Bandhan Bank Limited analyst Q&A

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. We take the first question from the line of Piran Engineer from CLSA. Please go ahead.

Yes. Hi, good evening. So just first question is what led to the strong average CA growth this quarter?

We had focused on current account affluent segment where we could manage a good growth in the current account at the granular level month -on-month, which has resulted in the total growth, which has happened throughout the year.

Okay. So, there's no seasonality in this, right? It won't fall in 1Q?

These are small SM E customers who have opened the current accounts with us. There is no major seasonality linkage.

And our staff department has also continued to show deposits from the various trust that has also added.

So, Piran the results of all the business initiatives and efforts, geared towards improving the current accounts.

And is there any particular target CA ratio that we have in mind?

So, we'll continue to improve. We have not yet crystallized the target to what percentage we'll come. But definitely, our focus is that we will continue to improve. Last year also, on CASA, we were at 31%. The sooner we achieve this milestone to set up a goal to fix our next target.

Yes, I think our overall CASA if you see has gone up from 27.3% to 29.3%, within that CA has improved further. As Partha sir mentioned, we'll continue to improve it further. We are also broad basing and introducing more products within the table of current accounts and savings that will help us in terms of improving the CASA further.

Understood. Okay. Fair enough. Secondly, how are we thinking about neutralizing our PSL shortfall and go back to that era of selling PSLC rather than purchasing PSLC?

So, a number of steps have been taken in this regard. This year, PSL cost has been definitely quite high. And in the Q4 also, we had to incur a cost of around INR 150 crores, INR 60 crores higher vs. last quarter . So , what we have done is that we have revamped our entire credit process in our EEB segment to quality more portfolio in the PSL and also incremental focus on our direct agriculture loans. The effect of these is going to come , as in t his year, we are expecting that the PSL cost would come down by almost 50% to what we have incurred in FY26. That is our aim this year. Going forward, next year, it will be almost neutralized or coming to zero. And after that, we will continue to earn from this PSL portfolio.

And sir, this is all from direct agri loans?

So, we have improved the process that we have for microfinance loans for EEB segment and the percentage of EEB loans for PSL has been improving steadily, which will also help us going forward.

Okay. But then, Rajeev, what sort of EEB loans today do not classify for PSL and going forward, they will classify, like what is the change, if you can?

No. Again, I'm telling you that it is more of a revamping of a process. So currently, what was there the agriculture of the allied agriculture loans that we're giving it are not getting captured into our system. So, we have made that available and I can tell you that currently, a year ago, it was only 10% or 15% of the EEBs, which was coming under the PSL, qualifying for PSL. Now it has already increased to 40%. Going forward, it will increase to 60%, 65%. So, the revamping has already been done. And you see for the RBI also in the circular clearly mandates that banks have to follow a certain process and procedures to get them qualified. So those steps have been taken, and we are now already seeing the green shoots. As I told you that almost 40% now have been covered on the EEB segment. So going forward, this percentage would increase. And apart from that, we are also focusing on the agriculture loans. That is a direct to agriculture which will have the PSL effect.

Understood. And sir, my next question is about the vehicle business. Vehicle finance now with the book is INR 5,000 – INR 6,000 crores. It's a decent size. Can you talk a bit about it? How much -- firstly, who is our typical customer who comes to us? Secondly, how much of the cross- sell happens to own deposit customers versus open market and is this entirely car loans or is it 2wheelers EV, etcetera, also?

Yes. So Hirak will be answering, he's our Retail Head.

So, this is to answer your first question, the vehicle loans include 2-wheeler as well as car loans and the customer segment is salaried and self-employed mix, but majorly it is salaried segment. When it comes to other vehicle finance which we talked about is commercial vehicle and construction equipment, where our major focus currently is on a strategic and super strategic customer and some portions say about 9% - 10% of our customers in the CV/CE are retail who are holding the fleet of less t han 10 vehicles. And about the cross -selling, so currently about almost 20% of our volume comes from our own customers, which we call it in an existing branch customer.

Okay. Sir, just broadly, what is the mix of loans between CV, PV, 2-wheelers?

Okay. So, about INR 3,000 crores is commercial vehicles, about INR 1,700 crores is construction equipment, about INR 1,800 crores is car loans and about INR 900 crores are 2-wheelers loans.

Thank you. We'll take the next question from the line of Zhixuan Gao from Schonfeld. Please go ahead.

Hi, thank you for opportunity. Just on the operating expenses, you mentioned there are some multiple one-offs. Do you mind giving some colour on quantifying those please?

There is some disturbance. Can you just repeat your question?

Okay. On the operating expenses, you mentioned there are one -off factors. Do you mind quantifying those one-off factors and which were they?

