Canara Bank Ltd. (CANBK) Q4 FY22 Earnings Concall Transcript

Canara Bank Ltd. (NSE: CANBK) Q4 FY22 Earnings Concall dated May. 06, 2022

Corporate Participants:

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Shri. Debashish Mukherjee — Executive Director

V. Ramachandra — Chief Financial Officer and Chief General Manager

Analysts:

Unidentified Participant — — Analyst

Ms. Mahrukh — — Analyst 

Gaurav Kochhar — — Analyst

Unidentified Speaker —

Dixit Doshi — — Analyst

Jai Mundra — — Analyst

Presentation:

Operator

Good afternoon everyone. Thank you for joining in. On behalf of Antique Stock Broking, I would — I welcome you all for the Fourth Quarter Earnings Call of Canara Bank. From the management side, we have Shri. L.V. Prabhakar, MD and CEO; Shri. Debashish Mukherjee, ED and EDs. Qithout further ado, I would hand over the call to MD sir, for his opening remark post which we can open the floor for Q&A. Over to you, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah. Thank you very much. I express my sincere thanks for all the investors who are participating in this interactive session. Let me brief the highlights of the performance of Canara Bank as on March 31st, 2022. We have concentrated on credit growth. We projected that there will be growth of 7.5%. Ania switch, the actual growth is 9.77%. The credit growth is widespread. There is growth in retail, growth in aggregates led activities and MSME. Apart from this, there is a growth in corporate also. So put together in each and every sector we ensured that the growth should be about 10% Y-o-Y growth.

Regarding deposits, we concentrated in CASA. Savings bank has grown by 12.22% and CASA has grown 11.5%. Retail term deposits, it has grown by 5% and bulk, we would like to control hence the growth was only 2% which we expected. Regarding the asset quality, as we have forecasted, we continuously strived to reduce the gross NPA and net NPA in absolute terms as well as in terms of percentage. Gross NPA at the beginning of the year was about INR60,000 crores as on date, it has come down to INR55,000 crores. In percentage terms, it was 8.93% as on date, it has come down 7.51%.

Net NPA in absolute terms, it was about INR24,000 crores. Today it has come down to INR18,000 crores. In percentage terms it was at 3.82% today it is at 2.65%. Provision Coverage Ratio two years ago Canara Bank used to have about 69% PCR. Today, we are at 84.17% and in credit cost also, we have controlled and it is at 1.75% as on December 21st and as on March 31st, it has come down to 1.53%. Slippage ratio quarter-wise, it has come down 0.38%. Regarding the income, we have concentrated to increase the interest income and also other interest income simultaneously focusing on non-interest income also.

Y-o-Y as on March, NII has grown by 25% and because of which the operating profit stood at INR6,202 crores showing an Y-o-Y growth of about 18.8%. Net profit, it was INR1,666 crores for this quarter. Showing a growth of about 65%. CRAR last quarter, it was at 14.8%. Now, it is at 14.9% after excluding about 23 basis points which is relating to the dividend payment amount. And this time Canara Bank is happy to inform that the Board has recommended 65% of our paid up capital as dividends, that is INR6.50 per share. Global business, we have crossed INR18.7 trillion and this financial year, we are projecting that we will be crossing about INR20 trillion business. With these few words, now we would like to take questions from the investors. Thank you very much.

Questions and Answers:

Operator

Thank you, sir. Participants please note, whosoever wants to ask a question, please raise your hand. We will wait for a minute for the question queue to gather. Our first question is from the line of Mr. Dhaval. Sir, please unmute yourself and ask your question. Mr. Dhaval?

Unidentified Participant — — Analyst

Yeah. Sir, am I audible?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Please.

Operator

Yes, you are.

Unidentified Participant — — Analyst

Thanks, sir. I had two questions. First, is on the sort of comment around Can Fin Home, you made a comment that there were some corporate governance issue in the company and frauds were detected. So just wanted to understand the quantum of the fraud and also I think management in their call mentioned about some 37 odd accounts from one branch where the IT documents are forged. So just wanted your perspective and size of the fraud and what steps have we taken do address that. So that’s the first question and then I will come back for the second question.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Second question is — You can ask the second question also.

Unidentified Participant — — Analyst

Okay. So, second question was, sir on the growth for next year. I just wanted to understand on credit growth, what is the outlook on corporate credit for next year and what’s the sort of pipeline around that and also if you could sort of give some perspective on sectorial level, where are you seeing corporate credit demand. So that was the second question.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Let me answer your second because first. Then first question next. Regarding the credit growth, we are projecting about 8%. However, we are also targeting at least minimum 10% credit growth in the retail and RAM sector. Regarding the corporate, the growth which we are projecting is more than 8% since we have already achieved 8% growth in the corporate sector. We are very active in HAM projects, infrastructure projects than Steel. Even to some extent in power and then we are also active in health sector. So the growth we are seeing not in one sector, in various sector spread over and apart from corporate as on date our loan book consists of about 57% retail and 43% corporate. Why am I emphasizing this point, 57% RAM and 43% corporate is, even if any one sector doesn’t perform well the other sectors will compensate so that at the end of the year, we will be in a comfortable position to exceed our projected growth of about 8%. And last year that is last financial year, credit — corporate credit growth was at 8.27% and we feel that with the number of inquiries and also demand which we are observing in capex, we will be comfortably achieve a growth rate of more than 8%. Now, coming to the Can Fin Homes. In CNBC, I did not say it is corporate governance, I said in the best interest of the corporate governance we have conducted the inspection. That is the word. And the origin is, there was a visible complaint which we have received from the NHB then it was discussed in the SEBI[Phonetic] and Board and then to find out the reality and also to pluck the loopholes, and to strengthen the company an investigation was done wherein, about 37 accounts were found. Amount is less than INR4 crores. Since some accounts have come so the Board has decided that why not we verify the other accounts for the weakness, if any to be addressed immediately and to strengthen the company credit loan portfolio. Canara Bank as a financial conglomerate is committed to support all its subsidiaries including Can Fin Homes and also it wants to have highest standards of transparency and also highest standards of corporate governance. Thank you very much.

