Suryoday Small Finance Bank Limited (SURYODAY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Suryoday Small Finance Bank Limited Q1 FY '26 Earnings Call hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshit Jain from Arihant Capital Markets Limited. Thank you, and over to you, Mr. Harshit Jain.

Thank you. Hello. Good afternoon, everyone. Welcome to Suryoday Small Finance Bank Q1 FY '26 earnings conference call. On behalf of Arihant Capital Markets Limited, I would like to thank the management of Suryoday for giving us this opportunity to host this call. Today, we have with us the entire top management team of Suryoday Small Finance Bank, represented by Mr. Baskar Babu Ramachandran, MD and CEO; Mr. Hemant Shah, Executive Director; Mr. Kanishka Chaudhary, CFO; and Mr. Himadri Das, IR Head. I will now hand over the call to Mr. Baskar Babu for his opening remarks, and then we will open the floor for Q&A session. Over to you, sir.

[Audio Gap] Q1 FY '26 earnings call. We appreciate your time and interest. I hope you had a chance to review our financial results.

Sorry to interrupt, sir. We couldn't hear you, please say again.

Can you hear us now?

Now I can hear you loud and clear.

Yes, sorry. So I hope you had a chance to review our financial results and investor presentation, both of which are available on our website and on the stock exchanges. The bank has started quarter Q1 FY '26 on a positive note in terms of the growth in advances and deposits. The growth was driven by inclusive finance disbursement, returning back to near normalcy and the significant momentum in the mortgages on the wheels business on the asset side. On the deposit side, the growth was driven by the retail franchise as well as the digital channel. The growth in the retail franchise on the deposit side is a further step towards achieving the bank's overall mission of serving 1% of the Indian households in a meaningful manner. The NBFC, MFI sector had experienced increased asset quality pressures in FY '25, primarily due to borrower overleveraging, sociopolitical dynamics and operational challenges, factors that have prompted the industry to strengthen its risk frameworks and operational resilience. Our bank also experienced these challenges, part of which was mitigated through the CGFMU credit guarantee cover. We are also confident that there's a huge opportunity lies in inclusive finance backed by individual loans, Vikas Loan, and we'll continue to serve these customers in a holistic way. Also, the bank has been proactive in implementation of the MFIN Guardrails 2.0 in November 2024 itself, well ahead of the mandatory implementation time line. And portfolio source post November 2024 have been showing better behavior either on 3-month -- 3MoB, 6MoB et cetera. Also, it was a year of opportunity, particularly in the focused growth of our secured assets portfolio and the continued strengthening of our deposit franchise. Strategic initiatives undertaken in recent years such as investing in credit guarantee mechanisms, enhancing our digital offerings across both product deposits and lending and sharpening our focus on the MSME segment have laid a strong foundation for the coming financial year. The RBI revised PSL norms for small finance banks have also enabled institution like ours to build a more diversified and balanced portfolio. This progressive move opens up greater opportunities for us to focus on segments like MSME, micro housing and other sectors, broadening our impact on reach. In respect to Suryoday's performance for Q1 FY '26, I'm sharing only the key highlights and not elaborate numbers in details, which have been included in the investor presentation uploaded on the stock exchanges. Our gross advances stood at INR 10,846 crores, with a 20% year-on-year increase. Our deposit base stood at INR 11,312 crores, which is 39% increase year-on-year. The share of the retail deposits now stands at 82% as of June 2025 compared to 79% a year earlier, driven by the deposits garnered through the digital channel. CASA is reasonably stable at 17.7% and we aim to reach back the 20% range in the coming quarters. To the inclusive finance, current bucket collection efficiency increased from 97.5% in April '25 to 98.4% in June '25, and the current bucket collection efficiency of the last 6 months of portfolio is at 99.5%. Our current GNPA is at 8.5% as of June 2025, and NNPA is at 5.6%. GNPA stood at INR 918 crores and NNPA at INR 593 crores, against which INR 584 crores is receivable under the CGFMU scheme. In effect, the CGFMU receivable and the existing provisioning covers almost 100% of the GNPA. Some of the strategic initiatives, which were initiated a couple of years back are now beginning to yield results, such as shifting from group lending to individual lending with strengthened underwriting processes, prudent risk management practices for wider coverage of cyclical events by initiating and continuing with the credit guarantee coverage for eligible loans focused on secured and retail assets business. Currently, the deposits sourced through the digital channel stood at INR 1,000 crores with a daily run rate of INR 3 crores per day on an accretion basis. The digital sourcing channel works effectively as a customer acquisition engine and also opens up opportunities and enables us to cater to the other requirements of our customers source through this channel. We remain committed to delivering consistent improvement across all key business parameters in spite of the challenges, and a strong focus on sustainable growth, asset quality and customer-centric innovation. As we move forward, we are confident in our ability to create long-term value for all stakeholders, while staying true to our mission of financial inclusion. Thank you for your continued trust and support. And over to Harshit for questions-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Jay Chauhan from Trinetra Asset Managers.