Yes. So, I think during the quarter, we had a couple of items which actually do not appear to be recurring. So, one is the PSLC cost, the Priority Sector Lending Certificate cost, which as we said that we have taken actions that this should go -- will get reduced. So , during the quarter, we had roughly around INR 60 crores of increase vs. last quarter that came through because of the PSLC costs. Apart from that, we had an increase in the IT expenses also, which was also amounting to a similar level of around INR 50 crores. Within this, there are a number of items which were more timing-related issues and therefore we don't expect that to get repeated immediately. These two, I think, are a couple of the recurring items, which came through during the quarter, roughly amounting to about INR 120 crores.

Got it. And then the next question is opportunity about, I know the macro concern, assuming kind of relatively stable environment, how should we think about ROA for FY27?

Sorry, the audio wasn't very clear. We couldn’t understand the question.

Your voice is breaking actually. If you can speak a little bit slowly I think it will be better.

Okay. Any thought on FY27 ROA?

On the ROA.

Yes.

ROA, we saw a improvement from 0.4% in Q3 to 1.1% in Q4 and the reason for this is one is we have seen improvement in the income as we had highlighted the cost of deposits have come down and also the other income has seen an improvement. Apart from this, we have seen a reduction in the slippages, which led to a reduction in the provisioning of the credit costs. And these factors, despite a bit of a partial offset through increase in expenses, overall, we still saw the overall profitability improved sequentially. And going forward, as we have been guiding the market, we will be working towards seeing how we can gradually keep on improving the ROA towards the guided level of between 1.6% to 1.7% ROA by the exit of FY27, give or take 10 basis points. So we intend to make sequential improvement towards that aided by multiple factors and also further sort of improvement in cost of fund that we envisage.

So just to give more clarity on it, the major. One of the major factors is that we could reduce our credit cost. So , 2%, number one. Number two is the NIM has increased as we've seen to 6.2%. And these are the 2 major factors. And definitely, the other income has also gone up. This is the third one. And the fourth is that despite an increase in the operating costs, the RoA have increased, so the trajectory of 1.1%+ has been maintained.

Got it thank you so much.

Thank you. We take the next question from the line of Jayant Kharote from Axis Capital. Please go ahead.

Thank you for the opportunity. So, first question is on the month of April, now that elections are almost closing in tomorrow. Anything that we should, I mean, I think this time, we didn't have any interruption, so to say, from collections. So fair to say the collection trends would have held up in -through the events of April as well?

So let me tell you a clear picture that till now, there is no adverse effect on collection on account of, I would say, either election or middle east war. The collection efficiency, what Rajeev has stated is continuing. But definitely a few basis point, it comes down in the month of April, but which is quite common for the days. But on the ground, no adverse effect is being seen. And we are hopeful and expecting that this trend will continue.

Great, sir. Sir, second question is on the RBI ECL impact. I don't know if you already spoken in the past about this but given that the direct. I mean, the final guidelines are exactly as what the draft was, you would have had some time to calculate. So how would your steady state credit costs look like? I'm not concerned about the onetime impact. I'm asking about the steady state credit cost. And just a corollary to that question also, on your unsecured book, what is the standard asset provisioning that you currently do?

So, Rajeev here. I think on the ECL, we do have the transition impact, which is based on the December 2025 portfolio based on the earlier draft circular. Yes, I think the latest circular came through yesterday. We are still going through if there are any further changes to that and what will be the implications of it. But based on the earlier draft circular in December 2025 portfolio, the transition that we expect is to be roughly around INR 1,250 crores, which as we are allowed to transition it or spread it over 5 years would translate to about INR 250 crores per year impact. Given the latest circular talks about this can be passed through the retained earnings or capital results, we expect roughly 16 to 17 basis points of impact on the CRAR every year for those 5 years. So that's the implication based on the transition. The flow impact is still being computed. We don't have a number as of yet. As that gets computed, we'll have to assess the new circular implications and then we'll be able to come back to what the flow impact should be. But as of now, this is the range of impact based on the transition that I can share with you.

Is there more to add on the standard asset provisioning?

Standard asset provisioning.

Yes. On the standard asset provision, we basically, on the unsecured portfolio, which is, let's say, micro finance, which is the largest one.

So correctly, we are having around INR 1,072 crores provisions on all the standard assets. So that entails actually that includes 2 additional provisions. One is that upon the standard assets, we take an additional 0.75%. And also, we have got an additional provision of around INR 136 crores. So with this, I think INR 1,072 provisions are already there in our books. So, our impact on the ECL going forward, the flowed is 5% in most of the cases, expecting some where the flowed is a little bit less. But since we are already continuing to make 1% additional provision on the standard assets, which is 75 basis points higher than what is now required as per direct norms for the day. So , in fact, might be that will be 4% on the March value for the day. But I think that going forward, the way we are managing our assets if we can manage our SMA-1 and SMA-2 books much more prudently, this requirement will not have that much of effect on our credit cost.

