Kotak Mahindra Bank Ltd (KOTAKBANK) Q4 FY22 Earnings Concall Transcript

Kotak Mahindra Bank Ltd (NSE:KOTAKBANK) Q4 FY22 Earnings Concall dated May. 04, 2022

Corporate Participants:

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

K.V.S. Manian — Whole-time Director & Group President, Corporate, Institutional, Investment Banking & Wealth Managem

D. Kannan — Group Head of Commercial Banking and Member of Executive Board

Shanti Ekambaram — Group President of Consumer Bank and Member of Executive Board

Gaurang Shah — President – Asset Management, Insurance and International Business

Jaideep Hansraj — MD & Director

Nilesh Dhirajlal Shah — Vice President

Dipak Gupta — Joint MD, Member of Executive Board and Whole Time Director

Analysts:

Mahrukh Adajania — Edelweiss Securities Limited — Analyst

Rahul M. Jain — Goldman Sachs Group, Inc. — Analyst

Adarsh Parasrampuria — CLSA Limited — Analyst

Saurabh S. Kumar — JPMorgan Chase & Co — Analyst

Prakhar Sharma — Jefferies — Analyst

Kunal Shah — ICICI Securities Limited — Analyst

Manish B. Shukla — Axis Capital Limited — Analyst

Nilanjan Karfa — Nomura Securities Co. — Analyst

Sumeet Kariwala — Morgan Stanley — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q4 FY 2020 Earnings Conference Call of Kotak Mahindra Bank. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Uday Kotak. Thank you, and over to you, sir.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Good evening, colleagues. Welcome to the Kotak Mahindra Bank earnings conference call on this hot 4th of May here in Mumbai. I would first like to share with you what has already been publicly announced by us today with reference to the various appointments and changes with reference to the management. I’m happy to share that my colleague, Shanti Ekambaram, who has been with the Kotal Group for more than 30 years, has been appointed on the Board of Kotak Mahindra Bank, subject to regulatory and shareholder approvals with effect from November 1.

I’m also happy to announce the reappointment of Manian for another term as Whole Time Director, with effect from November 1, subject to shareholder and regulatory approvals. I would also like to share that my colleague, Gaurang has voluntarily decided not to seek renewal of its term on its completion as a Whole Time director on 31st October 2022. However, I’m happy to also share that Gaurang will continue to be on the Board of all our major group companies, which includes Kotak Life Insurance, Kotak General Insurance, Kotak Asset Management company, International Subsidiaries, as also Kotak Investment advisers. I’m also happy to share that Gaurang has been appointed today as the Chairman of Kotak General Insurance.

However, wanting to share that Gaurang continues his active association with the Kotak Group, and will continue to add significant value to our key businesses on a consolidated basis. I’m also happy to share that my colleague Dipak Gupta, who has been on the Board of our alternate assets business, which is a growing business and which we propose to grow even faster, Kotak Investment Advisers, Dipak has been appointed as the Chairman of that company. And finally, my colleague Kannan, who has built our commercial banking business over the last many years, particularly the penetration we have made in the microfinance business, Kannan is being — has been appointed today as the Chairman of BSS Micro Finance, a company which we acquired a few years ago.

And Kannan will continue to see how we can grow in various segments, particularly in the microfinance business as we go forward. So moving — I would just like to share with all a few important message that Kotak Mahindra Bank is taking appropriate steps for transition, and the strength and the depth of Kotak Mahindra Bank and the Group management is something extremely proud of. And we see that as a very strong, stable, sustained base on which Kotak Mahindra Bank and the Group can continue to grow over long periods of time. Coming specifically to the financial numbers for the period ended 31st March, the earnings numbers are with you, and my colleague, Jaimin will take you through them shortly. I just wanted to make a few important points.

Actually more on the balance sheet side, specifically very happy to share that we are now seeing a very sharp drop in the slippage ratio in terms of the new bad loans. For the fourth quarter, the slippage ratio on an annualized basis is down to 1.08%, which is in absolute numbers only INR736 crores of gross slippage. Our COVID provisioning restructuring, our COVID restructuring portfolio is barely 15 basis points, and then the MSME restructuring portfolio is another 29-odd basis points. I think Jaimin will give you the exact numbers, but both put together are around the 0.5% mark. It again reflects on the very strong quality of the book as we come out of the pandemic.

The second important point I would like to highlight is we have been able to make significant inroads into cost of funds and our cost of funds are now at a historic low. We understand as rates move up that they will change, but with the CASA ratio in excess of 60%, we feel that we are well positioned for growth as we go forward. Third, as an extension of that, it also is demonstrating that our risk-adjusted pricing is giving us significant benefits on our NIMs, and here I would also like to highlight the fact that despite our loan book growing in the bank at over 21%, our capital adequacy ratio has continued to be equal or higher than what it was one year ago, which means despite the addition of risk assets at this space, the generation of earnings across different arms of Kotak is more than sufficient to actually keep the capital at similar levels despite a 20-plus percent growth.

And this, in a way, reflects on the mix and the quality of the earnings which we have. I’m also happy to highlight the fact that out of our consolidated profits, 30% of the profits come from the subsidiaries approximately and 70% of the profits are the stand-alone bank, because our true approach to a consolidated Kotak across financial services is something which is playing out well. And the fact that we own 100% of our subsidiaries is contributing significantly to the 30% number out of the consolidated earnings. We are also happy at the bank to have been cautious in building our fixed rate loan book. And it is actually somewhere between 15% and 18% of our total loan book, which is fixed rate loan book more than a year’s duration, the rest of the book is either duration below one year or is a floating rate book. So as interest rate scenario changes, we have got a significant ability to reprice our book.

We are, again, at a stage where we have put on the accelerator for speeding up our loan growth as is evident in our Q4 numbers. We feel with the quality of our balance sheet, our cost of funds positioning, our historical ability to manage and grow a low cost and sustained liability franchise, which is a core of a banking franchise, we feel pretty confident to be able to grow our loan book, both secured and unsecured despite interest rates moving up with an ability to price appropriately as things change. I would also like to share that on our fixed income bond book we run a very low duration, a little over one year is the duration of our treasury book and which actually positions us very well as the interest rate scenario changes.

With that, I will now ask Jaimin to take you through the financials and then open up — and also my other colleagues to take you through different parts of our performance in the last quarter and the year behind. Thank you very much.

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

Thank you, Uday. Let me take the consolidated numbers first. We end this quarter with a post-tax profit of INR3,892 crores, which is 50% higher than what we did in Q4 last year. For the full year, we closed at INR12,089 crores, 21% higher than what we did in FY 2021. Our overall customer assets at the group level grew 22% to close at INR3,27,000 crores. At the group level, ROA for the quarter annualized at 294 and cited the full year were at 2.36%. Capital adequacy at the group level, again, at the consolidated level was 23.7% with Tier one itself at 22.8%, both of them marginally higher than what they were one year ago. Our book value per share now at INR487 per share.

Return on equity, again, if I say the quarter 16.6%, year at 13.4%, the year being lower, thanks to some of the negatives which we had in quarter one of the — in this year. For this quarter, as Uday mentioned, the bank contributed about 70%, INR2,077 crores, which is about 64% higher than a year ago and 23% higher than the previous quarter. Kotak Prime showed almost a 70% PAT growth on a Y-o-Y basis, closing this quarter at INR313 crores. Similarly, Kotak Investments brought in INR101 crores, up 30% on a Y-o-Y. If I look at the two NBFCs put together, they showed a 60% growth FY 2022 over 2021.

