CSB Bank Limited (CSBBANK) Q3 FY23 Earnings Concall Transcript

CSB Bank Limited (NSE:CSBBANK) Q3 FY23 Earnings Concall dated Jan. 30, 2023.

Corporate Participants:

Pralay Mondal — Managing Director and Chief Executive Officer

B. K. Divakara — Chief Financial Officer

Analysts:

Manish Shukla — Axis Capital Ltd. — Analyst

Shubhranshu Mishra — PhillipCapital Research — Analyst

Sonal Minhas — Prescient Investment Management — Analyst

Pruthul Shah — Anubhuti Advisors — Analyst

Prerit Choudhary — Green Portfolio — Analyst

Mona Khetan — Dolat Capital — Analyst

Pallavi Deshpande — Sameeksha Capital — Analyst

Jyoti Khatri — Arihant Capital — Analyst

Dharma Venkatesan K. B. — Individual Investor — Analyst

Anuja Dighe — Elara Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY ’23 Earnings Conference Call of CSB Bank hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Manish Shukla from Axis Capital Limited. Thank you, and over to you, sir.

Manish Shukla — Axis Capital Ltd. — Analyst

Thank you, Rutuja [Phonetic], and welcome, everyone, to this call. We’re pleased to host the CSB Bank for the Q3 FY ’23 results. From the management team, we have Mr. Pralay Mondal, MD and CEO; Mr. B. K. Divakara, CFO; and their management colleagues. We have some opening remarks from Mr. Mondal and after that, we’ll open the floor for Q&A.

Mr. Mondal, over to you sir.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you, Manish, and thank you, everybody, for joining the analyst call today on our Q3 results for FY ’23. I’ll give a slight preview of what’s happening globally and then we can move into that CSB Bank results. So, as we all know that the global economic order stands tested following the chaos resulting from monetary tightening in most of parts of the world. Lower food and energy supplies elevated prices stayed distressed and so on and so forth. International organizations including IMF and World Bank OECD have downgraded their global growth projections. Relatively, of course, India is in a slightly better place, and though inflationary trends are still showing some moderation — some ugly signs, but I think moderation has been literally in play. We’ll know on February 1 the fed — what the decision they take and we also have the budgetary announcements in India and also the RBI decisions. So, most likely, the whole world is expecting somewhere between 25 to 50 and there’s a high probability of a 25, which means in India, I think the rate cycle is coming to a reasonably stable situation at this — there could be one more and then pause or — pause and then give a slightly different outlook. But whichever way it goes, I think things are now stabilizing quite a bit.

On the domestic side, of course, there’s a reasonable pick-up in manufacturing. Rural demand, which was a little bit of a concern, has started improving when we saw the results of some of the FMCG companies last quarter. And banking has never been in a better place than where we are today and we have seen most of the banks coming out of the NPA challenges. And I think in the next one or two years, the capex cycle will also start picking up. And we saw double-digit growth after a while in the banking ecosystem. Even I think the January numbers right now last fortnight, I think, was 16.5% in terms of credit growth. So, which means things are looking a lot better in this part of the world. Having saying that, we are, of course, connected to the global order. The liquidation — liquidity is a little bit of a challenge, of course. It is quite volatile. Funding cost is going up for the banking ecosystem. Overnight is hovering between 6% to 6.5%. So, there are challenges as well when it comes to funding. We see most of the banks are trying to manage their LCR and CD ratio this quarter. And hopefully, things will stabilize with more government spending coming in and liquidity easing a little bit.

The GDP estimates likely to grow by 7% though last time this estimate of was 6.8%. And overall, I think the CPI [Technical Issues]

Operator

Ladies and gentlemen, please stay connected. The line of the management got disconnected. Ladies and gentlemen, thank you for patiently holding. The management line is reconnected. Thank you, and over to you, Mr. Mondal.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you. So, I’m not sure where I got dropped off, but coming to the CSB specifics, I think Q3 FY ’23 has been a good operating quarter on most parameters — operating parameters, I’ll say. Net profit INR391 crores, up by 19% Y-o-Y. For the quarter ended, the net profit is at INR155.95 crores, which is up by 29% versus Q2 FY ’23. And that’s quite a significant achievement in my view Q-on-Q. Non-interest income ex-treasury posted 65% increase in Q3 versus Q3 FY ’22. And when we look at the non-interest income excluding treasury and PSLC income, it is 58%. And for the nine-month Y-o-Y, it is 40% growth. So, this is what I’ve been highlighting and we will deliver this when we get into the Q&A session that I was telling that we are trying to get our core non-interest income closer to — in double-digits. We had very low-single digit before. And now we have moved into the double digit. I think this quarter we are around 13%. And we — our aim will be to be in the 14%, 15% range in the medium-term as our overall franchise grows.

Provisioning buffer of about INR200 crores over and above the regulatory requirement. This includes the contingency provisioning, which we used to call COVID before — COVID provisioning of INR106 crores, and another INR90 odd crores based on provisioning, which we were doing over and above the regulatory provisioning. NIM has been stable. If at all it, has grown slightly, though I don’t read too much into the NIM because as quarters go by, NIM will normalize over a period of time. So, as I had always said that we will try to hold it somewhere around 5%. This quarter it’s 5.8%. Overall, it’s around 5.52%. But we’ll deliver it subsequently while we get into the discussion mode. ROE improved from 1.83% to 2% on a yearly basis and quarter-on-quarter at 1.87% to 2.37%. This shows that how our core operating performance of the bank is improving. I think the good news on the liability front has been that we had a 19% Y-o-Y growth and against the industry growth of around 9% to 10%. And that is — that gives us a little bit of comfort, of course, on a low base, which we understand, and hence we have to continue to work on it.

CASA growth has not been that encouraging. It’s around 8% growth. And hence, CASA ratio has come down. Cost of deposits reduced from 4.34% to 4.19%. Again, we’ll deliver at this because this is only a transient fare. Quarter-on-quarter, cost of deposits has gone up, so, as you can see in the investor presentation. On asset growth, net advances grew by 26% when you — or 24%, whichever you to take it, depending on who you are taking that — with write-off and without the write-off portfolio. But — so 24% to 26% is our asset growth. Industry has grown by 15% to 16%. Gold portfolio registered a growth of 51% and 9% Q-o-Q. And I want to mention one thing here, because a lot of people think that gold portfolio is growing because of price increase, but at least in our case, it has not been the case. We have been very cautiously not increased the available price just to ensure that we get our LTV under much better risk governance. And hence, our tonnage growth has been 49% while our gold loan portfolio has grown by 51%, which probably is very unique in the industry. Other — I mean — and this has also helped us in bringing down the LTV overall, I think, towards around 75% odd. Yield on advances were around 11.02% with an improvement of 21 basis points. This is where we need to focus on and we need to take it up, because the cost of deposits will continue to go up. And if we have to retain our NIM, we have to take the yield up slightly.

On the asset quality metrics, it’s a very very good performance, I must say. Even when you look at industry standards, we’re probably one of the best there right now. GNPA 1.45%, NNPA 0.42%, PCR 92%, even if you take — without that, it is 71%, which was around, I think 68% last quarter. So, I think the key point here is our PCR has improved while our GNPA and NNPA has come down significantly. Continued provisions, as I said before, accounted in the books is higher than the NNPA, which is very, very unique. And we have continued our accelerated NPA provisioning, hardened RBI requirements, and continue to hold the contingency provision of that INR106 crores which talked about. We have fully provided for this SI portfolio. This is based on our regulatory guidance which came, I think, in December, it came. So, we have now our entire SI portfolio has been provided for. So, whatever recovery we get from our SI portfolio now will be straight into the P&L and it is now fully provided for and we took a hit of around INR12 crores in our P&L this quarter.