And I think if I can translate these 2 percentages, for EEB, the requirement is 0.25%. We maintained 1%, which is 75 basis points higher, like Partha sir, mentioned. On personal loans and on ABG, it's around 0.4%, in line with the added requirements.

So just to rehash everything, EEB, you're already maintaining 1%, non -EEB unsecured is the only portion where you have to go from 40 bps to 1%?

That's correct. That's right.

Great. Thank you sir and congrats once again.

Thank you.

Thank you. We take the next question from the line of Ankit Bihani from Nomura. Please go ahead.

Hi thank you for the opportunity. I wanted to know that what proportion of your deposits would be government related? And the second question is, how should one think of margin trajectory from here on? Should we see improvement or a 4Q, generally, 4Q is th e seasonally strong quarter, so can hear the moderation from here?

Suresh, our Head of Branch Banking is answering this.

So, our government deposits on the CASA side will be around INR 6, 000 crores out of the total deposits that we have CASA deposits that we have.

The retail composition is overall 74%, as you are seeing for that year, we have improved 69% last year. So, we have improved to 74%. We have reduced dependence on bulk deposits and majority of these bulk deposits used to come from the government departments also. So that portion, we have reduced it.

So, the CASA share works out to around 12%, 12% of CASA is from the government deposits.

And on the margin side trajectory, just adding on to that. So TD repricing is largely done or we should see cost of funds benefit following through in the coming quarters as well?

Yes. I think as we have guided, we expected the cost of funds to continue to improve in Q4, Q1 and Q2. We have seen the improvement comes in Q1. The term deposit repricing has happened. And therefore, we had seen sequential improvement. And as a result, th e margins have gone up from 5.9% to 6.2%, it’s a 30 basis points increase, largely driven by the cost of funds, partly also due to the impact of lower slippages, resulting in lower interest reversals As we go through the next 2 quarters, we do expect further improvement because there are further term deposits coming in for renewals. So, we do expect at least another 10 to 20 basis points of improvement over the next 2 to 3 quarters.

10 to 20 basis improvement on cost of fund is it?

Yes, based on the cost of funds, improvement on the NIMs.

And on the credit cost front, how should one think? Should we consider 4Q as our base? Or again, as you highlighted, there were lower due to lower slippages. So do you see the slippage trend moderate from here or we could see it slightly inch up in 1Q on the MFI business.

Yes, I think we have, as I mentioned, our X bucket collection efficiency has improved to 99.6% for the quarter and in fact March months, it was 99.7%. If we are able to maintain these levels, we definitely expect these slippages to continue to remain at these levels. We of course need to be wary of the implications of the war that's happening, what exactly happens on that front as well as any other externalities. But based on the efforts that the team has taken and the improvement in the collection efficiency, we do ex pect these slippages to hold at these levels and maybe improve marginally as well.

What I was telling is that EEB has made a remarkable improvement. So , the slippages have been most, last quarter, it was INR 1,314 crores, it has come down to INR 1028 in Q4. And also in the slippages, even if you see the EEB slippages has also reduced from INR 942 cores to INR 690 crores. So, the improvement trend is continuing.

Yes. I think this is an important point. The overall DPD pool also, we have seen an improvement. The EEB DPD pool has come down from 4.6% to 3.1% across SMA-0, SMA-1 and SMA-2. This is the biggest reduction in SMA-0. And that will also help us in terms of trailing to slippage for the next quarter at similar levels.

Okay. And any growth outlook on the deposit and loan growth front? As I remember earlier, we had guided that deposits will continue to grow faster than advances, but currently, we are lagging. So how do you think deposit environment panning out? And what w ould be your guidance, given our balance sheet, we are still running at a lower rate versus the industry loan growth. What could be outlook for FY27, FY28 for the loan under volume growth?

So, our guidance remains the same here. We are particularly aiming a growth of around 14% - 15% in the credit. And the endeavour would be to have a better deposit growth rate. But yes, a challenging factor is that the entire industry has now reversed. If you look at from November onwards, incremental credit growth is more than the incremental deposits growth. So, we have to also look into the industry scenario accordingly also. But definitely, the, take whatever the guidance about there, so it will continue.

