Ladies and gentlemen, good day and welcome to Q1FY26 Earnings Conference Call of Federal Bank Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sovik Roy, Head of Investor Relations, Federal Bank Limited. Thank you. Over to you, Mr. Roy. Thank you so much and good evening everyone. Thank you for joining us, especially on a weekend. I've got quite a few messages over the past couple of days asking if Saturday is going to be the new normal for our earnings call. I can assure you it's still undecided and we promise you this wasn't by design. As always, I'm joined by our full leadership team, led by our MD and CEO, along with our Executive Directors and senior business heads. We'll start with some strategic updates from our MD, followed by the CFO walking you through the financials and business performance for the quarter. After that, we'll, of course, as always, open the floor for discussions and questions. With that, over to you, sir. Thank you, Shubhankar. Good evening everyone. Thank you for joining us this Saturday evening. Before we dive into the quarterly numbers, let me make some introductory remarks. While we will present to you a detailed review of our strategy implementation in January 2026, about a year after we first announced it, I thought a quick and a short interim update on the same may be useful. Earlier this February, when we introduced Federal 4.0, it was not just a catchphrase, but was a transformation blueprint to reshape the way we operate, compete, and grow. We are focused on execution, as I hope you will realize as we move ahead in this update. If I had to oversimplify our strategy, and I mean oversimplify, it really comes down to getting three things right: improving our CASA, especially the current account piece to address our cost of funds, driving better yield on advances largely by reshaping the asset mix, and increasing granularity and volume of our fee income in the quarter gone by. There is clear evidence that our execution is in sync with all these three objectives, and we are making good progress on all three fronts in spite of systemic headwinds on a few aspects. There remains, of course, a lot more to do. Later on this call, Venkat will take you through these details when he discusses the quarterly results. Coming to the execution elements, we began by refocusing our energies on the most vital part of the bank, our branches, people, and profitability model. The Free the Branch initiative is now fully underway. We have already created 70 Regional Business Support Centers, which are our hub and Agri Hubs and which are now fully functional, helping free up frontline teams from all activities other than relationship and sourcing aspects. The establishment of Regional Loan Service Centers, which will take care of the retail asset related work at branches, is progressing smoothly and should be fully in place in the second quarter. We continue to focus on what we call CODES, centralize, outsource, digitize, eliminate, simplify, and several initiatives have already been put in place and more are in the pipeline to operationalize each of these. Our goal here is clear: remove friction from day-to-day work and allow branch teams to focus squarely on customer engagement and business development. This process will continue and gain even more momentum in the next two to three quarters. We are in the final stages of finalization of standardized branch formats and manning models in them for CASA around opening. Turnaround times have been improved by realigning staffing models and improvement in processes. However, TAT across products is an important area of focus for the future quarters as well. We are investing in capability building across all levels. Sales management training is underway for identified managers in partnership with a globally renowned sales training firm. A lower cost sales force structure has already been deployed in select branches and we will enhance the scope of this initiative as we get more comfortable with the outcomes. We have kicked off the process of identifying new branch locations based on data-backed inputs and we have commissioned an external agency to help us assess our network scientifically. We have already begun a process of reviewing our branch locations and performance to evaluate, shifting and upgrading branches to improve their catchment and visibility. We are also working with a partner for redesigning our physical branch formats. This may mean slightly lower number of branches this year, but with a better foundational work we can be surer of the way forward and also gather speed later. We have overhauled our performance scorecards for branches as well as individual officers, RMs, etc., sharpening focus on CASA growth and profitability. A department level P&L framework going down to the branch level P&L has been rolled out and is now published frequently based on needs. Now the teams can see the actual financial impact of their actions. We have also made the Branch Manager role more aspirational with a higher incentive structure, performance-linked metrics and alignment to business priorities and freeing them from lot of routine. We want to ensure that the Branch Managers and our Regional and Zonal Heads of all businesses function like mini CEOs. That is the final goal. In some sense we are refueling mid-air, re-engineering the business while we are still delivering the business numbers that we have delivered. Fee income and pricing reforms have kicked off with several important changes. We have revised our fee and charges in line with competition, energized our product partners and improved our revenue structures. Some of the impact of that is already visible in our fee growth. For the last quarter we also implemented a new loan pricing and delegation structure. Our Risk-Adjusted P ricing Models and transfer pricing models have been fully revamped, giving us sharper insight into segment level profitability, product level pricing decisions across the bank, and customer level pricing and profitability decisions in the corporate businesses. With this methodology, a more holistic customer level approach to business with the right balance between wallet share and pricing, and also the right mix between fund based revenues and fee revenues, is enabled. The wealth management and Bancassurance vertical is now well underway with experienced hires. Onboarded Head of Business, Head of Products, and Sales Head are all in place. Technology enablement is underway. Our partnerships are being renegotiated or