Karur Vysya Bank Q3 FY26: NIM rises to 3.99%

Q3 FY26 update: RAM drives the narrative

Karur Vysya Bank (KVB) used its Q3 FY26 management update to emphasise stronger traction in RAM segments, short for retail, agriculture, and MSME. The bank linked the quarter’s performance to steady credit demand in these categories, while acknowledging a tougher environment for corporate credit because of prevailing interest rates. Management reiterated that it remains “cautiously optimistic” for FY26, with a sharper focus on margins and asset quality. The update also retained key operating targets for the full year, including profitability and asset quality thresholds.

Total business crosses Rs 2.11 lakh crore

As of 31 December 2025, the bank’s total business stood at Rs 2,11,647 crore. Management said overall business rose 4% quarter-on-quarter (QoQ) and 16% year-on-year (YoY).

The bank reported advances of Rs 97,52 crore with 5% QoQ growth. Deposits were reported at Rs 1,14,595 crore, rising 4% QoQ. On a YoY basis, management stated advances and deposits grew 17% and 16%, respectively.

Business mix steady; RAM remains dominant

KVB said its business mix remained unchanged, with RAM verticals contributing 86% and corporate banking 14% of the business. Management highlighted that RAM verticals grew 4% QoQ and 19% YoY, underscoring the bank’s stated preference to lean on granular segments.

Within RAM, retail advances rose 6% QoQ, which the bank attributed largely to growth in vehicle (transcript refers to “je loans”) and mortgage loans. The agriculture loan portfolio grew 4% during the quarter. The commercial business segment recorded 3% growth over the previous quarter, and another part of the update references a 21% YoY increase for the segment.

Corporate credit grows, but management flags headwinds

The corporate portfolio recorded 6% QoQ growth. At the same time, management noted that the “current interest rate environment” is challenging for expanding the corporate book. The comments position corporate growth as selective, even as the bank continues to run a largely RAM-heavy franchise.

Separately, a market note included in the provided material stated KVB had moderated credit growth to 14% YoY in Q4 FY25, citing a pullback from the low-yielding corporate book and higher-risk segments such as personal loans, BNPL, and vehicle finance. Even with that background, the bank’s stated FY26 approach remains to outgrow the industry by a margin.

Net interest margin beats earlier guidance band

On profitability drivers, management discussed net interest margins (NIM). It said the bank had previously guided for 3.7% to 3.75% for FY25-26, and that it “successfully navigated the quarter” to deliver NIM of 3.99%.

For the full year, management reaffirmed NIM guidance of 3.9% to 3.95%. The update framed margin performance as an area to watch, given broader sector liquidity and funding conditions.

Asset quality: credit cost and NPA commentary

The transcript references an annualised credit cost of 47% for the quarter and 67% for the nine-month period ended 31 December 2025, alongside “advances 16 cr” in the same passage. Management also said gross NPA “slightly decreased” from 76% to 71%, while net NPA “remains steady at 0.19%.”

In its forward guidance, management reiterated targets for gross NPA below 1.5% and net NPA below 1%, and said slippages are expected to be less than 1% of the book. It also stated it does not anticipate “any significant setbacks” at present.

Branch expansion and credit process changes

On distribution, the bank said it plans to open another six branches in the last quarter of the year. A separate report cited the bank’s plan to open 28 new branches before the first half of the current financial year, with a focus on southern and western India, as per MD and CEO Ramesh Babu.

Management also said it is in the process of revamping its credit process, without sharing detailed milestones in the provided excerpt. The commentary was positioned alongside guidance that keeps cost discipline in focus.

Guidance maintained: growth, profitability, and efficiency

KVB reiterated its full-year operating guidance across key metrics. The bank expects credit growth to be 2% above industry growth, with ROA above 1.85%. It maintained NIM guidance of 3.9% to 3.95% and said the cost-to-income ratio is expected to remain under 50%. It also reiterated its intent to keep gross and net NPAs within the stated ceilings.

Industry context: credit growth moderation and FY26 expectations

The update included an industry snapshot where bank credit growth slowed to 11% YoY in FY 2024-25, down from 20.2% the previous year. It attributed the slowdown to high cost of credit and tightening regulatory norms from the RBI, with knock-on effects on NBFCs and retail lending, and muted growth in industrial credit.

For FY 2025-26, the material said rating agencies expect 10% to 13% credit growth, citing GDP growth tapering, tight liquidity conditions, muted deposit growth, and high loan-to-deposit ratios as key risks. It also noted that higher capital outlay could support credit growth, and that an income-tax rebate for individuals earning up to Rs 12 lakh annually could support consumption and, in turn, credit and deposit growth.

Key numbers at a glance

What it means for investors: execution versus a slower industry

KVB’s update places RAM-led growth and margin management at the centre of its FY26 plan. The bank’s reiterated aim to grow credit 2% above industry comes as the sector is expected to see a more measured credit cycle versus recent years. If deposit growth stays muted across the system, managing funding costs and liquidity becomes more important for margins, which is why NIM guidance and cost-to-income targets matter.

In the material provided, Emkay Global reiterated a ‘Buy’ rating with a target price of Rs 300, valuing the bank at 1.5x its projected adjusted book value for March 2027.

Conclusion

Karur Vysya Bank’s Q3 FY26 commentary highlighted steady RAM-led growth, a reported rise in NIM to 3.99%, and a consistent business mix with RAM at 86%. Management maintained FY26 guidance across credit growth, margins, ROA, asset quality, and operating efficiency, while also outlining branch expansion plans and credit-process changes. The next key checkpoints will be the bank’s execution on growth versus the industry range cited for FY26, alongside its ability to keep margins and asset quality within the guided bands.