State Bank of India (SBIN) Q3 FY22 Earnings Call Transcript

State Bank of India (NSE:SBIN) Q3 FY22 Earnings Concall dated Feb. 05, 2022,

Corporate Participants:

Pawan Kumar Kedia — General Manager, Performance, Planning and Review

Dinesh Kumar Khara — Chairman, State Bank Group

Ashwini Kumar Tewari — Managing Director, International Banking, Technology and Subsidiaries

Analysts:

Mahrukh Adajania — Edelweiss — Analyst

Kunal Shah — ICICI Securities — Analyst

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Akash Jain — Ajcon Global Services Ltd. — Analyst

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

M.B. Mahesh — Kotak Securities — Analyst

Jignesh Shial — InCred Capital — Analyst

Gaurav Kochar — Mirae Asset — Analyst

Manish Ostwal — Nirmal Bang Securities — Analyst

Ashok Ajmera — Ajcon Global Services Ltd. — Analyst

Saurabh Kumar — J.P. Morgan — Analyst

Manish Shukla — Axis Capital — Analyst

Krishnan ASV — HDFC Securities — Analyst

Anand Dama — Emkay Global Financial Services — Analyst

Prakhar Sharma — Jefferies — Analyst

Nitin Agarwal — Motilal Oswal Securities — Analyst

Nilanjan Karfa — Nomura — Analyst

Adarsh Parasrampuria — CLSA — Analyst

Sumeet Kariwala — Morgan Stanley — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to State Bank of India Q3 FY ’21-’22 earnings conference call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Pawan Kumar Kedia, General Manager, Performance Planning and Review, State Bank of India. Thank you, and over to you, sir.

Pawan Kumar Kedia — General Manager, Performance, Planning and Review

Thank you, Aman. Good evening, ladies and gentlemen. I am Pawan Kumar Kedia, General Manager, Performance Planning and Review. On behalf of the top management of SBI, I extend a warm welcome to all joining us today and on SBI Q3 FY ’22 earnings call — conference call.

On the call today we have with us: our Chairman, Mr. Dinesh Kumar Khara; Mr. C. S. Setty, Managing Director, Retail and Digital Banking; Mr. Ashwani Bhatia, Managing Director, Corporate Banking and Global Markets; Mr. Swaminathan J, Managing Director, Risk Compliance and Stress Asset Resolution Group; Mr. Ashwini Tewari, Managing Director, International Banking, Technology and Subsidiaries; Mr. Alok Choudhary, Deputy Managing Director, Finance; Mr. Charanjit Attra, CFO.

Before I request our Chairman sir to give a brief summary of the Bank’s Q3 FY ’22 performance and the strategic initiative undertaken, 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 the circumstances. Actual outcome 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.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you. Very good evening to all of you. It’s a pleasure to connect with you once again virtually amidst ongoing pandemic. Thank you for joining this conference call on a Saturday evening.

I would like to start by thanking all our stakeholders, including our customers, shareholders, employees and the broader ecosystem which has been supported of our effort and initiative in our banking journey. For the last two months or so we have seen a sharp increase in COVID-19 cases due to new coronavirus variant, Omicron. However, its affect has been nowhere as deadly as the second wave, thanks to the government’s massive vaccination drive, including the cautionary booster dose for certain categories. The extension of vaccination to the age group of 15 to 18 also has contributed to better preparedness in dealing with the virus and return to normalcy.

The quarter three of the financial year continue results further validates that the Bank’s performance is improving steadily. I would like to highlight a few key indicators of our performance, which are essentially relating to Bank’s profit for the quarter, has increased to INR8,432 crores, which is a Y-o-Y increase of 62.27%. Operating profit has also increased marginally by 6.86% Y-o-Y. Our ROE has improved from 9.49% to 14.01% Y-o-Y basis. Our net interest income for quarter three of financial year 2022 is up by 6.48% Y-o-Y and our domestic NIM is up by 6 basis point Y-o-Y, even as the CD ratio is at 60.89% [Phonetic]. We believe that these are an outcome of the Bank’s focus on profitable growth, given the tasks [Phonetic] our brand enjoys, our heritage and our reach, we aim to deliver best value to our customers, while being profitable, as I’ve said in my prior interactions, we’ll land at price point which add value to all of us.

The gross NPA ratio of the Bank has come down from 4.9% to 4.5% on a quarter-on-quarter basis. While the net NPA is at 1.34% for quarter three of financial year 2022. The net NPA stands at INR34,540 crores, and additional provision is not included in net NPA INR30,089 crores. The Bank’s operating profit for nine-month period including additional provision is 2.48 times the net NPA levels, which makes it one of the most resilient balance sheet in the recent years. Our slippage ratio for nine-month financial year 2022 is at 1.16%, while our slippage ratio in quarter three of the financial 2022 is 0.37%. This is largely an outcome of the critical changes that have been made in our underwriting processes through the last cycles. Further, it highlights the inherent quality of the Bank’s underlying portfolio, which continues to be one of the lowest RWA portfolio [Technical Issues]. The CET1 ratio of the Bank is at 9.38% at the end of December 2021 and include — and if we include the profit on during the year, the ratio stands at 10.32%. We believe that the internal accruals are adequate to support the credit growth through the financial year 2023. The Bank’s journey towards digital leadership continues and is adding significant value both for the Bank and to its customers. The Bank’s super app, YONO, is getting strength by addition of new features.

From a longer-term perspective, I would like to highlight that we are one of the best managed institutions in the country. Our management quality and the bandwidth enable us to efficiently manage the scale and complexity of our wages [Phonetic] across the globe. We continue to attract the best talent in the country. In fact, that’s way [Phonetic] for Visionary Officers exam is one of the most competitive exams in the country with an intake ratio of 0.2% compared to a 1% intake ratio in the common admission test for the leading management institute. In the recent past, a number of our top executives have gone to hunt both public sector undertakings, private sector banks and also FIs.

Our team is committed to deliver 15% plus ROE consistently over the long-term. As credit growth picks up, we expect the profitability ratios to improve further. While the longer-term prospects are clear, now in the last quarter, we would still prefer to wait before giving guidance on key variables.

To wrap my all my opening remarks, I would like to thank you all for your support to the Bank. We remain committed to reward your trust in us with superior sustainable returns over the long-term. I wish everyone very good health and prosperity. My team and I are now open to taking your questions. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] First question is from the line of Mahrukh Adajania from Edelweiss [Phonetic]. Please go ahead.

Mahrukh Adajania — Edelweiss — Analyst

Hello. Congratulations. My first question is on recoveries. So, excluding inter-quarter recoveries, what would be the gross slippage in Q3? In the first half you already had inter-quarter recoveries of INR8,000 crores, so what would that figure be for nine months or just for the third quarter?

