Punjab & Sind Bank (NSE: PSB) Q2 2025 Earnings Call dated Oct. 21, 2024
Corporate Participants:
Swarup Kumar Saha — Managing Director and Chief Executive Officer
Mahima Agarwal — Chief Financial Officer
Ravi Mehra — Executive Director
Rajeeva — Executive Director
Analysts:
Ashok Ajmera — Analyst
Saket — Analyst
Sushil Choksey — Analyst
Rajiv Srivastava — Analyst
Presentation:
Operator
Good afternoon, ladies and gentlemen. I’m Shilpa Abraham, the moderator for today’s earnings call. I welcome and thank each one of you for joining us today for the Q2 fiscal year ’25 Earnings Conference Call of Punjab & Sind Bank. [Operator Instructions]
I would now like to introduce the management of Punjab & Sind Bank. We have with us today Managing Director and Chief Executive Officer, Shri. Swarup Kumar Saha; Executive Director, Shri. Ravi Mehra; Executive Director, Shri. Rajeeva; and Chief Financial Officer, Shri. Arnab Goswamy.
I would now like to hand over the conference to Shri. Swarup Kumar Saha, MD and CEO of Punjab & Sind Bank for the opening remarks, after which we will have the forum open for the interactive Q&A session.
Thank you, and over to you, sir.
Swarup Kumar Saha — Managing Director and Chief Executive Officer
Thank you, Shilpa, and good afternoon, everybody who have joined this Q2 earnings con call of Punjab & Sind Bank. It’s a pleasure for me to have you here and interact with you on the Bank’s performance of the second quarter of the current financial year.
So the results were already declared on 19th and the presentations was already uploaded in the stock exchanges. I’m very sure all of you must have got the opportunity to go through our presentations. But just to set the context of today’s interaction and for this con call, I’ll just like to mention a few of the highlights of Q2 performance of Punjab & Sind Bank and from where — then we can go into the Q&A session.
So the business highlights of the Bank is that the Bank’s business grew at 8.4% to INR2,15,057 crores. The deposits grew at 6.48% with — at INR1,24,025 crores and the gross advances grew at 11.14% and reached INR91,032 crores. The RAM segment grew at 18% plus. The RAM percentage, we’ve also shown a 317 bps Y-o-Y improvement at — and now stands at 53.86%, which is in line with our guidance for the entire year, which we would like to take it beyond 56% by March.
In terms of the — in terms of the efficiency ratios, we are very happy to state that the operating profit of the Bank for Q2 increased by 76.15%. The net profit increased to INR240 crores and increased by 26.98% Y-o-Y and this was possible by a robust net interest income of — growth of 29.33%, which stood at for the quarter INR873 crores. The net interest margin, which was also — which has also shown a good improvement both Y-o-Y and partially sequentially has improved by 38 bps for the quarter-end Q2. The cost-to-income ratio, which was one of the areas where we were facing challenges and we were trying to address it into our various strategies, this time has been reduced to 62.82% for the quarter, a substantial reduction of 958 bps from a year-on-year basis.
The return on assets was at 0.65%, showing an improvement of 1,300 bps — 13 bps — sorry, 13 bps on a Y-o-Y basis. The gross NPA percentage has also shown improvement and has reduced to 4.21% from a reduction of 202 bps. The net NPA has reduced to 1.46%, a reduction of 42 bps Y-o-Y. This was possible for — in terms of our management of our asset quality, our collection efficiency and accordingly, the fresh slippages was grossly reduced to INR230 crores for the quarter. The — one of the important component of our income this time was — has been the significant contribution of the core fee income, which has increased by 35.88% during the — during the quarter.
So these were some of the numbers, the — of the bank, of course, the CASA — as you all know understand that the CASA is the deposit mobilization, there is a lag between deposit and credit growth. So for us also, we are still in that area of challenges, but we are trying a level best to improve the CASA plus retail term deposit component. The CASA marginally reduced to 30.43%, but the traction of retail term deposit is still on. We are nearly at 9% Y-o-Y growth in terms of the retail term deposits.
The advances breakup still remains robust with the — in terms of our September — if you see our September numbers, was 64.25% of the total credit profile above INR5 crores was in the BBB and above which is and primarily concentrated on the AAA and AAs of the portfolio. So the core fee income actually, as I said, have increased by 35.88%. In fact, there has been a sequential increase of 26.05% also. This quarter, we all understand that in view of the market dynamics, the treasury has contributed and that has also shown a good contribution to the overall non-interest income of INR359 crores for the quarter.
So our gross NPA and net NPA, that is the asset quality has shown significant improvement. The slippage ratio has improved and for the quarter it stands at 0.28. The PCR also is an area where we are working on is at 88.56%. As I already said that the yield on advance — as I already said that the fresh slippages of the various segments have also improved. And particularly, you know that being a geographically skewed in the northern part of the country, the agriculture is always a area of challenge for us in the September quarter and it is heartening to see that the agriculture slippages for the quarter has been reduced to INR85 crores in September compared to INR144 crores of the September quarter last year.
