DCB Bank Limited (NSE:DCBBANK) Q4 FY23 Earnings Concall dated May. 05, 2023.
Corporate Participants:
Murali M. Natrajan — Managing Director & Chief Executive Officer
Satish Gundewar — Chief Financial Officer
Praveen Kutty — Head – Retail Banking
Analysts:
Darpin Shah — Haitong India — Analyst
Jai — I-Sec — Analyst
Akshay Gupta — Investec Capital — Analyst
M B Mahesh — Kotak Securities — Analyst
Rakesh Kumar — B&K Securities — Analyst
Rishikesh Oza — RoboCapital — Analyst
Indrajit — ThinkWise Wealth Management — Analyst
Nitin Aggarwal — Motilal Oswal — Analyst
Krishnan ASV — HDFC Securities — Analyst
Sohail Halai — Antique Stock Broking — Analyst
Pallavi Deshpande — Sameeksha Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to DCB Bank Limited Q4 FY ’23 Earnings Conference Call. Joining us on the call today are Mr. Murali M. Natrajan, Managing Director and CEO; and Mr. Satish Gundewar, Chief Financial Officer; and Mr. Ajit Kumar Singh, Chief Investor [Phonetic] Relations Officer. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Mr. Murali Natrajan. Thank you, and over to you, sir.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Thank you. Thank you very much for joining this call. I am talking to you from our boardroom in the corporate office. We have Satish Gundewar, our Chief Financial Officer. Then we have Praveen Kutty, our Head of Retail Banking. Then we have Meenakshi, who’s our Relationship Head for FI and Investors. We have Meghana, who is our Branch Operations Manager. We have Venky, who’s our Operations, HR and Technology Head. We have Sridhar, who is our Chief Risk Officer. We have [Indecipherable], who is CFO in-charge and currently handling our Operations and Special Projects. Then we have Satish [Phonetic], our Head of FI and Treasury — sorry, Ajit. My fault. Ajit, who is the Head of our Treasury and FI. Thank you very much for dialing-in. We also have our support staff from finance.
So this is a Q4 results and full year 2022-’23. I believe that we have a very robust quarter. Our balance sheet has crossed. INR50,000 crores, now it is about INR52,000-odd crores. The total business has crossed INR75,000 crores. Deposits have crossed INR41,000 crores. CASA is about INR10,500 crores. So we personally feel very happy and proud of achieving these numbers. And we are putting the bank on a trajectory to double the balance sheet in about four years. Our intention is to reach the INR100,000 crore of balance sheet in about four years time.
The performance on net interest income has been good, at 27.7%. What is very important to know about our income is that there are two big income streams which was presented last year, which was more or less non-existent this year. For example, PSLC, we made very decent amount of revenue in the year FY 2021-’22, but in ’22-’23, because of market conditions and regulatory changes, there has been a steep fall. And despite that, the overall fall in the other income category has been very limited, primarily because of the good work that is happening in third-party distribution fee on our — on processing fees and other items which are all the core items. So that is really something we are very happy about.
Operating profit is pretty much flat to last year. Of course, the year FY 2021-’22 had some one-off items. But nevertheless, the operating profit for fourth quarter has been very good at 11% higher than previous year same quarter. But again, important thing is that as we have made investments in the frontline, and in one of the chart in the investor presentation, you can clearly see the quarterly disbursal without considering the co-lending, how smartly it has moved up, and we are confident that given the frontline capacity and the productivity that we are working on, and also some of the frontline investments we are doing in technology, we should be able to consistently improve this number for further.
From a cost to income ratio point of view, the fourth quarter was 59.9%. Usually the fourth quarter is far better than the previous quarters because of the momentum that we have. And if you look at the same quarter previous year, again, you have seen that we had delivered INR113 crores of profit, which is all-time high. This year, we had done INR142 crores, which is again an all-time high. We believe that the profitability in a steady manner will continue to improve. One of the other thing that has gone up very well throughout the year for us is that, our upgrades and recoveries have been consistently equal to or higher than our slippages. And that is one of the reasons why we have been able to substantially reduce our provisions for this year, in fact, compared to previous year.
The other point to note here is that, pre-COVID, our operating profit divided by provision used to be in the range of 4 times to 5 times. We are back to that level, which clearly demonstrates the robustness and the strength of the business model. The net NPA is pretty much close to 1%. Our intention is to bring it down further over time. Initially, our target was 1.5%, but we have been able to surpass that target. For the fourth quarter, ROA is 1.1% and ROE is almost close to 14%, which has been our intention. Again, usually, as you know, in the first quarter, there is cost comes in of salary increases. So I expect some impact of that in the quarter in 2023-’24. However, we are confident that if we consistently improve our performance the way that has been seen now, we should be able to deliver the kind of results that are coming through. So those are some of the details I wanted to share with you.
And we have declared a dividend of 12.5% this year. And we also raised capital of about INR300 crores Tier 2 in the fourth quarter, which is also reflected in our capital adequacy. Our capital adequacy continues to be strong. And we believe that given the efficiency of usage of capital, we should be able to grow our book, and without having to raise capital for at least another year, maybe 15 months. That’s our current thinking.
So with those observations and with those commentary, I would like to hand over for 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 Darpin Shah from Haitong India. Please go ahead.
Darpin Shah — Haitong India — Analyst
Yeah. Hi, thanks and congratulations on good set of numbers. So, couple of questions. First is on margins. So, sir, you have mentioned that in the PPT that you are targeting margins of 365 basis point to 375 basis point. We are already at roughly around 4.2% types of or 420 basis point kind of margins. So do we see there is another sharp drop in ’24 or this is just a long-term target which you are looking at?
Murali M. Natrajan — Managing Director & Chief Executive Officer
See, our business model and the product mix and the kind of slippages and upgrades that we expect and the kind of deposit profile that we are working on, we have built a business model which can deliver higher than 1% ROA and closer to 14%, maybe higher than 14% ROE, with 365 basis points, 375 basis points of NIM, okay? Now the methodology, always there are so many moving parts in this NIM. The methodology of passing on the increase of interest rates in EBLR is that, as soon as Reserve Bank of India changes the repo rates, we pass on that to the customer. However, the deposit cost would be actually coming through. So I do believe that the deposit cost that is coming through — in fact, fourth quarter deposit costs was high, especially for retail term deposits. I believe that it will have an impact on margin. And even for this current year, at least from a business model point of view, we are not assuming margins of 4.18%, okay?
Also, we have had some benefit. There has been an interest — did we considered the margin, the INR3 crore of tax? No? So, we didn’t consider that, fine. Then it doesn’t really matter. So I think the upgrades and recoveries were very strong and that also results some amount of reversal of — that is recognition of the income which was not previously recognized. So that also impacts the margin in a positive way. Hello?
