What could be the excess provisioning requirement from the expected credit loss (ECL) framework?
The ECL framework is forward-looking and the exact provisioning requirement will become clearer only after system-level implementation. The bank expects implementation before December, after which more accurate numbers will start emerging. On a preliminary basis, the bank has estimated the total ECL-related provisioning requirement at around ₹10,000 crore. The estimate is based on probability of default, exposure at default and likely losses across different stages of assets.
There are three stages under the framework, stage 1, stage 2 and stage 3, with stage 3 comprising non-performing assets (NPAs).
The bank currently has a provision coverage ratio (PCR) of 94.2 per cent on stage-3 assets, while stage-1 provisioning is already almost in line with draft norms.
The major incremental provisioning requirement is expected to arise from stage-2 assets, where the regulatory floor for additional provisions has been raised from 0.4 per cent to 5 per cent. The additional requirement for this category is at around ₹2,500 crore.
Another ₹5,000 crore is expected from probability-of-default calculations across stage 1, stage 2 and stage 3 assets. And, around ₹2,500 crore could arise from non-funded exposures and likely defaults.
Despite this, the impact would remain manageable, given the bank’s annual profit of ₹19,000-20,000 crore and the regulatory provision allowing amortisation of ECL provisions over four years.
Even if the bank were to absorb the entire impact upfront in the first year itself, the capital adequacy ratio (CAR) would decline by only around 1-1.2 percentage points.
The profitability and strong internal accruals place it in a comfortable position to implement the framework without immediate capital raising requirements. We may explore fund-raising options if the need arises in future.
How much additional credit does the bank expect to extend under ECLGS 5.0?
We expect to extend an additional ₹18,000-20,000 crore of credit under the scheme. We have already identified eligible accounts, and the rollout will begin within this week.
Net interest margin (NIM) for Q4 was 2.51 per cent. What is the guidance for FY27?
Our NIM improved by nine basis points sequentially during the quarter, which is a significant achievement. For FY27, we expect NIM to remain in the range of 2.5-2.6 per cent.
Is the bank seeing any stress in the micro, small and medium enterprise (MSME) portfolio due to the West Asia crisis?
There is no visible stress in the MSME portfolio at present. Separately managed accounts (SMA) declined to ₹33,000 crore from ₹40,000 crore over last financial year, while slippages remained under control.
The government support measures, including ECLGS 5, are expected to provide additional relief to eligible borrowers.
The bank’s treasury income fell 72.7 per cent year-on-year to ₹272 crore in Q4FY26 from ₹995 crore a year ago. What was the reason?
Around ₹800 crore of the treasury impact came from mark-to-market losses due to adverse bond yield movements, with yields moving from 6.59 per cent to 7.05 per cent during the period. Additionally, the bank incurred an initial loss of around ₹25 crore while aligning its net open position with the Reserve Bank of India’s (RBI) revised norms. The bank’s open position has now been brought down to below $100 million and is fully compliant with RBI regulations, and we are closely monitoring the position.
Did the bank seek any relaxation from the RBI on the $100 million net open position cap?
The bank had initially made a request to the RBI regarding the cap. However, we are now adhering to the central bank’s guidance and operating within the prescribed limits.
 "Hardeep Singh Ahluwalia, executive director, Canara Bank")