# 1. Financial Performance ## A. Key Figures * **Operating Profit:** ₹4,009 Cr Q1 FY26 (+9%) · ₹3,677 Cr Q1 FY25 * **Net Profit:** ₹2,252 Cr Q1 FY26 (+32%) · ₹1,703 Cr Q1 FY25 * **Non-Interest Income:** ₹2,166 Cr Q1 FY26 (+66%) · ₹1,302 Cr Q1 FY25 * Balance Sheet Size: ₹2.82 Lakh Cr (Jun '25) vs. ₹2.75 Lakh Cr (prior) * CASA Ratio: 39.88% maintained * Capital Adequacy Ratio (CRAR): 17.39% (Jun '25) vs. 16.18% (Jun '24) * ROA: 0.82% Q1 FY26 (+12 bps YoY) vs. 0.70% Q1 FY25 * **Net Interest Income (NII):** -3% QoQ, with improvement expected in Q2–Q3 * Cost to Income Ratio: 51.30% Q1 FY26 vs. 51.47% Q1 FY25 * **RRB Restructuring Loss:** **₹518 Cr** net loss (₹849 Cr loss on Aryavart Bank, ₹330 Cr gain on Vidarbha Konkan RRB) * **FVTPL Book:** ₹40,000 Cr (QoQ from ₹23,000 Cr) ## B. Revenue Growth * **Robust Non-Interest Income Surge:** Record 66% YoY growth driven by strong treasury gains amid falling rates and high base of prior recoveries not recurring. * **Net Profit Outpaces Revenue:** Strong bottom-line expansion reflects operating leverage and absence of one-time cost spikes seen in prior quarters. * **NII Under Pressure Short-Term:** 3% decline in Q1 due to muted asset yields and no tax refund income, though advance growth and rate cuts expected to reverse trend in coming quarters. * **Sequential Profit Dip Explained:** Operating profit down ~₹850 Cr QoQ due to lower recoveries and **₹500 Cr reduction in salary expenses**, likely a mix of timing and non-recurring items. ## C. Profit Margins * **ROA Improvement Amid Seasonal Pressure:** 12 bps YoY ROA expansion achieved despite Q1 seasonality and elevated cost ratio, signaling underlying efficiency gains. * **Cost Ratio Volatility Explained:** Sharp 300 bps QoQ increase in cost-to-income ratio attributed to typically muted Q1 income, with guidance for improvement as credit flow normalizes. * **Exceptional Items Impact P&L:** Full provisions taken for frauds; **₹518 Cr net loss** from RRB restructuring (Aryavart Bank write-down) recognized as exceptional item, non-recurring in nature. * **Sustainable Cost Run Rate in Focus:** Sharp drop in salary costs under scrutiny, but prior Q4 spike due to one-time PLI provisions supports lower run rate for remainder of year. ## D. Balance Sheet & Cash Flow * **Balance Sheet Resilience Strengthened:** Size expanded to ₹82 Lakh Cr with **88% CASA ratio** and CRAR doubling to **39%**, reflecting strong capital buffers and funding stability. * **Strategic Treasury Rebalancing:** FVTPL book expanded to **₹40,000 Cr** (from ₹23,000 Cr) via AFS book growth, positioning for capital gains in falling interest rate environment. * **Non-Recurring Cash Flow Items:** Absence of large written-off recoveries and tax refunds weighed on Q1 income, but **recoveries expected in Q2** to support future cash flows. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Global Advances:** ₹6,72,000 Cr (+12%) · **Domestic Gross Advances:** ₹5,65,000 Cr (+24%) * Gross NPA Ratio: 2.92% (-170 bps) · Net NPA Ratio: 0.75% (-24 bps) * **Slippage Ratio:** 3.3% (-20 bps YoY) · **Credit Cost:** 0.68% (-17 bps YoY) * Provision Coverage Ratio (PCR): 92.94% (+0.83 bps YoY) * **Gross Cash Recovery (LTM):** ₹9,500 Cr ## B. Advances Growth * **Strong Domestic Momentum:** Domestic advances surged with **24% YoY growth**, significantly outpacing modest global loan book expansion. * **Credit Demand Resilient:** Management views current trends as reflective of **robust credit demand** and **positive rural performance**, offsetting urban sector softness. * **Policy Compliance:** Entire EBLR-linked loan portfolio is **Repo-linked per Board policy**, with **no exposure to GSEC or T-bill linked loans**. ## C. NPA Trends * **Asset Quality Improvement:** Significant YoY reduction in both gross and net NPA ratios, contributing to lower credit costs and improved loss absorption capacity. * **Fraud Reaffirmation, Not New Incidents:** **₹1,500 Cr** of frauds were **reaffirmed post-reexamination** following a Supreme Court judgment; **no operational failures** or new internal lapses identified. * **Contained Fresh Fraud:** Only **₹30 Cr** in fresh frauds reported this quarter, with prior fraud provisions **fully carried forward** and no new provisioning. ## D. Slippage & Recovery * **Slippage Pressure Persists:** Despite YoY improvement, **fresh slippages rose sequentially** and remained **largely flat QoQ**, signaling **ongoing asset quality stress** relative to peers. * **Recovery Outlook Stable:** Bank maintains **₹9,500 Cr annual recovery target**, supported by written-off accounts and UCI/URI; collections expected to **ramp up in H2**. * **SMA2 Accounts Monitored:** SMA2 migration limited to **state PSUs**, with **no expected slippages** and plans