Also, to highlight on our credit growth, whilst the overall number is around 13%. If we exclude EEB, I think the non -EEB book has gone to almost 25%. And we know that the EEB has gone through a cycle year -on-year, it's been a contraction. We have been able to r educe the contraction to only about 5% year-on-year compared to the industry, which actually has been contracting much larger. So therefore, actually, in EEB our market share has improved even further during this last year as well. So, our numbers are not exactly comparable with the peer group because of a little larger portion of micro finance that we have in our books. And on the deposit front, we have consistently shown higher deposit growth in advances. But this time, as we mentione d, consciously, we have reduced the bulk deposit share. And if we exclude the bulk deposit, our retail deposits have grown almost 17.8% or roughly 18%, which shows a very healthy growth rate.

And on the deposit market front, are we seeing any competition, intense competition there? Or is there a chance of TD rates rising across the banking sector? Term Deposit repricing across the banking sector?

I think the deposit competition is definitely intense, and we did see in the month of March itself, the deposit rates go up quite significantly being offered by the competition. And therefore, we have been focusing on improving the structural granular reta il deposits, and that's where the focus has been, and we want to remain steady on that particular strategy. And therefore, we took a call to not grow the bulk deposit significantly during the Q4. And that should help us going forward in terms of optimizing our cost of funds.

And lastly, what was your average LCR for the quarter?

Our period end LCR was around 131%. Average LCR, I think would have been ranged from between 130% to 140%.

Okay. So basically, your margins might have been supported by some liquidity, LCR coming down as well? Because as far as I remember, 1Q, we had an LCR of about 200% odd. So that has come down gradually to 130% odd, right?

Yes, it's a result of the bulk deposits coming down, which is helping us on the LCR also.

Okay, sure sir. Thank you for answering my questions.

Thank you. We take the next question from the line of Anand Dama from Emkay Global. Please go ahead.

Sir, thank you for the opportunity. Sir, one question that I had was on your credit costs. So, this year, should we expect a credit cost somewhere about 1.5%, 1.6%? Now that the EEB stress obviously is easing out, and I think initial impact will be largely taken through the balance sheet. So, is that a fair assumption in terms of credit cost for FY27?

We are keeping our guidance unchanged. So, the credit costs have substantially improved, and we have ended up at 2% in Q4 and going by the current trends in the EEB, especially in the EEB segment the rate of recovery and the collection efficiency for that year , I think that there will be some improvement in the credit cost going forward. But yes, definitely, there are certain concerns like the impact of the middle east war. We don't know the impact. How will it come? And how will it impact the economy, the fuel price, availability and then the casc ading effects on the other sectors of the economy which is there. But as on, you said that going by the current trend, the economy is moving and the portfolio of our bank is also showing signs of a lot of green shoots. I think that we can keep that guidance, and we will be trying to achieve as close to that.

So, our guidance, we have mentioned was between 1.6% to 1.7% by the exit of FY27, which is by Q4FY27. And we will still endeavour to work towards that.

Okay. And are we largely done with the sale of NPAs pull now?

So, it is an option. See it is a part of the NPA management. Option is neither closed nor we are following up also. So , we have not yet crystalized anything. So, if there's some opportunities we will be looking. If we get some good prices of our books we may prepone the cash flow, that's the only thing. That is the only advantage that happens, you know as you said. So . it is something as a part of management, it is till now, I can say that we are not crystallized on that, but at the same time, an option is available.

I think the two other factors, the NPA, the slippages have come down. The collection efficiency has picked up. The ARC sale that we did in Q3 prior to that we did 3 years ago. So , it's not something that will be done every quarter. But as Partha Sir has mentioned, this is an option that is available for the bank. And we will look at it whenever we need to do any kind of an NPA management, but there are no immediate plans as of now.

And sir, lastly, in FY27, with that, the credit cost will come down. Should we expect an ROA above 1%?

So, we have started the trajectory that much we can say. So , you see that from 0.2% in September, we improved to 0.4% in December and now 1.1%. The endeavour is there. We have not yet changed the guidance and going by whatever the green shoots, we are happy, we're seeing in the EEB segment, if that continues, and w e are also focusing on the other income front, especially in the wholesale segment. With all these things and by reducing the operating costs, I think that we will try to achieve as near to the guided range of 1.6% - 1.7%. That much I can say. Definitely, a challenge, but we are not changing the guidance as of now.

Just to reiterate the guidance, we had said it was 1.6% to 1.8% of ROA by the exit FY27, which is Q4FY27, give or take 10 basis points. So, we will work towards meeting those numbers.

That’s very helpful sir. Thanks a lot.

Thank you. We take the next question from the line of Nitin Aggarwal from Motilal Oswal Financial Services Limited. Please go ahead.