The big growth also came in the capital market subsidiaries, that’s Kotak Securities and Kotak Mahindra Capital. The two are then contributed close to INR1,250 crores to the post-tax profess against INR875 crores, it’s about 32% Y-o-Y. The life insurance entity this quarter had a 38% higher than previous year same quarter with INR267 crores. For the full year, of course, the Life Insurance segment had a negative first quarter, and therefore, the full year numbers are lower than what they did last year. The domestic mutual fund entities, the AMC and the trust we put together contributed INR454 crores, which is 28% higher than last year.

The ultimate asset, the Kotak Investment Advisers ended this year with a profit of INR58 crores. BSS, which is, as Uady mentioned, a business correspondent in the micro finance area, which we acquired in 2017, closed with a post-tax profit of INR82 crores this year against INR23 crores last year, INR42 crores of this INR82 crores came in the quarter four of this year. At the overall group level, the non-bank entity is continuing to give about 30% of trust. Advances at the group level at about, now crossing INR3 lakh crores. The overall network close — getting close to INR100,000 crores with the bank getting INR72,000 crores there. All of our entities are pretty adequately capitalized.

The two NBFCs, for example, have a capital adequacy each of over 30%, which together having INR10,000 crores of capital. The life insurance company has a solvency of 2.7% [Phonetic] with a net worth of 4.4%. And international subsidiaries now have roughly about $200 million of network, very little of that rental investment from there. I come to the bank stand-alone, where, as I said, for the quarter, we show a 64% growth on a Y-o-Y basis and 23% if I look at the full year, INR8,573 crores, 23% higher than last year. This quarter saw NII growth of 18% Y-o-Y. The NIM improved to 4.78% for the quarter and 4.62%. The fees and services again showed a healthy growth of 23% versus Q4 2021.

And this came both from higher distribution and syndication fees as well as the general bankers. The others under the other income thing for the full year is largely because of the MTM hit which we took, a lot it of it came in quarter three. Our employee cost for this quarter comes in lower than the previous quarter, thanks to some reversals of the [Indecipherable] provisions which were linked to, largely coming from the interest rate cycle. As we continue to push for growth, the non-employee expenses have grown with cost coming in promotions, towards planned acquisitions, both on the asset side and the liability side, technology and communication spends.

During the quarter, we added two million customers as against 1.1 million, which we had done in the same quarter last year. Our operating profit for Q4 at INR3,340 crores, which is 13% higher than what we did in Q4 of FY 2021, and 23% higher than Q3 of this year. We have done a reversal of COVID provision on the same lines and principles as we followed for Q3, and this quarter reversed a total of INR453 crores, and we continue to retain INR547 crores as COVID provision. What we have also done in this quarter is on our standard restructured book coming either from COVID or MSME, we have taken an additional 10% provision than what is required regulatorily, which amounts to a P&L cost of INR120 crores this quarter.

Our GNPA at March 31 stands at 2.34%, which is against 3.25% which was a year ago. In absolute numbers, we had a GNPA of INR7,400 crores in March 2021, which has now dropped to INR6470 crores. The net NPA at 0.64% as against 1.21, which shows a PCR of 73.2%. As Uday mentioned, slippages this quarter at INR736crores, which is about 0.27% of advances, annualized at about 1.08. Against this, we had recoveries and upgrades in this quarter, which were INR897 crores, which is therefore the third quarter in the row where we’ve got recoveries and upgrades higher than slippages coming in.

Our credit cost for this quarter without factoring any COVID reversals come to 27 bps. And if I take the full year, it’s at about 55 bps compared to what we had 84 bps in FY 2021. Our fund-based restructured under COVID resolutions at INR417 crores is about 0.15% of our advances. And similarly, under MSME resolution frameworks at INR788 crores, which is 0.29% of our advances. Our SME, which — SMA2 which is funded exposures for borrowers with INR5 crore plus exposure at INR186 crores.

Our stand-alone balance sheet now at INR4.3 crores approximately. CASA continued to be healthy at 60% plus and capital adequacy of the bank again 22.7% overall and 21.7%. And as Uday mentioned, this has actually been a small tick up in the capital adequacy despite a pretty healthy advances growth. Advances grew 21% on a Y-o-Y basis with this quarter itself clocking 7.3%. I’d request Manian to take the corporate book and then…

K.V.S. Manian — Whole-time Director & Group President, Corporate, Institutional, Investment Banking & Wealth Managem

Thanks, Jaimin. Good evening, everyone. As we usually do, let me take you through the corporate loan growth in its part. There are two parts to that. One is the SME portion, which you can see has grown at a healthy 25%. We continue to remain optimistic about this segment, and we have seen strong NPV new customer acquisitions as well as marginally higher utilization compared to the past. So this segment, we are quite optimistic about growth. The other part of corporate, which is I would draw your attention to the corporate banking book shown here in the presentation as well as the3 substitutes.

The combination of the two has grown at about 12%, 12.5%, actually 12.7%. And — we see, of course, somewhat muted growth on the corporate side overall in the industry. But we are beginning to see some green shoots and some capacity additions and capex-related demand. But as of now, we are not seeing that strong enough, the beginning of some green shoots there. Within the corporate shipment, the CRE segment has grown faster at close to 23%. Here, we had moved focus to the Residential segment from the Commercial segment, and that seems to be doing quite well.

In fact, on a consolidated basis between the bank and subsidiaries, the growth in the corporate advances is relatively better. In fact, within the corporate — core corporate segment, we’ve had to — as you can see, the Q-o-Q growth is very, very muted. We have seen some unsustainable levels of pricing here. And in fact, we — towards the end of the year we dropped some assets, especially in the PSU segment because of unsustainable pricing. Also in our advances, we saw good focus on PSL advances and within the corporate book we have built a fair amount of PSL loans.

And in fact, managing PSL loans, managing PSL cost and pricing is critical part of profitability for the corporate bank. Having said that, across all segments, whether it is MMC business, the new age companies, large corporates, conglomerates, we have seen very robust addition of NPV clients. In addition to assets, of course, our focus is always on fees and other earnings from corporates from the relationship. Our trade FOREX, current accounts and debt capital markets businesses, all these fee lines grew significantly faster than the asset growth. In fact, DCM had a record year — on the current account, the four current accounts, domestic current accounts also grew very strongly.

Custody business also continues to be robust, and we continue to add new clients. Overall, the current account growth was extremely good because also of our transaction banking focus. The quality of assets, of course, remained quite good throughout the year. And in fact, we are seeing record low levels of credit costs in the portfolio. Overall, therefore, the profitability of the franchise remained extremely robust. And in fact, our ROE rose during this year. We think our business model is best-in-class in terms of high focus on risk management, ROE, and growth as a balance. We manage our risk adjusted return on capital very carefully at the business level, product level and customer level.

Our segmental focus adds to the balance in the portfolio. We also have good progress on the digital and analytics front and customer experience front. I think more about this, Shanti will talk about in the digital side. Analytics is also an area where we have made significant progress, especially in areas of pricing, optimizing pricing, cross-sell and RM productivity. So we see the franchise in good shape. And with revival in the economy, we feel optimistic — we remain optimistic on business. Thank you so much. Can I hand this over to Kannan to take you through the commercial banking.

D. Kannan — Group Head of Commercial Banking and Member of Executive Board

Thank you, Manian. I’ll start with the commercial vehicle finance business. The commercial vehicle industry saw good growth in quarter four as compared to the previous quarter. The industry grew about 26% during the year and the fourth quarter was even better. Demand for new vehicles is being driven by better capacity utilization as well as replacement demand. Diesel price increases are to some extent being compensated by increased trade demand and good freight rates.

