Capital Small Finance Bank Limited (CAPITALSFB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Capital Small Finance Bank Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sarvjit Singh Samra from Capital Small Finance Bank Limited for opening remarks. Thank you, and over to you, sir.

Thank you, Avira. Good morning, everyone, and thank you for joining Capital Small Finance Bank Limited's Quarter 1 Financial Year '27 Earnings Call. Our financial results and the investor presentation have been filed with the stock exchanges and are available in the public domain. We trust you have had an opportunity to review the same. Joining me today are Mr. Munish Jain Executive Director; S. Mahajan, Chief Financial Officer; Raghav Aggarwal, Chief Credit Officer, Branch Banking; Sahil Vijay, Chief Treasury Officer; and Investor Relations Lead; Bharti Bhuta from our Investor Relations team and along with our IR advisers, SGA. I will begin by sharing our perspective on the operating and macroeconomic backdrop during the quarter 1 financial year '27, after which we will discuss the bank's performance and outlook in greater detail. The quarter gone by witnessed a gradually improving operating environment for the banking sector. While global uncertainties and the geopolitical developments continue to influence commodity pricing, inflation expectations and financial markets, the Indian economy continues to demonstrate remarkable resilience and remains one of the fastest-growing major economies globally. Growth continues to be supported by healthy domestic consumption, resilient rural demand, steady government capital expenditure and improving investment activity. Against a backdrop of moderating global growth, India's structural growth drivers continue to position the country favorable for sustained economic expansion. From a banking sector perspective, system credit growth remains healthy across retail, MSME and agriculture segments, while the deposit environment, though competitive, has started showing signs of normalization. The repricing of high-cost deposits across the industry is gradually easing funding cost pressures and creating a more supportive environment for margin expansion. At the same time, the government's decision to maintain interest rates on small savings schemes has helped preserve the competitive positioning of bank deposits and contributing to a great stability within the liability landscape. Against this backdrop, Capital Small Finance Bank remains well positioned to capitalize on the opportunities ahead. Our franchise continues to be anchored on 3 key strengths: a skewed and granular loan portfolio, a stable and retail-focused deposit franchise and deep relations across the semi-urban and rural markets that we serve. As we have outlined earlier, financial year '27 remains a year of profitable growth, operating lease and improving returns. The benefits of deposit repricing have started flowing through, while a strong capital adequacy and liquidity position provide us with ample headroom to support growth across all our core lending segments. Our strategic priorities remain unchanged. We continue to focus on growing our secured loan portfolio led by MSME, mortgage and agriculture segments, deepening our presence across contiguous geographies, strengthening our retail liability franchise. Having completed a decade as India's first small finance bank and over 26 years as banking institution, we believe the opportunities had to remain significantly higher than those behind us. We remain committed to create long-term value for all stakeholders through responsible banking, customer-centric innovation and sustainable financial inclusion. With that, let me now take you through bank's performance for the first quarter of financial year '27. Gross and advances increased to INR 9,074 crores registering 22% year-on-year growth, led by traction across MSME and other business loans. Total deposits for the quarter stood at INR 10,596 -- earlier from 34.7% in March 2026. Disbursements remained healthy at INR 1,009 crores during the quarter. Asset quality remained stable with GNPA at 4.47% and NNPA at 1.14%. The Net interest margin stood at 4.2%, while profit after tax for the quarter at INR 41 crores. Going forward, we remain focused on deepening customer engagement, improving productivity across our franchise, expanded selectively in semi-urban and rural markets and preserving the strong asset quality and operating efficiency. With that, I would now like to hand it over to Mr. Munish Jain, who will take you through the detailed financial and operational performance. Thank you.