Hi, good evening everyone and congrats on a good quarter. A few questions I have. Like, firstly, on the NII growth itself, if I see like NII growth this quarter is at 4% Q oQ growth. And this has come in despite pretty strong advances growth this quarter, even the previous quarter, we had a decent pickup and margins have improved in both the quarters. So , any reason why this growth is lacking the advances growth despite such a margin expansion?

Let me just tell you, the NII, first of all, the interest income last year was affected due to the repo rate cut. So almost 125 basis point that cuts were there in the repo rates. Number two is that we also rationalized our own MCLR. So that was, the effec t was almost 200 basis points on that account for the day. And if you look at the balance sheet, the advances have taken place mostly the incremental growth, 50% of the incremental yearly grown has taken place in the last quarter. So , for the day the effect, we will, we have not got in that quarter itself because many loans were disbursed say, in the month of March or end of March for the day. So , the effect of that was not given on that yet. But one good thing is that we could actually arrest the declining trend of the repo cut, if you look at the entire figure for that year. So, because January also, there was a 25 basis point repo cut was there I have to pass on to all the borrowers. But sti ll that we maintained at the same level at INR 5,428, vis-à-vis INR 5,431 during the previous quarter. So, the effect of this increase, what you are saying is that we will be seeing in during this quarter, I can say.

Yes, I think specifically for your question Nitin, three -four points. One is the advances growth came but that growth was rear-ended, so we will see the benefit of that in the coming quarter. The second is, you know, this quarter had roughly two days less. I think just from a day’s count perspective, there is an implication as well. Third is the repo rate reduction that happened in December of 25 basis points, which had an 11 basis points impact on our book, roughly 46% of the book got impacted. But of course, partly offset by the growth that we saw, the momentum we saw especially in the EEB growth that came through. I think these are three or four factors leading to the 4% improvement in the NII for this quarter.

Okay, got it. The other observation is around the collection efficiency. If I see like for the month of March and for the quarter, the gap has widened. Like while there used to be like a say last quarter was a 20 basis point gap if I look at the collectio n efficiency excluding arrears at 98 % and 98.2%. This time for the month of March it has stood at 98.6% versus 99.3% for the quarter. So how should one look at it? Has March deteriorated over the three months of, of this quarter or how should we read this?

No, So I think the way it can be read is that we actually saw improvement in the collection efficiency started to come through the month of November last year. So, last year October was impacted quite heavily because the over -leveraging saga was still pla ying out, but from November onwards and mid of November is when we started seeing the improvement come through. and therefore, I think, you know, we are seeing the difference between the quarter versus difference between the months to have a difference in the basis points, right?

Nitin, can I just add to what Rajeev spoke? In our month of November onwards, we have been clocking current ex -bucket collection at 99.6 % onwards and we did January and February month at 99.65% and 99.7%. March last day was a holiday which impacted as we have a holiday billing and that resulted into 98.9 % number or something and that overall, we finished the quarter at a much better number on the current bucket number at a 99.6%. So overall there is nothing to worry in terms of the March overall not holding compared to the entire quarter, but the quarter numbers of ours are together if I have to compare it to quarter three.

Till, I think, 15th November the situation was not that much better, but definitely from 15th November onwards the collection efficiency has improved a lot and steadily being maintained. And that also you can see as part of your SMA 0 improvement in EEB business across SMA 1 and 2 as well. All the buckets have come —come down including the slippage number. That clearly shows from the November month the progress has been so significant that all the buckets including the slippages overall has come down to a substantial amount.

Right. And the other question is around the profitability overall wherein we are indicating 1.6% to 1.8% ROA by Q4FY27. So how much of this improvement is hinged around MFI now that the collection efficiency has already improved to like near normalized levels now already and how much of it is like a further expansion break -even and recovery in the non-MFI businesses? So, can you give some profitability of non -MFI business therefore by some split or some color around that to understand this improvement in ROA better?

Yes, so I think three or four key factors, broad factors. One is the credit cost improvement as we mentioned from the current 2% level to 1.6% -1.7%. So, we do see the credit cost itself to provide further uplift on the ROA. Second is as Partha sir mention ed, we are focusing on generating higher other income and this will be the result of further capabilities which are coming in our secured asset businesses, especially wholesale banking. So, as these come in, we should be able to see some improvement there. We are also expecting as disbursements pick up, improvement in the processing fees and the momentum on the third-party products income to continue. So, I think other income will be one of the key drivers. We do expect at least about 10 basis points to come through there in the other income. And operating expenses as we mentioned like PSLC cost itself, if that reduces, I think we should be able to get some delta from there. So, these are the two or three key factors. Overall business momentum is important and I think we'll continue to maintain that momentum. The good thing also is that as we had set up a target of around 58% secured mix by March '27, we are almost near that now itself. So, we met that —that target nearly that a year in advance and therefore our growth rates across EEB and non-EEB can start to converge to some extent.

