Fino Payments Bank Limited (FINOPB.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Fino Payments Bank Q3 FY '26 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Raashi Khatri from Go India Advisors. Thank you, and over to you, Ms. Khatri.

Thank you Swapnali. Good afternoon, everyone, and welcome to the Q3 and 9M FY '26 Earnings Call of Fino Payments Bank. We have on call Mr. Rishi Gupta, Managing Director and Chief Executive Officer; Mr. Ketan Merchant, Chief Financial Officer; and Mr. Anup Agarwal, Head of Finance and Investor Relations. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that the company faces. May I now request the management to take us through the financials and the business outlook subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

[Technical Difficulty] Ladies and gentlemen, the line for the management has been connected. Please stay connected while we connect them back.

Thank you, Raashi. A warm welcome to all of you joining us today for our quarter 3 FY '26 earnings call. I would like to begin by highlighting the most significant development till date. During the period, your bank received in-principle approval from Reserve Bank of India to transition into a small finance bank, making the first and the only payments bank to reach this milestone. This approval marks an important step in our journey and validates the work we have done over the last few years in building a compliant, scalable and resilient banking platform. On behalf of the entire management team, I would like to thank the RBI, our Board, our employees, especially our shareholders for their continued support and confidence in Fino. This development is a key inflection point as we position the franchise for its next phase of growth, allowing us to deepen customer relationships and expand our role in advancing financial inclusion in reasonable -- in responsible and sustainable manner. With the SFB license, we had multiple revenue streams to our existing business model. Over the first 9 months of FY '26, our focus have been very deliberate and consistent around quality over quantity. Whether it is a merchant, public partner onboarding, deposit growth or client acquisition, we have consciously chosen to prioritize sustainability and scalability over short-term volume-led growth. This approach becomes especially critical as we enter the SFB transition. Because the foundation we built today will define the quality of balance sheet, returns and risk profile over the coming years. And as we move closer to the SFB phase, your biggest banks strength is that we enter this journey with a strong CASA based liability of about INR 2,500 crores. Add to this, with other bank -- add to these deposits with other banks of about INR 500 crores means that we are sitting on nearly INR 3,000 crore of low cost deposits. CASA for us is not merely a funding source. It is a strategic moat. It provides us with a structurally low and scalable cost of funds, which has remained under 2% for over the 9 months period. This gives us a strong structural advantage that allows us to design the lending business very differently from any other SFB. This low cost of funds will enable us to maintain NIM of around 10% on a largely secured portfolio. This will be driven by products such as loans to MSME, affordable home loans, LAP, micro LAP and select gold loans. We will remain disciplined on loan-to-value ratios, customer selection and ticket sizes. This calibrated approach is deliberate and is aimed at ensuring predictable credit costs, which we believe can be maintained sub-1% over a cycle as the loan book scales. From a medium-term perspective, as we transition into an SFB, our aspiration is to scale the business meaningfully while continuing to maintain discipline. Our loan book aspiration is in the range of INR 8,000 crore to INR 10,000 crore by FY '30, and this growth will be paced and prudent. We expect the credit deposit ratio to be around 75% in the initial 3, 4 years. Over the medium term, our aspiration is to build toward a 20% plus ROE, driven by a low cost of funds, disciplined credit costs and operating leakage. Another important differentiator in our SFB journey is our merchant-led ecosystem. Today, we