Canara Bank Ltd

NSE:CANBK

Q1-2026 Earnings Call

[Operator]

Good evening, everyone. Welcome to Canara Bank Q1 FY '26 Earnings Conference Call hosted by Antique Stock Broking. From the management side, we have with us Mr. Shri Raju, MD and CEO, sir; Shri Hardeep Singh Ahluwalia, Executive Director; Shri Bhavendra Kumar, Executive Director; and Shri S.K. Majumder, Executive Director.

With this, I hand over the call to the MD, sir, for his opening remarks. Thank you, and over to you.

[K. Raju, executive]

Good evening, all the investors whoever has attended this, sir, analysts and all. I'm here to present the one more quarter results, that's June 2025. Our global business has grown at 11% and year-on-year growth of 11% and stood at all-time high of INR 25.63 lakh crores. And our deposits have grown at 10%, that is INR 14.67 lakh crore and global advances have grown 12.42% near to the 12.5%, stood at INR 10.96 lakh crores. Entire the top -- whatever the top line, what we have promised in the May month, we have given the guidance for this financial year that advances will grow at 10% to 11% and deposits grow at 9% to 10%, global business at 10%. We have surpassed all those expectations, whatever the guidance we have given. And we -- our growth is beyond the expectations, especially the credit growth is above 12% in the June quarter first, year-on-year. This has led to that our operating profit also has grown year-on-year at 12.32%, stood at INR 8,554 crores, all-time high in the history of the Canara Bank.

This has helped us in maintaining that our net profit at INR 4,752 crores with a year-on-year growth rate of 21.69%. Our PCR improved 395 basis points, almost 400 basis points and stood at 93.17%. Our CET1, our core equity Tier 1 capital has crossed 12% and stood at 12.29%. Year-on-year, there is an improvement of 24 basis points. Our return on asset as against the guidance of 1.05% for this financial year. In the first quarter itself, we could show that 1.14% with year-on-year improvement of 9 basis points. Our gross NPA has come down to 2.69% with a decline year-on-year of 145 basis points. Our net NPA also has further come down and stood at 0.63% with an annual decline of year-on-year, that's 61 basis points.

This business growth was led by the RAM credit, which has grown near to the 15% in the year-on-year June quarter. Just here, I want to recall you that when we have traveled that started journey 3 years back, our RAM sector was 54% and corporate sector was the contribution was the 46%, which we have given a guidance to you. In the next 3 years period, we want to reach that our RAM credit at 58% and the corporate credit at 42%, which I'm happy to share that by the end of the June quarter, our RAM sector has reached 58% of our asset book. The reason behind this is our RAM credit is growing almost near to the 15% as against our corporate book of growth at 10%. This RAM growth is 15% led by our retail credit growth, which has grown at 34% year-on-year, stood at INR 2.35 lakh crores. And this also further aggravated that's helped by the housing loan sector, which is growing at almost near to the 14% and stood at INR 1.09 lakh crores.

Our vehicle loan is growing at 22.09% and stood at INR 0.21 lakh crores. Our earnings per share is at INR 21.01 as against each INR 2 share with an annual increase of 21.66%. This entire though there is a little stress on our NIMs and the NII, but our operating profit is led by our fee-based income and the treasury income and the recoveries and the written off accounts. These 3 helped our balance sheet, which is our core strength for the last several quarters. And this quarter also, we could take benefit out of it. And that our fee-based income has increased 16.39% year-on-year and stood at INR 2,223 crores. Our slippage ratio has further improved and with a decrease of annual year-on-year 52 basis points and stood at 0.80%.

These are all the few highlights of the June quarter performance I shared with you. Of course, by this time, you might have already gone through our presentation, that investor presentation. Now you are all open for the -- taking any clarifications or queries or the questions. We are ready to take up any of your clarification, sir. Along with me, my executive directors are there and my CFO and the entire top brass is with you. Now you are all open for asking for any clarifications, sir.

[Operator]

We'll take our first question from the line of Mahrukh.

[Mahrukh Adajania, analyst]

Sir, I had a couple of questions that in the fourth quarter, your NIM did not decline, like for everyone else, it declined 9, 10 basis points; for you, it did not. That was in the fourth quarter. And in the first quarter, of course, there is a decline of 17 bps, right? So how do we look at the second, third quarters? Do you think that some of the margin decline has been upfronted because a lot of banks, not only PSUs but private are guiding to a sharper decline in the second quarter compared to the first quarter. So in terms of the quantum of decline. So any guidance there would be useful, right? Because it's already a sharp decline in the first quarter. So will the second, third quarters be lower in terms of quantum of decline? I mean that clarity would really help us in forming a view.

And the next question is on PSLC, sir, that obviously, some banks have stopped booking PSLC. You have still earned PSLC income. So does it stop for us next year or even next year, it continues? How do we view PSLC income? And how come some banks are saying that they cannot do it after the circular -- after the RBI circular and then we are still having those opportunities.

[K. Raju, executive]

So let me clarify to you, madam. March quarter NIM was -- we were maintained at 2.73%. That was the reason behind that is we could control through our cost of deposit, whereas all other banks, cost of deposit was very high in the last quarter. But we could maintain properly on the cost of deposit because I already shared with you that we have internal call from staff members to garner the deposit. We got some INR 16,700 crores contributed by the staff by [ canvassing ] individuals. That has helped us in controlling the expenditure. But the reduction in the yield on advances has started from March a little bit. It has not reflected because it is affected only 25 basis points in the February. That is our RLLR-related book is 45%. That has not impacted much on our yield on advances in the March quarter.

