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Operator: Ladies and gentlemen, good day, and welcome to HDFC Bank Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to Mr. Vaidyanathan. Srinivasan Vaidyanathan: Okay. Thank you. Thank you, Nirav. Good evening, and a warm welcome to all the participants. At the outset, I know that it's 6:15, 15 minutes behind schedule. We had another meeting we had to conclude and come. Apologies for that, but we'll take as many questions as possible and extend where required. With that, without much ado, we'll straight go into the opening remarks by our CEO and MD. And then we'll -- and we have our DMD Kaizad, any comments we'll take, and we'll go straight to Q&A after that. Sashi, over to you first, and then we'll take it from there. Sashidhar Jagdishan: Good evening, friends. Thank you very much for joining in on a Saturday evening. I know it's rather late, but always appreciate your being here on a Saturday evening. I think we've just sort of declared the results, and you probably would have seen the financial numbers. We're reasonably sanguine and happy about the outcome that has happened. It's in line with our expectations. Looking back, I think the credit growth buildup has been extremely encouraging. We set our sights on a very balanced credit across customer segments. The easing rate cycle and the benign credit has provided catalysts for the credit growth. The CRR release enabled credit deployment slightly ahead of our expectations. As regards to funding, the funding through deposits, we continue to maintain rate discipline, and that has been extremely key. Core individual retail customer segments were seen to be quite strong. For both current and savings, having focused on granular segments have given us encouraging outcomes. And more of this, I'm sure Srini will sort of give the numbers. We did, however, fall short of our strong ambitions, but we are confident that continued focus on our strengths will bring the expected outcomes. On the growth, profitable growth, as mentioned earlier, cost of funds has moved down, reflecting the tailwind effects. CASA growth has been positive. Cost has been under control as productivity improvements have brought in efficiencies. Credit, which has always been our USP, remains best-in-class, allowing us to deliver stable returns as we pivot to the next stage of growth. Looking ahead, the regulator and government continues to be focused on supporting economic and credit growth. At the same time, optimally managing external factors. During the quarter, availability of liquidity was impacted due to some of these. We saw enhanced activity in open market operations and FX swaps to combat some of these challenges. India has demonstrated stable political conditions and consistent policy regime. This has led to being one of the fastest-growing major economies in the world. Growth with subdued inflation management was at the top of the order, and hence, we believe and we are very optimistic about outpacing loan growth in the coming year in FY '27, as we had sort of mentioned to you all along for the last 18 months. Liquidity and benign credit costs provides us a lot of runway to grow. Overall, liquidity in the country is expected to stabilize post trade deals. The foundations are in place to build deposits to fund loan growth. We are expanding our -- we continue to expand our customer base. We are now intensifying customer engagement primarily and largely focused on granular mobilizations. We are aligning pricing with segmented approach, and we shall see that in the coming quarters as well. There's been a lot of talk on the CD ratio. We did sort of drop our CD ratio to significantly since the merger to March '25. As you know, the kind of indicator is not necessarily on the radar for the -- from a regulatory perspective. Having said that, we believe that our glide path to lowering of CD ratio will continue. It's an important focus for sustainable profitability. I completely acknowledge. The cycle -- the easing cycle with credit growth focus in the country surely needs our participation. So the speed of CD ratio movement depends on how we are able to provide funding in the system at rational rates. But having said that, we're very confident that whatever we seem to have committed in the last 2 years, I think by March, I think we should see and by March '27 -- '26 and '27, we should sort of achieve all the -- most of the committed metrics that we have laid out for. I would like to say that under the current scenario, we don't think that we shall be constrained by the CD ratio. To reiterate, we are confident that it will be on a downward glide path. I would also like to reiterate that we shall meet the glide path that we had indicated earlier in terms of the growth, our top line growth, which is in line with the system this financial year and faster than the system in the next financial year. In summary, I have a great appreciation for our customers for partnering with us, and I have the greatest gratitude to all our 200,000 staff who are pillars making this place work successfully. We are confident of the path forward that we have set for ourselves. Thank you very much, and we have all of us here, Kaizad, Srini, and the team here to take on any questions that you may have. Thank you. Operator: [Operator Instructions] First question is from the line of Mahrukh Adajania, an analyst. Mahrukh Adajania: Sir, my first question is on the LDR. You did allude to it. But when do you think now you would reach an LDR, say, close to 90% or below 90%, like any time frame? So that's my first question. And my second question really is on agri compliance. So two large banks have been asked by RBI to make provisions on a certain agri portfolio because of noncompliance issues, provisions of INR 12 billion to INR 13 billion. So as we stand today in terms of your agri portfolio, do you think there is full compliance or there could be some issues somewhere given that it's a large portfolio, it's spread out across the country. And do you think you would be liable to such provisions in the future? Srinivasan Vaidyanathan: Okay. Thank you, Mahrukh. I'll take that. The first thing you touched upon is the LDR from a timing point of view. I think Sashi alluded to that we are committed on the glide path of taking it towards the downward glide path, and we continue to be in that. But on a quarter-to-quarter basis, it is slightly different. And that's because of the seasonality and the opportunity. And you know that in the recent time period, the further opportunity was also provided with the easing cycle and the credit growth focus in the industry as well as the CRR release, which provided that ample opportunity to do that. So given that, we do expect that over the next 1 year to 2 years, we would be getting down further into the levels that we had previously been there, call it, the 90s or low 90s and so on. And that's the level of confidence we have and the pillars that are required to drive that are in place to do that. That's one. The second one is in terms of the agri that you asked about, the regulatory kind of impact, if any. Our regulatory inspection is also complete. And whatever required according to the regulatory requirement, there was about INR 5 billion or so thereabouts, which have been taken in the overall context of our book and our results, if you see, they have been absorbed within that, and there is no special and we have had certain other things that were there. And so in future, we need to operate in a model that is acceptable with the regulatory. So that -- whatever is that, that's an ongoing process of what we do. Any one-time is already subsumed and it is there. And as far as the calibration that we need to do on the agri consequent to those kind of things, recalibration of our book due to the scale of finance, so that what is indeed an agri and what is outside of the scale of finance, scale of finance is the one that determines how much is required for the farm and how much of that is over and above the farm requirement by the farmer. Those evaluations we will take and go through that process to calibrate that. That's in terms of the future impact on that. Mahrukh Adajania: But did the INR 5 billion come this quarter only then? Srinivasan Vaidyanathan: Yes, it is already subsumed in December. Mahrukh Adajania: In December. Okay. And what would be the size of the portfolio? Any such indication you could give? Srinivasan Vaidyanathan: Our agri portfolio is published. You'll be able to see the... Mahrukh Adajania: No, the size of the portfolio on which the provision was taken. Srinivasan Vaidyanathan: No, that's not something -- that's not consequent to this at all because it depends on loan item and what is the scale of finance on each one and so on. But at an aggregate level, that's the kind of level. Operator: Next question is from the line of Kunal Shah from Citigroup. Kunal Shah: Yes. So again, getting on to the question on LDR and deposit growth in particular. So if we want to get the LDRs down and still want to grow loans above the industry average comfortably, then we need to see the acceleration in the deposit growth. And you said like pillars which are required are very much in place. So any reason maybe for a slightly slower deposit growth this quarter? Otherwise, we will need like almost 500, 600 basis points higher than the industry average deposit growth now to get the LDRs down. And any rundown in the bulk deposits, which have been there in this quarter? And if you can quantify that? Sashidhar Jagdishan: See, let me take this and maybe Srini and Kaizad can add into this if required. Kunal, if you recall, we gave a broad range. Number one is there is no regulatory what shall I say, benchmark or a requirement to meet a loan deposit ratio. Was it there as a bit of a nudge when the outlook was negative or when the system outlook was a little tight, liquidity is tight in the period when inflation was moving up and rates were moving up and there was a little bit of a concern on the credit quality of the system. There were certain preventive measures that the regulator had said that try and ensure that you bring down the LDR or maintain a certain stability in LDR. That is the -- at that point in time. Whether that -- whether there is a number that you need to meet, I don't think there is any compulsion. But in our own interest, we had given a kind of a glide path wherein we had said that we will come to a certain number in FY '25, which we achieved. We said we will try and be in a range of somewhere between 90% to 96% in the year FY '26, which is what we will be is what we are very confident about. And then maybe by FY '27, by the natural growth and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85% to 90% for FY '27. We continue to believe that this is going to be there. It's not an easy thing, as we have said, of course, but we know what are the strategies we need to do. There were certain tactical measures we could have taken in the third quarter. We chose not to, but that's all right. I mean these are sometimes learnings we probably may have missed, but we know what are the things to be done to bring about these kind of meeting our glide paths that we have committed in the broader sense on a longer -- medium- to longer-term basis. So as regards the kind of deposit growth that is required, I think the pace at which we are growing deposits in line with the top line growth that is more or less matching 11-plus percentage in the second year -- in this year should -- and probably slightly faster, which is what we normally do in the fourth quarter, like most -- what we have done in the past, should lead us to the kind of range that we are -- we have committed to. And we are very confident that, one, as we have a clear cut, as I said, all things remaining same with whatever we are seeing in the macro, we should believe that the growth runway opportunities for growth and hence, in the deposit requirements other than certain events that may happen, which you and I will not be able to predict now, we are reasonably confident that we will land -- and as Srini mentioned, don't look at quarter-to-quarter movements. We are on a -- you look at on an annual basis or on a medium- to long-term basis, the trends will be in that kind of period. So I think the inflection has started. We had to contain ourselves in FY '25 for all the right reasons. I think now we are opening up, the engine is opening up, and you will start to see this kind of a consistency in the trajectory that we have laid out for ourselves. Kunal Shah: Sure. And anything on bulk deposits rundown, quantification, if possible? Srinivasan Vaidyanathan: More than quantification. I mean, Kunal, that's part of the business. There are certain segments that we patronize. I think Sashi mentioned about where rate discipline has been the key. And to some extent, we participate for relationships and certain extent, we don't need it, we don't go there. But on the whole, if you look at the retail or non-retail, retail, there are individuals in retail, which have been phenomenally growing and growing. There are certain non-individuals in retail, which is branch related. It could be institutions, trusts and HUFs and whatnot. Examples of some non-individual but branch related, where we have had some lower levels of growth. And there are certain other customer segments which we have seen, particularly capital market segments where it has been low, where we have not paid rates as much as what the market has demanded or what the competition has offered. And that is what you see that is reflected in our cost of funds. If you look at our cost of funds is down by about 10 basis points, 11 basis points or so in the quarter. So we're trying to manage it growth with the profitability, and that is what you are seeing, right? So segment to segment, time to time, it changes, but at least you've got a color of how we operated in the recent time period. Sashidhar Jagdishan: So you're right, Kunal. Just to supplement what Srini is saying. The focus -- the good part is retail has grown very steadily and very -- and all these are the granular ones. I'm very happy with that. If the non-retail, tactically, we did not sort of offer the kind of market rates that were there. And we said it's all right because we did sort of know for the kind of growth that we needed, that is good enough. Kunal Shah: Got it. And one last question on labor code. So the impact of almost INR 8-odd billion, looking at our employee cost and then comparing maybe the labor code impact vis-a-vis the employee cost for others. For us, it seems to be relatively on the higher side, more than 10% of the employee cost, not so much for the other banks. So is this more of an estimation which has been done? And what would be the recurring impact which would be there on the cost as such? Srinivasan Vaidyanathan: Good point. Thanks for raising that. One, it is an estimate given whatever information that we have. And that estimate is driven through an actuarial process, right? So you go through the normal process of how you do and there is an actuarial valuation and determination of how do you do. Again, that is -- there is some signs in that, but it is based on certain assumptions that come. That's the second thing. The third thing is that variables. When you look at these variables, the definition of what is wage, what are determined to be wage inclusion, exclusion, the rule-making on that is pending. You know that, right? So there are some assumptions that go for one of the variables that go into those assumptions, and that is not based on determined rules, that is based on some assumed things. So that's the second -- third thing. The next item is the -- that individual organizations can be very different because of the longevity of the staff that you see there. So that determines on how long and what is the kind of tenure and so on and so forth, both historical and anticipated. And so many other factors like that go into play. So at this time, I would just ask you to take it as a higher estimate based on best available information and through a scientific actuarial process that has come. And as and when the rule-making evolves, as and when more information is available, this will be evolved. And again, we can -- I can't venture to come out with a forward-looking or what impact on an ongoing basis, cannot do at this time. And the reason being that we need to have all of these in place before we can get there. And that is why this is not determined at an employee level to say next month when somebody retires, this is the kind of amount that it can come or what will be the amount determined for a provident fund and so on and so forth. It cannot be determined at this stage. This is a really high level based on best estimate. Operator: Next question is from the line of Chintan from Autonomous. Unknown Analyst: May I get into the LDR again, please? So Sashi, please, did I hear you correctly when you said 85% to 90% by FY '27? That seems to be aggressive to me. If I look at consensus numbers, it's expecting 13% loan growth and 93% LDR. If you are going to achieve kind of the 90% in the next fiscal year, that suggests a very strong deposit growth number. And I know you've kind of said that you want to prioritize growth now. So it's not piling up. So if you could help us... Sashidhar Jagdishan: Chintan, thanks for asking. Maybe then let me -- I've given you a broad range because I don't want to box myself with a narrow range. But having said that, we have been operating in a range of around the 87%, 88% in the premerger level, 3 years before the merger. And so when I say 90%, of course, I would have meant somewhere around the plus or minus in that particular range of 90%, maybe around the 88%, 89%, et cetera, or it could be 90% to 91% as well. But why I mentioned this, at least the trend lines that we are saying, if it's -- it can be 96% for FY '26 or a 95%. We are all right. At least the direction is what we are looking at for. We just gave a broad one so that we know what -- if we are lucky to really step up growth or the liquidity changes and we have more benign liquidity and no FX operations or FX swaps or open market operations, maybe then it will be wonderful. So that is why I'm saying since I do not know what's going to be the liquidity condition in this, therefore, I gave a broad range. But even if I achieve these kind of directions directionally going there, that's something that we can achieve. As I said, there is no regulatory number to comply to. It is just a direction that I think we need to achieve for ourselves, let alone the regulator asking us to do. It is something that we believe just by doing what we are supposed to do will lead us to that kind of thing. I don't have to do anything extra to measure that metric. It will happen. So when we did sort of forecast a faster growth rate for ourselves than the system, we also -- as we have seen, we have been having deposit growth rates in line with normally the top line growth, slightly faster than the loan growth. So estimating that is what we believe where we will land for FY '26 and '27. So don't take it literally that we may be on the lower end of that range. It could be anywhere in that range. Practically speaking, it will be somewhere -- if it's 90% is that range, then somewhere around the 90% is something that we'll be happy with. Similarly, somewhere around the 95% is something that we'll be happy with for FY '26. Unknown Analyst: Appreciate that. I mean if you're trading off EPS growth for slightly slower ROE improvement, that's fine. I mean that's not the issue, especially if the opportunity is there in the market. So -- but I just wanted to make sure because we have an occupational hazard to kind of do our due diligence in our model. So I just wanted to get that flexibility that you have highlighted now. The second question was around asset quality. Could you -- you've got a unique vantage point, second largest bank in India. Could you give us some idea about any pickup in growth momentum, any pickup -- any issues in asset quality, particularly due to the U.S. tariff or in the MSME area? So it's a combination of is growth improving? And are there any asset quality concerns more broadly, if not in your book? Sashidhar Jagdishan: So if I got the question right, you want to know the trend for asset quality and how it is looking. Across segments and even first at the sectorial, you're well aware that the banking industry right now to borrow a term is going through a Cinderella phase where you've got very strong balance sheets when I refer to that from an asset quality point of view. We have the lowest accretion of gross NPAs and net NPAs are at decadal lows. Mirroring this trend has also been reflective on our books. We have seen very low accretion to gross NPAs. And none of the particular portfolios have indicated any stress building up. So I think the economic environment with the kind of GDP growth that one has seen, the kind of consumption growth that one is seeing as well as the wage increases that one has seen on one hand and on the other, the lowering of the interest rates and affordability, therefore, going up, including the fiscal benefits that were given to not take up much time, I would say the asset quality continues at the bank to be pristine. And as of -- as we see it, there is no particular segment which is showing any major signs of concern. Srini, would you like to... Srinivasan Vaidyanathan: Perfectly good. There will be seasonality in agri specifically... Sashidhar Jagdishan: That is separate... Srinivasan Vaidyanathan: Outside of that, every segment, including the agri segment period-to-period, if you see, is lower, both from a leading delinquency and into the slippages, which are far lower. And then from there, going into loss given default is also lower. You're seeing that the recoveries wherever we are there, that is also on an absolute level, good level. Chintan, I hope that gives you a perspective on both sides. Unknown Analyst: Yes. And just on growth momentum, are you seeing things improve generally in