Darpin Shah — Haitong India — Analyst
Sorry. Yeah, yeah, sorry. So in terms of — sorry?
Murali M. Natrajan — Managing Director & Chief Executive Officer
[Indecipherable] Yeah.
Darpin Shah — Haitong India — Analyst
[Indecipherable] has already happened for our book and how much more it can happen and lead to increase in cost of deposits then?
Murali M. Natrajan — Managing Director & Chief Executive Officer
See, the cost of deposits, last we changed the cost of deposit must have been at least one month ago, somewhere in March or — March. Yeah, March, we changed, I think, the deposit. Since then, I don’t think we have changed the deposit rates. It is published in our website. And I don’t believe that deposit rates are coming up, but what I’m trying to say is that all the new deposits will come in the higher rates that has been — when I say all the deposit, most of the retail deposit. And we are taking longer-term deposit because of our mortgage book. We target 20, 24 months kind of bucket four our deposit. So that will have an impact on the cost of funds. And we won’t be able to pass on further. Only in MCLR we can pass on, but not in EBLR portfolio. So that will impact NIM.
Darpin Shah — Haitong India — Analyst
Okay. Fair enough. And sir, lastly on the asset quality front, we have seen a sharp improvement in slippages during the quarter. What trend do you see for FY ’24 result?
Murali M. Natrajan — Managing Director & Chief Executive Officer
We should be in similar. But there may be some month on and all. But if I remember right, I had mentioned in the first quarter of last year itself, there is about two to three quarter the slippages should go back to pre-COVID levels. And I think without gold, our slippages are about 2%, which is what — 2%, 2.5% was our slippages then. If — the way we have analyzed our portfolio, if slippages do go up in any particular quarter, we are pretty confident that our collections and our recoveries efforts would bring it down. So we don’t see any issue with our portfolio. Only if you see an issue with the portfolio, then consistently your credit slippages and all will increase. There may be some up and down in one or two months here and there. But other than that, we don’t see any challenge at the moment.
Darpin Shah — Haitong India — Analyst
Okay, just one last question — a data keeping question, if I can get the breakup of provisions for the quarter and full year? Thank you. Satish, you have that? Yeah, Satish will…
Satish Gundewar — Chief Financial Officer
Data for the quarter, I think for the earlier calls we had given the data for the respective quarters. So the NPA provision is about INR39 crores. Floating provision is about INR4 crores. And the provision relating to standard asset, restructured standard assets and other things, they are the rest of it. The total provision for the quarter was [Indecipherable].
Darpin Shah — Haitong India — Analyst
Okay, thanks a lot.
Murali M. Natrajan — Managing Director & Chief Executive Officer
See, Darpin, I want to tell you something. I looked at IBA publishers, all the private bank and SFB results, of course they are one year late. They have published that for 2021-’22. And I looked at the floating provisions. We are the only bank, I repeat, we are the only bank for the last several years consistently having making floating provisions quarter-on-quarter and our floating provision currently is about INR137 crores, which is considered in the calculation of provision coverage. And, touchwood, we have never had to use the floating provision. Some of the banks have used the floating provision. So that’s an important strength which is there in our bank.
Darpin Shah — Haitong India — Analyst
Yeah. Great, sir.
Operator
Thank you. [Operator Instructions] The next question is from the line of Jai from I-Sec [Phonetic]. Please go ahead.
Jai — I-Sec — Analyst
Yeah. Hi, good evening, sir, and congratulations on a good quarter.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Thank you.
Jai — I-Sec — Analyst
First on asset quality, [Indecipherable] the slippages we have had high slippages on gross front because of the some daily recognition and some of gold-related products, OD-related products. Has that now normalized with this quarter slippages coming down significantly? So can we say that the entire whatever technical reasons that has now ended?
Murali M. Natrajan — Managing Director & Chief Executive Officer
See, if a customer does not pay their interest or principal — and/or principal for like three — installments are 90 days. There is nothing technical about it. That is an NPA, okay? The November 12 circular, what we were impacted, the gold loans were impacted by that is because we are giving an OD product. Many of those OD product customers have, after, what is that called, closing their current loans, have switched to installment loans, okay? So in installment loans, that 90-day problem on November 12 circular does not happen, because even if they service one interest, they will still be all right as long as they don’t slip to 90 days past due, right? So, to that extent, I think a lot of that issue has been addressed. But I do believe that while addressing that issue, we may have lost some target market who were only wanting to have OD kind of product, but we did a cost analysis, the cost of chasing them when collecting workers doing — losing their business. We took a call saying, let’s just do this, because it impacts productivity of ground staff if they have to chase up these customers.
Regarding mortgages and commercial vehicle and rest of the other kind of retail product like KCC, tractors and all, we very much believe that those portfolio seem to be intact. Barring any unforeseen situations, the slippages should be pretty much close to, if not better, to pre-COVID levels.
Jai — I-Sec — Analyst
Right. And sir, in this quarter, how much were the slippages from the restructured book. There is a…
Murali M. Natrajan — Managing Director & Chief Executive Officer
We don’t present those information. The entire — whether it is from slippages from restructured book or non-restructured book, everything is slippages. And that is how it has been every quarter. And the recoveries and upgrades were also from both restructured and normal thing. So we’re not presenting that information. Don’t worry about the restructured book. For one year it has performed. So you should worry about that. Anyways, we don’t, so you shouldn’t also.
Jai — I-Sec — Analyst
Sure. And almost entirely has come out of moratorium, right? I mean, they would be starting to service…
Murali M. Natrajan — Managing Director & Chief Executive Officer
Only small fraction is left, which will come out by, I think, July. But it’s almost very, very small portion is left. Everything else is out of the moratorium. And when they come out of the moratorium, we have to struggle with the customer for about two to three months. And because their muscles of prepay has [Indecipherable] so they have — despite our pushing and whatever, it doesn’t work. So finally, when the collection team is constantly following up with them, they start repaying and then it gets almost normalized in what about two, three months. So that possibility there even for the ones that come out in July, but overall portfolio includes slippages from restructured, and recoveries and upgrades, also includes slippages from restructures.
Jai — I-Sec — Analyst
And, sir, if you have the number for ECLGS, right, if — as in how much is the ECLGS?
Murali M. Natrajan — Managing Director & Chief Executive Officer
[Foreign Speech] ECLGS slippage is also in this. ECLGS recovery is from government also in this. Everything is all inside this. And we didn’t give ECLGS to any unsecured customer and all, very this thing. I mean ECLGS [Foreign Speech]. Even I don’t look at it, by the way.
Jai — I-Sec — Analyst
And on the cost of deposits, sir, would it be fair to assume that your card rate on TD would have peaked, or do you think you may still have to increase the card rate of TDs, while cost of deposit may keep going up because of the — as deposits reprice. But the fresh TD in your view and the card rates would have peaked, or that is…
Murali M. Natrajan — Managing Director & Chief Executive Officer
Praveen, our Retail Head, can answer it. Praveen, over to you.