We have a robust capital base. It has just grown further to 25.78%. So, we have to tell our business teams to grow the business. And this has happened at a time when we have grown the asset book by 24% or 26%, whichever way we look at it. And even then, our CRAR has improved. Our risk weights have gone down further. A little bit of our operational risk has gone up, but credit risk has gone down significantly. And overall, our risk weights are one of the lowest in the markets in the industry. Shareholder value creation, our book value has grown by — in line with our profitability growth. Somewhere around 29% I think it has grown. It has reached 167%. And EPS annualized is 22.54%, ROE, again, is 19.86%. So, which are very very good with a CRAR of 25.78%, ROEs of 19.86% is a good ratio to be proud of.

Investments of the future, we are continuing to add 100 branches. We’ll continue to do that next year. Our head of retail is trying to see that if we can try and put those branches with -GOTO- 18:10 year so that we get some benefits out of the branches. This year, we will open 100 branches.

So — and on the technology side is the biggest investment we’re making, leadership and technology side. We have a tremendous amount of IIM personally involved along with our CIO on the technology strategy for the bank for the next three to five years. And we are going to make significant investments into technology, whether it is for sustained LOS, LMS, CRM, RAM. I mean, everything. We have completely changed the entire wraparound system of the technology because that’s where the real growth of the bank is going to happen.

So, in conclusion, what I want to say is, we are absolutely on track vis-a-vis what we had communicated to you in our last few calls on our SBS, Sustain, Build and Scale 2030 strategy. We are currently in the build phase. Sustenance, we have demonstrated. We are doing well. The liability franchise we have started picked up because that’s what will build the future of the bank. We have tied up with market leaders like CRISIL, OneCard, UB Loans, etc. UB for SME, OneCard for the credit cards, CRISIL for various initiatives, and also we are doing lot of centralization of processes to ensure that we have better controls and management process is better, as you have seen that our CTI has come down this quarter. But quickly, I want to add that our — in my commentary, I’ve always said that we’d like to keep the CTI somewhere around 60% while we are investing into the future. So, this quarter is an aberration, but I would like to keep it somewhere around 58% to 60%, so that we have enough room to invest into the business. And by the end of 2030, we’ll bring it down to — between 40% to 45%.

New verticals has already been launched. Personal loans, education loans, home loans, CV, auto loans, then CE, ACF, commercial equipment, healthcare. So, policies, processes, systems, everybody — everything is in place. Credit cards has started off as I’ve said before. Retail growth, it’s too early to say retail growth, but let me put it this way, retails engine has got restarted, okay? We have got leadership in place. Gradually, we’re building the businesses. On the transaction banking side, we have created a separate vertical. So, we will look at CMS, we’re looking at supply chain. We’re going to build some of the systems around that because ultimately, these are system-driven businesses. Wholesale banking is working on the entire coverage strategy, reworking on the, I’ll say, entire coverage strategy. The — we just — because there are so many things happening in the bank right now, so many projects are running, it’s just unbelievable. So, we have just rolled out our project management tool called Rapid. We have internally branded it Rapid. So, on project management tool, I’ve said that no project will be there in the bank which is not on the project management tool. So, everybody through their dashboard can see where it is, how it is progressing and things like that rather than they lose track. So, overall, the progressive transformation journey undertaken in the bank is geared towards achieving the vision set for the bank in the medium to long term while the improved results for this quarter-on-quarter is giving us the confidence that we are progressing in the right direction. It also reminds us of the responsibility of what we need to deliver in the coming quarters based on the commitments which you make to the markets. And I’m very, very conscious, me and my team is very, very conscious of that.

So, in short, what I can say before I hand it over, is we have almost in this quarter demonstrated everything which we said that we’ll focus on. Growth, we were growing by 9% last year, we are growing by 24%, 25%, 26%, whichever is the right number we want to see. Liability franchise has started delivering. Our NIM has sustained. Our cost-to-income has sustained. Our the credit growth has kind of continued to be negative, at the same time I would say that it won’t be negative forever. So, we will provision for that. And we had some issues this quarter because we are on a very high base. Last year same quarter, Q3, we had a significant recovery from the provisioning of gold loans which we did in first quarter last year. So, even in spite of that fact, we have grown by 5% Q-on-Q, this quarter vis-a-vis the same quarter last year in spite of the fact that there was a very, very high recovery last year same time. And this has happened primarily because of various parameters ratios which I talked about, but also our non-interest. So, let me give you one data. Our non-interest income nine-month basis ex-treasury and ex-PSLC — PSLC is the PSLC commission because we had excess PSL, we have grown by 40% on a nine-month basis and 58% on a year-on-year quarter basis. And what it means is that our core non-interest fee, which is more sustainable and doesn’t depend on cycles, so PSLC a cyclic business because it depends on what is the premium that is available in the market, we — treasury income is cyclic basis. So, treasury, we had a variance of INR18 crores and PSLC, we had a variance of — last year, we had INR33.4 crores or something; this year we have got just INR33.6 crores. So, between these two, INR58 crores — INR30 crores and INR18 crores, INR58 crores [Phonetic]. And then this — suddenly, there’s a provision to do another INR12 crores. So, all of this together, INR60 crores is something which appeared out of nowhere this year, right, and which was not our doing, it is the market’s. So, we had to do our own stuff to ensure we get a better recovery, we get a better fee income. That’s one more thing. We have done a very, very good job on the recovery side. And that’s what helped us in either upgrading accounts or getting recovery from written-off accounts.

So, overall I think while the headline numbers looks reasonably kind of moderate, but when you deep-dive into these numbers, which all of you on the call know much better than me, I’m a business guy, all of you are experts of that, when you deep-dive, you will see a reasonably consistent operating performance and every operating parameters are improving by the quarter, which gives me a lot of confidence that you should be able to take the bank forward in line with what we have committed.

So, I think I’ve spoken enough. So, with that, I’ll stop here and hand it over to Mr. Divakara if you have to say something. And then we’ll open it up for Q&A.

B. K. Divakara — Chief Financial Officer

No, you have covered it elaborately, Pralay. So, I don’t think anything needs to be said from my side. But in question-and-answer session, if something needs to be supplemented, I will do that. Otherwise, you elaborately have covered all the areas of our performance.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you. So, we can take the questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Shubhranshu Mishra from PhillipCapital. Please, go ahead.

Shubhranshu Mishra — PhillipCapital Research — Analyst

Hi, sir. Good evening. Thank you for this opportunity. Just wanted to understand a bit on gold loans. One is what proportion of our disbursements is coming from balance transfers from NBFCs and what is getting originated by our own branches organically? Second is, sir, we’ve been seeing tonnage growth as well as account growth. What proportion of these incremental as well as on the book are above INR3 lakhs? And what is INR1 lakhs to INR3 lakhs and what will be less than INR1lakh, sir? Those are my two questions. Thanks.

Pralay Mondal — Managing Director and Chief Executive Officer

Thanks, Shubhranshu, for your questions. So, on your first question, it’s around 40% comes from balance transfer, rest is new to bank, because we have got a good distribution and the sales strategy on that. So, that is — and we have a brand also on the gold loan side of the business. On your second question was on tonnage growth. So, what was the question on tonnage?

Shubhranshu Mishra — PhillipCapital Research — Analyst

So, tonnage — or tonnage or maybe AUM, we can split it that way, what percentage of the AUM is below INR1 lakh, what is between INR1 lakh to INR3 lakhs, and what is more than INR3 lakhs on the AUM as well as on the disbursement, if we can speak on that?

Pralay Mondal — Managing Director and Chief Executive Officer

Okay. So, I think I don’t have that exact data in such a breakup, but I can give you some heads-up on this. So, our portfolio average ticket size is between INR1 lakh to INR2 lakhs, okay? And our — and coming to disbursement or incremental, our tonnage grew by 49% while our customer acquisition and customer addition grew by some 37% or 36% or something like that, which means that incrementally, our tonnage per customer is only going up, okay? There is a third question also you had.

