This is your highest-ever quarterly profit, is it sustainable?
This profit is basically coming from two factors. Our provisions are coming down because the asset quality is performing very well. Secondly, income is going up because the cost of funds has come down by 45 basis points. The combination of the two is resulting in this profit increase.
We think this performance could broadly sustain for the rest of the year as well, plus minus a few basis points. Of course, we will closely watch if there is any impact of oil prices or monsoons, but we have taken adequate provisions for that also.
What’s a realistic steady-state credit cost for the bank?
Our credit cost was 2.13% of loans including the microfinance portfolio, against a guidance of 2.10%. This year, encouraged by seeing our credit quality in the first quarter, we are targeting 50 bps lesser credit cost, say 1.5% to 1.6%. On Rs 3 lakh crore book it materially adds to profitability. Frankly, except the MFI issue, which was an industry issue, all through FY25 and FY26 also, our rest of the book performed very well and as per plan.
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You have taken prudent provisions despite improving asset quality. Are you expecting any pressure ahead?
We manage and monitor the performance of the portfolio closely because we are a technologically advanced bank. We don’t wait for month-end reports to know about the portfolio. These are tracked practically on a daily basis by various cuts like city, district, LTV, product type, vintage, ageing and so on, on a real-time basis using ML models and monitoring dashboards. Based on all these numbers, we don’t think there is any immediate issue on the horizon, but as bankers, we have learned a lot in life never to be too sure. We have created this provision of Rs 500 crore just as a precaution…in case there is any impact on the portfolio during the rest of the year. For now, there is no issue.Where do you see net interest margin (NIM) trending for the rest of FY27?
Our real NIM is about six basis points less than what we have reported because there was some I-T refund so it is at 5.9% in Q1FY27. For FY27 we feel it will be about 5.8% because the cost of funds is coming down.
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Where do you see demand in credit?
Our cost of funds is coming down, we are moving more towards products with lesser credit cost like mortgages, working capital loans secured by property, vehicle loans, corporate loans, etc. It’s the gradual evolution of the bank. But, of course, we will also do the inclusive loans to micro enterprises, kirana shops, village-level entrepreneurs, etc. It’s a specialisation we have developed over the years.
Wholesale book growth is strong, what is your strategy?
Initially, because we converted from a DFI (development finance institute), we faced many issues in wholesale lending. So, we went slow on wholesale book and de-grew it. Now, we are developing our confidence back in this business. Plus, corporate loans are an important investment in the Indian ecosystem, along with cash management requirements, foreign exchange, trade, and so on. We want to be a complete universal bank catering to all se-gments of society, from large corporates to a micro-enterprise to rural India.
How much do you plan to raise on FCNR(B) deposits?
We aspire to get about 2.5% of the NRI inflows into this scheme.