Bank of Maharashtra Ltd (MAHABANK) Q4 FY23 Earnings Concall Transcript

Bank of Maharashtra Ltd (NSE:MAHABANK) Q4 FY23 Earnings Concall dated Apr. 24, 2023.

Corporate Participants:

A.S. Rajeev — Managing Director and Chief Executive Officer

Asheesh Pandey — Executive Director

A.B. Vijayakumar — Executive Director

Analysts:

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Akash Jain — Ajcon Global Services — Analyst

Himanshu Saluja — Aditya Birla Sun Life AMC — Analyst

Vikram Damani — Damani Securities — Analyst

J.K. Jain — J.K. Jain & Company — Analyst

Jayesh Shah — OHM Portfolio Equity Research — Analyst

Presentation:

Operator

Ladies and gentlemen, good evening, and welcome to the Q4 and FY ’23 Earnings Conference Call of Bank of Maharashtra. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

We have with us from the management, Shri A. S. Rajeev, Managing Director and Chief Executive Officer; Shri A. B. Vijayakumar Executive Director; Shri Asheesh Pandey, Executive Director and all General Managers of the Bank.

I now hand the conference over to Shri A.S. Rajeev. Thank you, and over to you, sir.

A.S. Rajeev — Managing Director and Chief Executive Officer

Thank you, ma’am, and good afternoon to all.

Today, our Board of Directors adopted the results of financial results for the quarter underlining the year ended March 31, 2023 of our Bank of Maharashtra and we are happy to share our results with all the investors and the results and this year, particularly the quarter it was one of the best quarter as far as bank is concerned and for the whole year, the result is comparatively good. I’ll share some of the results at a glance, then we can share our question and answer session.

And the total business has grown by 21% to INR4,10,000 crores and the deposits increased by 16% to reach INR2,34,000 crores and the gross advances increased by 30% to INR1,75,000 crores. As of now, the CD ratio has improved to 75% and gross NPA 2.47%, net NPA 0.25%. With this, provision coverage ratio has reached 98%. For the current quarter, net profit increased by 136% to reach INR840 crores and operating profit grown by 57% to INR1,855 crores. Net interest income increased by 36% to INR2,187 crores for the current quarter and NIM improved to 3.78% as of 31/3. Cost to income ratio improved to 38% and ROA improved to 1.32%. Our return on equity improved to 36% and CRAR improved to 18.14% of which Tier 1 is 14.25%.

Operator

Ladies and gentlemen, we have lost the connection of the management team. Please stay connected. We will rejoin them. Ladies and gentlemen, we have the management team back on line. Please go ahead, sir.

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes/ And return on equity improved to 26% and the CRAR improved to 18.14% of which Tier-1 is 14.25%.

For the full year, net profit increased by 126% to reach INR2,602 crores as against INR1,152 crores for the year last year. Operating profit has shown a growth of 26% to INR6,099 crores against INR4,848 crores for the year ended 31/03/2022. Net interest income for the full year grown at 28% and fee-based income has increased by only 6%, the main reason was in the current year because of the shift in interest rates hike, profit on sale of securities was not there, instead of that we have given around INR180 crores MTM provision for SR, they have more than five years at 100% provision we have made. If the provision was not there, it was a growth of around more than 20% growth was there. So one-time measure, we have given SR provision of 100%. Cost to income ratio for the full year, it is 39% as against 44% last year. ROA for the full year is 1.1% as against 0.55% for the year ended 31/03/2022. Return of equity improved to 20% as against 11% for the last year.

So we have RAM sector is the major growth happened and retail has grown by 23%, MSME has grown by 27%, Agriculture also grown by around 25%. So the total RAM sector has grown by around 24% to 25%. Net advances has grown by 31%. So last year up to last quarter, we had INR1,200 crores provision COVID-19 provision we have kept it so that provision we have not utilized and it is kept as it is. It is not considered for capital adequacy purpose also, it is like a floating nature. As and when required, bank may be able to utilize that.

So, these are the major areas of financials are concerned and I will give my mic to Mr. Pandey Ji regarding digital area, what is initiative we have taken for the current year, if it is okay madam. Thank you.

Asheesh Pandey — Executive Director

Thank you, sir and good afternoon to all the analysts. Warm welcome in this meet. You would have already seen the bank’s performance results. So, accordingly, to inch up further, both because bank you would have seen almost, say, for last one year or so, bank is adding up the business in the range of say INR60,000 crores to INR80,000 crores, INR90,000 crores. So it is very much imperative to augment its technology. So first of all, the Board has already adopted and directed to have a budget of more than INR1,000 plus crores to augment its technology on various counts.

