RBL Bank Limited (RBLBANK) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to RBL Bank Limited Q3 F526 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 the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. R. Subramanya Kumar, Managing Director and CEO of RBL Bank. Thank you, and over to you, Mr. Kumar.

Thank you, ma'am. Good evening, ladies and gentlemen, and thank you for joining us for a discussion on our bank's financial results for the third quarter of financial year 2026. We have uploaded the results along with the presentation on our website, and I hope you have heard a chance to go through it in detail ahead of this call. As always, I am joined by Mr. Rajiv Al-Gooja, Mr. A.G. Fahyar, and other members of our management team to address any questions you may have. Before we get into the details on Q3 operational performance, I would like to briefly touch upon the business trends. Our advances grew 14% YOY and deposits grew 12% YOY. This was after we reduced our IBPC outstanding from 4,500 crores to 1,500 crores. The CD ratio stands comfortable at 86.1%. The granular deposits, which remain our focus area, grew 15% and constitutes 51.5% of total deposits. On asset side, secured retail while unsecured advances have now stopped through 30% OOI, driven by calibrated investments in relationship and credit teams across existing markets. We have adapted a calibrated approach to deposit repricing, including savings account rates, and remain confident of continuing this gradual process. During the quarter, we accelerated branch expansion by adding 18 branches and will sustain this momentum to strengthen our physical footprint and support growth in retail deposits. We have made meaningful progress in liberating branches and net sources.

We grew our net advances 14% year-on-year and 3% sequentially to 1,3,086 crores. Retail advances grew by 10% year-on-year and 1% sequentially to 60,611 crores. Consequently, the retail wholesale mix is now at 59.41. As Mr. Kumar mentioned, this is net of the reduction of 3,000 crores in IBPC in the business loan and housing loan segments. Secured retail advances after the above reduction in IBPC grew 24% year-on-year and 1% sequentially. Adjusted for IBPC, obviously, this has grown faster. Within secured retail, business loans plus housing loans grew 34% year-on-year and 8% sequentially. Finance grew at about 23% year-on-year and 7% sequentially. The disbursement rate, run rate for secured retail is well above For context, this number was approximately 3,000 crores in Q1 of this year. Wholesale banking advances grew at about 21% year-on-year and 5% sequentially, and within wholesale, commercial banking grew at a faster pace at about 30% year-on-year and 7% sequentially. The dispersal in the JLG segment is at a run rate of 700 crores per month versus 550 crores in the previous quarter. The good news is that the early bucket collection efficiency is 99.5. This is as good as one has got in this segment for a long time. The benefits of this has already been seen in lower sequential slippages, and we expect that trend to continue. Retrading what Mr. Kumar said on cards, we've now crossed one lakh card acquisition in a month for the first time post the Bajaj financial sourcing stopped in November 2024. As a result of which our cards in force also grew sequentially. This should now result in the receivables as well from the next quarter onwards. On deposits, our total deposits grew at about 12% year-on-year and 3% sequentially to 1,19,721 crores. CASA ratio now stands at 30.9. Our primary focus area being granular deposits, as we've mentioned several times in the past, the focus is on deposits less than 3 crores, which grew faster at 15% year-on-year and 4% sequentially to 61,632 crores and now constitute fifty-one-and-a-half percent of the total deposits, with every fifty-one percent in the last quarter. Branch banking-led deposits grew eighteen percent year-on-year and three percent sequentially, accounting for sixty-six percent of the total deposits of the bank. Average LCR continues to be healthy at one twenty-five percent. CD ratio, as Mr. Kumar mentioned, is about eighty-six point one. We are quite comfortable with the range of 83 to 87% on the CD ratio. Our cost of deposits for the quarter was down to 6.2% versus 6.26% in Q2. Our savings account cost for the quarter was 11 basis points down sequentially to 5.15. Similarly, our cost of TDs is down 23 basis This points to 7.29 versus 7.52 vis-à-vis last quarter. We've also taken a rate action in savings where we've reduced the peak bucket down to 6% from 6.5%. We do expect cost of deposits to further decline in Q4, and therefore should help to marginally improve the margins, even though the full impact of the December repo rate cut will come in Q4 of this financial year. A little bit on our operating performance, our NII was up 5% year-on-year, and more importantly 7% sequentially to 1557 crores. NIM as a consequence sequentially was up at 4.63% vis-à-vis 4.51. Other income in this quarter was up 13% year-on-year to 1050 crore, and excluding the one-off investment benefit that we had on a listing of a strategic investment we had in Q3 of the 526, so excluding that it was up 13% year-on-year. Core fee income grew 10% year-on-year and 3% sequentially Our total net income was up 2% year-on-year and 9% sequentially to 2,708 crores. OpEx grew less than revenues at 8% year-on-year and 2% sequentially to 1795 crores. Our cost-to-income ratio as a consequence is 66.3 versus 70.7 last quarter. Our PPOP operating profit was 912 crores, As a result, our net profit for the quarter was 214 crores. We've also taken the gratitude provision due to change in the methodology of about 30 crores, which is a part of the reason for net profit to be at 214 crores. On asset quality, in terms of net NPA ratios and GNPA ratios, we are down. GNPA was down 45 basis points quarter on quarter to 1.88, And the NPA was down two basis points to 0.55%. Provisioning coverage ratio is healthy at about 71.1%. Total net slippages in the quarter was 711 crores, down from 918 crores in Q1 FY26 and 725 crores last quarter. Net slippages in wholesale were negative, which has been the trend for a while, aided by recoveries, negative of 9 crores. Credit card slippage was 539 crores, JLG was 130 crores, and the rest of the retail was 51 crores. So essentially our major slippages are pretty much from cards and JLG with a reducing, materially reducing trend in the JLG business. JLG is also further reduced at 124 crores in line with improving collection efficiencies. We've also seen improvement in resolution rates in bucket one and bucket two. Also, we now have 80-plus percent of our standard JLG portfolio is now covered by CJFMU. Hopefully, that helps us in good stead if and when there is another cycle over the years. Our net restructured advances is very, very small now at 0.16 percent. On provisionings, net provision on advances was about 634 crores, largely dominated by cards with 491 crores, JLG of about 60 crores, and all of the retail put together at about 70 crores, and wholesale was about 13 crores. Credit cost as a result for the quarter was 64 basis points. On capital, we continue to be fairly healthy with the 14.94% total capital adequacy and CET1 of 13.45, including the profit for nine months. We burnt about sequentially about 7-8 basis points, largely due to growth. With this, we will now open the session for Q&A. Thank you.

