Bank of Baroda Ltd (NSE: BANKBARODA) Q3 FY23 Earnings Concall dated Feb. 03, 2023
Corporate Participants:
Sanjiv Chadha — Managing Director and Chief Executive Officer
Ian Desouza — Chief Financial Officer
Analysts:
Adarsh — CLSA — Analyst
Kunal Shah — Analyst — Analyst
Saurabh Kumar — Analyst — Analyst
Jai Mundhra — Analyst — Analyst
Rakesh Kumar — Analyst — Analyst
Presentation:
Operator
[Starts Abruptly] We have with us today Mr. Sanjiv Chadha, the Managing Director and CEO of Bank of Baroda, and he is joined by the Bank’s EDs and the Bank’s Chief Financial Officer. We will start with brief opening remarks by Mr. Chadha and [Technical Issues] a Q&A session. Over to you, sir.
Sanjiv Chadha — Managing Director and Chief Executive Officer
Thanks very much, Phiroza, and a very warm welcome to all of you. Great pleasure to see you after a long time. I think it’s three years since we met in person. So thank you again for taking the trouble. Let me just begin by introducing my colleagues, with many of whom you might be familiar. So starting on my right, we have Mr. Ajay Khurana who looks after retail for us. To his right, we have Lalit who you might be seeing for the first time, so Lalit was heading our U.S. operations and is now handling our international operations and also a lot of our platform functions including HR. To my left, Mr. Debadatta Chand who is handling corporate and also treasury for us. To his left, we have Joydeep Dutta Roy who looks after digital, IT and also wealth, right, — sorry, subsidiaries for us, right? And to his left, you have somebody who with whom you are most familiar, Ian Desouza, is our Chief Financial Officer.
So, I’ll just again make a small presentation, not take more than 10, 15 minutes and then open up to questions. Trying to make sure that I cover enough ground so that some of the questions, which we anticipate, are addressed and then you [Phonetic] can take it from there on.
Operator
[Technical Issues].
Sanjiv Chadha — Managing Director and Chief Executive Officer
So, thank you once again. We’ll just start with the first slide. Yeah, so I think — I just want to hop back again to the beginning of the year. So we had started the year by saying that finally, it might be possible this year for us to actually both grow our book and also to have margins. The last few [Technical Issues] were a challenge [Technical Issues] to grow [Technical Issues] margins. And this year, you will find that we have delivered largely on both counts. If you look at loan growth, it continues to be robust at about 20%. The good news, of course, is that now it seems to be spread pretty evenly across segments. There is no segment, which is not growing in double-digits. The standard performance is of course in retail, where organic retail growth is 30%, where the slowest growing segment is home loans, which is now growing at nearly 20% and unsecured personal loans, of course, are growing much faster. This is something, which has positive implications for the composition of the retail portfolio and also for yields as we go ahead. Now, we have reached a stage where unsecured loans actually are contributing significantly even in terms of competition to the retail portfolio. They still are a relatively small piece for us, and I believe this is something, which has spoke [Phonetic] to grow at almost an equal pace for a few more years before the growth really moderates. If you look [Technical Issues] this slide, you will find that the disbursement growth is mostly is significantly higher than the overall growth, so I think that would again augur well for the sustainability of this growth in the future. What has worked well for us is that the gap that you see with most banks between deposit and loan group, it was relatively small for us. So overall deposit growth is 17.5%, which is just a little bit [Technical Issues] 40% in terms of loan growth. And if you look at the domestic piece also, there again, it is 14.5%, that has meant that the CD ratio for us continues to be moderate. In fact, the CD ratio now is not much higher as compared to what it was three years back, so which means [Technical Issues] the loan growth and deposit growth roughly stack [Phonetic] up and it means that it is possible for us to continue to work for some time with our loans at a pace significantly faster than our deposits. So because of the fact that we have been able to grow loans significantly faster and most of the growth has come from the retail segment where you have got pricing upside, margins continuing to strengthen, we had guided last quarter that our margins were a bit overstated and they ought to be again about 3.17% on an adjusted basis. So if you see that, then our margins have improved by 20 basis points over the last quarter. Now this is because you’ll find that the gap between the yield on advances and cost of deposits is still there about 20 basis points this quarter. It was about 40 basis points the previous quarter. It’s about 20 basis points plus now. And I would believe there might still be a quarter or so when we can still profit from the lag effect between the repricing of loans and deposits as we go forward. In terms of profitability, you would find that the biggest jump has come in terms of net interest income, which is a logical corollary of the fact that our loan growth is about 20% and there is a margin improvement along with that. Fee income is a bit tepid [Phonetic] because in terms of private sector capital investment and term loan that come on account of that, that is still not where it would be when the cycle is completely back and that should improve as [Technical Issues] improves. You would also see that in the third column in the operating profit growth and the profit after tax, there were some one-offs, which were there. The operating profit difference is largely because of certain security receipts from ARCs where the treatment [Phonetic] recommended by Reserve Bank has changed and therefore [Technical Issues] above the operating profit line have come below the line. And therefore, the increase in operating profit on adjusted basis is about 37% [Phonetic]. On the profit after tax, it is also on account of the fact that there were some one-off tax provisions, which were made, which meant that our effective taxation [Technical Issues] high as far as [Technical Issues] is concerned. But the good part is that if you look at the last line, it would seem to suggest that we should be able to sustain this improvement as we go head.