Utilization of passenger vehicles has improved considerably during the quarter, and it’s expected to get better in the coming quarters. Our disbursements during the quarter has been much better and stronger than the previous quarters. Collection efficiency of current demand is back to normalx. Construction equipment demand continued to be good during the quarter, mainly driven by road mining and real estate sector. Manufacturer data points to better utilization of the existing equipment and better utilization is leading to better cash flows in the hands of our customers.

Our disbursement numbers are better than the previous quarter, and collection efficiencies on current demand feels back to normal time. This trend seems to be continuing into the month of April. There’s a marginal de-growth in the phase of tractors in FY 2022 as compared FY 2021. However, demand in April is again showing an improved trend. Rural cash flows continue to be good, driven by better yields and prices. Utilization of tractors in farming was always good and with the increase in rural infrastructure spending, utilization of tractors for commercial applications has also shown good improvement.

Collection efficiency on demand is good and is back to normalx. Outlook for our tractor financing business is quite positive, and we continue to maintain our leadership position. Demand for credit and utilization of existing lines has been strong in our agri SME and the agri value chain. Higher demand for commodities has also increased in private commodities is leading to requirement of increased credit. Customer cash flows are strong and collections are back to normalx. Our microfinance disbursements in the quarter shows a significant improvement over earlier quarters. Again, here, demand is mainly driven by agri and allied activities and also small businesses. Customer cash flows are being good, and this is helping us in restoring normalcy in our collections.

I’ll now hand it over to Shanti to take it over.

Shanti Ekambaram — Group President of Consumer Bank and Member of Executive Board

Thank you, Kannan. In continuation, I’ll start with advances. On the retail assets, our strategy was to go for growth, which we executed. All our retail lending products showed robust growth in Q4, helping us gain market share in many products. At the consumer asset aggregate level, we grew 35% Y-o-Y and 11% Q-o-Q. This was after 11% Q-o-Q in Q3. Mortgages, we continue to see strong demand for volumes in this quarter. Our home loan DIY [Indecipherable] where new bank customers can get a sanction letter in 10 minutes entirely. We continue to acquire quality customers and strengthened our market share across all customer segments, which will continue to be a focus area for us.

As business momentum picked up, we saw good volumes in LAP and had one of our best quarters. We saw a pickup in commercial and industrial property for self use. We continue to consolidate market share in that. Mortgages grew at 39% Y-o-Y and 10% Q-on-Q, unsecured [Technical Issues] We had one of our best quarters in credit cards with acquisition at five lakh cards and one of the best quarters with a Y-o-Y growth of 62%. Bulk of the sourcing has been from existing customers. We rolled out attractive offers to our customers in marketing alliance across e-com and physical partners, planned tie-up with Apple, Indigo Indiscernible with the customer.

We signed the program agreement with Indian Oil for credit cards in this quarter. Credit cord advances was at 40% Y-o-Y and 13% Q-o-Q. Certainly, we had our best are quarter in terms of volumes, over 40% of the personal loans is statically and internally. We saw increased demand in consumption from segments like travel, weeding, home renovation. We have scaled up our customer acquisition in both the traditional and the data-led digital space. Consumer Finance, a very good quarter once again across physical and digital distribution, and we continue to scale in this space through widening the solution relationship with key part with a strong data-led digital business.

Overall, unsecured business saw a Y-o-Y growth at 42% with a strong quarterly growth of 16%. In the working capital and Business Banking segment, we continue to witness sustainable growth in the customer segment, both secured and unsecured. We aligned the entire pricing with our current account and linked services to current accounts, which helped us show a strong growth in current accounts. We’ve invested in technology enabling ease of onboarding trading transactions like Indiscernible which I’ll talk about shortly. Q4 growth was one of the highest in the previous same quarter, accumulated by incremental select industries, higher import and export realization.

Our growth process continues to be on granular high-quality, profitable and sustainable businesses. 85% of this business qualifies for priority sector. Collections, our bounce rates and resolutions continue to be better than pre-COVID levels. Our digital collections platform saw significant adoption, increasing efficiency of our collections. We have invested significantly in the consumer asset business across digital, tech and digital, data and analysis, which has helped us grow our franchise and aggressive customer offers and propositions. We will continue to invest in this industry. Now to deposits. Average savings deposits grew at YTD Y-o-Y 11% and current account 26% and sweep term deposits 16%. The purpose continues on granular retail customer growth across digital and physical channels and each one continues to contribute successfully to our digital customer acquisition.

The bank had 32.7 million customers as of March 2022 versus 26 million last year, a growth of 26% Y-o-Y. Our CASA ratio was at 60.7% at December 2021. CASA and TD below five crores comprised 89% of the deposits. TD sweep deposits were at 7% of the total deposits. Cost of savings was at 3.5% this quarter versus 3.7% in Q4 last year. Our assets cross sell in Q4 was strong across all retail assets in the consumer and commercial space, which was driven by deep analytics helping us deepen our Indiscernible Fee income showed strong growth across insurance, investments and brokerage. First receiving in principle from Government of India for Agency business, we’ve received mandate to set up PBT, GSP, customs and pension.

We’ve launched our payments for custom and the transactions were INR250 crores in one month in the first month of launch, which was in 12 months. We will continue to build each and every part of the individual process. In Q4, we acquired six lakhs FASTag, maintaining our position as the fourth highest issuer. Customer acquisition, deepening and CASA is the core of our consumer bank strategy and will continue. Now to digital. We continue to invest in technology-led capability and our focus on resiliency and scalability, modernization and cloud-first applications, DIY Indiscernible product. all digital channels continue to show robust growth across adoption, financial transaction and so. Our mobile self strategy continues and our flagship mobile banking led the way. We continued new features to enrich customer experience, home search, investment interest among several others.

Our customer experience consistently amongst the top rated financial app across both Indiscernible contact features continue to see steady growth in an app UPI transactions, we are amongst the top 10 year UPI app across banks in number. We saw an 8.5 times growth in payer contract transaction over the last three quarters, 2.3 Y-o-Y on UPI overall. Our retail asset focus on customer journey and automation continues with home loan and homebuying digital journey. We revamped our credit card and loan section in these mobile app, providing our customers superior experience. We expanded our public ecosystem, played by enabling accounts aggregated and open framework. This will help us connect seamlessly customers increased adoption comes in certain platforms. Corporate business banking. In our endeavor to delivering the best customer experience, we continued with our journey of launching and upgrading tech platforms for corporate and business banking segment.

Within transaction banking, we introduced our future-ready one stop best-in-class digital portal Kotak, exclusives for business banking and corporate, providing our customers a paperless seamless end-to-end digital experience and one view across trade, collection payments and account services to a single agencies. We launched new other products for our customers like Indiscernible and upgrading our corporate mobility. Our corporate mobility app saw nearly 25 lakh YTD transaction, 37% up Y-o-Y while BDTS saw a growth in number of transaction. We will continue to invest in the corporate to have a superior experience for digital banking platform. Digital transactions to net mobile continues to grow across deposit, lending, service payments and shopping, 97.8% of savings transaction volumes were in digital. I now request Gaurang Shah to take you through the insurance business.

Gaurang Shah — President – Asset Management, Insurance and International Business

Thank you, Shanti, and good evening friends. The life insurance business started on a lot of challenges in the Q1 2022, but I think it ended quite well. So our embedded value during the year grew by 8.2% to INR10,679 crores. The growth in IEV was impacted by lower mark-to-market surplus due to increase in yields and extra mortality cost due to COVID wave two. Our VNB margin grew by 29.5% to INR895 crores for 2021/2022. Our VNB margin was at industry-leading 31.1%. VNB margin is mainly driven by a balanced product mix with good balance between par, non-par.