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 the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rakinsha from IFL Capital. Please go ahead.

Hi, good afternoon, sir, and thanks for the opportunity. I had four questions. First one was, you know, I just noticed that the balance with other banks on the balance sheet has jumped to 12,000 crore, sharp increase, both QOQ and IOI. Partly, it's a function of, I guess, you know, reduction in the CRR, but instead of deploying it elsewhere, it has again gone to other banks. So just wanted to get a sense, will this buildup continue or do you intend to deploy that in either GSEC or loans in the coming quarter? That's number one. The second one is on your provision coverage. It has now come down to 71%. So perhaps it means that the additional SMA loan provisions on MFI book are no longer being carried and it has normalized. So how do you expect PCR to kind of settle in the next one year? Is this the level where it will continue or would you want to further increase it? So, that's number two. Third one is on asset quality. So, the slippages in credit card are elevated, and Kumar, sir, you mentioned it may remain elevated for next couple of quarters. I was just curious to understand why has it not normalized yet? What is it keeping at elevated levels and probably longer than what we initially thought? And lastly, you know, pertaining to the fund infusion, so any initial thoughts how you would be looking to deploy once the capital potentially comes in 1QF527? So those are my four questions. Thank you.

I'll take a couple of them and I'll ask Jaydeep to get into that. The first one is about the deployment of the funds, as I told in the last time also. We said that we have drawn broad strategic points for deployment of that, and it is being discussed at the board level, and we will be able to give the precise way of doing it because we have identified the growth within all the areas which we have been growing for the last one or two years. Second will be some new forays and new areas will be entering, which will be in terms of investment part of it and wealth management, expanding our branch footprint and expanding our distributions, and some of the new products and services in retail will be able to introduce it, and we have a gift city we wanted to leverage it. These are the various things which I said earlier. We stand by that, and we are working on the deeper numbers on that. With regard to the PCR, if you look at it, we are normally comfortable between around 75 to 78 percent, which is what we have in maintaining it here. Maybe in a quarter to come, we will be building up to that extent. And with regard to the bank balance, I'd like to give you the details.

Yeah, and just to add on CCR, you know, we have, you know, board of group policies, so obviously there is not much discretion or changes that happen. So depending on the portfolio which is going bad, there is a certain level of provisioning which is taken. So it's a little bit of a mathematical outcome than a target, but we've said in the past that we should definitely be We're going to be 65 plus at most of the times. On credit cards, yes, we kind of, if I want to kind of divide the problem, I think we're kind of happy with the book that has been created over the last 18, 24 months, and we've seen progressively better outcomes on that if you look at leading indicators like six months on book or 12 months on book. There are certain pockets of the portfolio which are exhibiting weakness, and we think that it will take us, as Mr. Kumar mentioned, a couple of more quarters for that to resolve itself. And therefore, conservatively, we are guiding like this. And it's a combination of, you know, what underwriting. We had a reasonable jump in growth of cards post-COVID, so part of that could be related to that. Part of that is also related to some macroeconomic weakness Some of that is also related to the fact that we are withdrawing from many pockets because we were fairly distributed on cards when we had a partnership with Bajaj and we are now wanting to kind of focus in more in the top, let's say, 80, 100, 150 locations rather than being far more spread out. So as we withdraw from fringe geographies, there are some impact on collections that happen. So I think it's a combination of that. The good part is that We are quite confident of where we see these resolutions improving and what is the kind of risk underwriting that has happened over the last two years. So there is reasonable predictability on what we are saying, and hopefully we'll be able to demonstrate that over the next, let's say, two to three quarters. On the balance sheet, yeah, on the first quarter, it's actually a single-day phenomenon. If I look at daily averages, I don't think it will be so stark, but some deployment of excess liquidity in a manner which was more tactical at that point in time is more a consequence of that rather than anything from a structural trend to read into that.

