Bank of Baroda Ltd

NSE:BANKBARODA

Q1-2026 Earnings Call

[Operator]

Good evening, everyone, and welcome to Bank of Baroda's results for the quarter 1 ended June 30, 2025. Thank you all for joining us. We have with us today our MD & CEO Shri Debadatta Chand, and he's joined by the bank's Executive Directors and our CFO. We'll start with brief introductions and then a short presentation followed by opening remarks by Chand Sir, and the then we'll start with the Q&A session. Chand, Sir?

[Debadatta Chand, executive]

Yes. Thanks, Feroza. Again, good evening to all of you, all my analyst friend, and let me introduce the management team here. I'm D. Chand, I'm MD and CEO of Bank of Baroda. And with me Mr. Lalit Tyagi, Executive Director, he looks after the Corporate Credit, International Banking and Treasury as far as the bank's books are concerned. With us, Mr. Sanjay Mudaliar. He's the Executive Director, he looks after the IT function of the entire bank, and also on the Retail Asset apart from multiple other department, he heads. With us Mr. Lal Singh, he's Executive Director, he looks after the Recovery, the priority sector and also more importantly, the HR function of the bank. And we have Madam Beena Vaheed, she looks after the Compliance and Control function and also on the Retail Liability, which is very critical at this point of time, the retail liability of the bank. And we have the new CFO, possibly you are meeting him for the first time, Mr. IV Sridhar. He has taken charge as the CFO, and he is part of management discussion today.

So with this -- I mean Mr. Sridhar, please go through the presentation, then I'll have my opening remarks.

[Sridhar Inumella, executive]

Good evening. It's my privilege to present before you the financial highlights of Bank of Baroda for the quarter ended 30 June 2025. Our Global Advances have grown by 12.6% Y-o-Y with Domestic Advances growing at 1.4% and International at 13.6%. With the advances book -- within the advances book, the bank has continued to focus on RAM advances. Our organic retail book grew by 17.5%, agriculture at 16.2% and organic MSME at 13.1%. Corporate loans have grown by 4.2% Y-o-Y.

Within the Retail segment, we have seen a smart growth across the portfolio with Education Loan growing by 15.4%. Home Loan at 16.5%, Auto Loan at 17.9%, Mortgage at 18.6%. With regard to our personal loan book, we have moderated the growth as per the guidance given at 19.5%.

In terms of deposit growth, our total deposit have grown by 9.1% with the international deposits growing by 14.8% and domestic by 8.1%. Domestic CASA deposits have grown by 5.5% and term deposits have registered a growth of 9.9% Y-o-Y. As of 30th June 2025, the bank's credit deposit ratio stands 84.08% and CASA ratio stands at 39.33%. .

With regard to our profitability metrics, our operating profit for the quarter stands at INR 8,236 crores registering a Y-o-Y growth of 15%. Our net profit for the Q1 of '26 stands at INR 4,541 crores, registering a growth of 1.9% Y-o-Y. Return on assets remains above 1% at 1.03% in Q1 of FY '26. Return on equity stands at 15.05%.

Margins have been under pressure for the industry as a whole, given the reported cuts, leading to immediate repricing of EBLR linked loans and lag in deposit pricing. Therefore, with the -- with regard to our key ratios, our yield on advances stands at 8.09% for the quarter.

Our cost of deposits for the quarter have sequentially reduced to 5.05% as against 5.12% in the previous quarter. In terms of our net interest margin, there had been a reclassification of interest on income tax deferred. And the historical NIMs have been normalized as per the revised reclassification for comparability. And our NIM for Q1 FY 2026 stands at 2.91%.

Regarding asset quality. Our asset quality remains robust. Our GNPA has improved by 60 bps Y-o-Y and stands at 2.28%. Net NPA is below 1%, and that is at 0.6%. Our provision coverage ratio, including TWO is comfortable at 93.18%. Our slippage ratio for Q1 FY 2026 stands at 1.16%. Credit cost stands at a level of 0.55% for the quarter.

Coming to our SMA and collection efficiency, our CRILC SMA 1 and 2 as a percentage of our standard advances stands at 0.4% as of June '25. Our collection efficiency, excluding agriculture, remains robust at 98.9%. In terms of our capital adequacy, our capital position continues to be strong with CET-1 at 14.12%. Tier 1 at 15.15% and CRAR at 17.61%. Our LCR remains healthy at approximately 119% as of June '25. Adjusted for the profits of Q1 2026, the capital adequacy would have been 18.04%. Thank you.

[Debadatta Chand, executive]

So thank you, Mr. Sridhar. Again, just to give a quick remarks on the qualitative aspect of the results. We'll go more for question answer rather than my initial remarks. So let me tell again the bank business model as I told earlier is to working on a sustainable and consistent and stable outlook model. And I think the performance that you have given for this quarter is perfectly aligning with our business model in terms of focusing on sustainable business, focusing only on the organic business, at the same time, adding to its fundamental strength.

What I mean by fundamental strength is the book value -- incremental book value that I'm talking to service quarter-to-quarter. In terms of advance, the numbers are before you. On the advanced book, the bank had very strong 12.6% growth that is in this market, I think, is one of the good growth we have and advanced growth is propelled mainly by the RAM book, which is growing almost 18%. On the retail, continues to be strong. The MSME is growing at 13.1%, and the agri is of the highest growth we had in the last many quarters at 16% in excess of 16%. I think RAM will continue to grow strong on the bank, is focusing and on the corporate growth is at 4.2%. You may say it's muted. But if I look into the entire industry outlook and the performance, this growth is aligned with the growth.