So bank is working upon the three important pillars, one is the digital operations. So, it means whatsoever banking operations we are doing, so converting it to more on more technology, whether it is a reconciliation — whether it is reconciliation even not [Indecipherable] but whether more frequency within the day. So, that is one sort of thing. And so second is, what sort of operations can be converted to digital journeys. So, bank you would have seen the two press release, which has come from this commencement day, 8th of February and another last month because now bank has also taken a decision that each month there will be a digital launch day. So many of the things pertaining to these three pillars and the third pillar is digital compliance. So because the compliance is one thing, when it becomes legacy, it takes lot of time and the resources as well. So that is what we are thinking to imbibe all those sort of compliances within the three itself. So within these three, we are banking upon amongst others basically on the three things, the one is the artificial intelligence that we are very — on the verge of finalizing, so that we will be directly taking up. The robotic process automation long back we have already started deploying, so almost 10 process we have concluded and 62 approval we had, around 100 we have already identified. So that business process finalization and all is happening. And the third is machine learning, which is analytics or deep learning, I should say. It is in place with the analytics team in the bank and that we are using for our soft collections, also for the up-sell, cross-sell and also some of the areas where we have to strengthen or to understand where our stress would be.

So I think on these three pillars, which we are working. The fourth is that already, which is in our website we have come with almost. I think more than 50 RFPs for our various collaborations and IT initiatives and going forward within this month itself probably, we will be seeing some of the biggest RFPs, which we are coming on the lifestyle banking and other things.

So in this, again what we propose and the Board which has deliberated is, that on the business acquisition side, we are thinking for starting with 5% not only on the asset and liability, but even on the third-party products. So starting from say 4% to 5% this year to increase it to almost 25%, 30% in next three years’ time. So this is what we are looking from a technological side. And secondly, we have done some very big collaborations on the [Technical Issues], second is the CRISIL which is already in the press news and then is the [Indecipherable]. So we have strengthened our system of appraisals in the bank and third [Technical Issues] where we are using AI.

So, in brief, this is the total, the vision that the Board is having and on which the entire bank, all of us we are functioning. This is the brief on the technological or the digital initiative, which bank is aspiring and the areas which we want to comment. Thank you.

Operator

Should we begin with the question-and-answer session sir?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes. There is one point I forgot to tell you and Board has already recommended 13% dividend of also for the current year as against the last year it was 5%.

Yes. Now we can take up the question-and-answer.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Ashok Ajmera from Ajcon Global. Please go ahead.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Thank you for giving this opportunity. My compliments to you, sir. Very rich compliments to you Rajiv sir, Vijayakumar Ji, Asheesh Ji, for the fantastic performance. I mean, it’s not that only one quarter or two quarter, quarter after quarter and in the whole year you have given one of the best performance taking the bank’s total business beyond INR400,000 crores and I think you can be ranked as one of the best banks, if you look at least eight to nine parameters out of 10 parameters, you have done exceedingly well. So, my compliments to you all. And especially, even on the dividend front going from INR0.5 to INR1.3, I mean 13% is also another, I mean, big achievement for a small bank like — I mean, small in the sense, the business if you compare with other banks, the overall business like Bank of Maharashtra.

Having said that sir, and even on the operating profit you have performed well, INR1,855 in this quarter as against INR1,580 crores. On the provisioning side, sir, the provisions have increased even though the provision for NPA has not increased much, hardly INR7 crores. So this other provisions which have increased, will you elaborate on that and whether it is going to be the feature in the coming years too. This is one.

Secondly, after growing so fast, even in the last quarter I think the credit growth is almost 29.5% or so, where do we see the bank going forward, that are we going to — because still our base is low, so are we going to go on the same pace in percentage terms and making it almost totally 100% provided bank with the ROA of, say, 1.5% or so. So what is our basically the plan for the future for the FY ’23-’24?

And one, sir, on this Asheesh Ji’s digital journey, I mean he has taken us through the digital initiative. Out of this INR1,000 crores, which has been approved by the Board, how much has already been spent till now and how much do we plan to spend in ’23-’24. This is just a few observations and questions in the first round and I think I will get only chance for the second round.

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes. Mr. Ajmera, thank you so much. And first first query is regarding provisioning, the total provision for March ’23 is INR945 crores as against INR582 crores for December and INR365 crores for corresponding March. You can see that the split we have given in this page number 17 of the presentation that provision for standard assets is given, INR545 crore is the provision for non-performing assets. It is in tune with other quarters also. And basically 0.47% was the net NPA for last quarter and additional INR250 crores, INR300 crores requirement was given for reducing the NPA. So otherwise provision may not be required for coming years, I mean, quarter also because that is going to reduce now, because the 0.25% range we have to continue as a net NPA ratio that will continue. So that here I think INR200 crores, INR300 crores excess provision we have made.

