The Federal Bank Limited (FEDERALBNK) Q1 FY24 Earnings Concall Transcript

The Federal Bank Limited (NSE: FEDERALBNK) Q1 FY24 Earnings Concall dated Jul. 13, 2023

Corporate Participants:

Souvik Roy — Head, Investor Relations

Shyam Srinivasan — Managing Director and Chief Executive Officer

Venkatraman Venkateswaran — Chief Financial Officer

Harsh Dugar — Executive Director

Shalini Warrier — Executive Director

Damodaran V — Senior Vice President, Chief Risk Officer

Analysts:

Naysar Parikh — Native Capital — Analyst

Anand Dama — Emkay Global — Analyst

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Kunal Shah — Citigroup — Analyst

Arvind R — Sundaram Alternates — Analyst

Jai Mundhra — ICICI Securities — Analyst

Mahrukh Adajania — Nuvama — Analyst

Saurabh Kumar — JPMorgan — Analyst

MB Mahesh — Kotak Securities — Analyst

Rakesh Kumar — B&K Securities — Analyst

Tanika Aggarwal — Green Portfolio Private Limited — Analyst

Bunty Chawla — IDBI Capital — Analyst

Darpin Shah — Haitong India — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q1 FY ’24 Earnings Conference Call of Federal Bank Limited. [Operator Instructions]

I now hand the conference over to Mr. Souvik Roy, Head, Investor Relations, Federal Bank Limited. Thank you, and over to you, sir.

Souvik Roy — Head, Investor Relations

Thank you so much and good evening, everyone. Thank you for joining us on this post-earnings call. We appreciate your time and continued interest in our Bank’s performance. We are delighted to continue our tradition of reporting our numbers early and providing you with the timely insights into our financial results. Today, we are pleased to share, as you may already know that our total business has crossed an impressive milestone exceeding INR4 lakh crores. This achievement reflects the exceptional momentum we have experienced across all our businesses, highlighting a strong start to this fiscal year.

To address your questions and to provide deeper insights, we have our MD and our senior management present on this call, we are here to provide you with valuable perspectives on our performance and shed more light on our strategic direction.

So without further ado, I would hand the call — hand this call over to our MD, who will provide you with additional details on our achievements. Thank you, again for your participation, and we look forward to your question. Over to you, sir.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Good afternoon, everybody. Thanks, Souvik. By way of introduction and updates, I thought I’ll just begin by sharing some senior-level inputs on the bank. Our Chairman, Mr. Balagopal retired about 10 days of completing eight years on the Board. The next Chairman, Mr. Hota took charge on 27th of last month. He needs no introduction, Mr. Hota has been a pioneer and the original sort of father of NPCI, so we’re quite pleased that somebody of his debut and capability is now the Chairperson of the bank.

And in the Board, Ashutosh completed his term as Executive Director, stayed on as a Chief Mentor for another year. And Ashutosh has become an Executive Director. So, thanks, Ashutosh and complements to Harsh and I thought that’s an important starting point for our conversations today. The strength and the depth of the team is now both durable and as known and they are executing quite well.

Just now, sort of, Souvik talked about the INR4 lakh crore. I want to point out the INR1 lakh crore from INR3 lakh crore to INR4 lakh crore was done in two years. And the previous INR1 lakh took us I think three years and the previous INR1 lakh took us five years. So the bank is seeing consistent and steady growth. And it’s important to point out that in Q1 of this year, at least in all my time [Indecipherable] sequential, traditionally Q1 is seasonally a slow quarter with a strong momentum and we see all our businesses growing roughly about 5% sequentially.

It’s not about the Y-on-Y growth, we saw momentum and we believe that that momentum should be sustainable into FY ’24 and probably beyond. I had guided at the beginning of this financial year, we will be tend to grow 18% to 20%, both on advances and on liabilities and I’m encouraged to see that momentum is well engrafted and we’ve had a reasonably good start to the financial year.

Normally, I resist giving commentary on the environment and the economy and neither am I an economist, but I thought this time since we are the first bank to declare results maybe I will just take the liberty of giving a couple of points in specific to the market and the environment as we see it from the ground.

The credit growth opportunities, particularly for a bank like us, still is intact and growing quite well. Even through the early part of July or in Q2, we are seeing demand sustain credit opportunities to grow are there. And our choice has been that we don’t want to dominate into one business, as I’ve said for a long, we will have the retail mix, the wholesale mix between them, how it should be. And within those businesses also where the opportunities are, and we’re seeing that sustain even in Q2 and I believe that should continue as we go into FY ’24 and beyond.

On the liability side, I do think and I would think many in the industry to concur. The worst of the rate what is probably behind us and it did help that the INR2,000 withdrawal aided us all with some additional both deposit growing opportunity and provided some much-needed respite for that part of the bank.

In particular for Federal, the remittance business, which are — remittance and the NR deposit business, which was kind of muted in most parts of FY ’23 towards the back end of FY ’23, we started seeing it pick up. You may have seen our slides as well the market share, that had come off has come back to us now.

And likewise, NR deposit share, particularly the rupee deposit share for us is growing and we are seeing that momentum come back in. And it’s an interesting dynamic. The period post-COVID, we saw some behavioral changes, I was quite — we were watching it quite closely to figure out whether it’s sort of a long-duration change or is it just behavior correction, it appears to be the — sort of rubber band is back and growth on that front seems to be coming back up.

And the last point which is important, which I think we — over the last, particularly in the last three weeks of June, we had an opportunity to go out and meet many current or prospective investors of the bank. We did share our business plans and our commitments and our guidance focus there on how the year will shape up. And I do think on those points that we make, the first quarter has pretty much stacked up on most of discount whether be it growth or be it on the outlook on margins, the near-term impact and the longer-term outcome — outlook of margin, the business mix and the steady overall credit cost that we will anticipate.

So I just want to reinforce our Q1 in the context of the environment we are operating in, we remain quite confident that the growth momentum we saw will sustain in FY ’24. The margin outlook is playing to what I think our model had suggested. As most of us know that Federal Bank reprices T plus 1. So the impact on advanced gain was in earlier so as the impact on margin compression. So between Q4 of last year and Q1 of this year, I think we have seen the impact play through.

