtful, sir. I think it is going to be a challenge for sure. That is my view.
R. Vijay Anandh: But having said that, I think last couple of quarters, we have been consistent, and we have been getting into granular. Even if you see presentation, we have never gone behind bulk as well as CD. So, the term deposit less than INR 3 crores is contributing 48%. My INR 3 crores to INR 50 crores is only 17%, and more than INR 50 crores is only 8%. So this means 75% of my book is, I would say, slightly granular.
R. Vijay Anandh: But can we grow at the same pace of 21%, 22% in the next 2 years down the line? I think we may have to see. Today my branches productivity is slightly going up. My new branches has also started delivering. We were at 800 branches. Now, as we speak today, we are at 1,000 plus branches. The newly opened branches have started delivering quite consistently. This has been giving a cushion.
R. Vijay Anandh: Maybe we need to see for some more time before I really make this discussion confirmed that, yes, we have an appetite.
Suresh Ganapathy: Yeah. On a customer standpoint, there are so many options for him, new private sector banks, PSU banks. What is the USP that he comes and gives the deposit, CASA or otherwise retail TD to City Union? Do you play the rate game or what exactly is the USP for I know this is nothing new. You have been in the business for a long period of time, but the environment is also challenging. So how are you able to source your customers, market your products? Have you recruited newer guys from other private sector banks from a sales angle? Any qualitative color on that would be helpful. Thank you.
R. Vijay Anandh: Quite a good decent hiring has happened from other banks. As we speak today, sir, verticalization have been done for CASA. We have done one verticalization for CASA, we have done TASC, we have done government, and we have started NRI. Broadly, this is what we have started. Even we have for salary accounts, a separate vertical. We have a salary account, we have a TASC, we have a government, we have a CASA vertical, we have a NRI vertical. That seems to be working out well for us. Most importantly, we have increased our percentage score for BMs for CASA, and we don't go behind the terminal CASA because terminal CASA, they don't get anything. It's average CASA what is going to decide the rating. Number 2.
R. Vijay Anandh: In terms of services, I think relationship is what is helping us a lot. Beyond the transaction, we go and meeting the customers and other things. That's what is helping us. Hopefully, we try to replicate this every quarter and get this moving.
Suresh Ganapathy: Thank you. Thank you, sir. All the best.
R. Vijay Anandh: Thank you, sir. Thank you.
Operator: Thank you. Next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.
Rohan Mandora: Good evening, sir, and thanks for the opportunity. Sir, this is on the asset sales that we have done. We have done that around at 16% cash recoveries. Just wanted to understand the nature of these loans, because mostly we have secured and historically we have seen healthy recoveries from NPA. What was the rationale and what was the vintage of these NPAs?
R. Vijay Anandh: Good evening, sir. We have sold to the tune of INR 803 crores. Predominantly, we have provisioned INR 792 crores, as we mentioned. What typically happens is, as a bank, we have completely secured, and we run with an LGD of 20%. There are some loans which are more than five years, which has been completely written off. I will give you the exact figure. There are 757 loans of INR 645 crores, which are more than five years, and INR 645 crores is provision held. What typically happens, sir, is, say, the outstanding is INR 100, and he has become an NPA. I am selling the property, and I have sold it for INR 95. I carry this INR 5 as an outstanding against the customer. Technically, this INR 5 is an unsecured to me after I have closed the loan. This INR
R. Vijay Anandh: 5 we have sold because we have not given any closure or NOC for these loans. Against, say, INR 100 crores of NPAs, when we have collected INR 95, this INR 5 is always a challenge. Hence these we have sold. It is more than five years, the 757. Four years to five years, it is 91 loans of INR 40 crores. Three years to four years, it is 84 loans of INR 54 crores. Out of INR 802 crores, almost INR 770 crores. INR 770 at that time. INR 750, INR 760 crores was more than three years. Hence, we did the internal math time value of money, and we thought that, I think it is a fair deal if we can get this off.
Rohan Mandora: So sir, just to understand it clearly, all the loans that have been sold, there is no underlying collateral that has gone to ARC. These are all the residual amounts and if that was so, what is the incentive for ARC to buy these loans for 16%?