Got it. And just one clarification on the PCR command. Kumar, sir, mentioned 75 to 78% being the comfort level, and you did mention 65%. So it's a

consequence of which goes bad, right? So for example, theoretically, let's say at some point, let's say there is a secured retail asset shows some increase theoretically, that will continue at 15%, right? Because the recoverability that is very high. So as we expect, see one of the other things that is happening is on the microfinance front, there is a catch-up of provisioning that is happening. We have got back to a 25% run rate. So we will see a little bit of net NPA increase in microfinance from a legacy portfolio standpoint. Whatever went bad in Q2, Q3, et cetera, and Q4 will have a catch-up provision based on a 25% per quarter catch-up. So it has nuances around which portfolio at what point in time. I think this is the recoverability. We are quite comfortable with the provisioning guidelines that we have. So we are very aggressive, as you know, on cards. We are reasonably comfortable with the microfinance portfolio to be taken 100% provisioning over a year. We are, despite, you know, portfolios like Tractor, we take 100% provisioning in two quarters. So, despite it being secured. So, I think we, depending on what portfolio exhibits stress, there can be some ups and downs, but broadly speaking, as I said, plus minus 70 is where we should be comfortable with.

Got it. Very helpful. Thank you so much.

Thank you. The next question is from the Lionel Jayan Kharrote from Axis Capital. Please go ahead.

Thanks for the opportunity. There are two questions. One is on the car's business itself. While we do understand that you have taken corrective actions, but the quantum of slippages or at least the provision seems to be continuing for much longer than the industry. And a few more quarters, meaning a good one-third of the book is not growing. So even with the capital coming in, if a large part of the book doesn't accelerate, how do we see this business, not from the next two, three quarters, but next two-year perspective? And when do we really start the issuance rate to go back to the lower levels? That is number one. And specifically, you want to understand why RBL card portfolio lagging the industry over here? I'll come back to the second question.

In terms of coming back to a run rate of issuance of two to an hour flag, I don't think we are necessarily chasing a specific number here. I think the bigger excitement that we have is how do we underwrite cards that have multiple products, you know, looked at cost flow to the same customer base. So we are hopeful to have a significantly higher overlap between our savings account and card customers over time. We are hopeful of underwriting other secure products to the same customer base. So I think that is where even the methodology of how we approach customers, how the customers can do DIY journeys for consuming multiple products, I think that is where the focus is. I don't think we are looking at cards as a standalone product to grow materially beyond, you know, I mean, we will be very comfortable with a 10 to 15 percent growth in the book We should get to a 1.5 lakh new card acquisition in a few months, and I think that's a good run rate as long as we are able to bank the customer for more products, because ironically, one of the risk mitigants in this business is actually to have a more transactional relationship beyond cards with the customer, and that's obvious when you look at performance of card businesses across banks and non-banks. You will see that difference, and I think we want to progressively move towards multi-product customer consumption on this rather than a single product business.

This is very clear, actually. 10% to 15% of the book is very clear, and like you said, you're not targeting between half lakhs. Just to add, on the asset quality, how many more car quarters do you think you'll need for the cars book to stabilize on asset quality?

See, I just want this to be addressed in two parts of it. I mean, the acquisition which we are doing it in last, maybe around six months' time, is behaving normally. In a sense that we are in a position to go back to the quality of the acquiring, so that good stead. The existing book, which is just showing this just after we took over, as Jaydeep made it clear earlier, it was operating on all the pin codes. We have shrunk the pin codes. So, naturally, the PIN codes where we don't have the muscle to do this activity is just showing a lot of stress there because this is one business where you have to be in the business for retaining the people at the end, and you have to keep on doing the business and all the PIN codes will do that. That stress, we made a very sharp assessment of it, and it will pick out in the June, and thereafter, it will start trending down. So, we will be by September, if you call it, it will be normalized number what we have been seeing it earlier. So, June is what it will pick out, and And Vikram, anything more to add?

Yeah, sir, no, sir, I think you've summarized it well. In terms of our customer selection criteria and our distribution strengths, we are almost, you know, at a well-defined level, and from here onwards, we'll continue to grow at about 10-15%. What we have identified in collection performance is that, except, you know, the early trends and the new sourcing is behaving as per the plan, Except for a particular cohort, most of it is looking predictably coming within our risk appetite zone. And I think in another two quarters, we should see it getting back to the desired levels.

