Indian Bank (INDIANB.NS) Q2 FY2026 Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I welcome you all to Indian Bank's post results conference call for the second quarter of financial year 2026, hosted by Emkay Global. From the top management, we have with us Sri Binod Kumar, who is MD and CEO; and we have Executive Directors, including Ashutosh Choudhury Ji; Sri Bajrang Singh Ji; Sri Brajesh Kumar Singh Ji. First, I would request MD, sir, to briefly summarize the key highlights from the second quarter FY '26 results, including on the growth, margins and asset quality front. And sir, there are a lot of RBI directives which actually came through recently, including ECL directives on M&A, project financing and all. I would request if you can cover any comments on these as well in your opening remarks. Over to you, sir.

So good evening, everyone. And let me -- at the outset, I wish you, all of you and your family members very happy and prosperous Diwali, which is, I mean, only a couple of days from us, from today. Thank you, Anand. And really, I mean, a host of regulations RBI has declared on -- during this MPC. We'll discuss a few of them. As regards to the number of the bank -- as regards number of the bank, on growth side also, bank has done reasonably well. Asset quality side also, bank has done reasonably well. And profitability side, bank has done reasonably well. If you see total business has grown by 12.34% and has reached INR 13.97 trillion. And sequentially also, it has grown by 3.85%. Total CASA has also grown Y-o-Y 7.23% and sequentially 4.23%. Advances has grown by 12.65% and sequentially 3.19%. RAM has grown by 15.57%, sequentially 3.42%. We have been able to maintain CASA of around approximately at the same level as of the last quarter, 38.97% and now it is 38.87%. CD ratio is healthy less than 80%. So we have been able to maintain CD ratio also and CASA ratio also. One thing I will just share all of you, we have also sold around INR 12,000 crores of IBPC and generated fund at lower cost that will give benefit in quarter to come. Coming on the asset quality front, net profit has grown by 11.49% on an annual basis and 1.51% sequentially. Operating profit has also grown by 2.31% annually and 1.40% sequentially. Net interest income has grown by 5.74% (sic) [ 5.76% ] annually and 3.02% sequentially. We have been able -- almost able to maintain NIM at -- overall NIM, we have been able to maintain at 3.23% global NIM at the same level. Domestic NIM also only marginal decline of 1 basis point from 3.35% to 3.34%. So we have been able to contain that downward trajectory. Return on asset also, we have been able to, I mean, contain the downward trajectory, 1.34% it was in Q1, and it is 1.32 in Q2. Return on equity is 19.58%. Staff expenses almost, I mean, has seen a growth of 7.55%. Other expenses also has seen a growth of 14 -- around 8.92%. Cost-to-income ratio has gone up a little bit. But if you see in Q2 also last year also, cost-to-income ratio provides compared to Q1, it has gone up by 89 basis points. So it has gone around 48 and around 70 basis points, it has gone this quarter also, but a few expenditures were booked in this quarter, which may not be in the next quarter. So gradually, subsequently, we will be able to contain this cost-to-income ratio to our guidance level. Provision coverage ratio also increased from 98.20% to 98.28%. Credit cost, again, we have been able to maintain at 0.28% in Q1, it has come down to 0.26% in Q1 -- sorry, Q2. Yield cost of deposit has come down by 13 basis points sequentially and yield on advances has also come down 18 basis points sequentially. Capital adequacy ratio is healthy at 17.31% with CET1 is at 14.80% and AT1 other is 0.47%. Gross NPA, it has come down by 41 basis points from 3.01% to 2.60% and net NPA is at 0.16%, come down by 2 basis points. Slippage ratio, it has come down from 0.94% to 0.79%. And recovery -- recovery, again, recovery -- overall recovery is more than slippage even this quarter and since September '22, we have been able to maintain recovery more than slippage. Recovery for this quarter is INR 1,641 crores. Out of that AUC recovery is INR 607 crores. SMA book, SMA book, it has come down from 12.80% in September '24 to 7.35% in Q2. So around more than 500 basis point reduction is there. One guidance, I'm keeping all that guidance intact, I will not repeat already you must be having these numbers. One guidance I'm revising. Gross NPA guidance, I'm revising from earlier, it was less than 3%. Now it will -- we will be able to bring it down to less than 2%. So that one guidance I'm revising, maintaining rest all the guidance intact. Recovery, et cetera, also on the track against the guidance of between INR 5,500 crores to INR 6,500 crores, we have been able to recover a total of around INR 1,700 -- INR 3,700 crores, we have been able to recover so far. A few initiatives we have taken like on CASA, CASA, as I have told earlier also, CASA is a challenge. So we have taken a host of measures on increasing CASA. We have launched 6 products in the Q1. We are seeing good traction in that. We have been able to around of -- in these new products, we have been able to open around 1.77 lakh account in that category. And salary account also, we are focusing on salary account in a big way. Agriculture, if I take off the IBPC part, then my growth in agriculture is 22%. And we have taken some initiative in agriculture. We have opened 27 agribusiness sales. So purpose of that is to diversify our agriculture portfolio to food processing industry and production agriculture credit. We have also opened 2 micro branches, which cater to the need of SHG. And on -- we have seen increased use of Agentic AI-based voice calling, which we launched in the last week of the quarter, and we are seeing good traction in that, which will also help in reducing our SMA book. So coming to the point of ECL impact, still we are assessing. But one thing I will share -- I would like to share with all of you. We have made provision of SMA 1, around INR 400 crores in this quarter. So as per the definition, SMA 1 will be Stage 2. And in the draft guidelines of ECL, SMA 2 -- Stage 2 is to be -- has to make around 5% provision. So that we have initiated in this quarter. And going forward also, we will be maintaining that. ECL, we have some number, but that number, we are still working on -- once that number is finalized, we will share with all the analysts and media also. We are working on that. But one thing I will assure all of you, impact will not be very huge. We will be able to maintain -- I mean, -- maybe 5 years may not be required, maybe in 1 year itself, we can do that. So preliminary, that is the guidance. Then merger and acquisition, RBI has given direction on merger and acquisition. So that is also a good thing, I will say, that will help also give impetus to the credit demand. Only -- there are 2 challenges there I see. First, I have to see the quality of acquirer who is going to acquire. They should have sound financials and then the method of valuation. So that is the only challenge, method of valuation, how valuation of the going concern is to be arrived. RBI has also come out many ease of doing business, many things they have given like transaction account also. So there were some restrictions on the current account opening. So they have proposed some easing in that also. They have also -- AIF also a lot of easing has been done. So a host of regulation and new Basel guidelines, new credit risk guidelines are coming. So good moderation has been done on the risk weight side for rated category and also on the home loan sector, housing loan sector. So many things on MSME also. So a lot of positive things has been done, and we see a positive impact on capital adequacy of the banks on account of that and which will help in driving credit growth. Account opening, I will also touch since we are focusing on account opening. We have been able to open around 15.92 lakh account in this quarter. And good thing is that our average balance in saving fund is going up. In Q1, it was INR 25,000. In Q2, it has gone up to INR 44,000. So that is one good sign I will like to share. And corporate credit, you can see on top of it, growth is around 5%. But last day, again, I mean, that's why maybe I have been able to maintain my NIM. We are seeding some of the low-yielding advances. So because of that. Otherwise, my sanction in corporate book has gone up by -- on a half year basis, Y-o-Y, it has gone up by around 60 basis points. So good traction we are seeing in that. And NBFC exposure has also come down by around INR 6,000 crores as compared to the March. So these are the few measures we have taken. NCLT recovery has been subdued in this quarter, INR 141 crores only. Because a few of the accounts which were expected to be resolved in this quarter, maybe it will come in next quarter. But total recovery guidance and total AUC recovery guidance, I'm keeping it that intact. I'm not revising that because AUC recovery in this quarter also was INR 607 crores. So I will request my colleague, Mr. Ashutosh, to discuss about some digital initiatives what we have taken. Thereafter, we can go ahead with the Q&A.