restructured to better align outcomes and ensure we build a scalable platform. We also made strong progress in strengthening our trade and forex capabilities. We also now have a Head of Global Transaction Banking who joined us last month. The central teams have been strengthened. A team of RMs across the branch network, now called PRM Business Priority Relationship Managers, have been identified and trained to give a push to the retail trade and forex business as well as current account business. Our retail assets team has been restructured to have separate heads for unsecured and secured businesses. Both are now headed by new talent that we acquired last quarter. Also, within the secured business, separate verticals have been created for LAP and home loan, auto, as well as brand distribution of secured assets. To bring sharper focus, a Retail Credit Head would be soon joining our team. Under the Chief Credit Officer in the corporate bank business, we have created a separate vertical focusing on the BFIC segment, which will also help us enhance our focus on capital markets and correspondent banking. This allows the rest of the corporate bank to focus more sharply on growing the mid market corporate segment. Foundational work has been already done for tractor finance, EMI based business loans, and Agri based SME loans. These products will be rolled out in the coming quarters. Tech is, of course, the backbone of Federal 4.0. Our corporate and commercial credit underwriting automation has just gone live. On the customer side, FedOne, our unified interface for corporates, has gone live with a new collection and payment solution, thereby completing the phase one of rollout and will undergo monthly upgrades with future additions from here on. Online trade is our next big project within this unified interface. Fed Mobile app has seen over 15 new features rolled out this quarter. The GenAI-powered chatbot as an internal copilot for our employees is in alpha testing. It's been trained on our internal knowledge base and this is just the first step in embedding AI into both customer and employee journeys. At the infrastructure level, we are engaging a partner to undertake a full review of our IT architecture and create a roadmap for the future, ensuring our digital and technology backbone is future proof. We have strengthened the technology team with three key new hires just below the CTO level. We have placed customer experience at the center of all this transformation. Our CRM platform revamp has already delivered over 15 key enhancements. We have kicked off a deep dive study to improve adoption and usage of the platform, ensuring we are not just building tools but driving value through better on management, lead management, and organizing our cross sell processes better. There is a lot more work to be done in this area to leverage the investment we have already made in this platform. This year we have taken a bolder step in brand building. The Savings Ki Vidya campaign featuring Vidya Balan is now live. It is now not just a celebrity endorsement, it's about repositioning the bank in the minds of retail savers. This is an integrated transformation with over 50 large and 100 small projects under execution designed to make Federal Bank faster, simpler, more profitable, and more agile. Federal 4.0 is not just a plan anymore. We are transforming where it matters and we remain focused on doing it at speed. This is surely a multi-quarter journey. This journey will come with some air pockets at times, but we remain resolute in our execution. My team fully shares my excitement as we take this journey forward. Thank you for walking this journey with us. Now let me hand it over to Venkat for a more detailed walkthrough of the quarter in particular that went by. Incidentally, he recently got elevated to the board as Executive Director. Welcome Venkat and all yours. Thank you. Thank you Shaji V. Kallarakal and good evening to all of you. Thank you for joining us to discuss our Q1 FY26 financial results. I hope you have had a chance to go through our investor presentation and detailed disclosure. As always, we will use this forum to walk you through the key developments and then take questions. Let me begin by providing some macro context. The first quarter of the year is typically soft for the banking industry. The seasonal factors, particularly around collections, dispersals, FX segments like MFI Agri, and CV. This year was no different, and as you know, Reserve Bank of India cut the repo rate by a cumulative 100 bps since February, including a 50 bps cut in June. This was done with the intent to spur growth and improve liquidity. Inflation is under control and rural consumption is showing signs of revival. Credit growth in June has seasonally muted across the banking system. Corporate loan demand continues to remain selective, with many large borrowers opting for bond market and other alternate source of funding. At the same time, unsecured retail portfolios, especially microfinance and cards, remain under scrutiny and the industry has seen a calibrated pullback in new originations in certain sub-segments. On the liability side, deposit repricing has commenced in a small way and we will see a lagged impact of the rate cut on deposit. From our perspective, we believe the medium-term environment remains conducive for banks with disciplined credit filters and a diversified lending engine. Now coming to the metrics of the bank's performance, we delivered a strong operational performance in Q1 and by the way, we are now the sixth largest private sector bank by total business. Gross advances grew by 9.15% year on year and 3% sequentially. On the back of our strategy to grow medium-yield businesses, the growth was led by commercial banking, which grew by 5.5% QoQ and 30.28% YoY, credit cards which grew 8% QoQ, CVC which grew 5% QoQ. With the recent circular on gold, the gold loan business grew quite strongly in June and we'll see the full impact of that playing through from this quarter onwards. As mentioned by Shaji V. Kallarakal, the retail restructuring is almost complete and this will aid in stronger retail growth in H2. Also, with the festive season around the corner, we expect growth to gain further momentum. We are in line to grow at 1.2x nominal GDP. On the deposit side, growth was 8.03% YoY and 1.34% QoQ with retail TD seeing strong traction and steady CASA growth. In fact, our average CASA growth was 3% this quarter. Our CASA ratio stands at 30.35%, which is an improvement