Karur Vysya Bank Limited is a financial institution demonstrating sustained growth and operational resilience. As of December 2025, the bank's total business stands at INR 2,11,647 crores, comprising INR 97,052 crores in advances and INR 1,14,595 crores in deposits. The bank's strategic focus is heavily weighted towards the RAM (Retail, Agri, and MSME) verticals, which constitute a significant 86% of its total business, with corporate banking making up the remaining 14%. Within the RAM segment, the portfolio is diversified across Commercial (36%), Retail (26%), and Agriculture (24%). KVB has successfully managed to expand its profitability and maintain robust asset quality, underscored by a very low unsecured portfolio of just 1.91%. The bank is actively pursuing new initiatives, including revamping its credit card business and entering the affordable housing market, while continuing to strengthen its core operations through a balanced approach to risk and growth.

Official Website: https://www.kvb.bank.in/docs/investor-con-call-transcript-fy26-3.pdf

• Total Business: Reached INR 2,11,647 crores as of December 31, 2025, marking a 16% year-on-year (YoY) and 4% quarter-on-quarter (QoQ) growth.

• Advances: Grew to INR 97,052 crores, up 17% YoY and 5% QoQ.

• Deposits: Increased to INR 1,14,595 crores, a rise of 16% YoY and 4% QoQ.

• Net Profit: Stood at INR 689.96 crores for the quarter, an increase of 25% YoY and 20% QoQ. The net profit has grown 20-fold over the last five years, from INR 35 crores in December 2020.

• Operating Profit: Recorded at INR 1,005 crores for the quarter, a 23% YoY increase.

• Return on Assets (ROA): Improved to 2.05% for the quarter, up from 1.81% in the previous quarter. The year-to-date (YTD) ROA is 1.87%.

• Asset Quality (GNPA/NNPA): Gross Non-Performing Assets (GNPA) improved to 0.71% from 0.76% in the prior quarter. Net Non-Performing Assets (NNPA) remained steady at 0.19%.

• Slippages: Fresh slippages for the quarter were INR 154.14 crores, translating to an annualized rate of 0.63%. This is a significant reduction from INR 350 crores in the preceding quarter.

• Capital Adequacy: The Capital to Risk (Weighted) Assets Ratio (CRAR) under Basel III is healthy at 16.05%, without factoring in the current year's profit.

• Cost-to-Income Ratio: The ratio for the nine-month period was 43.98%, well within the guided range of below 50%.

The bank has delivered a strong financial performance, characterized by robust growth in both advances and deposits, significant profit expansion, and a marked improvement in asset quality metrics.

• Competitive Landscape: The environment is marked by heightened competition, particularly in sourcing deposits. This has also led to lower pricing and yields in certain asset classes like housing and vehicle loans, causing the bank to moderate its growth in these segments.

• Interest Rate Environment: The prevailing interest rate environment presents challenges for expanding the corporate loan portfolio at desired spreads. A rate cut of 0.25% in December is expected to impact margins in the subsequent quarter.

• Microfinance (MFI) Sector: The MFI sector has seen the introduction of new guardrails by self-regulatory organizations. This has encouraged more prudent, quality-conscious lending practices, addressing past concerns about multi-lender risk and delinquency and improving the long-term stability of the sector.

• Exporter Segment: Despite global uncertainties, the bank's exporter clients have shown resilience. The order book for some extends to March 2026, and there have been no significant requests for additional funding or dispensations under trade relief measures.

The banking sector faces headwinds from intense competition and margin pressures, but specific segments like MFI are showing signs of stabilization and improved risk management.

• Overall Business Growth: The bank's total business grew by 16% YoY. Advances grew by 17% YoY, and Deposits by 16% YoY.

• Segment-wise Advance Growth:

• RAM Verticals: Grew by 19% YoY and 4% QoQ, continuing to be the primary growth engine.

• Retail Advances: Increased by 6% QoQ, driven by strong performance in jewel and mortgage loans. Mortgage loan volumes increased by 14% during the quarter.

• Commercial Business: Grew by 3% QoQ. Disbursements in this segment increased by 21% YoY, supported by the launch of a Small Business Group relationship model across 79 branches.

• Agriculture Portfolio: Experienced a 4% QoQ growth, with agri-jewel loans making up 91% of this portfolio.

• Corporate Portfolio: Grew by 6% QoQ and 14% YoY, driven by identified opportunities in commercial real estate, capital markets, and EPC contractors.

• Deposit Growth:

• CASA: Grew by 2% QoQ, supported by a 6% YoY growth in savings account balances from new customers and a 10% YoY increase in value from new current accounts.

• Retail Term Deposits: Grew by 13% YoY, though growth was flat at 2% QoQ due to intense competition.

The bank's growth is well-diversified across its core RAM segments, with targeted strategies in corporate lending and a renewed focus on high-value CASA accounts driving performance.

• Corporate Lending: The bank has identified specific high-yield segments to drive growth while maintaining risk appetite. These include commercial real estate, capital markets, and EPC contractors.

• Credit Cards: A significant opportunity lies in the revamping of the credit card business. The bank plans to launch new variants by the end of the quarter and scale this business in a measured way.

• Affordable Housing: The bank has initiated lending in the affordable housing segment on a small scale. It is also in the final stages of technical integration with a co-lending partner to expand its presence in this area.

