Operator
Ladies and gentlemen, good day and welcome to the IDFC First Bank's Q2 FY27 Earnings Conference Call. 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 concludes. Should you need assistance during this conference, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saptarshi Bapari, Head Investor Relations and ESG. Thank you, and over to you, Mr. Bapari.
Thanks, Darwin. Thanks, everyone, for joining the call. We'll have the presentation first from Sudhanshu, who is our CFO, and then we'll have some brief comments from Vaidya, and then we can open the house for the Q&A. So, I'll now hand over to Sudhanshu for his opening remarks.
Yes, thank you, Samson Rishi. First of all, good evening, everyone. It's a pleasure speaking to all of you. I will, in terms of sequencing, I'll maybe first cover a few business numbers and then later on take on the profitability part. So, business momentum continues to be quite strong. During the quarter, we saw a healthy growth in both advances and deposits. However, the key development during the quarter was the FCNR mobilization under the RBI scheme. So, let me start with giving some numbers first on that front. During the quarter, the bank mobilized Rs. 34,390 crores, which is about USD 3.6 billion of FCNRB deposits. Under this scheme, this constituted about 10% of the overall deposit that we have at September 30, 2026. Against this, we also extended leverage of USD 2.6 billion, which is in Indian rupees about 25,000 crores, to NRI customers. If we see on the basis of these loans, then this constituted about 7% of the overall loan book at September 30, 2026. At mobilization of USD 3.6 billion, the bank garnered about 2.7% of the overall mobilization the country received under this scheme. This is about 1% higher than our NRI deposit share, which was this pre-FCNR announcement. As part of the exercise, we also obtained our debut Ibu International Rating from S&P and KRH. Happy to report that we got an investment grade rating for the bank on this front. On the back of the ratings, we also did a debut bond issuance. We almost raised close to $1 billion of bonds. The actual number was US$950 million, and these were raised from the offshore Ibu branch from Marquee International Investors. Since this was a specific opportunity during the current quarter, wherever relevant, I will try to give out numbers with and without FCNR to keep underlying trends comparable with the previous quarters. Moving on to loans, that registered a strong growth of 30.1% on a YOY basis and 13.6% on a Q&Q basis, including FCNR, and that book has now reached about Rs. 3.47 lakh crores. If we exclude the FCNRV-backed loans, the loan assets on a gross of IBPC basis grew by 22.2% on a YOY basis and 5.7% on a Q&Q basis and was about Rs. 3.29 lakh crores. The incremental growth on the loan side during the quarter was primarily driven by mortgage, vehicle loans, consumer loans, and a slightly faster growth in business banking and wholesale loans, which individually grew by more than 30% on a YOY basis. The MFI book saw a marginal increase during the quarter. That book now stands at Rs. 6,825 crores and about 2% of the overall funded assets. 97% of the book is now covered under the CGFM use scheme. With respect to credit cards, happy to report that the cards in quotes crossed 5 billion during the quarter. The book on an outstanding basis stood at Rs. 9,875 crore, and the credit card spent grew at a healthy pace about 15% on a YOY basis. We have given more details around the asset growth on slide number 31 in the investor presentation. Moving on to asset quality, there also we saw an improving trajectory across GNPA, NetNPA, SMA, across product classes. We give a fair degree of disclosure to the investor presentation around these numbers. On a headline basis, the gross NPA of the ratio of the bank improved by about 19 basis points, from 1.51% reported in Q1 to 1.32% in Q2, and by 9 bps if we exclude FCNR leverage from the denominator. Similarly, on net NPA, we saw an improvement of four basis points to 0.40%. If we exclude the FCLR-backed loans, the net NPA ratio would be 0.43% as again 0.44% reported in the previous quarter. Further drill down, if we look for now the retail, agree, and the MSME book, the GNPA ratio here improved from 1.4% to 1.24% and to 1.36% if we exclude again Moving on, the collection efficiency for the current bucket for retail continues to hold well. It has been now stable around the 99.5% for many quarters. The SMA 1 and the SMA 2 book for the retail was at 0.72% in Q2 from 0.77% which we saw in the previous quarter. SMA 1 and 2 for microfinance further normalized to 0.6% from 0.7 BIPs in the previous quarter. At an overall bank level, SMA 1 and 2 reduced by 4 basis points to 0.58%. The net slippage ratio for the quarter was stable at about 1.6%. Moving on to deposits, total deposits, which is customer deposits plus certificate of deposits, that reached at Rs 3.48 lakh crores. The growth was about 25.9% on a YOY basis and 11.8% on a Q&Q basis. If I just talk of customer deposits, that has crossed Rs 3.48 lakh It grew by 26.9% on a YOY basis and 14% on a Q&Q basis. This also included FCNR. And if we exclude FCNR deposits, customer deposits grew by 14.1% on a YOY basis. But here is where we slightly calibrated the growth because we got strong FCNR inflows during the current quarter. So, this was more a conscious strategy which we followed during the course of the quarter. As a result, we did reduce the bulk deposit ratio from 17.1% to 13.9% in the current quarter, and also repaid certain certificate of deposits as it came up for maturity. If I talk of CASA deposits, that grew to now 1.66 lakh crores. The growth on a YOY basis was 19.8%, while the CASA ratio for the quarter came to 47.6%. This was lower because of the FCNR deposit mobilization in the denominator. The average CASA ratio still, I would say, was healthy at about 48.4%. If I move on to profitability, I'm happy to report that the profit has remained above Rs. 1000 crores for the second consecutive quarter, and the profit for the quarter stands at Rs. 1045 crores, which is an improvement of about 196.5% on a viable basis, while it was marginally down as we had reported higher Treasury income in the previous quarter. We have also given in the presentation our numbers on a core PAC basis. When I mean core PAC, that excludes trading gains for all the periods and also certain one-offs items which we had called out in the previous quarters, like the impact of the fraud incident, some income tax refunds and interest which had come in the previous quarter. The core profit, and these details are given in slide 5 of the presentation. Again, happy to report that on a core basis, the profit has crossed 1,000 crores, and this was about 897 crores in the previous quarter. Some more drill down, all operating matrices continue to demonstrate a healthy growth trajectory. For example, NI grew by 21% on a viable basis and 3.5% on a Q&Q basis. N.I. growth was in fact 4.5% sequentially if we adjust for interest on income tax refund, which we had called out for Q1-27. The N.I. growth in the current quarter was also broadly in line with 21.1% YOY increase reported in the previous quarter. The net interest margin for the quarter was 5.58% as compared to 5.90% in the previous quarter, excluding the income tax refund which we had reported. Now, I will talk about why was the moderation in the current quarter. The NIMS moderated because of, I would say, three or four factors. One was the FCNR, which I would say was the primary reason since this came into the denominator, we had an impact of about 16 basis points on this FCNR-backed lending. Second, because we have mobilized strong, I would say, FCNR deposit flows, we in the interim also parked such liquidity in low-yielding treasury instruments and nostril balances. That had an impact on NIMP of seven basis points. Then there were also impacts because of change in asset mix, because we have grown wholesale banking and business banking at a faster pace. One point which I want to sort of also put across is that the margin impact on FCNR should not be viewed in isolation. As because FCNR also comes to the denominator, it's correspondingly also reduces operating expenses and credit costs relative to assets. And hence, we have estimated that the overall impact on the ROA could be very minimal as low as two basis points. Pursuant to the FCNR scheme, we have also estimated an additional benefit of 1%, including statutory