The nine-month profitability again demonstrates that what we have seen in this quarter is not necessarily again a one-off and we have seen [Technical Issues] have significantly improved performance. All of this again, the fact that you had profits to make sure that our balance sheet has strengthened is again [Technical Issues] in the asset quality. So on one hand, of course, the credit cost has come down substantially much lower as compared to what we anticipated. This is because the corporate credit cycle is possibly in the best place possible. All NPAs are fully provisioned and also on account of the fact that there were enough profits to take care of any deployment that might have been dead. So I would believe that we are now at that stage where we can again look at the existing book and we are reasonably reassured that there are no downside there. In terms of sustainability of this improvement, to my mind, this is a slide that would give us reassurance. Now for the last four quarters, the SMA [Phonetic] position continues to be very stable and improving. So therefore I think there is nothing as of now on the horizon, which would suggest that there might be any serious issues with impairments or asset quality as we go forward and the collection piece, again, is something which is now stabilized at a very high rate.
Because of the strong internal accruals, the Bank’s capital position continues to be good. [Technical Issues] loan growth, there might be a requirement for external capital infusion. But the fact is that even with this loan growth, the internal accrual [Technical Issues] that we will end up with a capital adequacy ratio at the end of the year, which is better than what it was at the beginning of the year. Now if you [Indecipherable] also to suppose that there might be some moderation in loan growth next year and also that this kind of internal accruals should sustain or improve. I think the Bank is in a good position to also sustain its growth [Technical Issues] in the coming year too. So as of now, we do not believe that there may be a reason for us to approach the capital markets, accepting of course the fact that growth is much, much faster as compared to what we anticipate today.
Last couple of slides again, we want to discuss again where do we stand vis-a-vis again peer banks. So, I think there is a cyclical upturn, which has benefited most banks, but I think there are also some factors which are particular to Bank of Baroda. Largely, it stems from I think how — please go to the previous slide if you don’t mind. [Speech Overlap]. Yeah, so largely again, they stem again from the Bank’s own position. So what you would see is that our physical build actually again has not expanded. So the number of branches are much lower as compared to what they were three years back, number of employees are lower, but there’s very robust growth that we have seen and this growth in some ways is understated because we had two years of very low growth, now that we are growing at 20% and let’s assume that that trend continues and [Technical Issues] the physical build also is largely where it was, you will see that there is an expansion of margins because finally, we have been [Technical Issues] what was the symbiotic link between costs and also in terms of revenues, so I think we should see an expansion of margins on account of the fact that we broadly would be able to contain costs better than peer banks. Some of the impact in terms of what we are talking of is already visible. I mentioned that our deposit growth again is probably better than peers. So, if you take the average of the top nine banks, which have declared results, our deposit growth is three [Phonetic] percentage points higher. Advances growth is also one percentage point higher. So, this should again translate to sustained outperformance.
Again, moving on to profitability, whichever measure you look at as compared to the [Technical Issues] nine banks, private sector and public sector, we outperform competition by a significant margin mentioned on the slide previous to the previous one, which is in terms of costs, where the gap between the cost — opex increase between us and peer banks is the widest. Our opex is increasing at half the rate, right? And as again this current growth that we have seen, it sustains, you will see, it would be getting infected in profit margins even more as we go forward.
Before I close, let me again address one question, which I believe otherwise might come from multiple sources. That is again our exposure to a large group, which again has been under discussion. So I’ll just put two or three factoids before you. I normally refrain again from talking in terms of specific accounts. But I believe you have a legitimate right to ask a question about our portfolio. So I’ll talk about in the context of our portfolio. So in the context of our portfolio, this particular group exposure does not figure among the top 15 by way of exposure to groups as per LEF norms. Now, as you are aware, LEF norms by the RBI take into account outstandings, they take into account non-fund based limits and they also take into account also undisbursed loans, right? Based upon the LEF norms, the Group does not figure in the top 15 large exposures of the Bank. That is factoid number one. Number two, as per the LEF framework, you can put out a certain percentage of your capital to a particular group. What we have put out is about one-fourth of what we can as per our capital, right? So that again would give some reassurance. Third, of the exposure that we have, 30% is either in joint venture with a public sector company or is backed by the guarantee of a public sector company, so therefore I would want to again give you that comfort and reassurance that whatever you have seen in the previous slides by way of performance, by way of profit trajectory, by way of credit costs is likely to continue regardless of the circumstances that we see either in the context of last few days or in the next few months. Thank you very much.
Questions and Answers:
Operator
Thank you, sir. We now open for questions. [Operator Instructions].