Operator

Thank you, sir. Our next question is from the line of this Ms. Mahrukh. Ma’am, please unmute yourself and ask your question.

Ms. Mahrukh — — Analyst

Hello, sir. Hi.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Hello, ma’am.

Ms. Mahrukh — — Analyst

Sir, I have a few questions. Firstly, what is the total interest reversal during the quarter and why are the slippages high?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, if you see the slippages, fresh slippages are about INR3,600 crores and our recovery, cash recovery is about INR3,157 crores, including recovering in written off accounts plus upgradation of INR842 crores, which amounts to about INR4,000 crores. So fresh slippages of INR3,600 crores is less than the recovery of 4,000 crores and in this particular INR3,600 crores, the composition is, agriculture it is about INR600 crores, MSME it is about INR800 crores and retail is about INR600 crores and remaining amount is other sectors. So basically the slippages are from small accounts where we have found some weaknesses. Those things have been classified as NPA. Coming to a linked parameter which is SMA, SMA2 and SMA1 can find out from the slides that outstanding of the loan accounts above INR5 crores in those accounts, SMA2 outstanding as on March 31st is about INR2,300 crores, which is it 0.27%. And SMA1 is INR3,700 which is equal to 0.43%. So both the things put together, it comes to only 0.7%. So slippages are under control and it will be under control going forward. Thank you, ma’am.

Ms. Mahrukh — — Analyst

So, sir I just wanted to know if there’s any lumpy corporate slippage but from the breakdown because a big corporate account has slipped from many banks, credit slipped for you in the previous quarter or what is the status in the retail sector?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

No, ma’am. Corporate accounts are not slipped. I think you may be interested to know about the Future Retail, if I am right?

Ms. Mahrukh — — Analyst

Yes, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes. Let me tell you ma’am. Today only we have received about INR227 crores in that account, Future Retail and our understanding is hardly INR1,200 crores. Wherein we have provided In spite of standard account, 60% as provisioning so that in Q1 FY23, there will not be any significant requirement of making provision. Is it okay, madam?

Ms. Mahrukh — — Analyst

Got it. Yes, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, ma’am.

Ms. Mahrukh — — Analyst

Sir, but interest income — why are they — sir, I was wanted to know that interest income why are they decline quarter-on-quarter. Why is it falling quarter-on-quarter? Is that stable here?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, if you see interest income Y-o-Y if you see there is a growth of about 8.6% but quarter-on-quarter, there is a minus of 1% because of two, three things. If you see, my asset portfolio of rated accounts AAA — AA and AAA portfolio, it has increased from 65% to 77%. Last year being COVID year, we are very conscious of taking exposure in high-rated accounts with low risk. Naturally when you go for high rated accounts, the yields will be EBIT less. However, this thing is confined to only 43% of the corporate, whereas in retail, we are getting sufficient interest income. So going forward, we see a good traction as far as the interest income is concerned and we have already increased our RLLR rate by 40 basis points, which will be affective them tomorrow. And MCLR in all the buckets, we have increased by 10 basis points, which will be effective from tomorrow.

Ms. Mahrukh — — Analyst

Got it sir. Sir, what will be your group linked to MCLR and to RLLR? What proportion of —

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, RLLR our book is to the extent of about 34%. MCLR is about 50%. So, about 84% of the book starts giving us higher rates.

Ms. Mahrukh — — Analyst

Got it sir. Sir, would you expect margins to improve from here on?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, NIM if you see we have projected about 2.80. Actually, we are at 2.82 and we are projecting 2.90.

Ms. Mahrukh — — Analyst

Got it sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

That will be minimum.

Ms. Mahrukh — — Analyst

Got it. Sir. Sir, and my last questions is just on the bond portfolio. Bond portfolio sir, what is the cutoff yield on the bond portfolio beyond which you start making mark-to-market losses?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Ma’am, for your information the portfolio which our treasury holds in the bond, we will not be getting depreciation more than INR200 crores to INR250 crores, not more than that.

Ms. Mahrukh — — Analyst

Okay, sir. Thank you.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, ma’am.

Operator

Thank you, ma’am. Participants please note whosoever wants to ask a question, please do so by raising your hands. And I would request you to please restrict your questions to two. Our next question is from the line of Mr. Nitin Agarwal. Please unmute yourself and go ahead.

