INDUSIND BANK LTD (INDUSINDBK) Q1 FY23 Earnings Concall Transcript

INDUSIND BANK LTD (NSE:INDUSINDBK) Q1 FY23 Earnings Concall dated Jul. 20, 2022

Corporate Participants:

Sumant Kathpalia — Managing Director and Chief Executive Officer

Arun Tiwari — Chairman

Sanjeev Anand — Head, Commercial and Rural Banking

Analysts:

Mahrukh Adajania — Edelweiss Broking Limited — Analyst

Kunal Shah — ICICI Securities — Analyst

Adarsh Parasrampuria — CLSA — Analyst

Manish Shukla — — Analyst

Rahul Jain — Goldman Sachs — Analyst

Sameer Bhise — JM Financial — Analyst

Jai Mundhra — B&K Securities — Analyst

Rakesh Kumar — Systematix — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q1 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sumant Kathpalia, Managing Director and CEO, IndusInd Bank. Thank you, and over to you, sir.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Good evening, and thank you for joining the call. Let me start with a macro commentary and then go into bank-specific details. During the quarter one financial year ’23, we saw economic activity momentum picking up sharply as well as headwinds to growth rising as well. The Services PMI index signaled a very strong improvement in private services activity, while manufacturing sector activity levels were stable.

Prospect of the farm sector also look better with the timely onset of monsoon and output last year, touching another record. Bank credit offtake too picked up over the quarter, in line with an improvement in the underlying economic activity. However, rising inflation level led to the monetary policy tightening by major global central banks, including India, which is likely to continue in the near-term.

Relatively strong economic growth prospects, a deleverage corporate sector, much improved health of the banking sector, along with some external — strong external forex reserve buffer and measures taken by the government and the RBI to curb inflation would help India negotiate these headwinds. Global supply chain pressures have begun to ease and non-energy commodity prices are now easing. While the real GDP growth is expected to slow down in financial year ’23, India will still remain among the fastest-growing global economies.

Coming to the quarter-specific development, our focus areas for the quarter was continued loan growth acceleration. We maintained a healthy loan growth of 4% quarter-on-quarter, driven by strong disbursements in vehicle, corporate and other retail assets. Micro finance disbursements too returned to normalcy after a brief hiatus to adopt to the new regulatory guidelines. We’re thus seeing loan growth momentum in all the business units. This has also resulted in an year-on-year loan book growth improving to 18% from 12% previous quarter.

Maintaining deposit momentum. We achieved 3% quarter-on-quarter growth in deposit mobilization in spite of the liquidity tightening and increased competitive intensity. Our growth was driven by 16% growth in CASA and CASA ratio improved from 42.7% to 43.1%. The retail deposits as per LCR also grew by 17% year-on-year. We also achieved the highest new customer acquisition of 425,000 customers during the quarter through Consumer Bank.

Ensuring healthy asset quality. We have provided gross slippages segregated for standard and restructured book in the investor presentation. Our standard book slippages have reduced to 0.57% from 0.75% quarter-on-quarter. Our restructured book has reduced by INR1,013 crores from 2.6% to 2.1% quarter-on-quarter. Our net NPA is at 0.67% with a provision coverage at 72%. Our contingent provisions are at INR3,003 crores with total loan related provisions at 141% of gross NPAs. Our credit costs has reduced to 50 basis points from 61 basis points quarter-on-quarter.

Sustaining profitability of the franchise. We saw healthy net interest margin of 4.21% with both loans and deposit witnessing repricing during the quarter. Client fee income grew by 9% quarter-on-quarter, driven by continued retail momentum. Our trading income too was positive during the quarter. Our PP PPOP margin to loans for the quarter were at 5.7% versus 5.8%, marginally lower due to lower trading income.

Steady improvement in return ratios. Our profit after tax grew by 16% quarter-on-quarter and 61% year-on-year to INR1,631 crores. Our return on assets improved to 1.73% and return on equity was at 13.4% for quarter one. With an improvement in profitability metrics and lower risk density, our capital adequacy ratio improved during the quarter with CET1 at 15.96% to 16.05% with overall CRAR at 18.14%.

Now coming to individual businesses. Vehicle finance, the vehicle finance loan business accelerated during the quarter to 4% quarter-on-quarter. The year-on-year growth too improved from 1% to 8% over the quarter. Historically, first quarter has been a seasonally weak quarter, whereas quarter four has been a strong quarter. Seasonally, however, we have seen disbursements of INR10,078 crores in quarter one, which are higher than the March quarter.

This is the first time in last several years we have seen quarter-on-quarter growth in disbursements in quarter one of financial year. The disbursements are also the highest in a quarter we’ve ever achieved. The segments showing strong disbursements are commercial vehicles, utility vehicles, cars and tractors. Disbursements are muted in the three-wheeler and two-wheeler segments. The disbursement traction also validates efficient capacity utilization of existing vehicles. Vehicle customers are also able to pass on increased cost of fuel to the end user. The recent oil price movement and also the tax rate cuts by various state governments provide further support to the freight economics.

The collection efficiency of standard customers remains stable at pre-COVID levels. The slippages from the standard book was stable at INR4.5 billion quarter-on-quarter. The restructured book in the vehicle finance has reduced from INR3,298 crores to INR3,131 crores quarter-on-quarter. The collection efficiency of these customers remain comfortable in the 80s [Phonetic] as per our expectations. While the vehicle portfolio pricing is fixed-term in nature, the fresh disbursements are at higher rate, broadly in line with the benchmark movements.

We have just seen an overall yield on the vehicle portfolio improve during the quarter and expect that trend to continue in the coming quarters. The vehicle portfolio has now shown strong disbursements for four quarters in a row. The industry volume however are yet to achieve — reach the peak levels. We do thus see further scope of disbursement growth in the year participating in the overall industry growth.