Shubhranshu Mishra — PhillipCapital Research — Analyst

It was around this one. It’s a split between — basically, one can infer that this tonnage as well as the account growth, almost 40% is coming from balance transfer from NBFC…

Pralay Mondal — Managing Director and Chief Executive Officer

That’s right.

Shubhranshu Mishra — PhillipCapital Research — Analyst

Both? Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

Or other banks, whichever way. Balance transfer is 40% and tonnage growth is faster than the customer acquisition, and our average ticket size is between INR1 lakh to INR2 lakhs.

Shubhranshu Mishra — PhillipCapital Research — Analyst

Understood, sir. Thank you so much. Best of luck.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you, Shubhranshu. Thank you very much.

Operator

Thank you. The next question is from the line of Sonal Minhas from Prescient Investment Management. Please, go ahead.

Sonal Minhas — Prescient Investment Management — Analyst

Hi, there. This is Sonal Minhas. Am I audible?

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah, Sonal. You’re very much audible. Thank you.

Sonal Minhas — Prescient Investment Management — Analyst

Sure. Thanks for taking my questions, sir. Sir, I’ve the first question on the CASA growth, which is a bit muted. Just wanted to understand from a bottoms-up level asking what is the limitation for the bank to grow with CASA because the branch network is growing on one. Is it technology? Is it a product? If you could just explain. That’s my first question.

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah. So, no, that’s a very, very valid and relevant question. So, you also know that building a CASA franchise not an overnight job. So, we have to build up a proper sub-franchise. Meanwhile, we cannot wait for that franchise to grow our bank. So, you can understand that in one year itself, we have grown the bank from 9% to 24%, 26% on the asset side, and liability grew to 19%. So, the main — and CASA cannot grow like that overnight. CASA needs, as you rightly said, product, process, distribution, the right kind of customer segmentation, acquisition, sales, and more importantly, surround products, which is you need your retail assets because just opening a CASA account will not give us the value. He has to run his EMI through that account. He has to have his payments through that account and all of that stuff. So, on a cost side also, you need to have the transaction banking, you need to have the slots only based on the value you create for those customers. These are very complex initiatives. The good news is that we have started most of these initiatives now in the bank. For example, we have started a sales structure. That’s why we could grow our number of accounts by almost 75%, 76% last year. Our quality of these accounts are much better than what we were doing. And hence, the value of these new customers are also better.

Also, we have launched our retail assets products, credit card products, and hence, the payments that will go through, the EMIs that will go through, will help us. On the transaction banking side, we have activated a separate vertical on that. And we are also building the technology through which this throughput will come. CASA, as you know, whether it’s current or savings, these are throughput business, right? One can always buy CASA. So, we are not saying that that is something which we’ll do or not do, but most banks — almost every bank does it. So — and it has its own benefits in terms of LCR and many other things. So, I’m not saying that’s a bad strategy. But it’s just that we have not reached there yet.

So, to that extent, because we are in a hurry to grow in a difficult liability environment, because even the established banks like HDFC, Axis, ICICI, Kotak, IndusInd, everybody is struggling on the liability growth. That’s why the systemic growth is 9% and than you will appreciate that in spite of the fact, we have grown by 19%. But, yes, CASA is a slightly high road and we have to build — do the building blocks to reach there. And lot of, me, our retail head here, all of us have build CASA businesses in various, at least, three large banks before. So, we know how to do it and we will go step by step. There is no shortcut to that success.

Sonal Minhas — Prescient Investment Management — Analyst

Sir, really appreciate the long answer. But is it more the senior team leadership or the technology, basically, which you probably contribute [Speech Overlap]

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah. Senior team leadership understands what needs to be done. Technology also, we are putting it there, but technology, as you know, that it takes some time to build. And also the products around it, right? So, even if I — see, I have myself or my retail head, we have handled the largest products in the market. But that does not mean that I can do it today, right? You have to build those products, you have to launch those products, you have to prepare a franchise, you have to run the EMI through the saving accounts, etc. And parallelly, you have get those customers also. So, when all of this together, we understand the complexity of the task. Having said that, I’m not saying that — we will see. For example, last quarter, we grew CASA by 16%, our FD grew by 7%, but still CASA ratio came down. That’s the nature of the business that when you grow faster, your — even if your CASA growth is faster than FD growth, your CASA ratio will continue to come down, okay? That’s maths. Having said that, this quarter, I have no such excuse because even CASA itself has come down, but I’d suppose that it has happened to most of the banks in the system, because suddenly, the gap between that SA and the CA and the 10-year G-Sec is so high that money is moving. This happens in cycles. So, we are no exception. But, yes, I am not shying away from — I’m being very honest about it. We have to do a lot of work to build a CASA franchise. And no bank has done it in short time. No bank has done it.

Sonal Minhas — Prescient Investment Management — Analyst

No, I agree. Sir, but is there a timeline, like for example you have timelines for everything, and that’s very, very good to know on each of the calls, is there a timeline where we can say that the CASA product, the technology, and the system is basically fixed maybe one year from now or 18 months or two years from now, and we are on a growth path on thereon, because that’s the sustainability built for the bank?

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah. I’ll give you answer for this, clear answers. You will start seeing CASA growth for us within the next 12 months, okay? Having said that, the real CASA franchise, it will take two to three years to build, because what is a real CASA franchise? When you look at HDFC, ICICI, Axis, etc., a real CASA franchise is when you have at least two or three relevant products with a customer and his EMI runs through that product. When you have a customer segmentation starting from a high net worth to that pyramid structure, when you have a transaction banking where you do collections, you do CMS, you do everything part of supply chain, for this, I need technology which we are building. We are changing our core system by the way, okay? So, core system takes anyway between 15 to 18 months to fully get operational, if you are lucky, okay? And the surround system in parallel, we are building, so we have on our project management tool, we have put all these timelines, as you rightly said. Having said that, none of you will have the patience for me to play out this timeline. This will happen three years down the line, two years down the line. But meanwhile, I have to also ensure that next one year, we get our CASA growth and we know how to get it. We are going to execute that and you will see the CASA growth within the next one year.

Sonal Minhas — Prescient Investment Management — Analyst

Thanks a lot, sir, for this answer. I have a second question, if I may ask, if I’m allowed to.

Pralay Mondal — Managing Director and Chief Executive Officer

Yes, please. Yeah.

Sonal Minhas — Prescient Investment Management — Analyst

Yes, sir. Sir, similar question on SME. I wanted to see the SME book, and it’s been kind of flattish. Not making any critical remark or whatever, but just wanted to see and understand if the market actually is somewhere not of high quality because of which basically, you have tapered down the growth of that segment. You’re not happy with the quality of approvals which are coming in SME. Just wanted to understand from a market perspective and then drill it down to your comment here.

Pralay Mondal — Managing Director and Chief Executive Officer

So, I’ll give a very honest answer here. We have an old book in SME, okay?

Sonal Minhas — Prescient Investment Management — Analyst

Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

And that is also running off. So, while we are disbursing reasonable amount per quarter, but we are also running off some part of the old book, okay? And some part of the old book is running off is not making me very unhappy also, okay? Because, we may not — when we — when I want to look at those books on a risk-adjusted basis, I may not like to have that book with me at that point of time, so I’m okay with running it off. So, in the process, I’m strengthening the quality of the SME book. I’m adding more business on our fresh disbursement and fresh customer addition, but still my growth is not coming. That is one part of that answer.

