THE KARUR VYSYA BANK LIMITED (KARURVYSYA) Q1 FY24 Earnings Concall Transcript

THE KARUR VYSYA BANK LIMITED (NSE: KARURVYSYA) Q1 FY24 Earnings Concall dated Jul. 17, 2023

Corporate Participants:

B. Ramesh Babu — Managing Director and Chief Executive Officer

Ramshankar — Chief Financial Officer

Dolphy Jose — Group Head, Consumer Banking

Analysts:

Prabal Gandhi — Ambit Capital — Analyst

Pranav Tendulkar — Rare Enterprises — Analyst

Sumit Bhalotia — MK Ventures — Analyst

Yuvraj Choudhary — Anand Rathi — Analyst

Renish — ICICI Bank — Analyst

Madhuchanda Dey — MC Pro — Analyst

Jay Mundra — ICICI Securities — Analyst

Akshay Gupta — Investec Capital — Analyst

Rakesh Kumar — B&K Securities — Analyst

Lakshmi Narayan — Tunga Investments — Analyst

Amit Jagwani — Jagwani Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q1 FY ’23-’24 Earnings Conference Call of the Karur Vysya Bank. We have with us today the management team of KVB represented by Mr. Ramesh Babu, MD and CEO; Mr. Natarajan, President and Chief Operating Officer; Mr. Ramshankar, CFO; Mr. Dolphy Jose, Group Head, Consumer Banking; and Mr. Srinivasa Rao, Company Secretary and Compliance Officer. [Operator Instructions]

I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO to take us through the highlights of the quarter gone by, after which we will open the floor for question-and-answers. Over to you, sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

So, good evening to all of you. On behalf of Karur Vysya Bank, I welcome you all to our bank’s earnings call for the quarter one financial year ’24. I am pleased to mention that bank continues to demonstrate its consistent performance in terms of growth, profitability and asset quality for the first quarter ended 30th June 2023. You will be glad to know that our performance in terms of asset expansion, margin, ROA, delinquency is in-line with our guidance. I am sure you will not disagree, if I say that the outcome is on account of our conscious effort, which we were explaining to you in our earlier calls. All of you would have gone through our detailed presentation on our Q1 numbers. I would like to share somewhat of my thoughts on the performance of the bank during the quarter and our guidance for quarter two.

Our total business grew by 4.88% during the quarter and reached a level of INR1,47,671 crores. Advances grew by 4.58% during the quarter and it’s an inclusive growth across business segments led by commercial and agriculture clocking 5% each. Our continued focus on MSME in the metro and urban locations, and gold, jewel loans in rural and semi-urban locations supported the growth. Retail grew by 4%, and the majority of the growth has come from mortgages, both residential as well as non-residential. Our focused efforts on the distribution and benchmarking of our products to market supported operating teams to garner more business under these segments. Though there were sizable disbursements under corporate as we consciously let off certain low-yielding borrowable accounts, the growth looks to be lower at 2%. The overall growth is that above on our annual guided growth of 14% and the trend would continue and we do not see any challenges.

Our deposit growth was at 5.32% during the quarter and term deposits and CASA deposits were grown at 6% and 4.32%, respectively. Though accretion to some extent was aided by return of INR2,000 notes, we are sanguine that the growth momentum would continue and support the asset expansion. We had highlighted about our liabilities acquisition team, out of the planned resource of 1,300, we have onboarded 425 resources during the end of first quarter, aggregating 905 resources. The outcome from the acquisition team would be visible from the second half of the year. So in the con call, our colleagues, so Mr. Dolphy Jose is there later, so he will be also explaining what are the things happening in that particular vein [Phonetic].

Net interest margin reduced by 18 basis points on sequential basis during the quarter at 4.19%. We had indicated in our last call about the expected compression in NIMs during the first two quarters and would be in the range of 4% in the next quarter two. While cost of deposits has gone up by 35 basis points, yield on advances increased by 14 basis points during the quarter, resulting in a compression of 21 basis points. Based on our historical pattern of renewal of deposits and fresh deposit accretion, we expect that there will be further increase in the cost of deposits to the extent of around 20 basis points in the second quarter, assuming no change in our deposit rates.

Considering available market liquidity and fall in bulk deposit rates, we had reduced our interest rates on special deposits by 20 basis points in June ’23. Yield on investments has gone up by 8 basis points during the quarter and it is estimated to go up by 10 basis points in the next quarter. We expect 10 basis points increase in the yield on advances during the second quarter because repricing of loans on account of MCLR will be there. Considering all these factors, and without taking into any policy rate changes, we expect to maintain NIM in the range of 4% for the second quarter. We have achieved an ROA of 1.53% in this quarter. In spite of reduced margin, our business growth, fee income, lower credit cost and recoveries in written-off effects continue to support us to keep our ROA at 1.5% levels.

Our cost-to-income ratio was at 47.29% for the current quarter, which is well within our guidance and sequentially higher over March quarter. This is due to lower recovery in technically written-off accounts and lower write-back of depreciation on the income side, and increase in employee cost on account of one-time performance incentives which is annual payout of INR46 crores. Last year, this was done in the month of July, that’s why it has gone to the second quarter. This time it has come to the first quarter. Otherwise, it is an annual phenomenon. Our normalized employee cost would be in the range of INR300 crores per quarter. As guided earlier, the ratio would be in the range of 45% to 50% for the year 2024.

Our slippages continue to be under control and our gross slippages for the quarter is less than 1%, which is as per our guidance. We continue to have negative net slippages taking into account recovery from the written-off accounts this quarter also. So all of you would have seen that more than 7%, 8% [Phonetic] our net slippages are negative. Our SMA 30 plus of entire loan book at the end of the quarter continues to be at less than 1%. Though it has increased sequentially compared to last quarter, we do not foresee any alarm as it tends to be elevated during the first quarter of the year. We are confident that we will continue to keep the ratio below 1% as guided in our earlier calls. Our efforts on recovery of technically written-off book is continuing to yield results as we have recovered a sum of INR58 crores during the quarter.

