State Bank of India (SBIN) Q2 FY23 Earnings Concall Transcript

State Bank of India (NSE:SBIN) Q2 FY23 Earnings Concall dated Nov. 05, 2022

Corporate Participants:

Sanjay Kapoor — General Manager

Dinesh Kumar Khara — Chairman

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

C.S. Setty — Managing Director

Analysts:

Mahrukh Adajania — IDFC — Analyst

Unidentified Participant — — Analyst

Manish Ostwal — Nirmal Bang Securities — Analyst

Saurabh Kumar — JP Morgan — Analyst

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Adarsh Parasrampuria — CLSA — Analyst

Anand Dama — Emkay Global Financial Services Ltd — Analyst

MB Mahesh — Kotak — Analyst

Kunal Shah — ICICI Securities — Analyst

Presentation:

Sanjay Kapoor — General Manager

Good evening, ladies and gentlemen. My name is Sanjay Kapoor, and I’m the General Manager of Performance Planning and Review department of the Bank. So on the occasion of the declaration of the Q2 FY ’23 results of the Bank, it gives me immense pleasure to welcome the analysts, investors and our colleagues in person after a gap of nearly three years. I also extend a warm welcome to the analysts, investors and colleagues who have joined this presentation through our live webcast.

We have with us on the stage our Chairman, Shri. Dinesh Khara, at the center; our Managing Director, International Banking and Global Markets and Technology, Shri. C.S. Setty; our Managing Director, Corporate Banking and Subsidiaries, Shri. Swaminathan J; our Managing Director, Risk Compliance and SARG, Shri. Ashwini Kumar Tewari; our Managing Director, Retail Business and Operations, Shri. Alok Kumar Choudhary; our Deputy Managing Director of Finance, Shrimati Saloni Narayan.

Our Deputy Managing Directors, heading various verticals and managing directors of our subsidiaries are seated in the first row and second row of this hall. We are also joined by Chief General Managers of different verticals and business groups. So to carry forward the proceedings, I request our Chairman sir to give a brief summary of the Bank’s Q2 FY ’23 performance and the strategic initiatives undertaken. We shall thereafter straightaway go to the questions-and-answers season.

However, before I hand over to Chairman sir, I would like to read out the safe harbor statement. Certain statements in these slides are forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual outcomes may differ materially from those included in these statements due to a variety of factors. Thank you.

Now, I would request Chairman sir to make his opening remarks. Chairman sir, please?

Dinesh Kumar Khara — Chairman

Thank you. Good afternoon, friends. Thank you for joining this analyst meet post announcement of the quarter two results of financial year ’23. It’s actually a pleasure to see all of you in person after a gap of almost three years. I must complement my finance team for opening this face-to-face interaction, which all of us have been missing in last three years. A warm welcome to all of you, including those who are connected virtually. We hope you and your family are in best of the health.

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown with inflation being higher in developed economies as compared to EMEs. This phenomena is perhaps seen for the first time. The cost of living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic, all weigh very heavy on the outlook.

However, in such uncertain and fragile global economic environment, the Indian economy has showed resilience. Indicators of aggregate demand indicate that the onset of the festive season and the pent-up demand kept growth impulse very strong. Several high-frequency indicators remain upbeat. The withdrawal of the Southwest monsoon has aided travel, hospitality and construction sector too.

Electricity generation has picked up in September. Rural demand also has shown very healthy sign. Also, we have seen that the two-wheeler and the three-wheelers and the motorcycles have shown a very encouraging trend. This is actually a reflection of the rural economy. Domestic tractor sales have also picked up sharply to an 11-month high in the month of September.

Credit growth in the banking system has continued to grow in double-digits in this financial year as against single-digit growth, which we witnessed in the last year. With economic activity gaining momentum, there will be an optimistic outlook for the demand conditions, and we expect credit growth to continue in the near-term.

At State Bank of India, our long-term strategy has been to build sufficient resilience in our balance sheet so as to absorb the volatilities caused by such external events. As a result, we have not only been able to ride through these difficult times, but we have been able to post consistently improving outcomes in business, profitability and asset quality parameters. I’m pleased to announce that during this quarter, we have posted the highest ever quarterly profit of INR13,265 crores. Our business growth numbers are good. And in terms of asset quality, our net NPA has dropped well below 1%.

Let me now give some color on the Bank’s numbers for the quarter. The net profit for the quarter increased almost 74% YoY to INR13,265 crores, while the operating profit at INR21,120 crores, increased by almost about 17%. ROA of the Bank for the half year period improved by 15 basis points on YoY basis to 0.76%, though this quarter ROA stands at 1.04%. And ROE improved by 291 basis points on YoY basis to 16.08%. Most other core profitability metrics have also improved over previous year as well as sequentially. Net interest income increased by almost 13% YoY on the back of the improved credit offtake in all segments and continuous improvement in asset quality.