[Indecipherable] protection business was 32.9%, an all-time high for us in group and individual businesses combined. And we have always maintained a very good balance of channel mix of bank assurance and agency. Persistency continued to be good except for the 13th month, which we need to improve. Individual conservation ratio was still at a very good level of 89.4%. We have excessively paid during the year in spite of such a node of two times to 3 times in certain verticals, our PIM settlement ratio for individuals was at 98.82% and for group claims it was 99.5%. Coming to our premiums, our gross written premium grew 17.3% Y-o-Y during FY 2022. Individual APE new business growth for Q4 2022 was 11.8% against private industry growth of 8.5%.

Individual renewal premium continued to be strong. We grew by 15.6% and AUM for the year grew by 20.3% to INR51,800 crores. Our opex ratio improved to 12.8% in FY 2022 from 13.6% in the previous year. The 32.9% protection share reflects in a number of active lives covered, which grew by 11% to INR3.7 crores. Our profit for the quarter was up by 38.3% to INR267 crores against INR193 crores in the same quarter in the previous year, and our solvency ratio continued to be at a strong level of 2.73%.

Now I hand over to Jaideep to take the presentation forward.

Jaideep Hansraj — MD & Director

Thank you, Gaurang. Good evening friends. Total income for Kotak Securities in Q4 of FY 2022 was INR651 crores. This is compared to INR570 crores for same period last year and INR656 crores for the last quarter with Q3 FY 2022. The profit before tax is INR335 crores for Q4 of FY 2022, which was against INR321 crores for Q4 FY 2021 and INR359 crores for Q3 of FY 2022. The numbers are INR252 crores for Q4 of FY 2022, which was INR241 crores same period last year. This number was INR270 crores for Q3 of FY 2022. The full year impact for Kotak Securities was INR1,001 crores versus INR793 crores for last year.

The cash market share for this quarter was 11.5% against 9.7% for the same period last year. We witnessed a very large growth in trading average daily volume for both mobile as well as the net. The market average daily volume for this quarter was INR47, 82,000 crores, again INR22,37,000 crores same period, a real serious drop. And the increase which happened predominantly in the auctions market. The cash market has remained more or less the same. The overall market volume on a daily basis was INR1,74,000 crores against INR49,000 crores in the same quarter last year. A few of the activities which were taken up by Kotak Securities on the digital side. In March of 2022, we launched a cloud-based trading platform, which would be best-in-class on all technology stacks.

We updated the customer experience across login, trade, payment and portfolio needs. There were significant mobile and web enhancement where we introduced new features like all the top fundamental and screeners and we scaled the net banking facility for additional 31 banks. The DIY service journey, like [Indecipherable] service journey are available to update details of nominee, bank address, mobile, email ID and trading segment activations. We executed our first deal with a company called [Technical Issues] trade an and we initiated partnerships with fintech like Indiscernible take informed trading decisions. In March of 2022, we launched our no-brokerage plan for the youth under 50 years of age, which would encourage you to experience market early without worrying about growth rate.

I would now hand it back to Manian on the investment bank and…

K.V.S. Manian — Whole-time Director & Group President, Corporate, Institutional, Investment Banking & Wealth Managem

Thanks, Jaideep. Considering our our investment banking had a record year, all-time best year. And both in the equity and advisory it had extremely robust performance. Even within the Equity ECM business I think it’s — the performance across IPOs, PAT and blocks was quite exceptional. Even with a relatively slower Q4 compared to Q3, the overall the firm ended with INR245 crores of profit after tax compared to INR82 crores of last year. And we continue to have extremely good pipeline growth on the IPO side as well as on the advisory side. And while such a record year is difficult to replicate, we still continue to be optimistic about the coming year in this business. Coming to Kotak Mahindra Investments Limited, it is the NBFC arm primarily into CRE and corporate structured lending. In fact, in this entity we also had the loan against share book, which as per RBI directive we have run down almost close to nil as at the end of the current year.

The corporate loan book showed extremely robust growth. CRE also grew well. The exceptional thing about this company this year was the quality of its loan book, which had almost close to zero kind of loss, very low loss and the quality of book is maintained very well. And this is an area where we think both in CRE as well as in the corporate structure book we can continue to maintain the growth momentum. And obviously, the margins improved as in NBFC because the cost of funds were well managed through the last year. The PBT grew by 44% on a Y-o-Y basis.

I’ll now hand over to Kannan to take you Kotak Mahindra Prime. Thank you.

D. Kannan — Group Head of Commercial Banking and Member of Executive Board

Thank you, Manian. Kotak Mahindra Prime has had a very good year, since we have a profit after tax of INR886 crores this year as compared to INR535 crores last year. Disbursements in quarter four has been higher than the previous quarters. Demand continues to be good, but deliveries are impacted due to supply constraints faced by manufacturers. Collections against current demand as well as overlies continue to be good and looks to be back to normalx.

I’ll now hand it over to Nilesh take this presentation forward.

Nilesh Dhirajlal Shah — Vice President

Thanks, Kannan. Good evening friends. Let me take you through our asset management business. Our total average AUM grew 22% year-on-year to reach INR2.86 trillion. Our equity average AUM supported by market bonds grew 53% year-on-year to reach INR1.44 trillion. Our total average AUM market share increased to 7.4%. Our equity AUM market share increased to 5.4%. Our SIP close for March 2022 grew 34% year-on-year to INR7.2 billion. Our SIP book growth, average AUM growth continues to outpace industry by a healthy margin. Our retail AUM stands at about 49%. We continue to serve investor requirements by launching active as well as specific funds focused on local as well as offshore markets across debt, equity and commodities.

We also remain focused on ESG investing as India’s first signatory to UNPRI. We also made our maiden foray into AI space by launching Fund this quarter. Consequently, our profit after tax has grown 31% year-on-year to INR450 crores for full year FY 2022. Our total AUM across mutual fund, PMS, offshore insurance and alternate assets grew 18% year-on-year to INR3.83 trillion. Our relationship value across wealth priority and investment advisory grew 68% to reach INR6.41 trillion.

Over to Jaimin Bhatt.

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

Thanks, Nilesh. Stephen, can we throw it open for Q&A, please.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mahrukh Adajania from Edelweiss, Please go ahead.

Mahrukh Adajania — Edelweiss Securities Limited — Analyst

Good evening and congratulations. My first question –

Operator

Ms. Adajania, Ma’am, request you to speak closer to the device please, your voice is not audible.

Mahrukh Adajania — Edelweiss Securities Limited — Analyst

Yes, hi, can you hear me now? Yes. So I just wanted to know, just your view on the sector outlook. So basically inflation concerns are rising, rate outlook has changed since your last results, but your guidance or your optimism on your own growth has not changed. So I’d just like to know that because you think you’ll acquire market share or do you expect sector growth also to pick up despite all these concerns?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

See, Mahrukh, if you look at a higher inflationary period and rising interest rates. In the early stages of the cycle normally, banks who have got reasonable focus on risk management actually have a good upside because you have your liability franchise, particularly the low-cost liability franchise, which normally the cost of funds does not increase at the same speed at which the interest rates and the economy increase. And on the credit cycle, in the early stages of the interest rate hikes, most borrowers are able to absorb that increase, especially if it is from record low rates, which is what we have seen.

