Central Bank of India (CENTRALBK) Q3 FY23 Earnings Concall Transcript

Central Bank of India (NSE: CENTRALBK) Q3 FY23 earnings concall dated Jan. 18, 2023

Corporate Participants:

Matam Venkata Rao — Managing Director and Chief Executive Officer

Vivek Wahi — Executive Director

Analysts:

Raju Baranwal — Antique Stockbroking Limited — Analyst

Suraj Das — B&K Securities — Analyst

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Shrey Hemant Gandhi — Arihant Capital Markets Limited — Analyst

Sushil Choksey — Indus Equity Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Central Bank of India Q3 FY ’23 Earnings Conference Call, hosted by Antique Stockbroking Limited. [Operator Instructions]

I now hand the conference over to Mr. Raju Baranwal [Phonetic] from Antique Stockbroking Limited. Thank you, and over to you, sir.

Raju Baranwal — Antique Stockbroking Limited — Analyst

Thanks, Lizan [Phonetic]. Good afternoon, everyone. On behalf of Antique Stockbroking, I welcome you all to the Central Bank of India’s third quarter FY ’23 earnings call. I thank the management team of Central Bank of India for providing us this opportunity to host the call. From the management — from the senior management side of the Central Bank of India, we have with us Mr. M.V. Rao, sir, MD and CEO; Mr. Vivek Wahi, Executive Director; Mr. Rajeev Puri, Executive Director; Mr. M.V. Murali Krishna, Executive Director; and Mr. Mukul, Chief Financial Officer.

So now without any further delay, I’ll hand over the call to Rao, sir, for his opening remarks, post which we can open the floor for a Q&A session. Thank you, and over to you, Rao, sir.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, thank you. Very good afternoon to all of you. And first of all, let me thank each one of you [Speech Overlap] yeah, thank you for each one of you for giving your time. And I’m very happy to share the highlights. I feel that by this time, you must have gone through the presentation, which we have uploaded in the website. And key highlights this I would like to share with you, the total business now it stands at INR5.53 lakh crores, that is 6.54% higher than the previous December ’21 quarter. And gross advances, it stands at INR2.08 lakh crores, that is Y-o-Y growth is 14.73%. And within this advances, let me share with you the RAM and corporate book, which is balanced, now it is at 66.58 RAM portfolio with 34% of corporate credit portfolio. And credit risk weight of the asset portfolio is 63.29%.

And coming to the deposit side, total deposits now stands at INR3.44 lakh crore, that is 2.12% higher than the previous December ’21 quarter. And CASA stands at 51.22%. And you may be having certain doubts on the deposit front, where our growth on the time deposits that is a little bit in the minus 1%, 1.2%, because we don’t had any requirements of the deposits as our CD ratio now inched up to 60%. So we had a lendable resources of INR35,000 crores. That’s why we have not ventured to garner the high cost deposits.

And coming to the CD ratio, now it is 60.77. And coming to the profitability parameters. Operating profit now is at INR1,807 crores, which is increased by 44.21% with the previous year. Coming to the interest income on advances. It is INR3,937 crores. NII stands at INR3,285 crores, which is up by 19.93%. Our net profit that is this quarter, we have recorded INR458 crore, that is 64.16% higher than the previous December quarter. That is — at that time, it was INR279 crores. So overall for nine months net profit is — now stands at INR1,011 crores. If you see the previous entire year, financial year, net profit was INR1,045 crores.

So coming to the efficiency ratios. Your NIM stands at 3.77%. If I include the one-off item, that — it stands at 4.07%. ROA is at 0.50%, ROE at 1.86% and slippage ratio 0.37% and credit cost 0.36. If I include the proactive provisioning, that is the upfront provisioning of the requirements of the future quarters, it stands at 1.72%. Cost-to-income ratio is 57.02. And coming to the asset quality, GNPA. Right now, it is at 8.85%. In the previous December, it was at 15.16%. And net NPA, now it stands at 2.09%, compared with the previous December quarter of 4.39%. Coming to the PCR, that is provision coverage ratio. Now it stands at 91.72%. This is the key highlights.

And without losing much of the time, I would like to open the floor open so that we can have interaction whatever the clarifications you require that we can provide you. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Ashok — from the line of Suraj Das from B&K Securities. Please go ahead.