Praveen Kutty — Head – Retail Banking
Yeah. Hi, Jai. Praveen here.
Jai — I-Sec — Analyst
Yeah. Hi, sir.
Praveen Kutty — Head – Retail Banking
So currently, the peak rate we have on term deposit has remained there all through Q4. And there is no reason to believe why we should increase the rate for getting the kind of term deposits — the kind of deposits that we got, right? I mean, Q4 is, by convention, the — particular quarter where the most — highest amount of renewals and highest amount of acquisition happens. We’ve been through it and I don’t see — at least, personally, I don’t see that increasing any further for the kind of loan demand that we have going forward.
Jai — I-Sec — Analyst
Sure. And…
Murali M. Natrajan — Managing Director & Chief Executive Officer
In between buckets, based on our ALM profile and things like that, we do keep doing that. For example, let’s say, we decide that we want to attract more deposits in, say one-year bucket, or more deposits in a three-year bucket, that ALCO will keep doing some changes depending upon the profile, right? So overall peak doesn’t seem like an issue at the moment, at least.
Jai — I-Sec — Analyst
Sure, sir. And last two questions, sir. The first is, in the last one, two years we have added a lot of capacity in terms of branches and headcount, right? And so if you can share if there is any qualitative improvement in the loan sourcing also? So, I mean, if one were to club connectors, let’s say, outside bank channel, so is there any meaningful change in the way we would be sourcing business just because we have added a lot of branches and employee in the last one, two years?
Murali M. Natrajan — Managing Director & Chief Executive Officer
In the metros, like I mentioned in many of my calls — previous calls, almost 70-odd-percent of the business comes from connectors, okay? But in AIB and non-metro business, almost 70%, 80% will come from our own sourcing. And that mix is how it is proceeding. But to give you some more sense, if we look at the total disbursals without co-lending in Q4 of 2021-’22 versus Q4 of the year that has just gone by, there is a 50% improvement in the disbursal, whereas our average headcount has gone up only by 27%, 28%. That quality in terms of what we have put in. And I’m quite sure, the more work that we do in terms of improving productivity, improving product, the process, systems, and that’s a continuous process, we believe that we can improve it further.
We put up a software called CUBE, which is for processing current and savings account and a few other deposit products. We have been able to reduce 98% of the errors that was being committed by frontline. We invested, say, one in that software, we have been able to save four because of that software of various categories like printing, stationery, productivity, [Indecipherable] blah, blah, all that put together. Also the number of applications that being processed by CUBE, which started, let’s say, at about 100, has gone to, let’s say, about 10,000. That’s the kind of volume that is being processed. So frontline improvements that I keep talking about have power to improve the productivity and we are working on it.
Jai — I-Sec — Analyst
Sure. And last question, sir. Maybe it is too early, but if you can share the — your thoughts on the succession planning, when do the bank starts to do that? Would you — would the bank have a parallel run and when does this is entire process starts? If you can share…
Murali M. Natrajan — Managing Director & Chief Executive Officer
What is the parallel run?
Jai — I-Sec — Analyst
I mean, the new guy, whoever it is, either external, internal, who does a parallel run with you, understanding bank culture. If it is more important if the person is outsider? But just to — the handholding kind of a thing, the parallel run.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Okay. So the nomination committee will decide the agency [Indecipherable] agency that would be appointed and the search panel. I believe all that should get completed soon. We believe that we need to put in the application for the new CEO tops by end of November because RBI needs about four, five months to process this thing. So I believe that we are well on-track. Both internal and external candidates will be evaluated and then NRP and Board will take a decision.
Jai — I-Sec — Analyst
Sure. That is very helpful, sir. Thank you and all the best.
Operator
Thank you. The next question is from the line of Akshay Gupta from Investec Capital. Please go ahead.
Akshay Gupta — Investec Capital — Analyst
Hi, sir. Thank you for the opportunity. Sir, just two questions from my side. Sir, currently there is 33% growth in — year-on-year growth in OpEx. So what is the OpEx growth for the next year we are expecting?
Murali M. Natrajan — Managing Director & Chief Executive Officer
It will be much less than 33% because we have already built the capacity. For example, we have added average headcount of 27% year-on year. I don’t expect the increased to be — I mean, it won’t be more than maybe 14% — maybe 12%, 14%. That’s what the current trends are indicating. So that would result in whatever, because headcount is our biggest cost. And number of projects would continue to be about 25, 30. That is unlikely to change.
Akshay Gupta — Investec Capital — Analyst
Okay. And sir, second question on, like, what’s your PSL income for FY ’23 versus FY ’22?
Murali M. Natrajan — Managing Director & Chief Executive Officer
One minute.
Akshay Gupta — Investec Capital — Analyst
Yeah.
Murali M. Natrajan — Managing Director & Chief Executive Officer
We don’t disclose the PSLC income. No we are not disclosing that income. But, yeah, okay.
Akshay Gupta — Investec Capital — Analyst
Okay. And sir, last question, sir, I missed…
Satish Gundewar — Chief Financial Officer
So last year the overall PSLC income was close to INR80 crores. And this year, the entire year’s full year PSLC income is about INR20 crores. So there is now a big fall. And as MD mentioned in his initial comments, I think despite severe fall in the PSLC income as well as we not having the opportunity to have any treasury gain, the overall fall in the non-interest income has been really contained to a robust disbursements and a very good growth in our processing fee income as well as a very good trajectory that we have seen in insurance and interest income.
Akshay Gupta — Investec Capital — Analyst
Okay. And sir, last question on gross slippages. Like, I missed your commentary on the gross slippages. So just I want to know like when we will — like, when will they go below to the pre-COVID level or something?
Murali M. Natrajan — Managing Director & Chief Executive Officer
No, when we were — at pre-COVID we were doing very well on slippages. And going back to pre-COVID, we are pretty much there at pre-COVID level, if you just exclude gold. And gold, I told you, is not a problem at all. Gold will slip and gold will get upgraded. That’s not a problem at all. So, I would say that our slippages are about 2% without gold. Pre-COVID, this used to be about 2.25%, 2.24% like that. So I think we are there already.
Akshay Gupta — Investec Capital — Analyst
Okay. Thank you so much.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah.
Operator
Thank you. The next question is from the line of M B Mahesh from Kotak Securities. Please go ahead.
