IDFC First Bank (NSE:IDFCFIRSTB) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the IDFC First Bank's Q2 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, 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 Sudanshu, who's our CFO, and then we'll have some brief comments from Vaidya, and then we can open the house for the Q and A. So I'll now hand over to Sudanshu for his opening remarks. Yes. Thank you, Sansarishi.

1:01 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 INR 34,390 crores, which is about USD 3,600,000,000 of FCNRB deposit under this scheme. This constituted about 10% of the overall deposit that we have at 09/30/2026.

1:51 Against this, we also extended leverage of USD 2,600,000,000, which is in INR about INR 25,000 crores to NRI customers. If we see on these on the basis of these loans, then this constituted about 7% of the overall loan book at 09/30/2026. At mobilization of USD 3,600,000,000, the bank garnered about 2.7% of the overall mobilization the country received under the 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 international rating from S and P and KRH.

2:37 Happy to report that we got an investment grade rating for the bank on this front. On the back of the ratings, we were also did a debut bond issuance. We almost raised close to $1,000,000,000 of bonds. The actual number was US$950,000,000, and these were raised from the offshore ID 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 Y o Y basis and 13.6% on a Q on Q basis, including FCNR, and that book has now reached about INR 3.47 lakh crores.

3:31 If we exclude the FCNRB backed loans, the loan assets on a gross of IDPC basis grew by 22.2% on a Y o Y basis and 5.7% on a Q on Q basis and was about INR 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 Y o Y basis. The MFI book saw marginal increase during the quarter. That book now stands at INR 6,825 crores and about 2% of the overall funded assets. 97% of the book is now covered under the CGF scheme.

4:19 With respect to credit cards, happy to report that the cards in course crossed INR 5,000,000,000 during the quarter. The book on an outstanding basis stood at INR 9,875 crores and the credit card spend grew at a healthy pace about 15% on a Y o Y basis. We have given more details around the asset growth on Slide 31 in the investor presentation. Moving on to asset quality. There also we saw an improving trajectory across GNPA and net NPA, SMA across product classes. We give a fair degree of disclosure in 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 when nine bps if we exclude FCR leverage from the denominator.

5:16 Similarly, on net NPA, we saw an improvement of four basis points to 0.40%. If we exclude the FCR backed loans, the net NPA ratio would be 0.43% as against 0.44% reported in the previous quarter. Further drill down, if we look for now the retail agree and the MSME book, the GNP ratio here improved from 1.4% to 1.24% and to 1.36% if we exclude again SG and A backed loans from the equation. 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 SME one and SME two book for the retail was at 0.72% in Q2 from 0.77%, which we saw in the previous quarter.

6:13 SME one and two for microfinance further normalized to 0.6% from 0.7 bps in the previous quarter. At an overall bank level, SME one and two reduced by four 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 3.48 lakh crores. The growth was about 25.9% on a Y o Y basis and 11.8% on a Q on Q basis. If I just talk of customer deposits that has crossed INR 3.4 lakh crores, it grew by 26.9% on a Y o Y basis and 14% on a Q on Q basis.

7:01 This also included FCNA. And if we exclude FCNA deposits, customer deposits grew by 14.1% on a Y o Y basis. But here is where we slightly calibrated the growth because we got strong FCR inflows during the current quarter. 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 INR 1.66 lakh crores, the growth on a Y o Y basis was 19.8%, while the CASA ratio for the quarter came down came to 47.6%.

7:55 This was lower because of the FC and R deposit mobilization in the denominator. The average cost ratio still, I would say, was healthy at about 48.4%. If I move on to profitability, happy to report that the profit has remained above INR 1,000 crores for the second consecutive quarter, and the profit for the quarter stands at INR $10.45 crores, which is an improvement of about 196.5% on a Y o Y 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 PAT basis. When I mean core PAT, that excludes trading gains for all the periods and also certain one off items, which we had called out in the previous quarters, like the impact of the fraud incident, some income tax refunds and interest income in the previous quarter.

8:53 The core profit and these details are given in Slide five of the presentation. Again, happy to report that on a core basis, the profit has crossed INR 1,000 crores, and this was about INR $8.97 crores in the previous quarter. Some more drill down. All operating matrices continue to demonstrate a healthy growth trajectory. For example, NII grew by 21% on a Y o Y basis and 3.5% on a Q on Q basis. NII growth was, in fact, 4.5% sequentially if we adjust for interest on income tax refund, which we had called out for Q1 'twenty seven. The NII growth in the current quarter were also broadly in line with 21.1% Y o Y increase reported in the previous quarter.

9:40 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 have 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 FC and R backed lending. Second, because we have mobilized strong, I would say, FC and R deposit flows, we in the interim also part such liquidity in low yielding treasury instruments and Nostril balances.

