CSB Bank Ltd

NSE:CSBBANK

Q4-2025 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to CSB Bank's Q4 FY '25 Conference Call hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Shivaji Thapliyal from YES Securities. Thank you, and over to you, sir.

[Shivaji Thapliyal]

Thank you to, [indiscernible]. Good evening, and a warm welcome to all those who have joined the call. The CSB Bank management is represented by Mr. Pralay Mondal, Managing Director and CEO; Mr. B.K. Divakara, Executive Director; and Mr. Satish Gundewar, Chief Financial Officer.

We specifically thank the management of CSB Bank for giving YES Securities the opportunity to host their result call. The management will first be making some opening remarks, after which we will throw the floor open for questions.

I now invite the management to make their opening remarks. Pralay, over to you.

[Pralay Mondal, executive]

Thank you, Shivaji, and good afternoon, everybody. I will give a brief understanding of the global scenario and then quickly move into CSB's specifics.

So globally, I think all of we know that the uncertainties have risen significantly in the last 1 quarter. It is reflected in the movement of interest and currency rates and commodity prices. Bank of England and CBS cut rates and the likely to cut even further. However it may take a wait and watch stance of the time being. The tariff negotiations as likely to impact global growth adversely and may become inflationary for the U.S. as well.

Indian economy is not insulated either from the global uncertainties and will also be impacted to a considerable extent. RBI has taken proactive steps in managing liquidity, banking systems has remained in surplus liquidity since the last fortnight of March '25, a series of OMOs aided by benign inflation expectation has also brought the G-Sec yield curve down.

The money market curve and CD curve have moved down 50 to 100 basis points during this period. The final LCR guidelines are smoothen the liquidity pressure. RBI has also lowered the growth expectation for the financial year to 6.5% from 6.7% earlier, and have started to cut report it to boost the domestic consumption.

Taking a cue from the ongoing tariff war and consequent uncertainty, IMF and World Bank has lowered GDP estimation to 6.2% and 6.3%, respectively. We expect the liquidity condition to ease further and more reduction in policy rates in the [indiscernible] in this financial year.

Coming to CSB specifics. On the highlights, first, we start with profitability. The net profit for the full year FY '25 stood at INR 594 crores, which is 5% growth on a year-on-year basis. And Q4 stand-alone was at INR 190 crores, which is 26% growth quarter-to-quarter on a year-on-year basis.

Operating profit for the bank for a full year is INR 910 crores and Q4 FY '25 is INR 317 crores with a growth of 17% and 39% on an FY and quarterly basis, respectively. Other income registered a 94% growth on a quarterly basis and 66% on an FY basis.

Other income contributed 21% of the total income for FY '25. On cost-to-income side, the ratio is showing a declining trend on a sequential basis and stood below 60% for Q4 FY '25 at 57.92% and cost-to-income for the full year stood at INR 62.82, which is in line with what last financial year was.

NIM could be sustained above 4% on FY basis at 4.13% in spite of the higher interest rate cost looming in the system. NIM for the quarter is marginally below 4% at 3.75%. I'm sure there will be questions on this. We'll respond them. ROA stood at 1.79% for the quarter ended 31/3/25 and 1.53% on a full year basis. Bank is holding the contingency provisions intact and is continuing with the accelerated loan provisioning policy.

On the liability side, a robust deposit growth of 24% year-on-year amid a slow-paced industry growth of around 10%. CASA grew by 10% Y-o-Y and CASA ratio stands now at 24.19%. We complemented our funding with FCI borrowings and refinance based on cost considerations. However, there were some cost escalation happened for a few months because of the hedging cost, which can cover through the conversations later, and this helped us in maintaining the LCR at comfortable level.

On the liquidity side, efficient management of liquidity risk. We are very, very carefully said that liquidity is something we'll manage because it was very uncertain what was going on in the ecosystem even 3 months back. CD ratio stood at 86%. Average LCR for the quarter is 124% and NSFR ratio was 121%. On the asset growth side net advance grew by 29% Y-o-Y higher than 2x times over industry growth of 12% Y-o-Y.

All the verticals have started contributing towards the asset growth, and this is the biggest highlight of this quarter and hopefully going ahead. Gold portfolio registered a growth of 35% Y-o-Y, while retail assets grew by 24%. SME continues to grow -- growth momentum and ratio growth of 33%.

Wholesale banking portfolio grew by 22% despite the impact of liquidation of DA portfolio, which degrew by 89%, effectively running off the entire DA portfolio. Corporate loans on stand-alone basis grew 44%, but because of the DA runoff, it came down to 22%. Yield on advances for Q4 FY '25 is 10.98%.

Asset quality ratios are stable. GNPA and NNPA rations for the quarter was 1.57% and 0.52% as against 1.58% and 0.64%, so mild improvement on a Q-on-Q basis. PCR now stands at 83.7% with PWO and 67.19% without PWO. Again, here, we have significantly improved compared to last quarter where it was 60% to -- we grew to 67.19%. Bank is holding a provisioning buffer of around INR 185 crores over and above regulatory requirements.

On the capital CRAR -- CRAR was 22.46% and Tier 1 ratio is 2.59%. Low proportion of risk-weighted assets compared to the industry as well helps us in this cost. On the shareholder value creation, book value per share is at INR 249. EPS for the year is INR 34.23. ROE for the year is 15.44%. We expanded our distribution network to 829 branches, 791 ATMs as of March end. We have added 56 new branches during the FY and March 6 branches as a part of branches rationalization.

In conclusion, I would like to say that our top line, both deposits and advances showed a strong sequential and YTD growth. In Q4, our focus was slightly more on the deposit front given the liquidity conditions prevailing in the system. And accordingly, we could manage the funding part and maintaining the liquidity ratios like CD ratio, LCR, et cetera, at comfortable levels.

The asset vertical also contributed to the liability growth by [indiscernible] self-funding. CASA also registered a yearly growth of 10%. On the advanced front, it is heartening to note that all the verticals have shown consistent growth, signaling the journey that we are targeting as a part of our SBS 2030 Vision.

We are looking forward to modernization of our entire tech stack, and this is the biggest excitement that's going on in the bank right now. And through the call, I'll cover some of this a little bit more. And we are migrating our CBS to Oracle system, implementation of various around systems.

And almost everything in the bank is changing as it comes to the tech stack, which will also help us in targeting new segments, new businesses, transaction banking, wholesale banking, retail, retail assets will scale up, everything will have the levers to grow now going ahead after our tech transformation is done.

And also the building of the customer franchise journey will really start at the end of this tech transformation, which at best will be done in the next 3 to 6 months' time. This will be a very, very big year for us, and we'll be laying strong foundation from materializing our long-term goals towards executing this, right, we are working as one team and ensuring participant of all staff members.