Second part of the answer is that we have this — when we have limited liability, and I have businesses which are coming at yields which is giving me almost zero risk, okay? And I have to give other ratios and other returns in the short term. I know this is not a very long-term good strategic view, but in the short-term, I also have to deliver. So, where would I deploy that when I have limited liability? So, given that, because I have to also raise money for investments into technology and distribution and other CASA which you talked about, for that, I’ve to very tactically deploy that. And as long as I’m able to deploy at a much more ROE, if you appreciate, my ROE is 2.37 this quarter, okay? And that ROE is required for my investment into the — this thing. So, there when they’re getting business at a particular yield, I’m refusing those businesses. And in spite the fact that HDFC, Axis, ICICI, they’re happily doing those businesses. And not a bad business to be, but on the risk-adjusted basis and on the NIM I have to get, I’m saying that I will rather deploy the liability somewhere else than technical businesses. That’s why to some extent, our SME and wholesale hands a little tied at this point of time. But I also understand the value of franchise. So, we are building this franchise as well as in parallel, okay? So, I also believe that in the market, gradually, the risk-adjusted returns are gradually starting to show now. But till now, the risk-adjusted returns on SME was not — I mean, at least it didn’t suit our appetite, okay? So, to that extent, we are little careful in the SME part of the business given the risk-adjusted returns we’re getting.

Sonal Minhas — Prescient Investment Management — Analyst

I understand that.

Pralay Mondal — Managing Director and Chief Executive Officer

Having said that, now we are — also, the other banks what they do is, they will do those low risk-adjusted returns and then they will do a lot of income through cross-sell of other products and other relationships. We don’t have — not only top-up but other fees and liability and other businesses, CMS, supply chain, so many other things are there, vendor financing, all that on the wholesale side. So, since we are launching those products gradually, since we don’t have those — on our ad hoc basis, we don’t have those income as yet, we — for us making those decisions are purely based on NIM or our spreads is not as easy as it is for some of those other banks. So, we are competing in a difficult market. So, that’s why we’re saying that we will be prudent in the way we build these businesses. But in the long term, let me tell you, our long term is very clear, 30% retail, 20% gold, and rest half and half between SME and wholesale. Maybe SME is around 20%, 21%, and wholesale is around 30%. So, that is not going anywhere, okay?

Sonal Minhas — Prescient Investment Management — Analyst

Got it, sir. Thanks a lot for your answers. I’ll come back in the queue. Thank you.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you.

Sonal Minhas — Prescient Investment Management — Analyst

Thank you, sir.

Operator

Thank you. The next question is from the line of Pruthul Shah from Anubhuti Advisors.

Pruthul Shah — Anubhuti Advisors — Analyst

Thank you for the opportunity and congrats on a good set of numbers. My question is with respect to the growth in advances. So, Y-o-Y, we have seen that advances have grown by 26%, however, gold loan book has grown by 51%. So, basically, other than gold, the book has only grown by 10%, So, just wanted to know that why this is not increasing in tandem to the overall loan book. So, you already spoke about SME, but if you can give a highlight on the corporate loan and retail loan that what’s the outlook on that.

Pralay Mondal — Managing Director and Chief Executive Officer

Sure. No, absolutely, a great question. So, let me start with retail. In a way, I covered in my first question, I think, that we are building the retail franchise on the back of technology products and processes. Retail assets build-out takes at least 12 to 18 months. But good news is that we have started our journey and we are starting to build. And this includes retail, agri, it includes microfinance, it includes the entire retail assets business, CV, CE, home loans, HCF, healthcare, all of it together, credit cards. So, good news is that now we have started each of these but to see the visibility of this on the balance sheet, you need to give us at least a year, okay? So, that’s on the retail side. But retail, we are firmly on play to gradually build these products and it will gradually show up. SME, I already answered, so I don’t want to duplicate the answer.

On the wholesale side of the business, what we have done is we have two parts of the portfolio. One is the BA portfolio and one is the normal wholesale business, which is primarily mid-market, emerging corporates, and we have a little bit of NBFC portfolio also. So, from that perspective, I think there again we have to build our products. We are increasing our coverage strategy. Wholesale is around 30% of our overall portfolio including BA. So, there is, in fact, today only, with our head of wholesale, I was just discussing before that how do we need to increase our coverage, etc. And also, please understand that we — our quality of the portfolio incrementally, we don’t do almost do never BBB. And most of our NBFCs are A and above. So, given that perspective, I think we are very conscious of the risk-adjusted return. That’s why we’re very carefully building it up. Wholesale tranches do not take the kind of time what a retail franchise will take or an SME franchise will take. I mean, retail will take longer, SME will take medium, and wholesale will take shortest. There we want to really press the pedal there and grow. So, but yes, still we need to create those transaction banking and also with the size of the balance sheet which we have, our wholesale team will not get an entry into many of the places where they want to. That’s why they’re choosing the right segments where we also — and also we are very conscious of the pricing we do. So, that’s where we will remain at this kind of a level for the time being and we will start seeing some in terms of business mix, it will not change too much from here. I mean, gold loan will be probably below 50%, SME will be around 12% to 15% in the next six months, and wholesale remaining including BA somewhere around 30%.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. Got it. So, just can you guide a number to it that other than gold loans, this SME, retail and corporate loans, what is the growth in loan book that we’re expecting going forward in this book?

Pralay Mondal — Managing Director and Chief Executive Officer

So, I understood your question. So, from here on, if I take growth on SME and wholesale only assuming that’s the best where we’re sitting on the base on that how much we’ll grow on retail, SME and wholesale, and retail includes agri and microfinance, we should be able to grow somewhere around 15%.

Pruthul Shah — Anubhuti Advisors — Analyst

Okay. Got it. Thank you.

Pralay Mondal — Managing Director and Chief Executive Officer

And beyond that, I don’t want know, and I’m telling you, practically, I don’t want to do it? You know why? Because, I have to continue to deliver the NIM till our technology is in play, because I have to make a lot of investment there. So, my constraint is liability. So, if I have 20% growth in liability and if I have 25% growth — I mean, hypothetically, I’m not giving a forward-looking number, suppose I have a 20% growth in liability with a CD ratio of 81%, and if I have an asset growth of 25%, I would still like SME and wholesale to be around 15% and rest coming from gold, purely because it’s a tactical play for the next one, one and a half years.

Pruthul Shah — Anubhuti Advisors — Analyst

Got it, sir. Got it. Thank you so much.

Pralay Mondal — Managing Director and Chief Executive Officer

But, again, long-term, I told you that will remain 20%, 30%. 20% gold, 30% retail, 20%, 21% SME, and rest wholesale.

Operator

Thank you. The next question is from the line of Prerit Choudhary from Green Portfolio. Please, go ahead.

Prerit Choudhary — Green Portfolio — Analyst

Yeah. Good evening, sir. Sir, I have a couple of questions. The first one is that our employee costs have been growing at a faster rate. And for last three, four quarters, our business per employee has been falling. So, when can we expect this to bottom out for our business?

Pralay Mondal — Managing Director and Chief Executive Officer

So, do we have all your questions or do I answer is? Okay. Let me answer this question first.

Prerit Choudhary — Green Portfolio — Analyst

Yeah. Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

So, there are two ways of looking at it. Business per employee — I mean, you take cost line only, so if you look at our overall cost-to-income, that is within control, right? I mean, I’ve said 55% to 60%, we’re within there. And when I have given that kind of an outlook, I have considered that our employee costs will continue to go up. Business per employee is something where you have to understand that we are adding a lot more frontline staff in terms of acquisition, sales. Somebody asked a question on how will you build retail asset, how will you build retail liability, how will you add more accounts, how will you build CASA. That can only happen when you expand a huge sales force out there. But they come at a very reasonable cost, right? So, they are not very costly resources. So, business per employee will always be a little bit of a challenge when — because we don’t outsource too much of an employer outside. A lot of other banks including all my previous organizations, especially, assets and cards and all these other businesses, everything is outsourced, the frontline sales staff. DSA, all of that. So, we are not doing too much of all that. So, given that perspective, my business per employee, I’m not giving an outlook where it will improve significantly from here, because number of employees will go up, their cost will go down, because the front-end sales staff is going up big time. So, that is on that front. My cost-to-income will remain between 55% to 60%, closer to 60%. That’s not because of employee costs, that will be because of technology cost, okay? And I’m telling you, next year, we’ll see huge investments is going to go into technology in terms of both capex and opex, okay? So, that was the first question.

