INDUSIND BANK LTD (INDUSINDBK) Q3 FY23 Earnings Concall Transcript

INDUSIND BANK LTD (NSE: INDUSINDBK) Q3 FY23 earnings concall dated Jan. 18, 2023

Corporate Participants:

Sumant Kathpalia — Managing Director and Chief Executive Officer

Ramaswamy Meyyappan — Chief Risk Officer

Arun Khurana — Deputy Chief Executive Officer

A. G. Sriram — Head of Consumer Finance

Analysts:

Mahrukh Adajania — Nuvama Wealth Management — Analyst

Kunal Shah — ICICI Securities — Analyst

Rahul Jain — Goldman Sachs — Analyst

Abhishek — HSBC — Analyst

Saurabh Kumar — JP Morgan — Analyst

M.B. Mahesh — Kotak Securities — Analyst

Manish Shukla — Axis Capital — Analyst

Shubhranshu Mishra — Phillip Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to IndusInd Bank Limited Q3 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. Thank you. And over to you, sir.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Good evening, and thank you for joining the call. I will start with some macro commentary and then go into bank-specific details. Domestic economic activity continues to strengthen over quarter three. Improving credit supply with resilient banking system is supporting the economic recovery. Gross NPAs fell to a

Seven year low of 5% in September 2022 and net NPAs dropped to a 10 year low of 1.3% of total assets. Monetary policy tightening is also likely to take pause part for after another possible hike in February.

On the physical front, the budget for 2023, ’24 is likely to continue to support economic recovery and help buttress overall macroeconomic stability through fiscal consolidation. While domestic activity remains strong risk from a challenging global economic environment would remain going forward. Indian economy has shown resilience during 2022 in the face of extraordinary external shocks. India is just likely to be the only major economy growing in excess of 5.5% per year over the next couple of years.

Coming to the quarter specific development, some of the salient highlights for the quarter was acceleration in loan growth driven by retail segments. Our retail businesses grew by 5% quarter-on-quarter and profit grew 4% quarter-on-quarter, driving overall retail growth of 5% quarter-on-quarter and 19% year-on-year. Within retail, vehicle finance growth was robust at 7% quarter-on-quarter with another quarter of record disbursements. Bharat Financial originated MFI loans and merchant loans grew by 2% quarter-on-quarter. Non-vehicle maintained steady growth of 6% quarter-on-quarter.

Deposit mobilization put momentum on retail. We achieved a 3% quarter-on-quarter and 14% year-on-year growth in deposits during the quarter. We saw healthy momentum in retail deposits with retail as per LCR accelerated to 21% year-on-year versus 16% in previous quarter and was up at 6% quarter-on-quarter. All key segments of branch banking affluent and NRI contribute towards the retailization momentum.

Stable asset quality, our gross slippages during the quarter reduced to INR1,467 crores from INR1,572 crores quarter-on-quarter. Our restructured book 2 reduced from 1.5% to 1.25% quarter-on-quarter. Our gross NPA is down to 2.06% and PCR remains healthy at 71% with net NPA at 0.62%. Our contingent provisions are at INR2,192 crores with a total loan related provision at 130% of GNPA. Our credit cost has reduced from 44 basis points to 40 basis points quarter-on-quarter.

Healthy profitability of the franchise, our core operating profits grew by 20% year-on-year, driven by improved NIMs as well as strong client fees. Net interest margin was at 4.27% versus 4.24% quarter-on-quarter. Client fee income grew by 28% year-on-year, driven by retail fees. Our cost to income was steady at 43.9% and our PPOP margin remained healthy at 5.7%. Our profit after tax grew by 9% quarter-on-quarter and 58% year-on-year to INR1,964 crores with annualized EPS of INR101 per share. Our return on assets improved to 1.87 and return on equity crossed 15% mark in quarter three for the first time in three years.

Now coming to individual businesses. Vehicle finance, the vehicle finance business continues to achieve a record disbursement every quarter and the third-quarter has been the best ever by a significant margin. The disbursements have been broad-based across all vehicle categories. Disbursement during the quarter were at INR12,713 crores, driven by 19% quarter-on-quarter and 44% year-on-year. The cumulative nine months financial year ’23 disbursements were at INR33,450 crores and are up by 52% year-on-year and already ahead of full year disbursement for last year and one more quarter — with one more quarter to go.

The vehicle finance loan growth as a result continued to accelerate with a robust 7% quarter-on-quarter growth and year-on-year growth and Y-o-Y growth improving from 13% to 18% during the quarter. Within vehicle categories, commercial vehicles, utility vehicles, car and construction equipment saw more than a 40% year-on-year growth in disbursements. Two and three-wheeler segments too which was stagnant since COVID saw demand coming back with healthy quarter-on-quarter and Y-o-Y disbursed — growth in disbursements. Vehicle asset quality remained steady with gross slippages at 0.9% versus 1.1% quarter-on-quarter. Standard slippages were higher quarter-on-quarter due to impact of mining duty in Orissa or freight availability. The duty has now been rolled back and freight availability has started improving.

The restructured book in vehicle finance reduced by INR400 crores to INR1,868 crores from INR2,270 crores quarter-on-quarter. The reduction in restructured was broadly equally driven by collection and slippages. The collection efficiency of the remaining restructured book — customers were stable at 84%. Overall, we continue to see healthy operating environment for the freight industry and thus, we expect to maintain our disbursement momentum in the current quarter as well as supported by new year purchases and income tax benefits.

Bharat Financial Inclusion Limited. Our micro finance and merchant acquiring loan related to [Indecipherable] grew by 12% year-on-year and 2% quarter-on-quarter. Our micro finance business disbursements were at INR8,928 crores, growing 27% year-on-year. The disbursements are lower by possibly a few hundred crores due to bunching of festivals in the first half of the quarter. The member addition nevertheless were at 5,93,000 for quarter three, up by 20% quarter-on-quarter, of which December was the best month of the year so far. The disbursement for these members would get — gather pace for the current quarter onwards.

