The first question is from the line of Pritesh Bumb from DAM Capital Advisors.

Congrats, sir, on a good outlook and numbers. Sir, just a few things. One is on the MSME side, we've been seeing a strong growth. Can you give the split for MSME between Haryana and Punjab, how has that been growing?

Pritesh, if I talk about the MSME, first, I'll give you some color about what we are doing in MSME. As like any other business, we are targeting the middle-income segment MSME, which is collateralized by immovable property and we are a purely collateralized lender. The average ticket size of this particular portfolio is INR28 lakhs. The growth of this particular portfolio on a quarter-on-quarter is 11% and year-on-year is 49%. The growth is well split between Punjab and Haryana. The growth between the MSME growth within the state of Punjab versus out of state of Punjab are around nearer to each other. We are growing at a similar level MSME, both in Punjab and Haryana. While I am not having a handy about the MSME portfolio between Punjab and out of Punjab or Punjab and Haryana, but our overall advances out of Punjab now is 25%, which was 24% a quarter back and around 21% a year back. We are seeing a continuous traction b etween Punjab and out of Punjab and the portfolio in MSME is primarily a domestic consumption -led portfolio to that particular segment of the customer who are typically more dependent upon the indigenous and the domestic consumptions.

Right, right. Okay. Second question was on the provision coverage ratio, the provision itself. We've seen a slightly higher provision this quarter. Generally, we've seen that we maintain the provision coverage ratio, but it seems to be from last few quarters, we have been increasing the coverage ratio. Any strategy on that? I mean, what are we thinking about it?

Pritesh, our medium-term target is to bring the net NPA towards 1% level. So, we were seeing some good profits or the decent profits are there. We have taken the opportunity to increase the PCR so that we can move towards the net NPA in that direction. Now we think a majority of that action has been done. Now our net NPA has come towards 1.14%, which we are able to improve it significantly against 1.39% a year back and 1.24% a quarter back. The PCR is directing towards our medium -term vision, where we have mentioned in our 2029 Vision to make the net NPA towards below 1% level. So that is where this particular thing is happening. And now I see a majority of the action has been taken care now.

So, we'll have a stable PCR from here on is what we're trying to mention.

Sure. So, the next question is related to this itself, basically then, what are we targeting as an ROA, given that our ROA has been stable at about 1.3% for a few quarters on a reported basis. So, because this provision has been slightly higher and that has been, to a certain extent, restricting the overall ROA.

We are seeing ROA expansion both for the current fiscal and the coming period. Current fiscal FY27, we are targeting to take it towards 1.4%. I will say the range of 1.35% to 1.4% is the range of ROA and we look forward of further expansion of the ROA by FY29, where we want to take it towards 1.6% plus levels. We are fully committed towards the ROA expansion. And even if you look into the current quarter, the ROA has been expanded, from 1.18% last year Q1 to 1.3%. Importantly, PPOP margin, that's the Pre-Operating Profit Margin has improved from 1.94% to 2.04% during the Q1 FY'27 versus '26.

Sure, sir. And last question was how much is the headroom left in cost of deposit to be repriced? Anything left there for us?

There is some cost of deposit is due for repricing, but that is the price delta between the contracted rate versus the present prevailing rate is not that significant. Our cost of deposit, I think the majority action has been done. But some portion is still left, and is not material. Material portion, which we already talked was in Q4 last year and Q1 current year, which has been taken care. So now we will see the NIM to be stabilized in the current year towards the present level of 4.2 -ish level and then l ook forward for further expansion of the same in the coming period with our CD ratio expansion. Now the cost of deposit has reached to the level where we are intending to bring it around 5.6% level. We see the repricing benefit are primarily taken care. But still, there is some repricing benefit still left, which is due in Q2 FY27.

The next question is from the line of Aditya Mundra from Mytemple Capital.

Sir, a couple of questions. Sir, so our NIM, you mentioned that it will continue to remain stable at around 4.2% levels. So, what will be the main -- because what it appears from the system that there is a lot of pressure on the cost of deposit, in the sense that doesn't seem to be reducing. And even on the yield side, if you hear the commentary of other banks, they're not very sure of the growth there. So, what is it that is going to help us to keep our NIM stable at 4.2% for this year, particularly considering the hardness of the rates across? I'll hold up with other questions, yes.

The thing is that, firstly, as Pritesh had just discussed about the cost of deposit. Over there are - - statistically around INR1,600 crores of the term deposits are getting due for repricing in Q2, which was going to give us some benefit of around 10 basis points to 12 basis points on that particular portfolio, which is around INR1,597 crores.