Unidentified Participant — — Analyst

Yeah, hi, Thanks for the opportunity. So, on this growth front, now we are guiding for a slower advances both in FY23 than what we have reported in FY22. So why is that so because general impression is that FY23 systemic growth should be better than what we have seen in 2022. So your thoughts around this sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, if you see the guidance which we have given last year, credit growth, we said it will be about 7.5% but in reality, it is 9.77%. So what we project is the minimum that we had supposed to achieve. So, as I said in 57% of my portfolio, which is RAM, the growth will be more than 10% and corporate also as on date, we are at 8% and we expect that this will also grow at a rate of about 10%. But however as a minimum guidance, we have said that our credit book will grow at 8%.

Unidentified Participant — — Analyst

Okay. And, but then on sir — on the similar lines, if I look at the CASA guidance that at 38% looks aggressive especially in a rising rate environment. How fair it is to achieve this number?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah. Regarding the CASA percentage, if you see the CASA growth it is 11.5% every quarter, and if you see the savings bank growth, it is about 12% but the percentage of CASA historically Canara Bank was having a lower percentage and it used to be about 30% two, three years ago. Every year, we are increasing by 2%, 2% and now we have come to about 34.88% and going forward we project at 38%. This is a percentage why means, this year we want to grow more aggressively in retail term deposits and wherever we get good rate even we want to take up some bulk deposits also. So percentage wise, growth of 2% itself will be significant. However, CASA Y-o-Y growth will be ensuring minimum 12%.

Unidentified Participant — — Analyst

Okay. And sir, the other question is on the NCLT resolution related recoveries that we have reported, which is on Slide 35. So if I just look at the average recovery per account that number seems to be quite small at around — a little around INR2 crore, INR2.5 crore range. So if you can indicate as to how the recovery rate overall overall is trending. What was the overall exposure in these accounts, and how much has been the recovery and is this similar recovery rate is what you expect from the upcoming resolutions in the coming quarters?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See, whenever we talk about NCLT accounts, in my opinion, I think we should not club each and every account and have a average. No, it should be taken as small accounts, medium accounts and large accounts. Because historical reasons, small accounts you may have security. In larger accounts, you may have less security. So the percentage if really you want to analyze, it should be bifurcated into three different categories and also secured and unsecured. Then more scientifically will be in a portion to understand. However, with the past experience what we see at least, there will be a realization of about 35% to 40% as far as the NCLT accounts are concerned.

Unidentified Participant — — Analyst

Okay. Sir lastly on the treasury front, you mentioned INR250 crores sort of MTM losses. So just to clarify, is this as per the bond yields where they are today. And also if you can share that duration of AFS?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, I request my Executive Director to kindly respond to this question.

Shri. Debashish Mukherjee — Executive Director

Yes. As our MD has said just know that based upon the portfolio, which we have right now and the way in which we have arranged that portfolio. Even in this rising rate scenario, the impact — negative impact with regard to the depreciation we expect would not exceed above INR250 crores. So, that is what we feel. Our estimation on the treasury depreciation.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

And to add to what our Mukherjee sir has said, if you see the last year’s performance in the beginning of the year everyone was of the opinion that this time the banks will not be able to make good profits by sale of investments. However, in Canara Bank if you see the quarter-on-quarter amount which the treasury has earned as on March by sale of investments we have earned about INR523 crores. Last quarter it was INR320 crores before that it was INR1,133 crores and in June, it was about INR647 crores. Put together it is about INR2,593 crores, which is a decent amount. And we will continue to earn in this range.

Unidentified Participant — — Analyst

Thank you, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sure. Thank you so much.

Operator

Thank you, sir. Our next question is from the line of Mr. Ankur Gupta. Sir please unmute yourself and go ahead. Okay. Our next question is from the line of Mr. Shridhar Shivram. Please unmute yourself and go ahead. Mr. Shridhar? Mr. Shridhar please ask your question. Okay. I think there is some problem with this line. We will move our next question to Mr. Deepak. Mr. Deepak, please unmute yourself.

Unidentified Participant — — Analyst

Hello, am I audible?

Operator

Yes, you are.

Unidentified Participant — — Analyst

Sir, I just wanted to understand in terms of credit cost, I think you kind of given a indication of 1.4% as compared to 1.53%. We have done in FY22 and 1.4% is what we are looking at in FY23. So in the absolutely our INR11,000 crores, it’s a credit concept we are looking at in FY23?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, because this time since in SMA1 and SMA 2 the alone accounts with outstanding more than INR5 crores is very insignificant. That is, it is about 0.7%. We don’t see any big accounts slipping going forward. Hence, whatever slippages will be there, it will be in the small accounts, which is natural and which can be properly handled. So that is why we are projecting slippage ratio of a challenging one.

Unidentified Participant — — Analyst

Okay, understood. Yeah, that’s a fair approach. But in terms of ROE, we are expecting a big jump from 0.5% to 0.7% with minimal increase — with the minimum improvement in our credit cost so what will drive our ROE improvement?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See, we are projecting ROE will be at 0.70%. Again, let me tell this will be the minimum benchmark for us. It is not the maximum one. So as in the last year we projected 0.40% and achieved 0.48%, this time what we are projecting 0.7%, that will be our minimum benchmark as far as ROE and we are confident of achieving that.

