The Karur Vysya Bank Limited (KARURVYSYA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Karur Vysya Bank. We have with us today the management team of KVB, represented by Mr. Ramesh Babu, MD and CEO; Mr. Sankar Balabhadrapatruni, Executive Director; Mr. Chandrasekaran, Chief Operating Officer; and Mr. Ramshankar, CFO. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, to take us through the highlights of the quarter gone by, after which we will open the floor for questions. Thank you, and over to you, sir.

[indiscernible] to all of you. On behalf of Karur Vysya Bank, I extend a warm welcome to everyone joining our bank's Q1 earnings call for the financial year 2026. Our financial results and accompanying presentations have been made available on our website, and we trust you have had the opportunity to review them thoroughly in advance of this meeting. As a summary of our discussion during Q4 call in May '25, we maintain a cautiously optimistic outlook for Financial year '25-'26, emphasizing the importance of managing margin pressures and closely monitoring asset quality. We are pleased to report that our performance indicators aligned with our previously issued guidance. Notably, we successfully front-loaded growth in the first quarter of this financial year consistent with our approach over recent years. Our sustained and inclusive results across all 3 metrics: growth, profitability and asset quality demonstrate the ongoing strength of our performance since the beginning of the year. As of 30th June 2025, the bank's total business reached INR 1,96,024 crores, reflecting our sustained growth momentum in the first quarter with an overall business increase of 5% quarter-on-quarter and an year-over-year growth of 15%. Advances rose to INR 89,374 crores, representing out of 6% quarter-on-quarter, while deposits increased to INR 1,06,650 crores, achieving a quarter-on-quarter growth of 4%. As previously indicated during the Q4 earnings call for financial year '24-'25, regarding the business mix of our advances portfolio, we have placed increased emphasis on the RAM verticals. Reflecting the strategic focus, the RAM segments have grown by 6% quarter-on-quarter, that is 20% year-on-year, now accounting for 86% of the total advances portfolio. After 2 years of negative growth, our corporate book has registered a Q-o-Q growth of 6%, although it remains negative on a year-on-year basis. Retail advances increased by 8% quarter-on-quarter primarily driven by growth in jewel loans and mortgage loans. The synergy between the brand channel and the open market channel is progressing well, as evidenced by 11% increase in mortgage loans during the quarter. The early bookings of assets supports consisted interest income generation throughout the year. Retail jewel loans registered a 23% growth during the quarter, considering the low yield and increased competition. We took a conscious call of going slow in housing loans and vehicle loans. We maintained a cautious approach towards unsecured personal loans and BNPL, buy now pay later during this period. The vertical is planning to come out with products in affordable home loans by sourcing as well as by co-lending model. It has also identified 144 branches to focus more on mortgages under the brand channel. The commercial business segment demonstrated a 5% growth over the previous quarter, driven by higher disbursements in both Small Business Group and Business Banking Group 30% quarter-on-quarter. As part of our ongoing reengineering initiative, for small business group, SBG coordinators have been appointed at divisional offices to provide an enhance its support to the branches. Despite various challenges, the agriculture portfolio recorded a growth of 4% during the quarter. Agri jewel loans constituted 91% of the portfolio, total portfolio and other agri loans constituted 9%. LTV of agri jewel loans is 64.28%, indicating availability of sufficient margins. The Reserve Bank of India has issued directions regarding lending against gold and silver collateral, which is expected to be beneficial for us. Implementation of that is currently underway. A favorable monsoon in many regions is projected to further stimulate growth in this segment. While we remain cautious regarding the MFI segment, coverage under CGFMU has commenced from April 1, 2025. The corporate and institutional loan portfolio experienced a 6% increase during the quarter, primarily driven by heightened disbursements in real estate, food processing