From a digital perspective, also, we are changing the UI/UX. We are changing the [ VDX ] platform, everything. And in short, the FY is going to be more eventful as we have lots of -- lots of balancing act between growth, cost, profitable, debt, et cetera, with the migration process. The pace of network expansion will mainly at least at par with this current -- in the last year. We will strive to maintain our guidance on key parameters and endeavor to deliver consistently quarter-on-quarter.

So in short, as I said before that sustained build, scale journey, which we had started in '21, '22, this is the last phase of our build journey, and our scale journey will start from FY '27. And this is the platform we are laying for the scale journey from FY '27 and FY '27 to '30 is only execution on scaling.

With that, I hand it over for questions. Thank you very much.

[Operator]

[Operator Instructions] The first question is from the line of Dhaval from DSP Mutual Fund.

[Unknown Analyst]

Congratulations on the good performance. I just had 2 questions, what was reasonable to [indiscernible]...

[Operator]

I'm sorry to interrupt you, Mr. Dhaval, we are unable to hear you clearly.

We'll move to the next question, which is from the line of Suraj Das from Sundaram Mutual Fund.

[Suraj Das, analyst]

Am I audible?

[Pralay Mondal, executive]

Yes, yes.

[Suraj Das, analyst]

Sir, 2, 3 questions. First one is on the fee income. This quarter, the fee income has been very strong. If you can give some rationale and the sustainability of the same?

[Pralay Mondal, executive]

You want to ask all the questions together; I'll answer or one by one.

[Suraj Das, analyst]

Okay. So that is one. The second one is on the slippages part, slippages again, I mean quarter-on-quarter has some seen some uptick. Is this because of the MFI book? I think that book was minimal for you.

And second part and the third, I think you were saying something like in the opening remarks in terms of hedging and all that thing. So if you can explain that, I mean, what has been that thing? And is that the rationale behind your cost of fund increasing higher than the cost of deposit this full year?

[Pralay Mondal, executive]

Yes. Thanks for your questions. So I'll take the first one first, which is the fee income. Yes, we had a very strong quarter on fee income. There are -- primary drivers of this fee income is insurance, transaction lending fees because our wholesale franchise, while -- when you see it's a 22% growth, but this quarter itself, we have grown from INR 900 crores of disbursement to almost INR 1,600 crores disbursement in 1 quarter. So obviously, along with the some transaction banking fees have also come in as well.

Thirdly, treasury income has also been good for us this quarter. And also fourthly, we also get some PSLC benefits out of our gold loan and other agri and those kind of portfolios. So a combination of all these and others are usual income like liability, credit cards, retail assets, processing fee, gold also, we had a good disbursement. Gold also have processing fee, which is large enough. So a combination of 7, 8 items, which are there. But within this, gold, wholesale banking and treasury and PSLC, these are the 4 major -- and insurance, these are the 5 major items, which has contributed to this growth.

And on treasury, I will combine this point along with your last question, which is hedging. So what has happened is because none of us knew that liquidity will get comfortable by the end of the quarter, right? So being a very risk averse kind of a bank, we didn't want to take a liquidity risk. So we created enough buffer in terms of liquidity into the system and -- which happened, a, through deposits; b, through CDs; and C, through FCI; and four, through borrowings, other borrowings like CB and those kind of.

So in that, what we did is we were sitting in a little bit of excess liquidity for past 2 months of the quarter. And because we are sitting on that and most of the forecasts, which are expected to happen on the asset side came in the last period, which is in the March quarter because wholesale business is like that, and we did a lot of wholesale business last quarter. SME also happened in the last -- end of the quarter. So this excess liquidity which we are sitting on created some challenge for us in terms of yields.

Because, in the money market, you don't get that kind of a yield. So we effectively were working on very, very low spread out there. But what we did in the process is that we used it for trading for the money market trading. In the process, we gained on a mark-to-market basis. So we sold SLR and bought back SLR, in the process, we had some income on the treasury side, primarily because we are sitting on significant excess liquidity at that point of time. You can imagine that after growing so much of the 30% year-on-year on asset growth, still, we are on LCR, 124% average for the whole quarter.

So -- and a lot of that has come in the end of the quarter how much we are sitting, and that's how we could do some trading. So what we lost on the NIM inside, we gained on the fee side. But this is a one-off. This will not happen every time. It happened because, a, that you said yield cut came down; and b, we are sitting on excess liquidity. So this will not happen every time. But in the process, we'll get that income on the income side -- on the interest income side.

Coming to the hedging, this is a part of this. What has happened is we have a 13% book, which is now borrowing. So out of that almost 9%, 8.5%, is FCI borrowing. So as you know because of the global uncertainty and tariff war and all of that happen, the hedging costs went up significantly because of which, while we are expecting the FCI borrowing cost to come down because these are all SOFR linked, SOFR also didn't come down that much last quarter and hedging cost temporarily went up, which took our cost of funds higher. And that's one of the reasons our overall NIM compression also happened because of that. But that we made good through fee income, which we did through the treasury.

On your slippages point, yes, you are right that we had some slippages. It is a combination of 2, 3 things. There are some migration provisions which happened this quarter, which was a part of the planned migration provision. Also, our unsecured book, which we had stopped sometime back, PL, then 2-wheelers, then some of the agri, some MFI book, et cetera, which we sort of call either unsecured or sure unsecured, where we take a much larger provision, 50% immediate provision we take. And also the migration provision, all of this together helped us in -- or rather given us more slippages in this quarter.

And -- but the good thing is that this is starting to come down. The entire unsecured book is less than 3.5% for us right now. And we also took some prudent provision in terms of saying that since our overall business has been reasonably good, so let's say, there is some -- where we don't need to take it regulatory. It's not even an outboard policy. But if some security deterioration we are seeing when we are revaluing these properties, et cetera, normally, we'll not take them, but we took those as a prudent thing -- prudent provisioning we did this quarter.

So it's a combination of 3 things. One is migration provision significantly increased this quarter, which is well planned. We is -- our unsecured book slipped between credit cards, MFI and PL and other unsecured book, which slipped a little bit, and that we took upfront with 50% provision. And some of the slippages has been happening before also, but those things fully got -- fully slipped because that's a part of the migration provision.

And third is some of the security, which -- I mean, you need to take this only if you come below 55% or 60% or something like that. We took those prudent calls a little upfront this quarter. So between these 3, the slippages were slightly higher, which also led to slightly higher NPA for the quarter. But we are pretty confident that come Q1, Q2, Q3 next year, we should be able to do a lot better than this. So overall slippages were around 1.19% -- slippages 1.19%.