Good evening all. Thank you, MD, sir. Till now up to Q2, we have made 132 digital journey launched. We have 166 fintech partnership for digital products and processes. Our mobile app that is IndSMART that has been rated at 4.4. We have the digital transaction growth Q-on-Q is INR 16.38 crores improvement. The mobile banking transactions, which is only financial transaction is INR 65.4 lakhs per month. And the UPI transaction has crossed INR 3 crore per day this particular quarter. The digital transaction has improved from 92% to 94%. And similarly, the branch transaction has come down from 8% to 6%. The mobile banking user base has increased 17% and the transaction has increased by 12%. The UPI user base has increased by 24% and the transaction has increased by 40%. The Internet banking has shown a little less increase, that is 6% user base and transaction has increased by 4%. The debit card user base has increased by 5% and reached INR 3.43 crores and the credit card user base has increased by 5%. So we launched this IndSMART app, which is for retail and IndSMART business MSME app. This business MSME app we launched last quarter. This has shown good traction in this particular quarter. The user base has increased to approximately 1.2 lakhs [ year ]. The log-in has increased to 1.2 lakhs and user base has increased to 5,500. The financial transaction has increased to 71,000 -- more than 71,000 amounting to more than INR 640 crores. The consolidated digital business has reached to [ INR 3,77,865 ] crores. If we analyze this particular up to Q2, the digital business has achieved [ INR 1,23,585 ] crores as against a target of [ INR 2,25,000 ] crores. Majorly, it is contributed by the asset side, which is [ INR 105,147 ] crores, rest is digital liability. If you see the digital adoption compared to Q1, we have -- we are able to maintain in almost all categories, liability, retail, agri. But if you see in the MSME category, the adoption has increased from 45% to 57%. We have introduced a couple of products. If you see the growth in that particular segment is that our digital liability business growth is 1.3x. The digital home loans is 2.2x. The digital vehicle loan is 2.1x. The digital jewel loan is 1.6x and the digital agri loan is 1.6x and digital MSME is 1.4x. We have recently launched one product, one platform called VBX in the Global FinTech Festival, that is virtual banking experience. This particular idea was conceived by MD sir. Where the customers, those who are doing banking transactions, but not coming to branch for the transaction. We identified almost 1 crore of such customers. And for them, we designed this particular platform. This platform has 3 varieties. The highest varies that [ Spark ] debit card, we have launched in this GFF with Mastercard and RuPay, which is offering unlimited launch access, then travel discounts, free OTT subscription and various lifestyle benefits there. Then in RBI ULI platform, we have introduced milk insights, a collaboration with Aavin milk in Tamil Nadu. And there are some key initiatives. We have launched our IND UPI app that is like Google and Paytm like that app. This will help us in the long term to reduce our operating -- operational costs. We have introduced cash management services for corporates in August 2025. We are also planning to introduce some new features in UPI app in collaboration with NPCI, like reset of the pin through facial recognition or facial authentication, biometric authentication for payment up to 5,000. Then we have introduced new fast charge systems in collaboration with fintech. We have introduced a new UPI QR soundbox with a T+0 settlement. We have introduced one travel card in Chennai, that is Singara Chennai Card, which is a mobility card for metro as well as other transport systems. We have introduced one cashless transaction card for IGIMS hospital partner. Similarly, we have online ticketing platform in Victoria Memorial Hall for Kolkata. We have also tied up with MCX for e-FDR facility for their brokers. Then in personalized banking, we are going to implement a CRM platform. Then we have introduced 132 digital journey that I've already told. So we have introduced android ATM. We have introduced virtual ATM. Then we have introduced PMEGP portal for Ministry of MSME. Then we are going to launch a new corporate website very soon. We are going to work out with data lake for a seamless customer experience. Then we are also getting partnership with POS aggregators. Then we are going for a mobile app transaction authenticator with voice biometric. Then with robo-advisor, we will introduce digital wealth management services. Thank you, sir. Over to you.

