Operator
Ladies and gentlemen, good day and welcome to YesBank's Q2-F527 Results Conference Call. On the management panel we have with us today, Mr. Vinay N. Tonse, Managing Director and Chief Executive Officer, Mr. Manish Jain, Executive Director, Mr. Niranjan Panodkar, Chief Financial Officer, Mr. Sunil Parnami, Head of Investor Relations and Sustainability. Mr. Vinay M. Tonsei will now give you an overview of the results, which will be followed by a Q&A session. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation controls. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your test-tone phone. Please note that this conference is being recorded. Participants are requested to ask questions pertaining to the bank's Q2 results only. For any other information, you may reach out to the corporate communications team separately. I now hand the conference over to Mr. Vinay M. Tunse. Thank you, and over to you, Mr. Tunse.
Yeah, thank you. Good morning to all. Thank you for joining us for the quarterly results presentation, and also thank you for coming in very early today. So, before we discuss performance for the second quarter, FI 27, I would like to address the Honorable Supreme Court's judgment of 15th October, 2026, concerning the Rs. 8,415 crore of additional tier one bonds, written down in March, 2020. This is a significant development for ESPN, and I believe it is important that we address it up front. The Honourable Supreme Court has upheld the Bombay High Court's judgment, setting aside the AT1 write-down, and dismissed the appeals filed by S-Bank, the Administrator, the Reserve Bank of India, and the Union of India. We respect the judgment and are examining it carefully, including the options available to the bank. The reconstruction of S-Bank in March 2020 took place in exceptional circumstances. with the objective of restoring the stability and viability of the institution and protecting the interests of depositors and the wider financial system. The 81 write-down was one of the measures undertaken in that context. We are evaluating the implications of the judgment with the same institutional responsibility that guides our other decisions. Let me address the capital implications. Based on our current assessment, which is indicative, and as of 30th September, 2026, the reinstatement of the 81 principal amount is expected to have a pro forma impact of approximately 240 basis points on our common equity tier 1 ratio, including profits. Our overall tier 1 capital ratio is expected to remain around 13.7% on a pro forma basis. We recognize that the distinction between CET-1 and overall Tier-1 capital is important. We will continue to assess the implications for our capital structure. The cost and availability of capital. Judgment in a disciplined manner. We have CNRB Mobile Edition. I wrote the loan process.
Operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for the moment while the question queue assembles. The first question comes from the line of Sukrat T. Patil with ISAT, FinTrade Private Limited. Please go ahead.
Good morning to the team. I have two forward-looking questions. My first question to Mr. Vinay is, I just want to understand beyond the regular outlook, what are the top two to three execution priorities you are focusing on in the next few quarters? And alongside that, what do you see as the biggest risk in credit growth, deposit, mobilization, and competitive intensity? And you want to understand how are you preparing to manage them while strengthening the bank's position in the banking sector? That's my first question. I'll ask you the second question after this. Thank you.
Thanks for that. Going forward, we have already started building strong foundational pillars for taking the growth momentum upwards. We have already seen a good traction, and some of these are already reflected in the quarter two, as well as you would have seen in the quarter one results. One of the main initiatives that we are now driving and focusing upon is the one bank concept The synergies between all the verticals start working, and we look at how do we meet the end-to-end customer needs of any customer, be it corporate or otherwise. See, growth and scale is something which we are looking at very strongly, and we are already seeing optimism in ourselves that things are looking much and more better as months pass. Another significant Positive for us would be the cross-referrals that come out of the SMBC relationship. And in this also, we have already started seeing some good traction in the cross-referrals that are happening. This is a simple response to you, so Chris.
Thank you. My second question to Mr. Niranjanin, again along the similar line, just want to understand from a financial point of view, what key risks or challenges do you anticipate in the next quarter, to be very precise, and what specific measures have been taken to manage margin, credit cost, capital adequacy, and overall... The balance sheet stress, especially in a rate-sensitive area. Thank you.