and NBFCs. Increased growth percentage is also on account of lower corporate portfolio base. Additionally, the vertical continued to invest in corporate instruments of entities to lock the yields, utilizing these as credit substitutes. The bank's liability business constitutes to 54% of the total business of the bank. Deposit growth remains a primary strategic focus for the bank with the past 2 years featuring numerous initiatives such as the establishment of the CASA acquisition channel, enhancement in CASA products and strengthening, deepening teams in the branches to protect the ETB book. Total deposits increased by 4% during the first quarter driven by gains in both retail term deposit and CASA. CASA balances grew by 5% over the same period. The CASA acquisition team has made significant progress in acquiring premium NTB customers. Our new products contributed to 56% of the CASA NTB book growth during the quarter. The team is focusing on Gen Z and start-ups by offering personalized products and for premium customers, offering exclusive options. The team is actively engaged with the customers during the first 90 days of the boarding that is the sales team what we thought, so onboarding to identify their needs and cross-sell suitable products. And after that, these customers will be handed over to the branches, which will be nurtured by the branches. Regarding ETB customers, targeted engagement by the branch sales and service executive teams at branches and a strategic emphasis on reactivating inoperative accounts contributed to higher book balances. Additionally, more than the anticipated end of the quarter inflows into current account to some extent. So further supported overall deposit growth. Retail deposits increased by 5% during the quarter despite the reduction in rates for special deposit scheme, inflows into RTD remained steady. During the first 2 months, we canvas for retail term deposits to fund the advances growth, which was front loaded. This has enabled us to have some sizable growth in retail TD as customers knew that interest rates are going to come down. They too are anxious to lock their interest rate, which we took advantage of that too. This has contributed to a decrease in reliance on bulk deposits throughout the quarter. Regarding margins, we had provided guidance in the range of 3.7% to 3.75% for first financial year '26. Although we anticipated a rate cut of 25 to 50 basis points during the quarter, the actual reduction was 75 basis points. I am pleased to report that we could successfully navigate the quarter and maintained our net interest margin at 3.86%, representing a decrease of 19 basis points from the previous quarter as there will be lag in reduction in the corresponding interest rates of deposits, which is in line with the industry trend. The cost of deposits increased slightly by 3 basis points on a sequential basis as majority of the growth has come from term deposits rather than the CASA. The overall cost has increased and the majority of repricing is anticipated to occur between September and November for the time deposits. We expect the cost of deposits to remain stable at current levels over the next quarter. Additionally, savings account rates for 1 segment which is the lowest segment but also adjusted downwards during the quarter, and we are likely to reap the benefit from Q3 onwards to start with. The yield on advances declined by 21 basis points during the quarter. Our loan portfolio comprises 53% EBLR-linked loans and 35% MCLR-linked accounts, approximately 37% of the EBLR portfolio is expected to be repriced in the upcoming quarter. We anticipate a further reduction of 10 basis points in the yield on advances in the next quarter. The yield on investments declined by 9 basis points during the quarter attributable to reduction in the yields in general in the investment book. This is due to reduction in the interest rates by RBI. Maturity of high-yielding CDs and CP securities, which were replaced by lower-yielding instruments and incremental SLR investments are being made at yields lower than the existing portfolio average, thereby pulling down the average. With the current visibility, as guided during Q4 results con call, we endeavor to maintain our full year guidance for net margin at 3.7% to 3.75% for the financial year 2025-'26. We anticipate that a reduction in the cost of deposits will become more apparent by the end of third quarter contributed to an improvement in overall NIM by the