benefits, which could accrue to us. If we compare this with a normal deposit, which we would have raised otherwise, if these FCNR flows were not there. This FCNR deposit also would not consume capital. Hence, whatever we earn, which I mentioned, of 1%, that increases my NI, that increases my profitability, that increases my ROE, EPS, and all of these numbers. Just in terms of how do we see NIMS going forward, we see this recovering to approximately 5.8% by Q4, as some of these excess liquidity would have been definitely put to use by then, and also the expected repo rate increase, which we also are factoring for the course of the year. Moving on to fee and other income, we saw a healthy growth that increased by about 24.5% on a viable basis compared to 22.9% in Q1. We have given details of the fee composition in the investor presentation. As a result of the increase in the NI in the fee, the total income excluding trading gains for Q2 on a YOY basis was a growth of 21.9% versus 21.5% reported in Q1. During the quarter, the treasury gains were modest at about Rs. 11 crores as compared to Rs. 181 crores reported for Q1, which was largely due to the hardening of the GSEC yields during the quarter. Moving on, the OPEX for the quarter was at Rs. 5942 crores. This grew by 16% on a y-o-i basis and by 3% on a sequential basis. The increase of 3% corresponds to an increase in core income growth of about 4.6% on a sequential basis. As a result, the cost-to-income ratio, excluding trading gains, improved by 57 basis points on a sequential basis to 70.2% and was, in fact, 358 bps lower on a buy-buy basis. Operating job, which is the growth between the total income and the OPEX, that continues to improve. In fact, for the quarter, it stood at 592 basis points, and for H1, it stands at 553 basis points. If you remember, we had guided for an upwards of 500 basis points, which we would endeavor to maintain, and we are broadly on track on that side. As a result, the incremental cost-to-income ratio was about 55% for H1, and that has also resulted in some of this opening of the jaws, which I sort of spoke of slightly earlier. If I talk of operating profit of the quarter, that saw a healthy increase of 38.5% on a YOY basis and 6.6% on a sequential basis. So for three quarters in an hour, now we are getting an operating profit increase of upwards of 30%. Moving on to provisions that reduced by 21.7% from 1452 crores, Rs. 1137 crores on a YOY basis. On a QONQ basis, if we see this has broadly remained at the same level as we reported about 1144 crores in the last quarter. However, to point to note also here is that the provision for the current quarter also includes candidate asset provision of about Rs. 100 crores on the FCNR-backed loans. If we exclude this, then the provisions for the quarter declined by 9.3% on a Q&A basis. The bank continues to hold the contingency provision of Rs. 515 crores created last quarter. This is on a prudent basis considering the evolving macroeconomic and the geopolitical uncertainties. In terms of credit cost translation, the credit cost for the quarter further improved to 1.38% as compared to 1.53% for the previous quarter. If we exclude the FD&R-backed loans and the corresponding provision, since these are backed by FDs, the credit cost for the quarter would have been further lower to 1.30% on average funded assets. On an average total assets, the credit cost which we have reported translates to a credit cost of 1.01%. Moving on to last few parts of my opening remarks, we all know that there has been a consultation paper which has been issued by IDA. While this is still, as I said, in a consultation stage, there could be a draft circle which could come in followed by final regulations, And this is largely expected to come in from next year. But we have estimated the impact as is in the current form that if this has to come, this will definitely reduce our free income. But we feel that to a large extent, the impact can be offset by the expected repo increase and the FCNR benefit, which I have talked earlier. We will also continue to work on product mix changes and closely monitor the developments in this regard. Moving on to capital and liquidity, the capital adequacy ratio stood at 14.66% at September, with CET1 ratio of 13.01%. On the LCR, the ratio was at 125% on an average for the quarter, and with September being at higher at 139% because of the FDNR money which came in towards the tag end of August. Normally, as you would have noted, normally we have been maintaining LCR around the 115% mark. Hence, we would continue to deploy some of this excess liquidity. We also broadly feel that this will get largely consumed in a month or so. With this, I will hand over to Vaidya for his opening remarks.
It's really, really a pleasure to talk to all of you. First of all, I'm really happy to share with everyone who's been observing us and tracking us for a while that second quarter in a row, a bank posts a profit after tax of 1,000 crores. It's a landmark event for us, considering where we started. It feels good. It encourages us to keep going. I mean, it appears to us that a reasonable look is that this should continue in the months to come as well, or the quarters to come. Now, if you see the core profitability, the core profitability meaning that if you take off what can be considered a one-time income, Like a treasury trading income, etc. Last quarter, the bank had posted a part of 897 crores, which we had rounded out to 900 crores. We called it out last time when we posted 1,070 odd. We had said that a portion of that is treasury income, like core core is 900. The quarter before that, the core core was like 746. The quarter before that was 430. Quarter before that was 300. So you can see the trajectory. So I can simply say that the trajectory is fairly established by now. This quarter, on the core, without any adjustments, it is 1,036 crore. So, we feel good about that. I always said that we'll be increasing distance of 1% ROA. It looks like we will get there. In fact, this quarter also we had ROA of about 0.93%. You know, Sudhan, she mentioned the HDNR in the denominator effect. But for that, probably a bit higher than that. So, broadly, in other words, the trajectory of profitability is looking good. I also want to say that the trajectory of profit maybe is today, but actually it is because of many investments the bank has been making for many years. If you recall, many may not recall, it's been a while back, but, you know, in the year that was the merger year, we were posting something about 700 to 800 crores, 750 crores as the core P-POP. Now, P-POP is now touching something like 10,000 crores, or annualized. So, I think the trajectory is looking good, and now you can take a sense where it might look next two, three, four years from there. In today's numbers, I'll try to give you a picture of that. So, the key thing to note is what is happening to the underlying economics. This is very important to understand, because if you see the H1, FY27 actuals, the interest The interest income is 10.7%. The interest expense is 5.0%. The NII is 5.7%, as you know. Now, fee income is 2.1%. These are all actuals. So, the total income for H1, 27, is 7.8%. Now, the cost-to-income ratio is currently 70.4% on stock. Now, if you subtract from that the credit cost, the ROA comes to about 0.99 for the half year. But for a minute on your spreadsheet, go and plug the cost-income ratio at 55%. Why 55? I'll explain to you in a moment. So put in 55%, and you see what it does to the OPEX. OPEX comes down to 4.3%, your PPOB becomes 3.5%, the provision is still 1.1, which is actual. Because the PBT becomes 2.4 and ROE becomes 1.84. The point is that on an incremental basis, the bank is now making return on assets of about 1.8% plus. On the stock basis, 0.97 or 0.93 that I mentioned to you. So what is the point? Why do we assume that it's 54, 55, and why you should assume so? Now, if you look at the incremental cost-to-income ratio, what you do is that you go to H126, our operating expenses was 10,000 crores, and our operating expenses in H1 of 27 is 11,000. So you get the drift. The incremental OPEX between H127 and H126 is 1,627 crores, and the incremental income is 2,900 crores. So on an incremental basis, the bank is posting 55% cost-to-income ratio. So, eventually, the incremental becomes the base as long as they keep repeating more of the same. Now, you might ask, how confident do we feel about repeating this? Now, look, for three quarters in