Yes. Thank you, Ashutosh. I think very elaborative digital initiatives that you talked about. In PS-wise typically, we don't tend to hear so many initiatives being taken. Good that basically you presented that. So now if you are okay, we can open up the floor for Q&A.

Yes, yes.

[Operator Instructions] We already have first question from Ajmera Ji.

Compliments to you, sir, and the entire team of the Indian Bank for yet another very good quarter. Very balanced kind of a quarter, even if you take on the profitability, a reasonably good profit, whether you talk about the operating profit or the net profit. Reasonably good growth on your business, whether you take it the credit growth or the deposit growth. And with this, there is no doubt that you will not only achieve the targeted numbers, but even cross them by maybe around, I think, 30%, 40% with that the way you are going. Having said that, sir, I have got some data points, some information, some small observations, and I would like to have your indulgence -- your feedback on that. One is that, sir, you said about -- you touched about that ECL provisioning and now when some of the norms are already getting cleared. And you said that for SMA 1 that you already started making provision of, I think you said INR 400 crores. So we just want to understand, sir, that what would be the -- like you said -- you also said that in 1 year itself also we can do it. So what kind of ballpark what kind of figure we are looking at additionally -- in addition to the buffer, in addition to the provision which already have, how much impact can be there, though the period of 5 years are there, you can mitigate like in 1 quarter losses and this thing. But just an idea to your bank how much on the ECL, I mean, rather hit or provisions which may be required to be made. This is just one question. I will just speak about some few more points. On the recovery from the return of accounts, sir, we have a little bit slow in this quarter as compared to INR 716 crores. We are INR 489 crores. So overall recovery target, as you said that INR 5,500 crores to INR 6,000 crores out of that you already made the half the way. But still there was a pressure in this quarter. So something on that recovery front. Then there is PSLC commission, which we earned in the last quarter also and this quarter also, whether that continuity of this kind of INR 340 crores per quarter is going to be there. Do you see that it continuously is going to be there? And one component of the income is a miscellaneous income, which has gone up from INR 114 crores to INR 536 crores. So it's a onetime, one-off kind of an income or it's a recurring income going to be on the quarterly basis. So these were the -- some of the questions on the fees and the front. And the provision also in this quarter, provisions have gone up a little bit higher. There is one item of others that is INR 57 crores, which has only made the major difference in increasing the provision in this quarter. So what is this INR 57 crore others? And is it going to be a continuous phenomena in the coming quarters? And some color I would like to have, sir, on the overall treasury book, like how much the AFS profit, which we have generated have gone to the -- directly to the balance sheet, how much profit we have accumulated from there? Because on treasury front, every bank is facing in this quarter some problem like not only -- I will say problem, but there is a reduction of the -- either you say the income from the investment or the loss of -- on the revaluation and overall investment income has comparatively has gone down as compared to the previous quarters. So these are some couple of questions and observations. Broadly, yes, on the -- going forward, on the credit side growth and the deposit and overall business growth and from where you would like to see it coming from.