M B Mahesh — Kotak Securities — Analyst
Hey, hi. Murali, just a couple of questions. One, in terms of the demand side for loans, how is the situation today?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Well, we haven’t got any resistance from our sales side and we have not changed our credit policy. Okay. We have not loosened our credit policy to accommodate more target or more customer or anything like that. That all has remained as it was. If any, we probably may have kind of refined it further based on the learning and so on and so forth. So we are not getting any resistance from our frontline. We still hold that we should be able to grow the core products, don’t include the corporate in it, because corporate is a very opportunistic kind of business that we run. So without that, we are still pretty confident that we should be able to double the loan book in about 3, 3.5 years like.
M B Mahesh — Kotak Securities — Analyst
Okay. Second question, on your outstanding stock of NPAs, on the mortgage book, how is — has the situation improved in terms of resolution timelines?
Murali M. Natrajan — Managing Director & Chief Executive Officer
I don’t know. Praveen can comment. I’m not sure, because — yeah. Go ahead.
Praveen Kutty — Head – Retail Banking
Hi Mahesh, Praveen here.
M B Mahesh — Kotak Securities — Analyst
Hi, sir.
Praveen Kutty — Head – Retail Banking
Mahesh, so what we’re seeing is that 2020 — early 2020 — the first half 2020 NPAs have gotten to a 24-month kind of cycle. So by now judicial proceedings are really giving us results in terms of verdicts from the court. And that is helping us kind of tempt the customer to make the adjustments, right, and sell the assets on his own and then give us back the money. So we are seeing incrementally what we can collect that we are collecting, that’s an early vintage NPAs have been giving us the result. And that’s how the momentum had happened in the first — the initial months. Now, we are seeing that the older vintage were ability to pay was a problem. Where asset sale had to happen, you are getting the resolutions of DRP and SARFAESI coming in as an influencer to help us convince the customer to sell the property and then move on. So both are — so the early vintage, clearly, is behaving like pre-COVID and the — later with the NPAs, you’re getting the benefit of the court orders to help recover.
M B Mahesh — Kotak Securities — Analyst
Perfect. Praveen, just see we…
Murali M. Natrajan — Managing Director & Chief Executive Officer
Mahesh, one second. One important thing is, at the — some of the target margin that we have, which is like a small ticket home loan, like a INR15 lakh, INR20 lakh kind of customer, or even those ticket size lapped customers, we don’t have to do reposes and all, just a legal notice all can actually result in recovery proceeding taking shape. So we don’t really have to go and — go to the court, reposes and all these things. So, those customers are — I mean, we don’t have to push them to that extent.
M B Mahesh — Kotak Securities — Analyst
Yeah. Murali, we have hit about a 50 basis points credit cost for FY ’23. In terms of the outlook that you’re looking for the next, let’s say, one or two years, does this number go below this or you think this — there is — this is the bottom that we can reach?
Murali M. Natrajan — Managing Director & Chief Executive Officer
The collection team and the analytics team believe that it can go below that, but there are so many things that happened in our country that doesn’t give me that confidence. There could be any events that can actually cause these issues. So I believe our business model is back to the frame what it was before COVID, which is a 40 basis point, 45 basis point, top 50 basis point type of credit cost. The intention is to do better because I think during the COVID one benefit that we have got is, you got better at some of the collection process, mechanism and we are also introducing some technology there to improve productivity, those should come in, hopefully, in the next few months. We’ve definitely got better in collections during COVID. I mean, capacity wise, planning wise, all that has happened quite well, I must say.
M B Mahesh — Kotak Securities — Analyst
Perfect. Thanks, Praveen. Thanks, Murali.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah.
Operator
Thank you. The next question is from the line of Rakesh Kumar from B&K Securities [Phonetic]. Please go ahead.
Rakesh Kumar — B&K Securities — Analyst
Yeah. Hi. Hi, sir. Thanks a lot, sir. Sir, firstly, just one question to understand that how much spread that we are making on cost of deposit in EBLR regime and in MCLR regime? So if you can say that, what is the spread in each of the regime that we make?
Murali M. Natrajan — Managing Director & Chief Executive Officer
No, all that is a composite number that has been reflected in our financial and it’s very hard to calculate all that because there is a part of MCLR book, there is a part which is EBLR book. There is a book which is semi-split, which over a period of one year and all will come into either EBLR or MCLR, depending upon what was the contract of the time of booking that customer. The deposit profile itself keep changing. So I don’t believe that I can even attempt to answer that question. But all we are saying is that our business model is somewhere around 370 basis points, 375 basis points. And we believe that with the mix of products on both deposits and the loan side — sorry — yeah, loan side, we should be able to achieve that.
Rakesh Kumar — B&K Securities — Analyst
Okay. Secondly, sir, on the gold loan book side, which is close to 8% of our loan portfolio. So did we have a double-digit gross delinquency rate in this quarter?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Means what?
Rakesh Kumar — B&K Securities — Analyst
In the gold loan book, the gross delinquency rate was — annualized number was in double-digit this quarter?
Murali M. Natrajan — Managing Director & Chief Executive Officer
What worries you in gold? If you can explain to me, then…
Rakesh Kumar — B&K Securities — Analyst
No, sir. First thing is that, like, at the first place why should we have this kind of a gross delinquency rate? So recovery happens. As you were telling that recovery happens in this book. But at the first instance, what is the reason for such a higher delinquency in the book?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Gold loan book will be high delinquency and I won’t apologize for that. The reason is, these are small customers, INR1 lakh, INR2 lakh, INR3 lakh, INR5 lakh small customers, who use gold loan for their business purposes and for emergency purposes, and sometimes even for putting money for their property margin money or whatever, all these things. These are small customer. They have — don’t have great discipline. Many of them are serviced by NBFCs where they actually would have taken a bullet loan and they don’t have to service on a monthly basis, whereas when they take it with a bank, we have to kind of bring in the credit discipline of making them pay.
As long as they have taken good quality loans and our LGD is intact, we don’t worry about the gold loan portfolio. Okay? And we have very good [Indecipherable] to ensure that we are not taking either some syndicated fraud gold, or some spurious gold in our branches. And wherever we find any issues in terms of process and all, we try to address it very quickly. So that it doesn’t become a problem for us. So gold loan delinquency goes up, I don’t think any of us worry about it.
Rakesh Kumar — B&K Securities — Analyst
Understood, sir. Understood. Sir, what is the LGD that you were mentioning, sir, in this book — in this segment? LGD for this book?
Murali M. Natrajan — Managing Director & Chief Executive Officer
I think Praveen can — I think [Indecipherable] zero almost.
Praveen Kutty — Head – Retail Banking
Rakesh, see the [Indecipherable] is virtually nothing. There is — this is actually gold loan business, right? I mean, look at it this way, INR133 crores was NPA stock when we started the year. That has come down to INR19 crores. So during the year gold NPA stock has come down from INR133 crores to INR19 crores.
Rakesh Kumar — B&K Securities — Analyst
Okay. Okay.