to **restore to SMA0**; **only one account** required additional provision under RBI 2019 circular. * **Muted Q1 Recoveries:** Absence of **lumpy recoveries** in Q1 weighed on recovery performance, contrasting with **three large recoveries in Q4 FY25**. --- # 3. Deposit & Funding Mix ## A. Key Figures * **Global Deposits:** ₹833,000 Cr (+7%) * **Domestic Deposits:** ₹710,000 Cr (+62%) ## B. CASA Strategy & Trends * **CASA Resilience Amid Credit Push:** Slight dip in CASA ratio attributed to **11–12% credit growth**, not structural slippage, with management confident in sustaining near **40% levels** through tech and Tab banking initiatives. * **Retail-Led Deposit Franchise:** **86% of domestic deposit growth** driven by retail inflows, underpinned by extensive **5,300+ branch and BC network**, highlighting strong franchise durability in tight liquidity conditions. * **Stable Maturity Profile:** Retail term deposits concentrated in **1–2 year maturities**, ensuring liability stability and predictable roll-off, supporting long-term asset-liability management. ## C. Bulk Deposits * **Disciplined Bulk Management:** Maintains **<14% bulk deposit ratio**—among lowest in PSU banks—reflecting prudent liability management despite **inflows from large PSU/government accounts** that cannot be declined. * **Cost Parity, Not Premium:** Bulk deposits **not high-cost**, with weighted average cost ~**9%**, aligned with retail term deposits due to minimal market differentiation; pricing guided by card rates and cost optimization. * **Short Tenor Profile:** Average bulk deposit duration of **7–8 months** (mostly 6–12 months), enabling active re-pricing and flexibility in a volatile rate environment. ## D. Term Deposit Rates * **Uniform Pricing Environment:** Retail and bulk term deposits converge at **~9% average rate**, reflecting system-wide tight liquidity and lack of meaningful rate segmentation across customer types. --- # 4. Segment & Product Performance ## A. Key Figures * **RAM Advances:** ₹328,000 Cr (June '25) (+69% YoY) · **58% of total domestic advances** * **Global Business:** ₹15,06,000 Cr (June '25) (+37% YoY) · **+₹141,000 Cr incremental growth** * **Corporate Loan Book:** **De-growth of ₹3,000 Cr** · **3–4% YoY growth** * **Total Business Pipeline:** **₹80,000 Cr** (₹10,000 Cr RAM; ₹60,000–70,000 Cr Corporate & International) ## B. RAM Advances * **Explosive Growth Trajectory:** RAM segment delivered exceptional YoY advance growth, significantly outpacing the corporate book and now forming the majority of the domestic loan portfolio. * **Digital-First Execution:** Entire RAM product suite—Retail, Agriculture, MSME—fully digitized, enabling over **₹1 lakh crore** in underwriting via **nearly 20 digital products**. * **Yield Resilience:** RAM yields expected to sustain above **9%**, supported by disciplined pricing and premium segments like high-CIBIL home loans at 8%. * **Rural-Led Demand:** Strong rural credit demand driving consumption-led growth, offsetting weak urban momentum. ## C. Corporate Book * **Strategic De-Growth for Margin Protection:** Intentional contraction in corporate advances reflects selective lending discipline, exiting low-margin exposures to preserve profitability. * **Emerging Corporate Focus:** Launch of **nearly 20 dedicated credit branches** targets mid-corporate segment, aiming to capture higher-margin relationships via MCLR-based loans and fee income. * **Diversified Growth Pipeline:** Corporate disbursements expected in H2, led by NBFCs, green energy, infrastructure, data centres, and EV financing. ## D. Green Financing * **Targeted Green Product Launch:** Introduction of **BOI Star Energy Saver** scheme expands vendor financing for residential and solar projects, aligning with green lending priorities. --- # 5. Digital & Branch Expansion ## A. Key Figures * **Branch Network:** **5,304** domestic branches (972 Metro, 856 Urban, 1,901 Rural) * **Branch Expansion:** **211** new branches opened in FY25 · **~201** planned for current FY * **IT Investment:** **₹1,850 Cr** spent of **₹2,000 Cr** budget in FY25 · **₹2,000 Cr** allocated for current FY ## B. Digital Initiatives * **Innovative Credit Product:** Launched **Repo-linked Export Credit facility in INR** for corporates to capture growing export financing demand. * **UPI Enhancement:** Enabled **linking of pre-sanctioned credit lines to UPI**, extending UPI’s utility beyond deposits and boosting transactional engagement. * **Paperless Banking Push:** Implementing **next-gen document management system** with full data migration and customization to support digital workflows. * **Automation Drive:** **Six liability-side products** now fully digital, reducing branch traffic and improving efficiency via mobile