year-end. The operating profit for the quarter was at INR 805 crores reflecting an 8% increase compared to the same quarter the previous year, but a 3% decline sequentially. Noninterest income for the period stood at INR 447 crores, down from INR 509 crores in the previous quarter. Recoveries from written-off accounts amounted to INR 78 crores compared to INR 182 crores in the prior quarter. This decrease was partially offset by treasury gains of INR 79 crores during the quarter, up from INR 16 crores previously. We had guided recoveries from the written-off accounts would be similar to last year, and the recoveries would not be even every quarter. This point also we have guided during last call. But overall, during the year, the recoveries would be around INR 600 crores, which we feel we will be able to achieve. Our operating expenses for the quarter stood at INR 721 crores, representing a sequential decrease of INR 42 crores with plant recruitments having been completed last year, establishment expenses remained stable at INR 365 crores. Other operating expenses were effectively controlled at INR 356 crores. The cost-to-income ratio for the quarter was 47.22%, which remains within the guided range of less than 50%. Net profit for the quarter was at INR 521 crores, an increase of 2% quarter-on-quarter and 14% year-on-year. During the quarter under review, an allocation of INR 118 crores was made towards the NPA migration, standard assets and restructured assets, resulting in a credit cost of 0.54 basis points annualized. No additional accelerated provisions were required this year as adequate buffers have already been established over the past 2 years. Gross slippages for the quarter amounted to INR 189 crores, representing 0.21%. On an annualized basis, it comes to 0.84% of the loan book. Though there is a spike in SMA 30-plus levels from 0.43% to 0.6% year-on-year basis, through ongoing diligent account monitoring, we are confident in our ability to maintain the slippage ratio below 1% level, as we have previously indicated. Owing to reduced slippages, improved recoveries and upgrades as well as write-offs, our gross NPAs have declined sequentially from 0.74% to 0.66%. Our net NPA remains steady at 0.19%, and we are committed to maintaining net NPA below 1% of our portfolio. The proportion of our standard restructured loan portfolio has further decreased to 0.57% of our total loans and continues to perform satisfactorily. At present, we do not anticipate any significant setbacks or slippages within this segment. Notably, a substantial portion is secured by collateral, and we maintain a provision of 42% for this portfolio. The ROA for this quarter stands at 1.73% slightly better than the previously guided range of 1.55% to 1.65%. Our CRAR Basel III continues to be healthy and is at 17.36%, providing us comfortable headroom for growth. Our liquidity coverage ratio continues to be well above the regulatory requirement of 100%. Our bank has successfully completed 109 years and is now entering its 110th year this month. I am pleased to announce that today, the Board have proposed a bonus issue of 1:5, that is 1 share for every 5 shares held, subject to the approval of the shareholders. Now challenges are what make life interesting. Overcoming them is what makes life meaningful, as noted by Joshua J. Marine. Despite some challenges, we began the quarter, first quarter on a positive note. Our team has demonstrated resilience in sustaining growth, and we remain confident in our ability to continue this momentum throughout the remaining quarters. As we enter our 110th year, we honor our history while looking ahead to the future and reaffirm our unwavering dedication to serving as a trusted partner throughout every customer's financial journey. I would like to express my sincere gratitude to all our investors, analysts and stakeholders for their continued confidence and ongoing support. We are committed to upholding this trust through continued strong performance in the future. To sum up, our guidance for the credit growth of about 2% over the industry growth continue for the rest of the quarters. And accordingly, deposits, how we need to maintain accordingly, the deposits will be raised. NIM for the full year will be in the range of 3.7% to 3.75%. Our GNPA is expected to be less than 1.5% and net NPA at less than 1% and slippages to be less than 1% and cost to income, we aim to have below 50%. So now I'll be glad to respond to your queries. Thank you all.