But when that's 25 basis points in the February, then again 25 basis points in the April, then again, 50 basis points from the June -- this total 100 basis points, we have passed on to that entire RLLR linked book of 45% of our total assets. Total 100 basis points, we have passed on to them. That is the reason for that decrease in the yield on advances for the current quarter. It's almost 36 basis points has come down. Whereas in the current quarter, deposit rate, up to June, we have not changed our deposit rate because we are interested to garner the more deposits. We should not face any problem for growth in the current year credit growth. And we maintained the same rate of interest up to June 8. On June 9, once the repo rate 50 basis points reduction has happened, we also has reduced 50 to 60 basis points on the term deposits in various buckets.

That benefit you will see only in the next -- this quarter onwards that reduction. So whatever the 100 basis points we have impacted that, of course, out of that 50 basis points, the impact is already reflected in the current NIM. So -- but another 50 basis points reduction in the RLLR is impacted only 1 month. The remaining 2 months will impact in this current quarter. So overall, what I want to say that the reduction in the deposit rate benefit also will start earning from this month onwards in this current quarter, but that will be compensated whatever the reduction it may happen in the first 2 months of that 50 basis points.

Overall, I feel that our NIM may not go below 2.5%, but we will be able to maintain that around the 2.5% for the next -- this current quarter. But we see that slowly that if no further rate cuts are there, subject to that, if -- we may see slowly that 2. -- this -- the NIMs may gradually improve in the third and fourth quarter. But the current quarter, we don't see that the -- September quarter, again, we don't see that much steep what we have seen in the first quarter, that 17 basis points reduction. 16 basis points reduction may not be there in the -- that much reduction may not be there in the second quarter. That is regarding the NIM madam.

The second one is regarding the PSLC. You should have that as against 40% of our -- actually, originally, our priority sector lending was around 56% to 57%. So though some part of that reclassification has happened in the last year itself, but that could be compensated with a higher rate of demand because there is a higher demand is there in the market. Earlier, we used to get at 1.6% to 1.7%, whereas this quarter, we could sell that whatever the excess we have at almost near to the 3%. So that has compensated our -- so though volumes have come down a little bit, maybe it is 30% to 40% volumes might have come down, but that has been compensated by the demand in the market, and it has -- we got the higher yields on this PSLC.

So clearly, I'm communicating to you even now after selling that much after booking INR 1,200 crores in the PSLC income, still as against requirement of 40% of priority sector, we are at 45.63%. As against agriculture credit of 18%, we are at 23.25%. As against a small SMF, that's a small and marginal farmers target of 10%, we are at 16.57%. There is a demand in the market, even these 3 parameters, we have excess on that. We also may take advantage in the current quarter, this whatever the excess is available with us. So what I want to communicate to you that it is not PSLC income is stopped for this bank. It will continue not only this year, the next year and then next year also.

[Operator]

We'll take the next question from the line of Jai Mundhra.

[Jai Prakash Mundhra, analyst]

Question on margins again. So in the -- I mean, 2.55% this quarter and let's say, in Q2, it reduces to 2.5%. And then sir, there is a slide on guidance, which says 270 to 280. Is that exit margin? Or do you think you can manage to do 275, 280 for the full year FY '26?

[K. Raju, executive]

No. At this moment, because in the market conditions, still we are hearing from various corners that there may be another 1 or 2 rate cuts. That 1 or 2 rate cuts are there, always every rate cut, the banks has to absorb for at least a minimum 6 months that burden, 6 to 9 months period that burden because that amount to that extent, the borrowers immediately, that benefit will be given. But the depositors, you cannot pass it on immediately on that and the existing depositor, you cannot pass it on. That can be reduced only in the fresh deposits. That's why always the gap between the loan reduction and the deposit interest reduction is 6 to 9 months period. If there are further rate cuts are there, even getting it whatever we have given the guidance, that will be a difficult task for us. But if there are no rate cuts, we will try to improve our NIMs in the third and fourth quarters.

[Jai Prakash Mundhra, analyst]

So sir, is the guidance that is -- the guidance slide, which is there in the presentation deck, is that I mean is that relevant or on the NIM part or is not very relevant?

[K. Raju, executive]

That's what actually at the initial stages, then we have come across -- when we have given this guidance, we have come across only 2 rate cuts of 25 basis points each. By the time we have given these rate cuts, the guidance, keeping in mind of that 2 rate cuts. But there afterwards, one more rate cut has come straightforward 50 basis points. Now again, you are hearing from the market that 2 more rate cuts at 2.25% may be there. So if you take all those things, it may be difficult to maintain that 2.75% to 2.80% guidance for this current financial year, I feel personally.

[Jai Prakash Mundhra, analyst]

Okay, sir. And sir, we have a decent amount of wholesale deposit, right? You would have seen the cost of that deposit at least maybe 30%, 35% -- 25% to 30% of the wholesale deposit, the rates would have eased there. But still the cost of deposit has not seen any downtick. Why is that, sir?