• Investment Portfolio: The bank is actively enhancing yields on its investment portfolio by rebalancing from government securities towards State Development Loans (SDLs) and select corporate bonds, which offer better spreads.

KVB is actively pursuing new growth opportunities in credit cards and affordable housing, while optimizing its corporate and investment portfolios for better yields.

• Branch Expansion: The bank is expanding its physical presence to drive business growth.

• Branches Opened: 10 new branches were opened in the first nine months of the fiscal year, consisting of 7 light branches and 3 regular branches.

• Future Expansion: A plan is in place to open another 6 branches in the final quarter of the year.

• Employee Productivity: Staff numbers have plateaued and are lower than in previous periods. The focus has shifted to improving the productivity of existing teams, which has contributed to stable employee expenses.

The bank is continuing its physical network expansion in a calibrated manner while focusing on enhancing the productivity of its existing workforce to support growth.

• Full-Year Guidance (FY'26):

• Credit Growth: Expected to be above 2% of the industry's growth rate.

• Net Interest Margin (NIM): Projected to be in the range of 3.9% to 3.95%.

• Return on Assets (ROA): Expected to be above 1.85%.

• Asset Quality: GNPA is guided to be less than 1.5%, NNPA less than 1%, and slippages less than 1% of the loan book.

• New Business Verticals:

• Credit Cards: The revamped credit card business is set to launch by the end of Q4 FY'26.

• Affordable Housing: The bank will continue to build its affordable housing portfolio, both through direct lending and a co-lending partnership.

• Branch Network: The plan to open 6 more branches in Q4 FY'26 will be executed, contingent on securing suitable premises.

The bank has provided clear and confident guidance for the fiscal year, supported by strategic initiatives in new business verticals and continued network expansion.

• Net Interest Margin (NIM): The bank achieved a significant NIM expansion to 3.99% for the quarter, an increase of 22 basis points (bps) from the prior quarter.

• Drivers of NIM Expansion:

• Cost of Funds: Reduced by 16 bps QoQ, with the cost of deposits falling by 13 bps. This was primarily due to a large portion of term deposits coming up for repricing at lower rates during the quarter.

• Yield on Funds: Increased by 6 bps QoQ. The yield on advances remained stable despite rate cuts, while the yield on investments improved by 4 bps.

• Loan Book Composition: The bank strategically managed its asset yields by increasing the share of its fixed-rate loan book from 15% to 23% of total loans. Concurrently, the MCLR-linked loan book was reduced from 29% to 20%.

• Future Outlook: NIM for the full year is guided to be in the 3.9% to 3.95% range. The benefit from deposit repricing seen in Q3 may not be as pronounced in Q4.

The bank has demonstrated excellent margin management by strategically altering its loan mix and capitalizing on deposit repricing, leading to a strong NIM performance.

• Deposit Mobilization: The bank faces intense competition in sourcing deposits, which resulted in flat QoQ growth for retail term deposits. This competitive pressure requires a strategic balance between growth and cost of funds.

• Loan Pricing: Competition has driven down yields in segments like housing and vehicle loans, prompting the bank to de-emphasize these areas. The bank has also allowed some corporate accounts to be taken over by competitors offering lower pricing that did not align with its risk-reward framework.

• Differentiators: The bank leverages its strong customer connect and quick turnaround times (TAT), particularly in the gold loan segment, to retain and grow its business even after shifting to higher, fixed interest rates.

KVB operates in a highly competitive market, strategically choosing to forego some low-yield business to protect its margins and risk profile.

• Margin Pressure: The primary risk is the potential compression of margins due to the full effect of the December rate cut in Q4 and continued competition for deposits.

• Asset Quality Monitoring: While current NPA levels are very low, diligent monitoring remains crucial. The bank is particularly mindful of the agri-jewel loan portfolio due to soaring gold prices and has strengthened its monitoring mechanisms.

• Low Unsecured Portfolio: The bank's unsecured loan portfolio is only 1.91% of total advances. This is a significant risk mitigator, as it demonstrates an ability to achieve high profitability and ROA without taking on substantial unsecured credit risk.

• Early Warning Indicators: The SMA 30+ (Special Mention Account) book, an indicator of potential future stress, has decreased to 0.24% from 0.27% in the previous quarter, suggesting a stable near-term asset quality outlook.

The bank has identified key operational risks, particularly around margin sustainability, and has implemented strong mitigation strategies, including maintaining a highly secured loan book.

• Leadership Stability: The bank's Board has recommended a two-year extension for the Managing Director and CEO, Mr. Ramesh Babu, ensuring leadership continuity. The proposal will be sent to the RBI for approval.

• Recoveries: The bank has performed strongly on recoveries from written-off accounts, achieving INR 601 crores YTD, which is in line with the full-year guidance of INR 600 crores.

• Microfinance (MFI) Portfolio: The MFI portfolio stood at INR 207.83 crores as of December 31, 2025. All fresh exposures in this segment are now covered under a guarantee scheme, enhancing portfolio security.

• Restructured Portfolio: The standard restructured loan portfolio has further decreased to 0.45% of total loans and continues to perform well. A provision cover of 44% is maintained for this portfolio.

Key operational and governance updates indicate strong execution on recovery targets and leadership stability, reinforcing the bank's positive trajectory.