Thank you, Mr. Samra, and a warm welcome to everyone on the call. I will now walk you through the key business and financial highlights for the quarter ended June 2026. As of June 30, 2026, our gross advances stood at INR 9,074 crores, reflecting sustained momentum in credit growth. On a year-on-year basis, advantage grew by 22%, while sequential growth stood at 4.5%, underscoring both consistent execution and healthy demand across our core lending segments. Disbursement momentum remains strong. Fresh disbursement during the quarter stood at INR 1,009 crores, representing 17% year-on-year growth reflecting sustained demand across key segments and the effectiveness of our distribution and underwriting capabilities. Our loan book remained firmly anchored in secured lending, -- as of quarter end, 97.4% of the portfolio was secured aligned with our retail-led and risk-calibrated approach. Importantly, 88.82% of our noncorporate book is backed by immovable property or secured against Bank FDR, reinforcing our focus on maintaining a high-quality, well collateralized and risk-mitigated portfolio. The average ticket size stood at INR 19.04 lakhs against INR 16.6 lakhs in Q1 FY '26, reflecting the granular nature of our lending our portfolio. Our portfolio continues to remain well diversified and business on segment is presently the largest segment in the portfolio, which increased to 27% of the book against 22% a year back. The mortgage segment remained stable at 45% of the total book, again around 26% a year back. Agriculture segment presently constituting around 27% against a 30% a year back and corporate exposure remained stable at 14%, reflecting a calibrated approach into well-rated corporate borrowers, consistent with our disciplined growth framework. The disbursement during the quarter continued to remain diversified with a business known accounts for 35% of the incremental disbursement mortgage constituting 21%, agriculture around 15%, while 20% towards NBFCs and large corporates with the balance comprising consumption and other loans. Encouragingly, growth outside Punjab continue to outpace the overall portfolio, advantage in non-Punjab geography, recorded over 30% year-on-year growth, highlighted increasingly contribution and scalability of our newer markets and strengthening relevance of our fallen franchise zone over core geographies. Asset quality, showing consistent improvement during the quarter, with gross NPA improved to 2.47%, improved by 28 basis points and by 7 basis points on year-on-year and quarter-on-quarter basis. Net NPA has also improved significantly and now stood at 1.14% compared to 1.24% in the previous quarter and 1.39% in the corresponding period last year. These metrics reflects prudent underwriting standards, stable portfolio performance and consistent recovery efforts. Credit cost for the quarter was 0.31%, largely in line with the last year. During the quarter, PCR has increased to 54.5% against 51.9% in Q4 FY '26 and 50.17% in Q1 FY '26. Early stress indicators also improved with SMA and SMA-2 accounts at 4.78% of the advances, down from 5.47% a year ago. supported by proactive collections and early delinquency management. On the liability side, our total deposits stood at INR 10,596 crores and continue to remain a primary source of our funding and constituting around 95% of the total outside liabilities. Deposit registered 16% year-on-year growth and 6% quarter-on-quarter growth, which is commensurating with over advance growth. the deposits continue to be retail-centric with retail deposit share remained above 90% with a rollover ratio of 90% plus. The same provided stability to our funding profit. The CASA improved to 36.7% from 34.7% in the previous quarter. underscoring the continued trust of our customers and the strength of our retail deposit engines. The cost of deposit has shown improvement during the quarter, consequent to benefit of deposit repricing on the maturities. The cost of deposits for the quarter stood at 5.6% against 5.8% a quarter back. The average credit-to-deposit ratio remained healthy with 83% in Q1 FY '27 compared to 80.9% in Q1 FY '26. Our balance sheet remained well capitalized and liquid. The capital adequacy ratio stood at 21.6%, providing sufficient headroom to support the future growth. The average liquidity coverage ratio for the quarter was at 184.18% reaffirming our conservative approach to liquidity and risk management. As of June '26 our branch network expanded to 116 branches across 5 states and 2 union territories, strengthening our presence in rural and semi-urban markets, which remain the key drivers of the long-term growth. Turning to the profitability. Net interest income, our net interest margin has improved to 4.21% against 4.06% in the previous quarter and 4.06% a year ago. The same is supported by a decline in the deposit cost on repricing coupled with acceleration in the [indiscernible] Net interest income grew by 22% on a year-on-year basis and stood at INR 134 crores against INR 110 crores in Q1 FY '26. Noninterest income remained stable at 0.82% of the average total assets and grew by 13% on a year-on-year basis. Operating efficiency remained broadly stable with cost-to-income ratio at 59.5% compared to 60.6% last year in the same quarter. Operating margin remained strong at 2.04% against 1.94% a year ago with pre-POP, that is a pre-provision operating profit increased by 23.1% year-on-year to INR 64.7 crores against INR 52.5 crores in Q1 FY '26. Profit after tax increased by 29% year-on-year to INR 41.3 crores against INR 32 crores in Q1 FY '26 with return on assets stood at 1.3% against 1.18% in Q1 FY '26. In summary, we remain confident in our strategy and execution and committed for creating long-term value for our stakeholders while contributing meaningfully to the Indian growth journey. As we look forward, the momentum of the first quarter marks an important step step towards Vision 2029 and making us well positioned to achieve the target FY '29 loan book of INR 16,000 crore plus and 22% growth in FY '27. We expect NIM to stabilize at the current levels for the FY '27 and start further expanding, supported by improving CD ratio in the coming years. During Q1 FY '27, the benefit of deposit repricing has shown the results and cost of deposit during the quarter has declined to 5.6% against 5.8% in Q4 FY '26. We expect further ROTA expansion and targeting to make it towards 1.4% in FY '27 and 1.6% plus by FY '29. and ROE expansion to 15% plus by FY '29. Our continued focus on secured granular and profitable growth, supported by strong asset quality, robust capital levels and disciplined risk management positioned as well to deliver sustainable performance in the coming periods. The book value continued to show improving tertiary and stood at INR 327 per share, with EPS on an annualized basis of 36.4%. With that, I would now request the operator to open the floor for question and answer.

