CSB Bank Limited (NSE: CSBBANK) Q3 2025 Earnings Call dated Jan. 28, 2025
Corporate Participants:
Pralay Mondal — Managing Director & Chief Executive Officer
Satish Gundewar — Chief Financial Officer
Analysts:
Shivaji Thapliyal — Analyst
Suraj Das — Analyst
Sonal Minhas — Analyst
Shreepal Doshi — Analyst
Mona Khetan — Analyst
Vatsal Parag Shah — Analyst
Sarvesh Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to CSB Bank’s Q3 FY ’25 Earnings Conference Call, hosted by YES Securities. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Shivaji from YES Securities. Thank you, and over to you, sir.
Shivaji Thapliyal — Analyst
Thank you. Thank you, Sejal. Good evening and a warm welcome to all those who have joined the call. The CSB Bank management is represented by Mr Pralay Mondal, Managing Director and CEO; Mr BK, Executive Director; and Mr Satish Gundewar, Chief Financial Officer. We specifically thank the management of CSB Bank for giving YES Securities the opportunity to host their result call. The management will first be making some opening remarks, after which we will throw the floor open for questions. Thank you. I’ll now invite the management to make their opening remarks. Prader, over to you.
Pralay Mondal — Managing Director & Chief Executive Officer
Thank you, Shivaji, and good evening to everybody on this call. This is regarding the Q3 performance of CSB Bank. But before that, widely on the economic scenario, especially because the world is a volatile place right now, especially in terms of financials. So just a quick summary of what we think is the global scenario. So after the US elections, markets globally have reacted to a stronger dollar and sanction on US imports contributing to inflation.
Our sale-off has happened in Indian equities by FBIs. The resulting depreciation of the INR along with the RBI’s effort to contain volatility has caused an INR liquidity deficit. The RBI has already taken necessary steps to address this, including a 50 bps CRR card in two phases earlier and the announcement of OMO long-term VRS and INR swaps yesterday to inject durable liquidity to the system. Also revised its growth estimate in the last few weeks to 6.6%.
While the MFI space shows signs of overeating, rural and government consumption are picking-up. Cooling inflation at 5.22% in December gives the RBI and the Ministry of Finance room to take further steps to inject liquidity and boost economic growth. Under the circumstances, the chances of the RBI cutting the repo rate are evenly balanced. With the new US President and dollar index at an all-time high, we expect pressure on emerging market equities and currencies to continue to for some more time. However, with the recent steps taken by RBI and its intent to address liquidity issues, we expect liquidity to improve this quarter along with the continued softening of yields.
On CSB specifically for this quarter, key highlights. On the profitability front, net profit of INR152 crores for the quarter marginally up Y-o-Y and Q-o-Q improvement is around 10%. Operating profit of the bank is INR221 crores with a growth of 13% and 10% of Y-o-Y and Q-o-Q basis. Other income registered a 75% growth on Y-o-Y basis and 10% on sequential-quarter basis. Other income constituted 19% of the total income, which is a significant improvement as compared to how the bank has to look a few years back.
Cost-income ratio marginally improved compared to Q2 level to 62.9%. It was 65 plus last quarter. Our NIM could be sustained above 4%, both on a quarterly and on Y-to-d basis, despite the tight liquidity conditions and higher interest-rate cost living large in the system, NIM for the quarter stood at 4.11%. ROA stood at 1.52%. Bank is holding the contingency provisions intact and is continued — continue with the accelerated loan provisioning policy. I’ll talk about it a little bit more when the questions come on provisioning.
On the liabilities front, we all know that the markets are going through difficult situation on the liabilities because of the negative liquidity. We had a robust deposit growth of 22% Y-o-Y amid a slow paced industry growth of around 10%. CASA grew by 7% Y-o-Y and CASA ratio stands at 24.07%. We complemented our funding with FCI borrowings and refinance based on cost considerations, which helped us also in maintaining LCR at a comfortable level. We ended our LCR somewhere around 130-odd percent, but average LCR is around 119%, which was marginally higher than last quarter.
On the asset growth, advances grew a growth of 26% Y-o-Y, which is more than 2x times of the industry growth, which is somewhere around 12%. Our gold portfolio registered growth of 36% Y-o-Y, other retail by 32%, SME growth was 29%. And I think on the corporate side also, we are starting to pick-up pretty well.
Though it recorded a growth of overall 30% on the corporate book, but the reason it is shown only 5% is because of the liquidation of the DA portfolio and few exits we opted for as part of our coverage strategy and risk appetite. But if you take-out that BA portfolio exit and some of the exits which you took deliberately, the fresh disbursements on the corporate book, which should be seen in the next quarter and next year, that will show-up in the top-line and the growth as well has been significant on the corporate side as well.
So what it means is between retail, wholesale, corporate and SME, all are showing organic growth pretty well. On the asset quality matrices, slippages has been contained effectively and recorded a lower NPA ratio sequentially over September quarter. GNP and NPA ratios for the quarter was at 1.58% and 6.64% against 1.68 and 0.69 percentage for Q2, which is a sequential improvement. PCR now stands at 60.12 percentage without PWO, which is slightly marginal improvement over last quarter and eventually we want to take it up to 70% at some stage.
Bank is holding a provision buffer additional of around INR181 crores over and above the regulatory requirements. And this is where I would say that we continue to hold INR105 crores of what we originally had a provision for COVID, which later on we moved into contingency provision. And in-spite of fact, a fairly large chunk of that was due to one account we had provision, that account is now exited. Still we hold that against the other accounts as a provision. So this is the kind of conservative policies which we do and that provision was INR34 crores.
So effectively, in-spite of the exiting of that account, the INR34 crores we continue to hold in contingency provisioning. On a capital base, CRDR 21.08%, Tier-1 ratio of 19.73%. Of course, this will improve when the profits come in the end of 4th-quarter. Low proportion of risk-weight assets compared to industry, marginally higher than 40%. Our shareholder value-creation side, book-value per share is 236. EPS for the quarter is 34.68, ROE is 15.28 percentage. So you can see most of the guided parameters other than NIM, we have sort of achieved this quarter on all the ratios. Distribution, we have a network currently of 807 branches and 77 ATMs as on 31, 12, ’24. We have added 34 new branches during the FY and part of the branch specialization 6 branches during the year. The rest of the branch expansion as planned will happen this quarter.
