DCB Bank Limited (NSE: DCBBANK) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Praveen Kutty — Managing Director and Chief Executive Officer
Ajit Kumar Singh — Treasury, FIG Business & Investor Relations
Analysts:
Jai Mundhra — Analyst
M B Mahesh — Analyst
Mona Khetan — Analyst
Akshat — Analyst
Aditya Khandelwal — Analyst
Nitin Agarwal — Analyst
Rishikesh Oza — Analyst
Gaurav Jani — Analyst
Amit Mehendale — Analyst
Raghvesh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to DCV Bank Limited Q3 FY ’25 Earnings Conference Call. 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Praveen, MD and CEO, BCB Bank Limited. Thank you, and over to you, sir.
Praveen Kutty — Managing Director and Chief Executive Officer
Thank you very much. Good evening, ladies and gentlemen. Thank you for logging in. Let me take you through some of the key highlights of our Q3 results. To set a context, these are very challenging times. Demand is softening. There are headwinds on certain areas, specifically unsecured lending, MFI lending, etc. And given this context, I’m happy to note that the bank has recorded a growth of 20% plus on customer deposits on a Y-o-Y basis, 22% on loans and advances and 20% plus on 20% on-balance sheet as well. We have been over the last four, five quarters consistently growing at a — at anywhere between 18% to 18% range. And this growth of — is something which we believe will continue in the key segments and products going-forward as well. Our yield in advances has shown an uptick, okay, it is growing in a descending mode till now, but in Q3, we have seen an uptick on the yield in advances. And while the cost of funds continue to inch up contrary to our expectation and what I told you earlier, the NIM has arrested its slide and has changed directions. Against the 20% top-line growth, our NII has grown by 15% Y-o-Y. And this is after quite a number of quarters that you’ve seen a double-digit growth in NII. We are reasonably satisfied with our fee momentum and more so with our core fee momentum, which is continuing its upward trend. Like I mentioned earlier, in the last quarter, the discipline on productivity and cost-control is an area where we are focused on. And while it’s still early days we believe that we will be able to demonstrate this in the future as well I’ll take you to some key highlights and then keep the field open for questions our growth rate of 20% on deposits has been achieved while keeping the top-20 deposits at less than 7%. We are at 6.97% our savings account growth has been upwards of 17% 141 crore of core fee income is the highest-ever so-far our capital adequacy is now 16.29% with the advent of Tier-2 capital during the quarter. We have 457 branches, six added in the last quarter and we have been very conscious on improving the productivity and that you can see in the reduction of manpower quarter-on-quarter as well. Our gross NPA is now 3.11% and net NPA is flat at 1.18%. So these are the main highlights. Now I’ll open up the call for any questions that you may have?
Questions and Answers:
Operator
Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press R&1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press R&2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask a question the first question is from the line of Hardesh Shah from ICICI Securities. Please go-ahead.
Jai Mundhra
Yeah, hi, good evening, sir. This is Jay. Sir, and congratulations on a steady and good set of numbers. Few questions, sir. First, it looks like, sir, the growth in this quarter from the disclosure that from the pie-chart that you gave on the breakup. It looks like that majority of the growth has come from co-lending. I mean the share has now jumped to 11%. If you can share some more color and it looks like that the entire is plugged in retail. So what are those products where we do co-lending? And is the observation right that most of the growth has come from co-lending?
Praveen Kutty
Okay. Jay, so good to hear from you and you’ve been very generous. Thank you so much. On co-lending, let me tell you, we have our growth excluding co-lending has been as good as the previous quarters. But what you said about growth — the growth in co-lending is correct. One of our biggest partners have — have on co-lending has started originating business again after a brief respite. And when our partners started the co-lending program, the — sorry, the origination of their loans, it also help us do co-lending. As far as the second question is concerned, we have a wide variety of partners in co-lending. We do with the various products that we do in no particular order are home loans, school finance, we do unsecured business loans, we do gold loan, we do SME have I these are the these are the various types of co-lending products that we do and we do it we do it across commercial vehicles we and we do it across more than more than seven or eight co-lending partners
Jai Mundhra
Okay. So — but this quarter it looks like that or from this time around, it looks like it has majority it would have come from gold loan, right? I mean that is the understanding. The delta.
Praveen Kutty
That is not a factually correct understanding. But you know, the increase — while the co-lending definitely has increased, that is the — that is a incremental that you see. Usually we grow about 18% to 19% the last few quarters. The increase to 22.87 has from the normal growth has come from co-lending
Jai Mundhra
Okay sure secondly sir in terms of so you have you have two businesses, two types of channels for microfinance, one is your own and then through BC. So is there any clawback through BC? And if you can share some more detail, it is like industry practice of having the clawback at around 5% or there is something different here in the MFI business.
Praveen Kutty
We don’t — first of all, we don’t have two channels. We have direct lending through certain MFI institutions, yes. And then we have lending through our business correspondent channel. So these two businesses that we had and what you said that I don’t know the 5% is we don’t — we don’t have such a such a condition.
Jai Mundhra
Okay. But both MFI lending is actually to institution or to borrower. I mean the individual borrowers.
Praveen Kutty
The business correspondent lending as to is to individuals. The microfinance loans are given to MFI institutions. So there are two different things.
