KARURVYSYA - Karur Vysya Bank

📊 NSE: KARURVYSYA 🏢 Banks - Private Sector 📅 Last Updated: 12/14/2025 8:50

💰 Financial Performance

Revenue Growth by Segment

Total business reached INR 2,03,216 Cr in Q2 FY26, growing 15% YoY. RAM (Retail, Agri, MSME) verticals grew 19% YoY, while Corporate banking grew 7% YoY. Within RAM, Retail advances increased 7% QoQ, and Commercial business grew 3% QoQ.

Geographic Revenue Split

The bank exhibits high geographic concentration with over 80% of its 841 branches located in South India, primarily in Tamil Nadu (Karur), Andhra Pradesh, and Telangana.

Profitability Margins

Net profit for Q2 FY26 was INR 574 Cr, up 17% YoY. Return on Assets (RoA) stood at 1.81% in Q2 FY26, exceeding the guided range of 1.55%-1.65%. Net Interest Margin (NIM) was 3.5% in Q1 FY26, down from 3.8% in FY25 due to rising deposit costs.

EBITDA Margin

Operating profit for Q2 FY26 was INR 1,017 Cr, a 25% increase YoY. The cost-to-income ratio for H1 FY26 was 44.76%, well within the management's guided limit of 50%.

Capital Expenditure

The bank opened 7 branches in H1 FY26 and plans to open 21 more in the current fiscal year. Investments are being directed toward 'KVB Neo' for fintech partnerships and digital transformation.

Credit Rating & Borrowing

CRISIL reaffirmed 'CRISIL A1+' for Certificate of Deposits (INR 5,000 Cr). ICRA maintains a stable outlook, noting that a fall in Tier I capital cushion below 3% or RoA below 1.0% would be negative triggers.

⚙️ Operational Drivers

Raw Materials

Cost of Funds (5.61% in FY25), Yield on Funds (8.93% in FY25), and Yield on Advances (10.15% in FY25).

Import Sources

Not applicable for banking operations; funds are sourced domestically from retail and institutional depositors.

Key Suppliers

Not applicable; the bank relies on a retail resource profile and institutional depositors for its 'raw material' (capital).

Capacity Expansion

Current network of 841 branches (as of Sept 2024) with a planned expansion of 21 additional branches in FY26 to deepen market penetration.

Raw Material Costs

Interest expenses on deposits are the primary cost. Term deposits grew 20% YoY to INR 74,246 Cr in FY25, while CASA grew only 3% to INR 27,832 Cr, increasing the overall cost of funds.

Manufacturing Efficiency

Credit-to-Deposit (CD) ratio remained stable at 83.91% in Q2 FY26. SMA 30-plus levels improved significantly, dropping from 0.6% to 0.27% QoQ.

Logistics & Distribution

Distribution is handled through 841 physical branches and digital channels like KVB Neo and fintech partnerships.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

The bank aims to achieve 15% growth by focusing on RAM segments (86% of business), scaling the 'KVB Neo' digital platform, and targeting INR 600 Cr in annual recoveries from written-off accounts. It is also expanding its branch network by 21 units and utilizing a new jewel loan sales team.

Products & Services

Jewel loans (91% of agri portfolio), mortgage loans, BNPL loans, commercial business banking (INR 5-25 Cr ticket size), and retail deposits.

Brand Portfolio

Karur Vysya Bank, KVB Neo, KVB Bhoomi Project.

New Products/Services

Expansion of BNPL loans during festival seasons and new fintech-led lending products through the Neo platform.

Market Expansion

Planned opening of 21 new branches in FY26, focusing on deepening the South India presence while selectively expanding in other regions.

Market Share & Ranking

Market share of 0.45% in total advances and 0.44% in deposits as of March 31, 2024.

Strategic Alliances

Partnerships with fintech companies and OEMs for Supply Chain Finance (SCF) and a meal program partnership with Akshaya Patra Foundation.

🌍 External Factors

Industry Trends

The industry is shifting toward digital-first banking and fintech collaborations. KVB is positioning itself through 'Neo' to leverage technology for customer acquisition and automated data flow for SCF.

Competitive Landscape

Faces intense competition from larger private banks and SFBs, particularly in housing and vehicle loans where KVB is currently 'lying low' due to low yields.

Competitive Moat

The bank's moat lies in its 100-year-old brand heritage in South India and its strong retail resource profile. Sustainability is supported by a healthy CRAR of 16.58% and a low Net NPA of 0.19%.

Macro Economic Sensitivity

Sensitive to RBI interest rate cycles; a shift to a neutral stance reduced treasury income. Favorable monsoons are expected to drive growth in the agri-jewel loan segment.

Consumer Behavior

Increasing demand for digital self-service and festival-linked credit, as seen in the uptick in BNPL loans during Dussehra and Diwali.

Geopolitical Risks

Minimal direct exposure; management confirmed that U.S. market exposure and potential tariffs do not significantly impact the loan portfolio.

⚖️ Regulatory & Governance

Industry Regulations

Compliant with RBI's LCR requirement (>100%) and Basel III CRAR (16.58%). Following SEBI Circular No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/97 for physical share transfers.

Environmental Compliance

Assigned a 'CRISIL ESG 68' rating for FY 2024-25 performance.

Legal Contingencies

The bank opened a 'Special Window for Re-lodgement of Transfer Requests of Physical Shares' to resolve legacy shareholding issues as per SEBI mandates.

⚠️ Risk Analysis

Key Uncertainties

Potential for further corporate slippages (INR 350 Cr fresh slippages in Q2 FY26) and the impact of ECL (Expected Credit Loss) provisioning implementation on future ROA.