[K. Raju, executive]

So that's what actually I'm telling you, sir, that the cost of deposit, whatever is there, up to March, there is no reduction. But whatever we have taken the deposits for a period of 3 to 6 months or 9 months or 1 year, that can be repriced only when it comes for the expiry date, due date. You can't really -- you can take a fresh deposit whatever it is required, which is falling in due for that April to June month. Out of our total INR 325,000 crores or INR 300,000 crores -- whatever it is, INR 390,000 crores of big deposits, the bulk deposit portfolio. Hardly the deposits will come for renewal of INR 60,000 crores to INR 80,000 crores. To that extent, we have repriced, but that will not impact suddenly immediately on that. It will impact gradually whenever you are repricing that, we are replacing that existing deposits with new deposits, then it will happen.

So that's actually the cost of deposits. So we have seen that March to June, it is maintained at 5.74%. But the term deposits, we have not reduced our rate of interest till the June 8. We maintained that whatever the earlier March, we offered the same rates, we continued because we need deposits for growth because we have expected credit growth is around 12%. To meet that requirements, we have to garner the deposits. That's why we have not altered or reduced the retail term deposits rate of interest up to June 8. Once the June 7, RBI has reduced 50 basis points, then on retail term deposits also, we have reduced 50 to 60 basis points. That impact you will see in the second to third quarter. So the interest reduction, the cost of funds reduction, you will see from the second quarter onwards.

[Jai Prakash Mundhra, analyst]

Okay. And last question, sir, in the notes to account, you have mentioned INR 1,883 crores of one-off item for the consolidated Canara Bank. And it looks like it pertains to RRBs, but the amount looks very high. So sir APGB...

[K. Raju, executive]

And actually, that is APGB, sir, Andhra Pradesh Grameena Bank. That was one of the best bank among 42 private sector RRBs. That was the highest profit earning RRB, which was under our control up to that April 30. On latest guidelines given by the DFS and the NABARD, that bank went to the Union Bank. but that transfer of that bank from one bank to another bank, it has happened as per their guidelines. It is only on the investment, whatever you made that investment on that book value only, investment face value only, it has happened. They have not considered that latest values. So to that extent, whatever that value, it has gone to the Union Bank. That's why it is a book entry what we have made to do that. That's why it is exceptional entry, it is reflecting it. It's pertaining to Andhra Pradesh Grameena Bank.

[Operator]

We will take the next question from the line of [indiscernible].

[Unknown Analyst]

Congratulations to the entire team of Canara Bank on strong results. Sir, firstly, just wanted to understand on repo rate cut, what happened in April, when did we pass it on immediately the next day or we passed it on after...

[K. Raju, executive]

No, no, sir. Our ALM date is 12th every month. So whenever that rate cut happens, whether it happens on 5th or 6th or 7th or 8th, if it is below -- before 12th. So 12th, it will be passed on to that because ALCO committee meets on every month 12th and it will be passed on from 12th effective. So all the 3 rate cuts, whatever it has happened on the first week of that respective months, it has passed it on to the borrowers on the 12th day itself on the next -- same month.

[Unknown Analyst]

Okay. Understood, sir.

[K. Raju, executive]

Hardly, it is a gap of 3 to 5 days.

[Unknown Analyst]

Understood. Understood. Okay. This is very clear, sir. Also on savings deposits, I think, sir, we cut by 25 bps in May and then again 20 bps in July. Am I correct?

[K. Raju, executive]

Yes, sir. Actually, it is 20 plus 20, sir. It is not 25 and 20. It is a 20 plus 20. The reason is actually, initially, we have cut 20 basis points. So by that time, actually, we were the highest paid interest on among all the banks. Then to bring at par with all other banks, everybody is paying at 2, 2.5. We also have made it our rate of interest at par with all other banks and made it 2.5%. That's why twice we could reduce that.

[Unknown Analyst]

Okay. But sir, can we see one more rate cut out here because the private sector banks are also at the same rate. Typically, government banks give it lower. So, just check it sir.

[K. Raju, executive]

No, at this moment, there is no such proposal on hands.

[Operator]

The next question is from the line of Bhavik Shah.

[Bhavik Shah, analyst]

Sir, I just want to understand we are at the target for 0.6% net NPA and still I mean our credit cost guidance is at 90 basis points. No scope for revision again, sir?

[K. Raju, executive]

No. Actually, always that is our regular practice that we give guidance conservatively, but we will excel in our performance. So we are continuing to do that. We need not change the guidance, but definitely, we will excel whatever it is there in the net NPA, gross NPA figures, what we have given for the March. The present tendency, it looks that even for the July quarter slippages also, we have seen that and recoveries, we have seen that. We are sure that the targets guidance what we have given for the March '26, we may likely to cross by September; if not September, December 100%. I think that September itself may happen.

[Bhavik Shah, analyst]

Understood, sir. So sir, is it fair to assume that our PCR improvement is broadly done. And now incrementally, we'll just kind of provide for whatever the NPA is.

[K. Raju, executive]

See, partly, we will go for that PCR. But partly, it will be on the declaring in the profits. But if the fresh slippages are coming down, naturally, our demand for higher provision not required. The provision is gradually will come down. That may reflect in our net profits.

[Bhavik Shah, analyst]

Understood sir. And sir, our NBFC book was down 3% quarter-on-quarter. Is it pricing competition or we choose not to participate?