engage with over 20 lakh merchants, which gives us a deep on-ground footprint and a strong base to thoughtfully extend our credit offering and drive our sourcing over time. This model allows us to operate with lower cost -- lower acquisition cost, better customer insight and stronger engagement and collections, and we believe it will continue to remain a key structural advantage as our business scales. In summary, our key differentiator will be merchant-led asset-light sourcing model that is non-brick and mortar and limited branches and asset center to complement our existing distribution network. We are not expecting to spend more than INR 15 crores on physical infrastructure on an annual basis. On the execution front, we have crossed a critical milestone on the technology side by going live on hollow-the-core projects and migration of our core banking system to Finacle. While some stabilization is natural in any large migration, the heavy lifting is behind us. This provides us with a flexible and scalable technology backbone that allows us to launch products quickly, customize offerings and scale without proportionate increase in costs. Apart from the technology, we need to hire talent for the critical vertical which also resonates our DNA and continue to be differentiated. With this, the heavy lifting on the technology cost is over, and we expect to build the additional technology stack for SFB with about INR 100 crores over the next 1 year. As we build the SFB we are equally pushing more on our current business. We expect the current business along with growth to contribute to about 75% of the overall revenue by FY '30 -- in FY '30. Over the first 9 months of FY '26, we have continued to strengthen the quality of our customer base with CASA being the cornerstone of our strategy and the primary growth engine. During quarter 3 FY '26, average deposits grew 32% on a year-on-year basis to INR 2,496 crores, reflecting continued customer trust and deeper engagement. We added over 8.7 lakh accounts in this quarter, taking the total number of accounts to 1.68 crores. More importantly, the focus has shifted from purely accounts acquisition to balance quality. With the average CASA balance improving around 9% year-on-year to INR 1,314. Digitally active customers grew 22% year-on-year to nearly 60 lakh customers with -- while renewal income grew 19% year-on-year to INR 57 crores, reinforcing stickiness and annuity potential. Digital engagement has continued to strengthen in this financial year. Digital throughput now accounts for approximately 56% of the total throughput with digital transaction count growing 17% year-on-year to more than 89 crores in quarter 3 FY '26. In digital payment business, enhanced regulatory scrutiny across the ecosystem continued to impact throughput in this quarter as well. However, we are seeing early tailwinds in this business accordingly. We are also expanding our business reach through strategic tie-ups with payment aggregators and payment gateway partners, which we believe will support recovery led growth as and when investment -- as the environment normalizes. As on December '25, we had 347 active merchants in this segment compared to 175 in September '25. Coming to cash-led business. CMS segment continues to see moderation in revenue due to pricing competition and structural shifts. Despite the sectoral headwinds, we have seen a 3% quarter-on-quarter growth in the throughput. Traditional business comprising of remittance, AEPS, micro ATM, saw a decline in revenue by 14% as the ecosystem moves towards digital channels. These products though continue to bring in footwall and remain a hook for our new potential CASA customers. To summarize quarter FY '26 and the first 9 months of the financial have been about disciplined consolidation in preparation. We are seeing the benefits of strategy reflecting stronger CASA improving digital engagement, a healthier revenue mix and resilient margins As we move forward, our focus remains on building a differentiated, scalable and sustainable banking franchise that is well prepared for the SFB opportunity ahead. With this, I will now hand over to Ketan to take you through the financial performance in more detail.