So thank you, Ajmera Ji, for, I mean, very elaborative questions, and thanks for saying it's part of a good quarterly number. I will come to impact on ECL in the last. So recovery in AUC, if you remember my Q1, I have told this number -- this quarter number is exceptional. Otherwise, I was not expecting that much some account which I was expecting in the Q1 -- sorry, Q2, that has come in the Q1 itself. So whatever guidance I have given, INR 2,000 crore guidance I have given for AUC, so that is intact. And all accounts, whatever we have identified that recovery will come in these accounts. So that is intact. So there we can say last quarter number was better. That's why this quarter number is not looking good, but it is intact. PCLC per quarter, whatever we have given, we will be -- I mean, achieving that. It will be continued because PCLC income, we are not booking in 1 quarter. We are spreading it over all the quarters. So it will be same in the next quarter also. Miscellaneous income, yes, it is one-off. We have got some IT refund of around INR 1,300 crores. We have got interest on that. So on account of that, miscellaneous income has gone up. Provision of further 57 -- okay. So nonbanking asset, we have made some provision of around INR 40 crores and unhedged foreign currency INR 22 crores. So that is on account of that. Coming to your treasury book. Treasury book, yes, treasury book, there was a challenge. But if you see my treasury book, MTM loss is there, but MTM loss is basically on account of one account and resolved account. So during inspection, it was pointed out that since other banks are still maintaining provision, it will be prudent that you also maintain the provision. So we have taken INR 87 crore hit in that. So because of that, my MTM, it is showing negative. Otherwise, there is no impact on the treasury side. Of course, treasury profit has come down as compared to the last year. If you see the yield has hardened from 6.32% to 6.57% in Q2 and which that was expected that, yes, of course, because that treasury income will be challenged. The impact on AFS reserve impact on AFS reserve is around INR 500 crores. And profit -- it has around INR 221 crores has gone to profit and around ForEx profit was around INR 149 crores. So these were on your specific questions. Coming to ECL, ECL impact, as I told you, we are still working. But the initial calculation says that we will be able to -- I mean, in the first year itself, we will be able to come out of that. There are a few components. We are still working on that. Once that is finalized, then exact number because I'm giving you today some number, again, I'm revising that, that will not look good. So we are working on that. As and when this number is finalized, we will definitely like to share with all of you. But rest assured, impact will not be much, and we will be able to take that in stride.

Would you like to revise your target, sir, for the credit growth because you're already achieving a good growth and your target was only 10% to 12%. So...

Let guidance be there. We'll try to do better than that.

Next question we'll take from Mahrukh.

Congrats. Sir, a couple of questions. Firstly, what will be the outlook on NIM for the next few quarters because you've done very well on margins, but there will be MCLR repricing as well, right? So in that context, how will margins behave in the next 2 to 3 quarters if there is no rate cut? That's my first question, sir. And then I have one more.

So NIM, Mahrukh, very rightly, you told MCLR repricing around 40% of my MCLR book will reprice in the next quarter. Deposit around 21% will reprice in next quarter. So there will be some pressure on the margin, but that impact will not be very high. So like this quarter also, if you see, I have given higher reduction guidance, but we have been able to maintain at only 1 basis point. Impact will not be much, but if there is -- assume there is no further rate cut from Q4. I think it should start picking up. It should bottom -- It should bottom out.

