IDFC First Bank Limited analyst Q&A

The first question is from the line of Zhixuan Gao from Schonfeld.

Just on Slide 52, thank you for giving the breakup of the slippages. Just wondering what is the like-for-like number on the -- other than MFI slippage in first quarter of FY '25?

Other than MFI, the slippages are INR1,972 crores, right? So, it's across the various product lines which we have. We, of course, saw an increase of about INR350 crores from the previous quarter. But I also mentioned that we had one corporate case, an ATM service provider company, which slipped into NPA during the current quarter. Rest of the slippage, I also said, is slightly attributable to seasonality, which sort of comes in, in Q1. So, it's across products. So, it's difficult to sort of single out any particular product where we have seen this increase.

Got it. And what's the number for first quarter '25 for the other MFI slippages?

That was INR1,603 crores.

No, that's fourth quarter '25, right!

But whatever it is, if we can get it, we can get it.

The next question is from the line of Param Subramanian from Investec India.

So firstly, on asset quality again, right? So, if we see across product segments in this quarter, there is an increase in the NPA levels and also the SMA levels that you've called out. So, anything specific you want to highlight? A large peer of yours has called out stress in MSME segment. So, anything you want to highlight because the delinquency levels seems to be up.

No. So, we have seen a general increase. Of course, we are watchful of certain segments. And so essentially, some part of stress could sort of be there in the rural segment in certain states. We are watchful of that. But having said that, we're also seeing collection efficienc y improvement in some of those states. So, there is nothing as such, which I want to sort of single out or call out.

Means Karnataka.

Yes, Karnataka. But it's a general increase. I have also said that the slippage ratio, if you see for the current quarter, it's only marginally up vis-a-vis what we saw in last 4 quarters of FY '25. So we are per se not very concerned, but we continue to be watchful.

Okay. Your thoughts on, say, unsecured MSME because one of your peers has called out that there is a rising delinquency here. And also in this quarter, I see higher delinquency in the credit card portfolio. So, anything there?

Credit card, of course, it has been very range bound. Of course, we saw some increase during the quarter, but I would say that it has remained quite stable over a period of time. Even credit costs have been quite range bound.

One thing, Sudhanshu. On credit card NPA has moved to 1.76% actually.

Yes. But sequentially, marginal increase, but it has come off from June of last year. So, to that extent, as I said, it is quite range bound. To your other question of unsecured MSME, of course, there we are seeing credit cost, which is broadly similar to the overall credit cost, which we just quoted a while ago of about 2%. So, we have seen some increase, but it's not material.

Not material meaning it's broadly in the lines of whatever we've been guiding in terms of credit cost, except for microfinance, which, of course, you point out. Other side, you can see the numbers. I mean, like H2, H1 all put together, like around 2%, Sudh anshu, this year? What are you guiding forward?

Yes. So I'm saying at an overall level, we should come at a credit cost of about 2%, 2.05%. This is broadly what we had guided earlier as well. And on unsecured MSME, as I said, we are also seeing a similar kind of a credit cost in Q1.

So think of it like a little more this quarter, but coming down in Q3, Q4, stuff like that. I mean in the sense that we are not seeing anything for us to call out that, oh my God, 2% is going to become 2.5% or something like that. I mean I know a few other calls you've heard elsewhere, people have raised issues to you and all that. We haven't seen anything material like that to call out to you.

Okay. Really helpful. Just one last question. So, on margins, there are a lot of moving parts from here, right? So, MFI is coming down, there are actions we are taking on the funding cost side. So how to think about margins from this quarter onwards? Yes.

So, we would see definitely some more impact coming into Q2 because of the rate transmission, which is yet to happen completely. But as Vaidya mentioned that down the line, we would also see benefits from FD reduction coming in, and that should reflect in cost of funds coming down more sharper in coming quarters. So, we feel that by Q4, margins should broadly restore back to what we posted last quarter and only caveat there is there could be , still some rate cuts, which could sort of kick in. So, my comment is caveated to that extent. But we are broadly hopeful that margins would, to a great extent, sort of restore back.

That's because we cut the fixed deposit rate quite sharply, you may have noticed it. So, we were earlier paying 7.9%, at the peak, when the money was tight, I think during March or something. And now we brought down to 6.75% as the peak rate, which is almost a reduction of 115 basis points. And in the 1 -year 1-day bucket, we brought it down to like almost like the big banks, plus 15 basis points or something like that. So, like think about it that we are just 5 years old, 6 years old, and we brought our rates down to the big banks league. So, these things will help the bank actually.