[Operator Instructions] The first question is from the line of Pritesh Bumb from DAM Capital Advisors.

Congrats on a good outlook and numbers. Sir, just a few things. One is on the MSME side, we've been seeing a strong growth. Can you give the split between for MSME between Haryana and Punjab, how has that been growing?

Pritesh, if I talk about the MSME, first I give you some color about what we are doing in as like as a business, we are targeting the middle income segment MSME, which is collateralized by immovable property. So we are a purely collateralized lender. The average ticket size of this particular portfolio is INR 28 lakh. So the growth of this particular portfolio on a quarter-on-quarter is 11% and year-on-year is 49%. The growth is well split between Punjab and Haryana. So the growth between the MSME growth within the state of Punjab versus out of state of Punjab are around near to each other. So we are growing at a similar level, MSME, both in Punjab and Haryana. So while I'm not having a handy about the MSME portfolio between Punjab and out of Punjab or Punjab and Haryana but our overall advances out of Punjab now is 25%, which was 24% a quarter back and around 21% a year back. So we are seeing a continuous traction between Punjab and out of Punjab and the portfolio in MSME is primarily a domestic consumption-led portfolio to that particular segment of the customer who are typically more dependent upon the indigenous and the domestic consumptions.

Right, right. Okay. Second question was on the provision coverage ratio, the provision itself. We've seen a slightly higher provision this quarter. Generally, we've seen that we maintain a provision coverage ratio, but seems to be from last few quarters, we have been increasing the coverage ratio. Any strategy on that? I mean, what are we thinking about it?

Pritesh our medium-term target is to bring the net NPA towards 1% level. So we were seeing some good profits or the decent profits are there. So we've taken the opportunity to increase the PCR so that we can move towards the net NPA in that direction. So now we have -- the majority of that action has been done. Now our net NPA has come towards 1.14% which was we are able to improve it significantly against 1.39% a year back and 1.24% a quarter back. So the PCR is directing towards our medium-term vision where we have mentioned over 2,029 vision to make the net NPA towards below 1% level. So that is where this particular thing is happening. And now since I see a majority of the action has been taken care now.

So we'll have a stable PCR from here on is what we're trying to mention.

Yes, we are anticipating a stable share going forward going forward. And with that stable share, we can now achieve over 1% net NPA target in a medium-term basis.

Sure. So the next question is related to this itself, it in, what are we targeting as an ROA given that our ROA has been stable at about 1.3% for a few quarters on a reported basis. So because this provision has been slightly higher and that has been, to a certain extent, restricting the overall ROA.

