Bank of Maharashtra (MAHABANK.NS) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Bank of Maharashtra Q2 and H1 FY 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us from the management, Shri Nidhu Saxena, Managing Director and CEO; Shri Rohit Rishi, Executive Director and all chief general managers and General Manager of the bank. I will now hand the conference over to Mr. Shri Nidhu Saxena for opening remarks. Thank you, and over to you.

Thank you, and good afternoon, and thank you for joining this con call. And today, we have done our Q2 and HY results, and I will very quickly cover the main highlights while you would have gone through the presentation, but the highlighting features, our total business grew by 14% taking it to INR 5.63 lakh crores. Deposits has gone up by 12.13%. Advances have grown -- gone up by almost 17%. CD ratio for us has improved to 82%. Gross NPAs have declined to 1.72%. Net NPA have been declined to 0.18%. Our provision coverage ratio is standing at 98.34%. Our net profit, too, has increased by 23% and the number is INR 1,633 crores. Operating profit has grown by 17% to INR 2,500 crores. Net interest income has increased by almost 16%. NIM stood at a healthy 3.85%. Cost to income has also improved to 37.1%. ROA has improved to 1.82%. [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I reconnect the management. Thank you. Ladies and gentlemen, we have the management line reconnected. Saxena sir, please go ahead.

Yes. Sorry for that technical disruption. I was mentioning about the last item, our capital adequacy is improving to 18.13% within which the Tier 1 is standing at 14.96%, almost 15%. SMA, the loan book is also behaving well. SMA-1 plus 2, which is always an element of concern within the overall SMA book, so that SMA-1 and 2 have actually gone down from 2.61% to 1.87%. It has been an improvement of 74 bps. A couple of things over and above these parameters of business growth, asset quality, efficiency ratio, profitability and capital adequacy metrics. What has happened is we have -- I would like to also mention about those. S&P Global has assigned us a BBB- rating, and which is 3 notches improvement of what other international rating agency has assigned to the bank. So now we have two international agencies that have assigned ratings for the bank. Our GIFT IBU, which was made operational in this quarter within a period less than 6 months of the Reserve Bank of India according approval to our application, we have operationalized the GIFT IBU, and we have closed this half year with INR 100 million of business in the IBU. And there is a complete pipeline that is getting built to see that we are getting more and more traction in that IBU. We are keeping aspirations. We have yet to put some numbers, but maybe can it be a $1 billion book in the next 12 months. And of course, it should be a profitable business is also our aspiration in the GIFT IBU branch. The rating improvements and sharp improvement, which has come from the international rating agency. We are also seeing traction in FII holding, which is going up. steadily. And very lately recently, we are seeing interest getting built up in FIIs who are looking and tracking our stock. From 0.39% FII holding in 2023, we have -- for September 2025, the FII holding has improved to 2.58%. Likewise, the mutual funds have also been building books with our Bank of Maharashtra scrip in the equity. We are also the bank which is consistently outperforming the industry. And one big enabler, I will a little bit speak about that is that we are fast expanding our presence in potential growth centers of the country. And that is one thing which has not only helped us register this industry -- more than industry performance, but it is also helping us sustain this kind of growth performance in the years to come because this is a 5-year plan to open 1,000 branches in the next 5 years is what the broad Board approval we are having, within which in this FY, we have taken one big initiative to open 321 branches. So we are calling it as the Project 321, and the plan is to open 321 branches in the next 18 months. And these branches are shortlisted after doing a scientific exercise, using lot of data points, taking help from an external agency. Am I audible or there is an issue again?

Sir, you are audible. Please go ahead.

Okay. Thank you. Thank you, again. So what I was trying to convey is this Project 321 is an ambitious initiative taken in this FY to see that... [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Sir, please go ahead.