Thank you. So, the first point I would like to call out is on our capital, because as Vinay just mentioned, we continue to keep our objectives on growth and scale, and maximizing the SMBC ecosystem. Our value proposition intact. Clearly, when we look through our capital requirements, it's going to be an important element. So, CET1, in the range of pro forma basis, again, this is not conclusive, is at about 11.4%. We do believe that we will continue to evaluate areas of capital actions. To make sure that the bank remains well capitalized in order to fulfill its growth objectives. That's point number one. Point number two, I think, which is where I would like to bring focus is on our core operations. As you would have seen over the last many quarters, the bank continues to improve on the core metrics of ROA. In fact, even adjusted for security receipts, either bank score, ROA, continues to improve. We continue to see improvements in our cost to income. So about two years back, the cost to income was in the range of 74%. It is already down to 64% as we reported this quarter. So there's an improvement that's happening there as well. The third is if you look through our NPA credit costs, Thank you. A function of the two, which is both undeployed credit. And the, and you know, much wider denominator meant that our margins were lower. Now that is one area that we will work to continue to deploy the credit. We should be. We should have a positive bias on the margins going in. So that's one area that we will continue to observe. The second moving part is on our RIDF balances. In H2 FY27, we will continue to have a reducing balance on our RIDF deposits. So just as a call out, you will recall. We had deposits placed in lieu of shortfall in PSL in the past. And those balances will continue to come down, and that will be a tailwind to margins. So as we look through H2 to respond simplistically, there will be competitive pricing pressures on margins, but we do believe that there will be tailwinds for us to be able to offset that as well. So our outlook when we think through H2 is December might still be closer to a stable margin structure, But as we look through March, we should have a positively improving bias. Thank you, and Thank you, Sukrit.
Operator
Thank you. The next question comes from the line of Jai Prakash Mudra with ICC Securities. Please go ahead.
Yeah, hi. Good morning, sir, and thanks for the detailed disclosures, including the pro forma number. Sir, I wanted to check on the accounting entry. Yes, hypothetically, this GT1 were to be reversed. Would there be any P&A implication or it will be only adjusted in the reserves? And because I believe at the time of write-off, we had taken the P&L entry. So, if you can highlight those.
So, Jay, I'll take that question. So, what we have done right now is to provide you a proforma which has been taken through the P&L and the impact is available. In terms of The, you know, the substance of this matter, we do believe that the route through the P&L is only gesture, gesture means, in substance. If you think about the restatement, it is actually a balance sheet structure where the core reserves are being used to reinstate the liability, and that is from the perspective of accounting. Now, when we finally effect, of course, it is subject to our assessment, and there are multiple operational aspects that we need to conclude. So, as the assessment is concluded, we will take it through the accounting route as well.
And is there any cash flow, cash outflow also because of this or it is only accounting?
The principal restatement of the AT-1 bonds, as I said earlier, is in substance a balance sheet change from the reserve to the borrowings, which is a tier one classification. There's no repayment, no cash outflow on the borrowing. It's just an accounting that we will have to restate.
And what is your, is this final that the coupons have no bearing, or you believe you may have to pay the coupon also, or is that clear, not clear, or very clear that the coupon will not be, that we are not liable for the coupon?
Jay, you know, the... The bank is still evaluating the consequential implications of the judgment, including the decisions, the actions that are required to give effect, right? And therefore, the manner and the timing of reinstatement of the bonds, as well as payment of the coupon, is also under assessment. We've informed the stock exchanges as well, and we will disclose the outcome once the assessment is complete. Our consideration on coupons will also be a function of the terms of the information memoranda, and that's also pronounced in the judgment. So, I'll stop here.
No, no, that is very helpful. Secondly, sorry, just to move away from this, what would be your market share in value terms in pair PSP and pay PSP? A broad number will also be useful. And maybe if you have the number for above 2,000 transactions.
I think, see, overall, I mean, without any details, we make these disclosures, but overall, you can say we are about a one-third market share bank.
No, if you have the numbers separately for payer PSP and PSP, I think that will be more useful.
So, JSP, PSP is about 58.7, and the payer PSP is about 36.4%. It is also disclosed in our investor presentation on page 41.
No, is this value or volume? Sorry, I was more interested if you have the value market share.
Maybe we can take this offline with you.
So, sorry, just to any quantification of this MDR, I think we have been investing quite early and quite substantially in this network. And now there is an opportunity to monetize. Have you done any assessment as to, you know, what kind of an additional fee it could generate for the bank as and when it comes? I mean, what kind of a quantum it could generate?
