# 1. Financial Performance ## A. Key Figures * Net Interest Income: **₹792.06 Cr** Q3 FY'26 (+8.8% QoQ) · **₹728.12 Cr** Q2 FY'26 * **NIM:** **2.92%** Q3 FY'26 (+20 bps QoQ) · **2.72%** Q2 FY'26 · **3.02%** Q3 FY'25 * **Cost-to-Income Ratio:** **58.72%** Dec'25 (-21 bps QoQ) · **58.93%** Sep'25 * **Aggregate Business:** **₹1,81,394 Cr** Dec'25 (+3% QoQ) · **₹1,76,461 Cr** Sep'25 * LCR: 186.84% Dec'25 (>> regulatory minimum of 100%) · 188.16% Sep'25 ## B. Revenue & NII * **NII Growth Despite Rate Pressure:** Net interest income rose sequentially on strong operating momentum, even as yield on advances declined due to repo rate cuts. * **Lag in Income Recognition:** Disbursements near quarter-end will contribute to future interest income, supporting forward NII trajectory. ## C. Profit & Margins * **NIM Expansion Driven by Liability Optimization:** Margin improvement stemmed from **CASA-led deposit cost reduction**, higher retail loan mix, and a rising CD ratio, offsetting asset yield compression. * **ROE/ROA Volatility:** Return metrics softened QoQ despite profit growth, reflecting balance sheet seasonality and timing of capital deployment. * **Cost Discipline Intact:** Cost-to-income ratio continues to trend down QoQ on sustained rationalization, though recovery benefits remain pending. ## D. Balance Sheet * **Stable Growth & Strong Liquidity:** Balance sheet expanded moderately, with LCR surging to **184%**, indicating robust liquidity positioning well above regulatory requirements. --- # 2. Loan Book & Asset Quality ## A. Key Figures * Gross Advances: ₹77,283.85 Cr (Dec ’25) (+5% QoQ) · Recovered to ₹78,000 Cr+ from trough of ₹71,000 Cr * Net NPA Ratio: 1.31% (Dec ’25) (-4 bps QoQ) · Improved from 1.39% YoY * Provision Coverage Ratio (PCR): 80.90% (Dec ’25) · Down from 81.05% QoQ including write-offs; 61.23% excluding write-offs (+101 bps QoQ) * Standard Restructured Advances: ₹867.95 Cr (Dec ’25) (-7.6% QoQ) · Down from ₹1,113.65 Cr YoY * Credit Cost: 0.11% in Q3 FY’26 · Up from 0.03% in Q2, down from 0.12% YoY * Recoveries (ex-upgrades): ₹114.18 Cr in Q3 FY’26 · Down QoQ, up YoY * **Technical Write-off Recoveries:** ₹43 Cr (Q3) · Projected ₹75–80 Cr (Q4), up to ₹100 Cr potential ## B. Advances Growth * **Loan Book Recovery:** Gross advances have rebounded to pre-downturn levels, reflecting stabilization after a dip in early FY26. * **Operational Rigor:** Follow-up mechanisms strengthened across all 15 centers and HO with deployment of concurrent auditors to support scaling. ## C. NPA Trends * **Asset Quality Pressure:** Gross NPA elevated YoY due to stress in **one large account**, offsetting broad-based improvements in MSME and retail portfolios. * **MSME Improvement:** Portfolio stress reduced and now under control, with active renewal and follow-up driving trend toward **5% or below** target. * **Housing Loan Anomaly:** 9% of SMA2 exposure attributed to secured housing loans; management disputes claims of 26% stress, calling them incorrect. * **Recovery Infrastructure:** Regional collection centers and dedicated CRMD teams credited with improved slippage control and recovery efficiency. ## D. Restructured Loans * **Stressed Book Contraction:** Restructured portfolio declined consistently from ₹1,544 Cr in Mar ’25 to ₹1,261 Cr, driven by repayments and upgradations. * **Upgradation Pipeline:** Over half of remaining restructured book requires **30% recovery threshold** for upgrade, a key focus area for de-stressing. * **Recovery Discrepancy:** A ₹100 Cr restructured account slipped, but only ₹70 Cr reduction recorded, leaving **₹30 Cr unexplained gap** under scrutiny. ## E. Slippages & Recoveries * **Credit Cost Volatility:** Sharp QoQ rise in credit cost to 11%, though below prior year, reflects provisioning for large exposure and guided PCR improvement. * **Recovery Outlook:** Technical write-off recoveries rebounding with **₹75–100 Cr projected in Q4**, reversing a quarter of lower-than-expected income. * **Large Account