Great. Just to again confirm, by September, if it stabilizes, it means second half of FY27, we should be looking at a normalized behavior of this book on the card. And the second question was on the growth after the capital and branch strategy. So, if you could just help us with the timelines on both branch expansion, assuming hypothetically the capital is already in the next one or two months, how do you lay out the branch expansion strategy over the next one or two years? And then, again, similarly, timeline on the growth, when do you see growth acceleration?

See, our branch expansion strategy is very clearly laid out, and it has been well-consumed with the team across. We will exit March with around 600 branches, and by next March, the year after, it will be around 800, and by third year, we will be receiving 5,000 branches. It is our own RBL branch bank. We have already identified 200 high-growth locations across the country, taking into consideration the opportunity for us to make a high growth rate How are you going to be talking about 10%? We have started leveraging it for the last couple of quarters, where apart from doing it ALG business they will be doing all that retail security businesses also. So, for a simplistic understanding, you will say that 1,000 branches will do all your retail assets, retail ability. It is a retail consumer business branch bank, and RFL will be doing your retail assets also. So, for the business growth opportunity, you will be having around 2,400 touch points by end of third year.

This depends on the timelines of our growth and the capital?

The capital is depending on the approval which is going to come. We don't have a precedence to say precisely that when it is coming, because it's the first of its kind. So we made our own assessment based on what was the conversation which is going on with various regulatory authorities to whom we are applying applications that have been made. We feel that maybe in Q1 will be the right time for us to say that approvals will come. Thereafter, the process will follow for getting that infusion to take place.

And post-capital, would you take time to start growing, or do you think you already have the right plan in place?

Right now, we are already growing in 25% to 30% range. If you see it, my wholesale is growing at 21%, and commercial is growing at 30%, and retail secured is growing somewhere around 30%, which all of them put together is somewhere around, what, 70% to 74% because they were unsecured, and the J&G put together is 26%, the remaining is this. This cohort is growing at the range of around 25% given. So with the capital, with the expense of the footprint, naturally it has to be much above the 25% what you are talking about. So, the growth is something which is given and assured. With our current growth rate, our run rate will go faster. Instead of getting forced, maybe that we will continuously reaching the boundaries much easier.

Great. This is very clear. Thanks for the transparency.

Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.

Yeah, thanks for taking the question.

So, two questions, particularly now getting on to the credit cost. So, given that the pain on the credit card is continuing, now how should we see the credit cost settling? And I heard that maybe the credit card slippages would pick out in maybe June. So, do we see a much elevated level even compared to that of 2Q going forward or 3Q going forward? Or maybe this is the level which can be sustained. And what would be the overall guidance on the credit cost side?

So, Kunal, I think on slippages, we are not suggesting that this is going up. I mean, we are broadly talking about current range, which are obviously elevated from where it ideally should be. There is no suggestion that we will see anything more than the range that you've been in. I think on credit costs, maybe it's going to be two different halves next year because cards will play a role. So, I guess the first half will be somewhat in the current range. It will be a little lower because microfinance is coming under control. But second half should start seeing significant improvement on credit costs.

Okay, so maybe this kind of run rate of 2.5, 2.3 to 2.5 should continue for a few more quarters.

No, not a few more quarters. I think, see, within this, I think microfinance is coming down. We are not seeing any material challenge in any other part of the business, whether it's wholesale or secured retail. And so if microfinance comes down, we should see some moderation on credit costs. But, you know, I'm not getting into precise number guidance here of 10 basis points or 20 basis points, but we should not go beyond this range, clearly. And as and when the card situation improves, which, as I was saying, as you're saying, should start looking better from September. So second half of next year should start moderating in terms of trade costs, quite materially.

Sure, got it. And second question is with respect to the cost of deposits benefit. Maybe in fact, when we look at it, it's not coming through much. Even like this quarter, it's been down just six odd basis points. So when do we see this eventually cost of deposits benefit to flow in? When we look at it, maybe from 6.53, it's still down to 6.2. So maybe when we look at it, maybe when should a larger part of this benefit flow in? And again, like maybe savings is seeing the benefit. TD, we saw it like 23 or business points this quarter. So, TD benefits should continue for another two quarters, given the average maturity.

Yeah, so Kunal, I think the TD trend is quite clear. The savings account reduction is calibrated consciously. I think where there is a little bit of a challenge is that the CASA ratio on a daily average basis is a little bit of a challenge given the situation in the industry and the fact that we are also reducing SAAR rates. So, if I look at TD rates, I think, yes, that trend will continue because repricing benefits will come over time. And therefore, effective cost of funds reduction will be a little moderated as compared to the TD cost reduction.

Okay. Okay, good. And one last question on ECL. Maybe if you have again recalibrated the impact and maybe gone into much detail about it, what could be the overall ECL transitioning impact now?

So, that's a little bit work in progress. Yes, I think we are in that 10% zone of net worth, but we are, you know, RBI guidelines have recently come out and we are in the process of, you know, we will also have to potentially start reporting IFRS accounts for consolidation purposes post the consummation of the transaction. So, we are working on that with a lot more detailed orientation. And as and when we have visibility, we'll come back. But we should be plus-minus broadly in that 10% zone of network.