I did mention in my calls — earlier today in some of the media interactions that we believe that the compression we saw should start turning the way there should be margin expansion that will come through because the tail end of the rate increase on deposits have played through, the yield expansion on both credit and also the business mix is beginning to show. So our belief is that what we had said last quarter that the full-year margins will be somewhere around the 3.3% space, we will see that pick up from Q2 onwards.

So in short, we have begun the year reasonably well, on guidance on most of the areas that we spoke off when we met — when we spoke in May 6, I think before the — after the Q4 results and the conversations I had subsequently with many of our investors, analysts who are keen to understand it better. Our outlook for FY ’24 remains reasonably intact. We believe 18%, 20% credit growth is okay, are possible. The margin we said will be a year of two halves. The first half being softer and the second half picking up. I’m now encouraged to believe that in the second quarter itself, is start picking up.

And lastly, the credit quality and the credit costs are certainly going to be in and around the number which you had talked about 40 basis points plus or minus. So with that, let me just mention that we are as usual the entire senior team is there and all of us are happy to take questions or clarify. So I’m happy to open it up for questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Naysar Parikh from Native Capital. Please go ahead.

Naysar Parikh — Native Capital — Analyst

Yeah, hi, thank you for taking my question. The first question is, we are obviously growing the retail high-yield book strongly. Can you just talk a bit about how does the credit performance in that book especially given the slippage rate has gone up further in the quarter to 1.9%, so just can you highlight the reasons for that and give some numbers of [Indecipherable] for gold loans or MSME personal loans, etc.?

Shyam Srinivasan — Managing Director and Chief Executive Officer

The retail assets that are growing in the so-called high margin businesses. To point out, they are early, so there is really no — not much in terms of slippages or even SMA position at this point in time that is uniquely different from our normal run rate. If you’re referring to the slightly higher slippage on retail this quarter, I think we had mentioned that in the past, the moratorium on the March 31, 2021 book of retail is the COVID restructuring. A large part of the retail restructure in COVID moratorium book ended in March 31, 2023. So those — their demand would have been in Q1 of this quarter.

So of the INR250 odd crores of retail slippages, close to 30% of that is from the restructured portfolio. And that’s the reason for the slight uptick in retail, but it was within our overall 40 basis points that we had visualized as credit costs. So in terms of incrementally at this point in time, we are also acutely sensitive to the question you asked in the narrative that’s going on in the market, we’re not seeing any trend shift because the book is secured. The unsecured book is just growing at this point in time hasn’t shown any adverse outcome any differently from what we’ve faced in any of our credit books.

Naysar Parikh — Native Capital — Analyst

Got it. And the second question was on the liability and the deposit side. So from a geography perspective, can you give a split of what percentage of that would be semi-urban, rural? And is that area of semi-urban rural — is that a focus and are we seeing growth there? And secondly, just one data point, what percentage is outside of Kerala in the deposits?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Let me give you some of the details. First is about 70%-odd of our network is in semi-urban, rural across India, right. In fact, unfortunately or fortunately, Kerala doesn’t have anything which is rural. Kerala is a very urban, semi-urban market. But our — large part of our network, particularly the incremental 800 branches that are outside of Kerala are in — at least 70% are semi-urban rural. So bulk of the growth that is coming and therefore, you could attribute to geographies that are fairly widespread across the India. The non-Kerala, the biggest, immediate geographies, Tamil Nadu, where you have 200 branches out of that, I think the city of Chennai and the city of Coimbatore collectively have about 50 branches, so remaining 150 branches are in sort of spread in — we are there in every district in Tamil Nadu.

And likewise, we are working to be in every district across the country. And of course, the incrementally of our incremental deposits, say about 15% or so has been coming from FinTechs, which are coming from 18,000 pincodes. They have about close to INR800,000 crores of deposits come from all our FinTech partner accounts that we have originated and that’s coming from 18,000 pincodes in India — India has 19,000 pincodes. So it’s coming from very distributed geographies. There was a question, sorry, I missed the other part of the question, could you just expand on that sorry, I missed it?

Naysar Parikh — Native Capital — Analyst

Yeah, how much like deposit, what percentage would be outside of Kerala?

Shyam Srinivasan — Managing Director and Chief Executive Officer

About 45% of the deposits is outside Kerala, 40% to 45%.

Naysar Parikh — Native Capital — Analyst

And is that somewhat different for incremental deposits, are we seeing that?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yeah, incrementally for the last two years, because of the expansion outside, that’s where it is, the stock is where Kerala is bigger. Rate of growth of deposits outside Kerala has been higher than the rate of growth inside Kerala.

Naysar Parikh — Native Capital — Analyst

Okay, thank you so much. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.

Anand Dama — Emkay Global — Analyst

Yeah, thank you for your time. Sir, first, can you just explain basically was there any versatile impact —

Operator

Sorry to interrupt, Mr. Dama. Your line was not very clear. We request you to please use the handset while you’re speaking?

Anand Dama — Emkay Global — Analyst

Yeah, am I audible?

Operator

Yes, this is much better, sir. Please go ahead.

Anand Dama — Emkay Global — Analyst

Yeah. Sir, I was asking that, was there any interest reversal on the NPAs in the current quarter?

Shyam Srinivasan — Managing Director and Chief Executive Officer

There would have been [Indecipherable] so correspondingly that have an interest reversal, right. So last quarter was 454, so about INR40 crores extra. To that extent, there would have been reversal of about INR10 crores, INR15 crores.

Anand Dama — Emkay Global — Analyst

Okay. And what basically gives us the confidence that the second quarter onwards basically, we will see a margin expansion?

Shyam Srinivasan — Managing Director and Chief Executive Officer

So the yield on advances, I think we’ve shown that has gone from — has gone to 920 if I remember, right, and —

Venkatraman Venkateswaran — Chief Financial Officer

921.

Shyam Srinivasan — Managing Director and Chief Executive Officer

921. Our model suggests this quarter will go to 927, the cost of deposits is at 534 looks like will start moderating, so the spread will open up.

Anand Dama — Emkay Global — Analyst

Yeah. So basically in that case, you mean that the yield expansion will happen in the second quarter as well, sir?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yes, we are expecting that.

Anand Dama — Emkay Global — Analyst

And, yeah, that should be on a higher side, right, because then only basically our spread would increase.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yes. And the trend line particularly in the June, July bookings are suggesting that.