[Operator Instructions] The first question is from Akshat Agrawal from SMIFS.

Congrats on a strong set of numbers. My first question is on asset quality. Credit costs are lower at 54 bps driven by the [removal] of prudential provisions as well as the reduction in structured and others. How are incremental [indiscernible] increase in the [indiscernible] workflow is also increasing. And this is possibly from corporate segment. So an NPA reduction this quarter was driven by higher write-offs and lower equities. So would you be able to maintain your credit cost around levels like 55 to 60 bps? Or should we say it's like more like 70 bps or 80 bps?

Yes, Akshat, please go ahead. But your voice is breaking. We are unable to hear fully, please.

Can you hear this now better, sir? Is it loud and clear now?

Yes, relatively better. Please go ahead.

So should I start from the beginning? Or did you...

Not required. Not required. I could guess what you wanted and all. So you continue the discussion. That's it -- your point you can continue, please.

Sure, sir. So would you be able to maintain your credit cost around current levels, say, around 55 to 60 bps this quarter this year? And will we be -- will we continue to see elevated slippages, higher write-offs and lower recoveries going forward? That was my first question, sir. I have a few more.

I'll respond, yes, please. No. Thank you. Thank you, Akshat, for the question. So -- but just one thing I want to tell you, that is the reason consciously I touched upon the point of SMA 30 plus. If you look at the verticals actually, all 3 RAM verticals are concerned, more or less the same level which we were having was continuing, not an issue. But in respect of corporate, if they are not actually on account of the external economy not doing well, demand is not there on account of those reasons, where some sort of internal issues between the partners, those things have come up and all, so we could find some sort of stress in those cases and all. Then proactively, what we thought instead of finally allowing them to do it and all, initially allowing to -- them to have a stress because these are actually backed by securities and all to put pressure on them to regularize or to recover. That is the reason. Otherwise, the earlier -- the trajectory of what was going on, on the SMA, the same thing is continued barring 1 or 2 accounts in the bank, so rest of the portfolio is as it is. So that way, we need not have much concern about the asset quality and slippages, first thing. And second thing, coming to the credit cost, what you mentioned. So we have guided credit cost will be around 1%, now 0.54%. But over a period of time, we do not actually currently, if you look at it, the commercial, retail, asset, everything we look at it, portfolio looks clean. You also would have seen saying that our unsecured is also 2.22%. And our MFI portfolio to some extent, it has given some sort of an NPS also, that also is flowing into the stress portion. But overall MSME -- our MFI book itself is INR 270 crores, even if 10% of that comes, also it comes to INR 27 crores, so which can be very well managed. With all these things, if you look at it, we'll be able to manage within that 1% credit cost, what we thought, but 0.54% is transitory for this quarter, but it is not for the whole year. So that way, currently, with the visibility what we have, asset quality is not a cause of concern for the bank.

Right, sir. My next question is on cost. Last quarter, you guided around 50% for the full year, which you have maintained. And this quarter, it was very managed with cost, growing at 8% year-on-year and 6% reduction sequentially. So there has been no addition of branches this quarter. So for the rest of the year, do you think we would see escalation during like next 9 months, more branches? Or are we seeing some strong productivity that is playing out? And did we see any headcount reduction in this quarter, sir?

Headcount reduction, we have -- I have mentioned, actually, what happens now, wherever a replacement is required on account of the wastages. We are going for that. Otherwise, headcount wherever we are adding on account of that we can see a straight, visible productivity for the numbers, then only we are going. Back office are concerned, we are not going for any headcount. And whereas wastages are there, the replacements also we have brought it down. And fresh additions are concerned, we are very selective because majority of the recruitments what all are required last year, we have done that. And those initiatives we are going to stabilize. Coming to the branches addition, we may be opening 40 branches, something like that this year, but we need to still firm up our requirement what all is there. So that way, cost is concerned, here and there, it may be going. But correspondingly what we feel, what we are incurring, you will be able to find the other side also, the income also will be there. That is the reason we have been indicating that our cost-to-income ratio will be 50. Suppose, if we do not incur the cost now let us assume, not opening the branches and a saturation reaches for the rest of the branches. At that time, suddenly we run around and open the branches. They will also take 1 or 2 years to stabilize and generate. So that way, what we thought on an ongoing basis, we need to open a few branches, 3, 4 years, we were not opening. Last 2 years only, we started opening. But even a branch also earlier, we were opening a fresh full-fledged branch. Now we have modified our model. We are opening light branches where 3, 4 people will be there, 3 people will be there, majority will be focusing on the liability accretion and not focus on the advances and the advances, the leads will be given to the hub branch. So these models started working, and we started taking people from the market also who have experienced in the liabilities. So that way, a few more light branches we will be adding that may add to the cost. But within all these things, we will find out our economics, how we are going to work out to have cost-to-income ratio less than 50.

Right sir. Let me just squeeze in one more question, if that's all right. So your other income in terms of like fees, it delined 6% Q-o-Q, but for a year-on-year it was [Technical Difficulty]

Akshat, I'm sorry to interrupt, but your voice is breaking again.

Is it clear now,sir? Is it better? .

Better. Yes, please go ahead, yes.

So sir, in terms of fees, is there any seasonality in reduction quarter-on-quarter 5%? And how should we see the base level going forward? And one more on NIM sir. How many rate cuts are currently absorbed in terms of 100 bps cuts so far? Is it like we have already say, absorbed like 50 basis points or 25 basis points? So some level of color would be helpful. And so NIMs kind of trough this quarter in Q2 and then increased. Is that what you meant when we, you were giving 3.7% to 3.75% guidance for full year? So that was my question, sir.