But if you look at it previously, our slippages in March quarter last year was 2.16%. June quarter was 1.64%. September was 0.93%, December 0.85%. After brings so much of this time what we have done, it has come to 1.19%. So it's not that -- it is significant, but yes, it was slightly higher, and this will start coming down next quarter onwards.

[Operator]

Next question is from the line of Dhaval from DSP Mutual Fund.

[Dhaval Gada, analyst]

Pralay, can you hear me?

[Pralay Mondal, executive]

Yes.

[Dhaval Gada, analyst]

Apologies for that. I was saying congrats on a good quarter. I just had a couple of questions. First was relating to the margin trajectory, some of that you explained in the earlier answer. But just directionally, how do you think margins move from here on for, let's say, the full year FY '26, and if you can give some qualitative comment about first half and second half, that would be useful?

And the second one is on the fee income side, you talked about several factors driving the fee income delta last quarter to this quarter. If you could just sort of normalize it from a one-off that you called out. How much of this is sustainable when you think about FY '26 or '25? Like would we see similar to asset growth from this base? Or it should be lower or higher. Any comments around that would be quite useful.

[Pralay Mondal, executive]

Yes, sure. So your first question was on this thing, NIM, right? So there, in addition to what I said, our overall mix is changing. So the wholesale business has started picking up. And while it is -- it has grown effectively by 22%, actually, if you take the BA portfolio out, we have grown by 42% on wholesale.

And incrementally, I just shared that from INR 900 crores of disbursement last quarter, this quarter, we have disbursed INR 600 crores. So that is one impact. Of course, that helps in many other ways, including fees and other things, but it also does not help NIM necessarily. It helps cost to income also, but it doesn't help NIM, that's one.

Second part is that this year, there has been some slippages. And once we have those slightly NPA, which is a little larger, some of the NIM gets impacted, marginal one that is also there. The third is that we have decisively pulled back on various businesses like high-yielding businesses, like PL, agri, MFI.

I mean, as I said before, that we are only degrowing those businesses. And when we're degrowing those businesses, the high-yielding businesses is significantly coming down as a proportion. And hence, overall, when I like -- look at business to business, like wholesale, what is the yield, SME, what is the yield, what is the yield, all of that gold what is yield, all of that is holding, but our overall yield is coming down because of the business mix change.

High yielding businesses, we have effectively degrowing and slightly lower yielding business on the wholesale, it is growing. And this is a part of a journey, which will -- which we had expected and which we are doing in decisively.

The fourth point is what I said that the cost of fund went up primarily because we all know that because of liquidity issue what the situation was. And because -- cost of fund also went up because, a, some of the FD costs were slightly high which we took; and secondly, because the things which I just mentioned that FCI borrowing what happened by hedging cost.

I mean, normally, we would have expected to come down, but it actually went up. That -- created a calculation issue for us. So with all these, our overall yield -- sorry, overall yield came down. The other thing what has happened is because we are sitting on idle cash for 2 months of this quarter, a significant amount, which treasury used to make some money on the fee side. That also where effectively you are rather on 0 negative margin there, right?

I mean when you pick up an incremental deposit as like 7.5% of the G-Sec where it is, so that is also -- it's a one-off. I mean, if you can say fee off also one-off, this is also one-off. So overall, it neutralized.

So from an ROA perspective, if you look at it, I don't see there's any change which is going to happen because of this one-off because one-off will neutralize the other one-off. That will happen in the next few quarters.

Now giving the perspective what goes ahead now, I think from a NIM perspective, okay, we have definitely hit the bottom. We will not go below where we are right now. But on a year-on-year basis, it will be -- we need to see because on a year-on-year basis, the NIM is 4.14%. Our current NIM is -- this quarter is 3.75%, and for the full of next year, the guidance will be somewhere in between 3.75% and 4.14%, somewhere in between it will be there. And probably somewhere close to 4% is what will be there. But I don't think we will go anything below this on NIM decisively, okay? So that is on the -- on your NIM.

What was your second question?

[Dhaval Gada, analyst]

Sir, second question was just possible to quantify the one-off...

[Pralay Mondal, executive]

Yes. So fees is sustainable, okay? I'll tell you why. Because what we didn't do is, we didn't book the MTM booking of treasury, and we lost opportunity because we are conscious that G-Sec will continue to come down, okay? And given that, we will have significant opportunity to book fees in this financial as well, which is FY '26, okay? And we have not utilized that because who will do that? I mean, we know that interest rates are coming down.

What we did is the idle cash, which is lying around, we use that up a little bit. And hence, there is a little bit of amount where that has sort of neutralized between NIM and fee income. But I think that on a broad basis, we don't see any fee income coming down next year, if at all, we'll grow on top of this fee income quite handsomely.

[Dhaval Gada, analyst]

Understood. Just one final thing on the growth. So what we saw was a very strong closing of FY '25 and the overall growth, do you see a similar trajectory in FY '26 because we had some tailwinds on gold, et cetera. But just generally, how would you think about growth for FY '26?

[Pralay Mondal, executive]

Frankly speaking, the growth is absolutely not a problem for us, except for funding the growth, okay? On the asset side, our wholesale has taken off, our SME has taken off, our gold is doing well, our retail will take off this year after our core system migration and everything because all our systems will be place in the next 3 to 6 months.

So the problem is now we have to see that whom will we give what funding to grow, okay? So asset growth, we can do even higher than what we are doing today. Our constraint will be how much liability we can generate. And that is what will constrain our growth. And also because of that, we will be in a good place to say that which is the franchise growth we want to have that will fund, and which is a lesser risk-adjusted return we are getting, that's where we'll do business. And hence, we will do a little -- we will be in a good place to do a little bit of choosing and picking up the kind of assets, which we want to do next year.

What we will not do, in fact, I always to say that we play in the range of 8% to 12% on the yield side. That has become more true because we have almost stopped most of the businesses, which are above 12%, 12% on the yield side, and 8%, we generally don't go below 8% ever. So between 8% to 12% is the range. And now we're in a good place to pick and choose. And hence, overall, I think anything between 20%, 25% growth is given for us now.

But of course, we have to see. But good part is a lot of -- that's another point is a lot of our fixed deposits, one strategy called we took last year that we will not lock ourselves into long-term deposits, okay, because we knew that the interest rates are going to fall.

So given that, the repricing of our deposits will start happening in another quarter or 2 quarters. And hence, our ability to manage NIM and then get growth on deposits may not be that difficult because our -- 44% of our book, which is gold, is kind of a non-elastic to the pricing or non-elastic to the interest rate decrease because those customers, that book will remain between 11.5% to 12% in terms of yield. So given that non-elasticity that side, okay? And if we'll able to get deposits at lesser rates, we should be able to grow deposits also, is my view. But yes, that's the constraint which will constrain the growth. So it depends on how much deposit growth we can take.

