Karur Vysya Bank · Material risks, their source context, and severity in the latest available quarter.
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Risk intelligence
Only 10-15% of term deposits will reprice in Q4 versus 20-25% this quarter, meaning the 13bps sequential deposit cost reduction will not repeat. Additionally, some lower-priced deposits are rolling over at current (higher) market rates, creating mild headwind.
Deliberate decision to not grow vehicle loans due to high LGD (150%+ capital cost), high upfront dealer commissions, and unfavorable fixed-rate economics at current low rate environment. This limits diversification of the loan book.
Analyst raised concern about RBI's LCR modification circular effective FY27. Management estimates 2-3 percentage point decline in LCR (currently 133%), requiring adjustments to HQLA management. CFO to provide detailed impact analysis.
Management indicated they compromised on advance growth to maintain deposit discipline and risk-reward balance. If competitive deposit pricing intensifies, the bank faces a choice between growth and margins—currently prioritizing the latter.