Got it. Got it, sir. Got it. And sir, my next question is in that, of course, there was this PSU bank, [ Manthan ] and when you read the agenda or when you read the PIB press release, there was no talk about or discussion about merger. But as late as yesterday, media channels go on talking about PSU bank mergers and giving some vague list. So what are your thoughts? Is there any potential? And is it very, very long term? Is it near term? Is it medium term? How do we view this? Because it's very confusing, right? And memories of merger, I know that books are much cleaner now, but memories of mergers aren't too good. So that's why I'm asking.

Yes. See, first of all, merger has good, I will say, good to the banking industry. If you see health of the banks, all are good. So -- but there was no discussion on discount. I mean that was a huge gathering. All MDs, all EDs they were there. So such sensitive issues will not be discussed in that type of gathering. So there was no discussion on that. Maybe [indiscernible] is thinking, but I'm not aware at least.

Because media reports, even yesterday, there was a report in money control of...

I also saw that, but no discussion with us.

Next question we'll take from Mona Khetan.

Congratulations on a good quarter. So firstly, is it possible to share the SMA 1, 2 for the entire book that is including sub INR 5 crore kind of accounts?

Yes, yes, yes. You can take. I can give you. SMA 1 and 2, you are asking?

Yes.

SMA 1 is [indiscernible] and SMA 2 is INR 8,926 crores. So taken together, approximately INR 19,000 crores.

Okay. And you mentioned of INR 4 billion provisions -- INR 400 crore provisions against SMA 1 book. So this was entirely made in this quarter or includes something...

This quarter only.

Okay. Okay. And so if I have to understand your standard provisions that you have made through the quarters, where would it stand at today, barring the minimum requirements, you've been making some excess provisions, if I'm correct. What would all of this add up to if I have to look at that number today?

In fact, we have not added up because if you add up, that will give us complacency. So we have not added up. But like I told, we have started SMA 1. So -- and like last quarter also, we are asking the question, like we are also making provision for SMA 2 already, 10% we are providing. So like wherever we see that there is some requirement, we are making provision, but we have not made any attempt to add it up.

Okay. Okay. So SMA 1, INR 400 crores you've provided and SMA 2 10% provisions we've already made.

Yes.

Okay. Got that. And just on the other income bit, when I look at core fees, it's come down about 7% year-on-year despite a 14% loan growth. So what explains that the limited growth in core fee items for you?

Other income, you are talking?

Yes, the core fee income.

Other -- so minimum balance charges. minimum Balance charges we have waived. So the impact of that is around INR 125 crores quarterly.

Okay. Okay. So that is the main item. So it falls under the transaction fees?

That comes from the transaction fees. that's true.

Next question, we'll take from Nitin Aggarwal.

Congratulations on a very consistent and healthy performance. Sir, I have a question on the ECL transition. While you mentioned that you want to talk about the number later on. But just like when we have started making these provisions, this quarter, we made INR 400 crores of provisions. What kind of PCR will you look to maintain as the bank migrate to ECL? Will it remain as high as to what it is? Or will you want to take it down because such a high 93% PCR may not be really needed once banks migrate to ECL. What is the thought process on that line?

So in initial days, definitely, this 98% will look very high. But gradually, as -- I mean, long term, maybe when a bank has inherent strength, then always better to have some cushioning.

Right. So basically, the provisioning number that you are working with and are providing for is keeping the PCR level broadly unchanged in the initial days as you migrate to ECL. Is that right?

You can say so. You can say so.

Yes. Because the reason I ask is like because PSU banks today, they have materially higher PCR versus private banks, but they don't have a lot of contingent provisions. So...

But see, Nitin, if you go through the guidelines in initial days, in any case, we will have to maintain that reason they are saying account -- if account is upgraded, you cannot write it back provision also. So pooling period, they have also introduced in case of upgradation also.

Okay. Okay, sir. And sir, the other question is on the micro enterprises. How are you seeing the credit environment there? That's like a significant exposure for us and that piece we are not growing. And so when do you look to start resume growth in that space? And does this pose any asset quality-related kind of worries going down the line, not immediately, but down the line? How do you read that?

But my growth in micro is better. Out of my MSME book, growth in micro and small is better. I don't have the exact number that I can share with you.

Yes. Micro only 3.29%.

Some IBPC, we have sold out of micro. So because of that, that number is looking subdued.

Okay. So -- but otherwise, sir, how are you looking at the credit environment in this space? Because otherwise, medium and small are doing fairly strong in 25%, 30% growth. But here in overall.

There -- as you see, we are all talking about some stress in the smaller segment. So because of that, we have put some restrictions on the branches also like that they have to take administrative approval from one step higher. And if you see the slippages also happening, that is happening also in the smaller category only. So because of that, only we have kept some restrictions on that.

