/**

• blogpostTitle: KVB FY26: record profits, low NPAs, and a cautious FY27 margin outlook
• blogpostSlug: kvb-fy26
• blogpostCoverImageDescription: Ultra realistic corporate finance scene: a clean modern desk with a laptop showing a banking dashboard featuring three main charts: a rising line for total business from 186,569 to 214,420, a bar chart comparing GNPA 0.75 and NNPA 0.19, and a gauge showing CRAR 18.76. Subtle RBI-style bond yield curve chart in the background, neutral lighting, no logos, no readable text.
• blogpostShortTitle: KVB FY26: profits up, NPAs low */

KVB FY26: record profits, low NPAs, and a cautious FY27 margin outlook

Karur Vysya Bank closed FY 2025-26 with a clear message to investors: growth stayed steady, profitability hit fresh highs, and asset quality remained among the cleanest in the sector. For the quarter ended March 2026, the bank reported net profit of Rs 725 crore, taking full-year net profit to Rs 2,510 crore, up 29% year-on-year. Operating profit for FY 2025-26 rose 27% to Rs 4,075 crore.

The balance sheet also expanded at a healthy pace. Total business reached Rs 2,14,420 crore as of March 31, 2026, up 15% YoY, led by 17% growth in advances to Rs 98,754 crore and 13% growth in deposits to Rs 1,15,666 crore. Management described the year as one where delivery remained aligned with guidance on growth, profitability, and asset quality.

Growth was steady, with RAM still doing the heavy lifting

The loan book continues to be shaped by a deliberate tilt toward RAM (Retail, Agriculture, and MSME or commercial banking). As per management commentary, RAM verticals formed about 86% of overall advances and grew 18% YoY to Rs 85,260 crore.

Within the mix, retail advances rose 25% YoY to Rs 26,197 crore, driven mainly by secured products. Mortgage or LAP loans increased sharply and jewel loans saw strong expansion. Housing loans, however, grew only 2% YoY, which management attributed to low yields and intense competition.

Agriculture advances increased 19% YoY to Rs 24,784 crore, with agri-jewel loans comprising a large portion of the agri book. Commercial advances grew 12% YoY to Rs 34,279 crore, though were flat on a quarter-on-quarter basis, partly because management took a conscious call to moderate growth in the last quarter amid external uncertainty and pricing conditions.

The corporate book expanded 12% YoY to Rs 13,494 crore. Including credit substitutes, corporate exposure rose 20% YoY, supported by focus on better-rated customers and pricing discipline.

Margins improved in Q4, but FY27 guidance turns cautious

A key highlight of the March quarter was a sharp sequential improvement in net interest margin. Q4 NIM was reported at 4.25% after excluding one-off interest on an income tax refund of Rs 21.68 crore. For the full year, NIM was 3.97% after excluding both the tax refund interest and an earlier one-off item of Rs 139 crore interest recovery from technically written-off accounts.

Management attributed the Q4 improvement to a reduction in cost of funds and an increase in yields. In the concall, the bank explained that it reduced certificates of deposit by around Rs 1,773 crore in the final quarter as CD rates were elevated. It also benefitted from deposit repricing through the year.

But the outlook for FY 2026-27 is more restrained. Management guided NIM at 3.75% to 3.80% for the full year, citing two reasons. First, the bank has increased retail term deposit rates in April 2026, which should lift funding costs as it flows through the book. Second, competitive intensity is expected to compress yields on advances as the bank prioritizes retention of relationships over holding unusually high spreads.

This stance was made explicit on the call: management said the bank may need to compromise on margins to avoid losing good accounts, especially in MSME segments.

Asset quality stayed among the best in class, with buffers reinforced

KVB reported GNPA of 0.75% and NNPA of 0.19% at March 2026, keeping headline asset quality stable despite a modest increase in gross NPAs in absolute terms. The yearly slippage ratio was 0.75% and yearly credit cost was 0.77% as per the presentation.

Stress indicators also remained controlled. SMA 30+ was 0.17% of total advances and the stress book ratio was 0.45% of total assets. Provision coverage ratio was reported at 96.45%.

During the quarter, provisions rose to Rs 258 crore versus Rs 162 crore in Q4 FY25. Management highlighted a one-time prudential provision of Rs 163 crore for sectors that could be vulnerable to geopolitical tensions. Sectors referenced on the call included textiles, chemicals, ceramics, fertilizers, and others.

Capital, liquidity, and operating discipline supported the strategy

Capital adequacy strengthened through FY 2025-26. The bank reported CRAR of 18.76% at March 2026 (Tier I 17.72%). Liquidity coverage ratio stood at 125.47% in the concall. Management stated it does not expect to raise capital in FY 2026-27, believing profit plough-back will be sufficient to fund growth.

Operating efficiency improved materially in Q4. Cost-to-income ratio for the quarter was reported at 37.27% (excluding the income tax refund one-off) and 42.96% for the year, better than the sub-50% guidance management referenced.

On distribution, the bank ended March 2026 with 901 branches and 2,213 ATMs and cash recyclers. Management guided it plans to open 50 branches in FY 2026-27, including regular and lite formats.

Digital adoption continued to rise. The presentation states 97% of transactions are served digitally and digital transactions grew 22% YoY. The bank also highlighted the scale of its DLite mobile app with 7 million downloads.

Closing takeaway

KVB’s FY 2025-26 performance reflects a combination of steady balance sheet growth, record profitability, and consistently low NPAs. The key swing factor for FY 2026-27 is margin direction: management expects lower NIM as deposit costs rise and competitive pressure forces pricing concessions to protect relationships.

Even with that caution, the bank enters the year with strong capital, high provision buffers, and a stated focus on keeping GNPA below 1.5% and NNPA below 1%. The operating framework appears geared toward defending asset quality while growing slightly faster than the system.