Right. And Rajeev, one, like curious question curiosity that I have is around the LCR ratio rather because we have been able to maintain one of the better LCRs in the industry, even this quarter after this decline at 130-140 average that you talked about is also a very, healthy number? So, what really differentiates Bandhan Bank LCR versus the other large private bank because if I compare on the retail mix of deposits or CD ratio, there is not much of a difference. So why the LCR numbers are so much better not just in this quarter but mostly even in the previous?

Yes, I think the, the other factor is that we, we have a large portion of deposits coming from retail. So, our retail deposit share is much larger and that has a much lower run -off factor as you know between a 5% to 10%. We have a lower share from corporate deposits which have a higher run-off factor of 40% or 75% or 100%. Therefore, I think to that extent there will be difference in terms of comparability across the different banks.

And if you add the non-callable part of the bulk deposits, so retail plus non -callable has got to more than 95%. So, the fluctuation and the volatility is concentrated more on the balance 5%. So that dependence has come down and that has helped us to main tain a better LCR for the day.

Got it. Thank you so much. Thanks for all the insights.

Thank you. We take the next question from the line of Suhani Goyal from ICICI Securities. Please go ahead.

Yes, hi sir. This is Jai Mundhra. So, Rajeev I heard your opening comments on ECL shortfall?

Mr. Mundhra, I do apologize to interrupt you there. Your audio is not clear. Could you please use your handset?

So, Rajeev, my question is you mentioned that there is a shortfall of let's say INR 1250 crores odd in ECL transition and we have a credit cost guidance of 1.6 %-1.7%. Given that now ECL provides that the transition can be adjusted through reserves, would you be, I mean, would you be, let’s say if you have buffer, you can still flow in the P&L and then you can adjust in the reserves or you would still like to minimize that shortfall? I just wanted to understand your thoughts on those?

No, so I think we are as we said, we are assessing. Look, the latest circular came yesterday, so we are actually evaluating what the latest circular allows as we understand is to take it through the retained earnings and also allows a period of five years in which it could be spread out. Therefore, you know, we will look at the flexibility that that offers and how exactly it impacts the balance sheet. Also, the assessment we did of the number we shared was based on December balance sheet. We'll have to reassess based on the latest balance sheet and of course how structurally we are able to change the balance sheet over the course of the year. So, these are the various factors that we'll have to assess to be able to take the final approach on the same.

Okay. Now as I mean, now the circular allows you to adjust through reserves, would you be keen to minimize the shortfall or would you be keen to adjust it through reserves because that is allowed? I mean, that is the broad question.

INR 1,250 crores is a estimate roughly on the basis of Q3 FY26, so this is a December number. So, March number and going forward also it needs to be crystallized. Maybe that we actually may have a lesser effect.

Right. Secondly, sir, on your write -off and provisioning, so let's say if INR 100 slips out of EEB, is there any set provisioning, set provisioning policy because I think you have to provide 100 by year end in 365 days. So, do you follow 25 %, 25 % or is there any pattern, is there any provisioning policy for MFI?

We do have a provisioning policy but we just maintain the PCR. If you look at our is that PCR including the SRs for the day we are maintained at 74.5%. So that, that is the crux we want to maintain it and to maintain that PCR, whatever the additional provisions are required, we do it once we write off our portfolio. So that is the way. The main theme is that we keep the PCR as the target point that need to be maintained and based on that, whatever the shortfall in provisions on account of write -offs are there, so it deserves merit for the day. We take a more conservative position than what the IRAC requires. I think for us broadly I think at 180 DPD itself we take almost a 100% provision for the EEB portfolio.

Right, that is good. And sir, lastly, the revised circular says that if there is any exposure which has government guaranteed linkages, it can have very small Stage 1, Stage 2 provisions. So any of your EEB portfolio, either through CGFMU or some other sc heme, do they qualify for that kind of a status or, or no?

So, for EEB portfolio currently we do not have any government -backed guarantee, but we are evaluating in terms of how do we want to progress it from here. As of now, there is nothing which is guaranteed backed by the government side currently. We don't ha ve any CGFMU coverage for EEB. That option is open for us, so we'll be evaluating.

Sure. And lastly, Vishal, since you are there on the call, if you can talk about your resignation. I thought everything is going on very well. I mean, you have reached almost turnaround or almost normalized level of slippages, so what happened? Thank you.

I'll take you offline on this one. There is nothing, it's a personal career advancement, nothing beyond. Yes.