MFI standard book net collection efficiency for quarter three was strong at 99%. The gross slippages during the quarter were down to INR409 crores compared to INR435 crores during the previous quarter. Our 30 to 90 DPD including restructured customers were at 2.4 on December ’22 compared to 2.0 at the end of September ’22. The increase was largely contributed by the eastern states. We have slowed down on disbursements in these geographies with increased focus on collections. Over due position for [Indecipherable] continues to be better than the industry at all equity DPD levels.

We continue to expand our merchant acquiring business under the banner of Bharat Fund and Shop [Phonetic] Portfolio. Portfolio forced [Indecipherable] under this business has grown 16% sequentially to INR3,094 crores with 4.9 lakh active customers. Our liability book store from customer service to refill has increased by 65% year-on-year to reach INR1,633 crores through 1.35 crores accounts, savings accounts, RD, FD and cars with us. Overall, we continue to be cautiously pivot towards the growth on the micro-finance business. The rural economy continues to improve. However, the pace of improvement seems to be slower than expected. We continue to leverage vehicle franchise to diversify into elite businesses and within microfinance, the disbursals are driven by lower ticket sizes and reducing geometrical concentration [Phonetic].

Global diamond and jewelry business. The business continued to maintain its global leadership position of being the largest lender to this industry. Our diamond portfolio saw a growth of 20% year-on-year. Asset quality remains pristine with no restructuring and SMA-1 or SMA-2 customers. We remain watchful on the implications of the prolong Russia-Ukraine crisis and remain compliant with all the extent guidelines and facilitating cross monitoring. The COVID relaxation in China is likely to help the overall demand for in this year.

Corporate bank, our corporate business delivered another quarter of healthy growth and no asset quality control. We achieved a growth of 20% year-on-year during the quarter with no net slippages. The growth was broad-based across segments as large corporate growing 3% quarter-on-quarter, mid-corporate 4% quarter-on-quarter and small corporate 11% quarter-on-quarter, realizing in the overall growth of 4% quarter-on-quarter. The segment driving the loan growth was fees, services, petroleum segments. Growth in small corporates were driven by continued scale-up of our SME segments and agribusiness seasonality resulting in ramp-up our commodity finance book.

We continue to actively reprice the loan book. Our yield in the corporate book improved by 37 basis points during the quarter. The portion of A and above rated customers is now 74% compared to 72% year-on-year. The overall weighted average ratio to improve was 2.64 from 2.67 on Y-o-Y basis. The gross slippages from the corporate saw reduction in both standard as well as restructured accounts. Overall, slippages are down to — down from INR179 crores to INR119 crores quarter-on-quarter. Exposure to [Indecipherable] was stable at INR17.3 billion, including fund based exposure of INR10 billion and balanced non-funded late exposure. We remain watchful on the developments of this account. Overall, we continue our journey of corporate growth driven by higher rated granular shorter duration loan book. The asset quality performance remains comfortable and growth broad-based across client segments.

Other retail assets. Our non-vehicle, non-microfinance, retail loan book too saw our growth momentum accelerating during the quarter to 23% year-on-year and 6% quarter-on-quarter. The growth was driven by credit cards, personal loans, as well as steady momentum in business banking. Our credit card spend continues to remain strong with spends of INR20,000 crores for the quarter. As a result, our credit card loan book grew by 9% quarter-on-quarter. Our new acquisitions remains robust with around 88,000 acquisitions in December ’22.

We also recently announced world’s first tripartite co-branded card in partnership with Qatar Airways and British Airways. We have done a pilot launch of our old home loans in September and we progressed on rolling it out of the various markets in the country. With this disbursements of over INR200 crores in the quarter, our aim is to scale it up meaningfully in the coming quarter. Overall, the share of consumer banking loan has increased to 16% of overall loans now. We expect this to continue to increase as we scale-up the home loans merchant acquisition to maintain — and maintain traction on credit card and personal loans.

Now coming to liabilities. Our deposits grew by 3% quarter-on-quarter and 14% year-on-year. We saw healthy acceleration in the retail deposit mobilization during the quarter. Our retail deposit as per LCR growth accelerated to 21% year-on-year from 16% in the previous quarter. The absolute addition of retail deposits is INR7,978 crores, which are also the highest in the last six quarters. The share of retail deposits as a result increased from 41.2% to 42.4% during the quarter. All our business units including branch banking, affluent and NRI contributed towards the growth. The growth momentum comes in the backdrop of the heightened competitive intensity in the industry.

Our new initiatives affluent and NRI banking saw growth accelerating during the quarter. Affluent banking, net relationship value grew 5% quarter-on-quarter to INR66,700 crores, of which deposits grew by 8% quarter-on-quarter to INR41,950 crores. Our NR [Phonetic] segment to maintain the momentum with deposits growing by 16% quarter-on-quarter to INR32,900 crores. We also recently went live on the income tax portal 2.0 and our customers can now pay direct taxes instantly through our IndusInd Bank account using our digital channels and our branch network.

Our CASA ratio at more than 41.9% versus 42.1% year-on-year. The CASA deposits saw growth into current accounts, whereas saving accounts contracted sequentially. The saving account contraction was due to customers moving deposit towards fixed deposits and we letting go some of the expensive and bulky accounts. This also ensures containing the increased cost in the savings — cost of savings account and as we have taken savings accounts rate hikes in October.

The share of top 20 customers in the overall deposits has also come down from 17% to 15% [Phonetic] quarter-on-quarter.

We opened 64 branches during the quarter taking the branch count to 2,384 and aiming towards closing the year at 2,450 to 2,500 branches. Contribution of the certification of deposit grew at 3.6% of deposits. We continue to maintain [Indecipherable] surplus liquidity of about INR44,000 crores during the quarter with liquidity coverage ratio of 117%. Overall, we remain focused on the retail deposit mobilization despite the challenging environment. We continue to invest in the franchise, both through distribution capabilities as well as offering competitive rates. The new initiativesbranch delivery availability — availability of long-term stable refinance as well as profit liquidity on the balance sheet will help us comfortably fund our acceleration in the loan growth.