[K. Raju, executive]

So you are aware that generally, we are very conscious on the pricing. We don't compromise on the pricing. Wherever some threats comes for prepayment and all, we generally accept it without compromising our pricing. This quarter also, we have taken it back one such big exposure, some INR 8,500 crores. We don't want to compromise the pricing. Still, we are able to maintain that -- that has not impacted our credit growth, if you see that.

[Bhavik Shah, analyst]

Yes. Sir, now on an incremental basis, I think our cost of funds would have normalized, right? So this quarter, like the second quarter, you would have seen good growth in NBFC or no, that is not the case.

[K. Raju, executive]

No, it may happen. chances are there wherever, but we don't want to lend at a throwaway price because we always keep our cost of funds into mind because when compared to all other banks, our CASA is low. So our cost of funds will be a little higher than the peer banks. So while advancing while giving to that, whether it is an NBFC or anybody, we have to keep in mind our cost of funds. That's why we will be a little cautious while lending, we will not run behind that organizations just for the sake of top line.

[Operator]

We'll take the next question from the line of Ashok Ajmera.

[Ashok Ajmera, analyst]

Hello. Good evening, sir.

[K. Raju, executive]

Good evening, sir. How are you, sir?

[Ashok Ajmera, analyst]

I'm fine and congratulations, sir, in spite of a very, very difficult quarter and for many of the banks who have declared results so far. You have -- at least you are positive on the operating profit, if not on the net profit. But -- and even on the business growth side also, there is a growth rather than the degrowth in the credit also. So compliments for that. Just a couple of few questions and some observations. I will start with, you said just now that your cost of fund is higher because of the lower CASA. So sir, on the CASA only, of course, we have a perennial problem which cannot be corrected overnight. But in this quarter, I think we have probably first time have gone below 30%, maybe in last 4, 5, 6 quarters. So what exactly are we doing on the CASA front? And when you say that your target guidance is 32%, how the CASA improvement will take place? What is different than what it was in this quarter?

[K. Raju, executive]

So first of all, let me say that, sir, every March, we get institutional deposits because we have 3 or 4 branches located well within that popular, some central PSU's campuses. In those branches, we get current deposits during the March every year, almost INR 20,000 crores to INR 25,000 crores. That they will utilize it in the April month and May month and all those things. That's why generally in the first 2, 3 quarters, it looks that the CASA growth is a little sluggish or negative. But that will be compensated when it comes for that next March, again, the funds will come. Meantime, we will steadily grow that. Even if you remove that quarter-on-quarter, may be negative. If you look at that year-on-year, the growth is 9.85% in the current account.

First, one thing let me highlight to you, whatever the initiatives we have taken during the last 2 years coming out with the new products and attractive features. our savings bank individual deposits are consistently growing, and it is growing more than 6%. But the only thing is that, within the savings also institutional deposit is there, that fluctuation continues because of central government policy. Nowadays, the government deposits are not maintained at the bank's level. That is some dip we are seeing in the institutional deposits. But individual deposits, there is -- literally, there is no dip. And every month-on-month, we have targets and we are achieving that target. That is actually a positive side of us.

Why the first time it has come below 30% is the earlier days, the total business used to grow at 3%, 4% or 5%. Our CASA also used to grow at 4% to 5%. But nowadays, last 2 years, you can observe that our growth is almost in the -- every year, every quarter, we are in the double-digit growth. When your business is growing, your credit opportunity is growing at more than 12% to meet that requirements, but in the market 12% growth at this juncture in the CASA will be very difficult, whatever the steps you take it. Absolute numbers, there is a growth. There is a growth of 6%, but that is not sufficient to meet the requirement of 12%.

So we are dependent on retail term deposits. That is growing much better than this other CASA deposits, and we are able to meet that credit demand of above 12%. Because of that difference in that percentage, it is absolute numbers, though there is a growth, but it looks that the deposit percentage, CASA percentage has come down to 29%. But we are sure that again, the next quarters and all will be there. This only first quarter, you will see the current account with so much negativity because of that institutional deposit withdrawing in the April. But again, quarter-on-quarter, there will be a steady growth. And I'm sure that we will be above 30% even at the end of the financial year, and we will try to reach the percentage what we have given at 32%.

Again, why I'm telling you this hope we have is gradually the term deposit interest rates are coming down. Whenever the interest rates and term deposits are coming down, if another further 1 or 2 rate cuts are there, our term deposit rates may go below 6%. When the rate of interest is going below 6% or near to the 5%, that generally people again tend to retain in the savings bank deposit only instead of converting them into term deposits. So there is every chance that in the coming quarters, our CASA may go up a little bit. That's what actually I'm telling you.

[Ashok Ajmera, analyst]

No, sir, point well taken, sir. Sir, my second point was on this SMA-2 numbers because last time, major amount was SMA-1...

[K. Raju, executive]

Now I will tell you that, sir. Now I will tell that. Actually, we have 2 accounts, sir. One account is real estate account from the Bengaluru that is mostly continuing for the last 6 quarters in the SMA-2, that's the exposure is around INR 2,000 crores. Then one state government guaranteed irrigation project exposure of INR 3,000 crores, which is moving from SMA-0, SMA-1, SMA-2; again, going back to SMA-0. Then it's like last 6 quarters, if you see that it is moving from 1 -- quarter to quarter on, with 1 SMA either SMA-0 or SMA-1 or SMA-2 but we are very much sure that these 2 accounts will never slip to NPA. But however, in the precautionary, we have provided INR 1,200 crores against these 2 exposures as a safety measure as an additional provisioning for that. These 2 exposures, INR 5,000 crores, our SMA-2 is only INR 1,800 crores.

