Indian Bank — Q1 FY26 earnings call

Call held 24 Jul 2025

Management summary

Indian Bank reported a strong Q1 FY26 with robust net profit growth and significant asset quality improvement, driven by healthy advances growth. While the domestic CASA ratio and NIM saw some compression, management is taking initiatives to address these and remains confident in achieving full-year guidance. Digital transformation and branch expansion are key strategic focus areas for future growth.

Highlights

  • Net Profit increased by 23.69% YoY to Rs. 2,973 crores, demonstrating strong profitability.

  • Gross Advances grew by 11.50% YoY to Rs. 6.01 trillion, indicating healthy credit expansion.

  • Asset quality significantly improved with Gross NPA at 3.01% (down 76bps YoY) and Net NPA at 0.18% (down 21bps YoY).

  • Slippage ratio reduced to 0.94%, well within the guidance of less than 1%.

  • Recovery efforts yielded Rs. 2,059 crores this quarter, including Rs. 340 crores from one large written-off account.

Concerns

  • Domestic CASA ratio declined to 38.97% from 40.17% in March, a QoQ degrowth of 2.03%.

  • Domestic NIM compressed by 13bps QoQ to 3.35%, with management expecting further marginal reduction in Q2.

  • Operating profit saw a marginal QoQ decline of 4.96% to Rs. 4,770 crores, primarily due to lower other income.

  • Management expressed candidly that maintaining CASA around 40% will be challenging due to external factors like JIT payments and alternative savings.

Key financials

  1. Total Business ₹13.45L Cr +10.3%YoY
  2. Total Deposits ₹7.44L Cr +9.3%YoY
  3. Domestic CASA Ratio 39% -3%QoQ
  4. Gross Advances ₹6.01L Cr +11.5%YoY
  5. Net Profit ₹2,973 Cr +23.7%YoY
  6. Operating Profit ₹4,770 Cr +6%YoY
  7. Net Interest Income ₹6,359 Cr +2.9%YoY
  8. Domestic NIM 3.4% -3.7%QoQ
  9. Return on Asset 1.3%
  10. Return on Equity 20.3%
  11. PCR Ratio 98.2%
  12. Credit Costs 28% -65.4%QoQ
  13. Slippage Ratio 0.94% -13.8%QoQ
  14. Gross NPA 3% -20.2%YoY
  15. Net NPA 0.18% -53.8%YoY
  16. Capital Adequacy Ratio 17.8%
  17. CET1 Ratio 15.3%
  18. Cost-to-Income Ratio 45.8% +1.6%QoQ

What they filed

Q1 FY27: revenue up 11.1%, net profit up 10.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue15,348 15,759 15,856 16,283 16,590 +8%17,098 +8%17,480 +10%18,090 +11%
Net profit2,706 2,852 2,956 2,973 3,018 +12%3,061 +7%3,103 +5%3,273 +10%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentYoY GrowthQoQ GrowthAdvances
RAM Advances15.9%3.5%₹3.63L Cr
Retail Advances16.5%3.8%₹1.24L Cr
Agri Advances16.4%4.8%—
MSME Advances——₹95,000 Cr
Corporate Advances1.8%-1.4%—

Guidance & targets

Deposits

  • Deposit Growth Deposits · FY26 · High confidence 8-10%
    We have given deposits in the range of 8% to 10%. It is now 9.26%.

    — Shri Binod Kumar, MD & CEO

  • CASA Ratio Deposits · FY26 · High confidence around 40%
    CASA, we have given guidance of around 40%, but our endeavor will be to maintain that 40%.

    — Shri Binod Kumar, MD & CEO

Advances

  • Advance Growth Advances · FY26 · High confidence 10-12%
    Advance, we have given guidance of 10% to 12%. It is in the range of 11.50%.

    — Shri Binod Kumar, MD & CEO

  • RAM to Corporate Mix Advances · FY26 · High confidence 65:35
    It will be around 65:35.

    — Shri Binod Kumar, MD & CEO

Asset Quality

  • Gross NPA Asset Quality · FY26 · High confidence less than 3%, maybe up to 2.5%
    Our gross NPA guidance of less than 3%, we will definitely achieve, I mean, maybe we can go even up to 2.5%.

    — Shri Binod Kumar, MD & CEO

  • Net NPA Asset Quality · FY26 · High confidence 0.1-0.65%
    Net NPA, same range, 0.1%, 0.7%, 0.65%.

    — Shri Binod Kumar, MD & CEO

  • Slippage Ratio Asset Quality · FY26 · High confidence less than 1%
    Slippage, again, we are maintaining less than 1%.

    — Shri Binod Kumar, MD & CEO

  • NCLT Recovery Asset Quality · FY26 · High confidence Rs. 800 crores
    recovery from NCLT, we have given guidance of Rs. 800 crores.