So, Jay, as you rightly said, clearly, you know, the MDR rules mean that we have an upside on income on account of our market share. However, it is going to be premature for us to be sizing of that because it's a function of How also the markets play out in terms of the actual MDRs that are charged. But we do believe that it is a quantum that will certainly be an upside to our current revenue streams. It's just that we don't want to, you know, size that up in the absence of where we feel, you know, commercially this will land in actual terms, number one. And number two, it's also a function of our bilateral, you know, arrangements and negotiations with, let's say, the third party application providers as well.
The arrangements which eventually will get crystallized, I think that also will have a bearing on how much we get out of it.
So, and coming to the call, yeah. Sorry, sir, I have a few more questions if I can ask them now or I can come back and let's see.
Okay, sure. Sir, if you can suggest your thought process on the NIMS sensitivity, in the sense, A, what would be your share of, let's say, EBLR, T-bills, MCLR, and fixed rate loans? And if you have done any sensitivity that one basis point, repo rate hike gives you how much additional rupees per interest income, that will be useful to see.
So, again, simplistically, when we think through our floating rate book structure, as a combination, and let me put it this way, as a combination of floating rate book, as well as the short-term book, because it might be in the nature of fixed, but it is akin to a market that keeps moving. On both these, the broad mix that we have is about... A two-third, one-third. So about 65% of the book will be floating, which is either linked to a repo or a T-bill. And T-bills, again, you know, at different, let's say there could be a one-month T-bill or even a three-month T-bill. So that's the broad split from the floating rate to fixed rate. As we look through the, let's say, the benefit of... Of margins, and I'm just putting a number, you have a 25 basis points of increase that has happened in the repo. Assuming we have a broadly similar structure, sensitivity to other benchmarks as well, you could see margins clearly moving into high single digit increases. But I think, again, the reason we don't want you to be guided by that is because it's finally a function of market forces. So when you think about spreads, it's a function of market forces. As long as the market in general increases prices by this quantum, of course, we do believe we'll find a high single digit increase on account of the 25 basis points increase. But it's then a function of liquidity, it's a function of competitive intensity, and that will also have a bearing of how exactly this flow is. Thank you.
And secondly, in an observation on certificate of deposits, so we have increased from 6,000 odd flows to around 11,000 odd flows. We also had FCNRB. So I believe you, what was the need for certificate of deposit rising up? I thought that, I found it counterintuitive that ideally it should have been repaid because you would have had excess liquidity out of FCNR. So any thought process here?
No, absolutely. So, on that, it is actually more tactical, not so much a change in our fundamental funding strategy. And, you know, the reason was also because we've had rating upgrades as well, although, you know, CD's short-term rating was always A1+, but... The long-term rating also went up above AA, which means, you know, the access to that funding was also at some, you know, cheaper rates as well. But I think fundamentally, when we think through our funding... So, one was, of course, economically, it made sense to access that funding. But secondly, there are also certain considerations from balance sheet, which is LCR, NFFR. So, some of this was more tactical in the interim as compared to a long-term strategy direction.
It was a selective use of that particular market. Very tactical at that time.
Okay, last question. If you can, sir, quantify the ECL impact, I believe we are now very close to the actual implementation. If you would have a broad number for what would be the transitional impact and maybe the recurring basis if you have that number. Thank you.
Yes, again, these are very indicative numbers, and these are getting formed up as we speak. But our expectation is on the opening balance sheet, the CET1 impact could be in the range of about 50 to 60 basis points. However, what we have also seen is that the new circular on credit risk also offers a substantial offset to this. So as we look through a combination of these two circulars, we do believe that the opening CET1 impact should not be a material hit to the CET1.
Thank you and all the very best.
Thank you. Thank you, Jay.
Operator
Thank you. A reminder to all the participants that you might be a star and one to ask a question. The next question comes from the line of Mayank Bukhari Diwala with MLP. Please cover it. Mr. Pukhla Diwala, sorry for interrupting. Your voice is not audible. Please speak a little louder.
Operator
Yes, now you are.