10:28 That had an impact on NIM of seven basis points. Then there were also impacts because of change in asset mix because we have grown wholesale banking and business banking in a faster pace. That had an impact of five basis points. And last is the day count convention impact because this quarter is ninety two days, reserve is ninety one days in the previous quarter. So to summarize, 16 bps is because of FC and R lending, seven bps is because of excess liquidity, four bps is because of day count convention and five bps is because of other asset exchanges. The 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 with the denominator is correspondingly also reduces operating expenses and credit costs relative to assets.

11:25 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 FC and R scheme, we have also have 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 in the otherwise, if these FC and R flows were not there. This FC and R deposit also would not consume capital. Hence, we earn, which I mentioned, of 1%, that increases my NII, that increases my profitability, that increases my ROE, EPS and all of these numbers.

12:11 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 them. 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 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 NII in the fee, the total income excluding trading gains for Q2 on a Y o Y basis was a growth of 21.9% versus 21.5% reported in Q1.

13:08 During the quarter, the treasury gains were modest at about INR 11 crores as compared to INR 181 crores reported for Q1, which was largely due to the hardening of the G SEC yields during the quarter. Moving on, the OpEx for the quarter was at INR 5,942 crores. This grew by 16% on a Y o Y 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, three fifty eight bps lower on a Y o Y basis.

13:54 Operating job is the growth between the total income and the OpEx that continues to improve. In fact, for the quarter, it stood at five ninety two basis points. And for H1, it stands at five fifty three 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 front. The as a result, the incremental cost to income ratio was about 55% for H1. And hence 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 Y o Y basis and 6.6% on a sequential basis. So for three quarters in a row, now we are getting an operating profit increase of upwards of 30%.

14:52 Moving on to provisions that reduced by 21.7% from INR $14.52 crores to INR $11.37 crores on a Y o Y basis. On a Q on Q basis, if we see this has broadly remained at the same level as we reported about INR $11.44 crores in the last quarter. However, to point to note also here is that the provision for the current quarter also includes standard asset provision of about INR 100 crores on the FCNR backed loans. If we exclude this, then the provisions for the quarter declined by 9.3% on a Q on Q basis. The bank continues to hold the contingency provision of INR $5.15 crore created last quarter. This is on a prudent basis considering the evolving macroeconomic and the geopolitical uncertainties.

15:44 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 FCFIRSTB loans and the corresponding provision, since these are backed by FD, 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 would come in followed by final regulations.

16:31 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 fee income. But we feel that to a large extent, the impact can be offset by the expected repo increase and the FCFIRSTB 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.

17:19 And with September being at higher at 139% because of the ST and R money, which came in towards the back end of August. Normally, as you would have noted, that 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 Vedya for his opening remarks. Good evening, everybody. Really, really a pleasure to talk to all of you. First of all, I'm really happy to share with everyone who've been observing us and tracking us for a while that second quarter in a row, our bank posted a profit after tax of INR 1,000 crores.

18:09 It's a landmark even for us considering where we started. It feels good. It encourages us to keep going. 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 onetime income, like a treasury trading income, etcetera, last quarter, the bank had posted a PAT of INR $8.97 crores, which we had rounded out to INR 900 crores. We called it out last time when we posted $10.70 odd, we had said that a portion of that is treasury income like core core is INR 900.

18:58 The quarter before that, the core core was like INR $7.46 crores. The quarter before that was INR $4.30 crores, quarter before that is INR 300 crores. So you can see the trajectory. So I can safely say that the trajectory is fairly established by now. This quarter on the core, without any adjustments, it is INR $10.36 crore. So we feel good about that. I always said that we'll be in casing distance of 1% ROA. It looks like we will get there. In fact, this quarter also, we had ROA of about 0.93%. As Uranti mentioned, the SG and A in the denominator effect. But for that, probably, it's been 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 in the year, that was the merger year, we were posting something like INR 700 crores to 800 crores, INR $7.50 crores as the core PPOP.

20:07 Now PPOP is now touching something like INR 10,000 crores. So or annualized. So I think the trajectory is looking good. And now you can get a 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 notice, what is happening to the underlying economics. This is very important to understand because if you see the H1 FY 'twenty seven actuals, 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 'twenty seven is 7.8%.

20:54 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 in a moment. So put it 55%, and you see what it does to the OpEx. OpEx comes down to 4.3%, the PPOP becomes 3.5%, the provision is still 1.1%, which is actuals, the PBT becomes 2.4% and ROE becomes 1.80.84%. 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.

21:44 So what is the point why do we assume this to 54%, 55%? Why you should assume so? Now if you look at the incremental cost income ratio, what you do is that you go to H1 'twenty six, our operating expenses was INR 10,410 thousand crores. And our operating expenses in H1 of 'twenty seven is INR 7,000. So you get the drift. The incremental OpEx between H1 'twenty seven, H1 'twenty six is INR $16.27 crores and the incremental income is INR 2,900 crores. So on an incremental basis, the bank is posting 55% cost 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 the our OpEx growth is 500 basis points lesser than the income growth. It's three quarters in a row. So it has some predictability now.