of 108 bps year- on- year and 12 bps quarter on quarter. An average deposit growth was 6% QoQ. Our net interest income for the quarter stood at INR 2,337 crore, growing at 2%. NIM for the quarter. Now, this 2% growth, you must note that YoY last year the rates were 100 bps higher, whereas we have got 100 bps rate cut impact in this Q1. The NIM for the quarter was 2.94%. As you are aware, we follow a T+1 repricing for the stock, and a large part of the 100 bps rate cut is already reflected. We had some offsets, including lower savings rate, which full impact will be seen in Q2. We did quite well to manage the impact of the NIM drop and end at 2.94%. We expect NIMs to bottom out in Q2 subject to no further rate cuts and improve in H2 as cost of funds falls. Total non-interest income, which was mentioned earlier, was the highest level for the bank at INR 1,113 crore. Core fee income grew by a healthy 20% year- on- year and other income by 22% year- on- year. Operating expenses were flat sequentially, and our cost to income ratio is 54.89%. We will continue to focus on operating leverage, especially through digital origination and process optimization. On asset quality, gross slippages for the quarter stood at INR 658.19 crore, with MFI Agri being a large part of it. Gross NPA was 1.91% and net NPA 0.48%. Broadly stable, CCR stands at a healthy 74.41%, and credit cost for the quarter was 65 bps. Excluding the MFI Agri impact, our credit costs are well in line with historical trend and in fact flat as compared to the last few quarters, including last year same period. Having seen the trend of the slippages in the month of May, June, July and the downward trajectory, we are confident that we'll maintain our full year credit cost guidance around 55 bps. It is important to reiterate that outside of MFI Agri and slight uptick in business banking, slippages are either stable or improved. Our CET1 stands at 14.69% and overall capital adequacy is at 16.03%. ROA for the quarter was at 1% and ROE at 10.3%. Disbursement momentum should improve post monsoon, especially in retail and MSME. Combination of a better macro backdrop, declining cost of funds, and recovery in unsecured lending should support margin and bottom line normalization. The external environment is improving, albeit there are some geopolitical and tariff-related uncertainties. Inflation is moderating, and early signs of consumption revival are visible. However, competition remains intense, especially on pricing, and they will be guided by risk-adjusted profitability. We see strong opportunity in secured MSME, Business Banking, Gold Backed Lending, and the other medium lending segments like LAP, CVC. As highlighted by many on the progress made on the 12 teams, we continue to invest in distribution, digital, and data to scale the franchise efficiently. Our focus will remain on sustainable growth, risk discipline, and improving productivity across the board. Thank you, and I'll now open the floor for questions. Operator, we will start with the questions. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. The first question is from the line of Mahrukh Adajania from Nuvama. Please go ahead. question on microfinance (MFI) is that quite a few lenders recognized MFI stress in the third and fourth quarters, and it continues to some extent even in the first quarter. For us, it bunched up only in the first quarter, is it? There would be accelerated or aging provisions on the slippages this quarter and in the next few quarters as well, right? The write-offs are not materially different from the fourth quarter overall in general. That's my first question. In general, there appears to be stress in the very retail segments like unsecured business banking. The MFI stress may peak in one or two quarters, but in commercial vehicles (CVs) and business banking, we hear a lot of lenders talking about new stress buildup. How do you view the environment, and do you see credit costs remaining high in the second quarter and then moderating, or how do we view it? That's my first question. My next question is on margins. You have repriced faster, so that explains the margin decline. You also got benefit on cost of funds. How much do they fall in the second quarter before stabilizing? The quantum should be much lower, or how do we view that? Mahrukh, multiple questions. Yes, it's correct that our microfinance (MFI) stress had begun to show up a little bit in the fourth quarter, but significantly showed up in this quarter. As I mentioned, in May we saw the peak of our slippages, and in June and July we have seen a drop in slippages in MFI. Of course, you know that since last year December quarter, we take an accelerated provision on our unsecured loans, so that policy continues. Therefore, this at best lingers for a quarter more. This slippage effect lingers for a quarter more at best, not more than that, because we take 100% provision by that time. That is point number one. I will ask Harsh to add something on the business part of that. The second question you asked was the NIM impact. Like you rightly pointed out, because we reprice faster because of our T1 policy, we have repriced faster. Interestingly, as you said, our cost of funds have also dropped significantly over this period of time, and we have been able to defend some of our NIM pressures. Since we have priced faster, we don't expect our further NIM pressure to be more than 5 to 10 basis point range in the next quarter. I hope that answers your question. On MFI, Ash wants to add some color. Yeah, on microfinance (MFI) you're right we did. Peak in May as Venkatraman Venkateswaran mentioned, and we have seen June to be better than May and July to be better than June. We do see slippages kind of coming off. Also, other indicators such as the SMA book and collection efficiency seem to be improving from what it was. We do feel that we should see improvements going forward from here. Mahrukh, I would add one more thing just to clarify, but for the microfinance (MFI) Agri segment, our slippages have remained in the same range that they have been all through the last year. In fact, in some products they are better or equal or very marginally higher, but nothing alarming, nothing out of the way, nothing significant, no significant change in asset quality other than the MFI Agri segment. Business banking is also good. Also, as it was in the first, business banking of course had a very good quarter last Q4, but if you look at seasonality in that and Q1 of last year, it is not