Resolution:** Recovery actions underway on fully secured, high-value account; resolution expected to reinstate **reversed interest**, boosting **NIM, ROE, and earnings**. --- # 3. Deposit & Funding Mix ## A. Key Figures * Aggregate Deposits: ₹1,04,111.52 Cr (Dec '25) · ₹1,02,817.19 Cr (Sep '25) * CASA Ratio: 31.53% (Dec '25) · 31.01% (Sep '25) (+3% QoQ in absolute terms) * Cost of Funds: 5.46% (Q3 FY'26) · 5.58% (Q2 FY'26) · 5.69% (Q3 FY'25) * Bulk Deposits (% of Total): 4.8% (Dec '25) · 5.3% (Sep '25) * Retail Term Deposits: ₹65,531.80 Cr (Sep '25) · ₹66,252.24 Cr (Dec '25) (+6% YoY) * CD Ratio: 74.23% (Q3 FY'26) · 71.63% (Sep '25) · 77.84% (Dec '24) ## B. CASA & Deposit Strategy * **CASA Transformation:** Rapid improvement in CASA ratio from near-zero base, signaling successful execution of **strategic focus** on low-cost deposits and customer acquisition. * **Product Innovation:** Launch of **'Soulabhya Deposit'** with partial withdrawal and enhancements to **Flexi Deposit, Supply Chain & Trust Finance** aim to deepen retail engagement and deposit stickiness. * **National Expansion Push:** Dedicated **CASA and TPP teams** deployed pan-India to drive new customer onboarding, expected to yield **better pricing power and cost discipline**. ## C. Funding Mix Optimization * **Shift to Granular Liabilities:** Strategic pivot from high-cost bulk deposits to **retail deposits below ₹3 Cr** is accelerating, enhancing liability quality and stability. * **Disciplined Renewals:** Bulk term deposits being repriced at **predefined card rates**, reducing cost pressure and supporting deposit margin resilience. ## D. Cost of Funds & CD Ratio Trajectory * **Funding Cost Relief:** Sharp decline in cost of funds driven by **CASA accretion** and **lower bulk deposit reliance**, with further room for improvement from **repo rate cut pass-through**. * **CD Ratio Recovery in Motion:** Ratio improving sequentially toward **76–80% target range**, supported by asset-side growth and stable liabilities; management flags risks if ratio exceeds **80%**. * **Near-Term Reversal of Weakness:** Deterioration in **RAM segment and other areas** through Q2 has reversed by March 31, indicating stabilization in credit deployment. --- # 4. Segment & Product Performance ## A. Key Figures * **MSME, Housing & Gold Loan Net Book Accretion:** **₹962 Cr** QoQ * **RAM Segment Advance Growth:** **2%** QoQ (Q3 FY'26) · **7%** QoQ (Mid-Corporate) * **IBPC Portfolio:** **₹1,639 Cr** (Dec '25) from ₹1,860 Cr (Sep '25) (-₹221 Cr replaced) * **Gold Loan Disbursements:** **~₹1,500 Cr** incremental since September * **Sanctioned Pipeline:** **~₹4,000 Cr** (expected disbursement: ₹2,500–3,000 Cr) * **Income Target from New Initiatives:** **₹3,000 Cr** (part of ₹85,000 Cr total target) ## B. RAM Segment * **Core Growth Engine:** RAM (Retail, Agri, MSME) remains central to strategy, driving CD ratio improvement and portfolio yield enhancement. * **CD Ratio Momentum:** CD ratio reached **74%**, with growth accelerating from October due to retail center rollout and decentralized decision-making. * **Agri Infrastructure Expansion:** Strategic focus on post-harvest and community farming assets under Agri Infrastructure Fund to deepen rural penetration. ## C. MSME Portfolio * **Strong Segment Leadership:** MSME, housing, and gold loans are key growth drivers, supported by ecosystem partnerships with LSPs and business facilitators. * **EV Financing Push:** New tie-ups focused on scaling electric-vehicle financing, signaling strategic alignment with emerging sectors. * **Major Corporate Tie-Up Secured:** Partnership with a tobacco corporation expected to materially boost advances and support credit growth. * **Regulatory Target Achieved:** Surpassed 18% agri lending mandate; focused efforts ongoing to meet small and marginal farmer sub-target. ## D. Gold & Housing Loans * **Gold Loan Recovery & Scale-Up:** Portfolio rebound contributing meaningfully to credit growth, with **~₹1,500 Cr** in incremental disbursements