[Dhaval Gada, analyst]

Just one final thing is on this tech transition. Any interim impact that you see on the performance, et cetera, or it should be quite smooth is your base scale expectation? Like anything that you want to call out of migration for FY '26? I know '27 onwards, the growth expectation is quite strong, but just '26, anything that you want to call out?

[Pralay Mondal, executive]

See, I will be practical to say that we have to see how this transition goes because any debt transformation of the size and scale what we're doing, probably one of the first in the industry where we are doing OGL OFSAA Oracle the core system, the entire tech stack, the entire digital stack, the entire OFSAA, OBDX platform, the entire database migration has already happened. The entire this thing data center migration has already happened and the kind of entire CMS, we are implementing, new CMS system. We are taking LOS new system; we are constantly building. We also are doing the supply chain implementation.

So effectively, we are building the bank afresh. And in the next 6 months, the bank will be completely new in all aspects, okay? The way the customer sees the bank and the way that we service the customer, the way we build products, the way we create franchise on the transaction making wholesale, retail, SME everywhere is completely going to change. Our main constraint in this bank or systems are not there. That's why you're not able to do what we wanted to do.

So given that it will be not savvy to say that -- it will be -- I mean, we are not ignorant. We know that this will go through some transition. But so far, yesterday was our second dry run. And people are very happy with the dry run because we had very little incidences or no incidences yesterday when we did the dry run. But dry run is like a net practice, and we are going for the main match somewhere in May. So we have to see how it goes.

We are giving ourselves 3 to 4 months for stabilizing it. We have done everything possible, including training, development, everything we have done. But we have to see -- or we are giving also 3 to 4 months of stabilizing. And starting from -- sorry, Q3, which is second half of this year, we will completely go all out in terms of scaling and building the bank. So that's where we are. There could be some issues here and there, which is unforeseen, unknown, unknown. But broadly, we have the right people and the right vendors, our OEMs, our partners who are working with us, we don't see too much of an issue as such.

[Operator]

The next question is from the line of Mona Khetan from Dolat Capital.

[Mona Khetan, analyst]

So firstly, again, just touching on the fee base. So if I look at the fee income for full year at INR 874 -- INR 87 crores versus INR 53 crores or so last year. Could you share the breakup between processing fees, commission, first-party fees, for the [indiscernible], et cetera? Could you just look for the full year perspective between this year and in this year, that would be very helpful.

[Pralay Mondal, executive]

I don't think we share that level of details in the this thing. But whatever we have, we have shared already with you. So beyond that, we don't give a breakup of how much is gold loan fee, how much is ForEx fee. I don't think we give that breakup. Do you give that, Satish. No, we don't give that detail.

[Mona Khetan, analyst]

Okay. But any color or in terms of how much is coming from corporate related fees that itself could help us understand because...

[Pralay Mondal, executive]

Yes. Yes. Yes. So that's what we -- I just covered that in one of the previous questions in detail. But just to summarize it, overall 21% is our noninterest income to total income. Out of that, around -- generally, what it happens is we are somewhere around 18%. So core fee is around 14% and noncore free, which is treasury and other related fees around 4%, okay? That has changed a little bit. So this quarter and only for this quarter. Next quarter, it will hopefully come back.

So this quarter, I think core fee has remained around 14% to 15%, around 15%, and noncore fee, which is primarily treasury and PSLC, has been around 6% -- 21%, minus 14% or whatever, 6%, 7%. So that's the only change which has happened, and I explained in great detail, why it has happened and why our NIM has got replaced by fee because of this excess fund we are sitting on.

Next year, also, I would assume that in the whole of next year because I can't share that, but I know the number while we are sitting on as of today on the 10-year G-Sec, what all on the portfolio, AFS portfolio, where we are sitting right now, we know. And hence, that will be much larger than what we had because we really didn't encash the AFS last quarter. What we did was trading profits.

So that opportunity will be there next year as well, but that will also be reported under noncore fee. So our core fee broadly, if you have to estimate next year as well, our core fee will remain around 15% -- 14% to 15%. And whatever on top of that we get, you can sort of calculate it on every quarter around noncore fee, which includes treasury and PSLC.

[Mona Khetan, analyst]

So sir, I'm only referring to the core fee part, which is ex of treasury.

[Pralay Mondal, executive]

Yes.

[Mona Khetan, analyst]

Would it be possible to give some understanding how much of this core fee of -- you reported about INR 87 crores of core fees this fiscal at FY '25. How much of this connected...

[Pralay Mondal, executive]

So I can broadly tell you, Mona -- yes, broadly I can tell you, it's very easy because our core fee instead of getting into the details, our core fee has 4, 5 components. One is gold loan fee, one is insurance, one is credit card, retail assets and ForEx and wholesale listing. Then other things will be penal charges and transaction banking fees, ForEx and all of that stuff.

So in this, the heavy weight is picked up by insurance, gold loan fees and to some extent, the ForEx and the transaction banking fees. Primarily, these will contribute to almost 80% of our fees, which are all -- and then there's a liability fees, processing fees, not processing fee, penal interest, penal charges and all of that stuff. So 70%, 80%, and almost 100% of this is scalable. If at all, the reason, I think we should do better next year because next year, second half of the year, we'll launch retail assets.

And corporate banking has just started. The transaction banking, once we have the CMS and supply chain, those systems in place, we'll do a lot more on that side. So I think our core banking fees -- sorry, core fees will only improve over a period of time.

[Mona Khetan, analyst]

Got it. Perfect. Secondly, on the gold loan book, are you seeing any impact of the draft circular that has come up from?

[Pralay Mondal, executive]

Actually, it's too early to talk, frankly, because it has not yet become a circular. It is a draft discussion point and representations are going on to IB and things like that. So because these are -- some of these are little operational intensive and things like that. So -- and hence, I'm not say that the final circular is yet out. I think impact will be in terms of primarily more process orientation. A lot of changes has to be done to the systems to be fully compliant to some of these things. And because we know in advance now, we have already started and because our new system will come soon in next quarter, so along with that, we'll start making those changes to the system.

So it's more execution, more system, more this thing. There are a few things, for example, auction and all of that, those things don't worry us too much. The -- even businesses, which is like what are [indiscernible] repledgure business and all that, what is being mentioned there, those also, if they don't come through repledges, it will come to us directly. So if you ask me, it won't -- those businesses will not stop. So the amount of work we have to do is a lot more and compliance kind of a -- has to be a little more detailed, and systems has to be revamped. I think those are the 3 main things.

Broadly, we don't see too much of an impact of this on our business at this point of time, but we have to wait and watch for the final [indiscernible].