ballpark in the same range. Very marginal, very, very marginal uptick. Yes. Thank you, thank you, thank you. Next question is from the line of Rikin Shah from IIFL Securities. Please go ahead. Hi, good evening and thank you for the opportunity. Just three quick questions. The first one, you know we spoke briefly about business banking and MFI, but would you be able to supplement it with some more color and data? Specifically on business banking, wanted to understand what proportion of the book is secured versus unsecured, how much of that is backed by any government guarantee schemes, and how the slippages have kind of moved year-over-year for Q. You did mention it was very strong, and even on MFI, if you could talk a bit more about X bucket collection efficiency in April, May, June, and how that has moved in July, that will help us to understand how the forward flows are and how much of improvement we can expect in the second quarter. That's my first question. Maybe I'll ask the other two questions after this. Rikin, on business banking, almost a very large part of that book is a secured book. It is not an unsecured book. Almost entirely, it is a secured book and there is very little of CGT, SME and those kinds of products we have done. Largely, it is pure lending, secured lending. That's the nature of that business. I hope that clarifies your doubt on that. On MFI, of course, we don't disclose the roll forward and those kinds of things, but let me clarify to you again that we saw the peak of this in May. In both the month of June and in July, we have seen a secular fall in slippages, even in our MFI book, and we are hoping that the trend is there to stay. Also, our SMA book, which is a precursor to slippage, is lower as we exit the quarter and is lower than the previous quarter. So. I would say that clearly on this part, as things stand now, we think the worst is behind us. Of course, provisioning comes with a lag, with some lag. It may moderate down but with a lag of a quarter. Slippages have at least shown a trend downwards. Got it. The second one was more like a clarificatory. The credit cost guidance has actually been up to 55 bps, right? I think we used to earlier guide below 50 bps. Is that a correct understanding? Not really, Rikin. Last time we guided 50 to 60 bps. Right now the guidance is around the midway on that. We used to guide that lower figure last year, Rikin. This year, in the last time itself, we had said 50 to 60 as the guidance. Got it. Got it. Sir, last question is for Shaji V. Kallarakal. Sir, historically the one comforting factor for the bank has always been a very stellar and stable kind of outcomes on asset quality for a much lower share of unsecured loans. We have started seeing stress. In 3Q we took accelerated provisions again this quarter. This is happening and margins given the starting point for Federal Bank itself was low. You have the cyclical downturn. How do we really think about the ROAs? Right, because you had guided in the analyst day earlier that we aspire to improve our ROAs meaningfully. Is this now pushed back? The macro environment is or would you want to kind of revisit your ROA growth trajectory outside in? Those are all my quetions. Rikin, if you see even this quarter performance and if you were to take the net interest on average assets and fee on average assets, our fee on average assets has also grown. In fact, if you technically look at it, we have been able to defend the ROA, but for the microfinance (MFI) provision that we have taken, we would have defended our ROA at the same level as last quarter but for the MFI provision. I remain optimistic. The structure change, as you can also see in our presentation of the mid-yielding assets, is consistently happening, right? You have even this quarter seen improvement in mid-yielding asset proportion compared to last quarter. Venkat mentioned that we are more optimistic about some of the products like gold, for example. The real change in regulation happened in June. The growth you see in this quarter is effectively a month growth, which will give us more growth in the coming quarters, and retail assets, like Venkat mentioned, we have restructured the business. We are more hopeful that things are now in place to push for growth. Mid-yielding assets are part of the strategy. I continue to say that our ROA is defined by improvement in CASA, which you can see evidence of in the quarter one results, improvement in fees, which again you can see the evidence in the first quarter results, and change in mix on assets, which again you can see the evidence of that in the results. All those three that we guided, improvement in ROA based on all those three parameters, are playing out clearly. Yes, the asset quality, like we again clarified. But for the MFI, the asset quality on rest of the book has remained absolutely at the same levels that it was till last year. Thank you very much. Thanks Rikin. Thank you. Next question is from the line of Piran Engineer from CLSA India. Please go ahead. Yeah. Hi team, thanks for taking my question and congrats on the quarter. Just a couple of questions. Firstly on fee income. Now we've done a good job on fee income over the last three, four quarters since you joined. Is this more a case of low hanging fruit being plucked and now fees will grow in line with balance sheet or can fees continue to sustainably grow for a long period faster than the balance sheet? If so, then what are the drivers? Of course, Piran, we would like to believe that of course this is there to stay and not just because we hope for it. I just mentioned that our wealth vertical is just about falling in place. We will have to grow our wealth business which will add to fees. I also mentioned that we now have a team in place on the transaction banking side and therefore we are expecting our trade and forex fees to grow from here. Our current bancassurance growth has been very good even in this quarter. If you see the parabanking fees have grown very, very handsomely. I think we are still scratching the surface and our card business continues to grow which will add to fees. I think there are enough levers for us to sustain the fee growth at a good momentum much faster than the growth in balance sheet. For many more quarters to come I am hoping. Yes. Okay, fair enough. Secondly, just on growth, two questions are both related to growth. One is I think I heard us mention that growth will be 1.2x of nominal GDP. Did I hear that? Is that only for FY2026? Because we used