the economy? Srinivasan Vaidyanathan: In the economy, the growth momentum, yes -- if you look at some of those indicators that we have seen, the -- take the crop cycle itself, very improved. The sowing cycle has improved over prior year, very healthy water reservoir levels have aided that. The manufacturing PMI continues to be in the expansionary zone with many programs that are coming in. Services sector doing very well on the consumption demand side. If you look at the recent time period for card spend, which is important for you to look at, the overall card spend up 15%, 3.4% sequentially. Within the card spend, when we look at the discretionary category of card spends, the discretionary category spends have grown 21% year-on-year. The nondiscretionary, which is the bread and butter normal activity is about 13% up. So that indicates that when the kind of a discretionary spend goes up, people do go and indulge. That's what you're seeing there. On the other side, we do see revolver rates not picking up. So which means people are spending to pay down. So there are certain other segments of the society, which is what is spending. So on an overall level, I would say that similarly, you've seen the auto and the tractors and so on. 2-wheeler has been somewhat less than expected, but then the 4-wheeler autos and the tractors type have done exceedingly well. And you're seeing some of that reflected in the aggregate level GDP output that gets reported too. Operator: Next question is from the line of Nitin Aggarwal from Motilal Oswal. Nitin Aggarwal: I have a question on the branch productivity and deposits now that we are so hopeful about the deposits pickup and targeting at close to 90% kind of a number. So like if you look back as to what kind of experiences that we used to have in terms of the branch vintage and the deposit buildup, has -- is that kind of sustaining in the recent years because the deposit growth is just not picking up at the system level and that is a key constraint across banks with LDRs, the number that we are seeing across many banks. And related to this, own branch kind of over the years has been like coming off from pretty high number now to every successive year, we are opening more branches. So do we see... Sashidhar Jagdishan: Nitin repeat that. Nitin repeat that? We could not hear you. Nitin Aggarwal: Sorry. So I was also saying that related to this, if you look at the branch expansion run rate, every successive year, we are now opening up lower number of branches, like FY '23 versus '24 to '25, every year, we are going down in terms of branch expansion. So how do you look at this corollary between the branch vintage and the deposit buildup? And do you think that the current pace of expansion will be sufficient for us to sustain that above industry growth rate over the next 3, 4, 5 years? So just some thoughts around this. Srinivasan Vaidyanathan: Okay. So I'll get started with the last one first, which is to do with the branches. Nitin, you can't look at 1-year branch, but you have to look at a trend of what was it, right? So for that, if you go back to -- you look at a 5-year branch trend, I'll give you round numbers of the branch trend. We opened about 250 branches in 2020, 350 in '21, 750 in '22, 1,500 in '23, 900 in '24, 700 in '25. So if you look at this, 250, 350, 750, 1,500, 900, the opportunity space that it provided, we took that and accelerated all within the overall returns framework, right? All through this time period, if you look at our returns between 1.9 to 2, right, in that period. So where there was, we accelerated, and we don't need to do 1,500 or 900 and so on. We can be more modest, but still add to the branches. It is important to add to the branches because currently, we have only a little more than 6% of the country's branch network with us. So that means our branches 9,600-plus is about a little more than 6% of the systems branch, right? So we have -- and we have more than 11% of the market share of deposits with us. So that's one in terms of -- we have more room to run and more share to gain through that process. Next is productivity, right? What does it do from a branch productivity? If you look at the per branch productivity, we are now at about INR 305 crores or thereabouts on a per branch at an aggregate level. Despite all of these additions that I talked to you about, if you go back where we -- I just mentioned to you about how we were doing per branch, if you go to '23 or '19 to '23, that time period. For that time period, about INR 237 crores per branch, right, at that time. And I told you INR 237 crores per branch before I started to talk about those acceleration of the branches, right? Now with all of those acceleration, we are at INR 305 crores per branch. So at every incremental branch, when we add, it is also at an aggregate level added. But this is at an aggregate level. Then that takes to the next one that you talked about at a micro level, right? At aggregate level is one. Let's talk about micro level in terms of where it starts to have the pivoting point for further scale. First, the breakeven is about 2 years or so. When you look at the breakeven, branches that are in the metro and urban area typically breaks even in about 22 months. Branches that are in the semi-urban and rural area takes about 27 months, thereabouts. On an average, about 2 years, it breaks even. So that's one. And these models are in consonance with our legacy branch models, which means they are confirming to what are traditionally there. That's number one. Number two, the pivoting point where 4, 5 years ago, where we analyzed to what does a branch do in 5 years, 5 to 10 years and 10 to 15 years and so on, when you look at it, where the scaling factor is about the 5th year mark to the 10th-year mark, it moves, and it moves about 3x. Between 5 to 10 years, it goes about 3x up. And then once it goes into 10 to 15 years, 10x up. So that is very important, and that scaling factor continues to operate now. Now what is more interesting and important than that is, currently, if you look at the branches that are in the bucket, 5 to 10 years bucket, which are doing 3x than what they were doing 5 years ago, 1,232 branches, right, out of the 9,600, 1,232 branches are in that bucket, right? And if you look at the branches before that, the 3- to 5-year bucket, 3- to 5-year bucket, we have 1,300 branches. So we are entering into the pivoting point where the cohorts that are entering into the 5-plus bucket is more than the cohorts that are going to exit from 5 to 10. So that is -- again, similarly, when you look at the 10- to 15-year bucket, it got 2,499 branches. And then the 5 to 10-year branches are going to go into those cohorts. And so that's almost 43% of our branches are vintage branches, less than 5 years. So this is the cohort that needs to move through the pipe and get there. And so we are quite -- that is point, I think we said that we are positioned well with good expectations coming out of that. And that's, again, aided by several factors that go. Nitin Aggarwal: Okay. So... Srinivasan Vaidyanathan: Another data point, Sashi was just reminding me because when we reviewed it with him. On an incremental basis, when you look at it, these new branches contribute slightly north of 20% of the overall incremental that comes -- deposits that come, which is very important, right, that these things keep adding accreting as we go along. That's something I wanted to leave... Nitin Aggarwal: Right. See, the reason to ask this is also because while advances side is still in our control, we can maneuver the advances growth and choose the business segments we want to underwrite. But deposits, if we compare across the best and private banks also, typically, the growth kind of has its own saturation point. And if you look as to how HDFC Bank has done last year and versus what is the current year, probably we will be closer to in terms of deposit rate versus what we were last year on a good case basis. So for us to talk about that LDR can come so sharply next year, do we look at this deposit growth run rate break out from as to how the trends have been in the recent years? Can this really happen with the kind of vintage gains that we talk about? Srinivasan Vaidyanathan: Nitin, these get benchmarked by district, by our presence in those districts, that's how we benchmark and that's how we work our marketing and product teams, work with our distribution channels where we are present to orchestrate and move this, right? So two things I want to mention. One is new account acquisition is an important element. We are at about 100 million customers. Last quarter, we added about 1.5 million new liability relationships. It is important to get that new account value because that's how you keep building. And the change in balances. So that means the existing customers adding, accreting has been lower in the recent time periods when some kind of choices into various other financial institution they take. So some of that has been slower. But again, you beat that by getting more presence and more customers and have diversified product -- asset product because you know that in the last 2 years, our retail asset products were slow than where we are now trying to accelerate or move. For every asset product that you have, again, cards, I think not in the last quarter, but maybe a few quarters ago, we have spoken cards. For card customers spending on their card account and having 100 outstanding, at the aggregate level in the bank, we see almost north of 5.5x deposit balances from the customers. So what does it mean? We want more of our customers to have cards. And same with mortgages, which I think last time we spoke, 99% today, we have penetration. That means we are not selling a mortgage product. We want to get the customer relationship. When we are giving a mortgage product, we get the savings account and the savings account gets funded approximately today at initiation at about INR 35,000. And then when you look at the 12-month, 18 months on books, which is the kind of vintage we can measure today and see, we are seeing that it is growing 2, 2.5x. But historically, some of those category customers that we have seen, it has got the propensity to have 5x more than a customer who does not have a mortgage. So liabilities don't come only purely on just an engagement and asking. It also comes by multiple products that get sold. Operator: Next question is from the line of Suresh Ganapathy from Macquarie Capital. Suresh Ganapathy: Yes. So first question is on LCR. What would be this quarter? And how it would move post the April 2026 guideline, whether it will move up, move down? Srinivasan Vaidyanathan: LCR, we reported 116% in this quarter. Suresh Ganapathy: And post the new guidelines? Srinivasan Vaidyanathan: No. The new guidelines, we don't expect any material change that can impact us. Suresh Ganapathy: Okay. And just a question on margins itself. It's been almost 9 quarters since the merger, your margins have not gone anywhere. In fact, it is even lower than what you had reported at 3.4%. I know there are several moving parts. Are you really confident that you can get this up in the next 2, 3 years? Srinivasan Vaidyanathan: Suresh, if you think about the margin, the most important lever on the margin is the cost of funds, which at various points we have mentioned. And within the cost of funds, there are a few. One is the time deposit repricing, which has a lag effect. We have changed time deposit rates in line with the policy rate change, but not fully, but maybe 2/3 way, we have changed 125 basis points is what the policy has changed. We have done about 2/3 into that. We need to see what more. And again, that what's competitively priced, right? So we are not at a disadvantage anywhere there. And that takes almost 5 quarters to flow in. Part of that this quarter, you have seen 10, 11 basis points change in cost of funds. That is the lag effect of that flowing through, then that continues. So that's one element. And the second element is the borrowing. Quarter-to-quarter has remained static at about 13%. But again, more than a quarter, if you look at the year, we were at about 7%. Broadly, the industry is at about 6%, 7%. So there is an opportunity space to beat that to keep coming down. That is another important lever that provides this cost of funds change. And the third one is the CASA, which again is a customer on the other side more than we creating any action where we need to work through to bring selling within the new customers and better engagement, more products, more retail products. That's the kind of process we need to take through to get to that industry average and beat that industry average over time. Yes, there is a line of sight, and these are some of those elements we work through. Operator: Next question is from the line of Prakhar Sharma from Jefferies India. Prakhar Sharma: Congratulations on the results. Just wanted to delve on this deposit growth part. It was an interesting color that you said that the granular retail has grown, but slightly bulkier retail hasn't. Is there any sort of a data point that you can share in terms of the growth or the mix in the two? And one alternative is, can we use the LCR deposit number and the growth there as a reference point to just get some comfort on what's the range of growth there because 4Q onwards, it gets aggressive on pricing. So if you can share some color, that will be right. Srinivasan Vaidyanathan: The second aspect of the question I didn't get, probably we will see. But as far as the rate of growth is concerned that you asked about the categories, certain other categories that you wanted. Yes, I mean, the -- if you look at the institutional types, they were in the mid-single digits, right? The institutional type of deposits, mid-single digits. That's what we have said. And within the retail branch, the non-individuals were much more modest. I think it was again a little more higher single digit. And the individual, individual within the branches were in the solid double-digit growth. Prakhar Sharma: Sorry, the individual at the branch was at? Srinivasan Vaidyanathan: No, I didn't give you a number. I said it's a good double digit, and everything else was in single digit. Yes. Prakhar Sharma: Okay. And is there a way to just give a context of within your total deposits, 83% is classified as retail. How much would be the granular retail and how much would be the quasi-institutional retail? Srinivasan Vaidyanathan: I don't think we have published that. But yes, when we say that is a branch-driven deposits where there are RMs engaged with either an individual or the individual organizations and institutions, that is what. Operator: Next question is from the line of Abhishek Murarka from HSBC. Abhishek Murarka: So Srini, going back to the branch addition question, and thanks for giving so much color. But just net-net, are you still looking to grow or add about 5%, 7% branches this year and in FY '27? Or what are your near-term plans? I understand the whole picture you painted about the scale-up of old branches and how that will accelerate deposits. I just want to know your next 1-year plans in terms of branch additions. Srinivasan Vaidyanathan: Yes. To answer in short, 5% to 7% implies 500 to 700 branches annual. I don't believe that, that kind of branch addition we can do in the near future. We'll evaluate as we go through the annual planning process and come back at some point in time, but it would be of a good order. Sashidhar Jagdishan: Abhishek, just to add to what Srini is saying. If you've seen the last cohort of what he just said in terms of the 4,800-odd branches over the last 5 years. Today, it is contributing, as he mentioned, somewhere around the 20-plus percentage points in terms of the incremental liabilities or the deposits that we are mobilizing. As this cohort starts to -- which we are seeing delivering and getting to a substantial number, then we know that we have the confidence to start to step up our -- the next phase of launching new distribution points. Obviously, we want to wait and watch. We are not saying we will not add any branches. As he mentioned, we will add branches, but these are probably in -- normally in suburbs where there is kind of an opportunity that is what we are now focusing on. But the -- we want to ensure and stabilize the last cohort of the 4,800 branches stabilize and start to get to a certain level of maturity and level of contribution, which is substantial, then it will -- we know that, that will be on an autopilot and then we can start to see the next phase of introduction. And obviously, at that point in time, we will have to rethink in terms of we would have probably moved far beyond in terms of our branch transformation and automation. So there will be some new thought processes in terms of what we -- how we need to add or how we need to sort of expand our distribution. It's not that it's going to be different, but maybe there will be some amount of recalibration that we will do in the next phase of branch additions. Abhishek Murarka: Sure. So Sashi, as I understand, that's a great point -- for making that point. So today, about 50% of branches, which is this 4,800 is contributing around 20% of incremental deposits. Is it correct to think that when this starts contributing maybe 40%, 50% of incremental deposits, that is when you start thinking about future expansion. Is that the right way to think about it? Sashidhar Jagdishan: Whether it's 40%, 50%, 60%, we will keep on recalibrating because we are -- there are a lot of things that we are trying to do. Obviously, we also -- if you really look at it, we stepped up our distribution the moment we knew that we announced our merger. And we knew that we needed to fund not just at that point in time, the future of -- in the future. So all this is going to add to incremental deposits in a substantial way into the future. But -- so there will be a lot more dimensions that we will examine not just the extent of contribution, but probably certain events that we may have or certain other dimensions that we may look at before we start to step up the pedal on the new phase of incremental. And you look at it even over our 30-year period, there have been these phases of right from 2009 onwards to 2013, '14, we stepped up our distribution. Then we had a little bit of a pause, then we started off again. So we -- this recalibration and doing it in phases is something that we have been doing. It's not a new thing. We have been doing this for right through our 30 years journey. And I think we will continue to do. Obviously, the dimensions keep changing in terms of what we need to look at as we move ahead because the world is changing very fast. The kind of technology implementations that we are doing, as we unveil, we probably may need different thought processes as well. So let me pause out here and probably -- you probably will get the drift. Abhishek Murarka: Sure. And the second thing is on credit cost. Now if I look at your net slippages, ex of the agri part, but let's say, look at the net slippages in the 9 months or last few quarters, around 30, 35 basis points. Write-offs are holding steady at INR 3,200 crores roughly a quarter. So why is the underlying credit cost around 55 bps and not coming off? I mean, don't you think that should also start coming off at some point if this kind of trends continue. Srinivasan Vaidyanathan: Abhishek, a couple of things. One is the slippages. If you're looking at excluding agri slippages, it's 24 bps in the quarter. Prior quarter was 23 bps. Prior year was 26 bps. So order of magnitude, call it, 25 basis points. That is the kind of a slippage in a quarter, right? That's what you're seeing. So not the 35 or something that you're talking about. That's one. The second thing is that credit costs -- also, you have to look at it, including the recoveries because when you write off certain loans as it progresses through some of the delinquency buckets, then you get it in the form of recoveries. And net of recoveries, if you see, we are at about 37 basis points or thereabouts. And when you look at, again, last quarter, last year, order of magnitude, very similar within a few basis points, 5 basis points. So it's not just about the 55 basis points. It is also about the net of the recoveries, which comes in quite handy. And it's a function of how fast you write off and how you recover. Abhishek Murarka: Sure. That's what I was referring to. So net of your recoveries, et cetera, it should keep coming down because your slippage performance is -- I mean, it's improving. The book is growing and your absolute is pretty much stable. So you're seeing very good asset quality trends. And I was sort of wondering why the credit cost is not coming off. Srinivasan Vaidyanathan: So why will -- see, in a growing book, if the slippage is steady, the losses are steady, recoveries are steady. I don't know what you're expecting, maybe something else... Abhishek Murarka: So 50, 55 is more or less BAU is what you're seeing. Srinivasan Vaidyanathan: No, GNPA? Abhishek Murarka: No, no, no, no, credit card. Okay. I'll take this offline. I probably not saying myself clearly. No problem. Finally, just one question on cards. Overall, card receivables are pretty stable. If I look at the data that comes out in RBI, the spend market share for you is doing well, [indiscernible] market share is doing well. So why is it not reflecting in the receivables? Is it just transactors running down? Or is it something else? Sashidhar Jagdishan: No, actually -- great question, Abhishek. I think if you really look at it, the segment that we are patronizing is more the middle and upper middle segment. Therefore, slightly higher-end cards is what is in our portfolio. The proportion of that is large. And a large part of that, over a period of time, we have been -- I mean, as you know, the card -- credit card -- what shall I say, the behavior has also changed over a period of time. Today, we look at it not as net receivable from a revolve perspective, from an asset perspective and an earnings perspective, we are