Axis Bank Ltd (NSE: AXISBANK) Q2 FY22 Earnings Concall dated Oct. 26, 2021
Corporate Participants:
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Puneet Sharma — President & Chief Financial Officer
Analysts:
Abhishek Murarka — HSBC — Analyst
Gautam Jain — GCJ Financial — Analyst
Mahrukh Adajania — Elara Securities — Analyst
Kunal Shah — ICICI Securities — Analyst
Anand Dama — Emkay Global — Analyst
Rakesh Kumar — Systematix Group — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Axis Bank Conference Call to discuss the Q2 FY ’22 Financial Results. Participation in the conference call is by invitation-only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents or the proceedings of the call is strictly prohibited and prior explicit permission and written approval of Axis Bank is imperative. [Operator instructions] Please note that this conference is being recorded.
On behalf of Axis Bank, I once again welcome all the participants to the conference call. On the call, we have Mr. Amitabh Chaudhry, MD and CEO; and Mr. Puneet Sharma, CFO.
I would now like to hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you and over to you, sir.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Thanks a lot for opening the call. We welcome you all to a discussion on Axis Bank’s financial results for the second quarter and half-year ended September 2021.
We also have on the call, Rajiv Anand, Executive Director and Head of Wholesale Banking; Ravi Narayanan, Group Executive, Branch Banking, Retail Liabilities; Sumit Bali, Group Executive, Retail Lending and Payments; and Amit Talgeri, Chief Risk Officer.
The past 18 months were tough for the nation and the economy. The Bank has emerged stronger out of this, thanks to our colleagues who kept their focus in serving our customers. The rapid pace of vaccination, continued support from the regulator and the government and the receding threat of a third wave give us confidence. We expect the strong pace of economic recovery to continue in the second half of this year.
We continue the disciplined execution on three GPS vectors of growth, profitability and sustainability. I’ll give an overview of the performance of the Bank and elaborate for few areas thereafter.
The strong granular growth in the liability franchise continues, the engine is humming now. We opened 2.3 million new liabilities accounts in the second quarter, highest ever in a quarter. In retail assets too, the number of customers who chose us for lap car loans and small business loans were the highest ever for any quarter. Retail disbursements are up 54% on both year-on-year and quarter-on-quarter basis.
We added 5.5 lakh credit cards in this quarter, a growth of 132% quarter-on-quarter. The festive season has begun well and we expect further momentum. Also, we took the Mastercard portfolio migration during this quarter in our stride. In corporate bank, we won multiple new mandates with strong performance in transaction banking, wholesale banking fee income grew 15% year-on-year. We became the first private sector bank to do a secured overnight financing rate, SOFR linked trade credit transaction for one of our marquee clients.
On asset quality and earnings, we saw sequential decline in retail slippages by 23%, resulting in lower provisions and credit costs. Net slippage trend is lower with better recoveries across all segments. Retail net slippages declined 81% quarter-on-quarter. Restructuring at 0.64% of gross customer assets is lower than larger private banking peers. 93% of retail restructuring is secured. Overall, fee income growth of 17% year-on-year and 21% quarter-on-quarter remains healthy. Our quarter two earnings have grown by 86% year-on-year and 45% quarter-on-quarter.
The One Axis approach is bearing fruit with our subsidiaries sustaining their superlative performance. The combined first half PAT of our domestic subsidiaries stood at INR513 crores, up 61% year-on-year. If I were to take a consolidated view of the past 18 months, we have put our legacy asset quality issues fully behind us, strengthened our balance sheet, invested deeply in digital and technology capabilities and we are now clocking strong growth in retail SME and transaction banking businesses. We have been careful about picking up business within corporate bank, opting for granularity and better rated corporates and shorter than our exposures.
The eight key transformation initiatives that are underway and offer an investments in digital technology and people that we have made give us confidence that there is more headroom for growth. Increased granularity, continued loan mix change, low credit cost and market share gains will gradually lead to margin expansion, growing over the next four to six quarters. Puneet will take you through financial performance in greater detail later.
Let me elaborate further. On deposits, CASA deposit growth in recent quarters is trending above medium-term industry growth of 17%. The persistency of our deposits, defined as average CASA deposits as percentage of period end balances improved 600 basis points from 86% to 92% in the last 10 quarters. In quarter two, our average SA balances grew 23% year-on-year and 5% quarter-on-quarter, while the average CA balances were up 18% year-on-year and 3% quarter-on-quarter.
The rigor and rhythm across distribution channels and key projects, [Phonetic] now show up in LTV performance. 71% and 58% quarter-on-quarter growth in new retail savings customers, 1.2 lakh SA accounts opened via video CIB in quarter two financial year ’22, 36% year-on-year and 58% quarter-on-quarter growth in new current account customers. 150 basis points year-on-year improvement in the share of premium segments as a percentage of overall existing to the bank retail savings account balances. On premiumization, combined AUM and Wealth segment is in excess of INR2,58,300 crores, up 52% year-on-year.
Burgundy Private now manages nearly 2,790 HNI families, up from 1,225 families last year. The total AUM here is an excess of INR75,950 crores, up from INR34,591 crores last year. On retail assets, we have improved our phase 2 [Phonetic] journeys and reduced cycle times disbursing to our customers. The business momentum has increased month on month and we expect stronger second half growth. Demand for homes is back as interest rates continue to be lower and real estate price is stable.
Builders have reported reduction in inventory and a good demand for new projects. Our Asha loans portfolio, which is the affordable home loan segment, crossed INR10,000 crores in the quarter. Auto loans have been hit due to supply side disruptions, but we continue to onboard new dealers in our dealer financing portfolio. The passenger car sales industry degrew by around 40% year-on-year, while we grew by 37% year-on-year in the month of September ’21.
Quarter two also witnessed growth in gold loans, working capital farmer funding and macro finance. Collection efficiency improved for this portfolio too. On credit card and payments, the access Flipkart co-branded cards saw highest ever monthly acquisitions with Flipkart platform in September ’21. We see growth continuing through both organic acquisitions and partnerships on the back of increased card spends, the cards book was up 11% quarter-on-quarter. The Google Pay, Freecharge and other partnerships are also contributing to the growth in new cards acquisition. Over 25% of cards sourced in the second quarter were through known to bank channels as compared to 21% in financial year ’21. We also have few large partnerships in the pipeline that will add to this momentum.
On Bharat Bank — our Bharat Bankfocused 2,065 branches, so 45% growth in disbursements in quarter two financial year ’22. The rural deposits also grew at 19% over previous year. We have added new partners to create multiple agri-focused ecosystems. Our overall count [Indecipherable] is an approx 19,500. Bharat is the big opportunity of this decade as the farm sector reforms, infrastructure investments and digital inclusion story plays out in rural India. We have created a growth-focused Bharat Bank unit to build for Bharat. During the quarter, Munish Sharda joined us as Group Executive for Bharat Banking. Manish has over 27 years of rich leadership experience in financial services and has managed the company and large distributor teams.