[Mona Khetan, analyst]

Sure. Got it. And secondly, on the gold loan book disclosures that you gave around LTV and number of accounts, so I see that the number of accounts in has declined Q-on-Q despite the sharp growth from about INR 4.9 lakh or so to INR 4.5 lakh. So what is change this? And also LTV has fallen sharply Q-on-Q. So if you could just throw some light around it.

[Pralay Mondal, executive]

Yes, yes. So LTV falling is good news because, obviously, with prices going up so much, we -- at least we are not very comfortable in taking the risk of a high LTV on such a high price. Because we -- they do a very detailed sensitivity analysis of every 10%, 5% drop in gold price and which can happen. I mean, nobody knows. So given that we are -- when prices goes up, our LTV actually comes down, and that has happened for us.

On your question on ticket size, effectively what you're saying, the primary reason for that -- one of the primary reasons for that is that we sort of stopped sourcing gold on business below INR 2 lakh because as per the guidelines, below INR 2 lakhs, you cannot have a security. So because of that, we stopped doing that, and that's where numbers are coming from. And hence, we moved up and because of that, the ticket sizes improved, or ticket sizes went up.

If you look at it, our business growth is slightly lower than the overall industry business growth, and this could be one of the reasons, because we moved out of the lower ticket sizes because you cannot really do it as per the new compliance process. So that is one of the reasons.

Second reason, of course, is that we have -- as gold prices has gone up, while our LTV is not -- has gone down, but still, value has gone up, okay? So from that perspective, ticket sizes have also gone up. So these are the 2 main reasons.

[Operator]

The next question is from the line of Bhavesh Kanani from Svan Investments.

We'll move to the next question, which is from the Chirag Singhal from First Water Fund.

[Chirag Singhal, analyst]

Am I audible?

[Pralay Mondal, executive]

Yes.

[Chirag Singhal, analyst]

Sir, first question is on the guidance on the credit cost trend. So you mentioned that there were a couple of one-offs in Q4, and you also did some prudent provisioning. So for FY '26, how should I look at the credit cost?

[Pralay Mondal, executive]

I think if you look at our overall credit cost, it is somewhere around 29 basis points. We are keeping our credit cost guidance below 30 basis points next year, okay? And we should be able to comfortably achieve that is our view.

[Chirag Singhal, analyst]

Okay. And second question is on the other OpEx. So even that has gone up significantly, if you look at it in Q4 versus previous quarter as well as last year. So I mean, if you can provide some color as to how should I look at it for FY '26 and going forward?

[Pralay Mondal, executive]

See, if we look at overall, our OpEx has been reasonably managed, but I think it is at 28% growth, how much? What is the growth [indiscernible]. So I think overall, our OpEx has not gone up significantly. But yes, what we're saying is because of the significant technology cost, which has -- let me see the numbers 20%. So that's what I said, right?

Operating cost has gone up by 23% on a year-on-year basis. But on our Q3 to Q4, it has gone up by INR 50-odd crores. That's what they're saying, INR 60-odd crores, okay, which is a 17% growth in operating [indiscernible]. I'm just seeing the line by line, Q-on-Q, 17%, All of the other expense.

[Chirag Singhal, analyst]

[indiscernible] other OpEx?

[Pralay Mondal, executive]

Yes, yes. Other OpEx. Yes, other OpEx has gone up by around 35% primarily because of some of these technology-related stuff, which we are doing as execution starts coming. So there's a CapEx and OpEx there. So for example, to give you a data, I mean without being too clinical about it is our -- we have fully utilized our OpEx budget on the technology side, but CapEx, we have not fully utilized last year, okay?

Because a lot of the execution items as it comes closer to D Day, a lot of OpEx expense starts manifesting itself on the technology side because we are now very close to the -- close to the migration. So that is one of the reasons. There has been significant increase on the -- a significant buy on the -- a significant increase in the OpEx side.

The other reason is, in the past quarter, we had some PSL buy on the MSI portfolio because we could not achieve our target on margin on small [ former ]. And that by through PSLC come on the expense side. And most of the buy we did in the fourth quarter. So these 2 have contributed to the overall OpEx increase.

But on the overall PSL, we were actually a net positive in terms of income. But MSF, we are negative. That's why you have to buy and most of it we bought it in the fourth quarter. These are the reasons.

[Chirag Singhal, analyst]

Right. And if you can help me with FY '25 guidance, since you said that in first 2 quarters will have some more cost towards the technology. So overall, how should we look at this number for FY '26?

[Pralay Mondal, executive]

I think we should be okay on our OpEx broadly because costs are already baked in. Now we are just executing it right now, okay? So I don't see a major -- when I was doing the budgeting for this year, I didn't see a major OpEx increase vis-a-vis this year at this point of time. So we should be okay.

In fact, if at all what we plan to do is not in the first few quarters, in the next 2 quarters, which is Q3, Q4, once the technology transformation is done and it's working fine, everything, Q3 and Q4 will expand significantly on our manpower. Because if you saw last year, we didn't grow our manpower. We are working on the productivity and all of that stuff. And without full technology, we didn't want to necessarily invest there. So now the investment on -- pending investment on people and this thing will come in the second quarter -- sorry, third quarter and fourth quarter of this year, and hence, some of the staff costs will start picking up from Q3 and Q4.

[Operator]

The next question is from the line of Chinmay Nema from Prescient Capital.

[Chinmay Nema, analyst]

A couple of questions from my end. Firstly, could you give some color on the health of the unsecured book, which you talked about previously in terms of the asset quality and if you could -- you're expecting any more slippages from it in the coming quarters?

[Pralay Mondal, executive]

So this way, we have taken some prudent calls, and we are fortunate because now it's starting to taper down for us, primarily because the portfolio is degrowing. So whole of last year, we have been constantly degrowing the portfolio. We started this degrowth a year back. And hence, currently, our overall unsecured book is around 3.3% of the overall bank.

Within that also, there is one portion which is credit cards, which while it comes as a credit cost, but we have OS to ensure that on a net ROA basis, we are neutral. So from that perspective, I think while on a percentage basis, it might look high, but the book itself will be so small, less of credit cards that it will not have a meaningful impact next year.

So I think in another 2 quarters between MFI, personal loan, 2-wheeler and all of these products, it will start getting negligible from their perspective. And hence, another 1 or 2 quarters to go. And another 1 or 2 quarters, it will be in line with what it is today. After that, it will not become material to the bank.

[Chinmay Nema, analyst]

Sir so the incremental provisioning during the quarter, is it entirely attributable to this book?