Second point is that regarding INR280 crores provision we have given for standard assets, the standard assets is two component is there, one component is for increase in the growth corresponding to December ’22. From December ’22, INR10,000 crores to INR15,000 crores standard assets has increased. On an average, it is coming around 0.5%, if we take around INR70 crores will come for standard asset provisioning and the remaining provision we kept for cushion, little floating provision we kept it, because when the bank is coming for ECL nature, then next year is RBI has given that to 2024 onwards bank has to give importance for conversion from the present provisioning to expected credit loss methodology. So we are creating certain provisions for standard assets provisioning for moving forward, because once expected credit losses had to be classified under standard assets provisioning, not from NPA provisioning. So some INR150 crore is kept for that, floating type nature. So INR167 crores non-performing investment is given, INR167 crores is given that is basically for SR provisioning, because we have some SR that is below five years or three to four years — above five years, so that 100% provisioning we have made. So with this, I think we don’t have any SR. Now, the provision is to be given 100%, we have provided. So otherwise provisioning in future also there may not have much impact requirement for provision is concerned.

Second point is regarding the growth, current year the 30% growth was in advances and 16% to 17% for deposit growth. Deposit growth, we have not taken much deposits because wherever possible, we have gone for our borrowing window we have utilized, so that slightly deposit growth rate has come down and the second point was the the market interest rate is also slightly high, so we have not utilized that window. So in coming year ’23-’24 bank may be able to, as per the direction given by the Board 20% to 22% is the growth rate envisaging by the credit and 15% to 16% is the growth rate for deposits. The growth rate of deposits of the current year will continue for next year also, but the advances growth is slightly we are bringing down, because last year 30% growth rate was there and the base also year-after-year, base also is increasing, definitely 2% to 3%, we have to bring down the growth rate. So otherwise there is no such problems and we will continue to grow and we kept INR5,00,000 crores business target of financial year ’24. Last year we have kept — this year we have kept for INR4,00,000 crores business target, instead of INR4,00,000 crores business target super-achievers target of INR4,10,000 crores, we have reached. So, INR500,000 crores target is kept for financial year, ’24 and with this growth rates we may be able to reach that.

Regarding the digital, I think our Pandey Ji will tell you that correctly.

Asheesh Pandey — Executive Director

Yeah. Ajmera sir, actually the — correct, for the every year, we are thinking [Indecipherable] and generally it starts from the August, September to the next August. So in this, already we have spent I think more than INR600 crores and some of the RFPs are already floated which are on the way for the closure, some are already closed and some we are going to float an another, say, one-month time. So I think as we said the budgeted more than INR1,000 plus crores, that we will be going to inch up and end up with in this year as well as the next year.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Okay. Sir, if I am permitted, we had certain accounts allocated for 13 accounts, I think about INR2,700 crores shortlisted. So what is the status there in NARCL?

A.S. Rajeev — Managing Director and Chief Executive Officer

This NARCL account list is of course dynamic, it keeps changing every time because some accounts are getting added, some accounts are getting deleted. At present, it is INR2,400 crores now. We feel that it is shortlisted for NARCL. Some accounts will come in the first quarter and remaining in the current financial year. So two accounts are already been received in Q4, one is JP Infra and another is Mittal Corp. Of course, though it was NARCL bid, actually it was won by another ARC in switch challenge and finally the account was transferred. So two accounts finally done for our bank and remaining now in the current financial year.

A.B. Vijayakumar — Executive Director

Little more I add, I am GM Recovery, Vijayakumar here, ED. Total number of accounts shortlisted in NARCL is 43 Bank of Maharashtra has got 12 accounts amounting to INR2,673 crores and as rightly JP Infra that account, remaining 11 are in the process.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Sir, the way we are going, the gross NPA is also expected to be reduced considerably in ’24, because that’s still, I mean as compared to what we have provided for the net NPA has come down considerably to 0.25%, but gross NPAs are you still I think 2.47% or something, is there any major reduction scope in the gross NPA in this coming year ’24, I mean, ’23, ’24?

A.S. Rajeev — Managing Director and Chief Executive Officer

We are trying to bring down below 2%.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Okay. Thank you sir, I will come back again. I’ve got some other queries also, but just to give the opportunity to others.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Akash Jain from Ajcon Global Services. Please go ahead.

Akash Jain — Ajcon Global Services — Analyst

Sir. Congratulations for a fantastic set of numbers. My question is regarding the gold loan book size, what is your target for the gold loan book, how is the book behaving in terms of delinquencies and what is the yield on the gold loan book and the NIMsthat you are enjoying. That is my first question.

And my second question is your outlook on the restructured loans. So how is the MSME restructured book behaving and what is the percentage of MSME restructured book to total advances as on date. That is my second question.