Dinesh Kumar Khara — Chairman, State Bank Group

See, as far as — we go for the net slippages that is what the industry practice is also. And our net slippages are INR2,334 crores for this quarter, which we have already shared. Yes, of course, we had a challenge in the first quarter, then our slippages were as high as INR15,666 crores, but we have recovered all those slippages well in time. And now as this — as the situation stands, we feel that our slippages are hardly any and whatever little is seen that also we are in a position to recover well. And even SMA 1 and SMA 2 also is at a much lower level in the month of December 2021. And, in fact, here also we are witnessing a pretty strong trend in terms of recovery. So I think that is one of the reasons why perhaps slippages are not as much of a worry for us.

Mahrukh Adajania — Edelweiss — Analyst

Sir, yes. But, sir, is it possible to have a figure like we had a figure of INR8,000 crore of first two quarters recovery in the second quarter. So would — can you have a similar number for the third quarter or for nine months?

Dinesh Kumar Khara — Chairman, State Bank Group

In fact, that was a very unusual situation which we saw in the first quarter and that’s why we were tracking the recoveries very closely, but since now the slippages are not as high, so we really don’t work out like that. But nevertheless, I’ll ask the department concerned, if at all, they will have some number, they will share with you separately.

Mahrukh Adajania — Edelweiss — Analyst

Thank you, sir. Sir, and my next question is just on the rate outlook. So market rates are hardening. Now, just in terms of loans and deposits. So for loans, how much of your loans would be repo linked? Of course, external benchmark, but within that repo linked because that would reprice only when the repo changes.

Dinesh Kumar Khara — Chairman, State Bank Group

See, we have — a repo linked loan is just about 0.24%. Our external benchmark linked loan book is about 22%.

Mahrukh Adajania — Edelweiss — Analyst

How much, sir?

Dinesh Kumar Khara — Chairman, State Bank Group

22% is in the repo — EBLR linked. It is essentially repo and a repo after [Speech Overlap] is — are neither are the two, that is how it is. It is 22%.

Mahrukh Adajania — Edelweiss — Analyst

Okay, sir. Sir, but most of this will reprice or even repo is high, right?

Dinesh Kumar Khara — Chairman, State Bank Group

No, if at all it is linked to the T-Bill, then it will be at — as and when the T- Bill rate moves.

Mahrukh Adajania — Edelweiss — Analyst

Got it, sir. Sir, and just in terms of deposits, sir, the growth in savings on a sequential basis, this quarter has been a little under 2% on a sequential basis. So, do you visualize the situation given hardening rate that in the next two, three months, we’ll have to increase your savings rate because if you are increasing your term deposit rates then the repricing is only incremental but savings it will be outstanding then?

Dinesh Kumar Khara — Chairman, State Bank Group

I think we will not be resorting to increasing the savings bank rate. We will rather be looking at certain maturities in the term deposit buckets. But yes, of course, much of it will depend upon the behavior, which we’ll see on the ground. But we don’t plan to increase the savings rate.

Operator

Mahrukh, is the question answered? Thank you. Our next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.

Kunal Shah — ICICI Securities — Analyst

Yeah. Good evening, sir. Sir, firstly in terms of the overall growth on the corporate side, so last couple of quarters, we have been highlighting there would be utilization of the working capital limits and when we see it across the industry, I think the larger part of growth is coming in from the petroleum and the other industries, while I think deleveraging is continuing in the iron and steel, roads, transport and all. So now, how do you see the outlook given maybe government is also putting a lot of trust on capex? And overall, how would we participate in terms of the corporate credit growth given the competition here?

Dinesh Kumar Khara — Chairman, State Bank Group

I would like to give you some kind of a color in terms of the under-utilization or the unutilization, which we have seen in the working capital cycle. As at the end of September 2021, we had a situation where the unutilized limits where as I have told [Phonetic] 52%. So from there it has come to about 43%, so which means that the unutilization or the under-utilization has come down. So — but having said that, still we have got the unutilized limits of, as I have told [Phonetic], INR1 crore as far as the corporate book is concerned. Even term loans also there is a slight improvement in the undisbursed term loans, but yes, of course, I think we have to wait and watch for the improvement in the utilization as far as the term loans are concerned.

As far as the infrastructure spend is concerned, of course, what we have seen and the growth till now, they were into various state government enterprises which are getting into various kinds of infrastructure spending. That is one of the major component. And apart from that, the utilization, which we’ve seen is into like these four sectors that is something, which has been — and even the infrastructure sector also we have seen a decent growth. So going forward, I think the kind of the under-utilization, which is coming down and also the trend which we have seen in the month of January, we hope to see it sustained and if at all, it’s a sales, then perhaps even we will witness much decent credit [Technical Issues] numbers than what we have seen in the third quarter.

Kunal Shah — ICICI Securities — Analyst

But it is not unwinding because the first fortnight number shows some unwinding in the bank credit overall, but that’s not the situation for us and we expect it to sustain.

Dinesh Kumar Khara — Chairman, State Bank Group

As far as — I don’t know about the banking system. But we keep on reviewing our numbers on an ongoing basis, and there we see very healthy trends.

Kunal Shah — ICICI Securities — Analyst

And on international and overseas side, there is a little traction. So what is the outlook out there? We had seen a good growth on a quarter-on-quarter basis, as well as year-on-year. So what is the nature? And do we see pursuing the opportunities for the Indian linked corporate overseas?

Dinesh Kumar Khara — Chairman, State Bank Group

So this financing is essentially trade finance, which has been done. It’s a 21% increase, which is coming as essentially trade finance and the local loans which we have done in these geographies. We are primarily focused into USA, UK, Singapore and Hong Kong. These are the major territories where we are growing. So I hope and apart from that we had started a new line of activity which was factoring, so that has also given us a decent growth. Hopefully, we expect to see a similar trend going forward.

Kunal Shah — ICICI Securities — Analyst

Okay. And one last question, in terms of the standard asset provisioning, is it more towards the restructured pool or the increment which is there maybe INR500 crores, INR600 crores, would be because of the increase in the loan book but balance would be towards the restructured book?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. It is essentially relating to one of the account, which we were seeing that it is under some stress. Though, it is still a standard account. So that is one of the reasons. And mainly it is on account of that and some bit of a restructuring, too.

Kunal Shah — ICICI Securities — Analyst

Okay. Got it. Yeah. Thank you.

Operator

Thank you. Our next question is from the line of Mona Khetan from Dolat Capital. Please go ahead.

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Hello. Yeah. Hi, sir. Thanks for taking up my question. So firstly, on the cost to assets, for nine-month it stood at about 1.8% for SBI. So where do we see this moving over the near-term? Could it normalize back to 2% levels we have seen earlier or could this remain where it is?

Dinesh Kumar Khara — Chairman, State Bank Group

Cost to asset ratio would be — it is somewhere around 1.78% now, it has come down from 1.95%. So I think I expect it to come down actually once we have the balance sheet number growing and also it was not linked to much of an incremental cost for us. So I think I expect it to improve further. And also there is lot of digital adoption, which is happening, if I may say so about INR40,000 crores worth of book has been underwritten in the current financial year through the digital medium. So there the cost is quite negligible. And we are trying to run through digital. So it will further come down.

