# 1. Financial Performance ## A. Key Figures * **Net Interest Income (NII):** **₹728 Cr** Q2 FY'26 (-6% QoQ) · **₹756 Cr** Q1 FY'26 * PAT: ₹319.12 Cr Q2 FY'26 (+9.1% QoQ) · ₹292.40 Cr Q1 FY'26 * ROE: 10.14% Q2 FY'26 (from 9.58% QoQ) * ROA: 1.03% Q2 FY'26 (from 0.97% QoQ) * Cost-to-Income Ratio: 58.93% Q2 FY'26 (from 58.05% QoQ) ## B. Net Interest Income * **Yield Pressure:** NII contraction driven by sharp decline in yield on advances, which fell to **98%** in Q2 FY'26 from **28%** in Q1, reflecting lower benchmark rates despite favorable product mix. * **Recovery Path:** Management expects yield stabilization through increased retail and direct-to-corporate advances and reduction in low-margin bulk deposits. ## C. Profit After Tax * **Profitability Resilience:** PAT showed sequential improvement despite YoY decline, supported by strategic execution and **PCR strengthening to 22%** (ex. written-off accounts) via accelerated provisioning. * **Capital Efficiency:** ROE and ROA both expanded significantly QoQ, indicating improved earnings quality and asset utilization. ## D. Cost-to-Income Ratio * **Cost Inflation:** Despite a 2% QoQ decline in operating expenses from cost discipline, cost-to-income ratio deteriorated sharply due to falling income base. --- # 2. Loan Book & Asset Quality ## A. Key Figures * Gross NPA Ratio: 3.33% (₹2,453 Cr) (–13 bps QoQ) · 3.46% in Jun-25 * Net NPA Ratio: 1.35% (–9 bps QoQ) · 1.46% (₹1,083 Cr) in Sep-24 * Credit Costs: 0.03% in Q2 FY26 (–1300 bps QoQ) · 0.16% in Q1 FY26 * PCR (excl. technical write-offs): 60.22% in Sep-25 (+104 bps QoQ, +507 bps YoY) · 59.18% in Jun-25, 55.15% in Sep-24 ## B. Asset Quality Trends * **Sharp Improvement in Slippages:** Gross slippages declined significantly to **35%** in Q2 FY26 from 53% in Q1, reflecting tighter underwriting and enhanced collection efficiency. * **Targeted Recovery Momentum:** Recoveries in Q2 reached ₹25 Cr (excl. upgrades), while **₹100 Cr recovered from technically written-off accounts** underscores their material impact on profitability. * **Portfolio Rationalization:** Sale of ₹490 Cr NPA portfolio in the quarter generated ₹5 Cr proceeds, with a high recovery rate on the ₹355 Cr book value tranche. ## C. Provisioning & Risk Coverage * **Strong PCR Progress:** Excluding technical write-offs, PCR improved to 22%, indicating meaningful de-risking and alignment with long-term resilience goals. * **Declining Credit Costs:** Significant drop in credit costs to 3% signals reduced stress and improved portfolio performance despite elevated gross NPA levels. --- # 3. Deposit & Funding Mix ## A. Key Figures * **Aggregate Deposits:** **₹1,02,817 Cr** (Sep 2025) (–0.4% QoQ) · **CASA Ratio:** **31.01%** (Sep 2025) (+17 bps) * CASA Deposits: +0.15% QoQ growth in absolute terms * Bulk Deposits: 5.3% of total deposits (Sep 2025) (–100 bps QoQ) · 7.6% of term deposits (Sep 2025) (–300 bps QoQ) * **Cost of Deposits:** **5.54%** (Q2 FY26) (–19 bps QoQ) · **Cost of Funds:** **5.58%** (Q2 FY26) ## B. CASA & Retail Funding Strategy * **CASA Momentum:** Strong absolute growth in low-cost deposits despite overall deposit decline, reflecting successful traction in **₹870 Cr in fresh CA/SA additions** and top-down strategic emphasis. * **Strategic Refocus:** Leadership is actively driving cultural alignment, with CEO and senior executives conducting field visits to reinforce **CASA-led growth** as a core priority. * **Retail Shift:** Deliberate pivot from bulk to granular retail deposits (< ₹3 Cr) continues, supporting structural improvement in funding mix and cost efficiency. ## C. Cost of Funds & NII Outlook * **Funding Cost Relief:** Cost of deposits declined sharply QoQ, driven by reduced bulk reliance and proactive rate cuts, with **further sequential improvement expected** due to repo rate pass-through and liability repricing. * **Maturing High-Cost Liabilities:** The runoff of a **555-day high-cost deposit scheme** will provide a future tailwind to margins, though with a lag relative to asset repricing. --- # 4. Credit & Segment Growth ## A. Key Figures * **Gross Advances:** ₹73,644 Cr (Sep ’25) (–8% QoQ) · ₹74,267 Cr (Jun ’25) * **RAM Segment Growth:** **4% YoY** (Q2 FY’26) · **~12% YoY decline** in corporate advances * **IBPC Portfolio:** ₹1,860 Cr (Sep ’25) (–₹1,455 Cr QoQ) · ₹3,315 Cr (Jun ’25) * **Gold Loan Growth:** **₹350 Cr** above Mar ’25 levels · **₹400 Cr** added in Oct ’25 alone ## B. RAM Segment Growth * **Strategic Reallocation:** Portfolio degrowth driven by deliberate exit from low-yielding corporates and IBPC, with proceeds redeployed into **higher-yielding RAM segment**, which posted net accretion of **₹392 Cr QoQ**. * **Growth Trajectory:** RAM segment now central to expansion, targeting peer-like growth rates of **16%–18%** in high-quality retail assets including housing, auto, and gold loans. * **Gold Loan Recovery:** After regulatory headwinds caused a **₹600 Cr portfolio dip**, strong rebound observed with accelerating momentum—**₹400 Cr added in October**—signaling restored demand and execution capability. ## C. Corporate Advances * **Portfolio Rationalization:** Sharp reduction in IBPC exposure reflects