Due to lower slippages, recoveries and written-off, our gross NPAs have moved to below 2% and we expect that we will continue to maintain at below 2% levels. For the quarter under review, we have provided a sum of INR137 crores towards NPA migrations, standard assets and prudential provisions. We estimate that credit cost for the current year would be in the range of 75 basis points, as guided. We also created a floating provision of INR25 crores as a prudent measure. Our net NPA has come down to 0.59% and we would continue to maintain our net NPA at less than 1% of our loan book. Our standard restructured loan book is further reduced to 1.33% of our loan book and we hold a provision of 4% [Phonetic] on the standard restructured book. Our CRAR continues to be robust at 17.67%, providing us a comfortable headroom for growth. Our liquidity is well managed and the CD ratio is at 83%.

During the quarter, we opened nine branches and opened one digital banking unit at Chennai and another 38 branches will be opened during this current year. Our new initiative of KVB Smart under commercial banking business has started functioning from Coimbatore, Chennai and Hyderabad locations during the quarter with a team size of eight RMs [Phonetic]. Our business performance highlights are given in our presentation, which you would have seen. We have been consistently improving our performance over a period of last two years and the trend has continued for the first quarter also. Our team is mindful of the same to take it forward — the confidence [Phonetic] of taking it forward. Our endeavor would be to focus on sustaining ROA above 1.5% levels going forward. I am grateful to all our investors, analysts and stakeholders for the confidence and continued support, which we will reciprocate through our better performance in the days to come.

Now, I’ll be glad to respond to your questions. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Prabal Gandhi with Ambit Capital. Please go ahead.

Prabal Gandhi — Ambit Capital — Analyst

Yes. Thank you for the opportunity. Am I audible?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, audible. Prabal, I think some more clarity if that is there, that will be good. Please go ahead.

Prabal Gandhi — Ambit Capital — Analyst

Is it better now, sir?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Absolutely, better. Now you go ahead, please. Thank you.

Prabal Gandhi — Ambit Capital — Analyst

Thank you, sir, and congratulations on a good quarter.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you.

Prabal Gandhi — Ambit Capital — Analyst

Sir, my first question is on growth. So can you update us on the performance of the non-branch channels? How are they doing?

B. Ramesh Babu — Managing Director and Chief Executive Officer

So non-branch channel when you’re talking about on the liability side or asset side?

Prabal Gandhi — Ambit Capital — Analyst

On the asset side, meaning co-lending, NEO, KVB Smart.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah, fine. Yes, absolutely. Now NEO is doing pretty well. Actually, if you can look at it, so last year, they grew by around INR2,000 crores and this year also more or less they are INR1,800 crores last year and INR150 crores something like that they have been growing. And they are expanding to few more geographies also. So that way, NEO, [Phonetic] it is not an issue. And we earlier, last year, I was mentioning that we have made an experiment with NEO by creating a new home loan branch at Hyderabad and subsequently similar branch, one more dedicated branch was opened at Bangalore, now at Chennai and later they’ll be opening at Bombay. So these branches started booking business. That Hyderabad branch has already started working well and all, more or less around INR200 crores already outstanding they have got in the last eight months. So other branches also there are in the pipeline. They will work well. In addition to their, there are other products, what all are like LAP, so they are doing well with the new geographies adding. So NEO will be on track.

Now coming to the co-lending, if you look at it, our co-lending arrangement is there with the Chola and a few other players, which is in the pipeline. But the main flagship program is Chola, which is more or less around INR700 crore to INR750 crores is outstanding now. They are going on pretty well, not an issue at all. So other two to three smaller players also we are working on that. Maybe in this quarter, we may be able to clinch few of them. Now coming to the KVB Smart. So, initially we are taking the people and the — as in my inaugural message I told, so we are working with Coimbatore, Chennai and Hyderabad. These three centers already eight relationship managers and few more credit people we already taking them on board. Now these people will need to get adjusted. So we are reasonably confident that with the new experience what we have. The KVB Smart initiative also will work well.

And the another thing is we can create a linkage between the NEO as well as the KVB Smart, because NEO handles the LAP and other products and [Technical Issues] handles the working capital. If these same customers if other side working capital we can handle this, so that it will be much — lot a synergy will be both of them. So that way, all three, what you’ve mentioned, they are on track and doing well.

Prabal Gandhi — Ambit Capital — Analyst

When these all three put together how much they would be contributing in the loan book right now?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Loan book, if I can say, NEO will be around 450 — no, no, this quarter, this quarter — this quarter you’re talking or total loan book you’re telling?

Prabal Gandhi — Ambit Capital — Analyst

Outstanding on the loan book? [Speech Overlap]

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, no. NEO itself is high. [Speech Overlap] No, no, no. All three together he’s asking. So all three together, co-lending is 750, NEO will be how much — around 4,500 — INR4,500 NEO this one, and KVB Smart just started, it is in two digits.

Prabal Gandhi — Ambit Capital — Analyst

Based on meaning all put together INR5,500 crores.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Around that area. Correct, you’re right.

Prabal Gandhi — Ambit Capital — Analyst

Okay. And just one question is, how are you controlling risk here because NEO, KVB Smart and all these are done not from the branch side. So there would be some element of risk involved there, right?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, no. Understand. These are — actually the accounts are there in the branch finally. So next thing is the documents are also coming to the branches only, placed in the branch. And we have a perfect system of these on-boarding and checks and balances, audit and external audit, internal audit, all these things are there. Not only that our risk management department also continuously, they review what is happening there. So that way, in all these cases we have placed fixed balance.

Co-lending is concerned, it is absolutely within the central office we are doing. So KVB Smart just started all the processes what all need to be done. So we have formulated here. Based on that we are going ahead. NEO is more or less stabilized that way and we are doing audits and all that way audit reports, we are getting a better control on that.

Ramshankar — Chief Financial Officer

Yeah, Prabal in addition to that, as far as NEO is concerned, the credit policy for the NEO or the other branches are same, number one. And number two is, they’re also using the same loan origination system. Whatever the underwriting standards, which we have defined for the digital lending, same thing is applicable. In that way, there is no difference either in the underwriting or in the any of the other processes. Only [Speech Overlap] thing is a differentiator.

Prabal Gandhi — Ambit Capital — Analyst

Got it. And sir, in previous calls, you’ve also mentioned that your aim is to increase branch per loan per month or two [Phonetic] versus what it used to be to a quarter. Now what is the [Speech Overlap] your aim is to have branch per month, but number of two loans per branches per month versus it used to be a quarter ago, right. So what is the progress there?