Thank you, Rishi, and good evening, everyone. I'll take you through the financial and operating highlights for third quarter and 9 months ended FY '26. As Rishi has already outlined, the operating environment during Q3 continued to reflect a broader industry transition particularly across transaction-led business and digital. Against this backdrop, our focus remains firmly on strengthening the core value drivers of franchise, including customer engagement, disciplined cost management and readiness for the next phase of bank's evolution. From a financial perspective, this consolidation phase has been about preserving earnings quality, improving the efficiency of operating model and ensuring the further incremental scale continues to translate into sustainable profitability. During Q3 FY '26, total throughput stood at approximately INR 1.18 lakh crores, while the throughput for 9-month period reached INR 3.56 lakh crores, reflecting an 8% Y-o-Y growth. Within this, CASA and digital activity continued to show healthy momentum. During 9 months FY '26, digital throughput increased by approximately 31% Y-o-Y, taking the digital share of total throughput to 55%, up materially from the prior year, which was 46%. Over a 9-month period, digital throughput reached INR 196,740 crores, reinforcing the structural shift towards scalable and account-linked activity. This evolution is also reflected in the revenue mix. Higher-margin business led by CASA and renewal led income streams now contribute approximately 41% of total revenue, while the share of low-margin volume-intensive transaction business has declined to around 18%. This improvement in mix has translated into meaningful expansion in margins. Importantly, these revenues are supported by recurring engagement lower incremental servicing cost and operating leverage rather than pure transaction intensity resulting in greater sustainability and visibility of cash flows even in a volatile transaction environment. At the same time, legacy transaction segments continue to moderate, broadly in line with industry trends. Overall, the transaction business declined by 12% quarter-on-quarter and 40% Y-o-Y for Q3 FY '26, reflecting structural shift from cash-based transactions to UPI coupled with lower BBT inflows. CMS throughput remained under pressure due to pricing competition, take rate down to 0.16% as compared to 0.17% in Q2 FY '26, although volume increased sequentially by 3% to INR 18,850 crores. Turning to financial performance. Q3 FY '26 revenue stood at INR 394.4 crores, reflecting a sequential decline of 1% and a Y-o-Y decline of 15%. Revenue for 9 month FY '26 declined to INR 1,247.9 crores, representing 8% Y-o-Y decrease. Despite this, due to margin expansion, excluding one-offs, the profitability remain resilient. EBITDA for Q3 FY '26 stood at INR 63.9 crores, with EBITDA margin improving to 16.2%. For 9-month period, EBITDA expanded to INR 187.1 crores, with a margin expansion of over 240 basis points on a Y-o-Y basis. At the PBT and PAT level Q3 FY '26 PBT stood at INR 17.5 crores, excluding one-off, which was INR 3.1 crores, this was at INR 20.6 crores. While PAT was at INR 12.2 crores. For 9-month period, PBT stood at approximately INR 63.3 crores, including one-off, reflecting a 20% Y-o-Y decline. Operating expenses remain tightly controlled. OpEx for Q3 FY '26 stood at INR 84 crores, while 9-month OpEx increased by only 2% on a Y-o-Y basis to INR 261.3 crores. The cost-to-income ratio for the quarter stood at 33.1%, reflecting a temporary revenue moderation while underlying cost discipline remain intact. Now going towards segment, very quickly, CASA revenues in Q3 FY '26 are at INR 162.8 crores, reflecting a 17% Y-o-Y growth. For a 9-month period, CASA revenue increased to INR 476.3 crores, up by 22% Y-o-Y basis. Within this CASA renewal income increased to INR 174.9 crores in 9-month FY '26 from INR 133.9 crores in 9 months period FY '25, reflecting a 31% Y-o-Y growth. While Q3 FY '26 renewal stood at 57%, up by 19% on a Y-o-Y basis. Digital payments revenue for Q3 FY '26 stood at INR 62.7 crores, reflecting a 43% Y-o-Y decline driven by regulatory tightening and moderation in certain categories. For the 9-month period, digital revenue were at INR 232.5 crores compared to INR 255.9 crores in 9 month FY '25, representing a 9% Y-o-Y decline. Transaction-led segment continue to reflect the broader industry transition. CMS revenue in Q3 FY '26 were INR 29.6 crores, declined by 27%, while 9 months revenue stood at INR 94.9 crores, reflecting a 22% Y-o-Y decline. MATM and AEPS revenue declined to INR 35.1 crores in Q3 FY '26, a 25% Y-o-Y decline, while 9-month revenue stood at INR 117.4 crores, lowered by 14% on a Y-o-Y basis. Remittance revenues moderated to INR 34.3 crores in Q3 FY '26, reflecting a 50% Y-o-Y decline and to INR 120.8 crores for a 9-month period, reflecting 57% Y-o-Y decline, consistent with the reduced reliance on cash DMT flows as well as the ecosystem, which we have mentioned in earlier calls. A key highlight of Q3 has been the continued improvement in revenue quality, driven by the deliberate shift in mix. low-margin transaction-led business now contribute around 18% of total revenue, while high-margin business primarily led by CASA, contribute around 40%. This shift has driven a 5.4% or 540 basis points year-on-year increase in the net revenue margin. With this net revenue margin at 37.5% in Q3 as compared to 32.1% in Q3 last year. As a result, despite revenue moderation, profitability has remained resilient with Q3 EBITDA at INR 63.9 crores, up 6% Y-o-Y and EBITDA margins improving to 16.2% compared to 13% in the previous year. On a 9-month basis, EBITDA grew by 10% on a Y-o-Y basis to INR 187 crores, reflecting disciplined execution and a better mix. On SFB transition, as Rishi has already outlined, we continue to make steady progress across people, technology, governance and operating readiness. Our cost of funds of 4%, as reflected in Slide 15 of our investor deck, would be our key differentiator in SFB operations and thereby driving profitability. With this, I now hand it over back to the moderator for any questions. Thank you.