Microfinance. During the quarter, microfinance industry adopted RBI Master direction on the MFI issued on March 14, 2022. Though the time available was short, necessary changes were made and we could commence the disbursements from May. We were able to recoup some lost base and achieved disbursements of INR7,531 crores during quarter one. These are the highest quarter one disbursements in Bharat Financial history. Our MFI book at the end of quarter one was at INR29,403 crores, was up 11% Y-o-Y. Our MFI standard book collection efficiency for quarter one was at 99.1%, same as quarter four financial year ’22.

The collection efficiency for new clients for the post-COVID has also remained healthy at 99.2%, which is close to pre-COVID level. Our 30 to 90 DPD book, including restructured customers, was at 2.2% on June ’22 compared to 2.6% at the end of March ’22. Higher emphasis was placed on recovery during the quarter as we felt that the economic conditions has subsequently improved for our customers to start repaying their overdue loans. Through focused effort, we were able to recover INR57 crores during the quarter one against written-off loans sold to ARC and expect to realize higher recoveries in the following quarters.

The gross slippages during the quarter moderated to INR560 crores as compared to INR815 crores during the previous quarter. The slippages from the standard customers reduced considerably to INR278 crores from INR779 crores quarter-on-quarter. The outstanding restructured books has also reduced to INR644 crores from INR995 crores quarter-on-quarter. The restructured book saw slippages of INR283 crores and we have utilized the contingent provision created last year towards these customers.

Our merchant acquiring business under the banner of Bharat Super Shop continued the growth momentum. Portfolio forced [Phonetic] under this business has grown 15% over quarter four financial year ’22 to INR2,237 crores with 3.8 lakh active borrowers. The total disbursements during the quarter was INR942 crores with continued demand from the missing middle segment. We see large opportunity and deepening relationship with these customers. The book has been performing relatively well with the standard book collection efficiency of 99.1% for quarter one financial year ’23 and net collection efficiency of 97.8%.

Our endeavor to take banking to the doorstep of the underserved customers in remote locations continued. At the end of quarter one financial year ’23, the total liability book sourced from the customers and service through BFL increased by 134% year-on-year to reach INR1,450 crores through 1.1 crore accounts with us. Our focus remains to be the banker of choice of customer segment in Bharat.

Global Diamond and Jewelry business. The global diamond trade slowed down during the quarter due to Russia-Ukraine conflict and lockdowns in China, Hong Kong. Our diamond book grew 1% quarter-on-quarter and 28% year-on-year and 4.2% of the overall loan book. That disruption however did not have any impact on asset quality with no clients getting into SMA category. The industry is working closely with policy makers for normalizing the supply chain. The recent step by the government and the regulators to facilitate trade between India and Russia should improve the flow of rough diamonds. Overall, we remain comfortable on the diamond portfolio, except for further growth to continue as the supply chain normalizes and markets in the PRC open up.

Corporate book. Our corporate book remained healthy — maintained healthy growth trajectory of 4% quarter-on-quarter growth. We saw growth across segments with large corporates growing by 3%, mid corporates by 5% and small corporates by 11% quarter-on-quarter. Loan book growth was broadly driven by the large corporate segments like strategic client group and financial services and, in the mid and small corporates like SME and healthcare. Majority of the corporate loan book is floating rate in nature and we were able to pass on increased rates for customers due for reset. Our yield in the corporate book thus improved by 7 basis points quarter-on-quarter, reversing the past trend of falling yield.

The portion of A and above-rated customers has improved from 70.6% to 73.5% year-on-year and weighted average rating improving from 2.68% to 2.63% Y-o-Y. The net slippages in the corporate book was INR4.1 billion for the quarter. This includes, as mentioned in the previous call, some group companies of retail corporate amounting to INR2.5 billion listed NPA during the quarter. Our corporate restructured book has now reduced from INR9.6 billion to INR5.6 billion quarter-on-quarter.

Exposure to stress telco, which was at INR18.5 billion, including fund-based exposure of INR10 billion and balanced non-funded exposure. We do see continued interest from corporate towards capex plans, impact of interest rate hike is not stressed strongly as budgeting was done with the assumption of interest rate hikes. We see interest in capex and particularly in segments which have deferred capex due to COVID such as auto components, stealed [Phonetic], renewables, etc. Capex is also seen under PLI scheme in electronics, mobile, distilleries for capacity is being put up.

Business momentum also remains strong in small corporates and SME segments with focus on new acquisitions, supply chain, financing, etc, elaborate on a small base. We are watchful of segments impacted by higher inflation. There are, however, segments witnessing tailwinds, example export-oriented unit, infras, textiles, etc, which provide opportunities for growth. Overall, we do see corporate book to maintain a steady growth driven by mid and small corporates with active repricing benchmark to the market rates.

Other retail assets. We saw another quarter of growth momentum in other retail loan book growing by 7% quarter-on-quarter and 23% year-on-year. Within secured assets, assets such as business banking and loan against property, we had seen intense competition over the last few quarters both in terms of pricing and collateral relaxation. With rising rate environment and inflation, we’re seeing underwriting improving. Our acquisition run rate does continue to accelerate.

Credit card spends have remained strong for us as well as industry spends up INR16,900 crores for June. We also saw the highest ever card acquisition of 75,700 in June with credit card base crossing 2 million mark. We expect growth momentum in retail businesses to continue in the current financial year. We do however remain watchful of inflationary chronic conditions, particularly on the unsecured consumption spend.

Now coming to liabilities. Our deposit grew 13% year-on-year, driven by 16% year-on-year growth in current and savings account and retail deposit as per LCR also grew by 17% year-on-year. The quarter was also marked by interest rate hikes and heightened competition for deposits. We also saw larger peer bank raising the term deposit rates, in some cases saving deposit rates too. We have been selective in our rate action and seen the rate gap with larger peer narrowing during the quarter. We have ramped up our deposit acquisition with new client acquisition from consumer banks, touching a new height of INR4.25 lakhs for the quarter. Our term deposit monthly run rates have moved from INR78,000 to INR115,000 quarter-on-quarter. Our CASA ratio has improved to 43.1% quarter-on-quarter, driven by 19% growth in savings accounts.