B. Ramesh Babu — Managing Director and Chief Executive Officer

I am unable to recollect. When did I say that two branch — two loans per branch?

Prabal Gandhi — Ambit Capital — Analyst

No, no, meaning every branch per quarter used to do two loans earlier. And your aim was to increase this to six per quarter.

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, these are — basically, it is a general focus which we are providing to the branches for the overall improvement. But I never — I can fairly recollect Prabal, in any of the calls I made this statement.

Prabal Gandhi — Ambit Capital — Analyst

Okay, not a problem. On the margin side, so can you guide us to what is the pricing change by SME segment right now?

B. Ramesh Babu — Managing Director and Chief Executive Officer

SME segment majority is commercial if you look at it, so it ranges between 9.5% to 10%, average yield itself is between 9.5% and 10% we are getting it, commercial. So our retail is concerned, that’s also around 9% odd and agriculture is also around 9% we are getting it. It is slightly lower in respect of corporate. That is the reason in the inaugural when I was mentioning that, so I clearly mentioned that consciously this quarter as well as last quarter, we allowed few of the big accounts or where the low-yielding accounts are there, when they recently [Phonetic] is due, we allowed them to prepay, because by prepaying them, overall our margins are improved, otherwise so it is not adding anything to the margin. So, overall that way we are focusing on that. You would have seen that, [indecipherable] basis points we could improve the margin over last quarter.

Prabal Gandhi — Ambit Capital — Analyst

Got it. Understood. Okay. Okay, sir. Thank you. If I have more questions, I’ll come back in the queue.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Please, please. Thanks, Prabal. Thank you.

Operator

Thank you. Our next question comes from the line of Pranav Tendulkar from Rare Enterprises. Please go ahead.

Pranav Tendulkar — Rare Enterprises — Analyst

Hi, sir. Sir, can you just highlight practice that will actually affect NIMs going forward and what is the outlook for that year?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Sorry, Pranav, that is echoing there, Pranav. We are unable to hear you, understand the issue.

Pranav Tendulkar — Rare Enterprises — Analyst

Hello, hello, can you hear me?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah, please tell me.

Pranav Tendulkar — Rare Enterprises — Analyst

Yeah. So, I’m just asking what are the various factors that you can visualize that will affect NIM going forward and what is the guidance for the year?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Okay, okay, understood. Yeah, factors in the sense that, you see, when we did a ballpark working on, the usual pattern of the deposit renewals in which bucket they will be coming and all based on our historical experience, when we worked on, we found out saying that, so around 20 basis points the cost of deposits will go up. Because one of our flagship product, which is a 444 scheme — 444 days, where lot of inflows are coming. So there consciously when these INR2,000 notes were going on at that time, when we saw an inflow, we reduced the rate of interest by 20 basis points. But despite that, I know there is a small dip in that bucket. But overall, the flow is still there. With these things, what we feel, the cost of deposits can go up by another 20 basis points. Likewise, when we look at our MCLR portfolio, so the — what all the portfolio which is coming up for repricing during this quarter, so there also we will be getting another 10 basis points. So that way the net we can expect that we may be four-plus something like that for the next quarter.

Now coming to the third quarter and fourth quarter, it would be too difficult to estimate at this stage. Maybe next quarter when we come for the call, we will be able to have a fair view of the third quarter and fourth quarter. So, but our intention is to the extent possible to maintain these yields. As I told you clearly, the low-yielding by getting out of those cases also our yields are improving, whichever way we need to protect our yields without losing on the quality, so we are working on that. We will see next quarter four, we will try to maintain and beyond that, August we can maintain, we will let you know.

Pranav Tendulkar — Rare Enterprises — Analyst

Okay, sir. Thank you.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you. Thank you, Pranav. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Sumit Bhalotia with MK Ventures. Please go ahead.

Sumit Bhalotia — MK Ventures — Analyst

Sir, congratulations for the excellent set of numbers.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, Sumit. Thank you.

Sumit Bhalotia — MK Ventures — Analyst

Yeah, there is quite of a sharp NIM compression, which you have already guided. You have maintained very good ROAs. So the few questions that I had, I think, few of them are already answered. But if you can give more insight on the consumer banking division that you expanding. And so you made a comment that hiring that you have done benefit of that will be visible from second half. So, if you can quantify that — so one is on how — what kind of benefit you are expecting in the second half on the deposit front, that is one. Second is more insights on the overall consumer banking division and the hiring that you’re doing, how that is going to benefit us say over the next couple of years. And also finally, on the cost to income, how do you see that panning out for this year and the next year?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. So, thanks, Sumit. In fact, all along I have been sharing what are the development. Now there’s a reason this time, we have included Mr. Dolphy Jose, our Head of Consumer Banking. So he will brief what is happening there and what is the manpower, which are the segments they have started and all, all these things. The cost-to-income ratio is concerned, our CFO will respond to the second question. Dolphy, over to you for the first part. Please brief the audience on this, please.

Dolphy Jose — Group Head, Consumer Banking

Yeah. Hi, Sumit, this is Dolphy. I will first take you through our plans for the liability fees. So, broadly we have classified our deposit mobilization into internal and external. Let me cover the internal part. Our largest franchisee of the bank, which is our branch network is continuing to acquire new with more focus on deepening and enhancing the customer origin and product per customer. And our existing business banking vertical, now have targeted delivery. They acquire NTB [Phonetic] current accounts. We also plan to increase lowest result [Phonetic], light branch network simultaneously to increase footprint, especially in the semi-urban and the rural geographies. Also apart from this, we are also opening digital banking units in tech parks and target cities.

External plans are the go-to-market plans. This would — the internal covers mostly deepening enhancement [Phonetic] and ETB customers. External is the go-to-market plans where we have formed a sales team where we have a feet on street for household and general public accounts for CASA and [Indecipherable]. We have a vertical called salary team, which focuses on salaried customers taken into salaried accounts, not specifically corporates, but mostly mid-sized companies and large affiliates. Then we have sub-verticals for NR and fixed [Phonetic] accounts. We have a separate vertical for government and institution business. These are primarily focused our efficiency plans. The field FX [Phonetic] vertical focuses on trade and [Indecipherable]. We have an existing BC partnership with close to around 100 BC points, which we will take it to about 450 to 500 BC points. And our intent is to have 90% plus active BC points. So confident to grow our deposit rates consistently as per the deposit [indecipherable] the bank.