So I just have one question, sir. You mentioned digital deposits have crossed INR 1,000 crores, with a run rate of INR 3 crores a day. So can you just break down the customer cohorts driving this inflow and some important metrics like CAC and tenable data points that would convince you to scale marketing beyond the current partnership model?

Yes. Thanks, Jay. Currently, our digital sourcing on liabilities is on account of our partnerships with the payment banks, Fino, Jio, Airtel, and these are our key partners. And on the digital fixed deposits, which are completely granular, we source through various platforms and the largest platform for us currently is Stable Money. And we are currently accruing around INR 3 crores per day, predominantly on the retail FD side. And the CAC is substantially lower than the physical mode, approximately around 35 to 50 basis points.

Understood. Understood, sir. And do you also calculate the renewable data points -- renewal data points, I mean and like customer lifetime value or something like that?

We just started in the last 6 months, as you know that it was kind of, almost doubling every quarter for the last 3 quarters. Currently, while we have INR 1,000 crores, it was less than INR 500 crores even a quarter back, which was last quarter. The renewals and all of that, we'll get to know the data only probably after another 6 months. But many customers, when they first test the platform, start with a very small deposit as low as around INR 1,000, INR 2,000 and try pre-closing it to see the efficacy of the digital platform. Once they are convinced, usually then it jumps up to INR 50,000 to INR 1 lakh and up to around INR 2 lakhs. The customer profile of the digital fixed deposits are substantially different from the regular channel in that they are digitally savvy, probably have a credit score, which is well above 750, and people kind of who have diversified savings. Not all their fixed deposits in our assumptions, as hypothesis, we'll have to test it later, really flows through a single bank. That's why usually, the deposit varies anywhere between INR 50,000 to INR 2 lakh. And the average, I think currently, we run at around close to INR 1 lakh.

The next question is from the line of Shailesh Kanani from Centrum Broking.

Sir, I had a couple of questions with regard to our secured portfolio. Now it accounts for more than 50% of our portfolio. So how is this segment shaping up, especially given that the Q-on-Q improvement is there in par 30 book over there, now it has come down to 4.3%?

Right. So as you may have noted, Shailesh, I mean the torchbearers for us is clearly CV and mortgage in that order. CV on a year-on-year basis has grown more than 50%. Mortgage has grown more than 30%. I think given the base that we have in both these businesses, our growth will continue to be quite high relative to what we plan to do in IF. And for both CV as well as on mortgage or on a 12MoB basis, our PAs are well under control. So I think we will continue to focus on these 2 lines of businesses for our retail asset secured business growth.

So I wanted to understand if there are any early indicator -- indications or signs because various partners are talking about stress in those assets. So are we seeing any signs given our exposure is on similar markets like Tamil Nadu? So I just wanted to have some color, anything on that front?

So Shailesh, overall, we are significantly outperforming the market right now for 1-year cohort or a 2-year cohort on both CV and mortgages. And it's too early because this static pool stabilizes in 36 months and -- anywhere between 24 months to 36 months. So last 3 year, anything sourced post-COVID, the portfolio is intact big and span. And we had some incidents in the past in MP in mortgage. Otherwise, we are -- the portfolio post that is completely intact.

Okay. That's helpful. Coming to unsecured portfolio, year 2 in Stage 2, we have seen a decline. Is it safe to read that slippages may have peaked during this quarter? And additionally, when can we anticipate 90-plus bucket to stabilize or potentially start declining?