I'll give a couple of data points on the corporate growth. We had a 2.5% Y-o-Y growth in June 2024. So typically, the beginning of the quarter we realigned the book. We realigned the book on the bulk deposit, which has gone down by INR 23,000 crores and so is on the corporate book. But let's also admit a couple of fundamental factors here in corporate book, there are corporates having strong cash flow position, they are de-leveraging. So demand is not that much because there is a de-leveraging happening on the corporate book.

At the same time, good corporates are able to tap one market at a cheaper rate. The BRLR has reacted, but the MCLR would take bit of time because it is stacked with the cost of deposit moderation. So they're able to raise at a cheaper so then the demand from the bank's credit unless. But more because of a seasonal factor, I think the corporate growth is at 4.2% but better than a couple of other banks. But still, we want to upsize this as we had a 2.5% last -- quarter of last year, but the full year was almost 9%. So we are thinking of almost growing at 9% to 10% for this year also on the corporate book.

Secondly, on the liability, I think that's something we really look into the cost metrics of the bank as on today. The bulk deposit has been reduced by INR 23,000 crores. The CASA growth of 5.5%, both on the saving and CASA is consistent for last many quarters. And in case you are tracking the PO performance, I think we're able to take the lead on that, and that's the core strength. The retail term deposit is growing almost at 8.1%, and that also if we look at numbers we are not growing on the bulk deposit. So meaning thereby, the focus continue to be on the stable deposit and for that, 3 data points I will tell which again, you can talk about the liability management, which the bank has done, on the cost of deposit at 5.05%.

This is one of the lowest in the industry. I'm talking about large peers. The CASA at 39.33% is one of the highest as far as the percentage in the entire large peers. At the same time, the margin, I'll come to margin later, we are holding at 2.91%. And the margin vis-a-vis the last quarter from 2.98% it has gone down to 2.91%, only a cut of 7 bps. You would have read many articles, which has come where the average cut in NIM, for most of the banks is 17 bps.

In the same scenario, I think the bank has done well in terms of managing liability and holding into the NIM. Even if you don't take the reclassification which has been presented in this quarter, the last quarter, the NIM was 2.86%, and if I don't take the income tax reform, which has been classified as interest income this quarter, then still, it would be at 2.81%. The cut is almost the same like 6 or 7 bps. So that's something very fundamentally talks about cost of deposit, 5.05%, the CASA at 39.33%. At the same time, the margin holding at 2.91%. I think the narrative on the bank's liability is very strong and that's something the bank is focusing very clearly on that.

I'll come to -- the profitability only one statement. If you look at the net profit, the bank has been posting net profit of more than INR 4,000 crores for the last 10 quarters. That means we're at a elevated level of the profitability curve for many quarters now. We are the only bank to get into an ROA more than one, that is in September 2022. So I'm at a elevated level.

So if you look at the percentage change, the percentage change may not work out very high. I suppose I had a suboptimal profit last year and then possibly I can think up a growth of 50% or 60%. I am at an elevated level of net profit, and that's why the profit percentage is less, although the operating profit growth is very strong at 15%. So I think profitability of the bank is clearly on a sustainable path.

No doubt, the NII is impacted because of the transition happening on the asset liability, as you know, and this is similar for all the banks, all the banks have taken some cut in the net interest income. So I think on the profitability, the strongly -- the bank book strongly have the earning potential, the profit potential is quite strong as of the bank's book is concerned.

And lastly, cover only on the slippage side. The bank slippage this quarter has been INR 3,500 crores as compared to our normalized slippage of INR 2,800 crores to INR 2,900 crores. It's precisely for two reason. One is that there is a large international account, which is presented in the analyst presentation also, that slipped to NPA this quarter. I'll come to give a color on that. Secondly, on the personal loan book, there is a marginal increase in the legacy, that's only INR 100 crores. So barring these two, there is no impact and the asset quality is very stable. The GNP is the best. The CRILC data shows that at 0.4%, SMA 1 and 2 is one of the best in the industry, if you look at the data and compare with other banks.

At the same time, the collection efficiency at 98.9%, which is better than the last quarter. So in that way, the asset quality's story continue to be strong, robust and resilient. I'll come to the international account, which again slipped into NPA this quarter. This account was restructured during COVID time. The account was -- then conduct was good, so it was upgraded after 1 year, but it continued to have some kind of a weakness continuing in that, either in the SMA 1 or 2 and now in the international trajectory, the account has gone to a resolution process called CNC. So it's all like a resolution process called the credit national crisis, wherein there is a resolution supposed to happen within 210 days, 120 days plus 90 days. And we will get to know the outcome of this account after 210 days in terms of resolution.

But let me again give you a couple of factors here. The account is a secured advances having a coverage much more than 1, right? And if you look at the vintage of this account, from the peak level of exposure of $80 million, it has gone down to almost like $50 million, so there is a continuous reduction happening in the account. So we do not see any challenge, although we have made a 40% provision as a prudential provision there. But we do not see any challenge on this account, and we think we can recover the amount in full.

So broadly, I covered, I mean, the aspect that I wanted to say on the fundamental on the NII front, it's a market phenomenon, it's happening across all banks because of the transition of the asset, because the deposit moderation would slightly take time. So looking at the outcome of everything, the Q2 can continue to be a bit of, again pressure on the margin and NII. But again, Q3 and Q4 would be much, much better in terms of what we have seen in Q1 and Q2. So with this, I thank all of you for joining on today's evening, and we'll open for question and answer now.