In conclusion, I’d like to say that we had a decent quarter both from deposit and advanced growth perspective, registering a growth of almost 2x times over the industry in both sides. Though the advanced growth outpaced the deposit growth, the gap was effectively bridged through diversified funding sources such as FCY borrowings, refinance, et-cetera. We are well-placed in terms of liquidity, capital ratios and have sufficient room for further growth.
Coming to profitability, while our NII growth is relatively flat, the operating profit grew reasonably well, both on a Y-o-Y and sequential basis. Other income recorded a robust growth of 75% on Y-o-Y basis and other income to total income has improved by 5% to 19% from 5% two years back to 19% now. Net profit recorded a growth of 10%. The proactive decisions taken in terms of slowing down the growth in unsecured loans, MFI, etc., is helping us with minimal impact compared to the industry. I’m sure there’ll be some questions on this later on. I’ll delve into the details. Our NPA ratios are lower on a sequential.
We have been generally able to hold-on to our guidance on growth ratios and asset quality, as I said before, and this can be taken as an indication that our compounding execution story is playing out as far as this 2030 vision. In the current quarter, the credit growth will be largely dependent on how the liability growth evolves. Our — for smaller players like us where the deposit franchise is yet to be fully built and we are working on that, the deposit mobilization at reasonable cost will have to be overmanaged and we have clear plans there.
On the take transformation side, this will be a big year for us. I’m talking about FY ’26 will be a big year because post FY ’26, we’ll almost have nothing left in terms of transformation bank from a very average tech capacity to probably best-in-clastic capacity in this — in next financial year. And there’s a lot of work happening on that front. Last-time, our CIO, Rajesh had given a briefing on this on the call. So if you have any questions, we’d be happy to answer on that front, but we are completely on-track in terms of what we want to do.
Our CVS migration along with OGL and some of the other pieces which are putting together will be — is expected to be completed in Q1 FY ’26, stabilized by Q2 FY ’26 and leverage from FY — Q3 FY ’26 onwards. So this is a big, big development for us and we are all excited to look-forward to that. Our distribution strategy is working well once the products and processes stabilize post CVS migration, the distribution will look at leveraging more opportunities leading to granular growth, helping the bank to deliver consistently in-line with the stakeholder expectations.
As we talk, we have also started planning our retail assets franchise because that is the one franchise which we deliberately didn’t pick-up so-far, a, because we saw the markets not seeing some stress; B, is because we are not fully ready in terms of liability acquisition, the entire systems and processes have to be in-place. So now that we have visibility of the tech pace, tech transformation in the next six to nine months, we have started our retail assets transformation journey now, which will be visible in the next one year and we can talk about it as we go through the call.
With that, I hand over the call-back to the coordinator. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Suraj Das from Sundaram Mutual Fund. Please go-ahead.
Suraj Das
Yeah, hi, sir. Thanks for the opportunity and congratulation.
Operator
Sorry to interrupt, Mr Suraj, I would request you to please use your handset.
Suraj Das
Yeah, is it better?
Operator
Yes, sir.
Suraj Das
Yeah. So thanks. Thanks, sir for the opportunity and congratulation on a good set of numbers. Couple of questions. Sir, on the yield side, so on a Q-o-Q basis, if I see your yield has fallen by around 15 to 20 basis-point and this is despite the growth being higher on the — on a Q-o-Q basis on the non-corporate segment on gold loan and your retail loans. And your gold loan yield is anyway much higher than your overall blended yield. Sir, what is causing this fall in yield on an overall basis, if you can explain?
Pralay Mondal
Yeah. Thank you, Suraj, for your question. You are right that the growth in gold loan has been 36%, which is higher than the bank growth, which is 26%. At the same time, we grew on retail as well as in SME, reasonably close to either 30% or higher than 30. And what I said, I think the critical part is that wholesale, if you take-out the DA portfolio and take-out the LCBD and that one or two accounts which we exited, which are on the very high-yielding basis, then they have grown by 30%, okay.
So what it means is that what we are putting on now are low-risk and hence necessarily not very high-yielding business, especially in a cycle like this where we want to be careful. And even on the — if you look at the details of our assets book, our de-growth has happened in three, four products, which are all high-linked products, two-wheelers, we have de-grown personal loans, we have degrown and basically have de-grown big-time. MFI, you have degrown and agri you have de-grown.
All these businesses are somewhere anything between 12% to 16% kind of a yield, okay, or maybe even higher certain places. So given that perspective, we decided to derisk our portfolio around a year back and that is accelerating as we are going, leading to some of the high link portfolios moving out. In wholesale itself, one account itself which moved out was more than INR200 crores, which was yielding us close to 13%. It was not a NPA, we are running well, but as a derisking strategy, we have moved that portfolio out, okay.
So when you look at all this, the prudent call which you’re taking is, be it retail, be it gold, be it SME or be even SME, our yields have remained kind of a similar as it was before. So we are playing in that range between wholesale to the highest yielding, 90%, 90% 95% of our incremental portfolio is between 8% to 8% to less than 12% because gold our business is less than 12%. So that’s a conscious strategy saying that yield maximization or NIM maximization in an environment where there is enough risk in the system is not prudent. And anyway, based on our Board guidance, we are looking at businesses which are long-term franchise building and just not NIM accretive. So that’s the reason we have done this. But yield has gone down slightly across all the products, almost all the products we had lower in than before.
But more importantly, the NIM compression has also happened because of higher-cost of funds and also because of that P&L interest, which we lost around 25 basis-points, that continues every quarter, right? So while part of that we are getting as a penal charges, but that’s more or less the reason. And in-spite of the fact we have managed a 4.11 NIM at this stage where things are not the most positive in the environment, I think we are quite happy with this risk — risk covers kind of strategy which have played out.
Suraj Das
Sure, sir. Thanks for the elaborative answer. And sir, on the gold loan piece, in terms of reporting numbers, have you changed any classification because last-time PPT versus this time PPT, I think in terms of numbers of the gold loan vertical and retail, I think there has been some reclassification in terms of numbers, both on AUM and disbursement numbers. So I mean, has there been any reclassification? And if yes, then if you can explain that also?