Shailesh, what we're really seeing, which is really kind of heartening is at the rate of accretion to the MP is coming down quarter-on-quarter. So we are kind of seeing almost a trend going closer back to what it would have been around 6 quarters back. So hopefully, if this trend continues, then it's near back to normalcy in Q3 and probably in Q4. The reason probably from some of the early SMAs would have come down is that the current bucket collection efficiency has inched up closer to around 98.5%, 98.6% and fairly confident that the current run rate scenario, some of the buckets would have been early SMAs would have [indiscernible] into GNPA and our accretion in the current bucket is lower and hence, it's showing a percentage reduction.

So just to summarize, Q3 is where we are expecting slippages to come down meaningfully, right?

Yes. But Q2 will be lower than Q1. Q3, if that trend were to be extrapolated, I think it's kind of a big assumption that we make based on at least whatever we are seeing, the ease with which probably the -- the lesser the difficulty in terms of inching it from 98.5% to 99% gives us the reasonable confidence that if the trend were to continue, Q3 is where you would see a substantial reduction in the NPA accretion compared to Q1.

Okay. Sir, my last question is with respect to our noninterest income. I believe a portion of it would have come from the change during the quarter. So can you just highlight how it works? And additionally, the remaining part of the PSLC, we are expected to receive this year, around INR 250-odd crores, how would that flow into P&L in balance sheet?

Yes. So there are 2 parts to your question. So on the other income, this year, we made a little over INR 30 crores on PSLC. And we had a onetime gain from a sale of our investment portfolio in OMO amounting to INR 13-odd crores, right? So both of them look to be one-off for the time being. We do not expect significant money to be made in PSLC for sure in the next 2 quarters. To your question on how the claim will impact our P&L.? So what we see that all claims that we are likely to make in Q3 will be P&L neutral, it will help us reduce our headline GNPA numbers.

So basically, it would not be representing any return of pool, right?

Correct. Absolutely. Yes. All will be in respect of NPA pool.

And what would be that amount, if there is any change in that number?

We are expecting about INR 300-odd crores as the claim amount from our side in Q3.

Okay. Can I squeeze in last one more question?

Yes. Yes, sure.

In terms of wins, we have seen quite a bit of pressure. I understand because of high slippages and also because of book mix changing. Where do we see this settling? And what is the kind of guidance for future and normalized business?

So for this particular year, we will look to have a credit cost of around 1.2 one quarter. On a steady-state basis, we will be having credit costs just about -- near about 1%. And given the kind of mix that we have in the businesses today, we will continue to have the 55-45 mix between secured, unsecured.

Shailesh, that is -- it includes claims from CGFMU. If you kind of adjust the premium for it and then add it up, it will add another 50 basis points or 60 basis points to the overall credit costs. the CGFMU premium paid is also treated as a credit cost.

I was actually referring to NIMs part because NIMs have kind of fallen, NIMs, net interest margins?

Yes. So we expect that our NIMs will be somewhere between on a steady-state basis with the kind of mix that we have…

Sorry to interrupt, sir, there is a background noise.

Yes, I was not able to hear them. Is it coming from my side?

Yes, I think so, Shailesh. Can you check, see?

Yes, yes, please. Is this better now?

Yes. Can you hear us, Shailesh?

Yes, yes. I'm able to hear you now. Please.

Okay. So like I was saying, we expect the NIMs to be in the region of 7.5% to 8% with the mix that we have. We shall continue to maintain this mix of 55%, 45% between secured and unsecured.

[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Yes, Am I audible, sir?

Yes, please.

Yes. Sir, just first up, I just wanted to know, I mean, this CGFMU portfolio, I mean, our 100% of IF portfolio is covered under the scheme?

Yes. More than 98% of the portfolio is now covered under the scheme.

More than 98% of the portfolio?

Yes.

Okay. Okay. Okay. Fair enough. And in terms of normalization of credit cost, we mentioned, we expect normalization to happen from third quarter, right?

Yes, please.

Okay. Okay. Okay. Understood. And in terms of Karnataka, we have any exposure?