Domestic NIM also improved by almost 5 basis points YoY and 32 basis points sequentially. Actually, on YoY basis also, we had some one-time — one-offs, which were there last year around the same quarter. If we ignore that, then we have actually grown well in this quarter on a YoY basis, too, as far as NIM is concerned.

Fee income grew by almost 10% YoY. Our cost to asset continues to remain among the lowest in the industry, reflecting our efforts to build long-term cost efficiencies. On the business front, the credit growth has continued to trend upward as the Bank posted a YoY growth of almost 20%, with growth coming from all the segments.

Corporate advances grew by 21% plus on a YoY basis, with bulk of the growth coming from large corporates, personal retail, also witnessed a decent growth of 19% on a YoY basis, with home loan book growing almost at about 15% and other personal loans growing at almost 25%. SME and Agri segment advances also posted double-digit growth at 11% and 13.24% YoY, respectively.

Domestic deposit grew by 9.16% YoY, driven by the growth in savings bank deposit and the term deposits. Our foreign offices have continued to perform well with good growth in advances as well as deposits. Advances portfolio at foreign offices in rupee terms grew by almost 30%, while in dollar terms it has grown at 18%. And the growth is coming from local lending, trade finance as well as India-linked loans. Sector-wise, growth has come mainly in OMC, banking and financial services and IT services. Deposit at foreign offices grew at almost 35%.

Coming to asset quality. We continued to post improving outcomes. Our net NPA ratio has come down below 1% mark and stands at 0.80% only at the end of — only as at the end of quarter two of the financial year ’23, with a YoY decline of 72 basis points. Gross NPA ratio at 3.52% is down by 138 basis points. Slippage ratio for the quarter stands at 0.33% and is lower by 33 basis points on a YoY basis. Consistently improving asset quality is also reflected in our credit cost, which stands at 28 basis points for the quarter and is down by 15 basis points YoY.

On the restructuring front, as at the end of quarter two of the financial year ’23, our total exposure on the COVID Resolution Plan 1 and 2 stands at INR27,336 crores. The restructured book has behaved well with 9% of the current exposure falling under SME 1 and SME 2 category. We are holding sufficient additional provision against the restructured accounts.

Capital also, I would say, is fairly okay, and we expect that our internal accruals will be adequate to take care of the normal business growth requirements. Our capital adequacy ratio without adding the profit for the current half year is at 13.51%, and the CET ratio at 9.53% are well above the regulatory requirement. Digital continues to be an important acquisition engine for the Bank across assets as well as liability product.

During the quarter, we have sourced 62% of the savings accounts and 45% of the retail asset accounts digitally through YONO. Our subsidiaries have also consistently performed well and continue to create significant value for all the stakeholders, and most importantly, for the customers. Most of our subsidiaries are leader in their respective segment, and we will continue to nurture these subsidiaries and see them creating value for their own shareholders as well as the shareholders of State Bank of India.

Now, before I conclude, I thank you all for your continuous support to the Bank. We are proud to be part of SBI and consider it a privilege to be able to contribute towards the growth of our economy and the Bank. We remain committed to reward your trust in us with superior, sustainable returns over the long term. I wish everyone here a very good health and a very happy weekend.

The floor is now open for questions from all of you. Thank you.

Questions and Answers:

Sanjay Kapoor — General Manager

Thank you, Chairman sir, for the presentation. We now request questions from the audience. [Operator Instructions]. We now proceed with the question-and-answer session. And the first question is from Mahrukh.

Mahrukh Adajania — IDFC — Analyst

Hello sir. Congratulations on a very, very strong set of numbers. Sir, my first question is on margins. So you’ve done very well and all core margin expansion. Given that there’s a bit of MCLR repricing still left, and there’s also EBLR repricing, which is not fully captured in. Is it fair to assume that at least for the next two quarters, you will continue to see margin expansion? The quantum can be different, but…

Dinesh Kumar Khara — Chairman

I normally follow a golden principle, under promise and over deliver. So on that particular account, I will say that I will still under promise that we’ll try to keep the NIM at this level, though we might give you better results quarter-on-quarter.

Mahrukh Adajania — IDFC — Analyst

Okay, sir. Sir, so a related question to that was on deposit growth, that obviously, you have a lot of liquidity, your CD ratio domestic is the lowest, right, at 63%. So, will we continue to see flattish deposit growth? I mean, till what level should the domestic CD ratio rise before your deposit growth accelerates?

Dinesh Kumar Khara — Chairman

Actually, we look at deposit as a franchise. And that is one the reasons why during the period when there was not enough credit growth, we never stopped our deposit gathering engine. And that resulted into a situation where we had deployed the money into the treasury. And today, while we talk, we have about — almost about INR3.5 trillion plus money, which is laying in the treasury instrument which we expect to redeem during the current financial year itself.

So you can very well expect that, that kind of a growth can be there in the deposit to support the advances growth, which is — which we expect to see in the remaining part of the year. And also, having said that deposit is a franchise, you would have observed that in the last quarter or so, we have also increased our deposit rates, because we don’t want to be unfair with our depositors either.