Anand Dama — Emkay Global — Analyst

Okay sir. Thank you.

Shyam Srinivasan — Managing Director and Chief Executive Officer

And we made our calendar for FY ’24 opening and shared our updates and our outlook. It was designed with this and added to recall distinctly saying it will be a year of two halves, so the first half being softer and the second half picking up. Now I am encouraged to say that first quarter and then we think the pickup will be in second quarter, because the model is reflecting that.

Anand Dama — Emkay Global — Analyst

Sure sir, thank you.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Thank you.

Operator

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

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Hi, good evening. Few questions. Can we — the INR164 crores miscellaneous income that we report —

Operator

Sir, sorry to interrupt, but we are unable to hear you, sir. It’s not very loud enough.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Is it better?

Operator

Yes. Please go ahead.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Yes, sorry. So I was asking what is the breakup of the INR164 crores miscellaneous income that we have? So there is a whole lot of the recovery from written-off accounts. There’s revaluation of investments which is there. So can you just give a breakup of this INR164 crore? And maybe corresponding to this last quarter breakup, Q4.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Venkat, you want to go?

Venkatraman Venkateswaran — Chief Financial Officer

Yes, Shyam, I’ll go ahead and take it there. Broadly in terms of the breakup, there were profit on sale of investments, recoveries on assets previously written off, that was about INR25 odd crores and dividends from subsidiaries, we had about INR15 odd crores. And then profit on revaluation of investment was around INR12 odd crores. And PSL, this is the first time we have net sellers of PSL, so we had a gain of about INR52 crores, which came in from the sale of PSL in this quarter. So this is broadly the breakup of that other income.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay, INR52 crore PSL investment profit of INR12 crore, dividend of INR15 crore and another INR25 crores of recovery from written-off?

Venkatraman Venkateswaran — Chief Financial Officer

Recovery from written-off assets and then profit on sale of investments of about INR13 odd crores.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay, okay. Sure, sure. So this PSL profit of INR52 crore, do we expect this to recur in the coming quarters also or this is like a one-off –?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Likely to recur at scale. There will be some, but it’s not at this stage.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Right, okay.

Shyam Srinivasan — Managing Director and Chief Executive Officer

What we should note is that, we have now moved to a situation where we are able to generate more and sell and make income out of it, so probably hopefully, every year, Q1 which is Q1 is where we maximize for the full year. We should start seeing this recovering on an annual basis, may not be on a quarterly basis.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Sure. Understood. And on Slide 14, where we give the breakup of the new businesses or so-called high-yielding businesses, the share of that in the overall advances. And there is another chat, what is the share of revenue from these businesses. So I think the revenue includes the revenue of treasury, miscellaneous income, everything right, here in this case and the interest income would also include interest income on your treasury book or cash, which may not be the right picture.

Like what would be the core income share, let’s hope, these higher yielding, typically one would assume that the revenue share from these businesses should be much higher than their overall share in advances. But that same is not reflecting outside, if you look at the average, 33% is the share in advances, but on the revenue, it’s just 30%. Optically it looks different, but if I were to exclude the treasury and the non-advances-related income from the denominator, probably the advance — the share of revenue of these items would go up. So just wanted to understand what would that number be if, let’s say, the share in advances is 33%, what would be the like-to-like income share?

Shyam Srinivasan — Managing Director and Chief Executive Officer

This wouldn’t have a treasury income in this, I don’t know whether you’re reading the part of treasury income and the high-yielding part.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay. So you’re in the clarification down you’ve given revenue is equal to interest income plus non-interest income. So here I’m assuming that interest income includes all total —

Shyam Srinivasan — Managing Director and Chief Executive Officer

That’s not treasury related, this will be fee related to that specificially.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay. So in this interest income line, are you only taking interest income on advances or you taking interest income — total interest income?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Only on advances.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay. So in that case, sir, then why the revenue share is lower at 30%? Because typically these are higher-margin products, so the yield would be higher, so the share of these on the overall book should be much better than 30%.

Venkatraman Venkateswaran — Chief Financial Officer

It’s also — we’ll have to look at the period at which this growth in terms of average during the quarter or is it more towards back ended. There are different factors which come into play in the income number.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Venkat, cost of origination will be there in the first year.

Venkatraman Venkateswaran — Chief Financial Officer

Yeah, the first year of dividends for some of the products.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Sorry, this is just revenue right, so you also considered cost, is it net of that or it’s only the cost income —

Shyam Srinivasan — Managing Director and Chief Executive Officer

See, in some products, we will have to do the net, whereas in some of them, the cost shown in the expense line, that’s based on the accounting.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay, it’s not very clear, sir. Maybe I’ll take this offline.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yeah, I can give you the details separately, which products we net off, what cost element, once there is [Speech Overlap] —

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Sure, sure. The idea was that if these are higher yielding, typically they should fetch more on revenue despite being 33% of advances, ideally the revenue mix should be much higher. But the same is not reflecting in this chart. So I thought maybe you on the denominator, there is other income also included. Sure, sure, I’ll take it offline.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yeah, I think your observation is valid. We will put out an explanation for everybody to see, not only the Mirae folks, we put out for everybody.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Sure, sir. And then the last question, what would be the incremental cost of term deposit? You mentioned that you expect the cost of deposits to trend down in this quarter. So just wanted to understand what would be the incremental cost of term deposits and what would be the stock cost of term deposits?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Venkat — Mani [Phonetic] you have it?

Venkatraman Venkateswaran — Chief Financial Officer

Yeah, it should be another probably around 10 bps increase from where we are currently, right, so 6.4%, 6.5% at this moment.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay. So you’re saying current stock is 6.5% and incremental is 6.4%.

Venkatraman Venkateswaran — Chief Financial Officer

No, no, the other way around.

Gaurav Kochar — Mirae Asset Investment Managers — Analyst

Okay. Stock is 6.4%, and the incremental is 6.5%. Okay. Sure, helpful sir. Thank you so much.

Venkatraman Venkateswaran — Chief Financial Officer

Okay.

Operator

Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.