Suraj Das — B&K Securities — Analyst

Hi, sir. Thanks for giving me this opportunity. Congratulations on a good set of numbers. Sir, a couple of questions. First one is, if you can explain the one-off items that is included in the NIMs.

Unidentified Speaker —

This is interest received on the income tax refund, and it is at INR242.37 crores.

Suraj Das — B&K Securities — Analyst

Okay. But I mean for the last — I mean, a few quarters, I mean, there has been this interest on income tax refund. So I think — I mean, this is — do you still consider it as a one-off? Or I mean it is like, let us say, I mean, the reoccurring item going ahead as well?

Matam Venkata Rao — Managing Director and Chief Executive Officer

No, no. We will never take it as a recurring or reoccurring one. That’s why we have given a separate illustration for that.

Suraj Das — B&K Securities — Analyst

Okay. Okay. Understood. Sir, second question on the staff cost side, I mean, there is a sharp increase of around INR500 crore staff cost. Sir, I mean, what is the reason? I mean, any sharp changes here on the staff cost side?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Here, number one, is around INR98 crores we have provided for the wage revision, because in November, this settlement is due, and we have provided around INR98 crores for that. And another INR20 crores, INR22 crores we have provided for the family pension liability. Remaining is only upfront. That means the liability that may come for the March for the pension liabilities, leave encashment and gratuity that we have in one way front-loaded in December by equal proportion.

Suraj Das — B&K Securities — Analyst

Okay. Okay. So sir, next quarter, I mean, you expect the staff cost to be at a similar level of INR1,600 crores or you expect it to go, I mean, a little bit down because you have taken something on upfront?

Unidentified Speaker —

See, it depends on the rate movement, suppose if due to the rate movement our requirement for terminal dues comes down. So to that extent, the staff cost also would go down.

Matam Venkata Rao — Managing Director and Chief Executive Officer

But it will never be more than INR100 crores variation won’t be there. Not more than that.

Suraj Das — B&K Securities — Analyst

Okay. Okay. Understood, sir. Sir, the third question is regarding the recent RBI guideline on this ECL transition. So sir, I mean, have you done any analysis on that and any impact that you can see anything on that? I mean what would be the impact for, let us say, Central Bank of India, given that, I mean, a full [Phonetic] transition from the current incurred loss approach versus the ECL approach?

Matam Venkata Rao — Managing Director and Chief Executive Officer

This one is just we are also evaluating, because we are also calculating what will be the impact on our capital. Still we have not arrived any final numbers. It will be very premature on our part to say anything on that. But definitely, we are not much concerned on that front. We have [Phonetic] initial numbers that are there on my table.

Suraj Das — B&K Securities — Analyst

Okay. Okay. Understood. Sir, the third question is that on the restructured book, sir, if you can just highlight how much of the INR7,200 crore restructured book would be still under moratorium? And how much has already resumed billing? And also what is the GNPA percentage in the overall restructured book?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Just a minute.

Unidentified Speaker —

The moratorium except around INR2,000 crores, others have already started repayment and the restructured out of the December stock of INR7,200 crore. My regular SMA is 68%, the slippage ratio is — for the nine months is 16%, which include what — with corporate group of fund [Phonetic]. If you remove that only it is 6.5% of other fund [Phonetic], slippage is only 6.5% out of the restructured book for the entire nine months. So I don’t think major slippage for the current quarter also. So it will be within the range only. And except that corporate group of funds — the corporate fund, no other corporate also slip for the nine months.

Suraj Das — B&K Securities — Analyst

Understood. Understood. Sir, just to reconfirm the number, so out of the INR7,000 crores, INR3,000 crores has already resumed billing, INR200 crore has resumed billing in December —

Matam Venkata Rao — Managing Director and Chief Executive Officer

INR5,000 crores already started, INR2,000 crores is having still some moratorium.

Suraj Das — B&K Securities — Analyst

Okay.

Unidentified Speaker —

Interest has started, principal moratorium [Speech Overlap]

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah. Interest payment started. Principal repayment moratorium is there in INR2,000 crores.

Suraj Das — B&K Securities — Analyst

Okay. Okay. And sir, last question, sir, on the security receipt side, so how much provision you would have on the security receipts? Is it fully provided 100% or how it is?