So, bank is now I would say much, much more process -driven rather than person -driven. I would say that we should look at it for the day. We have brought many changes in the EEB, rather we have transformed the model of the EEB business and lot of technology an d other inputs have been made and Vishal has implemented it very meticulously. It is his personal career growth he has aspired for and we wish him all the best.

So, these are all rumors. I have already -- we have already said that these are all rumors and nothing is going at the Holdco level, nothing is going to affect the shareholding pattern of the bank. If something is going at the CIC level, that is their call. It anyway is not going to affect the bank.

Right. Very, very clear sir. Thank you and all the very best.

Thank you, thank you.

Thank you. We take the next question from the line of Rahul Kumar from Vaikarya Fund. Please go ahead.

Yes. Hi Rajeev, just one question on this employee cost as well. I think if I exclude the base quarter number from the 3Q, the impact of Labor Code, I think I see a 14% increase in the employee cost QoQ. So what led to that?

I can say that INR 73 crores additional employee cost was there during this quarter. This has come on account number one is that yes, definitely this month there were large number of holidays and we have kept the bank open because to reduce for the collections and here we have kept the bank open for 2-3 days for which we have to pay some additional salaries to the employees as per the rules of the bank. So that has actually increased in the employee cost for the day. Otherwise, the a ll other costs are in line with what we have incurred in the previous quarters.

Regarding the new Labor Code related impact we had already taken in Q3. In Q3, there was no incremental impact that came through in Q4. So as Partha sir mentioned, this was because of a couple of days additional that people had worked and the salary impact of that and some normal salary expenses.

Okay, okay, okay. And if I look at the reported yields actually, they have increased in this quarter versus the 3Q despite the repo cut impact. So what drove that?

Yes, so I think there are two things. One is as we had done the ARC sale in Q3, a large chunk of the NPA portfolio had gone away and therefore you get the immediate benefit on the yield on the overall portfolio in the next quarter, right? Because the NPA book was actually suppressing the yield. So that was one of the key reasons. Apart from that, there was as we mentioned improvement in the EEB disbursement as well. And as the EEB book increased by almost 8% on a quarter -on-quarter basis, total advances increased by 6% on a quarter-on-quarter basis, which meant that overall mix perspective there was some further benefit that came through on the yield. I think those are the two key reasons.

Okay, okay, fair enough. And the last question which I have was on the slippages front. I think even though the ex -bucket collection efficiency has improved quarter -on-quarter in this, but you were trying to guide us on the slippages front that it will be similar to what it is -- it was in Q4. So is there something on the ground which is different versus what, you know, which you expect to be worsening in this quarter?

No, so we, we mentioned that slippages will basically hold to improve, right? So that's the range that we have given. We would expect to have some gradual further improvement as well come through. But we are also wary as we mentioned of some of the external risks which are coming through, especially we don't know fully if the war -related impact will come through in what shape and form. So, we are keeping some bit of conservatism there. But at the end of the day, based on the collection efficiency improvement, we are fairly confident on the level of slippages that we have achieved as well as what further we can improve.

Okay. Okay. Thank you.

Thank you. We take the next question from the line of Piran Engineer from CLSA. Please go ahead.

Yes, hi. Thanks for the follow-up. Just to reconfirm what Partha sir said, MFI slippages were INR 690 crores this quarter?

Yes. Gross slippages INR 690 crores and recoveries were INR 142 crores, so net slippages is INR 548 crores.

Okay, okay. Yes, that's it from my end. Thank you.

Thank you. We take the next question from the line of Jayant Kharote from Axis Capital. Please go ahead.

Thanks for the follow -up. Sir, sorry if this question has been asked previously. When you say the margins can improve by another 15 to 20 basis points, that is on the 4Q number or that is on the full-year number? Full-year number being 6.1%. And just a corollary to that question, it means if your loans are growing at 14%-15%, NII growth next year should be ahead of that. Is, is that a fair assumption?

NIM improvement that I mentioned was sequentially on quarter numbers. So , our quarter numbers are 6.2% and on that we expect 10 to 20 basis points improvement spread over the next two to three quarters. The guidance as we had been mentioning is by the exit of FY27, we expect NIMs to be around 6% on total assets, which means on earning assets basis it will be around 6.5%. We do have a line of sight of the next 10 to 20 basis points, we need to find another 10 basis points. So that's the aim that we're working on, of course on a best effort basis.

Thank you sir. Just, just if I do the math, 10 to 15 or even 20 basis points on NIMs, 10 on fees, another 20 on credit cost, is there something I'm missing because we need 70 bps post -tax which is almost 90 pre-tax. So is there something I'm missing for the ROA waterfall?