Yes. Thank you. And I'm sorry once again for that disruption, but I will continue what we were talking about is the new branch opening that we have shortlisted after doing a scientific exercise, taking help of an external agencies. And for us to understand is these are the potential growth centers of the country, potential growth centers of the nation that we are opening our presence in a phased manner. And this is what is going to also support and sustain our fast growth rate that we are clocking every quarter-on-quarter. So whatever guidance numbers that we have been sharing, I am satisfied as a bank, as a management that whatever guidance at the beginning of the year for the last 12 to 15 months we've been talking about, we are maintaining and achieving -- beating our own guidance quarter-on-quarter. So if you look at the metrics of importance to the investors, specifically the ROA, ROE, NIM, these numbers, we are having a decent guidance for NIM of 3.75%. But this quarter also, we have, despite the rate cut impact coming in completeness in this quarter, we have been able to maintain our NIM above the guidance that we had shared in the beginning. And the Q3 and Q4, we've seen that with most of our deposit maturity profile, seeing the deposits getting repriced, we should see that further NIM contraction should not be. But yes, we are keeping a conservative number of 3.75% in terms of the NIM guidance. Let me take a pause here and maybe take some questions before we keep sharing couple of other things.

[Operator Instructions] The first question comes from the line of Rohan Mandora from Equirus Securities.

Sir, I wanted to understand the movement in cost of deposits this quarter, which has gone up by 8 bps. So what was the benefit from term deposit rate cut? And what was the adverse impact from the current account changes, the decline in [ CASA ] balance?

Right. So if you see our deposit growth for this quarter, year-on-year, we have grown deposit by 12.12%, around that percent, but within which CASA has grown at almost 15%. So focus clearly stands out to have more and more low-cost deposit in the system. And the high-cost bulk wherever we have identified, which is sitting in our deposit book, we have been very consciously not renewing the bulk high-cost deposits. So what data I will share is that our bulk deposits have seen a degrowth of 9.9% -- minus 9.9% degrowth in the bulk deposits. But deposits have grown majorly from the CASA, which has grown at 15%, and that's how the total story is growing at 12%.

Right. But sir, the question is on cost of deposits, which has increased.

So the cost of deposit, maybe it is 7, 8 bps, which has gone up, but we are [Technical Difficulty].

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Rohan, if you can please repeat your question for the management?

Yes. Sir, I was understanding the cost of deposits increased, the reasons for that.

So Rohan, I think your question was well understood, and I was trying to -- I had already started, and I think we'll have to bear there is some technical challenge repeatedly. But still, I understood your question. And as I said, focus with us is to maintain our deposit growth majorly through the low-cost element. We have done a lot of efforts to see that both the components, the core CASA that is coming from our branches and the institutional CASA, which we focus from institutions, government departments, ministries, corporates. We have a separate vertical that takes care of that. These two components are being strategically achieved. The two objectives are strategically achieved through a lot of strategies that we have put in place. If I have to tell you, in terms of business that is happening in branches, we have done a lot of product improvements, we have introduced products for some segments where we were missing. So today, we have a complete basket of products that is taking care of the professionals, the HNIs, the NRIs, the business community and so current savings, salaried, nonsalaried, we have a complete basket of products. We have also looked at the process part, whether the process is a seamless -- healthy seamless onboarding of clients to the bank's business. And once they are onboarded, whether they are able to seamlessly transact. So today, if you ask me, our mobile banking application, we have revamped. We have not just upgraded our existing mobile application by introducing a new version, but we have revamped the version, and this is moving faster. And the concept of giving ease of doing business for a client that they are able to transact on this mobile application with minimum number of clicks has been our theories in building -- in developing this mobile banking application. Someone should experience it to understand what I am indicating to. And so a lot of technology is helping in this segment, the individual core segment that is happening in branches. For the institutional segment, we have -- we started with putting up a new business vertical, calling it as new business customer acquisition vertical headed by a lady General Manager. Having a complete structure with her and reaching out -- the only two KRA is to reach out to institutions and look at their banking needs and try to get institutional deposits from them. Bringing some value also to the institutional clients and understanding their specific needs and also offering some technology-based solutions there. So these two verticals are independently working. And we have seen that while the industry CASA was 44% some 12 to 15 months back, has come down to almost 36%, 37%. But in our case, we have been able to maintain our guidance to maintain CASA beyond -- above 50%. So even if -- this quarter, it is 50.35%. We have a little bit cost of deposits because of the fixed deposits repricing is in the process to happen. And 6 to 8 months is the maturity profile where we will see that my entire portfolio gets repriced. And a little bit, I would also assign it to with the interest rate cycle today, clients are also more aware. So a lot of your CASA has moved to term deposits. Wherever the liquidity is not immediately required, clients have created fixed deposits, term deposits for a longer duration in anticipation that the rate cut cycle will also let the fixed deposit rates in system to go down. So that's how for me that 5, 6 bps increase in deposits has happened. But I think going forward [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management once again. Please stay connected while I rejoin the management. Thank you. [Technical Difficulty] Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Sir, please go ahead.