a row, we have been pointing out that our office growth is 500 basis points lesser than the income growth. It's three quarters in a row. So, it has some predictability now. And we feel we can reasonably give or take, stay in this zone for the next few quarters as well. So we feel all of this year, i.e. in 27, we can operate the bank at 55% cost-income ratio. So that explains to you why I requested you to plug that 55% into the stack. And the moment you plug it into the stack, you don't need to do any adjustment, and you don't need to do, you don't have to go by projections of what cost-income ratio will be in the future. You don't need to go there. You just need to take it what it is and plug it there. You get a sense of where it might get to. So, we are actually happy to share with you that eventually our bank is not going to stop at one. This will increase because incremental is what it is, what I described to you. The second thing is that, you know, the loan growth. Now, on the bank front is that the loan growth continues strong at, you know, at least 20%. It's clearly in visibility. We've reported 30% this quarter, of course. Why, why? That's because the FCNRB, you know, that about 25,000 crores of FCNRB-backed loans are also, you know, showing up here. So, though the FCNRB was actually 35,000, 34,000 crores, this 24,000 I'm adding back because that is the amount the bank had raised in IBU and had lent to customers, which customers brought back the deposit to the bank. So if you look at it like that, it shows 30, but actually think of it more like 22. Now on the deposit front, again, you know, it's showing as 25.9, but really read it more like capacity to raise to 20. On NetTalk, FCNR, we read it probably lesser than that, but that's because we consciously reduced it because there was too much security. But think of the core capacity of the deposit side to keep growing at 21, 22 percent. Think of the loan growth growing at 20 percent. So, 2020, both sides. So, you know that the income will start, will keep flowing in strongly. Now, for a 20% growth, if our OPEX growth is 15, then you know 500 basis points I told you, and I told you how the cost-to-income ratio incremental comes, and then you plug in the ROA, the rest of the story I told you. Now, the next thing is that when you see this payoff, then straight away, when we see the 500 basis points increase, The difference between the OPEX growth and income growth, you find that the naturally operating profit then grows not in proportion of the book, but higher. So operating profit is now growing at 38.5. So that's how the stack is playing out. The good news is that after operating profit comes credit cost. So on the credit cost, we have now come down to about 1.3% or so of the loans, or about 1% of assets. Now, of course, it's all-time low for us. They're very happy about that. And we are very cautious about it because, you know, Q3, Q4, LD knows yet to show. We will watch this very, very carefully. But as far as our eyes can see, it looks like this is reasonably achievable in the next two quarters as well. So, therefore, if you take this at 1, then the rest of the stack plays itself out, you know, how the battery will play out. Now, next I'd like to talk about FCNR. Now, the really good news that, you know, all of us should take note is that for a bank, which is just, you know, just about 7 years ago, we started in full earnest setting up a deposit franchise. If you remember, the deposit franchise was retailed as 10,000 crores, so it is just at the start. And let me say, from the date we got a license, it's 10 years. Let's take that date. But for a bank that's 10 years from a deposit license, just think that we could raise 34,400 crores, that's $3.6 billion of FCNRB money. We have no overseas branch. We have no subsidiary. We have no rep office outside India. Just customer trust and digital capabilities. It should give you a clue about how strong the bank's digital capabilities have become. Is this the kind of money the bank can raise in that window? Now, the other big benefit of FCNRB is that there are three to five year, you know, deposits. So, it has given the bank a lot of structural liquidity. And particularly now that interest rates have suddenly risen in the last 15-20 days, we are now almost beginning to be overjoyed that we raised this kind of money for such long tenor at a low cost. The other thing is that there is some, you know, understanding in the market, let me say, Understanding or misunderstanding, let me say, about what this FDNRB does to NIM. So, I have seen, you know, people tend to jump to conclusions that the FDNRB has, whenever people have raised FDNRB, through leverage, that is through leverage, meaning having raised money through IBU and giving it to customers, just come back to us as a deposit. Particularly, there is a double counting on the, I mean, not double counting, let's say the balance sheet expands by that amount. In our case, that amount is 24,885 crores. Let me, since I spoke too fast, let me just slow down and explain that to you. In the IBU that we have, you know, we have raised this amount of money as borrowing, which we have further given ahead as loans to customers, which came to us as a profit. Now, because of this, the asset side expands by that amount. Now, when the asset side expands, then the name drops to that extent. So, in our case, that impact is 16 basis points. Now, oftentimes, many are looking at the 16 basis points in isolation and then wondering that, oh, my God, your name has dropped, so is your profit going to reduce? But that's not true. I want to clarify. While the NIM percentage dips by the 16 business points because of this impact, when you go back to the ROA tree, because eventually it's the ROA tree, when you go back to return on assets tree, the OPEX also has, is also now going to be divided by the expanded assets, which is the new number, which is add 25,000 quotes to it. So, there you get the benefit in operating expenses. Similarly, when you take a credit cost, again, that will get divided by a larger expanded base. So, when you come down and trace this down to the ROA tree, in our case, it's estimated that's only two basis points. So, I have to request analysts to not immediately read the 16 basis points as a red flag, because please go down and see what it does to the OPEX and what it does to the credit cost also. You'll see the ROA level is not much impact. So, this is one important clarification I wanted to bring to you. Now, the last bit I'd say I'd like to talk about is what this FDNRB has done to our cost of funds. Now, actually, before I come there, let me just talk about the IRDA, and I'll bring that back in context. So, all of you know that our IRDA has come out with the insurance paper on commissions to be paid, etc. Now, the paper is what it is. Let us assume it comes in its current form. So, we have to be prepared for it, and we have to know what the impact will be. Our consensus at our bank is that there are three countervailing factors which will, sorry, once again, subdiscipline the buy-in, and which will also compensate for that. One is that the FDNRB deposits that we have raised are giving us about 1% benefit to the overall cost of funds, what we would have cost of deposits, what it would have cost to have had we raised domestically. Let me read out the broad maps to you. So, basically, the impact, one is we have raised it at a rate, you know, the rate differential between the rate you borrowed it in the IBU and what we lend to customers. There is a small margin out there. Let me call it 40, 50 basis points. Now, when you add that back to the eventual price we pay to customers, which is 6.75, and 6.75 becomes 6.85, I think, because of the quarterly impact. Because it's annualized. Because annualized. Because if we pay a customer 6.75, it's actually 6.85 because of the annualization of the interest. So let me take that number of 6.85. So the numbers are with me. So the annualized cost of FCNRB deposit is 6.86%. We add some hedging cost to it. And then I told you that there is some positive spread in the IBU because between the rate that we borrowed and the rate we gave it to customers, there's about 40 basis points positive margin there. And that gives us about 29 to 30 basis points positive spread there. And then there's also the fact that there is no PSL requirement on the deployment of FCNRB funds. So all in all, our own estimate of that cost of funds money is, you know, it's basically, you