    — Shri Binod Kumar, MD & CEO

  • AUC Recovery Asset Quality · FY26 · High confidence Rs. 2,000 crores
    we have also given guidance of AUC of Rs. 2,000 crores, but we have been able to recover around Rs. 815 crores already in this this quarter itself.

    — Shri Binod Kumar, MD & CEO

Profitability

  • NIM Profitability · FY26 · High confidence 3.15-3.30%
    NIM, we have given guidance of 3.15% to 3.30%. We are at 3.23%. And I'm hopeful that we will be able to maintain the NIM guidance of between 3.15% to 3.30%.

    — Shri Binod Kumar, MD & CEO

  • RoA Profitability · FY26 · High confidence 1.20%
    ROA, we have given guidance of 1.20%, but we have been able to maintain at 1.34%.

    — Shri Binod Kumar, MD & CEO

  • Credit Cost Profitability · FY26 · High confidence 1%
    Credit cost, we have given guidance of 1%. We are at 0.28%.

    — Shri Binod Kumar, MD & CEO

Operations

  • New Branches Operations · FY26 · High confidence 119 branches
    this is our 119th year. So, we are planning to open 119 branches in this financial year. So, 51 we have already opened around another 68 branches we will be opening more.

    — Shri Binod Kumar, MD & CEO

Digital Initiatives

  • Digital Business Volume Digital Initiatives · FY26 · High confidence Rs. 2,25,000 crore
    Digital business this particular quarter we have done Rs. 57,955 crore, and we are aiming to do Rs. 2,25,000 crore of digital business this particular financial year.

    — Shri Ashutosh Choudhury, Executive Director

Technology

  • IT Spend Technology · FY26 · Medium confidence approx Rs. 1,500 crores
    our IT spend will be in the range of approximately Rs. 1,500 crores for this year also. Last year also, it was around Rs. 1,400 crores, Rs. 1,300 crores.

    — Shri Binod Kumar, MD & CEO

Human Resources

  • Fresh Hiring Human Resources · FY26 · High confidence 3,000
    Manpower, also, we are around 3,000 fresh hiring will happen in this year.

    — Shri Binod Kumar, MD & CEO

Other Income

  • PSLC Income Other Income · FY26 · High confidence Rs. 1000 crore
    we have already sold around Rs. 1000 crore PSLC income will come during this year.

    — Shri Binod Kumar, MD & CEO

What to watch in Q2 FY26

Domestic CASA Ratio Improvement

Next quarter
Current 38.97%
Target Improvement towards 40%

Why it matters

CASA is a key driver of cost of funds and NIM. Management has launched initiatives to improve it.

CASA ratio, domestic CASA ratio is at 38.97% against, in March, it was 40.17%... So that is the reason CASA was slightly come down to 39% approximately. ...We have taken some initiative on CASA.

Risks & concerns

  • CASA Ratio Decline

    medium

    Domestic CASA ratio declined to 38.97% from 40.17% in March, with QoQ degrowth of 2.03%.

    Management acknowledged

  • NIM Compression

    medium

    Domestic NIM declined by 13bps QoQ to 3.35%, with management expecting further marginal reduction in Q2 due to rate cuts.

    Management acknowledged

  • Competition in Lending Segments

    medium

    High competition noted in MSME and export-oriented units from private sector banks.

    Management acknowledged

  • Difficulty in Sustaining CASA

    medium

    Management expressed candidly that maintaining CASA around 40% will be challenging due to government's Just-In-Time (JIT) payments and people shifting to alternative savings options.

    Management acknowledged

  • Lag in Private CapEx and Corporate Borrowing

    medium

    Private CapEx is not happening at the expected level, and good-rated companies are raising resources directly from the market instead of through banks.

    Management acknowledged

Q&A highlights

6 direct
SMA-2 accounts and future NPA risk Direct
SMA 2, these two accounts constitute around Rs. 3300 crores. So total SMA 2 more than Rs.5 crore was Rs. 4586 crore. So, these two accounts had come out of SMA 2, and now SMA 2 is for Rs.815 crores only. ...I don't think these accounts will slip to NPA.

Clarifies the significant reduction in SMA-2 accounts and management's confidence in preventing them from becoming NPAs, addressing a key investor concern.

Asked by Ashok Ajmera

NIM protection amidst future rate cuts Direct
I think we will be able to, because see, from this quarter onwards the bulk rate has come down by more than 100bps. So, the impact of that will start coming in this quarter plus rate cuts have also happened in retail term deposit. So, the impact of that will also start coming out. In another three months to six months, around my Rs. 86,000 crores will be repriced. So, the impact of that will also start coming in. So, I am hopeful that I will be maintaining between 3.15% to 3.30%.

Provides insight into how the bank plans to mitigate NIM compression from rate cuts through repricing of deposits and maintaining its guidance.

Asked by Ashok Ajmera

Upgrading credit growth targets Partial
As of now, we'll try to stick between 10-12%; we'll try to be on the higher band of the guidance.