So Rohan, I'm sincerely apologizing because it is disconnecting. But I think very clearly, I said there is a core business of CASA, there is an institutional business of CASA. And we are trying to address both these components with a different strategy that is working for us. And we are trying to see that we maintain this low-cost element in our deposit profile, which is a big enabler, contributor to our bottom line. And the system would have seen the average CASA at some point of time, which was in the industry 44% -- 43%, 44%, came down to almost 37%. But we have been able to maintain our guidance to maintain it below -- above 50%. That is one. Second, a lot of our experience is that with this rate cuts in the deposit side also, clients are also parking their money from the CASA to creating term deposits with us. That's how the same money...

Sir, we heard all of these points. This point is well understood.

Okay. So I think we can move to the next question. I think if I didn't wanted to convey that, we can get to the next.

Sir, second was on what is the outstanding AFS reserve at the end of 2Q?

It's around INR 340 crores on the gross basis.

Okay. And just kind of the similar number, INR 500 crores at the end of 1Q, right?

I couldn't get you.

The number at the end of 1Q was INR 500 crores, which is INR 340 crores right now?

Yes, yes.

Okay. And sir, lastly, there's almost 10.5% Q-on-Q increase in credit RWA this quarter. So if you can explain what is the reason for that?

One second. My CRO is just joining the call, and he will respond. He's almost there.

Sir, if you see that total RWA from the June to September has increased around INR 16,000 crores. Out of which if you break up, the credit RWA has increased around INR 15,000 crores and market RWA has increased around 1,180. If you see the credit RWA has increased because of advances has -- gross advances have increased around INR 14,000 crores. And there is some extra undrawn is there. So that has also increased around INR 7,000 crores. So likely, it is around INR 16,000 crores on credit RWA has increased.

Okay. So the higher share is because of the undrawn lines as well. Okay, sir. I got it.

We take the next question from the line of Abhishek Kothari from Aviva India.

Sir, if you could guide with respect to your growth that I'm seeing in the RAM portfolio, retail has grown very nicely, but SME and agri, the growth is lagging behind. So any thoughts over there?

So RAM, overall share is 62-38. Our guidance has been to maintain it at 60-40 plus/minus 2%. Yes, we are doing a conscious rebalancing again in that -- the two verticals. The idea behind is the loan book that we are creating, and it must be of good quality borrowers, prime borrowers. And so in the agri portfolio, what we are making a shift is we are going to -- from production credit to investment credit and trying to look at reaching out some mid-segment kind of clients. [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management once again. Please stay connected while I rejoin the management. Ladies and gentlemen, we have the management line reconnected. Sir, please go ahead.