We are not taking advantage of that and believe that particular benefit will be taken away /off setted by the increasing cost of deposit. So that's why when I ask the first question answer, that particular thing will be counter adjusting each other. There is some benefit which we are expecting from the existing deposit, which is getting repriced versus the incremental deposits at the incremental price , which will be counter adjusting each other. The benefit will be adjusting each other and net benefit will be stable. We will be seeing a stability in there. And as far as the yield is concerned, we are already being optimized. The yield has already been reduced towards 10.9% from 11.1% last year. So just there may be some minor up and down on the yield side. And now if any interest rate movement comes, that will be affecting both the side of the balance sheet. Now we are not seeing any downward interest rate movement, which will not be able to pass through the deposit. And on the upward interest rate movement, Capital Bank balance sheet is well positioned. So that the benefit on the deposit will not be accruing immediately for the whole portion, but only for the incremental, whereas benefit will be coming from the advance side. So that giving us a comfort that for the remaining part of the current year, we will be able to maintain the NIM and start looking forward for the NIM expansion in FY28 and '29, given the average CD ratio will also increase. We are presently reporting an average CD ratio of 83%. And as we discussed over the last couple of calls, we intend to take it to the mid- to high 80s. So, there is an efficient opportunity available for the average CD ratio expansion, which will be adding to the NIM expansion as we move forward in the coming years.

Sir, most of our book is fixed rate, right? About half of our book is fixed rate...

Sorry to interrupt. Mr. Aditya, we cannot hear you well. Could you use a microphone while asking a question?

Yes, I'm on the microphone. Sir, am I audible now?

Yes, Aditya, now audible.

Yes, sir. So, what I was saying is that.

Aditya, the voice is getting missed. To the extent I understand, you are talking about the fixed versus floating composition of the book.

Yes.

And sort of floating...

Sorry to interrupt Mr. Mundra. We are not able to hear you well.

Okay. Let me fall back in the queue.

The next question is from the line of Sagar Shah from Spark PWM.

Congratulations to the company for posting such good numbers actually. Now my first question was regarding to our NIM expansion. So, I wanted to understand as far as consumption and other loans is concerned, when we talk of auto loans, gold loans, where the yield is more or less stable, but do you see that at least the share of these loans going up as you move to newer states? That is my first question related to the entire gross loan portfolio, what will be the mix that we are eyeing by FY28 and '29 that will actually enable higher NIMs for you in the future?

If we talk about the deposit advance mix and if I start firstly with your question of the consumption, let me clarify, Sagar ji. Consumption loans are typically a second hook for us. These are not the start point. These are the additional loans, which my existing borrower may be a business loan guy, may be a mortgage loan guy or maybe many other customers who take the additional loans, which is constituting almost 7% for a long period now Our consumption loan is stable at around 7% for a long period. And if we talk further slice of this, within the 7% around 2% to 3% always remain the loan against deposit or loan against securities, which are typically with a very limited interest yield opportunity available. Consumption loans are always a top -up loan for us. The composition of the consumption loan as a top-up loan almost remains constant across the geographies wherever we go, whether it is in Punjab, out of Punjab or that particular way, that is the point number one. Point number two, If I talk about the mix, which we see going forward, we being a lender who typically look forward for a production led lending, that is the money which we give shall be used for generating a cash flow for the customer or meeting his housing need. The 3 segments of our target portfolio are the business loan, agriculture and the mortgage. These 3 things put together, typically constituting anything between 75% to 82%. We believe that will continue to remain in the similar numbers, but I'm seeing a good momentum, which is building up in the business loan segment. But in the coming period, I see a good momentum will be coming also in the LAP. Even if you look into the current quarter, our LAP portfolio, which is also a good yielding portfolio, which is around 12.27% portfolio level yield, it's growing by 5% quarter -on-quarter and 18% year-on-year. So that is another portfolio which we're seeing getting a good traction. Within the mortgage, our overall growth is not that strong, not equal to the overall growth because of the housing loan, which we have also started getting back into the action. And the current quarter, we grew it by 3% quarter-on-quarter and year-on-year, it has grown by 10%, given the pricing competition from the PSB space is getting some muted. So with that thing in sight, we're seeing a good traction coming up from all the segments and by ensuring us

that we are maintaining a suitable mix, which is growth -oriented and also which is oriented towards maintaining the level of the interest spread, which we target as a difference between cost of deposit and yield on advances, which we're targeting to keep it around 5.05% or 5.1% to 5.3%, for the coming next 1 year or so, which is giving us this confidence that we can able to do so with this metrics. Our business loan portfolio, our overall yield is now 10.5%. Despite the fact that our cost of deposit has reduced by 15 to 20 basis points, here, the decline is almost negligible. It is almost stable at what we were a quarter back. So that's the overall portfolio mix and portfolio outlook, what we look forward as we move forward.