The cost of deposit has, we all understand that the cost of deposit has sequentially increased from 5.64% to 5.74%. We are addressing that through our mobilization of CASA and retail term deposit, lot of doorstep services are being implemented, a lot of new products are being implemented. So we will be able to — we are trying to build that traction in terms of deposit mobilization.
So that — and we are taking lot of new — and the capital adequacy stands at 16.89% without the calculation of the contribution of the half-yearly profits. Of course, the numbers will increase if you add the net profit for the half year and the capital adequacy will improve to 17.47% if we include that.
Now a lot of — we are expanding our branches to — we are — as of now, we are at 1,580 branches. We have already opened 17 branches this year. We have a plan of opening total of 100 branches for the current year. We continue to work on that. We are also increasing our BC network and our ATM network. A lot of initiatives have been taken on the — on the digital front. Some of them have been highlighted in Slide number 34. A few various collaborations have also been — have been done over the last three, four months, particularly for defense accounts, for salary accounts, for potential Punjab centering strategies at — and tying up with collaborating with Punjab Agricultural University, ISB Mohali.
We’ve also got the wealth-tech partner Fisdom for the mutual fund and the DMAT business on our app. We’ve also tied up with the warehousing development and regulatory authority for e-receipt financing.
So these were some of the key highlights of the bank for the Q2 — quarter two of the FY ’24-’25. And I will pause here and now — we are now and as a team ready to take your questions and answers. Thank you. Over to you, Shilpa.
Questions and Answers:
Operator
Thank you, sir. [Operator Instructions] Our first question is from the line of Shri. Ashok Ajmera from Ajmera Associates. Sir, please go ahead with your question.
Ashok Ajmera
Correct you. I am Ajmera not from and Ajmera Associates that’s a different Ajmera. I’m from Ajcon Global. So having said that —
Operator
Apologies sir.
Ashok Ajmera
Complements to use as a —
Swarup Kumar Saha
Thank you, Mr. Ajmera.
Ashok Ajmera
For really good set of numbers, especially in this quarter as compared to the last quarter and we have reasonably grown our credit book also, which is very, very heartening to know. And so I have got just couple of observations and some questions.
Sir, our major contributor in the net profit or the profit if you talk about this quarter is a non-interest income. I mean, almost as compared to the last quarter, almost INR165 crore out of your total income of INR307 crore has come from a non-interest income and that is also you also said in your opening remarks, the core fee income, good investment — sale of investment and profit on the revaluation of investment.
So my point is that going forward in the remaining two quarter of FY ’25, are we going to see the same trend in our profitability so as to make a proper assessment of the profitability for the whole year? Number one.
And number two, in this round of the questioning, you also said that there is some areas of challenges because the whole thing — whole interest changes have not been factored in so far because there is a time lag. So what kind of impact it can be on the NIM? And what is your target of the NIM for the whole year? This is my first question.
Swarup Kumar Saha
Yeah. Thank you, Mr. Ajmera, and appreciate your questions. You’re absolutely right when you have analyzed it that the major part of the Q2 results was due to the significant contribution of non-interest income. And if you see our sequential performance, so nearly around INR165-odd crores have been increased in terms of the non-interest income. That primarily due to the treasury, which has shown as the market moved and then yields moved downward and trend, we had the opportunity to continue and accordingly, they have — the Bank has done that.
Now going forward in this area, yes, we feel that the movement will not be in Q3, particularly the movement where it stands now the benchmark yields may moderate a bit more, but we still don’t know. We have to be — though the RBI future projections on the policy cuts, we all know what is the stance at this point of time, though the official stance has undergone a change, but on the point of the red cut, it still remains to be seen when it happens. And of course, the global scenario that is also moving in various directions in the ecosystem.
So we feel that there will be a moderation in the income from the non-interest side — from the treasury side. But if you see the other part is that the core fee income other than the treasury has also moved significantly forward in this quarter and we have taken a lot of efforts to improve this. In fact, if you see that there is nearly INR56 crores sequential increase in the core fee income. And this is an area of where we feel that the — whatever or whatever short — may come, it may come or may not come, but we have to be prepared. So we are preparing ourselves that whatever shortfall may come from the treasury side because of the lesser movement in the yields, we’ll be able to make it up through our — through our core free income, number one.
And number two, what we are also doing is that, as you see, if you see our movement of our advanced portfolio, the — we have been telling — talking on this consistently our — on our calls that we are moving to the RAM segment where the yields improve and we are churning our corporate portfolio.
So now the figure stands nearly at 54%, it is 53.86% as a RAM side and we want to move it to 56%. So the NII, if you see also is showing a good traction of 29%. I think if you compare the 29% NII growth for the results that have been declared so far, you will find that the bank is — our bank has been in a favorable position in that segment at least compared to the other banks. So we are churning our corporate portfolio, moving from the high-yielding assets towards the — sorry, moving from the low-yielding assets to the high-yielding assets and we will continue to churn the corporate portfolio because as we discussed earlier also, the pricing is very competitive.