Unidentified Participant — — Analyst
[Technical Issues]
Sanjiv Chadha — Managing Director and Chief Executive Officer
The Reserve Bank of India to allows you to lend a certain percentage of retirement capital, whatever the [Technical Issues] maximum allowed by Reserve Bank, it is one part of that.
Unidentified Participant — — Analyst
Of the 2.5%?
Sanjiv Chadha — Managing Director and Chief Executive Officer
[Technical Issues].
Unidentified Participant — — Analyst
[Technical Issues].
Sanjiv Chadha — Managing Director and Chief Executive Officer
So, I think — so, the fact is that this is the beauty of the LEF framework and we must compliment the Reserve Bank in terms of how it has been devised that this takes care of everything that you’re asking, right, what is the current exposure, what is the non-fund based exposure, what are the undisbursed mix, all of these are factored in. And on that basis, again, the Reserve Bank of India asks you again to limit your exposure. So all these things are there. I think the rest is very frankly a matter of detail. I think what is of interest to you and everybody else is that could there be any future impact on the Bank, [Foreign Speech]. So what I can assure you is that from the figures that I have given you, this should give sufficient reassurance that the kind of trajectory that you’ve seen from the Bank in terms of improved performance, that will be sustained. There is nothing in terms of this exposure that can have any significant impact from that.
Unidentified Participant — — Analyst
Okay, sir. How much percentage of you total credit is the exposure [Phonetic] to this Group?
Sanjiv Chadha — Managing Director and Chief Executive Officer
[Technical Issues].
Unidentified Participant — — Analyst
[Technical Issues]
Sanjiv Chadha — Managing Director and Chief Executive Officer
I think it’s a very fair point. And we have been conscious that while it will be — it’s a very good time to be a corporate bank, but corporate banking does again experience cycles and when those cycles are there, the impact on the Bank is very large. So therefore a granular portfolio is something which is to the benefit of the Bank. To my mind, if we progress towards a 60-40 proportion, that might be a good place to be in. We have been guiding that whatever, A, growth should be in line with the industry or better; B, of this growth, we would want our retail to grow at 1.5 times, so which means that if we want our growth to be at 15%, retail should growth at 22% [Phonetic] and corporate should be 0.7 times so that while you take full advantage of the opportunities in corporate, at the same time you’re able to progressively achieve a change in the portfolio, which [Technical Issues] that the kind of returns that we’re seeing are sustaining.
Unidentified Participant — — Analyst
Sir, one point on recovery and another one on treasury. Just small two questions. [Technical Issues].
Unidentified Speaker —
[Technical Issues] of recovery, it is almost same. In fact, it is [Technical Issues] improvement, but [Technical Issues] in our international group, [Technical Issues] between the last quarter and this quarter. Otherwise, our run rate is improving month-on-month.
Unidentified Participant — — Analyst
Sir, anything on NARCL front, how many are gone, what is the amount, gross or the net or the realization in looking forward in the next quarter?
Unidentified Speaker —
No. NARCL, see — so whatever they have identified [Technical Issues].
Unidentified Participant — — Analyst
[Technical Issues].
Unidentified Speaker —
There are two aspects to it. One is with regard to the interest income in treasury, right? So if you look at the book increase quarter-to-quarter and year-to-year, my income growth has been higher than [Technical Issues] so in a rising interest scenario typically it is the best-case scenario where I can generate [Technical Issues] in terms of investment, so that has seen a significant increase in terms of interest income in investment. The second [Technical Issues] so as far along on the [Technical Issues] side is concerned [Technical Issues] But there was one investment [Technical Issues] in terms of pushing that from above the line to below the line, so because [Technical Issues] and the treasury income is getting influenced [Technical Issues] the book is doing extremely well and [Technical Issues] quite good in terms of increasing income, at the same time continuing [Technical Issues] impact going forward. With regards to [Technical Issues] possibly the levels are [Technical Issues] now it is picking out in that way. And at the same time [Technical Issues] some kind of reversal happening possibly at the end of this financial year. So [Technical Issues] quite good [Technical Issues] impact also quite manageable.
Unidentified Participant — — Analyst
[Technical Issues]
Unidentified Speaker —
[Technical Issues].
Operator
Thank you, sir. Can you just take a few online questions. [Technical Issues] go to the next question, please.
Unidentified Participant — — Analyst
[Technical Issues] Yeah, hi. My first question, sir, when you talk about capital Tier I, it is just standalone capital, right? [Technical Issues].
Unidentified Speaker —
So we are talking in terms of how the Reserve Bank of India defines that, right? So that would be in terms of Tier I capital.
Unidentified Participant — — Analyst
[Technical Issues].
Operator
The next question is from Adarsh. Please unmute yourself and ask the question.
Adarsh — CLSA — Analyst
Yeah, sir, I just — Adarsh from CLSA. So you adequately answered, so the 25% of what was allowed under LEF takes care of undisbursed limits, non-fund exposure, overseas exposure as well, is that a correct clarification, sir?
