Federal Bank Limited (FEDERALBNK) Q3 FY22 Earnings Concall Transcript

Federal Bank Limited  (NSE:FEDERALBNK) Q3 FY22 Earnings Concall dated Jan. 25, 2022

Corporate Participants:

Shyam Srinivasan — Managing Director & Chief Executive Officer

Ashutosh Khajuria — Executive Director

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

Venkatraman Venkateswaran — Group President & Chief Financial Officer

Shalini Warrier — Executive Director

 

Analysts:

Arav Sangai — VT Capital Market Private Limited — Analyst

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Dhaval Gada — DSP Investment Managers — Analyst

Sumeet Kariwala — Morgan Stanley — Analyst

Manoj Bahety — Carnelian Asset Management — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Ajit Kumar — Ambit Capital — Analyst

Jai Mundhra — B&K Securities — Analyst

Nitin Aggarwal — Motilal Oswal Financial Services Ltd — Analyst

Ajit Kabi — LKP Securities Limited — Analyst

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Sameer Bhise — JM Financial — Analyst

Deepak Gupta — Reliance Nippon Life Insurance — Analyst

Aditya Jain — Citigroup — Analyst

Abhishek Murarka — HSBC Bank USA — Analyst

Akhil Hazari — RoboCapital — Analyst

Krishnan ASV — HDFC Securities Limited — Analyst

MB Mahesh — Kotak Securities — Analyst

Darpin Shah — Haitong Securities — Analyst

Anand Bhavnani — White Oak Capital — Analyst

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY ’22 Earnings Conference Call of Federal Bank. [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. Shyam Srinivasan, MD and CEO, Federal Bank. Thank you and over to you, sir.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you very much and good afternoon everybody. I’m assuming that all of you are keeping well. On the call, I have all my senior colleagues. We are all in different places, so I can’t see them, but I know they are on the call, and we’re happy to answer questions. I’ll keep a very — give a very brief opening remarks and turn it around — turn it over for question and answers.

We’ve published our Q3 results. I’m sure you’ve all had a chance to see the headlines and probably the Investor deck. I’ll — the quarter would go by as one of our better quarters in terms of overall performance. There were a few significant milestones this quarter. Our overall income crossed INR2,000 crores for the first time. Our net profit crossed INR500 crores for the first time, and importantly our ROA for the quarter was 1.02. It’s been a mile — important deliverable for us for quite some time. So I’m pleased that on all these counts, there has been progress. By no means the journey is starting, there is a lot of work going around and these are early signs of all that coming to fruition.

Asset quality of the Bank has been good for quite a while and I think this quarter has been no exception. Credit costs well under control, provisioning on the commitment — committed lines. We’ve added some extra provisions for the restructured book. We have created a meaningful buffer to ensure that should COVID wave three have challenges, we come out well protected. Operating income of the Bank this quarter was its strong, moved from INR830 crores — core operating income, INR830 crores the previous quarter to INR881 crores on a sequential basis. Our strong suite of liabilities continues to be performing well, very granular. CASA hit an all time high of almost 37%. And CASA grew Y-on-Y almost 15%.

So granularity of the book continues and our strong suite, the NR remittances is now touching 20% of India’s remittances is through Federal Bank and it’s growing well. We are gaining share meaningfully as is visible, because what we hear is that the overall numbers are contracting, but ours are growing quite meaningfully, so evidently we are gaining share. We saw good pickup in credit this quarter, the one that went by. For quite a while, retail was carrying the burden of credit growth. We saw corporate come back strongly in Q3 and has a — when I say corporate, I also mean commercial banking, both of them saw quarter-on-quarter growth and Y-on-Y growth annualized almost 14%, 15%.

You may have observed our very strong presence in the fintech ecosystem. We are I believe one of the most important Bank partners that most of the up and coming fintechs seek to work with. Our API stack is formidable. Our partnership capability is robust. We have created an institutional architecture which focuses on fintech. Personally, me and the team believe that it will serve us well. It is serving us well and I think it’s beginning to show. Over 75% of our new accounts book come through the fintech partnership and I’m sure there will be a few questions, I’ll be happy to answer them as we go along in the call.

So on balance, Q3 was good. We do think many of the material drivers of progress that we’ve put in place are working well. The teams have done a great job in navigating COVID and its challenges. No different for our Bank than it has been for everyone in this — in the country or in the world. It has been particularly the last three, four weeks leading up to today have been quite challenging because productivity has been impact, people have to deal with either personal COVID challenges or family members or customers and a combination of it.

But through all this, the teams are dealing with it very well and have have delivered on most counts. Post the quarter, as in the first few weeks of this month, we have actually had a Tier-2 bond issuance which went very well. We did about a INR700 crores raise of money about few days ago. So Q3, like I mentioned, from a net profit, from an income, from a margin expansion, from a credit standpoint, quality of the book and liability franchise continues to be granular.

So I’ll pause here. Happy to take questions. So me and the entire senior team is there. We’d be happy to answer any of the questions or any clarifications that you may need based on our Investor deck and the details that we put out. Thank you very much.

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 Gaurav Kochar from Mirae Asset. Please go ahead.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Yes. Hi, thanks for taking my question. Good evening, everyone. A few questions. Firstly on the personal loans book, I mean it’s fairly small right now, but it’s been sluggish for the last four, five quarters, it has not grown. So any specific reason? Is it a conscious call of not growing this book or what has been the reason for this?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. I think in part you answered that Gaurav. Our credit choices are relatively more conservative. We don’t go Gung Ho on the unsecured book till we are very sure that it’s good to go and the coast is clear. We did see through the pandemic, we did not want — not that the pandemic is over, through the peak of it, we didn’t want to be very cavalier about it. As we saw things improve, we started picking up. Normally in the pre-pandemic period, we were running close to INR100 crores a month of disbursement. As you know, we don’t do new to Bank PL, we only do existing to Bank entirely digitally originated based on data mining. Through this period, we were more cautious. As things started improving, we started picking up and you saw some uptick and I believe that uptick will continue as we go into FY ’22 — FY ’23.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Okay. So we’ve started clocking that INR100 crore disbursement run rate on a monthly basis?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Not as yet, but we are on course.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

All right. Sure. And my second question is slightly more say medium to long-term. So right now, congratulations on that 1% ROA mark, on delivering that. Now my question is, taking slightly longer-term view towards the journey of 1.2% to 1.25% ROAs, what are the two key drivers or two, three key drivers that you will be focusing on in order to achieve that. Because right now NIMs are at — I mean you guided for a NIM range and I think we are at the higher end of that — higher end of that guidance. So is it — do you see further margin improvement from here on driving ROAs or will it be driven by the other levers?

Shyam Srinivasan — Managing Director & Chief Executive Officer

We’ve always mentioned, Gaurav, that we don’t have one silver bullet. It’s many little things all adding up and I’m pleased that the things that we promised we will are working well. So we had said the NIM expansion by five to ten basis points, five of that ten is accomplished. We hope we will do another five. Our credit costs tend to be in the right space and I believe that has some space to move even better, because we made some incremental provisions now just to buffer for future period challenges. Those may not be required. And as we get our digital performance even better, I think the cost benefit that we are seeking out will play through. So the 1.2% ROA that we are more near term giving attention to, all look possible over the next four to six quarters.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Okay. So cost would be — I mean margin expansion by another five basis point and the remaining would flow from credit cost and opex?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes, you’re right. There are only three lines that you can [Speech Overlap] in a business, right.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Yes. Fee income is one. I thought, because of [Speech Overlap].