Thank you, sir, for such an elaborate answer. My second question was related to actually our NIMs is concerned. You have highlighted that there will be some expansion on NIMs due to the CD ratio going up. So sorry, I missed out, but what is the CD ratio that we are eyeing, sir, in FY27 and FY28?

NIM we're able to improve in the Q1 towards 4.21% and the primary driver of the NIM was deposit repricing, coupled with the acceleration in the CD ratio. For the remaining year 2027, we intend to maintain or slightly improve maybe there, but almost maintaining it around 4.2% level. That is the one variable we are very closely monitoring. We will be looking for accelerating it in FY28 and further accelerating in FY29. Our average CD ratio in Q1 FY27 is 83%. If I talk about the average CD ratio here, I mean the daily average CD ratio, that is the daily average of the advances and the daily average of the deposit. We intend to take our average CD ratio in mid- to high 80s. There is an opportunity available to accelerate it by around 3% to 6 %. So that is the one opportunity, which will be available for the NIM expansion because that means the assets, which are presently sitting in either the investments or the interbank placements will move to the advances and the thing wh ich they are carrying at around 7%, 7.5% will move towards 11% carry. So, which will be helping us in improving the NIM as we move forward in the coming years. So that I was trying to mean by this particular thing, Sagar, which I said earlier.

Okay. So basically, the money that is sitting in investments and cash that will be routed for the new states that you are eyeing, right, especially for MSME loans?

Yes, I will say so. I will not say that money. I'm saying the composition becau se the balance sheet...

Yes, absolutely.

The composition of the balance sheet will be moving ,that money will be moving instead of sitting at 7%, 7.5% carry, that will be moving towards the 10.5% to 11% carry.

Sir, on the earlier participant's response, you mentioned that the competition from PSU banks in the pure home loan segment has slightly come down. Now is it because of the rates? Or is it because of the ticket size? Or is it because of the geography? Can you give some color on that front?

If you look into the last year, FY26, with a sudden sharp decline in the repo or the banking rate that EBR, where the benefit of that particular thing has not been fully transmitted to the deposit side, which restricted us or giving us a limited opportunity to lend to the housing loan, which is completely packed with the EBR and accordingly, the price has substantially reduced. Now current year, the cost of deposit has reduced with the repricing co -dep with the deposit, which we have accepted in 2025 or 20 26 first quarter, being the deposit basically accepted in the 400 days to 500 days average maturity. So, our majority of the deposit will be getting repriced or I will say 90% plus of the deposit will be getting repriced by the Q2. So, which will be giving us in a level playing field from that particular regard. So accordingly, which is increasing our strength to increase our proportion of the housing loan, point one. Point number two, what happened we being in a SURU-specific play. We have a 74% of the branches in the semi-urban and rural segment. We are a middle-income group play. That is the segment which is the annual income earning of the gentlemen from INR6 lakhs to INR40 lakhs. And we are the housing loan, which if you talk about the our housing loan segment, that is a segment which is typically INR20 lakhs to INR25 lakhs average housing loan ticket. So, in that particular ticket, so we start getting a good competitive strength, given our deposit repricing poured in and some sort of intensity of that competition in the SURU segment getting reduced, so which help us. I will not say that is completely being done. Some portion is still to be left. So that's why you will no t see a very, very strong growth in housing. I will see a better growth in LAP and the business. But still, instead of not growing, we will start growing in the housing loan and which we have did also in Q1. We grow housing loan by 3%, which we were not a ble to grow for 1 or 2 quarters. So that is what I'm trying to say here, that housing loan has also started contributing towards the growth momentum and without affecting the yield. If we look into the yield curve of the housing loan, Q1, we closed at 9.87%, which was Q4 FY26, 9.85%. So, we are able to increase the portfolio by maintaining or slightly increasing the yield curve. So, this is the perspective I'd like to put forth on my side.

Okay, sir. And my follow-up on that is how is the competition from the private banks or when I say private, large private banks in the mortgage segment and the MSME segment? That's my last question.

