Operator
Ladies and gentlemen, good day and welcome to the Shriram Finance Ltd. Q2FI27 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 then zero on your touchstone phone. Please note that this conference is being recorded. I now have the conference over to Mr. Umesh Rivankar, Executive Vice Chairman, Sriram Finance Limited. Thank you, and over to you, sir.
Thank you. Good evening, friends from India and Asia, and a warm welcome to all of you. Greetings also to those who have joined the call from the Western part of the world. To present our Q2 FI 27 call today, I have with me Managing Director and CEO, Mr. Parag Sharma, Joint Managing Director and CFO, S. Sundar, and Sanjay Kumar Mundra, Executive Director, Investor Relationship. It has been a good second quarter of the year for Shina Penas under current circumstances. Let us first look at the broad economic indicators that has a direct impact or indirect impact on our business. First on the GDP growth, India's Q1 GDP growth of 7.8 in F26-27 has highlighted the resilience of the country's economy, with the data pointing towards strong consumption, rising investment, and sustained government capital expenditure as the key drivers of the expansion. The Stronger-than-expected performance has reinforced expectation of broad-based economic momentum across multiple sectors. The IMF has raised India in July. The revision in the estimate comes on the back of stronger-than-expected momentum, supported by resilient domestic demand and robust services in September for the economy, which has a major impact on our business. Rainfall in the more than decade, owing to electric, 13.8%, 15.2% have recorded, tractor again has recorded a good growth of 18.26%, with 2.91 lakh units sold, as against 2.4 lakhs, both in the previous year, 33 points. Coming to the passenger vehicle against 43.6153 lakh unit against 1.94 lakh unit.
Thank you. Good evening to everyone and welcome to our Q2FY27 earnings call. And I trust you had the opportunity to produce our results and the related investor presentation, which has been posted on the website of the stock exchanges. We registered disbursement growth of 25.71% year-on-year. Our disbursement in Q2 FY27 this year aggregated to Rs. 54,079.02 crores versus Rs. 43,019.17 crores in Q2 FY26. Our AUM, as on 30th September 2026, registered a growth of 16.96% over Q2F526 and a 4.85% sequentially. Our AUM stood at Rs. 329,021.72 crores as against Rs. 281,309.46 crores a year ago and Rs. 313,798, that is, Rs. 313,798.39 crores in Q1 FI 27. Our net interest margin in Q2 FY27 registered a growth of 38.2% year-on-year. We earned a net interest income of Rs. 8,661.04 crores in Q2 FY27, this year as compared to Rs. 6,266.84 crores in Q2 FY26. Our profit after tax grew at 59.37% and stands at Rs. 3,677.03 crore in Q2 FY27 as against Rs. 2,307.18 crore in Q2 FY26. The profit after tax was 3,444.56 crore in Q1 FY27. Our net interest margin in Q2 FY27 was 9.52% as against 8.19% in Q2 FY26 and 9.04% in Q1 FY27. Our earnings per share for the quarter stood at Rs. 15.63 as against Rs. 12.27 in Q2 FY26 and Rs. 14.83 in Q1 FY27. On our asset quality, gross stage 3 in Q2 FY27 stood at 4.65% and net stage 3 at 2.31% as against 4.57% gross and 2.49% net in Q2 FY26 and was 4.64% gross and 2.33% net in Q1 FY27. Our credit cost on total asset for Q2 FY27 stood at 2.03% as against 1.68% in Q2 FY26 and 1.66% for Q1 FY27. Our cost-to-income ratio was 22.52% in Q2 FY27, as against 27.76% recorded in Q2 FY26. Our cost-to-income ratio in Q1 FY27 was 25.48%. The Board also declared an interim dividend of Rs. 6.5 per share, that is 325%. The record date for the entitlement thereof has been fixed at October 29, 2026. On the liability side, the total liability stands at 2,36,271, broken up into public deposits, which is 31%, non-convertible venture, that is capital market, borrowing at 15.7%, ECB loan and bond at 16.5%, The domestic bank borrowing and institutional borrowing is at 21% and securitization at 14%. The cost of liabilities on balance sheet is 8.41% versus 8.56% in the previous quarter, a reduction of 15 basis points, and from March, it is down by 18 basis points. And the incremental cost of fund for the quarter was 7.3 versus 7.7 in the previous quarter. The liquidity coverage ratio was 303 versus 262 in the previous quarter. The liquidity buffers continue to be strong to repay our next quarter's liability. And leverage ratio was 2.16 times versus 2.14 times in the previous quarter, and March was 3.82. The capital equity ratio is at 33.24% versus 34 in the previous quarter. I think with this, we'll open the forum for question and answer. Thank you.
Operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 1 on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use hand fits while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Chintin with Autonomous. Please go ahead.
Hi, good evening. Thank you for taking my question. Could we start with asset quality? There is a step up in stage 2, stage 3 loans across construction equipment, gold, MSME. Could you help us understand, you know, what is kind of creating this increase in stage two, stage three loans, and how do you see, you know, provisioning costs play out for the full year? Your guidance from the previous quarter was around 200 basis points. So, you know, what is your expectation given that we've seen some deterioration this quarter? That's my first question.
I do not really see any kind of alarming situation in increase in the...
You know, sorry, just to be clear, on the credit cost, is the guidance still 2% for the full year? Because you are already 2.5 this quarter. It must be higher than 2% for the current year, correct? Yeah.
On the loan book, it's 2.3.
Okay. Okay, fine. And then, I mean, in the big scheme of things, you know, With your, where your margins are, these are not the biggest moves, but still, thank you for the color. On the NIM and NII, I mean, there's been good development there. How should we think about kind of NIMs going forward? So, you know, what is your take on evolution of cost of funds over the next year? How should we think about your loan yields, if you could give some color there as well?
The net interest margin is, it is likely to...
Could you explain the drivers of that as well? Like how, so what drives that moment?
No, see, basically what happens is, as the fresh capital is there, the capital cost being less...
Okay, so it's the typical ALM that is causing moderation. Could you give some color on where your incremental cost of borrowing is likely to be over the coming quarters? Like, we've already had one rate hike. I'm sure that's been passed on to you with perhaps more rate hikes on the way. So should we, like, you know, what is the starting point of cost of funds, and then we can adjust it for incremental rate hikes?
So, cost of libraries on book is 8.4, and I don't expect the incremental cost to be more than 8 as of now. That is, be it our bank borrowing or the retail borrowing and other instruments like securitization and all. But if the rate hike happens and capital market rates move up, I think that can slightly go up, which is as of now. Close to around 15% of our liabilities. Incremental costs can try to go up from 8% to around 35% level. But still, that overall liabilities being at 8.4, I don't expect the overall liability costs to go up for us, for the entire liability book.
Okay, thank you. And one final question, on MSME, if you can give some more color on, you know, what is causing the increase in stage 2, stage 3 loans, like what is happening in that product area? I know that you are trying to get into mid-ticket items, a product, so, you know, can you give some color in that MSME area?
MSME is a huge opportunity, and MSME is…
Okay, so it's more geographical, or you are also increasing your ticket sizes?
Ticket size is a combination of both, but wherever we have a comfort, then ticket size will go up.
Okay, got it. Thank you so much.
Operator
Thank you. The next question comes from the line of QI McTOW with Sean Fenn. Just go ahead.
Hello, am I all the day? Yeah, thanks for the opportunity. Just on growth, a strategy in the current situation, given the uncertainty of rural income in the second half, are we still going aggressive to push growth, or are we thinking about maybe increasing, tightening some filters? How should we think about growth in the future?
The growth, we have been cautious, even though our initial guidance was 18% growth, looking at the impact of the war situation in West Asia and the... The credit cost we had given a long-term guidance of 2%, but temporarily, maybe certain geographies, it may go up by 30-40 basis points, is what we indicated. And being a seasonal and monsoon being a week, we have seen a little increase in stage 2 and stage 1 in certain geography.