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Sure. And on the restructured book, the presentation mentions of INR33,000 crore. And once we include the non-COVID MSME restructuring under the earlier relief scheme and adjusted for any overlaps that we have with the current COVID-related restructured book. Where would be total restructured book stand for us?

Dinesh Kumar Khara — Chairman, State Bank Group

Total restructured book would be around INR40,000 crores.

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

INR40,000 crores?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. Restructured per se is INR32,000 plus crores whatever the winning one — the previous one. The previous book, if at all, will be reckon, it will be around INR40,000 crores.

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Got it. And finally, where does the total ECLGS disbursement stand for us today? And if you could give what was it last quarter as well? Thank you.

Dinesh Kumar Khara — Chairman, State Bank Group

Sorry, I could not get your question. Can you please repeat it?

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Yeah. ECLGS disbursement?

Dinesh Kumar Khara — Chairman, State Bank Group

ECGL?

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Yeah.

Unidentified Speaker —

The outstanding is INR31,000 crores.

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Okay. And where was it last quarter for us? Or how much did we disbursed in this quarter?

Unidentified Speaker —

We were at 20 — INR7,000 is additional disbursement during this quarter.

Mona Khetan — Dolat Capital Market Private Ltd. — Analyst

Okay. Thank you and all the best.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Our next question is from the line of Akash Jain from Ajcon Global Services Limited. Please go ahead.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Congratulations, sir, on a fantastic set of numbers in this quarter. I had a question regarding recoveries. Sir, what would be the recovery from written off accounts in this quarter?

Unidentified Speaker —

Quarter is INR1,500 crores, nine-month is INR5,600 crores.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Okay. And what are we expecting from NCLT accounts in terms of recoveries in coming quarter?

Dinesh Kumar Khara — Chairman, State Bank Group

We will not be differentiating between NCLT. But overall, we are expecting a total about INR8,000 crore this whole financial year.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Okay. And, sir, I wanted your outlook on the MSME book. Going forward, what do we foresee in the MSME sector?

Dinesh Kumar Khara — Chairman, State Bank Group

We expect the book to look even better going forward.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Okay. And…

Dinesh Kumar Khara — Chairman, State Bank Group

We are focusing on the vendor finance and dealer finance in a big way. So that will help us in improving the quality of this book.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Okay. And in the corporate book, which sectors are we seeing green shoots apart from infra?

Dinesh Kumar Khara — Chairman, State Bank Group

The core sector also — the core sector is also seeing some opportunities. And I would say that I think the kind of traction which we have seen in the last quarter and even the early months of this quarter, it appears to be universal. Very broad-based.

Akash Jain — Ajcon Global Services Ltd. — Analyst

And with regards to the much talked large retail chain account, do we have exposure to that account?

Dinesh Kumar Khara — Chairman, State Bank Group

We have the exposure and we are fully provided for that.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Okay.

Dinesh Kumar Khara — Chairman, State Bank Group

Almost fully provided.

Akash Jain — Ajcon Global Services Ltd. — Analyst

Thank you, sir. That is all from my side.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Our next question is from Jai Mundhra from B&K Securities. Please go ahead.

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

Yeah. Hi, sir. Thanks for the opportunity. I have a couple of questions. First is, sir, we have seen around INR1,490 crores of MTM depreciation this quarter. Is this mainly pertaining to reset bonds or what is there?

Dinesh Kumar Khara — Chairman, State Bank Group

The investment depreciation — the four investment depreciation is only about INR60-odd crores. The remaining is the accelerated provision that we have made on the security receipts that are maturing over the next two to three years. So since — as ours are held as part of investments. So it is reflecting in the investment depreciation. But investment depreciation per se is about INR60 crores.

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

Sure, sir. Sir, if you can highlight what is your gross book value of security receipts? And after this lumpy provisioning, how much we have the total provisioning there? I mean, the gross book value of [Speech Overlap]?

Dinesh Kumar Khara — Chairman, State Bank Group

INR8,600 crores is the gross SR and now we have provided up to 87% of the book.

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

Understood. And, sir, on this MTM now, if the G-Sec were to go up or if were to harden, how — I mean, what is our threshold of the investment AFS book? I mean, till what yields do you — you are protected in some sense there?

Dinesh Kumar Khara — Chairman, State Bank Group

We are protected till about between 6.95 and 7.

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

Understood. Great. And, sir, just to — just correct me if I’m wrong. If I were to see your AFS details that you had given. I think you have given very beautifully detailed AFS breakup. But if I were to understand that, let’s say, your sensitivity of interest rate, what — is the number right that I should be multiplying SLR into AFS which is like 41% and then the entire AFS book which is your G-Sec, T-Bills, corporate bonds, SBL, all would have more or less similar impact? Is that the understanding right?

Dinesh Kumar Khara — Chairman, State Bank Group

The impact won’t be different because the way the yields have moved currently they would have moved more on the longer term. This is what has happened over the last three weeks or so. So the impact will not be uniform across the portfolio.

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

No. Right. Assuming a parallel shift in the yield curve, would the entire AFS book that we have shown, G-Sec, T-Bill, corporate bonds, SBL and everything, that would have, let’s say, MTM requirement, right, the entire AFS book?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. So above a certain threshold, our PV01 is around 110.

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

Sorry, sir, what is 110? Sorry, sir.

Unidentified Speaker —

PV01.

Dinesh Kumar Khara — Chairman, State Bank Group

PV01.

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

Okay. I did not get. But anyway — okay. And this is like 41% of the entire SLR investment, right? Is that — that is the way to read this, right? INR11 lakh crore into 41% is the AFS book?

Unidentified Speaker —

No, no, no, no.

Dinesh Kumar Khara — Chairman, State Bank Group

Our total investment book is in excess of INR14.5 lakh crores, INR8.5 lakh crore is the HTN [Phonetic]. And our AFS is about INR6 lakhs.

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

Understood. Okay. And the other question was, sir, on growth, on corporate growth specifically. So I think Chairman mentioned that there is, of course, the lower or the utilization has not been that great. But it looks like that we are losing out market share as compared to peers, especially on the corporate side. So is this like a conscious strategy that you feel that the pricing is not that remunerative enough? Or how are you seeing this space, especially the markets are now [Phonetic] clear?

Dinesh Kumar Khara — Chairman, State Bank Group

So when it comes to the corporate credit growth and the market share, we are very mindful, as I mentioned in my opening remarks also, what the price points would like to lend and also in terms of the industries where we would like to lend. We don’t want to get into — indiscriminately into all sectors. Where we want to lend we have to be very mindful, and we have got a risk appetite accordingly will then.

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

Understood, sir. And the last question, sir, is on ECLGS there looks like last quarter was some INR24,000 crore and in this quarter it has gone up to INR31,000 crore. So, like 25% increase in this quarter. Any specific reason or this was just because the ECLGS 1.0 scheme was liberalized so maybe that has — that is causing this spike?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. It is both a combination of additional financing which was allowed under the ECLGS and also the extension to certain new sectors, together contributed to this growth.