The question which then arises is what is inflation going to do to producers and consumers. On the producer side to the extent through which the inflationary increase, producers are not able to pass on to their end consumers. You then have a squeeze on margins. And therefore you have to watch how that cycle plays out on the producer side. On the consumer side, it starts impacting the lower-end consumer first, where for an x amount of money which that consumer has, more and more money is needed for the nondiscretionary spend and for less and less surplus available for the rest.

And that puts the squeeze on that consumer in terms of the spend, as also in terms of being able to pay installments. So you have to watch how this inflationary cycle goes and to what extent it traverses. Further, one of the interesting aspects about inflation is particularly when a very large part of your book is secured. Inflation is a great protector for the value of the underlying security.

Therefore, whether it’s a home, whether it’s a car, inflation gives a natural hedge to the rupee value of the underlying assets for a lender. So to that extent, the secured book gets some natural protection because even as ability to pay gets a little impacted, the value of the asset is a good security for the lender. Because one has to, in the latest stages of the cycle watch out for the lower-end consumer who gets squeezed in because of less discretionary surplus available and which part of the producer chain gets impacted because of not being able to pass on the input costs.

So it goes back to Mahrukh, a first principal view that good risk management is at the core of financial services. There is no such thing as blind growth across different cycles. You have to look at each cycle, you’re going to look at where you sit and where you stand, look at different segments of your book, find out where you really want to be very aggressive where you think you need to temper based on the external environment metrics. And it’s a very dynamic part. Yes, you run the risk of some part of the historical book. And in that context, if you look at our current historical book, the relative stock of unsecured is low. The relative stock of the secured is pretty high.

The slippage ratios for us are at record lows. The very large part of the book is — this is essentially floating rate. Our CASA ratio is well above 60%. We genuinely believe that as we turn on the engine for increasing the liability growth, we do believe we have the ability of stepping on to that accelerator at speed, which is what we think is something which we will have to move into as interest rates move up.

So all in all, two parts, overall sector, significant focus on different segments, risk management, secured, unsecured mix producer, consumer, relative position. From Kotak point of view, some inherent advantages of where we are. And obviously, we have to — we cannot be complacent, but we see an opportunity because it is like in good times all those are lifted. It’s only in tough times, but both which can swim better will show better. So that is where we are. We actually believe that within; one is we have to really watch how this whole inflation dynamics play. We have been well prepared for it ourselves. And question is, does it really lead to a growth slowdown at this stage, early days, we cannot take a call that growth will slow down, but we have to watch it carefully.

Mahrukh Adajania — Edelweiss Securities Limited — Analyst

Thank you, sir. My second question is, what is the proportion of overdraft loans in your personal loan? And how would you assess risk on that product given that there’s no EMI schedule?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

No, we don’t have — very insignificant part of our total book is overdraft loans. It’s not a major part of our book at all. And if you look at our overall unsecured lending, we are still overall in single-digit percentage out of our total loan book. And overdraft is a very small portion. It’s insignificant. Not even material.

Mahrukh Adajania — Edelweiss Securities Limited — Analyst

Okay. Got it. And if you could share outlook on growth in savings deposits because that deal a little lower this quarter?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Yes, I will ask Shanti Ekambaram, who runs that business to give you feedback on how she’s seeing what has happened and how she sees it from here.

Shanti Ekambaram — Group President of Consumer Bank and Member of Executive Board

Thank you, Uday. So if you look at savings deposits, the growth has been a little slower as we came off a 6% and moved into competitive rates in the market. Towards increasing customer engagement, which we were not that focused and we had 6%, we have moved in integrating assets into our customers, whether it’s credit cards, home loans, we have increased the offers that we have rolled out for our various debit card and other products to the customer. So that has sort of created that slowdown, which we are seeing that turn. And our whole focus this year is going to be deepen the hooks into our customer to be able to get the savings growth back again. That is on the individual customer.

The second is on the government business. Our base is very small as compared to most banks and a lot of banks have grown very aggressively last year. With the receipt of approval, as I spoke in my — the thing of the agency bank and some of the taxes, which we have gone live and we will go live in the next one or two quarters, we hope to build our savings on that as well. I think these two are the strategies that we are adopting for getting the savings growth high.

Mahrukh Adajania — Edelweiss Securities Limited — Analyst

Thanks a lot. Thank you.

Operator

The next question is from the line of Rahul Jain from Goldman Sachs.

Rahul M. Jain — Goldman Sachs Group, Inc. — Analyst

Yes, thank you. Good evening. Uday and team, congratulations for good number and congrats to Shanti as well. Just a couple of questions. Number one, on, of course, in the backlog of what RBI has done today, how do you think about the NIM trajectory, particularly given the fact that there is a competitive pressure on certain products? So how would you choose to sort of respond to the market forces?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

So Rahul, back to good old basics. First of all, I’m very happy that savers will get a little more money on the savings deposits versus negative real returns. I think savings deposits means I’m just looking at overall savings, not the savings deposit rate at Kotak in particular. I’m talking about overall return on savings, including term deposits, whether it will certainly move up as we go forward. The good news for us is we are sitting on a reasonably decent CASA ratio. And we do believe that we will continue to focus, of course, on current account, but we will ratchet up our engine in terms of really getting our act together much stronger on the savings deposit as we go forward.

So we believe that, that is something low cost and stable liability is something which is at the core of a good banking franchise. In terms of NIMs, we have always priced on a risk-return basis. And actually, our NIMs are what they are, keeping in mind three things that there’s a reasonably large retail portion in what we have. There is a higher capital which is helping NIMs. And third is despite such high NIMs, our retail unsecured is still a very small part of the total.

So for the third part, third point, of course, if that mix gets a little higher, that actually supports NIMs, a high CASA ratio in a rising interest rate environment supports NIMs. And the third point is capital, we would hope to make more use of it organic or inorganic. But the fact of the matter is with a more than 20% loan growth. Our core equity capital ratio is actually marginally higher than what it was one year ago. So that actually shows the way our earnings models are built, which effectively pays for a certain base growth, which in this one year has been around 20%. We’re still not eating capital.

So our ability to price aggressively is always there, but we also value the discipline of risk-adjusted returns as the core to our philosophy. Therefore, we will certainly look at this as an opportunity to look at growing our market share on the asset side, even as we ramp up further our liability franchise. So we look at the opportunity of gaining market share, but we are also conscious and will remain so on risk-adjusted results.

Rahul M. Jain — Goldman Sachs Group, Inc. — Analyst

So the implied message here is that the growth, of course, is fair amount, even though while the margin trajectory could be upwards, we may sort of use that to grow faster. Is that a fair assumption?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Yes, I think the advantage is that with a solid cost of funds and a liability franchise, which we will continue to nurture aggressively, we have the ability for the risks we like to go aggressive on the lending side. And opportunity for us, our fixed rate book is relatively a small part of our total.

Rahul M. Jain — Goldman Sachs Group, Inc. — Analyst

The second question is on the branch expansion. Last two quarters, you’re gradually ramping up. One large bank is talking quite aggressive on the expansion side. How do you see branch expansion playing out or the distribution footprint playing out over the next few years there as well?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

So Rahul, I think as we go forward, our firm view is if you divide the customer base into broadly two categories, which is the consumer and the business customer, okay, divide the customer base into these two categories. Our firm view is while the consumer wants the comfort of a brand and some physical presence to be seen, the consumer is moving towards digital at a much faster pace and in terms of transacting. And we see that as a continuing trend. So we are of the firm view that we will certainly add branches in a measured manner, but the primary focus of our network will be more towards the business customer, primarily again because cash continues to be a very large part of the Indian economy.