[Operator]

The first question is from Rikin Shah.

[Rikin Shah, analyst]

Good evening, sir. Three questions, sir. The first one is on the fee income. So the fee income is still pretty soft at sub-10% Y-o-Y. Would you be able to share what is happening here? And is there any possibility of acceleration from here onwards?

Second, we have withheld kind of margin guidance, but clearly, there has been some reclassification. So would you be able to share how the margin trajectory looks like from 2.91% that we saw in the current quarter to the next few quarters? And lastly, in terms of the ROA, we did 1.03% ROA this quarter, but that is after substantial amount of trading gains, which may not incur in the coming quarters. So suffice to say that meeting 1% ROA is only a possibility if the trading gains sustain, but without that, the 1% ROA would be a tough target to achieve?

[Debadatta Chand, executive]

Okay. Thanks. On the fee side, yes, it's slightly soft as far as the growth is concerned. The bank is clearly focusing on the fee side, and it's been something that we are targeting for last many quarters now. We earlier said we run some kind of an internal focus on fee and flow and focusing cash management, we have significantly progressed. We captured cash management on the MSME sector more as compared to the corporate. So I think the growth would be upsize, and that is what key focus. I cannot give you a number here, but then clearly, the management is working to improve the fee side of the income.

On the margin guidance, this is an income tax refund, which has been accounted as per the regulatory clarification on the matter and all the banks have done that. And I suppose you exclude the impact of this, the NIM would be 2.81% as compared to 2.91% that we are seeing. And this is in comparison to 2.86% that we declared in the Q4. So if you look at including or excluding the cut is almost 6 to 7 bps. And here, the comparison I want to give you, if you look at multiple media articles therein on the average cut in the NIM based on the declared results of banks, it is almost -- average is 17 bps, whereas we are able to sustain at 6 to 7 bps cut in the NIM.

Going forward, the next quarter still be under pressure. But I think the deposit repricing is going to happen for the next quarter, almost 70% to 80% of that. So the upside benefit going to see clearly in Q3 and Q4. So on a full year basis, we are giving a guidance of 2.85% to 3%. But again, we'll just see after the September, anything we need to revisit on that because clearly, all of us understand that this is a transition time, we need to factor all these factors -- multiple factors are therein.

On the ROA of 1.03%, these are the 12 quarters we have posted ROA in excess of 1%. And you know there is a substantial treasury gain here, no doubt about it. And treasury gain has come on 2 counts. One is with regard to a lowering of yield and that typically of the AFS book, then you take advantage of the lowering yield movement. And secondly, the [indiscernible] comes out with a lot of OMOs in between and then out of the HTM, you can offer those to the OMO. So the OMO possibly the things can continue and then possibly it's still giving a good upside on the trading profit. In spite of the fact that whatever says our full year guidance, when we say ROA, they always have full year guidance. So even if there is pressure, we have -- on the provisioning side, we have taken a bit of prudential provisioning there. So a lot of -- I mean, they are in the system to sustain the profitability at the level at which we are operating now. We have maintained it in 12 quarters. So I think we'll be in a position to maintain next quarter also.

[Rikin Shah, analyst]

Sir, just a couple of follow-ups, if I may, on margin itself. If you could share what is the percentage of loan book mix in terms of repo, other EBLR, MCLR, fixed?

Number two, if you could just share what out of 100 basis points of repo rate cut that has happened, how much of that has already flown through in the book so far?

And lastly, in terms of cost of funds, you did mention that we would see 70%, 80% deposit repricing happening in the next quarter. So if you could just talk about what is the typical duration of the term deposits and how much cost of funds can go down from the current levels?

[Debadatta Chand, executive]

Yes. So coming to the segment of the loan, the BRLR book is almost 35%. Your MCLR book is 45%, fixed is 6%, [indiscernible] is 7% and the [indiscernible] is 6%. That broadly covers the mix of the percentage over there. In terms of the cut in repo, yes, on the retail side, full benefit has been passed on.

As far as MCLR is concerned, we have only announced one cut, but that would depend upon the cost moderation. The model is that once the cost moderates, they have to pass on. So it will take its own time to get repriced.

Thirdly, external benchmark, obviously, because these are high-quality assets, so they have the opportunity in the bond market. So there would be a lot of repricing happening on that count. So this is a quarter we need to watch out. That's something, but then repricing. But the cost moderation, again, as you talked about at 5.05% cost of deposit I would say one of the positive narrative in the entire bank with regard to the way we have maintained the cost of deposit at 5.05%.

And even in the case where there is -- I mean, the duration normally of term deposit is almost 1 year. So almost 3, 4 months has gone, 70% is going to reprice. So going by that, we are thinking on the cost of deposit at least there would be a 15 to 17 bps moderation going forward by September. And that typically take care of the repricing that's going to happen on the asset side. So that will be almost at a margin guidance which we had given. But notwithstanding the fact that because a lot of uncertain elements are there, there will be a bit of pressure continue at least for 1 quarter. And thereafter, there is a positive outside on the higher side.

[Operator]

[Operator Instructions] The next question is from Ashok Ajmera.