Matam Venkata Rao — Managing Director and Chief Executive Officer

100% we have.

Suraj Das — B&K Securities — Analyst

Okay, sir. Okay. Thank you so much, sir. And once again congratulations.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Ashok Ajmera from Ajcon Global. Please go ahead.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Thank you for this opportunity. And my sincere compliments to Rao saheb, all the three EDs and the entire top management team of the Central Bank of India. Quarter after a quarter now, you are improving your results and showing very good performance and the bank has again come back into reckoning, achieving now the past — some of the past glories. So compliments to you, sir.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Thank you.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

I have a couple of some observations and questions. And I hope I will not be disrupted by the moderator when I ask some three, four questions and some observations. One is, sir, we would like to know the road map for the digital journey, sir, for the bank, because we understand you have allotted a very good budget for it, and you are going to make it many digital banks amongst Indi Bank. So can you little bit highlight on that, sir? This is my first question, sir, or rather some information?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Okay. So as far as road map for the digital journey is concerned, see, you all know that all the public sector banks are having the CBS, which is as old as two decades. Now there is a need and necessity for us to have agile infrastructure so that any product or any offering that has to be made to the market time has to be reduced. For that, we have to have some tweaking in the CBS, and making some changes in CBS is not advisable because of the size of balance sheet and the way transactions that happens. For that, what we thought is to create a bank within the bank, the bank which is going to be created will be a Digibank. For that, we have started ST New [Phonetic] Project for which separate building is hired almost 65 IT new personnel were also recruited, and we have also onboarded one of the good consultants for our onward journey that already started.

And if this new — ST New, that is a Digital Bank within the bank will be catering to the requirement of the digital native and also the customers who are on the traditional CBS channels who are mature enough to carry out their transactions only on the digital channels. And these both the ST New, that is a digibank and the traditional CBS we’ll have the coexisting layer so that there won’t be any disruption as far as the transactions are concerned for the customers of both the entities within the bank. That is the concept on which we are moving. Thank you.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Good. And sir, what is the time spend, I mean you anticipate for at least going full-fledged digital on this? I mean some timeframe?

Matam Venkata Rao — Managing Director and Chief Executive Officer

It is in favor. And first, reaping of certain benefits will start from the 16th month. And then it will gradually evolve and what we are eyeing is 24 months to 28 months for the maturities.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

All right. Sir, my second question is, sir, you are doing very well — reasonably well on the recovery front. Now sir, going forward in this January, March quarter is going to be very happening quarter from the recovery point of view and some of the accounts getting settled. So can you give some color on that, that how much is NARCL, the account and the amount which is going to go that will reduce our gross NPA. And also on the overall picture or some color on the share [Phonetic], I think that you have got some mistake in that also. So can you just please explain something on this recovery front in the coming quarters?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah. See, recovery front, whatever the amount we have on the net NPA, which is around 6,000 — INR4,061 crores is the net NPA, okay? So whatever the resolutions that will be happening on the gross NPA side, will be adding to my bottom line. And coming to the accounts which are in the gross NPA, which is yet to be settled I don’t think we have any brighter view on the NARCL accounts which are going to be settled within these two-and-a-half months. But certain good actions that are happening at our front with just a few days back also we could be able to auction one property for INR170 crores — INR137 crores. So like that, we are getting certain good recoveries in the accounts which are already provided.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Yeah. My last question is [Speech Overlap]

Matam Venkata Rao — Managing Director and Chief Executive Officer

Our guidance —

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Yes, sir. Yes, sir.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Net NPA is — it will be in between one point — around 1.75%. Now it is 2.09%, it will come down around 1.75%, that is the guidance we are giving.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Yeah, 0.3%, 0.4% reduction further in this coming quarter. Sir, something on the credit growth, you have done well in this quarter actually as compared to the previous quarter. So going forward also, we are going to see in this January, March quarter also around 4.5% to 5%? I think INR9,000 crores was in this quarter if you net out — net-to-net. So is it going to be the same trend, or it is going to improve further from here or might slip from here, I mean, the credit growth?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Credit growth, we will maintain a similar trend. We are not going to be much more aggressive, not much more decile. It will be a very balanced growth we would like to show.