looking at it as an enabler for our liabilities or deposits. Srini has mentioned in the past, and that is something that we are extremely proud of, the spends in the cards actually provide a significant portion of our deposit momentum. Today, 20% to 25%, maybe in the mid of 20% to 25%, I can say, is the range at which out of the total deposit basket, the kind of momentum that you're seeing, whether it's on the healthy balances and what it contributes to total, it's somewhere around that 20%, 25%. So the credit card focus today is more not from a net receivable basis, but from a transactor basis. And as I said, I mean, whether it's a lot of you on the call or people in this room that we are, we all pay on a standing instruction basis on due dates. So this is something that we are very happy with. And so this is the kind of a new strategy that we are evolving. Obviously, we are also recalibrating some of the business model in cards. We have been doing that, and we probably are -- have come out with something which is very encouraging and something that the organization will really benefit from our card strategy. Srinivasan Vaidyanathan: I want to add one thing on the card, particularly the card revolving aspect of it, right, which is if you go back to 2020 or before and compare to today's revolvers, they are slightly under 2/3 level, right, slightly under 2/3 level. So that means of the pre-2020 levels revolvers, right, at level. And so the profile of the customers, and that is why you see the deposit balances of those customers, which is a little more than 5, 5.5x was slightly under 4x at that time. So the profile of those customers are also different where they do transact, they do keep balances and the revolver balances are lower for certain other segments. And we have not liberally offered the credit line increases and made more and more revolvers to tip them off into delinquency. We've been -- credit has been cautious on that. Operator: Next question is from the line of Jayant Kharote from Axis Capital. Jayant Kharote: Sir, one question is on your loan growth broad guidance of above system next year. Sir, I just wanted to understand when we are saying we'll grow above the system, what is our range of assumption for system growth? Because we are seeing some acceleration in the system growth itself where we are moving from this 11% to 13% band to maybe closer to 14%, 15%. If we were to move in that band, would we have accounted for that kind of system growth and we say we can grow above that? Sashidhar Jagdishan: So our understanding as of now is next year, we expect system growth to be between 12% to 13% when you look at nominal GDP and the credit growth that's required to support nominal GDP. So if we're talking about 12% to 13%, we are talking about a couple of percentage points above that going into the next year. We see distribution on the retail side, you've been seeing over the last 2 quarters coming up, our positioning also in the MSME space, given our geographic coverage as well as our suite of products that we have out over there and the wholesale piece, which you would have seen in this quarter again coming back. We do believe that we have the customer segmentation to be able to grow at a couple of hundred basis points over system growth next year. Jayant Kharote: Great, sir. I think this answers you're working with the 12% to 13% range at least. Second part is, on a broader 3-year or 4-year question. We have seen products like mortgage getting a lot of competitive intensity. PSA banks being well capitalized are probably being more aggressive in vehicle, increasingly auto. Do you see this competitive intensity eroding profitability for the larger players over the next probably 3 years, not a 6-month or 12-month question? Srinivasan Vaidyanathan: See, we are addressing competition only through relationship and not through pricing. Mortgage product, as you've seen that in the last 12 months, we are not leading through a mortgage product. We are leading through relationships where the mortgage product could be a fulcrum around which we can operate. Same with auto. I do want to let you know that our auto loans are almost a little more than 80% self-funded, which means the customers when they take auto loan, we want their liability accounts. We want them to have balances in that and the loan self-funds itself for the most part within the balance sheet. So it is about relationship offering, and that is part of the engagement in the branch, and it's not just a product and a loan balance sheet building approach. Sashidhar Jagdishan: Having said that, Srini, absolutely in order. I think we do continue to be the largest financiers in the auto loan space in the country. not only in terms of the disbursals but also the book size as well as if you see our year-on-year growth in the entire automobile space, I think that is reflective of what our position is and the target market that we will have. So it is relationship. It is also ensuring that we have the right pricing for the product based on the customer segmentation, and we don't feel any need to do business at price points which don't make economic sense. Jayant Kharote: And your market reading is, as of now, we are not in that situation where aggression is eroding margins for the broader system, at least in auto? Sashidhar Jagdishan: I'm sorry, I didn't catch your question. Can you repeat it, please? Jayant Kharote: So not for HDFC, but probably for broader system. Are you seeing that aggression in the auto segment from the public sector or maybe the broader system aggravating in the last couple of quarters? Sashidhar Jagdishan: Yes. We've seen it not only in auto, but also in the home loan product. So these are two products where we have certainly seen some amount of, if I may say, a bit of irrational pricing, but irrational pricing has never sustained. It will play itself out and bury itself in a couple of quarters on the outer side, if not earlier. Operator: Thank you very much. Ladies and gentlemen, we have come to the end of the allotted time for the call. I would now like to hand the conference to Mr. Vaidyanathan for closing comments. Srinivasan Vaidyanathan: Okay. Thank you, Nirav, and thanks to all the participants for taking the time to attend. At the outset, I again want to mention that we did come 15 minutes late. We did extend to be there. Further questions, any more comments, Investor Relations team will be on standby to guide and help and explain or clarify anything you need today or over the weekend or next week, whenever you desire, we are available. With that, we'll sign off for today. Have a great weekend. Bye-bye. Operator: Thank you very much. Unknown Executive: Thank you. Sashidhar Jagdishan: Thank you all. Thank you very much for all the hard work. Operator: On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Operator: Ladies and gentlemen, good day, and welcome to ICICI Bank Limited Q3 FY 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakhshi, Managing Director and Chief Executive Officer of ICICI Bank. Thank you, and over to you, sir. Sandeep Bakhshi: Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q3 of FY 2026. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anindya and Abhinek. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro markets. We continue to operate within the framework of our values to strengthen our franchise. Maintaining high standards of governance, deepening coverage and enhancing delivery capabilities with a focus on simplicity and operational resilience are key drivers for our risk-calibrated profitable growth. The core operating profit increased by 6% year-on-year and 2.5% quarter-on-quarter to INR 175.13 billion in this quarter. The total provisions during the quarter were INR 25.56 billion. This includes additional standard asset provision of INR 12.83 billion made pursuant to Reserve Bank of India's annual supervisory review, which Anindya will explain later on the call. The profit before tax excluding treasury was INR 149.57 billion in this quarter compared to INR 152.89 billion in Q3 of last year. The profit after tax was INR 113.18 billion in this quarter compared to INR 117.92 billion in Q3 of last year. Average deposits grew by 8.7% year-on-year and 1.8% sequentially, and average current and savings account deposits grew by 8.9% year-on-year and 1.5% sequentially in this quarter. The bank continued to see healthy growth in current account deposits and individual term and savings deposits. Total deposits grew by 9.2% year-on-year and 2.9% sequentially at December 31, 2025. The bank's average LCR for the quarter was about 126%. The domestic loan portfolio grew by 11.5% year-on-year and 4% sequentially at December 31, 2025, compared to 10.6% and 3.3% at September 30, 2025. The retail loan portfolio grew by 7.2% year-on-year and 1.9% sequentially. Including non-fund-based outstanding, the retail portfolio was 42.2% of the total portfolio. The rural portfolio grew by 4.9% year-on-year and 7.2% sequentially. The business banking portfolio grew by 22.8% year-on-year and 4.7% sequentially. The domestic corporate portfolio grew by 5.6% year-on-year and 6.5% sequentially. The overall loan portfolio, including the international branches portfolio, grew by 11.5% year-on-year and 4.1% sequentially at December 31, 2025. The overseas loan portfolio was 2.4% of the overall loan book at December 31, 2025. The net NPA ratio was 0.37% at December 31, 2025, compared to 0.39% at September 30, 2025, and 0.42% at December 31, 2024. During the quarter, there were net additions of INR 20.74 billion to gross NPAs, excluding write-offs and sale. The provisioning coverage ratio on nonperforming loans was 75.4% at December 31, 2025. In addition, the Bank continues to hold contingency provisions of INR 131 billion or about 0.9% of total advances at December 31, 2025. The capital position of the Bank continued to be strong with a CET1 ratio of 16.46% and total capital adequacy ratio of 17.34% at December 31, 2025, including profits for 9 months 2026. Looking ahead, we see many opportunities to drive risk-calibrated profitable growth and grow market shares across key segments. We remain focused on maintaining a strong balance sheet, prudent provisioning and healthy levels of capital while delivering sustainable and predictable returns to our shareholders. I now hand the call over to Anindya. Anindya Banerjee: Thank you, Sandeep. Let me first talk about the additional standard asset provision. Following its annual supervisory review, RBI has directed the Bank to make a standard asset provision of INR 12.83 billion in respect of a portfolio of agricultural priority sector credit facilities, wherein the terms of the facilities were found to be not fully compliant with the regulatory requirements for classification as agricultural priority sector lending. There is no change in asset classification or in the terms and conditions applicable to the borrowers or in the repayment behavior of borrowers as per these terms. The bank has been originating this portfolio over some years and will work to bring it in conformity with regulatory expectations. This additional standard asset provision will continue until the loans are repaid or renewed in conformity with the PSL classification guidelines. I will now talk about loan growth, credit quality, P&L details and the performance of subsidiaries. Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 11.1% year-on-year and 3.2% sequentially. Auto loans grew by 0.7% year-on-year and 0.9% sequentially. The commercial vehicles and equipment portfolio grew by 7.9% year-on-year and 3.2% sequentially. Personal loans grew by 2.4% year-on-year and 1.7% sequentially. The credit card portfolio declined by 3.5% year-on-year and 6.7% sequentially. During the quarter, we saw improved growth trends across the mortgage, rural and corporate portfolios. The sequential decline in the credit card portfolio was due to high festive spends towards the end of the previous quarter, which had resulted in high sequential book growth in that quarter and saw repayments in the current quarter. Within the corporate portfolio, the total outstanding to NBFCs and HFCs was INR 791.18 billion at December 31, 2025, compared to INR 794.33 billion at September 30, 2025. The total outstanding loans to NBFCs and HFCs were about 4.3% of our advances at December 31, 2025. The builder portfolio, including construction finance, lease rental discounting, term loans and working capital was INR 680.83 billion at December 31, 2025, compared to INR 635.83 billion at September 30, 2025. The builder loan portfolio was 4.3% of our total loan portfolio. Our portfolio largely comprises well-established builders, and this is also reflected in the sequential increase in the portfolio. About 1.1% of the builder portfolio at December 31, 2025, was either rated BB and below internally or was classified as nonperforming. Moving on to credit quality. The gross NPA additions were INR 53.56 billion in the current quarter compared to INR 60.85 billion in Q3 of last year. Recoveries and upgrades from gross NPAs, excluding write-offs and sale, were INR 32.82 billion in the current quarter compared to INR 33.92 billion in Q3 of last year. The net additions to gross NPAs were INR 20.74 billion in the current quarter compared to INR 26.93 billion in Q3 of last year. The gross NPA additions from the retail and rural portfolios were INR 42.77 billion in the current quarter compared to INR 53.04 billion in Q3 of last year. There were gross NPA additions of about INR 7.36 billion from the Kisan credit card portfolio in the current quarter compared to INR 7.14 billion in Q3 of last year. We typically see higher NPA additions from the Kisan credit card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from the retail and rural portfolios were INR 25.39 billion in the current quarter compared to INR 27.86 billion in Q3 of last year. The net additions to gross NPAs in the retail and rural portfolios were INR 17.38 billion in the current quarter compared to INR 25.18 billion in Q3 of last year. The gross NPA additions from the corporate and business banking portfolios were INR 10.79 billion in the current quarter compared to INR 7.81 billion in Q3 of last year. Recoveries and upgrades from the corporate and business banking portfolios were INR 7.43 billion in the current quarter compared to INR 6.06 billion in Q3 of last year. There were net additions to gross NPAs of INR 3.36 billion in the current quarter in the corporate and business banking portfolios compared to INR 1.75 billion in Q3 of last year. The gross NPAs written off during the quarter were INR 20.46 billion. Further, there was sale of NPAs of INR 1.2 billion for cash in the current quarter. The non-fund-based outstanding to borrowers classified as nonperforming was INR 22.29 billion as of December 31, 2025. The loans and non-fund-based outstanding to performing corporate borrowers rated BB and below was INR 33.92 billion at December 31, 2025. This portfolio was about 0.2% of our advances at December 31, 2025. The total fund-based outstanding to all standard borrowers under resolution as per various guidelines was INR 16.66 billion or about 0.1% of the total loan portfolio at December 31, 2025. At the end of December, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as nonperforming were INR 226.57 billion or 1.5% of loans. This includes the contingency provisions of INR 131 billion as well as general provision on standard assets, provisions held for non-fund-based outstanding to borrowers classified as nonperforming, fund and non-fund-based outstanding to standard borrowers under resolution and the BB and below portfolio. These provisions do not include the additional standard asset provision as directed by RBI in respect of a portfolio of agricultural priority sector credit facilities. Moving on to the P&L details. Net interest income increased by 7.7% year-on-year and 1.9% sequentially to INR 219.32 billion in this quarter. The net interest margin was 4.3% in this quarter compared to 4.3% in the previous quarter and 4.25% in Q3 of last year. The cost of deposits was 4.55% in this quarter compared to 4.64% in the previous quarter and 4.91% in Q3 of last year. The benefit of interest on tax refund was 1 basis point in the current quarter compared to nil in the previous quarter and 1 basis point in Q3 of last year. Of the total domestic loans, interest rates on about 56% of the loans are linked to the repo rate and other external benchmarks, 13% to MCLR and other older benchmarks and the remaining 31% of loans have fixed interest rates. Noninterest income, excluding treasury, grew by 12.4% year-on-year and 2.3% sequentially to INR 75.25 billion in Q3 of FY 2026. Fee income increased by 6.3% year-on-year and 1.2% sequentially to INR 65.72 billion in this quarter. Fees from retail, rural and business banking customers constituted about 78% of the total fees in this quarter. Dividend income from subsidiaries was INR 6.81 billion in this quarter compared to INR 8.1 billion in the previous quarter and INR 5.09 billion in Q3 of last year. The year-on-year increase in dividend income was primarily due to the receipt of interim dividend from ICICI Securities. On costs, the bank's operating expenses increased by 13.2% year-on-year and 1.2% sequentially in this quarter. Employee expenses increased by 12.5% year-on-year and 1.8% sequentially in this quarter, including the impact of INR 1.45 billion of provisions on an estimated basis pursuant to the new labor code. Non-employee expenses increased by 13.6% year-on-year and 0.8% sequentially in this quarter. Our branch count has increased by 402 in 9 months of the current year. We had 7,385 branches as of December 31, 2025. The technology expenses were about 11% of our operating expenses in 9 months of the current year. The total provisions during the quarter were INR 25.56 billion. Excluding the additional standard asset provision, the total provisions were INR 12.73 billion or 7.3% of core operating profit and 0.36% of average advances compared to the provisions of INR 12.27 billion in Q3 of last year. The profit before tax excluding treasury was INR 149.57 billion in this quarter compared to INR 152.89 billion in Q3 of last year. There was a treasury loss of INR 1.57 billion in Q3 of the current year as compared to a gain of INR 2.2 billion in Q2 of the current year and gain of INR 3.71 billion in Q3 of the previous year, primarily reflecting market movements. The tax expense was INR 34.82 billion in this quarter compared to INR 38.68 billion in the corresponding quarter last year. The profit after tax was INR 113.18 billion in this quarter compared to INR 117.92 billion in Q3 of last year. Adjusting for additional standard asset provisioning, the profit before tax, excluding treasury, would have increased by 6.2% year-on-year to INR 162.40 billion. And similarly, profit after tax would have increased by 4.1% year-on-year to INR 122.80 billion in this quarter. The return on average assets and stand-alone ROE would have been 2.3% and 15.5%, respectively, in this quarter. The consolidated profit after tax was INR 125.38 billion in this quarter compared to INR 128.83 billion in Q3 of last year. The details of the financial performance of key subsidiaries are covered in Slides 33 to 36 and 55 to 60 in the investor presentation. The annualized premium equivalent of ICICI Life was INR 68.11 billion in the 9 months ended December 31, 2025, as compared to INR 69.05 billion in 9 months of last year. The value of new business increased to INR 16.64 billion in 9 months ended December 31, 2025, from INR 15.75 billion in 9 months of last year. The value of new business margin was 24.4% in 9 months ended December 31, 2025, compared to 22.8% in FY 2025 and in the 9 months of last year. The profit after tax of ICICI Life was INR 9.92 billion in the 9 months ended December 31, 2025, compared to INR 8.03 billion in 9 months... [Technical Difficulty] Operator: [Operator Instructions]. Ladies and gentlemen, we have the management team back. Sir, please go ahead. Anindya Banerjee: I'll just repeat, gross direct premium income of ICICI General increased to INR 70.41 billion in this quarter from INR 62.14 billion in Q3 of last year. The combined ratio stood at 104.5% in this quarter compared to 102.7% in Q3 of last year. The profit after tax was INR 6.59 billion in this quarter compared to INR 7.24 billion in Q3 of last year. The profit after tax of ICICI AMC, as per Ind AS, was INR 9.17 billion in this quarter compared to INR 6.32 billion in Q3 of last year. The profit after tax of ICICI Securities as per Ind AS on a consolidated basis was INR 4.75 billion in this quarter compared to INR 5.04 billion in Q3 of last year. ICICI Bank Canada had a profit after tax of CAD 5.4 million in this quarter compared to CAD 19.6 million in Q3 of last year. ICICI Bank U.K. had a profit after tax of USD 5 million in this quarter compared to USD 5.1 million in Q3 of last year. As per Ind AS, ICICI Home Finance had a profit after tax of INR 1.95 billion in the current quarter compared to INR 2.03 billion in Q3 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions. Operator: [Operator Instructions] We'll take our first question from the line of Mahrukh Adajania from Nuvama. Mahrukh Adajania: My first question is on the standard asset provision. So what is the size of the portfolio on which these provisions were to be made? And what will be the impact on OpEx now that you have that much lower priority portfolio? Also, what was the classification issue as in -- I mean, what was noncompliant about the classification? So that's my first question. And my second question is on margins. So obviously, margins have held steady. There is a rate cut and there's, again, aggressive competition in mortgage pricing. So how do you view your margins from here on? Is there some amount of deposit repricing still left which will help hold up margins at these levels in the near future. So those are my questions. Anindya Banerjee: Yes. So coming to the first set of questions, I think as we have said, following the supervisory review, the regulator