First of all, we being a middle -income group segment, our biggest competitive landscape is typically from the PSB space. And if I talk about the business loan segment, which we've been targeting Tier 2, Tier 1 and Tier 3 towns in which typically the business guy, who is top line, is

typically anything between INR1 crores to INR25 crores to INR30-odd crores, which is giving us a collateralization, and well domestic consumption led. So that is our target segment. So, the competition density and our biggest play is in the ticket size of INR10 lakhs to INR50 lakhs. That is our largest play in the MSME segment, which is pushing us up. So, in this particular space, if we look into my universal commercial bank, private sector universal commercial bank brothers, they are targeting it, but not very, very strongly targeting. Their strong target is always above INR1 crore s of an average ticket, whereas our target is typically INR10 lakhs to INR50 lakhs or maybe INR10 lakhs to INR75 lakhs. So the competitive strategies adopted there, are working in our favor. And if I talk about from my PSB brothers, given the service, if we talk about the consistency of the service between the urban, metro and the semi-urban, where we are able to have a plus over my PSB brothers. And given the pricing, we are not charging something extraordinary. We are charging slightly above the market with our service, which we are able to capture with our turnaround times. So that is being reflecting in our growth also. If you look into our business loan, which typically grew 49% on year-on-year and 11% quarter-on-quarter. And we are continuously improving it from last now 6 quarters. in each of the 6 quarters, you will see our business loa n is growing at a much, much faster pace, which is giving us a good confidence and trust that with our service approach, with our experience, I will say it is not just the pricing, it is the overall experience, what is the turnaround time, how we behave wi th him, how we are transacting him. So all these things put together and with the one good customers approach, we keep on getting a multiple more customers, which is now giving us a multiplier effect. So, with that thing inside, we are seeing a good traction, both in the LAP market as well as in the business loan market, which are slightly linked because these 2 customers have some connection together. So which is giving us good confidence. And from a competitive landscape also, we are well positioned. Now our cost of deposit being 5.6%, our opex is 2.95x, which is giving us enough opportunity, enough strength to be in the market at the right price.

The next question is from the line of Nilanjan Karfa from TCG AMC.

The first question is, and I don't know if you have addressed this question in the past, but could you talk about your agri loans? And why do they have a yield, which is higher than every other segment?

So agri as a product, as in the industry level is carrying the yield, which is around the lev el we are targeting. Let me give you some color. Firstly, what we do in agri, we are doing an agri where the farmer needs the lending, anything between INR5 lakhs to INR35 lakhs. Our target segment is purely the segment of the farmer whose financial need or the borrowing need is INR5

lakhs to INR35 lakhs. In turn, we are not a lender to the small and the marginal farmer and neither we are a lender to the large farmer. So, our target segment is the farmer whose need is INR5 lakhs to INR35 lakhs and our average ticket size of this particular portfolio is INR30 lakhs. And we are not in sub INR5 lakhs lending, which is giving us a good resilience also and giving safety cushion also. In the segment which we are targeting INR5 lakhs to INR25 lakhs segment, the PSB market is also around 12-ish. So, we are typically charging 25 basis points to 35 basis points more, given our servicing from each of the segment and that's also in agri. So tha t's the way the agriculture is being getting fetched at this price, and this is consistent. If you look into any of the year's numbers, I'll talk about the last 7, 8 or 9 quarters, you will find it is to be 12 to 12.5. So that is a range, which we are maintaining for a long while now.

That is fair. I have looked at the past numbers also. I'm just wanting to figure out what type of loan is there that the yield is higher, which means typically higher yield will mean a higher risk. So I'm coming from that point. What type of loan is it, whoever it is, whether it is you or PSB Bank, that they are charging such a high yield? What is the risk in this?

Typically, in agriculture loan, what we are doing, we are doing this particular loan to the farmer for his farming need. That is the loan which is required by the farmer for the cultivation or for the sowing of the crops or for the crop purpose or for the investment ne eds that relating to that particular crop. Here, what we do for the risk mitigation, point number one, we are a lender to the farmer who is a middle-income group farmer. That is, who is not potential to any political challenges. That is which we call the look forward for the Indian domain up to 3 lakh ticket. Point number two, we are lending to a farmer who is a progressive farmer, that who is cultivating ideally 3 crops in a year, but minimum 2 crops in a year, so that any sort of challenge in a single crop is not resulting in a significant gap. Point number three, we are lending to a farmer who is must be growing minimum 1 MSP crop, but ideally 2 MSP crops so that with a higher productivity, price fluctuation risk doesn't come. Point number 4, the agri culture loan, whole of the agriculture loan which we lend is with the collateralization of LTV of 50%. So that is what we do on this regard. So, the pricing is basis the various inbound risk attached with this particular portfolio. So, this particular portfolio is being perceived as the risk because of climatical reasons or that type of reasons. So that's the reason. This particular portfolio is fetching around 1%, 1.5% more than the overall other portfolio yield.