Yes, I'll share with you. Yes. Now as far as income is concerned, agreed, as you said, there can be seasonality factors like, suppose quarter 4 usually the year wherein lot of advances, what all are in the pipeline are booked. Naturally, the income levels of the quarter 4 will be usually high. But if you compare with the last year, June 4, so we are up 239 has become 251 it's up by 5%. So that way, seasonality plays a role to some extent. So second thing also, if overall, if you look at the other income, our recoveries from the written-off account, which you -- which were INR 182 crores last quarter, it has come down to INR 79 crores, which I explained in my initial remarks that. So overall, for the year, it will be around INR 600 crores, INR 650 crores, you may get it. So one quarter here and there may happen because there is legality will be there, other issues will be there. But we feel that, that amount of INR 600, INR 650 we'll be able to get that. With that, the ROA 1.55 to 1.65 what we have indicated for the whole year, we will be able to manage that. It should not be a problem. And above all, we are focusing more on other income, even the third-party cross-sell income has gone up. And like that processing fee also now the corporate, we started building book, there also we started getting. With all these things, we will be able to make it up. It should not be a problem as far as fee income is concerned. Now coming to the NIM, so you agree that, we already told that EBLR book another 37% needs to be repriced in this next quarter. And suppose if there is another rate cut somewhere and all, we cannot say on that. And above all, the deposit repricing will start only after the September for us. And that way, third quarter and fourth quarter, we will see some amount of repricing in the deposits, the CRR cut may not give much sort of a benefit for us as far as NIMs are concerned. So that way, we feel quarter 2 may be a tough quarter. So -- but because there are so many moving parts are there, we will not be able to give -- quantify a number for the quarter that way. But overall, we feel the end of third quarter, we will start seeing the green shoots there. The pain, what we are undergoing all the industry, whole industry undergoing that will be reversed by the end of December that way. So with that, overall, we'll be able to maintain 3.75. It may come down, but it will start going up partially in quarter 3 and again in quarter 4. The average we work out between 3 to 3.75.

Just one last one question on corporate book [Technical Difficulty]

Akshat, really I'll tell you very, very difficult to hear. We're unable to hear. We are picking up some sort of a word here and there and all forming the question.

I'm very sorry about that. Is it now better?

You have to remove your headphone, headset, please?

Yes. Is it better, sir?

Absolutely.

Okay. So sir, in terms of corporate book, is it going to be a positive book going forward? Or is it continue to be a declining book as you had guided earlier?

I'll tell you it is a tactical book. Now how we are able to raise the deposit. And above all, am I going to get the money there? Suppose out of anxiety because the credit growth for the industry is 9.6 and if other banks are anxious to book because lot of money is there with them, they land at 8, 8.25. We may not be in this business at all because the amount what we are getting, other 3 verticals, if I'm able to make more money at 9.5%, 9.7%, 10%, we may not go for that. So that way, this year also, if we are able to make money on the corporate book, we will go ahead. And overall, other segments, we are able to make money, we will go there. The question is money has no color. Rupee is rupee for me. So that way, I cannot give an assurance for the sake of growth, we will not grow in corporate, okay? Wherever bank is making money, the money will be put there.

[Operator Instructions] The next question is from Jai from ICICI Securities.

Congratulations on a steady quarter. Sir, first question, just wanted to check, you said that 53% of the book is EBLR and of which 37% is either reprice or yet to reprice. So how does it work, sir? I thought that EBLR reprices almost immediately. So why is that some book has been repriced and some is yet to reprice?

Yes. Thanks, Jai. Thanks for the compliments also. Second thing here, you see EBLR book, though it is there, there are two components in the book, working capital as well as term loans. As far as working capital is concerned, the repricing will happen immediately 1 day, 2 days, whatever is the lag and all. But whereas term loans are concerned, the repricing will happen in a quarter when the reset, interest reset date comes. So that way, if you look at it, a part of the term loan book has been reset during the quarter 1. And the rest of the book has to be reset in August -- July and August. So that way, by end of August, we'll have an absolute clarity of the book. So working capital has been completed. Now term loan book only partially reset, it has to be reset now in the next 2 months.

Right. Sure, right. So no, that is clear. So 37% is already repriced or it is yet to reprice. Sorry, sir, just...

37% is yet to be repriced. No, what we are telling -- Jai here. Term loan book is concerned, it may be 55% or 63% repricing of the term loan book is still there. If you divide the term loan book into three parts, 33% is already repriced and 67% needs to be repriced -- need to be repriced. Now -- but why we are talking about 37% is overall EBLR book, you take it. It includes working capital as well as a term loan. Out of that, only the 37% needs to be repriced rest had already been repriced.