Digital traction. Overall, the digital strategy of the bank is geared at driving three major objectives: A, build direct to client digital platform; B, drive superior client engagement; and C, transforming existing lines of business, building this direct to client platform. The EasyCredit platform, direct platform, marketing led business, NPL and card has grown 6 times Y-o-Y and 75% sequentially quarter-on-quarter. The partnership business continued to grow strongly and grew 5 times Y-o-Y and 17% sequentially quarter-on-quarter. More than 35% of the business in savings account and card where volume is now digital and partnership led.

Drive superior customer experience and engagement through digital platform. Digital transaction intensity continues to grow with 93% of transactions processed digitally and 74% of service request process digitally. The mobile app continued to show a robust user base growth of 26% year-on-year in terms of monthly active user base. The engagement of the mobile app will further accelerate as the banks integrate the stack of art event-driven real-time engagement back in the app in quarter three. We further enhanced the IndusInd EasyCredit for individual stack with integration of new fintech partners leveraging the open banking capabilities of the stack, increase in STP percentage to 30% through advanced analytics.

Transform existing lines of business and making them more efficient. We continue to digitize the business with nearly all deposits and wealth business done digitally. With EasyCredit stack, now we have 95% of the credit cards sourced digitally and nearly 80% of the loans — personal loans sourced digitally. Nearly 50% of small business banking is digital and well — and on-track to grow at — to 80% plus by the end of financial year with the addition of full working capital product suite. Close to 80,000 accounts were awarded digitally every month across personal loans, credit cards, savings accounts by the bank.

Sustainability. Sustainability is core to our strategy and we continue to progress on our agenda of sustainable banking. From our data trust on our ESG linked products, we are launching a series of ESG linked products. We have already launched two such products including EV finance for passenger cars, and green fixed deposits. We also have a couple of more initiatives planned for launch in the coming quarters such as green personal loan for solar, group top finance and new platform supporting [Indecipherable] entrepreneurs.

During the quarter, the bank both also approved and upgraded a robust ESG risk assessment policy and governance framework for all our corporate exposures. This will help us prudently manage bank’s exposure to high ESG risk industries as the country transitions to a low carbon economy. Banks have also selected for a pilot of TNFD, Taskforce of Nature related Financial Disclosures, a UN supported initiative of sustainable agriculture. Our efforts are well acknowledged and this quarter saw a series of our ESG ratings from two marquee international rating agencies, Carbon Disclosure Project CDP and S&P Global rating and I’m happy to share that we have once again scored the highest rank among the five large private sector banks.

Now coming to the financial performance for the quarter. Net interest income grew by 18% year-on-year broadly in line with the loan growth. Net interest margin improved sequentially to 4.27% from 4.24% quarter-on-quarter. Our loan yields improved by 24 basis points quarter-on-quarter and yields on overall assets improved by 34 basis points quarter-on-quarter. The cost of deposits increased by 37 basis points and the cost of funds increased by 31 basis points during the quarter.

The core team maintained strong traction growing at 28% year-on-year and 4% quarter-on-quarter. The treasury income was positive and stable quarter-on-quarter. The overall other income by 11% year-on-year and 3% quarter-on-quarter. Share of retail fees remained healthy at a 71% of the total fee. Our total revenue for the quarter was at INR6,572 crores with 16% year-on-year and 4% quarter-on-quarter growth. Operating expenses grew by 4% quarter-on-quarter. We continue to invest in talent and we hired 1,800 employees during the quarter and around 8,500 during the current year. Our overall cost-to-income ratio was stable at 43.9% quarter-on-quarter. The operating profit for the quarter was at INR3,686 crores, growing 11% year-on-year and 4% quarter-on-quarter. The PPOP margin to loan continues to be healthy at 5.7%. Our core PPOP grew by 20% year-on-year.

On the asset quality and the provisioning front. Our provisions for the quarter were further reduced to INR1,065 crores and the provisions to loans are just now at down to 39 basis points now. The gross NPAs were down from 2.11% to 2.06% quarter-on-quarter and net NPA was stable at 0.62% with healthy provision coverage ratio of 71%. The slippages during the quarter were down to INR1,467 crores from INR1,572 crores. We utilized INR461 crores from contingent provision during the quarter with regular contingent provisions of INR2,192 crores or 0.8% of loans. Cumulatively, for nine month finance ’23, we had INR1,833 crores of slippages from the restructured book. We have utilized INR1,136 crores of contingent provisions so far. As the incremental slippages from the restructured book continue to be [Indecipherable], we’re comfortable with the contingent provision.

The net security receipts have reduced to 56 basis points from 67 basis points quarter-on-quarter and we carry provisions in line with the expense regulatory requirements. Total loan related provisions are at 2.7% of loans or 130% of gross NPAs. Our SMA-1 and SMA-2 book was at 8 basis points and 24 basis point, respectively. Total SMA-1 and SMA-2 are down to 32 basis points from 58 basis points quarter-on-quarter. Profit before tax — profit after tax for the quarter was at INR1,964 crores, growing 9% quarter-on-quarter and 58% year-on-year. Our CRAR including profits remained healthy at 18.01%. Retail on assets continued upward trajectory from 1.80% to 1.87% quarter-on-quarter. Our return on equity has improved to 15.2%. Overall, we are becoming — coming towards the end of our planning cycle five strategy and also, so far have been consistent with our objectives outlined in our earlier communications. We will be formulating our planning cycle six strategy in the current quarter and we’ll present to you the counters in the next analyst call. The key themes that will guide our strategy would be deposit retailization will continue to be the cornerstone of PC-62 [Phonetic]. We will add new growth boosters for increasing customer acquisition including Digital 2.0 offerings.