And then if can I just draw your attention to Page Number 11 of our present presentation in which we try to demonstrate over the last 10 to 12 years of our historical trend lines of our gross and net slippages along with the credit cost, along with the major events happened on those periods, may be natural climatical, economic or sociopolitical. So that gives you the idea about how efficient we are.

Fair point. Just an additional clarification, the SMA 1 and 2, it is for the entire portfolio, right?

Yes, it is for the entire portfolio.

Okay. And maybe not now if the answer is becoming too long. But could you talk about how you are attracting loans in Haryana? Is the model anything different out there?

We, as an organization, are doing the business through a branch-led model. What I mean by this, which we typically do the carpeting of the branch wherever we go, we have a very strong branch presence. So our majority of the acquisition is through our sales team who are typically called our personal banker relationship manager or the business development officers or the ARMs at the branch level, who are typically sourcing the business from that particular geography, which is reviewed by a different set of person who we call the cluster credit head, whose line of control is around 5 to 6 branches so that we can keep a control on the quality of that particular portfolio and which is underwritten by a very different person who is a credit manager. So typically, our acquisition model is a branch-led model. We strongly believe we need to know our customer well before we underwrite it. So that is the model which we are following not only in Punjab, not only in Haryana, throughout, wherever we are. And we are seeing a lot of merits in this particular model and a good growth momentum along with a good quality momentum as we move forward.

The next question is from the line of Divyansh Gupta from Latent PMS.

So, the first question is, sir, that if I look at the MSME asset quality, right, either quarter -on- quarter or even over a longer period of time, the NNPA has, let's say, been reducing continuously. Now there is also a base effect of high growth in the AUM of the MSME loans. So, I wanted to understand what would be, let's say, an asset quality trend for the MSME loans ex of, let's say, the denominator effect of a high growth in the MSME loan book? And the second part question to it is that the government had l aunched this MSME credit scheme for MSME customers. Do our customers qualify or all our customer segments are excluded right now?

I'll take the question one by one. First question, as far as the net NPA or the gross NPA position on respective segment, you believe that it is because of the denominator factor. If we give you the color about it , our gross NPA number of the business loan segment, the gross NPA of the business loan segment overall value basis, what was there on 31st of March 2023. And the gross NPA as on date of that particular portfolio on value basis has been reduced.

So, our gross NPA on this particular portfolio in MSME was INR65.41 crores on 31st of March 2023. And if I talk about the gross NPA in MSME portfolio as on June 30, 2026, it is INR54.54 crores. So, we are able to do a decent share of recoveries and in controlling the accretions. So, it is not linked with the base effect. So, we are able to see momentum both on the upside growth and also maintaining the quality of the book from the recovery angle. That is the point number one, I'd like to mention. Point number 2, if I talk about the ECLGS, yes, we are eligible, , our customers are eligible for ECLGS. And on need-to-have basis, they are getting that particular support of 20%, which is a government guaranteed also. So, we've been passing through that benefit on a deserving cases as provided by the government of India. So, our customers are eligible of 20% of the working capital facility.

Understood. Understood. Sir, just for clarification, that 65.4 cr coming to 54cr is the March '23 GNPA, right?

Yes, March '23, as I said, I've given you a very longer period that over the last 3 years, we are still able to manage it.

Got it. The other question was that how much of our loans gets repriced on an annual basis? The reason being that, let's say, till now, even if there was a rate reduction environment, the loans might not have gotten repriced, whereas we got benefit o f the deposits repricing. Now for whatever inflation and anything that happens, how should we understand the impact of these loans, which gets reset on an annual basis because liabilities will increase, but loans might not.

Let me give you , that's where my perspective are now when we talk about the MCLR, current quarter, Capital Bank has increased the MCLR by 10 basis points. Now if I talk about the annual reset portfolio, our annual reset portfolio is around 48.67% of our present portfolio. So over 48.67% of the portfolio will automatically get repriced and out of this, primarily, it is the MCLR driven. So, which is giving us a comfort that our NIM will be maintained.

Got it. Understood. And just one last question, if I can ask. The outside Punjab assets and liability percentage, if you can share?