Shyam Srinivasan — Managing Director & Chief Executive Officer

If you noticed, our core fee income this quarter, as you would have seen in the deck is about INR414 crores, highest level in the length of our business. Essentially because the treasury related business had fee income modest this quarter.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Right. Right. Sure. And just lastly on the NPA — I mean can you give some color around since most of it is secured, either housing or business banking, what has been the sort of repayment rate of this, are the customer servicing existing instalments or there may be some of them who may be less than 90 days DPD and you know, be NPA for technical reasons, because you cannot normalize or standardize them until they pay all the due. So such cases exist in our book, book of NPAs?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think NPA recognition is, in case they don’t service all dues there, they are NPA anyway. Yes. They have slipped and have not — don’t pay up all the dues. They don’t get upgraded by — so to that extent, sorry, I’m not sure what the question is.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

So, my question was, are there any less than 90-day DPD customers in the NPA book, because customers who have made — who may have not prepaid all three EMIs but would have repaid only one EMI out of the three, which is outstanding. But the given the intent is to pay, and hence they are at least servicing the existing EMI, so more than one EMI?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Well there will be, there will be, but they do subsequent quarter, they will be either upgraded. So that’s how it will. Maybe Babu or Ashutosh, would you want to add anything to that question? Ashutosh or Babu?

Ashutosh Khajuria — Executive Director

Am I audible? Hello?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Please say, Ashutosh, it’s good. Go ahead.

Ashutosh Khajuria — Executive Director

If I’ve understood the question, you mean to say that if they have not become 90 days DPD, they have not turned into NPA and before that instead of serving three instalments, they have serviced one instalment, right, is that the question?

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

No. My question is, they have turned NPA — they have turned NPA, they have been 90 plus DPD.

Ashutosh Khajuria — Executive Director

If they have turned NPA, they have to first become zero DPD, not only that particular account, all the accounts, all the related accounts as well. Everything have to become zero DPD on a day, then only the upgradation would happen. Otherwise they would like as an NPA, even if they are 60 DPD or 30 DPD.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Yes. That’s my question. So in the — in the NPA that we report of the total NPA that we have of INR4,000 odd crores, are there NPAs which are say 60 DPD also in that, is that maybe a majority chunk or a large chunk of NPA?

Ashutosh Khajuria — Executive Director

There would be some. I think the overall number if you see SMA 2, SMA 2 number is mix of both the ones which have not fully cleared all the dues, have not yet become zero DPD and therefore they continue to be NPA, though they may be 60, 61, 64, 65 DPD and the — the ones which have migrated from SMA 1 to SMA 2. So that number which you see you know that 4.5%, 5% number of SMA 1, SMA 2 all put together, because our collection efficiency is above 95%, so what remains is your SME. So I think if you see that number, that particular number, you would find I mean that SMA 2 would have both, they would have some who have not fully cleared all the dues, so therefore could not be upgraded and sorry in NPA, you will have some — not in SMA 2 but in NPA you will have some of those, which would be 60 DPD as you are guessing, but I don’t know exactly the number, but I can give you separately. It will have some.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Sure, sure. Yes. I would take that offline probably.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Fine. I think, Gaurav, your line is also disturbed. I think we should move on to other people.

Gaurav Kochar — Mirae Asset Investment. Managers — Analyst

Sure. Sure. Thanks.

Operator

Thank you. The next question is from the line of Arav Sangai from VT Capital. Please go ahead.

Arav Sangai — VT Capital Market Private Limited — Analyst

Somebody’s line has got disturbance.

Operator

Sir, we’ll check the line, one moment.

Arav Sangai — VT Capital Market Private Limited — Analyst

Yes. Hi, sir. Congrats for good set of number and hope all well at your end. So, sir my first question pertains to the yield moderation that we have seen. So we have grown our NIM this quarter, but most of it is regarding the cost of funds decline. So from a medium-term strategy, I wanted to understand since this quarter also our corporate book has grown better than the retail, so how are we looking at the broad mix of the book, and the yield coming in, especially when we’re hearing there is a lot of competition in the corporate segment. So from a one year or two year perspective, how are we looking at the segments which we are trying to grow and increase the yields on our book?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think we have been mentioning that our mix of business, 55%, 45%. 55% retail and 45% wholesale. And we are pretty much in that space and within that, the businesses that are higher margin are being pursued quite aggressively and we are seeing growth in all accounts, but I do want to point out that these things can’t be at the risk of later facing accreditation. So we balance that out. Credit cards beginning to see traction, gold loans coming back, businesses like commercial vehicle are strengthening and I see opportunities there. The commercial vehicles, business banking, gold loans, credit cards, all seeing traction.

In the wholesales banking, commercial banking which is a little more higher yields and operate will continue to grow. The business mix would be 55%, 45% and within that, the yield enhancing products are seeing traction. We see that will give us the option — opportunity to increase margins by another 5%.

Operator

Sorry to interrupt to you, sir. Sir, should I reconnect your line?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Is that my line which is a problem?

Operator

Yes, sir.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Please go ahead.

Operator

Thank you. Ladies and gentlemen, request you all to please stay connected while we reconnect the Chair person. [Operator Instructions] Thank you, and over to you. Mr. Sangai, you can go ahead.

Arav Sangai — VT Capital Market Private Limited — Analyst

Yes. Sir so — sir my second question is on the opex front. So as you mentioned that you are making a lot of investments with all these fintech initiatives and all, so right now we are cost to income of 55% and as you mentioned that cost is a very big lever of ours, we are achieving that 1.2% ROA mark. So by say in the next one or 1.5 years, where can we expect this cost to income, any band that you would like to guide us for?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. We were at 50%. In the last two quarters, it has shot up, because I think as explained in the last call, there have been impact on the wage related, partly because of the announcements that came on the wage side. I think that’s getting normalized. Over the next two, three quarters, that will start trending down and some of the volume-related costs which are good costs are going up, but that’s something that we are willing to live with. Some of the digital initiatives will start seeing sort of improvements in the cost-income in the quarters that follow. So over financial year FY ’23, we will see about 200 basis point improvement on this and I do think a similar number in the following year. We saw some pickup on that because there were some guideline changes and also some unexpected bump up on pension and family pension and gratuity and PF, all that is now factored in, so I think somewhere 200 basis point improvement in each financial year from here on.

Arav Sangai — VT Capital Market Private Limited — Analyst

Right. Thank you, sir. That’s it from my end. And all the best for the coming quarters.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Dhaval Gada from DSP Investment Managers. Please go ahead.

Dhaval Gada — DSP Investment Managers — Analyst

Yes. Hi, sir. Thanks for the opportunity. I had three questions. First was on the — going back to the retail credit growth point, so just wanted to sort of touch base relative to some of the larger peers who have reported, it seems that the sequential momentum was little bit soft and especially in personal loan was one and also in other products, we’ve seen relatively the momentum was slow, any comments that you have, is it more temporary? We are seeing momentum build back and if you could specifically give some comments on MFI and CV/CE as well, since that — those are the other portfolios that we intend to increase mix.

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think on personal loans in particular, like I mentioned in the beginning of the call, we are a little more by choice conservative on that count. I would not try to be very aggressive on that count. That said, we are seeing pickup as I mentioned. Our non-unsecured growth in retail was as usual in the 20% or so, blended was lower. So that will continue. The secured products are doing well and unsecured, we are seeing both personal loan and credit card will grow, but I want to caution saying that that’s not something that will grow in the very high numbers initially and then run into a problem later. That price we are willing to take. I mean that pain we are willing to take and grow slower and do it in a more graded fashion. But that said, it’s growing.

Commercial vehicles is doing well, but on a small base and here again, we have been more conservative. As things open up, we are seeing that catch-up. We have further strengthened the team. We’ve got a senior leader joining us as a Business Head for commercial vehicles. So he is putting out a plan to make sure that this business will see meaningful growth going into FY ’23. But I do want to point out businesses like commercial vehicles, credit cards, personal loans, microfinance, all of which are exciting and high margin, won’t dominate our incremental growth. So to that extent, that’s a philosophy of ours. Combined, these businesses may put up about INR3,000 crores in a financial business year. But on a business that may grow INR20,000 crores, INR15,000 crores, INR18,000 crores of credit, this will not be material, but it will add up in the quality of the business and over a longer period of time, it will sustain us.