Unidentified Participant — — Analyst

Okay. Because currently, I think this year, we are at about 0.48%.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

0.48% as in, annualized?

Unidentified Participant — — Analyst

Yes.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

And quarter wise if you see, it is better than this figure. What is written.

Unidentified Participant — — Analyst

Okay, I understood. Thank you sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you very much.

Operator

Thank you, sir. I would request all participants to please keep your questions to two. Next question is from the line of Mr. Rakesh Kumar. Please unmute yourself and go ahead. Mr. Rakesh? Sir, please ask your question. Okay, I think there is some problem with this line. We will will move to our next question from the line of Mr. Mani. Please unmute yourself. Mr. Mani?

Unidentified Participant — — Analyst

Good afternoon, sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, good afternoon.

Unidentified Participant — — Analyst

Sir, thank you for the dividend of INR6.5 rupees. I am holding almost about 40,000 shares.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you sir.

Unidentified Participant — — Analyst

It translates to almost about INR1 crore. Here, I would like to stress sir huge amounts are spent as CSR for donation to handicap people and the needy by the bank. It’s a great initiative and they also run a home for the destitute. And bank has got about 75,000 retirees of which maybe about 200 or 250 pensioners maybe having handicapped — wholly handicapped dependents. This detail is not available in the bank, the data is not available in the bank and approximately about INR72 crores is spent for the insurance — medical insurance for the serving employees whereas these handicapped dependent are not covered under the medical insurance scheme for the retirees. So even if it as a corporate social responsibility bank wants to cover them under this scheme of this IBA that the bank will have to spend only about INR20 lakh to INR25 lakhs on the whole. If you are good selves can look into this, because nobody is having any idea how many retirees are having handicap dependents so if your good self can help these parents and for your information, sir many of the handicap dependent — parents of handicap dependents have got only one prayer that the offspring should die before they die because they don’t want these people to be left in the lurch. So your good heartedness will be appreciated by one and all, sir. Thank you very much sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you sir. Your suggestion is excellent. We really keep it in our mind. Thank you, sir.

Unidentified Participant — — Analyst

Thank you.

Operator

Thank you, sir. Our next question is from the line of Mr. Shridhar Shivram. Sir, please unmute yourself.

Unidentified Participant — — Analyst

Last time had some issues with the line. Sir, my question is on the tax rate. Last year, we had almost 37% tax rate. Should we expect a normalization of tax rate for the current year. And if so, what sort of rate should we expect?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, one minute. I request my CGM sir, who is handling the accounts.

V. Ramachandra — Chief Financial Officer and Chief General Manager

Good afternoon. I am Ramachandra, CGM here. At present, we are paying a higher rate of interest of 35%.

At the moment, we found that this rate is advantageous to the Bank because of the merger accumulated loss we got to the merger. At the appropriate time, we have a plan of shifting to the new tax regime.

Unidentified Participant — — Analyst

So should we assume 35% for the next year also, for the current year?

V. Ramachandra — Chief Financial Officer and Chief General Manager

No, I have to take a decision at the appropriate time. Sir, I cannot commit now itself.

Unidentified Participant — — Analyst

Okay, sir. My second question is on the guidance that you have given of around INR7,000 crores, INR40 rupee EPS, you have given a guidance. If I work backwards, it looks like you are guiding for a total provisioning of close to INR15,000 crores. If I assume that you are operating profits will also grow at 10% from INR23,000 crores to about say INR25,000 crores, which looks slightly on the higher side. So can you give some guidance on the total provisioning number, the provisioning for NPA and the others and is my working correct?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

So there are two points. One is your assumptions are based on the OP that is going to be there, which you are telling it will grow at 10%.

Unidentified Participant — — Analyst

Yeah, I am taking a very conservative number based on what you have guided.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah. Here, let me share one important information to you, sir. As what the IBA agreement if the staff has to be paid 15 days PLA which we are doing which we did in the last year and which we paid this year also. There should be growth of minimum 15% in the OP by OA[Phonetic] So, I expect that every staff member wants to take 15 days PLA accordingly everyone will strive to achieve a OP growth of about 15% and regarding the provisioning sir as you have seen in the last two years, we do aggressive provisioning to make the balance sheet very strong and to keep the balance sheet ready for the future. This is the reason why in the last eight to nine quarters if you see, every quarter there will be continuous growth in all the financial parameters without any downward trend and we strongly believe that going forward also, we have to make the balance sheet. And forgive me —

Unidentified Participant — — Analyst

We were hoping for a five-digit number of profit for the current year. Because of the way the trajectory was going and it looks like you have a very high provisioning number already but looks like we may not get there? Is it that you are under-promising and over — you will perform better?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

I will share some figures from that you can get the conclusion. Last year, our net profit was about INR2,550 crores. This year it is INR5,678 crores. It is almost more than 100%, 120%. And regarding provisioning also if you see, we are already at 84% and we are projecting 85%. The third point is, for example Future account is there. It is a standard asended in our books. Asended means as on 23rd of January. Even then we have provided 60% to that account. We — our philosophy is we want to be ready for tomorrow by making sufficient provisioning today. So that is a philosophy with which we are working and it is giving excellent results and because of which it today, the Board is in a position to declare a dividend also, after a long period and I think this will go — going forward this will give a good dividends because of this approach. Thank you, sir.