Loan momentum should accelerate in PC-6 [Phonetic] with stable macro-environment. The acceleration will be driven by retail segments. We will continue to invest in franchise through distribution, technology, employee, adding and scaling new initiatives to diversify our revenue pools. We have maintained our PPOP margins in most turbulent and aim is to achieve that in PC-62. The overall return ratio has improved over the last couple of years and should continue to improve with normalization of provisions in PC-6. While we focus on scaling up our businesses further, the growth will be achieved with constant focus on governance and sustainability of the franchise.

With this, we can 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 Adajania from Nuvama Wealth Management. Please go ahead.

Mahrukh Adajania — Nuvama Wealth Management — Analyst

Yes. Hi, good evening. Sir, first of all, what are your views on the new ECL circular because we already have a good stock of contingent provision and provisions to loans are running at 2.7, plus you — all banks have been doing mock run with RBI and IFRS is what we’re told. So how does that affect — how does the ECL circular affect you, even some rough estimate would be good enough, either positively or negatively?

Sumant Kathpalia — Managing Director and Chief Executive Officer

First, it’s too early to comment on it. I think the circular has just come out. But I think what you need to understand is that there are certain parameters, which will — RBI will define, which each bank will have to follow. So each one bank has been following their own process. So I think there will be some standardization, which will happen as a consequence of this new loans. We have to give a feedback by the month of February and as a consequence, the new model will evolve, which RBI and the banks [Indecipherable] and as a consequence, the new model will emerge. I agree with you, the bank carries very comfortably on contingent provision as well as good capital ratio. So I think we should be able to manage this over a period of time, but it’s too early to comment whether — how it will happen, but I’ll ask Ramu to also give his view. Ramu runs our risk management.

Ramaswamy Meyyappan — Chief Risk Officer

Yeah, hi. So basically, I think the discussion paper that’s come from RBI has a several questions that they raised the participants, the banks to address or come back to them on. And then we would get the guidelines as to what the minimum levels required would be, but then we can [Indecipherable], no doubt. As we mentioned, we have been running these [Indecipherable]. We’ll have to look at the probability of defaults and what else will happen. We kind of [Indecipherable], the profit defaults may look higher, but it will get normalized over the next one or two years as the asset quality is improved across the banking system.

We — where we are at our different portfolios and where we are look at it and over the years ago, it should be comfortable with. I think we should be able to defend purely on how RBI gives the basic benchmark. And then once we have that, then we’ll be able to workout our models, how it validated as expected by RBI. And then we will have to take decisions on what it comes, but don’t expect a material impact as we have looked at our numbers, but we have to wait for the guidelines from RBI.

Mahrukh Adajania — Nuvama Wealth Management — Analyst

Sure. Sure. Thanks. And my next question is generally on sector outlook and then how that comes down through IndusInd Bank. So obviously, loan growth has been very strong for the sector and given that fourth quarter is busy season, it may continue to be strong. But do you see any deceleration or any big time fall-off in loan growth in the first or second or third quarters because it remained strong for a very long period of time. And that — in that context, what would be the guidance for your own loan and deposit growth be?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So if you look at the businesses in which we are in, I think our vehicle finance business is coming from cyclical lows. So I think you’re seeing a fantastic vehicle finance, the growth across the vehicle category. And I think quarter one is relatively a slower growth for them, but otherwise, they have done relatively very, very well. And I think that growth should continue in the next year also. So that’s something which we are hopeful of and we are — and we have diversified that group to a certain extend that I think we are not dependent on one single product to give our growth. So I think that’s why this growth is coming in.

Microfinance is a — is an industry, which can see growth. But again, we’re diversifying that industry and we are seeing the growth. I think diamond growth depends on the global environment and we have to see how the growth comes in. And going back to the corporate as well as this, our focus is on the MSME and the SME segment where we are seeing growth coming. And on the retail, I think the consumption story continues in India and we are seeing a huge growth on the same [Phonetic].

On the loan, I think our assumption is given where we are and what we are doing, I think we should see a growth of about 20% to 25% and we are going to present the — present our PC6 strategy very shortly in the next quarter. So you would see that growth and a PD ratio anywhere between 85% to 93%.

Mahrukh Adajania — Nuvama Wealth Management — Analyst

And would that require a lot hike in deposit rates from year on or are you seeing it cool down now for the sector and then for you?

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think we’ve always said and the house view has been that there will be one more hike, which will come in the month of February of around 25 to 35 basis points. And then we have to see how the global plays out and how the Indian inflation plays out. And I think we are very certain that I think then I think the stance should go into neutral. And I think we should see the scaling down of the deposit rates maybe by the third quarter of this financial year, not earlier than that.

Mahrukh Adajania — Nuvama Wealth Management — Analyst

Okay. Thank you so much. Thanks a lot.

Operator

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

Kunal Shah — ICICI Securities — Analyst

Yeah. So firstly, with respect to the asset quality on the consumer finance side, so that has seen some deterioration on a quarter-on-quarter basis. And particularly most of the product segments in vehicle has seen the increase in the GNPAs. So is it more a function of lower write-offs or any higher slippages out there in the vehicle finance portfolio?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So I think the vehicle finance, if you look at — rest are very small. The only thing where the slippages have happened is really on the commercial vehicle side of the heavy medium and heavy commercial side and it was because of the Orissa issue on the duty, which has been rolled back by the government and you should see that coming back to normal during this quarter itself. Of course, the total loan portfolio continues to suffer and we have an 8% delinquency there and we’ve not done any sale to the ARC also. That’s something which you would have noticed on the consumer side.

Kunal Shah — ICICI Securities — Analyst

Yeah, yeah. Okay. Sir particularly CVC, in fact, cars, tractors, tractors are also seeing some kind of deterioration.

Sumant Kathpalia — Managing Director and Chief Executive Officer

[Indecipherable] see that coming back this quarter itself.