Dhaval Gada — DSP Investment Managers — Analyst

And sir, just one data point, if you could provide on personal loan, what percentage or how many customers have we offered these pre — pre-approved personal loans, any data that you could share compared to let’s say last year or the year before? Some perspective, so basically are we in the process of doing that or we’ve already done it, some perspective if you could provide, that would be useful.

Shyam Srinivasan — Managing Director & Chief Executive Officer

It’s a base that is ever generating, right. Because it’s a base that every month the scrub runs on the existing client base and the whole 1 crore customer base whoever is eligible based on our internal criteria gets scrubbed every month, and there is a continuous offering. And existing customers top up, repay, top up, so it’s a — it’s a perennial source for both cards and other personal loan and other cross-sell opportunities. That said, the take-up is usually about 3% to 5% of our base every month.

Dhaval Gada — DSP Investment Managers — Analyst

Understood. The second question was on the fintech partnerships. So you’ve been sharing your experience with these players. So if you could just give some quantitative numbers around how much is the saving balance with these accounts that are coming with these fintech and then current account balances with the merchant acquisition business, see pre-pulls if any, if you could just quantify where are we today and any like one year, two year down the line, what size these — each of these metrics could be?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think the first thing I would say, has I think one of our Slides, Slide 16 in our deck and beyond, talks about the fintech partnerships. We have consciously indexed it to x and what percent — I mean how many times x has been growing every month, that you would see or you would notice both in balances and in number of accounts and it’s growing quite rapidly as you would observe. Numbers, we are consciously not sharing, not because that we don’t want to, but I think the partners seek that confidentiality because there are many partners and we put out they shouldn’t get into their own — they have other commercial considerations. So we are sharing it indexed to a particular number.

But suffice to say it’s growing quite well. It’s yet not very meaningful in the wider scheme of our CASA balances which is well or north of INR50,000 crores, these are yet to — is a speck in the horizon. But we believe on the margin, they are doing well. The three year more basics MOB balance build of these accounts match up to some of our segments of the business and we are giving ourselves calendar ’22 to make sure that these are actually catching up and providing us cross-sell opportunities as we mature into these businesses.

Dhaval Gada — DSP Investment Managers — Analyst

Would these be like more than 2% of CASA today, these partnerships the floor does?

Shyam Srinivasan — Managing Director & Chief Executive Officer

No, no, not — far from that. Not as yet.

Dhaval Gada — DSP Investment Managers — Analyst

Understood. Okay. Just one last point on the provision line just a data keeping question. I think we have adjusted based on the RBI circular, we have adjusted recovery from written-off account from the provision, is my understanding correct? And if yes, then if you could provide recovery from written-off account during the quarter. Yes. Those are the questions. Thanks.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Venkat or Babu, you want to take that.

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

So this is Babu here. What I understand, the question is, you’d like to say appropriation of accounts as per the latest deadline. If that is the question, I would like — Venkat may take the question.

Venkatraman Venkateswaran — Group President & Chief Financial Officer

Yes. I’m here. This is Venkat here. On the question about the RBI circular, last if you recollect in August, there was a circular where there was changes in the presentation which was prescribed on the financial statements by RBI, where recoveries from fully written off accounts, earlier which were shown as other income was to be netted off from provisions. So that’s what we followed in the Q2, but subsequently based on certain presentation in November, I think November 15th there was another circular, where they revised it and made changes and not just to go back as per the earlier presentation. So, we have restated the previous quarters as well in line with the change.

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

In Q3, that number was marginal, maybe like a few crores.

Dhaval Gada — DSP Investment Managers — Analyst

Okay. Thanks. Thank you. All the best.

Operator

Thank you. The next question is from the line of Sumeet Kariwala from Morgan Stanley. Please go ahead.

Sumeet Kariwala — Morgan Stanley — Analyst

Yes. Hi. Hi, Shyam, congratulations on a good quarter. I had a question on margins outlook that you have the historically given which has been in the range of 3.15% to 3.2%. We are running at 3.25% now, more than that and you’re sitting on a lot of liquidity, there is — the rate cycle is turning, you are very well positioned for that, you will open up risk appetite with respect to lending and so on, do you see the need to revise that guidance or should we assume some upside risk?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Sumeet, as you know, we are quite conservative on this guidance, but I do believe, like I said in the beginning of this call, there is another five, seven basis-point opportunity that is there in the near term, which we are working through.

Sumeet Kariwala — Morgan Stanley — Analyst

Got it, sir. Very clear. Thank you.

Operator

Thank you. The next question is from the line of Manoj Bahety from Carnelian Capital. Please go ahead.

Manoj Bahety — Carnelian Asset Management — Analyst

Hi, good evening, Shyam and entire senior management team of Federal Bank. Let me first congratulate you for achieving 1% ROA. So my question is mainly on digital initiative which Federal Bank is taking. So just wanted to get some color on this digital initiative, especially when on one side there is a risk of disintermediation from new fintech players and on other side, when I see like larger banks, they are also coming with open architecture and innovative solutions. So in that respect, just wanted to understand that how Federal Bank stands.

And secondly whether whatever digital initiative which we are taking, how it is going to enable our growth going forward, especially on the personal loan side, especially on like making our loan book more granular. So on that if you can give some perspective, that will be helpful. Thank you.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Sure. I’ll give you some remarks and I’m sure Shalini will also add in. Manoj, let me just begin by saying our approach to digital, I think I said this in the last time call also, I and the team believe very firmly that fintech partnerships is a very, what should I say, smart way for Federal Bank to extend our reach. We could have added 2,000 branches to accomplish the same outcome. We believe that, A, we built a good house of fintech stack, if you will, and that’s attracting a lot of fintech players to come to us or mobilize our partnership. You did mention some large banks, in the area of fintech I think large and small is irrelevant, it’s technology and agility that makes a big difference. I can publicly challenge anybody, I don’t think we are less than any of your bigger banks that you have in mind.

And nice evidence right, I mean if every fintech in the country is talking to us, it’s probably because we are willing and capable and swift and give attention at the highest level. Me and Shalini are personally involved in many of the things. We creted a fintech team whose only job is to breathe and deliver on this count. So, I don’t think we are lagging and I don’t want us to be lagging.

That said, will it be profitable, will it turn out to be the next money-spinner for us, that jury is out. We are working very hard to make sure that it’s productive and profitable. But I also recognize the fact that this is an investment, right. If you add 1,000 branches, it has a 18-month gestation period. We are seeing this in that context, we may get a few things right, a few things wrong and where we don’t get it right, we’ll exit it and where we get it right, we’ll expand it. Most of the partnerships are outcome based compensation for either of us. We gain, they gain. We don’t gain, they don’t gain.

And thankfully we’ve chosen partners who are willing to sort of with us and they find our engagement quite productive. So I think therefore, we have a pretty structured exercise. I’m not saying these are instant wins, but the exercise is quite structured. We have created a full-fledged team whose only job is live and breathe fintech and make it productive for us and for the partner. And I believe we must be at the forefront of it.

So, Shalini would you like to add any points?

Shalini Warrier — Executive Director

Thanks, Shyam. I think you’ve covered most of it. I’ll just add a couple of things and I think you alluded to on the lending side of it. Absolutely, this is another area where partnerships are designed to play a very key role for us. If you go back in time even the little bit of personal loans that we do or even through the COVID period, we were one amongst the first banks to kind of offer our loans on platforms like Google Pay and GPay and Paisa Bazaar. Even today, we work with both of them for our existing to bank customers. So, yes, on the lending side, we’ve got that.

We’ve got a very good example of how we’ve been able to scale up FCL, our credit card with FCL, you’ll see some of the data in one of the Slides on the Investor deck. So, it’s more about collaboration with fintech, it’s working with them closely across the spectrum, whether it is credit cards, personal loans, general savings account, rural India through BGB, merchants through Bharat Pay.