R. Vijay Anandh: No, no. We have done the mix of both. Majority of the loans are zero collateral plus we have got the loan. You have got the split up of this. Devro, split up is in here. I can give you the split up. Maybe I can send it to you. INR 100 plus INR 120 crores should be with collateral and remaining should be the closed loans. I can give it to you. Please give me a minute, sir. Okay.
Rohan Mandora: Yeah. 303.
R. Vijay Anandh: 303 is completely with collateral, 500 is without collateral.
Rohan Mandora: Got it. Sir, what is your outstanding TW pool after the sales? During the quarter, what was the provision you have taken from these loans?
R. Vijay Anandh: The outstanding technically written off pool is INR 900 crores.
Rohan Mandora: Okay. Provision?
R. Vijay Anandh: Fully provided, sir. All these are fully provided for.
Rohan Mandora: So no reversal we have taken right now in the P&L?
R. Vijay Anandh: No.
Rohan Mandora: Okay. In terms of the OPEX, the increase that has happened this quarter, one you explained is because of the wage hikes. Anything else which is one-off in either employee expense or other OPEX, or should we continue to expect this to continue incrementally?
R. Vijay Anandh: I think it is a July hike. Normally we give and that is what has.
Rohan Mandora: During Q2.
R. Vijay Anandh: During Q2. I think this is a very normal thing, what we always do in the month of July. We do not see much going up now from now for this year.
Rohan Mandora: Sure. This run rate of INR 280 odd crores will continue incrementally?
R. Vijay Anandh: Yeah.
Rohan Mandora: Perfect.
J. Sadagopan: Yeah, INR 270 to INR 280 you can expect.
Rohan Mandora: Sorry?
J. Sadagopan: Even if you see the last year, the Q1 to Q2, the Q1 was last year around INR 200 crores, which has increased to INR 225 during Q2. Likewise, this time, INR 235 to INR 280. You can roughly imagine or roughly assume it is around INR 275 going forward.
Rohan Mandora: Got it. Because the jump is almost 19% Q on Q.
J. Sadagopan: This is mainly because of the leave encashment, we have provided the actuarial valuation. We have provided to the tune of INR 32 crores during Q2, which used to be INR 3 to 5 crores of requirement each and every quarter.
Rohan Mandora: Okay. Got it. Lastly, on the gold loan NPA recoveries that we have seen, wherein the customers came back and repaid. Just wanted to understand in terms of, after they became NPA, within what time frame they came back and repaid and, if the money came, what was the typical source of that money? Did they borrow from somewhere else and repay, or was it family and friends? Why were they not able to pay earlier and then they were able to repay immediately?
R. Vijay Anandh: I can answer for the first part of the question. Between NPA and auction, it is 45 days.
Rohan Mandora: Okay.
R. Vijay Anandh: They will normally pay in the 45 days if they want the gold to be back with them. Normally, gold is an emotional product in South majorly. It is unlikely that they will allow it to go for auction. That is number one. Most importantly, the rate of the gold also matters because we are not a great rate per gram provider as well.
Rohan Mandora: Right.
R. Vijay Anandh: When there is still a leverage left, I think they have an opportunity outside as well. But honestly, we do not know the reason how they would have paid it. But we are not the great rate per gram master since they have a cushion to get more money from outside as well with this. Obviously they would not like to risk it.
Rohan Mandora: Got it. Sure, sir. Thanks for the opportunity.
R. Vijay Anandh: Thank you, sir. Thank you.
Operator: Thank you. We will take our next question from the line of Puneet Balani from Dolat Capital. Please go ahead.
Puneet Balani: Hi, sir. Thanks for taking my question. Just, sir, any specific reason why we did not grow our non-agri gold loan book this quarter?
R. Vijay Anandh: Sir, again, it is a question of input, what type of customers we are getting and what is the end use. As I was telling some time before, we really do not go with the metal and we grow. So if the customer is well within our guideline or within our framework, within our straw man, I think we will not hesitate to grow. So if the bureau is matching, if the PD is good, if the assessment is clean, we will grow for sure. In terms of agri, what more comfort you get is you know what type of products he is going for harvesting, and we know harvesting season. Typically, if you are aware, the belt is completely a rich Kaveri delta belt. So we are aware that this cultivation is going to happen in this month and all those.