On the retail asset guide, as I mentioned earlier, branch banking continues to be our largest franchisee for sourcing retail assets. Apart from that, we had full sub-verticals, one, would be a vertical which would be aggregators for fulfillment of leads generated by the branch channel, that is called the branch channel sales team. And one separate vertical for open market who will primarily sold from [Indecipherable]. These are two other verticals, which are charged under the retail assets segment. Apart from this, we are also re-launching the credit card co-branded approach. And we also intend to launch the opening market gold loan, where we would go to market with our sales team who would go to market and acquire gold loan. These are ballpark, these are our plans for both [Indecipherable].

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. Sumit, coming to — say, any questions on this before we move to the cost-to-income further, Sumit?

Sumit Bhalotia — MK Ventures — Analyst

So there’s — yeah, sorry, just one thing on the consumer banking. Sorry, I understand the division. But do we have internal targets of what kind of growth we would be targeting for this retail segment? So as of now, if I look at it, we have been growing [indecipherable] in the overall system credit growth for the last — for few years. So post this expansion that would be doing what kind of growth we would be targeting vis-a-vis the industry, when the team is fully in place and all these verticals are fully functional?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. Sumit, in fact, I’ll just share my point on this. Now you see, initially, we have focused on the liability side, particularly for the CASA. So that is going to help us in the low yielding — low cost deposit. Though initially they may be investing some sort of a investment on that, but they’ll be mobilizing the assets as well as the cross-sell also. So it will take one-year process for stabilizing, because these people they have come from different banks. Their working is different, they need to get stabilized and they need to see different products and all they need to get that. So our focus currently is on the CASA.

Simultaneously, as Mr. Dolphy was mentioning, rest of them, few of them are in the pipeline, few of them these direct selling agents and feet on street for the assets we started working. So it may take three months to six months from stabilizing this entire team for the working. But earlier, if you can look at it, we were struggling at around 4%, 5%, 6% that way 8% also in respect of the consumer banking asset side. So, but if you can recollect, see the numbers now, more or less, it has come up well, and this quarter also quarter-on-quarter, it is around 4%. Even if you annualize, it comes to 16%. So 18% minimum. So that way we have moved from 6%, 7% to 18% with the internal what all we have and some external what all we are taking and all.

So that way we will see overall once it stabilizes, how we can do it between 18% and 20% we can see that. Because [Speech Overlap] one more point I need to tell, Sumit. The easier way — sorry, growing in the consumer segment is to go for the unsecured. Unsecured, if we go on doing and all, then comfortably we can grow at 25%. But if you can look at our portfolio, unsecured, that slide also if you see, that INR600 crores what all is there and all majority is coming from the BNPL program. That’s why we have regrouped and we have put it there. So — and not only that, within the bank whoever are there unsecured we have given and this is our portfolio. We do not want to grow aggressively under the unsecured that too under current state where many banks are growing with a much faster pace. So that’s why unsecured when we have kept it out, so we need to mellow down our expectations also on the growth around 18% to 20%, that’s what we feel.

Sumit Bhalotia — MK Ventures — Analyst

Understood, sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Okay. Yeah, because in the cost-to-income on account of this initiative, our CFO will respond.

Ramshankar — Chief Financial Officer

Yeah. Sumit, Ramshankar here. See the various we should — already it was mentioned in our opening remark by our MD. See, one is that, the RL sales acquisition, the other one is the KVB Smart, and little bit in RA. All this put together, we expect around 10 basis points increase on our cost to assets on an overall basis. So — 10 basis points [Phonetic] give you the — actually, if you take into cost-to-income ratio, if you look at it, see may be initially one or two quarters, it may be — it may go up, but overall the productivity of these new channels will be — there’ll be a time lag where you can get the income from that. So till that point, there will be an increase. But however, we hope that it will be compensated as done in last two quarters by recovery from written-off accounts. So overall, as we guided, it will be in the range between 45% to 50% levels.

B. Ramesh Babu — Managing Director and Chief Executive Officer

So, Sumit, in fact, this is a — as always I say, cholesterol, good cholesterol, bad cholesterol. This is a good cholesterol, which we need to spend this capital investment for the future. So that is the reason. Though there can be a lag between what we are spending and what we are going to get, so that lag is quite useful because subsequently what we are going to do — going to get is perennial. So with that intention, we need to take the plunge and we took it.

Sumit Bhalotia — MK Ventures — Analyst

Thank you. Absolutely, agree with you.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you. Thank you, Sumit. Thank you.

Operator

Thank you. Our next question comes from the line of Yuvraj Choudhary with Anand Rathi. Please go ahead.

Yuvraj Choudhary — Anand Rathi — Analyst

Good evening, sir. Thanks for the opportunity and congratulations on a good quarter.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, Yuvraj.

Yuvraj Choudhary — Anand Rathi — Analyst

Sir, could you throw some color on how the demand scenario in Tamil Nadu for various industry — industries? Specifically, talk about textile industry.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. I’ll tell you. Agri [Phonetic], in fact, textile is one of our main stay. And so we have — so now if you look at it, last one, one-and-a-half years, textile is undergoing some sort of a pain because both the cotton price will be going up and the yarn. All these issues and the Europe issue, US issue, China issue with all these things, the level of production in many of the plants have come down. So then because the demand is not there. But clearly, the apparel industry also if you see in Tirupur, so their order book was more or less come to a — more or less minimal last year. But when we are interacting with the players now, so the question is, China started importing the yarn once again, because our yarn is one of the cheapest and the quality is good. So that way, some sort of a demand started because for few months, many months in China, there was a total lockdown and the activity was not there. So this is one way yarn when it has come back. Meanwhile, the spinning mills which are good and all, they are able to slowly get back. I’m not saying full-fledged full-scale they’ll be able to do it.