We’ve got all of these kind of working with us and using our fintechs as more as a collaborate, we don’t see them as a competitor. Having said that, our regular digital stuff is also making good progress. You will see some of the metrics in one of the Slides. Digital migration at 88%. We kind of offer a whole range of financial and non-financial services through our mobile banking platform. We’ve touched INR12,000 odd crores of mobile banking volume. So one is not in due of the other, both work in complement with each other.

Manoj Bahety — Carnelian Asset Management — Analyst

Just a follow-up to that, how do you measure your success of digital initiatives? Like it should be in terms of acceleration in getting good quality assets with lower risk, so how do you monitor success or failure of this collaboration along with your in-house digital capability?

Shalini Warrier — Executive Director

Should I, Shyam?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. Yes. Go ahead. Please go ahead.

Shalini Warrier — Executive Director

So I think what we’ve done at this point in time is carved out the whole fintech partnerships as a separate vertical by itself, it’s a business division on its own and it has a set of KPIs which are normal business KPIs, so that team of people is mandated to grow balances whether it is in the form of credit card outstanding, personal loan outstanding, savings bank balances, term deposit success of, has a set of KPIs on cross-sell to these customers, has a set of KPIs on income from these customers, as well as cost of — cost of acquisition, cost of maintenance, etc.

So it’s a regular business division on its own, the whole fintech kind of vertical that we’ve carved out or the team that we’ve carved out. And they are measured very, very carefully on these metrics and through robust reviews with our fintech partners, we ensure alignment and objectives and the commercial model is also aligns to those objectives.

To the broader point on digital and how do we measure digital, again we’ve got a set of metrics in place, but I think the overarching point is, every transaction migrated out of a branch and moves to a digital gives us that much more leeway in the branch to be able to sell either an insurance to a customer or a credit card or — or a regular savings account etc.

So the business growth that we’ve seen and if you map that against the growth in staff numbers, you will realize that our business has grown x times, whereas our staff hasn’t grown to that extent and that could have only happened if we had migrated about 85% of our transactions away from the branch. So broadly, both fintechs as well as regular digital stuff that we do have a set of very strong financial KPIs that are measured and usually reviewed by the management team on a monthly basis.

Shyam Srinivasan — Managing Director & Chief Executive Officer

No Shalini, I’ll also add only one more point to everything you said. We probably had — probably only Bank which has added just 20 branches in five years and grown 2.5 times business.

Shalini Warrier — Executive Director

Yes. Yes.

Manoj Bahety — Carnelian Asset Management — Analyst

That’s important. Thank you. Thank you for taking my question and wish you good luck.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Shalini Warrier — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Good evening, and congratulations on reaching important milestones. My question was on the corporate book, it has shown a sharp growth, is it more — are you seeing it more as a working capital kind of growth or do you see investment-led growth where the loan will stay on your book for a longer period of time? Thanks.

Shyam Srinivasan — Managing Director & Chief Executive Officer

A mix, Vivek, I don’t think it’s either or, it’s both. We’ve seen good progress this quarter for two, three reasons. One, corporates themselves are beginning to come back to banks. In the greater part of last year, corporates where literally keeping away from banks and we were keeping away from some of them because the pricing was obnoxious. Both have started showing some trajectory change. And so we were in the right place in Q3 and we started picking up share. The mix is, both working capital, the investment-led is much less, but three year loans are picking up.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Oh, excellent. Thank you very much and good luck.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Operator

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

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Hi, sir, good evening. Yes, good evening and congratulations on a good set of numbers. So firstly, on the cost of deposit side, is there still scope for improvement in that or do you feel we have bottomed?

Shyam Srinivasan — Managing Director & Chief Executive Officer

When the rate cycle is pitched for a turn, Mona, I don’t believe there will be too much of an opportunity to lower cost. Yes, if our CASA picks up even further, there may be some, but I must be honest that’s not a material number. At 4.27, we are at our lowest in terms of cost of deposits and compare very favorably with banks. Here I will admit there are bigger banks than us and I think we are at the — at the — at the probably at the lower end. I don’t believe there will be too much of an opportunity.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Sure. And just to follow up on the wholesale book, you have seen a healthy growth despite the pricing, the competitive environment, what are our incremental yields for both commercial banking and CIB book?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I don’t know if how sure couple are there, incrementally commercial banking is seeing some pickup. Corporate though, if you’re going after the best names which you are, I don’t see much of an opportunity for yield pickup on that in a hurry. But we are seeing other opportunities to cross-sell into that, that’s why you saw this quarter our core operating income shoot up quite materially, because in corporates where we are lending at very competitive rates, we are able to pick up other businesses. Commercial banking, I think the yield pickup is very good.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

But where would the incremental yield be, if you could give some color on that?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Commercial banking would see the bigger picture — bigger opportunity.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

But the rate, where would it lie, if you could give a broad range?

Shyam Srinivasan — Managing Director & Chief Executive Officer

It would be about 10, 15 basis points higher than our current run rates. And the commercial banking is somewhere around the seven, mid-seven to eight and I see that picking up even further.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Okay. Okay. And just finally on this, you know the whole fintech and investments around that, what could be the growth you can see in other opex owing to the technology investment?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think the way we see this are roughly in a quarter, we expect INR30 crores to INR40 crores of cost going towards investing in technology or investing in the partnership in terms of acquiring the customer. Annualized it should be somewhere in the INR70 crores to INR80 crores. In the near term, it will produce us less in the revenue side, but it will establish the presence of the Bank in the segment and in the longer term, it will start seeing. The lending relations related to fintech have quicker breakeven. The liability related have a little more gestation. So, we think this whatever, the INR60 crores to INR80 crores or whatever that number is going to be, will have a mix of benefits, brand, establishing our presence, getting customer base, building a cross-sell database, and establishing a credit relationship, which turn out to be much more productive very early.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Sure. And just one data keeping questions, in fact two. Firstly, how much of your book would be EBLR linked and secondly, SMA, I think somewhere you mentioned 4.5% of total SMA book. Is that a right understanding?

Shyam Srinivasan — Managing Director & Chief Executive Officer

My last number, 4.15% I think is the total SMA book. And EBLR, I don’t know, Ashutosh or Damodaran, do you have it at the top of your head?

Ashutosh Khajuria — Executive Director

40%, Shyam. 40% is [Speech Overlap].

Shyam Srinivasan — Managing Director & Chief Executive Officer

Around 40%. Yes.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

40% of your total advances would be EBLR linked?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Or is it floating share or floating rate?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Total advance.

Mona Khetan — Dolat Capital Market Pvt Ltd — Analyst

Okay. Thank you and all the best.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ajit Kumar from Ambit Capital. Please go ahead.

Ajit Kumar — Ambit Capital — Analyst

Thank you for the opportunity, sir. So, couple of questions from my side. First, in the last couple of quarters, NRE deposit growth has come down. This quarter the absolute NRE deposit amount is broadly flat on Q-on-Q basis and last quarter it declined. And even as per your press release, your market share in inward remittances has declined to 19.23% this quarter versus 25.54% last quarter, so roughly 130 basis point decline is there. So is there any pressure on the system of deposit?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think it’s a public fact that the gross remittances coming into India have dropped 25% or so, right. So our share gain is what we make sure that we happen and which something that’s part of the territory that the country is working through. So I don’t see that as a material issue, but our gain in share and our gain in momentum will continue.

Ajit Kumar — Ambit Capital — Analyst

Okay. Okay, sir. This decline in market share, inward remittances is basically temporarily you are saying?

Shyam Srinivasan — Managing Director & Chief Executive Officer

No, I think these are point in time. I mean literally only [Foreign Speech]. So I can’t — it just happens to be 19.20%, but that’s the difference. I don’t see much of an issue.

Ajit Kumar — Ambit Capital — Analyst

Okay. Okay. And sir, second question is on the MSME segment. So almost all the large banks have seen very high growth in SME and business banking side. I mean, more than 30%, 40% Y-o-Y growth, how do you look at the situation, is the opportunity by itself is increasing in this segment or large banks are gaining market share at the expense of mid banks and NBFCs probably by offering lower rates? Your assessment on this would be quite useful sir.

