AU Small Finance Bank Ltd (AUBANK) Q4 FY23 Earnings Concall Transcript

AU Small Finance Bank Ltd (NSE:AUBANK) Q4 FY23 Earnings Concall dated Apr. 25, 2023.

Corporate Participants:

Sanjay Agarwal — Managing Director and Chief Executive Officer

Uttam Tibrewal — Executive Director

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Vimal Jain — Chief Financial Officer

Bhaskar Karkera — Chief of Wheels

Unidentified Speaker —

Rishi Dhariwal — Group Head Liabilities

Yogesh Jain — Chief of Staff

Analysts:

Bhavesh Kanani — ASK Investment Managers — Analyst

Renish Bhuva — ICICI Securities — Analyst

Unidentified Participant — — Analyst

Ratik Gupta — Guardian Asset Management. — Analyst

Kunal Shah — Citigroup — Analyst

Param Subramanian — Nomura — Analyst

Nitin Aggarwal — Motilal Oswal — Analyst

Ashlesh Sonje — Kotak Securities — Analyst

Pankaj Agarwal — Ambit Capital — Analyst

Nidhesh Jain — Investec — Analyst

Sameer Bhise — JM Financial — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the AU Small Finance Bank Q4 FY ’23 Earnings Conference Call. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Mr. Prince Tiwari, Head of FIG and IR. Thank you. And over to you, sir. Yeah, thank you, Yashashree, and good evening, everyone, and welcome to AU Small Finance Bank’s earnings call for the fourth quarter of FY ’23. We thank you all for joining the call today. The format for today’s call will be very similar to last few quarters, where we will start with opening remarks from senior management for the first 20 to 25 minutes of the call, and we’ll follow that with a 30 to 35 minutes of question and answers from all the analysts and investors. To start the call, we’ll have our MD and CEO, Mr. Sanjay Agarwal, share his thoughts on FY ’23 overall performance and outlook for the Bank. He will be followed by our ED, Mr. Uttam Tibrewal, who will share his thoughts on operating highlights for the quarter and the financial year. Besides then, we also have few senior members of our management team on the call today to answer any questions that you may have. For the benefit of everyone so that we can take everyone’s questions, we’d humbly request everyone to keep the number of questions per participant restricted to two and join back in the queue in case you have further questions. With that, I’ll now request our MD and CEO, Mr. Sanjay Agarwal, to share his thoughts on the Bank’s performance and outlook.

Sanjay Agarwal — Managing Director and Chief Executive Officer

So thanks, Prince. Hi, everyone. Good evening. [Foreign Speech]. I’m very happy to speak to you on this call today as we recently celebrated 28 years of our existence and sixth year of banking. It has been an incredible journey and a wonderful experience to build a bank like AU. I met so many of you last year during the roadshow, while raising capital, where we got tremendous support, affection, acceptance, not only of our business model, but also for me, as an individual.

Today, I’m happy to share that we have fulfilled all our promises made last year during the roadshow despite many headwinds like inflation-led high interest rate cycles, liquidity issues, and unnecessary negative perception around us. We promised to grow our business around 30%, and our numbers speaks like this. Our deposits grew by 32%, now standing at INR69,000 crore plus. Assets after securitization grew by 26%, standing at INR59,000 crores, plus with pristine asset quality. We delivered sustainable and superior ROAs and —

Operator

This is the operator. Sorry, to interrupt you. Can you help me with your name and company name, please? Hello? Hello? This is the operator. Can you help me with your name and company name, please? Hello? As there is no response, you’ll be joined back to the conference.

Sanjay Agarwal — Managing Director and Chief Executive Officer

We actually serve 38 lakh plus customers at 1,000-plus touch points in 21 states and three UTs by winning team of around 20,000 people. My reappointment as MD and CEO and my colleague’s, Uttam as Executive Director, for the full three year reinforces that we are walking on the right path with strong compliances, robust governance, and sustainable business model. I’m really thankful for you for this.

The past couple of years have been personally trying for me as a seasoned entrepreneur of 28 years as we have been the subject for numerous unfounded, unfavorable rumors causing unnecessary commotions and diversion. I hope that now we can all move forward with focus on our performance. I would like to thank all my shareholders for their patience unwavering support and being there with us through thick and thin. Another feather in our cap is receiving of AD-I license on our foundation day. It is not only completes our product offering to the existing customers, but will also help acquire newer segment of customers. I’m thankful to the regulators for validating and strengthening the small finance bank platform by not only giving us the AD-I license, but also to another two SFB friends, so that product offering at SFB platforms are complete and at par.

Coming to India. We remain on a very different trajectory as a country of optimistic, determine, and hard-working people. We at AU are very excited to participate in India story of 1.4 billion people with economy expected to grow at 7% in next 10 years by providing excellent protective services to build India. With a market share of just 0.4% in both deposits and assets, the opportunities are immense, then the sky is the limit. Our business model is well-settled. We will remain in identified market segments, like urban markets for garnering deposits, and for lending, the core and rural markets. Our focus is to build sustainable, low-cost granular deposit franchise, where the challenge, as of now, is around interest rates, but we will continue to manage with strong emphasis on CASA and granular deposits, especially on a current account proposition. Last year, we grew current account deposits by 43%, bringing our CASA ratio to 38% and CASA plus retail deposit base at 69%. This helped contain our cost of money at similar level to last year at 5.96%.

In FY ’24, our margins may be impacted as the cost of money is higher and the peak is not over yet. Further, our loan book has been fixed rate, which also gets impacted in a rising interest rate scenario, although share is coming down and now it stands at 66% versus 74% a year ago. The share of Commercial Banking, affordable housing books are increasing, which are important franchise business, but with lower yield. However, these businesses have lower credit costs and lower opex, and thus has similar ROA as per our other retail businesses. Further, our margins will be protected by continuous investment in strengthening current account propositions, transition banking, focus on data and its capabilities, automation of credit and process reengineering. As we are investing to build capabilities, thus our cost to income level can be high. Moving ahead, we expect the advantage of scale to start kicking in, and by the year end, our investments in investor lending, video banking, unsecured lending, and cross-sell will start positively impacting the P&L. There will be more pool of revenues from AD-I license, a well product ETC. Credit card business is also expected to breakeven in the next one year.

Further, we bolstered our strength at the Board level by inducting three independent Directors last year, out of which two are women Directors. We are now 10 members strong Board with eight independent Directors. But talk about my own focus area, I mean, very importantly as a CEO, I’m very excited for my next tenure. My area of focus is to build brand, which will eventually help us in deepening trust in the entire ecosystem, strengthen our deposit franchise, invest in innovation, data first and digital culture with emphasis around understanding your customer, which we call UYC, and to build a strong HR practices.

Tech and innovation remain my top focus areas. I’m not a techie myself, but I’m investing a lot of my time these days in tech discussion with IT team, partners, and ecosystem stakeholders. We are working across all aspects of technology, be it core technology stack, digitization, automation, data analytics and digital customer-facing propositions. This quarter, we made significant progress in strengthening our core technology stack. We upgraded our core banking system to the latest version and we’re also upgrading capacity of our data centers.

In Wheel business, which is the oldest one, we are implementing Salesforce LOS along with underwriting tool by FICO to enable straight-through processing of vehicle loans. While we started this journey from our oldest business, we invest — we envisaged to implement similar processes of all the loans in the bank. Another step towards operational excellence is to automate processes using robotics process automation and AI. I personally believe that, in the next 10 years, every Indian will have a digital footprint and that would be to generate large data sets. And as a bank are the golden source of data, those with capabilities to leverage data to personalize customer experience would stand as winners.