So we're seeing a ROA expansion both for the current fiscal and the coming period. Current fiscal FY '27, we are targeting to take it towards 1.4%, I will say the range of 1.35% to 1.4% is the range of ROA which we look forward and we look forward of further expansion of the ROA by FY '29 where we want to take it towards 1.6% plus levels. So we are fully committed towards the ROA expansion. And even if you look into the current quarter, the ROA has been expanded, which was 1.18% last year Q1, towards 1.3% and more importantly, PPOP margin, that's our pre-operating profit margin has improved from 1.94% to 2.44% during the Q1 FY '26 for '27 versus '26.

Sure, sir. And last question was how much is the headroom left in cost of deposit to be replaced? Anything left there for us?

So I still -- there is some cost of deposit is due for repricing, but that the price delta between the contracted rate versus the present prevailing rate, is not that significant. So our cost of deposit, I think the majority action has been done. Just I will say, very -- some portion is still left, but that is not very material. So material portion, which we already talked was in Q4 last year and Q1 current year, which has been taken care. So now we will see the NIM to be stabilized in the current year towards the present level of 4.2-ish level. and then look forward for further expansion of the same in the coming period with our CD ratio expansion. So with now the cost of deposit has reached to the level where we are intending to bring it around 5.6% level, so we see the repricing benefit are primarily taken care, but still there is some repricing benefit still left, which is due on Q2 FY '27.

The next question is from the line of Aditya Mundra from Mytemple Capital.

A couple of questions. Sir, so NIM, you mentioned that it will continue to remain stable at around 4.2% levels. So what will be the main because -- what it appears from the system that there's a lot of pressure on the cost of deposit and that doesn't seem to be reducing and even on the yield side, like if you hear the commentary of other banks, we're not very sure of the growth there. So what is it that is going to help us to keep our NIM stable at 4.2% this year, particularly considering the hardness of the rates for us and I hold on with other questions here.

The thing is that, firstly, as Pritesh had just discussed about the cost of deposit. Over there are statistically around INR 1,600 crores of the term deposits are getting due for repricing in Q2. which was going to give us some benefit of around 10 basis points or 12 basis points on that particular portfolio, which is around 15 -- around INR 1,597 odd crores. So I'm not taking the advantage of that. I believe that particular benefit will be taken away by the increasing cost of deposit. So that's why when I asked the first question answer, that particular thing will be counteracting each other. So there is some benefit, which we are expecting from the existing deposit, which is getting repriced versus the incremental deposit at the incremental price. So which will be counter-adjusting each other, so the benefit will be adjusting each other for the beet benefit will be stable. So we'll be seeing a stability in there. As far as the yield is concerned, yield we are already being optimized. The yield has already been reduced towards 10.9% from 11.1% last year. So just there may be some minor up and down on the yield side. And now if any trusted movement come, that will be affecting both the side of the balance sheet. Now we are not seeing any downward interest rate movement, which will not be able to pass through the deposit. And on the upward interested movement, Capital Bank balance sheet is very, very well positioned. So that the benefit on the deposit will not be accruing immediately for the whole portion, but only for the incremental whereas benefit will be coming from the advanced side. So that's giving us a comfort that for the remaining part of the current year, we will be able to maintain the NIM and start looking forward for the NIM expansion in FY '28 and '29, given the average CD ratio will also increase. We are presently reporting an average rate of 83%. And as we discussed over the last couple of calls, we intend to take it to the mid- to high 80s. So there is an efficient opportunity available for the -- expansion, which will be adding to the NIM expansion as we move forward in the coming years.

Sir, but our, most of our book is fixed, right? About half of our book is fixed rate?

Sorry to interrupt. Mr. Aditya we cannot hear you well. Could you use a microphone while asking your question?

Yes, I'm on the microphone. Sir, am I audible now?

Yes Aditya now audible.

Yes, sir. So what I am saying is that the...

Aditya the voice is getting missed -- to the extent I understand you are talking about the fixed versus floating composition of the book. if I talk about today, we have a 50% fixed rate and 50% floating rate advance book. So we have a very fair portion of a floating rate advanced book, so which will be giving us a benefit. So if we talk about -- so which is giving us a comfort to maintenance of the NIM as we move forward.