R. Vijay Anandh: Also there is a good document evidencing the proof of the eligible underlying activity in agri, what he is doing. So when you have the documents, what is available, it gives you more comfort to fund. Whereas in consumption loan, you really need to probe. You really need to check what is the kind of loan, why does he need. So if it is matching within our risk appetite framework and straw man, we will grow for sure.
Puneet Balani: Right. Sir, going forward, given these trends, it is safe to assume that growth in gold loan will be driven by the agri gold loan segment for you guys, at least?
R. Vijay Anandh: Absolutely. Agri gold loan is given because you have the documents, you have the harvesting season and other things. Non-consumption loan is purely basis the risk assessment.
Puneet Balani: Got it.
R. Vijay Anandh: I will not say that we will reduce or we will go up. If there is customer matches with our criteria, we will not hesitate to grow.
Puneet Balani: And sir, what would be the yield differential in these two loans, around 100 bps between non-agri?
R. Vijay Anandh: Yeah. Totally it is 100 bps. Yeah.
Puneet Balani: Got it. So on the margin front, if I am not wrong, you are guiding for a 10 bps QOQ expansion or a near-term expansion, if I heard it right, I am not sure because of the rate hike and everything. I just wanted some qualitative color on what is the fixed rate book mix and floating rate book mix and how do we build that in our numbers, basically.
R. Vijay Anandh: We did say that 3.85% to 3.95% is the NIM, which we said eventually we will be there basis the rate hike. Between fixed and floating, entire gold loans are fixed, so this means INR 20,000 crores. The EBLR is 55% as we speak, fixed is around 33%, and MCLR is 12%. So we are saying that we will be between 3.85% to 3.95% in terms of NIM.
Puneet Balani: Got it. Yes. Thank you so much, sir.
R. Vijay Anandh: Thank you, sir. Thank you.
Operator: Thank you. We will take our next question from the line of Jayant Kharote from Axis Capital. Please go ahead.
Jayant Kharote: Thanks for the opportunity. The question is on the gold loan customer base. Can you help us understand the spread of the customer base? How many customers have been cross-sold gold loans from your liability franchise or, let's say, multiple asset products? What I understand is, what percentage of the gold loan book or what number of the gold loan customers relationships are new to the bank and only restricted to one product?
R. Vijay Anandh: Sir, typically, the gold loan is sold in 250, 260 branches of rural and semi-urban. Please understand it is going to be a 500 to 700 square feet office of a bank branch where the branch manager, appraiser, and officer are sitting, and it is going to be a INR 40, 50 crore book size branch. Hence, it is not a metro-based product where I do a cross-sell kind of stuff and do this. Out of that, 50% of the customers are agri customers. By the way, all the customers will have bank account with me. If you want to cross-sell, 100% of my gold loan customers have the SB account with us. In terms of other products, I see typically, I think it is very difficult because these customers can never be an MSME customer for sure, which is the main product for us.
R. Vijay Anandh: Otherwise, SB customer and probably if you see the other bureaus, it could be a two-wheeler customer for other banks or NBFCs, which we don't do. The characteristics of the customer is that you have two, three trade lines for these people. That is it.
Jayant Kharote: Okay. Sir, second question is on the utilization of the SME lines. How has that panned out and how is that looking into Q3 and Q4 now? Do we see some acceleration over there?
R. Vijay Anandh: Yeah, I think utilization is pretty decent in Q2. We would be around 71% to 72%. We were at 69%, if you recall, in the last call we did. From 69%, we have moved to 71%, 72% as we speak today. I think utilization has been pretty good, sir.
Jayant Kharote: Okay. Sir, last question. Gold loan currently is only being offered in Southern India. It is not being offered in the northern new branches. Is that correct?
R. Vijay Anandh: No. We are offering everywhere. It is a pan-India product.
Jayant Kharote: Both agri and non-agri.
R. Vijay Anandh: But major gold loan business is from South for us.
Jayant Kharote: In percentage terms, more than 90% still because these branches, north branches are still new.