to usually grow at 18-20% then we did this recalibration. We have been always saying 1.2 to 1.5, 1.4, 1.5 times. It depends on that. It also depends on the environment. If the environment is of a low growth environment, then the faster growth becomes tougher, and that's why we guide towards the lower end of that band. This is only for FY26, right. You should know the context. At that time, economy let's say was growing at 7% and inflation was 7%. You apply the 1.2 to 1.4x, you'll still get to that 18 to 20%. It's a context to that growth, and that's why we stick to nominal GDP and a multiplier. Understood. Also, on growth and business banking, you know we've slowed down quite a bit. Is this more a pricing related tweak that, you know, it's just very competitive? No, no. Piran, what we are doing in business banking is, of course, we are, you know, there is generally the environment is, I mean, you have heard many calls where people are warning against SME credit. While I mentioned that our book is not seeing particularly higher stress than in the past, it is important for us to be cautious. We have made some internal rejigs on our credit buying decisions, and we have been slightly more cautious while growing that. While on the commercial bank side, we have continued to grow faster because we have felt more confident of the market as well as our book on that, and it is the upper end of the SME. We are pushing the upper end of SME growth faster than the lower end. We have also created a new team there, there is a new leader there, there is a set of new RM that we have created dedicated to that business. Some of that is playing out. I am sure that in quarters to come we will pick up some growth in that segment as well. Got it. Okay. That was all that I had. Just one thing since Sovik mentioned it about this Saturday thing. I hope this is just a one off. You'll get much more clients on the call when you do it on weekdays. Literally every bank has started doing it on Saturday, which is just very surprising. When it clashes, imagine if you all clash with an ICICI or Kotak. People will obviously give more importance. I'm just being very honest here. Try not to follow the path. Let's see. Yeah, it's better on a week. We have noted your feedback. We will, yeah. Thank you, and wish you all the best. Thank you. Thank you so much. Thank you. Next question is from line of Anand Dama from Emkay Global. Please go ahead. Yes sir. Thank you for the opportunity and for the strong operating performance. My question is on the stress again. Like you said, microfinance, we have seen a stress in this quarter. If you can quantify what the liquidity is in microfinance, I believe our portfolio is towards Kerala rather than Karnataka or the state of, you know, wherever ordinance related impact. What basically led to this kind of higher stress in microfinance? That's my first question. Second is that CBC book, that also seems to be now seasoning out. And business banking, can there be some surprises over there in terms of asset quality that you see going forward? Anand, right? Yeah. Anand, on microfinance (MFI), our portfolio is not Kerala. Our portfolio is actually across the country over multiple states, but 20% is in Karnataka. That is where the big pain is coming, and our slipping numbers are there in our deck in MFI Agri. We call it Agri MFI, so it is there in the deck for you to get on. CV and business banking, as I mentioned, yes, we have seen marginally higher stress than in the past. I would say it is not yet something that is alarming on the CV and C. We are largely not on the very retail end of that business. We are in the medium to large size customers, strategic customers, and retail premium customers if you might want to call them. We are not at the lowest end in the LCV and the lower end of the business. While we have seen marginal deterioration, it is not yet alarming us. Of course, if the data tells us something else, we will change our mind. Right now, it does not give us any reason to change our mind on wanting to continue to grow the CV and C business. Banking, I mentioned to you again, very marginal change, broadly in line with what we have seen in Q1 of last year, and Q1 of this year is similar. Of course, in business banking, we have more Kerala-focused book. About 30% of the book is Kerala, but like I said, that is not showing any abnormal signs to us just now. We have been cautious. We have not grown that book very fast, and we have taken some protective measures over the last two or three quarters on that book, and we have done some tinkering with our underwriting as well to make sure that we have, because there are too many people calling out stress in that sector, and we don't want to wade into the storm. We have been cautious, though our portfolio per se has not exhibited any alarming tendencies. I wonder, do you plan to build? Some buffer on provision front? Because I mean you may never lose a stress mark portfolio incrementally. Obviously you can, Anand. It is a secured book, it is not an unsecured book. We are not yet thinking in terms of that. Secondly, cost implications of your transformation process, how that would look like in FY26 in terms of overall OpEx. You talked about branch transformation, you talked about people changes that you're doing and stuff. If you can just talk about that in terms of what kind of OpEx that we should build in for FY26 and FY27. Anand, we have always guided that don't assume any benefits out of cost to income and they will remain in the same range that they have been. As you can see, even this quarter while we have taken all those initiatives, we have created the 70 retail business centers. We are also trying to optimize. The fact that we have created 70 retail business centers does not mean we have added people from outside. We have also optimized internally, retransferred people from one role to another and created. When I said we have created 70 business PRMs, it is not an addition to our manpower, it is more realignment of our manpower. We are trying to optimize whatever we can and we are trying to get efficiencies that we can get. However, as per our past guidance, I continue to say that since we will be in the investment mode, all these talent that we have added will of course add cost to us and therefore we have to continue to optimize this. We don't want to guide for any benefits arising out of this. We will remain in the mid-50% range that we have always guided. Thank you. Thanks Anand. Thank you. Next question