know, it's about 6.8% or so, 6.85. Similarly, when we have to go, had this money had to be raised in India at this point of time, and, you know, the rates currently, our own census will cost us, including the CRRS, SLR cost, maybe the annualized cost would be, you know, if the customer rate is 7.25, you add some annualization to 7.45 to 7.50, And then you add SLR, CRR cost to it. That's more like about 7.8 or so. So, blend-blend between the 680 to 780, there is about 100 business points benefit in having raised this money at the right juncture. And that on the 35,000 crores is a, you know, material amount that is going to come to us. It is not in our plan at all. The second thing is about the repo rate itself. It just so happens that, you know, 25 business points repo rate went up. So that will increase the, you know, yield on the books, on the floating red book. You know, deposit doesn't rise immediately. As you know, it takes a year for the fixed deposits to get repriced as and when they mature. So there is a gap in between or there is arbitrage in between. I can't call it arbitrage, but there's a time period in between where the benefit comes to us. And then we are also assuming that for the rest of this year, i.e. between now to March of this year, we are expecting another 25, at least 25 business points more increase. So that makes it 50. And then we are expecting something to come up next year as well, maybe 25. So that's at least a house view at this point of time. Maybe some numbers are different, then output outcome will be different. So these are our current house views, about 50 business points. That is 25 already done, 25 yet to come, and maybe 25 more next year. So, that also is giving us a certain amount of income. Finally, you know, this money, you know, if we have to raise the 35,000 crores in India, you know, in the domestic market, that will also have a cost of raising, which is all not there now. So, when you add these things up, we broadly feel, give or take, we should be in the zone that, you know, we should be able to manage. And, you know, it will be some give or take, that should be broadly, you know, should be broadly managed, should be in the zone. So we therefore feel that, give or take, that should be managed. And other than that, let me just share with you that the book is building very well. And, you know, we expect this trajectory to be stable at least or grow. We are, of course, very watchful of this El Nino and the impact it will cause to us. There are a couple of stages at the client rot, et cetera. We have to see how much portfolio we have to manage that. But as I can see right now, it doesn't look like there's an immediate impact in Q3 or Q4, and then we'll take it as it comes. So that's all I have to share with you. Thanks for staying with us.
Operator
Certainly, sir. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Akshay Jain with Autonomous. Please go ahead.
Thank you, sir. Thank you for the opportunity, and thank you for the detailed margin bridge, as well as the ROA trajectory. So, just one clarification on this, you know, I don't see an impact of funding cost moderation in both the margin bridge, as well as the ROA expansion, which we discussed. So, since we have raised strong FCNR funds, should we not improve our ability to reduce funding cost differences vis-a-vis larger peers? So, that's my question number one. So, second question is more of a clarification on the NIMB bridge. So, how is the 34,000-odd growth which you have raised on FCNR being deployed in loans, liquidity, as well as repayment of bulk liability? And what is the spread you are assuming between, you know, liquidity as well as loans to get this 7 basis points of liquidity drag, which you have been quantifying?
Yeah, maybe Akshay, I will answer that question. Which I will follow up with. Yeah, Akshay, maybe I will answer that question. So, as I said, most of this money came towards FAGN, while we were able to reduce some bulk deposits of about 5,000 crores in September. And also, we didn't roll over certain certificate of deposits, again, about 5,000 crores in September. But there was still an excess liquidity, which was parked in, I would say, low-ending investments and nostril balances. As a result, the September LCR was about at 139%. As we speak, in October, the further usage of this excess liquidity has happened. And as I said, we should come to the normalized levels of LCR of about 115-116% in a month or so. So, which means that the drag which we had in September because of parking it in tertiary instruments, that is largely sort of taken care. And hence, we have said that in Q4, because this suddenly gets solved in Q3, the 7-bit drag sort of vanishes from the 5.58% number which we have reported for at Q2 because that includes that drag. And similarly, on the deposit side, Vaidya mentioned that there's an overall benefit of 1% including PSL benefits that will come over a period of time. But since these were deposits which were raised for 3 to 5 years, definitely this will flow into the P&L equation certainly starting from next year. We could see the full impact.
So, my question is more on the structural cost of funding side. Since you're becoming big, your liability franchise is improving, as well as giving you a strong performance on the SPNR side. Should it not improve your ability to reduce the funding cost incrementally?
Well, we keep a very close eye on that, you know. We've been doing that. If you notice that we were earlier paying 7% of savings accounts, then we made it 6.5, then we made it 6.25, now we made it 6%. About 25 lakhs, we're only paying 6 now. For us, it's a material change for somebody who's raising. So it's a continuous process. So now only for a small slab in between, we're giving 7. So after that, it's now come straight down to 6. It's a continuous process. You know, we've got to constantly moderate that and titrate that.
And actually, some of the funding costs could also inch up because repos are also increasing. So, you may have some corresponding increase on the liability side, right?
But what we've done, at least the cost of funds, the countries are coming down. Then we draw up our next year's plans for cost of funds also. We are by that time assuming that, you know, right now interest rates are on the rise. So, you know, whatever fixed deposit data is next year, we assume it will come at a higher cost. So, you know, but overall, overall, I think our own blended cost of funds of 28, don't take it as a guidance, but I'm just giving you a bit of an on-the-cuff estimate that next year should be maybe three or four or five basis points more, maybe over this, in overall cost of funds basis, over FY 27, I mean, 28 over 27, give or take, we feel should be We are assuming 25 more, 25 already done, 25 more in the rest of the year, probably, you know, this is in December itself, and then April of next year, 25.
Okay, so even for a 75 basis points, or say a 50 basis incremental rate hike? The cost of an impact should be only 5 to 10 business points, is what…
Yeah, may not even be 10, but at least let's, let's, let's, let's, let's, let's be safe and say 10, could be somewhere there, yeah. So, because the good thing is the bank has, because, you know, you should remember the bank is running high CASA percentage, this is super important point to note. Isn't it? Because bank runs a high CASA percentage, every percentage, only 50%. So, when, when interest goes up, it doesn't affect it that much. I understand.
Got it, sir. And secondly, on…
And unfortunately, on the savings front, on the savings front, current account front, there we are already doing well. I told you we are actually reducing it. And money is flowing thick for us because it has good tech capabilities, good mobile app, and good customer service and all that. So, all put together, we feel like next year we will be able to manage comfortably.
Understood, sir. And secondly, on the asset quality front, well, you know, you have managed this quarter pretty well, though there was a minor inch up in the slippage ratio, but I guess that can be ignored for this quarter. But how should you think about it incrementally? Because, you know, a large number of your NBFC as well as bank peers have been, you know, guiding a bit cautiously on the El Nino as well as the macro impact and the oil prices. So, you know, anything you are seeing over there and how should you think about it? And the credit cost guidance of 150 to 150 based upon space, correct?