Mahrukh Adajania — IDFC — Analyst

Okay, sir. And just one last question. If you could give some sense on what quarterly increments you can expect in your wage bill for the new wage revision, it will start mostly from next quarter, right? And what would be your assumption?

Dinesh Kumar Khara — Chairman

Yeah. I have got those numbers. I expected this question from the analyst community. So that’s why I have kept those numbers also ready with me. And I’ll just share those numbers. Just one sec. Give me a minute. Yeah. If at all, the monthly ad hoc provisions, we assume that it will be required to provide for about 36 months. And the estimate increase in wages, if at all, it is 10%, in that event, we expect about INR477 crores. So that is the kind of a number which we expect. And if at all, 12%, it is about INR580 crores. So much of it will depend upon what is the kind of a demand and where we finally start providing for it.

Mahrukh Adajania — IDFC — Analyst

INR477 crores per?

Dinesh Kumar Khara — Chairman

Per month.

Mahrukh Adajania — IDFC — Analyst

Okay, sir. Thank you so much.

Unidentified Participant — — Analyst

Hello. My complements to you, sir, for the fantastic performance. In fact, one of the best performance in the recent times and highest profitability in the Bank, and Bank has done well on almost every parameter. But sir, having said that, now the question comes for sustainability, because this quarter was an exceptionally good quarter and for some of the other banks also. But of course, you have exceeded. So on sustainability, what Mahrukh’s question was also there that in the coming quarters now, number one if the ROA — of course, we have crossed now 1.04. It was a demand for a long time, people were expecting.

And secondly, on all other parameters like cost to income and other ratios and the future growth in the credit books and also on the treasury front. Like last time, I think in — to answer one my questions, you had said that we are cushioned for 7.45 on the treasury front. So here onwards now, since we have already come to that level and we expect another 50, 60 basis points now going further, looking at the Fed increase of 75 basis points.

So on all the fronts, like on the treasury fronts, on the credit front, on the recovery front, returns, profitability, where do you see now — at least in the coming two quarters, how do we expect to end FY ’23, sir?

Dinesh Kumar Khara — Chairman

See, when it comes to the treasury front, though this quarter we had an opportunity, we could have booked MDM gain, but we consciously thought that we will not book it. We have kept it as a reserve for the rainy day. And maybe at some later date, if at all there would be a requirement, we can tap it. This is what our intention was.

But having said that, I would also like to mention that how the global interest rates will move and how the interest rates will move over here in the country will also be a function of the fiscal. That is something which I expect that the kind of robust GST collections which you have seen till now in the current year.

And going forward, I expect that those kind of things will probably ease out the burden of the government raising the borrowings from the system. So if at all it so happens, then perhaps the pressure will not be there as much for the G-sec. That’s how I read the situation, but much of it will depend upon how the situations unwind over the period of time.

The other question relating to the sustainability of this kind of a growth. Well, of course, we all are cognizant of the fact that the growth which we have seen in this quarter is a growth of the busy season. And generally, even post the busy season, the kind of growth which we are witnessing even now is in the range of about 14% to 16%.

So my reasonable expectation is that there are — some of the contributing factors, which I must articulate. The retail engine has grown all this while without any challenge, almost about 16% kind of growth which we have registered in the retail segment quarter-on-quarter basis, on a three-year CAGR basis also.

Corporate, we have witnessed a decent trend, and this trend is essentially attributed to the fact that we have seen improvement in the working capital utilization, almost it has improved, but to the extent about 4% as compared to the last YoY number. The other important component which we have seen is, we have seen the term loan sanctioned and the availment. We still have got a reasonably decent pipeline, which is as high as about INR3.7 trillion of the loans either already sanctioned or the proposals under process. So, that is something which gives me some kind of a confidence that 14% to 16% seems achievable.

Last, but not the least, corporates certainly were borrowing from the international market. Today, the international market rates plus the hedging cost is actually an expensive proposition. So that is also another factor which has led to a scenario, where corporates have started looking at the Indian banking system for borrowing.

So I think these are some of the factors which gives me some kind of a confidence that we can perhaps book 14% to 16% of the credit growth. But having said that, I would like to caveat it by the fact that the growth in the banking system is a function of the real economy. And though in the normal circumstances, we expect that the economy should continue to do well. And when we look around the globe, all of them are looking at India as one of the silver spots.

So I think in view of that, my reasonable expectation is that we should have a decent growth in the economy and which will offer us opportunities for the credit growth too.

Unidentified Participant — — Analyst

Sir, now coming on that international only, there are two things. One is that our investment, we are one of the — I mean, what one, we are the largest Indian bank having maximum branches and investment outside. Now there is a practice of marking 100% mark-to-market in the international book, and since our investment is the largest there, how much pressure do you see is left to be — like because interest rates are hardening up there also with another 75 basis and still it’s not stopping. So something must have been already provided in this quarter. But going forward, what kind of in numbers or some idea if we can get on that? This is number one.