is from the line of Madhuc handa Dey from Moneycontrol. Please go ahead. Hi, good evening. Hi Madhu. I have a couple of questions. The first is you sounded quite confident on the microfinance (MFI) asset quality not deteriorating from here on. You also said that there is a marginal downtick in NIM that is expected in Q2. Is it correct to assume that 1% is kind of the bottom of ROA for us? Yeah, I think we are close to the bottom of the ROA side. Like I mentioned to you, had it not been for the extra MFI provision that we took this quarter, we would have defended our ROA at 1.4 itself almost. Of course, who knows. We are assuming no rate cuts happen from here. Yes, we would say NIM 5 to 10 basis points downside possible, but hopefully we will defend that through fees and other means, and ROAs will sustain from here and upwards. My second question is on the asset quality. You sounded quite confident on broad array of asset classes. Is there any pocket of worry incrementally from here on? As we mentioned, if we go back to the data and strip it off the microfinance (MFI) situation, our MFI Agri, if I take that out, that segment out and look at the rest of the book, we have currently no reason to assume that there is any stress building up in our book. Our current SMA position even as of July, not only June but July as well, is not indicative of any stress that is building up in our book as of now. Is there a marginal deterioration in bubble CVC? Yes, there is. Like I said, there is a marginal deterioration, but it's not yet, I would say, alarming or anything like that to us. Unless this data changes, we remain confident of our asset quality. Will it be possible to quantify what% of our loan book or borrowers have exposure to the U.S. market? That's a tough one. Difficult to say that, Madhu. I know, I know where you are getting there. The way I look at the tariff situation is, first, it may not be the last word yet. There will be more developments on this. I'm sure government will get into some negotiation, do something to defend the situation. We may not yet have the last word on it, but once it is there, then I would say this is some monitorable for us. Difficult to say what the impact of this will be. Difficult to say. Frankly, we have never looked at our portfolio from this lens and analyzed it in that manner. Thanks a lot, and all the best. Thank you. Thank you. Next question is from Kunal Shah from Citigroup. Please go ahead. Hi. Thanks for taking the question. Firstly, if you can highlight in terms of have you aligned the KRAs of the employees. You indicated that now you are freeing the capacity at the branch and focusing on more business development, customer engagement, be it parabanking plus CASA. How have the KRAs of the employees changed? Eventually, in terms of the priorities, fair to assume that maybe CASA and fee income are the initial priorities. Would we be tweaking KRAs 6 months, 12 months down the line because now maybe, you know, you are well aware of how it's working and what are the lower hanging fruits here? Yes, Kunal, all branch scorecards have been changed. All employees in sales profiles have a scorecard which reflect our bank's priority. That has been rolled out across the bank for all profiles. That has been implemented and is in place, and scores are declared every month for every profile. That's all in place. Yes, CASA and fee, but asset mix too. If you look at the Kunal, our data that we have shown you, asset mix is showing steady improvement towards the mid-yield. Even in this quarter, we have made 50, 60 basis points improvement in the mid-yield. As I told you, the retail products as we get traction, gold as we get traction, will all add to this bucket. Therefore, all three, as I said, oversimplified strategy of CASA, getting CASA right, getting fee right, and getting asset mix right, all three are absolutely built into the scorecards of people. The way we are evaluating them, it is very much. Okay, got it. The weightages would have gone up for these three in particular. Yes, absolutely. Branches, for example, the CASA weightage for branches has gone up dramatically, more than it used to be. If you can quantify. Let me put it this way, more than half the weightage is for liability products. Yeah. Oh, great. Okay. Okay. Earlier it would have been more tilted towards assets. That's in the past. Now it's more than 50. Let's stick to that. Yes. Yeah. Okay, got it. Two more questions. Firstly, fair to say the increase in Agri is purely on MFI or MFI is there in retail as well. In this, there is no microfinance (MFI) anywhere other than what we classify as Agri segment MFI. What is leading to the increase in the retail slippage is when we look at it, maybe there also it's gone up a bit in the first quarter. Is it more of seasonality or maybe some. Kunal, even if you compare it with last year, we have seen the trend in the first quarter. It is generally slightly higher. In fact, we are already seeing July itself. SMA is lower, July itself, the slippages are lower. It is more. I won't say there is a trend of any big deterioration there yet. Okay, got it. Lastly, on EBLR. EBLR is now coming off. You indicated in terms of how you are transitioning maybe from floating to fixed, trading few of the portfolios. Are we largely done or still is there a scope to get the EBLR further down from here on? Yes, yes there is scope to get it further down. As you would have noticed we were 51% odd, close to 52%, sometimes down to 48%. Forty-eight now. There is scope to further reduce this. As we build, for example, the car loan business, the gold loan business are all fixed. Card is fixed, commercial vehicle is fixed. Some of the areas which are growing faster are fixed. There is definitely more scope to get it down from 48%. Okay. Also, more nicely from around 25-26% levels to now 33%. Yeah. The fixed book has moved up from 26 to 33, right? Yeah. There is clear, see, some of these priorities we said, clearly our execution is keeping pace with some of those priorities that we have seen fixed on all these parameters. I think 48 is still, there is upside on that. Okay, got it. Thanks. Thanks a lot. All the rest, yeah. Yeah, thanks. Thank you. Thank you. Next question is from the line of MB Mahesh from Kotak Securities. Please go ahead. Three questions from my side. One is, can you walk us through as to why would NIM only decline by 5 bps the next quarter? Within this, if you could spell out in this quarter what was the contribution of interest