A.S. Rajeev — Managing Director and Chief Executive Officer

Total gold loan portfolio of the bank is around INR7,000 crores and we have kept a very competitive pricing for the gold loan, because the risk weight is zero, but our average yield on the gold loan is around 7.25% with a zero delinquency. So that is one good sign of our gold loan portfolio. This comprises both one the retail segment also and the agriculture segment also.

Regarding the restructured book, we had only INR4,200 crores of total restructured, which are most likely to be come out from the current year, because the periods are getting over, accounts are more or less working fine, there is not much delinquencies are observed even in our total SMA, if you see, it is almost 0.45% of our total advances booked. So restructuring book is performing [Technical Issues] and there is no major risk on the restructured book also.

Akash Jain — Ajcon Global Services — Analyst

Okay, sir. Another question is considering the accumulated losses that you’re carrying on your book, so what kind of taxation we can expect in FY ’24 and your comments on the DTA reversal going forward?

A.S. Rajeev — Managing Director and Chief Executive Officer

Sir, we do not have any accumulated loss in our accounting book. In income tax, we have accumulated loss and probably we don’t need to make any tax provision for that, but whatever that DTA we have created earlier against our losses, that also is already reversal is done. Now, not much DTA is available, it is only the timing difference DTAs are on book of small amount. And overall carry forward losses is roughly INR8,000 crores, it will give us benefit for another two years.

Akash Jain — Ajcon Global Services — Analyst

Okay. And with regards to credit cost what would be your guidance since the provision requirement seems to be less now and slippages are also under control. So can we expect the credit cost below 0.5% for FY ’24?

Asheesh Pandey — Executive Director

Yes, it will be around 0.5% to 0.75% range we can keep it.

Akash Jain — Ajcon Global Services — Analyst

Okay. For FY ’24?

Asheesh Pandey — Executive Director

Yes.

A.S. Rajeev — Managing Director and Chief Executive Officer

Whatever credit cost you are seeing that is on account of additional provision we have made in order to bring down the net NPA. What sir has told, that it will be below 0.5%.

Akash Jain — Ajcon Global Services — Analyst

Okay. And your outlook on the treasury book?

Asheesh Pandey — Executive Director

Treasury book, that whatever that bad patch we have already seen and you know that now RBI this time has passed the rate also and going forward we are expecting that softening of yield. So with this that we are expecting the not only the yield of the treasury will go up, as well as that we will book the trading profit and there will not be any MTM depreciation. So overall outlook is good pertaining to treasury.

Akash Jain — Ajcon Global Services — Analyst

Yeah. And with regards to corporate credit growth, which are the sectors that has led to this kind of good growth in the corporate book. Earlier we were focusing on different clusters like pharma cluster, textile cluster, also infrastructure projects, especially Namami Gange. So going forward now which sectors are we focusing, are we continuing the same focus, the sectors we discussed earlier?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes. These are same sectors what we have grown that, because where earlier bank has not grown some of the sectors like pharma, this is LRD area where bank was not having any exposures, little exposure we have taken LRD and other manufacturing sector and the corporate sector, the growth is, though it is classified under corporate, the major component is coming from mid corporate sector that we are looking for now. Not this bigger corporate we are not looking for.

Akash Jain — Ajcon Global Services — Analyst

And sir, what is your sanctions pipeline as on date for the corporate book?

Asheesh Pandey — Executive Director

Around INR7,000 crores we already have pipeline sir, sanction pipeline.

Akash Jain — Ajcon Global Services — Analyst

Okay. And fund-based, non-fund based?

Asheesh Pandey — Executive Director

Sir, basically, it is more of a fund based only.

A.S. Rajeev — Managing Director and Chief Executive Officer

Fund based will be extra.

Akash Jain — Ajcon Global Services — Analyst

Okay. So that is all from my side. As of now, I will come back in queue.

Asheesh Pandey — Executive Director

Yes.

Operator

Thank you. [Operator Instructions] We have a question from the line of Ashok Ajmera from Ajcon Global. Please go ahead.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Thank you. I think Akash is also from my company only and we have been only asking the question to the management. Most of the points have been covered. I would just like to know something about the NBFC exposure of the bank and how are we placed on overall limit on that and co-lending and where are we heading, what kind of yield are we getting from the NBFC business and what is our outlook on that, sir?

A.S. Rajeev — Managing Director and Chief Executive Officer

Sir, regarding NBFC sector, we are continuously assessing our sanction exposure. And based on that we are taking decisions as and when required and we are taking exposure in the top-rated NBFCs only, with a focus of having good return also. That is prime, sir.

And regarding co-lending, after having gained experience, we are poised for good growth in co-lending and we are working on that front, along with digitalization of that co-lending process, sir.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

What is our total book size of NBFC loan book?

Asheesh Pandey — Executive Director

It is approximately INR10,000 crores.