So we will be able to make it up. We have already strategized our plan post the declaration of this result amongst in the bank. And we already understood what are the one-off gains that we have got in Q2 and how do we need to rebalance — how do we need to decompensate from the other side if that one-off items do not have faced continuity in the — in Q3.
And third option that we have also kept open is that we are giving a lot of focus on recovery and recovery in return of accounts. The Q2 numbers may not justify those efforts, but there are a lot of things in the pipeline, which will also help to boost the non-interest income. And if — and if those goes through and we are very hopeful that some of them will go through the things that we have in the pipeline, that will also compensate some — to some extent the shortfall that may occur in terms of the treasury performance. So these are some of the — some of the — on the issues of the treasury.
And your second question was also on the NIM. On the NIM side. So we feel that we have improved to 2.71%. And with all the things that we said now, we are hopeful that by the end of March, we shall be in a position to be at around 2.75% plus, because we have some strategic thought process in that. It is a challenging environment. Deposit is a challenge, deposit cost is a challenge, but we will churn our portfolios accordingly, move our investments accordingly and try to maintain that NIM of around 2.75% plus for the March quarter.
Ashok Ajmera
Sir, thank you, sir. Very elaborate reply and point well taken, sir. Having said that, I have just one more question on this — in this round. Sir, you have done really well on the credit growth side. In this quarter, it is almost about INR3,294 and for the whole year, you have done almost about INR5,100 crores something. So with that and with the visibility and with the confidence which you replied even the earlier question also, don’t you think that we can increase our credit target from 12% to 14% or 15% growth? Because even looking at this quarter, if we just multiply with another two quarters, INR6,500 crores additionally you can raise in the next two quarters, as against required amount of only INR5,000 crores.
Swarup Kumar Saha
Yeah.
Ashok Ajmera
So are you revisiting the number and giving us some revised target for that, sir?
Swarup Kumar Saha
We are — see, we — you’re right. First of all, I must acknowledge what you’re saying and you have been saying this repeatedly for us. So we take it like that. And you’re absolutely right. In your assessment without [Phonetic] base like our bank that we have, we should grow faster. There is no doubt about it. But the point, Mr. Ajmera, I think you will appreciate that if you see the Q2 trends so far for the banking industry as such, there is a moderation in the credit growth, right?
Ashok Ajmera
Yes, sir, overall.
Swarup Kumar Saha
And when banks of larger sizes are moderating their credit growth, there is a genuine reason why they are moderating it. What is — what is our — what would be our — in that — strategy now in that way? We are keeping the guidance. If we have an opportunity to grow beyond 10% to 12%, we’ll of course grow. But we need to grow profitably, Mr. Ajmera. That is what I’m trying to do. We are trying to say that we need to do a sustainable growth. I’m not naming the public sector banks, you will find that some of the banks so far has grown lesser than our bank has grown. So there is a component of challenge of the deposit mobilization where we feel that — and I have told this through, three quarters ago that the credit growth that was — that is happening in the industry is not sustainable. And that is exactly what is it is falling in line and it will happen, because if you see the private sector banks also, their conversations you must be attending, you will find that the same thought process is going through their minds also.
So what I’m trying to simply say at the end of the story, the bottom line is that we can grow. But if we have a grow — if we have an opportunity to grow at a higher-yielding asset, we will of course grow. We will not grow at the cost of my deposits. If my cost of deposit has 5.74 and if I’m — if my deposit — suppose the bulk deposits, the CDs have grown is just going very high. So I need to grow — I need to deploy funds much more than that. So I maintain my NIM, I maintain my NII. So that is the overall strategy. If high-yielding assets come in our way, we will definitely do.
What we are doing now is that while we have kept the conservative guidance of 10% to 12%, because the corporate — we are having some low-yielding assets because of the price movements, we are trying to churn them. We have told the big corporates that, yes, please increase our pricing to some x level, otherwise, please prepay our loans. That churning process is going on. And that’s a big number. So we are keeping that option open so that overall, my NIM and NII and my ROA gets protected.
Ashok Ajmera
Very good, sir. Thank you very much for just again giving the confidence and you’re absolutely right. The bottom line is ultimately end of the day is also very, very important. And — but after last few quarters, I mean, now we see that I mean, like you are doing better than the industry in some of the — except that one bank which is Bank of Maharashtra, which has always been the forefront in fact irrespective of the size of the bank. But otherwise, yes, there is a lot of improvement in our bank also, sir. Thank you very much.
Swarup Kumar Saha
Thank you, sir. Thank you, Mr. Ajmera. Good to hear that.
Operator
Thank you, sir. Our next question is from the line of Mr. Saket [Phonetic]. Sir, please go ahead with your question.
Saket
Good afternoon.
Swarup Kumar Saha
Yeah, Mr. Saket. Good afternoon.
Saket
Hello.
Swarup Kumar Saha
Yeah. Yeah.
Saket
[Foreign Speech] sir. And thank you for — thank you for this opportunity. Sir, you have mentioned about 10% to 12% loan growth for the current financial year, sir. I missed your numbers.