The next question is from the line of Anand Dama from Emkay Global.

My first question is on your capital raising. So you have raised INR7,500 crores. Obviously, the capital is yet to come. Any covenant changes which have happened in that? And is there any risk that basically this capital, particularly from the investor side , not talking much about the regulator, but is there any risk that you see from the investor side that possibly this capital might not come or there could be a delay in that? Is there any risk that you see?

No, we are not seeing anything at this point of time. Not at all.

Not at all? Okay. Sure. And secondly, on your credit cost. So where do you see your overall credit cost settling for the full year? Secondly, your cost -income ratio also has come down in this quarter to about 69%. Obviously, business, there will be some gr owth, which will actually kick in basically during the year and because of which the DSA cost and possibly might go up. So where do you see your cost-to-income ratio settling over the next 3 quarters? And also, if you can give a guidance on the overall credit cost for FY '26?

I thought credit cost we discussed earlier. I mean, discussed meaning I had a side talk with Sudhanshu, like 2% to 2.05%, I think, for this year call it like 2.05%, that's our best guess as we can see today. And what was the first question?

Cost income. The number you're seeing 69% is actually , has treasury income also into it. So, actually, if you strip it out, you'll find that cost income has gone up this quarter.

No, it has marginally come down from 75.5% in Q4 to 73.8%. But still, it's higher as we know that it's still impacted largely by the top line impact, which is sort of coming through. But of course, on the operating expenses, we have been able to contain opex to a great extent.

If you see the cost to income, ratio, it has like 2 components, cost and income. So, on the income front is where we are seeing, the composition change, microfinance going away, which is a good high-yield book and repo rate coming down, passed on to customers, FD rate not passed on, etcetera. That is where income, which we believe, will self -correct over the next few quarters. But the cost as such is coming down for the bank. And you can see Y -o-Y growth for the bank is only 11%. So, this is very good. If the bank balance sheet is growing by 20% and cost is going up by 10%, you can see that the bank is really doing some real work on cost front and operating leverage is more than coming in and a lot of transformation are helping the bank. So you can see that, that is why the cost income is kind of elevated, lesser than last quarter, but elevated. But it will come down. It will come down.

And just to add, Anand, while we are seeing this top line impact where NII and fee has just grown by 6% on a Y-o-Y basis. But because opex has grown at these levels, our core PPOP has improved sequentially by 7.8%, right? This was declining for last 2 quarters . I would say , at least we feel that we have been able to arrest the decline, and this would continue to sort of inch up from here on quarter-on-quarter.

See, as far as treasury gain is concerned, I agreed that basically it's one-off, but I think that should continue during this year as well, right, as the G-Sec will keep coming off.

See, treasury, we can never be sure of in life. We generally speaking, how can -- nobody can ever be sure of treasury, right? It's just like one of those things that happens to a life.

So then for full year, what's the cost-income ratio that -- I mean, the core cost-income ratio that you would look at in FY '26?

Anand, it's difficult to guide because there are too many moving parts. But by Q4, definitely, as things improve, this should come down, but it's sort of difficult to pencil out a number as such.

Because by that time, we discussed earlier, right, the margin should look better for the reasons we discussed and cost is anyway, we kept it very tight. So naturally, cost -income ratio by Q4 should start coming down.

The next question is from the line of Rohan Mandora from Equirus Securities.

I thought we just called it out, right?

Thanks Rohan. It's difficult to quantify that, but that usually, I would say, some bit of seasonality comes in Q1. And then the collection efforts are slightly muted and so on, right at start of the year and so on. Typically, Q4 is a strong quarter in that sense. So it's difficult to quantify seasonality as such, but we of course, expect slippages to sort of come off from here on.

Sure. And while you alluded to the fact that the slippages increase overall was across segments of products, but any customer cohort or any category of customers where we are seeing an increase in slippages? Or is it that certain customers have slipped where there are multiple linked accounts? Any colour around that?