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think it’s probably the latter. With credit opportunities in the top-end being more limited, a bank sitting on a fair amount of liquidity and having this keen desire to grow credit may have extended them sir, because we have encountered sometimes irrational pricing for smaller customers and pricing which don’t otherwise make too much sense.

Ajit Kumar — Ambit Capital — Analyst

Okay. Thank you, sir. That’s it from my side.

Operator

Thank you. The next question is from the line of Jai Mundhra from B&K Securities. Please go ahead.

Jai Mundhra — B&K Securities — Analyst

Yes. Hi, sir. Thanks for the opportunity and congratulations on a steady and good quarter. First question is, sir, on asset quality. So there is a Q-o-Q raise in slippages in business banking and commercial, while it looks marginal, but just wanted to understand if there is any more color there in terms of, is it due to let’s say RBI clarification which demands now daily recognition, or clearing pool overdue, or this is something to do with some ECLGS or restructuring maybe trending bad or this is just business as usual?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. I would categorize it as absolutely as business as usual. As in, I mean if you look at our own deck, take business banking, in five different quarters, it’s five different numbers and they are not in any trajectory or trend. And if you’ve seen 49 in one quarter, you’ve seen 196 in another quarter. So I don’t think you could draw any parallel from INR49 crores to INR84 crores. And I think normally, somewhere in the INR60 crores to INR80 crores would be a predictable number, but these tend to be very in that range. I can’t quite comment it’s anything to do — because this daily recognition and RBI circular practice we’ve been following for very long. So, it hasn’t materially affected us any in this quarter in particular.

Jai Mundhra — B&K Securities — Analyst

Sure. Sir, and anything on ECLGS sir? If you can highlight what is the quantum and how much has been — has already slipped?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Sure. I think the GCL slip is less than 5%, but Babu, you want to add?

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

Sir, the last point I was not — whether [Speech Overlap]

Shyam Srinivasan — Managing Director & Chief Executive Officer

The slippage of — the ECL book slippage?

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

Yes. ECL slippage is 2%, it is almost the way less than the normal debt, is 2% this quarter.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Did you hear that? 2%, 2.1%.

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

Yes.

Jai Mundhra — B&K Securities — Analyst

Okay. And there is no — is there any, I mean, what is the total number sir of the ECL book outstanding? An absolute number?

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

So, it’s some numbers, then you know, the current and about free cash.

Shalini Warrier — Executive Director

It’s about INR3,600 crores.

Shyam Srinivasan — Managing Director & Chief Executive Officer

INR1,650 crores is the ECL of [Speech Overlap]

Shalini Warrier — Executive Director

Yes. INR3652 crores and 2.12%.

Jai Mundhra — B&K Securities — Analyst

Sure. Yes, thanks. And second is sir, I think in the PPT deck you have mentioned that in the recovery include some ARC transaction. If you can provide some more details there as to?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. One of the ILSS roadways we sold and made a cash transaction and got the deal fully — fully out of our books.

Jai Mundhra — B&K Securities — Analyst

Right. Okay. Understood. And the last thing, sir from my side is, if I look at your retail loans, right, so mortgage is still double-digit growth, auto is also growing reasonably well actually better than industry, but the other portion of retail is showing a Y-o-Y decline if I were to see that. So broadly what is included in other of retail? Is it like education loan or something else which is de-growing? So if you can help us that which segment is de-growing there?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Right. Personal loans and auto lower, personal loans, education loans.

Jai Mundhra — B&K Securities — Analyst

Okay. Sure. Thank you, sir. Thank you and all the best.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities. Please go ahead.

Nitin Aggarwal — Motilal Oswal Financial Services Ltd — Analyst

Yes. Hi, sir. Congrats on a good quarter. Couple of questions. Like, what is the growth outlook that you see in the gold loan portfolio? After robust like FY ’21, we have seen nearly 4% growth in this portfolio in the nine-month FY ’22. So how do you see the trends ahead?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. You know, we did see this business cool off this financial year. Thankfully, the December month did well. We see that probably repeating itself. We are now looking at between 10% and 15% growth for this financial year and mid 20%s growth for next financial year.

Nitin Aggarwal — Motilal Oswal Financial Services Ltd — Analyst

Okay. And second, on to the restructured assets, now so far in this earning season, we have seen a decline in the restructured assets for most banks, while we have reported a very, very small increase. So if you can provide some color on this and how do you see the reduction in this portfolio over the next one year?

Shyam Srinivasan — Managing Director & Chief Executive Officer

The residual — see restructuring ended at the end of September. There were residual I think about INR400 crores or something that got restructured in Q3. After that, the restructuring book is zero, because there will be just for example, nothing in Q4. The restructuring book is behaving well. I think we’ve made anticipating whatever challenges wave-three can throw up, we’ve made a significant increase in provision for that. Otherwise, restructuring book is performing quite well, because 98% of our restructured book is secured.

Nitin Aggarwal — Motilal Oswal Financial Services Ltd — Analyst

Sure, sir. Thank you. Thanks so much.

Operator

Thank you. The next question is from the line of Ajit Kabi from LKP Securities. Please go ahead.

Ajit Kabi — LKP Securities Limited — Analyst

Hi, sir. Congratulations. Hi, congratulations for the good set of numbers. So I have one — already I had two questions, two bookkeeping questions. One was asked by Mona Khetan. So the question of, that what is the contingent you have provision you have, contingent provision mean, what is the provision you have outside this year?

Shyam Srinivasan — Managing Director & Chief Executive Officer

INR730 crores for our standard restructured advances.

Ajit Kabi — LKP Securities Limited — Analyst

Apart from that standard restructured provision, how much is the COVID provision or any counter cyclic provision book that you have?

Shyam Srinivasan — Managing Director & Chief Executive Officer

No, this is the universe of our provisions.

Ajit Kabi — LKP Securities Limited — Analyst

Okay. Got it, sir. Thank you. Thank you.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thanks.

Operator

Thank you. The next question is [Speech Overlap].

Shyam Srinivasan — Managing Director & Chief Executive Officer

Just allow me to just clarify so that everybody understands. Each bank has their own measure of LGD, segment, secured, unsecured, book profile, forecast of what can slip. So in our case, we’ve made a judgment based on our restructured book, it’s past behavior, it’s likelihood of slippages, what is the LGD and we want to make sure that at all point in time on our book, we keep our provision coverage at 65%. On that strength is what we’ve made a coverage decision provision.

Operator

Thank you. The next question is from the line of Renish Hareshbhai Bhuva from ICICI Securities. Please go ahead.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. Hi, sir, and congrats on great set of numbers. So just a couple of questions, one is on this, all the new products put together, like I mean MFI, CVs, credit card, what is the total outstanding book currently? Okay. Sub-thousand crores. Sorry, if you add commercial vehicles, it’s about INR2000 crores.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Okay. Including commercial vehicle is INR2000 crore?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Right now. MFI plus credit cards plus commercial vehicle.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Got it. And what is the target I mean over next two years? I mean is there any target or?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. I did mention earlier, annualized we think these businesses put together will grow between INR2,500 crores to INR3,000 crores. If you take two years, you can say post run off about INR7,500 crores from today.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Okay. Okay. And sir, again just apologies to repeating the question on this fintech journey, but just a very basic question. Let’s say the customer acquisition has been through this fintech partners, customer ownership remains with whom? I mean let’s say for example, if we are acquiring customer via as in Neo Bank and will start with offering the maybe saving account and then if you want to offer something else, are we allowed to offer something else or it will be the Neo Bank who will drive the cross selling thing?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think Renish, this question last time also I clarified. Varies from partner to partner. One of the first partners we signed up for origination of accounts, those accounts are now roughly coming up to six months old, some of them, the first month of origination in July last year. We have the opportunity to cross-sell based on the client behavior for credit cards and personal loans. And the relationship with each partner depends on what other products they offer. So sometimes we have the right to offer the entire suite of products, sometimes we have the right to offer products that they don’t have, sometimes it’s a joint marketing, each partnership varies. But for example, the first set of clients which we booked in July, ’21, which is the first cohort of good customers we booked with one of the Neo Bank, those are maturing up. Based on six months past experience, we can do cross sell of some of our credit products.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Got it. I mean just to clarify that Neo Bank is just a example. So we have 50 plus partners. So — so basically you are saying the arrangement will be different for each and every partner?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. The big client originating partners are four to five. The rest are technology enabling partners. So there is a difference.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Okay. Okay. Okay. So basically business generating partner would be four to five?