Swarup Kumar Saha
Yeah, yeah. That’s in my slide also. If you see the last slide of course —
Saket
Okay. And sir, taking into account the current business environment, what is your current take as we see the consumption pattern also slowing down and the — whatever the GDP numbers have been, they are also pointing towards stress in the system. So what are you penciling in, in terms of this 10% to 12% growth wherein you are categorically moving towards your RAM trajectory. So what are the factors that you have factored in giving this 10% to 12% loan growth when the underlying sentiments, if I may use the word have been deteriorating or are on the negative side?
Swarup Kumar Saha
Right. I think that’s a fair question in terms of the ecosystem that is playing out. What I’d — what you like to say is that from our bank’s perspective, historically, we had a higher proportion of corporates and one — three, four corporates going bust, had a lot of negative impact on the bank. And so we have changed our strategy and moved towards derisking the portfolios, derisking the entire — first of all, the movement towards RAM segment is the first priority is to derisk the portfolio, the entire advanced portfolio. It diversifies the risk.
Now within the RAM, now the question that is actually coming regarding the negative sentiments of consumption, etc., and in certain segments, particularly in the unsecured segment and credit card business. First of all, in our bank, we are not in that area. We are doing personal loans, but personal loans, our delinquency is very limited. We are very well-positioned in that because the personal loans are basically done for salaried accounts, though it is a — though it is a unsecured loan, but it is for unsalaried accounts. So our overall portfolio remains healthy.
The other unsecured part, which normally in a banking system is the educational loan. There again we are comfortable as far as we are concerned. The credit card business, we don’t have. So these three segments wherein the entire — what we call the ecosystem and the regulator is also pointing out on various forums that these are segments where we need to be careful about. So first of all, we are not in those segments. If we are growing, we are trying to grow in solid retail, vehicle, gold, gold loan also, some of — some here and there factors are there. But again, as of now, our bank is well-positioned in the gold loan portfolio. It is giving us good returns. So we — and we have got a robust system in place also, vis-a-vis the — what the regulator and various other stakeholders are talking about. But in our bank, it’s a low base, so we have a lot of scope to improve our gold loan portfolio. So vehicle alone is doing well.
The housing loan, also the co-lending, of course, another area we are working very closely. We have already increased our co-lending portfolio to INR2,900 crores for the Q2 and we have good partners around 10 partners we are having in the co-lending space, which as of now, our experience is very healthy. We have got in some robust places there. We’ll do some direct assignments of housing loan of very reputed banks. This quarter also, we have done amount on that.
So overall, in terms of the risk perception of the retail segment, we are not foreseeing in our bank the — that challenge, but as things play out, we’ll be very conscious of what is happening in the system. But so far, the segments that we are trying to — trying to build up, trying to grow are segments which are well with good mitigants and the areas of — which are giving me good returns also.
Our GST product, if you see, we have been talking on this subject, the GST, which gives us — our bank gives loan as far as — amount as up to INR10 crores is a very well — a very good product for the bank, which talks on the cash flows of MSMEs. And in that situation, we have already created a portfolio of INR1,500 crores in GST and the delinquency there again is under control and nearly — it is virtually negligible, I can tell you that. So again, this is an area where it gives me good yields. And of course, we have the — we will also go into the renewables, we’ll go into the LRDs which are in the corporate segment, which will give me a better yield also and also a secured portfolio. So these are some of the areas in which we are working on.
Operator
Thank you, sir. Our next question is from the line of Ms. Surbhi. Ma’am, please go ahead with your question.
Swarup Kumar Saha
Yes, good afternoon.
Operator
We will move on to the next question. I’ll request Mr. Sushil to please ask your question.
Sushil Choksey
Congratulations bank for a stable result.
Swarup Kumar Saha
Thank you, Mr. Choksey.
Sushil Choksey
Sir wisely you said that you have all the enablers in place —
Swarup Kumar Saha
Chokseyji [Foreign Speech] I think the sound — can you come to the mic a bit closer?
Sushil Choksey
Yeah, sir can you hear me now?
Swarup Kumar Saha
Yeah, yeah, absolutely. Loud and clear. Please go ahead.
Sushil Choksey
Sir congratulations on a very stable and a positive result.
Swarup Kumar Saha
Thank you.
Sushil Choksey
From my team and you have a great team now to work on credit growth, which is reflecting in the result. Sir, my first question is, how are we going to improve our CASA to get our margins up from 2.75% towards 3%?
Swarup Kumar Saha
That’s the question only or you have some more –?
Sushil Choksey
No, no, I’ll come one after another.
Swarup Kumar Saha
Okay, sure, sure. See, this is a challenging area for all of us in today’s ecosystem. All the ratios are coming down, every banks, all the means, all banks CASA ratios are coming down. And particularly we have a challenge because our geographical presence is still not as it should be in a public sector bank and we are facing this challenge and you’re trying to — not only the challenge of some of the unethical practices being done by some of the — some banks, I’ll not use any adjective for that. Outside the public sector space, there is — there are certain things that are happening and in our geographical areas, we have come to know about it. First of all, we have to — in terms of customer retention, we need to build up on that.