[Operator Instructions] We have the first question from the line of Anand Dama from Emkay Global.

Congratulations for the license. Sir, my question was, first related to our existing business where we are continuously seeing a downfall in our revenues because of the transaction banking business undergoing some stress, our CMS business also is down. So have you lost any bigger client over there because of the competition? If yes, if you can talk about which are the clients that we have lost, is there any pipeline to acquire new customers over there? Secondly, my question is about the -- in the presentation you've talked about that how you're going to transit into SFB by 2030. But then what's the starting point for that transition, whether we expect that to happen for FY '28? By then, we would be fully operational as an SFB. And if yes, how the run-up is going to happen? You also talked about some overnight digital float of INR 500 crores. If you can just explain what is the digital float that you're talking about.

Anand. Let me just go first question first on the CMS. Yes, I'll just quote some numbers. Q3, our revenue is INR 29.6 crores and Q2 sequentially, it was around INR 30.9 crores. So yes, it has indeed reduced on a sequential basis. However, as I mentioned in my commentary, it is more about the take rate volume and throughput during the same period, infact, has increased marginally by around INR 500 crores. So CMS, a, we do not have any -- whilst we have competition challenges. It is more about the take rate. We have not lost any kind of a revenue partner, which is coming across. So I trust that answers your CMS point. Your second one was regarding the SFB time lines, correct?

Yes, yes. And if you can just run us through like how the cost is going to be till FY '28, when you basically start up if you start from FY '28.

Okay. Thank you. Firstly, so 2 aspects, Rishi mentioned it in his commentary as well. We have around INR 100-odd crores of incremental CapEx IT investment, which would come through in year 1, we approximately have incremental INR 15-odd crores of infrastructure CapEx, which will come through. So these are the 2 CapEx. We need to be cognizant that a larger part of our business is not going to come through branches, and we've done some technology spend already. So these are the 2 aspects in terms of CapEx, which will come through or -- in the coming year. When do we intend to operationalize it? As all of you guys are aware, it is a process of -- RBI has given us a 18-month period to implement the same. We are working towards this and somewhere we're looking at the last quarter of this financial year, if everything works right in terms of preparation and working with RBI. Sorry Anand, I did not write your third question.

Yes. So no, no problem. So I think you said that this year, basically, our FY '27 fourth quarter is when you expect the final license to come back?

Yes. The in-principle license has come. Thereafter, it is a process that we have to make some preparations and then work along with RBI. And this is a time when we plan to operationalize it.

And so FY '28 is when you would -- so first quarter FY '28 is when you would want to start a full fledge SFB where you start lending business, right? Is that a correct understanding?

Yes. Yes, that's correct.

And before that, you will have to offload BC business as well or like you can continue for a while, you can get an extension?

Yes. That is the plan.

Okay. Sure. And if you can just run us through like how the FY '28 would look like in terms of SFB business in terms of operational cost or bulk of the CapEx-related costs and depreciation or people onboarding will be largely done in FY '27 itself. So FY '28, we have more of lending business coming through and the operational costs come down. If you can just take us through FY '27 and FY '28, how it should look at it?

No. So Anand, what we've essentially done, if you go to our SFB specific slides, we have put how do we expect to grow our lending business and vis-a-vis liabilities as well, where do we intend to grow, how are we turning, and I've also mentioned out what kind of a preparation, which we are doing. At the current stage, we're not putting across an FY '28 numbers, but that is something which we'll work through as well. However, our outline of our assets, liabilities, customer acquisition and more importantly, the cost of funds, all have been articulated in the investor deck.

But then, if you can just comment on FY '27, how would that lo like?

Sorry to interrupt, Anand, I would request you to rejoin queue again, as there are participants waiting for their turn. We have the next question from the line of Majid Ahamed from PinPoint X Capital.

Am I audible, sir?

Yes, you are.

Sir, my first question is you are entering the SFB space with 100% CASA funded balance sheet. Unlike most SFBs, they had to build a CASA post conversion. How does this structurally change your approach to loan pricing risk appetite and growth sequencing compared to traditional SFBs?

So thanks. It's a very fair question. We start off and Rishi mentioned it as well, we start off with an opening balance of around INR 3,000-plus crores. And if you go to Slide #15, in terms of our current model itself, we are saying that we can have incremental INR 5,000 crores. So with this, our distinct stated -- and this and our lean model, if you go to Slide #16, we are -- we've made ourselves prepared or we're preparing for a secured lending. With the cost of fund advantage which we have, and I again draw back the attention to Slide 15, where we've said approximately FY '30, we look at INR 13,300 crores of deposit at cost of funds of 3.9%, as you were alluding. And if you go to Slide #16, the kind of products which we are looking at is affordable housing, secured loans under MSME, LAP, micro LAP, gold loan. So that will constitute the major part of our lending portfolio. And that, along with these secured products, we can maintain our profitability largely because of maybe around 300 basis points advantage which we have vis-a-vis any other SFB on cost of funds. So that is our thought process in terms of leveraging our opening balance and going for a quality secured lending book.

Okay. Got it. And sir, most SFB had to clean up asset quality while building CASA. So Fino is doing the reverse, how does the change the risk profile in the first 3 to 5 years?

Can you come again with the question?