Shyam Srinivasan — Managing Director & Chief Executive Officer

The large cohort of new customers come through four, five important partners.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Got it. Got it. Also overall I mean, where we — where we stand currently? I mean, what percentage of our business comes from this four, five partners?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think we’ve mentioned it, roughly in a month we were doing 4,000 accounts and now we’re doing 15,000 to 18,000 accounts, sorry in a day.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

In a day. Okay. So we already moved from 4,000 account to 15,000 accounts a day now?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think we’ve been saying that and one of the Slides, we did have.

Shalini Warrier — Executive Director

I think it is, yes, one of the first few Slides, Shyam.

Shyam Srinivasan — Managing Director & Chief Executive Officer

[Speech Overlap] our new origination is now through fintech partners. I think we have billed about 12 lakh customers through this, yes.

Shalini Warrier — Executive Director

75% of new accounts have been booked. I think it’s one of our first Slide, Slide 3.

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

And then just a — just a last follow-up on that. So I mean of course let’s say the acquisition cost will be far higher than our blended cost to income ratio which is at sub 55% any sense, I mean, well do we start sourcing customer at the current cost to income?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Pardon me?

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

So I’m assuming, sir since this partnership are in very early stage and we might not have been able to leverage the customer fully, the cost of acquisition will be slightly higher than our blended cost to income ratio currently, which is at 55%, right, because the revenue potential from those customers will be lower currently and cost of acquisition will be higher, so the — any sense and I mean when this partnership will then breakeven?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I did mention that our annualized whole fintech cost base, we are in a depending plus or minus based on volume, between INR60 crores and INR80 crores annualized and that is encountering after assuming the cost income improving by 200 basis points next year. That should answer your question. Yes?

Renish Hareshbhai Bhuva — ICICI Securities — Analyst

Got it. Got it. Okay. Yes. Thank you. Thank you very much, sir. And best of luck for coming quarter, sir.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you, Renish.

Operator

Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.

Sameer Bhise — JM Financial — Analyst

Yes. Hi, thanks for the opportunity and a good quarter. Just wanted to get a slightly medium term sense on how you think on fees, because obviously you have been a bit conservative on — on chasing high yield assets. So any levers that you see from the fee side incrementally say couple of years out, or what are the possibilities there?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think on all the fee enablers, we’ve been making sort of sustained progress. For example, this quarter, our non — our core fee income probably was its all-time high and that every quarter I say that it’s at an all-time high. So evidently there is progress on that count and I think there is in one of the Slides that breakup is also there.

Shalini Warrier — Executive Director

Slide 27, Shyam. Slide 27 has a fairly detailed breakup.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes, there it is. So that will continue, Sameer and we believe that on all metrics, it’s making progress.

Sameer Bhise — JM Financial — Analyst

So, sorry to kind of stick around here a bit. So when we probably look at our next leg of our ROA expansion journey, obviously you have some bit of inch up or lift up from margins maybe costs. Does this feel high on a reasonably high priority or it is — because when we compare with some of the larger peers in the sector, there is a gap which needs to be filled, so which is where I was coming from.

Shyam Srinivasan — Managing Director & Chief Executive Officer

No, you are right. But ours is more what shall I say, sustained progress. I wouldn’t one quarter to have some extraordinary and the next quarter it falls off. [Speech Overlap] And you see our numbers across the even in the income deck, the other income distribution vertical wise, you will see progress on every — every line is making progress and I believe that it will continue. It will not be one thing that will fire, whether it’s FX, it will do well, para banking is making progress as cards lines sequentially every quarter has been making progress. I think that will continue. Processing fee as volume picks up, you’ll see progress. All of them, I mean we’ve given it as granularly as possible in the Slide 27.

Sameer Bhise — JM Financial — Analyst

Okay. I’ll probably take this offline later, but sure, all the best to you. Thank you for the opportunity.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Deepak Gupta from Reliance Nippon Life Insurance. Please go ahead.

Deepak Gupta — Reliance Nippon Life Insurance — Analyst

Hi, my question has been answered. Thank you so much.

Operator

Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead.

Aditya Jain — Citigroup — Analyst

Hi, thank you. Just wanted to ask about the fintech partnerships. The commercials of it, I wonder if you can talk about them at a qualitative level, roughly how are the commercial sector. You touched upon it when you mentioned that there is alignment of incentives, but is it like for every account opened, the partner will get a certain amount or is it linked to transactions happening. So for every transaction, there is a payment or how — broadly, how is that arrangement structured? Is it possible to just give us color on that?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Sure. I think we did mention, first of all just to clarify, there is no one fintech partnership, right, each one — as we mature and as we relate sign up new partners, each one varies in its structure, they are all not sort of cookie cutter and it’s not the same. And second, generally it’s outcome focused. So if we have success and they have success, then the gains are shared. If there is — it’s not catching on, there may be some sunk cost and we’ll exit it at an appropriate time so that customer has not left high and dry. And the lending relationship have a different kind of payout. The liability originating customers have a different kind of payout and the cross-sell that we can do will determine the productivity and the profitability of the customers. I would just say, it’s quite bespoke and not one size fits all. And as we graduate in that process, I think we are getting better and better with each of our engagements.

Aditya Jain — Citigroup — Analyst

Got it, sir. If we were to just think about the liability side for a second. So if it is a customer who is completely with the Bank and not come through a Neo Bank, then on an incremental transaction, the cost obviously for the Bank is low. It’s predominantly a fixed cost, but with these Neo Banks, does it become a more variable nature, just for liability relationship [Speech Overlap]

Shyam Srinivasan — Managing Director & Chief Executive Officer

Linked to balance build over a period of time, 6 MOB, 9 MOB, 12 MOB, balance on the account will get them rewards.

Aditya Jain — Citigroup — Analyst

Understood. That helps. Thank you.

Operator

Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Mr. Muraka.

Abhishek Murarka — HSBC Bank USA — Analyst

Yes.

Operator

Yes, sir. Your audio is not clear from your line sir. Please check.

Abhishek Murarka — HSBC Bank USA — Analyst

Is it better now?

Operator

No, sir. The audio is breaking from your line.

Abhishek Murarka — HSBC Bank USA — Analyst

Give me a second, please.

Operator

Sir, we request you to rejoin the [Speech Overlap]

Shyam Srinivasan — Managing Director & Chief Executive Officer

Abhishek, don’t worry. Just call Anand to get your answers to all your questions.

Abhishek Murarka — HSBC Bank USA — Analyst

I’ll do that.

Operator

Thank you. The next question is from the line of Akhil Hazari from RoboCapital. Please go ahead.

Akhil Hazari — RoboCapital — Analyst

Hello. Good evening. Am I audible?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes, you are.

Akhil Hazari — RoboCapital — Analyst

Thank you. Sir, I just wanted to know what is the normalized credit cost that you have going forward?

Shyam Srinivasan — Managing Director & Chief Executive Officer

This is one area which is working positively wrongly for us. I mean, every time I think it’s 60,70, 80 basis points, we end up coming much better, but I think steady state you could plug in between 60 and 70 basis points.

Akhil Hazari — RoboCapital — Analyst

60 and 70, okay sir. And I just want to know the — the credit growth guidance that you had given, 10% to 15% and mid 20%s, so that’s for the overall credit book or is that a specific book?