[Ashok Ajmera, analyst]

Yes, yes, that is very comfortable. So basically, there is no chance of these accounts slipping to NPA.

[K. Raju, executive]

100%, there is no chance of slipping to NPA, sir. It is not even 99%, I'm telling you, 100%. After observing the 6 quarters, I'm telling you this.

[Ashok Ajmera, analyst]

No, no, it's perfectly all right, sir. Sir, on the treasury front, I mean, I think our major part of the profitability even in this quarter also the treasury income booked in the other income, which has gone up to INR 1,993 crores as against INR 995 crores. So with further rate cuts -- expected rate cuts, can we get some color on total overall treasury operations and as well as the kind of profitability which will come in the other income rather than going to the AFS reserves? And how much AFS reserves we have already built up because of the change in the RBI stance for the same.

[K. Raju, executive]

So I'll ask my Majumder to give that answer, sir, Executive Director.

[Uday Majumder, executive]

Sir, as you know, the first quarter was a special quarter as far as treasury income goes where that OMO support was there. Out of that, we gained a substantial income of around INR 500 crores, which may not be there this quarter. But with the rate cut, there is some that from that AFS category, we are expected to get -- that support should continue. And -- but to answer your question straight, like the INR 1,000 crores additional which you saw this time, that is in the first quarter, that will be a bit -- that will be substantially lower, which we will -- which we are already thinking of avenues to bridge. This I can tell you.

[K. Raju, executive]

That will be compensated even with even a slight decrease in that. We have already earlier, I shared with somebody when they asked that we have excess priority sector cushion with us, and there is a huge demand in the market, which the entire thing we have not sold in the first quarter. We are keeping it for the second quarter also. That portion, we will encash it in the second quarter, that excess whatever the priority is there.

[Ashok Ajmera, analyst]

You are talking about PSLC?

[K. Raju, executive]

Yes sir.

[Ashok Ajmera, analyst]

So that may compensate INR 1,000 crores, i.e., INR 500 crores, INR 600 crores down here, that can be compensated by that. Sir, one point on the recovery side, sir, what is the status of the anything happening? I mean, in this quarter, nothing much has happened. But in the coming quarters, is there any chance of some good recovery coming from somewhere either by selling some assets to the NARCL or from the NCLT, some matured cases? Can you give some color on the recovery side, sir?

[K. Raju, executive]

Actually, NARCL, we identified 8 more new accounts, which is under different stages that will continue to follow it up with them, sir. That is around INR 4,000 crores. But actually, our Board has approved some OTS agreements for the almost 4 big proposals that is worth of INR 1,200 crores. Out of that majority, we are expecting that the repayment will come in this quarter. So this quarter definitely will be much better than the first quarter in the recoveries.

[Operator]

We'll take the next question from the line of Mona Khetan.

[Mona Khetan, analyst]

So 2 questions. Firstly, when I look at your MCLR rate, 1 year MCLR that come down by almost...

[K. Raju, executive]

MCLR?

[Mona Khetan, analyst]

Right sir. Yes, so that's come down by almost....

[K. Raju, executive]

Our MCLR book is around 45%, madam. Our MCLR has come down from 9.10% to 8.75% recently. So 45 basis points already we reduced 40 basis points.

[Mona Khetan, analyst]

Right. So the question is in terms of the reported yields, does that already factor in the yields? I mean, to what extent? And -- or is it yet to be reflected in the actual yield on advances?

[K. Raju, executive]

No, madam. Partly, it is already reflected. Partly may continue because this depends on our deposit rate. It's not that it is linked to the repo rate or anything. If our cost of funds are coming down because we have reduced on June 9, 50 to 60 basis points, our MCLR also has come down from 9.15% to 8.75%. If there is a further rate cuts as seen, naturally, we also have to reduce our deposit rates. If you reduce deposit rate, automatically next month, while calculating the MCLR, it will impact that MCLR and further reduction may happen. That all depends on the market conditions, madam.

[Mona Khetan, analyst]

Yes, sure. No, my question was more referring to the interest income. So does the 30 bps come with a lag in terms of the impact on yield on advances and...

[K. Raju, executive]

Naturally, madam. It will come in the lag only, any reduction because 1 year MCLR resetting may happen in every year. So whichever the accounts are due further to complete in that 1 year, only those accounts it attracts. It will not attract all MCLR linked portfolio immediately.

[Mona Khetan, analyst]

Okay. So it will take roughly a year to sort of start reflecting in...

[K. Raju, executive]

Whenever you reduce that MCLR, whether you reduce or increase complete the transformation, it takes 1 year, madam.

[Mona Khetan, analyst]

Got it. Got it. And secondly, we have made this other provisions of INR 449 crores. So does it pertain to the provisions we have made towards some of these large accounts that you mentioned in the earlier question?

[K. Raju, executive]

Yes, madam.

[Mona Khetan, analyst]

Okay. So what is the standard provisions that we may be holding against general and everything together, some of these accounts?

[K. Raju, executive]

No. Actually, whatever the standard provisioning, it is required 0.42 and all those things. So beyond that, actually, that is required only INR 3,000 crores. But beyond that, INR 1,200 crores is extra what we have provided.

[Operator]

We'll take the next question from the line of Nitin Aggarwal.