Jai Mundhra
Okay. Okay, understood. And second, and thisly on asset quality, sir, I mean, non-gold slippages seems to have risen as you have mentioned in the PPD also. If you can share some you know, some more details here, however, is it mainly through — mainly because of the unsecured, but that proportion is very less for you. So what is causing this kind of a slight increase?
Praveen Kutty
We still have a 704% book on microfinance and that is going through a similar kind of pain that the industry is going through. We are no different from the industry. So we are taking — there is a hit on that and that I don’t know-how long that will continue, but it is — that small which we have is giving higher NPA.
Jai Mundhra
Okay. And lastly, sir, if you can also elaborate a few banks have already said that for unsecured MFI, which is relevant for you, they provide maybe by formula either 25 or 50 or some banks actually provide 100% in the same quarter. If you can highlight what is your policy
Praveen Kutty
The internal policy J is internal for that particular reason. So you won’t be able to kind of reveal the internal policy. What you will know is that you can see the overall provisioning how we are vis-a-vis — we have credit provision that we do. So that’s the only way to be going-forward.
Jai Mundhra
Right. Okay. Great, sir. I’ll come back-in the queue. Thank you so much.
Praveen Kutty
Please do. Thanks.
Operator
Thank you. Next question is from the line of MB Mahesh from Kotak Securities. Please go-ahead.
M B Mahesh
Just one question on this. This quarter recoveries and upgrades have been a little bit on the lower side. Credit cost has been a little bit on the higher side. There’s some clarity around it?
Praveen Kutty
Yeah. That’s right. The recovery is on the lowest — in absolute sense, that been true, but we have had more than normal slippages happening because of the BC MFI book and some small unsecured DEA books that we had. So on that, while it’s anticipated, but it’s higher-than-normal. Normal.
M B Mahesh
Sorry, that is on the slipping effect, but on the recovery in a bit,
Praveen Kutty
The recovery has been — has been similar to what has been in the previous quarters, whereas the incremental slippage which has happened is on the microfinance book. Usually what happens is that when you have — when you have slippages happening on a normal book, you get recoveries also within the first one or two months. So the pattern is like this, either you recover it in the first two, three months or you wait for the judicial order for any secured asset which you have to take position. And these are the two times when you get all of the recoveries coming through. Whereas in unsecured that first component is seeing higher — once you move into — once MSIs move into a slip into NPA, there is no immediate recovery happening from the book.
M B Mahesh
Yeah. So second question, with respect to the way you’re seeing the industry, with respect to a segment that you are lending towards today, is the business fully liquor growing? What is happening on-the-ground?
Praveen Kutty
See the ticket size that we are in, we are seeing that there is enough demand in the market. On gold loan, our interpretation is, I don’t know-how true this is, but our interpretation is because of the microfinance slowdown, there has been a surge in gold loan and that’s helping both the natural organic book as well as the co-lending book. The — for our kind of business with a low-base, relatively low-base, growing upwards of 20% is not that much of a problem in the chosen segment that we have, there is enough demand for that. So that’s the way I see it, right? It also
M B Mahesh
Having — having — sorry, just to start step-in the other question is more so in the sense that is there a recovery in business for the people on-the-ground? Just trying to understand that part. We understand the credit demand.
Praveen Kutty
There is enough credit demand in the segment. Clearly, there is no slowdown there. You’re able to pick and choose.
M B Mahesh
Okay, perfect. Thanks a lot.
Operator
Thank you. Participants, you may press RN1 to ask the question. Next question is from the line of Mona Khettan from Dolat Capital. Please go-ahead
Mona Khetan
Hello.
Praveen Kutty
Hi, Mona, how are you?
Mona Khetan
Yeah, and good, sir. Good evening. And so yeah, my question is on — so if you look at the mortgage NPAs, for the last two quarters, they continue to rise. So if within the — within the lab book, can you give some color, firstly, the reasons around that? And secondly, some color around the average ticket size and LTV on the lab book
Praveen Kutty
I want to have a look at our slide where we’ve shown the incremental slippage and recovery for mortgages and just compare two numbers for me. One is Q2 slippages and Q3 slippages. One is INR46 crore, that is Q2 and then Q3 it is INR37 crores. So in absolute sense, the slippage is decreasing, okay. Is it where we want to be? No, definitely not. But are we getting better than the previous quarter, most likely yes, right? I’ll tell you which page number to look at. Can somebody help me with the page number page number 26, just have a look at page number 26 and you do the math, 569 minus 532 versus 532 minus 486. So you’re talking about INR37 crore versus 46 crore. So it’s getting better, right? But having said that, we will never be happy. We really want to kind of dry that down.