Shyam Srinivasan — Managing Director & Chief Executive Officer

No, I was mentioning that in the corporate when I think one of our colleagues had asked about corporate.

Akhil Hazari — RoboCapital — Analyst

Right. And so what would be the overall credit growth going ahead for FY ’23 and FY ’24?

Shyam Srinivasan — Managing Director & Chief Executive Officer

We certainly will seek to deliver much higher than the industry growth. We believe calendar ’22 will look good, FY ’23 will look good for the country and now our mid-teens and higher than that growth is very possible.

Akhil Hazari — RoboCapital — Analyst

Okay. Fine. Thank you so much. That’s it from my side.

Operator

Thank you. The next question is from the line of Krishnan ASV from HDFC Securities. Please go ahead. Krishnan ASV, your line is in talk mode. Please go ahead with your question.

Krishnan ASV — HDFC Securities Limited — Analyst

Yes. Hi. Many thanks, Shyam. Wish you and team Federal a very happy New Year. I just wanted to — I just wanted to ask a couple of things. Number one, I’m assuming whatever you have showcased in the investor presentation from Slide 15 onwards, are — are your signature partnerships within fintechs. So just wanted to understand how far you believe or purely from a potential of these partnerships perspective, how scalable are these partnerships? If you could just give us some qualitative inputs there, that will be great. That’s number one.

And number two, what would give you confidence to grow in this environment? You’re already seeing the larger banks are around the mid teens. Assume at our scale, it should be — we should find those opportunities to at least be on par on that kind of growth, even if you eliminate some element of fraud that’s going on with the large banks. So just wanted to understand what would give you that comfort in terms of being able to accelerate a little faster?

Shyam Srinivasan — Managing Director & Chief Executive Officer

On the first one, I think, the ones that we have showcased are all of them are potentially scalable and already on the scale. I think the names mentioned epiFi, Jupiter and some of those that we are tying up, are all like we were saying in a daily basis, we are adding 8000, 10000 new customers and some of them may be even bigger. So I think some of these names are material and scalable and that will continue and it will be visible and the moment we see signs of that not working, then we have certain filters that we have put in. So the conversation opens up in saying, does it makes sense, do we need to part and that’s a model that’s working and the team that Shalini pointed out is exclusively focused on that.

The second question is around growth, I don’t want to sound like we are bigger than anybody else, we are not, but certainly we are not guided by what big banks are growing or what others are not growing, we are guided by our appetite and what the market opportunity is for the appetite we have. And I think, growing at the levels that we promised or looking to grow I think is very possible. Where we don’t score and we have chosen not to score is in the unsecured growth and that’s served the Bank well, despite all the criticisms that we face of being less courageous, but I think it’s a sustained business that we’ve built and as things open up and our capabilities to do unsecured business increase, we are confident of growing at good rates.

Krishnan ASV — HDFC Securities Limited — Analyst

Great. That’s helpful. Thanks.

Operator

Thank you. The next question is from the line of Mahesh MB from Kotak Securities. Please go ahead.

MB Mahesh — Kotak Securities — Analyst

Good evening, Shyam and team. Just a couple of questions. One, if you’re looking at the way interest rates have gone up in the last six months out there, how does the opex line on the provisions move for you during this financial year? That’s number one. Second one to Shalini, which is the fed operations one, where are we with respect to the transition on that?

Shyam Srinivasan — Managing Director & Chief Executive Officer

So, first one, Ashutosh can answer. Second one, Shalini and maybe Shalini can answer, Venkat can add. But go ahead, Shalini and Ashutosh.

Ashutosh Khajuria — Executive Director

So, I think I’ll start with the expected provisioning on the investment book. So, I just wanted to share that we have a very low modified duration in our AFS book. In fact, we practically do not have much of a surplus SLR and that is evident from the fall in our LCR from about 240%, 250% state to about 160% or so. So, that fall of 80 percentage points, 78 percentage points itself suggest that whatever surplus SLR which is classified as HQ LA and all, that we have shed. And we have shed at you know, good profits and all. And that shows in the capital gains made in quarter one and quarter two. So, I think in a nutshell, the portfolio itself is very light and because the portfolio which is subject to mark to market is light, the provisioning requirement for that would be minimal.

MB Mahesh — Kotak Securities — Analyst

Sorry, Ashutosh, sir. Can I just interrupt? Sir, the question is more from an opex line sir. We are just kind of trying to understand the impact of the retirement-related provisions, now that interest rates have gone up. Sorry for not having been clear on the question.

Ashutosh Khajuria — Executive Director

So, it’s about the employee cost?

MB Mahesh — Kotak Securities — Analyst

Yes, absolutely. Absolutely.

Ashutosh Khajuria — Executive Director

Yes. So on that, I think that we traditionally do not reverse the provision. So even if interest rates move up or so, we’ll hold on to what we are having, we have provided for superannuation. Maybe the addition accretion would be a function of how the yield curve shapes up. For us most relevant part is 14 to 22 years band of the yield curve, sovereign yield curve, because of the requirement for provisioning for gratuity and for pension. So, that segment of the yield curve would be actually to be seen, to be watched and I mean 10-year benchmark may be anywhere, but what we are concerned with is where is 14 to 22-year segment.

And as of now what we are seeing is the steepness of the curve is reducing and you are having more of you know yield moving up in the lower segments. So yield curve is becoming flatter, to that extent yields are not moving in that particular segment. In fact, the most liquid bond is a 14-year bond presently. And these ahead over 10-year is quite less. But, so I mean I think I have — to that extent I have answered your question, but it’s difficult to predict where it’s going to land as at the end of the year, 31st March.

MB Mahesh — Kotak Securities — Analyst

Absolutely. On the opex transition?

Shalini Warrier — Executive Director

On the subsidiary, maybe I’ll get started and Venkat can add Mahesh. I think against the about objectives which we formed Federal operations and services sector made considerable progress. Headcount has moved about in the range of about 600 or more right now. Couple of key migrations we’ve done to it as examples of what — what has been achieved. One we’ve migrated one of our call centers completely into that, so the entire call center capability now is handed by Fed Serv. We’ve migrated a lot of our tele collections capability into Fed Serv.

We’ve managed — we’ve migrated a lot of tele sales services into my — into Fed Serv and therefore we have a unit now functioning out of Fed Serv which is doing inbound service, outbound sales, outbound collections and doing quite well from a productivity standpoint. We have seen the gains on that. In terms of operational processes, Venkat will add to what I’m saying I’m sure, but about 100 odd processes have already been migrated and both units, the one in Kochi and the one in Vishakhapatnam are kind of literally working now 24X7 to keep our operations going.

Venkat, you may want to just add to it in the last six, seven months.

MB Mahesh — Kotak Securities — Analyst

The question is more from the — from the question that — the question is that, given that we can’t observe what all changes is happening in the back end, the best we can observe is either a cost or an income for the Bank. Is there any way we can look at this transition from that perspective?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. From a productivity gain perspective, right Mahesh? Or a impact on the income? Impact on CI ratio?

MB Mahesh — Kotak Securities — Analyst

It’s impossible for us to understand which costs are moving and what are the gains of it sitting here. So just trying to understand what has this transition reached out in terms of numbers as external stakeholders?

Venkatraman Venkateswaran — Group President & Chief Financial Officer

Yes. We did a study recently to evaluate what are the benefits of having the subsidiary. The business case which was initially put up and what it is now, we did that very recently, clearly establishes the fact that we have gained productivity in terms of lower cost, better quality as well from the subsidiary, which gets translated into the numbers which we have and like Shalini mentioned, over 100 plus processes and we are looking at moving more and more of the incremental activity which comes to the Bank, which we’re putting directly into the subsidiary and it’s not like they’re moving work into the Bank and then from the Bank to subsidiary, so that way, do it right first time, build the efficiency in the operations subsidiary. And better risk mitigation DCP. We have now about 750 people, 150 in Vizag and 600 in Cochin and it’s growing. So very clearly establishes — the study establishes the business objective and we have full confidence that it will continue to deliver the business benefit.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Let me just add Mahesh, I think if you are trying to get a more crystal sort of something that you can latch on to. So there is two elements, Mahesh. One is the non-incurrence and the second is what Shalini and Venkat explained. Given our employee cost structure and wage structure, if that 750 were in-house, there would have been a different cost structure. So you have to see it in that light.