Kunal Shah — Citigroup — Analyst

Yeah, thanks for taking my question. So firstly, with respect to yield repricing, no doubt, repo has got repriced at T plus 1. But last time you were highlighting that there could be benefit of MCLR repricing, plus the proportion of higher-yielding is actually moving up. So is there maybe on the either on the business banking, commercial banking, we are seeing some competitive pressures with respect to yield on account of which there is only like 7 bps, 8 bps kind of a sequential rise?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Kunal, indeed, yes. I mean, we are as a business model not willing to go at segments that are willing to pay you price, but has risk associated higher. Our model has always been where we’ll get competitive price, but try to get more business from the customer and we’re seeing that play through in all our full engagement, you’re seeing our fee income steadily improve as you’ve seen this quarter also. So, the model of the bank is to ensure that we go after the better rated segments in every — better rated customer in every segment. We comparatively price, so we may not enjoy very high margins on that count but get good credit quality and fee income increase. And therefore the ROA expansion that we’ve seen will sustain.

Kunal Shah — Citigroup — Analyst

Sure. In terms of like going forward, despite the proportion of high yielding expected to inch up. We will not see too much of improvement on the advances side because of maybe moving towards the better rated all customer segments.

Shyam Srinivasan — Managing Director and Chief Executive Officer

The margin expansion will be there, that’s why we said the — it’s troughed out and we believe it will go up by maybe 7 basis points, 8 basis points in this quarter, the quarter that succeeds and that sustains from there on, but it is not going to go back — go to a 3.8 or 3.7 in a hurry.

Kunal Shah — Citigroup — Analyst

Okay, sure. And last time, you highlighted that the bulk deposit you create was largely due to [Indecipherable] and most of it has unwinded in 1Q. But again, if we look at it, in fact there is still like 17% 18% sequential growth seems to be very big on term deposit, while retail seems to be relatively low at less than 2% odd. So maybe — and maybe on deposit cost unwinding, we are expecting because this proportion could actually come off or maybe what could be the proportion of the wholesale maybe if we have to look at it two quarters down the line, three quarters down the line?

Shyam Srinivasan — Managing Director and Chief Executive Officer

See, at the peak where we’re 95% retail in that — so the RBI definition of retail deposits that’s come down to about 86% — 85% now. This will be the baseline between 85% and 88% is where retail deposits will be.

Kunal Shah — Citigroup — Analyst

Okay. And we see benefit of this reflecting the cost of deposits, maybe is there any unwinding of wholesale which is giving us confidence that cost of deposits should be lower in Q2 compared to that of Q1 because otherwise cost should actually reprice upwards only.

Shyam Srinivasan — Managing Director and Chief Executive Officer

We did mention — I did mention even today so did Venkat, the Q2 our overall cost of funds will move up from I think this quarter was 530 something will go to 540, but the yield on advances expansion will be higher, that’s where the margin expansion.

Kunal Shah — Citigroup — Analyst

Okay, okay, got it. And lastly, in terms of OP [Phonetic] maybe excluding the ForEx when we look at it in terms of card processing fee, I know there is distinct level of traction. So, should be seeing maybe what we highlighted in terms of that being one of the incremental delta to the ROA, we are equally confident in terms of maybe given this kind of product segments and the cross-sell which is happening, we should be able to sustain this overall momentum on the fee side and that is low one-off of the — yeah —

Shyam Srinivasan — Managing Director and Chief Executive Officer

So if you see Slide 19, where we have given the mix and fee income, it is just simply finding out the areas and many are volume and scale related. We are not one-off or unique to a quarter other than the PSL1 which Venkat spoke out, they’re all transaction and we’re seeing that sustained right. So it should — we are confident that momentum will play through. In fact, we are pursuing fee as a share of asset, so that 1%.

Kunal Shah — Citigroup — Analyst

Okay, got it. Okay, thanks a lot and all the best, yes.

Operator

Thank you. The next question is from the line of Arvind R from Sundaram Alternates. Please go ahead.

Arvind R — Sundaram Alternates — Analyst

Hi sir, thank you for taking my questions. So this was already discussed, but I still would like to understand like the CASA plus retail term deposit has been coming down even though like in other peer companies, banks, CASA has been coming down, CASA plus retail TD has been fairly stable. Like what gives you confidence that we will be able to bring it back up. And I know like — I wanted to understand like how much of this 7 bps to 8 bps is attributable to like high-yielding segment? Why I’m asking this is, like as the repricing has already been done by now, like hereafter only the mix change will contribute to higher-yielding, sorry, higher yields. That’s my question.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yeah, I think you’re right, mix change and incremental volume coming at pricing higher than what it was traditionally, which is what I said we’re extrapolating the last 45 days kind of run rates we are visualizing. And that’s how the yield on advances expansion will happen. On the mix of retail deposits, I mentioned the rate is between 85% and 95%, we were at 95%, we’re now close to 85%. There are probably banks which are at 70% and stable at 70%, 75%, but we were already at a high so it’s likely that we had to support our credit source in an era where deposit costs were higher. We had to get term from retail customers, these are retail customers term deposits. We have not done bulk borrowings in the market.

Arvind R — Sundaram Alternates — Analyst

Okay, sir. Thank you. Like — so, if we see core fee income to average assets, that has actually fairly been stable maybe in the first quarter, it is slightly lower because of the seasonality in the first quarter. But you’re talking about like fee income actually inching up, but it is primarily due to treasury income, I wonder — treasury gains and PSL [Phonetic] income, right. This is not — these are all not recurring for every quarter, right.

Shyam Srinivasan — Managing Director and Chief Executive Officer

You’re right. I think this 535, which is the core fee income is the number that I’m also referring to because those — the rest tends to be sort of choppy, this is growing at about 20%, 22%.

Arvind R — Sundaram Alternates — Analyst

And like the higher-yielding segment, like I understand it is 33% as of now, but do we have any medium-term target in terms of like reaching 40%?

Shyam Srinivasan — Managing Director and Chief Executive Officer

No. I’ll tell you where we have — I think we mentioned last quarter also, the overall book of the bank we wouldn’t want these segments to cross 10% of the overall outstanding of the bank. There are three guidelines, retail, wholesale, 55%- 45%. Unsecured as part of the total portfolio, not more than 10% and most segments will be more than 15% of the bank.

Arvind R — Sundaram Alternates — Analyst

Okay, sir. Just one more thing, like could you give me like a little more color on MSME segment, what is the usual average ticket price and maybe like what could be the yields like if we can get something like that and like whether it is predominantly working capital term loan kind of thing and what kind of sectors we usually give to a case if there’s any exposure to any particular sector or the geography?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Harsh and Shalini do you want to go, maybe Harsh and Shalini on this?