Therefore, the direction of the branch network, which, of course, undoubtedly, we’ll deal with the consumer as well, but the direction of the network will be much more towards the business customer as the need for the branch network. So digital on the consumer side is here to stay. And as Shanti mentioned, if I looked at in volume terms, more than 97% of the savings account customer transactions are now nonbranch in volume terms, may not be in value but in volume terms. So the traffic at branches from the savings and the consumer has significantly changed more towards transacting off branch.

Rahul M. Jain — Goldman Sachs Group, Inc. — Analyst

Okay. No more questions. Thank you.

Operator

The next question is from the line of Adarsh Parasrampuria from CLSA.

Adarsh Parasrampuria — CLSA Limited — Analyst

Yes. Uday, one question is on liability. On the liabilities, Uday, you did mention that we’ve got good CASA. But the fact is if you go through the last three, four years because of slow growth, let’s say, a term deposit growth has been quite low, right, and when you go significantly higher on overall growth of the balance sheet, deposit mobilization will need to expand manyfold, and that has a consequential impact on how CASA will work for the bank rate. It’s a completely different ballgame for the bank over the next two to three years, and that has a meaningful impact on cost of funds.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Yes. So your question is, how are we looking at the liability side strategy and execution, is that what it is?

Adarsh Parasrampuria — CLSA Limited — Analyst

Yes. And I’ll just give you some — because when you look at your term deposit book, right, it’s — we’ve accreted like $1 billion a year of term deposits in the last three, four, five years, while incrementally, you’ll need $4 billion, $5 billion, $6 billion annually, right? So it’s a material shift in the way the branches will mobilize term deposits, and it has an impact on CASA.

Dipak Gupta — Joint MD, Member of Executive Board and Whole Time Director

Adarsh, we’ve been through this debate with you before, if you recall, along with a lot of investors, which you had, and this is probably again coming back from the report which you had mentioned. And the answer to that is very simple. It is not just a one-way street. While some of what you mentioned does happen on the liability side, remember, we still are at a very high CASA. And some of this will get balanced by the incremental delta, which we hope we will get out of a better mix on the asset side. Net-net, maybe we are talking about our NIM contraction of 10, 15 basis points, but that is running off a high 4.5-odd NIM really. So I think in the overall context, that should not really be too much of a — one you’ll see.

Adarsh Parasrampuria — CLSA Limited — Analyst

No, Dipak, this is helpful because if you could — if you’ll go through the numbers and feel that NIM can be contained at 10, 15 bps with the kind of balance sheet expansion that we see, it will be a phenomenally strong outcome for the bank.

Dipak Gupta — Joint MD, Member of Executive Board and Whole Time Director

Yes. And like I said, some of this will also happen because of a gradual modification in the mix of assets, right, yes.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

See, one of the — I think taking on from what Dipak said, one of the areas which we have — we can do a better job mining as we go into the future, a significant ability to generate liability out of our asset strategy. Our historical focus has been cross-sell of assets, especially including in the last 12 to 18 months on the liability base. We’re now getting our engine and the hoops in place to see that the asset strategy also starts adding to the liability strategy. And we have seen some of the banks do a very good job at it.

Adarsh Parasrampuria — CLSA Limited — Analyst

Got it. Thanks, Uday and Dipak.

Operator

The next question is from the line of Saurabh Kumar from JPMorgan.

Saurabh S. Kumar — JPMorgan Chase & Co — Analyst

Yes. Sir, three questions. One is what is the LCR ratio for the quarter? The second is also, if you can quantify the technology spend to revenue or operating cost and what is your overall view on the operating cost from here on? And the third is basically on the savings rate. Now that what our savings rate increase will also be on the cards if you have to increase our growth?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

I’ll answer the third, and I’ll ask Jaimin to answer the first two. At this point of time, there is no plan to increase savings rate. And I’ll ask Jaimin to answer the first two.

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

So of the LCR, which we have, this is at — or the average for the quarter is at about 130%, 129% something. So that’s part of our Basel III disclosures, which happened. If I look at the debt cost, debt cost us — operating debt costs as part of the debt cost, not including the capex cost there. Operating debt cost as part of the overall debt cost is about 7.5% thereabouts, and that’s been consistent to this year, both for the quarter and the year. And of course, if I add the capex, it would be another 1/3 of that adding to that, exactly about that.

Saurabh S. Kumar — JPMorgan Chase & Co — Analyst

Okay. And just one follow-up, so the LCR drawdown that perhaps can continue for another quarter or so, right?

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

That’s right. So again, our numbers which we put for the previous quarter was about 143 thereabout, which is now about 129.

Saurabh S. Kumar — JPMorgan Chase & Co — Analyst

Okay. Thank you.

Operator

The next question is from the line of Prakhar Sharma from Jefferies.

Prakhar Sharma — Jefferies — Analyst

Thank you. Uday, just two questions on my side. One, since Citibank consumer portfolio that was announced by Axis Bank, there were expectations that Kotak Bank would also be high invested and frankly, everybody else was also looking at it. Is it possible to share some insight on what made the bank chose not to go ahead with this? That’s question one. And second is, from the management transition perspective, is there any further step that we should kind of expect or what you plan to do over the course of next 1.5 years as we go through the transition?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Okay. First, I mean, I would like to congratulate Axis Bank for its acquisition of the Citibank business, and we really wish them the very best on that. Something which I’ve said it publicly, and I just feel that I may want to repeat it for the benefit of all the analysts and investors. One of the important aspects of a merger or an acquisition is also the methodology of the same. When we acquired ING Vysya Bank, it was a merger of ING Vysya Bank into Kotak Mahindra Bank. The day the merger was completed and consummated, all the customers of ING Vysya Bank became customers of Kotak Mahindra Bank.

This is different from an acquisition, where you have to buy customers with positive consent of customers for some of the products like credit card and other products. So we believe fundamentally, the difference was — when I compare our acquisition of ING Vysya Bank versus the facts of the case as are in the public domain on the Citi situation, and therefore, I’m not discussing anything which is nonpublic, is very fundamentally different. And obviously, that creates different set of challenges, and we have to keep that in mind when we are looking at potential opportunity.

And I would like to say that, that is something which midway on our mind as we thought about various opportunities in the market. And we always listen our mind when we think about opportunities, the nature and the structure of the transaction. Coming to your point. As I mentioned, we have just announced appointment of Shanti Ekambaram as the whole-time director subject to approvals, reappointment of Mr. Manian, again, subject to approvals, continuation of Gaurang Shah’s involvement with all our major subsidiaries even as he steps down as a full-time director in the bank.

We are very conscious of this fact that we have huge strength in our leadership within Kotak Mahindra Bank, and it is at various different levels within the firm. We’ve built a very strong professional entrepreneurial leadership class within Kotak over the years. And we believe that as we go forward, any further announcements on transition, we will share at the appropriate time with the stakeholders. But we do believe that Kotak as an institution believes that sustainability and the power of a one Kotak strong leadership is something we are very proud of. And we will share with you the transition progress as we go forward.

Prakhar Sharma — Jefferies — Analyst

Okay. Thanks a lot.

Operator

The next question is from the line of Kunal Shah from ICICI Securities.

Kunal Shah — ICICI Securities Limited — Analyst

Yes. Congratulations for good set of numbers. So again, getting on to the liability franchise and deposits. So today, when we look at it in terms of your term deposits, again, they have been more or less flat. And you said like maybe now we will be showing up the engine. But how critical would we be pricing in this because it’s not moving up? And would pricing be a key element to drive both maybe the term and your highlighted savings might not go up, but eventually, that could also drive the savings deposits?