Pralay Mondal
No, there has been no change compared to last quarter. I don’t remember which quarter, but there is some change which we had done two, 3/4 back where because of regulatory and other reasons, we had — we had moved some of the businesses around INR1,500 crores, if I remember correctly from gold loan to loan against securities and we disclosed that in the call as well as in our conversations. So that we did not because we wanted to move from this side to that side, but because of some regulatory reasons, we didn’t classify them as gold loan. But the collateral security is gold, but they are classified as loan against security, which was INR1,500 crores, but nothing changed this quarter. It happened, I think last quarter itself.
Suraj Das
Okay, sure. No, I was actually looking at Slide 17, which is the disbursement number. I think last quarter in the gold loan vertical, you mentioned that INR6,944 crore was the disbursement, but this quarter, I think 2Q FY ’25 number has been reclassified to. 5,752. So second-quarter number I am saying.
Pralay Mondal
Oh, second-quarter number has changed compared to last-time, is it?
Suraj Das
Yes, yes.
Pralay Mondal
That could be that loan against share, which we would have — in the book, we would have changed date, but in the disbursement, we might not have changed it last-time. This we could have changed it this time when it came to, but nothing has changed between Q2 and Q3. So maybe last quarter, the disbursement number on loan security, we had kept it under a gold loan, but in the book, we moved it into portfolio, but we probably forgot it last-time and this same, but nothing has changed this time.
Suraj Das
Sure. And sir, is that also reason that of this number of accounts in the gold loan business has also fallen from earlier reported number of around INR7 lakh to now INR4.8 lakh. Is that the reason also? I suspect.
Pralay Mondal
Quite possible. And so I told you that it’s around INR1,500 crores, which has moved into retail. From the — because of loan against security, it could be the reason. Yeah,
Suraj Das
Understood, sir. And last two questions, sir. One, just a clarification. This CRAR number does not include the interim PAT, right?
Satish Gundewar
So CRA number, because of the 3/4, it is a limited revenue by the such as auditors and actual statutory audit, which is signed off is at the end-of-the year. So once — after four quarters, the profit number will get added into the CI.
Suraj Das
Understood. And the last clarification is, sir, the contingency provision that you were talking about INR100 odd crores. Is that included in the PCR or that is over and over PCR?
Pralay Mondal
No, no, no. Contingency provision is not in this year.
Suraj Das
Sure, sir. Thanks for answering all my questions.
Pralay Mondal
And then INR5 crores, it’s not in this year. I mean if we could have easily moved that INR34 crores into in
Operator
With no response from the current participant, we’ll move on to the next participant. The next question is from the line of Sonil from Persian Capital Investments Advisory LLP. Please go-ahead.
Sonal Minhas
Hi, sir, this is Sonal. Am I audible?
Pralay Mondal
Yes, yes, absolutely,. Good evening.
Sonal Minhas
Good evening, sir. I hope all is good. I wanted to understand the behavior of customers in an increasing gold price scenario. So typically as these products — the gold product is low in tenure. What happens for loans which basically reach their termination in a increasing gold scenario, do typically customers prepay the loans and they take a new loan for a higher cover how do you handle LTV for these kind of loans? Just trying to understand that as we speak.
Pralay Mondal
Yeah. No, I think it’s a great question. So there is no one answer to this. There are all kinds of behaviors. In a retail scenario, not everybody does so much of calculation and does things like that. Typically, what happens in a in a gold price rising scenario, some part of the LTV starts coming down. The reason that LTV starts coming down and as we are talking that when it was gold price was low, came down and then it went up, our LTV has moved down from 74% to 70%. And that itself proves that obviously not all customers does that because LTV is going down because gold loan prices going up.
At the same time, there will be some customers who will do this by which they will take — want to take benefit of the LTV and hence can close and open — open a loan. There are few customers like that and we have no problem with that because once they are opening, we’ll get a processing fee again, okay. And they’re willing to give that because they are getting a higher LTV. And even if you say no to it, they’ll go to the next branch and do it of another bank. So we don’t have a choice. We have to do this.
The third one is there is a third category also where they sell the gold, okay, now they take it away. And the reason for that is that they see the maximization, which they can do and they don’t see the price going down or whatever they are — in their limited views what they see. So during — when I see a sudden spike in gold price, I sometimes see that we lose some customers or we — some takeout happens from the portfolio itself. So all kinds of three things happens.
So not necessarily when gold price goes up, business goes up immediately. It goes up after a while. Initially, sometimes it falls as well, which means that some customers exit. The fourth type of customers who are on the higher LTV, we exit them also taking this opportunities. Suppose somebody is in an 85%, 90% racket, then we say this is a great opportunity and then we also exit them saying that pay it and go so that we can bring down LTV. So a combination of four, five things happen. It’s a very dynamic scenario. So — but in general, with gold price going up, LTV comes down.
Sonal Minhas
So what could be your BT out equivalent like in current quarter or in general when gold prices are up, like what would the number be?
Pralay Mondal
What number? No, I don’t — I don’t have that number. And sometimes we’ll not even know BT because it’s not like a BT where people will come and take it out like that. They will just take the gold and go where he is going, what is he doing, whether he is going to another bank or he is selling it, we don’t know or he’s consuming it, we don’t know. So, but generally in both scenario, our renewals are similar, okay. So we have not done that kind of analysis or how much BT out because it’s very difficult to do that. It’s a very physical business, right? We don’t know which one is BT and which one is taking out?
Sonal Minhas
Got it, sir. And any guidance on LTV as we speak, because the — but just as a precaution because the gold prices are inching up and the outlook is weak. So any guidance on that you?
Pralay Mondal
I mean, whether our outlook is weak or not is deferable because whenever I read various things, almost 70%, 80% people say that gold prices still can go up internationally. But that’s for another debate. I mean, we are not into that business of predicting gold price. So what we do is since the tenor of the loan is low, generally tenor of the loan is low. So this LTV management through prices does not happen that much. But generally, I can say that we hover anything between 68% to 75% and 75% also because part of our business is also exit portfolio. That’s why there we can go up to 85% as per in approved Board policy. So given that it goes closer to 75% and generally, it remains between 70% to 75%. In that range, it plays out.