Yes, we do have.

Yes. 11% of our portfolio is Karnataka, so we have seen a significant improvement in the current bucket collection efficiency right from February onwards. And now it is more or less getting normal. Earlier, Karnataka used to be the best state with 99.8%, 99.7%. It is maybe 1 quarter away to get you to that earlier high current bucket. Otherwise, Karnataka is back to normalcy as far as we are concerned. And we don't focus on group loans anymore. We focus on individual loans, and we have changed our strategy 2 years back. We stated that the customer behavior has changed from group to individual, and we started focusing on the graduating customers from 2023 onwards.

Deepak, just to clarify, 11% is on the inclusive finance portfolio.

11% of IF. Okay. And we have seen significant improvement, and we see Karnataka is already back to normalcy. That's what.

We are back to normalcy. Yes.

Of the current customers.

Correct. And any other state we are seeing any kind of issue, I mean stress?

Yes. Broadly, I think other than Karnataka, whatever stress we saw, but what's not really kind of stabilized is that it has not gone back to 99.5% as it was about 6 quarters back. So it's kind of stitches anywhere between 98.2% to 98.7%, 98.8%. So Tamil Nadu was seeing some stress. I think it has been fairly stabilized, not really showing any more deterioration. What happened, happened and kind of the remaining current portfolio operates closer to the same 95% -- 98.6%, 98.7%.

Fair enough. I got it. And just my last query from my side. I mean given the direction we are seeing in terms of more slippages and improvement overall across the sector. So would it be, I mean, right to say, I mean, quarter-on-quarter, we should see improvement in our bottom line? I mean, whatever we have seen, that would be a base, and we will build upon that in coming quarters? Because if you have to reach 11%, 12% ROE, that is one trend that we need to -- might be looking at, right?

Should probably play out the way we are mentioning, Deepak. But what we do currently, including in our inclusive finance portfolio, slippages, we provide the entire amount, which is not claimable under CGMFU is approximately 23%. We don't provide 25% of 23%. We provide the entire 23.5% in the same quarter as -- sorry, 27% in the same quarter, 73% is claimable. So to that extent, whatever -- in a way, it's kind of upfronting the credit cost of the portfolio, anything which is slipping in straight away 27% and the balance 73% is what is claimable. And as you know that it is with a cooling period of 1 plus 1 year, the year of origination and then you have the crystallization year, and then the third year is when we make a claim. So to that extent as we see more or less -- lesser and lesser slippages, 27% of that straight away will be our addition to our P&L. The current trend which we are seeing, of course, taken and we'll have to take into consideration, already 15% to 20% of the customers across board in the industry and even to us, it's no different, already has slipped into the GNPA. So what we are really talking about from now on is the customers who have been through including this stress cycle and have been paying reasonably well. And hopefully, once it stabilizes at 99.5%, things will be far, far different from what we have seen in the last quarters.

Correct. Correct. And what was the slippage amount in first quarter in rupees crores?

Yes. So we did around 278 -- we had INR 278 crores of slippages as against INR 308 crores that we had in last quarter of FY '25.

And do we expect substantial improvement in this number of slippage of INR 278 crores from 2Q onwards only?

Yes. Yes. We certainly expect that. So we would want that our slippages reduces anywhere between INR 50 crores to INR 70 crores in the next quarter and then the quarter thereafter.

INR 50 crores to INR 70 crores. Okay. [indiscernible] I think that's very helpful, sir. All the very best.

Okay. Thank you.

The next question is from the line of Saumil Shah from Paras Investments.

Sir, out of the INR 584 crores, which are receivable under CGFMU claim, so how much can we expect in this year and how much in the next year?

So about INR 320-odd crores will be for this year, and the rest will spill over to the next financial year.

Okay. And sir, since the industry is facing so much challenge, is there a possibility that these claims, what we have done, some of them are rejected or maybe their -- the percentage on the claim will be reduced?