Prerit Choudhary — Green Portfolio — Analyst

Yeah. The next question is for the company recently issued a new credit card with OneCard. So, if you can this number how many cards were issued in the recent quarter?

Pralay Mondal — Managing Director and Chief Executive Officer

So, we have just started.

Prerit Choudhary — Green Portfolio — Analyst

Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

So, it’s not the number which is too much of importance at this point of this time. And also what happens is you must understand as a franchise, we have limited credit qualified customers whom we will offer all these products. So, we have to add new customers in the coming quarters. So, this product is also in a way not to be a great credit card business, but to get new good quality, credit qualified customers to the bank who can also build CASA, which I have already told before in my previous calls. So, given the perspective, we have — I think we have just added around 2,000, 2,500 cards now. Maybe next quarter, we’ll add another 10,000 or so. But more importantly, I want to see this as one of the other products, because we don’t have too many products at this point of time. This is one more product, and it’s a very premium product, if you see this product and see the values that — and digitally-enabled products. We think that this is one more way to knock the door of the customer to open a relationship with us. And our strategy is not cross-sell of credit cards to CASA. Our strategy is cross-sell of CASA to credit card customers. So — because we need to build up a better quality CASA franchise, which will take a little time. So, credit cards is a very important business for us from that perspective.

Prerit Choudhary — Green Portfolio — Analyst

Okay. Yeah. Understood. I have one last question. It’s more related to the recent news related to the Adani. So, do we have any exposures to the Adani Group in our corporate loan book?

Pralay Mondal — Managing Director and Chief Executive Officer

I was jokingly saying before this call started that this question is going to the other banks, it did not come to us, because we don’t even have the balance sheet to give loans to Adani, I mean we can have a INR50 crores CD or something as per their instructions.

Prerit Choudhary — Green Portfolio — Analyst

Yeah.

Pralay Mondal — Managing Director and Chief Executive Officer

But that is nothing. But otherwise, we don’t have any exposure.

Prerit Choudhary — Green Portfolio — Analyst

Okay. Thank you. That’s it for me.

Operator

Thank you. The next question is from the line of Mona Khetan from Dolat Capital. Please, go ahead.

Mona Khetan — Dolat Capital — Analyst

Yeah. Hi, sir. Good evening.

Pralay Mondal — Managing Director and Chief Executive Officer

Again, there is a sound. Mona, just hold on. There is — now it is okay. There was a sound that was coming in the — yeah, Mona, go ahead.

Mona Khetan — Dolat Capital — Analyst

Yeah. Sir, firstly on the SME side, if you could share the disbursements made by the bank over the last three quarters, the quantum of disbursements, that will help.

Pralay Mondal — Managing Director and Chief Executive Officer

I will just tell you. I think last quarter or last year?

Mona Khetan — Dolat Capital — Analyst

Last quarters, Q1, Q2, Q3, it will be helpful.

Pralay Mondal — Managing Director and Chief Executive Officer

So, I think, we have disbursing incremental disbursement, pure-play disbursement is somewhere around INR350 crores to INR450 crores. I don’t exactly remember the number, somewhere in that level. Last my review, I I saw that. But we have lost more than that in terms of — either we have run them off or utilization has gone down on certain places because of rates and things like that. So, broadly around INR350 crores to INR450 crores of disbursements we’ve done.

Mona Khetan — Dolat Capital — Analyst

Okay. And we’ve seen some BTs as well.

Pralay Mondal — Managing Director and Chief Executive Officer

BT, yeah, in SME [Speech Overlap] lot of BT happens in SME. So, BT will be a part of this, yeah.

Mona Khetan — Dolat Capital — Analyst

Okay. And when it comes to your advances made, what would be the share of EBLR and MCLR loans in the pool?

Pralay Mondal — Managing Director and Chief Executive Officer

Our mostly — wholesale is on MCLR, okay? And most of our SME is EBLR. So — but this is becoming lesser relevant anymore, because interest rates are peaking right now, right? So…

Mona Khetan — Dolat Capital — Analyst

Yeah.

Pralay Mondal — Managing Director and Chief Executive Officer

…the benefits of this are gradually going to fade away and impact of cost of funds will start kicking in. So, that’s why I said in the beginning itself that 5.8%, don’t read this too seriously on the NIM.

Mona Khetan — Dolat Capital — Analyst

Right. So, wholesale would — and SME together would be, say, about 30%, if I have to exclude the direct payment and stuff?

Pralay Mondal — Managing Director and Chief Executive Officer

Gold is around 40%, wholesale is around 30%, SME is around 12%. 40% plus is between wholesale and retail — wholesale and SME, 42%.

Mona Khetan — Dolat Capital — Analyst

Okay. And gold would be in dilutive? Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

Okay. Gold is mostly fixed only, mostly fixed, because these are short-term, gold loan is short-term, it doesn’t matter.

Mona Khetan — Dolat Capital — Analyst

Got it. And on the deposit side — so we’ve seen a very strong sequential growth at 8%. So, if you could just give some color of where the sequential growth is coming from? Is it largely led by wholesale deposits, certificate of deposits, etc., or a larger share is by retail deposits?

Pralay Mondal — Managing Director and Chief Executive Officer

On CD, I must say that we are lesser than where we’ve started the year with, okay? So, our CD book is — if I — I don’t know whether we’d give the data or not, but it is somewhere between INR300 crores to INR400 crores. When we started the year, it was higher than that. So, I don’t think CD actually has come down, not gone up. I’m not saying it will not go up again. But it is just — it is not that material. And among most of the banks, our CD — our component of CD in our deposits as a percentage is also is one of the lowest. So, that’s not there.

On the wholesale question which you said, depends on what is — I just want to clarify, because it’s a recorded call, there is [Speech Overlap]

Mona Khetan — Dolat Capital — Analyst

No. Yeah, so interbank deposits.

Pralay Mondal — Managing Director and Chief Executive Officer

No, interbank is not there, okay?

Mona Khetan — Dolat Capital — Analyst

Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

But on wholesale, I thought that — see, there are two definition of wholesale.

Mona Khetan — Dolat Capital — Analyst

Above [Speech Overlap] Yeah.

Pralay Mondal — Managing Director and Chief Executive Officer

One is what a wholesale group gets, okay, which are mostly short-term and things like that. And the other one is what RBI classification sales are wholesale, which is also retail but they’re treated as wholesale. So, our — like most banks, we also have on an incremental basis last quarter more than 50%, almost 60% of our business, by RBI definition is wholesale, okay? But you can easily say — look at another ratio and see what the question you’re asking, is what is our LCR. We ended the LCR at 124%. How many — and how many banks have really done at that kind of a percentage. So, that cannot be a purely wholesale kind of a thing. Lot of these are retail actually. So, deposit franchise has to be seen in two, three parts. What is the overall cost of funds of the bank, what is the tenure of the deposit, what is the LCR of the bank, and what is the CD of the bank, okay? So, CD, we are one of the lowest, and I told you it is between INR300 crores to INR400 crores. Now it has come down actually, some of that has run-off as we are talking. Our LCR is 124%. Our cost of deposits were about 4.8 or something like that. And that will give you the answer where we are.

Mona Khetan — Dolat Capital — Analyst

Right. Sure. And when it comes to your loan-to-deposit ratio, what would be a comfortable level to you? Where could it peak rather?

Pralay Mondal — Managing Director and Chief Executive Officer

See, I would — in the current scenario, I’ll say that I’m willing to go up to 90%. But I was quite pleasantly surprised to see we coming down this quarter at 81% from 84% odd last quarter. But — 84% or 85%, I don’t remember, I think 85%. But it has come down actually this quarter. But that may not be the trend. I mean, I think in the current regime with liquidity where it is, 85% is a powerful cost right now.