Sonal Minhas
I understand that, sir. I’ll come back-in the queue. I have three more questions. Thank you.
Operator
Thank you. The next question is from the line of Shreepal Doshi from Equirus Securities. Please go-ahead.
Shreepal Doshi
Hi, sir. Thank you for giving me the opportunity. My question was on LTV only. So why — so what is our disbursement LTV in gold — in retailed gold and in agri gold loan?
Satish Gundewar
Sorry, what is the question?
Pralay Mondal
We didn’t get you want to break-up between agri and normal gold loan, is it?
Shreepal Doshi
No, what is our disbursement LTV in agri-loan and in retail gold loan.
Pralay Mondal
Your voice is not very clear. I can’t hear you properly.
Operator
MR. Doshi, I would request you please use your handset.
Shreepal Doshi
Sir, my question is, what is our disbursement LTV in loan and in retail goal loans?
Pralay Mondal
Oh, sure. LTV in — see, as per regulatory norms, LTV in retail gold loans has to be below 75. And agri, there is no this thing like that from a regulatory perspective. But generally, as per our internal guideline, we try to keep it within 85%. And when we say LTV, we include the bullet interest or interest included in this. And hence, you know that is a conservative LTV calculation we do. How much for this thing? On an average, it is well below 70%, obviously for normal and agri will be somewhere around 75 to 85%.
Shreepal Doshi
Got it. And just one more question here. Within the gold lending portfolio only. So there has been a sharp decline in number of loan accounts. So just wanted to understand what is the — what is the ticket size that we are focusing on in the retail and in agri-loan. Is there a thought process on ticket size or we are open to taking any or any sort of ticket side.
Pralay Mondal
So typically what has happened is now I have understood the previous person’s question also. So if you look at it, we — this sharp decline is between Q3 FY ’24 and Q3 FY ’25, okay. So this is year. It’s not quarter-on-quarter decline. I said already that in previous quarter, we had moved INR1,500 crores from the gold loan portfolio to loan against security portfolio because of some regulatory and other reasons, okay. So because of that movement, those INR1,500 crores corresponding accounts would have moved from — from gold loan to this thing.
Though the collateral is gold, but it is classified under loan against security, which has moved under retail, which we disclosed last quarter as well. So this also answers the previous because I didn’t have the number in front of me. So we didn’t make a mistake last quarter. It is basically year-on-year degrowth, okay. And year-on-year degrowth happened last quarter because we moved our chunky portfolio of INR1,500 crores from gold loan to loan security for — because we didn’t want to take the benefits of gold loan under that we moved them under security.
Shreepal Doshi
Got it. Got it, sir. This is helpful. Sir, just one last part. So in gold, what would be the average ticket size for retail sell for the agri gold loan
Pralay Mondal
I think our gold loan ticket size is somewhere between INR1 lakh to INR2 lakhs, okay and I think ticket size are almost similar.
Shreepal Doshi
Got it. One last question, sir.
Pralay Mondal
It’s slightly lower, but it will be between INR1 lakh to IN2 lakh average.
Shreepal Doshi
Yeah. Got it. Sir, just one last question. As a policy or as a strategy in the gold financing, do we try to maintain 75% LTV throughout the loan tenure or only at the time of disbursement we keep up the upper cap of 75% and then we do not really track it during the tenure of the loan.
Pralay Mondal
No, no, no. Gold loan is a very complex business to run on a day-to-day basis. So it’s not like that. So before that, let me answer the other question, what is our just came to me, forgetting. But on the — that ticket size, which you talked about, I certainly remembered that now that as per RBI regulation, okay, agri gold loan cannot be below INR2 lakhs, okay, because you cannot take any more agri gold loan with security below 2 lakhs. Previously this is to be 1.5 lakhs. And hence previously agri gold loan could not be below 1.5 lakhs.
Now it cannot be less than 2 lakhs. So anything below 2 lakhs we are taking under general category and above 2 lakhs we are taking under agri gold loan. So agri gold loan has to be necessarily above INR2 lakhs as per regulation. Coming to your question on LTB management, yes, while it is done at the time, but RBI is a regulation is that it has to be through the tenor, okay. And hence, we have to keep monitoring it.
And whenever it is going above 75% or above whatever limits are set by at any point of time, we have to go back to the customer and either take more gold or take more money to reduce the LTV. That’s done diligently in the bank. Having said that, we — that’s why we keep some buffer in the system so that we don’t have to keep going for INR100 super and INR100 signature. So we manage it accordingly, but the rule is that you have to be through the whole tenor of the book. You have to be keeping about below 75% for normal gold loan. For agri, there is no such listing.
Shreepal Doshi
Got it. So that is only for the retail golden, not for the agri-business.
Pralay Mondal
I don’t give a thing, LTV normal.
Shreepal Doshi
Yeah, right. And just like just a follow-up there. So we would have a bullet repayment option for agri, whereas for retail bullet, it will be typically EMI structure, right?
Pralay Mondal
No, bullet repayment can be — bullet repayment has nothing to do with agri or non-agri. We can have bullet repayment on both because we are calculating that bullet repayment on the — for the LTV calculation itself. And for our internal reasons, we generally like to keep it within 85% because that’s our own way of managing risk. So given that, we keep the bullet repayment within that 75% or 85%, whatever we Call-IT.
Shreepal Doshi
You got it, sir. Got it. Thank you so much sir, for answering all my questions. I’ll give that the next.
Pralay Mondal
Thank you,.
Operator
Thank you. The next question is from the line of Mona Khetin from Dolat Capital. Please go-ahead.
Mona Khetan
Yeah. Hi, sir, good evening and thanks for taking up my question. So firstly, on the corporate book, now that I believe the rate in corporate book is nearly done with, I was just looking for some color on the book, like where-is our average ticket size of that on this book and what would be the average yield? And also maybe how many exposures are above INR100 crore at this point? And where would you like to maintain your average ticket size at in the corporate book?
Pralay Mondal
So our — what we have given in public domain is our this thing, we can share that broadly our — on a segment is just give me a minute. So we vary between 9 to 9.5 generally the average depending on which quarter we are talking of,
Mona Khetan
Okay.