Sanjiv Chadha — Managing Director and Chief Executive Officer
That’s correct.
Adarsh — CLSA — Analyst
Okay and sir, one more thing, just wanted to check, right. One is about Adani being a group and lending to a particular group, right? I just wanted to understand, there are various related parties, some SPVs around related parties. Just wanted to check if you blend to any of them that would be part of this exposure, if at all.
Sanjiv Chadha — Managing Director and Chief Executive Officer
I think I mentioned to you, again, that 30% of the exposure is by way of joint ventures again along with the Group, right, also some, which are guaranteed. So all possible exposures, which can be clubbed in good exposure have been taken care of.
Adarsh — CLSA — Analyst
Perfect, sir. And, sir, I just wanted to understand now the second question was on margins. The sector has seen a very strong improvement in margins. Next year, obviously, deposits will catch up. It’s a little bit of a fight for gathering deposits, so with our loan mix improvement assuming some normalization in credit growth, what will be a fair sense of a sustainable margin for the Bank and just to be a little bit on the conservative side, right?
Sanjiv Chadha — Managing Director and Chief Executive Officer
Yeah, so I think where we are now I think seems to be a sustainable level. As you said [Technical Issues] there is some benefit that we received this year from the fact that there is a lag effect between the repricing of loans and deposits. That is already diminishing. I mentioned in my opening remarks, that was — 40-basis-point difference was there, now that’s come down to 20-basis-point difference. That will also vanish over a period of time, but I think that when it comes to our book, there are some positives that should continue to protect us. Now, one is, as we discussed at the beginning, the change in composition of the book, right? The fact that retail loans are of expanding proportion and retail loans actually are benefiting from the change in interest rates very substantially, that is going to be [Technical Issues] such time that we actually go back into another cycle, that might be some time off. Within that, the composition I think is again something which is important. So you’ll see that unsecured personal loans now are a very significant proportion of the retail book. It was almost nothing. Now it’s already might be 15% to 20% odd, right? [Technical Issues] so our total unsecured personal loans are about INR15,000 crores plus [Phonetic] probably. So I think that is — and there is scope for this to improve. So I think the upside that you will get in terms of margins from the rising proportion of retail loans, A, and within retail loans, rising proportion of unsecured loans I think should help in margins as we move ahead. Third, in terms of the repricing of the corporate portfolio, that is still in process. It is still in process in two ways. One is loans, which are benchmarked to one year MCLR, right? Over a one-year period, they get repriced. So that is improvement that will continue for some time. The second part is that still, again, you’ll find that a lot — most investments are coming really from the largest groups who have great pricing power. So you are not still fully able to price again the new rates when it comes to lending to the best corporates. This of course augurs very well for the quality of credit. But in terms of the benefit of rates, I think it will continue [Technical Issues] in the corporate segment in the next year.
Adarsh — CLSA — Analyst
Got it, sir. And when you say sustainable margins, you’re referring to the nine-month number.
Sanjiv Chadha — Managing Director and Chief Executive Officer
I’m referring to the — I’m referring to the nine-month number, it’s not very different from the quarterly number, so I would venture to say the quarterly number also.
Adarsh — CLSA — Analyst
Perfect, sir. This is super helpful and thanks for the clarification on the Group. Thank you, sir.
Operator
The next question is from Kunal Shah. Please unmute yourself and ask the question.
Kunal Shah — Analyst — Analyst
[Technical Issues] have given some qualitative aspects with respect to NBFC. But do we expect the [Technical Issues].
Sanjiv Chadha — Managing Director and Chief Executive Officer
So I think what you are probably asking, I think your voice is a bit distorted. So let me just repeat what I’ve understood. I think what we’re saying is that how sustainable the corporate credit rate growth might be because there might be some short-term loans, which again might actually run off, right? I think that’s what I understood.
Kunal Shah — Analyst — Analyst
Yeah.
Sanjiv Chadha — Managing Director and Chief Executive Officer
So, to my mind, yeah, so to my mind actually, we are — and we have tried to be fairly strategic about it, right? We are conscious that liquidity is still shrinking. Pricing power is likely to move in favor of banks as we move forward. Therefore, where you are getting the kind of pricing, which you believe is very fair, regardless of where you are in the liquidity cycle, that would be something where you might want to make commitments, which are longer-term, where you believe that still pricing power is not fully with you, right? And with certain sets of borrowers, that will be the case. You would want to make sure that that exposure again is capable of being repriced as you move ahead in the cycle. So I — there will be some short-term exposures, but we see it again more as strategic intent to fully profit from the interest rate cycle.
Kunal Shah — Analyst — Analyst
Sure, so — and given the environment, how are we seeing the pricing on the corporate side? Is it like [Technical Issues] it is still equally competitive for — say, with the rating profile, which we are doing on NBFC side?
Sanjiv Chadha — Managing Director and Chief Executive Officer
So every quarter is better than the last quarter.