[Ashok Ajmera, analyst]

Yes, definitely compliment, sir, that in spite of this very difficult quarter going through the transition, you have shown a good operating profit. And somehow, I mean, balanced most of the things, which shows your -- of course, your leadership and the top management of Bank of Baroda and working very hard on it. Having said that, sir, some couple of questions and some observations, sir. In the SMA book, we have given only percentage and that is also mix of 1 and 2. Can I know exactly the numbers of SMA-1 in this quarter and SMA-2 vis-a-vis because we have seen it in the most of the banks, SMA-2 numbers have suddenly gone up. So in your case, if it has gone up, then what is the explanation for that? So since I don't have the number, I cannot ask exactly on that. Only the percentage is there.

[Debadatta Chand, executive]

Thank you for complementing the bank, and we'll be working again. As I said, we work on how do you again -- I mean, optimize the fundamental strength of the bank. So that is what actually, thank you very much for that.

Talking of the SMA, we only give -- as a percentage we are giving. And if possible, then I'll share the data, but I'll just give you a color to the SMA 1 and 2. If you look at the percentage that we have given at 0.4, it's consisting of 3 accounts, which are again the government entity, government guaranteed, but always move between SMA 1, 2 and then standard.

So this quarter, there are 2 accounts still being there in the SMA, so slightly pushing the SMA percentage higher. If you exclude these 3 accounts, the SMA 1 and 2 credit book is at 0.10%. I mean that if you look at -- you are comparing also this credit data in terms of percentage and 0.4% is one of the lowest if I compare large peers. So in that way, the bank is quite confidently working on that in terms of percentage. But on the number side, I'll let you know in case there's a publish -- we have published earlier, and then we'll inform you on the number. Anything Lal Singh sir, you want to add on this?

[Lal Singh, executive]

No , Sir nothing.

[Debadatta Chand, executive]

So this data, with regard to number -- absolute number, we let you know on that.

[Ashok Ajmera, analyst]

Sir, on this -- you talked about this international account and 210 days. And you said it is a very asset-backed -- security-backed account. So in this financial only the 210 days period will get over. So there are chances you already have provided 40% of that. So there are very positive chances of getting off totally without any stretch from this account?

[Debadatta Chand, executive]

Yes, absolutely right. The current position is that because the account also has a lot of state backing on that in the in the interntional territory. I think there can be a resolution within 200 days. And if that happens, obviously, this 40% will be reversed after that.

And as of today, frankly, it's on the curative process. Actually, there is a standstill condition. But as a prudent measure because you are -- I mean, the domestic regulation talks about NPA, we have provided 40%. Otherwise, on the international, we are not required because there is a standstill condition on that. It's getting into a resolution process, but there is a curative process and there is a preventive protection therein.

[Ashok Ajmera, analyst]

Yes. Sir, one point, sir, if I come on recovery, the recovery from the written-off account in this quarter is a little slower than the March quarter. It can be understood also. But overall, giving a color of the recovery, our entire recovery book, like including we have that -- all that NCLT, maybe 99.9% provided for INR 43,402 crores in that account plus our -- we have a very good robust -- I mean, written off book also from where the chances are good. And every year, we are making good recovery. So on the overall recovery front, I mean, I think the other 3 quarters should be much better than this quarter, sir?

[Debadatta Chand, executive]

Yes, -- as you rightly, our average run rate on the recovery TWO without any one-off. Let me again say without any one-off is roughly around INR 750 crores per quarter. But June is typically a lot of transfer to happen slightly because of this -- all this recovery normally, if you look at June '24 also, it was lower. But you are right, the subsequent quarter will be much better than the numbers we have announced in June with the hope that a couple of one-offs can still be in the pipeline, which we are working strongly.

[Ashok Ajmera, analyst]

And you note, sir, I mean, on the NCLT and the transfer to asset recovery companies, NARCL or other things, can you give at least something in next 2 to 3 quarters? Are we having a lot of such accounts in the pipeline, which are towards sale or resolution from where we can expect some larger recovery?

[Debadatta Chand, executive]

Frankly, as far as NARCL or ARcil, we do not have much of pipelines for that actually. We are trying for a very strong recovery mechanism itself. We are trying for multiple resolution process just to recover money. So in terms of pipeline, I don't have much in terms of NARCL particularly. But there are a couple of accounts which again, there are discussion going on. But the fact of the matter is that the recovery target for the full year that includes [indiscernible] recovery and TWO, I think we will be exceeding the INR 10,000 crores that we have fixed internally to recover for the full year.

[Ashok Ajmera, analyst]

Last one, sir, on that airline account. We had the same question I asked in the Central Bank also. So earlier, we used to think that the recovery or the amount will be much -- I mean, amount will be recovered much faster because you have that INR 1,200 crores that land parcel, which is separately secured with U2 bank, the value of which might have gone up to maybe INR 1,700 crores, INR 1,800 crores now. So what is the status on that, sir? Are we expecting some major thing happening on that account in this year?

[Debadatta Chand, executive]

See, again, I mean, this sell of asset, particularly large piece of land parcel is always a time-consuming exercise. And the process is on, again on the same -- the Central Bank is the lead and they are taking lead on that. We are supporting that. Apart from the land parcel that we talked about, say, earlier, we said the ECLGS money we cut it, so 1/3 of the exposure has gone down. There is an arbitration issue that is also going on the international market where there's a strong possibility of upside there. So there are multiple process going on, but then land parcel always is time consuming and we need to be patient on that.

[Operator]

Next question is from Kunal Shah.