22:42 And we feel we can reasonably give or take stay in the zone for the next few quarters as well. So we feel all of this year, I. E, in 'twenty seven, we can operate the bank at 55% cost ratio. So that explains to you why I requested you to plug that 55 into the stack. And 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 our projections about 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 even today, our bank is not going to stop at one. This will increase because the incremental is what it is, what I described to you. The second thing is that the loan growth. Now on the bank front is that the loan growth continues strong at at least 20%.

23:35 It's clearly in visibility. We've reported 30% this quarter, of course. Y o Y, that's because FC and RB about that about INR 25,000 crores of FCNRB backed loans are also showing up here. So though FCNRB was actually INR 35,000 crores, 34,000 this INR 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, it's showing us at 25.9, but really read it more like capacity to raise to 20. We our net of FCNR, be 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%.

24:29 Think of the loan growth growing at 20%. 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, 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 sorry, 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 now growing at 38.5 So that's how the stack is playing out.

25:15 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. We're very happy about that. And we are very cautious about it because Q3, Q4, LDNO get to full effect is yet to show. We will watch this very, very carefully. But as far as our eyes can see, looks like this is reasonably achievable in the next two quarters as well. So therefore, if you take this at one, then the rest of the stack plays itself out, how the path will play out. Now next, I'd like to talk about the FC and R. Now the really good news that all of us should take note is that for a bank, which is just about seven years ago, we started in full earnest to be setting up a deposit franchise.

26:11 If you remember, the deposit franchise was retailed as INR 10,000 crores. So it is just at the start. And for maybe and let me say from the date we got a license, it's ten years. Let's take that date. But for a bank that is ten years from a deposit license, just think that we could raise INR 34,400 crores, that's $3,600,000,000 of FC and RB 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 digital capabilities have become. Is this the kind of money the bank can raise in that window? Now the other big benefit of FCNRP is that they are three to five year deposits. So it has given the bank a lot of structural liquidity. And particularly now that interest rate has suddenly risen in the last fifteen, twenty days, we are now almost beginning to be overjoyed that we raised this kind of money for such long tenure at a low cost.

27:05 The other thing is that there is some understanding in the market, let me say, understanding or misunderstanding, let me say, about what this FC and RB does to NIM. So I've seen people tend to jump to conclusions that the FCNRB has whenever people has raised FCNRB through leverage, that is through leverage, meaning having raised money to IBU and giving it to customers that come back to us with deposits, particularly, there is a double counting on the I mean, double counting, let me say the balance sheet expands by that amount. In our case, that amount is INR 24,885 crores. Let me since I spoke too fast, let me just slow down and explain that to you. In the IPO that we have, we have raised this amount of money as borrowings, which we have further given ahead as loan to customers, which came to us at deposits.

28:05 Now because of this, the asset side expands by that amount. Now when the asset side expands, then the NIM 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 NIM 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 basis points because of this impact, when you go back to the ROA three, because eventually, it's ROA three, you go back to the return on assets three, the OpEx also has is also now going to be divided by the expanded assets, which is the new number, which is at INR 25,000 crores to it. So there, you get the benefit in operating expenses.

28:58 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 ROE tree, in our case, it's estimated that's only two basis points. So I 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 so this is the bit on now the last bit I'd say I'd like to talk about is what this STNRB has done to our cost of funds. Now actually, before I come there, let me just talk about the IDF, and I'll bring that back in context. So if you all of you know that our IDF has come out with the insurance paper and commissions to be paid, etcetera.

29:52 Now 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 own sense is that our bank is that there are factors, which three will sorry, once again, some business at my end. And it will also compensate for that. One is that the FC and RB deposits that you have raised is giving us about 1% benefit to the overall cost of funds, we would have cost of deposits, what it would have cost us have been raised domestically. Let me read out the broad math to you. So basically, the impact, one is we have raised it at a rate 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.

30:58 Now when you add that back to the eventual price we paid to customers, which is 6.756.75% becomes 6.85%, I think, because of the quarterly impact. Because of the annualized. Because annualized because that what if you pay $6.75, actually $6.85 because of the annualization of interest. So let me take that number of $6.85. So the numbers are with me. So the annualized cost of FC and R deposit is 6.86%. We add some hedging cost to it. And then I told you that there is some positive spread in 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.

31:50 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 the deployment of FCNRB funds. So all in all, our own estimate of that cost of funds money is basically is 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 the rate currently, our own sensors will cost us, including the CRRSLR cost, maybe the annualized cost would be if the customer rate is 7.25, you add some annualization to seven forty five to seven fifty, and then you add SLRCR cost to it, that's more like about 7.8 or so. So blend, blend, between the six eighty to seven eighty, there is about 100 basis points benefit in having raised this money at the right juncture.

32:43 And that on the INR 35,000 crores, it's a material amount that is going to come close. It is not in our plan at all. The second thing is about the repo rate itself. It just so happens that 25 basis points repo rate went up. So that will increase the yield on the books, on the floating rate book. Deposit doesn't rise immediately. As you know, it takes a year to 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 a 25 basis points more increase. So that makes it 50. And then we're expecting something to come up next year as well, maybe 25.