Kunal Shah — ICICI Securities — Analyst

Okay, okay. And secondly, in terms of the deposit rate, okay, so in fact, maybe earlier — maybe almost eight quarters back, there was a good gap, which was there with be other private banks. Commendably, now we look at it, we are almost catching up with them and its very near to where some of the leading private banks are. So what would be the stance out there? Maybe do we see that, okay, to accelerate further deposits, we will need to have a more guess with be private banks or this seems to be good enough for the overall growth which is required on the lending side?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Our stated intent was that we will have a 50 to 75 basis point gap. But what we have observed is that people are talking and we were able to mobilize deposit and retailization with our branch expansion. Our branches were able to retailize deposits. So that’s something we did not feel the need of increasing our deposit rates in the retail side. We continue to watch that every month. And if we feel that our retailization is going down, we will increase the rate. So we feel right now, there is a big opportunity in the senior citizens segment. And I think where we find that — if you get the senior citizen account, you also get the savings account with a large balance. So I think there are opportunities and there are cluster of opportunities, which we go after and we feel that.

In the NRI, we — for the opportunities, we were able to garner that opportunity and you would have seen our NRI book grow to about INR32,400 crores from INR29,000 crores. So I think we see opportunities and strike the opportunities. And I think as of now, I think we will do some changes, but those changes will be immediately mocked at a broad skill levels, but at a specific tail off or a specific segment level.

Kunal Shah — ICICI Securities — Analyst

Sure, sure. Okay. So broadly may be currently there is no need and we will just evaluate it for there is no need for further…

Sumant Kathpalia — Managing Director and Chief Executive Officer

No, I did not say that. I said that we always evaluate opportunities and we find that there are certain segments where we feel there are opportunities and we will increase the rate in a short while from now in those segments where we feel we can get very good growth and very good months.

Kunal Shah — ICICI Securities — Analyst

Yeah. So also to do with the outlook on NIM, okay? So if we may go ahead and do the deposit hike and given fixed rate nature on the lending side, should we see that, okay, the margin should be more or less over the year or decline from the current levels?

Sumant Kathpalia — Managing Director and Chief Executive Officer

We should always say that our margins are between 4.15% to 4.25%. I’ve always maintained that. Don’t get carried away with 4.24%, 4.27%. I have also said 4.15% to 4.25% PPOP margins will be greater than 5%. We’ve been above 5.5%, but I’ve always said that in PC5, we will continue to maintain and that’s the stability, which we want to bring to our business and predictability which we also to bring to our business.

Kunal Shah — ICICI Securities — Analyst

Sure. And one last question on restructured, so impact of the improvement of 24 basis points, it seems 12 bps kind of slippage from the restructured. So on the balance pool, you said that, okay, collection efficiency is better on the [Indecipherable] side. But how should we look at it? Do we see the trend continue in terms of — capex on the restructured pool?

Sumant Kathpalia — Managing Director and Chief Executive Officer

It may very bare minimum. So if you look at it, it’s only going down and will continue to slip further. Yeah, so I think by the end of this quarter four, you would almost see the end of the — by quarter four or quarter one, you will see the end of the restructured book for us and that will be the end of it. And I think we will come back to normal credit cost as the other [Indecipherable].

Kunal Shah — ICICI Securities — Analyst

Okay, okay. Got that. Yeah. Thanks a lot and all the best, yeah.

Operator

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

Rahul Jain — Goldman Sachs — Analyst

Yeah. Hi. So one — just a couple of questions. The first one is I may have missed your comments, but when I look at the sequential NPLs in CV construction equipments and MFI, those have gone up sequentially, even though I think initially your outlook that you talked about was sounding quite optimistic. So wanted to understand was there any technicality or the write-offs have been lower in this quarter? So was it the reason why G&T moved up?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. Absolutely. I think one is there’s no ARC sale on the CV business, which we’ve done on the vehicle finance business. Number two, I think there is a specific Odisha issue, which came up and that impacted the business, which will have brought results and we’ll see the roll back happening at this part.

Rahul Jain — Goldman Sachs — Analyst

This was in which portfolio on the Odisha issue?

Sumant Kathpalia — Managing Director and Chief Executive Officer

CV one, the vehicle — commercial vehicle. Otherwise, you will see the — on other, you will see the rollback happening this quarter.

Rahul Jain — Goldman Sachs — Analyst

And why would the MFI, NPLs go up?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. It was in the eastern sector where we found the collection because of the holidays and the booking of the holidays, the NPA slippages happened and it’s very difficult to roll them back or three installments at that time and that’s why the slippages happened at that point. So I think another quarter of pain and I think MFI should be back.

Rahul Jain — Goldman Sachs — Analyst

Understood. That’s helpful. May be just one more point on this, just a follow-on. Is it possible to know the 30 DPD, 60 DPD in MFI?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So I will — I have told that…

Ramaswamy Meyyappan — Chief Risk Officer

30 to 90 DPD is 2.4% of the total book.

Rahul Jain — Goldman Sachs — Analyst

30 to 90 days DPD in MFI is 2 point?

Ramaswamy Meyyappan — Chief Risk Officer

2.4%.

Rahul Jain — Goldman Sachs — Analyst

Okay. Understood. That’s helpful. Thank you. The other question is on the current account deposits, which saw the second consecutive quarter of strong growth. So can you just throw some color as to what’s driving this?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Rahul, always remember that current account has a volatile business. We specialize in three distinct areas in the current account business. One is we are a very good escrow business specifically in the real-estate, we are part of it. Second, we are very strong in NBFCs cash management business. We are very, very strong on it. And third, on the trade FX part of the current account, we are very strong. That and as a consequence, we get trade. So you will see some floors which come out as a consequence and we get a lot of — sorry, on the last part, we get a lot of dividend mandate from the government banking business, which we do very well in the public sector undertaking.

So I think you will see floors growth coming in. Normally, you should see a standard floor, which was around 38 to 40, now moving up to 43 to 45 and that is our standard floor and you will see some floor which come in and they help us in managing our cost of deposits, but they are not stable to some extent the way you call stable with deposits. So you will continue to see wallet, but they do — they are part of our core business. They get out because we do these businesses of cash wallet, you know that cash line in money cannot last for us — last enough for more than three days or four days because as per the new current account guidelines or — and were are — it’s a part of our DNA to do the real-estate and we get the [Indecipherable] businesses as a part of the consequence of that. And of course, the great effect is a part of our core businesses. So we follow this as a process and I think that’s where the current account business is growing for us and we focused on these areas to get the business.