[Kunal Shah, analyst]

So firstly, you mentioned in terms of making some prudent provisioning out there. So I just want to get that sense. So this is very well reflected in terms of the standard asset provisioning, which is there at INR 320-odd crores instead of maybe despite our book running down by 2.5%. So ideally, there shouldn't have been any standard asset provisioning, that should have been the release. And what is this? Maybe is this particularly towards any maybe -- so the standard asset provisioning was there. What was the rationale for creating this, yes?

[Debadatta Chand, executive]

Yes, a couple of like we go by the IRAC provisioning, but a couple of accounts where there is inherent weakness which as per the auditors, they think that we need to slightly be more prudent on that, and we provide as per the guidance of the auditor. So typically, if you look at IRAC and the prudential, there is a gap over there. Actually, we have provided slightly more depending upon the weakness of the account.

So like a couple of large accounts, which is again -- I mean, gets into SMA 1, 2 again going back to standard, again going to SMA 1, 2. Even if there is a possibility of this account getting into NPA is less because of the vintage that you have seen in those accounts. There also we made a bit of provision even if it is IRAC basis may not be a requirement, but as a prudential measure because the auditors would say that there is an inherent weakness, which is continuing for a long and you need to provide. So these are the extra I mean, provisioning that we have made in the books as far as the provisioning requirement is concerned. Otherwise, we're complying fully with the IRAC norms. At the same time, if there is a auditor guidance on matter, then we comply to that.

[Kunal Shah, analyst]

So what was the provisioning? And what was the outstanding amount, if you can just highlight that?

[Debadatta Chand, executive]

Come back again, Kunal, didn't get you.

[Kunal Shah, analyst]

No, no. So what was the overall book, okay, wherein we have identified that to be having some inherent weakness? And what was the provisioning taken against it? If you can just mention the absolute numbers for both?

[Debadatta Chand, executive]

No, that's part of the -- actually a couple of the SMA-1, 2 book, which you are showing, they are actually roughly around -- you can take it on the standard asset, roughly around INR 500 crores to INR 600 crores is there, which is incremental provisioning that we have done based on the weakness of those accounts.

[Kunal Shah, analyst]

Okay. Okay. So INR 500 crores to INR 600 crores incremental and after the release, it's showing like INR 324-odd crores.

And secondly, on the international book, so maybe you indicated that this is more on the restructured side. But maybe have we taken the look on the entire book looking at what is happening globally and no doubt ours would be more like, say, the exposure to the domestic corporates. But do we see any risk and maybe this is the first quarter wherein we have started to see some kind of a pain emerging on international and this could again be the area of concern going forward?

[Debadatta Chand, executive]

No, absolutely not actually. This account was under our monitoring for long because it was a restructured account on the international book and all the restructured book was earlier discussed on that.

It was upgraded because it completed 1-year curative process and the account was standard at that time. But it was showing weakness, so we knew that there are weakness. And as on today, it has gone to a resolution process, right? It has not gone into [indiscernible] it's a resolution process, we need to be -- I mean, respect those process in those country. And then...

[Kunal Shah, analyst]

It was not particularly with respect to these accounts. I'm saying..

[Debadatta Chand, executive]

No, I'm giving a color. I'm giving a color. Actually, as a prudent measure, we have made 40% provision there, right, which can be upgraded at the moment the curative process, the realization happens, the money can be pulled back immediately, point one. Second is the asset coverage of more than 1 for very long. And if you look at the vintage of the account, the account, there is a reducing balances over a period of time. So we are not seeing any challenge for recovery in this account. Even if the worst-case scenario, the account is not getting upgraded, we are hopeful for a full recovery out of this account. But we are hopeful that the account may get upgraded during this year, then there is a write-back possible.

[Kunal Shah, analyst]

No, I was just saying ex of this account on the balance overseas exposure, how are we evaluating because there are like a lot of global events which are happening. So just to make sure that our book is robust and we don't see the further slippages on the international side because that tends to be chunky. So how are we evaluating the entire portfolio? And do we see any further stress which can come in over the next 2 to 3-odd quarters on the international or on the overseas exposure?

[Debadatta Chand, executive]

No, absolutely not. We do monitor actually, we have a mid-office, which talks about -- which maps out every account globally in terms of the exposure therein. There is no stress in any other account. This account was in SMA 1, 2 for some time and now getting into NPA. So there is no other account as on today, which is again showing the sign of SMA 1, 2 and still standard. So in that way, I do not see any challenge on the international front and particularly on the NP position.

[Kunal Shah, analyst]

And one last question, if I can. Just like the increase across the retail products on a sequential basis, be it housing, auto, you indicated even in terms of the PL. So is it like maybe with the seasoning of the portfolio, the kind of growth which we had, maybe would you see more to flow in, in terms of the slippages, particularly because PL has been growing quite aggressively and now we have seen GNPAs at closer to like, say, 4.8-odd percent. So maybe just if you can indicate for the overall retail as well as the MSME segment, yes.

[Debadatta Chand, executive]

So if you look at the -- there are 2 factors here, the percentage GNPA and also the slippage ratio on this product. And we continue to grow strong on the retail and MSME. Retail is growing very strongly for the bank and so as the MSME we picked up in last 1 year.

If you look at the slippage, I mean, maybe on a retail, if you look at the slippage June, there may be a couple of INR 100 crores or INR 150 crores in addition. But if you look at the slippage ratio because the denominator has also gone up, but the slippage ratio will be still contained.