Unidentified Participant — — Analyst

Sir. My last question on the dividend. It — your dividend absolute amount is about 20% of the profit. Should we expect a continuation of that going forward also?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, two years ago when I addressed my investors, I said we are working hard to take care about the investors, staff and the stakeholders. And we are of the opinion that we have to give maximum to the investors and the staff and the stakeholders. So our philosophy will go in that direction and accordingly, I think we hope year-on-year the thing should become better and better. That is our philosophy, sir. Thanks you.

Unidentified Participant — — Analyst

Thanks a lot, sir. And well done, sir. Thanks a lot. Bye.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you, sir. Our next question is from the line of Mr. Anand Laddha. Sir, please unmute yourself and go ahead. Mr. Anand? Okay, our next question is from the line of Mr. Pernal. Please unmute yourself and go ahead. Mr. Prenal? I will take the next question from the line of Mr. Gaurav Kochhar. Please unmute yourself and go ahead, sir.

Gaurav Kochhar — — Analyst

Yeah, hi, good evening, am I audible?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Good evening. You are audible sir.

Gaurav Kochhar — — Analyst

Yeah, good evening, sir. Sir, my question is with regard to the slippage in this quarter. If I look at the gross slippage number, it was elevated. Last quarter the net slippage number was very small, but even if I look at the net slippage number this was high sequentially and you are saying that Future Group was standard. So, any other corporate account that slipped in this quarter apart from Future Group?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, if you see the fresh slippages, it is about INR3,600 crores. And this INR3,600 crores sir, about INR800 crores is from the MSME sector, about INR600 crores from the agriculture sector and our about the same amount, INR500 crore to INR550 crores is on the retail, which are all smaller accounts. So whenever, we identify any weakness in an account, we would like to classify it as NPA so that it can be cured at the earliest whatever sickness are there. So that is the reason because of which even if you compare with the last March, ’21 where the slippages were INR14,000 crores, because of various reasons this time the slippages were only about INR3,600 crores, out of which we are hopeful that in this current quarter 25% to 40% of this will be recovered or will be upgraded.

Gaurav Kochhar — — Analyst

Sure. And sir upgrades and recoveries target for next year, total recoveries?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, first target, our target is always we target recovery should be more than slippages. For example fresh slippages this time it was about INR3,600 crores. My cash recovery is INR3,157 crores and upgradation is INR800 crores, which is equal to INR4,000 crores and we are expecting that during the current quarter minimum INR15,000 crores to INR16,000 crores of recovery will be there, both in bigger accounts and small accounts.

Gaurav Kochhar — — Analyst

Okay, got it sir. And my next question is with regards to Can Fin homes, you highlighted that you sent a team from the Bank for detailed audit, any findings from that audit or that that is a part of the 37 fraud accounts that you disclosed?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

That is the initial audit. Wherein, we observed some irregularities and the important one is about 37 accounts were identified as fraud, amount is less than INR4 crores, which is already provided and reported to NHB. And now the Board has decided that with the same internal team and also with the statutory auditors, there can be further checking of the existing accounts so that if any irregularities is there, it can be addressed immediately and it is an ongoing process.

Gaurav Kochhar — — Analyst

Got it sir. And then, sir —

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, please.

Gaurav Kochhar — — Analyst

Last question if I can squeeze in. On the Can Fin call, they did highlighted that Canara Bank has deputed three people in the risk function and audit function and one in the admin functions. So apart from this, any other action that the bank will take with respect to Can Fin Homes?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

See, Canara Bank will always take proactive steps, depending upon the situation or as situation warranted. And Canara bank is committed to support Can Fin Homes and all its subsidiaries in terms of providing no-how, in terms of giving support or if required in terms of capital also. So, we are as a sponsor, we are there to support all our subsidiaries.

Gaurav Kochhar — — Analyst

Sure sir, thank you so much.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir.

Operator

Thank you, sir. Our next question is from the line of Mr. Pranav. Sir, please unmute yourself.

Unidentified Participant — — Analyst

Hi, thanks a lot. Can you hear me?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, please.

Unidentified Participant — — Analyst

Yeah, so I just wanted to have little bit clarity on the slippage guidance that you have given. So slippage guidance of 1.7% don’t you think it is little bit on the upper side as compared to say FY22 and it was 1.7%?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

I can say it is not upper side. Why we have given this 1.75% is, we will not be crossing this. It can be less also it maybe — it may end up at 1.5%, 1.3% also. But for public, we want to say that this is our tolerance limit to which extent it may go.

Unidentified Participant — — Analyst

Right. And that is the gross slippage so net slippage anyhow be negative if your recovery and upgrades are above.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, sir. You are right.