Dipak Gupta — Joint MD, Member of Executive Board and Whole Time Director

So as I said, we have already — I’ve given you clarity on the savings, there’s no plan at this part of time of increasing saving deposit rates. And Shanti has also highlighted to you the steps we are taking to really get our savings engine really move revving up, including the fact that we are not — we were not a government agency bank, and there were a lot of technology initiatives post opening up by government, which have taken time to be put in place, which are now put in place or getting into place. So the whole government agency business is now going to be a very significant part of increasing our government savings, including individual customers transacting for taxation and other things.

So we think that is one of the very important engines. And there are some various other plans through which, including the digital side, where we are getting very high savings growth. So we will continue to sort of build on that further. So we believe that our fundamental engine is very much intact. We will — like I still remember, Kunal, if you and I had spoken about, about a year ago or even later, the biggest focus would have been how will we rev up our asset side. We have demonstrated that on the liability side in the past, we are now feeling very confident on the asset side.

As you can see in the numbers, which are in front of you, and we are continuing to guide on decent asset growth as we go forward. And we think that — I mean, once we make up our mind, we will get the liability engine also firing even faster because at the core of it, it is something which has been deeply in our DNA, which is low cost and sustainable liability. And we don’t start in a bad place with 60.7% CAPE ratio and 130% LCR.

Kunal Shah — ICICI Securities Limited — Analyst

Yes. No, sir, the question was when you look at the incremental growth, okay, for INR19,000-odd crores, which is coming on the advances side, largely, that’s been funded through utilization of the liquidity, but no increase in savings. So is it by choice or we need to fix this and pick that up and pricing would again play a key role. So when I look at it just on a quarter-on-quarter basis…

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Kunal, if you look at it and if you do a mathematics, it is no rocket science to show you that our cost of funds is below our savings deposit rate.

Kunal Shah — ICICI Securities Limited — Analyst

Yes.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

So I mean, this is — you are in a two-year period, where there has been a significant drop in the cost of carrying surplus liquidity. I mean there has been a significant drop in absolute returns which are available for surplus liquidity. And we are tuned to the fact that if cost of that liquidity goes up, we will be able to manage it. But our cost of funds is at a remarkable low point, and we have to take the choices, and we will take the choices, keeping in mind risk-adjusted returns and the fact that we like to get our risk-adjusted returns at a very good price.

Kunal Shah — ICICI Securities Limited — Analyst

Sure. And lastly, in terms of the investment, the last time we had taken a hit, but at this time, was there any kind of an M2M hit and you highlighted in terms of the duration how we are positioning? But even in terms of the non-HTM portfolio and overall duration with the rise in yields which might be there, given the rising interest rate scenario, how are we positioned now?

Dipak Gupta — Joint MD, Member of Executive Board and Whole Time Director

Whatever is in front of you, as I said, our duration of our fixed income book is a little over one year. So whatever rates — and this includes both HTM and HFC and AFS all put together a little more than a year. So you can figure out what the impact would be with a very large portion in out of that would be a decent portion of that even that in HTM, so we are very, very comfortable on ALM matching and actually feel very — in many ways, we were positioning ourselves for what has happened for quite some time.

Kunal Shah — ICICI Securities Limited — Analyst

Okay. And one last data keeping question, in terms of the breakup of the loan book between pulling other BR floating, maybe the fixed rate loan book, if you can just say that, yes?

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

Okay. If you take it the share, Kunal, the overall fixed rate would be about 30-odd percent. However, if you look at of those which are less than one year, which the payments are due in less than one year and which are over one year, it’s about half and half. So about — which goes over one year is just about 16%, 17-odd percent. So that’s the fixed rate book. If you take the non-fixed rate book, which is roughly about 67%, 68%, about 48-odd percent or 48% to 50% would be EBLR linked or rather EBLR linked and the others would be MCLR linked.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

So Kunal in some Twitter language on a total of 100 around 15% to 17% is fixed rate more than one year. Above 15-odd percent fixed rate less than one year.

Kunal Shah — ICICI Securities Limited — Analyst

Okay. And fair to assume within EBLR 70%, 80% would be repo linked?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Yes, EBLR is almost, PLR is entirely repo linked.

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

PLR is 48%, which is all repo linked and MCLR is 18%.

Kunal Shah — ICICI Securities Limited — Analyst

Thank you. Thanks a lot.

Operator

The next question is from the line of Manish Shukla from Axis Capital.

Manish B. Shukla — Axis Capital Limited — Analyst

Good evening, and thank you for the opportunity. Mr. Uday, just question here. This is the first time that we have a large portion of balance sheet for the banking system linked to repo rate, which depending upon which economies you’re talk to is expected to go up by 100 to 150 basis points over the next 12 to 18 months. How do you see the customer behavior changing for this set of customers, primarily home loans and MSME when we see such a large rate hike in a such a short duration of time?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

You have to ask yourself that there was no repo rate linked and it was MCLR linked. Instead of having a 40 basis point increase one short, you would have back to 10 basis points increase over three or four months. The end outcome would have been the same.

Manish B. Shukla — Axis Capital Limited — Analyst

It’s more like a cumulative rate hike because in the past cycle, while repo rate did change by 100 to 150 basis points, we didn’t see the benchmark rate change by the same order of magnitude, right. And at this time, the benchmark is changing.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

It happens more gradually on a monthly basis. Therefore, it does not look that high at every stage of MCLR increase, whether it’s 5, 10, 15, 20 basis point increase. repo rate, this was a shock, which I mean — I mean you’ve got to give — look at it differently. The Reserve Bank of India decided to have a meeting not only between policies, but during market hours. You have to read the signal of what RBI wants to convey. Obviously, the intent seems to be to create an impact. And if they want to create an impact, they’re creating an impact.

Manish B. Shukla — Axis Capital Limited — Analyst

Could you please quantify the MTM hit for the fourth quarter?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

For whom?

Manish B. Shukla — Axis Capital Limited — Analyst

For you, sorry, for MTM moving towards…

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Duration of our book is a little more than a year, a very large part of it in HTM.

Manish B. Shukla — Axis Capital Limited — Analyst

So last quarter, about 60% of the book was in AFS as of December. Has that meaningfully changed during the quarter?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Yes, but that includes our corporate bond book and everything put together. So even if you look at that total book is a little over a year, including both HTM, AFS, HFT.

Manish B. Shukla — Axis Capital Limited — Analyst

Okay. Got it. Thank you.

Operator

The next question is from the line of Nilanjan Karfa from Nomura.

Nilanjan Karfa — Nomura Securities Co. — Analyst

Hi, thanks for taking my question. If you go back to the deposit question once again. I think Dipak has experienced substantially talking about potential of maximum 15 basis point cut on margins. If you an HDFC Limited merger and so in competition also based into your expectation how the rate market will move on that side?

Dipak Gupta — Joint MD, Member of Executive Board and Whole Time Director

All that I know is that we have reasonable confidence that for the size of our growth of our balance sheet and what that rate of growth is we are not giving forward guidance, but you have our evidence for the last two quarters on a quarter-on-quarter basis, what is our loan growth. So if you can estimate how we will build our business as we go forward. All that I can say is out of the large ocean which you are talking about of various banks, large banks, small banks, NBFCs, everything, we believe for the size of our loan growth and our aspiration, which has been more aggressive on the loan side than in the past, we believe we will be able to generate liability at reasonable cost and with good NIMs as we go forward.