Pralay Mondal
On the rest of the questions what you’re asking is very much detailed. We generally don’t share that level of detail of how many customers are above 100 and they say. And given that perspective that our overall book itself is so small, it’s not that too many customers will be above 100 and 200, okay. But we don’t have that data in the public domain, so we’re not able to share it.
Mona Khetan
Sure. But some color on average ticket size will remain or the range of your ticket sizes
Pralay Mondal
Okay, I’ll tell you most — I can give you a round the answer on this. So our norms within the bank is that anything above INR50 crores goes to our management committee and for better-rated companies, above INR75 crores goes to management committee, okay. And most of our corporate loans goes to management committee. Okay. Then rest you can deduct.
Mona Khetan
Got it, got it. Secondly, on the fee side, so again, this quarter we have seen a very strong growth as you highlighted. So just want to understand how much of it is retail granular fees and you know, is there some component of corporate fee as well in this thing and where would this ratio remain on the fee side? And could this sort of growth trend continue on the fee side over first-half of this year?
Pralay Mondal
And so you have seen that our fee growth has continued and has been consistent. We are now around 19% to 20% of our overall income is coming through fees. Now that’s also ratio means because NII has also come down, it has gone up. So but that’s a ratio still. On the book growth, yes, we grew by 70%. The core fee or the way we define, the core fee, which is scalable, granular and scalable is around 15% of that and another 4% is — depends on things like PSL to commission, some one-off here and there, etc. So 4% is one-time — it’s not even one-time.
Every quarter we’ll get it, but it’s not a business-linked kind of a phase, it’s not granular kind of a phase. So on that, I can tell you that 15% is very clearly granular fees, which will have a compounding growth story. Broad hedge are processing fee, commission upon bancassurance and this thing and some credit card-related fees and some — and on the non-cost side, some PSL the commission. These are the broad larger lines which are there. There trade for TFX is also there. So there is more chunky corporate fee as such out there. Mostly it is granular and mostly scalable, which you will see in 4th-quarter also our fee business will do good.
Mona Khetan
So this entire INR200 crore, there is no corporate confidence, but there’s only 4% of the fee that’s probably one-time.
Pralay Mondal
Not one-time. There will — like PSLC commission.
Mona Khetan
PSLC.
Pralay Mondal
One of those income, which is the largest income in that 4%, but that PSLC can come every quarter also.
Mona Khetan
Yes,
Pralay Mondal
We don’t answer them as 4 fee. PSLC is not your business fee. That’s why I don’t Call-IT answer as.
Mona Khetan
Got it. And just finally on the — on the gold loan book, so any impact on the growth that you are anticipating in view of alignment with norms of in the quarters?
Pralay Mondal
I had responded to the same question last-time, so I’ll repeat what I said. 30th September circular, we had done so much of work on our gold loan portfolio last one or two years that we could have implemented that 30th circular in the next seven days itself, okay, because we are almost ready on all the points which has been communicated there. Only one part of that is a continuous process, which is how many audits we are doing, what are the operational efficiency we are creating, what controls we are building on a day-to-day basis. That’s a continuous process. Other than that, we are ready with everything.
And as on December, we have also communicated to RBI as per their guidance or as per that circular about our compliance to all the points which they had given, okay. So if it has not impacted us last quarter, I don’t see that circular will impact us this quarter or in future. We are quite comfortable with that.
Mona Khetan
Sure. And what would be the risk-weight on agrico loans versus the retailed loan, is there any difference?
Pralay Mondal
Actually, there is hardly any risk-weight on gold loan business. So I don’t know the difference, but there will be hardly — materiality will not be there at all.
Mona Khetan
But what are the risk-weights against gold loan just
Satish Gundewar
To the RWA consumption on the gold is very minimal because we get a set of on the value of the gold after doing a haircut. So after we do a haircut, that is compared to the outstanding and only whatever is remaining balance of that is risk-weighted. Now since the overall portfolio also, we always maintain an LTV of 75%. So after doing haircut also, there is no exposure generally, which is in excess of the collateral that we are holding after the haircut also. But overall portfolio level also, the RWAs are very low, so the capital consumption is very minimal on.
Mona Khetan
Okay. And sir, when I look at the — on Slide 16, there is a sharp decline in number of gold loan accounts even as the gold book has grown from 5.2 lakhs to 4.9 lakhs.
Pralay Mondal
The previous — I don’t know, you might have joined a little late. So let me quickly answer this. You would remember that last — this is last year same time to this year at the same time, Y-o-Y decline in number of accounts. The reason is, if you remember last quarter, we had said that INR1,500 crores, roughly INR1,500 crores our portfolio moved from gold loan business to LAS loan against security for some regulatory compliance reasons and then we don’t classify them under gold loan, neither we take benefits of gold loan under that, including the risk-weighted and things like that. So because of that reason, those accounts also move from gold loan to retail. That’s the difference that happened last quarter.
Mona Khetan
Yes, sir, sir, I get that. So that number was about INR7 lakhs. The earlier reported gold loan account, which has come down in the new reporting to INR5 lakhs. So even adjusted for that, the number of gold accounts have actually fallen year-on-year. So how do I read this? Is it based on the new reporting, both these numbers year-ago as well as the this quarter number
Pralay Mondal
I’m not giving it.
Satish Gundewar
So last quarter when you are seeing this slide on the gold loan included that portfolio, whereas now we have recate that portfolio, including in this slide that portfolio has been removed from there.
Pralay Mondal
No, no, no. No.
Mona Khetan
I totally get that. I’m referring to today’s — this quarter’s presentation where you have given last year’s number, which is at 5.2 lakh number of accounts and you know this quarter, which is Q3, it has fallen to 4.9 lakh accounts. So I’m assuming both these are as per the new reporting adjusted for the last
Pralay Mondal
Exactly what I explained to the previous person also. Q3 FY ’23 and Q4 FY ’25 is one-year gap, right?
Mona Khetan
Right.