So while the overall guidance is 60-40 plus/minus 2%, we are already at 62%. But if you see in the retail, there are a couple of products which are seeing a lot of traction. The housing loan -- home loans are growing at fast growth rate of 30%, 31%. For us, gold loans have grown at 47%. Vehicle loans have grown at 49%. And these are our own set of clients who've been banking with us. We have tweaked some schemes to introduce new customer-friendly schemes to bring them on our fold. And the entire focus in this segment is towards the big ticket advances where we are seeing the LTV is also very favorable to the bank. And we are having that comfort that this growth in the retail portfolio, we are growing in the segment which is constituting the prime and super prime borrowers. Like in the bank, today, there is no loan that is available for a client having CIBIL score less than 681. That, as per the definition of TransUnion CIBIL is a subprime segment. And we are -- so we have strengthened our underwriting benchmark. So that is one of the reasons that industry growth is supporting in these retail segments. Plus we have done a lot of product improvisations, introducing new product lines to see that there is a good traction in the retail. In the agriculture and MSME, we are also -- while we grow the loan book, we are mindful of the asset quality that we are going to -- the pool of assets that we are going to create. So we are focusing this time more on investment credit, some big ticket mid-segment kind of proposals where we will see a lot of ancillary business opportunities coming in cold storage, dhal mill, rice mill. And so ticket size also will improve, portfolio will also be there. We will get some ancillary business. We will get some tangible securities, which are going to be with those credit limits that we are going to consider for borrowers. So that kind of consciousness migrating from production-linked to investment-linked credit. In the production, in the KCC, we have already created digital journeys, and we would want the underwriting for small ticket KCC loans to be end-to-end digitalized. So to begin with two states, we have picked up. So state of Maharashtra is the first where luckily, we have the exposure -- good exposure, and the land records in this state are fully digitalized. So with that, end-to-end journey is possible in underwriting for the small ticket size KCC loans. So that's how the strategy is. And I think in coming quarters, we will see a lot of traction in these two segments also. To answer your question in one line, bank is looking at wherever profitable opportunities for growth are there, we will definitely be participating. But we'll be mindful of the quality of the loan book that is getting created and how the loan in times to come should be behaving. We are fully mindful of that, and then that's how we are going to increase.

Okay. Sir, your capital consumption was high in this quarter, around 193 bps. You have a resolution or Board approval in place for fundraise. So by when could we expect your fundraise to come by? Will it be in this fiscal, let's say, Q4? Or will it go to next fiscal?

So there are plans. We have approvals in place from our Board, from the government, RBI, shareholders. So approvals are in place to go for a fundraise. Within this FY, we will definitely -- we are looking at the opportune time and opportune mode to do that. And the one aspect that I would like to share here is while the capital adequacy stands at almost 18%, which is our guidance to maintain it going forward, and yes, 193 bps that we have consumed. But if I factor in the profitability of these 2 quarters, my CRAR improves by another 1.72%. So this is one thing. And coming back to your fundraise query, yes [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management once again. Please stay connected while I rejoin the management. Thank you. Ladies and gentlemen, thank you for your patience. The management line is facing some technical problems. So please stay connected while they fix the problem. Thank you. Ladies and gentlemen, we have the management line reconnected. Sir, please go ahead.

So my apologies. I think we have been able to identify the slag and hopefully, the call should not get interrupted, but please bear with us. And so we were trying to explain the capital raising question. Yes, there are definite plans. I have INR 7,500 crores of approval from the Board within which equity is INR 5,000 crores, the rest is debt. And at the opportune time in the FY -- remaining FY, we would definitely like to take a call on this. And opportune mode, we will use to go for the fundraise. That's the two reasons for us.

Sir, just to ask, would you be raising the entire INR 5,000 crores or it will be like INR 2,500 crores kind of a number?

So since this enabler is there and we take it from the beginning of the year, so that approval is on the higher side. If you ask me, with the healthy CRAR of 18%, there is no urgent emergent need for raising the growth capital. But going forward, our guidance is to maintain at this healthy level. And that makes the case for going for a capital raise to fund the growth that we are fast clocking. And the branch expansion reaching out to new geographies is only helping us with more and more business opportunities coming to the bank. And the second -- one of the reason with us is that we started the last FY with the Government of India holding standing at 86.46%. With the last rate, it has come down to 79.6%. So it is below 80% now. To comply with the SEBI MPS norm, we have just to complete this tranche of 4.62%. And once that is happening, we are seeing -- complying with the SEBI guidelines of minimum public shareholding. So these two reasons are very much there, which will be -- which are there in our mind. And at the opportune time, we are definitely going to decide to do this effort within this FY.