In terms of customer acquisition, we are trying to — what we are trying to do is create more and more customer-friendly products both on the liability side and also asset side. What we understand and what we have internally strategized is, while we can — we will continue to hunt for more and more standalone CASA, retail term deposits. But the crux will remain is that we have to do more lending on the MSME side to improve our CASA. That is a correlation between the current account portfolio and the MSME advances that happen in the bank. So at present, our MSME portfolio is growing at 11%, not good enough at this point. We need to increase it to a much higher level and acquire more and more MSME customers. So we have decided that we will go in this Q3 and Q4 and actually decided today itself that we will be holding special MSME drives in all the 25 zones for every fortnight and we will — we will press upon the point to our field functionaries that it is important for CASA to lend also. So we need — that is another area.
Collaborations, as we discussed earlier, we have — we have now created a lot of collaborations, particularly defense and other institutes in Punjab State Civil — Punjab Employees Association, then MCD Chandigarh, then MCD Lucknow. So many other salaried — we need to mobilize more and more salaried accounts into our bank. And for that, we need to have excellent customer service, excellent user experience on a digital app. You will appreciate that our PSB UnIC app today in the Google Plus store is rated at 4.70, which is the highest among the public sector banks. So we have moved from 3.7 to 4.7 in a matter of one year.
And that has happened, one — particularly due to the Finacle upgradation in October that has happened. We have been able to add various value-added services. Now we are having mutual fund business in that. We are having PPF in that — in that what you call PSB UnIC app. We have also other — various other products that we are in the pipeline, loan against FDs. So these are some of — and many others are in the pipeline, some of them are mentioned in our presentation at the end of the slides that we have.
So customer acquisition will be — is correlated with not only advances, it is also correlated with services that we provide — value-added services both at the brick and mortal level and also in the digital level. So in both the areas, we need — we are concentrating on improving customer service, both physically and interaction and also digitally to provide more and more backup so that we can — we can build on that. And these things will slow — some of the new projects that we are having, we have talked on that before, but it is worth repeating them also again today is that the new projects that we are taking to build up this CASA component and which will be implemented in five to six months’ time is one is of course, the CASA back office, which will not only take care of the regulatory part, but from the business part, we are going to introduce certain new methods of technology — new methods of technology for customer acquisition like CAT [Phonetic] banking and that may come around January, February.
Then we are also revamping RFPs on — for the call center revamp, which will have the — give us the CRM module also again five to six months’ time. Third, we are going to have a — so though forex — though it is a forex matter, but again, it is somewhere related, the forex trade module is going to come very short, in another five to six months’ time. So these new projects that are going to come are very important. We have created a data analytical cell now, which gives us lot of ideas on how to do cross-selling to our captive customers, which will also help us in creating this — creating this environment of acquisition of CASA account.
So I think this will — it is not that this will happen overnight, but once we take the right steps in the right direction, I think overall, it will — it will play its part in the coming time — in the coming times. So that was on CASA. And of course, just an added point is that while we will consider CASA, we are now moving in a CASA plus retail term deposit way. We are trying to build that we are at 72-odd-percent at this point of time. We’d like to build it up to 75% and then move to 80%. So at least the account — the depositor is retained and which will give me a [Indecipherable] to increase my advances and get out of the bulk and the CD borrowings that we do.
Sushil Choksey
Sir, how much of CD and bulk deposit we have today?
Swarup Kumar Saha
See, I’ll tell you 72% is the CASA and retail. So the balance is bulk and CD. The bulk is around 20% and the CD is rest, percent.
Sushil Choksey
So you’ve been a treasury person also in the past. So between yourself, Ravi Mehra and Rajeeva, do you think that the investment scenario in ’25 first quarter RBI should be acting? Global interest rate scenario has peaked. The interest arbitrage between treasury and corporate, this may be the right time to move from treasury to corporate credit. And this is my thinking. And if the yield is moving between 650 to 670 in next quarter, how are we going to capitalize balance with a low CASA and locking in long-term bonds or maybe loans which are yielding you 9% or hit 75% or 9.25% and where deposit rates are where we are.
Swarup Kumar Saha
Yeah, that’s the market dynamics. We are — over the last two quarters, I can tell you, Mr. Choksey, is that over the last two quarters, we have been — we have moved a bit away from treasury and deployed in a higher-yielding asset of credit. So that we have done in a small way. I’m not saying in a big way, but because we were very conscious of this, the yields coming down in one or two quarters. So we were conscious, but we balanced it a bit. So we were able to — the sequential growth that you are seeing in the credit, some part is, of course, due to some sort of a reduction in the treasury. We didn’t build it up to the level we could have built up.
Now coming to your second part in terms of the globals, we all know the global and domestic situation and there is — there is a — that the rate cuts, maybe the rate cuts will actually eventually play out in the next financial year. So we are now looking into how — wherever opportunity, the bottom line now is this instead of really having a script to script strategy, the bottom line is this that we will invest in a higher rating investment or higher-yielding, what we call the assets that we have — we have in pipeline. So that would be a — that would be the overall strategic thinking and try to improve our yields on investment.