At AU, we’re enhancing our understanding of customer through in-house and alternative source of data for the long-term vision to have a customer data as a good and as vast as what Google has, keeping in view all required norms around previous year data protection. On the digital front, we continue to deliver innovative products and upgrade existing offerings. We have recently launched a digital current account proposition, SwipeUp card, credit card upgrade program, and industry-first offering around bill payments over video banking. Our digital insurance and wealth proposition have also started gaining traction, and this year, we will further enhance and scale this and will be soon launching merchant app.

We’re also enhancing our digital payment stack with more powerful propositions around UPI, BBPS, FASTag ETC. I believe I’m sounding like a techie guy. So we have been preparing ourselves to leverage the opportunities available through the emerging public digital infrastructure in India. We are live on the account aggregator. We are one of the first few banks to live on the [Indecipherable] platform, and we are in discussion with ONDC team to implement innovative use case around digital commerce. We’re also working with an RBI Innovation Hub fintech to enable financial inclusion. We remain on a journey to build one of the fast — one of the best tech-led retail banking franchise for this country. To execute on our vision, we have strengthened our tech team and are working with leading global tech companies, be it Amazon, Salesforce, Accenture, Adobe, Oracle, and PCI, etc. All these asset partners have been engaging well with us, and I’m personally meeting their global leadership to further strengthen our relationship and to explore areas of innovation.

Another area of focus for me is to build strong HR practices because I feel people are the greatest asset. I’m happy to share that our senior team is quite stable with an average vintage of seven years, well balanced, and is driving the business with a lot of passion, purpose, and pace. On the hiring front, we are seeing a great traction on people wanting to join us. Our recent HR practices are getting acknowledged, policies like menstrual leave for women employees and AU Forever Pass, is among the first in industry inspired by our philosophy of Badlaav Humse Hai. I’m delighted to share with you that we have received the Retail Banker International Asia Trailblazer Award for our HR practices, adjudged as a Great Place to Work third in a row, and are one of the top 25 organization in the BFSI segment.

Among the many awards that we received last year, the prime one is to adjudged as the Best Small Finance Bank of the country by Financial Express and Business Today. We are really humbled and grateful to all of you who have been a critical part of this journey. In the end, I can assure you that we are more committed to build one of the finest institutions of the world. I believe that building a bank may take at least 10 years to understand all the nuances of this platform. I’m very happy to say that we have — the way we have progressed in the last six years despite so many real and unreal challenge that we faced, navigated and sailed over.

There’s a time for consolidation to build a long inning. Like the batsman gets more confident with every passing over, similarly, we are getting more confident with every passing year at this banking platform. We continue to lay foundation of building a sustainable, well-governed Pan-India bank with a mindset of playing a long inning. We are building ourselves to take advantage of the India opportunity over the next decade. We have figured out approach by offering the right product in the right market, deposits from urban, assets in core, offered by the right team with the right tech, walking on the right path, building practices and processes, which are standardized, scalable, and sustainable.

Thank you so much for listening to me. And let me hand over to Uttam for the operation highlights. Thank you so much.

Uttam Tibrewal — Executive Director

Thank you, Sanjay. [Foreign Speech]. And very good evening to everyone. I hope you all are in good health. FY ’23 witnessed a resurgence of the demand across various industries with domestic consumption on the rise, along with increase on ground activity and a positive outlook for India’s GDP growth. Our expectations of FY ’23 units remains well on track. As we conclude Q4 FY ’23, I’m pleased to report that AU Small Finance Bank has delivered a consistently strong and stable performance across all our businesses throughout the quarter and also the entire fiscal year.

From build-out of our digital properties to deposit growth to CASA growth and improve granularity to consistent loan growth with ever-strengthening asset quality, we are diligently focused on excelling in every aspect of our customer-centric business. Notably, we have managed to keep our gross NPA below INR1,000 crore, thereby bringing down our GNPA to 1.66% and net NPA to 0.42% on the back of strong collection efforts, while staying true to our philosophy of deep customer engagement and proactive problem-solving. Having recently completed our sixth year as a small finance bank and 28 years as an institution, I’m proud to say that we have built a winning team of over 28,000-plus employees, dedicated to transforming our organization into an institution that commands the confirmation[Phonetic] of regulators, the love and trust of its customers, and the backing of its investors.

I’m pleased to share that Bank customer base has grown to over 38 lakh in FY ’23, representing a growth of 40% over last fiscal year. During FY ’23, we added 108 new touchpoints to expand our distribution to a total of 1,027 touchpoints and serving our customers physically from 711 unit locations across 21 states and three union territories. Similarly, our digital distribution has also seen strong traction with our AU 0101 app saw 90% growth in user base registration to 19 lakh customers with more than 10 lakh active users in March 2023.

Our Video Banking channel has evolved into a comprehensive and self-sufficient digital franchise, offering 400-plus services and handling over 1,000 customer calls per day. On the other hand, our attrition of savings account customers via the Video Banking channel grew 100% during the year with 2.9 lakh plus customers having over INR1,150 crores of deposits, and 15% of customers also holding an additional product from Bank. I’m excited to inform you that we have started acquiring current accounts using Video Banking starting April 2023, and we are confident to get a similar success on this journey, too.

For credit cards, the journey of our sourcing through Video Banking started in October 2022. And in less than six months, we issued over one lakh credit cards via this channel. Our overall credit card provision now goes more than 5 lakh cards and the monthly issuance reached 50,000 plus cards and monthly spends reaching INR1,000 crores in March 2023. Also, in line with our commitment to innovation and customer centricity, we introduced SwipeUp, an industry-first instant card upgrade program, featuring a digital compare and purchase journey.

On the merchant side, I’m pleased to inform that we have reached a milestone of 10 lakh UPI QR codes with UPI QR transactions doubling over the past year, reaching 40 lakhs in March ’23. Not only payments, but our QR-based lending solution has also seen a good start with close to INR200 crores disbursed in merchant lending in Q4 FY ’23. Also, in Q4 FY ’23, we disbursed INR146 crores in personal loans, totaling to total disbursement of INR804 crores till date, all through the AU 0101 digital platform. The success in digital acquisition and engagement is also attributed to the growth in brand awareness with over 31 crore brand impressions and more than 1.6 crore website visits in Q4 FY ’23. Not only did the brand search volume increased by 30% in the fiscal year, but the website traffic has also grown by 2.7 times year-on-year with 50% lift in organic traffic, translating to growing brand affinity towards the Bank. We have also witnessed a 200% growth in number of existing customers visiting our website to explore products and enable services.

Moving on to our business numbers. Despite macro uncertainties and significant competition in the deposit market, we have shown consistently strong performance in our deposit franchise throughout the year. In Q4 FY ’23, the total deposits for the Bank grew to INR69,365 crores, a growth of 32% year-on-year with the Bank having 25.6 lakh deposit customers as of March ’23 compared to 19.8 lakh customers in the previous year, representing a growth of 28% year-on-year. This fiscal year, we’ve prioritized customer engagement and deepening [Indecipherable] our customers. Accounts will be of primary accounts. Our focus on customer satisfaction, better product proposition, and continued engagement with the customers has led to impressive 70% of current account and 57% of saving account customers regularly transacting with us. On an average, our transacting customers transact 33 transactions per month in savings accounts and 69 transactions in current account.

Similarly, our product per customer ratio improved to 1.61 for savings accounts customers, excluding dormant and BSBDA accounts and two product per customer for our current account customers. We have also found that engaged customers generated a lift in average monthly balance by two to eight times and those who are not engaged. As I have mentioned earlier, another important area of focus for us has been our current account deposits, which has resulted in remarkable growth of 43% year-on-year, reaching INR3,680 crores on March ’23 as compared to INR2,570 crores in March ’22. This help us optimize our cost of deposits for the full year.