Praveen Kutty — Head – Retail Banking
Right?
Rakesh Kumar — B&K Securities — Analyst
Okay, okay. Thank you. Thank you, sir. Thanks a lot, sir.
Operator
Thank you. The next question is from the line of Rishikesh Oza from RoboCapital. Please go ahead.
Rishikesh Oza — RoboCapital — Analyst
Hi, sir. Thank you for the opportunity. Sir, my follow up is with regards to the OpEx. You just indicated that the next year OpEx growth would not be more than 14%, 15%. But if you could also share…
Murali M. Natrajan — Managing Director & Chief Executive Officer
No, that is not what I said. I said that it will be much lower than 33%, or whatever, 32% that we had this year. And I also said that we have added 27% average headcount year-on year. I don’t believe that it will be more than 10% to 14% or something like that. I didn’t say that it will be — operating expenses will increase only by 14%. Please correct that.
Rishikesh Oza — RoboCapital — Analyst
Basically my question was regarding the cost structure. So basically, at what OpEx level will the cost structure flattens and by when?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Cost structure will not flatten. We are retail and SME business and it’s a very people-oriented business. The business is about continuously adding people to grasp more and more business geographically our target or whatever — I mean, different target market and so on and invest in frontline technology, process, system and all to make them productive, have good credit controls and collections mechanism so that your [Indecipherable] that is our basic model. We will — this is not a corporate bank model. This is an absolute retail-retail model. Our average ticket size is about INR30 lakhs, okay? For example, you take any of the small finance bank, their business per employee will be some INR2 crores, INR3 crores, and they probably will have about 25,000, 30,000 people for similar or slightly bigger balance sheets than us, right? You can verify what I’m saying yourself.
So we will continue to add people, but we lost out momentum in COVID years. So we took the courage to invest in a huge amount of frontline, like 2,000, 3,000 people we invested and that is showing in our disbursal volume quarter four 2021-’22 versus quarter four 2022-’23. Hereon, we may not have to have such a step change in increasing our headcount. I hope that provides you with some clarity.
Rishikesh Oza — RoboCapital — Analyst
Sure, sir. Just one last point on this. In your PPT you’ve said that your target cost to income you want to maintain around 55%. Can you attach a timeline to it?
Murali M. Natrajan — Managing Director & Chief Executive Officer
We believe that we should be able to do it within 1 year to 1.5 years, and we are working towards that. We have said that we are targeting 1% ROA and 14% ROE. This quarter, we have been pretty close to it. Of course, quarter one would — cost would come out first and then business grows very slowly in quarter one. If you see our last year fourth quarter ROA and ROE, we are better than that, right? And last year we may have had some one-off income. But this year, even that is not there. Okay? So we are moving in the right direction. Exact timeline and all is not so easy to give, because there are many variables. But directionally, it looks like in about 1 year to 1.5 years we should be delivering it, if not earlier.
Rishikesh Oza — RoboCapital — Analyst
Okay, okay. That was helpful. Thank you.
Operator
Thank you. The next question is from the line of Indrajit from ThinkWise Wealth Management [Phonetic]. Please go ahead.
Indrajit — ThinkWise Wealth Management — Analyst
Thanks for the opportunity, sir, and congratulations for a very good set of numbers. Sir, with regards — my question is with regards to our cost to income ratio and more to do with the productivity of our branches. Sir, you’ve mentioned in a lot of calls that it takes two years for a branch to breakeven, after which we start seeing income coming in. But when you map out total income per branch over last few years, we’ve not seen a significant improvement in our total income per branch metrics, despite now our branches — most of our branches are already three years old. So if you could — three to four years old. So, if you could just help me understand this and how can we see this going forward?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah. So if you see that last year we had — last year means, I’m talking about ’21-’22, I think we added about 50-odd branches. 40-odd [Indecipherable] 52 branches or something we added there. And this year we have added 27 branches, right? A lot of the branches last year came towards the later part of the year, right? So we review branches to say how they’re performing. There are branches which are already breaken even — broken even in about eight to nine months time. I mean, I just visited a branch in Gujarat. It’s just remarkable that we have been able to build a very strong book in a matter of just eight months. But there are branches, one or two of them I remember in South, that is in Tamil Nadu, where even about 2.5 years, they have still not crossed the line. Okay? So there are variations in — within these. We have a very strong book and we can actually pinpoint the revenue per branch and the cost per branch, and track it — productivity per person we are able to track it, and we are pretty confident that, on an average, when you put a bunch of branches, we can breakeven in about 22 to 24 months. Of course, there’ll be some outliers on both sides. But generally, that is the direction in which we are proceeding.
On cost to income ratio, please look at any bank which has got a retail portfolio. If you have corporate book, definitely cost to income ratio can be much below 50%, right? But if you just look at only the retail-retail kind of book, and probably some of the small finance bank can give you a clue on what is pure retail. Our retail book is about 85% of our book. There, to manage cost to income ratio below 60% is a very tough ask, but still we are targeting 55% cost to income ratio over a period of time, and we have confidence that…
Indrajit — ThinkWise Wealth Management — Analyst
Absolutely. Point taken, sir. But if we leave aside the last two years where you’ve again started increasing your branch count. If we leave aside these two years, even before that, since three, four years we’ve seen this total income per branch very stagnant — at a very stagnant level. So — because [Indecipherable]
Murali M. Natrajan — Managing Director & Chief Executive Officer
Because we have to put — when we add 100 branches, we have to put 25% in unbanked locations, where the population will be 2,000, 3,000. Okay? So that is not a metric that we can look at. But I can tell you that we are looking at our business per employee, which is 8-something. What is the number? 7.8. So it is close to 8, and we will be able to improve that.
The second point that I wanted to tell you is that, we have added substantial number of headcounts last year. And many of that headcount hasn’t yet completely given the peak productivity for us. So all that also has to kick-in.
Indrajit — ThinkWise Wealth Management — Analyst
All right. And sir, my second question is regarding competition. So there are a few NBFCs which have got very active in Tier 2, Tier 3 cities, and specifically in the MSME segment. So do you face too much competitive pressure from these and how do you look about it?
Murali M. Natrajan — Managing Director & Chief Executive Officer
I mean, one of the advantage that NBFC has is, that they can open branches and they don’t have to worry about unbanked and all the other constraints that bank have, like us. Because if I open a branch in a small location, then some percentage of branches have to be opened in unbanked location. So they don’t have that thing. Other than that, from a cost of fund point of view, we have a much better advantage. I don’t believe there is some small NBFCs have cost of fund like what we have. Because we lend to many of those NBFCs, so we know exactly what their cost of fund is. Those kind of competition hasn’t given us dampener from expanding our business or achieving the kind of disbursal goals that we have been pursuing for the last four quarters.