Operator
Thank you. Your next question comes from the line of Pedan Engineer with Svetik International. Please go ahead.
Yeah, hi team. Thanks for taking my questions and comments on the quarter. Sir, just one or two clarifications firstly. Sir, this MSM lending growth, which has just suddenly picked up this quarter, is there an ECLGS portion of it also?
No, we are not aware of any ECLGS.
Okay, so then this quarter we've disbursed almost 10,000 crores. In the peak, it has been 7,500, and last few quarters we are doing around 6,000 crores. Just a sudden 50% jump. Like, what drove that?
I know, I know. See, we have been informing in the previous quarter call also that we are focusing on MSME and we are reaching out to larger geography. Earlier, our focus was mostly in the southern markets and to some extent in the western market. Now, we are growing across India. Yeah. So, the MSME growth is mainly because of larger geography we are reaching out.
Okay. Okay. Fair. And, sir, just on your other comment that you made that near term for one or two quarters will be at these levels, and then the medium term, it will decline to 9% because the equity capital gets utilized. But on the other hand, our borrowing costs will also keep going down, right? So, net-net NIMS should not decline.
No, we are talking about increasing interest costs. That's one thing. And also, as new vehicles…
Last one for Parag, sir. What proportion of our bank borrowings have been migrated to EDLR? Or we are still on MCLR with some banks? Okay, sure, sure. Yeah, thanks, and wish you all the best.
Operator
Thank you. Your next question comes from the line of Raghav Gharg with Ambit Capital. Please go ahead.
Hi, good evening, and thanks for the opportunity. I just have two questions. One, in your total development and your AUM, what is the contribution from new vehicles, and if you can script that
The breakup of new and used will be provided through Sanjay. So you can reach out to Sanjay, post the call. He will help you out.
Sure. And then what would be the yield differential between the new and used vehicle financing?
It is normally, if it depends on segment to segment, it will be between 200 to 400 basis points. Understood.
And one more question, if I can ask you. Okay, so I see, I hear you out on the asset quality bit, you know, so I look at the slippages which have gone up some 50% YOY. You would attribute that entirely to the geographical disturbances because of, I think you're saying the rainfall or less rainfall, is that the only reason or there is something else also to it?
It's largely due to that, and we can't have a pinpoint region everywhere. It is, India is such a large country, there will be fluctuations in the income on various, but drought-prone areas, we see it a little higher. Understood.
Any data that you can give, how much of your slippages would have come from, say, the broad-prone states or areas, if you would have worked that out?
I don't have it right across. I will ask Sanjay to provide it.
Sure. That's all from Michael. Thank you.
Operator
Thank you. Your next question comes from the line of Neeraj Mali with Wealthy5. Please go ahead.
Good evening, sir. Thank you for the opportunity. My question relates to the reports of alleged unauthorized loan account in Kerala. Could management clarify the current status of investigation and the root cause of this incident? Given the company branch expansion plan, what measures are being taken to ensure that expansion does not compromise KYC verification and employee oversight?
Question, we will take it offline. So, you may reach out to Sanjay and then he will assist you in this.
Okay. And my second question is, what progress have you seen in the construction equipment segment? Since your previous guidance said that loan book could start growing from Q to FY27, is the recovery demand progressing as expected?
The construction equipment sales have grown up and the demand is picking up now. Last year, our overall construction equipment book, because in the last quarter, we are seeing the government spend.
Okay, fair enough. Yeah, that's it for myself.
Operator
Thank you. Your next question comes from the line of Kunal Shah with Sveti. Please go ahead.