Please go back. So, in your margin discussion, the point about the coupons that might need to be paid on those 81 bonds wasn't discussed, because that could have a materially negative impact on the margins. So, I just wanted to understand your thoughts on that. Now, I understand that those coupons These are optional and at the discretion. But since you've not mentioned those specifically on your margin mat for the future, I just wanted to understand how you guys are thinking about that.
As I said earlier as well, this is a matter that is currently under assessment. The entire consequential implications, decisions, actions are required to be given effect, and we are evaluating all of those, which includes coupon as well. So I would urge that allow us the time. To conclude on this assessment, and we will be forthcoming in making the relevant disclosures the moment this is done. As you rightly said, the coupon will be guided by the information memorandum, and that is also a matter that we are currently reviewing, and once we conclude, we will come back to you.
Perfect. I understand that. I understand that the coupons of the past remain a matter of debate. What I was trying to understand is that once these AT bonds are restored on the balance sheet, and I'm talking about prospective coupons, where I would believe that it's not really a legal matter. It is simply a management discretion issue. And I think the only thing that is an interplay between the coupon is whether you can say dividend or not. So, only from that perspective, I'm obviously not looking for an answer about the past coupons during which these bonds were not in play.
No, of course. Again, as I said, future coupons will form part of the future assessment. And therefore, I think just from a timeline standpoint, it's important that we first conclude the assessment on the judgment. I think our decisions on the future coupon will also, you know, will be made at the appropriate time. Our, you know, consideration on each coupon will continue to be guided by the terms of the information memoranda, as has also been pronounced in the judgment. So, there is actually no decision to pre-announce that today.
Okay. Fair enough. So if I could just ask one or two more questions. One on asset quality, the slippages from the retail book, they're sort of coming at the same level for the last couple of quarters. Just wanted to understand, is this the normalized level of slippages we should anticipate from the retail book, or is this likely to move down?
So, Maryang, if you think on slippages, we have seen on absolute terms actually the slippage is holding well. And for a book that is now beginning to grow with slippages holding up, I would say, you know, is actually a positive sign that we have seen. In absolute terms, we do believe that, you know, I think this is a level which is reasonable. And even now, from a slippage ratio standpoint, I think it is, we might see some basis points of improvement, but not a whole lot from here on.
Got it, got it. And sorry, last question, coming back to the same issue, but since our CP1 plus AT1 remains broadly the same and fundamentally materially above the regulatory guidelines, and I understand most of the capital strain is mostly, you know, an unofficial guidance from the regulator in some sense. To be closer to the 14-15% level, but would you guys have any conversation with the regulator given the circumstance where fundamentally CET1 plus CET1 remains the same and doesn't really force us into an immediate capital raise?
So, Mayank, you know, let me put it this way. For us, when we were at 14% CT1, it was our, you know, our comfortable level where we were operating in between, let's say, 13.5 to 14% level. We do believe it was a level which is, you know, which was comfortable just keeping our growth objectives, ambitions in mind. From a regulatory standpoint, there was no structure to say that, you know, this is the CT1 that you have to operate. There are regulations that cover our CT1. So, you know, we were always comfortably above those regulatory requirements. However, once we conclude the assessment with a CET1 pro forma at 11.4%, we do believe that it still allows us headroom to continue to grow. But yes, I would say the evaluation for capital actions, including any raise, I think we will have to be mindful of that because clearly 11, 11.5% of CET1 is not ideal, and that's something that we will, I mean, irrespective of how the regulator might want to say, we will want to make sure that capital levels are more comfortable. But we will certainly not take any action which is going to be detrimental to our stakeholders, including the shareholders, which are very important to us. So, the content, the value, the rate, I think all of these, we will make an ongoing assessment. Plus, there are certain other, you know, stored. I mean, features of stored capital that we have in our balance sheet, we've said that in the past as well. You know, there is a security receipts portfolio, which is about, you know, face value, about 15 billion. NAV is about 20 billion rupees, 2,000 crores. which has zero carrying value. Now, again, I'm not, you're not trying to say we will necessarily take an action, but there are such stored, you know, levers also available, you know, to unlock capital that allows us to continue to pursue our growth and scale objectives.
Got it. Perfect. Thank you so much for all the answers.
Operator
Thank you, man. Thank you. Next question comes to the line of Jane Karate with Access Capital. Please go ahead.