Saumil, what we kind of CGMFU cover has not started what post the crisis. We started when our GNPA was in this portfolio, higher portfolio was probably less than 2%. The mathematics at that point of time pointed that the premium will be substantially higher than the claims that we would make. But nevertheless, having seen a couple of cycles, every 4 years, known, unknown factors cause it like this time. So we kind of -- I would call this as an investment, knowing fully well that it was not in terms of to have a plan to have a claim more than the premium. We would have been happier even if the premium that we paid for consecutively 4, 5 years would have been higher than the claims that we received. So our portfolio is covered near 100% in the last 2 years. And to that extent we don't -- the scheme is primarily focused in terms of ensuring that more and more households without formal credit gets included, and it's a well-funded scheme to our knowledge. So to that extent, as long as we are completely right both in letter and spirit, and including in terms of a recovery, once claim, we do not simply write off the portfolio and liquidate that. There is a collection, which happens as much as in the regular GNPA portfolio, including in this portfolio where the claim comes, and that money is returned. We actually look forward to having a track record that a substantial amount of the claims that we make, we are in a position to return it back to the credit guarantee fund by focusing on the collections as if it is our own. And I think hence, we do not, at this point of time, having made our 2 claims and getting the entire 100%, and we want to ensure that what is eligible gets covered and that we are not cherrypicking of -- based on the risk of the customer either in terms of stage or in terms of indebtedness. Across the board, we kind of cover and do not see at this point of time, anything significantly different as a claim amount receivable -- received than what we make the claim.

Okay. Then that was helpful. And so the INR 320 crores, what you are saying, will be claiming it in the third quarter or we'll be receiving it in the third quarter?

We already got INR 50 crores in Q1 as you...

So our expectation is that the claim will be fulfilled in third quarter. So we do see a reduction in the headline GNPA number by the time we report Q3.

And the day we claim, I mean, in how many months we received the amount?

It would vary, but I think with the committed time line to service is around 60 days max.

Okay. So max by fourth quarter, we can expect this INR 320 crores?

I wouldn't be able to kind of second guess for the fund, but the fact is that to make a claim, till now, at least the turnaround time has been probably much lesser than the 60-day period, which they kind of work on.

Okay. Okay. And sir, for current year, we are guiding for 1.5% to 1.6% ROA and around 12% ROE. So how confident are we to achieve it? And by next year, can we expect ROE to be north of 2.5%?

I think we'll cross this year with whatever we have really committed and fairly confident. I think towards the end of the Q4. I think with the key learning is that the guidance works in a far stable environment. In a very dynamic environment like what we have seen, we would rather kind of -- completely kind of prudent in terms of ensuring 11% to 12% and 1.5%. And we kind of have that visibility fully clear, which will be by end of Q3, we will probably be in a better position to kind of guide. That is what we intend. But to kind of say that it would happen next year would rather be a little bit too early.

Okay. Okay. And sir my final question, what would be our guidance on GNPA and NNPA number by year-end?

Overall, I think we have guided for 5 and 3. But of course, the timing of the CGFMU play is a critical thing. So it may vary. But what would be is that, by and large, we'll try to maintain the NNPA minus the CGFMU cover very close to 0%. So the rest of it will be mathematical. And hopefully, towards the Q3, Q4, we'll also start seeing in terms of us getting even from the claims that we made, and, in a position, to return it back to the trade guarantee fund.

Okay. So this 3% NNPA is after considering this INR 300 crores of claims?

No, no.

Before that. Okay. Okay, fine. All the best.

Thank you.

The next question is from the line of [ Shashi Kapoor ] from Dhauladhar Capital.

Congrats, good numbers. Just wanted to know what kind of changes we are doing in our leadership team or what kind of hiring are we -- particularly in the top leadership team?

As we speak, I think we are fairly kind of happy to state that the leadership team has been stable for -- and the leaders who are here have been in the system for more than 3 to 4 years. That is extremely important in terms of ensuring a steady growth, aligned effective leadership. So we'll probably have addition -- one addition to handle marketing and HRO and marketing specifically. Other than that, I think we are fairly on. I don't think we are really focusing in terms of -- we have hired a senior leader for customer experience, and we have hired a senior leader for retail liability products. So I think we are full up at this point of time. And the focus is in terms of ensuring that all of us contribute substantially to the overall growth of the bank.

The next question is from the line of Rahul from Trellis Investments.

Am I audible?

Yes, please.