Mona Khetan
No, but if I look at the — you know the overall size, I mean, last quarter also there was a sharp increase and this quarter also the NPA has increased by 7%. So — and that’s not something seeing for industry as a whole. So anything that’s you know, more pertinent for you that’s causing the higher slippages
Praveen Kutty
Not really. I mean it’s okay, let me put it this way: we are not happy with the fresh slippage happening on the on the mortgage portfolio. But we are — quarter-on-quarter, we are seeing progress happening on that. Our current bucket bounces are looking better. I will take you to the last one of the collection efficiency pages. Have a look at this, really give you a good indication of how things are. Page number 28, right, this could kindly go to page number 28 and look at bucket zero collection. That will give a good indication of how the future is going to look like. So 99% recovery on LAP, 98.9% on home loans, right? So that’s the — that’s the way it’s progressing. On specifically when you spoke about lab we touched 99% for the first time while it’s only a decimal place movement, but the current book, bucket zero book is a large book. So how that even a I’m sure I’m preaching to the converted, but even a small decimal place movement there has got an impact either positive or negative on the future flows. So we are very — we are pretty much happy with the lower slippage, absolute slippage happening on a larger portfolio, not percentages and we are reasonably comfortable with the direction in which our bucket zero collection efficiency is moving.
Mona Khetan
Got it. And is it possible to give some color around the average ticket size and LTV in the lab book in particular?
Praveen Kutty
See, we are always in the 25 lakh, INR27 lakh loan range. So that’s the way we are. LTV number is something which I don’t know whether we will republish. I don’t think we publish that. Do we? No, we don’t publish the LTV number-one is conservative. It is very conservative
Mona Khetan
Got it. And so higher write-offs during this quarter were they mainly on account of MSI portfolio or CV as well?
Praveen Kutty
So CV, that story so well. So we had a lot of bad NPAs they remain, whatever is left and the organic book remains there. The DA book is much better. So we don’t have too much of CEV flows into NPA.
Mona Khetan
Okay. So it’s mainly NFI that has caused a high write-off this quarter.
Praveen Kutty
Yeah. I mean, relatively speaking, but if you look at absolute, mortgage is something which we are working on in curbing, reducing well going-forward. Well, directionally, we are happy with the slippage. If you ask, are you happy with the INR37 crore slippage? No, not really. So — but is better than 46.
Mona Khetan
And just finally, on the margin front, so you know so margins have been trending much lower than what you’ve been guiding for. So what are the levers to margin here on?
Praveen Kutty
Theoretically the levers are your yield in advances yield on investment and your cost of funds and your NPAs, right? Theoretically, these are only four elements to that. Where — at least directionally, again, I’m talking about direction. Directionally, I’m reasonably happy that the NIM reduction, the descend has stopped and we have an uptick, right? We are 3 bps better. And this is coming on the wake of yield and advances going to 11.44% as against 11.38% in the previous quarter. And what was unexpected for us was that unexpected the wrong word to use, but three months back, I thought the cost of funds would stabilize. It hasn’t. It’s increased by 3 bps. The net result of it is that we are — we are better-off by 3 bps on NIM. 11.44 of interest yield, 11.38 previously, 720 of cost of fund, 717 previously. And on NPA, you see net NPA is still at 1.18, so it’s like flat. So I’m taking it out-of-the equation currently.
Mona Khetan
So if I have to understand versus your earlier expectations a few quarters back to now, the 20 bps or 25 bps lower NIM that we are seeing today, that’s driven by, you know if I could understand, maybe if I bids by cost of funds, higher-cost of funds and what are the other things that have not panned out as per expectations, which led to the use has improved.
Praveen Kutty
Number-one villain there is cost of funds. And number two is that our interest yield was descending, if you were to see, I’ll tell you which page number it is, it is 1138 and 1144 page number 31, right, have a look at that. So that — the uptick in the yield on advances a very important factor. It is more than — more than the cost of funds. So cost increase. So these are two critical factors, but we put it another way. Look at this way. Our growth — top-line growth has been 20%. For the first time in three or four quarters, NII is double-digits, it’s actually 15%. What is — what for the NIM to be represent, the NIM growth be represent — NII growth to be representative of the top-line growth, right? If you to grow by 20%, when will the NII grow by 20%. That story is something which we are targeting, right? So if you do it from single-digit, you move to 15%. So going-forward, our ambition and the work that is happening in the bank is to ensure that even though with a lag, your NII growth reflects the top-line balance sheet growth.
Mona Khetan
Got it, got it. Thank you. Thank you so much. And finally, what’s the status on the capital infusion from promoters?
Praveen Kutty
Yeah. I mean, I’ve been saying this repeatedly. There are some minor information that we have to provide to Reserve Bank of India on the capital inflation. And once that happens, it could happen anytime, but that’s what I said last-time also. So we are expecting it to happen frankly anytime. And hopefully, next review, you probably will not ask this question. We will not be answering this question.
Mona Khetan
Sure. Thank you and all the best.
Praveen Kutty
Thank you very much.
Operator
Thank you. Next question is from the line of from SMIFS Capital. Please go-ahead.
Akshat
Good evening, sir. Congrats on a strong set of numbers. So sir, sir, first question is on cost. Is it just due to headcount reduction or is it actually we are already seeing some productivity benefits coming in. Further, you have changed the cost guidance target in the presentation from 60% CTI or below from 55% earlier. And in terms of cost percentage asset at 2.5% to 2.6% from 2.4% to 2.5% earlier. So is there some strategy — some change in strategy on that front?