See, if you see our yield on investment is at 7.06%, right. And our yield on advances is 8.75%. So there is a gap there. So now sources have to be deployed either in investment and in — or in assets. So from that perspective, whatever best comes, I’ll ask Madam Mahima to — in the treasury front, if you have anything to contribute. My Treasury Head will now supplement anything she wants to add.
Mahima Agarwal
Yes. As sir has said that we have consciously reduced our portfolio to around INR1,200 crores and we are not built up that way. But if you see that our treasury — if you include the profitability also then it will be 7.85%. And in the coming also due to the rate cut scenario, we are managing our portfolio in a way that because SLR requirements are also there, we have to maintain from that perspective also. So in overall scenario, we are managing our trading book [Phonetic] in such a way that we can fund the liquidity — we can have the good liquidity also, we can improve the advances and the treasury income also, sir.
Sushil Choksey
Sir what is the unavailed credit sanctioned as of today on your books?
Ravi Mehra
Yeah, Good afternoon, sir. Ravi Mehra this side. So it’s around INR4,000 crores.
Sushil Choksey
INR4,000 crores.
Ravi Mehra
Yeah. I think when you asked this question a few quarters back, we were a bit — we were a bit subdued. Now we can just tell you that [Speech Overlap] —
Sushil Choksey
So I’m asking this question because the vibrant environment is visible on the presentation color as well as in the numbers.
Ravi Mehra
Okay. Okay, good, good, good. Yeah.
Sushil Choksey
Sir, my next question before I come to the next round, basically, we know where the bank stands, for digital transformation, you started the digital journey. Where are we reached up on the digital journey, how much spend we’ve done and what is likely to emerge in the next six months or the next year?
Swarup Kumar Saha
The bottom line answer on this in a one liner is that you’ll find lot of changes that are coming in the next six months. It’s too premature for me to tell you exactly what are the areas which you are working on. But one thing I can assure you as I just gave you a small example of the rating improvement, which gives an overall idea how the app is now behaving towards a customer and that is very important. The UI/UX experience is very important in this part. So there are multiple projects that we have taken, some of them have been listed in the presentation, I’m not repeating them.
But two things which can be talked about here is that the corporate biz app means we are having a retail app, you know for the — which is doing so well. Now to mobilize current account, which is also a part of the current account acquisition, we are developing the corporate biz app. We will give some name on that. But internally the biz app is going on. And within three to six months’ time, we’ll be able to provide updated facilities to current account holders through our business app. That will be a game-changer for the bank in terms of customer acquisition and retention.
And besides that, as I told you that we have already started very advanced level of value-added services in the app like sort of mutual fund, we didn’t have [Indecipherable] products. We’ll bring the — we’ll bring — we have already brought that. So today, we are — the customers of our bank can open a DEMAT account through my app. And it is a very, very customer-friendly experience. We are already building up on that and I’m very sure in the long-run, it will improve the stickiness of the customer.
So I’m only saying a few of them. There are multiple ones. Once we cross the bridge, I think we’ll announce it and accordingly, you will find lot of — lot of traction happening through our app. What is the — why are we so confident on this? You can ask me. The confidence comes from the basic point that my core banking technology has been upgraded last October. And this is the time where we are building it up. Last October means October last year, right?
So now the impediments to do a transformation in digital side, which is particularly the base, that has now gone. Now it is only now adding those products on that base. So I think some sort of — but talking about exactly what are the things we’ll do, we’ll maybe one quarter down the line, we’ll hold our cards and we’ll announce it slowly.
Operator
Thank you, sir. Our next question is from Mr. Saket. Sir, please go ahead with your question.
Saket
You can hear me, sir?
Swarup Kumar Saha
Yeah, please. Yeah, Mr. Saket, carry on.
Saket
Yes, sir. So sir, you were explaining about the granular details of the RAM part of the story. But sir, as we see the trend today, almost every — every bank is moving towards this RAM part, building a RAM part of the portfolio. And with the same set of understanding that it is going to derisk the bank from the delinquencies going ahead. Could you please explain the reason sir why — why are the banks not moving towards the corporate part of the story? Because the growth in the lending could always be headed by the corporate side. If you could just explain the story, not only for Punjab & Sind Bank, almost all banks wherever the calls we are hearing, everybody is trying to build a portfolio that is skewed towards the RAM part of the portfolio and everybody is exiting the corporate book.
So if there is degrowth in the corporate sector, where the actual lending or where the actual contribution will come into the economy? That was my basic point, sir.
Swarup Kumar Saha
So I’ll talk less about the systems and more about my bank, okay? It helps the context also. [Foreign Speech] what we can say is that while we appreciate the point that there can be a herding of RAM segment portfolio by all the banks that’s — that there is a possibility and we need to be conscious of that process. But in terms of our — in terms of our ecosystem, you will find that the corporate segment today, one part is that the opportunities are not as that much as you think it is to be, okay, the capex particular. We are having other segments, but the capex particularly are not having –.
