Detailed Narrative
Robust Business Growth and Segment Performance
Karur Vysya Bank reported a 15% year-on-year growth in total business, reaching INR2,14,420 crores as of March 31, 2026. Advances grew 17% to INR98,754 crores, while deposits increased 13% to INR1,15,666 crores. RAM Verticals, constituting 86% of the overall advances portfolio, grew by 18% YoY and 2% QoQ, with retail loans making up 27%, agri 25%, and commercial 35% of the book.
Record Profitability and Strong Margins
The bank achieved its highest-ever net profit of INR725 crores in Q4 FY26, contributing to a full-year net profit of INR2,500 crores, a 29% increase over the previous year. Net Interest Margin (NIM) for Q4 FY26 stood at 4.25% (excluding a 7 bps tax refund impact), and the full-year NIM was 3.97%, surpassing the revised guidance of 3.9-3.95%. This margin expansion was primarily driven by a 9 bps reduction in the cost of funds and an 18 bps increase in the yield on funds during the quarter.
Maintained Asset Quality and Proactive Risk Management
Asset quality remained strong, with Gross NPA marginally improving to 0.75% from 0.76% last year, and Net NPA maintained at a low 0.19%. The bank made a one-time📎 prudential provision of INR163 crores for sectors potentially affected by geopolitical tensions. Gross slippages for the full year were INR744 crores (0.75% of the loan book), with Q4 slippages at INR187 crores, partly due to proactive classification of borderline accounts.
Strengthening Deposit Franchise and CASA Growth
CASA balances grew by 12% year-on-year, with an actual growth of INR3,290 crores, marking the highest such growth in the last 10 years. Demand deposits increased 10% and savings deposits grew 13% (incremental INR2,505 crores). The bank consciously reduced Certificate of Deposits by INR1,773 crores in Q4 and avoided bulk deposits at year-end, focusing on stable granular retail deposits.
FY27 Outlook: Moderated Growth and NIM Compression
For FY27, the bank projects a cautious outlook with credit growth expected to be 1-2% over the industry average. NIMs are guided to be in the range of 3.75-3.8%, anticipating a drop due to rising retail term deposit rates (incremental at 7.2-7.5%) and competitive pressures on lending yields. The bank aims to balance top-line growth with profitability, even if it means compromising on margins in some segments like MSME.
Strategic Initiatives and Digital Adoption
The bank continues to focus on strategic initiatives, including enhancing collaboration between branches and open market channels for retail assets, and planning to launch premium credit cards and an NRI channel. Digital adoption remains high, with 98% of transactions being digital and the DLite mobile app achieving 2.5 million monthly active users and 7 million downloads with high ratings.
Capital Adequacy and Shareholder Returns
The Capital to Risk-weighted Assets Ratio (CRAR) stands healthy at 18.76%, providing ample headroom for growth without immediate need for capital raising in FY27. The bank declared a dividend of 130% (subject to shareholder approval), payable on the bonus shares issued last year, reflecting its commitment to shareholder returns.
Gold Loan Portfolio Management
The gold loan portfolio, which constitutes 30% of the overall advances, is managed with an internal cap of 35%. The bank maintains a significant margin buffer (20-40%) between market gold prices and its lending rates, with the loan-to-value (LTV) ratio for agri jewel loans at 55.59%. Portfolios with LTV above 75% are miniscule, indicating a risk-mitigated approach despite high demand.