Pralay Mondal
And this happened last quarter. So obviously, it will show on a year-on-year basis decrease
Mona Khetan
No, sir. So if I look at large Q3 FY ’24 presentation, sorry, just let me this. If I look at Q3 FY ’24 presentation, this number was above 7 lakh accounts. So it has anyways come down based on your new reporting because you have also reclassified the loan book
Satish Gundewar
At some time last year’s presentation, Monar, that would have included the large portfolio. Now we have removed the portfolio from both the periods.
Mona Khetan
Right, right. So I’m just trying to understand why the decline in number of accounts
Pralay Mondal
Or two thing, let us say to offline. We are not able to understand the exact same — what she is saying, I’ve understood her question. What she is saying let’s understand what it is. And that would be other reason, let’s figure it out. What she is saying is that last year Q3, this 5.22 was 7%, okay. I don’t know. I don’t have the number. She might have that number. So she is saying if you have corrected that, that would have been corrected from here and here both, okay. So let’s find out what is the reason. We don’t know actually, Mona, I’ll check this out. It could be another ticket map or whatever. We have to check that out. Okay.
Mona Khetan
Sure. Thank you. I’ll come back-in the queue.
Operator
Thank you. The next question is from the line of Shivaji from YES Securities. Please go-ahead.
Shivaji Thapliyal
Yes, thank you. My question is again on the gold loan market as such, so this RBI advisory that we had seen as of September end, I just wanted to understand what is the early feedback in terms of is there any market-share shift going on you maybe from NBFCs to some of the regional banks because this RBI advisory is kind of targeted you know, or maybe it is affecting NBFCs more because they are the ones which have not, you know, so-far properly followed fallen in mind in terms of the processes or it’s you know what is your trading of the gold loan market as such?
Pralay Mondal
Thanks,. So before that, let me just try and address Mona’s question once because I think I got the response. So what could have happened is, you’re right that there has been drop. The reason could be that because RBI, I think covered that less than 2 lakhs accounts cannot be gold loan anymore because you cannot hold collateral against that. So because of that, we could have exited, but it doesn’t — but it didn’t impact — see, what typically happens is such small-ticket may not impact your overall portfolio or some of those customers could have brought in larger value and come under this thing.
So because of that, some numbers would have exited because we couldn’t have classified them under a gold loan or agri-gold loan anymore. And if we didn’t give it as a agri-gold loan, they would have exited us because he will not get the LTV what he wants. So given that perspective, there could have been some exits because of that. That’s what I’m guessing, but we will do a more detailed analysis of this question. But this looks to be the most obvious reason because we did exit lot of accounts from a LTV from a 2 lakh — below 2 lakh collateral perspective. And this happened this quarter, so it could be that number.
Now coming to your question, Shivaji, see, we do our business. So we don’t really necessarily try to capture market-share based on some regulatory reasons or some arbitrary or some other things. So we just follow execution and our market-share is not that big that if there is a impact like that in the market, we’ll get a lot of business under this thing. So frankly speaking, the answer is I don’t know, okay. But what we know is our business has not been impacted because we were ready with most of the measures which were taken and we have engaged with various measures which we have taken in our various supervisory reviews and everything like that.
So from that perspective, we are pretty comfortable that these measures, which has been prescribed as of 30th September has not impacted us overall as a business, which we show in the 4th-quarter. Yes, for example, what Mona was asking that some accounts could have exited because the small-ticket accounts which are classified as agri, they may have exited. But that won’t have impacted the portfolio because on the portfolio size, we have grown. So like that, some small little impacts will be there. But otherwise, broadly, I don’t think positive or negative, we don’t look at it, we just focus on our execution. And in the process what business comes, comes. We don’t try to find that gap in the market and try to address that. Those are too much strategic thinking. We just focus on execution.
Shivaji Thapliyal
Thank you.
Operator
Thank you. The next question is from the line of Parag Shah from Nightestone Capital. Please go-ahead.
Vatsal Parag Shah
Am I audible?
Pralay Mondal
Yeah, Bharag.
Vatsal Parag Shah
Yeah. Yeah. Thank you for the opportunity. So my question was on the tech side. So I understand that the tech transformation is going to take something like two, three years. But in this phase, how will the cost-to-income look like? So while this transformation happens, the opex has been already incurred or will it be incurred over the next two, three years linearly? So how will the cost-to-income look like over the next two, three years while this transformation is taking place?
Pralay Mondal
Yeah. No, great question. So typically, the way it happens from this transformation that whatever can be taken as capex is taken as capex, not everything can be capex, is opex also. So typically, our take spend has been somewhere around 8% to 9% of our overall opex. And we believe that some of this capex when they move to opex, along with that comes AMC also, which comes as an additional OpEx.
When you do that calculation, we look at the TCO and we look at it how it impacts our cost-to-income over the next five years because capex generally do it for five years. And so given that perspective, we have seen that it will remain in that range of anything between 80% to 10% of our overall — overall opex. Because once it moves to capex to OpEx, AMC comes and it all neutralizes. So finally, we have to keep our take investments planned between 8% to 10%. We are somewhere around 9% right now.
Vatsal Parag Shah
Got it. And this will be — this will remain in the 8% to 10% range till FY ’27, I’m presumed
Pralay Mondal
Probably forever, we don’t know.
Vatsal Parag Shah
Okay. Got it. And next question was on the retail side. So you said that you have degrown or been conservative in the unsecured part. So which side of the segment you are looking to grow, like is it lap or affordable housing or are you looking to grow in the unsecured as and when the scenario changes?
Pralay Mondal
The way we are doing right now is, if you see, we are not growing that much in retail, except for few strategic businesses like in CBC on strategic segments we are doing where you don’t get that kind of a yield, but we want to be playing in that space. So CVC is growing, lab is growing because that’s a segment which will continue to grow forever if you have — it’s like SME business, right? So wherever we have visibility of the end-use, end-customer, collateral, everything, we do those businesses more aggressively. We try to do business throughout in-house channel.
We don’t believe too much into DSA businesses, though there are some DSA businesses doing in-lab, but we will gradually decrease it over a period of time. But the roadmap in the long-run is not product-centric. Roadmap on the long-term is we will have all businesses and all products will have and based on the liability franchise and the customer acquisition we build-in and around the branches, we will cross-sell and build customer acquisition and customer cross-sell and customer deepening as a part of the wallet share.