[Nitin Aggarwal, analyst]

Congratulations on good results. Sir, firstly, on the OpEx, like if I see like going by the trend, first quarter is always a slight decline in operating expenses on a sequential basis. And probably as the incentives and the other variable costs, they don't recur and you see a Q-on-Q decline, which we have not seen this time. How should one look at the OpEx run rate for the year?

[K. Raju, executive]

Generally, OpEx, when you are investing every year INR 1,000 crores on the technology. So every year, you see a little bit 7% to 8% growth will be there in the operating expenses. Since we efficiently manage our operations, especially we don't pay too much money on DSA sourced business. That is only 16% in our new business, whereas all other banks are paying very heavily. There, we are able to maintain this very effectively at the same level. If you see even for the year-on-year, it is a -- growth is only 3% reflected; quarter-on-quarter, there is a marginal negativity is there. We are sure that we will maintain only on the same level of operating expenses with maybe 6% to 8% of growth. And if you see our cost-to-income ratio, last month, March, it was around 47.55%. Now it has come down to 46.77%.

[Nitin Aggarwal, analyst]

Right, right, sir. And sir, second, on the margin, while you talked about that downside from here isn't much and 2.5% can be the bottom. But can you also give some color as to how can the recovery be in the following quarters over the second half as the bulk deposit portfolio reprices and the rest of the deposit cost also [indiscernible] in the recovery?

[K. Raju, executive]

Generally, in our bulk deposits of total INR 4 lakh crores, 25% will be on 3 months, 25% will be on 6 months, the remaining 50% may be in 1 year. That is actually generally that we follow the formula. So first to 25% already we might have repriced by this time. The second 25% will be repriced in this quarter when we are going for that. So to that 50% of that bulk deposits can be repriced in this before the end of the September that year. So to that extent, benefit we will get it earlier, we have raised -- the average the cost used to be 7.6%, 7.7%. Now it is coming down because the fresh deposits, whatever we are taking, we are taking only at 6% to 6.10%, that is the rate we are taking it. So there will be a drastic reduction on that. But still the 50% of the bulk deposits, that is approximately INR 2 lakh crores is 1-year period. So you have to wait for that repricing of those deposits for some more time.

[Nitin Aggarwal, analyst]

Okay, sir. And sir, lastly, on the growth, while we continue to guide a very stable growth, but has there been any discussions with the government and some push on the growth front that you are seeing, which -- and the PSU banks, therefore, can deliver a better growth over the year?

[K. Raju, executive]

No. Always the government is keen on showing a higher growth, both in the MSME and agriculture, at which the same thing we are also giving a thrust on those matters. Core agriculture already last 2 years consistently is growing at a double-digit growth. And this year, by the June end, if you have seen that we are almost 11% growth is there in MSME. We want to grow much bigger in the MSME sector, especially. So though the expectation is beyond 20% growth, we are also trying for as much as possible to grow in this MSME and agriculture sector. And we are hopeful of doing that.

We have taken several initiatives on that. We have come out with some new systems. These 2 loans have been digitized completely so that we can address the TAT. We can do that faster disbursements and all that. So we are hopeful that we will do that much better growth in these 2 sectors. But overall, whatever the growth, the guidance we have given, 10% to 11%, and I'm telling you minimum 12%, we can grow easily overall credit. And within that credit, corporate may grow at 10% and our RAM sector is already growing at 15% and which may continue at 15%.

[Operator]

The next question from Ms. [ Suri ].

[Unknown Analyst]

It has been given to understand that 2 of your subsidiaries are going for IPO and you are diluting your stake, including sacrifice of majority stake. So if Canara Bank alone is diluting, then how will you protect the loss of controlling premium for sacrificing your majority stake?

[K. Raju, executive]

No, madam, even now after diluting that whatever the proposed dilution still we will be the leading -- major owner of those 2 subsidiaries. So we continue our hold on that.

[Operator]

We'll take the next question from the line of Anand Dama.

[Anand Dama, analyst]

Yes. So basically, sir, my question was on the project financing provisioning, which will actually kick in from 1st October. Have you made some provisions regarding that in this quarter and provisions are higher? Is it fair to understand? Or like you will have to actually make those provisions in third quarter?

[K. Raju, executive]

So in the guidelines, they have given that all the projects which are coming to the financial closure and implementing in the stages up to September 30, these guidelines are not applicable at all. Any project finance, which is financial closure is happening only after 1st October 2025, only those projects that needs that additional provisioning. Remaining all projects which are in the various stages will continue with the existing provisioning. So there is no demand, there is not required that we have to provide additional provisioning during this quarter.

[Anand Dama, analyst]

Okay. And you don't expect that to be made even in the future, right?

[K. Raju, executive]

Not required. Not required at all.

[Anand Dama, analyst]

Not required. Okay, sure. And yes. So sir, basically, second is the ECL implementation. Do you think that, that will come in this year? And if yes, are we shoring up a PCR specifically for that as well?

[K. Raju, executive]

Actually, we are prepared with that, but we don't know when it comes. It's only RBI regulator has to come out with the dates and all, but we are well prepared for that. We don't foresee any pressure on that ECL because of ECL.

[Anand Dama, analyst]

Sir, in the past, you had done some work around that.

[K. Raju, executive]

Even if -- see, they may be expecting that it has to be implemented in 5 years. Even if the entire thing has been implemented, absorbed that entire provisioning in the first year itself, it may impact not even we will not -- we will be much above the 14% of our CRAR.