since September. * **Competitive Pricing Strategy:** Rate revisions for housing and MSME loans have enhanced competitiveness and demand traction. * **Higher Ticket Sizes:** Growth fueled by rising average advance sizes in housing and mid-corporate segments, indicating improved customer quality and confidence. ## E. Corporate Rationalization * **Active Portfolio Optimization:** Ongoing shift from low-yielding corporate loans to higher-yielding retail and mid-corporate assets, with **₹221 Cr** replaced in Q. * **Strategic Risk & Yield Management:** Emphasis on collateral-backed, diversified lending to improve asset quality and returns. * **Enhanced Field Engagement:** CrMD teams at HO and regional offices conducting field visits to assess market potential and borrower dynamics, strengthening underwriting insight. --- # 5. Risks & Credit Exposure ## A. Key Figures * **MSME GNPA:** **6%** (Karnataka Bank) vs. 4% sector average * **EBLR-Linked Advances:** **80%** of Gross Advances ## B. Single Borrower Risk * **De-risking Strategy:** Actively reducing exposure to low-yielding, uncollateralized corporate segments through rigorous risk and rating analysis. ## C. MSME Sector Stress * **Elevated Stress Levels:** MSME NPA at 6%, above sector average, driving targeted slippage control and stress reduction initiatives. * **Sectoral Risk Concentration:** Contractors, manufacturing, and services account for primary MSME stress, largely due to cash-flow challenges. ## D. EBLR Repricing Risk * **Margin Protection Strategy:** Recalibrated lending mix in response to lower repo rates to shield yields, with 80% of advances linked to EBLR. ## E. Competition Pressure * **Operational Differentiation:** Addressing competitive intensity by improving TAT while maintaining compliance and credit quality. --- # 6. Guidance & Outlook ## A. Key Figures * **Loan Book:** ₹77,000 Cr → **₹85,000 Cr** target by FY26 end * ROA Target: >1% by FY26 end, progressing to 1.1–1.2% in FY27, 1.2–1.3% in FY28 * **NIM Target:** **~3% or higher**, with spread target of **3%+** immediately * **Cost-to-Income Ratio:** Expected to decline to **55–56%** * **Growth Targets:** **15%** long-term business growth, **15–20%** advances, **10–15%** liabilities ## B. Business Growth * **Positive Momentum Reestablished:** After negative CD ratio trends through September, green shoots have emerged with sustained credit growth now visible across **15 regional centres**, signaling turnaround traction. * **Growth Drivers:** Expansion fueled by **retail and MSME portfolios**, supported by a strong on-ground marketing team and decentralized execution since October. * **Confidence in Targets:** Management reaffirms **15% annual business growth** and balance sheet expansion to **₹84,000–85,000 Cr**, underpinned by disciplined scaling and operational stability. ## C. ROA & NIM Targets * **NIM Recovery on Track:** Q3 improvement reflects strategic focus on high-yielding **RAM segment** and funding mix shift; outlook remains constructive for **3%+ NIM** in Q4 and beyond. * **ROA Rebound Expected:** Despite recent dip below **1%**, management projects recovery to **>1% by March**, driven by **CASA-led cost control**, **CD ratio improvement**, and recovery performance. * **Profitability Levers:** Shift from bulk to retail deposits and income accretion in RAM segment to support **higher net interest income** and declining cost-to-income ratio. ## D. Strategic Priorities * **Execution Discipline:** Post-transition phase, strategic focus on **retail/MSME growth**, **funding cost optimization**, and **asset quality** is delivering measurable progress under new leadership. * **Digital & Product Push:** New platforms and targeted product launches underway to close gaps and enhance **customer experience**, with expected margin and return ratio benefits over time. * **Forward-Looking Adjustments:** Strategic revisions planned next month, with a comprehensive recovery and growth roadmap to be presented after Q4 results.