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

Understood, sir. Thank you very much, sir. And all the best.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Our next question is from Mahesh MB from Kotak Securities. Please go ahead.

M.B. Mahesh — Kotak Securities — Analyst

Good evening, sir. Just two questions from my side. One is, how are you looking at your capital adequacy number? In the sense that if growth does come back, would you still want to look at a possible capital raise intensive or are you think that the internal accruals are seems quite sufficient to manage the near-term growth numbers?

Dinesh Kumar Khara — Chairman, State Bank Group

See, as far as the growth which we’re looking at 9% kind of a growth, I think the drawback of the profit which we’ll have at the end of the year, we will be comfortably placed. But yes, we’ll wait for the growth trends in the coming year, coming financial year, and accordingly, we’ll take a call on the — after this.

M.B. Mahesh — Kotak Securities — Analyst

Sir, just one additional question, you kind of indicate that your near-term trajectory on ROE is around 15%. Does that mean that if credit costs were to go, let’s say, below your long-term averages for a certain period in time, would you allow the ROEs to move higher than 15% or you think that you kind of keep it at those levels at least for the foreseeable future? What is your internal assessment or how do you want to look at this?

Dinesh Kumar Khara — Chairman, State Bank Group

No. We would like to keep ROE above 15%, that is not that we don’t want to go beyond 15%, that’s very clear. And — but, yes, of course, I think many of the calls we’ve taken at the material point of time.

M.B. Mahesh — Kotak Securities — Analyst

Okay. And just kind of clarifying this. Let’s assume that your credit — your loan book was still running at, let’s say, 10-ish to, let’s say, 12% kind of a number and ROEs are still quite high. Do you still quite comfortable kind of keeping a high ROEs over pushing growth? Is that the way to see?

Dinesh Kumar Khara — Chairman, State Bank Group

So actually if you have a look at our numbers, we are — we should be at about 12% as far as Tier 1 is concerned. Our risk weighted assets are currently at about — at around 55%. So there is enough capital to take care of growth. So on the return on equity side, I mean, we haven’t really thought very deeply on the fact that whether we should hit 16% or 17%. But suffice to say that right now we are pretty well placed.

M.B. Mahesh — Kotak Securities — Analyst

Perfect, sir. This is very useful. Thanks a lot.

Operator

Thank you. Our next question is from Jignesh Shial from InCred Capital. Please go ahead.

Jignesh Shial — InCred Capital — Analyst

Thanks for the opportunity, sir. Just on the same thing I wanted to check. So, whether — with the kind of credit growth overall, a single-digit 9% to 10%. There is no immediate capital raise is — we looked into, right? That is what as we’ve mentioned? Is that correct?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah, that’s right.

Jignesh Shial — InCred Capital — Analyst

Okay. That’s important. And then number two, can you give some more numbers or throw some more light on your digital initiatives successfully, how the sourcing and all on the MSME outfront is happening or even the personal loan fund is happening? If you can give some more light on that? That would be really useful.

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. Digital, as far as the YONO app is concerned, it’s doing pretty well about 4.5 crore people have already become the registered user of our YONO app. And we have — when it comes to the online banking, over 9 crore people are using this, and — the online banking. So that is something which we’ve seen. Almost about 30,000-odd savings bank accounts are getting opened on a daily basis. And we have also seen a decent growth in terms of our PAPL, which is pre-approved personal loans, matured dispensing almost INR40,000 crore worth of loans have been dispensed in this financial year using this particular app.

And when it comes to the financial superstore, we are in a position to sell about almost INR4,000 crore kind of mutual fund — INR3,300 crore worth of mutual fund sales we have done with the help of this app. Over 17 lakh policies, personal accident policies we have sold with the help of this app. And the growth actually in the mutual funds is — have gone up by almost 4 times, 5 times on a Y-o-Y basis. I think going forward, in fact, we are already using this app for doing our KCC reviews and also the KCC gold loan — I mean, agri gold loans also we are sourcing with the help of this app, almost over INR10,000 crore worth of agri gold loans were sourced in this — with the help of this app. So that’s how things are. And I am quite hopeful that going forward the way we are leveraging our analytics, we are in a position to offer many more such functionalities with the help of this YONO app.

Jignesh Shial — InCred Capital — Analyst

Okay. And that’s quite useful. And just lastly reconfirming, roughly 22% of the loan book is linked to external market rates, right? That’s the T-Bill.

Dinesh Kumar Khara — Chairman, State Bank Group

22%. Yeah.

Jignesh Shial — InCred Capital — Analyst

So in case of any moment happening on the people side, immediately your 22% of the book will get to increase accordingly?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah, that’s correct.

Jignesh Shial — InCred Capital — Analyst

Okay. Thank you. Thank you so much, sir. Thank you. All the best, sir.

Operator

Thank you. The next question is from Gaurav Kochar from Mirae Asset. Please go ahead.

Gaurav Kochar — Mirae Asset — Analyst

Yeah. Good evening, everyone. Thanks for taking my question. Just a couple of questions, sir, first one is, your outlook on credit cost for fiscal year 2023, even that we have seen a very good sort of credit environment, asset quality has held up quite well despite the three waves of COVID. So just wanted some color around that. And in that context, if I look at the write-off pool, it’s set around INR1,80,000 crore today. So what kind of recovery should we assume going ahead from pool? And on a net basis are we looking at a very benign net credit cost for fiscal year 2023? That’s the first question.

Dinesh Kumar Khara — Chairman, State Bank Group

Credit cost, our endeavor would be to keep it around the level. But yes, of course, the guidance — when it comes to guidance, I would like to believe in under-promise and over-deliver. And that in mind, we would not like to change our guidance, but nevertheless, we’d like to keep it around the same number, credit cost. That is one.

Secondly, your question relating to the recovery from the write-off pool, generally our experience is that, we are in a cushion to recover about 20% of the write-off pool. So that is something which we have seen over the past. So I think it should be around the same level.

Gaurav Kochar — Mirae Asset — Analyst

Okay. So we’ll get to put numbers into context INR1,80,000 crore pool, roughly INR36,000 crore in the next, say, maybe two to three years basically sort of recovery, that you would be targeting from the existing pool?

Dinesh Kumar Khara — Chairman, State Bank Group

And also it depends also depending upon the security, if at all it is there. But just on the next two to three years on a rough basis, we can achieve that.

Gaurav Kochar — Mirae Asset — Analyst

Sure. Okay. That’s helpful. And my second question is with respect to the — it’s about the system credit growth data that came in every fortnight. In the last fortnight of December I think there was a huge bump up in credit, around INR3.7 trillion. So — and for us, I mean, the credit growth is also strong at 5.5% sequentially. So whether this large chunk of this growth in this quarter came in at the last fortnight, is that a fair assumption? And in that context, I mean, will it be fair to assume that the interest income — the interest on loan benefit for this growth will be more visible in 4Q? Is that a right way to look at it?