So what is also the second part is very, very important. What important part is this that the pricing war that goes into a corporate segment portfolio is literally a price walk the corporates have become more bargainable, so they bargained to the most and we are all cutting each other sometimes into — in terms of retaining customers, in terms of building portfolios, which in the long run is not a healthy way of — or I’ll tell you in other word is sustainable way of growth.
So the — first of all, the sectors are limited. Secondly, wherever opportunities are there, there is a pricing issue. And as you know, there is a lot of pressure on the liabilities with the LCRs, the LCR part is also needs to be taken care, the lag effect between deposit growth and credit growth. So these are multiple factors, which you cannot just ignore while you strategize the things going to be done in going forward.
And now coming to my bank, my bank had a portfolio of corporate around 55% at one point of time. And what happened we all know what happened and we were a small bank, three, four, five corporates on the NBFC segments went bust. Some banks were able to sustain themselves in some way, but we got into big trouble.
So in terms of the appetite, in terms of the capital ratios that we have, we think that it is for a bank of our size needs to move away from the corporate. Corporates will do where we get good returns and we are much more comfortable on the — not only on the return on investment, on the asset, but also on the return of the money.
Number two is that the risk concentration of segments in the corporate segment sometimes can create a systemic issue. You must be hearing the regulator talking frequently on one or two segments. Some actions have been taken on certain segments. So these are — these are some of the areas where we need to be conscious about. So our point is that in our case, we have shifted gears and in a — if you see in our bank’s own books at this point of time, my yield on advances in the RAM segment is at more than 9.5%, while the yield on advances on the corporate segment is much less. So ultimately, it’s a balancing game.
The deposits that we have, the resources that we mobilize in the market has to be deployed in a profitable manner. And that’s the — and that’s the diversification we need to do. We are now building a lot of retail products — sorry, MSI products, equipment financing, food processing, cluster-based financing. And the more we diversify on various segments within the RAM, not only it diversifies the risk, it also gives me better returns on my assets.
So that is what I — it is my view why we have moved towards this. Because RAM is not only retail, RAM is a retail agri MSME. Please appreciate that. And within retail, there are secured, unsecured mortgage-based loans, personal loans. We are not in the personal loan segment. We are not in the credit card business. We are not in the — so much in the educational loan. We are in GST. We are in mortgage housing loans, car loans, gold loans, LAP, loan against properties. And for us, those segments are doing well and we are going to bring in digital journeys.
I forgot to mention in a previous question that we are now bringing the digital lending into our digital store in the retail and MSME segments. So there, again, we are on this. So I think these are some of the factors at this point of time. Of course, we can always take a call when the ecosystem advises us to take a call. But at this point of time, we feel that this is a better option for the bank.
Operator
Thank you, sir. Our next question is from the line of Ms. Surbhi Tiwari. Ma’am, please go ahead with your question.
Swarup Kumar Saha
Good evening, ma’am.
Operator
Sir, I think there is a issue with the connectivity. We’ll move on to the next question from Mr. Rajiv Srivastava [Phonetic]. Sir, please go ahead and ask your question.
Rajiv Srivastava
Hello.
Swarup Kumar Saha
Yeah. Good evening, Mr. Srivastava.
Rajiv Srivastava
Hi, sir. Thank you for this opportunity. My question is your guidance for the slippage ratio is below 1.25 — 1.25% for FY ’25 with the actual figure at 0.52% as of September 2024. So what steps are you taking to control slippages, especially in the MSME and agriculture segments?
Swarup Kumar Saha
Yeah. See, the guidance what you have given, I think we have kept in mind, the slippages that has — that may occur in agri, MSME and retail partially. And above a few mid-corporate sized accounts, you know that the MTNL story has already played out. The — on 8th October, our bank has also declared the account as NPA. We have exposed around INR171 crores in that. And we also provided it fully in terms of the classification in the 30th September results itself. So we have — but that will be part of the story unless or until some resolution happens in the industry segment. So MTNL is one area.
We have in terms of the collection efficiency of the — sorry, another two, one account of course, is being also reported in the notes to accounts, the Jonson Rubber. It continues to be classified as standard, but the account is technically NPA due to the High Court order stay, we have not — we have not classified the account as NPA, but we are holding more than 60% — nearly 65% provision in that account. So we will — so that part is also there.
We have also another mid-corporate account on a residential mortgage, a project loan, which is under the SMA-2 category. We are on the SMA-2 category, it’s about INR100 crore account. We have fully provided — not fully, sorry, the — if the account slips, we have provided adequately in the 30th September results. So these are some of the accounts which may slip — one has already slipped, MKN has already slipped and which will impact our ratio a bit. But from the profitability side, we are already protected.
On the RAM segment, what we have done, we have started doing centralized calling. We identify accounts, the call center is activated, the department is activated. And then important structural change that we have brought in the bank is creation of a credit mid-office concept in the zonal offices. What these mid offices do and this has been implemented just recently is that they go through each of the sanctions that are — before disbursement, they go through and do a due diligence and the approvals are given by a centralized office, in zonal office and some in head office, in some big cases for disbursement of loans and they also monitor constantly beyond a cutoff of the loans that are sanctioned.