Operator

Thank you. I request you to come back in the queue for follow-up questions. We have our next question from the line of Himanshu Saluja from Aditya Birla Sun Life AMC. Please go ahead.

Himanshu Saluja — Aditya Birla Sun Life AMC — Analyst

Hi, sir. Thanks for the opportunity. Just few small questions, actually most of the questions has been answered.

Operator

I’m sorry, sir, can you use your handset, please. There is some disturbance from your line.

Himanshu Saluja — Aditya Birla Sun Life AMC — Analyst

Sure. Hello.

Operator

Yes, please go ahead.

Himanshu Saluja — Aditya Birla Sun Life AMC — Analyst

Yeah, hi. Sir, thanks for the opportunity. Just a few small quick questions. Firstly, given we have seen a margin expansion of 18 basis point in this quarter as well and as the deposit pricing is catching up, how you see the margin outlook going ahead? Do you see any still further scope of margin expansion? So that’s the first question.

Second question is around, are you seeing any signs of withdrawal of the sanction limits of the corporates, because of any nature of slowdown in any of the sectors? So that’s my second question.

And my third question is, how is the pricing competitive intensity at this point from the corporate pricing? So that’s small quick questions totally.

A.S. Rajeev — Managing Director and Chief Executive Officer

The first one is regarding the margins. I think now as of the present quarter, it is 3.78%. I think we will be able to continue with the same range of margins with plus or minus 20 basis point, 25 basis points here and there. Something, definitely it will be about 3.5% we may be able to keep that.

Regarding that the pricing is also connected with the margin and the pricing is concerned, we are looking risk-based pricing only and even if corporates also, wherever highly competitive corporates, we are not looking for. So the pricing and reasonable profits or reasonable pricing, that type of corporates only we are looking for that. So the pricing part, as of now no competition is there, in spite of competition and our cost of deposits and CASA ratio is high. So we can go with lower pricing in the market with highly rated customers that is what looking for that. As you are aware that our pricing in housing loans 8.40% is the lowest in the industry actually. So the same kind of pricing — differentiated pricing will be done for highly qualitative customers, that is our strategy which we are adopting. The portfolio also for example in housing loans and other things if we see the portfolio of our housing loan portfolio or that type of retail portfolio, above 800 is coming, double-digit is coming that 15% to 20% is coming about 800 plus number is coming. So the quality has improved. So the strategy of the Board is to improve the quality above the operating profit level, so that the provision has to be nil, that is the strategy we are adopting there.

The third point is regarding sanction withdrawal, there is no such issues and we have enough cushion, but we are on selective basis only, corporate selections are doing only selective basis with reasonable pricing. So there is no such issues are concerned, still there is good flow of corporate is coming and selective basis we are picking up that.

Himanshu Saluja — Aditya Birla Sun Life AMC — Analyst

Okay. Sure sir. Just one small last final question. When you mentioned that you are expecting the margins to range between plus-minus 25 basis point in the coming fiscal year, I understand that downside triggers for the margins if 25, what would be the margin uptick trigger according to you in the coming year?

A.S. Rajeev — Managing Director and Chief Executive Officer

Why I am keeping that 25 basis margin plus or minus because as you are aware, when the 48% to 50% of the RLLR is based upon the external benchmark. So RBI has already paused the rates and we don’t know, maybe one or one more quarter they may pause and chances are there, the interest rate cycle is coming down, then definitely the rates may start to coming down 25 basis points or 50 basis point, definitely this will impact the RLLR. So then, when the prices are coming down, definitely the transfer pricing has to be happen. So that is why I used the 25 basis point here and there we told, but with the 3.50% range bound is kept at the margin, that we feel that 3.5% to 3.60% NIM is one of the good margin actually, that is why we have used that wording to that.

Himanshu Saluja — Aditya Birla Sun Life AMC — Analyst

Okay. Sure sir, thanks a lot. Thank you.

Operator

Thank you. We have our next question from the line of Vikram Damani from Damani Securities. Please go ahead.

Vikram Damani — Damani Securities — Analyst

Hi, good afternoon. Am I audible?

Operator

Your volume is little low.

Vikram Damani — Damani Securities — Analyst

This is better?

Operator

Yes.

Vikram Damani — Damani Securities — Analyst

Okay. Congratulations on a good set of numbers. I just had a question with relation to taxes. Year-on-year on a percentage basis, it’s fallen significantly and even on a quarter-on-quarter basis, there doesn’t seem to be any sort of consistency in terms of percentages. So if you could throw some light on it, I understand you said you had INR8,000 crores worth of carry-forward losses, but going forward, what can we expect, if you can just explain a little bit? Thank you.