On Wholesale Banking, over the past two years, we have demonstrated industry-leading underwriting standards, deepening our talent pool in products and digital and focus on transaction banking, mid-corporate government and MNC businesses. The corporate digital bank transformation program Project Neo that we initiated in April is starting to bear results.
Our focus segments, mid-corporate and commercial banking business, grew 32% and 18% on year-on-year basis, they were up 10% and 7% on quarter-on-quarter basis respectively. The current account deposits from the commercial banking segment grew 10% year-over-year with 50% growth in average balances for new to the bank customer accounts, reflecting the quality of strong relationship-led franchise we are building. The asset quality in this matrix have been better than our expectations here.
During the quarter, large corporates continue to deleverage and working capital utilization levels remain below pre-pandemic levels. The overall corporate loan book, therefore, stood nearly flat on a year-to-year basis. Like I said here, therefore we are investing in Project Neo to build a world-class digital corporate bank. There are over 70 colleagues working in 16 ports in an agile mode to deliver this. We saw strong digital adoption of corporate APIs with growth of 45% in this quarter.
On digital, we’ve witnessed best ever growth in our digital business this quarter, but the number of customers acquired for the digital Buy Now Pay Later product were up 14 times quarter-on-quarter. Our VKYC intra savings account product cost INR1,000 crores and savings account balances in less than a year of launch. On WhatsApp banking, we are now 1.9 million customers with nine months of launch. We’ve maintained our strong position in UPI with a market share of 15% as Payer PSP and 19% in UPI P2M Acquiring, about 85% of customer service requests in branches and are now digitally available and serve through a proprietary cloud-based system.
Our mobile banking app continues to have the highest rating from users among banks in India and we have 5 million non-Axis Bank customers using our Axis Mobile and Axis Pay apps. We upgraded our developer portal, which is now amongst the largest set of Open Banking APIs in the industry with over 250 plus APIs live.
On track transformation and capability, over thousand plus people are now dedicated to the digital bank with cross-functional scores and pods working on 30 plus key initiatives that are transforming the core and building future-ready capabilities. We had shared a detailed document on this, which has been included on the website. Our cloud — on cloud, our leadership continues. We are the first bank to create three landing zones to support our multi-cloud strategy. We have 50 applications on cloud and the migration is getting quicker every quarter. We are leveraging our arena ENOW [Phonetic] product design and engineering teams to create proprietary digital products. We launched Jarvis, our in-house developed cloud-native API-oriented lending platform that powers the BNPL platform for us.
We are working on Data Architecture 3, where we are building alternated platforms, the auto underwrite, the mixed 100 million customers. This will be critical when account aggregator model picks up. We are also integrating unconventional and unstructured data for this moderated business expansion, impact of these initiatives is already visible. We won the Best in Future of Operations award, the first-ever International Data Corporation future enterprise awards.
On the ESG and diversity, we became the first financial institution in India to set up an ESG committee of the Board and we raised $600 million in India’s first ESG compliance sustainable AT1 bond in the overseas market. We have made a set of commitments under the Paris Agreement to achieve the sustainable development goals, which includes a target of incremental lending of INR30,000 crores over five years, to sectors with positive social and environmental outcomes, incremental disbursals of INR10,000 crores by financial year 2024 for affordable housing and increasing share of women borrowers, reaching 30% female representation in our workforce by financial year 2027. The steps we have taken in diversity, equity and inclusion are widely recognized as pioneering in India. We won the Leadership in Social Impact and the Leadership in Transparency awards at the ESG India Leadership Awards 2021.
In closing, we believe consumer and business confidence will continue to trend upwards in the second half as the vaccination coverage rises and the economy opens up with pent-up demand and spends materializing. Pandemic notwithstanding, we continued our progress on our strategy in the past 18 months. We have sorted legacy book issues underwriting has stood the COVID test, growth in multiple retail segments in quarter two was at all-time high and credit costs are upgrading fast. We have significant headroom for growth based on our distribution strength, continued — based on leadership, the eight transformation projects are underway and the business we are choosing not to pick. We are looking forward to the second half.
Let me now hand over the call to Puneet.
Puneet Sharma — President & Chief Financial Officer
Thank you, Amitabh. Good evening, ladies and gentlemen. Thank you for joining us this evening. I will discuss the salient features of the financial performance of the Bank for Q2 FY ’22 focusing on our operating performance, capital and liquidity positions, growth across deposit franchise and loan book journey of becoming a more prudent and conservative franchise, asset quality restructuring and provisioning.
During the current quarter, the RBI issued a direction that resulted in change in the classification and presentation of certain P&L items. These changes have adversely affected reporting revenue and profits and are marginally positive on credit costs. We request you to please see Slide 69 of our presentation to better understand the impact.
Our operating performance is healthy, reflected through continued buildup of granular fee impact growth. We continued to invest in the franchise to be able to capitalize on market opportunities once COVID stabilizes. Net interest income for Q2 FY ’22 stood at INR7,900 crores, representing a Y-o-Y growth of 8% and a sequential quarter-on-quarter growth of 2%. NIMs for Q2 for FY ’22 stood at 3.39%, representing a decline of 19 basis points Y-o-Y and 7 basis points Q-on-Q. And NIMs on a Y-o-Y and Q-o-Q basis are impacted by product mix. For example, growth in our overseas loan book interest reversals have impacted NIM on a Y-o-Y basis, increase in LCR by 3% and 5% on a Y-o-Y and Q-o-Q basis has contributed to the NIM. Timing impact of our Tier 1 capital base, market pricing pressures in the wholesale segment and mortgages business are the key contributors.
Improvement in NIMs over the medium-term will be driven by loan mix changes, continued improvement in low-cost deposits and the quality of fund deposit franchise and reduced share of RIDF bonds, which currently stand at 4% of our balance sheet size. We saw a strong growth in average CASA Y-o-Y and Q-o-Q, resulting in a decline in cost of deposits by 68 basis points and 9 basis points respectively. There is no incremental allocation of RIDF due to PSL non-compliance in FY ’21 through organic loan origination and PSLC purchases. Hence, we have moved on one of the structural drivers for NIM improvement.
The Bank has been improving the risk profile of its loan book. We — if we look at our NII as a percentage of average risk-weighted assets, it stands at 6.95%, improving 10 basis points Y-o-Y. Our fee income stood at INR3,231 crores, growing 17% Y-o-Y and 21% Q-on-Q. 63% of our fees is from our retail business, the balance coming from the wholesale franchise. Granular fee is 90% of our total fees.
We continue to see good traction in our CMS products and trade finance businesses that have resulted in an 18% Y-o-Y and 15% Q-on-Q both in non credit-related fees in the wholesale segment. Commercial banking fees grew by 6% on a Y-o-Y basis and 34% Q-on-Q. Fee on cards grew 19% Y-o-Y and 21% Q-o-Q. Fees from our digital channels grew 42% Y-o-Y and 39% Q-o-Q.