Indicates management's cautious but optimistic stance on credit growth, suggesting they will push for the upper end of the existing guidance rather than revising it upwards.

Asked by Ashok Ajmera

Co-lending and gold loan policy Direct
Co-lending, we are still not prepared for our digital platform. ...agriculture, we have this gold loan up to Rs. 2 crores, they have allowed now to take Rs. 2 lakhs. ...we have already initiated shifting this gold loan to retail loan.

Clarifies the bank's current strategy and readiness for co-lending and how it's adapting to new RBI guidelines for gold loans, impacting future growth avenues.

Asked by Ashok Ajmera

Treasury profit outlook with rate cuts Partial
if I sell some of the higher yielding, then again, whatever we'll purchase, that will be low yielding. So, we will book profit as per requirement only. I mean, not a very bumper or something like that.

Manages expectations regarding treasury profits, indicating a pragmatic approach to booking gains rather than aiming for 'bumper' profits, which could impact future yields.

Asked by Ashok Ajmera

Deposit mix and bulk deposit strategy Direct
So that book in March was Rs.1.41 Lakh crore and in June it is only Rs.1.45 Lakh crore. So hardly we have taken Rs.4000 crores increase. So not much of bulk. We are not taking very aggressively because that is at a cost. ...I mean if there is no option left and still, we are making some margin, we will.

Explains the bank's strategy regarding bulk deposits, emphasizing a cost-conscious approach and willingness to take bulk only if profitable and necessary.

Asked by Jayant Kharote

Recovery from written-off accounts Direct
It is basically on account of one big account has been resolved. In one account itself, Rs. 340 crores has come. So that is because of that.

Provides specific context for the strong recovery numbers, indicating it was largely driven by a single large resolution rather than broad-based improvement.

Asked by Mona Khetan

CASA growth challenges Direct
No, I don't think. CASA moving up will be really a challenge on two counts. One, government is also adopting JIT in many states. And this pace of increasing JIT will further increase only. And number two, if you see where people are shifting their saving to other alternates also. So, and this trend I expect will continue. So, maintaining even around 40% will be a challenge, to be very candid with you.

Highlights the structural challenges to CASA growth, including government policies and changing customer behavior, suggesting a realistic and cautious outlook from management.

Asked by Sushil Choksey

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Indian Bank reported a robust Q1 FY26 with Net Profit growing 23.69% YoY to Rs. 2,973 crores, and Operating Profit up 5.97% YoY to Rs. 4,770 crores. Total business expanded by 10.25% YoY to Rs. 13.45 trillion, driven by 11.50% YoY growth in advances to Rs. 6.01 trillion and 9.26% YoY growth in deposits to Rs. 7.44 lakh crores. The Return on Asset stood at 1.34% and Return on Equity at 20.26%.

Asset Quality Improvement

The bank demonstrated significant improvement in asset quality, with Gross NPA reducing by 76bps YoY to 3.01% and Net NPA falling by 21bps YoY to 0.18%. The slippage ratio also improved to 0.94% from 1.50% in the previous June. Management expressed confidence that SMA-2 accounts, now at Rs. 815 crores (down from Rs. 4,586 crores), will not slip to NPA. The PCR ratio remains strong at 98.20%.

NIM and Cost of Funds Dynamics

Domestic Net Interest Margin (NIM) saw a 13bps QoQ decline to 3.35% from 3.48%. Management anticipates further marginal compression in Q2 due to rate cuts but expects stabilization as Rs. 86,000 crores of retail term deposits are slated to reprice in the next 3-6 months. The cost of deposits marginally increased to 5.14% from 5.10%, while yield on advances saw a slight decline to 8.58% from 8.64%.

Strategic Growth in RAM Segments

Retail, Agri, and MSME (RAM) segments continue to be key growth drivers, with RAM advances growing 15.93% YoY to Rs. 3.63 trillion. Retail advances grew 16.52% YoY to Rs. 1.24 trillion, and MSME advances reached Rs. 0.95 trillion with 14.45% growth. The bank aims for a RAM to Corporate mix of 65:35, indicating a continued focus on these high-growth, granular segments.

Digital and Branch Expansion Initiatives

Indian Bank is aggressively pursuing digital transformation, having launched 11 new digital journeys this quarter, contributing to Rs. 57,955 crore in digital business volume, with a FY26 target of Rs. 2,25,000 crore. The bank also plans to open 119 new branches in FY26, having already opened 51, to boost CASA and business growth, particularly in underpenetrated regions like Mumbai and Gujarat.

CASA Ratio Challenges and Mitigation

The domestic CASA ratio declined to 38.97% from 40.17% in March, a concern acknowledged by management. They are implementing new CASA products for MSME, women, pensioners, and salaried accounts, along with branch expansion, to address this. However, management candidly noted that maintaining the 40% target will be challenging due to government's Just-In-Time (JIT) payments and people shifting to alternative savings options.

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