Our — we send regular SMSs to the borrowers of us towards the — for reminding them about their overdues. We have implemented the NACH mandate in a very big way. This was a bit lacking in our bank. Lot of accounts were not based as — from the ECS point of view or the NACH point of view or the SI point of view in our accounts. So that standing instructions have been put into place. So therefore, you will find if you — the collection efficiency of the bank was — overall was hovering around 60% two and half years back or three years back. And that has moved to — like that has now moved to 97.82% in 30th September. Overall, I’m sorry, I’m saying.
So within the segment, like the MSMEs, things will vary, but the overall collection efficiency has improved to 97.82% and that’s a fair enough positive movement that we have done. So various methods, we are now strengthening our underwriting engines, monitoring at the branches. We have created back-office structures for sanctioning of loans. Earlier, all these sanctions were done at the branch level. Now branch powers are limited, it goes to the back office. And again, the trend shows that the delinquency of the accounts that have been sanctioned by the back office is very, very negligible and therefore, this gives us encouragement to bring this sort of practices in the bank, which will take care of the future delinquencies.
Yes, some of the legacy accounts within agriculture and maybe a bit of MSME are still there. We don’t ignore that, but our top priority or credit monitoring division is working very hard and that’s how you are seeing the significant downward trend in the fresh slippages that have happened. And for the September quarter of our bank, which is particularly in the Punjab and Northern side, restricting the agriculture slippages to only INR85 crores, I think the teams have done well in that. But you cannot be complacent. Anything can happen on agriculture side, lot of — there are a lot of political announcements that can happen. We have to be conscious of that.
But the monitoring teams are now well engrossed in improving the collection efficiency. We have to do a bit of improvement in MSME and retail also in terms of the segment wise, but I think things are picking up in the right direction. Rajeevaji, if you want to add anything, my ED Monitoring.
Rajeeva
So you have already spent all the steps that we have taken. And of course, there is a margin improvement in the quality of underwriting after creation of centralized back office. And apart from that, as you have touched, regularly, we are in touch with all the borrowers for timely repayment. And of course, we have implemented early warning systems also. So that throws the early warning signs and then we take immediately steps. So with all these steps and as adequately reflected in the numbers also.
So this year in September, the retail slippage was INR47 crores as against INR62 last year. Similarly, there is a reduction in agriculture and MSME also. So overall, the slippage ratio has come down and hopefully going forward also we look towards lesser slippage going forward. So that’s all.
Operator
Thank you, sir. Our next question is from Mr. Ashlesh. Sir, he wants to note that you seem to have classified the PSU telecom account as NPA, while other banks have classified it as NPA. Any reason?
Swarup Kumar Saha
See, that — the NPA is based on a prudential guideline on the 90-day period. So our NPA became as from our disbursements and overdues, our overdue, the 90-day period was getting over on 8th October, so we declared it on 8th October. However, we have fully provided for the — fully means 15% provision has been done in the — in our 30th September itself.
Operator
Thank you, sir. Our next question is from Mr. Saket. What is the update on dilution of Government of India shareholding?
Swarup Kumar Saha
We have taken a plan of INR2,000 crores of QIP. We have taken the approvals, we have announced it also. The merchant bankers are now on board. We are going through the legal process of appointing a legal counselor for that. And very soon, we will be in touch with the market and we will time it accordingly, but INR2,000 crores of QIP is still — is on the cards, either this quarter or next quarter. And apart from that, that is part of the dilution that may happen from the government side. Apart from that, we have also taken approvals for INR5,000 crores of infra bond.
We may raise it — issue it in tranches and another INR2,000 crores of — INR3,000 crores by — sorry, INR3,000 crores of Tier-1, Tier-2 bonds. So this overall INR10,000 crores of capital raising out of that INR2,000 is QIP, which impacts the dilution. So we will be — we were waiting for this Q2 results. Now we are trying to — we’ll will approach the market at the right time.
Operator
Thank you, sir. The next question is from Ms. Isha Mehta. One, RAM now forms 53.86% of the total advances. What is your target for RAM’s contribution in the next few quarters? Second, whether the bank is looking to reduce the share of corporate loans in the future and focus on increasing the RAM loans in the portfolio.
Swarup Kumar Saha
I think we have answered that. Anyway, the guidance, if you see the last page, it shows more than 56%. So we are moving in that direction. And if that happens, the corporate segment will reduce.
Operator
Thank you, sir. Our last question is from Mr. Choksey. Sir, please go ahead with your question.
Swarup Kumar Saha
Yes, Mr. Choksey.
Operator
Sir, I think there is some connectivity issues. We’ll wait for a moment. Thank you. As there are no further questions from the participants, we now conclude this conference. [Operator Closing Remarks]
Swarup Kumar Saha
Thank you, everybody, and thank you, Shilpa.