Mona Khetan — Dolat Capital — Analyst

Okay. Sure. And just lastly, we’ve seen very low slippages, good recoveries in your case, especially, this fiscal, close to 1% kind of slippages is what we are seeing. So, what your guidance on slippages of from a normalized perspective as we go ahead in FY ’24, ’25? Where could the normalized slippages be for CSB Bank?

Pralay Mondal — Managing Director and Chief Executive Officer

See, we are a very conservative bank. Our management is also very conservative. So, that’s why you’re seeing some of the growth which you are not taking because — on SME and wholesale, because of risk-adjusted returns and not in line with what our conservative thought process is, okay? Gold loan, anyway the NPA and the slippages are very, very low, okay? Slippages can happen, but you recover that. So, gold loan is not a real issue. So — and some of our old portfolio on the retail, which was slipping, that is now started and that is now gradually going to become negligible over a period of time. So — and we’re also getting upgrades and recovery from some of the old SME portfolio and the retail portfolio as well. Not so much retail, but more from home loans, LAP, and SME portfolio. So, given this perspective, I cannot give a guidance on this, but I’m very happy, I’m sure you are, that we have a negative credit cost today, a very few people have negative credit cost. We have traveled the whole year with that kind of a negative credit cost. And I hope that we can continue that for this quarter as well. I don’t know. Hopefully, we will. But next year, obviously, we will not be a negative credit cost. But in terms of slippages, I think we will continue to be good, okay? I don’t see, because neither we have a chunky kind of except for one or two accounts, we don’t have too much of a chunky business, nor we have too much of stress in our portfolio. And anyway, we’re holding a contingency provision, we don’t know how to take care of that. So, we are constantly working with our auditors. So, we have a contingency provision of INR106 crores in any way. So, to that extent, you cannot adjust that, but you can have a formula for that over a period of next three, four years. So, to that extent, I don’t see a major challenge in terms of slippages or NPA or credit quality. But we may not have a negative credit cost. That is unreal.

Mona Khetan — Dolat Capital — Analyst

Sir, thank you, and all the best.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you, Mona.

Operator

Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please, go ahead.

Pallavi Deshpande — Sameeksha Capital — Analyst

Yes, sir. Thank you for taking my questions. Sir, just wanted to understand, again, a bit more on the deposit growth. What would be the outlook going ahead? And again, like you mentioned, you have to balance between the savings and terms. So, we can expect more term deposit growth? Would that be the strategy for the next one year?

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah. So, if you have to — see, at the end of the day, when you’re sitting on an 81% CD ratio, and I’ve said that our comfort is at 85% and we won’t like to breach 90%, so which obviously means that if we want to grow at the same kind of a level for asset, we need to grow at least around 20% on the deposits side as well. Now some part of that will do happen from term deposits because CASA takes its own time. Having said that, we will grow on this quarter-on-quarter on CASA as well. We have put our strategy together, thoughts together, and we’ll build CASA as well this quarter. We have launched some products on the both savings and current accounts side. You will see some growth on the CASA because I know that in our entire good operating quarter, there’s only quarter, that is only the black mark which we have, so we don’t want any black mark next quarter, so we will have our CASA growth as well. But frankly, TD growth, we have to sustain because when you are growing the balance sheet from 9% last year to 25% this year, I mean, so far, I’m not bringing a forward-looking statement, and in one quarter, drastic change obviously cannot happen. So, we need to have some dependence on term deposits as well, because CASA will not give you overnight growth. But we’ll try and see that our CASA does not fall below 30% because that’s psychologically not a good level to be here. My challenge here is mathematically, even if you grow CASA faster than TD, it will continue to fall below 30% till the CASA ratio goes above 35%, 38%, or above 40% mathematically. So, we have to solve that maths also, so we’ll see how to do it.

Pallavi Deshpande — Sameeksha Capital — Analyst

Yeah. And like you said, sir, we’ll monitor the LCR which has been of — despite the black mark, that’s been a blue mark, I would say.

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah. Thank you, Pallavi. Thank you.

Pallavi Deshpande — Sameeksha Capital — Analyst

Thank you. Sir, secondly on the PSLC, do we see that coming back in fourth quarter of this year it is a complete washout? PSLC?

Pralay Mondal — Managing Director and Chief Executive Officer

Let me put it this way, I’m not factoring that incoming in my projections, okay? If something comes, that’s bonus. But my theory is like this. I don’t know, this is a kind of a conjecture you can say, that this year, what had happened is credit book picked up to 16%, 17% in the ecosystem, and NBC was the previous year’s NBC. That’s why this year in the whole system, there was not too much of stress on PSLC, and hence, there was no premium on PSLC income, okay? Because, everybody would have probably achieved their PSLC targets. Next year what will happen, the reverse may happen, that you will see it on a higher end to this year. And next year, growth may actually taper off a little bit. And even if growth happens, it will happen, not necessarily in PSL-oriented businesses, right? Like if your wholesale start picking up or some parts of SME picks up, etc., they might not contribute straight to the PSL business. So, given that perspective, it’s not all lost cause. All this portfolio will remain with us next year. So, we’ll be able to get hopefully some PSLC income back next year. But this year, last quarter, how many people will be short and how much because if they had to buy, they would have bought it by now, why should somebody wait for the last quarter, I’m not so sure. But we are monitoring it daily, especially, in the month end. At quarter end, we’ll moderate more daily. And because we did it last quarter, there are only three days window where we got a 0.9% on PSLC, and we picked it up and we got that INR33.6 crores. Just three days window we got and we used it like an opportunity. So, we’ll watch that, and if we get that opportunity, we’ll get it. I mean, whatever we can, because it will otherwise zeroize at the end of the year. So, we’ll be at whatever, but I’m not so hopeful.

Pallavi Deshpande — Sameeksha Capital — Analyst

And sir, lastly on the recovery side, like we’ve seen, I think, the other income portion, the other — of other income has shown a good growth. So, can we expect similar kind of recoveries next year on that bit?

Pralay Mondal — Managing Director and Chief Executive Officer

I can only talk next quarter. Recovery is something for next year very difficult to predict. But our missionary is on and our team is fully geared up for a good fourth quarter, okay? Next year, we can discuss and then maybe next call.

Pallavi Deshpande — Sameeksha Capital — Analyst

Right. Okay. Thank you so much, sir.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you, Pallavi.

Operator

Thank you. The next question is from the line of Sonal Minhas from Prescient Investment Management. Please, go ahead.

Sonal Minhas — Prescient Investment Management — Analyst

Hi, sir. Thanks for taking my follow-on question. I wanted to understand the corporate loan book, sir. How does this work specifically in terms of you needing — sorry, there is some noise. So, I just wanted to understand the corporate loan book. And in the corporate loan book, are you the lead banker or this is part of a consortium that is how we try and build basically a corporate loan book?

Pralay Mondal — Managing Director and Chief Executive Officer

So, generally, we don’t do consortium lending as much, because there’s no point. Parties within a consortium don’t have a say. If you see, almost 35% 40% of our portfolio is NBFC in the corporate book, if you look at it, and the rest is mostly distributed lending, okay? But it’s mostly one-on-one kind of a lending. We don’t do — multiple banking but not consortium, okay?

Sonal Minhas — Prescient Investment Management — Analyst

I understand that. And sir, at a corporate level, maybe just trying to understand, is there a distinct reason the corporate or a new corporate would come to CSB? Is that because of the geographical reach or is that because of the interest rate? Or, are you — in a particular geography, you still, let’s say, maybe giving a discount over a larger bank in the same geography? I just wanted to understand the dynamics of this business when you take up a new client. Is it price? Is it your relationship? Just trying to get to that.