So, firstly, as you indicated in terms of the credit cost, it might be elevated for a couple of quarters, and we are seeing higher slippages in a few of the geographies. What are the, maybe the tightness in the credit filters, if we had done in any of this, and should it actually impact the growth momentum? Because this quarter, when you look at it with the crier, it's almost like 5% quarter on quarter. So, would this lead to some kind of a moderation in the overall growth momentum as well with the tightness in the credit filters?
See, the seasonal impact, you know, has nothing to do with credit filters. Credit filters will have normally proper credit filters done at, you know, every geography, have a separate credit filter, but a sudden, if I tell I had done some loan at two years back, and there is unseasonal negative impact because of certain reason, That will have some impact on the performance of the loan. So, definitely, whenever the environment are little against, like economic activity is slowing down, only then we decrease our LTVs and tighten the lending. Otherwise, we don't really change the LTV norms or credit Credit filters, for example, will remain almost same for the full year, unless, you know, there are certain reasons to believe that the economy is slowing down. Our particular segment is not doing well. So we don't see any of that, and all the economic indicators say that India is growing well. Demand, credit demand is quite good. We are also witnessing the demand. In fact, the demand from rural was much higher in the last two quarters. Only now, in the last one month, we have been a little cautious on certain drought-pronged areas.
And so overall, in terms of growth, you still indicated you would be growing at 15 to 17-odd percent. Maybe this quarter, quarter-on-quarter run rate was 5-odd percent. And generally, second half is better than that of first half. And we are already more than 8% or so. So what is making us guide slightly slower? Maybe even if you assume, like, say, this is 5% this quarter, and it picks up in Q3, and then maybe similar level, then also it takes it to a slightly higher percentage. So, I was just trying to gauge whether maybe credit cost is slightly making you more conservative on the growth side, or this 15 to 17 is like relatively a conservative growth guidance.
See, basically, because of the impact of the monsoon, we are a little cautious in certain geographies. That's the main reason to give a conservative number. Okay.
And how much would this broad-prone area be as a proportion of AUM, if you have to look at it?
I don't have the number, but generally the Maharashtra, Karnataka, Telangana are the largest hit now, and we have a reasonably large size there, but exact numbers I can see through. Sure.
And then in terms of the utilization of liquidity, to what extent are we done? So when I look at cash plus investments, maybe it's down to like 31, 32,000 crores from 38,000 crores. And so how much of utilization and what level we would be comfortable in this kind of a macro environment? And in terms of borrowings, is it like now we should start to see the increase in the borrowings also coming through, or maybe there is still the room to repay the borrowings going forward and manage the, maybe overall, at least on the borrowings and not have too much of an impact on the funding cost?
Yeah, I think this quarter we have started our borrowing program. We had bonds, bank borrowing. It is back to the pre-march level. So we have borrowed around 27,000 crores in the last quarter. Liquidity-wise, we have brought down the liquidity, and it is now at our three months of future liability level. So nothing of excess liquidity now, and our borrowing program will continue the way it was in the previous quarters.
Okay, so now it will be almost equivalent to the AUM growth. Whatever AUM, maybe now we will have to borrow, and there is no excess liquidity which would be utilized towards the growth.
Okay. Got it. Perfect. Yeah. Thanks. Thanks. And all the best. Yeah.
Operator
Thank you. Your next question comes from the line of Shripal Doshi with Equirius. Please go ahead.
Hi, sir. Thank you for giving me the opportunity. My question was on, again, on the increase in GS2 and GS3. So, is it purely because of the drought situation in the states highlighted by you, Or is it also because of the heavy monsoon or flood-like situation in the northern part of the country? So if you have to attribute weight, how would it be, the impact?
See, flooding is something very normal in the monsoon season. It will not have any negative impact. So it is temporary, some two, three days, impact will be there. That will not impact the overall progress or economic activity. When the drought-pronged areas only will have a lower income due to the agriculture output being lower. When the income slows down, consumption comes down, overall demand and economic activity comes down. So these are the main reasons where the businesses slow down and cash flow gets stressed, And then the
second question was on the construction equipment segment. So, while we have seen strong bounce back and disbursements, but the GS2, GS3 indicators here also show an increase. So, what is it that is giving us comfort on the incremental side that we have, you know, got back to high disbursement phase? In the construction equipment segments, there is a strong bounce back in the disbursements. However, if you look at the GS2 and GS3, the asset quality indicators, that continue to go up. So what is it that is giving us comfort or, you know, how to read into these two data points?