33:36 So that's at least a house view at this point of time, based numbers are different than output, outcome will be different. So these are our current house views, about 50 basis 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, this money, if we have raised INR 35,000 crores in India, in the domestic market, that 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 we should be able to manage. And to be some give or take, that 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.

34:24 And 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 cost to us. There are a couple of stages of decline, etcetera. We have to see how much portfolio we have to manage that. And 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, but thanks for staying with us through the call. So when we can open the floor for Q and A. Certainly, sir. Thank you very much. We will now begin the question and answer session. Our Our first question comes from the line of Akshay Jain with Autonomous.

35:33 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 r... The margin bridge as well as the ROA expansion which we discussed. Since we have raised strong FCFIRSTB should it not improve our ability to, you know, reduce funding cost differences vis a vis larger peers? So that's my question number one. Second question is more of a clarification on the NIM bridge. So how is the 34% of growth that you have been deployed in loans, liquidity as well as repayment of bulk liability?

36:24 And what is the spread you are assuming between, you know, liquidity as well as loans to get this seven basis points of liquidity drag, which you have been quantifying? Yeah. Maybe, actually, I'll answer that. Quality, which I'll follow-up it. Up. Akshay, maybe I'll answer that question. So as I said, most of this money came towards while we have been able we were able to reduce some bulk deposits of about INR 5,000 crores in September. And also, we didn't roll over certain certificate of deposits, again, about INR 5,000 crores in September. But there was still an excess liquidity, which was parked in, I would say, low yielding investments and NOSTO balances. As a result, the September LCR was about at 139%.

37:13 As we speak in October, further usage of this excess liquidity has happened. And as I said, we should come to the normalized levels of LCR of about one hundred and fifteen one hundred sixteen percent 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 sold in Q3, the seven bps drag sort of vanishes from the 5.58% number, which we have reported for at Q2 because that includes that track. Similarly, on the deposit side, where they mentioned that there's an overall benefit of 100%, including PSL benefits, that will come over a period of time.

38:03 But since these were deposits which were raised for three to five years, definitely, this will flow into the P and L equation certainly starting from next year, we could see the full impact. So my question was more on the structural cost of funding side. Since you are becoming big, your liability franchise is improving as well as giving you a strong performance on SG and side. So did not improve your ability to reduce the funding cost incrementally? We'll keep a very close eye on that. We've been doing that. If you notice that we were early paying 7% of savings accounts, then we made 6.5, then we made 6.25, now we made it 6%, about 24 lakhs, we're only paying six now. For us, it's a material change for somebody who's raising.

38:51 So, it's a continuous process. So, now only for a small slab in between, we're giving seven. So, after that, it's now come straight down to six. It's a continuous process. We've got to constantly moderate that and titrate that. Has it come with the funding cost could also aim chart because repos are also increasing. So you may have some corresponding increase in the liability side, right? But what we've done, at least the cost of funds continuously coming down, then we draw up our next year's plans for cost of funds also, we are, by the time, assuming that right now interest is on the rise. So this whatever fixed deposit you have raised next year, we assume will come at a higher cost. So but 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 we maybe three or four or five basis points more, maybe over this in an overall cost of funds basis, over FY 'twenty seven I mean 'twenty eight over 'twenty seven, give or take, if you should be able to manage about maybe five basis points. Five to 10 basis points in this range. Maybe five, probably. Okay. Anyway. What's the reported high care building in this?

40:11 We are assuming 25 more 25 already done, 25 more in the rest of the year, probably this in December itself. And then April of next year, 25. Okay. So even for a 75 basis points or, say, a 50 basis point incremental rate hike, the cost of an impact will be only five to 10 basis points is what... Yes. May not even be 10, but listen to... Let's say, let's say, is say, it's 10. It could somewhere there. Yeah. So because the good thing is the bank has because, you know, if you remember, the bank is running high CASA percentage. This is super important point to note. Yes. Isn't it? Because bank runs a high CASA percentage. Their every percentage is only 50%. So then when when interest rate goes up, it doesn't affect it that much.

40:59 Understood. Got it, sir. And secondly, on And and unfortunately, on the savings front on the savings on current account front, there, are already doing well. I told you we're actually reducing it. And money is money is flowing thick for us because they're good tech capabilities, good mobile app and good customer service and all that. So all all put together, we feel like next year we'll be able to manage comfortably. Understood, sir. And secondly, on the asset quality front, while you have managed this quarter pretty well, though there was a minor in the slippage ratio, but I guess that can be ignored for this quarter. But how should we 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.

41:52 So anything you are seeing over there and how should we think about it? And the paid cost guidance of 150 to 160 basis points is correct? Yes. So let's take this. Now in our case, we put out in our presentation very clearly what is our zero to 30 dpd. We disclose the full funnel, zero 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. As of now, our data numbers don't seem to suggest that there is a problem coming, the numbers per se. But numbers per se, 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.