Sir, most SFB had to clean up asset quality while building CASA. So Fino is doing the reverse. How does this change our risk profile in the first 3 to 5 years?

So it's a very relevant question, and it goes to the broad genesis of the SFB also. See, as Ketan mentioned, we are a liability-first bank. So we are not carrying any -- one is that our liability book is already there, roughly INR 3,000 crores compared to many -- compared to other SFBs who came 10 years back, they didn't have any liability experience. We obviously don't have a lending experience, so for us the asset quality or the treadmill on which they were running is not there. So that is where we have mentioned in my -- I mentioned in my own remarks also that we'll build up a prudent book over a phased manner and more on the secured side. So that our target is to keep the credit cost around 1%. And that is what we are focus is also. I hope that broadly answers your question that because we are not having any opening assets, neither we are running on a treadmill where we are growing at a particular pace. We will grow it slowly but our liability will be the driver for it.

Got it, sir. Sir, final question from my side, sir. What is the realistic time line to meaningfully deploy capital into lending and start reflecting SFB level ROA and ROE in reported numbers? And what ROA and ROE should we expect in the medium term, sir?

Some of this I've attempted to capture in Slide 19. Typically, and I think Anand also asked this question, if we are looking at operations starting last quarter FY '27 or first quarter FY '28. So that's where capital would be deployed. I also draw attention to our current net worth. We are adequately capitalized for first phase of growth. ROE, we are looking at in midterm, and that's what we put it as Phase 1 on Slide #19. We're looking at a 20% plus ROE, which can come through. The reason which we earlier articulated both me and Rishi is the lean model and the cost of funds advantage which we carry across.

[Operator Instructions] We have the next question from the line of Tanmay Jhaveri from Finterest Capital.

Sir, I have a couple of questions. The first one being that what would be our medium-term guidance on the margin side? And the second question is around the cost. I mean how should we look at the cost ratio now and in the coming quarters?

So I presume you are asking this question in the context of the next couple of quarters as a payment bank.

Yes, correct.

Fair enough. So as I mentioned in my earlier commentary, our margins are at historic high in terms of 37.5%. Now that is happening due to the change in the product mix. And earlier, we mentioned our transaction old -- low-margin cash business is reducing and now CASA contributes 41% of the margin. So from here on, we can expect margins to be largely range bound in terms of the next couple of quarters. That also depends upon how our digital business, which is -- which has been a bit benign over last quarter or so, how that recovers. But largely, we expect that to be range bound. Second expect -- second question, which we are coming across is in terms of cost. Yes, our cost will -- with some challenges over our -- or some moderations over our transaction banking business, we've maintained a very high cost discipline in terms of last couple of quarters, which is reflected in Y-o-Y numbers as well as sequential numbers. We continue to do that in terms of our cost -- OpEx cost management. There might be some incremental depreciation, which we are expecting as we have just completed our Finacle project as well, and as we have mentioned it earlier. So other than that, I think the cost should be a trend line with operating efficiencies will continue.

Any ballpark number that we can assume or the estimate?

No, as I said, we've not given an estimate for the next year, but I have given the drivers how it will all work across as well. Margins, I mentioned, is range bound. Cost will be trading currently on the basis of the current trend line plus the incremental depreciation, which we may have.

Okay. And sir, just one last question, if I can squeeze in. If you can just give a breakup on how do we see the loan book shaping in terms of product mix or sourcing channels and year-wise [indiscernible]

Yes. I think, again, if I go back, whilst we have put the products which we are going across -- as Rishi mentioned, we are a liability-first bank, which we want to put across there. We have had some more details coming across how much would be low-cost liabilities at 1.7%, which is more than 60% of our portfolio. In terms of products which we have identified, how do we build that product and what will be the percentage is something which we will -- which will evolve over the next quarter or 2. However, the point to emphasize, which we are very clear is we are not going to go rampage. We are going to take a very phased and cautious approach in building our affordable housing secured loan, MSME, LAP, micro LAP, gold loan and in certain cases, personal loans.

We have the next question from the line of Dhruv Shah from Ambika Fincapital.

First of all, congratulations on getting in-principle approval for small finance bank. Rishi, my question pertains to your digital. Should we see INR 62 crores as your base now and hopefully...

Dhruv, you need to be slightly louder, unfortunately.

Is it better now?

Now it is better.

Yes. First of all, congratulations on getting the approval. My first question is pertaining to your digital revenue. When do we start seeing growth here because this year, we have seen sharp degrowth. But can we now see because your UPI contribution has also come down from the highs of 1.62% to now 1.41%. When do you see this stabilizing and growing?