Yeah. So, let's take this. Now, in our case, you know, we put out in our presentation very clearly what is our 0 to 30 DPD. We discussed the full panel, you know, 0 to 30. We then talk about 31 to 90. And then we talk from the 90 plus gross, then we talk 90 plus net, we show everything. Okay. As from now, our data numbers don't seem to suggest that there is a problem coming. The numbers, numbers per se. But, you know, numbers per se, oftentimes backward looking doesn't tell the future story. So, when you look ahead, so to say, we don't expect that in the next one or two quarters, immediately things are going to change dramatically, because it doesn't change so quickly, because after all, it's a large book. But this impact of the El Nino and the drought in Maharashtra, We want to watch it much more carefully and cautiously before we make new comments.
Understood, sir. And just one more point on mortgage E&P. I can see that, you know, it has been steadily increasing and it is up by almost 27 basic points in the last one year, as well as the credit card SMA has inched up by 14 basic points this time on. Like, is it, like, anything to read in this, or, like, you know, I'm, you know, getting too much into the numbers?
You know, you're getting too much into the numbers, because, see, mortgage, what happens is that we are practically not growing the mortgage book for the last, you know, you know, I think YOY growth is practically nothing. So there's normal aging happening because when you set up, any business initially started zero, and then it increases, and then it stabilizes at some point of time when the book has a natural, stable growth rate. As of now, because mortgage book hardly is in yield, so we are not pushing it very much. I mean, it's just, it comes in as it comes, that's about it. So it's more because of the normal aging of the book. Nothing to read out there. I think the mortgage has only gone up from, if I'm not mistaken, has grown from, are you referring to the gross NP or you referring to the SMA?
Yeah, yeah, yeah, 1.2 to 1.54. But 1.55 for itself is 1.54 only, right? That too is the full security of your mortgage. So nothing to worry about.
Credit card is ultra, right? Credit card you can see come down from 1.99 to 1.49. I mean, there I am looking at SMS. Oh, wait. Let me see what you have there. So, okay, fair point. So, there it's gone up from 135 to 149, but nothing to read there. Nothing to call up, nothing to read. These are like normal variations of quarter to quarter.
And we are seeing credit costs actually coming down on the credit card.
We are actually seeing credit costs coming down, actually.
Okay, sir. Thank you, sir. Those are your questions.
Operator
Thank you. Thank you. Our next question comes from the line of Param Subramanian with Investech. Please go ahead.
Hi, sir. Good evening. Thanks for taking my question. Sir, firstly, the question, the slide that you have given, slide 4, which you discussed also, where you are talking about your incremental cost to income of 55%. Sir, is this something that you want to be held to going forward, That, you know, that incremental cost will be at, cost of income will be 55% for the next year or so. Is that something that we should look forward to? And secondly, in that slide itself, we are saying 30 basis points drag from liabilities business, but there will always be some drag. So what should that number be on a steady shift? That's my first question.
Okay, I think this is a good question. I like to be framed. It would like to be held to. Okay, yeah. So the thing is that, yes, currently it is cost income ratio. is coming at 55. We've done the maths also there. We've actually shown you how exactly to compute at 55. So indeed, for the last one year, in other words, to get an income of 2,957 crores, you've spent only 1,627 crores. So in other words, cost income is 55. Question is that will it stay this way? As far as our eyes can see, for this financial year, i.e. for 27, this number looks firmly in the bag. So in other words, for H2 also we expect similar And, you know, that's how I planned a business model. And see, basically, it all depends upon this, the finite basis point differential between how much the income grows and the OPEX grows. So we feel that that's what we want to achieve. We have been achieving now for three quarters. Let me leave it there. And you can also plot it broadly in your scheme of things. Now, with regard to your second question, yeah, what is the second question? Yeah, on the drive. Yeah, yeah, let me explain that to you. I'm happy you asked the question. See, basically, you know that we've been always calling out that the liability side business is a drag because it's a new bank setting up, setting up $200,000, $200,000, and all that, and setting up so many things, technology and all that. So the thing is that, think of it as a liability side. Okay. If the bank, for example, is making a, let us for a minute assume that the analyst estimates of this financial year for the bank is about 5,900 crore, sorry, 4,400, 4,500 crore. Let us assume for a minute these are the numbers. I think 4,400 crore is the estimate for this year. And for a minute, you assume the bank will meet it. Okay. So that can do a quick simulation out here. So now, if indeed those are the numbers, let's call it 4,500 for the year, now it is well known if you go to our slide in the liability slide, we already called out the bankers, current loss is 0.7% on the average deposits. So if you do the math and take a net of tax, you'll find that the loss turns out about 1,500 quarts on the liability side, maybe a little less than that. By definition, the asset should be making something like about 1,596,000 quarts. Now, assuming the bank is oversimplified and set as only two parts, one is assets, one is liabilities. So think of a bank makes 1,600 crores on the lending side, makes lose loss of 1,500 crores on the liability side, and net net bank, suppose bank costs about 44, 45 crores. Think of this equation. Now, in this equation, if you divide this by the average assets of the year, you will find that assets are making 0.3%, you will find liabilities are making minus 0.3% By the same numbers I just described to you, and net, net will come to 1%. But obviously, if you see the trend line, you're giving the trend line also in the presentation. If you see the trend line, it is not, we are not planning to lose 0.7% forever. It's coming down. It's coming down from 3% to 2% to, you know, 1% to 0.7. It has to come down to 0. So in other words, if you stretch this forward for maybe three years from now, you'll find that this number of 0.7 becomes 0. So, which means the drag from liabilities will become zero, and that 1.3 is 1.3, which you can see even today. Now, on that 1.3, which is the asset-side ROA the bank is making, now we assume two more, three more years go by, and some more operating leverage comes. So, therefore, you must expect this 1.3 should go to 1.4, 1.5, 1.6. It should happen.
Got it, sir. Thank you so much. Very detailed explanation.
Which means that even today, if this was not a new bank, if this had no drag on liabilities, had it been like any other bank which has been 30, 40 years to 25, 30 years of business and there was no liabilities at loss, imagine, the bank should anyway make 1.3 even today from the, it's seen from the books. And then operating a leverage in the next three years, it should take you to something beyond that for sure. Got it, sir. Thank you so much.
Sir, next question is on the margin. I think this was asked earlier also, but see, this waterfall that you are showing, where you are saying that the repo rate hike will help our margin by about 7 basis points, that assumes, I understood, I think, 50 basis points of rate hike, right? And because there are other moving parts also, there is tight liquidity in the system. So, we are pretty confident that despite all of that, this 7 basis point on a 50 basis point rate hike is what we are talking about on our name, right? Those assumptions, the assumption is of 50 basis points and some repricing on term deposits as well.