Correct. Sure, sure. So sir, in -- accordingly, so the NIM trajectory, right? So I think there's a lot of moving parts, as you said. And cost of deposit will start let us say, seeing favorable or positive movement by Q3 and it will pick up by Q4. And yields, as you said, yet to reprice by 10 basis point types. But sir, I'm more interested in knowing the exit NIM. So let us say, assuming no rate cut, no further rate cut as it is now. Would you believe that you will be able to hit the 4% NIM by exit FY '26, will that be a fair assessment?

No, no, it's unfair assessment, Jai. Why I'm saying, where is 4% you are talking because you see, second quarter, where we will be landing, we do not know yet. In the meanwhile, while the deposit cost is coming down, 35% of our portfolio MCLR is also there. Every time the deposit rates are coming down, MCLR is going to come down and that portfolio also gets repriced now. When all renewals are going to happen in third and fourth quarter, so I will be saddled with the lower rates for the MCLR book also. So with these things, so where -- how much we will be landing, we will not be knowing even without taking the 25 basis points also. So that is the reason what we thought. We may be between 3.7 and 3.75. But as you know, we will try to maximize wherever possible and all. We will try to do that, but we will not be able to quantify that number at this stage.

Sure, sure, sir. And secondly, sir, on your growth, right? So LAP, I think you mentioned that now there is a better, let us say, branch and non-branch channel, and that is working out very well. Has there been anything reclassification, jewel loan also, retail jewel loans that -- or you think this growth in retail jewel loan is without any one-off or without any classification -- reclassification?

No reclassification. Jewel loan is absolutely organic, the branches, what all they are booking, they are no way connected to the revised model of the business, what we are doing. That is applicable only for the mortgages. Jewel loans are concerned as hitherto what branches they are doing. There was a huge demand for that. That is the reason this organic growth, no reclassification, nothing.

Okay. And sir, now system is growing at 10. We have already done 15, right? So could we say that if system picked up, right, there has to be some tailwind for you also, right? I mean the number I'm not asking, but I'm saying in general, if there is a tailwind in the systemic growth for whatever reasons, you can still -- those tailwinds should also work for you as well, right? I mean, in general?

I agree. Absolutely. I agree. Jai, you understand. So we took a conscious call in the first week of April, entire team. What we thought, anyhow we need to grow. If we can do a good work in the very first quarter by slogging, at least we will be able to earn for the 9-month period. So that is the reason. You would have seen the growth also in every segment, no particular vertical has given the maximum growth. All verticals how judiciously contributed what they are supposed to contribute, we have got it. So which testifies that the teams are capable of generating the business despite the market has issues. Now coming to the tailwinds when you talk about it, it absolutely depends on the ability of the mix of deposits, what we raised. Suppose later also if the stress is found on the CASA front. And only time deposits we have to raise, and we have to actually fund our assets. So we may have to think because it will have a bearing on the NIM. But correspondingly, CASA front also goes up. To some extent, what I say, with the various measures we have taken, the savings bank started going up and the ETB balances, which used to come down. So more or less, we are able to find some sort of a stability there. And above all, when the deposit rates on the time deposits were coming down, people were shifting money from savings bank to the time deposits, that also phenomena has come down. And we also tested the savings bank rate, the lowest bucket, we have reduced it. You would have found out saying that ours may be the lowest. So we tested whether it has any impact on the balances of savings bank. So it's agnostic. Absolutely, there is no issue and balances are as it is same and going up also. So once we have a clarity on the mix of deposits, advances growth is concerned, more or less, we are well set. We'll be able to take it forward. Everything will be subject to the proper mix of deposits, what we raise.

Right. Right, sir. And last question, sir, the other OpEx, right, there seems some tight shift there. Was there any one-off? Or you think this is variable and depending on the volume or this has some lever for you to contain costs here, the other non-staff OpEx?

I agree. We are on the job on each of the line item of the cost, okay? So we are looking at it, what can be done, how we can reduce it. But -- so we are, to be frank, in a very initial stage of the working, which requires some time. We are working on that. So because we wanted to see if we can reduce 10 basis points in the DuPont tree for that, that will straightaway add to our ROA. So with that intention, all verticals we are looking at it, including the productivity, where this cost is warranted, not warranted, what we need to do, can we defer it? All aspects are being examined by the CFO team and verticals and all we are on the job.