Now coming to the other side, apparel industry and other things if you look at it. So, because the shelf in Europe, as well as US, our clients are concerned majority of exports are going to US. So when we interact with the teams and all, what we understand is slowly the demand from the US started coming up and this apparel also started getting the orders now. But good thing if you look at it, so, though this process is going on for the last one-and-a-half years, none of our clients actually told we are able to face the stress. Because there are two reasons. One is, they may be literally conservative initially itself unlike many of them. When the lot of expansion was going on, these people they didn’t go for such sort of an expansion. And even if our clients have gone for expansion, they have gone for solar, which substitutes the EV power what all is there, which has saved them. So that way the term loan component and the interest component burden is not there for them.

And second thing, because orders are not there, many of them, the working capital limits have come down drastically, the utilization levels. So, despite that we are able to show a growth of 17%, though working capital utilization is not there. So we are happy literally though working capital utilization is low, because when the orders are not there our working capital utilization is full, we will be terrified. So that way the quality of the clients what we have for the textile, though the portfolio is high, till date, one-and-a-half years, we didn’t had any problem that way and all. So we feel that while interacting with them, so maybe another six months this problem will be over and they will be able to back to normalcy because the cotton prices are stabilizing now.

Though on one side, people say, cotton production has come down and import duty, all these things are there. But whatever it is, price is getting stabilized at 50,000, 55,000. So that gives us some sort of a confidence to the people. Because earlier, people are thinking prices may come down further, that is the reason they were not buying the cotton and stocking it. Now that the stabilization is happening now, people started venturing buying the cotton, with that the utilization levels will go up. With this the production also will start. Otherwise, what all orders are there on a just-in-time basis, they are buying the cotton and all, they are producing and they are exporting or selling. So that trend is going to change shortly. So this is broadly about the textile.

Yuvraj Choudhary — Anand Rathi — Analyst

And that was really helpful, sir. Thanks.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Renish [Phonetic] with ICICI Bank. Please go ahead.

Renish — ICICI Bank — Analyst

Yeah. Hi, sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Hi, Renish.

Renish — ICICI Bank — Analyst

Just one question — hi, sir. Sir, just one question on the gold loan portfolio, it’s 25% of our book. So if you can just throw some light in terms of what is the tenure, what is the yield? And if you can share what kind of ROA we’ll be making on the gold business?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Renish, in fact, if you can look at it, so some one-and-a-half years back when I was asked what will be the gold loan portfolio of the total portfolio, I was indicating it can go up to 30%, but still we are maintaining a 25%, okay. Because other side also book is going up. Second thing I will tell you, so there are few advantages what we are getting when — I will talk about the yield also. But before that I want to talk about what are the advantages what we have. On one side, if you look at it, so absolutely, totally backed by security. And second thing, if you look at our presentation, the LTV is 68%, leaving 32% for any unforeseen eventuality. So that way the chances of losing money is remote.

And next thing is, there is no capital adequacy and charge recorded on this. So there is no capital cost on this. And next thing is, because majority of the portfolio is for the agriculture, it is covering for the priority sector. And that way, wherever shortage is there for other banks, if I can sell the priority sector certificate, we will be able to get the PSLC commission also on this. So these are the various advantages by going for the gold loan. Now coming to the tenure, if you look at it, majority of the gold loans are for one-year, one-year or two years maximum, and it depends, which is linked to the cropping pattern. For the crop what we are giving, it will be synchronized to that. And along with that, we will see some sort of a time also for the repayment. The pricing ranges between 8.75% to 9%, that’s how we will be getting it. So that way, it is no risk, no capital, with 68% with priority sector and 8.75% to 9% we feel is a good yield, that is the reason we have gone into that.

Renish — ICICI Bank — Analyst

Got it. Got it. And so let’s say the ROA in this business would be at around the blended level of 1.5%, or it should be higher than that, because I agree there will be no credit cost as such?

B. Ramesh Babu — Managing Director and Chief Executive Officer

It is slightly relatively higher than that. Because if pure ROA if you look at it, it will be 1.5% plus. But if I take into account the capital cost what I am saving and the PSLC benefit what I’m going to get in times of stealth, if I add it, it will be adding as a kicker for that.

Renish — ICICI Bank — Analyst

Got it. Got it, sir. And do you — let’s say since given this loans are shorter tenured loans and once — I am saying the gold loans are let’s say it’s a shorter tenure loans and hence the — when the unwinding happens, do you foresee this to the growth assumptions?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, that is the reason if you look at it, the potential what all is there, our branches. So simple reason, because there are many competitors are there. Despite that, if you look at it last Y-o-Y growth it is around INR2,500 crores growth has come. Maybe something to be aided by the price — the gold price has gone up. Otherwise also number of loans and this is going up because our people, they are good in giving a good turnaround time and as a service. So that is really helping us to have a better this thing. Maybe over a period of time, if it happens that way, that is the reason what we are doing currently is, we started slowly diversifying into other activities. So what we did in our presentation, we have shown, so other types of loans, which are more or less with tie-ups and all, so we started growing. More or less INR100 crores, INR150 crores, we have grown in this quarter, INR100 crores, it has come up. We will grow further.

Likewise, to some extent that MFI loans also what we thought, on a smaller scale, we started around INR55 crore something like an outstanding now. And there also with the checks and balances we are growing. Likewise, if we are focusing on the food processing, where there is a lot of scope is available, that and to some extent the poultry and dairy these sort of things that to with the tie-up. So these are the areas we are looking at it. Once we diversify and go into that one, then to some extent our dependence on this gold loan should come down over a period of time. That is our plan of action.

Renish — ICICI Bank — Analyst

Got it, sir. This is very helpful, sir. Thank you.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, thank you.

Operator

Thank you. Our next question comes from the line of Madhuchanda with MC Pro. Please go ahead.

Madhuchanda Dey — MC Pro — Analyst

Hi. Hi, good afternoon, sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Good afternoon, ma’am.

Madhuchanda Dey — MC Pro — Analyst

My question — yeah, hi. My question is on ROA. I mean, so far, it has seen a steady uptake thanks to the expansion in margin and lower credit cost. Now that we are hitting a point where margins are going to head south for sure, we have already seen that in the quarter, and you’re guiding to that and the credit cost remains extremely benign, what are the kicker for ROA expansion or should we expect ROA to stagnate from here on?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Ma’am, in fact, agreed. So margin expansion with all these things also still we are able to maintain. If you look at the credit cost, so it may look like this at today, but with 390 [Phonetic] crores of net NPA on a 66,000 crore, 67,000 crore book. So even if tomorrow we need to provide a lot also, we will not be able to provide for that. So that way, naturally what all we are earning will be flowing into the ROA only. So that is one. And second thing is, if you can look at it, the initiative what Mr. Dolphy Jose has mentioned about, the liabilities CASA vertical what we are starting. So with that, if the cost of funds comes down, naturally that will also help us to improve our margin. It will be margin accretive if we are able to go for that.