Rahul Jain — Goldman Sachs — Analyst

Understood. Thanks, Sumant. The other question is on the yield in corporates versus —

Operator

Rahul, sorry to interrupt you. Can I request you to speak through the handset?

Rahul Jain — Goldman Sachs — Analyst

Is it any better?

Operator

Yeah, Rahul. It’s better now.

Rahul Jain — Goldman Sachs — Analyst

Thank you. The other question is on the yields on the corporate portfolio, which moved up quarter-on-quarter nicely. Just wanted to understand what would be the rating profile of these corporates where we are able to pass on the cost? And can it sustain over the next few quarters?

Ramaswamy Meyyappan — Chief Risk Officer

So Rahul as we have said earlier, bulk of the corporate book is floating rate book. So it’s not about to rating profile or anything as such. And every quarter, you have to reprice the book and that continuous repricing is happening. So overall entire book, you will see the repricing happening as the — every quarter the book comes up for renewal and at every renewal, the repricing comes into play.

Rahul Jain — Goldman Sachs — Analyst

And the benchmark is a shorten benchmark or a year plus?

Unidentified Speaker —

So it varies depending on the corporate demand. If you see overall corporate book, almost 40% of the book is linked towards MCLR and within MCLR, it varies from three months to one year. And every corporate loan has to be repriced within a year and reevaluated within a year. So you can take it beyond one year. Another 40% is external benchmark linked. In our book, the external benchmarks typically at the GSX and [Indecipherable], etc. So that book gets immediately repriced and balance 20% is short-term in nature. So while it is a fixed rate book, but it’s get to reprice within a short period of two months to six months. So there also you get repricing happening in a short period of time.

Rahul Jain — Goldman Sachs — Analyst

That’s very helpful. Just one last question on the ECL. So we were under the impression that the parallel run was happening for the last few years, particularly for the private banks. So what really has changed in the discussion they were — that RBS put out which may or may not have impact on the number? You said it may not have any impact on the numbers, but any particular observation that you want to point out to us?

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think every bank was doing something on their own. Now the parameters are going to be governed by the RBI, some of the parameters. And I think we will have to back test this model based on certain parameters, which the RBI has standardized across the industry. So that’s one. Number two, I think they will take into account what has happened during the COVID period and will the probability of default get affected as of consequence of the COVID period.

Ramaswamy Meyyappan — Chief Risk Officer

It’s Ramu. So I had a comment towards as [Indecipherable] mentioned. So we have — we could bank depending on the data we have, we could use behavioral models or they could use standard SMA approaches. So each of us have followed during the period that we did this test followed our own approaches based on the data quality, richness of data and timelines of data that we had. We have to wait to see how RBI becomes [Indecipherable]. For example, we have four decades of data for our vehicle finance portfolio. So that’s what we need to do because during — in the stack we have mentioned there will be certain levels that they want to have of the provisioning requirements. It will not be at the same level as far as asset quality, the IRAC norms are. So those are the things to fine tune. But we have all the data, we have worked on it. So we — once we get clarity on that, the margin we’ll be able to pull together. This is early estimates, it looks under control.

Rahul Jain — Goldman Sachs — Analyst

Just to extend this point. So let’s say, the property of default indeed come on the higher side because you still have some of the portfolios which are maybe above the historical trend, the delinquencies and the credit cost. Would it impact the pricing of the loans as well because this would also be a number that will be going into the pricing of loans? And would it put you at any disadvantage versus the market?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Not at all. I don’t think so. Micro-finance, we are already the lowest. CV, not at all, because we are benchmark and the best-in class in the market on the CV business. So I don’t think…

Rahul Jain — Goldman Sachs — Analyst

Corporate loans?

Sumant Kathpalia — Managing Director and Chief Executive Officer

[Foreign Speech]. We have not seen the flows at all. You see our corporate book. You’ll see — see the floor this time also. There’s nothing. Diamonds came — nothing. There’s nothing on corporate.

Rahul Jain — Goldman Sachs — Analyst

Understood. Got it, Sumant. Very helpful. Thank you so much and good luck.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Thanks.

Operator

Thank you. Next question is from the line of Abhishek from HSBC. Please go ahead.

Abhishek — HSBC — Analyst

Yeah. Hello, good evening. So my first question is on the MFI book. Can you quantify the disbursement? I think I missed it from your opening remarks.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. So I’ll just tell you the number. It’s about INR8,928 crores.

Abhishek — HSBC — Analyst

And this is only for the MFI, right? Not merchant advances in…

Sumant Kathpalia — Managing Director and Chief Executive Officer

No.

Ramaswamy Meyyappan — Chief Risk Officer

In investor presentation, we give a slide on MFI.

Abhishek — HSBC — Analyst

So then sequentially, one would have expected the book to go up. So has it — have you seen like accelerated repayments or something? Basically, I’m trying to see…

Sumant Kathpalia — Managing Director and Chief Executive Officer

The run off is about INR3,000 crores a quarter — a month. That’s the run off from the book, yeah. We have a shorter duration book on the run off happens.

Abhishek — HSBC — Analyst

And what is the outlook on the disbursement, you see it going up?

Sumant Kathpalia — Managing Director and Chief Executive Officer

I think it will go to about INR11,000 crores. So that’s the maximum it will go to. It will never be a INR15,000 crores disbursement pool. So the growth will be limited to about INR1,500 crores to INR2,000 crores a quarter.

Abhishek — HSBC — Analyst

Yeah, yeah. No, actually the expectation was that in this quarter itself, you would see that kind of accretion. So just trying to get a sense of the growth going forward.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Because of the holidays in the month of October and the bunching up of the holidays, so October was a complete write-off with 10 days working — 12 days working days. November, it came back a little bit, but December is where we saw the INR3,300 crores of disbursements coming back.