A.S. Rajeev — Managing Director and Chief Executive Officer

Regarding taxes what figure you are seeing in the profit and loss, this is not the outgo of any tax liability. This is the reversal of DTA that we have done. When that we are writing off the account over the provision, whatever detail you have created on the disallowed provision that has to be reversed, once you are writing off debt. So because of that, there was tax liability in the form of DTA reversal and since because we are holding INR8,000 crores carry forward losses, even though that taxable income may come, but it will be adjusted by the whatever that losses we are having.

Vikram Damani — Damani Securities — Analyst

Okay. So that’s a good thing to come from — good to know. That’s it from me. Thank you very much and congratulations again. It’s been a great quarter. Thank you.

Operator

Thank you. We have our next question from the line of J.K. Jain from J.K. Jain & Company. Please go ahead.

J.K. Jain — J.K. Jain & Company — Analyst

Yeah, thanks for the opportunity and congratulations for a very good set of numbers.

One question, when we have got a capital adequacy ratio of 17%, 18%, then where is the need for further capital infusion. Is it just a resolution to be in hand because it was said that in the first quarter about INR1,000 crores of equity will be raised.

And second question, what will be the price of the equity because the company is now just looking very good. So if you dilute the capital already about two years back the capital was diluted and the equity was doubled. So a bank of your size having equity of INR6,000 crores looks a little embracing, while you are showing a very good set of numbers, but if capital is diluted, so it will affect shareholders. So your view on this please.

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes, this is capital adequacy ratio is now 18.14%. And what you told is correctly — it is correct that our ratios will be affected because of the high equity of INR6,000 crores. But that is what is already happened and the Government of India has equity investment is already done, but for growth is concerned, now the present the rate is, though it is 18%, when the bank wanted to grow at the 20% to 22% range if you grow, the same profit itself may not be sufficient to keep the pace of the growth. So what we thought it should be 50-50 that whatever the growth rate is coming, 50% growth rate will — that growth will take care from the additional net profit generated, profit generated during the year and the remaining has to be funded the capital through either borrowing or from equity. So over a period of time, this INR7,500 crores umbrella provision is given by the Board is only for two to three years growth capital is concerned, the Government of India and we don’t require any kind of capital from Government also. But when the equity, when we are raising that, this is only for growth capital, but you can see that ROE if you see the bank is able to grow at the rate of 20%, 22% ROE, it is one of the best return for the equity holders also.

So, for the time being, to reach — the second point is regarding SEBI guidelines bank has to follow, it is the compliance issue, by ’24 we have to bring down to 75%. So this capital raising process is mainly for reducing the shareholding of the Government of India to below 75% over a period of time.

J.K. Jain — J.K. Jain & Company — Analyst

So you can do one thing is that Government of India disinvest their percentage and instead of floating the equity capital of the bank of your size and which is progressing so fast and so good, because I don’t think there is any other bank in India, which has got virtually negative NPA and such a good profitability and all these things. So, why because I have seen that in all the key issues, capital is so high like your bank and Canara Bank and all these things, so it’s high time that when the conditions of bank has improved because of the very good work done by people like you and in other banks also. So you can impress upon the government that they should — if they want the money and they want to keep it below, say 80%, they disinvest. Why the bank suffers?

A.S. Rajeev — Managing Director and Chief Executive Officer

I think the government also may look into that, we will see that because they are also getting the opinion from different sides, how they may think we will — we have to — I think you already some of the market participants are already, as you have suggested they have already suggested to the government and they may look for that, that is my feeling.

J.K. Jain — J.K. Jain & Company — Analyst

Okay. In any case, what will be the rate of — if suppose you issue here in the first quarter, what is your expected rate for this year, I think at least maybe INR40, INR45 something like that?

A.S. Rajeev — Managing Director and Chief Executive Officer

No, that depends upon asset valuation, so that depends upon the value we have to see that. For this issue, actually we have planned for last quarter also because of the value was not there, so we have postponed actually. So postponement anytime it can happen, there is no — if it is not good definitely it will postpone, definitely.

J.K. Jain — J.K. Jain & Company — Analyst

So would you say that the result, which we have shown in this quarter, this fourth quarter, it will be bettered in the first quarter of ’24, we can jolly well accept — feel that?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes, as of now, it will be better as of now, because we don’t know the things around the present point of view of the results, I think we can have better results, that is what we are expecting that.

J.K. Jain — J.K. Jain & Company — Analyst

Okay, another question, very small question, it’s out of my curiosity because we generally see that NIM is usually 4%, 5%, 3%, but I usually talk to people and they say that the banks are having a margin of 60%, 40%, because if you are lending at INR9 and getting fund at INR6. So I will say you have you got a margin of 50%. Why you banks peoples are saying that we have got a NIM of 3% only. What is the statistical calculation. Can you highlight or throw some light, why don’t we say 4% is operating profit, that should be the percentage of gross profit? When we talk about any industry also, we say this company is earning a profit of 30% gross margin. Why banks all over the world, they go about 3%, 2%, it looks very low. If you start saying that, yes, we are having a margin of 40%, the prices of shares and the stakeholders will go up like anything, your view?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yeah, that we may have to look into that. I don’t have any — because these are market practices are there generally, but we will, if you have any suggestions we will look into that, if any kind of disclosure is required that we will do that.