So nothing of that sort as such, but if you take out that ATM service provider, then the increase is about INR200 crores for the quarter, right? I'm saying -- and sequentially, if we take out that ATM service, the increase is about 9.5%. So, while it has increased, but we feel that it's not that kind of large increase, which has come through. Some bit of, of course, increase is there. But if you see from a slippage ratio point, right, which I mentioned earlier, right, that's quite stable, right, at about 3.5%, and that was a similar trend which we saw in last year.

Sure. And nothing even on the vintage analysis perspective? It's spread across the board?

No, nothing as such to call out.

Sure. And sir, what will be the outstanding AFS reserve?

Outstanding AFS reserve? We'll just get that number.

The next question is from the line of Himanshu Taluja from Aditya Birla Sun Life AMC Limited.

Just a few questions at my end. Particularly on the opex front, given this year, we see most of the banks are showing improvement on the operating expenses growth because this is one lever where banks can play around. Can you help me understand over the medium term, not in FY '26, but in FY '27, '28, how do you expect the operating expenses growth versus your advances growth? And where do you expect the cost -income ratio to settle over the medium term? So that's my first question.

So Himanshu, thanks for the question. So operating expenses, we will continue to sort of moderate, and it should stay in the range of about 11% to 12% that kind of growth in the near term as well. And we have already guided on cost -to-income ratio of 65%, which we are targeting for FY '27, but still hope and belief is that we should try to come in ther e. So, we will try to ensure that we exercise diligence and proper controls around the operating expenses.

But some of the events have also changed since then. So just keep a word of caution there, Sudhanshu, because the microfinance, this, that, repo rate, so many things have happened. So just keep an eye out on that. But we are at least attempting to go in the direction. To your very specific question about what we expect the opex growth this year, next year, year after that, at least internally, the way we're thinking about it, if you remember, when we spoke about this, last quarter or before that also, we've guided that we expect this year to FY'26 to be around 12% to 13%. But it looks like we're going to not reach there also. Like Q1 has been only 11%. So, think of it like we're doing slightly better than what we must have guided before, on the opex front. I don't mean cost income, I mean opex because like you rightly said, it's in our hands. Now '27, '28, at least the way we are thinking about building the bank, we think more like 12% or so. So 12%, 13%, probably there.

So, do you expect around 600 to 800 basis points is there, where you can have the opex growth lower than the advances growth? Is that the right understanding?

That's how we are thinking about it, yes.

Yes, sure. Sir, second is on the MFI -- yes sure.

Because we grow the book by about 18% and if opex grows by, say, 12%. 12% is okay, Sudhanshu to say?

Yes, broadly.

Yes. So that's how we're thinking about it. Yes. I mean I want to say if you can write it 12%, 13%, but we're trying to do 12% actually.

Sir, second question is on the MFI business. Probably given this MFI, the proportion of the mix, which is there, probably it has come down over the last 1 year, and it may not go back to the earlier levels as well. What is given this is as an implication on your overall margins, how much of the permanent damage you expect on the margin front? How one should see a more normalized, because once this pass-through of the repo rate will happen and even on the deposit side as well, what is a pretty normalized margins one should expect going ahead?

See, I'm not sure if you discussed earlier in the call or not, but like 5.8-ish or so is what we expect Q4 to be, right, Sudhanshu?

Yes, or slightly higher, but only caveat, which I said is also contingent on repo , any more repo rate cuts, which will sort of come through.

Come through. So, for now, let us say, Q4, we're thinking like 5.8 -ish. Now, next year will be next year. We'll have to see how it plays out. There’re so many moving parts, but that's how we think about our business model. That's why in the earlier example, right at the opening part of the call, when I said, when I was trying to drop the ROA tree for the bank, I told you about 5.7% actually. I said 5.7% and then I said 2% for fees, I said 7.7% and I said 1.3% credit cost. That was the stack I was speaking to you, saying that that's how we are thinking about the bank. Now it all comes down to cost/income ratio, but that we answered earlier that as the events play out, we think by Q4, it should look better.

Yes. But once this segment will normalize, will you start growing this piece again what -- this piece again in FY '27?

It's an important question. Let me answer that. So the answer is, yes, we want to grow it. So this business, of course, after 8 years, 7 years, it has its own cycles, we agree with that. But with every cycle, every learning, the next part of the cycle stretches out longer because people learn. In this case, our own thinking is that probably it will bottom out at about INR7,500-odd crores. It's currently about INR8,500 crores.