Pralay Mondal — Managing Director and Chief Executive Officer

So, corporate banking is most about relationship business, okay? So, on the financial market side, on the NBFC side, we have been operating with — and people know that we understand that part of the business, etc. That’s why obviously we have our ecosystem and we have some amount of expertise on that business, so which we are leveraging on. Coming to other parts, what is happening is that people, when they join us and we are expanding our coverage group, etc. primarily, it happens based on the relationships people have and the products and services and the geography. Of course, we are a little more stronger in certain parts historically, but we are now expanding significantly in the West and North. We have got very good leadership in West and North. And as we are talking, we are also expanding and we are building our leadership in the upper South part, which is A.P. and Karnataka. So, while our strength was always there in Tamil Nadu and Kerala, but now we are getting stronger in A.P. and Karnataka and also Maharashtra and North. And we have build up leadership in each of these locations. We have clear vertical segments where we — in fact, our board has guided and our credit committee has guided in terms of which kind of segments where we can get the right kind of risk-adjusted returns, and we are focusing on those segments. And also, it’s a relationship business and a coverage business. So, all of this put together, ultimately, with all of this, we have a very large book. So, to that extent, this strategy works for us right now. In the long run, we have to build up our strategy based on solution products, transaction banking and other supply chain, vendor finance, etc. between SME and wholesale that we are working in parallel.

Sonal Minhas — Prescient Investment Management — Analyst

Understand that, sir. Sir, my second question is maybe beyond the results. I just wanted to get a sense of the Promoter Group basically, and them trying to bid for IDBI. I’m sure this is not a relevant question, but can I ask like this question or this is beyond the results discussion call?

Pralay Mondal — Managing Director and Chief Executive Officer

We are democratic country. You can ask any questions, but I cannot answer because I don’t know, okay? That’s the truth. I mean, what Fairfax is doing and what is their plan, they will — I mean, I have been told to organically build this bank and I’m clearly focused on that.

Sonal Minhas — Prescient Investment Management — Analyst

Understand that, sir. Okay. Thank you. Thanks a lot, sir.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you so much.

Operator

Thank you. The next question is from the line of Jyoti Khatri from Arihant Capital. Please, go ahead.

Jyoti Khatri — Arihant Capital — Analyst

Yeah, sir. Thanks for taking my question. Just wanted to understand on the opex side. You said that you will be investing in technology and people over the next one or two years. So, any number to put out there like how much opex and capex cost that will — that you would be — you have in your mind?

Pralay Mondal — Managing Director and Chief Executive Officer

So, let’s break up opex into three parts, okay? One is technology — okay. One is technology, one is distribution, one is people, okay? These are primarily three, rest are relatively smaller amounts. So, when it comes to technology, technology, is again, divided into two parts, capex and opex, okay? Now, our CIO, Rajesh Choudhary, is a great guy. So, I have told him he can run as fast as possible. Whatever he can run, we will fund it, okay? And I’ll ensure that our business teams are tasked to get those revenue to the bank, okay? Now up to him how much he can do. I have given him a whole laundry list of what needs to be done, okay? Starting from core banking to LOS, already we’re implementing four, five products, already we have implemented, some more to go. On the LMS, we have finalized, on corporate LOS, we are doing it, on corporate net banking, we’re doing it, on mobile banking and net banking, we’re revamping it. For them it itself is a huge task. I mean, I don’t want to open it up into that detailed discussion, but let me put it this way. I have told that this is one investment I will not, because the faster I get it, faster my payback period will be, because in parallel with that, I’m making other investments in terms of distribution, right? Because of technology, I’m expanding the distribution, and I’m not able to leverage that. That’s not very prudent, right? So, to that extent, technology is as much as he can do. On manpower, etc., we have got a productivity chart given to my retail head, to my SME head, to my wholesale head. And if they, I said that we’ll not stop anything, as long as you manage this productivity, you please hire. But if you don’t manage that productivity, you cannot hire, okay? And when it comes to distribution, I’ve said that we will have around 100 branches per year. And as our technology costs called starts tapering down, we will go beyond 100, because I fundamentally believe branch is also a way to build distribution till you have at least 2,000 branches in this country. So, to that extent, we will start expanding, but I cannot take both the distribution cost and the technology costs together. Technology cost will start tapering in the next three, four years. And then we will pick up the distribution of much larger than 100 per year. So, that’s broadly what it is. How much, I don’t know. I mean, I can’t give that number depending on the stamina of our leadership team. But broadly, back of the envelope, I think we should be — I mean, I don’t mind in investing into almost 70%, 80% of our reality profit also into these three opex items: distribution, people, and technology.

Jyoti Khatri — Arihant Capital — Analyst

Okay. And so, I mean, from a cost-to-income perspective, which we will see…

Pralay Mondal — Managing Director and Chief Executive Officer

Sorry, I want to qualify this. When I said this, I’m not saying per year; I’m saying on a project basis. For example, next three to four years kind of an investment I’m talking in about.

Jyoti Khatri — Arihant Capital — Analyst

Okay. So, from cost-to-income perspective, we will see more. So, it should remain above 60% level?

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah. That I’ve always said that we’ll not go below 55%. We’ll try and not go above 60%. We’ll be closer towards 60%. But by FY ’30, we’ll be between 40% to 45%.

Jyoti Khatri — Arihant Capital — Analyst

Okay. And another thing was, you know how crucial will be building up the retail liability assuming that it doesn’t go through as per your plan, it could derail your entire strategy of building on a retail franchising. Is that so? Because, I think currently everyone is facing challenges in building up retail deposits. So — and that is the one important crucial part in that entire retail franchising.

Pralay Mondal — Managing Director and Chief Executive Officer

If we can’t build that, we don’t have a story either to tell or to build it. So, I will start from a belief that we can do it. We have the ability to do it. And most of my management team has done it time and again in past in various large organizations. So, there is no way I will even think that we cannot do it, okay? Question is — and we will see. I mean, for example, in most of our investor calls, what I have said in past, we have delivered, right? I mean, look at this today’s call. We have almost delivered everything we have said. So, I don’t even want to get into a discussion. If it does not happen, that question doesn’t arise in our minds. But yes, it is a tough journey ahead, and we know how to do the building blocks. That’s why we’re not taking a shortcut to success. We’re saying we’ll build a franchise, we’ll go step by step, we’ll build a distribution, we’ll build a leadership team, we’ll build the technology, we’ll build those products. That’s why I’m not committing anything which is unachievable. I’ve done it three times in my past experience and I know step by step how to do things, and hence, we are not committing anything which we cannot do.

Jyoti Khatri — Arihant Capital — Analyst

Okay. Sir, just last thing on the margins and the credit cost. Is there any outlook for the next fiscal?

Pralay Mondal — Managing Director and Chief Executive Officer

Margins, I’ve said before, and again, I’m repeating, because you will see in most of the calls, my numbers don’t change much. I’ll be happy with the NIM of around 5%, okay? And in terms of credit cost, we can’t have a negative credit cost, but we will — on a three-year basis, we’ll be below 40 basis points. Next year, obviously, we will not reach 40 basis points, it will be lower than that, much lower than that, but it will not be negative also.

Jyoti Khatri — Arihant Capital — Analyst

Okay. Got it. Yeah. Thanks.

Operator

Thank you. The next question is from the line of Dharma Venkatesan K. B. [Phonetic], an Individual Investor. Please, go ahead.

Dharma Venkatesan K. B. — Individual Investor — Analyst

Good evening, sir, and thanks for the opportunity. So, my question is more on the MSME [Phonetic] book. So, have we explored any co-lending opportunities with the fintech or are all of them mostly originating from the bank? So, can you give some color on that?