If you see the absolute amount, it is still coming down quarter on quarter, even though the disbursements have been better this quarter. The previous quarter's gross stage 3 was 8.74, absolute amount, and this quarter, it is 8.62. Similarly, gross stage 2, if you see, it's 9.53 previous quarter. This quarter is 9.63. So, not much of a difference as such. So, it's more of a denominator effect, which is causing this spike in the percentages.
Okay, okay, okay. Got it, got it. Got it, sir. Thank you so much for answering the question, sir.
Operator
Thank you. The next question comes from the line of evade thing with evade securities. Please go ahead.
Hi, sir. Sir, my question is on the cost of funds. So, earlier we had guided a 100-base compression in the cost of funds because of the various vectors. So, does that guidance still stay or there is a provision on that part?
That we also mentioned that in case the rates don't go up, we'll be able to reduce. As of now, this quarter has come down by 15 basis point, and if rate further goes up and continue to remain at the current level, we may not be able to reduce our borrowing costs, but we are confident of maintaining it at the current level.
And in terms of the asset quality, so if I look at the accretion from the MSME segment in terms of the GS3, so it is coming at incrementally the accretion on GS3 from the MSME is quite higher compared to its share in the displacement. So any color, what cohort, or is there any specific geography which is not performing as well earlier, what we had in Bissach earlier?
No, basically, as I was explaining to you, in certain geographies, the seasonal impact is there, and therefore, there is an elevated state, the stage one. I believe it is a temporary one, and it gets normalized in the subsequent quarters.
And, sir, what is the share of unsickered exposure in MSME?
Yeah, unsickered MSME. 28% is unsickered. Okay, got it. Thank you.
Operator
Thank you. Your next question comes from the line of Abhishek Murarka with HSBC. Go ahead.
Yeah, sir. Good evening. Am I audible? Yeah. So, sir, my question is on gold, similar to what was just asked on MSME. Now, the GS2, GS3 growth for the past three quarters, if you look at the QOQ movement, it's very high. I understand there won't be losses, so obviously I'm not worried about that. But have you looked into reasons why GS2, GS3 are going up? I mean, apart from the macro reasons or, you know, RAIN related reasons, any micro reasons specific to your book, why GS3 are going up?
Basically, because we had introduced EMI and interest servicing gold loans. And people are habituated to servicing only. Then I think servicing is not on time.
When a loan gets into delay, at that time, what is the measure you are taking? Because that is the time when you have to tell the customer that you have to pay on time and not delay, right? So, what do you do at that time? And why is it that you can't arrest it even 90 days later? Because GS3 means that 90 days have passed at least.
We can always take action and sell the gold and appropriate it. So, we don't have any credit cost in the gold loan.
Do you understand it? No, I understand that, sir. So, I am not worried about losses, as you said, up front.
But just in terms of action, what is...
It's educating the customer. You have to educate the customer, saying that interest has to It will be serviced every month. So, the communication, educating takes time.
Okay. So, by when do you think this stabilizes?
No, it will stabilize. As we are now increasing our communication to the customer, it will stabilize and become normal. People will understand that paying EMI and interest servicing will help them in taking gold loan much better. They also have a higher amount of gold loan because LTVs are a little higher for that. And also their credit score will improve when they pay time.
Sure, sir. And so these customers you are lending to, these are existing customers for other products or these are freshly sourced customers?
It could be both, but we have what to call exclusive branches also for gold loan, and we also have gold loan as a product in our existing branch. So, it could be both.
Predominantly, 9,000 crores would be, I mean, do you have just a broad plate to understand where this is going? 9,000 crore AUM?