Yes.

Yes, like there. And then from there on, wherever industry grows, we'll probably keep in line with the industry. Let me make it simple to you that this is a really good franchise we have built. It's a really, really good franchise. It's not just because this major incident happened in mind. I have no intention of shutting it down or closing it or things like that. It's a really good business. We have people on the ground. We have built fantastic relationships, processes, technology, systems, reaching out a bottom of pyramid, weaker section financing, weaker section PSL, SMA PSL. There are so many benefits. So you've got the way we think about, it is that we got to do 2 things so that we protect ourselves. There are many benefits I already told you. What we need is protection. So, protection is we take a CGFMU cover and then maybe watch it very carefully.

Yes, sure, sure. Sir, just a suggestion, the way you have put in the disclosures around the asset quality earlier -- in the earlier presentations in the previous quarter, you have also used to disclose a lot on the cost side also, say, some of the segmenta l-wise as well. If you can incorporate some of those -- because I think if I have glanced it carefully, you have not put such disclosure this time on the opex front. If you can put it that, would be very helpful.

No. In fact, it is there. We have given cost income segment-wise in the presentation. It's on Slide 65 of the presentation.

The next question is from the line of Piran Engineer from CLSA.

Congrats on the quarter. I just had one question on repo pass-through. So, let's say, the repo rate was cut on 7th or 8th June, when does that pass-through happen on your EBLR book?

So that pass-through to a great extent will happen in Q2 on the June cut. And I would say some bit of repo transmission for the earlier cuts would also have an impact in Q2.

No, no. Okay. But does it happen, say, after 3 months or gradually within 3 months.

So, let me further clarify. Generally, say, a repo is changed on a particular month, there is a cycle. So, if a customer's loan will get reset once in 3 months. So, it depends on when his last change happened. So that's how the transmission will happen through the quarter. So hence, we saw some bit of repo transmission of the February and April cut in Q1. And as I said, because it's 3-month criteria, some bit of spillover could happen into Q2. But June would essentially come largely in Q2. So that's how the repo transmission will happen.

Okay. Okay. Got it. So even the April transition, transmission has not fully happened then because someone's due date could have come, let's say, on 15th May. So for that guy, it's only for half the quarter -- half of 1Q. Is my understanding correct?

Yes. So I'm saying someone whose last reset was in March would have completely got reset in Q1. Somebody where last reset was in, say, April -- a loan was taken in April, for him, the transmission will happen into the next quarter. So, it depends on the cycle when you have sort of availed the loan. And that's as far as the existing loans are concerned. For the new loans, of course, that transmission would be immediate and depends from bank to bank in terms of how you want to sort of price the loans in terms of lending.

Understood. So then -- so Sudhanshu, then my question is now we are 5.7% NIM, we want to go in the next 3 quarters to 5.8%. Obviously, 2Q will be lower. How much more do we need to cut our TD rates by to reach that?

No, no. We assume where we are currently.

So that alone is enough to go back to 5.8%? Just the deposit maturity pattern is enough to take us to 5.8%?

That's what we think because capital is also coming.

So your -- the deposit cost -- Okay. Fair enough. Got it.

The next question is from the line of Jayant Kharote from Axis Capital.

This is a more qualitative question on credit growth. Very few of the banks have been able to manage this growth in 1Q. So I wanted to understand June, July trends and if there are any segments that you want to call out that can drive the recovery from 2Q onwards? And also general credit environment, are you seeing any stress buildup in any segment, which wasn't there in 4Q?

So, we have actually put out how this growth is coming. So, if you take a full 1-year Y-o-Y, you could see that INR22,000 crores has come from business finance, which is basically wholesale banking loans, business banking, working capital, CV/CE, etcetera, etcetera. So that's INR22,000 crores. And then INR5,200 crores is coming from vehicle loans growth and INR8,400 crores is coming from mortgages growth, mortgage basically home loans and loan against property. So these are the 3 levers that have materially contributed to the growth because the total growth is INR44,000 crores. Out of INR44,000 crores, we are explaining INR22,000 crores plus INR5,200 crores plus INR8,400 crores. I think that's together it will come to 82%, if you do the math. So that's what it is. Now in terms of credit, I think Sudhanshu answered it earlier, but I'll say it again, that broadly, if you see SMA data of almost all products, they are all holding like similar like what it was in the prior quarter, and you can see t hat also. So, interest rate, one family of products, let me say, within every product family, say, MSME, there may be 7 or 8 products. Within that, one product may be higher, one product may be low. For example, in consumer loans, there is also vehicle loans, consumer loan, education loan, credit cards, gold loan, everything is there. Out of this, something may go up, something may come down. But broadly, broadly, all put together, like the zone we talked about, like that 2 -ish or 2.05, which is not any materially different than what we've said before. So, it's 10 basis points here or there. So that's what it is actually. So, there could be interest rates some up and down, but we are not calling out anything specific to say that there's a concern or anything of that.