Praveen Kutty
Yeah. Thank you for the — for the kind words. On the question, I’ll tell you how the cost has worked. It’s a combination of some two, three things. There has been a productivity increase. There has been a selection and a deselection. I mean we have ensured that the performers are you taken care of, the non-performers are groomed, all that work which happened over the nine months period is giving us some benefit, right? So you’re seeing that — and somewhere where we failed, where we’ve been all our effort and still not working up, that has resulted in a headcount reduction. Headcount is only one part of it. We are also acidously working on the — on the other expenses as well. So there has been a series of cost measures that have been undertaken by the management team which hopefully should give a continued discipline on the cost front. So our effort and productivity will continue and on non — on leaving productivity aside, on the other expenses, there is a — there is a discipline that we have put in, which should see similar kind of trend-line emerging in the future as well.
Akshat
So sir, change in cost guidance question, sir.
Praveen Kutty
On the changes, what we thought of is we break-up the milestone into smaller bite-sized pieces so that we achieve that, we overachieve that rather than give a number which is far too distant, which we really haven’t done for the last few quarters. So we — if you were to see cost-income ratio for one, from 64.8%, we are now looking at about 62.4%. We are trying to bring that down, even though the focus much more is on cost to average assets. So getting it under INR260 was a key internal milestone for us. And now we have to get it down to a 255 kind of mode, not going to be easy, especially with the kind of growth momentum that we are targeting. But then again, it’s not an easy job anyways, right? But there’s a lot of work going around towards that. We haven’t changed the on the NIM front also, if you may notice what is — what you mentioned about cost is true. We have looked at slightly more revised numbers, which we would like to get to. And to give you a bit of color on how the DuPont would look like so that possibly am kind of making your question redundant — next question redundant. Yeah. A 350 kind of NIM and then a 1.1 kind of fee. We are currently at 104. We had 123 last quarter, but on core fee income alone if you had to see — or not alone that the good performance on core fee income this quarter is still at 1.04. So it’s a bit of an ask there to get to 1.1. Get to a 255 kind of number. We are at 259. We are touching distance, right? We’re not low-hanging food, but touching distance, doable 255 and credit cost, currently we’re at 38% but for Times not number every quarter we have been saying we are in the 45 to 50 kind of range. So that’s how if you were to look at it, 330 plus 1.1 minus 255 minus 50 into 0.74, if you were to do the math, it probably will come at 1% ROA.
Akshat
Right, sir. Sir, thanks for answering that. Another question is on CD ratio. It jumped like roughly 3% and while it’s still lower than many of the private banking peers, is there some change in strategy on level or is it like some deployment of extra liquidity like from Cut or something else?
Praveen Kutty
No, no, no, simple answer. We got some Tier-2 capital during the quarter and that came in and because that came in we looked at — we looked at-cost of funds, we looked at a bit of borrowing. Even though customer deposit, if you see has also grown handsomely. So we did a bit of a bit of a the mix to get the cost also into play, which has resulted in the cost of deposit on the — sorry, on the on the CD ratio going worse, but that’s not a direction we want to take. We’re not particularly happy with that. We always want to grow deposit more than cost — more than loans. We want to bring it back. So this is — it’s not something which we are — we are — there’s no strategy change in that direction at all. In fact, if anything, it just reiterates our — of our strategy that we should get the CD ratio back to lower levels?
Akshat
Right, sir. If I could just squeeze in one small question. Yield on advances uptick, is it related to co-lending growth or more of a function of increase in LAP versus retail mortgage loan? As in — has it moved substantially from a roughly 50 demarket which you had guided like earlier. So how fast are you planning to ramp-up this proportion of business loan, which would probably help offset the impact of anticipated rate cuts at some point this year.
Praveen Kutty
See, essentially, you’re right, it is because of the change in the mix. Co-lending cannot — I mean, cannot give you that benefit to that degree, right? So that’s not it. You moved the BL to HL, but sorry, HL to BL. But I want to tell you this, that may not be the way it will be continuing in the future. And the reason why we are relooking at it and revamping that thought process is because of the advent of PMAY. The current PMAY is this — is hitting the sweet-spot of the home loan, which DC Bank does. Around INR25 lakh, there is five-year the book stays with you, upper cap of 11.5% interest-rate. If the customer becomes delinquent, then the customer ceases to get the subsidy. The subsidy spread over five years. So these are wonderful principles which just makes it so much of the kind of loans that we want to do. And obviously, it comes at a low RO risk-weighted asset. So we may, once the final PMAY guidelines come up, relook at this ratio business and we may even ramp-up the home loans because at 11.5% max, which meets all this criteria, there is an onus for the customer to make the home loan, the last loan he or she will default. So probably we will give that home loan once PMFA comes in or affordable home loan, the impetus that it deserves. But till then, the BL will continue to dominate over HL.
Akshat
Thank you very much, sir. Have a great evening.
Praveen Kutty
Thank you very much.
Operator
Thank you. Next question is from the line of Aditya from SIMPL. Please go-ahead.
Aditya Khandelwal
Hi, sir. Thanks for the opportunity. Sir, my question is on co-lending. So we have stated in the past that we would like to keep this at 8% to 9% of total advances. So this quarter this constitutes now around 11% of advances. So is it just a one-off or there is some change in the strategy of the bank?