Predominantly, it was to fresh customers, or what is the proportion of, let's say, existing customers to fresh customers? Just a broad call.
I don't have a number right now. Probably Sanjay will help me to get it.
Okay, okay. All right, sir. Thank you. Thank you, and all the best.
Operator
Thank you. Your next question comes from the line of British with ICICI. Please go ahead.
Yeah, hi, sir. Sir, just one thing on the margin trajectory, right? So, you know, when can you expect the end times excess liquidity to get absorbed? And, you know, when we look at the pre-deal margin trajectory, which used to be between 8.5% to 9%, and then, you know, you were expecting the structural decline in the cost of fund by almost 100% of the cost. I can understand that the rate cycle reversal, you know, might be a challenge on that. So, question on the problem, you know, how this 9.5% mean in clear-to-moving, and structurally, where do you see ultimately means settling when the equity security gets above?
See, I can't have an exact number because the rate, repo rate increase they have done after a long time now, and there is an indication that it may go up further in the next policy rate also. We do not know. If the food inflation doesn't go up, may it may not go up. So there There is so many ifs and buts, and also there is a view on the war being stopped, crude going down, so many things. How can I exactly tell you the, you know, how would you move? It is not. That's why we are telling you in the medium term, it slows, it comes down to around 9, In long term, it will settle down at around 8.5. But exact timing is not possible to, you know, calculate.
Okay, okay. So, basically, you are saying in a sales state, the name would be 8 to 8.5. Factoring our entry into large tickets, new vehicle, etc. Is that the fair assumption?
The new vehicle will keep growing in our book, because we would like to retain our customers. So, that is one factor. But the other factors which is not in our control is the interest rate environment.
Correct. But in that case, doesn't our, sort of, the pricing policy can factor those changes and, you know, things sort of give us a closer number to our, let us say, the client name, etc. or nature doesn't allow us that activity.
See, pricing I can do only for the new loan that I am booking. For existing loan, I can't do it. So, I can price it only as the new loans. So, we don't have a floating rate scenario. NBFCs normally have fixed trade. Got it.
Got it. Okay. Okay, sir. Okay, sir. Thank you, sir.
Operator
Thank you. Your next question comes from the line of Aditya Tiwari with MK Research. Please go ahead.
Yeah, hi. Good evening. My first question is regarding the gold financing that has, you know, sellers are around 60 years. In previous quarter, the management has said that the gold will grow faster than this new year. But there are some signs of concerns in the gold loan segment. In fact, there has been some rising instances on the multiple borrowings against gold loan. Three of the companies have also stated that there has been on an industry level that gold loans are emerging as a special and few of the banks have also deliberated, deliberately moderated their gold loan growth. In fact, for the state plan, state free assets for our company has also increased. So, is there any kind of concerns that you are seeing on an industry level in terms of gold financing?
No, we don't really see any kind of a challenge as far as proper and also valuing the gold properly. So, stage 1, stage 2 was the interest and EMI of the product.
Okay. So, like in quarter one, the management has stated that their target for goal financing is to grow the book double in next few years from around 2.5% to around 5% of the book. So, does that guidance remain intact or any kind of changes or revisions are there?
No change in revision. There is no change. We will go as per the plan.
Okay, and I just wanted to confirm regarding the day-game growth guidance for FI27 has been cut to around 15 to 17% from 18% earlier, right?
And the credit cost guidance for FI27 has increased to around 2.3% to a range of around 2.4% from 2% earlier.
I said there will be a temporary increase of 30 to 40 basis points and not for the full year. So, I feel the full year cost can be much lower than the 2.3. Temporary, maybe for this quarter and next quarter.
Okay, got it. And just wanted to come to our last question. In the MSME segment, the stress is predominantly because of the drought affected regions, right? There aren't any other reasons for this stress in MSME.
I don't really see any other reasons because other factors like increase in cost of raw material, increase in labor costs, all these things have been already factored. So, only in certain geography, there are some challenges because of seasonality.