So both of them are related in a way because the digital payment business from a high of INR 11,000 crores per quarter to INR 4,500 crores per quarter, has resulted in the degrowth of that UPI share also. See, let me just try to explain. See, there is no challenge as far as the growth is concerned, we have the railroads. We have the partners, there are enough and more merchants which are there in the market, more use cases are also building up on the UPI side. Last year, because of the real money gaming ban, there was some drop, which happened on account of some merchants as such, but our volume was not very high. So -- but more importantly, what is happening is that the increased scrutiny, which we have to do from LEA point of view, the regulator point of view, is affecting the onboarding of merchants, once -- one is that it slows down the onboarding. Secondly, the merchant themselves, the number of merchants, which we can onboard also comes down because we have to check now multiple things before we onboard. So in the last 1 year, there has been a big transition in terms of the entire regulation monitoring, onboarding for merchants for digital payments. And you can understand there is so much of focus from the PMO, the Ministry of Affairs, the LEAs, the regulator on the cyber digital frauds, which are happening. So that is where we have been -- not only we -- largely every bank has slowed down this business just to have a better check and control in terms of the onboarding and the monitoring of transactions. So we believe that this kind of -- while we were expecting that this number would be better from September, if you see, I mentioned also the number of merchants have gone up. We should continue to see growth on this business. But a large part of it depends on the directions which we get from the LEAs, the I4C and the regulator. So while business opportunity is there and from a technology and other points, we are all geared up to do double, triple the numbers which we have done in this quarter. But because of the heightened scrutiny, which is there and the direction which we have from the regulator, we have kept it benign on this as of now. We'll have to see how the environment changes and accordingly, we'll have to take a call on it. So it's more of a cautious approach, which we mentioned. But to counter this, what we have also started to do, there have been recent guidelines which have come from RBI as recent as in November '25, which talks about onboarding of PAPG platforms. So as I mentioned also, we are now pushing more on PAPG platforms or PAPG companies, but the revenue margins in that is very low compared to a program manager kind of a platform. So it's a calibrated approach which Ketan also mentioned.

Right. Rishi, just next question on the higher base of your CASA till 2030, I'm assuming you have projected a 30% CAGR of CASA growth. Do you think it's possible at 1.7% because then now all the banks are also coming down. I understand that you have a unique proposition. But then on a higher base, growing at 30% CASA because your whole thesis of low funding depends on your CASA growth of 30%, right?

It's a very valid question. In fact, we debated quite a bit internally on this point. See what the kind of customers, which continue to get on a payments bank are largely transactional, people who open bank accounts with us for transaction purposes. So they are nearly not looking at what is the rate of interest they're getting on a savings bank account. So they keep about INR 2,000, INR 3,000, INR 4,000 of deposits. People who have higher deposits definitely look at a higher rate of interest. So the model in which we are building it up to INR 1 lakh, we will keep the same rate of interest, which is there currently. Above INR 1 lakh, which means we move up from this customer segment to a higher customer segment, which may not be running into lakhs, like we had about 30 lakh, 35 lakh customers a year will be not of that level, will be at a much lower level, will be people who will keep more than INR 1 lakh of balance. So the moment they keep more than INR 1 lakh, I can offer them a FD kind of a saving bank account. So I don't need to change my current less than INR 1 rate of interest. I hope it kind of explain the strategy which we are working on. Is it clear?

Right. Understood, I understood. Basically, our average deposit per customer has to go up going forward. That's the main thing, right?

If you look at the buildup also on the Slide 15, first INR 6,300 crores, INR 7,300 crores comes from the payment bank current ecosystem or around that. The balance comes at 6.6%. So the 6.6% is a mix of deposits of more than INR 1 lakh, FDs, some wholesale deposits, all of that put together.

And Rishi, on the lending front, you mentioned the 90% you want to grow secured. But we have done some pilots, but what's the feedback on those pilots? And can you just elaborate by FY '28, the first year, how do you want to ramp it up to [ 10,000 ] by 2030?

See, we have done pilots. So 2, 3 things which we are working on. One is our gold loan numbers. So total numbers is roughly about INR 350 crores. So we did about INR 350 crores of disbursements in quarter 3, which is our highest disbursement on referral product till date. Of which, I would say, 95% or so would be gold loan. Around 5% to 7%, which we have built up a team of about 30 people working in some states in the country, where they are building up a affordable housing, LAP kind of a product. So they could reach a disbursement from INR 0 to INR 8 crores in, say, 3 to 4 months. I think they did about INR 8 crores or so of disbursements in December of quarter 3. So both the pilots, I would say, both on the gold loan, which has been there, where we -- total we have reached INR 350 crores. I think it's going very well. So on an average, you can say affordable housing LAP employees able to generate INR 30 lakh of new leads, which is converted into disbursements per month, which, to my understanding, is a healthy growth as such.