42:38 But because it doesn't change so quickly because Aptar is a large book. But this impact of the MVNO and the drought in Maharashtra, Kanata, etcetera, we want to watch it much more carefully and cautiously before we make new comments. Understood, sir. And just one more point on mortgage G and P. I can see that it has been steadily increasing, and it is up by almost 27 basis points in the last one year as well as the credit card SME has inched up by 14 basis points this time on. Like, is it like anything to read in this? Or like, you know, yeah, I'm getting too much into numbers? You're getting too much numbers because, actually, mortgage, what happens is we are practically not growing the mortgage book for the last I think Y o Y growth is practically nothing.

43:30 So there's normal aging happening because when you set up new a 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 has any yield, so we are not pushing it very much. I mean, it's just if it comes in it as it comes, that's about it. So it's more because of the novel aging of the book. Nothing to read out there. I think mortgage only gone up from, if I'm not mistaken, has grown from... Are you referring to the gross NP or you're referring to the S and A? NP, yes. 1.27 to 1.54. Yes, yes, yes. 1.27, 1.5 for by itself is 1.54 only, right? That too is the full security mortgage. So nothing to worry Credit card fees?

44:21 Credit card will turn. Credit card, you can please come down from 1.99 to 1.49. There, I'm looking at SMS. Oh, wait. Oh, this is... So let me see what you have there. So... Okay. Fair point. So there, it's gone up from $1.35 to $1.49, 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 cost actually coming down Like, we could see on the credit card. Yeah. We see credit cost cost coming down, actually. Sir. Thank you, sir. Those are my questions. Thank you. Thank you. Our next question comes from the line of Param Subramanian with Investec. Please go ahead. Sir, firstly, the question, the slide that you have given, Slide four, which you discussed also, where you're talking about your incremental cost to income of 55%.

45:13 Sir, is this something that you want to be held to going forward that incremental cost will be at cost to 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, you're saying 30 basis point drag from liabilities business, but there will always be some drag. So what should that number be on a steady state? That's my first question, sir. Okay. I think it's a good question. I like to be afraid, don't really like to be held to. Okay. So the thing is that, yes, currently it is cost income ratio is coming at 55. We've done the math also, but we've actually shown you how exactly the computer is defined. So indeed, for the last one year, to in other words, to get an income of INR 2,957 crores, you spent only INR $16.27 crores. So in other words, cost income is INR $2.55.

46:03 Question is that we will stay this way. As far as I can see for this financial year, I. E, for 'twenty seven, this number looks firmly in the bag. So in other words, for H2 also, we expect similar number. And that's our plan to business model. And see, basically, it all depends upon this 500 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 at that. And you can also plot it broadly in your scheme of things. Now with regard to your second yes, this what is the second question? Yes, on the dry... Yes, Yes, yes. Let me explain that to you.

46:49 I'm happy to ask the question. See, basically, you know that we've been always calling out that the liability side business is a drag on because of the new banks setting up current advances, and all and setting up so many things, technology and all that. So the thing is that think of it as a liability side. If the bank, for example, is making let a us assume that the analyst estimates of this financial year for the bank is about INR 5,900 crore sorry, 4,404 thousand 500 crore. Let us assume for a minute. These are the numbers adding INR 4,400 crore estimate for this year. And for a minute, you assume the bank will meet it, okay, because so that we can do a quick simulation out here. So now if indeed those are numbers, let's call it INR 4,400 for the year. Now it is well known, if you go to our slide in the liability slide, we already called out the bank is current loss is 0.7% on the average deposits.

47:48 So if you do the math and take it net of tax, you'll find that the loss turns out about INR 1,500 crores on the liability side, maybe a little less than that. By definition, the assets should be making something like about INR 1,500 to INR 6,000 crores. Now assuming the bank is oversimplified and set as only two parts, one is assets, one is liabilities. So think of a bank makes INR 1,600 crores on the lending side, makes lose a loss of INR 1,500 crores on the liability side and net net bank suppose bank force 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 is making 03%, you'll find leverage is making minus 0.3% by the same numbers I just referred to you, and net net will come to 1%.

48:34 But obviously, if it's the trend line, we give the trend line also in the presentation, If it is a 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 1% to 0.7%. It has to come down to zero. So in other words, if Texas forward for maybe three years from now, you'll find that this number of 0.7 becomes zero. 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. That's the to read that. Got it, sir. Thank you so much. Very detailed explanation. Thank you. Which that even today, if this was a new bank, if this is not a new bank, and this had no drag on liabilities, had it been like any other bank, which has been thirty, forty years twenty five, thirty years in business and there was no liabilities at loss, imagine.

49:37 The bank should anyway making 1.31 today from what we've seen from the books. And then operating leverage next three years, it should take you to something beyond that for sure. Yeah. Yeah. Got it, sir. Thank you so much. So next question is on the margin. I think this was asked earlier also, but see, this waterfall that you're showing where you're saying that they will... The repo rate hike will help our margin by about seven basis point. That assumes... I I understood, I think, 50 basis point 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, the seven basis point on a 50 basis point rate hike is is what we are talking about on a NIM. Right? Those assumptions... The the assumption is of 50 basis point and some repricing on term deposits as Eight eight. This is eight basis points.