Unidentified Speaker —

And the ratio between corporate and this thing will remain at 35-65 or 34-66, whatever is there.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, yeah. 65-35, what the previous quarter we told plus or minus 5, but still we are at 66-34 right now.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

I believe, sir, our CD ratio, you said, is 60.77%, so there is a lot of scope there.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, yeah.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

But looking at the capital adequacy, how do you spend it out? I mean, like you have extra SLR that when you are going to take it? Or how are you going to meet this credit growth at [Speech Overlap]

Matam Venkata Rao — Managing Director and Chief Executive Officer

See, as far as credit growth is concerned, I’m comfortably placed as my lendable resources we have around INR35,000 crores. There is no issue for me as far as the credit growth. Coming to the CRAR, that is the capital adequacy is concerned, yes, now with this quarterly results, we will be — because already we have the Board approval to raise the INR1,500 crores of type 2 bonds, that we will be approaching the market maybe within a span of one month to one-and-a-half months.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

But not looking at reducing the equity of the government. I mean, not — it shouldn’t —

Matam Venkata Rao — Managing Director and Chief Executive Officer

That is not at all in our control or in our domain to comment.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

And last thing is, sir, on the treasury front. Sir, this quarter, our treasury income was INR97 crore as against INR199 crore of the — in the last quarter. So how do we — I mean, calculate the next quarter coming in with maybe another 25 basis point might increase by RBI. So looking at that, we are comfortable on the treasury income and profit. And even that mark-to-market as some amount has been — there has been some loss on the revaluation of the investment of INR33 crore. So how is this coming quarter, January, March quarter, do we see this treasury spanning out?

Unidentified Speaker —

See, Mr. Ashok, actually our — we — if you consider our net M2M in our treasury products, our treasury portfolio, total investment portfolio, we have no M2M provisions this quarter. And going forward, we are expecting max 25 [Phonetic] basis point increase. And we are fully view [Phonetic] to that by way of our hedging and various hedging products. My modified duration is very low. It is just above one for SLR AFS. So we don’t see any reason because our view is that interest rates, there will not be — in this quarter, at least, there will be max 125 [Phonetic] basis point intrinsic. So we don’t visualize, my modified duration is just above one. And by PV01 is also very low, it is around two. So we do not foresee any M2M provision, significant at all.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Thanks a lot, sir, for this round of answering my questions. If time permits I’ll come back again, just a few more. Thank you, sir. Thanks a lot. All the best.

Operator

Thank you. The next question is from the line of Shrey Hemant Gandhi [Phonetic] from Arihant Capital Markets Limited. Please go ahead.

Shrey Hemant Gandhi — Arihant Capital Markets Limited — Analyst

Yeah. Good evening, sir. So my question basically is on the loan growth front. Like in the loan growth of the bank was quite robust at around 6% on a quarter-on-quarter basis, while the deposit growth continued to have a lag. So what’s your strategy on the deposit mobilization side? That will be my first question. So if you can answer, please?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, yeah. See, that’s what in the initial opening remarks, I made it. We are not aggressive in garnering the high-cost deposits because we have enough lendable resources at our disposal. That’s why we are not that much aggressive on the deposit. Having said that, now this quarter, we will be focusing on deposit mobilization also. For the special products, we have already released in the market and a good traction is coming.

Another point, what we would like to highlight is my 65% of the branches are in rural and semi-urban areas. So these are all the feeding lines for me, for CASA having the 51%. So there, I do not have much competition as far as the deposit mobilization is concerned. Since as for the market trend, we do not want to lose out on the further accretion. That’s why we have improved the rate in certain time buckets of the term deposits.

Shrey Hemant Gandhi — Arihant Capital Markets Limited — Analyst

Okay. Okay. Sir, one more question from my side. Like what would be your outlook on the margins as we are near to the high level of around 3.8%. So, is it sustainable? Or how can — how we have an outlook for going ahead for that — for the margins?

Matam Venkata Rao — Managing Director and Chief Executive Officer

See, earlier previous quarter, we have given the floor level of 2.75%. And this time, having witnessed increase in the rates, whether it is a Repo or MCLR, we will be giving the floor level of 3.25 for the March quarter. And it will be above that only. What I mean to say is the floor, that is 3.25.

Shrey Hemant Gandhi — Arihant Capital Markets Limited — Analyst

Okay, sir. Yeah, okay. Thank you so much, sir. Thank you.