Kunal Shah — Analyst — Analyst
Okay. Got that. And secondly, when I look at it in terms of the retail term deposits, in fact, that’s down on a quarter-on-quarter basis, so again, what would be our strategy in terms of trying to — I think major part of the deposit growth has come by building up the bulk deposits over here. So what would be the strategy in terms of mobilizing the retail [Technical Issues].
Sanjiv Chadha — Managing Director and Chief Executive Officer
So ultimately, you want to manage your costs to make sure again that you maximize this time period where you are actually getting some kicker from again the pricing differential. And also you would want to protect yourself from the possibility that the present spike in rates may not be a permanent increase in rates. Therefore, if you look at what is the published highest rate of the Bank, right, which you might see on billboards when you drive through Mumbai. It is 399 days, 7.8% to our senior citizens because we believe that we can be fairly sure that for next 12 to 15 months, rates might be where they are, but there may be a possibility just when we talk of it again, the Reserve Bank of India will possibly be appraising rates maybe a year from now, there could be a possibility that retail deposit rates [Technical Issues] trend might again reverse or get stabilized. So therefore, we will find that growth is coming, a, from this deposit scheme that we have talked of; b, it is coming again from wholesale deposit, but also coincidentally or the maximum of one year, right? So what we’re trying to make sure again is that we do not commit to the Bank to an interest-rate cycle about which we are not confident today and as we move forward, there may be again [Technical Issues] for us to broaden the time segments where we believe we have fair visibility of again stable rates. If you again go back to two or three years back, most of our growth again came from large long-term deposits, three years, five years, because we believe that was a good time to lock into longer-term rates. So effectively this works pretty much in a deliberate manner to make sure that you, a, take into account the uncertainties of the future, and you also make commitments to the extent that we have visibility.
Kunal Shah — Analyst — Analyst
Sure. Thanks. Yeah. That’s fair enough.
Operator
Thank you, sir. We will take the question here from [Technical Issues].
Unidentified Participant — — Analyst
[Technical Issues] very very successfully and you are being benchmarked among the best private PSUs like Indian Bank, Canada Bank [Technical Issues] and among the best performances to date. Hats off to you and your whole team. Now a couple of very specific, very, very important questions. We have seen in the last couple of days, major development, particularly the finance minister’s speech on giving a major biggest impetus for infrastructure, it is being title as such capex budget and the largest boost by government spending, 4.9% of the GDP. Yeah, bigger push is required to get the private, public sector, which has been mentioned. So how do we see in this bank the push to infra lending and would it be among the whole time highest-growth, particularly in FY ’24 because that is being addressed pre-election, because it touched a lot together and how do we see the risk management framework because infrastructure is — we had to take long-term needs, short-term needs, short-term in terms of last mile funding, the finance minister talked about for closure of [Technical Issues] projects and also long-term sustainable development, which takes about 15 to 25 years, and that [Technical Issues] framework, looking at the asset-liability mismatch, also because of the period. Of course, one year would be or could be a walkthrough. And [Technical Issues] in terms of the cash flows and business groups and we have to address this. It gives us actually a tremendous opportunity. How do we look at it?
Number two is the [Technical Issues] savings which has come up, particularly in the last two days, the new default regime. The new regime [Technical Issues]. So after a long time, the banks have got what they wanted, level playing field [Technical Issues] suppose those are [Technical Issues] finance minister talked about [Technical Issues] savings and do we see a big impetus to deposit growth [Technical Issues] opportunity [Technical Issues], how do we see deposit growth, particularly in [Technical Issues] new default regime of income tax, it gives us a great opportunity. Number two, it was particularly — we talked about quantitative indicators like return on equity, how do we see, because we are looking at the peer banks here, of course, [Technical Issues] you will be seeing closely that was missed out in the industry versus BOB and the other banks, could we achieve a ROE of 20% soon? And we see a lag in the results. You have given very good new [Technical Issues] operating profit growth [Technical Issues] but the fee-based income is lagging behind. Normally [Technical Issues] any particularly issues and how do we intend to correct in this coming year and what we are looking at in this particularly year?
Unidentified Speaker —
[Technical Issues] so if you look at the infrastructure, our growth, in terms of the industry, growth has been the highest, right, and particularly two sectors doing extremely well. One is the power sector and second is road sector, right? And [Technical Issues] kind of budget that we had where there is substantial push for infra and we as a bank move [Phonetic] the economy, right. So, the more the growth on the infra side, the Bank would be again growing on those sectors and the book is quite long and its outlook is also quite long in infrastructure, right. On the second aspect that you talked about with regard to — on the retail, I mean, on the money [Technical Issues] masses and whether that will lead to deposit growth, it can lead to — yes, it can lead to a deposit growth or can be [Technical Issues], which is good for my normal loans, all my retail loans and all, so [Technical Issues] positive, both in terms of the outlook on the budget and that has impact on the economy, at the same thing specific to [Technical Issues] like infra, yes, we’re going to be long with regards to [Technical Issues] supplement the retail deposits, similarly on [Technical Issues] advances also because that would conventionally lead to more [Technical Issues] at the lower level and that could also do good for [Technical Issues] book in that way. [Technical Issues] because it was a long question in that way.