[Pralay Mondal, executive]

I didn't get your point, but the incremental provision what we did this quarter was because of -- I explained in great detail that some part of that is some of the migration provision. Some part of that is because of the unsecured, which we took a significant provision. And third is because of some security deterioration, which happened in some of the legacy portfolio.

While it is not regulatory guideline to take those calls, but we took those calls because we said that we'll start the new year on a clean slate. From that perspective, we took some more prudent provisioning based on securities, which we have. So between these 3, we had slightly higher slippages in Q4.

[Chinmay Nema, analyst]

Got it, sir. And sir, my second question is on net interest income. If I look at the last 4, 5 quarters, the net interest income has been somewhat flattish. Previously, you've talked about the competitive intensity that comes in to play if you pass on the increased cost of borrowing. Could you give some more color on this, essentially think understand why it affects CSP more than the industry? Or where do your borrowers turn to if you increase the use yields on the product?

[Pralay Mondal, executive]

Yes. So I explained in great details on this a few questions back, but let me attempt once again. So you're right that our NIM has come down. But on a stand-alone basis, for a full year basis 4.14%, is it a too bad a number? Probably answer is no because when we mirror like a proper portfolio, eventually, in the long run, I'm not proposing anything above 4%, 4.5% kind of a NIM. If at all, it will be closer to 4%. That is what guidance I've been giving all through.

So it's just that our NIM was slightly higher because we had a slightly higher gold loan proportion. And incrementally, now other businesses are starting to pick up. But the real reason for our NIM depletion has been because of the liquidity challenge, which was there in the ecosystem. We are sitting on excess liquidity this first 2 months of this quarter. And we did book FCI bookings where we had a significant hedging costs, which came up, which has gone away also now because it is linked to dollar index and dollar extent is back to 100 or below.

So given that perspective, I think we have a slightly -- while FCI borrowing costs should have come down, it went up temporarily. Again, this quarter, it is coming down. So it was a blip. That's why you saw the huge drop because now our borrowings is 13% of the portfolio. Our borrowings used to be almost nothing a year back. So -- but eventually, that will start -- it will follow the SOFR and start coming down.

So it was a kind of a blip last quarter. But on a trending perspective, I think we have been coming down, and that is what is expected because most of the mix of the businesses are changing. And our deposit franchise, CASA is not that high, et cetera. So to that extent, our cost of funds is higher than 6%. And that will sort of taper down only when the interest rates overall falling.

The good part is when interest rates start falling, on a competitive basis, we'll be better off because our fixed rate loans are slightly higher. Like a gold loan and other fixed rate loans is 60%, 23% is MCLR linked, which will mirror the overall curve of the deposit cost. And our linked to EBLR and T Bill is around 15% to 16%. So -- and where we have fixed rate loan also, like gold, while they are shorter tenure, but the sensitivity of the yields are much lesser, like credit cards in a rising cycle and a falling cycle, in both cycles, they remain the same, the interest rate. So gold is also somewhat like that. We'll retain our yield around 11.5% to 12%.

So when you look at 1 year from now, we will be slightly in a better competitive advantage from a NIM perspective, purely based on yield versus the funding cost, which is the spread. So given all this, I think we are very, very confident that because of that one-off that happened last quarter on hedging and because of this trending which will happen, our cost of funding will also start coming down gradually mirroring the overall [indiscernible]. I think this is our hitting our bottom on the NIM. I don't think us coming down further anymore. Our overall guidance will be somewhere around 4% in between what our quarterly NIM was and yearly NIM was. yearly NIM is 4.14%, quarterly NIM is 3.75%. So our next year guidance is somewhere in between of this. around 4%.

[Operator]

The next question is from the line of Rohit Priyadarshi from Mittal Analytics.

[Rohit Priyadarshi, analyst]

Congratulations on the good set of numbers. Sir, 2 questions from my side. What is your medium term like 2- to 3-year target for maintaining the return on assets and return on equity?

[Pralay Mondal, executive]

Yes. So our return on assets, our guidance is between 1.5% to 1.8% and return on equity between 15% to 17%. This quarter, return on equity went up a little bit. But for the full year basis, we are slightly higher than 15% -- so it will be range in that 15% to 18% in that range. And ROA will range between 1.5% to 1.8%. But closer now, it will be closer to 1.5% right now for 1 or 2 more quarters. Yes.

[Rohit Priyadarshi, analyst]

Okay. And sir, next question will be like what are the 2 to 3 key risk areas the management is most focused on mitigating it in FY '26?

[Pralay Mondal, executive]

See, one of the risk which is there in the ecosystem was this unsecured book. I think we have broadly mitigated it. Unsecured, including MFI and retail, we have broadly mitigated it. So we -- some more flow-through will happen, but that will not be that material, maximum 6 more months after that, it should taper down. Second risk was liquidity risk, which is a bigger risk for a bank like us because we are a small bank and for our ability to attract retail deposits is slightly lower compared to some of the larger banks. So thankfully, the liquidity in the system is much better now. And hence, I think we have passed the most difficult year for the bank last FY. And still, we have done reasonably well.

As the liquidity has improved and overall deposits are getting -- I mean, getting a little more easier compared to before. So we -- one of those risks are starting to get better for us. I mean mitigation is happening automatically in the system. The biggest thing for us is not risk, but the opportunity. How do we manage the opportunity which is tearing us once the system migration happens. Obviously, for 2, 3 months, once the entire migration and the tech transformation happens, things has to take time to settle down. And in the process, 1 or 2 months, people will be busy doing that. So once that is done, which is another maybe 3, 4 months from now, after that, the biggest opportunity is to build the business from scratch based on the new system it is there.

So if you ask me, the biggest risk for us is this migration and the entire transformation and biggest opportunity is also that, and we are waiting for that. So I think that's it. Otherwise, I don't see any -- the legacy risks are also more or less done because we corrected our portfolio on SME, we correct our portfolio on wholesale broadly. So I don't see too much of a risk. Liquidity risk is hopefully not there. But obviously, the global risk, the tariff risk and all of that stuff and a smaller player will always have challenge when the whole ecosystem gets impacted. Otherwise, I don't see any major risk otherwise.

[Operator]

The next question is from the line of [ Rupesh Bhatia ] [indiscernible] Capital.

[Unknown Analyst]

Am I audible?

[Pralay Mondal, executive]

Yes, yes, please.

[Unknown Analyst]

Sir, my first question, sir, is on cost-to-income ratio. Cost-to-income ratio used to be 57%, 58% annual. I'm talking about the annual number. It has moved up to 62% in last 2 years. So where do you see this number in FY '26 and FY '27? If you can give some view -- I understand that the technology CapEx is there and then maybe from second half of the year, it will taper down. I understand all of that. But if you can give some number, it will be very helpful. That is question number one. Question number two, sir, is in terms of philosophy at the AUM level, where do you see the gold loan percentage is at, I think, 44%, if I remember the number right. So where do you see at a philosophy level, where do you see that number in 2, 3 years?