Okay. Got it. Thanks. Thanks and all the rest.

Thank you. Next question is from the line of Jay Mudra from ICICI Securities. Please go ahead.

Yeah. Hi. Good afternoon. And thanks for the opportunity. First question on are they approval? So, you mentioned that you also sought approval for amalgamation of Emirates India branch and of course there is an approval pending for the transaction. Are these two separate approval or they are like one approval only?

There are two different approval. It has to be a first one is in respect of contributing the transaction. The second will be the amalgamation of the branches into it. And we also made a No, during the intervening period, we also sought the permission for running the two entities, which is also the third approval, which is also gone. All the three approvals are independent of each other. And they will be considered concurrently because everything has a linkage to every other approval. It is not, nothing can be given on a standalone basis. And it starts in sequence.

Okay, sure. No, that is very clear. And second question, sir, on a credit card business. So you mentioned about the likely asset quality behavior, but I also wanted to check on the growth side, right? So if you believe that it will take over two quarters for portfolio quality to more stabilize, in the interim period, would you would you see the big book outcome to be similar where in the QOQ Your YOI growth has been negative, or you think that, you know, maybe the recent behavior makes you positive to at least start growing this book. How should one look at the credit card book growth over the next two to four quarters?

So, one important point, I'll tell, then I'll ask our Vikram to talk about it in detail. The first thing will be that, first, it will become QOQ positive. Then, it will start working on YOI positive. Next quarter, it is going to become QOQ positive. And the other OIOA positive, because with the 10-15% range, it will take some time for you to become OIOA positive, because we can give you more for the details.

Right. So see, Nane, any mature credit card portfolio, you see erosion of about 20%, you know, annually, either voluntarily or involuntarily, which means that to sustain our growth of, say, about 10-15%, we have to do new cards equivalent to about 25-30% of our current base. Now, immediately after exit of Bajaj, we did the diversification of distribution, which has scaled up to 100,000 cards in December. We'll continue to now scale it up to drive, you know, about 10 to 15% growth on a sustainable basis. In months of November and December, after, I think, about, you know, 12-15 months, we have seen growth in the portfolio. Now, after the start of the, so this is the point of inflection from where we will sustainably grow 10 to 15% annual, which means that about 5, 7 to 10% quarter on quarter. That is the answer on growth. For driving this growth, we have already developed well-defined distribution within the bank with no dependency on third party, which is giving us sustainable new

Yes, that helps very much. Then another question, sir, was on IBPC sell-down. I was under the impression that, you know, the bank would need more growth, even if it comes from IBPC. So why sell-down IBPC when, you know, one or two quarters is down the line, you may have to again do IBPC only?

Sir, I think it is not the sale of our asset. This is something IBBC which has been taken by us over a period of time, and it got accumulated to fortify anything. Then we said that our own market should contribute. So we have started saying that instead of working, doing lazy banking, we wanted to do hard work banking, which is one of the major reasons for us to share this IBBC. At one point at a time, you can't depend on the third party. If you want it, you can accumulate a social growth. Minus this, our people are able to show the growth of around 24% organic, so that now they know that strength, which will go up to, let us say, 30, 30 to 35. That is an idea. It is not our assets sold out to IVVC. It's the other way around. We shirked or removed our IVVC book, which we bought over a period of time.

Okay, last question, sir, on LCR. If you can quantify from April beginning, you know, you may have to provide more runoff rates on MIB, and there could be some lower runoff rates on wholesale deposits. What could be the net impact because of these changes on your LCR? Could there be release or you may have to provide more liquidity?

If I remember right, the task is going to give you the benefit of a LCR release because it is going to move away from 100% out-row to the 40% out-row, and it is providing an opportunity for growth, plus it is going to give you the release of LCR. I don't think there is going to be a problem of LCR. Marginal benefit only are the net-based.

Sure. The only thing is that you have to provide more on the mobile and internet banking, but That will be offset, right, by the lower run-off rates?

Yes, correct.

Thank you and all the very best. And congratulations, Jaydeep, for your delegation. Thank you so much.

Thank you. The next question is from the line of Viran and Jinnia from CLSA. Please go ahead.

Yeah. Hi, team congrats on the quarter. Just a few questions. Some might be repetitive, but on this credit card slippages, So I understand that the new cohorts are doing better. Do you think it's also an issue with our collections infrastructure? Like maybe when it was with Bajaj, they have a vast collections infrastructure across multiple products, multiple districts. Obviously, it will be much bigger than ours. And now when we move to ours, that is one of the reasons. So it's not just the quality of the customer, but the ability to recover, which has impacted slippages. What do you think of that?

Yeah, Vikram, you can answer.