We have the next question from the line of Franklin Morris from Reliance General Insurance.

So currently, we have a subscription-based CASA model. So will we continue to have that model post the SFD as well?

Yes, yes. Absolutely. Nothing changes.

Okay, okay. And in terms of the LCR estimate, so basically, there is a higher stance runoff rate for CASA accounts vis-a-vis term deposits. And also the fact that if it is digitally acquired, there is a higher runoff. LCR to that extent, tends to come lower. So considering the fact that we will have a high proportion of both these in our overall liability mix, what is the kind of LCR that we have said in our estimate?

So thanks. This is a fair question. What we need to be cognizant and comes back to the Slide 15. We are running a current model where our -- whilst we only have CASA and our core book of CASA, which is a nonvolatile CASA is to the extent of around 90% plus. So what you essentially said the volatility, which can impact LCR is more attributable to a different segment for us. And as Rishi said earlier to Dhruv's question, we are continuing our current model of acquisition of the subscription base, et cetera. So we do not expect that kind of volatility coming across. This will be relatively higher core percentage of CASA is what we are looking at. And that is not out of the blue. That is the demographics of our current customers, which we will continue doing.

But any LCR number that we would...

No, we've not projected that currently the way it is there. But I just explain to you the logic of how it will be core.

Okay, okay. And finally, just to understand, like in the interim, our cost-to-income ratio would tend to increase before it starts moderating as we go forward, right? So right now, like our cost-to-income ratio is about 94%. So I just wanted to understand what's the trajectory of this cost-to-income ratio maybe in the next 3 to 4 years?

So again, this comes back someone, perhaps Majid also had a similar point earlier as well, maybe that was pertaining to how the cost is going for next year. I had explained that off. If you see our -- and Rishi mentioned in his commentary as well that if our cost of funds is around 3.9%, and our margin is around 10%, we are not going to go via a branch model or we will have limited and selective branches coming across. So we do not expect an abnormally high OpEx coming on account of SFB. How do we draw out a model in terms of profitability for 3 to 4 years? Currently, as I said, we put margins. We put assets, we put liabilities. We've also corroborated the incremental CapEx, which is essentially coming across. So that's where it will come through.

[Operator Instructions] We have the next question from the line of Manish Srivastava from Infinity Alternatives.

Am I audible?

Yes, yes. Loud and clear.

I just wanted to understand like it seems to be a very tight market for people. I mean how are we shaping up in terms of hiring plan for [indiscernible]

Manish earlier, you were extra loud and clear, and now you are...

But I understood your question. You're basically asking in terms of how is the hiring going on? And look, see, fortunately for us that we are sitting in Mumbai, which is the financial hub of the country where most of the banks, NBFCs, fintechs are there. And so there is enough and more people who are in the same city. So we don't have a challenge of getting people from a different city. Secondly, because we are building up this business from ground 0 on the asset side, there are a lot of interest which we are getting from relatively experienced people who want to be part of this journey of building up a bank where they see that overall contribution to our overall contribution from their side will be enormously much bigger and very different to look at it. So right now, key roles, which we are looking at, most of them, we have already done multiple interviews. There is already a shortlist of employees, which is there. So over the next 1 to 2 months, we plan to close the top level of hiring and then the hiring will actually go down as they keep on joining. So the challenge on hiring I don't see there is much on that side. Obviously, we have to build up a cohesive team where the culture of the DNA of the company is maintained and grow with the new people. So that part, we are also working parallelly. So from a project implementation point of view, I think a lot of work has started to happen, and we see that momentum getting built over the next 60 days as we go into the journey.

[Operator Instructions] We have the next question from the line of Harsh, an individual investor.

Am I audible?

Yes, please.

So I just wanted to understand. So you mentioned a majority of our lending will also happen through our merchants, right? I just wanted to understand how that model shapes up? Like how do you plan to implement checks and balances when you're lending through merchants?