Operator

Thank you. The next question is from the line of Sushil Choksey from Indus Equity Advisors. Please go ahead.

Sushil Choksey — Indus Equity Advisors — Analyst

Sir, congratulations to management and team of Central Bank of India for stable results.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Thank you.

Sushil Choksey — Indus Equity Advisors — Analyst

Sir, with all the growth enablers in place, which have been taken by the current management team in the last 12 months to 18 months, and you have initiated digital transformation journey too. So if I look at the 12-month to 24-month or an outlook beyond that, a Central Bank with direction which you have given of 65:35, so MSME RAM, what would be your outlook on retail businesses? And I would like to know what is the unutilized credit limits today? Or what is the sanction pipeline?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Sir, here, let me put it in different buckets. As far as the corporate is concerned, we would like to maintain that 65:35. So in that range, because having eye on the CRWA, that is the credit risk-weighted assets, that is right now at 63.29%. On the corporate side, I have unutilized lines around INR2,500 crores and further sanctions around INR4,000 crores, it is in the pipeline. But all these things we have evaluated in terms of what the repayments will be receiving in this quarter. So as far as the calculation, the way we have done earlier and we have succeeded in achieving our estimate in a similar way we are doing for this quarter, and we are confident to maintain the similar thing in the corporate book.

Coming to the RAM segment, that retail is almost — it is growing at the rate of 21%. So that will continue to be there, because one more driving force that is the co-lending, which is also doing well right at this moment. The original forecast what we have given for March is INR5,000 crores that we will be achieving. Now, right now, we are at INR4,100 crores outstanding is there. So these are all the growth areas or growth drivers as far as the retail is concerned. So any further clarification, you are welcome.

Sushil Choksey — Indus Equity Advisors — Analyst

Sir, what is the indicator CD ratio you’re assuming from March ’23?

Matam Venkata Rao — Managing Director and Chief Executive Officer

We will be around 64 or 65 [Phonetic].

Sushil Choksey — Indus Equity Advisors — Analyst

That answers my question. Second thing sir, co-lending, we have been a market leader with the number at 4,000 already achieved and many more partnership may be emerging. With the digital initiatives you have taken can this become a bigger growth engine for the bank along with the retail section where housing loans and maybe some other loans are doing well?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, yeah, exactly, exactly. See, for this limited — for this quarter, whatever the guidance we have given, we’ll be achieving, but going forward, this will be a one more driver for growth, this co-lending partnerships and collaborations, what we are undertaking. That will be a major growth driver.

Sushil Choksey — Indus Equity Advisors — Analyst

So when you transform into the digital banking, these partners will be part of that journey, that’s what you mean?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Exactly.

Sushil Choksey — Indus Equity Advisors — Analyst

Okay. Sir, what is the digital spend you would be doing for this year and next two years?

Matam Venkata Rao — Managing Director and Chief Executive Officer

See, our total outlay for our digital bank is around INR1,500 crores. That will be spread out by 3.5 to — that is around 36 months to 40 months. So that is the total budget we have.

Sushil Choksey — Indus Equity Advisors — Analyst

This is inclusive of the consultant and the rollout and everything –?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, yeah, yeah, all, all, all, infra, people, all the things, whatever the fintech wears [Phonetic] who will be onboarding for this all those things.

Sushil Choksey — Indus Equity Advisors — Analyst

Sir, seeing our CASA, we have one of the more stable numbers if I take next — last five years. And this is not coming from urban or metros as many other banks would have. What kind of initiatives are we tapping for those customers to increase our fee income or product marketing or maybe reach out to those customers with many more enablers as Central Bank has a larger part?

Matam Venkata Rao — Managing Director and Chief Executive Officer

See, as far as rural and semi-urban, it is not that now these customers, you cannot take them granted. And whatever the products that are to be offered, whether on the — this ancillary services, maybe on the insurance front or in the stocks or in mutual funds, all those things are — we are making available to them for the investment.

Sushil Choksey — Indus Equity Advisors — Analyst

So are you envisaging our fee income would be a much larger pie in coming years from where we stand today?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah, yeah, definitely. That has to move up, because that is another area where we will be focusing from ’23, ’24 FY onwards.