The overall CASA deposits grew by 36% year-on-year from INR19,608 crores to INR26,660 crores, helping and improving our CASA ratio from 37.3% as of March ’22 to 38.4% as of March ’23. The increase in CASA ratio is a marketable achievement in an environment where there was notable competition for deposit across the banking system. After resounding success of our first premium banking offering, AU Royale, we are excited to announce the launch of the AU ivy program, a one-of-a-kind product in the industry. This is an invite-only super HNI category product, and we look forward to receive the same affection and acceptance from all.

Our strategy of focusing on urban markets for liability products has been successful, and we opened 58 new branches in urban and metro markets in FY ’23. We have already seen few branches, which are less than one-year-old, ramping up their deposits to INR50 crores to INR100 crores, reflecting the positive response we have received from high-quality retail customers in urban markets. Our strategy of asset cross-selling to our liability customers has proven effective in engaging our customer base and deepen the relationship. Cross-sell of asset products to branch banking customers increased by 25% to INR2,500 crores in FY ’23 compared to INR2,000 crores in FY ’22. Credit cards, personal loans and Business Banking are among the key assets for liability customers, and we will keep ramping up our efforts here.

The gold loan is another area where we are focusing in branch banking and currently offering this product from 50 locations. We are in the process of scaling up our gold loan business, and we’ll keep you updating as we progress. On bancassurance, our partnerships with HDFC Life, ICICI Prudential, Future Generali, Aditya Birla, Care and Chola has helped us to drive customer activity and engage customers for life, general, and health insurance. Through these partnerships, we sold and renewed over 5.9 lakh insurance policies in FY ’23 for a premium upwards of INR640 crores.

Last year, we have placed greater focus on wealth management and have completely digitized our wealth journey, making it paperless and signatureless, resulting in a seamless and superior customer experience. As a result, the number of customers having SIP has doubled from 23,000 to 56,900 in March ’23. Consequently, our mutual fund AUM has increased by 62% from INR103 crores in March ’22 to INR167 crores in March ’23. We have also started distributing PMS offerings to some of our HNI customers through our partnership with Motilal Oswal Financial Services. We have acquired over 31,000 3 in 1 trading accounts taking the total number of such accounts to more than 90,000.

Now, let me turn to our asset business. Starting with Wheels. For Q4 FY ’23, the vehicle industry sold a total of 48 lakhs units registering a year-on-year growth of 7%. Coming to the full year, commercial vehicle segment saw a year-on-year growth of 27% while tractor, personal vehicles and two-wheeler segments also exhibited good growth, registering a growth of 19%, 12%, and 5%, respectively. Keeping up with industry trends, we disbursed INR3,716 crores, a 1.34% increase from Q4 FY ’22 with an IRR of 14.44%, marking a year-on-year increase of 101 bps. In addition, we achieved the highest quarterly disbursal for used vehicle financing at INR1,750 crores in Q4. Our average ticket size of disbursements was around INR5.03 lakhs and around INR3 lakhs at portfolio level,

Excluding two-wheelers. As of 31st March ’23, the total portfolio of Wheels stood to INR22,833 crores through 8.43 lakh live loans, comprising of 52% new vehicles, 36% used and refinanced vehicles, 10% tractors, and 2% two-wheelers. The portfolio’s commercial segment contributing to 46%, while the personal segment contributing to 44%, and tractors contributing to 10%. Our used business asset quality further improved with gross NPA at 2.25%.

Moving on to our secured business loans. In Q4 FY ’23, we saw our highest ever quarterly disbursals of INR2,300 crores in SBL segment. The yearly disbursals stood at INR6,717 crores with year-on-year growth of 39% with an average ticket size of INR11.6 lakh and across 60,000 loans. The total SBL portfolio stood at INR19,509 crores, an annual increase of 18% with portfolio IRR of 15% and GNPA at 2.5% across 2.5 lakh live customers. With the increasing number of MSMEs and rapid formulization in the sector, we believe the size of the pie will keep expanding. As AU has been serving this segment for the last 15 years, we have built a sustainable business model to serve the majority of our customers in rural and semi-urban areas. We are well equipped to penetrate existing markets and venture into new ones.

Moving on to our home loan businesses. As a relatively younger book, the portfolio of housing book grew by 63% year-on-year to INR4,283 crores across 42,400 loans with an average ticket size of INR11.81 lakhs and an IRR of 11.8%. In Q4 FY ’23, we disbursed INR722 crores, taking the total annual disbursement to INR2,200 crores. Currently, home loans are available at 240 branches of the Bank, and we have scope to expand coverage to all our touchpoints in due course to encourage retail cross-sell. Our GNPA was stable at 0.33%. And it is noteworthy that much of our affordable housing book is also eligible for long-term refinance firm, NHP[Phonetic].

Moving on to Commercial Banking. Commercial Banking disbursed INR2,848 crores in Q4 FY ’23. Of which, Business Banking and Agri Banking accounted for 63% of business. The total Commercial Banking portfolio grew by 56% from FY ’22, reaching to INR13,006 crores and now accounts for 22% of Bank gross advances. Gross NPL of Commercial Banking has reduced from 0.84% as of 31st March 2022 to 0.38% as of 31st March 2023, which further validates our underwriting approach and customer selection. The Business Banking portfolio reached to INR4,938 crores as of March 2023, showing a year-on-year growth of 70% with disbursements of INR1,005 crores during the quarter.

The Agri Banking business reached the INR3,964 crores portfolio mark, showing a year-on-year growth of 75% with disbursements of INR800 crores during the quarter. This growth was a result of several factors, including expanding our footprint in new geographies, like Uttar Pradesh, East India, and Southern markets, newer product initiatives and increased synergies with Branch Banking. Furthermore, our NBFC funding book has reached the INR2,551 crore mark, showing a year-on-year growth of 25% with disbursement of INR601 crores during the quarter. Our R&D book has reached to INR1,224 crore portfolio mark, showing year-on-year growth of 57%, with disbursement of INR442 crores during the quarter.

To sum up, looking ahead, the strong credit demand will keep the pressure on deposit rates and we will need to manage our cost of funds. Thus, growing our current account business will remain a key focus. Our focus in liabilities business remains on acquiring low-cost granular individuals, small business, and transacting customers and building a predictable, scalable, and sustainable deposit franchise. On our asset businesses, focus will be on bringing efficiency, productivity, and automation, digitization, and leveraging existing customer base through cross-sell. We are grateful for the Authorized Dealer Category – I license granted by the regulator, which completes our suites of banking products for [Technical Issues] banking customers. We will now be able to offer forex services for existing customers as well as acquire new customers for cross-border trade, remittances and guarantees.

Looking back at the 28 years of our journey, I reminded of a tree, which starts with a simple seed, grows into a sapling, and with adequate nurturing and care before growing into a fully grown tree. In the past six years of our banking journey, we have tried to lay a strong foundation to build a forever bank and our efforts towards offering customer-focused services and products have become visible. We are successfully transformed into a primary bank for a sizable part of our customer base, which is specified with growing active users on AU 0101 and increase in customer transactions. We look forward to continuing this journey and serving our customers with greater dedication and commitment in the years to come, and I look forward to sharing more with you in the coming quarters.

Thank you. I’ll now hand you over to Prince for taking the call forward. Please take good care. Thanks.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Thank you, Uttam. Yashashree, we can now open the call for question and answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Bhavesh Kanani from ASK Investment Managers. Please go ahead.