Yeah, yeah. Hi. So, see, when we have done a very rapid transition in January, in somewhere in last financial year, there definitely was a transition impact which was there. But when we look at our collection outcome today, they are operating, you know, almost 5% better than what they used to operate in Bajaj's collection management days. Our problem is not, you know, generally at a portfolio quality level. We have identified, there is a particular cohort which is giving us a little bit of a grief. If we were to see the collection performance outside that, we are doing a little better than what we used to do even when Bajaj was here. So our collection muscle right now is fully developed and fully ready to manage a portfolio of this size with a reasonable growth. But the slippage is coming because of that cohort which is giving a little bit of grief. Otherwise, we are reasonably in control over the portfolio.

Just to summarize the point what you have asked about, whether the collection infra is weak when compared to the BFL is a broader point which you brought about. The collection infra at the end of the day is always the collection agency which is working on the field, right? The collection agency is going to be with X or it is going to be with Y, the same set of people. The supervisory team is what it has been taken over. This infra setup might have taken a little time, but the setup is as strong as that it used to be earlier. There is a broader sense I wanted to give you and give you a comfort that it is not the collection infra. If the collection infra is weak, it is going to be fairly weak. So it isn't so. So the initial setup and adoption period, the moratorium got extended a little because of that. The locations on which we have to work on is much beyond the pin codes where we have been set up our pin code. That creation has taken a little longer time.

And we have, you know, accelerated the issuance only after fixing the collection infra issue. So, I mean, we have paused our growth and still the collection infra was 100% in control and was delivering at the original level. So that is the thing that we want to submit.

Okay, got it, got it. Secondly, when our secured retail slippages, are we happy with current levels? Is this built into our, you know, profitability matrix, etc., like 167 crores a quarter from a 35,000 crore book? I mean, if I look at other banks, obviously, but we do understand that you all have to take higher risk bets because of your cost of funds. Is this in line with your estimates or not, is my question.

So, a couple of things. We have a very small agri portfolio, which had some couple of accounts of about 15-20 crores this quarter. If I divide the book into, let's say, two, three parts, If you look at mortgages, which will include a small lab, micro lab, housing, prime housing, prime lab, all of that put together, I think we are in a relatively negligible slippage situation. And you should look at net slippage on this, because there are certain businesses where, because of the guidelines, you do have slippages, but then they get upgraded. So, other than, you know, a couple of quarters back, we had an issue with our working capital business, and this time we had a couple of loans on Agri, but these are not anywhere symptomatic of the portfolio. This is anecdotal, and I think we are, other than tractors, which by definition goes at about 2 to 1.5 percent of the portfolio, as led to the credit cost, we are quite comfortable Okay, got it, got it.

And just your 15,000 crore secured business loan book, that fixed rate, floating rate, what's the average 10-year life?

On the business loans, on LAP portfolio?

The 15,000 crore secured business loan, so I presume that is LAP, but I don't know if it's working.

That's correct, that's correct. So behaviorally, it should be about 4 to 5 years.

Okay, and it will obviously be floating rates then?

Yes, yes, all entire retail is pretty much linked to repo and floating, other than cars and microfiners, and tractor structure, basically.

And gold also?

And gold also, yeah, so basically mortgages and working capital.

Got it. And lastly on CASA now, you mentioned industry-wide pressures, but is it just simply that your customers are moving from SAR to TV?

We saw that assessment. Some of them have moved from one bucket. The people who are there in the higher bucket has moved partly to that TD. But one thing I wanted to tell you that the NTDs which my team is able to mobilize even after the cut, it just outweighs even that outflow which we have seen here. If you look at it, in the last two, three cuts, the total net outflow is somewhere around 200,000 or 300 crores only for the book of around 18,000 crores, which is a sign of holding the customers together.

Thank you.

Thank you. The next question is from the line of Param Subramanian from Investec. Please go ahead.

Yeah, hi. Thanks for taking my question. Firstly, I heard Mr. Kumar call out 200 branches per year, if I'm not wrong, for the next two years. What does that mean for OPEX run rate for FY27 and 20?

Yeah, I'll tell you now, on average around what half a million is what we'll do, OPEC?

Yeah, I think, so let's say, simplistically, if you look at 200 branches for fiscal 27, we will look at an average rollout impact from a P&L standpoint of 100, and one should assume 60 to 70 lakh operating cost, run rate per branch, and therefore that will translate We will continue to improve profitability on our secured retail. Third, we expect a material change in cards and microfinance profitability by the time we exit our second half of fiscal 27. So I think when you put all of that together, I think we are quite comfortable in taking these expansion costs, because ultimately we have to balance at some level, some level of growth, and it's easy to grow loans. We have to obviously, if you have to grow deposits, and that two deposits at a cost which we are comfortable with, because We do have a stated intention to reduce the gap, and along with that, if we impose a 25-30% growth in deposits, naturally, we will have to arm the businesses with distribution, and that's the intent.

So, JB? Now, with the branches and the distribution for retail, retail assert, we have a very calibrated plan of making the branches to become profitable on the 18th month. That means the branch which is opened in this quarter will become, before FI28, it will become profit. And once the cycle sets in, and with your ability to reduce the cost, with your ability to borrow at a cheaper rate, that will get compensated. But while, of course, when you wanted to expand on the liability side, the print has to be...