Second, on international book, again, there is a plenty of — I mean, the book is growing very fast because of the interest rate now divergence, and we are getting higher margin, and the cost of operations is much lesser, maybe 20 basis or 15. So net-net, we are gaining there. So, what are your comments on that and plans for the future on the international book?

Dinesh Kumar Khara — Chairman

See, when it comes to international book, one, of course, our assets are generally, if we look at their average maturity, it would be much lesser, so — as compared to what we normally get to see over here, that is one part.

The second component is our — when it comes to our NIMs, of course, they have improved. And our book is actually split into the local lending, which is almost about 33%, India-linked loans are about 35%, and the trade finance is almost 30%. And local lending, which we are doing, it is essentially syndicated loans which we do.

So, I think — and also when it comes to geographies, we are essentially into USA, UK and also into Singapore and Hong Kong. These are the major geographies where we are present. So I think on that particular count, we are very closely reviewing this book. Though, as I mentioned, in rupee terms, it has grown about 30%. But in terms of dollar terms, it is at 18%.

So, I think we are quite cognizant of what the realities are. And — but one thing is I think ECBs perhaps may not really pick up as much going forward. That’s the other sense which I have for the international book. Deposits we are in a position to raise in the local markets depending upon our local requirements. So, that’s how this international book is.

Unidentified Participant — — Analyst

Sir, one question on NARCL. Now you see our gross NPA is still, I think, 3.52%. So how much — are we still expecting the same kind with which we started? That time I had calculated that almost about 25 basis point our gross NPA will come down if all those accounts which are identified goes to NARCL. So, what is the difference now? Have they — first of all, they were yet to start. But now started, it seems. But they are going slow on that, I think INR2 lakh crore initial amount and that. So what is it — can you give the color on the total NARCL number of accounts this quarter, and this FY ’23, how much we are going to pass on at least to bring down the gross NPA? I mean, how much loan we are selling?

Dinesh Kumar Khara — Chairman

Actually, when we started and now, there is a lapse of time and during that period, from the system also, all kind of options were explored, including the options of 40s and compromises, all kind of options were explored. And by the system as a whole, that number also came down. Having said that, now NARCL has started performing and as far as — I believe there are about — around more than 40 accounts are there, which are under resolution with NARCL. And we expect that it will — I mean, the way they are really addressing, I hope to see better results there.

But nevertheless, I think the banking system as a whole is open for all kind of other options as well. The plus is that with NARCL coming in a very important component of the ecosystem has got strengthened. And also, it has helped in the resolution through various other channels also. So I think overall, what will be the impact? We’ll have to probably wait and watch. But as far as we are concerned, I think about 14 such accounts [Speech Overlap] 14 offers have been made.

Unidentified Participant — — Analyst

Amount? Outstanding amount?

Dinesh Kumar Khara — Chairman

Amount I would not… [Speech Overlap]

Sanjay Kapoor — General Manager

We’ll give you the amount.

Unidentified Participant — — Analyst

No issues. No, thank you very much, sir. I’ll come back if time permits.

Manish Ostwal — Nirmal Bang Securities — Analyst

Hello. Hello, sir. My name is Manish Ostwal from Nirmal Bang Securities. My question on the — from the 4th of May 2022, the policy rates has moved by 190 basis points. And on lending side, mostly the rates have been passed on. But the deposit side, rates passing on is very gradual. So, when do you see the deposit rates see the reflection of the policy move?

Dinesh Kumar Khara — Chairman

Well, as far as the rates are concerned, I think each of the bank is actually looking at the rates on their own perspective in terms of how their liability is stacked up, and how things are with them. So I think — and also what kind of growth they are seeing as far as the asset book is concerned.

So, as far as the retail TD rates are concerned, we are very closely monitoring how things are and what is our ALM requirement. And based on that, we are also calibrating our interest rates. Your question that, in how much time will the transmission happen, I think perhaps we’ll have to wait and watch. Because as I mentioned, that there are multiple factors, which would be at work in the transmission of the policy rates.

Manish Ostwal — Nirmal Bang Securities — Analyst

How much we have raised till now, from 4th May?

Dinesh Kumar Khara — Chairman

From 4th May, we will give you that number. We’ll give you that number.

Manish Ostwal — Nirmal Bang Securities — Analyst

The second point, sir, from the credit cost and the slippage and ROE and ROA, a ten-year high. And the credit growth also, nine-year high. So, in terms of certain numbers like credit cost and the slippage number is extraordinarily low for the Bank. So can we sustain these numbers, or what is your comment? I know you under deliver, promise and over deliver. But what is your sense on these numbers, sir?

Dinesh Kumar Khara — Chairman

Our effort will be to keep it as low as they are currently. But yes, of course, it’s a function of the real economy, too. So how the real economy pans out, we’ll have to wait and watch for the actual numbers.

Manish Ostwal — Nirmal Bang Securities — Analyst

Thank you.

Sanjay Kapoor — General Manager

Yeah. Next question?