Bhavesh Kanani — ASK Investment Managers — Analyst

Thank you for taking the question. I have two questions. One, when we look at the ROA profile for this year and when we think about the key trends likely next year, one would expect that NIM could be under a little bit of pressure, provisions, which have been delayed this year, can be [Indecipherable] going up. And all the while, we’ll continue to spend heavily on strengthening our franchisee. So is it right to expect that the ROA for next year could be lower than where we have ended this year? Your thoughts on these. And if you can help us understand the lower effective tax rate for this quarter.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Hi, Bhavesh, this is Prince here. So maybe I’ll start and then probably Sanjay [Foreign Speech] can add. So as you rightly said, for the last two years, if you see, overall, our margins have actually expanded quite well and we have got the benefit of the tailwind on the cost of funds, given the lower liquidity post-pandemic. And even as today — as of today, as we have mentioned in the presentation, we have managed to maintain our overall cost of funds for the last financial year in FY ’23 at the same level of FY ’22, right? So of course, there will be some amount of catching up, that’s going to happen with the lag, that’s happening with the entire industry, and that will happen with us as well. So you’re absolutely right that there will be some amount of pick-up in the cost of funds in the next financial year, right?

And you also mentioned and rightly so that we have also been using this tailwind to invest in our future capabilities and businesses. Like, if you look at the entire tech investments that we have done, coming out of lower cost of funds or higher margins and lower credit cost, we have used that money to upfront invest in our capability, and we are now nearing somewhere near the end of that investment phase. Of course, we’ll probably have one or – – next 12 to 18 months still to go, but the pace — the returns have also started crystallizing, right? So by the end of this financial year, you will see us monetizing our — some of the key initiatives around Video Banking, around your entire merchant lending, UPI QR code or unsecured lending, personal loans, cross-selling that we have been piloting or even towards some amount of distribution capability around the insurance side as we have added some new partners, right?

So all in all, I would say — and then obviously, we have AD-I coming up, and of course, it’ll take some time for us to implement it. But at least by the end of the year, we are hoping that we’ll be live up and running and there’ll be some amount of benefits will start accruing. And then obviously, we have the credit cards coming up sometime in FY ’25 when we are looking for the credit card business to breakeven. So all in all, there are some of the investments that we have made during the last few years, which will start leading positive results beginning end of FY ’24. So honestly, while we may have some costs inch up, but we are not too worried around ROA trajectory. The ROA trajectory will definitely be maintained, and probably you might see some positive impact by the end of FY ’25 because for all the things that I mentioned.

And even on the cost of funds, if you look at — currently, we are in a pause mode. We, obviously, saw a very heavy or very strong March in terms of competitive intensity. But of course, we are beginning FY ’24 with slightly pause, regulators have put a pause on it. We are at about 7.10. So while there will be an intense pressure, but as we have said, we might look at — as Uttam [Foreign Speech] also said in his speech, we are looking to add current accounts. We are also trying to see how we can play with the mix. We securitized some of the portfolios last year to get advantage. So keeping all of those factors in line, will the margins be impacted? The answer is, yes. Would it be really, really large? I would not really think so. I think it will be somewhere in the range of historically where we were between pre-COVID to now. And however, the ROA trajectory definitely is not going to be compromised.

Boss, if you want to add anything?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah, yeah. So Bhavesh, my simple answer is this that NIM will get pressurized, maybe around 30 bps, 40 bps in this year, and — because already we are starting our cost of money around 6.4% instead of 5.96% the cost of money was last year whole, right? So there will be a pressure on our NIMs, that is clearly there because it’s not easy to also transfer the entire pressure on the borrowers because there is a lot much competition also there. But banks are generally not meant to only build their profits from NIMs. We have the other pools. And like last year, there was no pool from — pool income from PSLC or from any kind of investment, right? But I hope — I mean, we should hope that there will be other pools like, maybe insurance income can inched up this year, we’ll have AD-I, we’ll start monetizing our QR business, next year it will be credit card. So overall, as Prince narrated that we would able to save our ROA. And ROA — the golden — I think the data is around 2%, right? If you earn 2% ROA in these few years of our journey, it will be good enough for us, but maybe around 1.2% range. We are hoping that we will click that kind of ROA next year, too.

Bhavesh Kanani — ASK Investment Managers — Analyst

Okay, wonderful to hear. And just the small clarification on the effective tax rate being at 20%?

Vimal Jain — Chief Financial Officer

So, Bhavesh, Vimal this side. So for effective tax rate, we have received one refund and assessment order in our favor in this quarter. So that income has been considered here as a reversal of income tax. So that’s why this reduced the tax rate.

Bhavesh Kanani — ASK Investment Managers — Analyst

Wonderful. Thank you, and all the best.

Operator

Thank you.

Vimal Jain — Chief Financial Officer

Thank you. Thank you.

Bhavesh Kanani — ASK Investment Managers — Analyst

We have our next question from the line of Renish Bhuva from ICICI Securities. Please go ahead.

Renish Bhuva — ICICI Securities — Analyst

Yeah, hi, sir. Sir, just two questions from my side. So one is on the vehicle book. I mean, so after a long six, seven quarters, we have seen the absolute decline in the book despite there is industry tailwinds. So just trying to get a sense what is happening there.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

So before Bhaskar [Foreign Speech] answers, Renish, let me just clarify. The vehicle book hasn’t really declined. In fact, it has gone up. But yes, you have to — we have also securitized some business this year or this quarter, and because of that, you are seeing in the absolute terms only on gross advances. If you look at the overall Wheels book, then the growth has been upwards of about 32%. [Speech Overlap]

Sanjay Agarwal — Managing Director and Chief Executive Officer

You need to add the securitized book in the overall to figure out the growth.

Bhaskar Karkera — Chief of Wheels

Correct. So Renish, hi, Bhaskar here. Nothing changes, all’s well. It’s just — as Prince rightly mentioned, it’s just a matter of the securitized book, otherwise, all products in the markets that we are, the things that we do, we continue to do, and we continue to do the same strategy of balancing the product and [Indecipherable] if the bank needs it.

Renish Bhuva — ICICI Securities — Analyst

Got it. So let me put it this way. So we have not lost our market share in Q4 in Wheels business?

Bhaskar Karkera — Chief of Wheels

No, no. No, we’ve not lost market share.

Renish Bhuva — ICICI Securities — Analyst

Okay, okay. Rather you would have gained right, Bhaskar [Foreign Speech]?

Bhaskar Karkera — Chief of Wheels

In and around the same share because usually we do more. So market share, when they talk about, they talk about new vehicles more and then we play the game of — so that’s the reference point. But in and around the same market share, yeah.

Renish Bhuva — ICICI Securities — Analyst

Got it. And sir, secondly, again, continuation of what Bhavesh was trying to highlight, is that — let’s say, in FY ’22, given the — like the NIM trajectory, and also, this year the credit cost was lower, which should idly normalize in FY ’24. So when we — we’ll have two major components should drive ROA lower. One would be, of course, the NIM contraction and the credit cost normalizing. So how confident we are that we’ll be able to sort of sustain this 1.8% ROA in FY ’24 as well?

Sanjay Agarwal — Managing Director and Chief Executive Officer

So my take on the credit cost is a little different. I strongly believe that this year also we’ll have the benefit because of the top asset quality around us. You are seeing how we are getting it now is — I mean, pre-COVID level also is better than that, right? So it’s 1.6%, net NPA is 0.4%. And I think every day, and we are going on the ground, we are seeing a lot much optimism around credit growth, credit compliance, repayments. So I don’t think that credit cost can surprise us in this year or even get to the normal level. And again, I want to say you that, somehow I’m able to figure out in the last six years that sometimes some pool helps you, sometimes the other factor helps you or sometimes there’s negativity of some other things. So this year, it may be because of NIM getting pressured, but it can be helped out because of a good asset quality, the other income from other pools like AD-I or maybe demonetization of our QR business and all those things. So it’s a mixed bag, and we need to carefully craft our journey. So that is why we are hoping that this year, also to be very honest, ’22,’23, people were challenging us that we won’t able to give this kind of ROA. But in the end, we are able to deliver that, right? So let’s hope for best and see how the market also plays out in the next maybe two quarters because there is a pause of interest rate as of now, right? And we are seeing it like bonds are coming down at 7.10 today, right? So I think we need to believe more in hope and belief and see. We will play our inning well, that’s our sense.