Unidentified Participant — — Analyst

Okay. So that is first question. Second question is, can you just spend some time on explaining the treasury income. So, treasury income as I understand, there will be some interest and then there will be some AFS-MTM and then this treasury income that comes into other income is the sum of the two items. And now if you see even in this quarter, you have not reported negative. So, is it safe to assume that this number on a net basis will be in the same range of minimum INR300 crores to INR500 crores?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah. Mr. Mahesh, are you there? Yeah, Mohan sir, please.

Unidentified Speaker —

Like we said just now, we do not expect any very drastic change in the depreciation levels in the treasury. Our AFS duration is around 2.3, which is a very healthy duration we can say. So with this, we are in a position to manage the risk in the treasury which due to this higher rate regime — interest rate regime, which we are facing. So it won’t be as good as what it was in last financial year, but it will not show much drastic lowering of the treasury income also. Like we said we are totally aware of the depreciation levels which our treasury book will undergo which roughly would be somewhere in the range of INR200 crore to INR250 crore.

Unidentified Participant — — Analyst

Right sir. What is the other item in this income? Like one is minus 200 and then there will be some plus, right?

Unidentified Speaker —

Can you please repeat?

Unidentified Participant — — Analyst

Yeah, so I am saying. So even if that is minus 200, the treasury income that comes in the other income will have some other components like it’s just not AFS-MTM.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

No, no, it will have its other components as well. Like it had it this time also. So, profit on exchange transactions and other things will also be there. They will also contribute, like it had contributed. We are totally talking about sale of investments or the core treasury functions what I was telling you about that. But there are other avenues of income, which will help boost the treasury income, like we said.

Unidentified Participant — — Analyst

Sir so, if I do just match by the guidance given by you, say 10% or 8%, 9% growth in credit and 10 basis points increase in NIM which will account to somewhere around 13% to 14% increase in NII. And obviously, other income factoring in what other income you are saying, and obviously taking operating expenses. Whole guidance of profit and EPS looks very, very conservative. I think it can be 40% higher. Am I wrong in this conclusion because 1.4% of NPA provisions would have been around INR1,000 crores max and if I just bring in all the other data that you have guided then this this 14 EPS looks very conservative.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, this is our minimum benchmark which will always be conservative. And going forward as we declared our June results, we will be revising the forecast also sir. Guidance will be revising and upper side.

Unidentified Participant — — Analyst

Perfect. Sir, the tax rate of 20%, above 30% will continue for how much time?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, as long as it is beneficial to us. Till some more quarters, we will continue with that. Once the carry-forward losses are over then naturally, we may take a call to shift it to a new tax regime.

Unidentified Participant — — Analyst

Sir, any guidance on how many quarters in that continue?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Only going forward, I will be in a position to say sir. As of now, I think it’s difficult for me.

Unidentified Participant — — Analyst

Perfect. And just to repeat last question from my side just to repeat —

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Please, sir please.

Unidentified Participant — — Analyst

Yeah. Out of INR1,000 crores Future exposure, INR200 crores payment we have received and INR600 crores already we have provided. So there is almost nothing to be provided hence forward, is that right?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir. We have provided 60%.Six-zero in Future so 40% is leftover. Generally, our philosophy is to make a provision as far as possible. So we may do in this quarter remaining amount also.

Unidentified Participant — — Analyst

Correct. But you said also you received INR200 crores. So, INR800 crores —

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Today after excluding INR227 crores which I have received, now the balances is INR1,200 crores roughly.

Unidentified Participant — — Analyst

Okay, got it. Thank you.

Operator

Thank you, sir. Our next question is from the line of Mr. Bhavik Shah. Please unmute yourself and go ahead. Bhavik Shah? Okay. Our next — Yeah.

Unidentified Participant — — Analyst

Hello.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, please go ahead.

Unidentified Participant — — Analyst

Hi, sir. Thanks for the opportunity. Sir, I just wanted to know what would be your liquidity coverage issue this quarter?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir as on date, it is125% LCR.

Unidentified Participant — — Analyst

Okay. And sir now —

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yeah, please.

Unidentified Participant — — Analyst

Go ahead sir.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

As on date it has increased to 140% sir. As on balance sheet date, we are on 125%.

Unidentified Participant — — Analyst

Okay. And sir, why has this drastic movement because of deposits or — from 120% to 140%?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

I think sir, RBI has given this latest on 19th April. Some MSR projections has given per HQLA[Phonetic]. That is also there.

Unidentified Participant — — Analyst

Okay. Understood, sir. And one more thing, I wanted to understand how has the slippages been from the restructured book and what would be your outstanding restructuring number?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, restructuring book is about INR14,000 crores as far as under the resolution framework two is concerned and about the INR5000 crores under resolution framework one. Put together, it is about INR19,000 crores to INR20,000 crores. We are observing about 4% to 4.5% as slippages. And in this restructured book now the resolution framework one the repayment is up to 95% and in resolution framework two, the repayment is about 85%. Okay. Understood sir. That’s it from my side. Thank you.

Operator

Thank you, sir. Our next question is from the line of Mr. Abhijeet Sakari. Please unmute yourself and go ahead.

Unidentified Participant — — Analyst

Yeah, hi, good evening, sir. First question is on the investment provision. There’s a INR1,000 crore debt that you have taken. This relates to the security receipt book?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Exactly correct sir. Because it has crossed eight years so we have made 100%.