Harsh Dugar — Executive Director

So yeah, I’ll take it. Shalini, do you want to go ahead?

Shalini Warrier — Executive Director

Harsh, go ahead. Go ahead, Harsh.

Harsh Dugar — Executive Director

Yes, okay. MSME for us goes across all verticals from — at the higher end of the MSME or in corporate banking and up to the lower end which is in business banking, so all three verticals have it. In terms of the yields we’re looking at the sectors we are reasonably sector market, some of the places where we are very comfortable as FMCG suppliers, vendors and suppliers — dealers to some of the large OEM and some of the sectors which we are looking at it like chemicals, white goods, all these are over here. MSME is very broad-based across sectors, across regions. So this is on the MSME side. We are comfortable in terms of going into the supply-chain initiatives also, which then qualify us apply MSME. Vendors and the dealers of the large corporates is what you’re passing on and going ahead.

Shalini Warrier — Executive Director

Yeah. If I can just add to that. On the lower end of the MSME which is the business banking kind of segment that we call business banking, typically, somewhere in the range of anything up to about 5%, 6% say about 7%, 7.5%. That would be the typical size for the — for the lower end of the MSME. In this, we follow really catchment approach, it’s driven, it’s very much a brand-centric business and the catchment area of the branch is what becomes the target customer segments, industry agnostic, grow that India growth. So as we’ve noticed, we’ve added new branches, for example, in Tamil Nadu, Karnataka, Telengana, etc, because we are seeing growth opportunities in the back of the B2B segment.

So MSME kind of panned across all of these areas and we get the benefit of PSL across all these areas, but within that, we’ve segregated as to see the lower end of it. The lower [Indecipherable] is primarily branch-driven, secured, term loans, working capital, both — a mix of both that service by — serviced typically by the branch. The [Indecipherable] I mean, the MSME under B2B, for example, the ticket size will be about 70 odd lakhs, average ticket size about 7.5% yield, etc. But a broader question, MSME for us and as you’ll see it in Slide 14 actually business banking, commercial banking also. Some data is there on Slide 9 — 14.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Just two points I’ll add, on the working capital term mix, we are about — roughly about 55% to 60%, working capital in the balance of the term price. The average ticket size if I look at the medium and the small category of MSME, it would about INR15 odd crores, INR17 odd crores, micro would obviously be smaller and [Indecipherable].

Arvind R — Sundaram Alternates — Analyst

Okay, thank you. Thank you so much.

Operator

Thank you. We have the next question from the line of Jai Mundhra from ICICI Securities. Please go ahead.

Jai Mundhra — ICICI Securities — Analyst

Yeah, hi, good evening, sir. I have this more or less same question on margins, but I wanted a few data points before that. If you can help me with the blended savings account cost for us, maybe for this quarter and last quarter? And the loan mix by benchmark, so fixed EBLR and MCLR?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yeah, Venkat, go ahead.

Venkatraman Venkateswaran — Chief Financial Officer

Shyam, whilst I have the numbers for the [Technical Issues] detail. So we should be given that level of details in the quarter.

Shyam Srinivasan — Managing Director and Chief Executive Officer

So share whatever we can and then they can interpret from there.

Venkatraman Venkateswaran — Chief Financial Officer

3.2% for the savings blended.

Jai Mundhra — ICICI Securities — Analyst

Sure, sir. I mean, just for comparison, if you have the last quarter —

Shalini Warrier — Executive Director

So if I can just comment on the savings account fees, Venkat given the overall kind of blended number, but a very large — we are the lowest really offer only 3.05% we do have it on the — you’ll see it in the public domain as you walk out kind of thresholds are and what not very extra wagons in how we pay for our savings account, Jai.

Jai Mundhra — ICICI Securities — Analyst

Yeah, right.

Shyam Srinivasan — Managing Director and Chief Executive Officer

And also just for your other question in terms of comparable, it will be around similar levels last quarter also Jai.

Jai Mundhra — ICICI Securities — Analyst

Sure. And sir, the loan mix by benchmark.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yeah. The repo linked is around 49% plus, fixed is 27% and the MCLR is about 14%.

Jai Mundhra — ICICI Securities — Analyst

Right. So now sir the question is, if you see the — let’s say, on both yield side as well as cost of deposit/cost of funds. The yield, if I see our reported yields in the last two, three quarters, there has been a sharp, let’s say, the simulation and pace of yield expansion, 49 basis point rise was there in third quarter that decelerated to 35 in this quarter has been 8 basis points. And while the loan mix may change and hence let’s say it remains at similar levels. But then the cost of deposit, as you said that the incremental TD is still outpacing the outstanding TD cost. And the cost of deposit may still remain firm. So it looks like the margin expansion, of course, it could be because of the capital raise if that happens or is there any organic mechanism also to sort of help NIMs, because the high-yielding products —

Shyam Srinivasan — Managing Director and Chief Executive Officer

Let me just interrupt and say in my calculation when we had spoken, we have not taken capital increase whenever we do that into this conversation when I guided for 7 basis points, 8 basis points improvement, so trust our mathematics and this is the final answer in this, I don’t need any more conversation on this.

Jai Mundhra — ICICI Securities — Analyst

Sure. No, no, that is helpful.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Don’t try to cross question management’s capability to calculate, guys.

Jai Mundhra — ICICI Securities — Analyst

No, sir. But anyway —

Shyam Srinivasan — Managing Director and Chief Executive Officer

I am putting a final word. I have not calculated capital raise in the conversation that if we’re adding 7 basis points, 8 basis points. If capital raise happens, when it happens, it will add its own values, but that is not in my conversation.

Jai Mundhra — ICICI Securities — Analyst

Right, right. Yeah, sure.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Next question please.

Jai Mundhra — ICICI Securities — Analyst

Yeah. And sir, just a small question on PSL. So I see that the CV — proportion of CV, which contributes to PSL is 69%. Is that the — I mean is that a broad number to be taken or there is some, let’s say, one-off, really, I would have thought that the CV proportion to PSL would have been much higher, just a small observation.