50:33 Maybe, Param, I'll answer that question. So 25 bps repo increase has already happened. We resume one more repo increase happens in the... Maybe in the next quarter. So and this is a NIM position for Q4. So cumulatively, we should get some benefit of these REPO increases, which are two increases in this year. However, there could be a corresponding increase in funding costs. What we have put out there, seven bps 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 bps increase, 33 bps 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 NIM trajectory.

51:22 So that's the broad calculation here. And the other thing is that this seven bps factors 50 bps, basically. Basically, it assumes 24 already done and 25 yet to come. Yeah. Because we're talking about q four we're talking about q four only here, just for for context. So try to assume that Q2 to Q3, there might be a slight dip before this, and Q3 to Q4 is when most of the expansion happens. Because Q2 to Q3, the FC and R drag will be higher, just so that we are clear because you're putting out a margin expansion. Yes. Q3 should be flattish probably. We feel it to be quite range bound from the current levels which we've reported for. 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, the excess liquidity drag will be gone, The repo hike would give you the seven basis points. And just to tell you that repo assumes fifty and twenty five more, which I hope you agree probably will be a fair guess. Would agree, sir? Yes, yes, yeah, yeah, yeah.

52:25 Then then... So therefore, the reason to 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 suddenly start worrying that, my god, it's come down so much, where is it headed? We want to give a two quarter picture that within two quarters, it seems to normalize. And then for and then by our own internal estimates, I'm using our internal estimates that for 'twenty eight, 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 'twenty eight also. Got it. Got it. You can factor it in when you do your work on us.

53:10 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 q three, q four 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 NIM. We have reasonably factored it in. That's why I said we've given two quarters view. Haven't given next quarter's view. Yes. All that is factored. We have done the math. 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 request some more explanation from us? What do you think? Just be honest with us.

54:02 No. I think, sir, you are sitting on excess liquidity. So the... Which is what we're trying to understand that you're clearly calling out you will benefit from late times. And, logically, that should play out. So we're just trying to understand, sir, you know, the extent of the benefit which you are calling out, and I think it's very helpful. Yeah. No. No. I'm asking is a bit clear. I'm asking you. I'm using a sample of one to ask this question. Is 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 clear. Yeah. Okay. Sir, lastly, on the slippages, so... Or from asset quality perspective, I think I heard you mention on q three, q four, you know, LDNO is 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.

54:55 So any pressures we are beginning to see in your portfolio? No. No. Nothing yet. You should expect a reasonably good, you know, good good numbers, some IDFC next few... Next couple of quarters also. I always put a caveat because unknowns are unknowns in life. But as from whatever we can see right now, you'll be comfortable for the couple of quarters. Okay. So we are very comfortable with our 1.5 to 1.6 credit cost guidance. Yes, yes, yes, definitely. Okay, sir. Thank you so much. Congrats on the quarter. Thanks for taking my questions. Thank you, sir. Thank you. You. Our next question comes from the line of Piranjanian with CITIC Securities International. Please go ahead. Yes. Hi, team. Congrats on the quarter, thanks for taking my question.

55:44 Once again, I don't want to talk too much on NIM. But since you put it out 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 For... In the old waterfall chart. No, it should be okay for Q3. Piran, definitely September, as I said, we ran higher LCR because the FCR and 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, 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.

56:48 And that's the number which we have put out in the presentation. Just to be clear, okay. This does not in Fair. No, that's good to know. Also, just to be clear, this does not factor in capital raise, right, your 5.8 NIM. So if you do it before 4Q, that will be further additive. We will see on the capital depending on the market conditions and so on. So that is something could also slightly benefit if whenever it comes in into the overall equation. It will add more cushion to this actually. In that. Okay. Fair, fair. Okay. Then just moving on from just firstly on CASTA growth and here I'm looking at quarterly average CASTA.

57:34 Used to be 30% last year, then last quarter moderated to high 20s, 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 scale sort of ready to grow? Sasan? Sorry, you mentioned that we were not able to hear you clearly. Can you just repeat? So, Sudhansh, I'm talking on the average Kapha growth. Yes. So that's about 30% on a Y o Y basis. Average. Average. Okay. Three. The car growing at 30 and slightly slightly lower pace. But ticket, Piran, somewhere there 23 or so, yeah, you should expect that from us.

58:22 Maybe why are the... If it is 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, cashing cash 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 beyond two quarters back. No, that whatever had happened already gone, so we don't worry, that's not a concern anymore. But the this 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 more arrival of the bank is no longer it's like already built on reasonable scale. If we can maintain even 20 to 22 ish kind of zone, this is 23, but even if we maintain the deposits will go by 20 also from here on because if the overall deposit will by 20 and CASA also go by 20, we'll find we'll maintain the CASAS percentage, it should be good enough.