Saurabh Kumar — JP Morgan — Analyst

Hi, sir. This is Saurabh from JPMorgan. [Speech Overlap]

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

Coming to retail deposit question. The hike in the retail deposit rates, we have raised the rates four times after 4th of May, and it has been as high as 80 bps in the one to two year segment.

Saurabh Kumar — JP Morgan — Analyst

Hi, sir. This is Saurabh from JP Morgan. Sir, just two questions. One is, your net slippage is negative this quarter. So can you at least — what will your expectation, at least in the near-term we can continue with these kind of levels or this is exceptional what we are seeing right now?

And second is, there is a small — there’s an increase in your SMA 1 book, SMA 2 is still flat. What would be explaining that?

Dinesh Kumar Khara — Chairman

Well, SMA loan book, of course, we have seen the number is slightly above where it was in June. But we had a one particular large corporate account where we had seen it got slipped into SMA, but that we could pull back immediately. So I think SMA is a phenomena, which is on a particular day. So, it’s a number which keeps on changing. And even in the retail also, we have pulled back some of the SMAs also. So, I think not as much of a worry.

The other question is whether slippages will be around this number. I think as of now, as I mentioned, it’s again a function of the real economy. As of now, we don’t envisage any challenge, whatever challenges were seen in the book, we have already provided for it. But if at all, there are some one-offs at a point of time, we really cannot really predict that kind of a scenario. So we’ll have to be in readiness for any kind of eventuality.

But I think we have built up enough cushion in the balance sheet to really address any such challenge which comes up.

Saurabh Kumar — JP Morgan — Analyst

That’s it.

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Hi, sir. This is Jai Mundhra from B&K Securities. Sir, your CET1 has now stands at 9.5% around. If you can elaborate if you want to raise capital because the growth that we are seeing is also pretty decent. So your thoughts on capital.

Dinesh Kumar Khara — Chairman

See, as far as our plan of action is concerned, we were to raise 81 and 82, which we raised at the most competitive rates. And also, the other plan of action is that last year also we plowed back a decent amount of profit, and we intend to do a similar plowback in the current year too. And at this number, we will have reasonably decent number to plowback as well. So with that, we will have sufficient capital to support the growth here. And even at this number also, the kind of growth which we are visualizing, we are in a position to support it.

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

No, sir, no doubt that you are well above the regulatory threshold, and this is sufficient enough to chase growth. But it looks like that within all, even PSU peers and large private, SBI has the least amount of CET1.

Dinesh Kumar Khara — Chairman

No, we’ll raise at the appropriate time, don’t worry.

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Secondly sir, on your margins, is there any one-off kind of a thing in interest income? Or this is purely, purely organic?

Dinesh Kumar Khara — Chairman

This quarter, we have INR592 crores as the interest on income tax refund. Actually last year around the same time, we had INR1,900 crores worth of — so, I think it is much lesser as compared to that and considering our numbers, it should be — it is almost insignificant.

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Sure. And last question, sir, if you can provide the breakup of the entire loan book by EBLR, MCLR and maybe fixed rate and what’s…[Speech Overlap]

Dinesh Kumar Khara — Chairman

Almost about 74% of the book is linked to MCLR and EBLR — 75%. And out of that, about 41% is MCLR-linked. The remaining is EBLR-linked. And I think about — our fixed rate is just about 26% — [Speech Overlap] 21%. And rest is BPLR, base rate and those kind of things.

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

So just a corollary, sir, if I look at yields in this quarter, right, despite having 75% of the loans which are floating rate and within that, 30% is EBLR. The yield expansion on a quarter-on-quarter basis looks very sort of low. Any comments there, sir? If you look at your yields on loan domestically…

Dinesh Kumar Khara — Chairman

Actually, yield expansion is also a function of the one-off, which I mentioned. If at all, we will — we look at that particular number, then probably it will throw up the right numbers. You were saying something?

C.S. Setty — Managing Director

See, essentially, see, 41% is MCLR, and bulk of this book is linked to six months MCLR. So the reset will be with a lag. And 34% is EBLR of which 11% is treasury-bill linked, T-bill linked. We — since it is linked to 91 day T-bill, we reset only once in three months. So while the policy rates keep moving, it’s not that immediately the transmission takes place. Transmission has got a reset date, during which it will happen. So the full benefit of this will be available in Q3, Q4 rather than Q1, Q2. That’s the sense that I would like you to read from there.

Jai Mundhra — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Thank you so much, sir.

Adarsh Parasrampuria — CLSA — Analyst

Sir, question here. Adarsh from CLSA. On — because margins have done so well, do you see any scope for changes in savings rate? Or do you think it’s transactional, so no need to really look at savings rate over the next three to six months?

Dinesh Kumar Khara — Chairman

No, we will also look at the market scenario. And also, you would have observed that for high-value savings bank account, we have already increased the interest rates.

Adarsh Parasrampuria — CLSA — Analyst

Got it, sir. And sir, you all mentioned the reset on the T-bill. Your reset on repo is 90 days after the RBI moves? Or you do it in the next month?