Contribution of certificate of deposit remains low at 3% of deposits. Our affluent segment deposits grew from INR35,300 crores to INR36,300 crores during the quarter. Affluent AUM was stable at INR59,000 crores despite the market correction. Deposits from NR segment have remained stable at INR26,800 crores. The NRI momentum is expected to pick up with the recent regulatory guidelines. We let go of borrowings during the quarter reducing by 12% quarter-on-quarter and 15% year-on-year. The borrowings now form only 10% of the liabilities and almost all are long-term in nature. We also repaid our Euro MTN program in April and thus we don’t have any foreign currency bonds outstanding. We also exercised a call option on additional Tier 1 bond at the earliest permitted anniversary of five years.

Overall, we continue to remain focused on the retail liability mobilization. Our physical and digital distribution priorities had been aligned towards retail deposits. We are aiming to take the brand distribution to 2,500 by March ’23. We continue to scale up new initiatives like affluent and NRI. We are confident of maintaining a deposit and cost of deposit profile to fund our loan growth aspirations.

Digital traction. Digital sourcing percentage across products continued to increase. And what is interesting now is that we have started building and scaling up digital unassisted models with focus on scale with profitability. During the quarter, more than 200,000 clients were onboarded using video KYC. 96% of bank savings accounts and fixed deposits are originated digitally. Of this, 30% of savings account are opened in a digitally unassisted manner through marketing of direct-to-client platforms and 40% of fixed deposit originate in a digitally unassisted manner.

Easy Credit stack continues to scale, bringing in fresh volumes as well as reduce the cost of acquisition. 90% of parts are originated digitally now on the back of Easy Credit at a cost of processing, which is 60% to 70% lower per unit. We recently went live with Easy Credit for personal loans as well, and 54% of personal loans are originated digitally, which will be scaled up to 90% within the next few months. We continue to focus on increasing digital transaction intensity and increasing their clients digitally. 92% of the branch transactions are digital. Mobile transactions have increased more than 2 times Y-o-Y and mobile active base had increased 21% Y-o-Y.

On WhatsApp Banking, we scaled up our user base to more than 5 million. We offer more than 50 services on WhatsApp, and our WhatsApp transactions increased to 45% Y-o-Y. In terms of new launches, Indus Merchant Solution App has scaled up to user base of 80,000 plus retailers and every second user on the app is a new-to bank suggesting strong pull of the product in the market.

Indus Easy Credit for business stack is also scaling up steadily, wherein we offer small ticket business loans and secured overdraft to clients. As a result, nearly 40% of our MSME lending in less than INR2 crore exposure bucket is now digital and we plan to make it 100% digital with the expansion of working capital product suite over the next couple of quarters. We are progressing on the remaining two launches for Digital 2.0, that is for individuals and for SMEs. They are expected to be launched in the second half of the year. As we build capabilities in our digital platforms and applications, we also leverage the underlying APIs to integrate with partners and ecosystems to boost our Banking-as-a-Service model.

Now coming to the financial performance for the quarter. Net interest income grew by 16% year-on-year and 4% quarter-on-quarter, in line with the loan book. Net interest margin improved sequentially from 4.20% to 4.21% quarter-on-quarter. The net interest margin was supported by repricing on the asset side as well as active management of the liabilities. Our consumer as well as corporate book loan — loan book saw yield improvement during the quarter with overall yield on loans improving by 10 basis points. While the cost of deposits decreased — increased by 19 basis points, the cost of funds increased by only 6 basis points due to reduction in our borrowing expenses.

Other income grew by 12% year-on-year and 1% quarter-on-quarter. Core client fees, excluding trading income, grew by 9% quarter-on-quarter and 41.7% [Phonetic] year-on-year. Our trading income was down quarter-on-quarter and Y-o-Y due to rise in interest rates. We have nevertheless saw positive non-core income of INR146 crores during the quarter. Share of retail fees improved to 70% from 64% of total fees.

Our total revenue for the quarter was INR6,057 crores with 15% year-on-year growth. Operating expenses grew 5% quarter-on-quarter with continued recovery in the business momentum. Our overall cost-to-income ratio increased from 42.6% to 43.4% quarter-on-quarter due to lower trading income. Our core cost-to-income before trading income improved from 45.4% to 44% quarter-on-quarter. The operating profit for the quarter was at INR3,422 crores, growing 10% year-on-year and 2% quarter-on-quarter.

The PPOP margins to loans continue to be healthy at 5.7%. On the asset quality and the provisioning front, our provision for the quarter have further reduced to INR12.5 billion. The provisions to loans are thus down to 50 basis points now. We saw reduction in slippages from the standard book from INR17 billion to INR13 billion. The reduction was driven by lower slippages from microfinance and corporate customers, whereas vehicle and other retail was stable quarter-on-quarter. The restructured book slippages were driven by microfinance customers coming out of eligible moratorium and also retail group in corporate banking. We also made continued provisions against these last year and have utilized to the extent of slippages.

The restructured book has reduced by INR10 billion during the quarter from 2.6% to 2.1%. We did not have any sale to ARC during the quarter. The net security receipts have reduced from 83 basis points to 72 basis points. Overall, the gross NPA for the bank was at 2.35% and net NPA was at 0.67%. We have maintained provision coverage ratio of 72%. Our contingent provision, excluding specific provisions, were at INR3,003 crores. We have utilized INR325 crore towards slippages during the quarter from the restructured loans, as explained earlier. Total loans related provisions are at 3.4% of loans or 141% of the gross NPAs.