8.8. This is 8 basis points, no?
So, maybe Param, I'll answer that question. So, our 25-year repo increase has already happened. We have assumed one more repo increase happens in the, maybe in the next quarter. So, and this is a NIMP prediction for Q4. So, cumulatively, we should get some benefit of these repo increases, These are two increases in this year. However, there could be a corresponding increase in funding cost. What we have put out there, 7 BIPs, is a net impact, which could be an increase because the repo goes up, offset by some bit of a funding cost increase. For us, about 32% of the book is rent to repo. So, on a 50 BIPs increase, a 33 BIPs should broadly translate to about 16, 17 basis points, but we have assumed broadly half of it to sort of translate in terms of a NIMP trajectory. So, that's the broad calculation here.
And the other thing is that this 7 beeps charters 50 beeps, basically. Basically, it assumes 20 is already done and 25 is yet to come. We are talking of Q4 only here, just for context.
So, where do you assume that Q2 to Q3, there might be a slight dip before this, and Q3 to Q4 is where most of the expansion happens. Because Q2 to Q3, the FCNR drag will be higher, just so that we are clear because you are putting out a margin expansion.
Yeah, Q3 should be a flattish problem.
We feel it to be quite range-bound from the current levels, which we've recorded. May not dip that much.
But then Q4, you'll claw back a lot of it, because the day convention will give you back eight basis points, your excess liquidity drive will be gone, the repo hike would give you the seven basis points. And just to tell you that repo assumes 50 and 20, that is 25 more, which I hope you agree probably will be a fair guess. Would you agree with that? Yeah, so then, so therefore, the reason we put out this slide is as to where is the drag and how will it come back, is that we don't, we didn't want people to, you know, suddenly start worrying that, oh my God, it's come down so much, where is it headed? We want to give a two-quarter picture that within two quarters, this is a normalize. And then by our own internal estimates, I'm using the word internal estimates, that for 28, when we do a spreadsheet and projections, we assume some cost of funds increase, we assume some repo increase, all that, we expect it is next year, as far as I can see today, to be like around 5.8% into 28 also. Got it, got it. You can factor it in when you do your work on us.
Yeah. And sir, will there not be an asset mix impact? Because I think we are still on excess liquidity. September LCR is pretty high. So the asset mix impact will not, you know, hurt us in Q3, Q4, because we still have to deploy that liquidity. Will there be a higher wholesale proportion of that deployment? Just so we are clear on the name.
We are reasonably factored in. That's why I say we give a two-quarter view. Go ahead and give a next quarter's view. All that is factored. We have done the maths. It looks like we are comfortable, and we wanted the market also to be comfortable that things will come back because of this detailed explanation. That is the purpose. And to be honest, Param, when you read this report, does this give you adequate clarity? It doesn't. Or you feel Anders will require some more explanation from us? What do you think? Let's be honest with us.
No, I think, sir, you are sitting on excess liquidity, which is what we're trying to understand, that you're clearly calling out your benefits from rate hike, and logically that should play out. So we're just trying to understand, sir, the extent of the benefit which you're calling out, and I think it's very helpful.
No, no, I'm asking, is it a bit clear I'm asking you? I'm using a sample of one task's question. Is it a bit clear to you?
Yeah, it is, it is, it is. So it is very clear what you're guiding for, sir. Yeah, that's very good. Yeah. Okay. So, lastly, on the slippages, so, or from asset quality perspective, I think I heard you mention on Q3, Q4, you know, something to watch out for. So, any early signs of any pressure or anything in your rural portfolios, especially, because some of the lenders are calling out, you know, pressures in some of the drought-affected districts. So, any pressures you are beginning to see in your portfolio?
No, no, nothing yet. You should expect a reasonably good, you know, good numbers, some ideas in the next couple of quarters also. You know, I always put the caveat because unknowns are unknowns in life. But from whatever we can see right now, you will be comfortable for the couple of quarters as well.
Okay, so we are very comfortable with our 1.5 to 1.6 credit cost guidance. Yes, yes, yes, yes, definitely. Okay, sir. Thank you so much. Congrats on the quarter. Thanks for taking that question. Thank you, sir. Thank you.
Operator
Thank you. Our next question comes from the line of Piran Engineer with CITIC Securities International. Please go ahead.
Yeah, hi. Hi, Steve. Congrats on the quarter, and thanks for taking my question. Just once again, I don't want to talk too much on this, but since you've put it out of here, Wouldn't the September month NIM be meaningfully lower than the 2Q average NIM? And if so, wouldn't we be starting off a much lower base in the old waterfall draft?
No, we should be looking for Q6, don't you?
So, definitely September, as I said, we ran higher LCR because the LCR money had just come in. And LCR was at 139%, which means September NIM would have been slightly lower. But as I said, this liquidity is getting fast deployed. In October, as we see, LCR issues are further normalized. And I expect this liquidity to be put to use in next maybe one month or so. We have taken this into account and also some bit of a repo increase benefit which would come in Q3 for the one which has happened. Taken all of this together, we expect that NIMS could be very range-bound in Q3 from the current level and before it sort of again picks up in Q4. And that's the number which we have put out in the presentation.
And just to be clear, it does not factor in capital rates, right? You have 5.8% in. So if you do it before 4Q, that will be further updated.
We will see on the capital, depending on the market conditions and so on. So, that is something that will also slightly benefit whenever it comes in, into the overall equation.
It will add more cushion to this, actually.
It will add, okay. Fair, fair. Okay, then just moving on from, just firstly on Casta's growth, and here I am looking at quarterly average Casta. It used to be 30% last year, the last quarter moderate, high 20, now it's down to 22, 23. How do we really think about, is it simply just a question of yours being much larger now and scales of making it a growth?
Sorry, you mentioned that we were not able to hear you clearly. Can you just repeat? So, Sudhankar, I'm talking about the average Casa growth.
Yeah. Yeah, so that has been about 30% on a YOY basis.
Average. No, it's 23. 23. The star growing at 30, and the star is slightly lower, says.
But, okay, Kupirant, somewhere there, 23 or so, yeah, you should expect that from us.
Maybe, why are you, you feel it's low? You feel it's low? You feel or you felt it was...
No, I'm just, no, I'm trying to just understand whether it's a matter of scale, capturing, or it's a question of, say, governments are moving out, Which is what the large banks talked about, which is kind of what happened to your two quarters back.
No, that whatever had to happen was already gone, so we don't worry, that's not a concern anymore. But the, this is like 23, think like 23 like a base case for us. Not base case, meaning like you're right, it's like a, it's a more arrival of the bank, it's no longer a, you know, it's like already built some reasonable scale. If we can maintain even 20 to 22-ish kind of zone, this 23, but even if we maintain, And, you know, if the deposits will grow by 20 also from here on, because if the overall deposits will grow by 20, and CASA also will grow by 20, we'll find we'll maintain a CASA percentage, which will be good enough.
Yeah, no, sir. I think the only risk is maybe a year later, the 23 goes down to 18, and then to 16, just as scale builds.