Sir, do you see increased competition? I mean, right now, the competition levels would be lower in unsecured credit, for example. Do you see that returning in Q2 and Q3? Should that have any effect? Or basically, I'm trying to understand what is not -- is it a demand issue? Is it a supply issue? Or is it just everybody waiting until the bureau scores point to a better macro numbers?

No. Let's get a question clear, if you don't mind. So, are you trying to understand, about growth or asset quality because I need to answer it more precisely?

Yes. Actually, I'm trying to understand for unsecured credit. There are two players, who have reported decent growth at scale, but most of the system still doesn't seem to be there. So, we are trying to understand if it's still that asset quality comfort at a system level, not specific to IDFC, but more from a system level because you would be seeing it in the competition levels that you face on the street.

Yes. So of course, we know that some members have talked about higher credit cost and something here or there. But I already answered this question maybe a few times that we are not seeing a material call out for us, on the credit quality front because asset quality is holding good. Gross NPA is still 1.97%, net is still, I think, 0.55% or something. And then the credit costs are already publicly announced. We already said the number is going to be 2%, 2.05% or something like that. And maybe let's call it, 2%, 2.05% is a close estimate at this point of time. So nothing material to call out. Now in terms of how we expect the -- how we are seeing in the market and so on and so forth, sometimes we should be careful when we see the market, and therefore, we should double and triple check our numbers. For example, the credit cards. For many quarters now, some institutions or other have been pointing out some credit issue, but we are not seeing anything in credit cards, and we've been reporting our numbers publicly for the last many quarters. In fact, we specifically call out credit cards as a product and we call out what is the gross net, etcetera. So, we watch, but we should be confident about what we're doing also.

Sir, I mean, you have given the CASA number together, which is like 30% Y -o-Y growth. If you would have the number separately for CA and SA in rupees crores for this quarter and maybe Y-o-Y Q-o-Q also, just to get an understanding of the growth in CA and SA separately?

Jai, thanks for the question. So, we are broadly getting a similar growth in CA as well, but the CA as a proportion is still smaller for us, right? And that's about 15% of the total CASA. Our, of course, endeavor is to increase this CA proportion as we sort of go along. If you see for players who have been there for long, this ratio is typically higher at about 20%, 25%, right, of CASA or CA as a percentage of total deposits, the ratio is more around 13%, 14%. For us, that ratio is around the 7.5%, 8% mark currently.

So we have a work to do basically on the current account front. And actually, see, like we are lower, let me say, on the CA front as compared to what it should be. But in the industry, generally speaking, building CA is a harder task. But we certainly feel that we should, because we are a good bank, tech is good, reach is good and so on and so forth, we believe that we should be able to get, we're at least striving to get to industry numbers, yes.

Sir, I was trying to understand the SA movement in the last, let's say, 1 or 2 quarters, a lot of banks have cut SA rate drastically, right? And we now have a significant advantage over peers in terms of at least the SA rates. Has that shown in dramatically in the balances because that was not visible just by looking at the CASA number in total. So that was the idea to understand, of course, if we are, let us say, sacrificing a bit on cost, are we getting the desired throughput?