Indrajit — ThinkWise Wealth Management — Analyst
All right, sir. That’s helpful. Thank you so much.
Operator
Thank you. Next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Nitin Aggarwal — Motilal Oswal — Analyst
Yeah. Hi, good evening and thanks for the opportunity. Sir, I — sorry to belabor this point on cost to income again, but is there any non-recurring expense that we are incurring currently in other expense? And — because what will drive this cost to income reduction as we are also looking at some compression in margins?
Murali M. Natrajan — Managing Director & Chief Executive Officer
No, no. You guys have a framework saying that cost to income ratio should be 50% or 45%, and then trying to fit all banks into that. It doesn’t work for us that I want to tell you right away. Because, if you compare our business of 85% retail with the 50% retail of another bank, obviously, and we do those comparisons in our boardroom and see what the impact on that is. What I’m saying is, we have invested in frontline heavily last year. And that is because, for two years, our average CAGR growth on ’21 and ’22 was only 7% or 8%. Now, we lost the balance sheet of about INR5,000 crores because those two years of COVID, because we pursue SME business.
Now the option in front of us is, okay, should we just go back to trying to grow the cost by only 10%, 12% in this or put in the investment, because we know the business model, we knew how to make it work and grow the business, which is the option we have taken. And it’s already demonstrating results. So this year, our cost increase is unlikely to be in the 32% range. It will be much lower than 32% range and we hope that income — the income growth is higher than our cost growth. And that is how out cost to income ratio will keep coming towards 55%.
Nitin Aggarwal — Motilal Oswal — Analyst
Right, sir. Actually I was just asking because we are building in some compression in margins also, which may limit the improvement by FY ’25?
Murali M. Natrajan — Managing Director & Chief Executive Officer
We have been running this model and we did it very successfully pre-COVID. You guys were worried about the operating cost increase. We have demonstrated that in our growth. Look at our mortgage growth, it is 27%; look at our AIB growth, it is 30%; look at the co-lending growth, it is I think about 50-odd-percent. So everywhere we are growing very, very strongly with the investment, it takes time. And we are pretty confident. And there are flexible cost. In the sense, they are not sticky costs. If a set of sales people or frontline don’t perform, there is a clear scorecard which helps us address those costs.
Nitin Aggarwal — Motilal Oswal — Analyst
Right. Thank you, sir. Thank you and wish you all the best.
Operator
Thank you. The next question is from the line of Krishnan ASV from HDFC Securities. Please go ahead.
Krishnan ASV — HDFC Securities — Analyst
Yeah, hi. [Indecipherable] Are you able to hear me, Murali?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yes, yes, sure.
Krishnan ASV — HDFC Securities — Analyst
Yeah. Okay. Sorry, thanks. So my question is a little more on just the MSME business and where they are at given the kind of rate cycle or the steep acceleration in rates that we have seen over the past few years. I mean, given that you tend to be kind of with your banking predominantly with the MSMEs in India. Could you just throw some light on where we are at? We tend to think that housing and autos are typically rate-sensitive, that has been proven to be the case. Are MSMEs reflecting any sense of rate sensitivity at all?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Praveen, do you want to answer that?
Praveen Kutty — Head – Retail Banking
Yeah.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Praveen will…
Praveen Kutty — Head – Retail Banking
Hi, Krishnan, Praveen here. I’ll just tell you the particular segment that we are looking at and that is the micro part of the MSME. Our average ticket size hovers around the INR30 lakh mark, okay? The products that we do either cater to the capital requirement of the customer, or specific business loans for those — installment loans for the particular customers, that’s what they are looking at. Where this particular book is concerned, we are seeing that there is an increasing demand coming in. And the delinquencies — early delinquencies for those customers of a similar vintage is better — is actually better than the pre-COVID levels. Reasonably good performance thus far. It’s a pretty large market. Okay? It’s a pretty large market. More — lot of our — this particular segment is having a — is an assessment based on an ability where these people are still not having recorded verified income. Quite a lot of these customers are new to credit as well, and it’s a growing market.
In India, the MSME segment that you’re speaking about is 63 million base. And over a period of time, they will get formalized. And then when they get formalized, our ability to access income will be better and we’ll be able to give higher loan. Today, we are very conservative to given a higher loan. So there are built-in moats for these customers. There is an ability that the bank has. We’ve gone through couple of credit cycles, average of, let’s say, five years, six years, right? Two six-year cycles we have passed through. We’ve gone through headwinds of pandemic and demonetization, what have you, GST, right, multiple headwinds. And now you’re seeing the results of that in terms of the NPA stock post-pandemic decreasing the way it has been decreasing on an absolute sense, forget in a percentage sense. So it’s a very thriving market where there is an expertise the bank has.
Krishnan ASV — HDFC Securities — Analyst
Right. So this is what we — this is what I think I’m trying to just make sense of reconcile the macro headwind with the micro tailwind. Because at an enterprise-level, it seems that companies have almost infinite capacity to absorb rate hikes. It’s also reflecting in fairly superior recoveries and upgrades, organic upgrades that you yourself are seeing and the rest of the banking system as well. So what gives here is all I’m trying — is all that I’m trying to…
Murali M. Natrajan — Managing Director & Chief Executive Officer
The parallel you can draw is this. So these are customers primarily in the service industry, right? So take an example of something like a marriage hall. They’ve been — the business has been virtually nil from March 2020 to a good part of 2021. They have definitely become NPA, because there is no revenue coming in. But what you see happening currently, and that’s the proof of the pudding is in the stock numbers. Not only are many of them, most of them servicing their EMIs, but also have had a benefit of increased business which is allowing them to payback their entire overdues, otherwise it will continue to be in NPA. So if you were to take mortgages, INR342 crores of NPA stock is now INR270 crores. That movement you see is because there is a resilience and robust of the business. Some people have gone completely out of their business, started new businesses which are income-generating and that income-generating resilience is what is key to this MSME, SME segment, which is allowing them to come back into the regular installment paying capability towards knocking off the overdues in most cases.
Another point which I want tell you, Krishnan, is that if you see our recoveries, it’s got two components in it. There is an upgrade company and there is a recovery component in it. Recovery is when the customer throws up his hands and says, look, there is no way. I can’t repay this particular loan, my business is not working. Upgrade is where the customer finds an alternative revenue stream or an increased revenue stream, where he clears overdues and becomes a normal customer. The reason why — one of the reasons why you’re seeing the improvement in NIM is because these customers — the NPA continues to be a revenue-generating, revenue-accruing customer, and is giving us a [Indecipherable] so you’re getting the overdue flow, minimum of three months, maximum could be as high as 12 months.