And next thing is regarding the other products under the personal banking. So, where — currently our focus is all on the mortgages, now we are trying to go for to some extent on the unsecured. For that, what our plan is, we have extensively gone for the BNPL with the Amazon program. In the process, lakhs of customers we have acquired. So it is only a monoliner [Phonetic] under that the BNPL only we are getting them. So what we have discussed with our partner and we started doing is, what are the possibilities are there for co-lending these people for the personal loans. Because if a customer is there with us for two years and continuously has been servicing with Amazon loan continuously and other cibil scores, if you look at it, so we will have a fair view of this customer, where we can go further. Under that, the other partner whoever is there, last six months to eight months, he started the program for co-lending, directly lending under personal loans to them and it started very well and all the recovery and repayments are pretty good. Now, we are actively working with them, either for the co-lending or for the pool purchase of the personal loan portfolio, which will help us — which will add to the margins of the retail portfolio.

Likewise, our agriculture also if you look at it, currently, we have been doing only the majority of this gold loan. Now when we are moving into other areas of agriculture where the margins are relatively better and we have tied up with one of the prime player in the MFI sector, business correspondent who is well versed with doing this one based out of Coimbatore and he is there in the field for the last 11 years. And the MFI when we started working there, there also the yields are relatively better. So that way we are looking at various options where we can go further. As it is, you know very well our commercial banking where the yields are 9.5% to 10%, our focus area today also is commercial banking. For that what we are doing, we are trying to benchmark our products as well as the processes to the market and all. If we can improve our commercial portfolio further, that will help us in overall yield.

So next thing is, we are focusing on the fee to assets, sir. Fee to assets currently the non-fund based what all is there, we are seriously working on that. And how to improve that, further we will be able to get that. We have strengthened our cross-selling vertical. They were taken from the market a set of people and we have engaged many people. Now we are working on how to offer many more products to our customers, that way improving the cross-sell income. I can say that compared to last year, this year our income under the cross-selling is more or less doubling. So we have a lot of scope further. So that way, every lever what all is available for us to improve the income side both on the fee as well as the interest, we are working on that. With these things our endeavor is to see that the 1.5% what we have reached, it has to be above that always and all, whatever is possible we will try to take it forward by pushing every lever.

Madhuchanda Dey — MC Pro — Analyst

Sir, you mentioned on the revenue income side. But you didn’t mention anything on the cost side. So should we assume that —

B. Ramesh Babu — Managing Director and Chief Executive Officer

Okay. I’ll share that also. In fact, if you look at the cost side, there are two main aspects are there. One is establishment costs, second is other expenses. If I look at the other expenses, the earlier numbers at this, the progression is more or less the inflation-linked. What all inflation is there, more or less the same way it is moving, nothing much. Coming to establishment part, if you look at it, you must be knowing that last three years, four years back, we started taking many people from that market. All of them are the CTC-based who are linked to the performance as well as the variable pay that way. So that way, so we have a better flexibility, better productivity. They may be paying something more, but we were able to get the better productivity.

If you can look at the slide of the presentation what you have, so last 2020, it was 3, profit per employee, now it is 17. More or less, the set of staff members from the bank whoever are there, the same level of 8,000 number ballpark here and there, we are maintaining that, whereas the profit per employee has moved from 3 to 17. So that way we are trying to control the cost. I agree, our cost to efficacy is around 2.5, 2.6 running. We will try to bring it down to 2.5 — 2.5 currently is there. We will — we are also planning to see, which are the areas where we can bring it down.

But let me be frank on one point, suppose if I am a miser in respect of incurring a cost and tomorrow I may be missing an opportunity for getting a great business in that. That is the reason we have invested a lot on the liability verticals, in the Smart and other verticals also. It may look at cost now, but it is going to be a money spinner tomorrow. So that is the reason, keeping all these things in mind. Our focus is majority on how to earn more on the income side rather than giving the total focus on the cost. Though, we will focus on that ratio.

Madhuchanda Dey — MC Pro — Analyst

Thank you, sir. So I mean, what is the three-year aspiration as far as ROA is concerned?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Aspiration for the ROA or — I’m sorry, which one you are talking about? Aspiration for the ROA?

Madhuchanda Dey — MC Pro — Analyst

I am saying — yes, yes, in three years time, three years down the line.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Ma’am, three years is a very long period. At least now a days, three quarters [Speech Overlap] these things are moving. No, no, ma’am, in fact having — I will tell you, you must be seeing, you must be tracking this also. Three years back, we were at 0.33% something like that. At that time, we never imagined that our ROA will reach this sort of a number. We have reached this. One more point also for the benefit of the entire audience I’ll share, we started looking at our last 13 year’s numbers, the annual growth barring two years where in 2011 and 2012, we were aggressively growing in the corporate, those years the annual growth was 12,000 crores. Otherwise, the rest of the year, the total business growth was around 7,000 crores, 8,000 crores.

If you can look at our first quarter growth, annual growth for the eight years, nine years what we were getting it, we are able to get it in one quarter this year, 6,786 [Phonetic] crores is the growth in the first quarter. So with the tempo what we have brought, though ROA we will try for between 1.5%, 1.75%, whatever it is, because we will not stop our efforts there. The growth in the business, what we are bringing and that too the difference between the earlier portfolio and current portfolio is now it’s a granular portfolio. If you can look at it, the corporate consciously we have brought it down, number of below 125 [Phonetic]. And the majority of the portfolio is secured. If we look at the unsecured portfolio of the bank, it is 1.85% which is below 2%. With all these things, we feel, so we will not be below 1.5% and whichever we will take it forward and all, our endeavor will be there to take it forward, ma’am.

Madhuchanda Dey — MC Pro — Analyst

Thank you, sir. Thanks a lot, and all the best.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, ma’am. Thank you.