[Operator Instructions] We take the next question from the line of Suraj Das from Sundaram Mutual Fund.

Am I audible?

Yes. Please go ahead.

Sir, two questions. First one, your agri GNPA has increased quite a lot over the last 1 year, and the number is touching almost 10% now. Anything specific that is happening there or any particular state or anything there? That is question one. Question two, sir, your comment on ECL, any impact there on both the credit cost or the asset quality side as well as on the fee income side, because now I think fee will be amortized? So these are my two questions.

So there are two elements of your question, if I've understood correctly. One is the increase in the agricultural NPA. Second is on fee income. And what was the third part? Credit cost. So this is again...

Sir sorry, fee income and credit cost is in the context of ECL.

Understood. So ECL, I will take that and agri NPA. So agri NPA, this again is a conscious strategy to recognize the issue and then go ahead and resolve it. So although what we have seen is the first half of the year and more particularly the first quarter, we would see some slippages in the agri segment. But we had also been trying to rebalance our agriculture loan book. As I was mentioning a little while ago that what is the segment of agriculture that we will be looking at. So my [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management once again. Please stay connected while I rejoin the management. Ladies and gentlemen, we have the management line reconnected. Sir, please go ahead.

So we were discussing agricultural NPA. What we have seen some agriculture stress in some pockets, in some branches where we have seen incessant rains and flooding, and those kind of small, small issues. At the holistic level also, I've mentioned about we are rebalancing our agri book and taking it towards the investment credit side. So we were a little slow in doing the production KCC credit for some time. We had consciously decided to have the underwriting in one level above, not allow the branches. So somehow the portfolio in terms of volume has not grown. So denominator actually reduced and the NPA stays there. And you see the percentage slightly going up. So this is one. Also the RBI guidelines on classifying your advances, gold loan advances and agriculture had gone some changes. And then again, it has gone for some change. So that's how a lot of our agriculture classified gold loans, we had marked them as nonpriority to comply with the RBI guideline. And it was a substantial number. So in real terms, nothing has happened in the agricultural NPA, but this rebalancing plus this RBI guidelines undergoing a change, which again, now up to 2 lakhs, they have -- RBI has permitted. And we are again able to reclassify that to the agriculture gold loans because anything and everything that is getting to be done has to be compliant with what the regulator expectations, regulatory guidelines are. That is first and foremost requirement. So this is how the agriculture NPA for the moment is looking elevated, but we are very consciously working on it. And going forward, we don't see any major challenges. Our strategy may take a quarter or 2 when we are onboarding fresh advances, big ticket advances in the agri segment, and we are able to build the denominator also. So you will see the percentage also normalizing in this -- in the following quarter. Coming to the next question is ECL. ECL calculations, once it was indicated as something as a forthcoming guideline. So the broad number is there with us, INR 2,500 crores. We had already started proactively providing for ECLs provisioning. I am holding in my balance sheet, INR 250 crores of ECL provision. But what -- if I give you a sense of it, it is INR 2,500 crores to be maintained from 1st April 2027 to 2031, 31st March. So there is a glided path available. The number is requiring me to provide INR 100 crores to INR 125 crores every quarter towards ECL, which is a number which is very well managed, and we can -- we see absolutely no challenge in making those provisions when the guidelines are coming into effect from 1st of April. And credit cost, yes. So credit cost has seen a slight improvement in this particular quarter. Credit cost has actually come down from Q-on-Q, if you look at from 1.19% to 0.92%. So I think our new underwriting norms, which are put in place for the last 10, 12 months. Wherein even in the individual segmented loans, we are not underwriting to the subprime category. For the MSME loans, we are benchmarking our underwriting to CMR ranks given by the TransUnion CIBIL. So anything which is below the investment grade, it is not considered in the bank. So only CMR 1, 2, 3, 4 and up to CMR 5, which are defined as investment grade is what -- so we have restricted. So all these -- if I give you a sense data, home loans that have happened in this bank, this fantastic growth of 31%, 30% after we have introduced that no home loans below 681. So in the last 10 -- 12 months, what home loan sanctions have happened with [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Thank you. Ladies and gentlemen, we have the management line reconnected. Sir, please go ahead.