That’s the way we want to build our retail access business very, very clearly because we don’t need retail assets business to grow to build our 25% 30% growth. But we want — but our liability franchise will not grow if you do not give them payments products, if we do not build wealth businesses, if we do not build retail asset businesses, that’s why the entire bouque of products has to be there. That’s the way we’ll do. Growth will come from LAP, CV, CE as we grow auto inventory funding because we want to have a visibility of the end-use and the end collateral. And only where we know the customer well, we’ll do businesses like little more like auto than your personal loans and all of this. So that’s a long-term plan of the bank.
And even if we do this right because the acquisition will be so huge FY ’27 onwards that cross-sell there itself will build our retail assets portfolio, which is on the — not on the productive asset side, but on consumption asset side. That will go on the existing customers based on the new acquisition we do. That’s a clear roadmap and clear strategy laid out. We are starting to build our strategy both on credit collections, products, processes, technology, everything on the retail asset side, that story has just started now. So it will take a year for us and we will take-off once the entire tech transformation happens when our liability side of the customer acquisition side of the story starts picking-up and then the retail assets will grow.
Vatsal Parag Shah
Got it. That was helpful. And sorry for repeating the question, but again on the cost-to-income side, so you said that you will continue to incur around 8% to 10% OpEx. And so like how will the cost-to-income trajectory go below 50, like it’s not clear to me. Can you just explain that?
Pralay Mondal
Yes. So that’s around that calculation, I’ll explain. So I think if you have to run an efficient bank and if you have to actually bring down your cost-to-income, you have to incur 8% to 10% of your technology cost because you have to automate everything because people, productivity, all of that stuff will happen only when we are making the person productivity through on-the-go mobility on its hand, better customer service, why should the customer come to us and ask for more products or why will build more balances? We have three other options in his hand, in his wallet, right?
So only which will happen provider I’m able to give a better service. I’m able to cross-sell better. I’m able to undergo understand what the customer needs. I’m able to do better analytics, I’m having a better turnaround time. All of that stuff will require that kind of this thing. So actually investment in technology prudently will help us in having a multiplier effect on productivity, which will reduce the cost-to-income. What it effectively means business per employee will go up, okay. Productivity per employee will go up. All of that stuff will go up and we’ll have more happier and more — at a customer level, profitability will be much higher.
So that’s the way we want to build-up the franchise. This is a classical method where without taking names, larger banks and more successful banks have done it. So we are not doing anything so special. We are just following the best practices in India as well as globally. I think 8% to 10% technology spends prudently is a great strategy by reducing. So if you have more products per customer, okay, whether it is the wholesale side or on the retail side or on the SME side, automatically your opex — I mean operating expense comes down because of you know, cost of servicing and cost of manpower comes down, right? So that’s the way you also want to build the franchise.
Vatsal Parag Shah
Got it. And just to put this another way, so are there any onetime expenditures which you have taken this year or are going to take next year.
Pralay Mondal
Not that I’m aware of. Most of our heavy-lifting is sort of done now. Now you will see trickling on effort through the capex to opex route only primarily. There is no one-time expense. All our leadership is in-place right now. So we don’t have any more leadership to be hired in the bank right now at a senior-level. So most of the heavy-lifting has been done now they have to deliver.
Vatsal Parag Shah
Okay. Thank you. Those were all my questions. Thank you.
Operator
Thank you. The next question is from the line of Savesh Gupta from Maximal Capital. Please go-ahead.
Sarvesh Gupta
Good evening, sir. Sir, just wanted to better understand your medium-term sort of an ROA. So the way I look at it is that right now you are very heavily focused into gold loans and there you are incurring minimal credit cost. So your credit cost is like 0.1% for 9M or something like that. So now as you grow and you increase your mix into other products where as of now, your yield is lower. So yield is probably going to come down overall because your gold loans are at a higher yield, your cost-to-income is sticky and looks like it will remain at the same level. And your credit cost is also probably going to increase as you grow into other products. So what are the levers you are seeing to increase this ROA, if at all you have the aspiration of increasing or do we want to sort of — do we feel that this can be built-in also?
Pralay Mondal
Yeah. So I’ll try and explain this. So I think our ROI, what I’ve told is somewhere around 1.5 to 1.8 in that range. I think given the overall environmental challenge right now, we’ll stick to somewhere around 1.5 to 1.6 at this point of time. But eventually what will happen is it has come down and it will start going up FY ’28 onwards again. I’ll tell you how. So at the same time, when gold loan eventually by 2030 is slated to be around 20%, okay, of the portfolio, which is around 45% right now.
The reason it will happen is, along with gold loan which is low on loss, high on yield, okay, operating cost is also very-high. One of the reasons our business plan employe, which is 8, which is one of the lowest in the industry is also this world loan business. One of the reasons is that most of our business — gold loan is also a portion to the branch cost, et-cetera, because we are not doing some of the other businesses, etc.
The fact is that wholesale business, our Group in wholesale Manish tells me that he can do 2% ROA business, okay. So it is possible that every business — when I was doing my retail assets business many, many years back, I used to do a ROA business, which is much higher than 2%, okay. So the reason the way it happens is that your — one customer has to have multiple products, okay.
So in wholesale, for example, you will get-in a account or get into a relationship at maybe 8%, okay, or even lesser. But then you build the entire ecosystem banking there, cross-sell and other floats, other businesses, collection accounts, so many other things and then through supply-chain, you’ll get more business. In the process over that account level, you will get ROA.
Similarly in the corporate salary business, which you don’t do by the way here yet, but we’ll launch that once our — this thing is done. Corporate salary business, you don’t make money through liability by the way. You make money through cross-sell on fees, on assets, cards and all of this stuff. So the banking business is not about a single-product business. Unfortunately, we have become a product company because we are 50% gold — 35% gold loan. But eventually, the journey, the whole reason of investing this kind of a this thing into technology and leadership and distribution and customer acquisition, all of this is to move from a kind of a single-product to product business to a multiproduct because then you book your products to customers and the whole idea is to get better cross-sell, better penetration per customer, whether it is wholesale, SME or retail and then get the ROA up.