Surely. Outside Punjab, assets are 25%. So, we have outside Punjab advance asset of 25%. And out of Punjab, liabilities are typically 10%. If I give you the comparative data, this 10%, if I talk about last year June, if we talk about the March, it was around 8%. So it has improved from 8% to 10%. And outside of Punjab, that was around 25%, which was typically in the month of March, it was around 24%.

March, you're saying March '26, right?

March '26, a quarter back. I'm talking about a quarter back.

The next question is from the line of Aditya from Securities Investment Management.

If I talk about the MSME, I'm not having a very handy data, but one gives you some color that all the guys to who we are lending, 90% plus will be availing a working capital facility with us. So, we are heavy on a working capital facility on this. So, it will be primarily a working capital- driven loans, but I'm not having a handy data. But one thing I'd like to clarify that we are primarily a lender, whom we are the primary lender. We are not intend to be one of the lender. We intend to be the primary lender for the segment. So we intend to have a cash flow visibility of our clients. So despite I'm not having the data, but my gutsy is there is a decent share of the working capital in this facility, may it be a CC , OD or WCTM. My team had just fetched the data. They said it is around 80% plus.

Understood. And sir, you just mentioned that we are generally the primary lender. So just help me understand, generally, what is the product per customer which we would have?

Aditya, I believe you were talking about MSME cohort. What we are doing cohort here is, we are looking forward for the , first, if I talk about the economic activity -wise. We target trader community, whether it's a retail or a wholesal e trader. We target manufacturer, whether it's a manufacturer in any of the spaces or we also target the service industry, may it be providing any other service. So, all the 3 economic activities within the business loan segment, we target. And then if I talk about the top line, we are typically targeting the clients whose typical top line over expected that he should be not a very, very nano. We are not in a nano business. That is a sub INR10 lakh business. We are not in the nano business. We are in a meaningful business. So typically, our aspiration, that is top line, is anything between INR1 crores or I can say maybe INR75 lakhs, maybe we start it also. But typically targeting it anything between INR1 crores to INR30 crores. That is the top line in which we are operating in. So these are the 2 cohorts in which we are operating. And primarily, these gentlemen will be in the domestic consumption, who are typically dealing with the domestic buyers and domestic sellers. So these are the 3 cohorts in which we are targeting our business loan segment.

No, sir, my question was a particular customer of ours, how many produ cts would it be taking from the bank, be it a loan, be it a savings account, a current account or an insurance product?

Aditya, the answer to this is not that simple. Given the lending in the business loan is given in the name of his firm. Typ ically, it may be a partnership firm, it may be a partnership - proprietorship firm, LLP or the private limited company or public limited company, primarily a private limited company. So, in the deposits, he will be giving us in the name of his individual c ust IDs. And he's taking as the liability businesses, third-party businesses in the name of his individual capacities. So, if I talk about the relationship management, from the cust ID perspective, that will be completely a different number. But if I talk about the relationship values from that particular family, that will be completely different value. So statistically driving the number on the family oriented. But I will say, we look forward for multiple hooks with that gentleman.

Our objective is when we enter that business loan, we take care of the salary account of his whole of the workers, we take care of the savings of whole of his family, we take care of the protection plan of whole of his family. We look forward for the engagement with these buyers and sellers. That's the way this business is growing. So, we are getting the leads from one to another and data from one to another. That's the way we are leading from one customer to another customer. So, we are very active in cross -linking and engaging. And that is the way we are able to improve our cost incom e also and improving our quality of book also.

Understood. And sir, any outlook on opex? Currently, it is around 2.95%, 3%. Going forward, with your expansion strategy, do you believe it would remain at a similar level or there is scope for some improvement over there?

I see there will be , if I talk about , I will slice this question into 2 time series. If I talk about FY27, we will see some improvement in the opex level. Typically, current quarter, we're seeing at around 2.95% to 2.98 % levels. That is the opex in the current quarter. I'm seeing an improvement in the coming period for this. What make me believes so? Because if I talk about my opex has primarily the salary component. And in the quarter 1, annual increment comes due. So, with the first quarter, we have a higher salary against not a fully optimized business, which will be getting adjusted over the period, when the salary increase will not be there, but the business will keep on increasing. The opex in the quarter 1 versus opex in the Q3 naturally will be different. So we will be seeing a good operational outlook on the opex as we move forward in the coming quarter. Secondly, with the scale increase, the opex is going to be looked forward. In FY27, I will see a moderate increase in the opex. But if I talk about my FY28 and '29, I see a big momentum in the opex, and that will be contributing to my ROTA expansion also. So, my opex expansion in FY29 will be a larger play. FY27 and '28, it will not be that larger play. But in FY29, it will be much larger play.