But personal loan, yes, there is a bit of a legacy book has an incremental NPA going forward. But the book is not large enough point one. And secondly, in terms of slippage ratio, I don't think there is a concern because the retail slippage ratio as on June is below that of June last year. So in that way, the denominator is also going up. So it's part of a normal business in terms of why do you maintain. So both the GNPA of the retail products and MSME, the slippage ratio in the retail products and MSME, these are well within our threshold and maintaining the same level of outstanding as compared to the last year.

[Operator]

Next question is from [Bhavik Jha].

[Unknown Analyst]

Sir, our L2 maturity book is down 4% quarter-on-quarter. Is it because of OMO operations or we have [indiscernible] sold our 5%, which was allowed under the new investment guideline?

[Debadatta Chand, executive]

Mr. Tyagi, can you respond to this?

[Lalit Tyagi, executive]

So in fact, you said you picked it up rightly. We took the advantage of OMOs and earned good profit also. There was a good opportunity.

[Unknown Analyst]

Okay. And sir, sir, when is your ALCO meeting. So I just want to understand how does repo pass-through work. So is it on T+1 or it happens...

[Lalit Tyagi, executive]

So in fact, the repo cuts passed on immediately, and ALCO meets every month on a fixed frequency.

[Unknown Analyst]

Sir, last question. Sir, last year, your provision for employees was INR 800 crores. And this quarter, we are close to INR 1,000 crores. So should that be the run rate going forward? AS15 provision, I mean.

[Debadatta Chand, executive]

Madam Beena, can you take it up, our CFO.

[Beena Vaheed, executive]

Sridhar, will you take that question up? On the provision for staff?

[Sridhar Inumella, executive]

Yes. Basically, the discount rate has gone down, that's why the provision requirement has come up for this quarter.

[Unknown Analyst]

Understood. So this will be steady state for the next 3, 4 quarters as well, right?

[Sridhar Inumella, executive]

It depends. It depends on the rate movements again.

[Operator]

Next question from Ankit Bihani.

[Ankit Bihani, analyst]

I just had two questions. One was on your return of pool, which was as of FY '25, it was at INR 764 billion. I just wanted to know what would be the vantage-wise breakup like less than 5 years, 5 to 10 and greater than 10 years. If you have that data?

[Debadatta Chand, executive]

I do not have. Lal Singh can you respond or we can provide the data later?

[Lal Singh, executive]

Yes, sir, we'll provide the data later.

[Unknown Analyst]

Okay. I just wanted to check how that less than 5-year return of pool has moved across -- a time series data would be helpful.

And the second question is on your margins, which is at 2.91%. So there are no other one-offs right in this margin that you have reported because the banks that we are seeing reporting have seen higher decline in margins.

[Debadatta Chand, executive]

No, there is no one-off. Actually, I'll tell you what is that impact we are talking about. The income tax refund was earlier, was taken as other income. And in this year, it is not only for us, all other banks, they have declared the income tax refund as income. So consequently, that the NIM is getting changed. So we recalibrated the NIM that we declared earlier. On that basis, which was declared at 2.86% is 2.98%. So if you compare pre, post anything, the cut is only 7 bps and that's one-off.

The story here, which again, how it is compatible with the other numbers. When I look at cost of deposit at 5.05%, CASA ratio of 9.33%, I think the margin something strongly collaborate with all these numbers. And that is what our strength in the current market vis-a-vis large peers, the space is where we operate in terms of maintaining the margin. So there is no other one-off.

[Operator]

The next question is from Mr. Sushil Choksey.

[Sushil Choksey, analyst]

Calculations, team Bank of Baroda for stable numbers. Sir, looking at your outlook on treasury, how many repo cuts are you hearing or you are likely to project?

[Debadatta Chand, executive]

Okay. To respond to this, actually, we have a very strong economist with us Mr. Madan Sabnavis. So our house view is that we are expecting further 25 bps cut, but the expectation is more towards the end of the calendar year rather immediately. I mean I'm talking about we are not expecting any cut in the next policy, but possibly can happen after September.

[Sushil Choksey, analyst]

So are you estimating 10-year [indiscernible] to touch 6% or looks difficult?

[Debadatta Chand, executive]

See 10-year is not only dependent on the repo cut, but also influenced by the U.S. treasury, right? And you know what is happening on the U.S. treasury. So let the Fed also cut the rate and possibly, yes 6, if the Fed is not cutting rate, then possibly can be marginal decline, but not to a very large extent. Tyagi sir, any comment?

[Lalit Tyagi, executive]

Sir, actually, you have said it all. In fact, when the rate cut was happened at that time, the 10-year G-Sec came down to 6.70%, 6.80% and has pulled it up without any other ostensible reason. So we believe that going forward, the U.S. Fed move as well as our own inflation trajectory and the commentary on the liquidity will also play its own role.

[Sushil Choksey, analyst]

Sir, what is your yield on RAM advances? And second thing, your corporate advances you have shredded, are these mainly PSU-led or AAA rated, which were not yielding even 6% or 6.25% when you shredded or there are some typical loans which are replaced with CP and NCDs?

[Debadatta Chand, executive]

You're right. Typically, the corporate book, it is more on the fine price, which has got into further fine, which again slightly is suboptimal in terms of our margin. So you're absolutely right. Otherwise, a core corporate is actually growing much stronger. So we have not declared the core corporate growth, but it is growing much stronger than the 4.2% growth that we have seen. You're right because of -- I mean, these are high-quality asset, fine price has become [indiscernible] for the fine making it slightly challenging for us to hold on to those assets. But again, we will try to work it on for this quarter.