Operator

Thank you. Our next question comes from the line of Jay Mundra with ICICI Securities. Please go ahead.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Hi, Jay.

Jay Mundra — ICICI Securities — Analyst

Yeah. Hi, sir. Thanks for the opportunity, sir. Sir, wanted to check on employee count. Last time you had said that we want to step on employee — I mean we were hiring few employees after long. So how has been the employee count as of 1Q end? And is the majority of the hiring has already been done? Or it should continue for the next nine months as well?

Ramshankar — Chief Financial Officer

Jay, actually the count as of 30th June is 7,900. But as far as the liability business is concerned, still we are in the job. And already our MD has indicators to how many numbers what we have done. For example, we planned 1,300 resources. So of each 905 resources already onboarded. During this quarter, we have onboarded 425.

Jay Mundra — ICICI Securities — Analyst

Right. Okay. Right. Sure, sir. And on savings account balances, right, so we are doing a lot of efforts on savings account on the institutional side. But the total SA growth has been very soft, right. So it is an industry-wide phenomenon also that across banks the SA growth has been much muted. But there is any — I mean two questions, how do you see SA growth panning out; and b) do you envisage any tweak in the SA rate also to assure the savings account balances?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Second question I’ll respond and first question, I’ll give it to Dolphy, Jay. So Jay, in fact earlier also when we looked at it, the change or hike in the interest rate be it [Phonetic] materially brought many inflows into the book. But the downside is, this rate would be going for the existing base also, in that overall the cost is going up. The cost we are going to incur and the benefits we are going to get it is not commensurate. That is the reason we held it. But whatever it is, we will also look into that one, because a set of people from the market they are there continuously studying the pulse of the market, what we need to do. If at all that situation comes, we will gauge the cost benefit and we will do that. Coming to the first question, Dolphy, will you take that question, please?

Dolphy Jose — Group Head, Consumer Banking

Yeah. Jay, Dolphy here. So whatever I’ve mentioned on the go-to-market plans or some sales team as well, see these are all exclusive teams catering specifically to SA acquisitions. Then I say salaried teams, and I say NR [Indecipherable] institutional business like government business, et cetera, all are specifically towards SA. Now all these activities, I mean, as our President mentioned that already about 900 odd people are onboarded and they are active. All this is going to be incremental SA execution [Phonetic]. So I agree that at industry level, SA has been muted. So being a part of the industry, we also have to face that. But our go-to-market strategy what we discussed and what we invested, we are getting incremental SA.

B. Ramesh Babu — Managing Director and Chief Executive Officer

One more point also, Jay, if you can see that, so SA would have gone up agreed, but consciously our own staff also they discussed with the customer and wherever to some extent customers are risk averse, and where they are susceptible to move to other banks for a time deposit. So we ourselves we converted them into time deposits, so that we can retain the deposit with us and relationship with us. So that way, to some extent, the growth in the time deposit 20% we have come. It is something is organic, something is actually driven by our own teams. So we thought relationship and retaining is important. And otherwise, some other bank will take them out and all, we will not be missing that — we will be missing that relationship. There is another reason also for reduction in the SA and growth in the time deposits.

Dolphy Jose — Group Head, Consumer Banking

Also Jay — can I just [Technical Issues]

Jay Mundra — ICICI Securities — Analyst

Please.

Dolphy Jose — Group Head, Consumer Banking

For our SA customers, specifically, we are coming with the array of products as in form of third-party products. For example, if I — we have good existing you start marketing FID, where we ensure that the SA balances are maintained in terms of cyclical FID. So they are seeing, which you are looking at and trying to ensure that these deepening once SA happens. And from [Indecipherable] SA point of view, where we are looking at government business and institutional business, where we are looking at getting SA balances from autonomous controls like corporations and [Indecipherable], that’s the broad plan for SA bulk as well as retail and digital [Phonetic].

Jay Mundra — ICICI Securities — Analyst

Yeah. So my limited point is, sir, these institutional balances they are supposed to be interest sensitive, right, rate-sensitive. So how do you intend to chase or attract those deposits when we are let’s say not in the top quartile when it comes to offering the rates?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Our rates are relatively better. In fact, they’re quite competitive, Jay. But Dolphy, you can respond on that, please.

Dolphy Jose — Group Head, Consumer Banking

Yeah. So when I say bulk, I mean, there is a segment where we can actually operate at slightly higher rates where it is not retail. And still get a decent impact on our overall SA cost. So that’s our plan. And so there are some slabs where as agreed, example 100 crores and plus kind of slabs, where we can get into a SA [Indecipherable] and we will probably proceed in that direction. And on the retail side, if you look at the smaller SA accounts, again raising from 10 crores to 25 crores, it’s mostly insecure, especially it has relationship and it is our driven business where the relationship is quite intense and engaged. And there we intend to integrate these department — not department, these autonomous concerns on a solution basis. And offer solutions to make sure that the SA balance is in-line with that. That’s the plan.

Jay Mundra — ICICI Securities — Analyst

Right, right. Okay. And sir, on your term deposits. So, if you can briefly comment that you know how much proportion of the term deposits would have repriced? I hear you saying that next quarter also cost of deposit is going to go up. But a rough calculation that, at least what proportion of the term deposit would have repriced?

B. Ramesh Babu — Managing Director and Chief Executive Officer

I have seen the numbers, Jay. On an average, around 2,000 crores is repriced. So that is the usual run rate for the time deposits to reprice.

Jay Mundra — ICICI Securities — Analyst

Sorry, 2,000 crores you said?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah, yeah. So few months 1,800 crores, few months 2,400 crores, that range they are getting repriced. So this is the range our people they have taken into account also. They’ve also seen earlier the repricing what all is happening. They are going into which bucket, luckily, now we have reduced the rate of interest also. So that — a lag there with all these things. Now, to be frank enough, last — in the month of this April, when we did some sort of a homework how the prices will move, so what all we thought the 30, 35, so we thought by July ending it’ll come, but it would have come in June. So that way, what all we have planned, more or less on track this movement on the cost is going on. So with that only we thought that it may go up by another 20 basis points that’s what we thought.