derecognition on account of some of the high-yielding segments slipping in the current quarter. Impact of high interest derecognition. Okay, let me take the NIM part first. We have a residual, see, 50 bps that came in June has had a one month impact. Right. We need to yet get two months impact on 50 basis, which is roughly 33 basis points. If 48% of our book is there, say 33 will be 15 or 16, and we are saying that we will defend seven or eight basis points. Therefore, we are saying something around between 5 and 10 will be the impact. That's the answer to your NIM question on the income gate. Again, about that 4 to 5 bps, Mahesh. Has been the impact due to the RBI. Okay. The second question is on the fee income line. This contribution of recovery from written off continues to remain fairly high. Any outlook on that? This general processing fees contribution also continues to remain high. Any color on these two line items? General processing fee will remain high. In fact, we think as the disbursements go up and gold and all these businesses disbursement goes up, it can become even more robust. General charges are also, as I mentioned in my introductory remark, we also revamped our fee structures on many of our products, liability products. That has also resulted in some of the change that you see in the fee side. We have also renegotiated some of our partner fee structures and that has also resulted. Some of those are sustainable increases in fee structure. There is no one-time stuff on the general fee that you see there. The second question, second question. Recovery. Recovery from return of assets, Mahesh, in this quarter has been relatively lower than last quarter. Last quarter, obviously Q4, you will see a very large uptake. Every year that has been lower. In Q1, like every year, we have the reval of the unlimited investments. We get the benefit of that in the other income in Q1. This will decline as you go forward. That's a safe assumption to make. Recovery will continue. I don't think that will decline substantially. That should remain or get better actually as we get towards the last quarter again next year. Usually, seasonal wise or maybe the effort wise, it tends to be better in the last few last couple of quarters. Next quarter we should also get benefit of some. Yeah, some other positives will come. Okay, perfect. Done. Thank you. Thanks. Next question is from the line of Param Subramanian from Investec India. Please go ahead. Yeah. Hi, good evening. Thanks for taking my question. Firstly, sir, if you could call out. The slippage in microfinance (MFI) and Agri segment separately. For this quarter and last quarter. They normally don't give that split, Mahesh. A large part of the three part is the MFI param. A large part of. age that you see there is microfinance (MFI). Can I say the write-off number proudly? Because what write-off. I mean, the write-off has also been high for the last couple of quarters. Will it be equal to the write off that you know what is? No, no, no. It has no connection. Okay. Okay. Sir, the recovery NPL recovery number is also softer than what we've seen. Over the last three, four quarters, which is why your next slippage is also looking high in this quarter. there anything to call out over there? Usually Q4, you know, have. Please don't compare Q1 with Q4. If you do that, it will always look like this. Every year the way to look at it is Q1, what it was last year, and compare that, and if you look at that, it is more. Or less at the same position. It is not very different. Okay. Okay. There's no change in our recognition of recoveries or any such thing? Nothing, nothing, nothing. Okay. Okay. One last question. On your loan processing fees, it. Is down year-over-year by 11% in the fee breakup. What exactly is happening there? Yeah, that is largely some. The products which give us more fees when on disbursement, like gold, were lower in this quarter. Like I told you, the gold loan, actually whatever growth you see, is actually only a June phenomenon after Reserve Bank of India clarity happened on the gold business. Some of those businesses which give higher processing fee were lower in this quarter. We are hoping that some of that will recover. In fact, in spite of that, our overall fee performance was fairly strong actually. Varun, are you with us? Hello, operator? Hello. Sorry, I was on mute. Yeah, thanks a lot. All the best. Thank you. Thank you. Thank you. Thank you. Next question is from Sumeet Kariwala from Morgan Stanley. Please go ahead. Hi, good evening team. A couple of questions. What is the decline in savings deposit? Cost on a quarter on quarter basis? Okay, let me put it this way. We cut our savings deposit rate twice. Second was in only June. We cut it in June 15th, on June 15th, by 25 bps. We cut it to 2.50% from 2.75%. That has not seen the impact in the full quarter. It has seen only a 15-day impact. That benefit will come entirely next year if that is what you were looking at. Sumeet, are you with us? Thank you. Sir, the line for the participant dropped. We move on to the next question. Next question is from the line of Harsh Modi. Hi Harsh. Thanks for this. Please go ahead. Go ahead. What is happening here? Hello, Harsh. Hi Harsh. Sir, one moment. I think he's on mute. Just give me a moment. Yeah, can you hear me? Yes. Yes, now we can. All right, great. Thanks for this. I would also request if it is possible not to do a briefing on Saturday, that would be a huge help on the mid-yield. What I'm trying to understand is where is the risk of higher credit issues coming in with higher yield? It is difficult to see a scenario where credit spreads have gone up but credit risk has not gone up. For example, if I want to understand the nature of collateral, let's say for SME and the business loans, are these still the real estate kind of hard collateral or have you moved to collaterals which are where probably the loss given default is higher while they're still secured, but probably the loss given default may be higher. Could you explain a bit what are the potential risks that comes with higher credit spread? I have a follow up question on that. I have been talking about the higher asset yields by change in mix and not necessarily by saying that we will go for higher yield assets with higher risk. I just want to put on record that we are all on the same page on that. Having said that, on the lower end of business banking in the SME side, when we say they are secured, we do not mean other security, we mean property