Unidentified Participant — — Analyst
[Technical Issues] depositors. So how do you look at such products? And these are [Technical Issues] and this is what the market wants, particularly in terms of [Technical Issues] which has become the norm actually now post COVID. And we are also looking at such [Technical Issues] category and what you feel could be the market [Technical Issues] totally?
Unidentified Speaker —
[Technical Issues] because you were talking about a floating rate deposit as compared to floating rate advances, right? [Technical Issues] bankers to offer [Technical Issues] product also. But then these are more for a product [Technical Issues] the retail that is what our earlier experience is. So we’ll just map it out and if there is a requirement, we will have look on that, but currently because product [Technical Issues] floating, like our deposits are typically up to one year, right, so it gets decided at the end of one year, so the requirement of resetting the liquidity, everything would be mapped out and we need to see that market developing although on the loan side, these are all floating [Technical Issues] would do floating rate deposit, but then we need to see the market [Technical Issues].
Unidentified Participant — — Analyst
Thank you, [Technical Issues] all the best.
Operator
We have one question I think at the back.
Unidentified Participant — — Analyst
Thanks for the opportunity. [Technical Issues] can you just explain [Technical Issues].
Unidentified Speaker —
[Technical Issues] for the security receipts. But they were being as part of the revaluation provisions, which we actually reflect above the line. Also in this quarter, we reversed those provisions and we provided for them in the below the line in provision for non-performing investments. In addition, there was a one-off investment, for which we took provision, so net of the two is what you see there. And on P&L, the impact is about INR632 crores. [Technical Issues] so because one is a reclassification.
Unidentified Participant — — Analyst
Sure, and so [Technical Issues] this will continue to [Technical Issues] Thank you.
Sanjiv Chadha — Managing Director and Chief Executive Officer
So currently, the entire book, almost entire book is existing bank customer, right. We are considering that we should look at now that we have some comfort with the product that we might look at new to bank customers for the simple reason that what is your existing customer, right, a customer for whom we have data, which you analyze and that way, you can take a decision. Now that distinction in terms of data availability is potentially shrinking, once you have comfort and confidence that you have a similar quality data available for our loan [Phonetic] customer, you might want to diversify that portfolio, but for the moment, nearly 100% of the portfolio is of the existing bank customers who have accounts with us and then you can analyze those accounts and then make them offers in terms of the kind of exposure you can take on them and also at what kind of rate. I think this is something which could go grow again for some more time at a fast pace because even for us, I think it might the — current book might be given the size of the bank, probably a fourth of what is the potential size if you’d look at peers. So that’s why there is some runway there.
Operator
Thank you. We’ll take a couple of questions from the online audience, please. Thank you, sir. Saurabh Kumar, I request you to please unmute yourself and ask your question.
Saurabh Kumar — Analyst — Analyst
Thank you sir. Sir, two questions, one is on this large group, your team has been able to do any credit assessment over the last week? And could you share your thoughts as to what is your view of the credit of this growth? And any latest assessment that you’ve been able to do? Second is, what is the total pool of restructured assets and the provision you’re carrying now on the same? And the third is on the opex. Is there any wage revision you have done — provision for wage revision you have done? Thank you.
Sanjiv Chadha — Managing Director and Chief Executive Officer
So we’ll go — the wage revision, yes, we have made the provision, which has been required for all of us [Technical Issues] with effect from last November, right? In terms of the large group, you — I think, as I mentioned that for all large group exposures, we try to make sure that it is as diversified as possible. In this case [Technical Issues] this would be spread over a number of companies, maybe a dozen of them. Also I mentioned to you again that a significant proportion of that is in joint ventures. Also, I think there is nothing at all to seem to suggest that any operating company, we should have any kind of issues. As I mentioned, we are at the most comfortable time in terms of the corporate credit cycle. The environment is very comfortable. Third, in terms of where the Bank stands, I think in terms of the corporate credit cycle, I don’t think there is anything for us to worry about. I would only want to reassure that both in terms of this particular exposure and also in terms of the corporate book, in general, we are likely to continue to see the improvement that we have seen in terms of lower slippages, lower credit costs and therefore more and more of the operating profit getting [Technical Issues] the bank’s bottom line.
Operator
Thank you, sir. The next question is from Jai Mundhra. Please unmute yourself and ask the question.
Jai Mundhra — Analyst — Analyst
Yeah, hi, sir, good evening. Sir, firstly on this large group exposure again. If you can sort of specifically mention the exposure through bonds, right, so, what you mentioned is the total exposure, a, could there be significant difference between exposure and outstanding as of third quarter or later and what could be the bond exposure? Could it be like negligible bond exposure or there could be still some sizable bond exposure?