Thank you for the opportunity. Sorry, I joined a bit late. I wanted to know what is the RIDF plan for this year, the rest of the two quarters? How much is the rundown expected? And again, Mr. Ka, what is the exact NIM outlook for the next two quarters? I understand the medium-term leavers, but specifically for 3Q, 4Q, if you have given quantitative NIM guidance, given the rate hike and this RIDF rundown. This is the first question.
So, on the RIDF, H2 reduction is expected to be about 8,000 crores, H2, and that split Q3 as about 4,700, and Q4 of about, let's say, 3,500 crores. So, that's really the split, of course. You know, I would request that when you think through the benefit of that reduction, so let's say Q3, reduction of about 4,700 crores, kindly bake the benefit of that to play out in Q4, and similarly, Q4, reduction of about 3,500 crores. So I think that's an idea. That's one clear tailwind. We spoke about, Jain, we spoke about the 25 basis points repo increase as well. Because the repricing of the book will start, let's say, beginning November, because the decision was announced in October. So we will have two months of repricing. Thank you. Some bias. You know, how are we?
And just thinking into FY28 now, given that you'll exit on a very strong, I mean, when I say strong, I mean a decent uptick in Q4, but the full impact of the second of RIDF payment. Should start showing in FY28 as well. So, fair to say all things being equal, our ROA steadily for all four quarters, again, all things being equal, meaning asset quality being stable. Just from purely waterfall perspective, we should comfortably be north of 1%. I remember our guidance used to be exit 1% ROA for this year. Would you want to fathom a guess for next year, where do you see yourself exiting by Q428?
So, Jayant, you know, I will, what I had, what we had said is that fiscal 27 ROA should be, you know, should be a 1% for full year. We are clocking at a 90 basis points for H1. What we had said, however, is that for that guidance to play out, entirely there is also some reliance on, let's say, the non-core elements that we call, for example, the quantum of security receipts that we will have, so on and so forth. Right? What we certainly believe is that, you know, that... Core ROA performance, we continue to see a material improvement, even in H1. For example, we have already higher on the core ROA, closer to like 20 basis points as we see H1 playing out. And that improvement, we are very confident that we will continue to deliver. As we go into FY28, I would say our confidence on delivering 1% ROA with lesser and minimal reliance on non-core, I think it's something that we can directionally certainly call out, but you'll have to allow us to put that guidance out more emphatically as we conclude fiscal 27.
Great, great. As a last question on growth now, let's assume this impact fully comes through. And if I'm not wrong, there will be a DTA release, CET, one of 60 basis points, right, which you keep getting over the next few years or quarters, which means theoretically our growth. The capital consumption is not proportionate to the growth because we have release of this deferred tax asset that will come through. So have you done any analysis or calculation at what level of growth, even with this capital, without the capital raise, can you guys comfortably grow for next two or three years? I mean, if any calculation has been done, because there are some elements like the CET release, like the stored capital that you have. So any analysis where you, like below which number, you would not want the balance sheet to slow down.
So, Jayant, point number one is, I would, I mean, instead of growth, I will look at, let's say, from an ROE perspective, because ROE is accreting capital. So, at about, you know, 8.2% accretion to ROE, actually, in effect, allows us… With the benefit of DTA, we have ability to grow at 11% without consuming capital because there is a DTA release, grossing up that happens, and ROE is actually on a higher denominator of equity. Once you adjust for DTA, you know, effectively you are creating core equity at a higher rate. So that means at about 11%, We have the ability to grow without consuming capital, and we can just put some very simplistic numbers. So, if risk-weighted assets are growing at 15%, we will have about a 4% burn on our CET1 ratio. So, if my CET1, let's say, is 12%, I'm, again, simplistically putting a number, that's about 48 basis points, but it is never a linear answer. The actual answer will be more like a 35 to 40 basis points because it's not a linear equation. So, even with a 15% growth next year, we are potentially looking at a consumption which could be in the range of about... Let's say 30 to 40 basis points. And then, you know, one can also argue that with some capital actions that we could take, as you said, stored capital, potentially, you know, we could look to operate at the similar ET1 levels as well. So, you know, the way I would portray this is... We don't believe that this really has a bearing in the way we will want to look at our growth capital. Of course, when we were earlier looking at, you know, solving for capital at some stage, maybe some of that thinking thought process could be, you know, could be brought forward a little bit. But it is not that we have to solve for it in one quarter or two quarters. I think we will have the reasonable cushion and buffers to still make sure that we solve it in a manner that is appropriate and in the best interest of all the stakeholders.