Our SMA 1 and SMA 2 book was at 10 basis points and 39 basis points respectively. Profit after tax for the quarter was at INR1,631 crores, growing at 16% quarter-on-quarter and 61% year-on-year. Our CRAR, including profits, remained healthy at 18.14%. Return on assets continued upward trajectory from 1.51% to 1.73% quarter-on-quarter and return on equity improved to 13.4%.

I also want to spend a minute on the stock exchange intimation done earlier this month on media speculation. As disclosed, this pertains to an old investigation. The Bank is providing the necessary support to investigating agency. The matter was also scrutinized by the regulator in the past and the outcome of the same was intimated to the stock exchange in 2016. The Bank is not named as a party in the First Information Report. Given the investigation is in progress, there will be limited scope for further information beyond what we’ve already disclosed.

Overall, the quarter saw turbulent operating environment with interlinkages of inflation, reversal of accommodative monetary policy and Russia-Ukraine concept playing out. The first quarter was also a seasonally weak quarter for some of our businesses. The Bank has nevertheless focused on delivering our PC-5 ambition. Loan growth has accelerated to 18% from 12% last quarter. Our vehicle and microfinance [Technical Issues] quarter one disbursements in their history.

Consumer and corporate books are delivering steady growth. Asset quality trends from standard book continues to improve. Restructured book carries comfortable contingent provisioning. All key portfolio metrics across NIMs, core PPOP margin, ROA, ROE has maintained positive trajectory. We continue to invest in new initiatives like affluent, NRI, tractors, merchant acquiring and plan to launch the home loan this quarter. We will also launch the remaining two of the planned digital initiatives during the year. We’re thus committed to deliver our PC-5 ambitions of achieving 15% to 18% loan growth CAGR and maintaining a healthy PPOP margins upwards of 5% and reducing credit cost towards 120 to 150 basis points.

We can now open the floor for questions and answers.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Mahrukh from Edelweiss Broking Limited. Please go ahead.

Mahrukh Adajania — Edelweiss Broking Limited — Analyst

Hello, sir. Congratulations. Sir, my first question is, if you could explain, sir, there has been strong growth in general banking and third-party distribution fees, if you could give some color on that. That’s my first question, sir.

Sumant Kathpalia — Managing Director and Chief Executive Officer

So, I think, when you look at the fees, you have to look at the general banking fees as a multiple conference. One is the regular deposit processing fee, the second is the payments, and the third component is the PSLC — PSL certificates. I think it’s a combination of all the three, which has increased. Of course, the PSL increased by about INR50 crores to INR60 crores in the quarter, and that is what has added to that growth exponentially.

On the distribution side, I think the growth is normal and it’s actually the core businesses, which are growing, which is the health, the insurance distribution, the card distribution. But that’s what has grown and that is what is categorized in the overall fee, and that’s what is growth.

Mahrukh Adajania — Edelweiss Broking Limited — Analyst

Okay, sir. That looks sustainable, at least for a few quarters, right? Okay, sir.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. So it’s about 8% quarter-on-quarter growth.

Mahrukh Adajania — Edelweiss Broking Limited — Analyst

Correct, sir. My next question is, in general, on outlook on growth, right. If you see the banking sector road or if you listen to the commentary of banks, they remain quite optimistic on growth, whereas investors generally remain concerned on a slowdown. So how do we tie in the two?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So, in my opinion, you have to see the growth coming from which segments. And that’s how you should link it. So if you look at our vehicle finance business, and if you talk to the OEMs, all of them are projecting a high growth because they are coming from a cyclical downturn. For two to three years, we’ve seen a downturn. So, I think, you will see growth coming back in this segment, of course, also fueled by our entry into the used car markets, our tractor business is seeing the scale up in those segments and like the medium and the light commercial vehicle, which we have entered and we’ve now got an 8% market share, seeing a scale up to come expense. So I think you will continue to see a 16% to 18% growth in this segment for us and we’ll continue.

In microfinance, I think there is enough demand. I think the demand was affected this large last quarter because of the RBI regulations and there was a system modifications, which was happening. I think the first 45 days were lost. The last 45 days is where we did the disbursements. And I think you should see a 25% to 30% growth happening in this segment and also will be fueled by new — our entry into the Merchant Acquiring segment where we are seeing a very rampant growth, which is INR2,300 crores when we expect to close the year at INR4,000 crores. So that segment is also growing very fine for us.

And Diamond, of course, once the rupee trade and the regulatory changes happened, you should see the growth coming back. And I think that’s got affected this quarter. Corporate side, I think the SME and MSME segment, we are seeing good growth. And on the large corporate, while there is growth, I think the pricing is still very fine. And we continue to be very careful in what we are doing. I think we are getting 3% to 4%, then we will go in line with the market or maybe a percentage point higher because we come from a very small base.

Mahrukh Adajania — Edelweiss Broking Limited — Analyst

Got it, sir. And my last question is on corporate slippage. So, where would you see it normalize quarter, like a broad run rate? Of course, there was slippage from restructured of INR250 crores, which was pertaining to the group, which you had mentioned last quarter only. But where would — I mean, now most of the restructured corporate loans also would have slipped, right?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Correct. So, I think the corporate will — you see, these are one-off specific cases which have come in and which are affecting the corporate. And you know which group I’m talking about. And I think that’s the flow which happened this quarter. And there was one more item which happened, which actually got upgraded during the quarter itself. And you will see an upgrade also in that quarter itself. So I think otherwise you should see corporate normalizing. We are not seeing any high indicators of any such fresh flows, which are coming in. I think it will be a BIO [Phonetic]. On BIO floor, we’ve always said corporate will fluctuate between 30 and 50 basis points, and that’s where it will be.

Mahrukh Adajania — Edelweiss Broking Limited — Analyst

Got it, sir. Okay, sir. Thank you. Thanks a lot.