Renish Bhuva — ICICI Securities — Analyst

Got it, sir. Best of luck, sir. Thank you so much, sir.

Operator

Thank you. We have our next question from the line of Subhranshu Mishra[Phonetic] from PhillipCapital. Please go ahead.

Unidentified Participant — — Analyst

Hi, sir. Good evening. Thank for the opportunity. Two questions. First one is on the deals. If we can split the book into various asset classes, what comprises of how much proportion, what would be LCV, HCV, cars, tractors, so on and so forth? The second question is on the initial comments Sanjay [Foreign Speech] made about breakeven of the credit card business in FY ’25. This seems very aggressive compared to any other bank in India. Sir, there is no bank which can claim a breakeven in credit card business in flat three years, generally it takes around five to seven years. The largest of the banks in India have done it in as much time. So given the fact that you’ve pointed out the average credit limit and the new to bank customers and new to credit card customers, I think we are going very aggressive on those parameters to really have the breakeven faster and play to the gallery. Is that a fair comment to make on the credit card, sir, if you can explain [Indecipherable]. Thanks.

Sanjay Agarwal — Managing Director and Chief Executive Officer

So the answer is the later one first. So as you know — so I think [Speech Overlap] Subhranshu, okay. So I hope you would have gone through our credit card presentation done maybe three, four months back to really explain our strategy around it. So as you know, Subhranshu, that we are more of a still employed kind of lenders and we know how to lend in core markets over the years. So we are not playing to the galleries, to be very honest, because credit card as a business is very lucrative, post our all digitization across country. And now it’s a first product to be very honest for the payments and the oldest one, and the data which we are getting every month, and we have seen it — I think would have read in our presentation also that our average spend is around now INR20,000 per card per month. Our 84% is active. We are giving around 50% cards to our existing customer base.

And we haven’t done so much of investment to be very honest that its recovery happens in five to seven years, and I’m saying with a lot of responsibility that our credit card will become profitable in quarter three of FY ’25 based on our whole growth plan and the business plan in place. And Mayank and team is doing fantastic job and adherence to the data is superb there, right? So I would like you to — we can be touch with the IR team, they can be in touch with the bank and team and to figure out our strategy there. But I’m absolutely confident that we are very rational there, we are very confident there. We are doing everything in the way we want to build our franchise, which is sustainable and which is forever. So we don’t have any room to make mistakes, to be really honest, right. So I think there you will find us in quarter maybe two and three — maybe two or maybe three in FY ’25, making us breakeven, right? So this is the credit card commentary. I would say

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Bhaskar [Foreign Speech].

Sanjay Agarwal — Managing Director and Chief Executive Officer

Bhaskar [Foreign Speech], can you comment on the Wheels data?

Bhaskar Karkera — Chief of Wheels

Sure, sir. Hi, Subhranshu, from a split point of view, that personal car is about 40%. We do a car taxi, which is about 12%. Our trucks, which is the heavy commercial, which you asked about is less than 5%. Our LCV is around 4%. We’ll do close to tractor of 10%. We have 4% of construction equipment. So this is what we get and we have about 2% of two-wheelers, so that’s the story from the two to 22-wheeler that we generally have as a split on the book today.

Unidentified Participant — — Analyst

Understood, sir. Just a follow-up question —

Sanjay Agarwal — Managing Director and Chief Executive Officer

One more data point here. Just to comment on your playing for the galleries. So this book is being handled and built by our ex CRO, his name is Mayank, right? And he does not belong to a business or does not belong to a particular kind of mindset, right, he belongs to a risk mindset. And he’s building this business from the last two-and-a-half years and he’s strong in his credit compliance, strong in his overall approach to do this business, right? So I hope he will make a surprise next year.

Unidentified Participant — — Analyst

Just one follow-up question on the credit card. Sir, what is the sum cost? What is the total tech investment that we have done in credit card, which is why it’s breaking even so fast?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

So Subhranshu, hi, this is Prince here. So we have given the details on our P&L slide, right? So that comes to about — for this particular year, it’ll come to about INR156 crores for the last quarter of — I mean, that’s the total investment, but of which 70% has been on credit cards, so that will be about INR100 crores. There’s also a corresponding income that we have shown in our other income breakup, which has also been about INR100 crores. So for the full year, I think we would have invested about 300-odd-crores — INR250 million, INR300 million — about 250-odd-crores on credit cards and we have a revenue — sorry, fee income of about INR100 crores against that. And of course, there’s NII. But happy to — Subhranshu, I think just to get into further details of this, may be a good idea for us to get you a meeting with Mayank to answer further questions specifically on credit cards. FYI, we have also given on slide number 31 specifically the overall ROA impact of all our digital initiatives, including credit card.

Unidentified Speaker —

Best of luck for the credit card breakeven. I look forward to it. Thanks.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Sure.

Operator

Thank you. We have our next question from the line of Ratik Gupta from Guardian Asset Management. Please go ahead.

Ratik Gupta — Guardian Asset Management. — Analyst

Yeah, hi, sir. Good evening. So my question is on the book — the breakup of the fixed and the floating rate book. So currently, as we have a 66% in the floating rate and assuming that the repo rate will remain the same, so do we hope that the fixed rate breakup will go high or do we have a projection on what will be the sort of breakup between the fixed and the floating rate book?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

So — sorry, [Indecipherable], right. I mean, Ratik. Ratik, hi. So this is Prince here. What we have given and what we generally talk about is the mix on the overall asset level. So you see we have like four broad businesses on the asset side. Of course, you have Wheels and SBL, which are predominantly fixed rate books. And then you have home loans and commercial vehicles, which are predominantly variable rate books, right? So the overall composition of these books have already been given and we broadly think that we’ll probably try to maintain somewhere around this mix where retail assets, which is home loans plus SBL plus Wheels would be anywhere around 65% to — 60% to 65% and probably around the Commercial Banking can be anywhere from 20% to 25%.

Sanjay Agarwal — Managing Director and Chief Executive Officer

No, no, Ratik, so I think what I’m able to understood your question is, is that how we will reduce our fixed rate book, right? So I would say that we started — once we started a Bank, right, it was — 100% was fixed rate. Now, in six years, we have reached 66% as fixed rate and 36% as our variable rate. And as our retail book largely from home loan and Commercial Banking is going up, I expect my fixed rate book to touch down nearly 50% in the next three years. So there is no room that my fixed rate book will go up from here because I’m able to build my Business Banking book, Agri Banking, NBFC, Real Estate housing book and all are actually growing faster than my fixed book, which is largely SBL and Wheels. So from here onwards, you will see a drop in our fixed rate ratio in asset very gradually. And in next three years, will touch down to 50%. That’s our overall assessment.

Ratik Gupta — Guardian Asset Management. — Analyst

Okay. And my second question is on the borrowing and the deposit ratio. So if you see the borrowings have reduced, so are we looking forward to be reduced borrowings and focus on deposits for increasing our capital, like the borrowing side, liability side?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Yeah, so I think around the CD ratio, if you see, obviously, last quarter was very good on deposit growth. And to that extent, the CD ratio is currently at about 84% and which is basically what is reflecting on the overall borrowing percentage lower. But historically also, if you see our borrowings have always remained anywhere around 7% to 8% and bulk of it is refinanced, so — and that gives us the cost advantage.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Long-term, without your —

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

CRR and SLR.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Right.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Right? So it’s part of our strategy of liabilities, diversifying liability business and the cost of funds because refinance gives me that leverage in terms of a lower cost against our priority sector assets. At the same time, we don’t have to maintain CRR and SLR on that book. So you’d see us borrowing somewhere around the ratios that we are broadly.