Okay. Okay, sir. And sir, last question is on CASA, where you mentioned that there is a pressure on CASA, but we have reported a fairly healthy growth in both CA and SA this quarter. So between CA and SA, is there any one segment wherein you are more optimistic when you look at the overall CASA growth? Because our CA mix also has been like a little over 5%. So do you see any room to grow CA mix, if not SA? Or any color around these 2 like deposit segments?

We definitely like to grow in CA, but CA is very volatile. So with some sustainability -- actually, we are working on various strategies so that we can get some CA, stable CA. Like various -- we are going for some collection accounts also, we are going for fees collection account also. We are -- and we have some good products, which is being used by many universities also. So we are trying to replicate it in other universities also. Rather my focus is on -- of course, CA is also there, but my focus is on SA. So that salary account, if you can get, that will give us good opportunity to cross-sell also. So more focus is on salary account. Of course, all accounts are welcome, but salary account, we are focusing a little aggressively.

Next question we'll take from Jai Mundhra.

Congratulations on a good numbers. Sir, first question on agri gold loan, sir, if you can quantify how much is the total gold loan at the bank and within which, how much is agri and non-agri for this quarter and maybe Y-o-Y number?

The total agri, I remember INR 1.04 lakh crores. Total is how much? INR 123. Total agri -- total gold loan book is INR 123. Out of that agri is 1.04.

Okay. And sir, if you have the number for last quarter also, Q1 FY '26 last quarter, just to get a sense.

Q1 -- I don't have a number yet available.

Sir, have you -- after the final guidelines on gold loan, wherein LTV was realized?

Yes, it is in presentation [indiscernible] loan. Agri loan nonpriority, it is there, 12,000, it was there. Presently, it is 14,000, but he's asking total. Total we'll give you.

Sure. Sir, after RBI changed the -- I mean, they have given the banks that you can change the LTV on nonconsumption loan. Have you done any change in the gold loan product that after the RBI has liberalized the LTV?

No, we have not changed. We have not changed any LTV.

Okay. Sure. And sir, on this thing, this quarter -- okay, so I'll leave it that. So that is one. Sir, on ECL, I think Nitin was also asking the same thing. I'll ask in a different way that when you say that ECL impact is manageable, and we will be doing -- we may not need to amortize. When you do that calculation, do you account for the write-back that you may have possibly from such a 90% plus PCR? Or that is the gross number that you believe is so manageable that you can do it in 1 year itself?

So no write-back also.

Okay. So that number is after assuming some write-back given the LTV.

After write-back also, yes. That's why I'm saying that's actually -- that's why I'm not giving the number. Write-back, we are still thinking. Should we take write-back, should we not? Because if you see, we have to maintain provision for the -- even if account is upgraded. So we'll have to think actually. That's why we are not saying the number. Once our number is finalized, we internally are convinced.

Right, right. And sir, the draft guidelines, I think they are silent, right? If you can write back or if you not write back? Or what is your reading? I mean, what would the draft guidelines say in terms of provisions already created? Can you write back or cannot write back any?

Guidelines does not speak anything if I have gone through correctly and understand correctly, there is no -- I mean, discussion on that point at all.

Right. Okay. And sir, on Stage 2, right, so your SMA 1 plus 2 is INR 19,000 crores, which is roughly 3% of the book. Is that a number a good proxy for Stage 2 assets? Or there would be over and above this number or lesser than this number? How should one look at Stage 2 as per draft guidelines?

I think that should be a good proxy. SMA 1 and 2 combined should be a good proxy. You can...

Upgraded NPAs will also come in Stage 2.

Yes. So upgraded -- upgraded accounts will also come under Stage 2.

But that are a very small number, right? I mean even wait for...

Yes. But SMA 1, 2 will be a good proximity for Stage 2.

Right. right. And sir, there is an improvement in SMA 2 in corporate book. Is that a state government account or...

Yes, account has gone to SMA 0. That is oscillating between 0 and 2.

So that is -- anyway, it was a state government account, right? So you have got the money, right? Is that the understanding?

Yes, yes.

Next question we'll take from Jayant Kharote from Axis.

Congratulations, sir, on a good set of numbers. Sir, first, again, going back to the NIM discussion, can you clarify that 40% number in 3Q repricing, you mentioned overall book or the MCLR book? Also for the deposit 40% of the MCLR.

MCLR book. MCLR around -- so whatever say, my MCLR book is 48%. So 40% of that will reprice in Q3. And similarly, term deposit out of total term deposit, 22% will reprice in Q3.

And sir, what is the current status of how much of the total book has already been repriced in MCLR?

In MCLR...