Operator

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

Kunal Shah — ICICI Securities — Analyst

Yeah. Hi, sir. So, two questions. Firstly, currently how much are we getting in terms of the provisions on the restructured pool?

Sumant Kathpalia — Managing Director and Chief Executive Officer

We are carrying INR3003 crores as contingent provisioning.

Kunal Shah — ICICI Securities — Analyst

Yeah. So, contingency, so we can assume that maybe larger part of it is towards the restructured. And then, maybe there is a flow-through from the restructured, contingency will keep on getting utilized the way it has happened in this quarter.

Sumant Kathpalia — Managing Director and Chief Executive Officer

We don’t utilize full. We see how it is — our objective is to take — our guidance is 120 to 250 basis points. I also feel, for example, in microfinance, most of the restructured pool, the moratorium is over, they are paying. Whatever had to flow in has flown in. What we’ll get, another INR50 crores, INR100 crores maybe will flow in. Otherwise, we are back to. In the CfD book, the vehicle finance, we’ve always said 20% will flow in. And that is what is growing in. It’s not that we are seeing anything else which is flowing. And so, I think, except for the future — the one corporate group which actually flew in, there have been no surprises for us in the restructured book.

Kunal Shah — ICICI Securities — Analyst

Okay. Got it. And in terms of this BL, PL and HL, now that component is also quite huge and there has been a good pickup in this segment, so you can highlight, amongst these three, which is growing and given that now that scale is also quite high, INR11,000 odd crores, would we tend to break it down further?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yes. So, I think, PL is growing. I think we have seen INR300 crores to INR400 crores quarter-on-quarter growth on the PL side of the book. We are seeing merchants loans, which is about — from the Bharat Financial, I think we have seen a 15% growth in the Merchant acquisition, which is growing. I think we are seeing affordable — this thing, what you call, smaller businesses like BL and NGL [Phonetic], they have grown, quarter-on-quarter by 32%. And KCC, again a 3.5% growth quarter-on-quarter, which has come in.

So I think all these businesses have started growing well. And we will see more growth as we go forward in these businesses. And we are diversifying our group for secured as well as unsecured. So this is why these businesses have been put and they are doing very fine now. If you want split, we can send you the split over the mail also.

Kunal Shah — ICICI Securities — Analyst

Yeah. Because now that’s becoming quite substantial. So that would be great if that can be shared going forward. And lastly, in terms of the branch expansion, so again maybe almost we are looking to add more branches, maybe it was not a substantial one in Q1, but you highlighted 2,500 by the end of this fiscal. And we have seen opex also growing sequentially now 5% and catching up the pace with peers. So how should we look at cost-to-income? Would we see that going up with this investments getting into the branches and the employees?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So, I’ve always said that our income growth will also match our expense growth at some point. So I think that’s what we will see our microfinance unfortunately did not growth this quarter, but you will start seeing the growth. I think our cost to income will be range bound between 41% and 43%. Of course, in some quarters, you may be 30, 40 basis point here or there, but our objective is to come down. We added our branches infrastructure cost came in, I think our resources, if you look at — we added 3,200 resources last year and we’ve already added 927 resources this year. I think our cost on technology specifically is going up. And I think that’s about 6% to 7% of our overall cost. Now, it’s increasing, and I think once our operating leverage of vehicle and MFI starts coming in, I think we should still come back to 41% to 43% range, which is what we are headed for and that’s the guidance which we have given.

Kunal Shah — ICICI Securities — Analyst

Sure. Okay. Okay. Thanks a lot and all the best.

Operator

Thank you. The next question is from the line of Adarsh from CLSA India Private Limited. Please go ahead.

Adarsh Parasrampuria — CLSA — Analyst

[Technical Issues] Congrats on good numbers.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Sorry to interrupt you, sir. Your audio is not very clear. May I request you to speak through the handset.

Adarsh Parasrampuria — CLSA — Analyst

Yeah. So, thanks. Sumant, couple of questions. One, on liabilities, this is kind of tough period in the sense that a lot of wholesale deposit cost would have moved up sharply. So just wanted to understand is, a lot of that already there or we will see some of that impact come through in the next few quarters?

Sumant Kathpalia — Managing Director and Chief Executive Officer

A lot of — bulk deposits are smaller duration, yeah, 90 days to 180 days. So, I think, we will see some part of it also coming in next quarter. It’s not that because I think if the cost goes up and the RBI increases the cost by about 30 to 50 basis points, we’ll see that impact on the books coming in. So I think we have taken that into account while we are preparing our quarter two and quarter three going forward. So we’ve taken that into account. And we still believe that even if the cost of deposits, we have enough assets and our strategy to make sure that our NIMs are within range bound between 4.15 to 4.25.

Adarsh Parasrampuria — CLSA — Analyst

Perfect, Sumant. And my second question related to the restructured book, right. So, a lot of the reduction was slippages in this quarter. So, as you said, a lot of it what had to slip has slipped, like so what — how does this 2% of restructured book wind down, like they perform for a year, they wind down or like when do we know that what was the outcome from the full book?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Quarter-on-quarter, you will start seeing the winding down. I think — but I think by March of next year, which is the financial year ’22-’23, you will see 70% of the book winding down to a large extent, because I think the payments would have started. And what I had to go down will go down. We’ve always said that we provided extra. And I don’t see our restructured book cost actually crossing more than INR1,100 crores to INR1,300 crores. So that’s what our [Technical Issues]. We have only utilized up till now INR325 crores. We’ve always said that we will keep extra buffer and keep INR2,000 crores safe. And I don’t think we need to utilize anything more than that on a restructured book. So that is — that if you think of it overall, it’s 15% to 20% of the restructured book, which was original, which is what the cost will be.