The next question is from the line of Aditya Mundra from Mytemple Capital.

Sir, so what I was asking is, the overall MSME growth, which has been very good this quarter. Firstly, what would be the reason? And secondly, sir, how are you seeing the MSME growth as well as the overall growth going forward, especially for FY27?

Aditya, we are confident about our FY27 and FY29 growth outlook, which we have shared over the years, beginning of the year. So, we are quite confident. We have given a guidance of 22% current year growth, and we are confident of maintaining that, and we have given a guidance of INR16,000 crores by FY29. So, we are confident about both. If I talk about the MSME, MSME has not grown only in this quarter, if you look at over the last 3 to 4 consecutive quarters, you will see a traction in the MSME every quarter. So I'm confident of MSME growth even in the current quarter. So even if

I talk about the running quarter, I will be seeing a good opportunity still in the MSME, there's a good opportunity available in MSME growth. And since I believe after we getting into this particular value chain system, we ha ve one value chain to another, another to another, another to another, which is taking a good momentum at the branch level, at the customer ID levels. So I'm seeing a good momentum in the business loan segment as well as the overall loan segment. So if I talk about position as on date, it is giving us good confidence and we are confident of maintaining our both the annual guidance and FY29 guidance.

Sir, the MSME, is it an industry-wide phenomenon that we are seeing across Punjab, Haryana? Or is it something that we have taken some steps that we have taken, which have given us this kind of growth? What's your outlook on that?

It is not an industry level data. We have done a lot of different things earlier, as I said earlier. We have a specific niche. We've worked on that niche. We have specialized trained team now on MSME at the branch and at the cluster levels. We have a very clear value proposition for the MSMEs. We have a very good, I will say, customer feedback. Customer works on the other customer feedback very, very quickly. With that customer feedback s, we have worked a lot of stuff on this, including reducing the TAT. Servicing standards, the business people look forward for a very high servicing standards. So all these things, small, small things, but a lot of things are there, which is helping us in building it up. So that's what we are intending to do. And also, we keep on evolving the product. Whatever is the need of that particular gentleman, minor tweak ing. I will not say the major tweaking, minor tweaking. So those minor tweaking so that the friction can get reduced. So all those things put together are increasing this particular momentum, and we are getting a meaningful share. And with the strong branch presence, we are being always following up with a thick branch presence wherever we go and the carpeting approach. So that are also adding to this with the customer references getting very, very seriously activated.

And sir, there is a sli ght increase on the SMA -2 level, although overall, it has come down. So any light on that? Overall, SMA-1 and 2 has come down, though.

Yes, that is, I will say, Q1 is typically always the period in which typically SMAs always shoot up. But this time, we worked very, very hard and very concentrated that we will not let SMA -1 and SMA-2 shoot up, and we are able to contain it. But what typically happens, there is always a lag between the farming money reaching to the business people or to the other sets of economy because that money comes to the farmer, then it will transmit it into the other people, and there is always some lag. So that's why in June and December, you will see some SMA position is getting some slightly deteriorated. But with concentrated effort, we are able to reduce both overall basis SMA -1 and 2 put together. But yes, there is a slight increase in SMA -2, that is from 2.71% to 3.11%. That

is typically, I will say, not meaningful, but we are not keeping it unnoticeable, and we are working very, very hard to bring it further down.

But it's business as usual. There's nothing out of the ordinary in that is what you mean.

Yes, that's what I mean. And the numbers are also speaking the same thing. So having a 30 basis points, we are talking about the basic point change. We are not talking about a 100 basis point change even. We're talking about the basic point change in the portfolio, basic point change always happens.

And sir, there has been a slight decline on the other income, like noninterest income...

Sorry to interrupt, Mr. Aditya. May we request you return to the question queue for a follow-up. The next question is from the line of Siddhart Chandrashekhar, an individual investor.

Congratulations for the good set of numbers. So, sir, I have one doubt related to our deposit profile, right? So, if I see the last 5 years, deposit growth Q -on-Q for the Q2 and Q4 is flat for our bank, which is a little different for the other banks where like they showed good deposit growth for the Q4. And also, Q2, they are showing some decent 2% to 3%, some kind of growth, right? So why there is a difference in our bank because this is happening for last 5 years. And additional to that, since we are targeting -- at least like based on our FY29 growth, right? So we need to improve our deposit growth. So I see like Q1 and Q3, we are always doing good. And this Q1 also, we have showed good growth in deposits. So is there any trend change will happen in the upcoming Q2 and Q4 where there also we will show some good growth in deposits so that it will match the loan book?