[Operator Instructions] The next question is from M.B. Mahesh from Kotak Securities.

Just two questions. One is on what conditions would you unwind the contingent buffer that you created last year?

No, no. We didn't unwind anything. So Mr. Mahesh...

I'm asking you on what conditions would you unwind, sir?

You'll unwind, you'll unwind on what conditions you're asking?

Yes, that's true.

No, no. We created that one. Suppose any unforeseen situation, something is there, which we need to have a fallback. At that time, we will be doing. Otherwise, we will not even touch that because for a rainy day, something is required, we thought of doing. Intention is to manage with our own routine what organically we are getting it. If the situation comes when we are pushed to the wall, we may have to use that. We have not apportioned that for any specific purpose that way.

Okay. Sir, this quarter, you lost about 20 basis points on the loan yield side.

Correct.

And you also kind of said that there's a fairly large amount of portfolio, which is still yet to be repriced. Would you know at what yields would you settle at the end of 2Q and 3Q by any chance?

No, it will be too difficult, Mr. Mahesh, to be frank enough because so we are trying our level best in engaging with various borrowers. So what all EBLR rate cuts has come, how we are going to make good a part of that also we are working. And so rest of the things, how it happens, we do not know. So that way, Q2 and we may not be able to guide anything at this stage on the fall. But however, I have told in the guidance note that there can be another reduction of another 10 basis points in the yield that's what I have guided. But this is also a very faint picture what we have with the current understanding what we have with us.

Correct. No, the reason I asked for the same reason, when you guide for a 10 basis points margin contraction for 2Q...

No, no, I didn't say margin contraction. I talked about the YOA, yield on advances will be down by 10 basis points. The margin, we need to see how it works that way because how cost of deposits will support me, I need to see. So if that support is not coming, actually, majority of the deposits are not getting repriced. So this 10 basis points may straight move into that side also, we do not know. So all these permutations combinations we need to work out only while going through only we'll be knowing.

Okay. And last question, what are the peak savings rate that you cut in the term deposit rate?

We have done at the lowest bucket what all is there up to 1 lakh balances, what all are there. For that, we have brought it. What is the current rate now on that? 2%, 2% is the rate on that bucket.

Sorry, 2% is on what, sir?

Up to 1 lakh balances, the rate of interest is 2%.

Okay. And the peak term deposit that you have cut?

Peak is 1 to 2 years and all, 6.75, 6.85...

1.6 was there, that was reduced to...

6.85...

7.5% was brought down to 6.85%.

7.5% it used to run there. It has been brought down to 6.85% now. In two stages we have brought it.

Yes, that's okay, and INR 118 crores of provisioning this quarter. Can I have a breakup here?

INR 118 crores, what do you say, sorry?

Loan loss, is there any investment provision here?

No, only on NPA provisioning...

Entire 100. No, no, not only that, we have a breakup -- just a second, tell the breakup, one second. Yes. INR 118 crores is like that. NPA provision is INR 114 crores, standard assets INR 21 crores, restructured write-back of INR 15 crores is there. And NP investments, INR 2 crores write-back is there. That comes to INR 118 crores. And one more thing, Mahesh, in fact, let me tell you, INR 114 crores for NPA may not be warranted. But what we thought is to maintain the net NPA levels at the same level we have provided. So otherwise, that INR 114 crores majority is also not warranted.

The next question is from Pritesh Bumb from DAM Capital.

Can you hear me?

Yes, able to hear you. Please go ahead.

Yes, sir. Sir, just wanted to take your thoughts on the ROA and ROE. From the last 4 quarters, we have been maintaining a very steady ROA of about 1.7% now when there are some repricings going to come next quarter -- next 2 quarters. What are the levers available for us? So we've seen this quarter OpEx coming down, some part of provisioning also coming down. What are the levers available to maintain ROA? Or will it also be slightly under pressure going ahead?