Adarsh Parasrampuria — CLSA — Analyst

Perfect. That was helpful. And just a follow-up on margin, Sumant. We’ve seen unsecured mix pickup for us, CVS is doing well, MFI will likely come back. So, from a loan mix perspective, the levers are there for margins to do well, right?

Sumant Kathpalia — Managing Director and Chief Executive Officer

See, we have always maintained certain thing. We’ve always balanced our book. Our overall unsecured book to the overall loan book has been always been less than 30%. We’ve always maintained the resource. At the unsecured book, which is credit cards and PLs in the Consumer Bank has been less than 5%. We’ve not let that buck because we have a microfinance book, which we have always said to the market can go up to 15%. So I think those are the levers which we have used. And I think we have some headroom there, but I don’t think you will see us busting those levers ever.

Adarsh Parasrampuria — CLSA — Analyst

Got it. This is useful. Thanks, and all the best, Sumant.

Operator

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

Adarsh Parasrampuria — CLSA — Analyst

Hi. Thanks for the opportunity. So, Sumant, first question is around the treasury performance of the [Indecipherable] that looks quite strong in the challenging times. Any more color as to what has driven this quarter in the treasury line?

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think, first of all, we must admit that we’ve done well on treasury. And we run a very good treasury book. And I think we manage book well. Arun, who is here, who is our Deputy CEO and who runs this business also. I think, Arun?

Arun Tiwari — Chairman

Yeah, I think, way back in January onwards, we started unwinding all duration portfolio. And I think as a conscious decision, we did not do any of these — we did very insignificant sort of non-SLR bonds. And by March-April, we had unwound everything. So by April actually, all our positions were unwound when it came to this thing. And we have switched them into mostly treasury bills. And that’s why we did not really take a hit on any of these positions, but yet had to get some revenues with the positions that we carried and we sweat them off in first week April to second week April.

Adarsh Parasrampuria — CLSA — Analyst

[Technical Issues] bank has been putting a very resilient performance over the last several quarters. Every time there will be probably other concerns, [Technical Issues] great as well. So, going into FY ’23, as you look to de better on earnings and growth, [Technical Issues] most watchful.

What is the top three things that are most for the current year?

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think three things, which I think we have been watchful is, I think we have given a guidance on credit cost. We want to remain within the guidance of 120 to 150 basis points. And I think that’s one thing we’re very good. Second is, I think, on the first thing itself you check out the flows. And I think the standard book flows have normalized. While our flows have increased because of the restructured, I think people have to understand, and I think the message is our standard book has normalized and is improving every quarter-on-quarter. And that is something a message and please look out for that.

Number two, I think I’m very watchful is that I think we manage our mix in such a way that we are able to maintain in the NIM range which we have guided. And I think our cost of deposits, I like to see this quarter has seen an increase. We manage the cost of funds very well. And I think we have to continue to manage the balance between cost of deposits and cost of funds to make sure that we are within the three and manage the mix of the portfolio.

The third thing, and I think which is much more important, I think we have to be watchful of a cost. I think while we continue to invest for growth, and we never stopped our investment, I think technology cost and the launch of the new initiative on the individual sites coming up in the third quarter of this financial year, I think you will see some expenses on the marketing side, which will build up. And I think our data center migration is also in line. So we have to see how are we going to manage these costs as we move forward. So I think these are some which we are looking forward to. I may necessarily not say the costs have to met. I think the growth in the income has to be much better than try and manage the investment costs. So I think I always look at it that it’s too small right now to start managing cost I think in these areas. I think for us, the growth in income is more important than managing the costs as of now. Nitin?

Operator

The next question is from the line of Mr. Manish Shukla [Phonetic]. Please go ahead.

Manish Shukla — — Analyst

Thanks for the opportunity. First question, Sumant, if you could please break down the slippages from restructured book by segment again for the current quarter as well as the previous quarter?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. So you can take down the gross slippage. I think the gross slippages in quarter four financial year — so I’ll go by the segment. So, CFD, which is the vehicle finance book, we had INR450 crores of gross slippages in quarter one financial year ’23 against INR453 crores in the standard book. We had INR235 crores of slippages in the restructured book in quarter one against INR100 crores in quarter four. I think it will be easier if I just upload that table along with the commentary?

Manish Shukla — — Analyst

Yeah, that will be perfect. Thank you. That will be much easier, yes. Second question, Sumant, is that on the granularization of the liability side, the share of retail in quarter end as per LCR has been holding around 40%, 41%. Now that we are in a rising rate environment, every bank is going to chase deposits. What are your thoughts on increasing the share of retail in overall deposits as reported under LCR?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So we’ve said we want to achieve 45% and that we are committed to achieve 45%. I think there are four or five initiatives which we are backing this up with. I think the NRI, I think unfortunately the NRI flows have been stable over last year or the previous year also because of the moving targets. I think you will start seeing the NRI flows coming in. And with the regulations changing or RBI giving the dispensation on the CRR and SLR and I think some more dispensations will come in the forward or the swap rates. And I think you should see the growth coming back in that business. We are targeting a good growth out there as a consequence of that. That’s number one.

The second is the affluent piece. I think the affluent piece also saw some — while the growth in liabilities have been strong, I think they can do much better. And I think we are committed to achieving our numbers on that. That should see a growth. Our acquisition run rates have increased. And I think we are seeing around — in the branch banking side of the book, we are seeing about 125,000 to 150,000 accounts and savings accounts, which should move to about 200,000. And I think the acquisition run rate will increase the balance sheet, along with the new branches.

The fourth is the Bharat Financial book has started increasing and if the accounts getting opened. I think we’re already seeing a INR200 crores, to INR150 crores, which is if the disbursement starts happening, I think you should start seeing INR350 crores to INR400 crores quarter-on-quarter growth in this business, which is along with the Merchant Acquiring business.