Trading income stood at INR473 crores, degrowing 36% Y-o-Y, mainly on account of lower government security sales and consequent profits. Other income stood at INR95 crores grew 24% Y-o-Y, basis post reclassification of recoveries from written-off pool to credit costs.
Core operating revenue grew 11% Y-o-Y and 6.5% Q-on-Q. Operating expenses for the quarter stood at INR5,771 crores, growing 36% Y-o-Y and 17% Q-o-Q. Staff costs increased by 36% on a Y-o-Y basis. The increase in staff cost is not comparable as Q2 FY ’22 has an impact of increments for two years. If you recall, we had offered increments last year effective October 1 and this is [Indecipherable] from the third quarter reporting.
We have added 10,322 people from the same period last year, mainly to our growth businesses and our technology teams. We have continued to top-up the gratuity expense for the social security code, something that we have taken ahead of others. The Bank has, in the current quarter, booked an ESOP cost of INR72 crores on account of the change in the RBI guidelines for accounting for such costs. Other operating expenses grew 37% Y-o-Y, mainly attributed to higher business volumes, higher collection expenses, IT expenses, statutory cost comprising of PSLC certificate purchase and RBICBC came in.
If I were to look at the sequential cost increase in rupee crore terms and break that up for you, the growth can be attributable to the following reasons: 30% of our cost growth sequentially is driven by volumes, the upfront loan origination cost as an expense while income comes through the life of the loan; 20% of our cost increased sequentially is for future growth and technology. We are confident that the franchise can grow well and we are investing in it to date. 30% of our cost growth is attributable to collection expenses, COVID-expenses and statutory expenses. Collection expenses have more than paid for themselves through the lower provisions that I will discuss later on the call. 20% is RBI expense growth. On a holistic basis, about 7.5% of the sequential quarter growth is from one-off items that are not likely to repeat.
Operating expenses to average assets stood at 2.12% for Q2 FY ’22, higher by 15 basis points Y-o-Y and 7 basis points on a sequential quarter basis. The adverse impact of netting of the balance sheet that we commenced from Q1 of the current year is 2 basis points on that ratio. We continue to believe that we will fall back to our long-term target of 2% cost to assets in the next few quarters as growth accelerates. Operating profit for Q2 FY ’22 was INR5,456 crores, degrew 7% Y-o-Y and 3% Q-on-Q. The decline on a Y-o-Y basis is mainly on account of expenses growth, which I have discussed previously. The decline in core operating profit sequentially is entirely attributable to reclassification. Would request you to see Slide 69 of our presentation.
Provisions and contingencies for the quarter were INR1,735 crores, declining 60% Y-o-Y and 47% Q-o-Q. The bank has not utilized any COVID-19 provisions in the current quarter. The provisions and contingencies include an amount of INR525 crores of additional non-NPA provisions made by the bank during the quarter. The annualized credit cost for Q2FY ’22 stands at 0.54% declining 116 basis points Q-on-Q. Profit before tax stood at INR4,193 crores growing 81% Y-o-Y, 45% Q-o-Q. PAT at INR3,133 crores, growing 86% Y-o-Y for the 5% Q-o-Q.
Annualized Q2 ROE stood at 12.72% improving 477 basis points on a Y-o-Y basis, 361 basis points Q-on-Q. The strength of our balance sheet is reflected through the cumulative non-NPA provisions as of September 30, standing at INR12,951 crores. The key components of these provisions are COVID-19-related provisions of INR5,012 crores. We have not utilized any provisions in the current quarter, the size of our provisions are not to be construed as our assessment of relative weakness of the quality of our loan book but purely prudence-led provisions.
Restructuring provisions of INR1,455 crores are at first bucket NPA rates translating to 24% cover with 100% unsecured loans being fully provided for. Weak asset and other provision stand at INR6,484 crores. Our standard asset cover, which is defined as all non-NPA provisions by standard advances stands at 2.11%, improving 6 basis points sequentially. Our provision coverage, all provisions NPA plus non-NPA divided by GNPA stands at 124%, improving 617 basis points on a sequential quarter basis. The bank is well capitalized, we carry adequate liquidity buffers. Our overall capital adequacy ratio including H1 profits is 20.04% and our CET1 ratio stands at 15.81%, improving 66 basis points and 43 basis points on a Y-O-Y basis respectively. The prudent COVID provisions we carry as of 30th September provide us with an additional capital cushion of 67 basis points over and above the reported capital adequacy I spoke of.
Our average LCR ratio for the quarter is at 120%, our excess SLR stands at INR85,580 crores. The risk weighted assets of the bank as of 30th September 2021 stand at 62% as compared to 68% on — as of September 2020. This improvement in RWA is reflective of the quality of business being done by the bank. The bank has a call date on its Tier 1 capital falling due in the next quarter. If the call is made subject to prior regulatory approvals, the Tier 1 capital will have an impact of 58 basis points.
Moving on to growth across our granular deposits, we prefer to focus on quarterly average balances instead of month end balances. CASA grew 21% Y-O-Y and 5% Q-on-Q. CASA ratio stood at 42%, improving 200 basis — 201 basis points Y-O-Y on an average balance basis.
SA growth was strong with 23% Y-O-Y growth and 5% Q-on-Q. CA 18% Y-O-Y, 3% Q-on-Q. Our term deposits on a quarterly average balance basis grew 15% of which retail deposits grew 11% Y-O-Y and 3% sequentially. A large part of our incremental NRTD deposits over March ’21 are LCR accretive and non-callable. Our focus on premiumization continues with 69% Y-O-Y and 9% Q-on-Q growth in quarterly average balances for our Burgundy and Burgundy Private accounts. The NRI segment also witnessed a 19% Y-O-Y growth. Our salary segment QAB balances grew 13% Y-O-Y and 4% Q-on-Q. Our structured cadence between the corporate and retail teams is already in progress. We continue to leverage the wholesale banking relations to remain focused on increasing our share in top 100 marquee corporate names.
Our focused segments comprising retail, assets, SME and mid-corporate segment have been our key loan growth drivers. Our overall loan book grew at 10% Y-O-Y and 1% on a sequential quarter basis. The composition of the loan book continues to remain balanced with 56% of the overall advances with retail, 34% as corporate and 10% as CBG. The book represent healthy characteristics with 80% of the retail book as secured, 86% of the corporate book being rated A and above and the CBG being well diversified across geographies and industries, 96% secured and 70% on shorter tenor.
Retail disbursement grew 54% on a Y-O-Y basis and sequentially. Our brand sourcing of retail loans was 51% Q2 FY ’22. The number of loan accounts opened in Q2 FY ’22 across most retail secured assets like LAP, car loans, SBB, gold loans were the highest ever, while home loans Q2 was the second best quarter ever in disbursement terms. Home loan disbursements were 86% up Y-O-Y and 54% Q-on-Q with SBB disbursements at 103% and 72% Y-O-Y and Q-on-Q respectively. Domestic retail loans grew 15%, led by secured products like home loans growing 19% Y-O-Y, LAP 24% and small business banking 43%. Over the last couple of quarters, we have become more comfortable in growing our retail unsecured book on an incremental basis within our risk framework. Personal loan disbursements were up 72% Y-O-Y and 21% Q-on-Q. The credit card spends for Q2 FY ’22 were up 64% Y-O-Y and 34% Q-on-Q and were trending above pre-COVID levels.