Praveen Kutty
No, see, I’m not too sure whether we have said that the co-lending will be an explicit percentage at least in public, okay? I don’t think you’ve said that. But having said that, as a bank, there are reasonable caps that we have at a product segment location level, which we won’t — we don’t want to bust because of inherent risk reasons. But as far as co-lending is concerned, we’re pretty much comfortable with the kind of book growth that we are getting. We’re comfortable with the yield that we’re getting, the book growth that we are getting. And I’ll tell you some of the philosophy on co-lending, it’s very important that we should articulate that. We want to be — we want to do co-lending with partners who are either not in the product that we have or not in the segment that we have or not in the location that we have. So we make clear who we want to do co-lending with and for what, right, that tomorrow after getting an experience of the of this unknown product, unknown segment, unknown location, will we go into it that probably exists. But the fact is we want to keep — we keep extremely clear Chinese walls to ensure that the partners are — we were in that in that level. This comes with with low or very little operational cost helps a cost-income ratio. At the right yield and at the right risk framework, it’s a good partnership to get into as long as you’ve chosen the partners right?
Aditya Khandelwal
Understood. And sir, as you mentioned that co-lending would give you lower yields, but should have a lower opex as well. So on a return perspective, does this product give us a targeted ROA of 1% or is it lower or is it higher? Any perspective you can share on the same?
Praveen Kutty
And unfortunately, I wish I could, but I can’t — we don’t do product-wise ROE. But obviously the kind of business that we do has to be accretive in nature. Otherwise, why will you do business, right? It has to make sense for both of parties, if you would do have a scale that business.
Aditya Khandelwal
Understood. And sir, next question is on your cost of funds. So our deposit growth has been pretty — pretty good as compared to the industry. So because of which cost of funds have seen some increase because of liquidity concerns in the system. So do you think the cost of funds have peaked now or they could increase further?
Praveen Kutty
Look, last quarter also I said I expect this to be stabilizing in the next quarter and that has not proven true. Okay. And it’s not because we took a Tier-2 capital, which usually is a slightly higher-cost than normal deposits. That contributed, but that’s not the only reasons. There is a tightening which is there. Maybe who knows, Q1 could tell us a real story, but I’ve been proved wrong last quarter. So frankly, I don’t know whether that opinion really matters, right? So what we are looking for is to ensure that we get the right constant — the right the right components, right, get retail, deposit, small-ticket size as far as possible interviews and small, small businesses, get the rights with our LCR norms are well and truly and very comfortably met. But on cost of deposits, one really can’t tell. All we can say is that the deposits that we used to book three years back when it gets repriced is fairly at a similar kind of rate. So it is not a question of repricing the stock, which is creating an increase in cost of fund. But there is — I mean, it’s undeniable that there is a tightness of deposit in the market. You know that from the industry published figures as well.
Aditya Khandelwal
Understood. Understood. And sir, our targeted ROA of 1%, so there were three levers. So one was cost-to-income and other income. So on both of these aspects, we are touching — we are within touching distance of our targeted range. But on the NIMs part, that is one area where we are pretty far from a targeted range. So going from around 3.2%, 3.3% NIMs to around 3.5%, 3.6% NIMs. How long do you think it will take us to reach that level to achieve our targeted ROI of 1%?
Praveen Kutty
So this is what I was telling Mona who asked the question earlier. If you were to look at the last 3/4, the top-line was leading, we were around, 18% 19% consistently but the NII was lagging and therefore the bottom-line also was lagging, a single-digit growth. Now you’re seeing NII growth at 15% or Y-o-Y, right? There’s a 15% Y-o-Y increase on a 20% growth in the top-line. The — you will see the NIM benefit actually coming through when the volume benefit translates in entirety to the NII growth. Let’s say, I’m not saying it’s a 20%, but let’s say it’s 20% top-line and then when the top-line growth at 20%, the NII also grows by similar 20% Y-o-Y. So that is where you would see us inching closer to the 3.3 kind of NIM that we are targeting in. But having said that, every second decimal point improvement, whether it’s cost of cost to average assets or fee is a fight. So there is a lot of work happening on that count to get that moving. And also remember, we have credit cost is 0.38, whereas the guidance is around 0.45. So we have to cover-up for that also because the steady-state scenario is that it’s around 0.45.5 kind of number. So you have to cover for that also. So we are — the management team is aware of it, is working on it, how well we execute and how fast we execute will tell the story. I think directionally, we are going right and what we are watching is how are we moving directionally? Is every quarter directionally better in the previous quarter?
Aditya Khandelwal
Sure, sir. Thanks for answering your question, sir. I’ll jump back-in the queue.
Praveen Kutty
Not at all. Not sir. Thank you so much.
Operator
Thank you. Next question is from the line of Netan Agrawal from Motilal Oswal. Please go-ahead.
Nitin Agarwal
Yeah, hi, good evening, everyone.
Praveen Kutty
Hi, Nitin, how are you?
Nitin Agarwal
Hi,, thanks and congrats on good numbers.
Praveen Kutty
Thank you very much.