On the RAM, I mean, I'll give you a ballpark number. It is almost -- I mean, the report is -- I mean, it's almost 250 or 300 almost at 9.5% kind of a number we have a RAM yield on that.

[Sushil Choksey, analyst]

Sir, you had given a guidance in last analyst meet that your RAM should be 64% by year-end and the balance would be corporate. Are we on a trajectory or we are looking at exceeding RAM number at 64% with the current yield of 9% to 9.5%?

[Debadatta Chand, executive]

No. I mean we gave a guidance of 64%, 65%, but we always said 2 to 3 years. So it's not going to happen this year because this year, look, as on today, if we are at 62.7% because the corporate growth is a bit muted. And the corporate growth catches to almost like 9% to 10%, possibly this number may not be the same level. But yes, the retailization narrative and the retailization [indiscernible] is working strong for the bank.

You would have seen the retail growth has been consistently 3% to 4% above the system retail growth. I'm talking about the large peers, not the full system. So in that way, we continue to work to grow on the retail and maybe 2 to 3 years, we'll be a position to achieve 64%, 65%.

[Sushil Choksey, analyst]

Any digital expenditure, human resource expenditure which you are likely to incur and any asset monetization plan in the subsidiary?

[Debadatta Chand, executive]

So digital earlier we said our normal OpEx and CapEx, normally, we target at 10% of the operating profit for the full year. And that's something we work and we also give an upside therein if there is a requirement, we'll take it to 15%, but that's something we are working on that.

Employee headcount, yes, we have a plan to hire almost 15,000 employee at different [indiscernible] Murali on the operation and the relationship side in this year. Actually, it takes a time to onboard them and put them into a year, but there is a good hiring plan.

We're expanding literally because there is a plan to open almost like we opened more than 250 branches last year, another plan to open another 300 branches this year. So we are literally expanding. So in that scenario, it's -- I mean, changes happening across in headcount, operating -- I mean, the spend on the IT and we're working on all the them, I mean, on a holistic basis.

[Sushil Choksey, analyst]

Sir, we are one of the early banks to have a shared service which you had set up in Gujarat and was supporting your RAM business, specifically with FX and many other things. How is the outlook there? And what kind of capacity have you built so far?

[Debadatta Chand, executive]

The entity has almost provided if on a headcount of 74,000 total almost provided slightly above 10% to us in terms of their resources, which are -- who are deployed now. So almost 10% of the -- I mean, payroll headcounts they have provided. They are doing excellent service there in, I mean, doing activity, which again put me on an efficient curve in terms of the cost structure.

And we will continue to engage them more and more at the moment we find that they can do those because it's also a trade-off in terms of the skill set. So the moment you find them, they have the skill set to do my activity, we'll more and more do that. At the same time, on the payroll also since we are expanding, we'll continue to hire more and more employees on the payroll [indiscernible]

[Sushil Choksey, analyst]

Are we using this facility for some other banks to move up?

[Debadatta Chand, executive]

We are not allowed to do that. I mean it is only for only Bank of Baroda captive.

[Operator]

The last question for the evening is from Jai Mundhra.

[Jai Prakash Mundhra, analyst]

Sir, first question on your yield, domestic yields, they are down like 15 basis points Q-o-Q. Assuming no more action from RBI, what would be your sense? How should it behave in the, let's say, in the near term and maybe for the rest of the year? So the 50 basis point rate cut done in the June, that will still be there for the next -- that was only there in the -- only for 1 month. How do you look at the domestic in the near term?

[Debadatta Chand, executive]

That's a very fair question. And as we said that margin can be under pressure or continue to be under pressure one more quarter. So on the BLLR or the repo-linked already the reprice has happened and the full quarter, the impact will come in this quarter, September quarter. At the same time, non-BLLR, which are MCLR or the external link continue to reprice at a lower level, and that is happening in the market. So the moment there is a cost maturation will continue to decrease the MCLR and that impact also would come.

At the same time, as I said that the positive narrative for the bank is on the liability side. At a cost of deposit of 5.05% with CASA of 39.33% with a margin of 2.91%, I think we have much better position to reprice deposit and get the benefit. Our normal thumb rule as on today, actually, asset side, I cannot give you how much cut the asset -- I mean, yield on asset would happen. But normal expectation in case we are able to reprice the maturing deposit for September quarter, at least we are going to get a benefit of around 15 to 17 bps reduction in the cost of deposit and the cost of fund.

And that will be significant because deposit has a larger base. So I think in that scenario, we are almost able to possibly maintain on the margin guidance. Saying so, the margin would be under pressure. But on the full year, since we are very positive about the Q3 and Q4 on a full year guidance, we are thinking somewhere around 2.85% to 3% will be in a position to maintain on a full year basis, saying that Q2 can be something we need to watch it out. It can be under pressure, but we are in a better position to nullify the impact on the asset repricing from the liability mix that we carry as in today.

[Jai Prakash Mundhra, analyst]

Sure. So sir, just to get this straight, 15, 17 basis points is the stock impact, right, on the overall cost of deposit, right, based on repricing of including bulk deposit and including the savings account also, right? Because we have cut savings rate by 20 to 30 basis points -- 20 to 25 basis points.