We continue to drive growth in cards and unsecured lendings via our Known to Bank and Existing to Bank franchise. With strong partnerships and huge KTB customer base of over 120 — 140 million customers, we intend to grow our unsecured retail loan book faster over the next few years. We continue to remain — maintain our strong positioning in the UPI space with a market share of 15% on Payer PSP by volume and 19% in UPI P2M throughputs. Our Deep Geo coverage stands at 2,065 branches which Amitabh discussed earlier.
Our progress on corporate banking is to build a profitable and sustainable corporate bank. Corporate disbursements were up 24% Q-on-Q and flat Y-O-Y. 93% of the incremental sanctions are A minus. We remain focused on delivering higher loan growth from our chosen segments. The mid corporate segment grew 32% Y-O-Y and 10% Q-on-Q. Our commercial banking segments grew 18% Y-O-Y, 7% Q-on-Q. These segments help us bring greater granularity to our books, reduce risks and meet our RAROC criteria.
Our large corporate book — sorry, our letter of credit book grew by 48% Y-O-Y with a market share in foreign currency LCs up 63 basis points on a Y-O-Y basis to 9.4%. We continue to have a strong position in GST and RTGS payments with a market share of 9% and 8.1% respectively. The offshore assets grew by 42% Y-O-Y. The growth in our overseas corporate loan book is primarily driven by Gift City branch exposures. 97% of our overseas standard book is India linked and 86% is rated A and above.
Commercial banking disbursements rebounded strongly with a 76% Q-on-Q growth, aiding a loan growth of 18% and 7% Y-O-Y, Q-on-Q respectively. Early results of our tech led transformation on our commercial banking business is measurable through — CBG CA deposits now contribute 24% of the overall CA for the bank and grew 10% Y-O-Y, reflecting the quality of the commercial banking franchise new building. Non-asset fees in commercial banking grew 17%. The depth of our CBG relationships is demonstrated by the fact that our commercial banking group contributes 19% of our Burgundy Private and Burgundy account acquisitions.
Our subsidiaries have delivered a strong performance. Overall, the H1 profit stands at INR513 crores, 61% Y-O-Y growth. Axis Capital continued to maintain its leadership position in ECM, H1 PAT up 72%. Axis Finance over the last 2.5 years has been investing in building a customer-focused franchise. Its retail book grew 5 times Y-O-Y and now constitutes 23% of the book compared to 8% last year. Axis Finance book quality continues to be strong with near nil restructuring and net NPAs at 1.3%, its H1 PAT grew 84% to INR138 crores and ROE stands at 18.5%.
Axis mutual funds quarterly AUMs went up 52% Y-O-Y, driven by fund performance. Axis AMC’s H1 PAT was up 60% Y-O-Y to INR147 crores. Axis Securities added a 0.12 million customers in Q2, up 43% Y-O-Y, PAT up 59% with an ROE of 42.4% for the quarter. We are seeing an improvement in our asset quality metrics and we have well provided for [Technical Issues]. The gross slippage for the quarter was INR5,464 crores, lower than Q1 FY ’22 by 16%. Retail and CBG gross slippages declined 23% and 46% respectively Q-on-Q. At the bank level, 28% of the gross slippages on a same account basis were upgraded in the same quarter as compared to 22% for the last quarter.
On a segmental basis, the same quarter slippages and upgrades in retail was 31%, corporate 14% and CBG 46%. Therefore, it’s better to focus on net slippages insofar as we are concerned. Further, 23% of the gross slippages are attributed to linked accounts of borrowers that was standard and was classified. Net slippages for the quarter are INR707 crores, down from INR3,976 crores or 82% sequential quarter decline. The net slippage ratio for the bank on an annualized basis stands at 0.46%, improving 214 basis points quarter-on-quarter. The asset quality on the wholesale business is holding up well, with the net slippage of an absolute INR26 crores on the size of books that we run. Net slippages for SME book are negative for the quarter. We have negligible restructuring here and that has not contributed to the lower net slippages.
Net slippages in retail stand at INR697 crores, down 81% sequentially. The net slippage ratio on an annualized basis stands at 0.83%, declining 370 basis points quarter-on-quarter. On the collections front, check bounces remain marginally elevated in Q2 FY ’22 as compared to pre-COVID levels. Our concerted collection efforts and investments in collections has resulted in demand resolution for the retail portfolio, in the month of September being 98.8%, which is better than levels we saw pre-COVID, which is a key trend we continue to remain focused on. Recoveries from written off retail accounts in Q2 FY ’22 is 64% higher than Q1 and has been the best quarter in the last 18 months.
We expect the second half of the year to have fewer net NPA additions as compared to H1 FY ’22 given the collection intensity and moderation of delinquency outcomes. The intensity, length and time and government policy action emanating from a COVID wave 3 if any remains a key monitor. The bank has undertaken prudent limited and largely secured restructuring. The outstanding implemented fund-based restructuring 1 and 2 stand at INR4,342 crores, representing 0.64% of our gross customer assets as of September 2021. Invoked but pending implementation COVID 1 and 2 restructuring stands at INR118 crores or 0.02% of our GCA.
Hence, in aggregate, COVID restructuring will not exceed 0.66% of our GCA, which we believe is lower than larger private sector peer banks. 96% of loan restructured under COVID 1 and 2 are standard as at 30th September 2021, 93% of retail loans restructured under 1 and 2 are secured. The LTVs of secured loans range from 40% to 70%. On a segmental basis, COVID 1 and 2 restructuring on loans is 0.68% on the wholesale book, 0.8% on the retail book and 0.02% which is zero — near zero for the commercial banking book or the SME book.
We were able to upgrade INR501 crores of restructured tool 1 and 2 that was NPA as of 30th June to standard as of 30th September. The linked non-fund based exposures on restructured loans is INR1,002 crores. The net slippages from COVID wave 1 restructuring stands at 3% of the wave 1 pool. Details of our BB and below book and restructuring are set out on 40 — Slide 48 of our presentation in greater detail. The fund based investments and investment BB book stood at INR7,307 crores, declining INR1,370 crores on a quarter-on-quarter basis, which is a 16% Q-on-Q decline. The 79% of our corporate slippages in the quarter were from the BB and below book, 21% of the fund based BB and below book is rated better by at least one external rating agency.
All accounts downgraded in the current quarter were individually less than INR80 crores and the average ticket size of accounts downgraded was INR12 crores. The average ticket size of fund based exposures in the BBB+, BBB and BBB- is INR40 crores with no individual exposure in four-digit growth, showing the granularity of book that we have been focused on. We request you to see Slide 48 of the Investor Presentation which sets out more details. The GNPA of the bank was 3.53%, improving 75 basis points Y-O-Y and 32 basis points Q-on-Q. The GNPA is the lowest that the bank has seen since Q2 FY ’17. The net NPA stood at 1.08%, improving 12 basis points Q-on-Q. The net exposure of the bank to two NBFCs where RBI superseded the board in Q2 FY ’22 is nil. The bank has a healthy PCR of 70%, greater details are provided on Slide 47.