Nitin Agarwal
One question I have is on margins, which is a key metric for us to achieve 1% or higher ROA, right? And so like how confident are we to improve NIMs to 3.6%, 3.65, especially as the deposit markets remain tight, liquidity remains in a deficit and going ahead with potential rate cuts, yields may get further impacted. So how do you look to drive this? And any color that if you can provide around the incremental disbursement yields and the book composition in respect to the repo and MCR linkages? So covering this entire piece, if you can provide some color and because this is very key to for us to reach 1% ROI.
Praveen Kutty
So what we’re doing is, I’ll tell you first what we are not doing because that’s very important. In the chase for higher NIM, we are not going to move-out of the risk framework or the business strategy framework that you have put for oursels. And the reason for that is we have seen the bloodletting that the market does market frankly is red in its tooth and the claw, right? It is kind of bites you back very badly so during tough times. So that is something which we will not be kind of exploring. So within the risk framework and the business strategy framework. We are really reassessing our portfolio because if you were to look at the portfolio, you have all kinds of low-level, we are working out strategies to improve the ROA and ROE for the loan. How do we improve that? First, diagnosis is very easy, right? INR47,000 crore of loans, which are the ones which are cutting it, which are the ones who are not cutting it, we know that. Now that’s the easy part. The difficult part, which we have embarked upon is where — where those loans are not cutting it, how do we ensure that we get additional revenue through a variety of products the bank has and mostly it will lead to increase in fees, specifically core fee income, right? I mean, you can’t negotiate and get a higher-rate of interest. But what we can do is you can get a higher revenue and we have started doing that already and you’re seeing some benefit of that in the improvement in the core fee income over the last three, four quarters, right? I’m not saying all of it is because of the good work that you’ve done. We just — it’s really our doors task, it’s not easy to go back and cross-sell various products that we have. We have a — more than 50% of our INR47,000 crore book is mortgages. Mortgage is a — for us, it has been always been a low engagement product. Now we are unashamedly, shamelessly going back to the customer, finding out ways in which we can offer something he or she wants in the financial market, which would help him or her and also would help us get revenues from the — from the second or third product that we are offering. A tough task, not easy, difficult, but — but that’s how we are planning to improve the ROE at the loan level. It may not increase your NIM, but it definitely will improve your — your overall revenue from the customer. And end-of-the day, frankly, it doesn’t matter to us. Because the stickiness increases with the second product. There are so many other benefits that come through. A lower-cost of fund provider will not be able to take that customer away from us. So theoretically, there are a lot of benefits, but practically how well the team and I implement this will mean how fast we get to the decide ROE.
Nitin Agarwal
Right.
Praveen Kutty
Sorry, long answer, but it’s very important that we share with you what our thought process is
Nitin Agarwal
Very helpful. Thank you so much and wish you all the best.
Praveen Kutty
Thank you very much,.
Operator
Thank you. Next question is from the line of Rishikesh from Robo Capital. Please go-ahead.
Rishikesh Oza
Yeah, I’m good, sir.
Operator
Sorry to interrupt you, but your audio is not clear. Can you come in a better reception area, please?
Rishikesh Oza
Am I audible now?
Praveen Kutty
Oh, very much.
Rishikesh Oza
Okay, great. So my first question. It looks high.
Operator
Sorry to interrupt you, but again, your audio is breaking. May I request you to rejoin the queue, please reconnect the line next question is from the line of Rakesh Kumar from B&K Securities. Please go-ahead. Rakesh, may I request you to unmute your line and go-ahead with your question please Rakesh Kumar, can you hear us?
Praveen Kutty
Maybe he’ll come back. You want to go to the next?
Operator
Yes, sir, sure. Participants, you may press R one to ask a question. Next question is from the line of Gaurav Jani from Lilladher. Please go-ahead.
Gaurav Jani
Yeah. Thank you. Just one question. So on the MFI front, right, so what kind of a timeline do you envisage in terms of the pain that could — that could be recognized in the upcoming quarters? Any color on that?
Praveen Kutty
Yeah, I wish I could tell you an answer. I wish I knew myself, but what we’re seeing in the industry when you go to credit bureaus, etc is that every subsequent month looks like worse than the previous month. So that’s a very pessimistic answer. Yeah. But we — I wish we see an improvement happening. But right now, the honest answer is we don’t know.
Gaurav Jani
And sir, if you could just sort of also give out, you know as to what kind of stress has already been recognized of the overall MFI portfolio. If you can just throw out some numbers, please.
Praveen Kutty
Page number 26 has it. It doesn’t have it, is it? Actually it’s all mixed up in the others so you probably get a sense of how that is moving see because it is a small portfolio it is a small portfolio so it is getting kind of submerged in that others column so it’s not big enough for us to show separately.
Gaurav Jani
Understood. And sir, just you know, just wanted your sense on the normalized credit cost level, right? So before COVID, if I had to look at your historical numbers, we were at somewhere between the 60 to 80 basis-points. Now with credit cost normalizing for the system and other banks, what sort of levels are we — could we envisage after this MFI pain is entirely recognized.
Praveen Kutty
Yeah. Well, having said that MFI is a small — I mean see in the overall context of things, for us, it’s a very small percentage of pipe. The 16% to 18% credit cost was is actually unreal because — and I’ll tell you why it’s unreal because we had a large restructured book and the restructured provision was taken for these customers.