Dinesh Kumar Khara — Chairman, State Bank Group

No, you’re right, but I think in our case, the growth that you’re thinking in terms of the last quarter it was not really so. I would rather say that we have seen the growth coming in the early part of January, which, of course, we’ll get to see in the current quarter. So I think hopefully we’ll have decent numbers to talk about when we close this quarter.

Gaurav Kochar — Mirae Asset — Analyst

Okay. Okay. That’s great to know, sir. And on the incremental yield versus the on book yield on loans, will — how high is the incremental yield given that large part of growth is coming from retail and within retail, the unsecured retail? So, any color on what would be the incremental yield?

Dinesh Kumar Khara — Chairman, State Bank Group

Actually, retail growth is about 14%, 15%. But we have observed is that, the chunky growth comes from the corporate book. If at all chunky growth comes from the corporate book and a significant portion of our loan book is now linked to external benchmark or MCLR. So, that also will be the guiding factor in terms of kind of earnings which you will get to see. About 50% is MCLR and about 22% is external benchmark linked rate. So that is how our book is set up.

Gaurav Kochar — Mirae Asset — Analyst

Right. Right. So, sir, just to stress this question a bit. I mean, on margins, roughly 50% plus when you do that, 72% of the book is externally linked and if we are in rising rate environment and then interest rate has to go up, say, next 12 to 18 months by another 25 basis points to 50 basis points in that, but on the liability side, given that SAR [Phonetic] rate could be broadly fixed and term deposit rates assuming the CD spread right now that you have is significant so you need not raise the term deposits over the medium — or near- to medium-term. So taking that context, what kind of margins you’re looking at from current levels? Can you assume a 20 basis point — 15 basis point, 20 basis point of margin improvement over the next, say, 12 months, 24 months?

Dinesh Kumar Khara — Chairman, State Bank Group

I think there are many variables. So we’ll have to wait and watch but nevertheless our effort would be to keep the NIM at around the same level, which where we are today. And if at all there will be scope for improvement we’ll certainly improve the NIM.

Gaurav Kochar — Mirae Asset — Analyst

Okay. Okay. Thank you so much, sir, and all the very best.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Next question is from Manish Ostwal from Nirmal Bang. Please go ahead.

Manish Ostwal — Nirmal Bang Securities — Analyst

Yes, sir. Thank you for the opportunity, sir. My question on the — our interest income during the quarter, sir, we have a growth — we saw a growth of 5% on — 5.5% on loan book side but NII is on the declining side. So any one-off in the previous quarter to this quarter sir? Can you explain on that?

Dinesh Kumar Khara — Chairman, State Bank Group

Probably IT refund will be the one.

Manish Ostwal — Nirmal Bang Securities — Analyst

What is the quantum, sir? What is the rate of movement?

Dinesh Kumar Khara — Chairman, State Bank Group

INR1,900 crore.

Manish Ostwal — Nirmal Bang Securities — Analyst

INR1,900 crore. Okay, sir. Thank you.

Operator

Thank you. Next question is from Ashok Ajmera from Ajcon Global Services. Please go ahead.

Ashok Ajmera — Ajcon Global Services Ltd. — Analyst

Thank you for giving this opportunity. And congratulations Khara and the entire team once again, you’ve made the operating profit of INR18,521 crores, making the Bank to be — making a profit of INR75,000 crores on the annualized basis if you take it or it will go rather more, which is really commendable. And even on the other front of the various ratio the NPA gross, NPA — net NPA, your PCR, ROE, fantastic result. Again said this, sir, I would — because most of the questions have already been covered. I would, sir, just seek your view, though, the time has been very short from the budget to now. So with this RBI supported digital currency movement now coming in, maybe it may take some time, but yes, it is going to be there. Sir, have you got any time to think over it to how it will disrupt the entire banking system? Whether the deposits will flow out of the banking systems? Whether — what kind of impact it could — it can have? Because it is going to come. That is for sure now. So this is my first question, sir. Not only a question. I mean, just — I just want your views on this.

Dinesh Kumar Khara — Chairman, State Bank Group

It’s too early and too premature, unless until we get to understand what the size, dimension and nature of this particular concept is going to be. But nevertheless, one thing I would like to mention that I think digital is becoming a default option in the economy and with the digital becoming the default option, if at all, there is any digital currency, so as against physical currency, the movement is going to be through the digital currency. So that’s how I really understand. But yes, it’s various dimensions in terms of a store of value, transaction value and how will it be accounted for, when it comes to the country’s GDP is concerned. So all of those dimensions I’m unable to really comment. I’ll my colleague Mr. Ashwini Tewari, to comment and give his views. Yeah, please.

Ashwini Kumar Tewari — Managing Director, International Banking, Technology and Subsidiaries

First thing we have to remember is that the Reserve Bank is conservative institution. It is not an institution which will disrupt the system. Second is that, the digital currency, on the Central Bank side, it’s like only in two, three countries, you have Nigeria with the naira, you have [Indecipherable] and few other smaller countries. China is still testing. Though, it has been very advanced in terms of testing and one of the leading reasons for China to do this was because big take in China and wallet-based funding that become really, really powerful and very large account systems. That was their motivation. In India, what we have is that, the payment system is already very evolved. So the digital payments through UPI and through NPCI are really, really significant part of the system. And since the inclusion is already happening through these channel, the motivation to that extent from the digital currency is relatively not that much. So the use cases which RBI has to find for digital currency should largely with the wholesale space, and therefore, we have to wait and watch as to what RBI thinks about the objectives. It is not a currency for the currency sake. It should be for what objectives it should be done. So we’ll have to wait and see. RBI has reached out to some players to actually take their inputs and there will be committees, etc., which will be set up, so we’ll wait and see how it goes.

Ashok Ajmera — Ajcon Global Services Ltd. — Analyst

Okay, sir. My next is on — now with NARCL, National Asset Recovery Company, now finally everything is approved and it is now in place. So in this quarter, that is the January, March quarter, how much are we thinking like? Because I think it has been — overall size of this past trends have been — I’ve been reading has reduced from INR84,000 crores to some INR50,000 crores. So how much will be of SBI in this, the gross value wise?

Dinesh Kumar Khara — Chairman, State Bank Group

Should be around INR20,000 crores. Phase 1 will be about INR11,000 crore.

Ashok Ajmera — Ajcon Global Services Ltd. — Analyst

Okay. And we feel that the realization is about that — in that 20%, 25% valuation and 15% of that is actually cash coming in.

Dinesh Kumar Khara — Chairman, State Bank Group

It is — the structure is going to be the same 85% SRs. It will be government-guaranteed SRs, 15% is going to be cash. So that is the current [Phonetic] structure which will be there.