Abhishek — HSBC — Analyst

Understood, understood. And in terms of slippage, how much of it was from MFI this quarter?

Sumant Kathpalia — Managing Director and Chief Executive Officer

I’ll just give you the numbers.

Ramaswamy Meyyappan — Chief Risk Officer

We will upload a table, Abhishek, with the segment-wise slippages.

Abhishek — HSBC — Analyst

Okay. Perfect. And just one more thing, on this telecom exposure to this particular company where you have I think INR20 billion outstanding…

Sumant Kathpalia — Managing Director and Chief Executive Officer

INR1,700 crores now.

Abhishek — HSBC — Analyst

INR1,700 crores. So it is entirely provided for right?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Provided INR990 crores. Funded exposure is provided.

Abhishek — HSBC — Analyst

Okay, okay, okay. Got that, right. I think, yeah, those were my — okay, sorry. One more question just quickly squeezing it in. Contingent provisions, I think two or three quarters back, you had called out that you would probably use around INR1,100 crores to INR1,300 crores or something of that order. You’ve almost used I think around…

Sumant Kathpalia — Managing Director and Chief Executive Officer

INR1,136 crores.

Abhishek — HSBC — Analyst

Yeah, INR1,100 crores. So…

Sumant Kathpalia — Managing Director and Chief Executive Officer

It will remain within that number, INR1,300 crores or something. We will not cross that number.

Abhishek — HSBC — Analyst

Okay. Got it, got it. Perfect. Thanks so much.

Operator

Thank you. The next question is from the line of Saurabh from JPMorgan. Please go ahead.

Saurabh Kumar — JP Morgan — Analyst

One question on the slide 18, which you’ve given. So one is, what will be the overall sales you will be earning on this entire CPG book? And there is this low investment grade 4%. Would you quantify what that is?

Sumant Kathpalia — Managing Director and Chief Executive Officer

We — I’ll ask Arun to answer this. Arun runs our — the whole business, yeah.

Arun Khurana — Deputy Chief Executive Officer

No. So Saurabh, what was that MC book?

Saurabh Kumar — JP Morgan — Analyst

How much revenues you get from LCBG [Phonetic]?

Arun Khurana — Deputy Chief Executive Officer

Okay. So it’s all client-related businesses on the LCBG as well as mostly on the [Indecipherable] because we’re classifying that actually in the three slide if you see. So there is slide on trade and trade piece out there. So I think trade remittances was something like INR201 odd crores and then FX on account of client income was at INR250 odd crores. So that’s what we get. And so it consists around — of the total fee pool, of core fee pool of INR1940 crores, so this is around INR450 odd crores out of that.

Saurabh Kumar — JP Morgan — Analyst

Okay. And most of these exposures you have written public sector and all, but what will be the acceptable exposure, sir?

Arun Khurana — Deputy Chief Executive Officer

Sorry, what was that? Most of the exposure was?

Saurabh Kumar — JP Morgan — Analyst

Sectors which these will be happening into like…

Arun Khurana — Deputy Chief Executive Officer

Yeah. It’s a mix of both. So trade is primarily corporate accounts, right? So because it’s typical LCs and [Indecipherable]. Bank guarantees are typically the PSUs.

Saurabh Kumar — JP Morgan — Analyst

Okay. And sir, the last question with below investment grade, which is 4%…

Arun Khurana — Deputy Chief Executive Officer

That’s to the telecom one that we just referred, non-fund based facility to the telecom company that we have.

Saurabh Kumar — JP Morgan — Analyst

So of the four, one is telecom. What is the other three?

Arun Khurana — Deputy Chief Executive Officer

There is no account.

Sumant Kathpalia — Managing Director and Chief Executive Officer

There is no one particular large chunky account there. Only able to disclose the name, that’s it.

Saurabh Kumar — JP Morgan — Analyst

Okay. Thank you.

Operator

Thank you. Next question is from the line of M.B. Mahesh from Kotak Securities. Please go ahead.

M.B. Mahesh — Kotak Securities — Analyst

Hey, hi. Just a couple of questions. One, if you look at the deduction of these cost of deposits which has kind of increased by about 35 basis points — about 30 basis points this quarter. Could you just kind of give us a rough indication as to how does this change over the next few quarters based on the current deposit rate and the maturity that you have in your books?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So I think you will continue to see if the — in February, if the rate of deposits changes, I think you will see a rate change. And currently, I think you should expect a 15 to 25 basis points rate hike or 15 to 25 deposits really hike on the overall book as a consequence of that.

M.B. Mahesh — Kotak Securities — Analyst

Sumant, just the question is the other way around. Assuming that there is no change, this quarter, if you assume that it’s about 35 basis points, would you say that the number increases to 50 basis points next quarter or do you sense that the number kind of remains where it is at 35 each quarter?

Sumant Kathpalia — Managing Director and Chief Executive Officer

Yeah. I think it’s more of the latter. I think you will have around 30 odd basis points increase, somewhere maybe 5 basis points here or there on the number that we had as an increment in the last quarter.

Ramaswamy Meyyappan — Chief Risk Officer

And Mahesh, you will also have to note that last quarter, we have taken a savings rate hike which reprices the whole base immediately. So that is not going to happen every quarter, unless we raise our rates again.

M.B. Mahesh — Kotak Securities — Analyst

Perfect. Okay. Second question, sir, in the past, you’ve kind of mentioned that you will be kind of reducing this balances that you have on the balance sheet on the cash side. This — again, it remains reasonably at a high number at about INR54,000 crores.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Actually…

Ramaswamy Meyyappan — Chief Risk Officer

It was around 44 —

Sumant Kathpalia — Managing Director and Chief Executive Officer

INR44,000 crores.

Ramaswamy Meyyappan — Chief Risk Officer

So we carry excess liquidity and we have been saying that as the loan growth accelerates, the excess SLR will keep coming down, but at the same time, we will continue to carry INR25,000 crores to INR30,000 crores of surplus liquidity at all points in time as a manner of prudence and conservative building buffers on the balance sheet.