So, 7,200 crore is your annual OPEX run rate. So, you are saying only a 60-70 crore extra impact. Did I get that correctly? For branches, yes. And this is fully loaded, as in your, this is fully loaded branch expansion. So that should be the incremental learning, okay. Okay, now, second question, again on your margin in this quarter, so on slide 5, you saw these movements, right, between your cost of funds and yield. I can see the LCR is also broadly stable quarter and quarter. Your yield Fund is down 13 basis points, cost of fund is down by less than that. So how exactly is this LIM expansion, how is it played out over 12 basis points in this quarter?

So part of that, Param, is CRR cut benefit of about maybe four basis points or so. Right, yeah, that I get. Yeah, part of that is, on a daily average basis, the investment book to advances book was lower than historical trends. Some balance sheet efficiency, some improvement in short-term investments that we had. So, it's a mix of factors. Okay.

No, I thought it should have reflected in your LCR, right? I mean, that is flat. Thank you.

The next question is from the line of Rakesh Kumar from Valentis Advisors. Please go ahead. Yes, Mr. Kumar, please go ahead with a question.

Yeah, hi. Hi, sir. So, for the question, sir, on extension of DCCO, so how much, how much is the provision that we are holding on those outstanding?

Can you, can you repeat? Sorry, we can understand the question. Can you repeat?

Yeah, so with, with respect to, so, where?

I'm sorry to interrupt you, Mr. Rakesh, your voice is breaking, sir. We are unable to hear you.

Is it fine now?

Yes, please go ahead.

Yes, so I was asking the amount of a standard asset provision that we have on the loan that we have, you know, where the DCCU has been extended. So, so what is the provision that we have on those loans?

So total project loans that we have on our books, basically, new guidelines that kicked in is about four groups.

Okay.

On standard.

Okay, so what would be the incremental number? So, like, because of this increase in the, this is your extension?

Four crore is largely incremental because we would have had only whatever 40 basis points before that. So, roughly four crore is delta.

Okay. Okay. And if you look at, you know, the constitution of your retail liability, like, you know, it has marginally deteriorated from, you know, from the June number. So, so if you have any color to add here.

In what context for you?

Yeah. So if I look at your retail liability constitution wise breakup, which is there in the slide number 16. And if I look the number from June, June to December number. So there is like, you know, individual and HVF number percentage has come down.

Yeah, I guess that necessarily is not good or bad in itself. I think small business, if you look at granular deposits, we are sequentially better. So it could be from small businesses, it could be, you know, so we would typically not necessarily look at just individuals as a constitution, but look at the granularity. And on an individual basis, I think that we've kind of seen SA savings account anyway being a challenge for the industry. So part of the reason would be that otherwise. Oh, sorry, Narendra, yeah.

Our retail deposit is better, which is CASA and FD less than 3 crores, is growing faster at 16% as compared to the total deposit. And our granular deposit is growing at 15%, which is better than total deposit. Individual is showing lesser because we cut the rates from 7.5% to 6%. But on the retail deposit growth and granular deposit growth, we are growing at a faster rate.

So the third question lastly TD has like you know from the March number it has fallen by approximately 40 bits to now considering that what is the you know first deposit you know fall that has happened in the system as per the RBI number what would be the you know acceleration in the you know additional fall in the TD cost so would it be around 70 bits or 80 bits assuming that there is a You know, complete pass-through happening in the outstanding TD number also, in line with press TD number. So, like, how do you think that, you know, would it complete in the next six months, nine months, or one year time?

I think it should complete in a, maybe a nine-month kind of a timeframe. The typical average maturity of TDs would be in the nine to 12-month zone on a blended average basis. And the latest cut, see, I think the issue is that, I don't know, maybe we have another 20 basis points to go in terms of incremental TD cuts, at least in this cycle. And therefore, I would not go to the extent of 70, 80 bits. I would say 30, 35 bits is what we would have broadly as some more room to go in terms of overall TD cuts, cost of TDs coming down.

In the next three quarters.

In the next three quarters, yes.

Yeah, so from the liability side, at least we are safely, we are very safe on the margin front, on the liability side, at least.

Yeah, I mean, I think, I guess, you know, in our case, there are multiple plays on margins, right? So, I mean, we went to a period where there were rapid repo cuts, and there was a material reduction in our microfinance and card book contribution to total, right? So, now, both seem to have bottomed out, and therefore, We are, you know, it's difficult to predict long-term, but clearly over the next three months, maybe in six months, we should see margins improve a bit.

Thank you. Thank you, sir. Thank you.

Thank you. The next question is from the line of Shailesh Ganani from Centrum Broking. Please go ahead.

Yeah, good afternoon, everyone. Thanks for the opportunity. I have to ask a question. So first question is indicated.

I'm sorry to interrupt, Mr. Kanani. We are unable to hear you. Sir, your voice is breaking.

Is this better?

Yes, please go ahead.