[Debadatta Chand, executive]

Actually, [indiscernible] there is a RBI report saying that on the average lending rate has gone down by almost -- although fresh loan, it has gone down by 51 bps, but the average has gone down by -- I mean, the average has gone down by almost 17, 18 bps, right? So on the average lending on the outstanding loan [indiscernible] on the outstanding deposit has gone down by only 2 bps.

[Jai Prakash Mundhra, analyst]

So that RBI data is very -- I mean, that has not much sense actually it keeps on fluctuating every month.

[Debadatta Chand, executive]

No, no. That's what my sense I can tell you because the deposit are sticky because of a fixed nature. And assuming a deposit of a 1-year duration on the term deposit, bulk and CD have reacted big time. But assuming a deposit duration of 1 year, almost 4 months have gone now. So balance there is a 6 months. I mean, balance there is 8 months -- so by end of September, I think 70%, 80% of the deposit would get repriced in a manner, I mean, assuming a larger component of bulk, slightly lesser component of the retail term deposit. So by that time, we have a fair view with regard to the trajectory going forward. But we are working on this issue. And otherwise, the NIM cut for the bank would have been very significant as compared to you have seen the other banks NIM cut. But we are still able to maintain that is what the liability management we run, right? So that's what our strength, I believe.

[Jai Prakash Mundhra, analyst]

Right, right. And sir, overseas NIM actually have gone up despite a sharp moderation in the global interest rates and we also had a small slippages in overseas book also. And still the overseas margins have gone up from 170 to 175. I mean, they should ideally fall more than the domestic margins, right, because they would have gone up even sharper. Is that a fair understanding?

[Debadatta Chand, executive]

Overseas market slightly ahead of us in terms of the realignment restructure that is [indiscernible ]. So the peak level of NIM in overseas was 2.23%, it has gone down to almost like 1.70%. So it has stabilized at that level. So now again, we are able to get some good deals at slightly at a better off rate. So in that way, it has moved marginally from 1.70% to 1.75%. Otherwise, the NIM cut of the overseas already happened, and that is from a peak level of 2.23% has gone down to 1.70%, and now it has stabilized. I mean, I'm not differentiating between 1.75% and 1.70%. Anything Tyagi sir, you want to add on the overseas NIM?

[Lalit Tyagi, executive]

So you have said it all. In fact, that is the reason that 5 basis point is transient in fact. So the earlier Fed cuts have already been priced in until March.

[Jai Prakash Mundhra, analyst]

Sir, lastly on MSME, right? So if you see the bulk of the slippages is now coming from MSME. And some time back, we used to give this breakup of MSME book by CMR, right? How much is CMR 1 to 3 and then maybe 3 to 7 or some bucketing there, would be very helpful because now the entire -- I mean, majority of the slippages are coming from MSME. So if you can provide some more color on the rating of the MSME book even now if you have on the -- as of June 30. And just on a qualitatively, most of -- I mean, the entire MSME should be secured, right? We don't do any unsecured MSME -- or you have some proportion which is unsecured MSME?

[Debadatta Chand, executive]

No. Actually, our MSME is basically -- see on the retail piece also, these are all secured retail, personal loan is very less therein. But MSME also, all our loans are secured. Unsecured MSME would not do much. And the only case where unsecured MSME, if there are adequate backup because now we have come out with a cash flow-based OD product, which is again unsecured. So the component is very less here. We don't do otherwise a business loan unsecured like what the NBFC and others do. So our -- most of the portfolio is a secured one.

Secondly, a couple of areas where we have seen a growth in MSME because we are focusing on [indiscernible] one segment, policies of banks were not very strong now, we as a bank we have been quite strong on that. Supply chain is also picking up. Trades that are good volumes happening now. So core MSME, we are bundling along with the cash management system so that we understand the cash flow. But unsecured component is less, but then a couple of schemes were recently announced unsecured OD and that is based on the GST return. So these are a couple of small scheme operating, but not much. Lal Singh, anything you want to add on unsecured loan?

[Lal Singh, executive]

No, there is not much unsecured loans in the MSME. And whenever the loans are without securities, those are covered by the CGTMSE guarantee coverage from government entity schemes.

[Jai Prakash Mundhra, analyst]

And last question, sir, if I may ask, what would be your best guess for the staff cost for full year FY '26, assuming whatever is happening on interest rate because a lot of banks have also started doing PLI. I do not think we -- or we would have done the one PLI, 15 days this thing. but I do not recall a very big PLI scheme for us in FY '25. What would be -- if you have what kind of PLI schemes that you are running for employees? And what would be your sense on the staff cost for FY '26?

[Debadatta Chand, executive]

Lal Singh or Madam Beena CFO, anybody can take this question?

[Lalit Tyagi, executive]

Sir, if I may submit, we are making adequate provisions towards PLI [indiscernible] keeping in mind the requirement.

[Debadatta Chand, executive]

So adequately provided on PLI; at the same time, AS15 also I believe we have adequately provided, right?

[Lalit Tyagi, executive]

Yes.

[Debadatta Chand, executive]

Any further data on that, we can provide you offline.

[Operator]

Thank you, everyone. That's the last question we're able to take. Can I ask Sridhar, sir, to please give the word of thanks.

[Sridhar Inumella, executive]

I would like to extend my sincere gratitude to you all for joining us today for the announcement and the discussion of our financial results. Thank you once again for your time and continued support. Have a great day ahead. Thank you.

[Debadatta Chand, executive]

Thank you very much.