As I close, we summarize the bank’s journey so far and broad outlook on key performance drivers. Our capital adequacy ratio at 20.04% is the best we’ve had in years. Our balance sheet is resilient, visible through declining NPA ratio, stable provision cover, build-up of non-NPA provisions, prudent, limited and largely secured restructuring. The average CASA balances on a closing balance basis has improved to 92%, showing the improvement in the quality of the CASA franchise we’re building. Annualized H1 FY ’22 earnings for subsidiaries will cross INR1,000 crores for the full year. Our return on investments from subsidiaries now stands at 58%. On ESG, Axis is now the first bank to establish a standalone ESG committee of the board and is moving forward on its ESG agenda.
Our reported net interest margins have moderated, though when adjusted for risk weighted intensity of our assets, we see an improvement over time. We have clearly identified, discussed and are seeing traction on the building blocks for improving our reported margins in the medium to long term. We expect FY ’22 net margins to remain at or marginally above H1 levels, but we’ll improve structurally over the medium to long-term basis initiatives that are in place today. We will continue to invest in the franchise and have seen a short-term cost escalation, the pace of growth in costs will moderate in the second half as base effect corrections like salary cost increase. We — while we stay committed to the cost to assets target of 2% in the medium term for FY ’22, we will be between 8 basis points to 12 basis points higher than that.
We believe our businesses are resilient and we are well-equipped to capitalize on opportunities, are investing in the franchise to deal with contingencies that the pandemic may pose. We reiterate our stance of stopping specific guidance. We thank you for your time and we will pause now and we will be happy to take your questions.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Abhishek Murarka — HSBC — Analyst
Yes. Hello, good evening and thanks for giving me the opportunity. So, two or three questions. One, on growth, so, your commentary is pretty strong and I am looking at the corporate portfolio which has declined about 4%, 5% on a Q-O-Q basis. So, just can you guide — rather can you give some color on what led to this? Is it from end of period balance or is it something that you stayed away from? And what’s the outlook on growth here? The retail and SME growth seems to be pretty good. So, just some color on the corporate side.
Puneet Sharma — President & Chief Financial Officer
So within the corporate side, SME, as you said, continues to grow strongly. Even on a Q-on-Q basis, growth is strong in the sectors that we have chosen. Mid corporate, MNC, growth continues to be strong. We have seen some deleveraging repayments, prepayments, etc., but one point that I want to make, which is, I think important, the way that corporates, particularly in the large corporate space are thinking about that capital structure and funding patterns, these really is diversity which includes bank loans and so therefore what they are choosing to use is offshore loans, offshore bonds, local loans, local bonds and Axis is participating on each of those opportunities. Not all of those opportunities may convert into loan growth at a point in time, but most important, it will ensure that we are engaged with a customer across the capital structure and we’ll obviously ensure that we are driving fee incomes, etc.
Our pre-eminent position on the DCM side is well known. We’ve been around for the last 13 years on the debt capital side. We have a very, very strong loan syndication book and we are now the only Indian bank that is focused on the offshore debt capital markets as well. And we’ve had a fair amount of success within this space. So, the way to think about loan growth is, I think, one needs to look at it on a much wider basis, particularly in the large corporate space as if one wants to engage with a set of customers that we have chosen to engage with.
Abhishek Murarka — HSBC — Analyst
So, incrementally this book — when does this book start expanding as in — or — and what are the particular opportunities you see out there? Because I believe private capex is still a bit far away from picking up?
Amitabh Chaudhry — Managing Director and Chief Executive Officer
So I think what happened in the first half of the year is — I think what I’m fairly certain about is that the capex cycle has bottomed out. We would have probably seen a stronger capex cycle at this point in time, but two things have impacted that: wave 2 and the probability of wave 1, I mean there were various news reports that wave 3 would hit us in October, November, December, has probably held that back. As also whether the festive season will bring the kind of demand that we expect were some of the reasons why perhaps the capex cycle has got postponed by anything between 6 months to 12 months.
But I think what one is certain is that the capex cycle has bottomed out and we should certainly see that begin to kick in. There are various initiatives, a national monetization program, PLI schemes. We are seeing small levels of capex in chemicals, in steel, in cement and so on and so forth. Some of that is being funded by internal accruals. We are also seeing that that corporates at this point in time are preferring to deleverage, use their own cash flows to support capex. But I think it’s just a question of time before that begins to kick in.
Two is you will hear commentary from Puneet, and you’ve already heard some of that is that the festive demand has been fairly strong. And what that means is that the working capital cycles, which hitherto where utilization of our working capital cycles were — working capital lines were relatively weak, we think that that will start to pick up in the second half of the year as well. We are also, I think, Puneet mentioned this point about the overseas book growing. I just want to reiterate that a few quarters ago, we mentioned that the overseas book will be only focused on India linked NIMs.
So what we’re really doing there is to follow the customer in terms of their client needs around transaction banking. So, if you look at trade finance, which is where predominantly the overseas book has grown, we are now 2.5 times in terms of the size of that book as compared to some of the foreign banks who dominate this business at this point in time. We are getting increased franchise breadth, depth of client conversations and cross-sell opportunities across transaction banking as a result of the growth in the — in our overseas trade finance book. The associated cross-sell revenues and balance arising is not factored into NIMs, but is certainly showing up in strong fee growth that you’re seeing in our transaction banking franchise.
Abhishek Murarka — HSBC — Analyst
Great. Thanks so much for that. My second question is on NIM. So, you’ve mentioned in your CBG that there is an adverse mix impact of 13 basis points. But if I look at the broad mix, retail SME has gone up, corporate has come down. So what exactly — why exactly is this mix impacting NIM unfavorably?
Puneet Sharma — President & Chief Financial Officer
Abhishek, thanks for the question. The way I requested to look — to think about that number is the liability franchise has grown exceptionally well. The asset is now growing on an incremental basis. Given the fact that you’ve originated liabilities in advance of assets, the surplus money which I called out earlier in the presentation about INR85,000 crores [Technical Issues]. The mix between investments and advances, which is a material contributor to that.
Abhishek Murarka — HSBC — Analyst
Understand. So how should we look at or think about NIMs going forward. On a just a loan basis, are your spreads improving and how do you — just how do we think about it going forward?
Puneet Sharma — President & Chief Financial Officer
Absolutely, Abhishek, the way to think about NIMs are there are three structural drivers to our NIMs. One is the loan mix change. So one part of the mix change will come from the fact that as advances growth comes back, which you will see given the disbursement momentum we see. You will see the recalibration between advances and investments.
Abhishek Murarka — HSBC — Analyst
Right.