has directed us to make this provision of INR 12.83 billion, and that is what has been communicated, and we have made it. The underlying portfolio that we need to work out and resolve in terms of ensuring conformity with the PSL guidelines would be between INR 200 billion to INR 250 billion or so. And as far as the cost aspect is concerned, I think what we will be working on is to bring this portfolio into conformity with the regulatory expectations and thereby minimize both the provisioning and the PSL impact. On the underlying issues, I think those are really observations made by the regulator as part of its inspection process. So we wouldn't want to go into those details, but the outcomes are what we have reported. Coming to your next question on margins. I think we -- as you rightly said, if we look at the current quarter, Q3, which has gone by, we did have the impact of repricing of loans, both on account of repo and MCLR. And we also had the seasonally higher nonaccrual impact on the KCC NPAs. This was offset by some amount of deposit repricing and also the benefit of the CRR cut. If we look ahead into Q4, I think that level of nonaccrual will not be there. We will see the impact of the repo repricing as well as MCLR on the floating rate loan book, the repo cut which happened in December in particular. But at the same time, we should continue to see some amount of repricing of the retail deposits. So overall, I think we would stay with our view that the NIM should be range bound from here on. Operator: We'll take our next question from the line of Rikin Shah from IIFL Capital. Rikin Shah: I had three questions. So the first one is on -- I just wanted to understand, was there any additional PSL cost due to the declassification of the agri loans as non-PSL? Was there any cost in the P&L this quarter or any potential cost in OpEx in the quarters to come? So that's first. The second one is on the growth. So just wanted to get a sense of are you seeing any momentum of growth improving, i.e., even on a month-on-month basis during 3Q? And would you expect now the growth to improve from the current levels within the constraints of your quality and risk framework? And the third one specifically on the credit card. So what is weighing on the overall credit card book growth? Is it merely a decline in the share of transactor loans following the festive pickup in 2Q or there is more to read into it? Those are my questions. Anindya Banerjee: So first, I think in general, the cost of PSL compliance has been going up. We do meet a part of our PSL obligations by buying the priority sector lending certificates and the cost of those has steadily gone up over the last few quarters. So part of the increase, for example, or the level of operating expenses over the last couple of quarters has been due to that. But I would say that's not been done specifically in the context of this regulatory observation. That's something we keep looking at on a totality basis and analyzing what is the most efficient thing to do in terms of meeting the priority sector lending requirements. As far as this particular observation is concerned, as I said, we would be working to kind of bring this portfolio into conformity with the regulatory expectations and thereby minimize the impact. And so I would not want to call out any additional cost, et cetera, at this juncture. I mean, we'll assess it in totality and see where we go and try to absorb it in the P&L. So that was the first one. I think your second question was on growth. So I think clearly, we have seen a pickup in the -- if you look at the sequential growth rate in the fourth quarter vis-a-vis the third quarter, despite the rundown in cards, which I'll come to separately. Certainly, there has been a pickup in momentum. And we see that momentum sustaining into the fourth quarter as well. And I think even the year-on-year growth rate, which is impacted by the trailing 4 quarters has picked up in the current quarter, reflecting more recent trends. And I would expect that to continue into Q4 as well. On the credit card specifically, I think we had a very strong book growth sequentially in Q2 because of the last week kind of festive spend, which were billed and repaid in the current quarter. So that is the main reason for the movement in the current quarter. I mean, we feel that the book should grow from here on. I think in both credit cards and PL, one thing, as we have been saying that the quality of credit has certainly improved. So if you look at our aggregate retail NPLs excluding the KCC have come down in terms of NPL formation. And we are pretty comfortable with the quality now across secured and unsecured. In personal loans also, a very small uptick, but there has been an uptick in Q3 on the year-on-year growth and the sequential growth. So I think we are quite positive on what we are underwriting. And I think it's a question of leveraging our franchise to grow these businesses. Of course, there is price competition across the board, but that's something we will have to keep optimizing and managing. Rikin Shah: Right. Sir, just a clarification on the first one. While you are not calling out any additional OpEx-related costs due to this regulatory observation, there would be this INR 200 billion, INR 250 billion of the loans which are now declassified as PSL. So to meet that shortfall, would you be requiring to do more of RIDF bonds or PSLC? Or do you think that the organic PSL generation itself will take care of the shortfall and hence, no additional cost impact? Anindya Banerjee: So I think the first step is that we will work to bring this portfolio into conformity with the PSL requirements. And that is how we will minimize the shortfall and the impact thereof. That would be the first objective. Thereafter, we will assess overall as we do in any case on an ongoing basis that to the extent after organic and inorganic generation of priority sector loans, whether we should buy PSLCs or we can live with some amount of RIDF call. That is an analysis that we anyway do on an ongoing basis. And over the years, I think we have improved our PSL compliance. So our RIDF book outstanding currently, on a relatively larger balance sheet, is down, I think, to 1/3 of its peak levels. Rikin Shah: Got it, sir. Congratulations, Mr. Bakhshi for the reappointment. Sandeep Bakhshi: Thank you. Operator: Next question is from the line of Kunal Shah from Citigroup. Kunal Shah: Yes. So a couple of questions. Sorry, again, to harp up on the credit card side. But even now when we look at the portfolio, it is almost at a similar level to where we were in June, okay? In fact, like hardly any growth out there over and above June. And this kind of a trend we had not seen in the earlier years during the festive wherein it tends to run down. So any particular cohort or maybe like the transactor proportion significantly going up, which is leading to this? Anindya Banerjee: No, I think that the transactor portion has gone up across most players, I would think. In our case, there's nothing specific other than the fact that we had an unusually strong growth in Q2 and that has gotten offset in Q3. We continue to be... Kunal Shah: But how should we compare it with first quarter or maybe Q4 end? Because since Q4 end also, there is a decline in the portfolio. And even from first quarter, it has just been flat over 2 quarters despite the spends going up, yes. Anindya Banerjee: See, as we have said in the past, we are not looking at credit card just as a product portfolio in itself, but really as part of an overall customer offering and most of our new launches are aimed at enriching the offering to attract good customers and really be able to bank them on a 360 basis. But as I said, I think in this quarter, the book decline is more one-off, and we should see it gradually improve from here on. Kunal Shah: Sure. And secondly, on the corporate side, so significant traction on a quarter-on-quarter basis. And within the risk framework or maybe on a risk calibrated operating profit level, earlier it was thought that maybe PSU entities would not be giving us that kind of a benefit or operating profit. And we are seeing the increase in the BBB proportion as well. No doubt you have earlier alluded that, that's because of the business banking. But is the larger part of the growth on the corporate also coming in that segment of BBB or not really? Anindya Banerjee: No. So I think that, overall, if we look at our approach to the corporate loan growth, one, corporates are well funded and have multiple sources of funding. To the extent that they are accessing bank funding, we are very happy to participate. It has been very price competitive. So we do look at what is the overall relationship with the corporate. And wherever we have a franchise and we want to build a franchise, we do participate quite actively. I think one of the things that has changed maybe relative to the past couple of quarters is kind of the settling of the benchmark because a lot of the lending is happening at external benchmark linked rates. So the settling of the benchmark kind of gives us more confidence to price and lend. From a credit quality perspective, I think it's -- we are quite comfortable with these rating grades. And we have our own limits on BBB, for example, origination, both in terms of aggregate and in terms of borrower size, and we are within those frameworks. So we are quite comfortable with the quality. Kunal Shah: Sure. And lastly, on overall OpEx growth now getting closer to like, say, 13-odd percent, we had seen OpEx growth being contained almost in a single digit. So you indicated some cost of compliance being there, but is there any other element? And would we see cost almost settling in a similar level or there are maybe cost containment levers which are available and it should grow below the balance sheet growth? Anindya Banerjee: We will see whatever is necessary to maximize kind of the overall PPOP. I don't expect costs to go up at the pace at which they had gone up maybe till a couple of quarters ago. If you would see sequentially this quarter, other than the impact of the labor code, costs would have actually come down marginally on an absolute basis. So I think we will work towards maximizing the PPOP and not really cutting cost per se, but definitely leveraging it as well as we can. Of course, one thing is that as far as the labor code is concerned, what we have accounted for is really the additional estimates of liability as they stand today. On an ongoing basis for all companies and banks, the code will marginally increase the recurring operating costs, but that's something we'll have to just absorb as we go forward. Kunal Shah: Okay. Got it. Congratulations Bakhshi sir for the reappointment. Sandeep Bakhshi: Thank you. Operator: Next question is from Nitin Aggarwal from Motilal Oswal. Nitin Aggarwal: I have a few questions. One is on the BB segment. And if I look at the growth in the business banking, it has been moderating for quite some time now. We have earlier talked about that it is a conscious kind of a moderation that we're pursuing to while the quality overall remains strong. But how are we looking at this on an incremental basis? Do we now look to relax some figures? Has the growth rate now bottomed out? And -- so some color around this? Anindya Banerjee: No, Business banking, we are at it full steam actually. I think the moderation in the growth rate is really just a function of the base. Even this quarter, on a year-on-year basis, we have grown at 22% and even the accretion this quarter is close to the accretion we've seen on the corporate side probably. The portfolio in itself now is actually larger than the corporate portfolio slightly. So I don't think we are holding back, and we believe that there is enough untapped space for us to do. As the portfolio grows, the growth rate will normally moderate. But we don't have any -- the portfolio quality has also held up well. So we are quite happy with growing this portfolio. Nitin Aggarwal: Okay. Okay. And likewise, on the unsecured, Anindya, when you say that growth rates in credit card NPL will get better, do you see this like now moving above the overall loan growth or it will just be a recovery from where we are? Because we are like currently at very, very muted levels. So some color as to how... Anindya Banerjee: I think that will take some time. When overall loan growth is 11.5% and personal loan is growing at 2%, it would be foolhardy to say that it will cross that level, but we definitely believe it should pick up from these... Nitin Aggarwal: Right. And one -- like on this standard provision that has happened, like earlier also, we have seen this happening with another bank. So just curious to know like are large private banks more vulnerable to this RBI directive? I mean whatever led to this directive from the RBI, are large private banks more vulnerable or you can see some things happening for PSU banks also? Anindya Banerjee: I really can't comment. I think we have to take the observation that has been given to us, comply with it and resolve it as best as we can. Operator: Next question is from M.B. Mahesh from Kotak Securities. M. B. Mahesh: Anindya, just two questions. One is on this low growth in deposits on the savings account side, if you can just kind of comment what's happening there? Anindya Banerjee: Yes. So actually, over the last 2 quarters, our growth in the retail savings account, the individual savings account has continued to be quite strong, adjusted for seasonality. That growth typically is much better in the first and second quarters because the salary accounts see a pickup in terms of the year-end payments and so on. But we, even in this quarter, have seen a pretty strong growth in the retail savings account. Over the last 2 quarters, we have seen a reduction in balances in what we call the institutional banking savings accounts, which is essentially the government entities, the government schemes or departments that we bank. There, the floats -- the amounts have come down in absolute terms, which has resulted in a lower growth or flat on the overall savings, but the retail savings continues to do quite well. In fact, both the retail savings and the retail term as well as the current account are all have done -- we are quite happy with the way they are performing. The institutional SA has proved a bit of a dampener on the overall numbers. That's not that large a proportion of our deposit base. And hopefully, this impact will moderate going forward, but it has been an issue in the last couple of quarters. M. B. Mahesh: Okay. And should we assume that it's -- when you say it's not a large proportion, it runs into a double-digit number or it's lower than that? Anindya Banerjee: I couldn't get that clearly. M. B. Mahesh: When you say the corporate deposits are not a large number, it's more than a double-digit number that we are talking about here? Anindya Banerjee: Yes. The institutional savings account would be 10%, 12% now of our -- or definitely around less than 15% of the average SA base. M. B. Mahesh: Okay. The second question is, this share of this AA and, let's say, the high investment grade, how much are you willing to take it lower in your internal expectations? Anindya Banerjee: See, I think that we are quite comfortable with the A family and above. I think that historically, those ratings have proved to be reasonably stable, and that is also where we find better risk-adjusted return. So we are not hung up particularly on the AA, AAA part of it. And as I said, on the BBB, we have to do it selective and really look at the counterparty carefully and operate within our limits framework. Operator: We'll take our next question from the line of Param Subramanian from Investec. Parameswaran Subramanian: Congratulations to Mr. Bakhshi. But my first question is related to that. So what is the thought process behind the Board seeking a 2-year extension as opposed to a full 3-year extension because there is nothing holding us back from a regulatory perspective. So how should stakeholders read into that? Yes, that's my first question. Anindya Banerjee: So I think the Board in consultation with the CEO have decided on a 2-year appointment. As you know, the current term itself ends in October 2026. So from now till the end of the renewed term is almost 3 years and nothing really further to add to that. Parameswaran Subramanian: Fair enough. So just if I can follow up on that. So one might read into it that this might be his last term. So that's the sort of signal that comes through. So yes, anything you want to add to that? Anindya Banerjee: No, I think as we said, we have 3 years to go. So on a lighter vein, we hopefully addressed the speculation around October '26, and I think it's too early to speculate about October '28. Parameswaran Subramanian: Okay. Very helpful answer. Second question, this is on the results. So sir, we saw a quarter-on-quarter yield on advances decline of about 21 basis points. Is this almost entirely the KCC reversal effect, because this quarter, that impact would have been minimal. Anindya Banerjee: No, no, there would have been multiple things. So for example, if you look at the repo cut which happened in June, while all loans would have repriced some in July, some in August and some in September, the portion which repriced in September would have seen only 1 month of impact in Q2 and 2 months of impact or the full impact in Q3. Similarly, our MCLRs have also come down. I think we are down by about 75 basis points in this rate cut cycle. So that would also have progressively impacted the portfolio as it repriced. So those would be equally relevant as far as the yield on advances is concerned. Parameswaran Subramanian: Fair enough. So it means the KCC impact is not as much? Operator: I'm sorry, your voice was muffled, Param. Anindya Banerjee: As we said on the -- just to be clear -- to avoid confusion, the RBI observation on standard asset provisioning has no impact on asset classification. On a regular basis, in Q1 and Q3 of every year, we see seasonally higher NPLs on the rural product, which is what leads to the nonaccrual. And that has happened this year in Q3 as it happened in Q1 and as it happened in Q3 and Q1 of last year at the normal level. In addition, of course, we have had this whole repricing impact of the loan book, both the external benchmark-linked book and the MCLR linked book. Parameswaran Subramanian: Got that. Got that, Anindya. Very clear. Last question, if I may, on the fees, right? So I mean, core fee has been sort of soft at 6% Y-o-Y. So how should we look at it? Will this pick up when the retail loan growth eventually starts picking up? Or is unsecured or credit cards, the number to track? Anindya Banerjee: So I think in this quarter, the cards and payments piece has been something which has been a bit of a drag in terms of year-on-year growth in this number that we hope will pick up. Loan growth also should contribute, although a lot of the loan-related fees, the processing fees and so on are under some competitive pressure. But hopefully, we would want to grow this number from here on. One good thing is that it's an extremely granular number. As we have said, 78% of the fees even in this quarter were from the retail, rural and business banking portfolios. And even the corporate fees are very granular, transaction banking-oriented fees. Operator: We'll take our next question from the line of Suresh Ganapathy from Macquarie Capital. Suresh Ganapathy: Yes, Anindya, what is your LCR this quarter? Anindya Banerjee: 126%. Suresh Ganapathy: Okay. And post the new April 2026 guidelines, would it go up or go down? Anindya Banerjee: It will be kind of similar. Suresh Ganapathy: Okay. Flattish kind of level. So would you want to maintain around current levels LCR? Or what exactly do you guys consider, I mean, is a normative level? Anindya Banerjee: So I think that we kind of have a certain funding structure, and we maintain a certain amount of liquidity as a cushion. And that results in this number. So can it go up down 2, 3 percentage points? It could. This is -- of course, the number that we report is the average for the quarter. So in every month, there would be periods when it, for example, goes down to 120 or something like that. But yes, at an average level, this is probably an okay level, somewhere above 120 or higher. I mean, we don't have a strict policy on that, but that's where we've been operating. Suresh Ganapathy: Okay. So my final question is related to this because if you look at on a Y-o-Y basis, deposit growth has lagged loan growth. We have seen a rising LDR. So is LDR a constraint or it's just a mere outcome. As long as you maintain all these ratios intact, even if it goes up, it doesn't matter for the management or the Board. Is that the way we should look at it? Anindya Banerjee: See, LDR is a function of what is the liability structure on the balance sheet, and banks with higher capital ratios, higher capital levels, higher net worth as a proportion of loans can afford a higher LDR. And it's also a function of the regulatory preemption. So this quarter, I think for the entire system and for us and most banks, the LDR would have gone up because of the CRR cut. I think given the current level of capital that we hold and the regulatory requirements of liquidity, this is an okay level. I don't see it going up from here. It can moderate marginally, but we are quite comfortable at this level. In terms of our funding side, as we always say, we maximize the retail deposits, including CASA. And then we look at the different types of wholesale funding available, which could be refinance, bonds, wholesale deposits and so on. And our reliance on wholesale deposits is pretty moderate. Operator: Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference back to management for closing comments. Over to you, sir. Anindya Banerjee: Thank you very much for joining us on a Saturday evening, and we'll be available to take other questions. Thank you. Operator: Thank you. On behalf of ICICI Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Operator: Ladies and gentlemen, good day, and welcome to ICICI Bank Limited Q3 FY 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakhshi, Managing Director and Chief Executive Officer of ICICI Bank. Thank you, and over to you, sir. Sandeep Bakhshi: Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q3 of FY 2026. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anindya and Abhinek. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro markets. We continue to operate within the framework of our values to strengthen our franchise. Maintaining high standards of governance, deepening coverage and enhancing delivery capabilities with a focus on simplicity and operational resilience are key drivers for our risk-calibrated profitable growth. The core operating profit increased by 6% year-on-year and 2.5% quarter-on-quarter to INR 175.13 billion in this quarter. The total provisions during the quarter were INR 25.56 billion. This includes additional standard asset provision of INR 12.83 billion made pursuant to Reserve Bank of India's annual supervisory review, which Anindya will explain later on the call. The profit before tax excluding treasury was INR 149.57 billion in this quarter compared to INR 152.89 billion in Q3 of last year. The profit after tax was INR 113.18 billion in this quarter compared to INR 117.92 billion in Q3 of last year. Average deposits grew by 8.7% year-on-year and 1.8% sequentially, and average current and savings account deposits grew by 8.9% year-on-year and 1.5% sequentially in this quarter. The bank continued to see healthy growth in current account deposits and individual term and savings deposits. Total deposits grew by 9.2% year-on-year and 2.9% sequentially at December 31, 2025. The bank's average LCR for the quarter was about 126%. The domestic loan portfolio grew by 11.5% year-on-year and 4% sequentially at December 31, 2025, compared to 10.6% and 3.3% at September 30, 2025. The retail loan portfolio grew by 7.2% year-on-year and 1.9% sequentially. Including non-fund-based outstanding, the retail portfolio was 42.2% of the total portfolio. The rural portfolio grew by 4.9% year-on-year and 7.2% sequentially. The business banking portfolio grew by 22.8% year-on-year and 4.7% sequentially. The domestic corporate portfolio grew by 5.6% year-on-year and 6.5% sequentially. The overall loan portfolio, including the international branches portfolio, grew by 11.5% year-on-year and 4.1% sequentially at December 31, 2025. The overseas loan portfolio was 2.4% of the overall loan book at December 31, 2025. The net NPA ratio was 0.37% at December 31, 2025, compared to 0.39% at September 30, 2025, and 0.42% at December 31, 2024. During the quarter, there were net additions of INR 20.74 billion to gross NPAs, excluding write-offs and sale. The provisioning coverage ratio on nonperforming loans was 75.4% at December 31, 2025. In addition, the Bank continues to hold contingency provisions of INR 131 billion or about 0.9% of total advances at December 31, 2025. The capital position of the Bank continued to be strong with a CET1 ratio of 16.46% and total capital adequacy ratio of 17.34% at December 31, 2025, including profits for 9 months 2026. Looking ahead, we see many opportunities to drive risk-calibrated profitable growth and grow market shares across key segments. We remain focused on maintaining a strong balance sheet, prudent provisioning and healthy levels of capital while delivering sustainable and predictable returns to our shareholders. I now hand the call over to Anindya. Anindya Banerjee: Thank you, Sandeep. Let me first talk about the additional standard asset provision. Following its annual supervisory review, RBI has directed the Bank to make a standard asset provision of INR 12.83 billion in respect of a portfolio of agricultural priority sector credit facilities, wherein the terms of the facilities were found to be not fully compliant with the regulatory requirements for classification as agricultural priority sector lending. There is no change in asset classification or in the terms and conditions applicable to the borrowers or in the repayment behavior of borrowers as per these terms. The bank has been originating this portfolio over some years and will work to bring it in conformity with regulatory expectations. This additional standard asset provision will continue until the loans are repaid or renewed in conformity with the PSL classification guidelines. I will now talk about loan growth, credit quality, P&L details and the performance of subsidiaries. Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 11.1% year-on-year and 3.2% sequentially. Auto loans grew by 0.7% year-on-year and 0.9% sequentially. The commercial vehicles and equipment portfolio grew by 7.9% year-on-year and 3.2% sequentially. Personal loans grew by 2.4% year-on-year and 1.7% sequentially. The credit card portfolio declined by 3.5% year-on-year and 6.7% sequentially. During the quarter, we saw improved growth trends across the mortgage, rural and corporate portfolios. The sequential decline in the credit card portfolio was due to high festive spends towards the end of the previous quarter, which had resulted in high sequential book growth in that quarter and saw repayments in the current quarter. Within the corporate portfolio, the total outstanding to NBFCs and HFCs was INR 791.18 billion at December 31, 2025, compared to INR 794.33 billion at September 30, 2025. The total outstanding loans to NBFCs and HFCs were about 4.3% of our advances at December 31, 2025. The builder portfolio, including construction finance, lease rental discounting, term loans and working capital was INR 680.83 billion at December 31, 2025, compared to INR 635.83 billion at September 30, 2025. The builder loan portfolio was 4.3% of our total loan portfolio. Our portfolio largely comprises well-established builders, and this is also reflected in the sequential increase in the portfolio. About 1.1% of the builder portfolio at December 31, 2025, was either rated BB and below internally or was classified as nonperforming. Moving on to credit quality. The gross NPA additions were INR 53.56 billion in the current quarter compared to INR 60.85 billion in Q3 of last year. Recoveries and upgrades from gross NPAs, excluding write-offs and sale, were INR 32.82 billion in the current quarter compared to INR 33.92 billion in Q3 of last year. The net additions to gross NPAs were INR 20.74 billion in the current quarter compared to INR 26.93 billion in Q3 of last year. The gross NPA additions from the retail and rural portfolios were INR 42.77 billion in the current quarter compared to INR 53.04 billion in Q3 of last year. There were gross NPA additions of about INR 7.36 billion from the Kisan credit card portfolio in the current quarter compared to INR 7.14 billion in Q3 of last year. We typically see higher NPA additions from the Kisan credit card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from the retail and rural portfolios were INR 25.39 billion in the current quarter compared to INR 27.86 billion in Q3 of last year. The net additions to gross NPAs in the retail and rural portfolios were INR 17.38 billion in the current quarter compared to INR 25.18 billion in Q3 of last year. The gross NPA additions from the corporate and business banking portfolios were INR 10.79 billion in the current quarter compared to INR 7.81 billion in Q3 of last year. Recoveries and upgrades from the corporate and business banking portfolios were INR 7.43 billion in the current quarter compared to INR 6.06 billion in Q3 of last year. There were net additions to gross NPAs of INR 3.36 billion in the current quarter in the corporate and business banking portfolios compared to INR 1.75 billion in Q3 of last year. The gross NPAs written off during the quarter were INR 20.46 billion. Further, there was sale of NPAs of INR 1.2 billion for cash in the current quarter. The non-fund-based outstanding to borrowers classified as nonperforming was INR 22.29 billion as of December 31, 2025. The loans and non-fund-based outstanding to performing corporate borrowers rated BB and below was INR 33.92 billion at December 31, 2025. This portfolio was about 0.2% of our advances at December 31, 2025. The total fund-based outstanding to all standard borrowers under resolution as per various guidelines was INR 16.66 billion or about 0.1% of the total loan portfolio at December 31, 2025. At the end of December, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as nonperforming were INR 226.57 billion or 1.5% of loans. This includes the contingency provisions of INR 131 billion as well as general provision on standard assets, provisions held for non-fund-based outstanding to borrowers classified as nonperforming, fund and non-fund-based outstanding to standard borrowers under resolution and the BB and below portfolio. These provisions do not include the additional standard asset provision as directed by RBI in respect of a portfolio of agricultural priority sector credit facilities. Moving on to the P&L details. Net interest income increased by 7.7% year-on-year and 1.9% sequentially to INR 219.32 billion in this quarter. The net interest margin was 4.3% in this quarter compared to 4.3% in the previous quarter and 4.25% in Q3 of last year. The cost of deposits was 4.55% in this quarter compared to 4.64% in the previous quarter and 4.91% in Q3 of last year. The benefit of interest on tax refund was 1 basis point in the current quarter compared to nil in the previous quarter and 1 basis point in Q3 of last year. Of the total domestic loans, interest rates on about 56% of the loans are linked to the repo rate and other external benchmarks, 13% to MCLR and other older benchmarks and the remaining 31% of loans have fixed interest rates. Noninterest income, excluding treasury, grew by 12.4% year-on-year and 2.3% sequentially to INR 75.25 billion in Q3 of FY 2026. Fee income increased by 6.3% year-on-year and 1.2% sequentially to INR 65.72 billion in this quarter. Fees from retail, rural and business banking customers constituted about 78% of the total fees in this quarter. Dividend income from subsidiaries was INR 6.81 billion in this quarter compared to INR 8.1 billion in the previous quarter and INR 5.09 billion in Q3 of last year. The year-on-year increase in dividend income was primarily due to the receipt of interim dividend from ICICI Securities. On costs, the bank's operating expenses increased by 13.2% year-on-year and 1.2% sequentially in this quarter. Employee expenses increased by 12.5% year-on-year and 1.8% sequentially in this quarter, including the impact of INR 1.45 billion of provisions on an estimated basis pursuant to the new labor code. Non-employee expenses increased by 13.6% year-on-year and 0.8% sequentially in this quarter. Our branch count has increased by 402 in 9 months of the current year. We had 7,385 branches as of December 31, 2025. The technology expenses were about 11% of our operating expenses in 9 months of the current year. The total provisions during the quarter were INR 25.56 billion. Excluding the additional standard asset provision, the total provisions were INR 12.73 billion or 7.3% of core operating profit and 0.36% of average advances compared to the provisions of INR 12.27 billion in Q3 of last year. The profit before tax excluding treasury was INR 149.57 billion in this quarter compared to INR 152.89 billion in Q3 of last year. There was a treasury loss of INR 1.57 billion in Q3 of the current year as compared to a gain of INR 2.2 billion in Q2 of the current year and gain of INR 3.71 billion in Q3 of the previous year, primarily reflecting market movements. The tax expense was INR 34.82 billion in this quarter compared to INR 38.68 billion in the corresponding quarter last year. The profit after tax was INR 113.18 billion in this quarter compared to INR 117.92 billion in Q3 of last year. Adjusting for additional standard asset provisioning, the profit before tax, excluding treasury, would have increased by 6.2% year-on-year to INR 162.40 billion. And similarly, profit after tax would have increased by 4.1% year-on-year to INR 122.80 billion in this quarter. The return on average assets and stand-alone ROE would have been 2.3% and 15.5%, respectively, in this quarter. The consolidated profit after tax was INR 125.38 billion in this quarter compared to INR 128.83 billion in Q3 of last year. The details of the financial performance of key subsidiaries are covered in Slides 33 to 36 and 55 to 60 in the investor presentation. The annualized premium equivalent of ICICI Life was INR 68.11 billion in the 9 months ended December 31, 2025, as compared to INR 69.05 billion in 9 months of last year. The value of new business increased to INR 16.64 billion in 9 months ended December 31, 2025, from INR 15.75 billion in 9 months of last year. The value of new business margin was 24.4% in 9 months ended December 31, 2025, compared to 22.8% in FY 2025 and in the 9 months of last year. The profit after tax of ICICI Life was INR 9.92 billion in the 9 months ended December 31, 2025, compared to INR 8.03 billion in 9 months... [Technical Difficulty] Operator: [Operator Instructions]. Ladies and gentlemen, we have the management team back. Sir, please go ahead. Anindya Banerjee: I'll just repeat, gross direct premium income of ICICI General increased to INR 70.41 billion in this quarter from INR 62.14 billion in Q3 of last year. The combined ratio stood at 104.5% in this quarter compared to 102.7% in Q3 of last year. The profit after tax was INR 6.59 billion in this quarter compared to INR 7.24 billion in Q3 of last year. The profit after tax of ICICI AMC, as per Ind AS, was INR 9.17 billion in this quarter compared to INR 6.32 billion in Q3 of last year. The profit after tax of ICICI Securities as per Ind AS on a consolidated basis was INR 4.75 billion in this quarter compared to INR 5.04 billion in Q3 of last year. ICICI Bank Canada had a profit after tax of CAD 5.4 million in this quarter compared to CAD 19.6 million in Q3 of last year. ICICI Bank U.K. had a profit after tax of USD 5 million in this quarter compared to USD 5.1 million in Q3 of last year. As per Ind AS, ICICI Home Finance had a profit after tax of INR 1.95 billion in the current quarter compared to INR 2.03 billion in Q3 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions. Operator: [Operator Instructions] We'll take our first question from the line of Mahrukh Adajania from Nuvama. Mahrukh Adajania: My first question is on the standard asset provision. So what is the size of the portfolio on which these provisions were to be made? And what will be the impact on OpEx now that you have that much lower priority portfolio? Also, what was the classification issue as in -- I mean, what was noncompliant about the classification? So that's my first question. And my second question is on margins. So obviously, margins have held steady. There is a rate cut and there's, again, aggressive competition in mortgage pricing. So how do you view your margins from here on? Is there some amount of deposit repricing still left which will help hold up margins at these levels in the near future. So those are my questions. Anindya Banerjee: Yes. So coming to the first set of questions, I think as we have said, following the supervisory review, the regulator has directed us to make this provision of INR 12.83 billion, and that is what has been communicated, and we have made it. The underlying portfolio that we need to work out and resolve in terms of ensuring conformity with the PSL guidelines would be between INR 200 billion to INR 250 billion or so. And as far as the cost aspect is concerned, I think what we will be working on is to bring this portfolio into conformity with the regulatory expectations and thereby minimize both the provisioning and the PSL impact. On the underlying issues, I think those are really observations made by the regulator as part of its inspection process. So we wouldn't want to go into those details, but the outcomes are what we have reported. Coming to your next question on margins. I think we -- as you rightly said, if we look at the current quarter, Q3, which has gone by, we did have the impact of repricing of loans, both on account of repo and MCLR. And we also had the seasonally higher nonaccrual impact on the KCC NPAs. This was offset by some amount of deposit repricing and also the benefit of the CRR cut. If we look ahead into Q4, I think that level of nonaccrual will not be there. We will see the impact of the repo repricing as well as MCLR on the floating rate loan book, the repo cut which happened in December in particular. But at the same time, we should continue to see some amount of repricing of the retail deposits. So overall, I think we would stay with our view that the NIM should be range bound from here on. Operator: We'll take our next question from the line of Rikin Shah from IIFL Capital. Rikin Shah: I had three questions. So the first one is on -- I just wanted to understand, was there any additional PSL cost due to the declassification of the agri loans as non-PSL? Was there any cost in the P&L this quarter or any potential cost in OpEx in the quarters to come? So that's first. The second one is on the growth. So just wanted to get a sense of are you seeing any momentum of growth improving, i.e., even on a month-on-month basis during 3Q? And would you expect now the growth to improve from the current levels within the constraints of your quality and risk framework? And the third one specifically on the credit card. So what is weighing on the overall credit card book growth? Is it merely a decline in the share of transactor loans following the festive pickup in 2Q or there is more to read into it? Those are my questions. Anindya Banerjee: So first, I think in general, the cost of PSL compliance has been going up. We do meet a part of our PSL obligations by buying the priority sector lending certificates and the cost of those has steadily gone up over the last few quarters. So part of the increase, for example, or the level of operating expenses over the last couple of quarters has been due to that. But I would say that's not been done specifically in the context of this regulatory observation. That's something we keep looking at on a totality basis and analyzing what is the most efficient thing to do in terms of meeting the priority sector lending requirements. As far as this particular observation is concerned, as I said, we would be working to kind of bring this portfolio into conformity with the regulatory expectations and thereby minimize the impact. And so I would not want to call out any additional cost, et cetera, at this juncture. I mean, we'll assess it in totality and see where we go and try to absorb it in the P&L. So that was the first one. I think your second question was on growth. So I think clearly, we have seen a pickup in the -- if you look at the sequential growth rate in the fourth quarter vis-a-vis the third quarter, despite the rundown in cards, which I'll come to separately. Certainly, there has been a pickup in momentum. And we see that momentum sustaining into the fourth quarter as well. And I think even the year-on-year growth rate, which is impacted by the trailing 4 quarters has picked up in the current quarter, reflecting more recent trends. And I would expect that to continue into Q4 as well. On the credit card specifically, I think we had a very strong book growth sequentially in Q2 because of the last week kind of festive spend, which were billed and repaid in the current quarter. So that is the main reason for the movement in the current quarter. I mean, we feel that the book should grow from here on. I think in both credit cards and PL, one thing, as we have been saying that the quality of credit has certainly improved. So if you look at our aggregate retail NPLs excluding the KCC have come down in terms of NPL formation. And we are pretty comfortable with the quality now across secured and unsecured. In personal loans also, a very small uptick, but there has been an uptick in Q3 on the year-on-year growth and the sequential growth. So I think we are quite positive on what we are underwriting. And I think it's a question of leveraging our franchise to grow these businesses. Of course, there is price competition across the board, but that's something we will have to keep optimizing and managing. Rikin Shah: Right. Sir, just a clarification on the first one. While you are not calling out any additional OpEx-related costs due to this regulatory observation, there would be this INR 200 billion, INR 250 billion of the loans which are now declassified as PSL. So to meet that shortfall, would you be requiring to do more of RIDF bonds or PSLC? Or do you think that the organic PSL generation itself will take care of the shortfall and hence, no additional cost impact? Anindya Banerjee: So I think the first step is that we will work to bring this portfolio into conformity with the PSL requirements. And that is how we will minimize the shortfall and the impact thereof. That would be the first objective. Thereafter, we will assess overall as we do in any case on an ongoing basis that to the extent after organic and inorganic generation of priority sector loans, whether we should buy PSLCs or we can live with some amount of RIDF call. That is an analysis that we anyway do on an ongoing basis. And over the years, I think we have improved our PSL compliance. So our RIDF book outstanding currently, on a relatively larger balance sheet, is down, I think, to 1/3 of its peak levels. Rikin Shah: Got it, sir. Congratulations, Mr. Bakhshi for the reappointment. Sandeep Bakhshi: Thank you. Operator: Next question is from the line of Kunal Shah from Citigroup. Kunal Shah: Yes. So a couple of questions. Sorry, again, to harp up on the credit card side. But even now when we look at the portfolio, it is almost at a similar level to where we were in June, okay? In fact, like hardly any growth out there over and above June. And this kind of a trend we had not seen in the earlier years during the festive wherein it tends to run down. So any particular cohort or maybe like the transactor