Dinesh Kumar Khara — Chairman

It’s immediate.

Adarsh Parasrampuria — CLSA — Analyst

Immediate? Okay. Thank you.

C.S. Setty — Managing Director

It used to be quarter-end and month-end, now it’s 15th of the same month. So, — [Speech Overlap] No, we have change it immediately after.

Adarsh Parasrampuria — CLSA — Analyst

Perfect. Thank you sir. That’s it. Thanks.

Anand Dama — Emkay Global Financial Services Ltd — Analyst

Sir over here, Anand. Sir, Anand from Emkay. So we have seen so much of rate hikes, sir, all along. This year has been pretty strong in terms of overall credit growth. Can we see a dip in the overall credit growth next year? Do you see any impact of the rate hikes, particularly into the retail segment or the corporate capex possibly which would have actually come in?

Dinesh Kumar Khara — Chairman

To answer your question, we’ll have to probably look at what the behavior we have seen in the current year. And one of the major area where — which perhaps can be a reflection of the behavior, which we can see going forward is the home loan. We have seen the home loan interest rates have gone up, but we have not seen the demand tapering off.

So I think much of it will depend upon the segments. The way I look at it is, as far as the corporates are concerned, so long as there is a visibility of demand, then perhaps they — because in the overall cost structure, the interest rate — interest cost is about — on an average, about 10% of their total cost structure. So long as they have got a visibility of the demand and they’ve got the capability to pass on this increase in interest rate, so I think people will continue to borrow.

But, we are assuming some factors to remain constant. The fact of life is that practically all the variables keep on changing. So, I think, a year down the line, we’ll have to probably revisit all these assumptions and look at it how the economy is looking like, what is the confidence level across the globe and what is the confidence level in India, that will probably help us in sort of gauging the situation on ground.

Anand Dama — Emkay Global Financial Services Ltd — Analyst

Okay. But there is a chance of basically a dip in terms of the overall home loan number?

Dinesh Kumar Khara — Chairman

I don’t think so. As I mentioned that the home loan, despite the increase in interest rate, the home loan book for us has grown almost 15%, the highest ever growth which we have seen. So, I think much of it is — I mean, of course, there are multiple variables. So how those variables interact and throw out the results, we’ll have to wait and watch.

Anand Dama — Emkay Global Financial Services Ltd — Analyst

Sir, secondly, there was this RBI circular in 2019. And basically, what we had heard that a lot of these banks have made standard asset provisioning on some of these government entities. Have we got any intimation from RBI that we also need to make some additional provisions on these quasi-government or government entities, including the likes of FCI, Food Corporation of India in the current quarter? If yes, what is the status over there?

C.S. Setty — Managing Director

At this point in time we don’t have any definite indication on that, but we are aware that at the industry level there are discussions happening. But I think it will be premature to comment at this stage. Maybe we will let you know once the time — once these discussions get firmed up.

Anand Dama — Emkay Global Financial Services Ltd — Analyst

Because look at BOB, PNB, all of these banks have made provisions or in fact, BOB has reversed the provisions on that front. So it’s just a matter of time that you will get some kind of an intimation. But any ballpark in regard to… [Speech Overlap]

Dinesh Kumar Khara — Chairman

These things are normally looked at on merits. And if at all required, we will also — we’ll see as and when the situation arises, we will appropriately plea it with RBI and — if at all, there is a situation like that. And we’ll see what is the outcome. And whatever be the outcome we are there to comply with what the regulatory dictates would be.

C.S. Setty — Managing Director

On the balance sheet and P&L it has adequate cushion. If at all such things do come up, I think we’ll be able to absorb as and when it comes. It should not be an issue for us.

Anand Dama — Emkay Global Financial Services Ltd — Analyst

Sure. But then… [Speech Overlap]

Dinesh Kumar Khara — Chairman

As of now, we don’t have any such message.

Anand Dama — Emkay Global Financial Services Ltd — Analyst

Okay. Sure. Thanks a lot sir.

MB Mahesh — Kotak — Analyst

Good evening sir. This is Mahesh from Kotak. Three questions from my side. One is, is there a particular threshold limit beyond which you would say that the margin seems to be too high, and you would want to revisit the yields that — or the spreads that is sitting across the various lending products that you have?

Dinesh Kumar Khara — Chairman

We have not kept any threshold margins for us. But yes, of course, as one of the — we would like to be reasonable with our customers, both on the deposit side as well as on the loan side.

MB Mahesh — Kotak — Analyst

Okay. In the sense that if margins does expand further, you would say your action would be mostly on the deposit side rather than the lending side?

Dinesh Kumar Khara — Chairman

Let’s wait and watch.

MB Mahesh — Kotak — Analyst

Okay. Second question, sir, on this foreign currency loan. Any particular reason as to why there is so much excitement to do this business? Very strong growth, environment doesn’t seem to be that great outside India.