Okay. Okay. Thank you. Thank you so much.
Operator
Thank you. The next question comes from the line of Pranut Shah with 3P Investment Management. Please go ahead.
Hi, thanks for taking my question. First question is on the OPEX growth has been quite benign despite the disbursements picking up pretty decisively. So, is there a reversal? What is driving that?
No, the previous quarter we had the annual bonuses released for the DAC office team, and hence the staff cost was slightly elevated. The current quarter was normalized. Having said that, the medium to long-term guidance will be, the cost of income will be around 25 percent.
Sorry, when you say 25%, it is on the current base of your NIMS, because the NIMS also, you're saying, will come off pretty meaningfully in the medium term. So, that is, you're considering an 8.5% NIM, right?
No, that is for a long term, that's what Mr. Ravankar had mentioned. In the medium term, it will be hovering around 9%, is what he had mentioned.
Understood, understood. And, like, even if I look at your OPEX to AUM, that has fallen off pretty meaningfully. So, if I were to just look at in terms of OPEX relative to AUM growth, should that continue to trend downwards, or how should it be?
It should be in the same level.
Sorry, your 2Q is at 2.5% level. So, do you expect that kind of OPEX to AUM to continue?
What will happen is that there will be additional costs on the technology front, and that may have an impact on the overall OPEX.
Okay, okay. And the second question is, can you disclose what is your disbursements in gold on this quarter and what is your LTV this quarter and last quarter?
We have the disbursement number, I'll just tell you. First quarter gold disbursement number is 5,443 crores.
And what is the LTV on your book, including the interest accrues?
It should be around 72 to 73%.
70 to 70. And what would this be last quarter?
It would be the same region. There is nothing significant change in that. And the improvement for the previous quarter was 5153.
Yeah, thank you. Thank you. Thanks a lot. That's it for my head.
Operator
Thank you. Your next question comes from Harvik Shah with MLP. Please go ahead.
Hi. Thank you for the opportunity, sir. My first question is, in terms of your assessment of the IRDA circular that has come through, what could be the potential impact for us in terms of insurance income? Number one. And number two, to clarify the understanding on credit cost. You've got it for 2.3% for full year. If you can kind of clarify in terms of how that would trend directionally from 2Q to 3Q, And how are you assessing it for the second half? Because your first half credit cost is around 2.1. Full year, 2.3% would imply around more than 2.4% credit cost for second half. So, how to think about this?
On the second question, I told very clearly that it will be temporarily elevated for this quarter and next quarter. We cannot be giving you at this stage a number 2.3 for the full year. We can't be. So, I said it's a temporary 30-40 base point for one or two quarters. So, we'd like to wait and see how it will impact. And generally, affected period only, it goes up. That's one. And as far as the IRIDA is concerned, it is a draft guideline. There is a representation from the manufacturers on the distribution income to the distributor because the growth in insurance is dependent on distributors. So, major impact on the distributor's income will impact the growth in the insurance business. So, I believe that IRDA will look into it and probably come out with revised guidelines or revised, we are waiting for the same. However, given the income may come down by 50% of Shriram Finance is concerned.
So, the previous year, full year, the insurance commission that we received was around 350 crores. So, if the proposed guideline income, there may be maybe around 100 odd crores of impact on that. And for the size of our balance sheet, it is not material.
Understood. Understood. Very clear. Perfect. Thank you.
Operator
Thank you. Thank you. Ladies and gentlemen, we will take that as our last question for today. I now hand the conference over to Mr. Umesh Ravankar for closing comments.
Thank you, everyone, for joining. And so many other raw material prizes went up. And secondly, now half of the year is much busier. And we are confident of outperforming and coming back to you again. Thank you.
Operator
Thank you. On behalf of Sriram Finance Ltd., that concludes this conference. Thank you, everyone, for joining us on Human Outers Connected Alliance. Thank you.