MB Mahesh — Kotak Securities — Analyst

Correct.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Okay.

MB Mahesh — Kotak Securities — Analyst

Okay. Perfect. Perfect, sir. This is useful. Thanks a lot.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Darpin Shah from Haitong Securities. Please go ahead.

Darpin Shah — Haitong Securities — Analyst

Yes, thanks. I know, just to clarify — check on restructured book, you mentioned 98% of the borrowers are paying?

Shyam Srinivasan — Managing Director & Chief Executive Officer

98% of our book is secured I said.

Darpin Shah — Haitong Securities — Analyst

Okay, sorry. So how much of your borrowers would be paying?

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think our collection efficiency [Speech Overlap]

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

96% is our collection efficiency.

Darpin Shah — Haitong Securities — Analyst

It is in the restructured book as well?

Babu K A — Executive Vice President & Head – Loan Collection & Recovery

Restructured book as well it is moreover on the same line as of now.

Darpin Shah — Haitong Securities — Analyst

Sorry, sorry, sir. Come again?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes, you’re right, Darpin, as of now that’s the same number, is what Babu was saying.

Darpin Shah — Haitong Securities — Analyst

Okay. Okay. Yes. Thanks a lot.

Shyam Srinivasan — Managing Director & Chief Executive Officer

Welcome. I think we should bring this to a close, Operator. It’s passed an hour and a quarter, are there any more questions in the pipeline?

Operator

Yes, sir, we do. Should we take one last question?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes, please. You can take two more. If there are many, then Anand can chip in. But we could close in about five minutes, please.

Operator

Okay, sir. The next question is from the line of Anand Bhavnani from White Oak Capital. Please go ahead.

Anand Bhavnani — White Oak Capital — Analyst

Thank you for the opportunity. Sir, quick three questions. One is, of our liabilities, what percentage are kind of linked to any external benchmark? Second, if you can give us some sense on the IPO of Fedfina and what’s the timeline and would we be doing any sales which can help our capital adequacy? And thirdly, with the yields on FLDG guarantee is unlikely to be now allowed with our fintech partners, how does the equation change? And if you can give us some color on it will have an impact on growth in our fintech partnerships?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Okay. Question one, I don’t know, Ashutosh, Venkat, you can look at.

Ashutosh Khajuria — Executive Director

We answered that earlier Shyam, 40% is the external benchmark.

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think he is talking about the liability benchmark, deposit business.

Ashutosh Khajuria — Executive Director

Deposit side, it should be around 30%, 32%.

Anand Bhavnani — White Oak Capital — Analyst

Okay.

Shyam Srinivasan — Managing Director & Chief Executive Officer

The second question that you asked was around the IPO for Fedfina. All I can say is, the Board of the Bank has approved and Fedfina Board is considering, they are in the process of going through the motions. First is to file the DRHP which may happen between now and say end of February, March, and then the approval from SEBI takes bring two months to three months. So, we are into somewhere around May is probably when we will have the approvals in hand, and then after that, as you know, depending on a bunch of things like market, timing, so on and so forth, but I don’t have a comment on that at this juncture. So, the motion has been — the process is in work, timing and related approvals, regulatory clarifications, you know the bunch of stuff that needs to happen is underway. So, I don’t have any sort of timeline for it. We’ll see how it goes.

And the third question, sorry I can’t quite recall the third question?

Anand Bhavnani — White Oak Capital — Analyst

The FLDG guarantees [Speech Overlap]

Shyam Srinivasan — Managing Director & Chief Executive Officer

If you want to go on the digital fintech partnership FLDG, if I just want to say that, our digital lending ex credit cards is actually very marginal. So it doesn’t have an impact on that, but Shalini you can give more texture.

Shalini Warrier — Executive Director

Yes, think of one, this is in the stage of a discussion paper and a working group and as Shyam mentioned, the kind of the one that is growing currency for us is our credit card partnership. We’re not very concerned about it, because we do have models in place which indicate how we can make sure, with collection efficiency and commercial considerations, we should not get unduly impacted with the removal of an FLDG. Suffice to say that I think the discussion paper is still out. I think there may be some changes in the final version. But it doesn’t have place us in any un-competitive sense here.

Anand Bhavnani — White Oak Capital — Analyst

Thank you.

Operator

Thank you. Ladies and gentlemen, we will take one last question from the line of Manish from Fiducia Capital. Please go ahead.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Yes. Thank you for this opportunity. I think the last couple of quarters, you’ve been going very, very determined and a very defined manner. So my — [Indecipherable] to that. You have been mentioning all that the something into into operating. So how much of our total book is secured? Hello? Hello?

Operator

Sir, I request you to please hold the line. Ladies and gentlemen, the line for Chair person has got disconnected. We request you all to please stay online while we reconnect him. Thank you.

Shalini Warrier — Executive Director

So I think in the meanwhile, the question is, just to clarify the question, how much of the total book is secured, was that the question?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes, I think, Shalini that is the question, how much of the book is secured. If you were talking of total loan book, just exclude the AAA corporates and all, yes, there is some unsecured portion. Other than that, you know, we have only personal loans and a small portion of credit cards and all which is unsecured, rest of it is all secured.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Okay. And the AAA would basically be forming part of the corporate book. So I can get a sense that as to how much of that could be?

Shyam Srinivasan — Managing Director & Chief Executive Officer

Yes. AAA, AA plus type of top notch corporates that there could be some unsecured portion in that, but that is, you know I think something where the risk of default is practically nil.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Yes, I get that. I get that. Thank you so much. But we see the next question for the madam was, basically, we see going to your Slide number 17 which demonstrates that I know fantastic growth that you’re seeing on your Bharat Pay relationship, might be. My question was, how will the Bank make money out of this relationship? Like you know the numbers are really exploding, you know like 50 lakh merchants, then 20 lakh transactions on a daily basis. So I mean, how would the Bank make money on this particular say relationship?

Shalini Warrier — Executive Director

A couple of things, one from the merchant side of things, we do have floats that we get, the current account floats and these are also again commercial discussions that are held with the partner and with the merchants. Some of them T plus one, some of them T plus 2, some of T plus 0, depending on the kind of category of the merchants. So there is a float benefit that we get from it.

On the transactions, we do have a cost-sharing arrangement under the commercial negotiations that we have with Bharat Pay, so that [Indecipherable] some of the costs that we may incur on the transaction and the broader point is, as this book matures, as we get to understand the customer behavior better, we understand the flows of the merchants better, Bharat Pay as you know is already offering loans to their — in their own books and we are working with them to see what alternate data scoring methodologies can be put in place. We are quite cautious about it because it is unsecured, it is something that we’ve always been a little cautious about, but there are opportunities for a risk calibrated approach to cross-sell. So there are various opportunities, but the underlying is the current configuration is the current account balances that come in.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Thank you. Thank you so much and all the best.

Shalini Warrier — Executive Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Shyam Srinivasan for closing comments.

Shyam Srinivasan — Managing Director & Chief Executive Officer

I think, thank you very much. I think the line signals that everybody was tired of us answering questions so it got cut. Thank you very much. Stay safe and hopefully we’ll come back in after Q4 results to have a better conversation. So thank you very much. And all the best everybody.

Ashutosh Khajuria — Executive Director

Thank you, bye.

Shalini Warrier — Executive Director

Thank you. Bye everybody.

Venkatraman Venkateswaran — Group President & Chief Financial Officer

Thank you. Thank you.

Operator

[Operator Closing Remarks]