[Anand Dama, analyst]

Okay. That's the working that you've already done and you feel that you're comfortable on it.

[K. Raju, executive]

Yes, yes, yes. We are very, very comfortable on that.

[Operator]

We'll take the next question from the line of Pritesh Bumb.

[Pritesh Bumb, analyst]

Just a few questions. One is on NII side. Any interest on IT refund this quarter?

[K. Raju, executive]

No, that's a small amount. It is there under the INR 300 crores to INR 400 crores. That is every quarter, we will have that much a little bit. But the majority of our interest is on overnight lending.

[Pritesh Bumb, analyst]

Okay. Okay. And second question was on -- in terms of PSLC, you clarified some of the parts, but just wanted to check that some -- there was a guideline that the gold loans may not qualify for the PSL and you mentioned direct agri is at about 14%. So is it beyond the gold loans, basically the direct agri.

[K. Raju, executive]

See, actually, the gold loans, it is not portfolio there. That is not the actually RBI clarification. Initial stages where there was a draft guidelines expecting that, that below INR 2 lakh without -- agriculture loans should not be sanctioned with (sic) [ without ] collateral. So whatever the loans, gold loans up to INR 2 lakhs, we have sanctioned and classified as an agriculture was thought of that reclassifying that as a non-agriculture. Anyhow, in the first quarter, we have kept out of that bucket that whatever the exposure is there, we have not sold for that, and we have kept out of that priority sector.

And whatever left out only, we sold it in the market because we have ample cushion as against the requirement of 40%, our actual priority is around 57%. So last year, we sold almost INR 85,000 crores. This time, we have sold it around INR 40,000 crores in the market. Only thing last time we got lower commission. But this time, because of heavy demand in the market, we got a higher commission, we could garner INR 1,200 crores. And now the RBI has classified that, there is no bar in classifying such voluntarily if somebody has given that gold as pledge -- as a collateral also, agriculture can be classified. That latest guidelines have come from RBI. So that also -- I don't think that any issue is there now here afterwards.

[Pritesh Bumb, analyst]

Got it, sir. Last question was on recovery of NPA from written-off account. What kind of a run rate you can see, sir? Because last year, you look at second half was quite strong. Could we see some...

[K. Raju, executive]

This time -- this quarter will be much better than the June quarter, sir. Already, last quarter itself, we have sanctioned some 4 or 5 big proposals and OTS and we have given time for that 90 to 120 days. So most of them are falling in due for the payment in this quarter. We expect that much more better recovery will come in this quarter. Our recovery on the written-off accounts will be much better than the June quarter and the September quarter.

[Pritesh Bumb, analyst]

Got it, sir. Sir, if I squeeze in one more. You are selling your stake in Cana HSBC OBC.

[K. Raju, executive]

Yes, sir.

[Pritesh Bumb, analyst]

And you have tied up recently with LIC as well. So do you -- will you be like tying up with more insurers? Or will you be exclusive [indiscernible] HSBC?

[K. Raju, executive]

No, that depends on the demand and supply that's sir. Now Canara because we want to give more opportunities to our customers, we have onboarded LIC in addition to our own subsidiary, Canara HSBC. And we'll see that if the demand is there, then we will think about it. That is a Board level decision, sir. At this moment, we are not thinking of onboarding any other.

[Operator]

We'll take the next question from the line of Sushil Choksey.

[Sushil Choksey, analyst]

Congratulations, team Canara for excellent results.

[K. Raju, executive]

Thank you, sir. Thank you, Choksey.

[Sushil Choksey, analyst]

Sir, you mentioned that you are expecting that there will be 2 rate cuts in the current financial year. Are you sensing this more towards the latter half of the year or you are sensing quarter now and quarter later.

[K. Raju, executive]

I have not told that I'm expecting 2 rate cuts, sir. I'm hearing from various market -- people that feelers are coming when you go through that media and all. So they are expecting that 2 more rate cuts. But one rate cut, definitely, it may happen, but whether it happen in August or October, we are yet to see, sir.

[Sushil Choksey, analyst]

Sir, in case there are 2 rate cuts where do we see...

[K. Raju, executive]

That is only our treasury can tell. Sir, you tell.

[Uday Majumder, executive]

It should be around 6%.

[Sushil Choksey, analyst]

It should be around 6%.

[Uday Majumder, executive]

Let us see sir. Let us not speculate on market conditions. This is that way...

[Sushil Choksey, analyst]

No, I'm not speculating. I'm just visualizing Canara numbers if I have to write any report. [indiscernible] Majumder is replying to.

[Uday Majumder, executive]

That rate cut, if it happens, it will give us -- it will have a temporary hit in the NIM and the NII. But I'm sure, sir, we will make it up. We have other avenues which will make it up. So we are aware that, that is a possibility. And I don't think, sir, with now, as sir said, 2 IPOs, 2 divestments are also coming in, there are some cushion for us in case of extreme adversity.

[Sushil Choksey, analyst]

Sir, my next question to management is RAM and retail specifically are growing well. In view of rate cut, the geography where Canara Bank is strong is likely to do well because of GCC, manufacturing, agriculture, various aspects. Do you think the numbers what we are seeing are sustainable quarter-on-quarter or may we see a little higher growth on that?