Yes. So I was sharing an example, an outcome of the one simple step of no underwriting in the bank below 681 in the home loan segment, one product category. So my 27% of home loan sanctions that have happened in the last 12 months are 800 and above CIBIL score category. 57% has happened in CIBIL score category, 750 and 800. So you will see the major underwriting that is happening is in the prime and the super-prime categories. So that's how in times to come, quarters to come, we will see that the slippage number, which has shown slight improvement. We are on the right track of building a loan book which is of right rated, good rated borrowers, prime category borrowers and the slippages, which is a guidance for us is to maintain below 1% we would be able to maintain it on a sustainable basis.

Sure, sir. Just one follow-up, sir. On the fee income, do you see any decline in fee income because now you have to amortize fee under the ECL versus now, I think upfronting of fee income?

So we are -- the way we are growing the credit and along with fund-based, nonfund-based. So the opportunities that we are creating for enhancing our fee-based processing charges, LCBD commission, then we have identified other areas of augmenting the fee income. We have gone for entering into new partnerships. So today, we are joined with SBI Cards, where we are offering co-branded cards, and this is one of the leading credit card companies offering best of the offerings for clients. So my clients, I'm seeing are enrolling in large numbers. We are seeing the traction, and I'm getting fee-based. So like this, a couple of bancassurance is another area. We have ramped up our partnerships in life and non-life. And these partners are in the process of onboarding, but we are also very conscious of the misselling part of it. So we are digitalizing the entire end-to-end policy issuance so that there is no chance left for any income leakage, revenue leakage and right selling practices, customers getting what they actually require. We are mindful of that. So all these elements, which contribute to enhancing our fee-based is definitely in our to-do list. And very consciously, we want to improve this parameter of performance also.

And sir, one last thing. This you have COVID provision of INR 1,200 crores also. So that INR 2,500 crores of ECL provision is after adjusting for this INR 1,200 crores or this is -- this, you can use towards this INR 2,500 crores?

So it is not just INR 1,200 crores of COVID provisioning. Today, we have adhoc provisioning in the balance sheet cushion, which is almost now INR 3,000 crores, which can be. But this is our -- every conscious strategy going by what guidance comes from the regulator also from time to time that these are the good times for the industry and all the players, entities operating within it, and we should be looking at building extra cushions and buffers in the balance sheet. So that's how we are doing it. But INR 2,500 crores, I am holding today almost INR 3,000 crores. I can do it in one go, but that's not what is the right prescription to do. INR 2,500 crores as against that, we have already built INR 250 crores, and we may follow a glided path as is also allowed by the regulator to create the provisions.

[Operator Instructions] The next question comes from the line of Siddharth Rajpurohit from Systematix Group.

Sir, first on gold loan. What will be your LTV in the agri and non-agri side?

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I reconnect the management. Thank you. [Technical Difficulty] Ladies and gentlemen, we have the management line reconnected. Sir, please go ahead.

So LTV in the gold -- yes, I got your question, sir. I'm replying to that. LTV in gold loans, the RBI guidelines are 75% at all times. So for agriculture, we have kept 85% LTV. And we have some variance within this range in the nonpriority, but wherever we get higher LTV, we offer a lesser ROI to incentivize clients to come and pay a higher rate. I mean, if they want more loan, they have to pay me a higher pricing. The pricing is tweaked towards lower -- the higher LTV, which is our safety. But in agriculture segment, we are 85%. All our product variants are following the RBI LTV norm of minimum 75% at all times.