Unidentified Participant — — Analyst

Okay. And then there is a NR1500 crores which is still pending there. So that would also get marked down consequently?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

It will take some years, not immediate sir. It will take some years. Immediately, there maybe around INR300 crores to INR350 crores, which if at all require to make the provision in the full financial year.

Unidentified Participant — — Analyst

And sir, on the G-Sec book the impact that you are sharing, potential future impact. What are you looking at in terms of the cut-off yields when you are calculating that number?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

We are — that is our outlook is somewhere around INR7.50 to 7.60. That is what we expect.

Unidentified Participant — — Analyst

Okay. Sure. Sir, second question is on the slippages if we just reduce if we deduct all the retail agri SME slippages, we still have INR1600 crores of corporate slippages. So trying to understand if this is like really spread out across lot of accounts or if there is any larger still sitting there?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Large accounts at the most it is about INR150 crores or INR120 crores. Not in four digits. Are not in higher, three-digit figure. Is the spread over 1.

Unidentified Participant — — Analyst

Sure. And sir last question is a clarification on the pricing of home loans, for example. So when we increase the RLLR rate by 40 basis points. How are we — are be doing anything on the spreads as well, is that that being retained, are we cutting it, how are we dealing with the spread on top of the RLLR tweaks that we are doing?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

As far as RLLR is concerned, we have increased 40 basis points by maintaining the spread as it is.

Unidentified Participant — — Analyst

So there is a straight 40 basis point impact on the portfolio?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes. On the portfolio have about 34% of my loan book.

Unidentified Participant — — Analyst

Got it. This is useful. Thanks a lot.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir.

Operator

Thank you, sir. Our next question is from the line of Mr. Dixit Doshi. Please unmute yourself and go ahead.

Dixit Doshi — — Analyst

Yeah. Can you hear me?

Operator

Yes, please.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Yes, I can hear you. Please go ahead.

Dixit Doshi — — Analyst

Thanks for the opportunity. So most of the questions have been answered. Just one question. So, looking at the growth that we are targeting for FY23 and also the recovery and upgradation, we are targeting. Is it fair to assume that in FY23, we will not required any fundraising?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, as on date with my present CRAR, half of 14.9%, I can comfortably achieve a credit growth of about 10%. However, our philosophy is to strengthen the balance sheet and strengthen the capital base as far as possible and since now the Canara Bank is in a very strong footing, we can raise at a very competent rate, AT1 bonds tier-II bonds. Equity, we are not looking as of now. So AT1 bonds and tier-II bonds to the extent of about INR9,000 crores, we may raise and this will be taking to our Board in the coming — in the next Board and once the approval is there, then we will be coming to the market.

Dixit Doshi — — Analyst

Okay. Thanks, that’s it from me.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you, sir.

Operator

Thank you, sir. Our next question is from the line of Mr. Jai Mundra. Sir please unmute yourself and go ahead.

Jai Mundra — — Analyst

Yeah, hi, sir, good evening. I have three set of questions.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir. Good morning, sir, please.

Jai Mundra — — Analyst

Good evening, sir. Sir, first on Can Fin. So if you can suggest what is the course of action here in the interim will the current MD, CEO stay or there could be a potential change of management there and also, it looks like the amount of fraud is not that material considering their balance sheet side. So what is the thought process there?

V. Ramachandra — Chief Financial Officer and Chief General Manager

So I will break up this question into two, three parts. One, with regard to the stay of MD and CEO there at Can Fin Homes, you see at the present moment, we do not foresee any change. That is number one. Number two is, with regard to this whistleblower complaint as we have been explaining you, this has been forwarded by NHB so we had to pay a lot of attention and seriousness on that which led to discovery of certain fraud accounts amongst other irregularities, which we have already taken rectification action on them like provision of the fraud accounts and etc. on the irregularities. Now, as our MD sir was telling you — telling the other participant that is, we have since we have found out certain lacunar certain irregularities we wanted it to be more broad based. So that is the idea with regard to what, as we said, that we have appointed the Central Statutory Auditors of the Company to themselves verify and see the books, so that it is made more strong in the near future. So that is what the basic idea with which we have work in this area.

Jai Mundra — — Analyst

Understood, sir. The second question is, sir on your corporate slippages once again. So, out of INR600 crores corporate slippages and your SMA1 plus SMA2 that still remains the more or less similar. So what is the sanity of this SMA1 plus SMA2 number when you have INR1600 crores of corporate slippages and you still have, let us say, INR1200 crores spending from Future. So how should one look at this INR6,000 crores of SMA1 plus SMA2, it looks like it does not show the real riskiness in the book. So how would you tie that up?

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Sir, as far as corporate is concerned regarding this SMA2 in SMA1 which accounts to about 0.7%. This is the whole INR5 crores. And regarding the slippages of INR3,600 crores from which we said that excluding Retail, MSME, agriculture, there is other small accounts called small businesses and others also. And excluding this, the corporate there is no big account, even if it is a big account, it is about INR110 crores or INR120 crores. So put together in a full quarter, the slippages were about INR3,600 crores, including everything and the SMA1 and SMA0 where we are projecting about INR6,000 crores, there can be some slippages but not significant slippages in the current quarter.