Sushil Choksey — Indus Equity Advisors — Analyst

The fee income can take care of the digital spend, you think, sir?

Matam Venkata Rao — Managing Director and Chief Executive Officer

See, in digital front, upfront, you cannot see that’s a breakeven that will be happening in ’23-’24 or ’24-’25 as a — if you see the profit center per se itself. It is having a wide contribution for the business growth, where it cannot be singled out for — to bring the breakeven further infra cost we are spending for the digital.

Sushil Choksey — Indus Equity Advisors — Analyst

Sir, my last question to Mr. Wahi. He has emerged as a winner where a treasury book is concerned over a period when the turmoil and the money market has enlarged. And despite our CD ratio at 60 today, the investment book has not given shock.

Vivek Wahi — Executive Director

Yeah.

Sushil Choksey — Indus Equity Advisors — Analyst

So how time might be emerging where he may be a [Phonetic] in the balance sheet of Central Bank is concerned. So can I have his outlook for 12 months to 24 months.

Vivek Wahi — Executive Director

Yes. Thank you, Sushil ji. Actually, see, as you are aware that CPI has come below six — though CPI has come below six, but core inflation is a sticky one, and it is again hovering above six. So in our view, our in-out view is that there will be at least one rate hike in the ensuing policy. And thereafter, there can be a pause for a couple of monthly policy. So thereafter, a fresh look will be taken only after the actual inflation numbers because this time, the CPI has come down basically only because of vegetable prices. So we feel that there won’t be much of rate high. And going forward till March ’24, there is no sign of actually rates of interest coming down.

So till then, we are immune to the rate hikes. And further, it’s the right time to, in fact, build some duration so that whenever the reversal happens, we are also able to encash the bond value. So with these views only, we are moving, and as you know that rightfully at present the AFS portfolio, SLR AFS portfolio is very lean. So we would like to build up in coming months. And irrespective of even a couple of rate hikes because ultimately, from March ’24 onwards, it is very much expected that a reversal should happen. So this is our view. That’s all. We will work on that.

Sushil Choksey — Indus Equity Advisors — Analyst

Thank you for the reply and congratulations. Best wishes for the years to come.

Vivek Wahi — Executive Director

Thank you.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ashok Ajmera from Ajcon Global. Please go ahead.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Thank you for giving me the opportunity again. Sir, one is on our cost-to-income ratio, though improved from 61.02 to 57.02, but still it is on the higher side, that’s what I feel, as compared to some of the other banks. So your comments, number one, on that? And secondly, on the slippage fronts, we are controlling it very well. Even in this quarter also there was a lot of improvement. But going forward in this coming quarter, I would like to know from recovery — I mean increase our — that how do we — how are we placed when half of this month has already gone and two-and-a-half months are left? Is there any kind of signals we are getting? Or this number will be improved further on the slippages as well as on the recovery?

Matam Venkata Rao — Managing Director and Chief Executive Officer

Yeah. See, as far as the recovery part is concerned, this — if you see the SMA slide that will give a clear indication, because in our slide, we have given both above INR5 crores and below INR5 crores, that is the entire portfolio we have given for the better clarity. So if you see that the 6.66% is the total SMA portfolio, wherein SMA 2 is only 1.65%. And going with the previous quarter, the way we have controlled the slippages, this time also, though our guidance earlier was around 0.80, now we are at 0.36. So our endeavor will always will be below 0.5. So that may not give any shocks to us, because we know the now accounts we know each as far as the INR5 crores and above, which is very, very less INR879 crores, where SMA 2 is INR125 crores. So it’s all very negligible numbers that will be able to control the slippages.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

And this cost to income and sir, connected with this ROA —

Matam Venkata Rao — Managing Director and Chief Executive Officer

Cost to income — yeah, yeah, cost to income, I already explained in my opening remarks, that 57, whatever, the amount that is enhanced that is you are seeing, is it because of the evening out the requirements of the March quarter for this December itself, we have accounted for whatever the requirement that may come for the March. If you see March to March, then it will give a very fair idea of you know, about the cost-to-income ratio. Otherwise, the numbers what you have for December is padded up figures for the upfront requirements we have taken care in December.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Yeah. So the other colleague also had [Phonetic] asked this question that like in that case, do we expect the reduction, I mean, as compared to this quarter in the next quarter on the cost side, when you say that INR400 crore, INR500 crore out of the INR120 crore you explained, but another INR350 crore or INR80 crore, you said you are upfronted from March. So I think the March should be — March quarter should be better from the cost-to-income point of view also and overall operating cost point of view also, sir?