proportion significantly going up, which is leading to this? Anindya Banerjee: No, I think that the transactor portion has gone up across most players, I would think. In our case, there's nothing specific other than the fact that we had an unusually strong growth in Q2 and that has gotten offset in Q3. We continue to be... Kunal Shah: But how should we compare it with first quarter or maybe Q4 end? Because since Q4 end also, there is a decline in the portfolio. And even from first quarter, it has just been flat over 2 quarters despite the spends going up, yes. Anindya Banerjee: See, as we have said in the past, we are not looking at credit card just as a product portfolio in itself, but really as part of an overall customer offering and most of our new launches are aimed at enriching the offering to attract good customers and really be able to bank them on a 360 basis. But as I said, I think in this quarter, the book decline is more one-off, and we should see it gradually improve from here on. Kunal Shah: Sure. And secondly, on the corporate side, so significant traction on a quarter-on-quarter basis. And within the risk framework or maybe on a risk calibrated operating profit level, earlier it was thought that maybe PSU entities would not be giving us that kind of a benefit or operating profit. And we are seeing the increase in the BBB proportion as well. No doubt you have earlier alluded that, that's because of the business banking. But is the larger part of the growth on the corporate also coming in that segment of BBB or not really? Anindya Banerjee: No. So I think that, overall, if we look at our approach to the corporate loan growth, one, corporates are well funded and have multiple sources of funding. To the extent that they are accessing bank funding, we are very happy to participate. It has been very price competitive. So we do look at what is the overall relationship with the corporate. And wherever we have a franchise and we want to build a franchise, we do participate quite actively. I think one of the things that has changed maybe relative to the past couple of quarters is kind of the settling of the benchmark because a lot of the lending is happening at external benchmark linked rates. So the settling of the benchmark kind of gives us more confidence to price and lend. From a credit quality perspective, I think it's -- we are quite comfortable with these rating grades. And we have our own limits on BBB, for example, origination, both in terms of aggregate and in terms of borrower size, and we are within those frameworks. So we are quite comfortable with the quality. Kunal Shah: Sure. And lastly, on overall OpEx growth now getting closer to like, say, 13-odd percent, we had seen OpEx growth being contained almost in a single digit. So you indicated some cost of compliance being there, but is there any other element? And would we see cost almost settling in a similar level or there are maybe cost containment levers which are available and it should grow below the balance sheet growth? Anindya Banerjee: We will see whatever is necessary to maximize kind of the overall PPOP. I don't expect costs to go up at the pace at which they had gone up maybe till a couple of quarters ago. If you would see sequentially this quarter, other than the impact of the labor code, costs would have actually come down marginally on an absolute basis. So I think we will work towards maximizing the PPOP and not really cutting cost per se, but definitely leveraging it as well as we can. Of course, one thing is that as far as the labor code is concerned, what we have accounted for is really the additional estimates of liability as they stand today. On an ongoing basis for all companies and banks, the code will marginally increase the recurring operating costs, but that's something we'll have to just absorb as we go forward. Kunal Shah: Okay. Got it. Congratulations Bakhshi sir for the reappointment. Sandeep Bakhshi: Thank you. Operator: Next question is from Nitin Aggarwal from Motilal Oswal. Nitin Aggarwal: I have a few questions. One is on the BB segment. And if I look at the growth in the business banking, it has been moderating for quite some time now. We have earlier talked about that it is a conscious kind of a moderation that we're pursuing to while the quality overall remains strong. But how are we looking at this on an incremental basis? Do we now look to relax some figures? Has the growth rate now bottomed out? And -- so some color around this? Anindya Banerjee: No, Business banking, we are at it full steam actually. I think the moderation in the growth rate is really just a function of the base. Even this quarter, on a year-on-year basis, we have grown at 22% and even the accretion this quarter is close to the accretion we've seen on the corporate side probably. The portfolio in itself now is actually larger than the corporate portfolio slightly. So I don't think we are holding back, and we believe that there is enough untapped space for us to do. As the portfolio grows, the growth rate will normally moderate. But we don't have any -- the portfolio quality has also held up well. So we are quite happy with growing this portfolio. Nitin Aggarwal: Okay. Okay. And likewise, on the unsecured, Anindya, when you say that growth rates in credit card NPL will get better, do you see this like now moving above the overall loan growth or it will just be a recovery from where we are? Because we are like currently at very, very muted levels. So some color as to how... Anindya Banerjee: I think that will take some time. When overall loan growth is 11.5% and personal loan is growing at 2%, it would be foolhardy to say that it will cross that level, but we definitely believe it should pick up from these... Nitin Aggarwal: Right. And one -- like on this standard provision that has happened, like earlier also, we have seen this happening with another bank. So just curious to know like are large private banks more vulnerable to this RBI directive? I mean whatever led to this directive from the RBI, are large private banks more vulnerable or you can see some things happening for PSU banks also? Anindya Banerjee: I really can't comment. I think we have to take the observation that has been given to us, comply with it and resolve it as best as we can. Operator: Next question is from M.B. Mahesh from Kotak Securities. M. B. Mahesh: Anindya, just two questions. One is on this low growth in deposits on the savings account side, if you can just kind of comment what's happening there? Anindya Banerjee: Yes. So actually, over the last 2 quarters, our growth in the retail savings account, the individual savings account has continued to be quite strong, adjusted for seasonality. That growth typically is much better in the first and second quarters because the salary accounts see a pickup in terms of the year-end payments and so on. But we, even in this quarter, have seen a pretty strong growth in the retail savings account. Over the last 2 quarters, we have seen a reduction in balances in what we call the institutional banking savings accounts, which is essentially the government entities, the government schemes or departments that we bank. There, the floats -- the amounts have come down in absolute terms, which has resulted in a lower growth or flat on the overall savings, but the retail savings continues to do quite well. In fact, both the retail savings and the retail term as well as the current account are all have done -- we are quite happy with the way they are performing. The institutional SA has proved a bit of a dampener on the overall numbers. That's not that large a proportion of our deposit base. And hopefully, this impact will moderate going forward, but it has been an issue in the last couple of quarters. M. B. Mahesh: Okay. And should we assume that it's -- when you say it's not a large proportion, it runs into a double-digit number or it's lower than that? Anindya Banerjee: I couldn't get that clearly. M. B. Mahesh: When you say the corporate deposits are not a large number, it's more than a double-digit number that we are talking about here? Anindya Banerjee: Yes. The institutional savings account would be 10%, 12% now of our -- or definitely around less than 15% of the average SA base. M. B. Mahesh: Okay. The second question is, this share of this AA and, let's say, the high investment grade, how much are you willing to take it lower in your internal expectations? Anindya Banerjee: See, I think that we are quite comfortable with the A family and above. I think that historically, those ratings have proved to be reasonably stable, and that is also where we find better risk-adjusted return. So we are not hung up particularly on the AA, AAA part of it. And as I said, on the BBB, we have to do it selective and really look at the counterparty carefully and operate within our limits framework. Operator: We'll take our next question from the line of Param Subramanian from Investec. Parameswaran Subramanian: Congratulations to Mr. Bakhshi. But my first question is related to that. So what is the thought process behind the Board seeking a 2-year extension as opposed to a full 3-year extension because there is nothing holding us back from a regulatory perspective. So how should stakeholders read into that? Yes, that's my first question. Anindya Banerjee: So I think the Board in consultation with the CEO have decided on a 2-year appointment. As you know, the current term itself ends in October 2026. So from now till the end of the renewed term is almost 3 years and nothing really further to add to that. Parameswaran Subramanian: Fair enough. So just if I can follow up on that. So one might read into it that this might be his last term. So that's the sort of signal that comes through. So yes, anything you want to add to that? Anindya Banerjee: No, I think as we said, we have 3 years to go. So on a lighter vein, we hopefully addressed the speculation around October '26, and I think it's too early to speculate about October '28. Parameswaran Subramanian: Okay. Very helpful answer. Second question, this is on the results. So sir, we saw a quarter-on-quarter yield on advances decline of about 21 basis points. Is this almost entirely the KCC reversal effect, because this quarter, that impact would have been minimal. Anindya Banerjee: No, no, there would have been multiple things. So for example, if you look at the repo cut which happened in June, while all loans would have repriced some in July, some in August and some in September, the portion which repriced in September would have seen only 1 month of impact in Q2 and 2 months of impact or the full impact in Q3. Similarly, our MCLRs have also come down. I think we are down by about 75 basis points in this rate cut cycle. So that would also have progressively impacted the portfolio as it repriced. So those would be equally relevant as far as the yield on advances is concerned. Parameswaran Subramanian: Fair enough. So it means the KCC impact is not as much? Operator: I'm sorry, your voice was muffled, Param. Anindya Banerjee: As we said on the -- just to be clear -- to avoid confusion, the RBI observation on standard asset provisioning has no impact on asset classification. On a regular basis, in Q1 and Q3 of every year, we see seasonally higher NPLs on the rural product, which is what leads to the nonaccrual. And that has happened this year in Q3 as it happened in Q1 and as it happened in Q3 and Q1 of last year at the normal level. In addition, of course, we have had this whole repricing impact of the loan book, both the external benchmark-linked book and the MCLR linked book. Parameswaran Subramanian: Got that. Got that, Anindya. Very clear. Last question, if I may, on the fees, right? So I mean, core fee has been sort of soft at 6% Y-o-Y. So how should we look at it? Will this pick up when the retail loan growth eventually starts picking up? Or is unsecured or credit cards, the number to track? Anindya Banerjee: So I think in this quarter, the cards and payments piece has been something which has been a bit of a drag in terms of year-on-year growth in this number that we hope will pick up. Loan growth also should contribute, although a lot of the loan-related fees, the processing fees and so on are under some competitive pressure. But hopefully, we would want to grow this number from here on. One good thing is that it's an extremely granular number. As we have said, 78% of the fees even in this quarter were from the retail, rural and business banking portfolios. And even the corporate fees are very granular, transaction banking-oriented fees. Operator: We'll take our next question from the line of Suresh Ganapathy from Macquarie Capital. Suresh Ganapathy: Yes, Anindya, what is your LCR this quarter? Anindya Banerjee: 126%. Suresh Ganapathy: Okay. And post the new April 2026 guidelines, would it go up or go down? Anindya Banerjee: It will be kind of similar. Suresh Ganapathy: Okay. Flattish kind of level. So would you want to maintain around current levels LCR? Or what exactly do you guys consider, I mean, is a normative level? Anindya Banerjee: So I think that we kind of have a certain funding structure, and we maintain a certain amount of liquidity as a cushion. And that results in this number. So can it go up down 2, 3 percentage points? It could. This is -- of course, the number that we report is the average for the quarter. So in every month, there would be periods when it, for example, goes down to 120 or something like that. But yes, at an average level, this is probably an okay level, somewhere above 120 or higher. I mean, we don't have a strict policy on that, but that's where we've been operating. Suresh Ganapathy: Okay. So my final question is related to this because if you look at on a Y-o-Y basis, deposit growth has lagged loan growth. We have seen a rising LDR. So is LDR a constraint or it's just a mere outcome. As long as you maintain all these ratios intact, even if it goes up, it doesn't matter for the management or the Board. Is that the way we should look at it? Anindya Banerjee: See, LDR is a function of what is the liability structure on the balance sheet, and banks with higher capital ratios, higher capital levels, higher net worth as a proportion of loans can afford a higher LDR. And it's also a function of the regulatory preemption. So this quarter, I think for the entire system and for us and most banks, the LDR would have gone up because of the CRR cut. I think given the current level of capital that we hold and the regulatory requirements of liquidity, this is an okay level. I don't see it going up from here. It can moderate marginally, but we are quite comfortable at this level. In terms of our funding side, as we always say, we maximize the retail deposits, including CASA. And then we look at the different types of wholesale funding available, which could be refinance, bonds, wholesale deposits and so on. And our reliance on wholesale deposits is pretty moderate. Operator: Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference back to management for closing comments. Over to you, sir. Anindya Banerjee: Thank you very much for joining us on a Saturday evening, and we'll be available to take other questions. Thank you. Operator: Thank you. On behalf of ICICI Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Operator: Ladies and gentlemen, good day, and welcome to HDFC Bank Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to Mr. Vaidyanathan. Srinivasan Vaidyanathan: Okay. Thank you. Thank you, Nirav. Good evening, and a warm welcome to all the participants. At the outset, I know that it's 6:15, 15 minutes behind schedule. We had another meeting we had to conclude and come. Apologies for that, but we'll take as many questions as possible and extend where required. With that, without much ado, we'll straight go into the opening remarks by our CEO and MD. And then we'll -- and we have our DMD Kaizad, any comments we'll take, and we'll go straight to Q&A after that. Sashi, over to you first, and then we'll take it from there. Sashidhar Jagdishan: Good evening, friends. Thank you very much for joining in on a Saturday evening. I know it's rather late, but always appreciate your being here on a Saturday evening. I think we've just sort of declared the results, and you probably would have seen the financial numbers. We're reasonably sanguine and happy about the outcome that has happened. It's in line with our expectations. Looking back, I think the credit growth buildup has been extremely encouraging. We set our sights on a very balanced credit across customer segments. The easing rate cycle and the benign credit has provided catalysts for the credit growth. The CRR release enabled credit deployment slightly ahead of our expectations. As regards to funding, the funding through deposits, we continue to maintain rate discipline, and that has been extremely key. Core individual retail customer segments were seen to be quite strong. For both current and savings, having focused on granular segments have given us encouraging outcomes. And more of this, I'm sure Srini will sort of give the numbers. We did, however, fall short of our strong ambitions, but we are confident that continued focus on our strengths will bring the expected outcomes. On the growth, profitable growth, as mentioned earlier, cost of funds has moved down, reflecting the tailwind effects. CASA growth has been positive. Cost has been under control as productivity improvements have brought in efficiencies. Credit, which has always been our USP, remains best-in-class, allowing us to deliver stable returns as we pivot to the next stage of growth. Looking ahead, the regulator and government continues to be focused on supporting economic and credit growth. At the same time, optimally managing external factors. During the quarter, availability of liquidity was impacted due to some of these. We saw enhanced activity in open market operations and FX swaps to combat some of these challenges. India has demonstrated stable political conditions and consistent policy regime. This has led to being one of the fastest-growing major economies in the world. Growth with subdued inflation management was at the top of the order, and hence, we believe and we are very optimistic about outpacing loan growth in the coming year in FY '27, as we had sort of mentioned to you all along for the last 18 months. Liquidity and benign credit costs provides us a lot of runway to grow. Overall, liquidity in the country is expected to stabilize post trade deals. The foundations are in place to build deposits to fund loan growth. We are expanding our -- we continue to expand our customer base. We are now intensifying customer engagement primarily and largely focused on granular mobilizations. We are aligning pricing with segmented approach, and we shall see that in the coming quarters as well. There's been a lot of talk on the CD ratio. We did sort of drop our CD ratio to significantly since the merger to March '25. As you know, the kind of indicator is not necessarily on the radar for the -- from a regulatory perspective. Having said that, we believe that our glide path to lowering of CD ratio will continue. It's an important focus for sustainable profitability. I completely acknowledge. The cycle -- the easing cycle with credit growth focus in the country surely needs our participation. So the speed of CD ratio movement depends on how we are able to provide funding in the system at rational rates. But having said that, we're very confident that whatever we seem to have committed in the last 2 years, I think by March, I think we should see and by March '27 -- '26 and '27, we should sort of achieve all the -- most of the committed metrics that we have laid out for. I would like to say that under the current scenario, we don't think that we shall be constrained by the CD ratio. To reiterate, we are confident that it will be on a downward glide path. I would also like to reiterate that we shall meet the glide path that we had indicated earlier in terms of the growth, our top line growth, which is in line with the system this financial year and faster than the system in the next financial year. In summary, I have a great appreciation for our customers for partnering with us, and I have the greatest gratitude to all our 200,000 staff who are pillars making this place work successfully. We are confident of the path forward that we have set for ourselves. Thank you very much, and we have all of us here, Kaizad, Srini, and the team here to take on any questions that you may have. Thank you. Operator: [Operator Instructions] First question is from the line of Mahrukh Adajania, an analyst. Mahrukh Adajania: Sir, my first question is on the LDR. You did allude to it. But when do you think now you would reach an LDR, say, close to 90% or below 90%, like any time frame? So that's my first question. And my second question really is on agri compliance. So two large banks have been asked by RBI to make provisions on a certain agri portfolio because of noncompliance issues, provisions of INR 12 billion to INR 13 billion. So as we stand today in terms of your agri portfolio, do you think there is full compliance or there could be some issues somewhere given that it's a large portfolio, it's spread out across the country. And do you think you would be liable to such provisions in the future? Srinivasan Vaidyanathan: Okay. Thank you, Mahrukh. I'll take that. The first thing you touched upon is the LDR from a timing point of view. I think Sashi alluded to that we are committed on the glide path of taking it towards the downward glide path, and we continue to be in that. But on a quarter-to-quarter basis, it is slightly different. And that's because of the seasonality and the opportunity. And you know that in the recent time period, the further opportunity was also provided with the easing cycle and the credit growth focus in the industry as well as the CRR release, which provided that ample opportunity to do that. So given that, we do expect that over the next 1 year to 2 years, we would be getting down further into the levels that we had previously been there, call it, the 90s or low 90s