[K. Raju, executive]

And actually, the first quarter, generally, you see a little slow growth in the credit. That is a general [indiscernible], sir. But what we are growing at 14.9% RAM sector. And I am sure that we may be able to continue that range to 14 point means, so that means around 15% growth in the retail sector -- RAM sector.

[Sushil Choksey, analyst]

What would be our blended yield on RAM sector?

[K. Raju, executive]

Pardon?

[Sushil Choksey, analyst]

This yield on RAM advances would be what?

[K. Raju, executive]

So that's what, sir. Actually, the last time when it comes for that blended RAM sector, it was around 9.23% to 9.3% was there. But now it will come down a little bit 8.7% to 8 point. That is the average yield sir.

[Sushil Choksey, analyst]

When you expect the monetization of both the divestment in the second half or you expect in the current quarter?

[K. Raju, executive]

One will be in this quarter, sir, if subject to SEBI permission, the one will be in the next quarter.

[Sushil Choksey, analyst]

Sir, any view on Can Fin Home, which is doing stable, but there are mixed reports. I don't know who's quoting whom. Are we looking for divestment or are we looking for growth for the right value?

[K. Raju, executive]

No, we are looking at further growth, sir. I earlier also several times shared that my minimum expectation is INR 1,000. So we are confident of reflecting that INR 1,000 price of that in the market. Now it is around INR 800. So still, we are confident that we can move towards that. At this moment, we are not thinking of any stake sale in that Can Fin Home sir.

[Sushil Choksey, analyst]

Sir, you mentioned that you will be spending INR 1,000 crores on technology. That's a regular run rate. But Canara is ahead of the curve on doing a lot of technology initiatives to roll out a lot of products. Is there anything new which is in pipeline which would make something unique again to start at Canara?

[K. Raju, executive]

Sir, we are working on now cybersecurity measure, comprehensive cybersecurity platform, we are creating it. And recently, we have also launched a loan against mutual fund end-to-end digital transformation. So everything will be even raising the loan, even closing the loan, even pledging everything can be done through online portal only. And major contribution will be on digital lending platform, sir. We have launched the comprehensive digital lending platform. By the end of this March 2026, entire RAM portfolio, we want to convert into a digital platform. Already 70% to 75% of products we have created there, and we have started working on that. Some are on the UAT stages, some are already actually for new loans, all new loans, we are onboarding it. But we want to -- even existing loans also for renewals and all, we want to convert them into digital lending. That will change the face of the credit side portfolio, sir, in the quality as well as in the TAT and all those things. There will be a sea change in that so that we can easily compete with the private peers in the credit side also.

And of course, cybersecurity, I told you, we are almost to -- INR 70 crores we have invested on that. That platform will come for operations in another 1 month time. Then again, we are also investing almost more than INR 100 crores in the credit card platform. That entire credit card platform is being rephased, and we are working on that. That purchase order also almost at the verge of issuing the purchase order. That also will change that -- actually, we want to grow big in the credit card also within the bank. For that, we want a bigger platform that has been onboarded. And now once that is implemented, we will go aggressively on canvassing that credit card also for that.

The third one is we want to strengthen our Canara Bank Securities Limited. That is actually where we are dealing. So far, we are not able to serve to our own existing customers who deal in the equities and mutual funds. That's why we want to invest our capital something on that our own subsidiary. We want to strengthen that subsidiary, Canara Bank Securities Limited. And already we approached a general manager there. And so that, that will be a mutual benefit for our CASA also so that our customers also can deal directly in the trading of equity and the mutual funds, sir.

[Sushil Choksey, analyst]

To strengthen all the digital initiatives and new products, what measures are we doing for human resource so that end-to-end satisfaction technology, all that is achieved?

[K. Raju, executive]

Recently, we recruited exclusively 120 people only for IT, sir. And the advertisement has been given through IBPS only, we recruited 120 specialist IT guys at a Scale 1 officer level. And they have all been reported, they have all been deployed in various key areas where earlier we used to depend on outsourcing or the resources taken from the people. But now again, recently 1 month back, we concluded the interviews for 60 specialists at a little higher cadre that is at a project leadership cadre. And those people also may come and report and after 2 months because the lock-in period 3 months' notice period is there for all those guys.

And these 60 people have been recruited on a contract basis in 3 months with the market demand packages. And these all once they are given, each one will be given one-on-one projects, and we will monitor the project progress on that. Once they report, I think our implementation of project will further speed up in those matters. Since we have a lot more on our AI-related initiatives on our card, these 60 people will help us in implementing it and taking advantage of that.

[Operator]

There is one question in the chat. What is the breakup of the slippages into retail, SME, and [indiscernible].

[K. Raju, executive]

It's a -- INR 650 crores is agriculture, INR 400 crores is retail, INR 1,000 crores is MSME.

[Operator]

And the total outstanding restructured book as on first quarter?

[K. Raju, executive]

See, the restructure that RF1, RF2 and all those things, now it has come down drastically. Now it is outstanding is only around totally, it is INR 11,000 crores, INR 7,000 crores is in standard asset, INR 4,000 crores in NPA.

[Operator]

Thank you. That was the last question for the day. I hand it over to the management for your closing remarks.

[K. Raju, executive]

Thank you. Thank you so much for all the analysts, sir, for attending this conference call. Thank you, sir.

[Operator]

Thank you. That concludes the earnings call for the Canara Bank.