# 1. Financial Performance ## A. Key Figures * Net Interest Income: ₹922 Cr (+₹65.7 Cr QoQ) * **Other Income:** **₹256 Cr** (53% from processing fees & insurance) * NIM: **7.9%** (+20 bps) * PAT: ₹122 Cr · ROA: 1% · ROE: 7.7% * Cost to Income Ratio: 66.4% (stable) * CRAR: 21.4% (strong capital position) * **Recovery Guidance:** **15–20% of ₹750 Cr** written-off/sold assets (~₹113–150 Cr) expected this FY ## B. Revenue & NII * **Funding Cost Discipline:** Cost of funds improved QoQ and YoY on proactive deposit rate resets, with **further relief expected** from ongoing CRR reduction phases. * **Diversified Growth Engine:** Strong NII and yield performance underpinned by **microfinance loan book expansion** and leadership as the most diversified player in the segment. * **Other Income Upside:** Over half of other income now from high-margin **processing fees and insurance**, with structural shift expected to continue. ## C. Profitability & ROE * **Profitability Stabilizing:** Low cost-to-income ratio and stable returns reflect operational discipline, with **pre-provision profits now positive and growing sequentially**. ## D. Balance Sheet & RWA * **Capital Strength Maintained:** Solid CRAR supports planned growth while management focuses on **opex and funding cost optimization**. * **RWA Contraction Explained:** Sharp QoQ RWA decline driven by off-balance sheet adjustments and borrower rating upgrades, partially offset by loan growth and higher risk weights. ## E. Cash Flow & Recoveries * **Write-Offs Winding Down:** H2 write-offs to be **significantly lower**, with vehicle finance contributing only **₹2 Cr** to total write-off pool. * **Meaningful Recovery Pipeline:** Management targets **₹113–150 Cr in recoveries** from legacy ₹750 Cr written-off/sold asset pool this fiscal. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Gross Loan Book:** **₹34,588 Cr** (+9% QoQ, +14% YoY) · **Secured Loan Mix:** **47%** (+from prior) * **Slippages:** **₹278 Cr** (down from ~₹350 Cr) · **SMA Book:** **<2%** as of Sep '25 * **Secured Slippages:** **~₹50 Cr** for six consecutive quarters * Vehicle Finance GNPA: ≤2.5% for 12-month book · Bucket X Collection Efficiency: 98.9%–99.1% * Maharashtra MFI PAR: 4.2% · GNPA: 1.9% · Individual Loan NPA: <2% * **Provisioning:** **₹31 Cr** accelerated · **PCR:** **73%** · **Floating Provision:** **₹21 Cr** * Microfinance PCR: 80% · Standard Asset Provision: 0.5% ## B. Portfolio Composition & Strategy * **Secured Book Expansion:** Strategic shift toward secured lending accelerating, with secured segment growing faster and mix now at 47%, targeting 65–70% medium-term. * **Disciplined Diversification:** Loan book growth underpinned by controlled expansion and improved underwriting, with recent vintages showing markedly better asset quality. ## C. Asset Quality & Credit Trends * **Stabilizing Credit Metrics:** GNPA and slippages show sustained improvement, with slippages down meaningfully and SMA below 2%, signaling portfolio stabilization. * **Resilient Collections:** Collection efficiency remains strong across key buckets, particularly in vehicle finance and micro banking, with Karnataka showing recovery momentum despite recent stress. * **Regional Stress Contained:** Elevated PAR in Maharashtra MFI and Karnataka-driven slippages are acknowledged but deemed non-systemic, with no incremental stress observed. ## D. Risk Management & Provisioning * **Prudent Buffering:** Bank maintained robust PCR at 73% with additional floating provision, proactively managing risk in lower-ticket secured segment amid stable performance. * **High Coverage in MFI:** Microfinance portfolio backed by 80% PCR plus 5% on standard assets, reflecting conservative risk posture and confidence in recoveries. * **Recovery Leadership:** Management highlights early recovery from microfinance sector stress, positioning as a front-runner in credit cycle normalization. --- # 3. Deposit & Funding Mix ## A. Key Figures * **CASA Deposits:** **₹10,783 Cr** (+9% QoQ, +1% YoY) · **71%** retail TD + CASA