So there is a very big resilience in this particular segment. So we talked about the demand, we talked about the size of that particular market across the — across geographies, and we talked about the ability of the customer to find to come back to normal. So, I’m not 100% sure of the micro tailwind that you’re speaking. We don’t see that. We see the clear resilience in the kind of customer selections that we had of this particular segment to not only to service installments, but to service installments and clear overdue so far.
Krishnan ASV — HDFC Securities — Analyst
Right. That’s very helpful. So just one other question, which is more about the target segment that we have been going after very consistently, Murali, for the last 15 years. I’m asking this to you, Murali, because you have kind of re-engineered the bank from the time that [Indecipherable] and we have seen all the difficult years and now it seems the kind of the easier years, I think. And so, all credit to you and the rest of the team that has been who were with DCB all these years.
But I just wanted to understand, has that addressable market that DCB wants to go after, how much has [Indecipherable] help you to expand your own target universe and could you just index it for us just to understand the addressable market just for DCB Bank looking at it inside out?
Murali M. Natrajan — Managing Director & Chief Executive Officer
I think a lot of the items that have helped us. Aadhaar has helped us, no question about that. Because it makes life so easy in terms of doing KYC, and all the items that are linked with Aadhaar. GST has helped us immensely. Many of the customers, at least our — partly in the GST bracket, our own ability to — kind of all the digitization that has happened, whether in electricity bill or supplier bill and all those things, all that has given us the confidence of looking at things a lot more carefully and be confident of what we are doing. So, I would say that — and then we also have learned a lot about the target market. [Foreign Speech] some of the target market which we didn’t understand. By doing a little bit small experiment and all, we have been able to go into those target markets as well. I mean, when we started this journey, I don’t think our ticket size was INR20 lakh, INR30 lakh. It probably would have been INR50 lakh, INR60 lakh. But over time, we have been able to kind of successfully enter these target market and create, at a individual level, very profitable kind of loans.
Praveen Kutty — Head – Retail Banking
And Murali, if I can add.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah, sure.
Praveen Kutty — Head – Retail Banking
Geolocation, digital collection, the ecosystem in the country has significantly changed, that is really helping us big time. We know where the customers are. We know — the customers have an ease of payment. [Indecipherable] come 40 kilometers away to the nearest branch to pay back the money. There is a sea change.
Krishnan ASV — HDFC Securities — Analyst
Right. That’s very helpful. I’m done with my questions. Thank you. Thank and all the best.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah.
Operator
Thank you. The next question is from the line of Sohail Halai from Antique Stock Broking. Please go ahead.
Sohail Halai — Antique Stock Broking — Analyst
Good evening, sir, and congratulations on a good set of numbers. Sir, my question actually relates to from the provision coverage ratio. So, we have reached on books CCR of around 68% and closer to 80% including technical write-off. So from a book perspective, which has around 25% in terms of the mortgage NPL, is it relatively fair to assume that all the legacy NPL provision in other books have been basically taken care of? And probably in terms of, this was a question asked in the past as well, that can you actually understood the credit cost, probably because of the increase in the provision that you have made so far?
Murali M. Natrajan — Managing Director & Chief Executive Officer
So, I don’t know what you mean by legacy. We are the legacy write-down. Okay? Whatever we have created, we own it. Okay? That’s what it is. So I don’t know how to respond to you on that legacy part of it. All I want to say is that, 85%-odd of our book is secured, right? 50-ood-percent of our book is mortgages. Even the entire SME book is — most of the SME book is secured, except for TReDS. TReDS is not secured. If I look at our tractor, KCC, all that has a security. And each of that, we understand the loss given default and probability of default. All these also have improved post-COVID also because of our collection efficacy, as well as various other analytics that we put into improve our performance on that. So, I believe, our coverage ratio is pretty strong. We don’t have any target coverage ratio. We wanted to be above 70% and we are above 70%. We keep making provision as per RBI norms or more. Like in mortgage and all, our provision norms are higher than what is expected by RBI. So we will continue to build on that provision, while trying to do the best that we can in terms of recoveries and upgrades on these slippages. So I do think that our credit costs should be in the range of 45 basis points to 50 basis points, which was our pre-COVID level number.
Sohail Halai — Antique Stock Broking — Analyst
Okay, thanks. Sir, another question pertaining to this only, in terms of write-offs, is something that we are doing it for the last three quarters around INR40 crore to INR60 crore range. And is it fair to assume that some of these write-off has also started flowing through the P&L? So, in terms of from the income level, so recoveries from written-offs has actually improved over the last two, three quarters?
Murali M. Natrajan — Managing Director & Chief Executive Officer
I’m not sure. Satish, are you able to relate to this question?
Satish Gundewar — Chief Financial Officer
Sohail, I’m not able to relate to the question exactly.
Sohail Halai — Antique Stock Broking — Analyst
So probably in terms of, one, that you’re actually writing-off around INR40 crores to INR50 crores per quarter now, and historically also in terms of last two, three years, you have written-off some amount of these loans. If I just back calculate in terms of write-off and the cumulative write-off books that we have. So is recoveries on written-off account also started picking-up in the last two, three quarters?
Satish Gundewar — Chief Financial Officer
So you are saying the recovery from the written-off accounts?
Murali M. Natrajan — Managing Director & Chief Executive Officer
That will actually come into provisions. Yeah, correct?
Satish Gundewar — Chief Financial Officer
Yes, yes.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah. So the recoveries that are coming from written-off account also come as a — come in the provision line, not in the income line.
Sohail Halai — Antique Stock Broking — Analyst
Okay. But sir, is the trend improving there as well?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah. I mean, when we look — see, the collection team does not have any idea what we have written-off at the head office. They don’t have any idea about it. They are collecting on the account [Indecipherable]. I mean, like, collection will have no clue which item we have written-off and which are not we have not written-off, right?
Sohail Halai — Antique Stock Broking — Analyst
Right. And sir, final question in terms of yield on loans, I understand that some amount would be because of the upgrades and recovery as well. But post three or four quarters, our yield on loans actually moved up. So is the pricing environment better as compared to what we have seen in the last year? Any qualitative comments on that?
Murali M. Natrajan — Managing Director & Chief Executive Officer
No, the competition is as tough as it is. We keep doing analytics and making sure that we are pricing as much as possible from a credit risk point of view, so that we don’t lose the margin and the margin were both making money as well as to absorb the credit losses. The mix of portfolios that we have on the deposit and the loan side, we are targeting NIM of about 370 basis points, 375 basis points. If you do very well on collections, recoveries and all, you may see some improvement in our NIM, which is what you’ve seen here in this particular quarter. Also the EBLR, it works like this and you actually make the EBLR as RBI announces the repo rate changes and the deposit cost follows. So we do expect some compression in our NIM in the coming quarters.
Sohail Halai — Antique Stock Broking — Analyst
And sir, basically, in terms of, if you could just quantify how much of the yield benefit would be because of upgrades and recovery? Any ballpark number?