Puneet Sharma — President & Chief Financial Officer
So that should create NIM coming back. The second bit is we have improved the quality and the percentage of our low-cost deposits. But as the quality of our deposits improves further, we should see a release of available liquidity to lend and that’s going to be a driver. The third element that I would like to call out is 4% of our balance sheet is RIDF bonds. These are negative spread as we stand today. For the last year, we’ve incurred opex and purchased PSLCs which is why you also see opex cost increase, but what we are doing is we’re solving for the RIDF problems, no incremental allocations. These should run off between three to four years on a weighted maturity basis. And just this run off should be able to give us anywhere between 10 basis points to 12 basis points uplift on NIM. And I’m not saying a full run off, I’m saying run off to the next closest peer bank. So as we work through each of these, you’ve heard us speak on where our loan growth is going to come from, you would see the NIM improved structurally over the coming quarters.
Abhishek Murarka — HSBC — Analyst
Sure. Thanks for that. And finally just a question on slippages. So I’m looking at the gross number and I know you said we should which focus on the net, but just if I want to be talk about the gross number, still a little high, right, at about 3.8 — 3.9% annualized. So just where is this slippage really coming from and given the pickup in the economy, do you see this normalizing in two quarters or four quarters? What is your outlook there?
Puneet Sharma — President & Chief Financial Officer
So Abhishek, we can annualize the slippages number and come to a percentage that you’ve computed. The first way I would request you to look at that number is I specifically called out in Axis’ context. We report on a gross-gross basis. So 28% of the gross slippages sell in the same quarter and recovered in the same quarter. So, effectively, one-third of your computed number will disappear basis the same quarter upgrade/downgrade reference point. And I had also called out for your consideration this across product segments. So that plays through. Adjusted for the same quarter upgrade/downgrade, the inventory that got built up because of wave 2 is playing out. Just to give you context, in the retail business, our net slippage for the month of September was zero. So, we will continue to track asset quality and see how our net slippages move ahead, but we are reasonably positive that asset quality should improve in the second half of the year on the slippage front.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Abhishek, I’d also request you to give us some credit for lower level of restructuring. If I do a lot of restructuring, I will not see these slippages. So if I’ve taken the hit upfront, give us some credit. And I think it is coming through very clearly in the second quarter where we took the hits. We are taking them through — they’re going through NPL, but they’re recovering also. So I think you need to take into consideration that fact too.
Abhishek Murarka — HSBC — Analyst
Sure. Amitabh, that part is very well appreciated actually. The only thing I was trying to figure is this inventory build-up and I understand one-third of it gets resolved quickly. This is happening from which sector, is it secured, is it unsecured, is it retail or — should be mostly retail SME. So I’m just trying to figure out where it’s coming from?
Puneet Sharma — President & Chief Financial Officer
So net slippages on the wholesale and SME segment is near zero. So of the INR707 crores net slippage that I spoke off, if I net down CBG at wholesale, that number is zero. So largely coming from retail and like I said in retail for the month of September, the net slippage is zero. So the INR707 crores is a build up of July and August.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Yes, I mean, returns on flow-through coming from COVID — 2 COVID, right? So…
Abhishek Murarka — HSBC — Analyst
Yeah. Sure. Thank you so much for answering those questions and all the best for the coming quarters.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Gautam Jain from GCJ Financial. Please go ahead.
Gautam Jain — GCJ Financial — Analyst
Hello.
Operator
Please go ahead, sir.
Gautam Jain — GCJ Financial — Analyst
Yes. My question pertains to your one-off opex. [Technical Issues] one-off in other expenses. Can you just elaborate in the absolute number, what was that?
Puneet Sharma — President & Chief Financial Officer
I said see one-off opex — Gautam, thank you for the question. What I called out was 7.5% of the sequential quarter opex 7.5% of the sequential quarter opex growth was on account of one-off items. The one-off items are in the nature of catch up on ESOP cost. The — district Tier 1 bonds in the current quarter, where expenses on fundraising are charged to our P&L upfront. We do not amortize it over the life of the bond. So those would be one-off items that are not likely to repeat. And that constitutes about 7.5% of rupee crore expense growth in the quarter.
Gautam Jain — GCJ Financial — Analyst
Okay. And my second question pertains to the credit cost. You did mention that credit cost in the second half will continue to fall. But can you just give us some qualitative comment on credit cost going forward on a sustainable basis. Would it be 1% or around 1%? Comment would be appreciated.
Puneet Sharma — President & Chief Financial Officer
So, Gautam, we don’t specifically side on credit costs on what it should be. So where we have structurally driven our balance sheet and created food and provisions and provided for seen risks, we believe that we have come to the end of our wholesale credit cycles so there should be a moderation from our long-term average. We don’t offer a specific guidance on what that number would be for the next quarter or the next financial year.
Gautam Jain — GCJ Financial — Analyst
But I looked at your contingent provisions compared to your peer banks, we have the highest provision to our loan book. So if we don’t see slippage going forward in next two, three quarters, will there be a case of some reversal in the provisions where we provided already?
Puneet Sharma — President & Chief Financial Officer
So, our COVID provisions are rule-based and the release thereof is also rule-based. The way we run our COVID prudent provision is, we determine this threshold that the pandemic wave will prevent us. If that risk threshold is breached, we utilize the COVID provisions. If the risk threshold is not breached, we continue to provide through the P&L. This is data points that we have today. We do not believe COVID wave 2 thresholds are likely to be breached. Therefore these provisions will be carried forward on the balance sheet. When COVID wave 3 — if and when COVID wave 3 were to hit us, we will make a similar assessment and drive this. What I simply want to say is, it is structured and rule-based, we do not release or create provisions on a quarterly basis, on an ad hoc…
Gautam Jain — GCJ Financial — Analyst
Okay. And how soon can be these two are P&L level NIM around 4%?
Puneet Sharma — President & Chief Financial Officer
I don’t want to comment on what the level of NIM we will get to. Like I said, structurally we think we have the right drivers to deliver in NIM expansion in the medium to long-term. The three drivers, specifically discussed for loan mix change, our RIDF reduction and improvement in cost and quality of our deposits. On CASA, you’ve seen improvements happening on a sequential quarter basis. RIDF, incremental allocations has stopped, given our compliance with PSL requirement for the last year. Asset mix should play out as loan growth comes back in a meaningful way. And therefore, I would say, structurally all drivers in place, NIM journeys are multi-quarter journey, but you will see us making the right — that external improvements in the coming quarters.
Gautam Jain — GCJ Financial — Analyst
Okay. And finally, credit to the team for good management of the quality, watchful account and remain in the book. Thank you so much.
Puneet Sharma — President & Chief Financial Officer
Thank you, Gautam.
Operator
Thank you. The next question is from the line of Mahrukh Adajania from Elara Securities. Before that, I’ like to remind all participants, please limit your question to two per participants only. Thank you.