59:21 Yes. No, sir. I think the only risk is maybe a year later, the 23 goes down to 18 and then to 16 with such cases. Unlikely because we're managing this very closely, and we just like to see a half a percentage in the zone of the high 40s. Unlikely, we'll let it go there. We'll double up our work, but our intent is to keep our bank in the high 40s. We've worked hard for the first seven, eight years to build a discipline of the high CASA. We have no intention of raising more money to fixed deposit and trading the P and L so finally that we let go of the CASA percentage down to the 40s and below 40s. We have no such plans. We intend to keep it in the high 40s, and we'll do whatever it takes to keep it there.

1:00:17 Got it. Got it. 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 what are the 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 PSQ and large 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?

1:01:11 It's really very good question. People often tend to think that this technology and tech stack, etcetera, is a very retail retail thing. But you'll be surprised to know, I think that the same tech stack and capabilities IDFC Bank has built on the retail side, though you're not using it as user because you're an individual, but same thing for enterprise, you will see a real difference of IDFC's technology stack with the VA, let me say, what might be available elsewhere. So for example, in cash management, 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 enterprise person who's accessing it can tell you.

1:02:01 The second thing is that we have kind of been very successful in building a really good governance capabilities in the bank, even though we may be lending to, let me say, mid tier company, and our delinquency has literally been nil, there's only one ATM company in the last seven years where we lost INR 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 1.5 lakh crores, net book is INR 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.

1:02:52 So delinquency is good, yield is reasonable, surround products are very good. We are really, really liking the business, actually. And we think that the in a sense that the book also gets more diversified, better rated corporates, all that. So to give you an idea, A and above rated companies, since you said what kind of customers we lend to in the corporate side, A and above rated companies, we it makes 76% of our book. BBB companies 76%. BBB companies is 20%. And BB and below is 4%. That is our composition. It's quite comfortable actually, and it's zero default practically. And just imagine seven years of Iran, no delinquency.

1:03:39 It's something really. No, that's definitely. But how do we think about ROA in this? It's pretty good now because if you take out the credit cost, it's not there. I'm not saying it'll never be there. Like we face the ATM issue, rather ATM company issue, it could be lurking the corner. But as of now, it's quite low. So when delinquency is low, we are able to get... 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, we sent the 70,000,000 to you, but if you take the non funded, that equity is probably INR 1 lakh crore. And the rating distribution I told you is belongs to the full book of INR 1 lakh crore.

1:04:25 Got it. No, sorry, Rajat. I meant what is the ROE differential or maybe incremental ROE differential between retail and corporate? I'll tell you, our cost in commission corporate side is more like 32% or 33%. Our yield on book is something about 9.5%. 9.2%. 9.2% now, sorry. So 9.2%. And imagine... Yeah. So so if you take take out the cost of funds, and, you know, we probably be pressing the asset side people about maybe 7.5% or so give or take. I don't know. But, you know, if you do the math of that and add that 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.

1:05:12 Okay. Yes, that's probably even a bit more actually, to be honest. Got it. Okay. Yes, that's good. Thanks and wish you all the best and happy Diwali to spend time. Thank you. Thank you, Prahlad. 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 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.

1:06:14 No. You can... If you do the back calculation of the the benefits of INR 35,000 crores where we say 1%, I did the math for you earlier, that's also quite a meaningful amount. If you assume that our we already mentioned what we assumed in terms of rate increase and then the 25% to 25%. And then you put it on a INR 1 lakh, maybe INR 20,000 crore protected book and multiply that, you see that's also a very meaningful amount. And then you also we'll also do the product changes and all along the way, we've done some thinking among us. So you'll do the math, like give or take, it is matching up in its own. So we feel that we know what time is the estimate for us for next year, etcetera. We don't see any material changes to those numbers.

1:07:02 We believe broadly they're achievable. Sure. That's fair. So basically, the hit you're expecting and the recovery from FCNR cost saving and 75 bp rate hike, is it coming to something like INR 1,200 crores of that order? We don't really call out because I... Then it'll take take us down to a lot of calculations and maps to explain. So you can go over what are public numbers you will see. Got it. But next night, your message is that things will offset the revenue loss and therefore, And neutralize the 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 assume anything optimistic from here. It is what it is. It will come out, and let's be prepared for that.

1:07:51 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 HCNR? If you can give those two numbers, that would be. Fee was a very small component of about INR 30 odd crores during the quarter. And on the OpEx front, that number, because we did mobilize borrowings and bonds, that number was more around 60 odd crores. Okay. Got it. Got it. Thank you so much, and all the best and greetings to everybody. Thank you. Thank you very much. Thank you. Our next question comes from the line of Jayaprakash Mudra with ICICI Securities. Please go ahead. Sir, first question on foreign borrowings.

1:08:46 Do you have any more pipeline for raising foreign for ECB or OCB or not much? No. So Jay, we have largely mobilized the moving. We don't have any pipelines as far as this one. Right. And then secondly, on LDR, loan to deposit ratio was improving as deposits were outpacing loans. Now because of this quarter, wherein the FC and RB was strong. So going ahead, would deposits still outpace loan growth or LDR is not a very relevant metric in the current situation?