Ratik Gupta — Guardian Asset Management. — Analyst

Okay, okay. That’s it from my end, sir. Thank you.

Operator

Thank you. We have our next question from the line of Kunal Shah from Citigroup. Please go ahead.

Kunal Shah — Citigroup — Analyst

Yeah, thanks for taking the question. So the question is on fee income side. So a lot many levers now available, be it in terms of the increasing contribution of credit card plus distribution and AD-I license would also help. So where do we see fee income to assets settle? What would be maybe our aspirational maybe ratio for fee income to assets and when do we expect to achieve that over how many years, yeah?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

So Kunal, Prince here again. And if you see our entire fee, other income or fee income ratio to assets for the current year, it has been anywhere around 1.3%, and at the core other income, it has been about 1.4%, right? So obviously, this was a year when we didn’t had any one-off in terms of fee income. There was no treasury gains, there was no PSLC fee income, right? So this is a pure and pure core operating fee income at about 1.4% of assets. Now, if we move forward from here and add some of the levers that you talked about, definitely it should go up. Now, the question is, at what level and to what extent we’ll have to see, honestly, as things materialize, but in the longer-term, I don’t think it should be any different from where most of the commercial banks are today as we go.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah, just to add on, Kunal, on Prince’s narrative that I strongly believe that there is a change in insurance payout also on the recent circular from IDA[Phonetic], right? So that will add up to the other income space. And we’re also growing our insurance very well. Last year, we’ve done around INR600 crore premium. This year, we might be doing INR800 crore. We have started building a very wealth proposition also, it’s a small start, but we’ve got some kind of income from there also. Our trade income, which is — was — without AD-I license, also we’ve got some decent amount and is getting traction. AD-I will start kicking from quarter three, quarter four. It’s difficult to ascertain as of now, and while it will take two to three years to really get to the real level of that income. But I think overall, I would say that we, as a bank, being an SMB, we didn’t have much options also in our initial years. But we are now settling down as a bank, and we are getting traction from everywhere, right? So the fees income from our asset liability is getting stabilized.

Insurance and income will get more on to the balance sheet now. We are expecting wealth to settle down. We are expecting AD-I to settle down. So in next two, three years, what — and of course, our credit card income, all those things, the monetization of QR code business, will start now — is around the corner now, right? Something will start from this quarter three, quarter four, and definitely from next year, it will be coming up at a decent level on our balance sheet. And next 18 to 24 months, it will get a decent shape also. So I think we need to be a little patient with us. And now I think time has come where we’ll start commenting very specifically that how much percentage it will be on our balance sheet side, right? So that’s the overall sense we are getting internally.

Kunal Shah — Citigroup — Analyst

Sure. And secondly, with respect to yield, so maybe you highlighted in terms of 30, 40 bps pressure on NIMs. And if I have to look at it in terms of the cost of funds, given that now it’s stabilizing, there will be some catch up. But given the pause in the rates, looking at the maturity of our advances, how much could be the improvement on the yield side, which we could see which was — I think maybe we have not witnessed it over the last three quarters. So just things standing as it is and looking at the maturity, what could be the [Speech Overlap]?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Kunal, the — I think if you go and see our assets built up, the mix has changed a lot, like Commercial Banking book and Housing book is now coming up the size, and there, the yield is not high. Actually, you need to play on NIM, and of course, you need to play on ROA, right, because there is a lower opex, there is a lower credit cost. So I strongly believe that there is an incremental hike in our Wheel business. We are able to pass on some kind of hike there. We are able to pass on some hike on our even SBL business. There is some hike in our even housing, even personal loan space, but because we are also building a book like Commercial Banking, and overall yield on book, it doesn’t reflect, right? So that is why there might be a pressure on NIM because you will see that our cost of money going up, but — and yields are not there on the overall asset, but you will see the lower opex and lower credit costs in times to come. So there is a change in our business model also. And that’s why I narrated in my speech that generally bank takes 10 years to build, right? And we have just done our six years without noises, right? So I think another four years, I think all these things will settle down, and you will see that we are able to comment specifically on our NIMs and all those things, which is so efficient for you people to forecast our future, right?

Kunal Shah — Citigroup — Analyst

Yeah. So with change in mix, no repricing benefit at all from current level of 13.4-odd-percent in it?

Sanjay Agarwal — Managing Director and Chief Executive Officer

I would say — I don’t want to comment, to be very honest, but five, 10 basis doesn’t help us, right? So It won’t be like 30, 40 bps, sure.

Kunal Shah — Citigroup — Analyst

Okay, got that. Perfect.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah, yeah.

Kunal Shah — Citigroup — Analyst

Okay, thank you.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah, yeah.

Operator

Thank you. We have our next question from the line of Param Subramanian from Nomura. Please go ahead.

Param Subramanian — Nomura — Analyst

Yeah, hi, thanks for taking my question. Sir, I was looking at the Slide 35, where you’re showing the deposit mix split between individuals, corporates, etc. So if you look at it quarter-on-quarter, there is an increase, five percentage point in — from government and corporate, while the individual deposits has come down. So just wanted to understand how sticky is this deposit flow that we are seeing more on the bulk side from government and corporates? That’s my first question. I’ll come back for the second. Thank you.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Rishi, do you want to comment?

Rishi Dhariwal — Group Head Liabilities:

So, hi, Rishi Dhariwal here. So basically, the — across the year, the deposits between the government and retail have actually moved more towards retail only in the last quarter because we continue to focus on getting more and more granular retail. So the composition between the individuals and corporate sort of looks a bit slightly lower than Q3. And we managed to win a couple of good government deals so which is where these are transacting accounts that we have. We won mandates from the government, departments, as well as businesses, where we have transacting accounts from them, and that is what has helped us to sort of get that number over there. So these are not bulk deposits, but these are project accounts where the transactions are happening through us. We are registered on PFMS for a state government project. We are registered on the PFMS for a central government project. We have the nodal account with us. So even the government account money, which is there, is actually a transacting account and it is a long-term sticky relationship that we have over there.

Param Subramanian — Nomura — Analyst

Okay, got it. Sir, is the funding cost here higher than what we see for the, say, the individual deposits?

Yogesh Jain — Chief of Staff

Hi, I’m Yogesh Jain. So just to add, this government account, on your question, cost is absolutely less actually than my individual or corporate because this is transacting account in savings. So cost is lesser than my individual and this is what Mr. Rishi[Phonetic] mentioned that this is nodal account. And in normal course of business, we get these accounts from central or state government. That is why you can see that government proposal is a little bit high. And in terms of corporate, also, these are very small corporates, these are not big corporates. Again, kind of INR5 crore to INR10 crore kind of category, which we get a small corporate. So otherwise, we are on course.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Yeah, if I can just add to that, Param, if you’ll — like what Rishi [Foreign Speech] was also articulating, if you look at a year-on-year trajectory, then it is rather — it is exactly same rather, right? In fact, it has come down on the government side and corporate is 14% itself. So as Rishi [Foreign Speech] was saying, throughout the year, we have focused a lot on current account, we have focused a lot on savings account and that has helped us to even manage the cost without necessarily looking for bulk deposits. But definitely, in the last quarter, there was a competitive intensity, some amount of, as Yogesh [Foreign Speech] and Rishi [Foreign Speech] mentioned, we did get some savings balance money in some of the transacting accounts that we won, and that’s the impact.