Mahrukh Adajania — Elara Securities — Analyst
So my first question is on credit card. So, of course, there was a fair bit of discussion earlier on this. But the specific credit cost is down to 60 basis points, which is lower than the long-term average as well. And at some point in time, we will be drawing down COVID provisions, maybe next year, may not be this year. So are we likely to see quarters of negative credit cards? And is this — I mean, have credit cards bottomed out or they’ll remain specific credit cards, has it bottomed out now or is it going to remain volatile? Because you just corrected more sharply than other banks, which is why I’m asking.
Puneet Sharma — President & Chief Financial Officer
So, Mahrukh, the way — Mahrukh, thank you for your question. Again, they way I’d like you to think about credit cost in our context is, we consciously took the decision to recognize paying early. And therefore, we believe that that should get us out of an adverse credit cycle early, where we have restructured these in short provisions, cover us for first bucketing, be provisioning.
To your point or observation on COVID provision release over the next few quarters, I would reiterate the comment I made earlier. The COVID provision is rule-based, faces the risk outcomes. We do not see a relief of that provision, at least for COVID wave 2 versus data points visible to us today. We will continue to watch if there is a wave 3 or an impact thereof. The way I would request you to think about our credit cost is in a three-pronged manner.
One is, let’s start with our long-term average credit cost. We have moved to a provisioning level that is about 15% to 20% higher than historical provision cover that we ran. So you should see a marginal uptick from the long-term average credit cost, because just the prudence that we’ve built around our provisioning rules. You will see an improvement from the long-term credit costs on account of the fact that our wholesale lumpy book is now granular, and the underwriting quality is much better.
Structurally, as we do a little bit of more unsecured business price for risk, the income comes above the line and the risk comes below the line. But adjusted for risk, this business will be profitable, but you will see a uptick as we recalibrate from the 87% secured to 30% unsecured disbursement mix strategy as we move forward to a range of 80%-20%, 75%-25%. So very difficult to give you a precise number on where the credit cost will be, but I think the improvement both in underwriting and portfolio quality are visible on our balance sheet.
Mahrukh Adajania — Elara Securities — Analyst
Sure. Thanks. And could you please quantify the mandate? So of those provisions of INR129 billion, what would be the mandatory general provision, because I can’t tally the amount?
Puneet Sharma — President & Chief Financial Officer
So, standard asset provision numbers, if you can just give me a couple of minutes, I’ll come back to you and give you that response.
Mahrukh Adajania — Elara Securities — Analyst
Sure.
Puneet Sharma — President & Chief Financial Officer
We could move to the next question. But Mahrukh, I will answer that question in the course of the call, please.
Mahrukh Adajania — Elara Securities — Analyst
Sure. I have just one more question. And again, it’s on loan growth, because you explained before. But the loan growth has lagged most other private banks. And of course, there has been a change of loan base, there has been a change of approach for you. But what is so risky that you are seeing that other banks are not seeing, especially in the corporate segment. Because that is one area where probably loan growth is slower and even in some other segments. So what really explains the consistent — this consistent difference in loan growth between you and the private bank, say, for the last three to four quarters?
Puneet Sharma — President & Chief Financial Officer
So, Mahrukh, I’m not worried about the difference. If I want to bridge that gap between us and the peers at a price, it is very easy to do. So, therefore, as long as meeting our underwriting standards and pricing standards, we will certainly put on those loans. Maybe they’re not risky, but maybe the pricing doesn’t work for us, which is why some of the stuff we’ve walked away from. But like I said, what is important to us is the depth of the franchise, right. I mean, there is so much more that we are doing with our customers. We are adding new customers within the wholesale and CBG franchise.
We think that some of the pricing that we’re seeing at this point in time is not pricing for risk. So we are willing to wait it out. I mean, you’ve seen for example, on our CBG book, we were pretty much flat for a couple of years. We are now much more comfortable with that book. And you’re seeing growth, you’ve seen what, about 7% growth, even on a Q-on-Q basis. So, I’m not really too worried about that there is a gap between us and the peers.
Mahrukh Adajania — Elara Securities — Analyst
Got it. Thank you.
Operator
Thank you.
Puneet Sharma — President & Chief Financial Officer
So, Mahrukh, to answer the question — Mahrukh, to answer your question on standard asset provisioning, you can assume that roughly INR3,000-odd crores of the INR12,900 crores that we call out is regulatory standard asset provision.
Operator
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Kunal Shah — ICICI Securities — Analyst
Yeah, hi. Sorry if I missed out. But in terms of the moment of BB and below, if you can highlight in terms of the downgrades from the upgrades, downgrades and how we are getting at a lower by almost like INR1,300-odd crores?
Puneet Sharma — President & Chief Financial Officer
So, I think, Kunal, the way you should look at that number is, of the INR1,300 crores, 50%-plus would be recoveries and upgrades. And the balance INR680 odd crores…
Kunal Shah — ICICI Securities — Analyst
Hello?
Puneet Sharma — President & Chief Financial Officer
Yeah. Kunal, sorry, did you get my response? Or was that not audible?
Kunal Shah — ICICI Securities — Analyst
No. Sorry, I missed the last part. So, in absolute term, if you can just suggest in terms of this movement from INR8,000 to INR6,700, yeah, now on the fund-based side of BB and below?
Puneet Sharma — President & Chief Financial Officer
Kunal, roughly like I said, the difference is about INR685 crores of slippages and the balance is recovery.
Kunal Shah — ICICI Securities — Analyst
And balance is recovery. Okay, okay. Yeah. Thanks a lot.
Operator
Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.
Anand Dama — Emkay Global — Analyst
Yes, thank you. So basically on your cost, so staff cost has again gone up during the quarter and so has been our other expenses. So what really explains that? Are we doing ESOP expensing in the staff cost? Number one. And in the other expenses, can you really highlight basically apart from the collection expenses, what other expenses would have gone up so that we have seen such a jump up in the D&A expenses on a quarter-on-quarter basis?
Puneet Sharma — President & Chief Financial Officer
Anand, thank you for your question. Yes, we account for ESOP costs as part of our staff expenses. And therefore, that expenses is sitting in the staff cost line items. The overall increase in staff costs, as I said, is we feel confident of emerging stronger post-pandemic. So we’ve added close to 10,000 people to our core growth business since September ’20 to September ’21. So that’s about 10,000 people added to the franchise for our growth businesses across liabilities and [Indecipherable].
In terms of the sequential quarter growth in expenses, 30% of the expense growth is volume led. You have seen our disbursements are higher as business momentum comes back to the expense loan origination cost upfront, so that causes an expense escalation. 20% of the increase in expenses are attributable to our future growth and technology. We clearly have a large technology agenda that we are driving. And 30% of the growth is attributable to collections, COVID and statutory costs. So the balance 20% is BAU cost increase, given the franchise that we have. I hope that gives you a breakup of where the expenses are coming from.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
So I just want to add to what Puneet said, I think as a bank from a strategic perspective, we believe that, as Rajiv talked about the fact that as the Indian economy starts growing, it will provide opportunity to the large banks to gain market share and it’s very, very important for us to ensure that from a overall platform perspective, we invest today and are ready for capitalizing the positive as we move forward. I’ve shared with you, Puneet has shared with you, so the thing that you have created, it did not have that many APIs, you have 250 APIs now.