Ashok Ajmera — Ajcon Global Services Ltd. — Analyst

Sir, now coming to, sir, this budget announcement, very bold — the capex announcement of almost about — increased by about almost INR195,000 crore, making it to INR7.5 lakh crore. So from that, sir, don’t you take the queue that tremendous work is going to happen in this and the bankers are going to play very, very major role in this. So is it not the time to again relook at our target of 9% or going forward even the — from the capital adequacy point of view also, the huge opportunity will be there in place, a huge investment will be built up along with — along this line. So what…

Dinesh Kumar Khara — Chairman, State Bank Group

I agree with you. And the kind of capex aspirations, which have been indicated in the budget, we are very much prepared to meet those kind of growth requirement of the economy. And variable gets spread over a period of time, so I think we will be very closely watching the situation and if at all there will be need for any capital, we’ll certainly look at it. But as of now, we will be plowing back our profit also at the end of this financial year and thereafter we’ll look at it that how things really look like.

Operator

Thank you. Mr. Ajmera, I request to join the queue for any follow-up as we have several participants waiting for their turn.

Thank you. The next question is from the line of Saurabh from J.P. Morgan. Please go ahead.

Saurabh Kumar — J.P. Morgan — Analyst

Sir, just two questions, one is, the current account has gone down quarter-on-quarter. Could you just highlight what’s happening there? Current account deposits.

And the second is, sir, on this NIMs just from the understanding I’ve got is essentially that you do get a positive benefit from rates given the orientation of the book. But you would — in the interest of loan growth, would look to pass on some of that benefit back to consumers and keep the ROAs around that 0.11% level? These are two questions, sir. Thank you.

Dinesh Kumar Khara — Chairman, State Bank Group

See, when it comes to NIM, of course, it’s absolute credit growth apart from that, yield on advances. Yield on advances have come down in the system as a whole. So, we are very mindful in terms of the kind of underwriting which we will do and at what price point we will do. So we’ll keep that in mind. So absolute growth will come, but maybe at a price, which may not be in tandem with what we have seen in the past, but much of it will be a function of the market. So I think that is one positive.

And current account, of course, it is always — it is something, it’s a function of the volatility in current account is a reality. So, if at all people — economic activity improves, people don’t keep the money into the current account, they rather consume. So that I think we’ll have to live with.

Saurabh Kumar — J.P. Morgan — Analyst

Okay. So there is no one-off in this INR250,000 going down to INR230,000.

Dinesh Kumar Khara — Chairman, State Bank Group

No, no, no. To us market always sells also because when government releases many, lot of payment, so it goes up also. So that’s the reality.

Saurabh Kumar — J.P. Morgan — Analyst

Okay. Understood, sir. Thank you.

Operator

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

Manish Shukla — Axis Capital — Analyst

Good evening and thank you for the opportunity. First question is on the loan book, you said about 22% is EDLR. Could you give the breakup for the rest, how much is MCLR and how much is fixed rate?

Dinesh Kumar Khara — Chairman, State Bank Group

MCLR is 49%.

Manish Shukla — Axis Capital — Analyst

And fixed rate?

Dinesh Kumar Khara — Chairman, State Bank Group

Pardon?

Manish Shukla — Axis Capital — Analyst

Sorry, and balance trade [Phonetic] loans, is it?

Unidentified Speaker —

Fixed rate don’t [Speech Overlap] some small, small quantity.

Dinesh Kumar Khara — Chairman, State Bank Group

Fixed rate is about 17%.

Manish Shukla — Axis Capital — Analyst

Okay. All right. The second question is that, a scenario where interest rates have already started rising, on balance sheet, we are sitting on almost 31% investments, of which INR6 lakh crores is AFS. So, a) it is a lower yielding book and b) we are in a rising rate scenario. So, how comfortable are you with this mix of assets between loans and investments?

Dinesh Kumar Khara — Chairman, State Bank Group

See, I think since our book which is linked to MCLR and EBLR 72%. So, I mean, the rising interest rate scenario, we will not have much of a challenge and even fixed rate also, there is a structure which allows us to revisit the interest rate. So that’s not as much of a worry. As far as the investment book is concerned, we’ll have to wait and watch for how really things look like, thereafter. We’re taking appropriate call. But nevertheless as far as our duration is concerned, modified duration for us is about 1.97. So we are — there is the month of December we are quite fine, even now also when we — as we speak, we are okay. But let’s see how things look like going forward.

Manish Shukla — Axis Capital — Analyst

Sure. The second question, sir, is on COVID provision, sir, about INR6,000 crores. What are your thoughts around either carrying it as is or utilizing it going forward?

Unidentified Speaker —

So in this quarter we’ll decide depending upon the, say, evolving situation we’ll decide that, but we will surely make some provision and use this around.

Manish Shukla — Axis Capital — Analyst

Okay.

Unidentified Speaker —

In whatever way it is prudent.

Manish Shukla — Axis Capital — Analyst

Okay. And this sectoral exposure shows that the telecom exposure is up sharply Y-o-Y. What is the nature of this, Slide #10?

Dinesh Kumar Khara — Chairman, State Bank Group

This is something — it is essentially the AAA companies.

Manish Shukla — Axis Capital — Analyst

Sorry, I didn’t catch that.

Dinesh Kumar Khara — Chairman, State Bank Group

It is essentially to the AAA companies, regulated companies.

Manish Shukla — Axis Capital — Analyst

Okay. The really last question for at least two or three quarters now international loans have been growing faster than the domestic loans. And clearly, that is a drag on net interest margin. So just wanted to get your thoughts on how you see that opportunity between additional business versus drag on our net interest margin?

Dinesh Kumar Khara — Chairman, State Bank Group

I think these are all short-term financing which has been done. And, of course, apart from that we have done some — not bilateral, it was syndicated loans, which we have participated in. And we have introduced a new line of activity which is factoring, so that also helped us in ramping up this book.

Unidentified Speaker —

And the interest rate which is redeployed quickly. It’s a short-term book, it can be redeployed into better yielding assets quickly and in good rated assets overall.

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. It’s well rated assets also.

Operator

Thank you, Mr. Shukla, request you to join the queue for any follow-up.

The next question is from the line of Krishnan from HDFC Securities. Please go ahead.

Krishnan ASV — HDFC Securities — Analyst

Yeah, hi. Very thanks management. Couple of queries. One was around the Xpress Credit segment, there has been a furious pace of growth there for a few quarters now. Just wanted to understand your sense of what kind of end-use are you seeing here. What kind of ticket sizes are these typically? That’s one.

The second is, now obviously private sector banks are allowed to compete for the government business, just wanted to understand your thoughts around how the competitive intensity is and where does SBI continue to have a right to win?

Dinesh Kumar Khara — Chairman, State Bank Group

Well, of course, when it comes to the unsecured PAPL is concerned, you wanted to know the ticket size, the average ticket size.

Unidentified Speaker —

Yeah. I think two questions what you asked in terms of growth potential of that I think we’ve been consistently maintaining that. This is coming mainly from our salary package account holder. We have about 1.7 crore to 1.8 crore salary account holders and our penetration in PA — the excess is just about 25% to 26%. So there is a good potential still available to be explored there. And yes, it is a competitive area. But we have been devising very, very dynamically all our salary packages. And to be — to continue to be extremely competitive in this area.