So great question. It will require a lot of time for me to explain. But I will just give you a high-level thing. Probably we can meet and then we can discuss this in detail. So largely, what will happen is that we have a large merchant ecosystem across the country. These are merchants who are sitting in those local shopping areas and local plazas, which are there in any semi-urban, rural or metros around their towns which are there. These are people who are well connected in the ecosystem. And these are people who are aware of what is the economic activity happening around them in that geography. So they will be able to generate leads for us. Once the lead will come, the lead will go through. And we are also, as I mentioned in my last call, we are also using a lot of AI, fortunately for us as we move into more much, much deeper technology, the AI will definitely benefit us. We have, in fact, shortlisted about 8 to 9 partners already on the AI integrations, which we have to do, starting from getting the basic information, the photograph, the personal discussion and a lot of other activities from that. So a lot of that part, we expect the merchant will be able to do where there is -- it's like an [indiscernible] kind of an ecosystem. Once that is done, it will go to our asset centers, which will be positioned in kind of a hub model. And from there, whatever physical verification or anything will be required to be done will be done by our own staff. And obviously, there will be lawyers and legal counsels who will help on the validation, verification specifically on the housing kind of loan structure. So lead generation, collection of the basic information, decisioning and everything will be at the hub level and the central office level, obviously, we'll have to make some rules engines on which the entire ecosystem will work. But the large part of the leads we expect to get generated through our merchant ecosystem and fulfillment through our asset centers and through that ecosystem. I hope it clarifies at a high level, obviously, this is a much deeper process flow and everything, which will require a lot of time.

Yes, yes. Understood. And just a small clarification. So in terms of our referral loans, right, there is no -- we are not taking any [indiscernible]

So if I get your question, no, we are not taking any credit risk. As a payments bank, we can't take any credit risks. We refer it to the relevant partners, and then they take that relevance. Gold is a very operational kind of a model. I think affordable loans and LAP are more where they have to take a much more informed decision.

And will this referral business continue as we transition?

Sorry to interrupt in between Harsh. I would request you to rejoin the queue again as there are participants in the queue. We have the next question from the line of Rupesh Uttvani from Nayan M Vala Securities Private Limited.

Am I audible?

Yes.

Congratulations on the SFB bank license. I just had one small question on the CASA-related renewal income. Now you had said that you have -- there's an increase in the renewal income on a year-on-year basis. But if I look at it on a quarter-on-quarter basis, it has come down by somewhere around 8%. So is there a specific reason behind that or something if you can explain?

Yes, your observation is right. Typically, renewal income is like an annuity income, which is building and helping us, and we quoted a Y-o-Y percentage for 3 months -- for the quarter as well as 9 months. To address your point, I think our Q2 revenue was INR 62 crores, which has come down to INR 57 crores. That is largely attributable to the DBT-related aspects direct benefit transfer. So the direct benefit transfer, which came essentially from the government had reduced significantly from quarter 2 to quarter 3, and that's the trend which is showing across as well.

Okay, sir, great. And just 1 last question, if I may squeeze in. Will we be focusing on any particular demographic for the loan book? Or is it something that you haven't yet decided?

Yes, largely, we have looked at North to West and 1 or 2 states in South to start with.

Ladies and gentlemen, due to time constraint, that will be the last question for today. I now hand the conference over to the management for the closing comments.

Thank you. Thank you, Raashi, for the conference. So this quarter has been a remarkable quarter, I would say, from a long-term transition point of view of the bank. We achieved 2 significant milestones. One on the SFB, second on the technology, which sets up apart compared to any other payments bank and other SFB in the same domain. Our SFB as we explained, and a lot of it is there in the presentation, we would encourage. If there are more questions, please -- we'll be more than happy to answer that on one-to-one basis, to explain the entire thinking of our business model on the SFB side. On technology, we have migrated to the new platform, and we are expecting that the benefits of migration to a new -- next-generation platform will start coming in from the next quarter onwards as we move into this -- in a more stable and complete our other pending jobs on the entire platform as such. So a lot of activities have happened. There has been a slight drop as we saw in our business and the profitability. There is a one-off item on the labor cost also, which also affected our bottom line. But in the long-term point of view, we expect that with this big achieve -- big 2 transitions, which we are now done with, this will take us to a different level in the next 1 or 2 years and we continue to remain focused on what we want to build over the next 12 to 18 months. And hopefully, we'll build up a very differentiated bank according to the things which we have contemplated and we are building on it. And we continue to look forward to your continued support. Thank you very much, and have a nice day.

Thank you.

Thank you very much. On behalf of Fino Payments Bank, and Go India Advisos, that concludes this conference. Thank you for joining with us today, and you may now disconnect your lines.