Unlikely, because we're managing this very closely, and we like, you know, we just like to see a CASA percentage in the zone of the high 40s. Unlikely, we'll let it go there. We'll, you know, develop our work, but our intent is to keep our bank in the high 40s. You know, we've worked hard for the first seven, eight years to build a discipline of the high CASA. We have no intention of, you know, raising more money through fixed deposit and, you know, threading the P&L so finely that we let go of the CASA percentage down to the 40s. And then just
lastly, on your corporate banking business, now it used to be, now it's possibly the less focused or less talked about one, but from 15% of loans two years back, it's now up to 20%. Just trying to understand really if you can share more color around this in terms of, you know, which sectors, what are the rating of the corporates out there, and really what is our right to win out here, especially when we have a higher cost of funds, and there's only PSU and larger private sector banks in this space. Like in retail, we get your moat, right? That you're targeting a different consumer segment. You've got an excellent app, frictionless banking services. You've got all of that, which helps you in retail. But how does any of this, or what are your moats in wholesale really?
It's a really very good question. You know, people often tend to think that this technology and tech stack, etc., is a very retail, retail thing. But, you know, you'll be surprised to know, I feel that the same tech stack and capabilities IDFC Bank has built on the retail side, though you're not using it as a user because you're an individual, but same thing if you're an enterprise, you will see a real difference of IDFC's technology stack with the VA, you know, let me say what might be available elsewhere. So, for example, in cash management, you know, we have built some really, really good cash management capabilities on trade, on FX. On many of the solutions, we built some really good tech stack there. So that's an experience thing which, you know, enterprise, you know, person who's accessing it can tell you. The second thing is that, you know, we have kind of been very successful in building a really good governance capabilities in the bank, even though, you know, we may be lending to, let me say, a mid-tier company. And, you know, our delinquency has literally been nil. There's only one ATM company in the last seven years where we lost 100 crores or so. But that's it. In seven years, just imagine, okay, no bad loans. Seven years. And we built, when you disperse, not less than maybe one and a half lakh crores. Net book is 70,000 crores. So that book is coming really well, so our confidence has increased. The first thing is that the demand is a lot. We can grow as much as we want, but currently we're growing at the numbers we're growing. So delinquency is good, yield is reasonable, surround products are very good. We are really, really liking the business, actually. And we think that, you know, in a sense that the book also gets more diversified, better rated corporates, all that. So to give an idea, A and above rated companies, since you said what kind of customers we lend to, I mean, the corporate side, A and above rated companies, B makes 76% of the book, and triple B companies, 76%. Triple B companies is 20%, and double B and below is 4%. That is our composition. It's quite comfortable, actually, as it's zero default, practically. And just imagine, seven years up, you run, no delinquency. That is something, really.
No, that's a different thing. But how do we think about ROA in this?
It's pretty good now, because if you take out, credit costs are not there. I'm not saying it will never be there, you know, like we face the ATM issue, rather the ATM company issue, it could be lurking in the corner. But as of now, it's quite low, so when delinquency is low, we are able to get, and our speed is very good, our decision making is pretty quick, so all this also matters. So, our total corporate exposure, including non-funded exposure, you know, we sent the 70 to you, but if you take the non-funded, put it in probably 1 lakh crore. And the rating distribution I told you, it belongs to the full book of 1 lakh crore.
Got it. No, sorry, I meant what is the ROI differential or maybe incremental ROI differential between retail and corporate?
I'll tell you, our cost in combination of corporate side is more like 32 or 33%. Our yield on book is something like about 9.5%. 9.2%. 9.2, no, sorry. So 9.2%. Yeah, so if you take out the cost of funds, and, you know, we'd probably be pricing the asset side people about maybe 7.5% or so give or take, I don't know. But, you know, if you do the maths of that and add back fees to it, and if you don't have credit cost, at least 1.6, 1.7 ROA is easily in the bag on that front. Understood.
Understood. Okay, yeah, that's good.
Probably even a bit more, actually, to be honest.
Okay, yeah, that's good. Thanks and wish you all the best and happy Diwali to send that.
Operator
Thank you. Our next question comes from the line of Abhishek Murarka with HSBC. Please go ahead.
Hi, good evening, everyone. So, my question is on this insurance circular impact. And if I go through that paragraph that you've given in the PPT, I wanted to know, have you assumed that the entire revenue that you make will be covered? Or are you assuming a percentage of the revenue which you estimate to be a hit that will be covered? So what are you assuming? Because when I back calculate, the number that I am getting is a fairly high number. So it would pretty much encapsulate the entire revenue you are getting. So I just wanted to get that clarification.
No, you can, if you do the back calculation of the benefits of 35,000 crore where we say 1%, I did the math for you earlier. That's also quite a meaningful amount. If you assume that our, you know, we already mentioned what we assumed in terms of rate increase, and then the 25 plus 25, and then you put it on a 1,000,000, maybe 20,000 crore product read book and multiply that, and you see that's also a very meaningful amount. And then you also, you know, we'll also do the product maintenance and all along the way, we've done some thinking among us. Then do the math, like give or take, you know, it is matching up in the zone. So, we feel that, you know, we know what analysts are estimated for us for next year, etc. We don't see any material changes to those numbers. We believe broadly they're achievable.
Sure, that says, so basically the hit you're expecting and the recovery from FCNR cost saving and 75-bit rate hike, is it coming to something like 1,200 growth of that order?
We don't really call out because then it will take us down to a lot of calculations and maps to explain. So, you can go by whatever public numbers you see.
Got it. But next night, you have messages that things will offset the revenue loss and therefore neutralize the impact.
And in our mind, we're assuming it will come as it is. We are not being any more optimistic. We are not expecting. I mean, we don't want to assume anything optimistic from here. It is what it is. It will come out and let's be prepared for that. Got it.
The second thing is on fees and OPEX, can you just call out how much of the fee and OPEX would be due to HC&R? If you can give those two numbers, that would be true.
So, fee was a very small component of about 30-odd crores in the quarter. And on the OPEX front, that number, because we did mobilize borrowings and bonds, that number was more We're now 60-odd crores. Okay, got it.
Got it. Thank you so much, and all the best, and sweet greetings to everybody. Thank you. Thank you very much. Thank you.
Operator
Our next question comes from the line of Jai Prakash Muntra with ICICI Securities. Please go ahead.
Yeah, hi. Good evening, and thanks for the opportunity. Thank you, Jai Prakash. Sir, first question on foreign borrowings, do you have any more pipeline for raising foreign borrowings for ECB or OECB or not much?
No, sir, Jay, we have largely mobilized the borrowings. We don't have any pipelines.
Secondly, on LDR, loan to deposit ratio was improving as deposits were outpacing loans. Now, because of this quarter, we are in the SCNRB was strong. So, going ahead, would deposits still outpace loan growth or LDR is not a very relevant metric in the current situation?
There are broad numbers you have to meet because they are the regulatory requirements, and maybe we'll keep a little cushion on top of it. But we don't think that, at least for our bank, since you've seen a deposit growth for the last seven years now, we feel that we'll be able to comfortably raise the deposits we need to raise. We've done our planning for Q3, Q4. We've estimated our outflows, estimated our inflows. We're feeling comfortable.