So Q4 will also have some bunching up.

Q4 also, yes, Q4 is also there. So you can see...

Is already repriced.

Okay. So more than you can say -- yes, around 50% to 60% has already repriced.

Okay, sir. So actually, I'm not able to get the math. If 50%, 60% is repriced and you're saying another 40% gets repriced in Q3, then Q4, we would have already repriced the whole book.

That's why I'm saying it should bottom out in Q3. Some -- see, some repricing will always happen, but rate cut has started.

3 months. Up to 3 months MCLR will keep on repricing.

1 year MCLR impact will come in Q4.

Understood, sir. Understood. But you're saying the [ bulk ] will be behind us from Q3. Is that a fair understanding?

Yes, yes.

And in TD also, you are expecting -- actually, TD can keep releasing you some gains in Q4 also.

TD bulk repricing will happen in Q4 because rate has not gone down substantially up to -- I mean, say, up to, you can say, Q1 at least, definitely, you can say. Rate has not gone down substantially.

Understood. Sir, you said there was some IT refund -- pardon my ignorance, you don't capture IT refund -- interest on IT refund in your NIMs to you by any chance? And if that was the case...

No, no, no, no. We don't know. And that comes as part of other income.

Understood. And Q3, you are expecting a steady or slight decline and then recovery in Q4?

NIM.

NIMs, yes.

Yes, yes.

Sir, second question is on credit growth. We have seen first 15 days post the 22nd GST. How is the offtake? Any products that you want to call out where the numbers are better than your expectation?

The impact, I'm getting this question from many places. But what I can say is, so far, we have seen good consumption demand and some good traction in particularly vehicle loan. So apart from that, gradually, it will come. But we are expecting good -- because of that, good traction should come in a few of the sectors like consumer goods and then vehicle loan, we should see some good traction.

Sir, mid-corporate segment, is there -- some banks are seeing some offtake towards the end of the quarter from mid-corporates. Are you seeing any of that?

Mid-corporate, of course, also mid-corporate also, there will be -- because of the consumption, there will be demand.

Sir, lastly, on capital release due to the new risk weights. Have you done any calculations? How much can it be? So the AA book will release some risk weights?

See, net-net, maybe -- I mean, very marginal increase maybe because if you see -- you have seen the 2 components. Number one, they have told that PD has to be in the range of whatever they have given range. So PD has to be in that range. If PD of the rating -- external rating agency is not in that range, then it will be a capital charge for the lower rating category will be applied. So there will be some increase there also. And one component, CCF, you have seen CCF on the undrawn portion that there also they have increased some multiplication factor. So net-net, there may not be a very substantial improvement in the capital, maybe 5 to 10 basis points.

Sir, we have one question in the chat box. And it says that you have SMA 1 and SMA 2 book somewhere about INR 19,000-odd crores, loans below even INR 5 crores. And if one assumes about 5% of that, it comes down to about INR 1,000-odd crores of provision that you will require. And of that INR 400 crores you've already done. So whether you intend to finish off the entire ECL provisioning of additional about INR 600 crores in just FY '26 itself?

No, no, if you talk of SMA 1, SMA 2 only, it is already there. SMA 2, we are providing 10%. Already providing 10% on SMA 2 and 5% we have started now in SMA 1.

Okay. So on SMA 1, basically, you should be largely done in terms of provisioning in FY '26 itself, right? That's a fair understanding.

Yes, yes, yes.

FY '27, we will not have any ECL-related impact.

Stage 2 on account of Stage 2. Because we have some impact. But Stage 2, yes.

Sure, sure. And sir, on the PSLC fees, this quarter was about INR 340 crores. You said that I think you're spreading the PSLC fees over 4 quarters. But versus first quarter, the PSLC fees obviously was better in second quarter. Now there is a change in the guideline. Do you expect this INR 340 crores, INR 350 crores kind of run rate in third and fourth quarter as well or it should go up?

No, no. I think it will be maintained at this level only because -- see, if we are not selling further PSLC during the remaining -- in the H2, there will be no addition in the PSLC income. It will be maintained at this level.

Sure. Sir, last 2 questions we'll take from the participant is one from [ Ashlesh ] and then from Bhavik.

Sir, just a clarification on the ECL part. If I understand correctly, you already have 98% PCR. You have another 5% coverage on SMA 1, 10% on SMA 2. And for which set of loans do you require any additional provisions for?

That LGD Stage 1 on a standard book, we will require Stage 1. And there, they are asking for LGD of 65%. So requirement in that segment will be higher.

Okay. And approximately, what is the coverage do you expect?