Dinesh Kumar Khara — Chairman

Normally, this is given to the well-rated corporates in India and well-rated public sector entities in India.

MB Mahesh — Kotak — Analyst

But — okay. You don’t see any risk coming out of this particular book?

Dinesh Kumar Khara — Chairman

That’s what I’m saying, the well-rated is something which takes care of the risk component.

MB Mahesh — Kotak — Analyst

Okay. And the final question sir, just a bookkeeping question. Write-off from the loans, does it now come under other income? Or does it — is it now part of provisions?

Dinesh Kumar Khara — Chairman

Write-off, what?

MB Mahesh — Kotak — Analyst

Income from write-offs, sir.

Sanjay Kapoor — General Manager

Recovery from write-off.

MB Mahesh — Kotak — Analyst

Recovery from write-off.

Dinesh Kumar Khara — Chairman

Recovery from write-off, that in the other income.

MB Mahesh — Kotak — Analyst

Any — What is the ballpark number that is there for this quarter?

Dinesh Kumar Khara — Chairman

It’s I think — how much — INR1,800 crores?

Saurabh Kumar — JP Morgan — Analyst

INR1,823 [Phonetic] crores.

Dinesh Kumar Khara — Chairman

INR1,800 crores kind of a number is there. INR1,823 crores.

MB Mahesh — Kotak — Analyst

Sir, under miscellaneous income, it is INR564 crores, which is total, which should be part of that, right?

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

No, no, it is not like that. We have had some losses. And to offset that actually, derivative losses we have had, but the AUCA recovery has been to the tune of INR1,803 crores. Last year, AUCA recovery was INR1,344 crores, which is a growth of 34.15%. But last time, we had some treasury losses because of some derivatives losses, due to which this INR528 crores number is coming.

MB Mahesh — Kotak — Analyst

Okay, perfect. Thanks a lot.

Sanjay Kapoor — General Manager

Maybe we can have one more question.

Kunal Shah — ICICI Securities — Analyst

Yes, sir. Kunal over here from ICICI Securities. So maybe with respect to this entire other provisions which are there of almost INR900 crores-odd. So what that pertains to actually? Because I think maybe there is no recovery component. But otherwise, we had seen a negative and there is some provisioning of INR900 crores-odd this quarter.

Dinesh Kumar Khara — Chairman

Just one second.

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

What’s that?

Dinesh Kumar Khara — Chairman

INR900 crores, other provisions.

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

Other provisions would be this non-fund-based, provision on non-fund based? [Speech Overlap] Yes.

Dinesh Kumar Khara — Chairman

Just a second. No, other slide.

Kunal Shah — ICICI Securities — Analyst

Yeah, INR898 crores, INR900 crores-odd.

Dinesh Kumar Khara — Chairman

Yeah, we’ve provide you the breakup.

C.S. Setty — Managing Director

Yeah, these are the provisions that are made under non-fund-based limits. Also, wherever the ICA restructuring is not implemented within the time line, etc, there are some additional provisions that get made as per the regulatory requirement. They appear under other provision. But in any case we’ll share the exact breakup later.

Kunal Shah — ICICI Securities — Analyst

Sure. And when we look at it in terms of the overall slippage, which is there for this quarter…[Speech Overlap]

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

Sir, this is restructuring. INR898 crores is the restructuring is what… [Speech Overlap]

Kunal Shah — ICICI Securities — Analyst

It is towards the restructuring?

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

Yeah.

Kunal Shah — ICICI Securities — Analyst

Okay.

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

We have provided 30% instead of the 5% mandatory that was the RBI guidance.

Kunal Shah — ICICI Securities — Analyst

Okay. Got it. And when we look at the slippage, how much could be the impact of recoveries inter-quarter adjustments which would have been there? Because last quarter also we highlighted that out of INR9,700 crores-odd, INR2,800 crores have already got recovered. So does that get into the recoveries and upgrades? Or it is netted off into this number itself?

Dinesh Kumar Khara — Chairman

No, it gets into the recoveries and upgrades.

Kunal Shah — ICICI Securities — Analyst

So this is pure in terms of — maybe when we look at it, almost like INR3,000 crores-odd retail, SME, which was the last time, that itself would have come down quite significantly?

C.S. Setty — Managing Director

Inter-quarter and net-off is there. The numbers which you’re seeing here.

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

This is the net number.

C.S. Setty — Managing Director

It is inter-quarter net-off. The recovery average for the last year’s [Speech Overlap]

Kunal Shah — ICICI Securities — Analyst

Okay.

Dinesh Kumar Khara — Chairman

If you look at the slide on NPA movement plus AUCA, there you will see the breakup in terms of total gross slippages as well as the recovery and upgrades. You want the slide number, I can guide you there.

Kunal Shah — ICICI Securities — Analyst

Yeah, yeah. That’s — So maybe whatever is there up to last year, only those recoveries and upgrades are there. Whatever was there in Q1, maybe that’s getting netted off.

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

Yes.