R. Vijay Anandh: Sorry, sir. You may have to repeat the question. I am sorry we lost you.
Jayant Kharote: Sorry. Sir, I would say in percentage terms, more like 80%, 90% would still be Southern India and because the northern branches are relatively fresh and.
R. Vijay Anandh: 96% in Southern India, 4% outside Southern India.
Jayant Kharote: Great. Thank you, sir, and congrats for a great set of results.
R. Vijay Anandh: Thank you, sir.
Operator: Thank you. Before we take the next question, would like to remind participants, to ask a question, please press star and one on your phone. Next question is from the line of Jaiprakash Mundhra from ICICI Securities. Please go ahead.
Jaiprakash Mundhra: Yeah. Hi, sir. Thanks for the opportunity and congratulations on a good quarter. Sir, first on tax rate. So in the last two quarters, the tax rate, the way we calculate is tax upon PBT. That has inched up a little bit versus what we did in FY26 at around 20% to 21%. Is there any change in the income profile or the rural portfolio, and what should be the likely tax rate for this full year?
J. Sadagopan: Sir, generally, the tax rate used to be in the range of 20% to 21% for the past few years. For the last two quarters, it mainly depends on the rate of what we have done during the quarter. It is taking into consideration of multiple parameters. So we have done with 23% to 24% in Q1 and Q2. Probably going forward, you can roughly assume the range will be 21% to 23%, sir.
Jaiprakash Mundhra: Okay. The blended could be around 22% to 23%, right?
J. Sadagopan: Exactly. Around 22% to 23%.
Jaiprakash Mundhra: Okay. Sure. That is one. Secondly, sir, treasury income. You have made a treasury income, whereas the yields have actually gone through the roof. Is there any equity-related thing or what explains this treasury gain? We are in the black on treasury.
J. Sadagopan: See, the treasury income for the quarter, which comes to INR 36 crores versus INR 52 crores during the first quarter. As explained by MD during the call, around INR 12 crores of mutual fund income diverted to interest income, mainly because of that got reduced to INR 36 crores from INR 52 crores.
Jaiprakash Mundhra: Okay. Sir, did you have any MTM loss on the bond portfolio?
J. Sadagopan: No, it is there, but it is actually accounted under AFS reserve, not in the PNL.
Jaiprakash Mundhra: Okay. How much was the AFS reserve delta, sir? How much was in Q1 end and at the end of Q2?
J. Sadagopan: The exact figures are not with me. Anyhow, I will call you and give, sir.
Jaiprakash Mundhra: Sure. Okay. Secondly, sir, on SMA2 number, you have seen strong improvement. How about your SMA1 in INR crore and SMA0, if you have that number?
R. Vijay Anandh: Yeah. SMA0, 1, 2, all have come below the threshold. So SMA0 to gross advance is 1.23%. SMA1 to gross advance is 0.64%. SMA2 to gross advance is 0.67%. Total SMA to gross advance is 2.53%, sir.
Jaiprakash Mundhra: Okay. All right. Now basis, sir, SMA, I think this is multi years low. How should we look at the ECL transition impact, if you have sort of finalized that?
R. Vijay Anandh: Yes.
Jaiprakash Mundhra: Yes, sir.
R. Vijay Anandh: Our ECL impact is INR 299. We should have INR 300 crores of ECL impact totally. That is what our calculation says.
Jaiprakash Mundhra: That is on 1 April, right?
R. Vijay Anandh: 30 September 2026, incremental ECL provision requirement is INR 299.42. The variation is -INR 5.36.
Jaiprakash Mundhra: All right. No, until this is for.
R. Vijay Anandh: When we started with 31 March 2025, our incremental ECL provision requirement was INR 445 crores. That has come down to INR 299 crores.
Jaiprakash Mundhra: That has come down because the improvement in portfolio continued, right? Quality.
R. Vijay Anandh: Right.
Jaiprakash Mundhra: Sure, sir. Last question, sir, if you can highlight your average ticket size in retail and agri jewel loan.