And even when you said that 8% ROE leads to 11%, I mean, just from that 8 and 11 delta of 3%, you have only assumed the DTA that you are currently releasing, or you have assumed the DTA that you will also release once you account for this 8,000 crore of it?
So, so, so, so, no, so that, that DTA, so, okay, let me go this way. So, when I look through an 11.4 percent. CET1, let's say CET pro forma number, that takes into account that DTA. So, DTA is effectively a function of whatever profit you make, you actually gross it up for the profit. So, let's say if we make, so let's put it this way. Let's assume on a pro forma basis, you know, So, the CZ one is at 11.4%. So, with an ROE of 8.2, The first step that will happen is the ROE first will actually improve to about 9% for the same level of profits because now the equity effectively is lower. The 9% then let's say the bank is delivering a 9% at a structure level you could argue that that in itself is looking to improve. Let's assume that that improves to about 10%. The point I was making is that on that 10%, you could now further build the DTA benefits, because whenever you have an ROE of 10%, there will be a DTA release that will be commensurate to that earnings, and therefore, potentially, we could work upwards more like a 12 to 13% of ability to fund the growth. As we move forward. So, you know, I think there is no gun to our head to solve for capital. In any case, we have to make sure we are going through the moment of evaluation assessment. But we believe that this is something where we will continue to work towards, you know, growing in line with our objectives.
So, fair to say you're not taking your feet off the... Absolutely, Jayant.
For us, this is the way we look at it is our CET1, again, subject to the actual conclusion of assessment and implication. For us, this is core equity of 14%, potentially down to 11.4%. But that will still mean that we will want to continue to focus on our growth scale because the rest of the franchise is, I mean, the whole of the franchise, I wouldn't say rest, you know, is actually working at a great momentum. It's getting reflected in our numbers, including growth. For, you know, bank and, you know, we were delivering sub-industry-level growth levels, of course, for the right reasons in the past. We are now actually clocking, even adjusted for the FCTL, a growth in excess of the industry as well. So, that momentum is strong. We will want to make sure that, you know, we continue to, you know, sustain that momentum.
Perfect. In one line, I think we have enough capacity to continue to grow at whatever we have planned.
Great. Perfect and all the best of the team.
Operator
Thank you. The next question comes from the line of Maruk Adajanya, the other capital. Please come in.
Yeah, hi, good morning. Hi, hi, good morning. I just had like a fundamental question on coupon payment. So I know that you are assessing the order. And I also know what's written in the info memorandum. But like, there need to be... Dire circumstances to not pay coupons. Would that be correct on a fundamental basis like, say, weak profitability or if a company is making losses? Otherwise, it would impact sentiment around capital raise, right? Whether it's bond or equity. It would also impact the valuation of bonds and equity, right? I'm missing coupons without... Very serious circumstances. Is that the correct way to think about it, or is there some other way?
So, Maruk, you know, I'm afraid we will not comment beyond what we've already said on this, because there are two parts to this. One is the evaluation of the consequential implications of the judgment, which is immediate. And second is we are talking about, you know, elements of future. So, you know, I want to break this into two. We are right now in the process of concluding, you know, the present, which is the judgment and its implication. I think when we come to the point of future, I think I don't want to preempt a decision, you know, a decision that has not been made yet. So there's no point on that. The, you know, the information memorandum is out there, you know, as the judgment has also directed towards. We will abide by the information memorandum where the conditions have been detailed on coupon payment.
Okay. Thanks a lot. Thank you. Thank you, Martin.
Operator
Thank you. Next question comes on the line of Kunal Shah with City. Please go ahead.
Thanks for taking the question. Sorry, I called the join a bit late, so if it's repetitive, but firstly on credit rating agencies, have there been any interactions with them, how they are viewing this judgment, and if there is a knockoff on the CET1, how they are looking at it, and suppose if there is no coupon payment, which happens in future, would there be any implication on the credit rating out there?