Yes, sir.

From a slightly longer-term perspective over the next 2, 3 years, how do you see like the profitability trajectory of the secured lending business such as like housing finance or MSME? We have been active in this segment for some time, like I just want to know what's the broader vision in terms of that segment because as we are shifting from unsecured to secured mix. So I just wanted to know that.

Rahul, as you know that we've never called out saying that we'll go towards 80% secured. There is a good balance that we would like to maintain. Ideally would have preferred a 50-50 kind of very comfortable at 45%, 55% that is 45% so-called unsecured and 55% will be -- rest will be secured. Initially, we have kind of taken a focus in terms of secured, both in commercial vehicle as well as in terms of mortgages to be at reasonably closer to the near prime segment. And as we really have a portfolio, which is seasoned and fairly confident, slowly, we'll kind of inch up to kind of do a little lower ticket sizes, but the profitability will be higher than what we have built up secured. And even within the secured, since most of it is business loans and not in terms of personal LAP, the possibility of giving quasi-secured or semi-secured loan or unsecured loan has become substantially higher. We've also become liability customers. I think now we have the leadership at the top level, which handle mortgages and branch banking. We see quite a bit of benefit in terms of making customers on both sides of the balance sheet, which is both on the deposits and savings side as well as in terms of the lending side, gives us fairly good confidence in terms kind of a customer holistically and purely on a product basis. So it will stabilize, and we were very clear that, that transition will happen in a way that the P&L is not impacted by excessively moving to secured in a very, very accelerated manner.

Sir one follow-up question. When I look at the investor presentation key strategies that have played out slide. So looking at the strong growth trajectory in the Secured Retail Segment like CV and mortgage, where the portfolio has scaled from around like INR 1,000 to INR 3,800 crores like around 50% CAGR, along with stable GNPA levels. How do you see the profitability profile shaping up over the next 2, 3 years for the secured business in terms of the CV and mortgage? Because additionally, what role will be the increasing granularity and geographical diversification play in supporting such returns?

Two ways in which we can really look at it. One, if you look at the portfolio already built up, the cost of maintenance of the portfolio will be kind of substantially lower than probably -- I don't have the exact number, say probably around 100 basis points. But if you look at the cost that we are investing or the investment that we are making in terms of securing higher businesses is what really adds up to the cost. Both the businesses at double the scale at which we are at this point of time, will become ROE accretive to a point -- to an extent of probably very close to 1.5%. And the same, you can consider this as a breakeven to the ROA, we are kind of well beyond the breakeven at this point of time in both the products. And specifically, if we look at only the maintenance piece of that, it will be pretty high. But both combined investment as well as the maintenance put together inching up to ROE will be when the portfolio doubles, which will probably be 1.5 years from now.

[Operator Instructions] The next question is from the line of Siddharth Chandrashekhar, a Retail Investor.

Am I audible?

Yes, sir, please.

Sir, I have a question regarding the liability franchise. So I was going through our presentation. So we have a guidance for 40% growth in our deposit book. I was going over the branches that we have also, right? So from 2021, we have around 550 branches around, sir, and now we have around 700 branches. So what I could see is like our incremental deposit book is not coming from our branch growth or employee growth, right? So what is our -- where we are getting our -- this much amount of growth? Because the industry-wide phenomenon is there, basically 10% ROA -- or in a good case, it's 15%, right? So could you elaborate our -- what's our strategy to get this excellent amount of growth in deposit side? So you alluded to the fact like outside third-party sourcing is INR 1,000 crores, right? So I guess the remaining 90% is from our own side, so what's driving this factor?

Sir, I'll let my leader Gaurav answer the question. But before that, the fact is that we are now present only in approximately 130 of our overall branch network in terms of focused on deposits. Slowly, we are kind of enhancing our all other branches also to become a deposit focus in a smart balanced manner. We also started what we call smart banking outlets, which are 300 to 400 square feet, surrounding our main branches to cater to the big neighborhoods. Digital is incremental and over to Gaurav.