and so on. And that's the level of confidence we have and the pillars that are required to drive that are in place to do that. That's one. The second one is in terms of the agri that you asked about, the regulatory kind of impact, if any. Our regulatory inspection is also complete. And whatever required according to the regulatory requirement, there was about INR 5 billion or so thereabouts, which have been taken in the overall context of our book and our results, if you see, they have been absorbed within that, and there is no special and we have had certain other things that were there. And so in future, we need to operate in a model that is acceptable with the regulatory. So that -- whatever is that, that's an ongoing process of what we do. Any one-time is already subsumed and it is there. And as far as the calibration that we need to do on the agri consequent to those kind of things, recalibration of our book due to the scale of finance, so that what is indeed an agri and what is outside of the scale of finance, scale of finance is the one that determines how much is required for the farm and how much of that is over and above the farm requirement by the farmer. Those evaluations we will take and go through that process to calibrate that. That's in terms of the future impact on that. Mahrukh Adajania: But did the INR 5 billion come this quarter only then? Srinivasan Vaidyanathan: Yes, it is already subsumed in December. Mahrukh Adajania: In December. Okay. And what would be the size of the portfolio? Any such indication you could give? Srinivasan Vaidyanathan: Our agri portfolio is published. You'll be able to see the... Mahrukh Adajania: No, the size of the portfolio on which the provision was taken. Srinivasan Vaidyanathan: No, that's not something -- that's not consequent to this at all because it depends on loan item and what is the scale of finance on each one and so on. But at an aggregate level, that's the kind of level. Operator: Next question is from the line of Kunal Shah from Citigroup. Kunal Shah: Yes. So again, getting on to the question on LDR and deposit growth in particular. So if we want to get the LDRs down and still want to grow loans above the industry average comfortably, then we need to see the acceleration in the deposit growth. And you said like pillars which are required are very much in place. So any reason maybe for a slightly slower deposit growth this quarter? Otherwise, we will need like almost 500, 600 basis points higher than the industry average deposit growth now to get the LDRs down. And any rundown in the bulk deposits, which have been there in this quarter? And if you can quantify that? Sashidhar Jagdishan: See, let me take this and maybe Srini and Kaizad can add into this if required. Kunal, if you recall, we gave a broad range. Number one is there is no regulatory what shall I say, benchmark or a requirement to meet a loan deposit ratio. Was it there as a bit of a nudge when the outlook was negative or when the system outlook was a little tight, liquidity is tight in the period when inflation was moving up and rates were moving up and there was a little bit of a concern on the credit quality of the system. There were certain preventive measures that the regulator had said that try and ensure that you bring down the LDR or maintain a certain stability in LDR. That is the -- at that point in time. Whether that -- whether there is a number that you need to meet, I don't think there is any compulsion. But in our own interest, we had given a kind of a glide path wherein we had said that we will come to a certain number in FY '25, which we achieved. We said we will try and be in a range of somewhere between 90% to 96% in the year FY '26, which is what we will be is what we are very confident about. And then maybe by FY '27, by the natural growth and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85% to 90% for FY '27. We continue to believe that this is going to be there. It's not an easy thing, as we have said, of course, but we know what are the strategies we need to do. There were certain tactical measures we could have taken in the third quarter. We chose not to, but that's all right. I mean these are sometimes learnings we probably may have missed, but we know what are the things to be done to bring about these kind of meeting our glide paths that we have committed in the broader sense on a longer -- medium- to longer-term basis. So as regards the kind of deposit growth that is required, I think the pace at which we are growing deposits in line with the top line growth that is more or less matching 11-plus percentage in the second year -- in this year should -- and probably slightly faster, which is what we normally do in the fourth quarter, like most -- what we have done in the past, should lead us to the kind of range that we are -- we have committed to. And we are very confident that, one, as we have a clear cut, as I said, all things remaining same with whatever we are seeing in the macro, we should believe that the growth runway opportunities for growth and hence, in the deposit requirements other than certain events that may happen, which you and I will not be able to predict now, we are reasonably confident that we will land -- and as Srini mentioned, don't look at quarter-to-quarter movements. We are on a -- you look at on an annual basis or on a medium- to long-term basis, the trends will be in that kind of period. So I think the inflection has started. We had to contain ourselves in FY '25 for all the right reasons. I think now we are opening up, the engine is opening up, and you will start to see this kind of a consistency in the trajectory that we have laid out for ourselves. Kunal Shah: Sure. And anything on bulk deposits rundown, quantification, if possible? Srinivasan Vaidyanathan: More than quantification. I mean, Kunal, that's part of the business. There are certain segments that we patronize. I think Sashi mentioned about where rate discipline has been the key. And to some extent, we participate for relationships and certain extent, we don't need it, we don't go there. But on the whole, if you look at the retail or non-retail, retail, there are individuals in retail, which have been phenomenally growing and growing. There are certain non-individuals in retail, which is branch related. It could be institutions, trusts and HUFs and whatnot. Examples of some non-individual but branch related, where we have had some lower levels of growth. And there are certain other customer segments which we have seen, particularly capital market segments where it has been low, where we have not paid rates as much as what the market has demanded or what the competition has offered. And that is what you see that is reflected in our cost of funds. If you look at our cost of funds is down by about 10 basis points, 11 basis points or so in the quarter. So we're trying to manage it growth with the profitability, and that is what you are seeing, right? So segment to segment, time to time, it changes, but at least you've got a color of how we operated in the recent time period. Sashidhar Jagdishan: So you're right, Kunal. Just to supplement what Srini is saying. The focus -- the good part is retail has grown very steadily and very -- and all these are the granular ones. I'm very happy with that. If the non-retail, tactically, we did not sort of offer the kind of market rates that were there. And we said it's all right because we did sort of know for the kind of growth that we needed, that is good enough. Kunal Shah: Got it. And one last question on labor code. So the impact of almost INR 8-odd billion, looking at our employee cost and then comparing maybe the labor code impact vis-a-vis the employee cost for others. For us, it seems to be relatively on the higher side, more than 10% of the employee cost, not so much for the other banks. So is this more of an estimation which has been done? And what would be the recurring impact which would be there on the cost as such? Srinivasan Vaidyanathan: Good point. Thanks for raising that. One, it is an estimate given whatever information that we have. And that estimate is driven through an actuarial process, right? So you go through the normal process of how you do and there is an actuarial valuation and determination of how do you do. Again, that is -- there is some signs in that, but it is based on certain assumptions that come. That's the second thing. The third thing is that variables. When you look at these variables, the definition of what is wage, what are determined to be wage inclusion, exclusion, the rule-making on that is pending. You know that, right? So there are some assumptions that go for one of the variables that go into those assumptions, and that is not based on determined rules, that is based on some assumed things. So that's the second -- third thing. The next item is the -- that individual organizations can be very different because of the longevity of the staff that you see there. So that determines on how long and what is the kind of tenure and so on and so forth, both historical and anticipated. And so many other factors like that go into play. So at this time, I would just ask you to take it as a higher estimate based on best available information and through a scientific actuarial process that has come. And as and when the rule-making evolves, as and when more information is available, this will be evolved. And again, we can -- I can't venture to come out with a forward-looking or what impact on an ongoing basis, cannot do at this time. And the reason being that we need to have all of these in place before we can get there. And that is why this is not determined at an employee level to say next month when somebody retires, this is the kind of amount that it can come or what will be the amount determined for a provident fund and so on and so forth. It cannot be determined at this stage. This is a really high level based on best estimate. Operator: Next question is from the line of Chintan from Autonomous. Unknown Analyst: May I get into the LDR again, please? So Sashi, please, did I hear you correctly when you said 85% to 90% by FY '27? That seems to be aggressive to me. If I look at consensus numbers, it's expecting 13% loan growth and 93% LDR. If you are going to achieve kind of the 90% in the next fiscal year, that suggests a very strong deposit growth number. And I know you've kind of said that you want to prioritize growth now. So it's not piling up. So if you could help us... Sashidhar Jagdishan: Chintan, thanks for asking. Maybe then let me -- I've given you a broad range because I don't want to box myself with a narrow range. But having said that, we have been operating in a range of around the 87%, 88% in the premerger level, 3 years before the merger. And so when I say 90%, of course, I would have meant somewhere around the plus or minus in that particular range of 90%, maybe around the 88%, 89%, et cetera, or it could be 90% to 91% as well. But why I mentioned this, at least the trend lines that we are saying, if it's -- it can be 96% for FY '26 or a 95%. We are all right. At least the direction is what we are looking at for. We just gave a broad one so that we know what -- if we are lucky to really step up growth or the liquidity changes and we have more benign liquidity and no FX operations or FX swaps or open market operations, maybe then it will be wonderful. So that is why I'm saying since I do not know what's going to be the liquidity condition in this, therefore, I gave a broad range. But even if I achieve these kind of directions directionally going there, that's something that we can achieve. As I said, there is no regulatory number to comply to. It is just a direction that I think we need to achieve for ourselves, let alone the regulator asking us to do. It is something that we believe just by doing what we are supposed to do will lead us to that kind of thing. I don't have to do anything extra to measure that metric. It will happen. So when we did sort of forecast a faster growth rate for ourselves than the system, we also -- as we have seen, we have been having deposit growth rates in line with normally the top line growth, slightly faster than the loan growth. So estimating that is what we believe where we will land for FY '26 and '27. So don't take it literally that we may be on the lower end of that range. It could be anywhere in that range. Practically speaking, it will be somewhere -- if it's 90% is that range, then somewhere around the 90% is something that we'll be happy with. Similarly, somewhere around the 95% is something that we'll be happy with for FY '26. Unknown Analyst: Appreciate that. I mean if you're trading off EPS growth for slightly slower ROE improvement, that's fine. I mean that's not the issue, especially if the opportunity is there in the market. So -- but I just wanted to make sure because we have an occupational hazard to kind of do our due diligence in our model. So I just wanted to get that flexibility that you have highlighted now. The second question was around asset quality. Could you -- you've got a unique vantage point, second largest bank in India. Could you give us some idea about any pickup in growth momentum, any pickup -- any issues in asset quality, particularly due to the U.S. tariff or in the MSME area? So it's a combination of is growth improving? And are there any asset quality concerns more broadly, if not in your book? Sashidhar Jagdishan: So if I got the question right, you want to know the trend for asset quality and how it is looking. Across segments and even first at the sectorial, you're well aware that the banking industry right now to borrow a term is going through a Cinderella phase where you've got very strong balance sheets when I refer to that from an asset quality point of view. We have the lowest accretion of gross NPAs and net NPAs are at decadal lows. Mirroring this trend has also been reflective on our books. We have seen very low accretion to gross NPAs. And none of the particular portfolios have indicated any stress building up. So I think the economic environment with the kind of GDP growth that one has seen, the kind of consumption growth that one is seeing as well as the wage increases that one has seen on one hand and on the other, the lowering of the interest rates and affordability, therefore, going up, including the fiscal benefits that were given to not take up much time, I would say the asset quality continues at the bank to be pristine. And as of -- as we see it, there is no particular segment which is showing any major signs of concern. Srini, would you like to... Srinivasan Vaidyanathan: Perfectly good. There will be seasonality in agri specifically... Sashidhar Jagdishan: That is separate... Srinivasan Vaidyanathan: Outside of that, every segment, including the agri segment period-to-period, if you see, is lower, both from a leading delinquency and into the slippages, which are far lower. And then from there, going into loss given default is also lower. You're seeing that the recoveries wherever we are there, that is also on an absolute level, good level. Chintan, I hope that gives you a perspective on both sides. Unknown Analyst: Yes. And just on growth momentum, are you seeing things improve generally in the economy? Srinivasan Vaidyanathan: In the economy, the growth momentum, yes -- if you look at some of those indicators that we have seen, the -- take the crop cycle itself, very improved. The sowing cycle has improved over prior year, very healthy water reservoir levels have aided that. The manufacturing PMI continues to be in the expansionary zone with many programs that are coming in. Services sector doing very well on the consumption demand side. If you look at the recent time period for card spend, which is important for you to look at, the overall card spend up 15%, 3.4% sequentially. Within the card spend, when we look at the discretionary category of card spends, the discretionary category spends have grown 21% year-on-year. The nondiscretionary, which is the bread and butter normal activity is about 13% up. So that indicates that when the kind of a discretionary spend goes up, people do go and indulge. That's what you're seeing there. On the other side, we do see revolver rates not picking up. So which means people are spending to pay down. So there are certain other segments of the society, which is what is spending. So on an overall level, I would say that similarly, you've seen the auto and the tractors and so on. 2-wheeler has been somewhat less than expected, but then the 4-wheeler autos and the tractors type have done exceedingly well. And you're seeing some of that reflected in the aggregate level GDP output that gets reported too. Operator: Next question is from the line of Nitin Aggarwal from Motilal Oswal. Nitin Aggarwal: I have a question on the branch productivity and deposits now that we are so hopeful about the deposits pickup and targeting at close to 90% kind of a number. So like if you look back as to what kind of experiences that we used to have in terms of the branch vintage and the deposit buildup, has -- is that kind of sustaining in the recent years because the deposit growth is just not picking up at the system level and that is a key constraint across banks with LDRs, the number that we are seeing across many banks. And related to this, own branch kind of over the years has been like coming off from pretty high number now to every successive year, we are opening more branches. So do we see... Sashidhar Jagdishan: Nitin repeat that. Nitin repeat that? We could not hear you. Nitin Aggarwal: Sorry. So I was also saying that related to this, if you look at the branch expansion run rate, every successive year, we are now opening up lower number of branches, like FY '23 versus '24 to '25, every year, we are going down in terms of branch expansion. So how do you look at this corollary between the branch vintage and the deposit buildup? And do you think that the current pace of expansion will be sufficient for us to sustain that above industry growth rate over the next 3, 4, 5 years? So just some thoughts around this. Srinivasan Vaidyanathan: Okay. So I'll get started with the last one first, which is to do with the branches. Nitin, you can't look at 1-year branch, but you have to look at a trend of what was it, right? So for that, if you go back to -- you look at a 5-year branch trend, I'll give you round numbers of the branch trend. We opened about 250 branches in 2020, 350 in '21, 750 in '22, 1,500 in '23, 900 in '24, 700 in '25. So if you look at this, 250, 350, 750, 1,500, 900, the opportunity space that it provided, we took that and accelerated all within the overall returns framework, right? All through this time period, if you look at our returns between 1.9 to 2, right, in that period. So where there was, we accelerated, and we don't need to do 1,500 or 900 and so on. We can be more modest, but still add to the branches. It is important to add to the branches because currently, we have only a little more than 6% of the country's branch network with us. So that means our branches 9,600-plus is about a little more than 6% of the systems branch, right? So we have -- and we have more than 11% of the market share of deposits with us. So that's one in terms of -- we have more room to run and more share to gain through that process. Next is productivity, right? What does it do from a branch productivity? If you look at the per branch productivity, we are now at about INR 305 crores or thereabouts on a per branch at an aggregate level. Despite all of these additions that I talked to you about, if you go back where we -- I just mentioned to you about how we were doing per branch, if you go to '23 or '19 to '23, that time period. For that time period, about INR 237 crores per branch, right, at that time. And I told you INR 237 crores per branch before I started to talk about those acceleration of the branches, right? Now with all of those acceleration, we are at INR 305 crores per branch. So at every incremental branch, when we add, it is also at an aggregate level added. But this is at an aggregate level. Then that takes to the next one that you talked about at a micro level, right? At aggregate level is one. Let's talk about micro level in terms of where it starts to have the pivoting point for further scale. First, the breakeven is about 2 years or so. When you look at the breakeven, branches that are in the metro and urban area typically breaks even in about 22 months. Branches that are in the semi-urban and rural area takes about 27 months, thereabouts. On an average, about 2 years, it breaks even. So that's one. And these models are in consonance with our legacy branch models, which means they are confirming to what are traditionally there. That's number one. Number two, the pivoting point where 4, 5 years ago, where we analyzed to what does a branch do in 5 years, 5 to 10 years and 10 to 15 years and so on, when you look at it, where the scaling factor is about the 5th year mark to the 10th-year mark, it moves, and it moves about 3x. Between 5 to 10 years, it goes about 3x up. And then once it goes into 10 to 15 years, 10x up. So that is very important, and that scaling factor continues to operate now. Now what is more interesting and important than that is, currently, if you look at the branches that are in the bucket, 5 to 10 years bucket, which are doing 3x than what they were doing 5 years ago, 1,232 branches, right, out of the 9,600, 1,232 branches are in that bucket, right? And if you look at the branches before that, the 3- to 5-year bucket, 3- to 5-year bucket, we have 1,300 branches. So we are entering into the pivoting point where the cohorts that are entering into the 5-plus bucket is more than the cohorts that are going to exit from 5 to 10. So that is -- again, similarly, when you look at the 10- to 15-year bucket, it got 2,499 branches. And then the 5 to 10-year branches are going to go into those cohorts. And so that's almost 43% of our branches are vintage branches, less than 5 years. So this is the cohort that needs to move through the pipe and get there. And so we are quite -- that is