Kunal, on credit rating agencies, we've had interactions. There are a couple of them that have actually come out with a bulletin or a note, which our understanding is that it is put out as a very emphatic credit neutral event on the rating. Of course, there are certain other comments that have been made, but at the fundamental level headline, this is a credit neutral event from a ratings perspective. I think two of the agencies have put out, one international and one domestic. Others are, of course, we've had conversations. I think they will go through the motions of their conclusions as well.
And secondly, in terms of maybe you are evaluating the consequential actions and even some legal remedies, so what could be any legal remedies out there over and above this judgment, or do we say like, okay, this is something which has happened, and maybe the only option now is left is the capital raise to show up the CT1, and the capital raise could happen much sooner. Rather than waiting for all the legal remedies which are there. So which would be the priority? Maybe going through a legal remedy or considering this as a judgment and going for the CT1 raise.
So Kunal, I'll break this into three simple buckets. One is the evaluation of the consequential implications of the judgment. We have to... The second part, as you said, are the legal remedies, you know, what could be the next steps. But I have to, I have to call out that these are two, you know, two separate lines that we will pursue. One part of the motion. The second, as I said, is a legal remedy, legal review. I think, again, it is a matter that we are currently discussing with our legal counsel, the advisors, and we will evaluate and, as appropriate, take... Solving capital, etc., whether I do it beforehand or afterhand, after all of this. There, in my previous response, The evaluation of whether we need to raise capital now or we do it afterwards, I think these are commercial evaluations that we will do, but I think the simple point I want to leave with you is that it is not that I have to solve for capital tomorrow. We do believe we have buffers, we have the benefit of DTA, you know, that allow us to solve for growth without necessarily, you know. You know, getting to capital levels that we don't feel comfortable at all.
Okay, got it. And lastly, in terms of this SPNR deployment, so how much of this would have been utilized because we are still seeing in terms of the growth? FCNR deposit accretion would have supported that kind of a growth. And when do we see the entire money getting utilized? In fact, we have seen many of them putting into the short-term corporate lending for us. In fact, the corporate and institutional banking is just flat on a quarter-on-quarter basis. So would it be like more of the – maybe would there be immediate generalization which would happen into the FCNR deposits or this is going to take some time?
No, as I said, Kunal, earlier, you know, Q3, between Q3 and Q4, we think that this deployment, you know, should be complete. So, our expectation is that I think that's the two quarters, largely in Q3, but some part will spill over to Q4.
And fair to assume Q2 didn't have much of a deployment.
So, I would say Q2, you know, there was a large increase in our short term, which was in the nature of, let's say, investments, you know, some nostril balances that we had. So, yes, not ideal from a credit perspective.
Yeah, so overall, maybe in terms of whenever it gets utilized, at least it will be yield operative, and the maximum drag on margins would have got, maybe there will be a full quarter impact which will come through in Q3, but still, otherwise, maybe at least on an incremental basis, now only it will get generalized into a better yielding one.
Yeah, and that's what I also called out, Gunal, earlier, that once we will have a full quarter impact in Q3, but there will be offsets. I think repo rate hike, assuming spreads don't change, is there, plus RIDF reduction in balances will continue to play out. So, I think those are, you know, those are tailwinds, you know, which will support the margin in Q3. We said Q3 in our assessment should be similar to Q2, maybe a very marginal negative bias. But as we kind of go into Q4, we certainly believe, you know, we should have an upward bias on the margins.
Okay, got it. Yeah, thanks for answering all the questions and all the best. Yeah, thank you.
Thank you, Gunnar. Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I now hand the conference over to Mr. Vinay M. Tonse for closing comments.
Thank you very much, all our friends for joining in, and as I said, early morning. Apologies for that. Our priorities remain centered on the fundamentals, that's improving the core profitability, growing deposit franchises, and advances in a risk-calibrated manner, managing margins and operating efficiency, and also maintaining asset quality. Capital planning will remain an important... The bank, you would have seen, has made progress in strengthening the scale and quality of its franchise. And I must also here say that we recognize the significance of the Supreme Court judgment. We also recognize the need for a carefully considered response. And we will continue to act in accordance with applicable legal and... Thank you.
Operator
Thank you. On behalf of ES Bank that improves this conference, thank you for joining us. You may now discuss your lines.