Yes. As Baskar mentioned, I think there are a couple of things apart from the digital space wherein, of course, in the last 6 to 9 months, we are seeing great results coming in. I think apart from that, I think what is helping us is the investment we have done in the last 2 years in terms of manpower. I think instead of going -- spreading ourselves, let say, currently, it is about 130 while we grow. But I think the objective has been to kind of go deep into the current geographies and of course, look at the enhanced productivity on the retail side. So I think that is something which I think has worked for us, and we kind of plan to continue for the next 2 to 3 quarters.

So ultimately, Siddharth, our base is not very high now. We are just about INR 11,000 crores and odd. So to that extent, kind of the mathematics in terms of the [indiscernible] a little be higher.

Okay. So whatever growth that we are capturing is basically from our account holders. So these are not just accessing customers just for deposits [indiscernible]?

Yes. It's large -- it's primarily retail granular. So 80% of our deposits are granular retail deposits.

Okay. Okay. I have one more question regarding our inclusive finance book. So what I could say is, I appreciate the fact that we got CGFMU for our insurance coverage. So that's a commendable job. But excluding the fact that right, if I see the performance of that specific book and if I compare it against the peers, what I could say is like maybe ours is not the worst, but still I can say like versus not -- still not the best among the peers, right? So where exactly we were [indiscernible] because in COVID also like our GNP spiked a lot, right? And now also our GNPA is spiking a lot, right? So there is some pattern like some of the peers got impacted first during COVID time and now they are a little stable. But our book got impacted heavily in both periods, right? So what are our learnings from here, and what we are trying to change to make sure that this does not happen again?

Sir, while -- well, kind of this is something which has to be seen at a little longer basis. So I do agree that in COVID, it was a little higher basically because we are -- either because of geographical concentration. But we're also very clear that this is not a customer segment where you fund it and you kind of go and collect somehow. So sometimes even on a personal basis, when you go and meet the customers, there has been a health crisis or there has been an economic crisis. Irrespective of whatever pre-analysis that you do, when they kind of get into that, it's not collected at any cost. So we are reasonably proud that in terms of any complaints in terms of the way we handle collections in the inclusive finance segment, we have not gotten into this business and are not in this business only from the point of view of high yield, high return. So there is a balance which we kind of exhibit in terms of the way we collect. And given that probably always the damage may be a percentage more than 2, but I think increasingly, what we are really seeing is that including from our GNPA customers, we are able to see collections coming back as long as we are in touch with the customer. There are a certain percentage which is migrated or for circumstantial default moving to intentional default over a period of time. I think we would probably like to work on a model where can we really treat these customers with a far more responsibility and that -- some of the times when you do a 90-plus and the write-off, it's not probably not the customer is not wanting to pay. We lose touch with the customer. This, I think one clear learning this time we have taken, and we'll attempt to do it, is it to be in touch with the customer and be in touch with the customer, and I'm sure that will kind of translate into a better collection efficiency, including for customers who have still be on the GNPA.

The next question is from the line of Ashlesh Sonje from Kotak Securities.

Sir, firstly, can you just share the micro finance slippage number, please?

Okay. Okay. So out of the INR 280 crores of slippages that we have at the bank level, INR 240 crores is on account of micro finance.

Okay. Sir, can you share some qualitative commentary on the situation on the ground today, specifically in terms of borrower leverage and how the market is performing in terms of disbursements?

So overall market has slowed down in terms of disbursal. So you can clearly see muted portfolio across. So players like us who are focusing on the graduating customers and on continue to play and continue to grow, so we can -- like we have gone back to the more or less same disbursal numbers of Q1 FY '25 as this quarter. And our individual loans are actually become now 2/3 of our overall IF portfolio. So we can clearly see the market is having a challenge and the group behavior. So the group model, like Baskar has called out a couple of years back, group model has inherent inbuilt operational challenges now at a design level because earlier in a group, we used to have 12 to 15 members minimum. Most of the groups used to be more than 15. And the economies of scale, productivity used to be there. And there was a good meeting point for the customers to come and gather on a given day in a month. Now it's no more the activity, and there are 20-plus lenders in most of the pin codes. So that's the primary thing. Market is definitely moving. There are always -- even in the worst of the time, the 80% of the customers are good. So we just need to pick and choose the customers. So from a qualitative point of view, internally, we are clearly focusing on graduating customers and not only existing customer -- Suryoday graduating customers, but also MSA industry graduating customers. So our NTB Vikas Loan started from the month of January. Now we have built a portfolio of almost INR 200 crores after NTB Vikas loans. It's too early. However, bounce rate is low single digits, and we continue to collect all the money through standing instruction in the savings account.