Gaurav Jani
So please let me interrupt, I meant 60 to 80 basis-points pre-COVID.
Praveen Kutty
I’m not too sure whether it’s right, but somebody can check this out. My understanding was that in — okay, I’ll have a look at March 2020 or even March ’19, that will be a good number. Yeah, hold-on for a minute. Let me see whether you’re right. If you are right, right then I probably don’t have an answer, but I think you’re not totally correct. We’ll check it out. Can you hold-on for about 10 seconds if you can, please?
Gaurav Jani
Yes, please.
Praveen Kutty
I just check for us. 2019 is a good time to check, right, because March 2020, or March 24 March 2020, we already had declared COVID and we have taken provisions, incremental provisions or most banks had we also did. So 2020, March may not be the right year to look at. We’ll have a and see where we were.
Gaurav Jani
Yeah, I am looking at the numbers, so ’19 was about 64 basis-points. That is provisions there by average loans that was 77 basis-points in ’18. So
Praveen Kutty
Just hold-on. On. I’m will tell you in a moment. But let me answer the second part of the question. Where do we see this? We see normalized credit cost somewhere between 45 bps 55 bps. That’s what the model usually supports. And the reason why we’ve been consistently lower and even in Q3, we are lower is that we are — we are getting a diminished return benefit on the restructured book going being there. So I’ll have a look at March 19 c and get back to you. Somebody is furiously searching for it. Is it? Is it correct? Yeah, it is correct. It’s not correct? No, okay, we, we are just checking. So, Gaurav,
Gaurav Jani
Yes, sir, I’m there.
Praveen Kutty
Yeah. Let me see if I can provide you an answer right now. Otherwise, I can send you by email after checking whether this credit — what the credit. What I’ll do is, we’ll get you to — we’ll get to send you a trend-line of the credit cost — annual credit cost for the bank for ’18, ’19, ’23, ’24 and now. Let’s have a look at it. Based on that, we can revisit this question, if that’s okay with you.
Gaurav Jani
Sure, sure. No problem, sir. I’m done from my end. Thank you so much.
Praveen Kutty
But if you don’t hear from — from us, please Call-IT. I’m sure you will hear it, but happy to take this question. I’m happy to come online with you and talk to you, give you the answer for this as well.
Gaurav Jani
Sure. No problem sir. Appreciate that. Thank you so much.
Operator
Thank you. Next question is from the line of Amit from Robo Capital. Please go-ahead.
Amit Mehendale
Thanks for the opportunity.
Praveen Kutty
And now your voice is sounding nice and clear.
Amit Mehendale
Great. So my first question is on the profit and sale of investments. So if I look at the last year and for FY ’24, the number was, I think INR33 crores. And the first-nine months you’ve booked about INR100 crores plus and this quarter is also healthy, I think around INR350 crores. So what should we forecast that number for FY ’26, ’27? Broadly, what is the run-rate annual loans, right?
Praveen Kutty
Look, I won’t be able to comment on that because what we do is we forecast the core fee income, okay, internally also, we look at the core fee income and have a — we have a clear plan, a clear goal on whatever is core. And then we look at one-offs, which can happen both at the opportunity front and the risk front. So that’s how we plan our budget for three years go-forward. But to answer your question? But to answer your specific question, it is — it depends upon how the interest-rate movement happens. In fact, what I will do is I would request Ajit Singh, who heads Treasury to kind of give his views also. Hold-on.
Ajit Kumar Singh
Amit, actually it is easier to predict at least for a 12-month horizon for rate of interest. But please note that for-sale of investment, a decent portion would come from equities by way of IPO. For that, it is very difficult to make a projection for coming one year. We don’t know-how equity market will evolve and what kind of IPO will be there and what kind of premiums will be there on that. It’s very difficult too. But generally for rate of interest, we understand that going ahead like interest-rate should decline. This is a fair projection. It’s a question of time like somebody may be predicting for 1/4, it may take two quarters or so. But it is very difficult to predict for the equities actually how IPO market behaves. So we are not able to give you the precise number for that is, it will be a little unfair on our part to give a guidance to the market on that.
Amit Mehendale
So, but I mean, my understanding or my interpretation from outside was that whenever there is a one-off on the cost side, maybe some treasury profits can be booked off that one-off so that some run-rate can continue. Is there a fair assessment or it’s not like that?
Ajit Kumar Singh
Your assessment in the sense that please note that we are typically NIM-centric PAC and although we do book one-off income, but we have a calculation on the — how our say yield on existing assets will behave going ahead. Part of income we may be booking, but it’s not everything — everything that is on the plate, we finish it off. This is the way. But interest rates, we believe that there could be decline and bank may be booking, say, trade income — trading income. And in the present regulatory environment, only 5% of STM book is there. One-off like during the first-quarter, it’s not available. So that’s what we can book. If we decide to book, we can book. But it would be unfair to give you a projection for the coming financial year at that. Because we don’t know-how equity will be.
Amit Mehendale
Yeah, sure. Thanks. I have second question on — I think I joined the call a little late, so apologies in case this was this was earlier. There is a write-off of about — there was a write-off of about, I think INR80 crores-odd. Yeah. So can you share some details on that?