So as we expand in various parts of the bank in terms of investment in technology, analytics and generally the people, creating the franchise and listing in other banking and some of the other stuff, I think money spent today will give good returns in the future as the Indian economy starts expanding. Yes, it means there our expense ratios, are looking a bit higher today, but we believe they will moderate in the future and hopefully the returns will also come through in the revenue line quickly. So that’s how we are driving it. And that’s why when you kind of break it down as Puneet has shown, you will see that some of it is obviously BAU, but some of it is related to obviously investment for the future and some of it is one-off or more a base effect impact.
Anand Dama — Emkay Global — Analyst
Thanks. But is it possible for you to share the technology expenses that typically we have in a P&L as a percentage of our revenues? And how basically this is really going to convert into higher growth, particularly into the non-mortgage book? Because mortgage certainly — I mean, that will be largely run through DSAs or through a branch model, but the non-mortgage retail business, particularly consumer finance and all, will need a lot of technology spends. So how that is really going to convert into growth also, that if you can explain, that would be great.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
We are running a number of multi-year transformation programs to almost every business of ours. I in our opening remarks shared how we are doing that on the wholesale side, we ran a similar project on the CBG side, we are running couple of those projects on the retail liabilities and the asset side and it does not stop there. We are looking at architecture, we are looking at how the employees can be enabled. So there are many, many transformation programs going on in the bank, and they are multi-year, they are not six months, nine months, it will take three years for us to land those programs completely.
So as we do that, technology obviously is a very, very important component of it. The question we’re asking ourselves is not only to be best-in-class, but look at things globally and see what is the platform we create, which can take on some of the global practices. We cannot say anything beyond that at this point, because it does not make any sense. We have to show you the revenues coming through and then we will talk about it as to what exactly we have done.
But I just want to assure you that the bank is working on — and we have shared some of those transformational projects with you, working on many transformational projects across various businesses. Our technology spend we shared with you was up 78% over the last two years and that should give you a sense that the spend on technology has gone up significantly. I shared with you that now 1,000 people are working on digital banking. So, obviously this needs expenses, this needs people and obviously this leads to higher cost to asset ratio, whatever it is — whichever way you want to look at it. But we believe that, given how we are catching up and in some areas going ahead of the others, it will start reflecting in our business and our revenues and our numbers.
Anand Dama — Emkay Global — Analyst
Yeah. Hope that happens pretty fast. The last question is that, we had one of our EV retiring, any replacement that we have worked out about that?
Amitabh Chaudhry — Managing Director and Chief Executive Officer
We are not planning any replacement this stage. The portfolio will be distributed amongst various Senior ESRs, as again I have been sharing that we have not only at the ED level where one of them is going, we have very, very smart young and senior leaders at our group executive level. I was sharing with someone that at the group executive level, we have three people who are ex-CEOs of pretty large organizations. There was someone who was the ED of a large mid-sized bank. So we have very, very strong leadership level at the next level from ED, which is a good executive level and all these people are part of Vancom. Over a period of time, obviously we expect some of them to move up, but at this stage we are redistributing the portfolio. By the way, those executive changes has already been announced.
Anand Dama — Emkay Global — Analyst
Okay. So we will operate with one ED at this point of time.
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Yes, sir.
Anand Dama — Emkay Global — Analyst
Okay. Thank you, sir.
Operator
Thank you. The next question is from the line of Rakesh Kumar from Systematix Group. Please go ahead.
Rakesh Kumar — Systematix Group — Analyst
Yeah, hi. Good evening. Can you hear, sir?
Amitabh Chaudhry — Managing Director and Chief Executive Officer
Yes, please. Go ahead.
Rakesh Kumar — Systematix Group — Analyst
Yeah. So, my one question is related to the loans priced on external benchmark. So like among the large three banks, we are on the lower side and the progression also if we see like you know from the March end to September end, the progression is also quite slow. So is it that just to protect margin, we are not progressing very fast on that front? What is the reason there?
Puneet Sharma — President & Chief Financial Officer
Just give us a minute. What the regulators has said is that incrementally all retail loans and some of the SME loans need to be externally benchmarked, so that’s done. And obviously we are in compliance with that. If the question is, there is still some stuff that is at base rate or MCLR as the case may be, why is that not moving? There is a concerted conversation that is on with the consumer — with the customer and some of these customers have made the choice of staying either with base rate or MCLR as the case may be.
Because remember that that external benchmark rates are good on when rates are going down. But when rates are going up, it will go up as fast because market rates typically will move very, very quickly. And in that sort of an environment, EMIs will get repriced, will increase quite sharply as well. So, therefore some of the customers have chosen to be either at base rate or MCLR as the case may be. So, not sure what exactly the point that you’re making.
Rakesh Kumar — Systematix Group — Analyst
So, the first point is that, like if you see the case of, say, ICICI Bank, some other large bank, they have got close to 50% of loans already linked to Repo. And we have got close to around 31%, so is that a lower loan growth for us? That is the reason that in those segments where it is mandatory to your price at APLR, there we are not witnessing the growth, is that the reason or that we are not asking customers to switch from MCLR to Repo rate? So that is the one question.
And second question is coming from your end, sir, itself, that we had the bottom of the kind of a entrusted cycle. So when the rates are going up, by having a lesser proportion of loans on Repo, it will hit margin for us on a relative basis as compared to other bank?
Puneet Sharma — President & Chief Financial Officer
So, Rakesh, thank you for your question. Maybe I can respond to it in two different ways. First and foremost, I think if you look at the composition, let’s start at the headline level of fixed versus floating, about 32% of our book is fixed and 68% of our book is floating, which is the disclosure we make on Slide 12 of our presentation. Why is that — and within floating, we have compositions of repo base rate, NCLR and foreign currency floating. The reason that you see our Repo at 31% since that’s the number you picked up, effectively will be a function of the product mix and the segment mix that we run our book at.
As far as we look at the interest rate cycle, all floating rate benchmarks should be accretive. It is just the pace of change of the floating rate benchmark that one will have to observe. As I stand today, I’m not sure repo will reprice faster than the other benchmarks on a upcycle. So I think it’s a wait and watch. We are very focused on ensuring that our balance sheet on a fixed floating basis is fully balanced. And we fundamentally believe that the interest rate upcycle should benefit us no less than what it should benefit our peers.
Rakesh Kumar — Systematix Group — Analyst
Got it, sir. Thank you. Thank you, sir.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Puneet Sharma for closing comments. Thank you and over to you, sir.
Puneet Sharma — President & Chief Financial Officer
Thank you, Janus, for assisting us with this call. Thank you to the participants for having spent the evening with us. With festival season, wishing your families a very happy Diwali. We hope that you and your family stay safe and enjoy the festival season. Thank you very much and we’d be happy to answer any questions you may have. Please do reach out to us, we would be happy to engage. Thank you. Have a good evening.
Operator
[Operator Closing Remarks]