Murali M. Natrajan — Managing Director & Chief Executive Officer
We don’t have that information. Everything is comprised in the NIM, yeah. So we don’t have the number.
Sohail Halai — Antique Stock Broking — Analyst
Sure, sir. No problem. Thanks, sir, and all the best.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Thank you.
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. Just wanted to understand what would be our term deposit cost right now currently? And what would be the share of deposits, which get a special rate above the card rate in the deposit mix?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Why would we give a special rate over the card rate? But bulk rate is also published for us. Yeah. So whatever — see, some of the banks are not publishing bulk rates. We publish all the rates. What you see in our website is all the rates that you see. And I think our bulk rates have been brought down probably in April or something, I don’t know, something like that. Some date, I don’t remember, we brought it down. So there are no rates that are not published. All the rates are what you see.
Pallavi Deshpande — Sameeksha Capital — Analyst
All right. Got it. And secondly, sir, on the co-lending side, which you are seeing very good growth. So price — the take rates, or what is the kind of take rates you have to offer to the fintech partners for these?
Murali M. Natrajan — Managing Director & Chief Executive Officer
What rates?
Pallavi Deshpande — Sameeksha Capital — Analyst
The take rate for the fintech partner…
Murali M. Natrajan — Managing Director & Chief Executive Officer
What is the rate split between us you are saying?
Pallavi Deshpande — Sameeksha Capital — Analyst
Yeah, I understand that 80-20. Is that right?
Murali M. Natrajan — Managing Director & Chief Executive Officer
The — 80% of the loan is written and 20% of the loan — you want to explain that whole thing?
Praveen Kutty — Head – Retail Banking
Yeah.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Praveen will explain, hold on.
Praveen Kutty — Head – Retail Banking
So Pallavi, what we do is, we have co-lending partnerships where there is minimum skin in the game of 20% for the originator. And depending upon what kind of product it is, it can go higher. So, the reward and the risk are shared equally. So if it’s 20%, everything is shared — the book — 80% of the book comes to us at our agreed pricing and the customer pays whatever the origination pricing is to the originator.
Pallavi Deshpande — Sameeksha Capital — Analyst
Right. And in case your partner cannot have the book, like, somebody like a Paytm or somebody become — keep the book on their this thing. So, you wouldn’t have those kinds of partnerships I’m assuming?
Praveen Kutty — Head – Retail Banking
I’m not too sure whether I got the question. Can you say that again?
Pallavi Deshpande — Sameeksha Capital — Analyst
Are some players in the market, the fintech players, they can’t keep [Indecipherable] on their books. And so, this 80-20 may not work with those players. So would that prevent you from those being that those players — I’m talking of the likes of Paytm, yeah?
Praveen Kutty — Head – Retail Banking
So Pallavi, there are two things. That is, one is with co-lending, what I explained to you was the concept of co-lending. We have a significant — we have a sizable book on co-lending. What you’re talking about is a referral arrangement with fintechs. Most of the fintech referrals are coming under the Buy Now Pay Later or personal loans, mostly in the unsecured segment, right? That’s how the industry currently, or checkout, financing, etc. That’s an area which we are not invested in. Where there are fintechs which are providing you with mortgage or SME leads, we take that. But that follows a similar to the connector [Indecipherable]. So it’s more a lead referral thing than a — there is no identification, etc., of the customer, Aadhaar identification of the customer at the fintech end. We take it full on and then do the appraisal entirely ourselves, reject or accept as per our criteria and move on.
Pallavi Deshpande — Sameeksha Capital — Analyst
Thanks. Got it, sir. Thank you so much.
Operator
Thank you. The next question is from the line of Akshay Gupta from Investec Capital. Please go ahead. Akshay Gupta, your line is unmuted.
Akshay Gupta — Investec Capital — Analyst
Hello.
Operator
Yes, please go ahead.
Akshay Gupta — Investec Capital — Analyst
Sir, can you hear me?
Operator
We can hear you.
Murali M. Natrajan — Managing Director & Chief Executive Officer
I can hear you.
Akshay Gupta — Investec Capital — Analyst
Hello.
Murali M. Natrajan — Managing Director & Chief Executive Officer
We can hear you. Please go ahead.
Akshay Gupta — Investec Capital — Analyst
Yeah. Sir, my question is like, you received lower PSL income compared to the last year. So why the PSL rate fallen and do we expect it to recover?
Murali M. Natrajan — Managing Director & Chief Executive Officer
PSLC.
Praveen Kutty — Head – Retail Banking
Yeah. So, Akshay, hello?
Akshay Gupta — Investec Capital — Analyst
Yeah
Praveen Kutty — Head – Retail Banking
So, on PSLC, the bank’s priority sector lending book as a percentage of the total advances that we have, have remained as healthy as it is. So there is no supply problem. But the rate at which the PSLC is being produced in the year ’22-’23 has plummeted as compared to ’21-’22. And the reason for this is not a demand issue, it is a supply issue. Earlier, for the customer to become a — to be eligible for priority sector lending, you have to naturally get a Udyam certificate, which had to meet certain norms of what kind of activity the customer is doing. And it’s a stringent way of ensuring that, that particular customer is meeting the particular norms and getting a certificate called Udyam. That has been significantly relaxed in the last year, which has resulted in a increased supply.
The moment supply has increased, two things have happened. Many institutions which were deficient in PSL, has, by virtue of easier norms, got the — got fulfilled the PSL criteria or near fulfill the criteria. Secondly, the need for purchase also has become significantly less, which has resulted in a drop in the price. What will happen in the future depends upon how much of PSL is required by whom in the market and that will drive the price. So right now, there is no clear visibility of what the price is going to be.
Akshay Gupta — Investec Capital — Analyst
Okay, okay. And sir, my second question is, like, related to our new CFO appointment. Like, when we are expecting the new CFO in our system and it will be from internal or external? Some comments on this?
Murali M. Natrajan — Managing Director & Chief Executive Officer
So as of now, Ravi Kumar is going to be taking charge from Satish. Satish is here with us until June 3 and the [Indecipherable] and Board will work with the management team and we will finalize the candidate in about few weeks, which is what we have represented in the stock exchange.
Akshay Gupta — Investec Capital — Analyst
Okay, okay. That’s it from my side. Thank you.
Murali M. Natrajan — Managing Director & Chief Executive Officer
Okay. Thank you, operator, and I hope that’s — is there any other question left?
Operator
No, sir. That would be our last question. Would you like to add any closing remarks?
Murali M. Natrajan — Managing Director & Chief Executive Officer
Yeah. Thanks very much for dialing into this call. It’s been a pleasure interacting with all of you and I look forward to talking to you again next quarter. Thank you very much.
Operator
[Operator Closing Remarks]