Param Subramanian — Nomura — Analyst

Okay, fair enough. So what I understand is the mix will reverse back to something that we’ve seen in the last few quarters going ahead, right?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Our endeavor will be to grow individual and retail money, which is what we have always talked about, and that’s the ratio that we track, which is basically CASA plus retail, right? So CASA plus retail for us is around 69%. That was same as last quarter at 69%, and in March ’22, that was 67%.

Param Subramanian — Nomura — Analyst

Got it. Thanks. So one other question from me. Just, sir, if I can — Sanjay, sir, if you could give some insight into how you’re seeing loan growth going ahead? You closed this year at 26%, 27% on the gross advances side that you reported. But going ahead, how do you — how you are seeing the demand environment and the growth outlook for AU, say, for the next couple of years? That’s it from me. Thank you.

Sanjay Agarwal — Managing Director and Chief Executive Officer

No, no, I think as I narrated in my call that there is not much optimism in every sector, be it Wheel, be it SBL, be it Housing, be it Commercial Vehicle — sorry, Commercial Banking, so I think it’s about — us is not about and how much really we can grow, the answer is we are looking at this, how much really we want to grow, right? So I think last year also we commented that we want to be in the range of 28%, 30%, and that we achieved if you add on asset securitization, we are near to that rate only. And so we really want to build more on rationality, we really want to build more on sustainability. And being in the industry for so many years, I strongly believe that sometime, sometime the bad books are built in good times, though. So I want to be really cautious here, and because deposits is also not available at will, right, we have to put a lot much effort there.

And as you were talking about that whether we have — whether we choose or we have a right to choose, it’s not there, right? If government money is coming at a semi account, whether it’s INR3,000 crore, whether it’s INR4,000 crore, whether it’s INR2,000 crore, I need to pick up, right? We being in a small finance bank, we are early in our journey. So we don’t have choices. But in the end, if you see our overall data profile, which says that our CASA is 38%, our retail is 70%, and our cost of money is around 5.95%, and then, of course, we are building lot much around digital, we are building lot much around the other aspect, then, holistically, you see Bank going very strong, and then, of course, our overall asset rationality around growth, and then, of course, the asset quality. So that makes me more comfortable that we have the business model, which is sustainable, which is scalable, and that’s the way we really want to be in this business.

Param Subramanian — Nomura — Analyst

Okay, sir, thank you so much and all the very best. Thank you.

Operator

Thank you. We have our next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.

Nitin Aggarwal — Motilal Oswal — Analyst

Good evening. Congrats, Sanjay and Uttam [Foreign Speech] on good results and also for the reappointment. I have one question.

Sanjay Agarwal — Managing Director and Chief Executive Officer

[Foreign Speech]

Nitin Aggarwal — Motilal Oswal — Analyst

Yes, sir. Definitely. And so, sir, on the deposit side, we have done very well and you indicated that, as an SFB, we have to take any good deposit that’s coming our way. But the excess liquidity on the balance sheet is looking quite high. So if you can quantify that number? And now looking at the potential margin compression and also the SFB profitability showing that additional investments are not adding anything to ROA. So what would be our approach on this front? Like, would we look to reduce this excess liquidity or will we continue to raise deposits at this pace?

Sanjay Agarwal — Managing Director and Chief Executive Officer

No, no, so I would — Nitin, I would say that whatever way we have done in the last six years, whether it’s our deposit strategies, deposit build-up strategy, asset build-up strategy, the quality around it, the cost around it, the people around it, the tech around it, like I’m very happy to see that our credit card business becoming profitable next year. We already started monetizing our QR code business. We already started building up Video Banking as an option to Branch Banking, right? So I think — I don’t have a choice not to invest, to be very honest, because we are looking to build this Bank for next maybe 100 years, right? And tech is essential, tech is essential, whole tech innovation is essential. You will be left out, so you need to invest with NPCI. We need to invest with Amazon. We need to invest with Salesforce. We need to invest with Visa and FICO, right? Those are coming like from everywhere now. So I don’t think that for one year or two year to make my balance sheet very smarter or my ROEs and ROAs very attractive, I should not do investment, right? So I will — we will keep doing investment because that’s the need of the hour and that’s the way the Bank should be built on because we are also earning very healthy ROE and ROA. Our ROEs are north of 15% in spite of raising so much of capital last year, right? And you will see that ROEs coming back maybe in next two years, whatever you expect. But I think then it will be more sustainable because it will be tech-led ROEs and ROAs, right? So that’s one thing.

Second, the other question because the excess liquidity, it was temporarily parked because the money we only got in last week or maybe last two weeks of March and we already have deployed it. And again, we are not in position that we had a lot many choices to say no, right? We say no to many things. But if deposit is coming in current account or deposit is coming in savings around at 4.5%, 5%, we need to accept because we are a banker on a street, which is available for customers to do banking, right. So I think there also, the access is not hitting us so much because, optically, on March, it looks very heavy, but it’s around 128%. But as of now, when I’m speaking to you on 25th of this month, it already got resolved, right? So that’s the sense. So it’s a very dynamic platform, very operational platform, many things we need to accept as we do our business on a regular course, but very confident and very excited that our sixth year has gone without much of disturbance around us, other than the perception, right? And our deposit franchise, our asset franchise, our digital franchise, our governance, our overall aspect of banking, we are ticking every box out of it.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

And just to add, Nitin, one point that — like as was said, [Technical Issues] that has already normalized. And for the last quarter as well, we had reported the average LCR was 128%, right? And again, being a small finance bank, relatively newer bank compared to some of the existing guys, we do have to keep some excess liquidity. I mean, the regulation requires us to keep 100%. There is a certain amount of Board mandate as well, given the kind of vintage that we have.

Vimal Jain — Chief Financial Officer

And Nitin, Vimal this side. So if you see the slide number 31, even in that excess liquidity, we are not losing money. So at least it’s slightly in positive side. So we are keeping the excess liquidity for keeping our balance sheet strong and not losing any profit as such.

Nitin Aggarwal — Motilal Oswal — Analyst

All right, got it. Thank you so much, and wish you all the best.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thanks, Nitin.

Operator

Thank you.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Thanks, Nitin.

Operator

We have our next question from the line of Ashlesh Sonje from Kotak Securities. Please go ahead.

Ashlesh Sonje — Kotak Securities — Analyst

Hey, hi, team. Congrats on the good numbers.

Operator

Sir, can you speak louder, please.

Ashlesh Sonje — Kotak Securities — Analyst

I hope you can hear. I hope this is better. So first question is on the SBL book. If I include the securitized book, that segment has grown about 7% Q-o-Q, which is a healthy number. What run rate do you expect for this growth in the near future?

Sanjay Agarwal — Managing Director and Chief Executive Officer

SBL book?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

SBL book.

Sanjay Agarwal — Managing Director and Chief Executive Officer

SBL book should grow in the range of 20%, 22% year-on-year, right, plus, minus 1%, 2% here and there because we have got a scale now is north of INR20,000 crores. So I think it will go around 20%, 22% range every year.

Ashlesh Sonje — Kotak Securities — Analyst

Okay. And secondly, you mentioned that you have taken some hikes already on interest rates on the new originations in both SBL and Wheels. Can you quantify roughly a weighted average number or something, the hike which you have taken on new originations [Speech Overlap]?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Incremental — in the incremental — Bhaskar [Indecipherable], you have a data incrementally — in one-year term, how much incrementally you have passed on to the borrowers?

Bhaskar Karkera — Chief of Wheels

Yeah, so we have already — if you look at the entire year, we have gone up by 80 bps over what it was last year, and Q-on-Q, the last quarter of last year versus this quarter it’s up by 1%. So incrementally on a sequential — Y-o-Y, but if you look at during the year, we have passed on upwards on 85 bps[Phonetic].

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah, SBL, we have largely remained on the same course. Okay, understood, sir. Sir, any idea what would be the sequential increase during fourth quarter in the Wheels segment? The rate?