M.B. Mahesh — Kotak Securities — Analyst

This book fits in the — it earns any interest or it doesn’t?

Ramaswamy Meyyappan — Chief Risk Officer

If you see split of the INR44,000 crores, so roughly around INR25,000 crores to INR30,000 crores is in the form of excess SLR. So these are the G-SEC [Phonetic] securities, which we carry beyond what is recovered from the regulatory requirements. So they give us returns in terms of the G-SEC yields that are there in the market. And the balance INR10,000 crores to 15,000 crores is pure cash that is kept beyond the CRR requirements.

M.B. Mahesh — Kotak Securities — Analyst

Okay. Perfect. And Sumant, just last question to you. Any conversation with the RBI on the extension of tenure?

Sumant Kathpalia — Managing Director and Chief Executive Officer

No, Mahesh. There has been no communication from RBI.

M.B. Mahesh — Kotak Securities — Analyst

Okay, perfect. Thanks.

Operator

Thank you. Next question is from the line of Manish Shukla from Axis Capital. Please go ahead.

Manish Shukla — Axis Capital — Analyst

Good evening. Thank you for the opportunity. Inventory provision of INR2,192 crores, how much is restructured asset provisions?

Ramaswamy Meyyappan — Chief Risk Officer

How much restructured asset provisions? These all are — see, Manish, what we have to carry is if you remember the RBI circular, we have to carry 10% of the restructuring — 5% to 10% depending on the security and all. So that is only what is required to carry by the regulations.

Sumant Kathpalia — Managing Director and Chief Executive Officer

That’s around INR500 crores, INR458 crores.

Ramaswamy Meyyappan — Chief Risk Officer

Beyond that, then there is INR1,000 crores for telecom assets and balance is pure contingent of surplus.

Manish Shukla — Axis Capital — Analyst

So both that telecom as well as INR500 crores is part of this INR2,192 crore?

Ramaswamy Meyyappan — Chief Risk Officer

Correct.

Manish Shukla — Axis Capital — Analyst

Yeah. Okay. Secondly on the yield on your consumer loans. If I look at first nine months December over March, that has moved up by only about 32 basis points, while I do appreciate that it’s a fixed rate book. The book itself has grown 17% in the last nine months, but the yields have not moved. I mean, could you just explain what’s happening there?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So I think you have to understand that the credit card yields have shown a decline over the last four quarters where the revolving rates have come down on the credit card book. So that affects the book in a big way. Second, I think the — in the CV business, the scooter loan businesses of the high-yielding business has come down, scooter loan and all. And I think the yield has remained almost static while the disbursement in the other parts would have increased, but the scooter loan business of the high-yielding, the three wheeler businesses, those portfolios have come down and the disbursements have come down on that businesses because they are still coming out of the COVID. So that’s number two.

Number three, on the microfinance side, the disbursements have not been very high in during this phase, and I think the run off of the book has happened. The growth has been very, very different at this point of time. So I think you will see that growth coming back and that’s why we’re so comfortable when we give a range of 4.15% to 4.25%. So we’ll see the growth coming back in these sectors and they will fuel the growth of the — and the interest rates of the business.

Manish Shukla — Axis Capital — Analyst

Great. Last question on housing loans that you are doing, what is the yield broadly that you are getting?

Sumant Kathpalia — Managing Director and Chief Executive Officer

So we are getting about 8.95 right now. That’s the yield which we are getting the loans at right now. So that’s the yield.

Manish Shukla — Axis Capital — Analyst

Okay. Thank you. Those were my questions.

Operator

Thank you. Next question is from the line of Shubhranshu Mishra from Phillip Capital. Please go ahead.

Shubhranshu Mishra — Phillip Capital — Analyst

Hi, sir. Good evening. Shubhranshu here.

Sumant Kathpalia — Managing Director and Chief Executive Officer

Hi.

Shubhranshu Mishra — Phillip Capital — Analyst

Just on the vehicle finance part. Sir, what proportion of our vehicle finance is for — is to SRTOs and what proportion is to the fleet operator? And what is the credit risk management that we do? What kind of collection architecture we have and what’s the one plus that’s — one plus DPD we have…

Sumant Kathpalia — Managing Director and Chief Executive Officer

So I have got Sriram who runs this business. Let him answer this.

A. G. Sriram — Head of Consumer Finance

65% of the book is for SRTOs.

Shubhranshu Mishra — Phillip Capital — Analyst

Right. And what is the one plus and the collection architecture in this business, sir?

Ramaswamy Meyyappan — Chief Risk Officer

So we don’t share the one plus DPD because there are always operational delays that happen, people travel around the country. So there will be quite a bit of people between 1 to 30 DPD, but over a period of time, you get back the collections. So whatever is the slippages and only if you are 30 to 90, then only that case comes in. But I’ll let Sriram articulate about the collection architecture.

A. G. Sriram — Head of Consumer Finance

Yeah. See, below the branches, like we have separate collection people, like whether a customer is in overview or not, it gets offering to a collection agent. And generally he has around 250 contracts and he [Technical Issues].

Operator

Ladies and gentlemen, we request you to please remain connected. We are trying to reconnect the management line. Please do not disconnect. Thank you. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.

A. G. Sriram — Head of Consumer Finance

Yeah. On the collection fees, we have branches. Below branches, we have separate collection executives who handle not only like overview contracts, but also other contracts, which are not — which are in no due. So nearly 250 customers get allotted to each collection assistant. And the above branches, it is all we do business and collection together. Unlike other bankers, we do not have a separate vertical for collection and business, [Indecipherable] business like all the hierarchy for both business and collection together. And yeah, and all the collection executives are — they are trained and they have certificate and even reposition nearly 50% to 60% are handled in-house by our collection executives.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. 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 joining the call. Is there any other further questions and we will definitely — you can definitely call up me or Indrajit and we will of course have one on one calls starting tomorrow onwards and we can discuss. Thank you so much.

Operator

[Operators Closing Remarks]