of total deposits * **Total Deposits:** **₹39,211 Cr** (+5% QoQ, +1% YoY) * **CD Ratio:** **88%** in Q2 FY'26 · **85–86%** prior quarter * **CD Book Size:** **₹411 Cr** ## B. CASA Growth * **Milestone Achieved:** CASA crossed **₹10,000 Cr** for the first time, reflecting strong momentum and effective mobilization strategies. * **Growth Levers:** Upcoming **MF distribution**, ASBA, and forex services to be launched in Q3 FY'26, expected to further enhance low-cost deposit inflows. * **Strategic Liquidity Management:** Excess liquidity absorbed to support loan growth; focus maintained on expanding CASA despite comfortable prior CD ratio. ## C. Term Deposit Repricing * **Funding Cost Optimization:** Significant reduction in cost of funds driven by rate cuts on FDs and SAs, with **full savings account repricing complete** and TD repricing ongoing. * **Lower-Rate Environment Benefit:** Incremental term deposits being booked at **markedly lower rates**, contributing to improved funding mix and **sustained cost advantages**. * **Pricing Advantage Realized:** Retail term deposit maturity-sourcing spread delivered a **108 bps benefit**, underscoring scalable and efficient funding potential. ## D. Bulk vs Retail Deposits * **Strategic Shift to Bulk:** Bulk term deposits sourced at **67 bps lower rates** than retail, prompting increased reliance while maintaining retail growth focus. * **Deposit Mobilization Restarted:** After flushing out excess liquidity, the bank is re-accelerating deposit gathering efforts to align with renewed loan growth. --- # 4. Segment & Product Performance ## A. Key Figures * **Loan Disbursements:** ₹7,932 Cr Q2 micro banking (+21% QoQ, +48% YoY) · ₹14,471 Cr H1 (+36%) * Secured Disbursements: ₹3,701 Cr Q2 (+78.8% YoY, +39.6% QoQ) * **MSME Loan Book:** ₹2,559 Cr (+69% YoY, +14% QoQ) * **Agri Loan Book:** ₹510 Cr (+4x YoY, +27% QoQ) * **Micro Mortgage Loan Book:** ₹1,094 Cr (+180% YoY, +23% QoQ) * Affordable Housing Loan Book: ₹7,656 Cr (+42% YoY, +8.3% QoQ) * **Gold Loan Book:** ₹412 Cr (+6x since Q2’25, +41% QoQ) * **Vehicle Loan Book:** ₹656 Cr (+150% YoY, +17% QoQ) ## B. Micro Banking * **Record Disbursement Momentum:** Micro banking originations surged on strong demand, particularly in secured products, with robust customer acquisition of **26 lakh** in Q2. * **Secured Product Shift:** Portfolio transition accelerating toward gold loans, vehicle finance, and micro mortgages, supported by **32,000 group-to-individual loan graduations**. * **Stable Yields Amid Rate Cuts:** Micro banking yield held firm at **22%** despite repo rate decline and absence of prior quarter’s one-off benefit. * **Graduation Dynamics:** Individual loan (IL) growth lagged overall portfolio, but management sees potential for **IL to outpace group loans** in coming quarters due to improved borrower filtering. ## C. Micro Mortgages * **Hypergrowth in Micro Mortgages:** Secured book expanded rapidly, with micro mortgages up **180% YoY** and GNPA stable at **1%**, signaling strong credit quality. * **Affordable Housing Strength:** Portfolio grew **42% YoY**, well-diversified across borrower types, with **94% self-occupied** loans de-risking exposure. * **Path to ROA Parity:** Micro mortgage is **profitable**, targeting industry-average ROA within **2–3 years**; secured book on track to exceed **35% FY’26 growth guidance**. ## D. Vehicle & Gold Loans * **Explosive Growth in New Secured Verticals:** Gold and vehicle loans scaled rapidly, with **gold book up 6x** and **vehicle disbursements +117% YoY**, driven by festive demand and branch expansion. * **Profitability Trajectory:** Gold loans expected to **breakeven next year**; two-wheeler financing on track to break even by **year-end** at **₹1,000 Cr** book size. * **Yield Enhancement Underway:** Non-microfinance secured yields (~12%) set to rise as higher-yielding products—**micro mortgages (~19%+), vehicle (~20%)**, and **gold (~15%)**—gain share. --- # 5. Branch & Distribution ## A. Key Figures * **New Branches:** **14** added in Q2 FY26 · **11** planned