J.K. Jain — J.K. Jain & Company — Analyst

It is a question not to you, but question to the general fraternity of the banking sector, particularly from the American side. Thank you, sir. Thanks a lot.

A.B. Vijayakumar — Executive Director

Okay, one thing is that, it says that major income of the bank is from the interest income, other contributors are also measured in that based on the interest income. That’s why NIM etc, it is come into picture. And one thing we should not forget that there are the operational cost that can be also factored in percentage terms.

Operator

Thank you. We have our next question from the line of Jayesh Shah from OHM Portfolio Equity Research. Please go ahead.

Jayesh Shah — OHM Portfolio Equity Research — Analyst

Hello. Thank you, sir. And big congratulations for excellent results. I just wanted to clarify, I don’t know if I heard it right, did you say you have INR1,000 crores of capex expense budget for digital infra and how much of this, you said you spent some INR600 crores. So is this INR600 crores coming into P&L or it is capitalized?

A.S. Rajeev — Managing Director and Chief Executive Officer

No, it is the total budget is — total budget both capital and revenue and we used to calculate in that way that how much we are going to have an IT spend, IT and digital and all put together. So actually both it is collective only.

Jayesh Shah — OHM Portfolio Equity Research — Analyst

I see. Can you give a breakup of capital and revenue expense of the INR600 crores that you spent in FY ’23?

A.S. Rajeev — Managing Director and Chief Executive Officer

I think if you can take it around say I think 60%, 40% right now, because now not many RFPs are already floated in last one year and some of the RFPs are going to be floated in next one or two months. So that is the reason that seems you are going to acquire the software. So the first year, what is the license cost and other things will go into the capital and then ATF AMCs and other things will go into the revenue.

Jayesh Shah — OHM Portfolio Equity Research — Analyst

I see. So 60% will be the capital expenditure and 40% will be revenue?

A.S. Rajeev — Managing Director and Chief Executive Officer

It will be in between 60%, 40% or 70%, 30% range it will come mainly for AMCs and other things. Then depreciation also is one of the part, it will come, because within three-year period, we may have to write-off, that means one-third only — one-third you have to write off that, yes.

Jayesh Shah — OHM Portfolio Equity Research — Analyst

I see and this INR600 crores will go to INR1,000 crores for the next two years each year?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes.

Jayesh Shah — OHM Portfolio Equity Research — Analyst

I see. Okay, thank you very much.

Operator

Thank you. We have our next question from the line of Akash Jain from Ajcon Global Services. Please go ahead.

Akash Jain — Ajcon Global Services — Analyst

Sir. My question is, the recovery from written-off accounts. So as on date, what is the accumulated written-off accounts amount and what is the recovery target from that?

And my second question is, since we are taking many initiatives, especially on the process front, making it digital. So is there any scope of improvement in cost to income ratio. We are already having one of the good cost to income ratio, we are one of the most efficient banks, but is there further scope of improvement?

A.B. Vijayakumar — Executive Director

Recovery in written-off accounts is at present it is INR1,000 crores, it is almost 5% of what is the stock and we expect same 5% to 6%, 7% in current financial year also around INR1,200 crores.

Akash Jain — Ajcon Global Services — Analyst

Okay. I think last quarter it was around INR18,000 crores total written-off —

A.B. Vijayakumar — Executive Director

Of course, the write-off stock rightly said by you INR18,000 crores, it is growing also now it is INR20,000 crores.

A.S. Rajeev — Managing Director and Chief Executive Officer

Out of that INR1,000 crores, we have recovered in the current year.

A.B. Vijayakumar — Executive Director

Yes.

A.S. Rajeev — Managing Director and Chief Executive Officer

I think the same 5% to 6% range will continue and for future years also, it’s a continuous process.

Akash Jain — Ajcon Global Services — Analyst

And last quarter also, we had a discussion regarding excess SLR. I think it was last quarter it was around INR5,000 crores to INR6,000 crores. So as on date, what is the excess SLR we have, would it be used for improving CD ratio?

A.S. Rajeev — Managing Director and Chief Executive Officer

4% to 5% excess SLR still it is there. So that around INR12,000 crores of excess SLR is there that we can utilize for borrowing or it can be converted to for credit purpose.

Akash Jain — Ajcon Global Services — Analyst

Okay. And what is the target we are having for CD ratio?