And then the third question, sir, is, I mean, despite liquidity, despite negative carry on your book and all of that, you are saying that the NIM will stay at 4%. So then how -- and then you are still saying that 1.5%, 1.8% ROA is your guidance. So then I mean, there is no margin for any cost of credit spike. There is no margin for error for any cost-to-income spike. So how do you -- I mean, how do you balance all of that? Because it is ROA calculation doesn't work, it looks to me at 4%. So those are the 3 questions, sir.

[Pralay Mondal, executive]

Sure. So let me handle the first 2 first. These are more qualitative questions. So cost to income, I had always guided that till FY '27, it will be somewhere around 65%, 62% to 65%. And then once the entire ecosystem of the banking gets built up around the core system transformation and other things we are doing, the whole franchise will start playing out. And very quickly between FY '27 to FY '30, the cost to income will go down to 50%. So the journey of cost to income from 65% or 62% to 50% will happen between FY '27 to FY '30. And that I have articulated almost every call, every meeting, which I have with investors.

On your second question on gold, we will continue to do well in gold as long as we can, but other franchises start picking up. If you see SME has grown by 33% this year, highest growth for SME ever in this bank. Our wholesale banking, while it has grown by 22%, but if you take the DA portfolio out, which we run off, and that's a lazy portfolio, we ran it off, effectively wholesale has grown by more than 40%. Retail will start the story. I mean, this year, retail, actually, if you take agri and MFI out, retail has grown by more than 40%, okay? But because we are degrew in retail, agri and unsecured, some of this, so our overall growth is around 24% or 25%. But actual growth, what we are focusing on and which are meaningful portfolio for us in future is growing upwards of 30%, 35%.

So all of these will ensure that gold loan as a mix will start tapering down. And gold loan price every year will not go up like this the way it has gone up, right? Sometimes it will stabilize, sometimes it will come down, et cetera. So given that perspective, our long-term philosophical thinking is wholesale will be 30%, SME will be 20%, retail will be 30% and gold will be 20%. That's our FY 2030 journey. But meanwhile, because you're also asking the cost-to-income question, to ensure that we are there, we have to have a good profit-making product as well, and we understand the gold loan business. That is helping us in building the other businesses at this point of time. FY '27 onwards, we'll see other businesses, they will start contributing more, and hence, we'll have a more meaningful mix.

On your third question was on ROA, I think it's very, very clear that we are a 1.5% minimum ROA bank and ROE between 15% to 18%. And one needs to -- you can do 2 things. Either you can plan for cost of credit or you can decide good credit in the beginning itself. So there are philosophies. I'm not saying what is right, what is wrong. There are philosophies do high-link business and provision for higher credit. And there are philosophies by which you do lower-yielding businesses, best risk-adjusted businesses, long-term sustainable growth businesses and better cross-sell business in the long run. So what we are building on the wholesale side, for example, right now, we are not doing a single business above 9.5%, 10%, okay? So -- and -- but our ROA will come there not through NIM, but their ROA will come through fee income and cross-sell and supply chain and all of this for which we are building systems.

Same thing with SME. SME is somewhere around 10%, but they are building cross-sell over a period of time. Retail is all a cross-sell game at the end of the day. So we -- at least I don't believe in too much of a high risk, high return kind of a game. We play in that 8% to 12%. And there, our margin for error is very limited. If you look at our last 3, 4 years, you see where our NPA and credit cost has been, okay? And this year, it has been a little high because of 2 accounts, and those are all legacy accounts. And I said before that almost of the legacy accounts are now at the end of the life cycle for our bank because we have been working on them.

So given that I don't think that -- because as soon as you start baking in a huge credit cost for the businesses you are doing in your ROA tree, then automatically, you start doing higher-yielding business. And automatically, you will follow that cycle of higher rates. It will become a self-fulfilling process, which we don't want to do that. So from that perspective, we are pretty confident that we should be able to do somewhere around 1.5% ROA and 15% ROE on an average without too much of a problem.

[Unknown Analyst]

Okay. So just one question, sir. through this transformation, right? I mean, what you are trying to do, I totally under get the logic. Is it fair to assume that AUM and profitability will grow at 20%, barring any black swan events for multiple years? Is that a fair assumption to make?

[Pralay Mondal, executive]

Yes, give us another year. okay. Ask us this question in the next annual call. We'll be able to answer more decisively, but that's the attempt.

[Operator]

The next question is from the line of [ Sagar Shah ] from [ Stock PMW ].

[Unknown Analyst]

Sir, I just had 2 questions. My first question was regarding our -- actually liabilities actually. You had highlighted initially on the call that the problem -- the main problem is not on the asset growth, but is on the liability growth actually. So this year, in FY '25, we increased branches by around 50. And in this particular year, our bulk deposits as compared to total deposits has also increased by from 33% to almost 43% out of our bulk and retail deposits. So going ahead in the next 2, 3 years, what are you seeing -- what steps are you taking to increase your retail base to increase your customer acquisition strategy? That is my first question.

And the second question was related to data keeping that in spite of a sequential growth in the asset side by almost 10% sequentially from Q3 to Q4, our net interest income actually reduced. So were there any huge interest reversals in this quarter that led to NII decline trend in this quarter? So those are my 2 questions.

[Pralay Mondal, executive]

Yes. The second question I've answered in various ways, so I will keep it short. But let me answer the first question. It's a very good question. You're absolutely right. The branch distribution, if you look at it, currently, our branch distribution in Kerala is somewhere around 33%, 34% right now. It was 57%, I think, a year back, okay, or a little more than that 2 years back. And there's a time when it is to be sent to us. So what it means is that more and more branches we are building -- more and more branches we are building it, we are building for the future. No longer we are building a branch, which will break even in 1 year, we'll only do gold loan and those kind of businesses. These branches are being built for the new transformational technology, products, processes, retail, wholesale, transaction banking, SME, all of this keeping in mind.

And hence, you cannot time it, right? Can I start doing all this after my tech transformation is over? Then we'll be sitting and waiting for these branches to come up and people to come in, et cetera. And hence, very strategically, we have put these branches in various locations in North, in West, in rest of South, everywhere. So we are well distributed. There is a slide, I think, where we show the branch distribution across the country, and it shows how well distributed we are becoming. Now each of these branches will be able to get leveraged a lot more once our tech transformation journey is over and the new products and processes are in place. And this will help us in building the entire granular liability franchise. But what happens, what is -- until then can we sit quietly and do nothing when we have an asset opportunity. That's why we are taking some more bulk deposits, which comes at a slightly higher cost. That's why we have taken FCI visit. So this is like a bridge funding for us, if you may, for -- till our entire retail journey starts on the liability side. That will start in another 12 to 18 months.