Vivek Wahi — Executive Director

Definitely, there will be two components.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Yeah.

Vivek Wahi — Executive Director

One, you see, my operating profit is consistently showing a growth. So over next quarter also, we expect that our interest income should go up substantially. So that will help me reduce my cost-to-income ratio. Secondly, on an estimate basis, we have taken what would have been the provision up to March ’23 required for terminal dues. And we have tried to take major portion of this. Now in March, the rates also go down slightly in that case, my requirement here will go down. Third was the INR90 crores the provision for the wage revision that we have done. So that will continue at, say, INR30 crores per quarter, we’ll have — per month, we’ll have to do. So next quarter also, this around INR130 crores, INR135 crores, this outgo will be there. But the cost-to-income ratio will definitely come down.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

That’s great. Sir, any guidance on the ROA for the whole year now, March ’23?

Matam Venkata Rao — Managing Director and Chief Executive Officer

See, already we have achieved the guidance what we have given —

Ashok Ajmera — Ajcon Global Services Limited — Analyst

0.50, yeah.

Matam Venkata Rao — Managing Director and Chief Executive Officer

So now you take it as a floor only, whatever that happens upside that will come back in April for the March number.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Okay, sir. Thank you very much.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Thank you.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

A great come back, sir.

Matam Venkata Rao — Managing Director and Chief Executive Officer

Thank you very much. Yes, some urgent call is coming. Just I will be excusing myself from here. Our Executive Directors and CFO will be attending to the quires of the other participants.

Ashok Ajmera — Ajcon Global Services Limited — Analyst

Sure, sir. Sure.

Operator

Thank you. [Operator Instructions] The next question is from the line of Sushil Choksey from Indus Equity Advisors. Please go ahead.

Sushil Choksey — Indus Equity Advisors — Analyst

Sir, my last question, if any of the EDs or CFO can answer.

Vivek Wahi — Executive Director

Yeah.

Sushil Choksey — Indus Equity Advisors — Analyst

Our government holding at the current level of in ’90s, some of the other peer banks are talking of dilution led by SEBI or government directive, I’m not too sure. Is there any news from our side?

Vivek Wahi — Executive Director

See, Mr. Sushil, actually this dilution of government share is not in our hands. It is not in our purview also. And it will not be a right place to comment on that. That is purely GY [Phonetic] call. And — but going forward, we will be definitely raising some capital in this quarter, maybe Tier 2 capital, that is envisaged. But otherwise, dilution, we are not able to comment at this platform.

Sushil Choksey — Indus Equity Advisors — Analyst

No, Tier 2, Tier 1, I understand. I was just asking equity because Bank of Maharashtra and Bank of India, [Speech Overlap]

Vivek Wahi — Executive Director

Yeah. Tier 2, definitely, we are — we’ll be trying in this quarter. We are already had some initial interaction with our players. And we will be continuously engaging with them for this, and we may come up with some Tier 2 bond issue in the early part of February.

Sushil Choksey — Indus Equity Advisors — Analyst

Thank you, sir. Thanks a lot.

Vivek Wahi — Executive Director

Thank you.

Operator

Thank you. [Operator Instructions]

Vivek Wahi — Executive Director

So if there is no other observation, shall we —

Operator

Sir, we don’t have any more questions.

Vivek Wahi — Executive Director

Right.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Raju Baranwal for his closing comments.

Raju Baranwal — Antique Stockbroking Limited — Analyst

Thank you, sir, for giving the opportunity, and thank you, participants for joining us. So I would like to — but I would like to — hello?

Vivek Wahi — Executive Director

Yes, yes. Please go ahead.

Raju Baranwal — Antique Stockbroking Limited — Analyst

Yes, sir. So — and you would like to say something in your closing comments?

Vivek Wahi — Executive Director

No. I thank once to all the analysts present here for spending their valuable time. My sincere thanks to them. And we look forward for their continuous interest in our bank and the numbers. We assure you that the performance will even be much better in the coming quarters also. Thank you.

Operator

[Operator Closing Remarks]