Yes, yes. 100%, you are right. ROA will be under pressure. There's no doubt in it. 1.73%, we cannot take it that every quarter, we'll be able to do it second quarter and third quarter. So this quarter, because initially, the repricing has happened for a part of the portfolio, we are able to manage. Next quarter it may not be. So that is the reason factoring all these points only. We have given for the whole year range of 1.55% to 1.65%. It may come down. But later in quarter 3, it may stabilize. quarter 4 may come back again. With all these things keeping in mind, we have given an ROA projection of 1.55% to 1.65%. Coming to the levers, what you say, one of the good levers you could have found saying that -- so we see we have booked majority of 5%, 5.8% growth in advances in the very first quarter. So the interest, we can get it throughout the year, 9 months, which was not so in respect of earlier years. So that way, to some extent, the interest income will go up there. And next, coming to other levers, if you look at it, so we need to see how we need to price our loans, what all we are going to book. These can be a few other levers we can think of. So coming to ROA cost also, you have seen that what best we can do, we are trying to do that. And this quarter is slightly deceptive as far as the written-off income is concerned because written-off income, INR 181 crores, we have brought it down this time to INR 70 crores to INR 55 crores. So that may give us some sort of an income again. But one more lever which we may or may not use is our treasury. The treasury, what all the securities, the rates are there because high-yielding rates are there that can be done. That also we can think of, but though not now. So that way, if you look at the overall levers are concerned, levers are available. 2 more main levers, what I'll tell you. We are focusing on the other income like processing fee, guarantee fee, LCDs, also, we are focusing on that. Coming to the provisioning part is concerned, earlier, we have sufficiently provided for the ECLs, countercyclical -- all these we have provided. So that way, the need for provisioning may not go up. Keeping in view the quality of the assets, what we are maintaining. So that way, provisions can be a good lever and write-off recovery can be another good lever that way. And so cost, we can do something and all that also we can manage. But all these levers are available to maintain that. But keeping all these things also in mind, we thought how it goes to unfold, we do not know. We gave an indication of 1.55% to 1.65%. Automatically, when the profit is coming on those lines, ROE is a derivative of that. So because profit is getting added last year itself, INR 1,900 crores plus profit has been added. So on that ROE is coming up. So there can be here and there ROE gaps can be there. But the end of March, more or less ROE also will be always above 15%, even now also 16% odd, you have seen that, that should not be a cause of concern.

Got it, sir. Second question was on mortgages business. We've seen a strong growth. What will be the incremental yield here? And what will be a general reset of -- for pricing here?

Yes, agreed, market. In fact, I'll tell you when the credit growth is low, there is a tons of demand even for the mortgages business. There's an undercutting also is there. We are offering very fine pricing, which we do not want to give. Otherwise, had we given that pricing, our growth instead of 11% would have grown at 30%, but we are -- are you able to hear me?

Yes, yes.

So now that what -- the current pricing, what we are getting is between 9.25% to 9.75%. So that's what we are getting. We'll see. So how to manage this. This currently, with these rates, we are able to go ahead. But a few people are going for below 9%, but we are not interested in doing that sort of a business.

But sir, there will be a reset -- similar reset for this business as well, I mean this segment as well?

Yes, yes, absolutely. When the EBLR link is there, the old loans, what all I have given, there also reset is there. That also is going to -- that's why overall, when we talked about 52% EBLR, that includes the mortgage business also. Going forward, how we are going to manage, that's why repricing we are going to do. Existing accounts also, we are approaching them. What best we can do to reduce the benefit to pass on and to retain with us. That also our team is actually working on that.

Sure, sir. And last, sir, data keeping question. I just wanted to check, you have given non-agri jewel loans as a number and retail loan jewel also. So that's a different number. So apart from agri, retail jewel loan, we also do jewel loans in other segments, right?

Correct. Other segments in the sense that next to agri, majority jewel loans will come only in the personal segment, that is retail segment. A very small quantity here and there, any customer requires, we may be giving under commercial. But commercial, the main activity is not jewel loan, either the working capital and term loans only. So the major two verticals are agriculture as well as the personal banking segment, that is retail.

That was the last question. I would now like to hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments.

So thank you all for the interest what you have shown and for a delayed call also. So all of you have been waiting. That itself shows how much interest all of you have on the bank. So we will continue to do well. And as per the expectations, and we'll deliver as guided. Thank you all, and good day to all of you. Thanks.

Thank you very much. On behalf of The Karur Vysya Bank, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.