And the last is the digital piece, which I think will get launched by November-December, where I think we will start talking about our scale in a different way. So what we are doing with the branch banking today, I think we’ll double of that, we will start doing in the digital. We will start doing 200,000 to 250,000 accounts a month to about 3 million. And that I think will set a new benchmark on how our balance sheet show. I think we are well prepared to take care of our growth as well as the retailization piece, which we are moving towards.

Manish Shukla — — Analyst

Okay. And my last question is on the entire MFI whistleblower episode. Whatever actions had to be taken from your end, those are largely done in terms of either making procedural changes or making provisions or is there anything which is still remaining?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Nothing is remaining. In my opinion, the only thing which is remaining, we are doing for our system upgrade where I think by March ’23, we would have done a system upgrade also. So I think that’s the only thing which we are doing. We are making it much more robust. And I think we are adding much more features and controlled features into that, that will happen by March ’23. Otherwise, all changes in the organization structure, processes as well as what needed to be done have already been done.

Manish Shukla — — Analyst

One last question is, in the MFI book, there is a quarter-on-quarter uptick in ticket size from about 27,800 to 29,700. Is this because of the new RBI norms and should this be the new normal?

Sumant Kathpalia — Managing Director and Chief Executive Officer

No, no, no. I think what has happened, the acquisition of new to bank client, actually which was 800,000 to 900,000 a month went down this quarter to 500,000. The cycle one ticket size is actually 18,000 to 20,000, whereas in cycle two is 30,000, in cycle three is 35,000. So what has happened this quarter is that the cycle two and cycle three has been successful. Our new to bank customer has been lower than what they are normally. And as a consequence, the ticket sizes moved up.

Manish Shukla — — Analyst

Understood. This is very clear. Thank you very much. Those are my questions.

Operator

Thank you. Next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead.

Rahul Jain — Goldman Sachs — Analyst

Yeah, thanks. Hi, Sumant. I think most of the questions have been answered. Just one observation. If I see your Slide number 25, the write-offs in the corporate book appears to be on the higher side. So, pardon me if I am sort of repeating this question, but can you sort of explain what sort of triggered for the large write-off number, I’m sure, this is an aberration.

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think you’re absolutely right. There are two accounts, which have gone into the write-off. One is the media account, which was there, which we have taken a provision long time back and we had to write-off because of the IRAC norms. And the second one was a real estate account, which was active [Phonetic]. So both of them have been written off as a consequence.

Rahul Jain — Goldman Sachs — Analyst

Got it. Just that I have the floor, maybe one or two more questions. On the deposit side, again, coming back, all right, so you’ve got the levers on the yield side across portfolios with pickup in high yielding portfolios, etc. I hear you on the NRI deposits, etc, but anything that goes beyond building the customer base, which is far more sticky, and allows you to diversify in your retail deposit — retail asset mix at a future point of time, I mean any strategy or anything that you’re sort of doing out there to improve that part of the segment so as the business becomes less cyclical?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. So I think what’s — I told you, I think while the branch banking is doing — which is all the levers, which are mobile payments and all of that is happening, I think the digital piece will create a very super engagement strategy. And we are coming with a completely different UIS [Phonetic] payment stack which will redefine the client experience product as well as the business strategy on the liability side. The client experience does not start from liability, it can start from a very different journey and end up because of the transactions going through the payments — going through the bank. And I think as a consequence we believe while the ticket size may not be equivalent to what our branch gets of about 52. We have taken a 30,000 of about almost 50% decline in the ticket. I think it’s the volume, which we are planning to do. And I think we will acquire about 2.5 to 3 million customers per year through the strategy.

And I think as we go forward, you will see a very differentiated customer mix as well as the bank going forward in the in the liability strategy. And I think we believe that that’s going to be the change agent for the bank going forward in the INDI [Phonetic]. No way I am saying will stop expansion of branches, no way I might take that brand distribution is not a quarter. I am saying it’s a mix of both the strategies work together and create a very differentiated offering.

And of course, in the current account side, you would have seen the merchant acquiring business. And I think as we scale up this business, 30% of the client flow go through it. So the AUM, which is there in the merchant acquiring business, which is about INR2,300 crores, about 30% of that book lies with us in the current account book. We want to scale this business up to about INR15,000 crores in three years’ time. And you will see that the flows in the current account as a consequence will start coming in.

And as we grow more deeper into our MFI penetration, while the book may not be book, the cost of that book will be very, very good as we go forward. And I believe that we should be able to create a INR5,000 crores to INR6,000 crores book in the next two years in this. We’re already at INR1,500 crores. So I’m seeing a very good potential, which is coming in as a consequence of these efforts which we addressed.

Rahul Jain — Goldman Sachs — Analyst

Understood. Appreciate that. And just on the deposit, but again on deposit pricing rather, over the next few quarters, of course given that everybody is sort of fighting for deposits, how do you see yourself playing in that market? I mean, would you need to offer substantially higher rates or you’re comfortable with whatever rate differential you’re running with versus the larger banks and that should be enough to generate enough volumes to support your loan growth?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So, if you look at our loan growth, we are talking about — even if you do everything, even if we do 20%, we’re talking about a INR50,000 crores loan growth, which means that we have to convert this into a INR60,000 crore of liabilities. That’s what we need to convert it into. If you look at our growth, we are today at INR10,000 crores or INR12,000 crores — INR10,000 crores. I think for that we need another INR5,000 crores. And you will see us maybe solving that — rocking that situation in the next two quarters itself, so what the way we are going. I don’t see that as a risk if all our strategies play out. And I think we’re not seeing that risk.

Having said that, I’ve always said that initially we were 200 basis points ahead of the market during 2020-’21. We reduced it to 150 basis points. And now I said, we will be 150 to 175 [Phonetic] basis points ahead of the market. And that’s where we want to be. And I think we’ve been able to attract deposits at that level. And I think we should maintain that. If the situation gets worsen, I think we will come and inform, but we will also change our mix in such a way that we have changed the mix of the business in such a way that we were able to take care of the deposit price.