point, I think we said that we are positioned well with good expectations coming out of that. And that's, again, aided by several factors that go. Nitin Aggarwal: Okay. So... Srinivasan Vaidyanathan: Another data point, Sashi was just reminding me because when we reviewed it with him. On an incremental basis, when you look at it, these new branches contribute slightly north of 20% of the overall incremental that comes -- deposits that come, which is very important, right, that these things keep adding accreting as we go along. That's something I wanted to leave... Nitin Aggarwal: Right. See, the reason to ask this is also because while advances side is still in our control, we can maneuver the advances growth and choose the business segments we want to underwrite. But deposits, if we compare across the best and private banks also, typically, the growth kind of has its own saturation point. And if you look as to how HDFC Bank has done last year and versus what is the current year, probably we will be closer to in terms of deposit rate versus what we were last year on a good case basis. So for us to talk about that LDR can come so sharply next year, do we look at this deposit growth run rate break out from as to how the trends have been in the recent years? Can this really happen with the kind of vintage gains that we talk about? Srinivasan Vaidyanathan: Nitin, these get benchmarked by district, by our presence in those districts, that's how we benchmark and that's how we work our marketing and product teams, work with our distribution channels where we are present to orchestrate and move this, right? So two things I want to mention. One is new account acquisition is an important element. We are at about 100 million customers. Last quarter, we added about 1.5 million new liability relationships. It is important to get that new account value because that's how you keep building. And the change in balances. So that means the existing customers adding, accreting has been lower in the recent time periods when some kind of choices into various other financial institution they take. So some of that has been slower. But again, you beat that by getting more presence and more customers and have diversified product -- asset product because you know that in the last 2 years, our retail asset products were slow than where we are now trying to accelerate or move. For every asset product that you have, again, cards, I think not in the last quarter, but maybe a few quarters ago, we have spoken cards. For card customers spending on their card account and having 100 outstanding, at the aggregate level in the bank, we see almost north of 5.5x deposit balances from the customers. So what does it mean? We want more of our customers to have cards. And same with mortgages, which I think last time we spoke, 99% today, we have penetration. That means we are not selling a mortgage product. We want to get the customer relationship. When we are giving a mortgage product, we get the savings account and the savings account gets funded approximately today at initiation at about INR 35,000. And then when you look at the 12-month, 18 months on books, which is the kind of vintage we can measure today and see, we are seeing that it is growing 2, 2.5x. But historically, some of those category customers that we have seen, it has got the propensity to have 5x more than a customer who does not have a mortgage. So liabilities don't come only purely on just an engagement and asking. It also comes by multiple products that get sold. Operator: Next question is from the line of Suresh Ganapathy from Macquarie Capital. Suresh Ganapathy: Yes. So first question is on LCR. What would be this quarter? And how it would move post the April 2026 guideline, whether it will move up, move down? Srinivasan Vaidyanathan: LCR, we reported 116% in this quarter. Suresh Ganapathy: And post the new guidelines? Srinivasan Vaidyanathan: No. The new guidelines, we don't expect any material change that can impact us. Suresh Ganapathy: Okay. And just a question on margins itself. It's been almost 9 quarters since the merger, your margins have not gone anywhere. In fact, it is even lower than what you had reported at 3.4%. I know there are several moving parts. Are you really confident that you can get this up in the next 2, 3 years? Srinivasan Vaidyanathan: Suresh, if you think about the margin, the most important lever on the margin is the cost of funds, which at various points we have mentioned. And within the cost of funds, there are a few. One is the time deposit repricing, which has a lag effect. We have changed time deposit rates in line with the policy rate change, but not fully, but maybe 2/3 way, we have changed 125 basis points is what the policy has changed. We have done about 2/3 into that. We need to see what more. And again, that what's competitively priced, right? So we are not at a disadvantage anywhere there. And that takes almost 5 quarters to flow in. Part of that this quarter, you have seen 10, 11 basis points change in cost of funds. That is the lag effect of that flowing through, then that continues. So that's one element. And the second element is the borrowing. Quarter-to-quarter has remained static at about 13%. But again, more than a quarter, if you look at the year, we were at about 7%. Broadly, the industry is at about 6%, 7%. So there is an opportunity space to beat that to keep coming down. That is another important lever that provides this cost of funds change. And the third one is the CASA, which again is a customer on the other side more than we creating any action where we need to work through to bring selling within the new customers and better engagement, more products, more retail products. That's the kind of process we need to take through to get to that industry average and beat that industry average over time. Yes, there is a line of sight, and these are some of those elements we work through. Operator: Next question is from the line of Prakhar Sharma from Jefferies India. Prakhar Sharma: Congratulations on the results. Just wanted to delve on this deposit growth part. It was an interesting color that you said that the granular retail has grown, but slightly bulkier retail hasn't. Is there any sort of a data point that you can share in terms of the growth or the mix in the two? And one alternative is, can we use the LCR deposit number and the growth there as a reference point to just get some comfort on what's the range of growth there because 4Q onwards, it gets aggressive on pricing. So if you can share some color, that will be right. Srinivasan Vaidyanathan: The second aspect of the question I didn't get, probably we will see. But as far as the rate of growth is concerned that you asked about the categories, certain other categories that you wanted. Yes, I mean, the -- if you look at the institutional types, they were in the mid-single digits, right? The institutional type of deposits, mid-single digits. That's what we have said. And within the retail branch, the non-individuals were much more modest. I think it was again a little more higher single digit. And the individual, individual within the branches were in the solid double-digit growth. Prakhar Sharma: Sorry, the individual at the branch was at? Srinivasan Vaidyanathan: No, I didn't give you a number. I said it's a good double digit, and everything else was in single digit. Yes. Prakhar Sharma: Okay. And is there a way to just give a context of within your total deposits, 83% is classified as retail. How much would be the granular retail and how much would be the quasi-institutional retail? Srinivasan Vaidyanathan: I don't think we have published that. But yes, when we say that is a branch-driven deposits where there are RMs engaged with either an individual or the individual organizations and institutions, that is what. Operator: Next question is from the line of Abhishek Murarka from HSBC. Abhishek Murarka: So Srini, going back to the branch addition question, and thanks for giving so much color. But just net-net, are you still looking to grow or add about 5%, 7% branches this year and in FY '27? Or what are your near-term plans? I understand the whole picture you painted about the scale-up of old branches and how that will accelerate deposits. I just want to know your next 1-year plans in terms of branch additions. Srinivasan Vaidyanathan: Yes. To answer in short, 5% to 7% implies 500 to 700 branches annual. I don't believe that, that kind of branch addition we can do in the near future. We'll evaluate as we go through the annual planning process and come back at some point in time, but it would be of a good order. Sashidhar Jagdishan: Abhishek, just to add to what Srini is saying. If you've seen the last cohort of what he just said in terms of the 4,800-odd branches over the last 5 years. Today, it is contributing, as he mentioned, somewhere around the 20-plus percentage points in terms of the incremental liabilities or the deposits that we are mobilizing. As this cohort starts to -- which we are seeing delivering and getting to a substantial number, then we know that we have the confidence to start to step up our -- the next phase of launching new distribution points. Obviously, we want to wait and watch. We are not saying we will not add any branches. As he mentioned, we will add branches, but these are probably in -- normally in suburbs where there is kind of an opportunity that is what we are now focusing on. But the -- we want to ensure and stabilize the last cohort of the 4,800 branches stabilize and start to get to a certain level of maturity and level of contribution, which is substantial, then it will -- we know that, that will be on an autopilot and then we can start to see the next phase of introduction. And obviously, at that point in time, we will have to rethink in terms of we would have probably moved far beyond in terms of our branch transformation and automation. So there will be some new thought processes in terms of what we -- how we need to add or how we need to sort of expand our distribution. It's not that it's going to be different, but maybe there will be some amount of recalibration that we will do in the next phase of branch additions. Abhishek Murarka: Sure. So Sashi, as I understand, that's a great point -- for making that point. So today, about 50% of branches, which is this 4,800 is contributing around 20% of incremental deposits. Is it correct to think that when this starts contributing maybe 40%, 50% of incremental deposits, that is when you start thinking about future expansion. Is that the right way to think about it? Sashidhar Jagdishan: Whether it's 40%, 50%, 60%, we will keep on recalibrating because we are -- there are a lot of things that we are trying to do. Obviously, we also -- if you really look at it, we stepped up our distribution the moment we knew that we announced our merger. And we knew that we needed to fund not just at that point in time, the future of -- in the future. So all this is going to add to incremental deposits in a substantial way into the future. But -- so there will be a lot more dimensions that we will examine not just the extent of contribution, but probably certain events that we may have or certain other dimensions that we may look at before we start to step up the pedal on the new phase of incremental. And you look at it even over our 30-year period, there have been these phases of right from 2009 onwards to 2013, '14, we stepped up our distribution. Then we had a little bit of a pause, then we started off again. So we -- this recalibration and doing it in phases is something that we have been doing. It's not a new thing. We have been doing this for right through our 30 years journey. And I think we will continue to do. Obviously, the dimensions keep changing in terms of what we need to look at as we move ahead because the world is changing very fast. The kind of technology implementations that we are doing, as we unveil, we probably may need different thought processes as well. So let me pause out here and probably -- you probably will get the drift. Abhishek Murarka: Sure. And the second thing is on credit cost. Now if I look at your net slippages, ex of the agri part, but let's say, look at the net slippages in the 9 months or last few quarters, around 30, 35 basis points. Write-offs are holding steady at INR 3,200 crores roughly a quarter. So why is the underlying credit cost around 55 bps and not coming off? I mean, don't you think that should also start coming off at some point if this kind of trends continue. Srinivasan Vaidyanathan: Abhishek, a couple of things. One is the slippages. If you're looking at excluding agri slippages, it's 24 bps in the quarter. Prior quarter was 23 bps. Prior year was 26 bps. So order of magnitude, call it, 25 basis points. That is the kind of a slippage in a quarter, right? That's what you're seeing. So not the 35 or something that you're talking about. That's one. The second thing is that credit costs -- also, you have to look at it, including the recoveries because when you write off certain loans as it progresses through some of the delinquency buckets, then you get it in the form of recoveries. And net of recoveries, if you see, we are at about 37 basis points or thereabouts. And when you look at, again, last quarter, last year, order of magnitude, very similar within a few basis points, 5 basis points. So it's not just about the 55 basis points. It is also about the net of the recoveries, which comes in quite handy. And it's a function of how fast you write off and how you recover. Abhishek Murarka: Sure. That's what I was referring to. So net of your recoveries, et cetera, it should keep coming down because your slippage performance is -- I mean, it's improving. The book is growing and your absolute is pretty much stable. So you're seeing very good asset quality trends. And I was sort of wondering why the credit cost is not coming off. Srinivasan Vaidyanathan: So why will -- see, in a growing book, if the slippage is steady, the losses are steady, recoveries are steady. I don't know what you're expecting, maybe something else... Abhishek Murarka: So 50, 55 is more or less BAU is what you're seeing. Srinivasan Vaidyanathan: No, GNPA? Abhishek Murarka: No, no, no, no, credit card. Okay. I'll take this offline. I probably not saying myself clearly. No problem. Finally, just one question on cards. Overall, card receivables are pretty stable. If I look at the data that comes out in RBI, the spend market share for you is doing well, [indiscernible] market share is doing well. So why is it not reflecting in the receivables? Is it just transactors running down? Or is it something else? Sashidhar Jagdishan: No, actually -- great question, Abhishek. I think if you really look at it, the segment that we are patronizing is more the middle and upper middle segment. Therefore, slightly higher-end cards is what is in our portfolio. The proportion of that is large. And a large part of that, over a period of time, we have been -- I mean, as you know, the card -- credit card -- what shall I say, the behavior has also changed over a period of time. Today, we look at it not as net receivable from a revolve perspective, from an asset perspective and an earnings perspective, we are looking at it as an enabler for our liabilities or deposits. Srini has mentioned in the past, and that is something that we are extremely proud of, the spends in the cards actually provide a significant portion of our deposit momentum. Today, 20% to 25%, maybe in the mid of 20% to 25%, I can say, is the range at which out of the total deposit basket, the kind of momentum that you're seeing, whether it's on the healthy balances and what it contributes to total, it's somewhere around that 20%, 25%. So the credit card focus today is more not from a net receivable basis, but from a transactor basis. And as I said, I mean, whether it's a lot of you on the call or people in this room that we are, we all pay on a standing instruction basis on due dates. So this is something that we are very happy with. And so this is the kind of a new strategy that we are evolving. Obviously, we are also recalibrating some of the business model in cards. We have been doing that, and we probably are -- have come out with something which is very encouraging and something that the organization will really benefit from our card strategy. Srinivasan Vaidyanathan: I want to add one thing on the card, particularly the card revolving aspect of it, right, which is if you go back to 2020 or before and compare to today's revolvers, they are slightly under 2/3 level, right, slightly under 2/3 level. So that means of the pre-2020 levels revolvers, right, at level. And so the profile of the customers, and that is why you see the deposit balances of those customers, which is a little more than 5, 5.5x was slightly under 4x at that time. So the profile of those customers are also different where they do transact, they do keep balances and the revolver balances are lower for certain other segments. And we have not liberally offered the credit line increases and made more and more revolvers to tip them off into delinquency. We've been -- credit has been cautious on that. Operator: Next question is from the line of Jayant Kharote from Axis Capital. Jayant Kharote: Sir, one question is on your loan growth broad guidance of above system next year. Sir, I just wanted to understand when we are saying we'll grow above the system, what is our range of assumption for system growth? Because we are seeing some acceleration in the system growth itself where we are moving from this 11% to 13% band to maybe closer to 14%, 15%. If we were to move in that band, would we have accounted for that kind of system growth and we say we can grow above that? Sashidhar Jagdishan: So our understanding as of now is next year, we expect system growth to be between 12% to 13% when you look at nominal GDP and the credit growth that's required to support nominal GDP. So if we're talking about 12% to 13%, we are talking about a couple of percentage points above that going into the next year. We see distribution on the retail side, you've been seeing over the last 2 quarters coming up, our positioning also in the MSME space, given our geographic coverage as well as our suite of products that we have out over there and the wholesale piece, which you would have seen in this quarter again coming back. We do believe that we have the customer segmentation to be able to grow at a couple of hundred basis points over system growth next year. Jayant Kharote: Great, sir. I think this answers you're working with the 12% to 13% range at least. Second part is, on a broader 3-year or 4-year question. We have seen products like mortgage getting a lot of competitive intensity. PSA banks being well capitalized are probably being more aggressive in vehicle, increasingly auto. Do you see this competitive intensity eroding profitability for the larger players over the next probably 3 years, not a 6-month or 12-month question? Srinivasan Vaidyanathan: See, we are addressing competition only through relationship and not through pricing. Mortgage product, as you've seen that in the last 12 months, we are not leading through a mortgage product. We are leading through relationships where the mortgage product could be a fulcrum around which we can operate. Same with auto. I do want to let you know that our auto loans are almost a little more than 80% self-funded, which means the customers when they take auto loan, we want their liability accounts. We want them to have balances in that and the loan self-funds itself for the most part within the balance sheet. So it is about relationship offering, and that is part of the engagement in the branch, and it's not just a product and a loan balance sheet building approach. Sashidhar Jagdishan: Having said that, Srini, absolutely in order. I think we do continue to be the largest financiers in the auto loan space in the country. not only in terms of the disbursals but also the book size as well as if you see our year-on-year growth in the entire automobile space, I think that is reflective of what our position is and the target market that we will have. So it is relationship. It is also ensuring that we have the right pricing for the product based on the customer segmentation, and we don't feel any need to do business at price points which don't make economic sense. Jayant Kharote: And your market reading is, as of now, we are not in that situation where aggression is eroding margins for the broader system, at least in auto? Sashidhar Jagdishan: I'm sorry, I didn't catch your question. Can you repeat it, please? Jayant Kharote: So not for HDFC, but probably for broader system. Are you seeing that aggression in the auto segment from the public sector or maybe the broader system aggravating in the last couple of quarters? Sashidhar Jagdishan: Yes. We've seen it not only in auto, but also in the home loan product. So these are two products where we have certainly seen some amount of, if I may say, a bit of irrational pricing, but irrational pricing has never sustained. It will play itself out and bury itself in a couple of quarters on the outer side, if not earlier. Operator: Thank you very much. Ladies and gentlemen, we have come to the end of the allotted time for the call. I would now like to hand the conference to Mr. Vaidyanathan for closing comments. Srinivasan Vaidyanathan: Okay. Thank you, Nirav, and thanks to all the participants for taking the time to attend. At the outset, I again want to mention that we did come 15 minutes late. We did extend to be there. Further questions, any more comments, Investor Relations team will be on standby to guide and help and explain or clarify anything you need today or over the weekend or next week, whenever you desire, we are available. With that, we'll sign off for today. Have a great weekend. Bye-bye. Operator: Thank you very much. Unknown Executive: Thank you. Sashidhar Jagdishan: Thank you all. Thank you very much for all the hard work. Operator: On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
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