Sir, second, on your small and medium segment. In the segment, sequentially, the NPAs have gone up. So what is the trend that we are seeing? Are there incremental pain that is in this segment? And also, if you can -- so these are numbers above INR 5 crores. So if you can give some trends that we have observed in, say, below INR 5 crores also?

So the NPA in the lower segment, we are trying to address in a long-term basis. So mostly for like Mudra segment loans, we have created digital journeys online end-to-end. So a customer can, without reaching to our branch, online make the application. The processing, the documentation and disbursement happens end-to-end online. So we work -- we do for maintaining the quality part of it that the rules we are prescribing in this digital journey, BREs are decided by the bank to see that the beneficiaries are the right kind of beneficiaries that are entering into this loan book, my system once they follow this underwriting. And our experience is whatever physical mode that we have been erstwhile doing, legacy, the loan book that is getting created through digital sanctions, end-to-end digital journeys, the quality, the stress level, everything is far, far better. So with that, the low-ticket loans, we are migrating, whether in the agri segment or in the micro MSME segment, we are all migrating to this digital journeys. Within this, we also have done a lot of co-lending partnerships, almost eight to nine co-lending partnerships we are having today. And of course, the RBI guidelines have undergone change. And I have to make it compliant now with those things, but we have built a good book through co-lending, where we are getting a reasonable pricing and we are having this co-lending and the business that happens entirely digitalized. End-to-end is digital. So there is no intervention from the branch when they are dealing with the low ticket size. So this is the broad way to look at the micro and that kind of stress that generally may be experienced in the lower segment and pricing the risk also properly.

Sir, are you seeing some incremental stress in the MSME space, of late?

So it is not something too alarming in the retail and MSME. If you ask me the stress which is there, so retail, more than 50% of book is home loans; and home loans, it is backed by mortgage. And if there is an account which is experiencing stress and tomorrow, SMA-2, it will slip to a delinquent category, we can start the recovery action very fast. And with the mortgage, I'm able to recover my dues also. And we are seeing quick upgrades also happening because since it's backed by mortgage and the value of security only appreciates. So we are not seeing any stress in that retail element. But yes [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Sir, please go ahead.

Just a final question, sir. On the MSME particularly, sir, are you seeing any incremental stress?

So MSME, in fact, if you see my absolute number, it is -- percentage terms, it has gone down from 2 -- in the presentation, if that is accessible to you, sir, MSME has the stress number -- so year-on-year, if you see, September '24 was 2.39%. It has come down to 1.73% now. If you see for my bank, I mean, the MSME portfolio is also behaving well. There's no issue.

We take the next question from the line of Akshay Badlani from HDFC Securities.

Just wanted to understand, given the fact that the ECL provisions, the impact is INR 100 crores to INR 125 crores per quarter. So what are we sensing in terms of a credit cost, like a sustainable credit cost guidance, if we could get? Also given the fact that our tax rate would get normalized also maybe to some extent in '26 or '27. So what could be the normalized credit cost range that we are looking for?

Right. So credit cost guidance has been to maintain it below 1%. And if you see September '25, we have achieved 0.92%. On a half yearly basis, it is marginally 2 basis points above, 1.02%. So I think we are seeing that the steps that we have taken to keep the credit cost in line, they are delivering the results. And this guidance number going forward also, we would be maintaining to keep the credit cost below 1%.

This is including the ECL impact as well that we will additionally provide for the next 4 to 5 years, right?