And sort of floating

Sorry to interrupt Mr. Mundra. We are not able to hear you well.

Okay. Let me fall back in the queue.

The next question is from the line of [ Sagar Shah ] from Spark PWM.

Yes. Congratulations to the company for posting such good numbers actually. Now my first question was, sir, regarding NIM expansion. So I wanted to understand as far as consumption and other loans is concerned, when we talk of auto loans, home loans, where the yield is more or less stable but do you see that as you start the share of these loans going up as you move to newer states? That is my first question related to and related to home loan -- related to the entire gross loan portfolio, what will be the mix that we are earning by FY '28 and '29 that will actually enable higher wins for you in the future?

If we talk about -- if I talk about the deposit advance mix. And if I start firstly with the question of the consumption. Let me clarify Sagar ji. Consumption loans are typically a second hook -- these are not a start point. These are the additional loans, which my existing borrower may be a business loan guy, may be a mortgage loan guy or maybe many other customers who take the additional notes. So which is constituting almost 7% for a long period now. So our consumption only stable at around 7% for a long period. And if we talk further slice of this within 7% around 2% to 3% always remain the loan against deposit or loan against securities which are typically with a very limited yield opportunity available. So consumption loans are always a top-up loan for us. So the completion of the consumption loan as a top-up loan almost remain constant across the geographies, wherever we go, whether it is Punjab, out of Punjab or that particular way. So that is the point number one. Point number two. If I talk about the mix, which we see going forward, we're being a lender who typically look forward for a production and lending that is the money which we give shall be used for the generating a cash flow for the customer or meeting is housing lead. So the 3 portfolio, which we will target our portfolio are the business loan, agriculture and the mortgage. These say things put together, typically constituting anything between 75% to 82%. So we continue to believe that will continue to remain in the similar numbers, but I'm seeing a good momentum, which is building up in the business loan segment. But in the coming period, I see a good momentum will be coming also in the LAP. So even if you look into the current quarter, our LAP portfolio, which is also a good yielding portfolio, which is around 12.7% portfolio level yield. It's growing by 5% quarter-on-quarter and 18% year-on-year. So that is another portfolio, which we're seeing getting a good traction. Within the markets, our overall growth is not that strong, not equal to the overall growth because of the housing loan, which we have also started getting back into the action. And in the current quarter, we grew it by 3% quarter-on-quarter and year-on-year, it is grow by 10% given the pricing competition from the PSB space is getting some muted. So with that thing in sight, we're seeing a good traction coming up from all the segments. And by ensuring us that we are maintaining a suitable mix which is growth oriented and also, which is oriented towards maintaining the level of the interest spread, which we target as a difference between cost of deposits and yield on advances. So which we're targeting to keep it around 5.0% or 5.1% to 5.3%. So which we are -- which we have for the coming next 1 year or so, which is giving us confidence that we can be able to do so with these metrics. And even if you look into our business own portfolio, our overall yielding now 10.5% despite the fact that our cost of deposit has reduced by 15 to 20 basis points. The here, the decline is almost negligible. It is almost stable at what we were in due a quarter back. So that's the overall portfolio mix and portfolio outlook what we look forward as we move forward.

Thank you, sir, for such an elaborate answer what -- my second question was related to actually our NIMs is concerned. You have highlighted that there will be some expansion of NIM due to the CD ratio going up? So sorry, I missed out, but what is the CD ratio that we are on, sir, and in FY '27 and FY '28

If I talk about the NIM, NIM, we're able to improve in the Q1 towards 4.21% and the primary driver of the NIM was deposit repricing, coupled with the acceleration in the CD ratio. For the remaining year, 2027, we intend to maintain or slightly improve maybe there, but almost maintaining it around 4.2% level. That is the 1 variable we are very closely monitoring. And then we will be looking for accelerating it in FY '28 and further accelerating in FY '29. Our average CD ratio in Q1 FY '27 is 83%. If I talk about the average CD ratio, here it means the daily average CD ratio that is the average of the daily average of the advantage and the daily average of the deposit. We intend and we intend to take our average CD ratio in mid- to high 80s. So there is an opportunity available to accelerate it by around 3% to 6-odd-percent. So that is the 1 opportunity which will be available for the NIM expansion because that means the assets which are presently sitting in either the investments or the interbank placements will move to the advantage and the thing which we are carrying at around 7%, 7.5% will move towards 11% carry. So which will be helping us in improving the NIM as we move forward in the coming years. So that I was trying to mean by this particular thing, Sagar, which I said in earlier.