Kunal Shah — ICICI Securities — Analyst

Okay. And lastly, in terms of the restructured pool, so when we look at the decline, that’s also not significant. In fact, hardly like INR1,000 crores-odd of movement, that too coming in from the corporate. And even since March, hardly INR3,000 crores-odd movement. So when do we see retail and SME actually moving out of the restructured pool? And how would that behavior be?

Dinesh Kumar Khara — Chairman

I think the repayment process started 24 months repayment is there [Speech Overlap] 24 months moratorium. And, I think moratorium only in — very small book of the book has got the moratorium over. So there — that, I think, is what we have already seen. That we have actually… [Speech Overlap]

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

Slide number13. Put the Slide number 13.

Dinesh Kumar Khara — Chairman

So this is how it is looking like. And… [Speech Overlap]

Kunal Shah — ICICI Securities — Analyst

Yeah. So movement has largely been on the corporate side. Retail and SME would really take some time. So when should we see that actually coming off?

C.S. Setty — Managing Director

Next financial year or… [Speech Overlap]

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

24 months was the maximum that was…[Speech Overlap]

Dinesh Kumar Khara — Chairman

That’s the moratorium which has been extended. So we’ll get to see it, perhaps early part of the next financial year.

Kunal Shah — ICICI Securities — Analyst

Sure. Okay. Thank you.

Sanjay Kapoor — General Manager

So we have a few questions coming in through the online webcast. So Chairman sir will now address these questions.

Dinesh Kumar Khara — Chairman

Yeah. The question from Mr. Darpin Shah is, if you can provide breakup of slippages for retail SME, Agri, corporate and overseas business? SME has slipped INR408 crores, Agri has slipped INR631 crores, and PER has slipped INR330 crores. In the retail segment, it is INR1,369 crores slippages. In the corporate segment, it is INR956 crores. And total domestic, all put together, is INR2,325 crores. The IBG slippages were INR74 crores. So overall, Bank as a whole, we have seen a slippage of INR2,399 crores.

The next question comes from — what is Bank’s outlook on NIM and ROA? Can we sustain the trend we have shown in this quarter? We will put in our best effort to see that we sustain this trend. This is coming from Ashish Sharma.

The next — the third question is coming from Sharad Juttu. Are NIM sustainable if looked at in the context of shrinking CASA base and rising FD rates amid competition? Strategies and lever available to save the NIMs? Well, of course, I do agree with what you have mentioned in terms of shrinking CASA base, but there also we have put in some efforts and those efforts are essentially — the current account market otherwise is comprising of about 49% government business and 45% coming from the trade and commerce. Government business likely to witness a very tectonic shift, because now they are opening the SME and the CNA accounts. And they are managing their cash pretty well. So they may not leave much afloat. That’s why we have started embarking upon the trade and commerce. And there, we have seen growth of almost about 8% in the current quarter.

So hopefully, we have recalibrated our strategy for the current account deposits. And we have all the products and services. Hopefully, we should be in a position to reverse this trend of current account also. And savings bank deposit, we have opened very large number of savings bank accounts, and we’ll continue to do that. So that will probably help us in coming back as far as CASA is concerned.

And, we are very mindful in terms of increasing our interest rate on the term deposit. So I think hopefully, our effort will be to sustain the NIM. But of course, the market forces, how will they really react going forward will also influence our decision. But nevertheless, our conscious effort would be to sustain the NIM.

Going forward, given the present advances growth and capital burn, post what level of CET will you consider an equity capital base? Perhaps we will revisit this decision. This is a question from Lalita, and we will be revisiting this subject after the financial result of the financial year ’21 — ’22-’23. And at that stage, what will be the plowback and how the capital will look like? That will be the point of time when we will look into this.

Last question is from Mr. Sawant. His question is, will you please give more color on how Bank is positioning to manage credit growth in low deposit growth environment? I have mentioned that we have almost about INR3.5 trillion worth of securities which we’re holding in the treasury. And we’ll be in a position to monetize those securities, which will help us in supporting the credit growth. And we are having almost about 10% kind of a deposit growth also as of now. Going forward, we might see even better trends. And with that, we should be in a position to take care of the advances growth.

C.S. Setty — Managing Director

Just to follow up on your question on how many offers have been made. Ten offers of INR24,000 crores roughly. Our share is INR3,400 crores. Thank you.

Saloni Narayan — Deputy Managing Director, (Finance), CC, Mumbai

We have some more questions received on the chat box, but in the interest of time, we’ll reply in writing. Sorry for not taking it up right now.

Sanjay Kapoor — General Manager

Okay. So I trust all the major questions have already been addressed now. So, in the interest of time, we’ll stop here and we’ll be happy to respond to other questions in offline mode. So let me end this evening with thanking the Chairman, the top management team, the analysts, and the ladies and gentlemen. To round off this evening, we request you to join us for high tea, which is just arranged outside the hall.

Thank you very much.

Dinesh Kumar Khara — Chairman

Thank you very much.