ROA as we said we already touched 1.1% and our aim is to reach 1.6% to 1.8% give or take 10 basis points by Q4FY27. So say there's a journey of about 50 to 60 basis points further that we need to climb. Some of these components that we mentioned are the ones which will help us, right, in terms of meeting that. The timing of which will depend upon every quarter to quarter how exactly we make a progress. But we have to also be aware of any kind of external shocks or risks etcetera that could come through or any headwinds that could come through. So, we will defini tely try and see how we can get through these numbers despite those headwinds.

Thank you sir and all the best.

Thank you.

Thank you. We take the next question from the line of Dev from Horse Power Securities. Please go ahead.

Yes, good afternoon gentlemen. Congratulations on the excellent set of numbers. Can you listen to my voice?

Yes, Dev. Thank you, Dev.

Yes. So as far as my knowledge goes and I -- how far I understand, that you are trying to increase your share of secured book, right? So by the end of FY27, are you trying to target increased share of secured books in your total book portfolio and what would be that percentage? And if you intend to increase the secured portion of your portfolio in comparison to other EEB books or whatever that unsecured portions are, what would be the effect on your NIMs? Is it going to come down from 6.2 or something?

So, let me make it very clear.

Because I mean if you are trying to increase your secured loan book portfolio share like the other banking units or banking companies, their NIMs are far below your -- from your NIM. So if you are trying to converge into that path, is your NIM going to come down?

So, let me just explain. So, first of all, we had a target of doing a secured -unsecured business of 58%-42%. So that's what our goal at FY27. Exit of FY27, we have projected a secured book of 58% and 42% unsecured. So , we have already achieved that or near to achieving that. As if you see my Q4 results, we are already at 56% and another 44% is unsecured for the day. The second part is that so 56 % to 58% will not have much impact on the NIM. Let me tell you that we are keeping our trajectory or the aim that our EEB will continue to be one-third of our total portfolio. In both ways, the unsecured book, the EEB book will also grow and the secured books will also grow. The question as the NIM, as for the NIM is concerned for the day, the EEB book, the main major problem of the EEB book if you look in the past year was the delinquency level or the NPA level and because that where the interest reversals took place and wher e the NIM was largely affected. If we can continue even with this 35% share and maintain the present, I would say, the NPA level or the SMA book and the delinquency level and if we continue to improve it further, it will not have any much impact on the NIM as for the day. So again, if there is any shortfall, let me again tell you about our direction for the day that we are now focusing on the other income of the secured book. So if in there is any shortfall in the NIM on account of the growth of the secured book, it will ge t compensated on the other income. So overall NIM plus other income what we have projected is around 6.0% and 1.5% on assets. I think 6% and 1.5%, so total of 7.5% on assets. So that will remain intact, that is our aim. So if somewhere if we say that if we have come out at 5.9 % or 5.8% on our NIM on assets, so the other income will also go by 20-30 basis point more in that segment. So overall that trajectory of 7.5%, we will try our best to maintain it.

Okay. And for going forward, say within 5 years, do you continue to stick with that proportion of 58%, 42% or there would be something I mean long -term any goal or target that you are continuously pursuing to achieve 42 to what?

Currently that ratio remains. It is again the experience that we will see, we will have to strategize or we have to change our strategy at that point of time. The reason for going to secular growth as we have told that there were two -three reasons. The first one was that we were too much on the unsecured books and we are a universal bank. The depositors' confidence is very important. So that's why a secular growth in all the advances comprising secured and unsecured books is necessary. This is the first thing why we have shifted. Number two, because now my portfolio is also becoming much, m uch stronger than what we had been a year or two years before for the day. This is one thing. So currently, definitely, we have not thought, but again, it will all depend on our experience. So, we hope that things like Corona or other things will not happen or even this war would also end, there will not any impact. So it will depend -- it will completely depend on the experience that we gather going forward. But as of now, as I've told you that we want to be remain a leader in the EEB segment and we continue to do that. So EEB segment is definitely a focus area, so we have seen an 8% growth QoQ, but definitely our secured book has grown at 25%. So the focus this year is on the other income part from the secured book, not only on the interest income, and along with a reasonable growth in the EEB segment also. And with the improved credit cost. And with the improved credit cost, yes. And with the i mproved credit cost. Yes.

Thank you, sir.

Thank you. Ladies and gentlemen, we take that as the last question and conclude the question- and-answer session. I now hand the conference over to the management for their closing comments.

Thank you, everyone, for joining and we hope that you continue to place the trust on our bank. Thank you so much.

Thank you.

Thank you. On behalf of Bandhan Bank, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.