Yeah. So, my question is, Mr. Kumar indicated that the retail secure portfolio has become contributing to the profitability at the cohort level. So, can you please provide a product-wise breakup in terms of profitable break-even and yet-to-break-even products?

Sir, I think the prime housing followed by prime lab, you know, tractors are already profitable. Gold loan is getting to be profitable. I think lab is profitable. Prime housing is yet to catch up. And small, affordable housing and small lab, given that it's a growth area, you know, acquisition costs are still a little higher. And maybe that is just about breaking even. So two things will drive profitability. One is obviously there is a back book which keeps growing and therefore giving you interest income without cost of acquisition. Second, we are consciously keeping the mix in favor of small business loans and affordable housing, as you will see in the slides that we have presented, which has a faster week-even time. And third, you know, we continue to expect productivity gains on origination as well going forward. So I guess it's a combination of all of this in terms of improving profitability.

So if I'm understanding right, in terms of yet to break even, it is only prime housing

is one segment which is yet to contribute to the break even. That is understanding, right?

Fair enough, yes. Yes, fair enough.

Sir, my second point is to wholesale lending. Obviously, macro has helped and this quarter the numbers were good. But if you can throw some light, say once the capital comes in, two years, three years down the line in terms of mix, we have been stable in terms of 60-40. How would that number be in terms of retail and wholesale?

Next number, we'll be able to say once we finalize our strategy, I'll be definitely trending towards, I mean, moderating in respect of, moderating in respect to the, in favor of, in favor of also.

Okay, fair enough. Sir, just one question, sorry to harp again on credit card business. Because we have had some misses on that income, especially, especially post our, post our time with Bajaj. Can you shed some more light in the sense what gives us the confidence that in the next two quarters, asset quality would improve because in the past also we had given similar guidance, but somehow because of the macro and other factors beyond our control, we were not able to kind of deliver on the asset quality of credit cards. So if you can throw some more light.

Yes, Shailesh, as we said, I think if we look at, you know, portfolio originated over the last couple of years, leading indicators on that portfolio, underwriting changes that we have done, and being demonstrated in terms of X flow bucket, we are seeing other than some patches of cohorts, as we mentioned, we are looking at significant improvement in line with our expectations. So, there is a clear visibility on improvement which we see from September quarter onwards. I think…

No, I was just…

I was just missing. Yeah. Okay, okay. So, we are pretty confident this time around to deliver a couple of quarters and the betterment in asset quality for credit cards, right?

And I think, you know, in terms of profitability, it's not only credit costs, We are also significantly working on cost of collections and cost of business in general, which also got bloated because of higher slippages and higher collection costs. So, in terms of overall business outcome, if I dial back three years, it was significantly higher on revenue. We are now, the industry is settling down to a, you know, structurally lower revenue business, and that has to be countered with both reduction in cost, cost to assets. as well as collection and slippages and credit costs. Sorry, Vikram, you want to add?

Vikram, Shailesh is looking for the confidence from yourself.

Yeah, hi. So, Shailesh, you know, after the transition of collection from Bajaj to us, we have done significant investment in collection infrastructure and we have paused the growth from third party, you know, till the time we have full handle on collection. So, as Jaydeep has said, now our distribution muscle is ready, our refresh rate is ready, our collection infrastructure is also, you know, in place, and has been tested on scale. Our incident of defaults are significantly lesser. I mean, they are right now at, I think, all-time lowest since we started the business. Our resolution rates are back in, you know, back in the required range. Now, what we are dealing with is a particular cohort, which we will, I think, sort over next, you know, two quarters of sorts, and then we should be back on absolute full desired levels.

That's very helpful to come. Thanks a lot, and best of luck, everyone. Thank you.

The next question is from the line of runs, Orenki, from RSP and Ventures. Please go ahead.

Hello, I'm audible.

Yes, you are. Please go ahead.

Other than JLG, I just want to know the strategies about the wholesale and other secured retail banking, like how we see the other two segments of the bank going forward, not in the next two, three quarters, but I'm talking about the after one, two years.

You're talking about, if I understand right, you're asking about the growth of wholesale banking and the growth of retail security. Is that correct?

Yeah, yeah, yeah.

Okay. We have been growing wholesale at around 21, so that is a minimum base, and it can't go below that, and it is going to go up. In the near term, it will continue to be in the range of 25, and in the long term, it will be much higher. In respect of retail, we have been growing at around 30%, 25 to 30%. In the near term, it will continue to be the same range. In the long term, it will also go up by around 5 to 10% or more.

Okay. And on the GLG front, will the growth will be as higher as we have in last one year, about four quarters back? Will it be possible for us to go by that kind of growth in unsecured sector?

No, unsecured, we have already come on record to say that we will not be growing disproportionately high. We reduced it from 36% to 24%.

Thank you.

Ladies and gentlemen, we now conclude the question-and-answer session. If you have any further questions, please contact RBL Bank Limited via email at ir at rblbank.com. On behalf of RBL Bank Limited, we thank you for joining us, and you may now disconnect your lines.