A.S. Rajeev — Managing Director and Chief Executive Officer

CD ratio is now around 75%. So 75% to 78% is the target we have kept it, 78% is the ideal according to us at present.

Akash Jain — Ajcon Global Services — Analyst

And any plans to rationalize branches?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yes. Branches, it is a continuous process. Last year also we have a rationalization done by 30 to 40 branches either merged or we have closed and another 200 branches we have opened new branches in different districts. So this year also, this is a process same way because loss-making and those branches where compounded annual growth is below 5% for continuous three, four, five years. So especially in rural branches and all these things, those branches either will be closed or it will be merged or if it is a loss making branch and correspondingly, we will open 200 branches, permission is already given by the Board for the current year. So as of now 2,203 branches is there. So by FY ’24, I think we may be able to reach around 2,400 branches.

Akash Jain — Ajcon Global Services — Analyst

Any comments on NCLT — any recovery expected through NCLT resolution?

Asheesh Pandey — Executive Director

Yeah. NCLT one big account of Sri [Phonetic] is there where now, we are expecting in the current financial year, DSK deal is there. Two, three small accounts are also there, but Sri is one big.

Akash Jain — Ajcon Global Services — Analyst

So, when are we expecting recovery from this?

A.S. Rajeev — Managing Director and Chief Executive Officer

It will happen in current quarter or at the most up to September.

Akash Jain — Ajcon Global Services — Analyst

Okay, thank you sir. All the best. That is all from me.

Operator

Thank you. [Operator Instructions] We have a question from the line of Ashok Ajmera from Ajcon Global Services. Please go ahead.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Thank you for giving the opportunity once again. Sir, I would like to discuss a little more on the treasury side now because you can give another full [Indecipherable] now to the profitability of the bank after having been in this quarter the losses in both, if you see this segment also the treasury has in this quarter has given the loss. So now since the rates are stabilized and the RBI has taken a pause, now how do we see the treasury operation going ahead and giving us what kind of roughly the profitability, so that other profitability being intact, this will add further to that. So any color on that. I mean how much are we estimating and our modified duration also has come down. I think we should have good operating profit from the treasury operations?

A.S. Rajeev — Managing Director and Chief Executive Officer

Yeah. So you rightly said during this period when that the yield was on higher side, we affiliated INR8,000 crores, INR10,000 crores in securities where the yields are above 7.5%. So now with the RBI has paused the rate and going forward that it will further soften. So this would be the right time and the good trading profit. Secondly, in previous year we suffered most because of the MTM. With this softer, MTM is not there and second, one thing is that if you see our overall duration, it is below 1.25. So this will also have helped us in keeping the check on the MTM. So going forward, there will not be much MTM or the MTM will be nil and by selling the securities when the yield soften that the bank will earn good profit, so you can expect a good contribution from treasury side in the current financial year in the profit and loss account.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Are we looking to park API proper liquidity, the funds into the CP where the rates are comparatively higher, the yields will decrease you are getting especially, six months, nine months CPs, I think you are getting anything from 8.75% to 9.25% in A rated — well-rated companies, are we looking at that opportunity?

A.S. Rajeev — Managing Director and Chief Executive Officer

It will depend on the what is the lending demand. If the lending demand is there and we are getting good rate, so we will prefer to put fund in this lending instead of the putting in treasury. You know that treasury rate you will not get what you are going to get in lending. Having said that, we will explore the good opportunity and at opportune time, we will purchase security and sell it, so that trading profit we are going to grow and the good thing is that if you see the financial result, in quarter you will see that treasury yield has also gone up from 6.04% it has gone up to 6.34%. So with this accumulation of the securities, not only the yield will go up, we will have more opportunity to undertaking profits.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Sir, a little observation, I was just going through one note on that fraud account where the total amount of last year, I mean INR933 some odd crores has come down to INR735 crores or something, I don’t exactly remember that figure. So is that the recovery from the fraud account or I mean when it was already 100% provided for, what is that exactly and where it stands in the profit quarter for this year?

A.S. Rajeev — Managing Director and Chief Executive Officer

No. The fraud, which has been identified of INR933 crores, this include also the unrecovered interest, but basically we make the provision only for the balance, which is outstanding. So INR735 crores is balance which is outstanding, against that we have made a 100% provision.

Asheesh Pandey — Executive Director

This provision has not made during the current year, we are holding the provision and that since it was declared fraud, same provisions carried over.

Operator

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Shri. A. S. Rajeev, Managing Director and Chief Executive Officer for closing comments. Over to you, sir.

A.S. Rajeev — Managing Director and Chief Executive Officer

Thank you so much for all support given by you and once again, thank you, madam. And if any have further questions or any clarification anybody needs, please let us know that, you can send the query and we will respond that immediately and once again, thank you.

Operator

[Operator Closing Remarks]