Rahul Jain — Goldman Sachs — Analyst

Great. Great. Congratulations for a good quarter and thank you so much for the responses.

Operator

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

Sameer Bhise — JM Financial — Analyst

Yeah, hi. Thanks for the opportunity. Just one clarification on the vehicle finance book. So, the sequential accretion in the loan book appears a bit more pronounced versus the fact that disbursements were flat Q-o-Q.

Sumant Kathpalia — Managing Director and Chief Executive Officer

This is what we have been explaining for last three, four quarters, the way the EMI construct works, in the previous year disbursements are lower, the run-offs are so high that even the higher disbursements can’t catch up. And once you have delivered three, four quarters of consistent disbursements, then you don’t have to keep on growing disbursement, it keeps on building up. So, it’s purely because of that construct that you have seen the disbursement versus loan book movement over the last three, four quarters.

Sameer Bhise — JM Financial — Analyst

Okay. Sure. And just secondly, on the corporate side, what sectors are you seeing the incremental opportunity?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Sanjeev?

Sanjeev Anand — Head, Commercial and Rural Banking

Yeah. I mean, basically there is — on the large and mid-sized corporates, so it’s across the auto sector, the renewable space, the government push on infra, the PLI scheme, so pretty much it’s across everything. And they are big capex kind of plans.

Sameer Bhise — JM Financial — Analyst

Okay. And just about the slippages on the microfinance side, could you split it between from the restructured book and even from the standard book?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So we are uploading the information, but I can tell you that quarter one slippages, INR278 crores came from the standard book and INR283 crores came from the restructured book, out of the INR550 crores of slippages.

Sameer Bhise — JM Financial — Analyst

Thank you and all the best.

Operator

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

Jai Mundhra — B&K Securities — Analyst

Yeah. Hi, sir. Congratulations and thanks for the opportunity. Sir, if you can…

Sumant Kathpalia — Managing Director and Chief Executive Officer

Sorry to interrupt you. May I request you to speak a little louder please?

Operator

[Operator Instructions] Hold music and move on to the last participant. The next question is from the line of Rakesh Kumar from Systematix. Please go ahead.

Rakesh Kumar — Systematix — Analyst

Yeah, thanks for the opportunity. Can you hear me?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah.

Rakesh Kumar — Systematix — Analyst

Yes, sir. Just extension to the previous question in relation to the regulatory disclosures that we make on NSFR and LCR. If I see in the NSFR, like the stable deposit composition is relatively on the lower side and looking like an outlier as compared to the bank of a similar size. So how we are going to change this deposit composition profile maybe in times to come. And second thing is that what we have seen in last 10 years, 12 years performance that our rate raise — subsequent years, there is a margin pressure. Because your deposits are then priced at a higher rate, and then we see [Technical Issues].

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think you have to look at it in two ways. I think if you look at it, you’re absolutely right. If you look at our retail LCR, it’s on the low side, and that’s something which we’ve done it on purpose. And we are now increasing it. And as we’ve laid it out, as a part of our PC-5 ambition as well as going forward, and I think our LCR today if you look at it from a Basel III is 41% and we want to go to 45% and eventually settle at 50% at some point of time. And I think that’s where we are headed. And I think as that happens, I think you will see it.

The other thing which you will see is, if you look at our CASA ratio, I think one of the things which you will observe is that our current account percentages are lower, to a large extent, whereas anybody else who’s there would be around 30% to 35% of its book in CASA and this will come out of the current account. And I think that’s where I think you will start seeing our focus on the current account business. And that itself will start driving the margin as well as going forward. So I think three or four things, I think you will start seeing us focusing on retailization of liability. The second is the current account book which has almost been stable for last four, five quarter are declining. You will start seeing growth in that book as we go forward.

I think the third thing is, I think you will start seeing that as a part of percentages move up, I think your cost of deposits will start going down and your margins will come.

Fourth, I think we’ve always said that we have the capability and we may not have added loss. I think we have the capability of creating a distribution mix through our domain specialization. Well, we contain the mix very fast to manage our NIM as we have got our margins as we move forward.

Rakesh Kumar — Systematix — Analyst

Got it, sir. Just one more question, if I could ask. This is with relation to the risk weight of the credit and proportion of the loans, which are on the [Technical Issues] a lot of growth in that kind of a loan. Q1 NSFR is not yet out. So — but looking at these two numbers, it is looking that we are trying to get into the credit, which has higher risk weight, at least from the two quarters numbers that we have.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Just to give you, I think if you look at, and it’s a part of the commentary, are A-rated and above book has actually increased by 300 basis points from 70% to 73%. Overall our risk weighted asset year-on-year has gone down. Our risk weights have gone down. So I’m unsure as to where you’re coming from. Of course, we have increased our SME and MSME book also. But as a percentage within our — not increase, so don’t know from where it’s coming. Maybe you can send us a question and we can investigate and get back to you on that.

So for example RWA growth is 11%, whereas the loan growth is 18% year-on-year. The credit RWA growth is 12%. So, the [Indecipherable] has actually come of for the last 12 months. But I can engage with you separately offline and discuss with this.

Rakesh Kumar — Systematix — Analyst

Sure. Sure. Thanks. Many thanks.

Operator

Thank you very much. Ladies and gentlemen, we’ll take that as the last question. And I now hand the conference over to Mr. Sumant Kathpalia for closing comments.

Sumant Kathpalia — Managing Director and Chief Executive Officer

So thank you for participating in the call. As usual, Indrajith and me are available for any other further clarifications that you may require. We will upload the one statement which we have to upload by the end of day or tomorrow morning earlier. So, thanks a lot for participation. Thank you.

Operator

[Operator Closing Remarks]