1:09:33 There are broad numbers you have to meet because we have 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 deposit we need to raise. We've done our planning for Q3, Q4. We've estimated our outflows, estimated our inflows. We're feeling comfortable. And there, we will ensure that deposit flows slightly higher than the loan growth, right? So directionally, LBR should keep improving or stay in a particular zone. And so Ranjit, you mentioned repo linked book at around 30% to 33%. What is the number for FCNR and maybe then maybe fixed and others if you have that split?

1:10:28 So I've taken FCNR in the math. So out of INR one 100, about 60% is fixed, 61%, 62%. Then about 31%, 32% is repo linked and balance is MCLR. So that's the gross 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 weight circular. But if you have only the number separately for ECL transition hit and maybe the recurring impact.

1:11:17 Today, my commentary on ECL continues to remain the same. In fact, the positive development in this quarter is yesterday only when revised operational risk guidelines have come in. I had did mention in the previous calls that we could be a big beneficiary on that front. And that also kicks in from 04/01/2027. 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.

1:12:07 Sure. And anything on recurring basis, any number to call out? As I have sort of said in the past, on a recurring basis also steady state credit cost slightly goes up. But we 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 on a total, the net impact on a ROA could be still small. I'm managing it. That is very clear. Yeah. That is very clear. Thank you and all the best. Thank you. Thank you. Our next question comes from the line of Pritesh Bambuk with Telan Capital. Please go ahead.

1:12:57 Hi. Good evening, sir. Can you hear me? Hi, Pritesh. We can hear you. Yeah. So on the credit card business, congrats on crossing 5,000,000 cards. Just wanted to, you know, check. In the past, we have mentioned that once we cross a particular number, which is about 5,000,000, 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 intensive business. So do we see that falling in the cost to income in the subsequent quarters? Yes. Cost to income has been coming down. I also did mention that credit cost also has been coming down.

1:13:44 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. So on the flip side, this quarter, we reduced or we made a feature where zero ForEx charges in terms of so 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 in that. We've got to watch wait and watch how the reaction is because, of course, we lose some money in the whole base. And the payback will come when it comes.

1:14:32 But anyway, as you know, from day one, we're building Customer First Bank and building on Customer First and Pro customer product and all that. So hopefully, this will be one more feature launch by the bank. The benefits will come over time in terms of customer goodwill, trust, more spends hopefully, and maybe even more optical cards over time. Sure. Sure. Second question was on the wholesale book. I think you've mentioned in the call out that you take a three sixty degree approach. Just wanted to understand qualitatively that with the strong growth, will we have taken significant market share in some of the other features like transaction banking, Sagi accounts, if you can give some assistance on that?

1:15:26 At the Steel 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 a mid tier bank will be same in terms of size. But certainly, the corporate side, we can't claim that. But it is we find our space in the corporate banking side. We could obviously be giving large exports of INR 4,005 thousand crores to some top tier groups of this country, and it could be earning maybe 6.5%, 7% or whatever. We have found our own space. And by the we're finding huge opportunities, just not small. We're finding huge opportunities in the space we have chosen. So more than market share, we are finding when we say three sixty day approach, we are very keen on cash management. And I told you, we've built some really good solutions on that front.

1:16:19 If time permits, maybe next time, I'll tell you what those solutions are. So because today, we're running out of time. So we've done some really good cash management solutions. 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 on a stable manner, which over the years can only compound. Sure, sure. Just lastly, 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 orientations.

1:17:05 Yeah. Thank you. We'll do that next time maybe. The thing is that we sometimes feel that, of course, are different... Obviously, have different styles that we're talking about AI. We feel that, frankly, talking about AI is like AI is like, 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, like you're feeling maybe we'll do some more explanations. Yeah. So basically, whatever is happening across the globe in terms of cybersecurity is very, very concerning. No. Cyber is a different point, by the way. I I I meant AI. On AI, we can finally have AI to deliver, and so we are focusing on outcomes.

1:18:00 I'll give you a small example so that you'll understand. For example, if people are processing loan applications a particular way today, yesterday before the arrival of AI. Now today, the same loan applications are able to see the bank statement, see the GST, see increased income tax statement, the combined count for the AI to read their documents 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. That's why we focus on results. Now let me talk about cyber. On the cyber front, of course, thanks for pointing that out. I agree it's super important, and maybe we'll we'll bring some more angle into that. Yeah. It'll give people more security. It'll it'll make people feel more secure. I agree with you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments.

1:18:57 No, nothing more 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. And 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 may tend to think that this FC and R brings down NIM. Remember, FC and R expanding the base also brings down OpEx, also bring down freight cost in a percentage sense. In a ROA, ROA sense is not going to impact you very much. The second point I want to flag was the insurance thing, we feel comfortable that we'll broadly 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. Happy Diwali advance. Happy Diwali. Thank you. Behalf of IDFC First Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.