Shyam Srinivasan — Managing Director and Chief Executive Officer

It’s actually 69% in the presentation, Harsh, yeah. It’s 69%, it’s roughly about — because we also classified once we get the [Indecipherable] certification, which we have been getting and it’s a closer to 76% now. It typically hovered around 75% to 77%. Large portion of the school buses also which we financed, come under commercial vehicles, but they don’t qualify under because schools have qualified under that. So within all of that, roughly about 70% to 80% would remain in the PSL.

Jai Mundhra — ICICI Securities — Analyst

Right, okay.

Shyam Srinivasan — Managing Director and Chief Executive Officer

And also of this, about 15% to 20% will be micro.

Jai Mundhra — ICICI Securities — Analyst

Right, right. Understood, sir, yeah. Thank you, and all the best, sir.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.

Mahrukh Adajania — Nuvama — Analyst

Yeah, good evening, sir. Sir, my question was firstly on deposit growth, of course, it looks very good right now. So on a sequential basis even for the sector, it’s higher than loan growth because of the — possibly because of the 2,000 note deposits. But a lot of bankers point out that this is not permanent flow, right, and then people also point out that the FM has asked PSU banks to focus on deposit mobilization given HDFC Bank’s merger. So given all this news flow, do you see a situation possibly even growth picks up in the second half that banks may have too high deposit rates through special schemes even though RBI does not hike repo rates or does liquidity look like comfortable and sustaining, whether PSU banks start attractive schemes, they had started schemes for deposits even in October last year like that.

Venkatraman Venkateswaran — Chief Financial Officer

Well, I think that the challenge is an ongoing challenge, it could be PSU, it could be another private sector bank. But I think if credit expansion happens, deposit automatically follows Mahrukh, you know that, right, credit period deposits, so I don’t believe we will be in a situation of no deposit creation, but only asset creation, then there is a fundamental problem. I do think the deposit —

Shyam Srinivasan — Managing Director and Chief Executive Officer

And for us I mentioned, we are seeing Mark [Phonetic] and quite defining changes in the deposit momentum and in particular to the non-resident deposit momentum in the last 45 days, quite meaningful. So I don’t believe in the positive direction. I don’t believe it will — I mean, nothing is easy, right. And our business is not like you can sit back and believe it will come to you. So there will be competition, but I think the deposit certainly at a price, it will be available, whether it will be at all CASA, however, it will be retail term and CASA that’s — that as long as the bridge between savings and term is not very distinct, then you will see SAAR [Phonetic] grow.

If savings and term is 400 basis points gap, you will see deposit growth in the form of term. We’ve seen that for long periods of time, I can see that slowly compressing.

Mahrukh Adajania — Nuvama — Analyst

Okay, sir. Sir, and my second question is on loan yields again for this quarter, that’s it for the first quarter that the mix has changed very favorably, right. The growth in of course on a low base growth in CVs, MFI has credit cards has been very, very strong. So — even so yields may not have risen at the pace of the change in loan mix and that’s because of competitive pressures in those price segment, is it?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Partly that. Partly, it’s the growth could have been more at the second half of the quarter. So you didn’t get the full benefit of it in the quarter. But yes, it’s a combination, I don’t believe it’s just one, the combination of all. Even in the CV business or the micro-finance business while they are higher yield than our average, we are not going after 24% or 36% or 28%, we are still, if our run rate is 12 inward 14 because we don’t want to go into riskier of the nature, at least in the early days still we understand these businesses much better.

Mahrukh Adajania — Nuvama — Analyst

Sure. And sir, in general, for the sector, there has been some even based on sectorial data, some moderation in growth in mortgages — in home loans. Is it just seasonal or what is your take?

Shyam Srinivasan — Managing Director and Chief Executive Officer

We’ve also been talking about it, but I think you may have seen, our numbers is still being consistent in growing, but we are seeing pressure on pricing in the segments we have built. So there is a real fight for taking share. And in home loans, there is no cost, there is no foreclosure or nothing, so people can move with [Indecipherable]. So we have to worry about that. But yet not seen any — and we are — our home loans are quite concentrated in five, six geographies. We are not very deeply into every part of the country in home loans, in those geographies, we haven’t seen any slowdown. Shalini or some other here in the call, you can add.

Shalini Warrier — Executive Director

Yes, you’re right, Shyam. We haven’t seen any slowdown. Yes, there is competitive pressure on pricing, typically the new sourcing in some of the metros that we kind of compete in Mumbai, Bangalore, Chennai and Delhi, etc, there is that pressure on pricing. So we have been quite disciplined about pricing. We look at the overall relationship, look at other aspects in there, that momentum per se haven’t seen any concerns as such.

Mahrukh Adajania — Nuvama — Analyst

Okay, thank you so much.

Shalini Warrier — Executive Director

You’re welcome.

Operator

Thank you. We have the next question from the line of Saurabh Kumar from JPMorgan. Please go ahead.

Saurabh Kumar — JPMorgan — Analyst

Yeah, just two questions, one is, how would you think about OpEx growth especially employee cost growth this year, should we see any operating leverage come through? And the second is on — again on NIM, sorry. So, based on your guidance of 330, 335, fair to say that your second half NIM will be touching 350?

Shyam Srinivasan — Managing Director and Chief Executive Officer

First quarter, 315, we think second quarter onwards, it will start picking up. So, I’m not even venturing into talking about last quarter as yet, but we still think the full-year NIM will be closer to 330.

Saurabh Kumar — JPMorgan — Analyst

Okay. And on the OpEx, please, on employee costs?

Shyam Srinivasan — Managing Director and Chief Executive Officer

I think people costs is pretty much running on course, Saurabh, because whatever the increments and the expected raises have been factored in. That’s on the people cost. On the operating expenses, it should be more like a single-digit or early double-digit kind of growth but Venkat can expand on that.

Venkatraman Venkateswaran — Chief Financial Officer

Yeah. I think on the OpEx, two parts, the staff and other OpEx. Staff cost what we’ve seen is the impact of the yield movements for the pension that should be provisioning, it’s just can actually a liability which we have taken in and that will move subject to the yield movement during the next few quarters. And also in Q1, we traditionally see slightly higher uptake on staff cost on leave encashment, leave travel and all that stuff. So that has come in, so I don’t expect staff costs moment to be very high from now on.