in H2 FY26 ## B. Branch Expansion * **Accelerated Rollout:** Robust pace of branch expansion with full-service micro banking offerings launched from day one, enhancing early revenue potential. * **Strategic Product Roll-In:** New branches will progressively introduce additional products, supporting long-term customer deepening and share gains. --- # 6. Credit & Portfolio Risks ## A. Key Figures * **PAR:** **7.4%** in Karnataka · **60 DPD** allowed under MFIN vs. **30 DPD** internal guardrail * NPA: 4.8% in Karnataka (vs. historical <2%) * **IL Portfolio Target:** Expansion from **30%** to **45%** of total book * Collection Efficiency (Bucket X): Improved from 99.46% (Jul '25) to 99.50% (Sep '25) ## B. State-Level PAR Trends * **Deteriorating Credit Quality:** Significant stress observed in **Gujarat, Tamil Nadu, and Karnataka**, with Karnataka newly added to stressed states in Q4, leading to slippages. * **Persistent Weakness in East:** West Bengal and Bihar show **flat book growth** and no meaningful improvement in PAR/NPA, prompting restrained expansion. * **Outperforming Regions:** Strong asset quality in **Maharashtra, Tamil Nadu, and Haryana**, with no underwriting or product-level concerns identified in stressed regions. * **Proactive Risk Controls:** Company enforces a **stricter 30 DPD internal threshold** (Guardrail 0) despite MFIN allowing 60 DPD, signaling conservative credit assessment. * **Stable Repayment Trends:** No deterioration seen in repayment behavior in **Gujarat and NCR**, despite regional stress. ## C. IL Portfolio Stress * **Mixed IL Performance:** While overall collection efficiency improved, **deterioration in Karnataka, Maharashtra, and West Bengal** raises caution around IL book expansion to **45%** of portfolio. * **Targeted Growth Under Scrutiny:** Management’s ambition to grow IL exposure faces headwinds from state-level asset quality risks, particularly in high-stress regions. ## D. Karnataka Exposure * **Sharp Deterioration in Asset Quality:** Karnataka’s NPA surged to **8%** from a historical base below **2%**, driven by external factors, though root cause remains unconfirmed. * **Elevated Credit Costs Likely:** Despite improving collections, **Anand Dama flags sustained pressure** on credit costs due to high PAR, warranting close monitoring. * **Limited Sector Concentration Risk:** **Tirupur textile exposure** (2% of base) shows **no stress**, with stable repayments, mitigating sector-specific contagion fears. --- # 7. Guidance & Outlook ## A. Key Figures * **Loan Book Growth:** **7–8%** FY guidance (H2 stronger than H1) * **Credit Cost (Q2 '26):** **₹235 Cr** (decline expected in H2) · **Full-Year Guidance:** **4%** * Net Interest Margin (NIM): 7.9% in Q2 '26 (up from 7.7%) · Expected to stabilize around these levels for FY '26 * **H1 Credit Cost:** **~270 bps** (ex-accelerated provisions) · **Implied H2: ~210 bps or lower** * Cost of Funds: Expected to settle at ~7.1% by year-end ## B. Loan Growth Targets * **H2-Weighted Expansion:** Microfinance loan book on track to meet **7–8%** full-year growth, with **stronger momentum expected in second half** amid recovering demand. * **Institutional Commitment:** Management reaffirmed focus on delivering guidance and building a **sustainable, enduring institution**. ## C. Margin & Credit Cost Forecast * **Margin Recovery Achieved:** NIM expanded to **9%** on liquidity deployment and secured lending mix, with **deposit repricing effects now flowing through**; stabilization expected. * **Credit Cost Normalization Underway:** Elevated H1 provisioning largely complete; **meaningful decline expected in H2**, with **tail risks minimal** and **normalcy anticipated by FY '27**. * **Funding Cost Optimization:** **17% of loan book** sensitive to repo rate cuts, but **deposit cost actions (Apr–Aug)** are driving margin support, with **full impact lagging into next quarter**. * **Yield Outlook:** No specific target for non-microfinance yields, but **modest upward trend expected** driven by product mix evolution.