Nilanjan Karfa — Nomura Securities Co. — Analyst

Right. See, it is very easy for all of us to talk about future, but — so I’ll just concentrate on, let’s say, the fourth quarter. I mean given the INR19,000-odd or INR20,000 crores of loans that we added looking at the way we funded it, if you look at the average car and the average between Q3 and Q4, it’s actually declined. Whereas on a figure it in basis, the car has actually increased, TV is flat, so the rebate and we have basically, borrowings have gone down, which possibly we have a lot of online that has happened on the corporate since we have the MCR book. So the question is, have we sort of teased out whatever was there in our balance sheet right now?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

No, I think divide. I think that divide into two or three parts. First of all, Jaimin mentioned, we have 130% LCR. So if you had squeezed out everything, you would have been at 110%. So there is LCR, which is with us. Number two, our NIMs for the fourth quarter are at record. Dipak talked about the average for the year, means for the fourth quarter are 478 average for the year are 462. We’re still well above the four to 4.5 mark, okay.

And even as Dipak indicated, even if there is some reduction in NIMs, NIMs in the 4s 430,440, 450, 460 would be very healthy NIMs for a bank growing at the pace at which we are. And therefore, we are very far away from being squeezed out in terms of getting NIMs. Yes, 478 is an exceptional fact with huge cost of funds advantage, but we’re still running 130% LCR. And it’s not about squeezing out. It’s about the fact that we want to ensure that we make the best returns and optimum returns for our shareholders on a consistent basis. And obviously, our job is to maximize that.

Nilanjan Karfa — Nomura Securities Co. — Analyst

Absolutely. The management of the balance sheet has been quite fantastic. And this is one thing I maintained it’s being very fluidly managed. Fair enough. Moving on towards a different part, which is on the asset quality side. Now this is obviously we look up to quarters back as almost a gold standard there. But across the banking system, it does look like there is a very strong recovery that has happened. So Uday, would you want to sort of give some color as to is it that banks in general because of their past learnings have been very prudent in terms of charge-offs or taking recognitions? And secondly also, is the underlying growth also coming to be a little better? And if you can qualify which segments are actually the ones where you’re seeing recovery?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

We have — first, when you’re looking at numbers, be very careful of base effect, okay. So a lot of hits were taken in the first year, particularly in the December and the March quarter last year. And I would request you to look at two important metrics as we go forward. First is the slippage ratio. And I’m not commenting on other banks. All that I can say is our slippage ratio on a gross basis before recoveries, okay, was 1.08% for the fourth quarter. And we think that is a pretty low ratio, but we’re getting back to what I would call a pre-COVID period.

Jaimin also mentioned our credit cost for the fourth quarter was 27 basis points, and average for the year is 55 basis points. So — and first quarter was COVID — COVID 2.0. Now where do we think our credit cost will be higher than 27, probably 40, 45, 50. I don’t want to give a guidance, but that’s the kind of feel we believe at this part of time, okay, which is still very much within a controllable range for the nature and the mix of our book. Therefore, slippage ratio is a very important lead indicator of what it is looking like.

The second important point is restructure. Our COVID restructuring cost, our COVID restructuring book is 15 basis points, and MSME restructuring book is 29 basis points. Again, it is at a very low level before. I remember 1.5 years ago, there was concern about the size of our ECLGS book, but the fact was the matter is our total restructured book, our slippage ratio, both MSME, COVID, overall, is there for you to see. And SMA2, again, you look at our numbers, we are probably among the few banks which does it. We are at INR186 crores SMA2 total on a INR2,71,000 crore lending book on the five-plus SMA2. So there the numbers and the data is in front of us, basis that we are making some projections.

However, it’s a never-normal world. Tomorrow, if Mr. Putin does something which is outside what you and I think, we have to respond to that. We cannot then say, oh, we should plan for it today in this fullest sense.

Nilanjan Karfa — Nomura Securities Co. — Analyst

Sure. And just the third question. Given the rate cycle and potentially another 75 or whatever number additional hikes, on our strategy in last two quarters, we have been talking about organically growing down secured part from a very low base. Does that continue? Or are you going to…

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

We are clear. We have — I think we have spelled out and I would like to once again reiterate our growth strategy continues. We believe that unsecured retail as a percentage of our balance sheet is extremely low. We are in a good place to be. And for the right risk management on our customer base, we will continue to grow it at a good pace. We are not getting into a shelf merely because interest rates have gone up.

Nilanjan Karfa — Nomura Securities Co. — Analyst

Thanks.

Operator

The next question is from the line of Sumeet Kariwala from Morgan Stanley.

Sumeet Kariwala — Morgan Stanley — Analyst

Yes, hello everyone. Congratulations on very good set of numbers. I had a question on operating leverage last three or four quarters, opex growth has been higher than revenues. And obviously, because we were gradually ramping up the loan book, there were COVID issues and so on. And at the same time, you were investing. I just wanted to understand — so two questions in the back. When do we see positive jaws? When do we expect revenue growth to accelerate opex or over the near term, we’ll see continued investments? And second is we are a revenue benign credit cycle. As you said, credit cost is going to be like 30, 40 basis points. Does that mean that the bank can look to accelerate investments further? So those are two questions.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Sumeet, you’re not very clear. We got it little muffled. Can I — I got this point on operating costs and technology. And the second was on the — what is the 30, 40 basis points you said?

Sumeet Kariwala — Morgan Stanley — Analyst

Okay, first question very good quick on operating leverage. When does that play out? How do I think about cost? And second question is credit card is going to remain very benign 30, 40 basis points. Does that mean that you would look to accelerate the pace of investments for the — there’s no compromise that I see at Kotak, but because the credit card is going to run very low, does that mean that you could look to invest even faster?

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Yes. On the first, I mean, and Sumeet, as you know, I don’t know what Mr. Putin does tomorrow morning before all this is subject to that. I do believe that we’ve got a reasonable risk-adjusted return model. And as long as we get that, we are happy to grow, okay, on a very clear basis. For the mix of assets, we think, which get our risk-adjusted returns, okay. So absolute categorical position from where we are. Second, with reference to costs and technology costs, I will ask Jaimin to answer that question to take you through your specific queries.

Jaimin Mukund Bhatt — Group President, Group Chief Financial Officer and Member of Executive Board

Sumeet, if you look at it, yes, as we mentioned last time also, there has been a go for growth approach. So there is tens for acquisition and acquisition spends are both on the liability side and the asset side. There is also the whole issue about promotional spend, a lot happening in the technology and the communication areas. So all of that is going to continue. We’re not saying they’re going to slow down at this period.

In fact, if I do a very quick math and take away some of those promotional costs and the going for growth cost, the cost growth over the period has been pretty modest. But yes, we are going to continue this cost as we go for growth. So at least this year, you’ll see some of that continuing. So we’re not going to stop growing, that would help us get to a better number, but this is our investment as we go into the future.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

And Sumeet, what we are really focused is on unit economics, not what is a front-end acquisition cost. Finally, each of our decision making is on the operating metrics that is the underlying unit economics working. And therefore, if it means a front-end operating cost increase, for underlying unit economics, we will go ahead and do it. And that is the core of how we look at building this. And the second is we are also clear that the strategy of asset growth, leading to some increase in liability growth by putting the hooks, including some of the spend-related costs, we are ready to do it because we want both the engines now to fire significantly as we go forward.

Sumeet Kariwala — Morgan Stanley — Analyst

Got it. That’s helpful. Thank you.

Operator

Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Uday Kotak for closing comments. Over to you, sir.

Uday Suresh Kotak — MD, Chief Executive Officer, Member of Executive Board & Director

Thank you very much. It’s been 1.5 hours, so a long call and a long meeting on a very eventful day in the Indian financial sector. Look forward to continuing engagement and my entire team here with me, we are really excited to be building this institution into the future. Thank you very much.

Operator

[Operator Closing Remarks]