On the other OpEx, we’ve seen between Q4 and Q1 also there has been a slight increase. And large part of it is variable business related. The impact of some flow-through depreciation coming through for projects which have gone live over the last year. Other than that, there is no significant non volume-related costs which are likely to come through.

Saurabh Kumar — JPMorgan — Analyst

Okay, got it, sir. And sir on the pension piece, I mean, as it rolled down, the benefit is still that INR253 odd crores or –?

Shyam Srinivasan — Managing Director and Chief Executive Officer

I’m sorry?

Saurabh Kumar — JPMorgan — Analyst

The defined contribution, I mean as you’re — on the employee cost has a defined contribution shared increases, the —

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yes, roughly about INR300 crores for the full year.

Saurabh Kumar — JPMorgan — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of MB Mahesh from Kotak Securities. Please go ahead.

MB Mahesh — Kotak Securities — Analyst

Sure, hi. Just a few questions, one on the demand environment, if you could just kind of briefly kind of highlight across the segments, how is it shaping up?

Shyam Srinivasan — Managing Director and Chief Executive Officer

I hope in saying Mahesh, we saw reasonable traction, we saw good traction in Q1 even in Q2 just two weeks have passed, our credit committee has met four times. So we are seeing reasonable momentum in most of our businesses in volume and at least new proposals coming in. Yes, in a segment, we are pursuing segments which are relatively on the lower-risk spectrum, so to that extent, it will be a very competitively priced but we are seeing reasonably good traction even now. And outlook for Q2 looks quite similar.

MB Mahesh — Kotak Securities — Analyst

Okay. On the second question on NR deposits, there has been some level of slowdown there, some clarification on that?

Shyam Srinivasan — Managing Director and Chief Executive Officer

NR deposits, I did mention at the beginning of the call and let me reiterate. In fact we are reasonably happy to see that come back of it in the second part of Q1 and early part of Q2 and hope that sustained. We did see post-COVID remittances coming in, but not all of it translating into deposits, particularly this non-FCNR, we are not a big FCNR player. So our focus is on NRE, savings and NRE term that’s where we have a large share. That share has gone up, in fact from eight odd to 8.38% or 8.4% of India’s NR deposits in that categories with us. So we’re gaining share there. What was a little behavioral change we saw is that remittances are coming, but not translating into deposits as it did in the past period.

We thought there were some structural change or whatever post COVID looks like those, either they were making investments or one-time whatever, commitments being fulfilled that is beginning to build back. In the normal quarter, we’ve seen in the past as high as INR2,000 crores to INR2,500 crores of incremental deposit built, for then it fell off materially, we’re seeing it come back of about INR1,000 crores or so now. So there is a build back coming.

MB Mahesh — Kotak Securities — Analyst

Okay, perfect. My last question, sir. For a 250 basis-point increase in lending rates, the corresponding increase that we’ve seen so far is about 130 basis points. Where are you seeing the pressure on the lending side from a pass-through perspective?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Across the spectrum, Mahesh. I think we discussed this at length. We have seen about 130 basis points and they were another residual of another 10 odd basis points when comes through 10 basis points to 15 basis points, it will come through. We did think that about 150 basis points is the maximum that you can pass through.

Again, going back to the segments that we are, I don’t believe you can just transfer it entirely and expect, so we are in a very competitive environment, right, Everybody is going after the best.

MB Mahesh — Kotak Securities — Analyst

Sure, sure. Perfect, sir. And thanks a lot.

Operator

Thank you. The next question is from the line of Rakesh Kumar [Phonetic] from B&K Securities. Please go ahead.

Rakesh Kumar — B&K Securities — Analyst

Yeah, thank you sir. Sir, just couple of questions, firstly, with respect to the increase in the cost of deposit which was close to around 20 bps quarter-on-quarter, but we haven’t increased our MCLR, correct me if we’re wrong?

Shyam Srinivasan — Managing Director and Chief Executive Officer

I think last month the ALCO — MCLR — Damodaran if you are there, MCLR went up right, last month?

Damodaran V — Senior Vice President, Chief Risk Officer

Actually, there was one production in between due to minor reduction in the operating cost sector. You see, MCLR actually driven by — a formula driven by RBI. So whatever is the number we are computing, accordingly it will come. Interest in MCLR, first based on the increase in the marginal cost. From the original level if you repeat, come back with the — so properly increased on the — there we’ve started increasing the repo rate. I will come back with the number very quickly. There is a reasonable increase in our MCLR across this period.

Rakesh Kumar — B&K Securities — Analyst

No, I was looking at RBI number which is giving MCLR at 9.35 in March and 9.05 in temporary and 9.35 in June, so I was thinking like, you know, our ROE — so if you look at MCLR template what RBI gives so like OpEx to asset ratio, your marginal cost, your ROE number.

Shyam Srinivasan — Managing Director and Chief Executive Officer

I think you are right. I think your point about MCLR, 935 going to 905 coming to 935, so as pass-through has done, because 935 coming down to 905 like Damodaran pointed out is not just cost of deposits that the operational cost also, some cost reduction happened that also as we pass through. So the formula at the stage, not just entire cost of deposits alone, right, cost of deposits is one element of the MCLR calculation.

Rakesh Kumar — B&K Securities — Analyst

So I was thinking, sir, like 14% of loan, as you mentioned is on MCLR and 49% on two-wheeler, 27% on fixed-rate. What — where the remaining 10% would be, sir?

Venkatraman Venkateswaran — Chief Financial Officer

Staff is about 5.5% and then we have — and base rate.

Rakesh Kumar — B&K Securities — Analyst

Base rate, foreign currency. And sir, have we increased any spread on the fixed-rate loans from March end to June end. So have been — like there is some — there is some struggle to increase the spread on the fixed-rate loans. So what is our experience there, sir?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Only when it comes up for renewal right. Harsh, do you have any?

Harsh Dugar — Executive Director

Yeah, let me clarify, yeah. Our fixed-rate loan technically you see, we cannot change this, by very nature of it, but let me clarify the number given [Indecipherable] it also includes short-term one, which has been given. So it’s not that we are carrying a long-term or a low-rate or something like that.

So quick rate, the fresh ones that’s done at revised rate, let me give an example, commercial vehicles, the loans had gone to as less below 7% today the loans have been done well above 9%, but these are fresh ones, the stock as for retail. Similarly, fixed rate have been done with the large corporate remains fixed for the tenants, all the period has been fixed for.

