Karur Vysya Bank: Navigating Growth with Prudence in Q2 FY26

Karur Vysya Bank (KVB) has reported a robust performance for the second quarter of the financial year 2026, demonstrating sustained growth across key financial metrics. The bank achieved a significant milestone, crossing the INR2 lakh crore mark in total business, reflecting a 15% year-on-year (YoY) increase. Advances grew to INR92,724 crore, while deposits reached INR1,10,492 crore, both registering a 4% quarter-on-quarter (QoQ) and 15% YoY growth. Net Profit for the quarter stood at INR574 crore, marking a 21% YoY increase, while Operating Profit rose by 25% YoY to INR1,017 crore. The bank's Net Interest Margin (NIM) was maintained at 3.77%, showcasing its ability to manage margin pressures effectively.

Strategic Focus on RAM Verticals and Digital Transformation

KVB's strategic emphasis on Retail, Agriculture, and MSME/Commercial (RAM) verticals continues to yield positive results. These segments collectively constitute 86% of the bank's total business, growing by 19% YoY. Commercial advances grew by 16% YoY to INR33,209 crore, retail advances by 22% YoY to INR24,023 crore, and agriculture advances by 20% YoY to INR22,614 crore. The bank has been proactive in enhancing its digital ecosystem, launching initiatives like an Omni Channel Marketing tool for customer communication, Instant VKYC in its DLite app for quick onboarding, and digitalization of NACH processes. These efforts have led to a 18% YoY growth in digital transactions, with 93% of transactions now served digitally.

Asset Quality and Prudent Provisioning

Maintaining a strong asset quality remains a cornerstone of KVB's strategy. The bank's Gross NPA stood at 0.76%, a significant improvement from 1.10% in the previous year, and Net NPA remained low at 0.19%. Despite a 'modest increase' in fresh slippages during the quarter, largely due to two corporate accounts, the management adopted a proactive approach by recognizing these stresses upfront. This allowed for immediate realization efforts and a clean-up of the balance sheet. The bank made provisions of INR274 crore for the quarter, including INR186 crore for these specific corporate accounts, which is considered a one-time measure. The Provision Coverage Ratio (PCR) improved to 96.76%, and SMA 30-plus levels reduced to 0.27% from 0.60% in the preceding quarter, reinforcing the bank's commitment to robust risk management.

Outlook and Management Confidence

Karur Vysya Bank's management expressed confidence in sustaining its growth momentum and maintaining strong financial health. They reiterated guidance for NIMs to be in the range of 3.7% to 3.75% for the full financial year, with gross NPA expected to be less than 1.5% and net NPA less than 1%. The bank plans to open an additional 21 branches in the current year, expanding its physical presence. The focus on enhancing customer engagement through digital tools and optimizing SMS communication using GenAI highlights a forward-looking approach. KVB's disciplined execution, proactive risk management, and strategic investments position it for continued credible progress in the Indian banking sector.