Also, let me tell you, by end of FY ’28, ’29, once this thing has gone live and these things is chugging along very well, that’s the time we launch Wealth business. And wealth business will make a lot of money provided you start addressing the medium to top-end of the pyramid, okay. And there is a lot of money to be made there as well. Most of the retail banks, 20% of the customers contribute to 80% or 100% of the profit of those banks, okay.
We are not existent out there. We will build those portfolio also by FY ’29 onwards, we’ll start building that. So there are many levers to create ROI tree and we have done it in past. It’s not that we have not done it. We know-how to do it. But it’s difficult to have a visibility right now because we are seeing CSB as a single-product kind of a bank, which will not be after ’27, ’28.
Sarvesh Gupta
In fact, for building all these new lines of products and businesses, generally, again, for every business, it becomes a multi-year journey where you start with a more than 100% cost-to-income and it will take some while for it to become profitable. So will that not impact your profitability as you want to develop into omniproduct and multichannel sort of a bank.
Pralay Mondal
I’m glad you asked this question because this is exactly the mindset of a product company. When you — I mean, you can look at a product company, you can look at a franchise. When you look at a franchise, I’m not looking at a product profitability. I’m looking at a customer. I’m going to see what did I say in the beginning. My model is I’ll give the customer what he wants. I’ll not go to a DSA and tell him build business for me. I’ll not go to a dealership and say build auto loan business from you or go to DSM say, we build a personal loans business. That can never be profitable as far my experience goes. For the same business and in a cycle, we will lose that business also.
The way we will do it is that all products will be there, there’ll be a single-channel which will deliver to the customer, there will be other support teams, whether it is an asset team or it’s a liable — sorry, card stream or something else or a fee steam which will help. But customer will be at the branch level to that branch man. So the monitoring will be customer level profitability, not a product level profitability. As soon as we do that, then you are not investing. Unfortunately, many places have seen that people work-in silos.
And in silos, these products don’t takes time to break-even. But the day they work with customer franchise branches and channels, that’s the day you don’t incur those costs which you otherwise incur. So we will not incur that kind of a cost in these production businesses. We will — everybody else will support the front-end who is supporting the customer or servicing the customer. If you take that model, then there is — that’s a product-centric mindset to customer-centric mindset. That’s the reason this model is very different. I build this model on my accept sheet and this is how we’ll work.
So I have no doubt about it that our growth will be faster FY ’27 and ’28 onwards because liability will happen because of other cross-sell, not — liability also is not a different business. Liability happened because other things are happening and hence liability is an outcome. That’s the way we have to build the franchise.
And same thing, I mean, I’m talking about retail because I know that more a wholesale Manish, sham on the SME side, they also tell me the same thing on SME and wholesale as well. It’s the same thing. More we leverage, more we penetrate the customer, more money we make. So — and even if one-product doesn’t make money, that doesn’t matter. So that’s the way we’ll build. We will build a franchise model. Today, unfortunately, we are a product bank. That’s the reason why even a 1.5% ROA is looking difficult.
Sarvesh Gupta
Understood. And finally, on your margins, so now at least if I look at last 12 months, obviously, now there are constraints on the CD ratio and hence you had to take a lot of bulk deposits, which has probably hurt your NIM. So instead of growing at such a rapid clip to achieve the same result, thereby taking more risk and incurring higher operational cost. Would have — would have — would it be better to grow at a lower pace without taking bulk deposits because the end result in terms of absolute profitability would probably remain the same.
Pralay Mondal
So no, let me answer — again, I’m glad you asked this question. It gives me a excuse to clarify our strategy again. Our strategy not to maximize profits. Our strategy is not here to maximize NIMs because three years down the line, four years down the line, nobody will remember what NIM was in FY ’25, okay. What people will see is what is the franchise we have built, okay. So if there is an opportunity to do a business, if there is an opportunity to penetrate our corporate account, if there is a penetrity to build a market where I can acquire customers.
If there is an opportunity to get into SME segment where I want to be, should I stop doing that just because I don’t have a liability franchise today? To me, the strategy — our strategy says, no, the answer is not that. We have to fund that business which we are building a long-term strategic franchise. But do we want to do show business by going to a DSA and doing a personal loan business or some other business just to show top-line? Answer is no. Because for them, I agree with you that if I do that and then to take a high-cost funding, what are they doing? I mean, we are going round and round around the safety.
So given that, look at it this way, that after all this also, we have achieved a NIM of 4.11, which is not so bad, okay, in my entire stint in my — one of the larger organizations I worked in, it used to be 3.9 to 4.2 all my life, okay. So 4.11 is not a bad name. Look at our LCR is still 130 period-end and 119 average, okay. Our CD ratio where a lot of large banks are struggling, our CD ratio is 86%, which is not so bad when we are sitting on a borrowing, which is 12% of our portfolio, okay?
Just think about it how much liquidity we are sitting on, why we are sitting on it, because we don’t want a liquidity risk. And I don’t want a situation where if Manish and tomorrow tells me that I want to do this business, I cannot say, no, no, no, I can’t support you from a liability perspective. I have to support him because he is building a franchise — we are building a franchise. And then once we build that, eventually we’ll make lot of profits out of that based on the relationships which we are building. So our strategy is little different.
We are not in the NIM maximization game. We are not in showing top-line at this point of time. We are building a long-term franchise, which only we will kind of leverage FY ’28, ’29, ’30 onwards. So our thinking and strategy is slightly large — larger bank mindset. We don’t want to play a niche strategy, which I’ve told many times. And this is not our niche strategy saying that we’ll maximize NIM, we’ll remain small, we’ll do this. That can be also our strategy, but that’s not our strategy.
Operator
Thank you. Thank you. Ladies and gentlemen, we will take this as the last question. I would now like to hand the conference over to the management for closing comments.
Pralay Mondal
Thank you. Thank you. Thank you, first of all, yes,, Shivaji and team for hosting us. We had absolutely fabulous set of questions and also some questions keeps me thinking on that gold on which I finally got an answer. So we may not be able to answer all the questions upfront, but I think we have been able to satisfactory give a response to most of the questions. Thank you again for asking very good questions and look-forward to see you at the end of Q4 again. Thank you. Good evening to everybody.
Satish Gundewar
Thank you.
Operator
Thank you. On behalf of Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.