R. Vijay Anandh: Retail without Mumbai, Delhi, we will be around 0.8, INR 70 lakhs, INR 80 lakhs we would be without Mumbai, Delhi. With Mumbai, Delhi, we will be around 1.3.
Jaiprakash Mundhra: No sir, gold loan. In gold loan ticket size.
R. Vijay Anandh: Gold loan you are saying? Okay.
Jaiprakash Mundhra: Yes.
R. Vijay Anandh: One second. Give me a minute. Gold loan sheet. Agri is.
J. Sadagopan: INR 1 crore, 90 lakhs.
R. Vijay Anandh: 1.9. Agri is INR 1 lakh 90. Sorry for this. Agri is INR 1 lakh 90, non-agri is-
J. Sadagopan: INR 3 lakhs.
R. Vijay Anandh: INR 3 lakhs.
Jaiprakash Mundhra: Okay. This is per customer, right? Not per account.
R. Vijay Anandh: No, per customer.
Jaiprakash Mundhra: Per customer.
R. Vijay Anandh: Per account.
J. Sadagopan: With respect to total number of accounts.
R. Vijay Anandh: Yeah, per accounts.
Jaiprakash Mundhra: Number of accounts. A customer can have multiple gold loans, right? Given how much security, how much ornament he has given at different point of time or there is a restriction there.
R. Vijay Anandh: He can have maximum 20 accounts.
Jaiprakash Mundhra: Right.
R. Vijay Anandh: He can have maximum 20 accounts and again, the multiple loans is basis the eligibility and bureau as we spoke.
Jaiprakash Mundhra: Right. This is per account basis or this is per customer basis? This INR 3 lakh.
R. Vijay Anandh: Again, the average ticket size what I gave it to you is basis the number of accounts and with respect to customer, he can have 20 accounts and his loan is basis the eligibility, income, bureau.
Jaiprakash Mundhra: Right. So maybe, sir, you do not do small 20, 30, 40 thousand ticket size gold loan, right? Maybe there is a different delinquency in those.
R. Vijay Anandh: No, not like that, sir. It depends on the market. If it is unbanked rural, probably I am the only bank there. There are some 50, 60 cities where I am in unbanked rural.
Jaiprakash Mundhra: Okay.
R. Vijay Anandh: These cities get 30, 40k loan, which we will be happy to take. These are genuinely a right kind of borrowers who comes with end use. So it again depends on the market. In semi-urban, it will go slightly higher. It goes as high as INR 2 lakhs. Again, agri is the function of how much acre you hold and what is the harvesting. If your number of acres is high, you will need more money. If you have 1 or 1.5 acres, then your requirement will be small.
Jaiprakash Mundhra: Right. Last question, sir. MSME growth has also picked up, and gold loan is now 30%. Do you believe this gold loan will remain at 30%, or the share of gold loan can still rise to, I don't know, 35% or will it stabilize?
R. Vijay Anandh: No. Maximum 1% or 2% we are looking at. I think we don't want to go beyond 31%, 32% for sure.
Jaiprakash Mundhra: Okay. Sure, sir. That is very helpful. Thank you and all the very best.
R. Vijay Anandh: Thank you, sir. Thanks a lot.
Operator: Thank you. Next question is from the line of MB Mahesh from Kotak Securities. Please go ahead.
M.B. Mahesh: Good evening, sir. Just a couple of questions. One is, there is an improvement in the lending yields in the gold loan portfolio. This is a reflection of a rate hike that you have taken or is there anything else to it?
R. Vijay Anandh: We increase it. It is a fixed-rate gold loan book, and we did increase the rate in the market where we had an opportunity. I think that is the result of that.
M.B. Mahesh: How much of headroom is there? What is the blended yield at which you are raising the gold loan book today?
R. Vijay Anandh: 10.8 is the blended rate, sir.
M.B. Mahesh: If I would say that this is 10.7 today, that you have reported in the presentation, you are saying there is still some headroom on the gold loan portfolio to protect the portfolio margins for next quarter. Is that the way to look at it?
R. Vijay Anandh: Well, this quarter I do not think we will be raising. I think we will not raise this quarter. I think
M.B. Mahesh: No. Adjusting for the previous loans which has repaid and the current loans coming in at 10.8, you are saying that there is still some headroom available for the portfolio yield to still catch up higher.