Ashlesh Sonje — Kotak Securities — Analyst

Yeah, though, overall —

Sanjay Agarwal — Managing Director and Chief Executive Officer

Quarter two to quarter four. [Speech Overlap]

Ashlesh Sonje — Kotak Securities — Analyst

So it’s around 10 bps?

Bhaskar Karkera — Chief of Wheels

10 bps, yeah. 10 to 12 bps, yeah.

Ashlesh Sonje — Kotak Securities — Analyst

Okay, thank you. Those were all the questions, sir.

Operator

Thank you. We have our next question from the line of Pankaj Agarwal from Ambit Capital. Please go ahead.

Pankaj Agarwal — Ambit Capital — Analyst

Yeah, thank you. Sir, what’s the reason behind being more securitizing this quarter?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Sorry, sorry, what’s the question?

Pankaj Agarwal — Ambit Capital — Analyst

More securitization. It’s Pankaj.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Again, it’s about optimizing your cost. I think we have raised securitization at 100% — I think 100 bps lower than the cost of overall incremental money —

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

In March.

Sanjay Agarwal — Managing Director and Chief Executive Officer

— In March.

Pankaj Agarwal — Ambit Capital — Analyst

Okay. So at what price the securitizing deals are happening right now?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Sorry? So Pankaj, as we said during the Q4, we securitized INR3,000 crores, as we have disclosed, and the average rate there would be about 100 bps lower than where we would normally raise term deposits. So it was — and obviously, it gives you a longer-term funding, which is matched. So it helps us to optimize our mix on the liability side and also helps us on the overall liability, how much growth that we can do and focus on retail business rather than chasing deposits.

Pankaj Agarwal — Ambit Capital — Analyst

The reason I’m asking is that any bank who is buying this portfolio might be at least demanding 7%, 7.5%, right? So you’re saying that your incremental CD rates are more around 8%, 8.5%.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

No, no, so this is more priority sector loans. Typically, you know that larger banks are short on priority sectors. And while there is a PSLC market, but they always prefer buying the portfolio because it goes directly into their investment book and stays with them for next three years. So to that extent, they are willing to pay a bit of subsidized cost or a premium on that.

Pankaj Agarwal — Ambit Capital — Analyst

Okay, okay. Okay, got it. Thank you.

Operator

Thank you. We have our next question from the line of Nidhesh Jain from Investec. Please go ahead.

Nidhesh Jain — Investec — Analyst

Thanks for the opportunity. Sir, firstly, how should we think about cost to income ratio in FY ’24 and beyond? It will remain at the same level [Technical Issues]?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Nidhesh, how are you? Good evening.

Nidhesh Jain — Investec — Analyst

Good, sir. Good evening, sir. Good evening. How are you, sir?

Sanjay Agarwal — Managing Director and Chief Executive Officer

You got the answer, you were worried?

Nidhesh Jain — Investec — Analyst

Yeah.

Sanjay Agarwal — Managing Director and Chief Executive Officer

The worry is around cost to income, right?

Nidhesh Jain — Investec — Analyst

Yes, yes. Sir, how should we think about cost to income in FY ’24 versus FY ’23?

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

So Nidhesh, maybe I’ll start, and Sanjay [Foreign Speech] can add. So on the cost to income side, as you have seen that Q1, obviously, we went up to 65%. But we have done well to manage the cost overall for the full year at about 63% where we had initially talked about 62%, 63%. And as we have been saying earlier in the call that there are many more profit pools, which we are just around the corner. So we have been investing and that’s part of the reason why our cost to income has been higher. But as we move forward, maybe the end of ’24 — so this year, obviously, the cost of income should broadly be in the range that where we are. But as we move into FY ’25, and as I said, some of the investments starts tapering off and some of the revenue pools starts kicking in, including AD-I and credit cards and other things, hopefully, you’ll start seeing a gradual decline in cost to income for us.

Sanjay Agarwal — Managing Director and Chief Executive Officer

So Nidhesh, my take on subject is, is that we are focusing more and more on this. But as you know, we are investing a lot in our tech and our distribution and to build this bank in a very sustainable and with kind of forever mindset, right? So the best case for your own [Technical Issues] best case will be 60%, but it won’t go above 64%, right? So I think that’s the range. But ideally, we should be around 62%, 63%. That’s the way I’m thinking. But it’s too long a call, it’s a full one year, right, and we’re just in April. So anything can happen. But for your own calculation, it can be done like this.

Nidhesh Jain — Investec — Analyst

Sure. Thank you, sir. And secondly, do we plan to scale up consumer loans, personal loans, or any other lending product over the next couple of years [Speech Overlap] on affordable housing?

Sanjay Agarwal — Managing Director and Chief Executive Officer

Not really, Nidhesh. I think we have done enough on our product side. We are running around 15, 16 type of loans starting from Wheels, then SBL and all those things. So we want to focus on our unsecured book, but it has to come through credit card or we want to really see how our QR code business can build up that and also how our data analytics helps us to give us cross-sell option to our existing customers. And both — all three are shaping up well, all three are shaping up well. As I think Uttam told you that we have done INR800 crore of disbursement in our cross-sell PL book, we have around INR200 crores on our QR code business, we have done around INR1,000 crores around credit card. So all are shaping well, and I think we want to be really like that only for next couple of years, and then we’ll see how we want to progress there.

Nidhesh Jain — Investec — Analyst

Thank you, sir. Thank you. That’s it from my side.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Yeah.

Operator

Thank you. We’ll take our last question from the line of Sameer Bhise from JM Financial. Please go ahead.

Sameer Bhise — JM Financial — Analyst

Hi, thanks for the opportunity and congrats on a good quarter as well as the reappointment. So as we mature in our investments over the next 12, 18 months and with the kind of credit quality that we have demonstrated over a large part of our history, what would you see as a steady-state ROA as the business matures in the next three to five years or will we be happy with the current range of 1.8% to 2%? Just from a construct perspective given that we have a large granular asset book, a liability franchise, which is improving on the right side and probably the curve of high investments will be over. So just wanted to get Sanjay [Foreign Speech] thoughts on that. Thank you so much.

Sanjay Agarwal — Managing Director and Chief Executive Officer

I think it’s a good question and thank you for understanding us because we are doing a lot many investment to really build future, right? And if you ask me about my three- to five-year time horizon and if the interest rates doesn’t go off the rack, right, and it remains in one range, I strongly believe that this kind of interest rates are not sustainable, right, for any kind of country. So I mean, it will come down. So because ROA depends on NIMs and other incomes and credit costs and all those things in ROA. So I think I strongly believe in the next three to five years, the way we are building ourselves, and now — as of now, will be complete in terms of our product offering once AD-I start coming in. So I think anything north of 2% ROA will be sustainable because we do retail, right, and we do in high-yield assets, our cost of money can be managed, and that our collection and our ability to collect and manage, our asset quality is always there. And by bringing lot many tech-led innovations, we’ll manage our opex also. So all will start kicking in from next year itself, right? So for the next two, three years, if things remain strong, we can surprise many people in terms of our performance. So that’s my sense. But anything above 2% is quite achievable, given what we have done in the last six years.

Sameer Bhise — JM Financial — Analyst

Great, sir. This is helpful. Thank you, and all the best.

Sanjay Agarwal — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. I now hand the conference over to the management for closing comments. Over to you.

Prince Tiwari — Head of Financial Institutions Group and Investor Relations

Thank you, Yashashree, and thank you, everyone, for joining the call and for your questions and for all your support. Look forward to interacting more. In case you have any further questions, kindly reach out to the IR team. This is Prince signing off from AU’s management side. Thank you so much.

Operator

[Operator Closing Remarks]