And also one component, if you have gone through on eligible collateral, normally, we are maintaining 0% risk weight. They have asked now 65% LGD -- sorry, 45% LGD. So on that account also, we will have to provide. I mean, we will have to make provisions.

Understood, Sir. And roughly, what is the coverage you will expect on Stage 1?

I didn't get you.

What ECL coverage do you expect to eventually maintain on Stage 1 loans?

It depend on how much requirement comes. Normally 1.5%. No, that is flat. Yes. Stage 1 -- it's coming around 1.5%...

Understood, sir. And the current provisions would be roughly around 40 basis points.

Yes, yes.

Congrats on a good quarter. Banks have taken out on the term deposit cut of 65 basis points. We have also taken our term deposit cut in the 1- to 3-year bucket by 60 basis points. We have also cut [indiscernible], we have also cut [indiscernible]. Sir, our MCLR cuts in 1 year bucket has only been 25 basis points versus large private banks, they have cut 1 MCLR by 75 basis points. Sir, why such a disconnect? So would we accelerate MCLR cuts going forward or we are good incrementally [indiscernible]?

No, actually, see MCLR is formula driven. RBI has given formula, we are putting input in that and whatever it is coming, we are taking that. So see -- and it is marginal cost of funding formula. So -- and if you see marginal cost of bulk deposit has gone down, but on term deposit, which is the core term deposit, which is the major component of our resources, their rate has not gone down substantially. So because of that, only MCLR reduction is a little subdued.

Okay. Okay, sir. And sir, there is a component of return on equity also in the MCLR [indiscernible]. So would we be using 18%, 20% or [indiscernible].

Return on equity around 18% to 20% we will be maintaining.

Okay. And sir, on ECL, I just wanted to confirm the INR 400 crore provision currently in your standard book, not a part of [indiscernible].

Yes, that is part of the standard book SMA 1.

Sir, we just take last question from Gaurav [indiscernible]. Maybe we can't hear Gaurav. I think [ Kunal ] was there. Kunal, you want to ask a question?

Yes. So just wanted to reconfirm. So this INR 400 crores of provisioning that is coming in the standard asset provisioning through P&L. So that's the correct assumption. So otherwise, maybe there was a write-back in the standard asset provisioning. But I think because of this line item, it is showing like almost a similar number like last quarter.

Yes, yes, there was some release in other segments. So because of that similar number, it is looking like similar number.

Okay. Okay. And just to -- maybe looking at what you are indicating, it seems like from the Stage 3 provisioning, we are not looking to allocate much of the provisioning towards Stage 1 and Stage 2, and it will be the incremental provisioning that we will create. So is that the fair assumption?

Yes, yes, yes.

So this is our concern, this is something which is being indicated.

No, no. We are -- see, what I'm saying, so account which is upgraded, write-back may not be allowed in these certain accounts. But we say we have some additional provision in Stage 3. Then of course, in final calculation, that will be taken. But if some account is upgraded, whatever upgradation, so provision of that will not be written back.

Got it. But maybe when we are looking to create Stage 1 provisioning of 1.5% and even like, say, Stage 2 provisioning, which you are already carrying at 10-odd percent. So there maybe -- so the Stage 1 can actually come from the additional provisioning, which is sitting in the Stage 3?

Stage 3, yes.

I think Gaurav is connected, sir. So he just want to ask a question. I think we can't still hear Gaurav. So I think he's put the question in the chat box, what is the miscellaneous income that you have put out? So I think you mentioned that miscellaneous income is higher because of interest on IT refund. But -- so most other banks tend to -- yes, so most other banks basically tend to put the interest on IT refund in the interest income, the other interest income. So why is that we put it into other income? And if it is so, why the other interest income is also higher?

So I mean this is an accounting policy of the bank. We are booking it under miscellaneous income.

Sir, we have seen the FAQs of RBI this one also. So there also, it is given that we have to book under other income.

Yes. And other interest income, not much difference, Anand, INR 600 crores to INR 610 crores only sequentially.

Okay, sir. So that was a question which was there from Gaurav. Yes, I think we have answered all the questions. So we'll take basically that as the last question. And with this, we can come to the end of the Indian Bank's post results conference call. Sir, you have any closing remarks to make?

I think all the points has been discussed. And whatever guidance we have given, we are on track of that. We are committed to maintain that. Only one guidance I have revised gross NPA, we have given less than 3%. Now I'm revising it to less than 2%. Rest all the guidance, and we are on track of all the -- whatever guidance we have given.

That's very helpful. On behalf of MK and the management of Indian Bank, I thank all the participants for joining and happy evening and happy Diwali.

Thank you. Happy Diwali, once again to all of you. Thank you.