and internet banking. ## C. Branch Network Strategy * **Targeted Physical Expansion:** Growth focused on high-potential areas for **CASA, retail term deposits, and RAM advances**, supported by dedicated Relationship Managers. * **Network Optimization:** Recent closure of **two Metro and five Rural branches** reflects strategic rationalization to align physical footprint with digital adoption trends. ## D. IT Investment & Cost Management * **Sustained Digital Spend:** Maintaining **₹2,000 Cr annual IT budget** to drive automation, cyber security, and TAT improvements across retail assets. * **Operational Leverage Goal:** Investments aimed at **stabilizing Cost to Income ratio** while freeing staff capacity for sales and customer acquisition. --- # 6. Credit & Liquidity Risks ## A. Key Figures * **Domestic NIM:** 2.82% as of Jun-24 (−8 bps) · **Global NIM:** 2.55% (current quarter) * **Loan Book Linked to EBLR:** **60%** (immediate rate cut transmission) * **MSME SMA:** ₹1,630 Cr (↑60% QoQ) · **Corporate SMA2:** ₹3,900 Cr (four accounts, single state PSU) * **CRR Cut:** 100 bps (effective from 6th Sep, 4 tranches), releasing ₹2 lakh Cr+ liquidity ## B. NIM Pressure * **Margin Compression Driven by Liability Lags:** NIMs under pressure due to delayed deposit rate reductions despite rapid transmission of EBLR-linked loan cuts, with full benefit expected in Q2–Q3. * **NIMs Likely Bottomed Out:** Management asserts domestic and global NIMs have stabilized, with outlook for recovery toward a 3% interest spread target by September–December. * **Growth vs. Profitability Trade-off:** High bulk deposit costs and low advance deployment (~8%) raise concerns over margin-dilutive growth, prompting calls to reevaluate unprofitable business lines. ## C. Deposit Cost Risk * **Deposit Rate Relief in Pipeline:** Full 100 bps Repo rate cut passed on immediately for EBLR loans; deposit cost transmission expected in Q2–Q3, supporting NIM recovery. * **Liquidity Glut Limits Near-Term Rate Cuts:** Ample system liquidity (₹2 lakh Cr+ surplus) reduces likelihood of further Repo rate reductions despite current rate at 50%. ## D. SMA Monitoring * **Sharp MSME SMA Spike, But Signs of Stabilization:** MSME SMA surged 60% QoQ due to weak Q1 collections, though recovery is underway with improved efficiency by end-July, suggesting peak stress. * **Concentrated Corporate SMA2 Risk:** ₹3,900 Cr SMA2 exposure concentrated in just four accounts tied to a single state PSU, highlighting single-name concentration risk. --- # 7. Guidance & Outlook ## A. Key Figures * **Global Advances Growth Guidance:** **12–13%** for FY26 * **Global Deposit Growth Guidance:** **10–11%** for FY26 * Credit Cost: 0.68% (current quarter) → 0.70% guidance for FY26 * Net NPA: Improved to 0.75% → 0.70% guidance for FY26 * ROA Guidance: 0.90% for FY26, with 0.98% achieved in Q4 FY25 * NIM Guidance: 2.50–2.60% for FY26; Domestic NIM projected to recover to ~3%; Global NIM expected at 2.70–2.80% * **Capital Raising:** **₹20,000 Cr** infrastructure bond program approved; **₹5,000 Cr** additional capital approved for FY26 (₹2,500 Cr each for Tier I and Tier II bonds) ## B. Macroeconomic & Strategic Outlook * **Resilient Domestic Growth:** India’s economy remains robust amid global headwinds from trade frictions and conflicts, supported by policy agility, strong forex reserves, and elevated public capex. * **Asset Quality Momentum:** Sustained improvement in credit metrics with Net NPA down sharply from prior year, targeting further reduction to **70%** in FY26. * **Profitability Trajectory:** ROA near target at **98% in Q4 FY25**, with full **1% ROA** contingent on interest rate stabilization and NII recovery. ## C. Rate Repricing & Margin Guidance * **NIM Recovery Pathway:** Liability-side repricing initiated in **October 2024** will drive sequential NIM expansion, with full benefit expected in **Q3 and Q4 FY26**. * **Margin Drivers:** Deposit rate cuts to transmit over one-year cycle, leading to **declining interest expenses** and **higher net interest income from Q3 onward**. * **Domestic vs. Global Spreads:** Domestic MIM recovery expected in **December and March quarters**, while global operations—representing **~18% of book**—to sustain higher NIMs of **70–80%**. * **Rate Cut Expectations:** Repo rate may see **25–50 bps** cut in **August or October** if inflation remains below **2%**, though current liquidity surplus limits near-term action. ## D. Capital Raising Plans * **Funding Strategy:** ₹20,000 Cr infrastructure bond program approved in tranches; no issuance yet pending market timing. * **Regulatory Capital Build:** Additional ₹5,000 Cr capital plan for FY26 via **Tier I and Tier II bonds** (₹2,500 Cr each) to support balance sheet growth.