Jai Mundra — — Analyst

Right. Sir. What I was saying is that last quarter, we also had the similar number which looks very small, less than 1%.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Last quarter, we had INR5,000 crores — last March, we had about INR5,000 crores compared to this March which is about 0.7% in SMA2 and about INR10,000 crores in SMA1 which is about 1.47% put together, it is INR15,000 crores constitutes about 1.17%.

Jai Mundra — — Analyst

So, I was comparing slippages of INR1600 crores in corporate is clearly for this quarter. So maybe I was comparing versus last quarter. There is not too much change in this SMA1 plus SMA2 and we have —

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Total INR1,600 crores is not corporate sir. In that, again there are small businesses and retail also to some extent where there are not corporates and corporates, when we say INR100 crores, INR150 crores such accounts are one or two only.

Jai Mundra — — Analyst

Okay. Understood. And third question is, sir, on capital and tax. So, one is, we have accumulated losses of INR18,000 crores plus which we have set off despite having that it looks like we are still paying accounting taxes, whereas one other PSU banks when they shifted to new tax regime or without shifting to new tax regime, when they had accumulated losses, they were still showing negative taxes. So why are we not showing debts provisions write back when we have accumulated losses or if you can explain that.

V. Ramachandra — Chief Financial Officer and Chief General Manager

See, as already informed by our MD and CEO as long as advantageous to the bank with higher tax regime, we are continuing with the higher tax regime. I confirm that as on today, it is advantageous to us to have a higher rate of tax, because of the reversal of the whatever the carry-forward loss. So when it is advantageous with the new tax, we are really going to shift it.

Jai Mundra — — Analyst

No, I am asking, sir when we had accumulated losses of INR18,000 crore, why are we still paying taxes?

V. Ramachandra — Chief Financial Officer and Chief General Manager

Sir, see the accumulated loss is not a static, every time it is reducing also. I can only tell it is advantageous as on today with the higher rate of interest. With the tax paying also it is advantageous. Totally, overall it is advantageous to the bank.

Jai Mundra — — Analyst

Sorry, how sir, how paying taxes are advantages?

V. Ramachandra — Chief Financial Officer and Chief General Manager

You can come off the line, we can explain.

Jai Mundra — — Analyst

Sure, sir. Okay. And lastly on IFR, Investment Fluctuation Reserve. It looks like RBI had asked bank to provide at least 2% of IFR and it looks like we did not, we have only done some 1.7% something if I look at the last Annual Report —

V. Ramachandra — Chief Financial Officer and Chief General Manager

It is only provided.

Jai Mundra — — Analyst

Now — okay. And how much —

Operator

Sir, we request you to please come back in queue.

Jai Mundra — — Analyst

Sure.

Operator

Thank you, sir. Our next question is from the line of Ms. Neha. Please go ahead. Unmute yourself and go ahead. Ms. Neha? Please ask your question ma’am.

Unidentified Participant — — Analyst

Plan to selling of any of the subsidiaries on the fund raising plan?

Operator

Ma’am, could you please be a little louder?

Unidentified Participant — — Analyst

Just wanted to know any plans you are planning to sell any of the subsidiary. And second question is, any plans to raise the capital, considering the growth which we are targeting?

Shri. Debashish Mukherjee — Executive Director

Madam, to answer your first question, at present we do not see any necessity for any lowering our stake in any of our subsidiaries for the present moment that is number one. With regard to raising of capital as our MD had very clearly stated that regarding the growth, which we are envisaging in credit, it is not necessary for us to raise capital on account of that but for strengthening the balance sheet further, we may come out with some plans for raising capital, which we will separately take up with our Board of Directors in the coming months and get their permission and then we will announce. Hello? Could you get my answer?

Unidentified Participant — — Analyst

Yes, one more thing. During the fourth quarter, we have seen a high substantial fee income, can we expect the same trajectory to continue in the coming quarters on the fee income side?

Shri. Debashish Mukherjee — Executive Director

See, you see our endeavor is always for maintaining the fee income. Of course, the contribution of treasury would be less, but at the same time, the fee income by way of commission and LCBG commission and other, our bank assurance, there’s government business service charges, etc., we would continue the same level of income so far as the fee-based income is concerned.

Unidentified Participant — — Analyst

Okay, got it, sir. Thank you.

Operator

Thank you, ma’am. This would be our last question for the day. I will now pass on the mic to MD sir for his closing remarks.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Thank you very much for all the investors for giving us an opportunity to clarify if any doubts are there and also to project our future guidance. Today, really we are happy as our Board has kind enough to declare the dividend for which we have worked hard in the last two years to take care about our investors, about our staff and our both over stakeholders. We expect the same type of support and cooperation from you all people. Thank you very much.

Operator

Thank you, sir. On behalf of Antique Stock Broking, I thank the Canara Bank management for giving us the opportunity to host them. Thank you everyone for joining and goodbye and have a good weekend. Bye.

V. Ramachandra — Chief Financial Officer and Chief General Manager

Thank you.

Shri. L.V. Prabhakar — Managing Director & Chief Executive Officer

Bye-bye.