I think so. I mean it's just -- I don't think because end of the SA growth is very strong. So, see, in as in management and anything, it's very difficult to see what is hitting right for somebody, right? It's a combination, it's a brand, it's a tech, the UI/UX. It's a very, very good mobile app. If you don't have the bank account, you should really test out our mobile app. Our tech stack is very good. So, our public presence, in the sense, is good. So, there are so many things that are going well. Our culture is good. Service levels are good. The service rate is also good. It's very difficult for us to pick what is working for the bank, but something is working , as a combo is working somewhere. So, in fact, we've cut FD rates. The reason why we cut FD rates more like sharply and meaningfully is that as and when we cut, let's say that 1 year goes forward, our entire fixed deposits balances of about INR1 lakh crores gets repriced downwards, let's call it, like 90, 100 basis points. Can you imagine what a material benefit it will be for the bank in the subsequent years in '27, '28, '29, '30, I mean, assuming we can maintain this kind of rate. So, because you got a structural advantage. So that's how we think about cutting FD rates because we will see the benefit of it in subsequent years because it's structurally come down. SA is in our hands. We can cut it any time we want. We just want to make sure that there is enough money in the bank that we pay off all our bonds. We still have to pay INR30,000 crores of bonds, not high cost, but to refinance and everything. So, we pay off everything with this money, and it's still cheaper than our , many of the other borrowings.

Right. No, sir, I was just looking at the timing of -- if we want to cut SA rate, then maybe this is the time, right? I mean SA rates by the peer banks have come down to historical low levels.

But many of the peer banks have not cut the FD rates to our rate. See our rate, if you take 1-year rates, we are like in the zone of the big banks. Other banks don't cut it that rate. So, people have chosen to cut one or the other or moderately cut both. We have sharply cut the fixed deposit. I mean it all comes back to the same thing. Everything contributes to cost of funds, but cutting FD structurally cuts it.

Right. And sir, just on margins, right? So, this quarter, let's say, we have a decent 60%, 65% fixed rate book, where the impact would have been very smaller, except for the mix change. And let's say, 50 basis point yield compression has actually resulted in 25 basis point yield NIM reduction, right? Because there's not too much change in the cost of funding at all, right? Similar things could happen in Q2, right? The remaining 50 basis point yield impact comes and then there is no material change in the cost of deposit and maybe the similar NIM outcom es. Is that a decent mathematics?

Yes, of course. I think you got it right. That's why we pointed out that, you could have a situation where we, if you remember right at the beginning, I pointed out that your Q1, Q2 will go through this phase, where income will come down and cost of funds will not have come down proportionately. But we have mentally factored in because we're looking ahead. And when you look Q3 or Q4, things will even out. And that's why we said this , Mr. Sudhanshu said earlier, like 5.8%, he expects to claw back. But Q2, we expect our NIM to come down.

Right. Last question, sir. We are now a large bank, right? And one of the fastest growing. On the Board side, just a small observation that we have one Executive Director, which resembles some of the small private banks. Whereas the large private banks, th ey have multiple EDs. So, when do you think we would hit that we would -- that time would come when we may have more than one ED?

Thank you. We'll think about it. We do think about these things at the Board. So, we'll think about this one also.

The next question is from the line of Harsh Modi from JPMorgan.

Definitely, it seems like your asset quality is holding much better than peers on the delivered numbers. But are there any early warning signs, let's say, 3 or 6 months from now, if we do end up getting some sort of weakness, what may be the possible areas where -- which could lead to slightly higher NPL stresses on your book?

So, what would be a material number, Harsh, that you would worry about? I'll answer the question accordingly. Would you say 5 basis points would bother you? Would you say 10 or 20? At what stage would you say that we should have called out?

Like, say, 50 bps delta.

50 bps delta.

5-0?

Yes.

No, we don't think there's anything that's moving the button like that for us. Had you said 5 bps or 10 bps, I would have said, yes, maybe some products can. For example, if you think of a rural market and you find that, okay, you've got the MFI business. Now are there any other businesses that can give you a little more higher credit cost than the other? Yes, like I told you that 20 products, something will give more, something will give you less. So, would you say, can the numbers change by 5 basis points, 10 basis points? Yes, of course, we are running a bank, anything can happen. But 50 basis points, no, we don't think like that at all. I mean, we don't think we'll give you that kind of a surprise.

Right. So incremental is very limited 5, 10 basis points because there is a bit of a dichotomy here. We have multiple banks, NBFCs, big and small saying there are some degrees of risk that are watching certain segments, MSME, some CVCE, microfinance is an ongoing issue. But your commentary seems to be reasonably sanguine. And definitely, a lot of it has to do with your underwriting and your standards. But I'm just trying to figure if there is a risk 3 or 6 months down the line, which may be growing, but as a market, we are not fully aware of...