And as far as ticket size is concerned, it ranges from 6 lakh to 8 lakh.

Krishnan ASV — HDFC Securities — Analyst

Anything around the end users at all? I mean, what are these typically being used for just to get a sense of where consumption is heading?

Unidentified Speaker —

See, this depends salary holder, they — when they went — when they go home, they will have some repairs of homes and all, this is very easily available loan. So normally, they take for these kind of expenses, some home repair…

Dinesh Kumar Khara — Chairman, State Bank Group

These are all consumption expenses.

Unidentified Speaker —

[Speech Overlap] No, no. They don’t know — mainly put in assets. But generally, we cannot say marriages.

Krishnan ASV — HDFC Securities — Analyst

Thanks. And just on the competitive intensity around the government business.

Unidentified Speaker —

Yeah. That’s why I said.

Dinesh Kumar Khara — Chairman, State Bank Group

[Speech Overlap] requires lot of investment in terms of manpower and machine. So — and also I think we are quite competitively placed.

Unidentified Speaker —

And the international is holding up.

Krishnan ASV — HDFC Securities — Analyst

Understood. Understood. That’s helpful. Thank you.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Next question is from Anand Dama from Emkay Global. Please go ahead.

Anand Dama — Emkay Global Financial Services — Analyst

Yeah. Thank you for the opportunity, sir. Sir, one thing, a lot of private banks have given how much is the tax spend as a percentage of opex. Is it possible for you to give some ballpark figure over there?

Dinesh Kumar Khara — Chairman, State Bank Group

Tax? Okay, fine. At some stage we will start also introduce.

Anand Dama — Emkay Global Financial Services — Analyst

Okay. Sir, any ballpark figure like any percentage that you can give?

Dinesh Kumar Khara — Chairman, State Bank Group

I would not have anything on this.

Anand Dama — Emkay Global Financial Services — Analyst

Okay. Sure. Sir, second is on the restructured portfolio. Sir, you said that your restructured portfolio is somewhere about INR40,000-odd crores, how is that portfolio behaving? Because if you look at the non-restructured portfolio of the NPA, certainly, are coming up. Even your agri portfolio did well. But your restructured portfolio has lot of SMA pool as well. So how is the payment performance over there, whether customers are paying? And what kind of relapse rate or the NPA formation that we expect from the restructured portfolio as and when the moratorium ends?

Unidentified Speaker —

So far we have not seen any unusual trend in terms of either slippages or SMAs. I think it is usual performance so far. So I don’t think there is any concern. But, of course, lot of MSMEs also got some moratorium. So once the moratorium goes up, we’ll have to see how the behavior is there. But so far there is no untoward kind of uptick in the slippages.

Anand Dama — Emkay Global Financial Services — Analyst

Sir, when basically the moratorium is going to end for most of the SME customers?

Unidentified Speaker —

So it depends [Speech Overlap] moratorium. It’s very difficult to say that — somebody opted for six months, somebody opted for 12 months. So maximum of two is permitted. So different MSME customers have taken different moratorium.

Anand Dama — Emkay Global Financial Services — Analyst

Okay. Sure, sir. Thanks. Thanks a lot.

Operator

Thank you. Our next question is from Abhishek Khanna from Jefferies. Please go ahead.

Prakhar Sharma — Jefferies — Analyst

Good evening, sir. This is Prakhar. Just a couple of questions. While I appreciate you don’t want to disclose your gross slippage numbers, which all the other banks in the industry do that. But if I’m looking at the credit cost number for the quarter, it is sequentially up 15%. And would it be fair to see that on our quarterly flow basis, your next slippages would have been higher by a similar percentage more or less?

Dinesh Kumar Khara — Chairman, State Bank Group

Not really. It is whatever additional provisions have been done on account of aging would be one of the component for the credit cost, which seems to be little higher.

Prakhar Sharma — Jefferies — Analyst

Because the coverage last quarter improved by 200 basis point. This time it has improved by 100 basis point. So last time, I think you would have covered more ground than this time, that’s why I was…

Dinesh Kumar Khara — Chairman, State Bank Group

Earlier slippage, my dear, sir, there is early slippage this year — this quarter. Why don’t you look at that number please.

Prakhar Sharma — Jefferies — Analyst

I understand, sir. I just wanted to get a broad sense because we don’t have the gross flow number [Speech Overlap] number.

Dinesh Kumar Khara — Chairman, State Bank Group

We have been giving that slippages always.

Unidentified Speaker —

And we want to be consistent on that.

Dinesh Kumar Khara — Chairman, State Bank Group

And we want to be consistent on that. [Speech Overlap] simple about that decision [Speech Overlap].

Prakhar Sharma — Jefferies — Analyst

Sequential also it has come down, sir.

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. It has actually come down from 0.61% to 0.57%.

Prakhar Sharma — Jefferies — Analyst

Thank you, sir, for answering.

Dinesh Kumar Khara — Chairman, State Bank Group

Appreciate that.

Operator

Thank you. Our next question is from Nitin Agarwal from Motilal Oswal Securities. Please go ahead.

Nitin Agarwal — Motilal Oswal Securities — Analyst

Yeah, hi. Congrats on strong results and thanks for the opportunity. I got couple of questions, one is that, we have been reporting very benign levels of slippages for last two quarters now. And 4Q is seasonally a strong quarter from asset quality angle. So how do you see the sustainability of this current slippage run rate?

Dinesh Kumar Khara — Chairman, State Bank Group

Hopefully, we should have an vision to maintain this trend.

Nitin Agarwal — Motilal Oswal Securities — Analyst

Okay. And secondly, like on the credit growth we have seen a good pickup in the system, but in the next fortnight there has been a pull back also which is like almost half of the addition that we saw in the quarter end period. So how has been that for SBI and how do you see the growth momentum sustaining over the 3Q like additions that we’ve seen?

Dinesh Kumar Khara — Chairman, State Bank Group

We have seen the sustenance of the trend which we sort in the month of December. Rather in certain respects, I would say it is even a stronger one, which we are seeing.

Nitin Agarwal — Motilal Oswal Securities — Analyst

So we have not seen any pullback as such, that’s the system [Speech Overlap]?

Dinesh Kumar Khara — Chairman, State Bank Group

No, not really.

Nitin Agarwal — Motilal Oswal Securities — Analyst

Okay. Sure, sir. And, sir, Lastly, the performance of our General Insurance subsidiary has been into pressure and this quarter we have put it loss there. So how do you see the paying ratios trend in this business? Any color on the performance and the profitability outlook, if you can share?

Dinesh Kumar Khara — Chairman, State Bank Group

I think it’s a disyllable [Phonetic] trend, that’s we are part of that and maybe going forward we should be in a position to take care of this.

Nitin Agarwal — Motilal Oswal Securities — Analyst

Sure, sir. Thanks so much.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Our next question is from Nilanjan Karfa from Nomura. Please go ahead.