security. At the higher end of SME that we spoke about in the commercial bank, it tends to be not fully 100% secure kind of transactions as well. At the lower end, it is largely when we say secured, we mean property secured. Retail and commercial? Yeah, retail and commercial. Retail and commercial. Both. Both kinds of security are available. I hope that clarifies your question. Yeah, right. Has the loss given default of these securities, let's say in the last six months, changed? I know it's too early to see any defaults. If you think about the assessment of loss given default for loans given in the last six months, are they the same as those of loss given default assessment, let's say two years ago? We obviously use a historical model to determine what to do going forward based on our underwriting. We keep reviewing our data and keep updating the loss given default as the defaults keep occurring and losses keep occurring. Having said that, please remember that usually in properties both things work, right? While the risk may play out, the fact is also that property values also in most places inch upwards and not downwards. Usually the property valuations are higher. Of course, we have our own rating models and, you know, relatively higher rated customer. We may take a less LTV ratio at lower levels, whereas if the customer is rated low, we take a more conservative view on LTV. These are things that play out, but we have no reason just now to assume that what we are underwriting now is any higher risk at all than what we have done in the past. Thanks for that. I'm sorry to double click on that, but let's say the LTVs that you talked about for either property, let's say something like a gold loan, which is pure LTV business. How has the LTVs of gold loans, let's say in the last three months versus a year ago, and also the LTV at origination for some of the mortgage or business-related loans with property as collateral? Have you changed the LTVs, increased the LTV to which allows you to probably make higher yield? No, not for making higher yield. Actually, it is the other way. Harsh, in many cases, for example, in our LAP business, the question is whether we take our LTVs based on market value or fire sale value. Obviously, the best of customers will never give you their business if you put, you may think you are safer by doing an LTV based on fire sale value, but no good customer will come in. It leads to adverse selection. What you think is good credit actually turns out to be bad credit. We are not doing anything. Let me say our objective is to get right pricing for the risk we take rather than take higher risk and therefore get higher pricing. That is not what we want to do. Fair point. Exactly. Sorry, the last question, then. Maybe you are not doing it, but it seems a lot of your competition is also focusing on the similar, and I absolutely love the phrase mid-yield segment. A lot of your competition, smaller banks, larger NBFCs, are getting into that space. Is the competition forcing some sort of dilution of credit standards, is what I'm trying to get to? No, there is competition, no doubt, but that doesn't force our credit standards to be low. It's a big market, it's a large market. I think the share that we want, we are getting at our. Do you. In that kind of situation, we would rather, what you call, give a rate discount but not, what you call, bring down our security level. That is the approach that we have taken. If we have to choose between the two, we will choose lower rate than lower security. Got it. Great. Thank you so much. Those are my questions. Thanks Harsh. Thanks operator. We can probably just take one final question and then close it. Sure, sir. Participants, we'll take one last question from the line of Sameer Bhise from Dymon Asia. Please go ahead. Yeah, hi, thanks for the opportunity. Just wanted to understand from a near to medium term profitability perspective. One is that some of the high yielding categories, mainly the MFI, business banking, CV, the degree of risk has gone up, so you would probably be cautious there. What is going to do the growth heavy lifting when we say that we will grow at 1.2, 1.3 times nominal GDP and at the same time help margins? That's one. Secondly, generally even large banks have also been saying that credit cost could normalize upwards. Would it be fair to say that bulk of the profitability or ROI benefits come more in FY2027 second half in terms of tangible measurable outcomes and this is more like a building blocks kind of a year? Those are my two questions. FY27 second half is too long for us to start talking about. I think we remain focused on the next half year. I will repeat one thing. You know some of the gains that we are talking about from NIM and therefore profitability will come on the liability side as well. That part can come without risk. There are still opportunities for us as a relatively small market shareholder in many of the products to continue LAP. For example, we have just scratched the surface. We don't have almost have a LAP book when many other banks are looking at, they are looking at growth from a large book, we are looking from a small book and therefore for us it is possible to grow that business. It is possible for us to Gold is like I said, I am very optimistic about growing gold which is a reasonable yield book, highly capital efficient, very low NPA, highly profit accretive business for us, fee and interest accretive for us. There are enough opportunities for us to grow our book to get to that 1.2 times metric that Venkat gave you. I think we still have opportunities within our sphere of operation to do that. Sure, this is helpful. Finally, given the environment is sluggish, you still remain confident on asset quality. We are always cautious, so we will remain cautious. Like I said, bar MFI, there is no reason for us to be alarmed about anything as yet. If data changes, we will change our mind. As of now, I have no reason to feel diffident about it. Let me put it that way. I am not diffident about it. We will always be cautious. I will keep watching. Great, sir. Thank you. This is super helpful and all the best. Thanks a lot. Thanks, Sovik. Thanks everyone. Thank you, everyone. Thank you so much for taking time out on a Saturday and attending our call. Yes, we will try and see if we can stick to Friday evenings next time onwards. Thank you so much. Thank you. Thank you. Thank you very much on behalf of Federal Bank Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.