Okay. So basically, the money that is sitting in investments in cash, that will be routed for the new states that you are eyeing, right, especially for MSME loans?

Yes. I will say so. I will not say on that money. I say composition because the balance sheet will be --, composition of the balance sheet will be moving that money will be moving instead of sitting at 7%, 7.5% carry. That will be moving towards the 10% 10.5% to 11% carry.

The next question is from the line of [ Parth Gutka ] from 361 Capital.

Sir, on the earlier participants response, you mentioned that the competition from PSU banks and the pure home loan segment has slightly come down -- now is it because -- is it because of the rates? Or is it because of the ticket size? Or is it because of the geography? Can you give some color on that trend?

So typically, if you look into the last year, FY '26, with a certain sharp decline in the report or the packing rate at ABF, where the benefit of that particular thing has not been fully transmitted to the deposit side, which restricted us or giving us a meted opportunity to lend to the housing loan, which is completely packed with the EBR and with -- accordingly, the price has substantially reduced. Now current year, the cost of deposit has reduced with the repricing did with the deposit, which we have accepted in 2025 or 2026 our first quarter being the deposit particularly accepted in the 400 days to 500 days average maturity. So our majority of the deposit will be getting repriced or I will say 90% cost of deposit will be getting repriced by the Q2. So which will be giving us a level playing field from that particular regard. So accordingly, which is giving increasing our strength to increase our proportion of the housing loan point one. Point number two, what happened? We've been in a sure specific play. We have a 74% of the branches in the family urban and rural segment. We are in middle income group plan. That is the segment which is around -- which is the annual income arening of the gentleman from INR 6 lakhs to INR 40 lakhs. And we are the housing loan, which if we talk about the over housing loan segment, that is a segment which is typically INR 20 lakhs to INR 25 lakhs average housing loan ticket. So in that particular ticket, so we start getting a good competitive strength given our deposit repricing porting and some sort of intensity of that competition in the SURU segment getting reduced. So which help us. I will not say that is completely being done. Some portion is still to be left. So that's why I will not see a very, very strong growth in housing. I will see a better growth in LAP and the business. But still, instead of not growing, we will start growing in the housing loan and which we have did also in Q1. We grew housing loan by 3%, which we were not able to grow for 1 or 2 quarters. So that is what I'm trying to say here, that housing loan has also started contributing towards the growth momentum and without affecting the yield. If we look into the yield curve of the housing loan Q1, we closed at 9.87%, which was Q4 FY '26, 9.85%. So we are able to increase the portfolio by maintaining or slightly increasing the yield curve. So this is the perspective I'd like to put forth on my side.

Okay, sir. So -- and my follow-up on that is how are -- how is the competition from the private banks or when I say private, large private banks in the mortgage segment and the MSME segment. That's my last question.