Sanjiv Chadha — Managing Director and Chief Executive Officer
So, again. I think we’re trading into [Technical Issues], which I fear to trade upon, right? Because at the end of the day, we will be getting into specifics. What I would want to again say is that, look, at the end of the day, we are here to analyze the possible impact of this or any other development on the bank, right. I don’t think there’s anything, anything which can significantly alter the trajectory we have seen of the bank and all the questions that you asked, there is — I think in any potential answers, which would give you any discomfort, let me put it this way.
Jai Mundhra — Analyst — Analyst
Sure. Understood, understood, sir. And secondly on, I think CFO sir mentioned that this NPI and the MTM reversal in the other income, if you can quantify the nature of this NPI, I mean, which was one-off, which was the usual NPI and the rest would be security receipts? And what is the — and do we now and — what is the PCR on security receipts, now?
Sanjiv Chadha — Managing Director and Chief Executive Officer
Yeah, so first, let me just [Indecipherable] I think the other question that you asked on restructured loans, right, I think which I omitted to answer and then we’ll pass it on to the CFO.
Ian Desouza — Chief Financial Officer
[Technical Issues] INR16,700 crores [Technical Issues].
Jai Mundhra — Analyst — Analyst
So the provision for the NPI that we took incrementally this quarter is INR632 crores [Technical Issues] non-performing investment, not the security receipts, right?
Ian Desouza — Chief Financial Officer
No, no, this is for the investment, the security receipt reclassification was INR680 crores.
Jai Mundhra — Analyst — Analyst
And what is the PCR now on security receipts, sir?
Ian Desouza — Chief Financial Officer
INR600 crores.
Jai Mundhra — Analyst — Analyst
Sure. 100%, right?
Ian Desouza — Chief Financial Officer
Yeah.
Jai Mundhra — Analyst — Analyst
Yeah. Okay. And last question sir, if you can share the loan book by benchmark. I mean MCLR base rate — sorry MCLR, EBLR, fixed, etc.
Ian Desouza — Chief Financial Officer
Yeah. So the MCLR is almost 50%. In terms of EBLR, it’s around 30% [Technical Issues] we have pretty small proportion of 6%, 7% fixed rate. The remaining is floating rate, but benchmark to rates like T-bill and etc.
Jai Mundhra — Analyst — Analyst
Thank you and all the best, sir.
Operator
Any questions here, if you can get the mic [Technical Issues].
Unidentified Participant — — Analyst
While you indicated that we are not having a very [Technical Issues] cycle, which is why we are raising bulk deposits [Technical Issues].
Sanjiv Chadha — Managing Director and Chief Executive Officer
So, I think this is what you normally see, right? Whenever interest rates go down, the first thing that you pay off is your bulk deposits and that’s what you would have seen also. If you were to analyze our books last two, three years, that is what you might have seen. And again, as they move up, this is possibly a way of ensuring that your marginal rate in what you pay is a little different from what you might be paying on the portfolio, right? It makes sense to do that. Now, as again, that difference between the marginal rate any portfolio rate narrows, it probably will make lot more sense to actually start focusing on the other part also, so I would believe we might reach that stage sometime in the coming financial year.
Unidentified Participant — — Analyst
Right. And secondly, sir, again on the [Technical Issues] not looking for any data points or as such. Do you think that there can be any reason [Technical Issues] to banks because the large part of exposure is outside the banking loans? It’s true for bonds and the other [Technical Issues]. So [Technical Issues] possibility of that.
Sanjiv Chadha — Managing Director and Chief Executive Officer
So, look again, at the end of the day, we can only look at our own books, right, given where we are in terms of point in time. To comment anything beyond that, I think it’s just possibly not — it’s just not feasible. When you look at our own books, I would only say that look, our books are not related to anything which has changed over the last few days, we lend on [Technical Issues]. There is a leverage ratio that you accept. There is certain cash flow that you accept to [Technical Issues] that leverage ratio has not changed. The equity that we have assumed again, that equity value has not changed [Technical Issues]. So therefore, as of now, I would believe that there should be very little reason. Also, whatever independent [Technical Issues] that we have again heard, none of it would suggest that any of these things should really become a problem, so I think we are there, there is a lot of noise, which is there, that noise is something that impacts certain parts of the financial sector more, certain parts less. I would believe that structurally given the nature of the issue, banks are likely to be the least impacted. At least we are very, very comfortable with our own portfolio.
Unidentified Participant — — Analyst
Sure, sir. And sir, lastly, on the — while you talked about [Technical Issues] making, have you also worked out the linked pension liability and what are the plans to provide for that?
Sanjiv Chadha — Managing Director and Chief Executive Officer
Ian?
Ian Desouza — Chief Financial Officer
Yeah and you are talking about the family pension liability or you are talking about the wage areas?
Unidentified Participant — — Analyst
[Technical Issues] potential wage hike.
Ian Desouza — Chief Financial Officer
[Technical Issues] look at the pension also, the possible pension.