We will ensure that deposit flows slightly higher than the loan growth, right? So, directionally, NDR should keep improving on a stay in a particular zone. Right.
And, Sudhanj, you mentioned repo link book at around 30 to 33%. What is the number for FCNR and maybe FIGs and others if you have that split?
So, I have taken FCNR in the math. So, out of 100 rupees, about 60% is fixed, 61-62%. Then about 31-32% is repolinked, and balance is MCLR. So, that is the broad math. Sure, sure.
And last question, sir, on ECL, now we are very close to an actual implementation. If you have any only pure ECL transitional impact, I know in the last calls you have mentioned that it will broadly be offset by a new credit risk rate circular. But if you have only the number separately for ECL transition hit and maybe the recurring impact.
Thank you. Today, my commentary on ECL continues to remain the same. In fact, the positive development in this quarter is yesterday only the revised operational risk guidelines have come in. I had mentioned in the previous calls that we could be a big beneficiary on that front. And that also kicks in from April 1, 27. So, if we take all RWA changes through this operational risk guideline, credit risk guideline, offset by capital impacts which could come through ECL, the impact is broadly sort of neutral on the CET1 ratio. So, the commentary broadly stays on that front. We are still fine-tuning some of these numbers. So, maybe in a quarter or so, we will be able to give further more clarity around this front. But we feel that it's broadly manageable. Sure.
And anything on recurring basis?
Any number to call out? Again, as I have sort of said in the past, on a recurring basis, also steady state credit cost slightly goes up. But since we have a large proportion of a retail book, we will also get benefit because of amortization of OPEX and processing fee put together, which to some extent neutralizes this impact of a steady state increase in credit cost. But But on a toto, the net impact on a ROA could be still manageable.
That is very clear. Yeah, that is very clear. Thank you and all the most. Thank you.
Operator
Thank you. Our next question comes from the line of Pritesh Bump with Ilana Capital. Please go ahead.
Hi, good evening, sir. Can you join me?
Yeah, hi, Pritesh. We can hear you.
Yeah, so on the credit card business, Congress is crossing 5 million cards. Just wanted to, you know, check. In the past, you mentioned that once we cross a particular number, which is about 5 million, I think, if I remember, we'll see a material cost to income decline. You know, especially when we look at the disclosures you made in the past that credit card business was one of the, you know, high capital intents of the case. So, do we see that falling in the cost to income in the subsequent quarters?
Yeah, cost to income has been coming down. I also did mention that credit cost also has been coming down. And if you see the cost to income ratio for the Q2, this is more now into 70s. So we feel that the profitability is certainly getting better. And we are well on track on this front.
Sir, but on the flip side, this quarter we reduced or we made a feature where zero forex charges in terms of side. Any material impact from that could have been there already?
No, not a material impact on this front. In fact, we feel spends could increase as the product offering is quite lucrative.
We've got to wait and watch how the reaction is, because, of course, we lose some money on the whole base, and the payback will come when it comes. But anyway, as you know, from day one, we're building Customer First Bank and building on Customer First and pro-customer products and all that. So hopefully this will be one more such feature launched by the bank. And the benefits will come over time in terms of customer goodwill, trust, more spends hopefully, or maybe even more, maybe, maybe even more uptake of cards over time.
Sure, sure. Second question was on the wholesale book. I think we've mentioned in a call out that you take a 360 degree approach. Just wanted to understand qualitatively that with the strong Will we have taken significant market share in some of the other features like transaction banking, salary accounts, if you can give some assistance on that?
At the stable bank, we can't call ourselves any material market share, so to say. Actually, for that matter, even on the retail side, we can't call ourselves great market shares because we're still, you know, mid-tier bank, let me say, in terms of size. But certainly, the corporate side, we can't claim that. But, you know, it is, we find our space in the corporate banking side. You know, we could obviously be giving large exports of 4,000, 5,000 crores to some top tier groups of this country, and it could be earning maybe 6.5% or 7% or whatever. We have found our own space, and why are we finding huge opportunities? Just not small, we find a huge opportunity in the space we have chosen. So more than market share, we We are finding, when we say 360-degree approach, we are very keen on cash management, and I told you we built some really good solutions on the front. If time permits are, maybe next time I'll tell you what the solutions are, because today we're running out of time. So we've done some really good cash management solutions, you know, so that brings current accounts. So we're looking at more in terms of it's building as a good book, high-quality book, with many embeddings of multiple products into it. And making good revenue out of that in a stable manner, which, you know, which over the years can only compound.
Just last thing, as a feedback, if you can put one or two slides on what we are doing on AI and cybersecurity, that will be very appreciated, David. For the bank, given that we have a very technology orientation.
Yeah, thank you. We'll do that next time, maybe. The thing is that we sometimes feel that, you know, of course, there are different organizations, different styles that we're talking about AI. We feel that, frankly, talking about AI, it's like AI. It's like, you know, do we ever talk about internet anymore? It's part of internet banking. Like that, AI is now embedded deeply into our products, our journeys, our processes, our customer experiences, our employee experiences. Everything, it's everywhere. So we felt that finally it has to deliver. That is the reason we actually chose to focus on the outcomes thus far. Of course, if many of you feel the same way like yours, you're feeling maybe we'll do some more explanations.
Yeah, so basically, whatever is happening across the globe in terms of cyber security is very, very concerning.
No, cyber is a different point, by the way. I meant AI. On AI, we felt finally AI should deliver, and so we are focusing on outcomes, okay? I'll give a small example so that you'll understand. For example, if our people are processing loan applications a particular way today, yesterday, before the arrival of AI. Now, today, the same loan applications, they're able to see the bank statement, see the GST, see the income tax statement, combine, you know, for the AI to read the document easily, to analyze them, to process them, and give it back to us. All that has become much quicker. So, we felt that anyway, it's going to deliver results. So, that's why we focus on results. Now, let's talk about cyber. On the cyber front, of course, thanks for pointing that out. I agree it's super important, and maybe we'll bring some more angle into that, yeah. It'll give people more security, it'll make people feel more secure, I agree with you.
Yeah, thanks so much. All the rest.
Operator
Thank you. Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to Mr. Vaidyanathan for closed comments.
No, nothing but to add, we've discussed in detail. So thanks very much, everybody, and really very thanks for being patient with us And spending over an hour with us, the key thing we want to point out is the NIM angle so that there's no confusion among others. I want to just point out to you one last time that while NIM, you know, you tend to think that this FCNR brings down NIM. Remember, FCNR expanding the base also brings down optics, also brings down credit costs in the percentage sense. In an ROA, ROA sense, not going to impact you very much. The second point we want to flag was the insurance thing. We feel comfortable that we'll probably manage it. This is only two things. Other than that, I think growth continues and life will be fine.
Thank you, everybody. Thank you, everyone, and happy Diwali in advance. Thanks, everyone. Happy Diwali in advance. Thank you. Bye.
Operator
Thank you. On behalf of IDFP First Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.