R. Vijay Anandh: Maybe 5, 6 bps. Yeah, 5, 10 bps we have room for the customers who are closing the loan and getting the new loan. Whoever has gotten
M.B. Mahesh: Okay
R. Vijay Anandh: the lesser rate that time, who is coming now and repaying and taking the loan, I think we have got 5 and bps more.
M.B. Mahesh: The fact that you are saying that despite a fixed-rate book of 30% not having an impact on the margins for the next couple of quarters, that confidence is coming essentially from which part of the book? Is it on the asset side pricing that comes through in the next couple of quarters, or is it on the liability side? Just trying to understand that.
R. Vijay Anandh: It is a combination of both. EBLR today is 25%, which is increased 23 bps and it is a combination of both. My liability should also help me as well, what we are lending on retail secured plus MSME. Both should help.
M.B. Mahesh: Okay. Just one clarification. In your assessment, next quarter, the deposit cost that you are carrying today remains flattish or it has a room for an increase out here. What is your assessment of the book on the deposit side?
R. Vijay Anandh: We foresee 10 bps increase there, sir.
M.B. Mahesh: There, okay. Okay, sir. Done. Thanks a lot.
R. Vijay Anandh: Yeah.
Operator: Thank you. Next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.
Rohan Mandora: Sir, thanks for the opportunity again. Just want to clarify the INR 300 crores of ECL that we have indicated. That is after adjusting the provisions we have created, so this is the unprovided part? Or how should one read into that number?
R. Vijay Anandh: Which one you are referring?
Rohan Mandora: ECL impact, INR 300 crores that you responded to in one of the earlier questions.
R. Vijay Anandh: Right. Yeah. We have done with INR 30 crores earlier. We are going to adjust it against the capital.
Rohan Mandora: Capital.
R. Vijay Anandh: We have done INR 30 crores. We will be doing this remaining in the capital. We should consume 0.4.
Rohan Mandora: Net incremental impact would be what, INR 270 crores?
R. Vijay Anandh: Yeah, right.
Rohan Mandora: Okay, fine. Unprovided part is INR 270 crores. Okay.
R. Vijay Anandh: Yes, 0.45 we should consume in the capital.
Rohan Mandora: Got it. Thanks.
Operator: Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. Next question is from the line of Parth Gutka from 361 Capital. Please go ahead. I am sorry, we cannot hear you, Parth.
Parth Gutka: Yeah. Hi, can you hear me now?
Operator: Yes.
Parth Gutka: What was the impact of the ARC transaction in the other income? What was the quantum?
R. Vijay Anandh: The total ARC transaction is around INR 131 crores, of which other income INR 407 and INR 26 crores swap part of liability.
Parth Gutka: Okay. Thanks, Neeraj. That was my only question.
Operator: Thank you.
Parth Gutka: Thank you.
Operator: As there are no further questions, I now hand over the call to management for closing comments. Over to you, sir.
R. Vijay Anandh: Thanks a lot. Thanks everyone for joining. I think broadly, this has been a decent quarter, and we are on track to achieve the credit growth 2% to 3% above the industry level, and we have necessary infra in place in terms of people, process, technology. I am sure the MSME retail and gold loan addition will add new avenues to keep the momentum in growth. Our deposit growth is always aligned with the credit growth, and this will continue. As explained in the call, we will try to be around 3.85% to 3.95% in the NIM. ROA, we want it to be around 1.6% to 1.65% range. Largely, our cost to income will be around 45% to 47%. Thanks a lot. Wishing you-
J. Sadagopan: There is no impact of P&L.
R. Vijay Anandh: There is no impact on?
J. Sadagopan: P&L in ECL.
R. Vijay Anandh: There is no impact of P&L in ECL. That is what I think my CFO wants to add. There is no impact of P&L in ECL. Thanks a lot. Wishing you and your family a very happy Diwali. Thank you.
Operator: Thank you, members of the management team. On behalf of Ambit Capital Private Limited, that concludes this conference. Thank you all for joining us today. You may now disconnect your lines.