strategic shift away from intermediary-based lending toward direct, higher-margin corporate and retail advances. ## D. Loan Book Churn * **Active Portfolio Upgrading:** Ongoing churn replaces bulky, opportunistic loans with direct, higher-yielding exposures, aiming for structural balance sheet improvement in H2 FY’26. * **Historical Precedent:** Past cycles show potential for **strong loan growth** following such realignments, with **27% growth in 2017–18** and **19% YoY in 2018–19** post-strategic shifts. --- # 5. Operational Efficiency ## A. Key Figures * **Branches Active in Growth:** **800 out of 950** branches directed to contribute to expansion * **Cost-to-Income Ratio:** **~50%** in FY23–FY24, down from over **60%** under prior management * **Branches with Rental Renewals:** **955–956** branches subject to periodic rent renegotiation every 3–5 years ## B. Turnaround Time & Strategic Execution * **Accelerated Credit Decisions:** Delegated sanctioning powers expanded to regional heads and supporting officers, enabling faster TAT and decentralized credit processing. * **Efficiency-Centric Structure:** Proposals bypass intermediate tiers if exceeding regional authority, moving directly to head office to prevent decision delays. * **Digital & Product Momentum:** Pipeline includes pre-approved personal loans, supply chain finance, Green Deposits, and a merchant payment app, reinforcing digital transformation goals. * **TAT Improvement Imperative:** Management emphasizes dramatic TAT reduction as critical to achieving fiscal year targets amid limited treasury support. ## C. Branch Rationalization & Cost Control * **Targeted Branch Optimization:** Suboptimal branches being shifted while retaining strategically important locations to balance cost efficiency and business continuity. * **Rental Cost Leverage:** Periodic renewal cycle for nearly all branches provides recurring opportunity for cost savings through renegotiation. * **Opex Discipline:** Focus on reducing non-essential costs introduced during past hiring surges, with declining employee costs due to resignations aiding ratio control. * **Efficiency-Growth Balance:** Cost-to-income ratio management prioritizes sustaining loan growth while improving fee income and containing operating expenses. --- # 6. Regulatory & Credit Risks ## A. Key Figures * Standard Restructured Advances: INR939.35 crores as of Sep 30, 2025 (from ₹888 Cr on Jun 30, 2025) * **Post-Qtr Recoveries:** **₹33 Cr** recovered post-quarter-end * **Newly Restructured Account:** **₹101 Cr** added due to technical issues ## B. EBLR Repricing Risk * **Yield Pressure Fully Priced In:** Full 100 bps repo rate cut impact absorbed, with **75% of loan book linked to EBLR** already repriced, causing steepest yield decline in prior quarter. ## C. Restructured Book * **Temporary Increase Driven by One-Off:** QoQ rise in restructured book despite **₹193 Cr in recoveries** was due to addition of a **₹101 Cr account** on technical grounds. * **Resolution in Sight:** Management expects the **₹101 Cr account** to be resolved and removed from restructuring by **mid-December**, restoring downward trend. * **Upgradation Pathway Defined:** **48% of restructured portfolio** requires **30% recovery** for upgradation; active follow-up continues despite no fixed timeline. * **Significant Cleanup Progress:** Restructured book down from **over ₹4,000 Cr** to **under ₹1,000 Cr**, reflecting sustained credit resolution success. ## D. SMA Monitoring * **Stress Indicators Improving:** SMA levels and overall stress metrics trending downward, with **NPA levels well contained**. --- # 7. Guidance & Outlook ## A. Key Figures * CD Ratio: 71.63% (Sep 2025) vs. 71.93% (Jun 2025) and 75.41% (Sep 2024) * **NIM:** **2.72%** in Q2 FY'26 vs. 2.82% in Q1 FY'26 and 2.23% in Q2 FY'25 * ROA Guidance: 1.1%–1.2% for full-year FY'26 * **CASA-linked Loans:** **77%** of loan book tied to EBLR ## B. CD Ratio Strategy * **Aggressive Rebalancing:** CD ratio target raised to **80%** from 75%, reflecting strategic pivot toward retail and MSME credit growth amid prior under-lending. * **Seasonal Rebound Expected:** First-half muted growth attributed to seasonality and transformation; H2 seen as critical for credit deployment and ratio improvement. ## C. NIM Dynamics & Outlook * **Margin Pressure Bottoming Out:** NIM decline driven by lagged liability repricing and **30 bps yield drop** exceeding deposit cost savings, but management sees current levels as trough. * **Path to NIM Expansion:** Improvement expected via deposit repricing, higher **RAM mix**, and CD ratio enhancement, with yield guidance of **9% or above** for H2. * **CASA as Leverage Point:** Strong CASA growth emphasized as key enabler of better pricing power and NIM expansion. ## D. ROA Trajectory & Strategic Focus * **ROA to Rise on Multiple Drivers:** Full-year ROA outlook supported by higher NII, other income, PAT, and potential **20 bps uplift from written-off account recoveries**. * **Transformation Underway:** Management acknowledges subpar investor returns and signals turnaround through disciplined credit growth, liability optimization, and efficiency targets.