Rakesh Kumar — B&K Securities — Analyst

So actually sir, if we have not changed the MCLR and obviously repo rate has not changed, fixed-rate book there is like we are not done much. Then whatever the increase in yield is there in this quarter is basically because of compositional change.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Part is compositional change, part is fresh booking as well. To give an example, if a fixed-rate loan book which are obviously concentrate also, the lower end of the fixed-rate, which was booked two years back or three years back, obviously comes up for maturity and the threshold book are 1.5%, 2%, 2.5% higher than that. So that is also the efficiencies that we also add to that, if I just along.

Rakesh Kumar — B&K Securities — Analyst

What I was looking at the NSFR data, so that was showing that the amount on the asset side, which was coming for repricing, that number was quite low actually. The number given in the March quarter numbers made for disclosure as per that number, the repricing was scheduled in this quarter or maybe for the six months, number was not much.

Shyam Srinivasan — Managing Director and Chief Executive Officer

[Speech Overlap] March 2022, our MCLR was 790 [Phonetic] whereas it is 930. So there is an increase of 140 bps, approximately. I mean, we know this is — this may added in pick up, based on the [Indecipherable]. It can go up or down, but there are ways the fund maybe slightly higher.

Rakesh Kumar — B&K Securities — Analyst

And sorry to come back, this is incremental TD cost and outstanding TD cost, so incremental TD cost are 6.4% and outstanding is 6.5%, correct sir?

Shyam Srinivasan — Managing Director and Chief Executive Officer

The way it works will be slightly different, you need to take our latest cost of deposits that we are offering for the different plans and the factors of which we need to multiply is basically our historical distribution across the capex. So though we call it marginal cost, they are permanent likely historical and slightly marginal. [Indecipherable] we are growth incremental growth also, is in the proportion for the different buckets.

Rakesh Kumar — B&K Securities — Analyst

Okay, okay. Okay sir, thank you. Thank you, sir.

Operator

Thank you. The next question is from the line of Tanika Aggarwal from Green Portfolio Private Limited. Please go ahead.

Tanika Aggarwal — Green Portfolio Private Limited — Analyst

Hi, sir. The question is also around like [Technical Issues] —

Shyam Srinivasan — Managing Director and Chief Executive Officer

Sorry, we can’t hear you, please. We can’t hear you.

Tanika Aggarwal — Green Portfolio Private Limited — Analyst

Is it better now?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Not quite, maybe you have to — if you’re in headset or something, remove that and —

Operator

Ms. Aggarwal, the line for you sounds muffled. It’s not clear.

Tanika Aggarwal — Green Portfolio Private Limited — Analyst

Okay. Is this now audible?

Operator

No, it’s still not clear ma’am.

Tanika Aggarwal — Green Portfolio Private Limited — Analyst

I’ll just get back in the queue then.

Operator

Sure. Thank you, ma’am. We will move on to the next question which —

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yes. Operator, we can probably close after two more questions, please.

Operator

Thank you. Yes, sir. The next question is from the line of Bunty Chawla from IDBI Capital. Please go ahead.

Bunty Chawla — IDBI Capital — Analyst

Thank you, sir. Thank you for giving the opportunity. Small data point, if you can share. This quarter, retail NPA has been higher. So which segment under retail has shown this kind of a share? And secondly, the restructured assets as we have seen, it has declined, but still it remain INR2,500 crores kind of a thing. So how — and as you said, almost two years moratorium, I believe all this portfolio has been completely out of the moratorium. So how we can see the NPA pressure coming from these books?

Shyam Srinivasan — Managing Director and Chief Executive Officer

No, the restructured book is restructured standard as you know, the regulations require it to continue to be one year of servicing before you can upgrade it. So that’s going on. The demand of the restructured book in Q1 that we serve that is where I mentioned a third of the retail slippages is from, restructured is there. Retail book is secured home or LAP, so the slippages is there on that one.

Bunty Chawla — IDBI Capital — Analyst

Okay, okay. And sir just lastly, your previous guidance was 5 bps to 10 bps improvement in ROA should be there in coming years as such. Now, what is the guidance currently, given we have said that margin should be remaining stable as compared to last year and credit costs should be also similar kind of thing. So how one should see the ROA guidance going forward in next two years?

Shyam Srinivasan — Managing Director and Chief Executive Officer

We had said when we started financial year, we ended last year at 128, we said 78 basis-point improvement in FY ’24 and a similar repeat in FY ’25.

Bunty Chawla — IDBI Capital — Analyst

So we maintain the guidance, sir?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Yes.

Bunty Chawla — IDBI Capital — Analyst

Yeah. Thank you. Thank you and congratulations.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. We will take the last question from the line of Darpin Shah from Haitong India. Please go ahead.

Darpin Shah — Haitong India — Analyst

All my questions have been answered, just one, how much will be the outstanding provisions on the standard restructured book?

Shyam Srinivasan — Managing Director and Chief Executive Officer

Including management overlay, we have a significant some not touched close to — I don’t know if we have shared in the past, but yeah, meaningful come.

Darpin Shah — Haitong India — Analyst

Okay, fair enough.

Shyam Srinivasan — Managing Director and Chief Executive Officer

It maybe required us to have, if I remember right 15% provision on the restructured book peak the restructured book was INR3,600 crores. So we had made that plus we made a significant overlay of another 10%, so you can do the math. And we haven’t touched that.

Darpin Shah — Haitong India — Analyst

Okay, that’s helpful. Thank you.

Operator

Thank you. I would now like to hand the conference over to Mr. Souvik Roy for closing comments. Over to you, sir.

Souvik Roy — Head, Investor Relations

Thank you so much and thanks to all of you for joining us today. As always we are committed to delivering value and we continue to focus on our growth and strategies. As always, the management team is available to answer any questions that we may have slipped a bit. I believe we have answered all. And we, of course, appreciate your continued support and we will keep in touch and we’ll keep updating you on our progress in the future. Thank you all and have a great day ahead. Thank you.

Shyam Srinivasan — Managing Director and Chief Executive Officer

Thank you.

Shalini Warrier — Executive Director

Thank you, everybody. Bye.

Venkatraman Venkateswaran — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]