Got it, sir. And specifically around the household leverage situation to you, how do you see the -- what is the situation of those borrowers, which you would have probably stopped disbursing or would have flown to NPA because of higher leverage? Do you see those customers also getting access to any credit at this point?

Yes. For some reason, this is something we have been taking in internal MFI forums. Customers continue to get lending, not necessarily in the same name, in the household. So that's a fundamental challenge. And there are also challenges of -- during a significant period, lending was done on Aadhar numbers. And when we put voter ID, the match doesn't happen. So customers continue to get loans.

Actually there are some of the operational challenges of the industry, which the industry is working on, MFIN is working on in terms of unifying and clearly identifiable unique number for the customer. It is not Aadhar at this point of time. So we'll have to come up with -- there have been some requests made, including MFIN requesting for whether we can use the last 4 digits across. Some will come in. But at this point of time, we'll have to play prudent in terms of where there are credit bureau track record of 2 of the people at the household level. It's up to each institution to play the risk. And with overall, however, the Guardrails 2 too is getting implemented. We certainly will see some benefit, the so-called slippages, slippages is -- better to have those slippages upfront than the liquidity kind of flushing that out. So we'll see some little bit of a movement there. But overall, I think it has been very good for the industry. And I think everybody is clearly appreciative that while it is at the cost of a little bit of a business drop in a couple of quarters, it's going to probably help us in terms of building a solid portfolio. More important than that, the word spreads around, saying that only good customers will get funded probably earlier if defaulting to x, but as soon as they're good to me, I can go ahead and fund. The new Guardrails really kind of put a cap on that. That I think will be a good behavioral change for the institutions in the micro finance segment as well as for the customers.

Got it, sir. And just lastly, when you do acquire a borrower or offer a repeat loan to a borrower, do you think it is viable enough or viable enough to check the bureau report, bureau history of all the members of the household? And do you do it?

See there is a legal angle as well. So I can't really kind of take a credit bureau of all the members connected. To the extent they are coming into the deal structure, it's kind of not done. It's the applicant and the co-applicant because they sign up for it. But mostly, these are the 2 main earning members of the family.

From April 2023 onwards, it is mandatory to collect the co-applicant's KYC detail. So the entire industry collects it. So we have collected -- we have got the bureau track of the husband or the earning members of the household. So we have a significant data as far as our existing customers are concerned.

The viability of doing assessment, now I think at least all that we have seen in the last 1 year, it's much, much cheaper than to really enter and then encounter creditors across the sector.

Okay. Sorry. Just to confirm, you do check the bureau history -- you are able to check the bureau history of the applicant and co-applicant?

All of us, I think, do. That's my understanding here.

[Operator Instructions] The next question is from the line of Saumil Shah from Paras Investments.

Yes. I have a small confusion. You just mentioned to me that by year-end, we are expecting 5% GNPA and 3% NNPA. Is my understanding correct?

Yes, please.

And this INR 320 crores, which we are expecting in Q4, this NNPA is without that INR 320 crores?

Yes, that's correct.

So can I...

Yes. So basically, the claim that we will get from CGFMU goes to reduce our headline GNPA numbers, right? So as an example, if -- let's say, if I have INR 100 of NPA, I am already carrying INR 27 of provision. And I'll -- when I get the INR 73 claim from CGFMU, I use the provision and the claim to write-off.

Otherwise our NNPA is actually today also nearly 0, and so whatever guidance we have given is before considering that CGFMU claim. Otherwise, today also if you consider CGFMU claim or although the GNPA is 8%, 9%, but NNPA is nearly 0...

And since we are providing 100% for the uncovered portion, it essentially means that my net NPA is entirely covered under the guarantee.

Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments. Over to you, sir.

Yes. Thank you very much for taking time and participating in our conference call. Thank you very much for your continued support. Thank you.

On behalf of Arihant Capital Markets Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.