So mostly, if you see in terms of IRAC norms, if you look at my NNPA, it is 0.18%. Now to maintain that kind of NNPA number, when every quarter, every -- whenever we are encountering slippages, so as against the IRAC norm of providing 15% on day 1, we are providing 100%. So that's how my credit cost also looks elevated. But if I say from the IRAC perspective, it is ranging from 0.4% to 0.45% in real terms. If I look at as per the regulatory norms, my credit cost is 0.4%. But because of this maintaining the fine NNPA of 0.18%, I am providing 100% against the regulatory prescribed of 15%. And if you also hold -- sorry, just to add, if you also hold -- our PCR, if you see is 98.37% now. With 98.37%, I don't have the pressure of aging provisions. It's mostly book which is provided for. Minus TWO, it is also 90.37%. So with that kind of high provisioning we are holding, the aging provision pressure is also not there.

Understood. Got it. And the second question was given the fact that you have given this target of 321 branches in the next 18 months, how do we -- in which geographies are we seeing these incremental branches? Which geographies do we -- how much of it would be like non-Maharashtra, given the fact that we are looking to expand beyond Maharashtra as well? So which kind of geographies are we looking for to expand?

Today, if you ask me, Maharashtra, which is not that it is not important, the highest contributing state to the nation's GDP, we all know is Maharashtra. But our current branch presence gives us a sense that we adequately represent [Technical Difficulty]

Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Thank you. Ladies and gentlemen, we have the management line reconnected. Sir, please go ahead.

Yes. So I was responding to our branch expansion strategy. Sir, as I explained, we are adequately represented within Maharashtra. So our expansion is all beyond Maharashtra, outside Maharashtra. And if you see 12 months from now, our branch ratio was 52% Maharashtra and the other side is non-Maharashtra. That ratio has changed to 42% now in Maharashtra, rest is all outside Maharashtra. And the 1,000 branches that we have taken approval and this 321, it is all opening branches outside Maharashtra. And very consciously, we are planning our presence where two things are happening. One, there is an existing banking business potential already there. Second, the growth is also happening. So the scientific work that we have done using lot of data points, they have down to the PIN code level. So one center suppose has three PIN codes, the Kanpur city, if has three to four PIN codes, we have a recommendation from the external expert that this is a PIN code that you should be opening the branch. So where the city is expanding. So that makes a lot of sense. And so we are opening branches where the existing banking potential is there and potential for growth is also there. So our sense is that when you are going to be one another player in a mature market, it will be very difficult to get traction. But if you are going to open your shops in places where the opportunities are increasing, business is growing, you will find that there will be a scope for a new player to also garner reasonable business in the first year of operations. And we have very clear laid down metrics that if it's a metro branch, that branch, how much of business in the next 12 months of opening is that they will be expected to garner, within which what should be the ratio of advances, what is deposits. And we would expect a branch on their own to become a profit center head for us. So that's how very clearly measurable metrics for the new branches in metro, urban, semi-urban and rural. Also, if you see my business -- new business verticals that I mentioned about, they are now in this year, given five focus states, which are, of course, Maharashtra, we have a strong traction edge. We are building on that relationship through more cross-selling to the institutional clients also. But outside Maharashtra replicating our experience and handling institutional business in five focus states. If you ask me those focus states, these are the states where the central allocations are coming in big numbers. So we have done an analysis, studied the budget, the allocations, and we have a sense that there is always a scope for a new player to even garner an institutional business. So these five focus states, my new business vertical approaches and they are able to offer -- understand their needs and offer customized tech-based solutions and get that business on the board. We have got a lot of tractions from this initiative. And this year, we have only gone ahead and strengthened the vertical further with every 50 zonal offices having some extended arm of the new business vertical. So that's how we are approaching the branch expansion strategy.

Ladies and gentlemen, due to time constraint, we take that as the last question, and we conclude the question-and-answer session. I now hand the conference over to Shri Nidhu Saxena for his closing comments.

So I think there were rounds of disruptions and probably some time got consumed, but we are very actively and aggressively doing the reach out outside these quarterly calls and meeting the investors and analysts and the community as a whole, both domestic and foreign. And I think that kind of initiative will keep going on, and thank [Technical Difficulty].

Thank you. On behalf of Bank of Maharashtra, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.