First of all, Siddharth, I'd like to tell you about our business profile on the deposit. If you look at our Slide Number 26, you will see one thing that , if you look into the deposit composition, over 75% of our deposits are coming from a semi-urban and rural market. And if we talk about the other market participants, you will find a different number. So we are in the ground root level and purely retail, and 90% plus of our deposits are retail. We are not a bulk heavy or a bulk dependent liability franchise. We are a purely retail-centric deposit franchise. So, if you look into these 2 numbers put together and review it, you will see we are raising money from where the actual money is lying, that is the semi -urban and rural market and deploying. And on the asset side, you will see 45% of our deployment is in urban and metropolitan. So, we are raising the money from a semi-urban and rural and deploying it in the urban market, where the less risk of deployment is there. So that is the over all business model which we are following. Now since we have predominant presence in Punjab and Haryana, Punjab and Haryana being agri -heavy states, where economic activity directly or indirectly or even I talk about a lot of linkages between agri crops. So, in these 2 states, the procurement or the crop harvesting or the crop money is flowing in Q1 and Q3. So, we take an opportunity in those particular quarters when the money is coming into

the system to grab it as much as we can. So, if you look into that particular perspective, you will see in Q1 and Q3, our deposit will be always outpacing our advance growth, if you look into any of the last years. You will see in Q1 as well as in Q3, our deposit growth will be outpacing the advance growth. And in Q2 and Q4, our advance growth will be outpacing our deposit growth. So we are maintaining a fine balance between both the pillars in the different time cuts so that we can get optimal outcomes. So, while we completely understand that we are very, very seriou s about our deposit franchise and deposit growth, we are 83% average CD ratio entity, which is the lowest in the small finance bank space and significantly lower also with a lot of universal commercial banks. We constantly believe to improve the efficacy ratios. We need to increase this average CD ratio. So, our advance should outpace our deposit growth for some peers, maybe 2 years or so, which is the one factor which we are taking care. So yes, we have worked a lot hard if you look into our, I will say, about the seasonality trend on the asset side. Our asset side, now the growth is almost uniform in all the 4 quarters, not exactly uniform, with lesser deviations, with a higher growth in Q2 and Q4 and with a d ecent growth in Q1 and Q3. So, we are also moving in the same direction on the deposit also. But yes, over Q1 and Q3, given the market money coming in, we'll be heavier on deposit growth and Q2 and Q4, we'll be heavier on the advance growth. And that's the overall on a year-on basis, you will find a fine balance. And if you talk about FY26, which we have just crossed a quarter back, we grow both our deposits and advances by 21% each. So that's my submission. And still today, we are 83% CD ratio with enough opportunity to grow and enough opportunity on the liability side. 95% of our outside liabilities are deposits. So a lots of other alternative funding options are available at most competitive pricing. So, liabilities not seems to be a point of concern for our growth. So liability is one of our biggest assets. This is what we strongly believe. Liability is one of our strong and biggest asset. So this is what our perspective is about the same, Siddharth ji.

Sir, one more question. Since you are meeting most of the requirements that RBI has guided for a universal bank, are we trying to apply for that?

Sir, we have an aspiration for the universal commercial bank, but it all will be done at the most appropriate time. My job as an executive member is to make ourselves eligible for universal commercial bank by making a full diversification and ticking all the boxes. The one box which is left to be ticked is net NPA, and we are working hard from the last 2 quarters by increasin g slight TCR reaching towards 1% NNPA. So just at the most appropriate time, the apex body of us, our Board will take a decision. But one thing I'd like to mention, Siddharth ji, grow th in the present avatar is also very, very strongly available. But just we have aspirations for the next level, and we look forward.

Let's go forward for the next level in a very strong and committed way so that the chances of success are much higher. So, we will be going for universal bank, that is for sure, and we are strongly aspiring for that. Just, we are looking forward for the appropriate time, to time it maybe with our looking into some business metrics what my Board has internally decided. So we a re working towards that. And at the most appropriate time, we will go for the UCB, that is for sure. We are high aspirant for that particular license.

Thank you. Ladies and gentlemen, due to time constraints, we take that as the last question fo r the day. And now I would like to hand the conference over to the management for closing comments.

Thank you, everyone, for being part of this call. We hope we have answered your questions. If you need more information, please feel free to contact our Investor Relations team or SGA, our Investor Relations Advisors. Thank you very much once again. Have a great day ahead.

Thank you. On behalf of Capital Small Finance Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.