First of all, we being a middle income group segment, the our biggest competitive landscape is typically from the PSB space. And if I talk about the business loan segment, which -- and we've been targeting Tier 2, Tier 1 and Tier 3 towns in which typically the business client whose top line is typically anything between INR 1 crore to INR 25 crores to INR 30-odd crores, which is giving us a collateralization. So -- and who are domestic assumption. So our -- that is our target segment. So the competition density and our biggest play is in the ticket size of INR 10 lakh to INR 50 lakh. That is our largest play in the MSME segment, which is pushing us up. So in this particular space, if we look into the -- my universal commercial bank, private sector, universal commercial bank, others, they are targeting it, but not very, very strongly targeting. Their strong target is always above INR 1 crore average ticket. whereas our target is typically INR 10 lakh to INR 50 lakhs or maybe INR 1 lakh to INR 75 lakhs. So the competitive strategies out there are working in the favor. And if I talk about from my PSP brothers, given the service, if we talk about the consistency of the service between the urban metro and semi-urban, where we are able to have a plus over my PSP brothers. And given the pricing, we are not charging something extraordinary. We are charging slightly above the market with our service, which we are able to capture with our turnaround times. So that is been reflecting in our growth also. If you look into our business loan, which typically grow 49% on year-on-year and 11% quarter-on-quarter. And we are continuously improving it from last now 6 quarters. Every 6 quarters, you will see our business loan is growing at a much, much faster pace. which is giving us a good confidence and trust that with our service approach, with our experience, I will say it is not just the pricing. It is the overall experience, what is the turnaround time, how we behave with him, how we are transacting him. So all these things put together and with the one good customer approach, we keep on getting a multiple more customers, which is now giving us a multiplier effect. So with that thing inside, we are seeing a good traction, both in the LAP market as well as in the business loan market, which is -- which are slightly linked because these 2 customers have some connection together. So which is giving us good confidence. And from a competitive landscape also, we are well positioned. Now our cost of deposit being 5.6%. Our OpEx is 2.95x. -- so which is giving us enough opportunity, enough strength to be in the market at the right price.

[Operator Instructions] The next question is from the line of Nilanjan Karfa from TCG AMC

The first question is -- I don't know if you have addressed this question in the past, but could you talk about your agri loans? And why do they have a yield which is higher than every other segment?

So agri as a product as in the industry level is carrying this yield, which is around the level we are targeting. Let me give you some color. Firstly, what we do in agri, we are doing an agri where the farmer needs the lending, anything between INR 5 lakh to INR 35 lakh -- so our target segment is purely the segment of the farmer whose financial need or the borrowing need is INR 5 lakhs to INR 35 lakhs. In turn, we are not a lending to the small and the marginal lender farmer and neither we are a lender to the large farmer. So our target segment is the farmer whose need is INR 5 lakhs to INR 35 lakhs and our average ticket size of this particular portfolio is INR 30 lakhs. And we are not in sub INR 5 lakhs lending. So -- and which is giving us a good resilience also and giving safety cushion also. In the segment which we are targeting INR 5 lakhs to INR 25 lakh segment, the PSB market is also around 12 -- so we are typically charging 25 basis points to 35 basis points given our servicing from each of the segment and that's also in agri. So that's the way the agriculture is being getting fetched at this price, and this is consistent. If you look into any of the year's numbers, I've talked about the last 7, 8 or 9 quarters, you will find it is to be 12% to 12.5%. So that is a range which we are maintaining for a long while now.

That is fair. I have looked at the past numbers also. I'm just wanting to figure out what type of loan is there that the yield is higher, which means typically higher yield will mean a higher risk. So I'm coming from that point. What type of loan is that whoever it is, whether it is you or PSP Bank that they are charging such a high yield? What is the risk in this?

Typically, agriculture loan, what we are doing, we are doing this particular loan to the farmer for his farming need. That is the loan which is required by the farmer for the cultivation of the -- or for the sowing of the crops or for the crop purpose or for the investment needs of that relating to that particular crop. Here, what we do for the risk mitigation, point number one, we are a lender to the farmer who is a middle income farmer. That is who is not potential to any political challenges. That is which we call the look forward for the Indian domain up to 3 lakh ticket. Point number two, we are lending to a farmer who is a progressive farmer that is cultivating 3 crops in a year, but minimum 2 crops in a year so that any chart of challenging single crop is not resulting in a significant gap. Point number three, we are lending to a farmer who is must be growing minimum 1 MSP crop, but ideally 2 MSP crop so that with a higher productivity, price fluctuation doesn't come. Point number four, the agriculture loan, what -- whole of the agriculture loan which we lend is with the collateralization of LTV of 50%. So that is what we do on this regard. So the pricing is basis the various inbound risk attached with this particular portfolio. So this particular portfolio is being perceived as the risk because of thematical reasons or that type of reasons. So that's the reason this particular portfolio is fetching around 1%, 1.5% more than the overall other portfolio yields.

It's not for us, it is industry level. Your question was also similar because while the industry level, the yields are high on agriculture because of these risks, which they perceive -- so this product gets priced industry-wise like this, and we are a part of that.