No, I generally believe your concern is a valid concern because if we give you a 50-bps shock, like tomorrow if we came back to you by end of the year and said, "Oh my God, it's not going to be 2% or 2.05% and it's going to be 2.55%, right? I'm thankful to you that you gave me a number so that now I know what your benchmark of a material movement is, it will make 50. Now do we think any product of the bank would take us that zone? The answer is no. Do we expect our H2 to be in a credit cost average book? In fact, we think could be better than H1. We think, Q2 could be like probably in the zone or probably Q1, Q2 could be probably similar, I'd say, in terms of give or take. But Q3, Q4 is actually, we feel at this point of time. And frankly, we've not gone very wrong with our numbers for the last many, many years. We model this all the time and keep projecting it forward. We've not gone wrong with the past. Our own benchmarks say that Q3, Q4 should only be better. We don't expect it to like go the other way around. Your concern is can 2% or 2.05% become 2.55%? No, we don't think so. So, we'll watch, since I see that you are concerned. So you're seeing other people's numbers, other people's commentary. We don't have those commentaries to give because we are not seeing data to suggest anything like that.

The next question is from the line of Vishal Biraia from Bandhan AMC.

It's a marginal increase. Home loan in fact, have come down.

I'd like to point to Page 49. We want to see how it has gone up. Where has it gone up actually? So, 0.84% is the gross NPA and 0.52% is the net NPA for home loans. Correct?

Yes exactly. So, my question is from 70 bps to 84 bps on a sequential basis.

Okay. I mean last quarter, it was 70 bps. Okay. It's not on my sheet, so I'm not able to compare. But really, there's nothing to call out. Also, maybe the book is probably slowing down. We are not growing it that much. So, think of it like that. But nothing like when we see , nothing that should materially bother you on home loans. And anyway, home loans, as you know, is a very stable thing. It doesn't disturb us. Home is anyway stable, right? Neither for us nor anybody in the whole system, home has given any trouble. Don't bother.

Fair enough. And my second question is on the MSME side. Is there a change in the pace of disbursement on the MSME front? I mean I'm assuming LAP would also largely indirectly be MSME financing. So, if you combine both, is there a change in pace of disbursement or anything that you can highlight because a lot of banks and a lot of NBFCs have been highlighting some sort of stress or potential stress on MSME front?

I know we said this many times in this call, has come about and other people are saying this and pointing out some concerns. Well, we also want to be very reasonable, but we are not seeing any material slowdown or anything like that. But you see for our overall business finance book , which has wholesale loans, wholesale loans has grown, and the rest of the book is muted only. Anyway, it's not growing dramatically, as you can see. If you take a quarter, so you see March '25, the business banking book is INR9,700 crores, the CV /CE is INR7,500 crores and other MSME, long tail is INR14,000 crores. You can do the math offline; you can take these three numbers together. Then in June '25, it's INR10,000 crores, INR8,300 crores and INR14,000 crores. If you add them up, give or take, maybe it's been flat.

Ladies and gentlemen, due to time constraints, that was the last question of the day. I now hand the conference over to Mr. Vaidyanathan, MD and CEO, for closing comments.

Yes. Thank you very much for staying up this long and participating with us. I want to just assure you that we'll be careful. Except microfinance, we don't have anything to particularly call out. Like I said, there are some 25 product lines, something will go up, something will come down. But broadly, we are in zone of where we said. We've discussed it many times. Many callers asked this question. One of the callers specifically mentioned -- Harsh, I think, mentioned clearly, what is the material movement in that 50 basis points. I want to assure you we are not thinking anything that line. If you heard it from anywhere else, maybe you can reflect cl osely, but we don't have anything to call out like that at all. 10, 15 basis points can always happen. We are running a business, can happen always, but nothing material has order we talked about. Like I said in the beginning, we are very focused on building a quality brand, quality bank, good journeys, good systems, good technology. All these things will eventually play out in the way the bank will come about. So that's what it is. So, look forward to seeing you next quarter. And look forward to material improvement from us, let me say, by Q3 or maybe Q4. Basically, that's when the whole economics change, because of the funding cost changes by that time.

Yes. Thank you, everyone.

Thanks very much. Bye.

Thanks, everyone, for joining. Thanks.

Thank you. That concludes this conference. Thank you for joining us, and you may now disconnect your lines.