Pralay Mondal — Managing Director and Chief Executive Officer

Yeah, what is happening is, we were doing some business on the fintech side, but because of the new digital lending advisory or guidance which has come from RBI, we are — we have gone back to the drawing board again and we are seeing how this will work out. So, we are talking to few partners and we are working on it. On the other co-lending, which is a little larger, there is a technology development that is required, we are also working on that. So, yes, that is very much in the thought process. That is a large part of our strategy. But we — I think that we’ll take a little time to create the framework for that strategy. But if you ask me this question two years from now, I can show you how much business we have done in this.

Dharma Venkatesan K. B. — Individual Investor — Analyst

Okay, sir. And how many branches you have opened in this quarter, in this particular quarter?

Pralay Mondal — Managing Director and Chief Executive Officer

In this quarter? Around 40 branches, I think.

Dharma Venkatesan K. B. — Individual Investor — Analyst

Okay, sir. And my final question is that, it’s more of a generic question. Sir, suppose if we’re like we are building up for the future, we are implementing in technologies and other aspects we are building across our franchises, so do we any management bandwidth into Tier 2, Tier 3 levels? Or, what are the other things you need on your management bandwidth to achieve the level of growth that we are aiming for, maybe, say five years or 10 years from now?

Pralay Mondal — Managing Director and Chief Executive Officer

Sir, our issue is not the Tier 2, Tier 3. We are very well placed there. And that’s why you will see that we have a net seller and PSLC all the time. Our — primarily where we have to work on is how do we build a franchise for the metro and urban markets, okay? And that’s why we need multiple products, multiple premium businesses, I can’t say premium, but at least meat of the pyramid to going towards top of the pyramid. So, our challenge is very different to some of the other banks, who are trying to grow for metro and urban to deeper geography. So, we are coming from deeper geography to metro and urban. So, basically, it’s a full franchise which we have to build because in these metro markets and urban markets, if you have to be present profitably, you have to have a full-service franchise. And that’s what we’re working on. So, our challenge is exactly the opposite.

Dharma Venkatesan K. B. — Individual Investor — Analyst

Maybe my question didn’t get thrown properly, sir. My question was on a management level like on our management bandwidth of prior to employees and Tier 3 employees, like do we need to — how much bandwidth we need for a growth that we are anticipating five years from now, or are we will capitalized on the management side, is what I was trying to ask.

Pralay Mondal — Managing Director and Chief Executive Officer

So, let me try and answer that. So, you know what, because we understand the gold loan business very well, and the Tier 2, Tier 3 markets are very good on gold loan, agri, MFI, these kinds of businesses. And because we are very good in some of these businesses, rest of the businesses we do understand liability, assets, retail assets, as the grow deeper as we create credit structures, and also digital is becoming a major part even in deeper geography. So, not necessarily you have to have so many people in those locations to run the businesses, okay, except for gold loan, gold loan is a very physical business and which you understand. So, most of these branches in Tier 2, Tier 3, Tier 4 kind of towns, gold loan itself gives us very quick turnaround in terms of profits. So — but they don’t make big money, right? The smaller branches don’t like big money. So, to make big money, you have to have larger presence and higher end of the pyramid in metro and urban markets, because all large banks have top 20% customers who are contributing to more than 100% of their profit and 80% of their revenue. And that is one pie which you have to build we are not present in those — in that segment as yet, but we are building that. And that will take three, four years to build. Management bandwidth, we have enough presence in the deeper geography. That’s not a problem.

Dharma Venkatesan K. B. — Individual Investor — Analyst

Okay, sir. And just one more final thing. What is the top 10 or top 20 deposits and advances concentration, top 20 or top 50?

Pralay Mondal — Managing Director and Chief Executive Officer

Top 20 deposits, I don’t know whether we’ll give you that number or not. Mr. Divakara, do we give that number, can you share?

B. K. Divakara — Chief Financial Officer

Yeah, but later on, we can — if need be, we can furnish that information.

Pralay Mondal — Managing Director and Chief Executive Officer

Maybe on one-on-one.

B. K. Divakara — Chief Financial Officer

12%.

Dharma Venkatesan K. B. — Individual Investor — Analyst

On the advances side or on the deposit side, sir?

B. K. Divakara — Chief Financial Officer

Deposit side.

Pralay Mondal — Managing Director and Chief Executive Officer

Top 20 deposit. Top 20 deposit is around 12%. And we are trying to bring that down quarter. I forgot that number, it has been that. So, we are bringing — we’re going to bring that down that number top — this thing over a period of time.

Dharma Venkatesan K. B. — Individual Investor — Analyst

And similar number on the advances side?

Pralay Mondal — Managing Director and Chief Executive Officer

Sorry?

Dharma Venkatesan K. B. — Individual Investor — Analyst

On the advances side, similar number on the advances side?

Pralay Mondal — Managing Director and Chief Executive Officer

Advances, nothing. 47%, 45% of our business in gold loan, which are all less than INR2 lakhs, okay? So, it is not very relevant.

Dharma Venkatesan K. B. — Individual Investor — Analyst

So, we don’t have any major exposure to one particular person or a company/ That’s what [Speech Overlap]

Pralay Mondal — Managing Director and Chief Executive Officer

We may have two or three, but they are less than INR300 crores.

Dharma Venkatesan K. B. — Individual Investor — Analyst

Okay, sir. Fine, sir. Thank you, sir, and good luck for the coming quarters.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from line of Anuja Dighe from Elara. Please, go ahead.

Anuja Dighe — Elara Capital — Analyst

Thank you for the opportunity. I just have one data-keeping question. I think we have realigned our loan mix this quarter. So, may I get a similar number for SME, corporate, and retail for last quarter?

Pralay Mondal — Managing Director and Chief Executive Officer

I think it is there in the investor presentation if you look up. But I — if I remember it correctly, our gold loan was around 45%, but you can check it in the net, our gold loan, I think was 45%, our SME was around 13%, 12% to 13%, and DA was around 5% and rest was on the wholesale side.

Anuja Dighe — Elara Capital — Analyst

Okay.

Pralay Mondal — Managing Director and Chief Executive Officer

Around 25%, 27% was on the wholesale, I think.

Anuja Dighe — Elara Capital — Analyst

Okay. And another small question. If I’m not mistaken, you mentioned that according to RBI definition, the wholesale deposit base is around 60% of the book? Is it right or is it 16?%

Pralay Mondal — Managing Director and Chief Executive Officer

No, I didn’t say that. Let me first clarify what I said. The wholesale by definition — RBI definition, if I remember it correctly, more than INR2 crores is called wholesale, okay? It can come from any individuals also. I think more than INR2 crores anything. NRI gives INR2 crores or somebody else gives a INR2 crores, I think more than INR2 crores is wholesale. I’m not able to remember exactly, but I think so, okay? So, what I’m saying by RBI definition, which is large ticket, any large ticket, which is as per RBI, you have to classify the wholesale deposit, not necessarily the deposit that’s come from a wholesale, okay? So, that more than INR2 crores incrementally last quarter around 50% to 60% of our business came from that. Generally, it’s around 30% to 40%, but last quarter, we focused a little bit more — around INR2 crores to INR5 crores of deposits because we needed to grow the deposit last quarter, okay? Because only incremental for last quarter, not our overall portfolio. Our overall portfolio is pretty much very granular, more granular than most of the banks, okay, even now.

Anuja Dighe — Elara Capital — Analyst

Okay, sir. That’s clarified. Thank you, sir.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Pralay Mondal — Managing Director and Chief Executive Officer

Thank you. Thank you very much. Thank you, Manish and Axis Capital for organizing this call. And really thankful to all the investors and analysts for being such active and enthusiastic questions. I hope I could respond to most of the answers. And again, I would like to say that I’m happy that we could almost deliver all the parameters on a consistent basis and whatever we have committed, we will work very hard to ensure that we don’t disappoint you. Thank you very much. Have a good evening.

Operator

[Operator Closing Remarks]