Praveen Kutty
Yeah. So last year, our write-off, if I remember right was about INR69.3 odd crores, maybe slightly short of INR70 crores. And this year, the write-off was about INR71 crores. And it is in-line with the normal write-off or which we take. So that continues as normal. And so it’s a mix of various products which we have you know, kind of gone through and residue which remains is written-off. But for the frontline it is it is business-as-usual they continue to collect and we continue to get income — recognized income on collection of these on a go-forward basis? Although in ribs and wraps.
Amit Mehendale
Okay, perfect. So there is — I mean, was there a one-off there because in December quarter there was a bump there, right? But on an annual basis, you’re saying there is no one-off if you look at. Is that my understanding correct?
Praveen Kutty
Yeah. No, it is a normal one. Yeah, it’s a — Ravi, you want to comment on that?
Amit Mehendale
I mean, if I look at December the Q3 numbers, I see INR84 crores there on slide number
Praveen Kutty
So there are — so that includes the — OTS. It includes write-off, haircut, sacrifices, OTS all put together. So we give up a complete download on all kind of sacrifices that taken during that particular quarter.
Amit Mehendale
And out of that, so I mean, is microfinance contributing large portion out of that 84 is — is there some color available on that?
Praveen Kutty
No, no, no, no. It is a combination of accumulated stuff. Microfinance is a microfinance problem and NPA is a new phenomenon. We don’t want to give it up in this early. We’ll continue or multiple levels of collection of strategy including legal, including feet on-street, including calling, all that works. So before we write-off anything. So these are — these are not necessarily NFI, at least not currently. Maybe two years down the line, possibly some of microfinance also could come in.
Amit Mehendale
Sure, perfect. Thanks a lot. That’s it from my side.
Praveen Kutty
Not at all.
Operator
Thank you. Next question is from the line of Raghesh from JM Financial. Please go-ahead.
Raghvesh
Okay, congrats on a good set of results. So what we wanted to understand
Operator
It’s coming little muffled. Can you speak through the handset, please?
Raghvesh
Hi, is it better?
Operator
Yeah.
Praveen Kutty
Much, much better.
Raghvesh
Okay. That’s a very great set of numbers. What I wanted to understand is how the average ticket size expansion works in terms of the economics. Understanding is maybe the yields would be lower there is the cross-sell income higher and is the you know lower-cost initially? Does it compensate for sacrifice on? I this?
Praveen Kutty
Okay. First of all, the higher-ticket side thing hasn’t shown any appreciable material movement, okay, at least not enough material movement to create a dent in the cost or improve the productivity. That has not happened yet. So — and also the yield will have a slight impact had it gone higher. So we still are trying, but that really hasn’t caught fire so to speak, right? So why we want to get-in that segment is that overdraft product 50 lakhs is something which we have an inherent advantage over the type of competition that we deal with, which is mostly NBFCs. So that’s why we’re going a slightly higher-ticket size between the same framework. But to say is it — is it working? No, it is still very much WIP. We are — we’re not particularly happy with the kind of movement that is happening. That is sad. And so therefore, it’s definitely not the reason why the cost-income is improving or the reason why cross-sell income is improving. The cross-sell increment is improving primarily because we’re going after the old customers who have not been gone after. We have been reaching out to asset customers. In-branch — in the branch business, there is much more of transaction digital as well as physical to enable cross-sell. On the asset side, primarily on the mortgage side, we’ve been kind of pretty dormant about it. I mean, there’s one interaction in the beginning, one or two interaction during the tenure and then whenever the customer closes the account, closes the home loan, that’s another attraction. So we are trying to change that, reaching out to these customers and they are — they have same financial requirements as just about anybody else. So there we are seeing a slight uptick happening on the cross-sell, cross-sell related fee income.
Raghvesh
So that is what we are seeing now. So if we are able to increase, we are able to double the ticket size. So in that segment, the yields will be lower, right? The yields will be lower than that.
Praveen Kutty
So obviously, that’s an opportunity for us is that from a ’27, if we were to go to even 45, that’s at least a 60% 70% improvement in productivity. So we still are at it. And theoretically will it result in a reduction of yield? Maybe, but the net revenue will definitely be positive for the bank rather than negative. So because the price differential between a 45 lakh and 27 lakh or 26 lakh is hardly anything.
Raghvesh
And sir, how is the sourcing mix in our mortgage business? I mean, entirely in-house or are we dependent on the DSA for a large portion?
Praveen Kutty
So we continue to be partly dependent in the big cities, there is a dependence in the smaller towns, we are fairly doing things on our own. So the ratios have not changed too much.
Raghvesh
Thanks for this. Thanks a lot.
Praveen Kutty
Not at all. Not at all.
Operator
Thank you. Ladies and gentlemen, that was the last question.,
Praveen Kutty
Thank you very much.
Operator
Go-ahead, sir, would you like to give any closing comments?
Praveen Kutty
No, that’s it. It’s — we are back to the drawing board, back to putting a nose to the wheel. It’s a challenging market out there. It’s not easy, but we have a task on-hand and we’re just putting — taking fresh god and facing the next ball. That’s where we are.
Operator
Thank you very much. On behalf of DCB Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.
Praveen Kutty
Thank you very much.