Nilanjan Karfa — Nomura — Analyst

Hi. Am I audible?

Dinesh Kumar Khara — Chairman, State Bank Group

Yeah. Please go ahead?

Nilanjan Karfa — Nomura — Analyst

Yeah. Sir, I just wanted to go back to a strategic question. So, we are probably running the lowest cost of deposits and as rates are hardening, don’t you think this is the right opportunity to continue to pass on some of the rate benefits, may be in terms of fee, maybe in terms of spread and get a greater wallet share of the customer? And also considering that our credit costs are probably going to run much below the historical trends. Is this kind of a thought is something that has been discussed in the top management and any strategic intent on this side, sir?

Dinesh Kumar Khara — Chairman, State Bank Group

We are very closely watching the situation. And I think last month we had increased our term deposit rate and this is fine. So we are very closely watching the situation and accordingly, we are taking the steps.

Nilanjan Karfa — Nomura — Analyst

Okay. Have we reduced any charges on, let’s say, LCVs even in the non-funded side, have we done any tinkering on that side, sir?

Unidentified Speaker —

No. So it’s not very customer-specific. And depending on the wallet share and depending on the volume of business that the customer would give us, this is a continuing process. And it is also a response to competitive pressures that we get from other banks.

Nilanjan Karfa — Nomura — Analyst

Right. Sorry, if I have to extend this question, are you seeing a lot of competition from at least the top [Technical Issues].

Dinesh Kumar Khara — Chairman, State Bank Group

We are all playing in the market. So, competition is bound to be there. Nothing unusual. Competition is part of the game.

Unidentified Speaker —

There is no trend as such. So, in response to your question, definitely there has been no revision on the corporate. But on a case to case business decisions are always taken and that has been the usual trend. There has been nothing significantly different over the previous quarters.

Dinesh Kumar Khara — Chairman, State Bank Group

The liquidity was very good.

Unidentified Speaker —

And as regard other fees like processing fees on retail and all, there are several campaigns that run for shorter periods where the maximum benefits are passed on to the customer.

Nilanjan Karfa — Nomura — Analyst

Right, right. That’s very helpful, sir. Thank you. Thank you so much.

Operator

Thank you. Next question is from Adarsh Parasrampuria from CLSA. Please go ahead.

Adarsh Parasrampuria — CLSA — Analyst

Hi, sir. Congrats on good numbers. Couple of questions. One, does SBI even need to raise capital over the course of the next 12 months? Because from March if you add back pro forma profits, there has been a 30 basis point improvement in our CET1 level. So just wanted to understand any self financial growth because ROEs are better than growth. So if you can give your sense?

Dinesh Kumar Khara — Chairman, State Bank Group

I think we’ll have to. We’ll be taking the call in the next financial year. But as of now, we feel that first job over the next financial year whatever growth is likely to be there, that can be adequately supported by the capital which we have.

Adarsh Parasrampuria — CLSA — Analyst

Got it. And, sir, the next question which been touched upon by a few participants that’s been a bit of a drag on the system has been the credit growth, right, some pickup that we’ve seen. What is your sense of credit growth? Which areas do you think, certainly, you are seeing momentum in terms of how clients talk to you that is improving or not? Because we’ve been in single-digit growth for a long time as a system, right?

Dinesh Kumar Khara — Chairman, State Bank Group

No, we have started seeing the — as I mentioned that you the under-utilization has come down by almost 900 basis point as far as the working capital is concerned on the corporate side. And similarly when it comes to the term loans it has also come down by about 100 basis point unavailed term loan component. So that way there is a traction which we saw in the month of December — in the December quarter. Thereafter, at absolute level, we have seen a much better credit growth in the month of January, though, despite the fact that Omicron had affected partly the various parts of the country, but nevertheless still we could see a much better growth. So going with the January trend, if at all that is sustained, we expect the credit growth in this quarter to be much better than what we saw in the October-December quarter. And I feel that should be — that kind of a behavior should be sustained in this quarter. And apart from that now the budget has also talked about investment into the infrastructure-related areas, so it will also open up many opportunities and also many of the industries which had already hit capacity utilization of 100%, they will probably augment their capacity too. The core sector being one of the major one. So hopefully, we’ll get to see much better credit growth in the coming financial year. But, yes, of course, we’ll wait and watch for the early trends to be seen.

Adarsh Parasrampuria — CLSA — Analyst

Got it, sir. My last question is on the SME credit, again on retail and corporate has held up very well. SME, there was a lot of dispensation, right, incremental ECLGS lending, restructuring. So what will be your expectation? Because that could be one risk for the next maybe 12 to 18 months in terms of asset quality. What would be the expectation?

Dinesh Kumar Khara — Chairman, State Bank Group

We are trying to get into activities, which should be cash [Indecipherable] financing and also into better quality of SME lending, which would be essentially into dealer financing, vendor financing, etc. So that is one of the focus area for us. And to that extent, I think we should be in a position to improve the quality of the book and the SME.

Adarsh Parasrampuria — CLSA — Analyst

So from the restructured pool and where we gain ECLGS, we wouldn’t see too much of a risk?

Dinesh Kumar Khara — Chairman, State Bank Group

Not really, because if you will look at it, our book would be around — so we book INR32,000 crore, we already have got the COVID provision of about INR6,000-odd crore. And what we have seen from the past is that, the PD is generally around 30% but this book is very unusual because this was a very unusual circumstances in which the restructuring has happened, it was essentially attributed to the disruption in the cash flow. As the cash flow gets repaired, the — I mean, the stress also goes out and we are seeing that some of the people starts repaying and don’t really avail the restructuring benefits for the full term. So, I think we’ll have to wait and watch. But nevertheless, we feel that we have instituted the balance sheet.

Unidentified Speaker —

This is supplement of what — I think out of this INR32,000 crore restructuring book which we are talking about, the MSME is about INR12,000 crore. So in that also we are not seeing any untoward kind of behavior in terms of the slippages. So there is no great concern on the restructuring book on the MSME. So I think this is one thing which everyone should remember.

Operator

Thank you. Our next question is from Sumeet Kariwala from Morgan Stanley. Please go ahead.

Sumeet Kariwala — Morgan Stanley — Analyst

Yes. Hi. Hello, everyone. I just had one data question, what’s the yield — incremental yield on the unsecured loan book, if that’s available?

Dinesh Kumar Khara — Chairman, State Bank Group

I don’t have that number with me.

Sumeet Kariwala — Morgan Stanley — Analyst

No problem. I’ll take that offline. Thank you.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you.

Operator

Thank you. Ladies and gentlemen, due to paucity time, that would be our last question for today. I would now like to hand the floor over to the management for their closing comments. Thank you, and over to you.

Dinesh Kumar Khara — Chairman, State Bank Group

Thank you very much for the time taken by all of you on a Saturday evening. Look forward for your continued support. All the very best. Enjoy your weekend. Bye-bye.

Operator

Thank you very much. Ladies and gentlemen, on behalf of State Bank of India, that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.