Unidentified Participant — — Analyst
Sure, thanks, sir. Thanks.
Operator
Thank you. We will take a couple of questions. If we have [Technical Issues] go to online? Okay. I think we can ask a couple of online participants. [Operator Instructions].
Unidentified Participant — — Analyst
Hi, sir. Sir, regarding the large group exposure that we’re talking about, just wanted to confirm that this includes the investment book in the domestic and international entities, right?
Ian Desouza — Chief Financial Officer
Confirmed.
Unidentified Participant — — Analyst
Sure, sure, thanks, thanks a lot, sir. That’s all.
Operator
The next question is from Rakesh Kumar. Please unmute yourself and ask the question.
Rakesh Kumar — Analyst — Analyst
Hi. Am I audible, sir?
Operator
Yes, you are.
Rakesh Kumar — Analyst — Analyst
Yeah, thank you. Thank you, sir. Sir, just one question with respect to loans proportion on MCLR, so have we increased the proportion on MCLR or in coming quarter or so, are we further going to increase the MCLR proportion to enhance the margin?
Ian Desouza — Chief Financial Officer
Yes, that’s, if we look at the composition, prior to that, there was a bigger component in terms of external linked benchmark under the corporate [Technical Issues] MCLR, so [Technical Issues] component would definitely go up.
Rakesh Kumar — Analyst — Analyst
Sir, just a related thought, would not the regulator wish to discontinue the MCLR and is there a possibility that on the corporate loans also being benchmarked — to some external benchmark, is that a possibility in the near future?
Ian Desouza — Chief Financial Officer
No. We have no idea [Technical Issues] that is continuing. So absolutely no idea about it.
Rakesh Kumar — Analyst — Analyst
Okay, thank you, sir.
Unidentified Speaker —
And even as [Indecipherable] said, the choice is available to the borrower, right? And what is the benchmark, they might choose, so even today, the choice is there and ultimately the borrower is to determined what banks do.
Rakesh Kumar — Analyst — Analyst
No, but, like sir, like, in the case of floating rate loans in the retail and MSME, we are mandated to give loans on EBLR. So if there is — if there is a similar kind of guideline coming from the regulator, then we don’t have any option.
Ian Desouza — Chief Financial Officer
Yeah, as per regulatory guidelines, we have to act on that. [Technical Issues].
Rakesh Kumar — Analyst — Analyst
Got it. Got. So because like maybe after some time, not now, we will stabilize the interest rate and then we will set into the declining rate scenario, so — and MCLR will help us in that scenario, but if there is a change in the regulatory guideline, then situation can be different.
Ian Desouza — Chief Financial Officer
Yeah. Right, absolutely you are right on that.
Rakesh Kumar — Analyst — Analyst
Thank you sir. Thank you.
Operator
The last question is from Adarsh. Please unmute yourself and ask the question. Adarsh [Indecipherable], you are requested to unmute yourself and ask the question. [Operator Instructions]. Okay, we will just take one last question from [Indecipherable] and then we’ll close.
Unidentified Participant — — Analyst
Hi, sir, thanks for the opportunity. Sir, one question. Sir, as we are seeing that 4Q because the kind of the Q2 margin expansion that we are seeing, probably this is another quarter where [Technical Issues] margin [Technical Issues] where the cost of funds will catch up, but can we say like in FY ’24 margin would be closer to the average of the full year of FY ’23 because of the product mix improvement towards unsecured and some bit of retail share improvement can drive that? [Technical Issues] for full year for FY ’24 would be closer to the average of what we are able to deliver on FY ’23?
Sanjiv Chadha — Managing Director and Chief Executive Officer
So I think, really, as we’re getting into speculation, I can only say that we have tried to exercise discipline even when the environment was unfavorable to make sure that we don’t compromise on margins, right. So now that when the environment is more favorable, pricing power has finally returned to the banks in some measure after three years, I think particularly in the corporate book, where we [Technical Issues] 45% of the book, I think there is scope for some expansion in margins there that will flow on account of two reasons; a is because as was mentioned the previous question, there is a normal cyclical play out in MCLR, which will continue to happen. Number two, as I mentioned, they are still large groups, where again, which have great pricing power, great Bargaining power, I think to some extent, there is still a bit of a rigorous balance [Technical Issues] so I think we remain fairly confident that the improvement in margins that we have seen should continue. Certainly, where we are, maybe some scope for improvement as we go ahead.
Unidentified Participant — — Analyst
Yeah. Sure, thanks.
Operator
Thank you. [Technical Issues] I’d like to now invite Mr. Ian Desouza to please give the vote of thanks.
Ian Desouza — Chief Financial Officer
So, good evening, everyone, and thank you all for making it to our first physical event in over three years. That’s a real pleasure to see all of you here. For all of you who participated online, thank you as well. If there are any further questions, due to the paucity of time, we couldn’t address them, please feel free to reach out to me and my team. We are happy to interact with you [Technical Issues]. Thank you so much.