And the acquisition story, which you are talking about, very important, that will start 6 months from now, and we are going to create a full acquisition team. We are just waiting because today, if I do it, we'll not get good customers because we cannot offer the products or services, which some of the other banks are offering. So how will you get good customers. So that's why we have delayed it a bit, but we didn't delay the branch expansion strategy in the right areas, which will leverage this entire transformation, which we are doing. So that's the first answer. If I can add something more to that, just not the branch distribution and liability, retail assets will happen around those customers because the same customer will cross-sell. We'll not go too much externally to get business. Most of our asset businesses, fee businesses, everything will happen internally to our liability customers and hence, acquisition strategy will become very big, and that will help us in our asset fees, everything else.

That's why I'm saying that our journey is just beginning now, if you ask me. Coming to the second question on growth versus NIM, I think I explained it 2 times actually. The NIM, this thing was primarily because of higher funding cost, a little bit of a carry cost which we had because -- and that we used in trading and getting it on the fee side. And hence, we had a little bit of an issue there. But I think it is behind us. That's why I'm putting my head and saying that we have sort of bottomed out on NIM right now. From here on, we'll only improve on NIM from here and we'll be somewhere around closer to between 3.75% to 4.14%, somewhere in between, we will play in the whole of next year.

[Unknown Analyst]

Right, sir. So can you quantify the interest reversal in this quarter, sir?

[Pralay Mondal, executive]

There is no interest reversal.

[Unknown Analyst]

No interest reversal?

[Pralay Mondal, executive]

I mean there will be probably, but that is not meaningful, which is thing. Satish, you want to add answer to that? I don't know this number.

[Satish Gundewar, executive]

When there are slippages, there will be interest reversals. But that information, that kind of information is not given there. What you should ultimately see is in terms of what is the credit cost that is there because whether there is interest reversal or everything or there are provisions, ultimately, everything will be captured in the provisions number. And for the full year, our credit cost is in 29 basis points, which is reasonable.

[Pralay Mondal, executive]

And then if you look at it, gross NPA is 1.57%, which is lower than last quarter. Net NPA is 0.52%, which is less than last quarter. So from a slippages perspective, except for what I already explained slippages, I don't want to explain again. I think we are broadly okay. 29 basis points and our comfort level is we'll go below this next year is a reasonable credit cost to have.

[Unknown Analyst]

Great, sir. So at least my last one from my end. So at least from -- in FY '26 and FY '27, will we see the expansion of branches, the pace to be higher than what we saw in FY '25?

[Pralay Mondal, executive]

So we have every year, grew by anything between 50 to 100 branches. We will retain that kind of a pace. After our acquisition because how much we can invest till you have the product services and processes, okay? So you will see a significant expansion from FY '27 onwards. But to ensure because we already have 829-odd branches right now. So that is a large enough branch distribution to leverage for at least 1 more year. And FY '27 onwards, we'll start expanding because otherwise, we will be expanding and keeping it idle for systems to come or products to come. So I think we have invested enough and the investment into branches will expand only after FY '27. This year, we'll expend similar to last year, okay? Similar to last year, we'll expend.

[Operator]

The next question is from the line of Mona Khetan from Dolat Capital.

[Mona Khetan, analyst]

Yes. Just one clarification. So the corporate account that has slipped about a year ago, INR 100 crores or so. I just wanted to know.

[Pralay Mondal, executive]

I can't hear you, Mona, you be little closer to -- I can't hear you.

[Mona Khetan, analyst]

Yes, is it better?

[Pralay Mondal, executive]

Yes. Yes.

[Mona Khetan, analyst]

So my question was related to the corporate account that has slipped about a year ago. Any update on the recovery there? And what sort of provisions you hold against it?

[Pralay Mondal, executive]

So we -- unfortunately, we -- because it has gone into a little bit of a legal tangle right now, that's why we could not recover, but we have a fair bit of assets out there, which is secured with us. And hence, we should be able to recover at some stage. We had expected it, but it went into a little bit of a litigation at this point of time. So we are going through the entire process at this point of time. Having said that, we have taken provision as per our Board guidelines, which is around 50%. And we have taken a little bit more against some of the security, et cetera, and that's prudent provision we have taken because we had thought that we'll be able to recover some money this year because we couldn't -- we have taken some prudent provision against that, which is I was referring to some of my earlier comments. So net-net, if you look at the PCR, the PCR has come to 67% now from 60% last quarter, and that is one of the reasons for that.

[Operator]

The next question is from the line of [ Saikiran Pulavarthi ] an Individual Investor.

[Unknown Attendee]

Just a couple of questions, sir, before you enter for the building for sale phase, do you feel that -- are there any gaps in the top management? Or do you feel some gaps over there to get filled up? That's question number one. And question number two, how do you ensure that you can get your liabilities to grow in excess of 25% when the systems deposit growth itself is very low. What kind of initiatives you are taking and how you ensure that on a sustainable basis to grow the balance sheet at high teens or maybe much significantly higher than the industry?

[Pralay Mondal, executive]

Yes. So on the management, we have no gap at all, okay? Every senior position starting from CXO level to CXO plus 1 to regional head to distribution head to product heads, even now wholesale entire team is now growing at a very rapid pace. The SME team is already in place. Transaction banking team is in place. So every team and every senior management is completely in place, and we don't have any attrition. So attrition in the senior management, I'm saying, of course, at an entry-level junior level, there will be attrition. So that way, we are doing extremely well in my view. And the team is very engaged in trying to build the bank. So the whole motivation is to build the bank to that extent, I think there is a lot of kind of engagement with the top management team here.

Coming to your question, we are not talking about high teens. I think we should do better than that, okay? And the reason for that is if you could do it last year with that kind of a liquidity issue and that kind of a challenge which was there on the liability side, I think it will get a little easier this year for us, primarily because we have a little better experience and post our migration and post our entire systems and processes and products in place. Second half of the year, we should start picking up a lot more on the liability side. And thankfully, that time, hopefully, the price will get priced into the liability business as well because we also don't want to book too much into the long-term liability even now. But I think by the second half of the year, when we'll be fully ready with all our products and services. By that time, hopefully, the liability prices also get rationalized a little bit more. So we are pretty confident of anything between 20% to 25% growth. And last year, we grew by 25% to 30% in a very difficult environment. So the management is confident of that.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

[Pralay Mondal, executive]

Thank you very much for your questions, and we look forward to our next meeting again after a quarter. Till then, hopefully, we should be able to do even better than what we have done this quarter. Thank you very much.

[Operator]

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