Jay Mundra — ICICI Securities — Analyst

Right. Okay, sure. And lastly, sir you’ve created a INR25 crore floating provisions. Any thought process as to — of course, the credit cycle has been very good. But if any thought process on — is this some policy driven, you want to achieve a certain percentage of standard assets in term of floating? Or this is — this could be one-off kind of a thing?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No. I don’t agree it is a policy-driven. Board has approved a policy also for this purpose. So we thought of going for this. Now they understand that when good times are there, we need to have some sort of a buffer for any bad times from somewhere comes which we cannot visualize. That is the reason we thought that let us do this. Now, if you look at it, on one side, RBI they have released an approach paper for the expected credit loss ECL was there. And now may be one-year or whatever it is, if they come up and all. So we do not know or unknowns and knowns are there, how it pans out and all, how much we may have to do it, all these things are not known.

So that is the reason what we thought instead of having a sudden shock as at material time. So, if you can start creating some sort of a buffer from this stage, at that time we can utilize that by taking the approval from Reserve Bank of India, which will not alter the equilibrium what we are continuing for the normal trend. So this is a basic intention. Otherwise, also if you can look at it, so this is not going to get wasted. It will be a part of the tire 2 capital. So tire 2 capital when it is going there it is indirectly supporting us for our growth also.

Jay Mundra — ICICI Securities — Analyst

Right. But sir, if I look at your SMA 1 plus 2, right, they are very benign, and it looks like they are the industry lowest, right. So when KVB has to shift from let’s say Indian GAAP to — I mean, IRAC to Ind-AS, the impact should not be material, right, because you have the SMA 1, 2 is actually, few basis point only, right? It is less than 50, 60 basis [Speech Overlap].

B. Ramesh Babu — Managing Director and Chief Executive Officer

I agree with you, Jay. The question is, what do you think SMA 1, and I think the NPS currently and I may think the LGD what all is there on account of PD. But only these things will play around and finally, the ECL guidelines will come or something else will come. We do not know at this stage. Once we have an absolute clarity, then absolutely we can — we need not place it also, till such time we have a clarity we thought of doing this one, so that we are reasonably assured of our position for the continuity in future. That’s it.

Jay Mundra — ICICI Securities — Analyst

Right. Understood. Where in, last data keeping question, sir, what is the recovery from PWO [Phonetic] account in this quarter?

B. Ramesh Babu — Managing Director and Chief Executive Officer

58 crores we have got it. So, last year, first quarter is not there. Now from first quarter onwards we started getting 58 crores, we have got it.

Jay Mundra — ICICI Securities — Analyst

Sure. 1Q [Speech Overlap]

B. Ramesh Babu — Managing Director and Chief Executive Officer

Last call, for what Renish was asking, saying that whether we’ll be able to get that much amount what we have got for the last year. More or less, we are working on that to far surpass last year recovery what we have got on the recovery.

Jay Mundra — ICICI Securities — Analyst

Right. I mean, see your PCR is 93%, 94%, right, on including PWO.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct, correct.

Jay Mundra — ICICI Securities — Analyst

So, ideally that should help.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct.

Jay Mundra — ICICI Securities — Analyst

So, great sir. Thank you so much and congratulations also on the re-appointments.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Oh, thank you. Thank you, Jay. Thank you. Thanks for the good wishes. Thank you.

Operator

Thank you. Our next question comes from the line of Akshay Gupta with Investec Capital. Please go ahead.

Akshay Gupta — Investec Capital — Analyst

Yeah. Hi, sir. Thank you for taking my questions. Hello, can you hear me?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, please. Akshay, again, but some sort of an echo is there. If something else you can do it, I think great, otherwise you continue.

Akshay Gupta — Investec Capital — Analyst

Yeah. So, sir, I have two questions regarding. So what’s your NII growth guidance for FY ’24, right? We already given a guidance for advances and deposits. So what’s your view on the NII growth?

B. Ramesh Babu — Managing Director and Chief Executive Officer

You are talking about net interest income?

Akshay Gupta — Investec Capital — Analyst

Yes, yes. For FY ’24 guidance.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Agreed. FY ’24, Akshay, I may not be able to give at this stage. You see, we are at 3.8 something like that we were running. So, we — 3.84. Currently for the quarter ending if you look at it, so that way overall ROA we are planning for 1.5. If suppose NII some issue is there, we maybe trying to make it up in the fee to assets or the cost or the freight cost, whichever way, the overall math to what all is there will work on that. And we will be above 1.5, that is our intention. So because we do not know how these cost of deposit pans out and the yield. Because yield, if you can see that, last year October our MCLR has changed and after that, so we started doing this after October you will get the benefit and last MCLR change was in February.

So after — next this February we will be getting some sort of tickle, some sort of a growth in the fee income — interest income will be there. So what all I have told earlier for the fee income what we are working, that also should help us. Even if there is some amount of shortfall here and there in the net interest income. So we may be able to make it up in the fee to income. That way, overall, we will try to balance it. But I can say that the ROA is a key factor where we are monitoring overall how to deliver. Then internal what all is there here and there some adjustments will be there, where we will be able to manage.

Akshay Gupta — Investec Capital — Analyst

Okay. And sir, second question I have like in the current quarter, why we have restated [Phonetic] historical balance sheet?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Sorry, what is historical balance sheet?

Akshay Gupta — Investec Capital — Analyst

Yeah, yeah, my question.

Ramshankar — Chief Financial Officer

Sure. We have given, if second page was the interest accrued, but not due. As per the RBI disclosure announced, we have reclassified it. It was done in March. So according to this, next one year this adjustment will be there. Because we have to — the comparative figures also we have to realign [Phonetic] it. So that’s why there is a realignment in the [Indecipherable].

Akshay Gupta — Investec Capital — Analyst

Okay, okay. Thank you, sir.

Operator

Thank you. Our next question comes from the line of Rakesh Kumar with B&K Securities. Please go ahead.

Rakesh Kumar — B&K Securities — Analyst

Yeah. Hi, sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Hi.

Rakesh Kumar — B&K Securities — Analyst

Very good set of numbers in this quarter, so —

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you.

Rakesh Kumar — B&K Securities — Analyst

So quite a splendid performance. Sir, based on the — like we had a quite good discussion on deposit side. But just to slightly understand it, the TD counts increased has been built in the system as per and for us also. So like any specific reason that TD cost, of course, the reason on the calculated basis from a quarter average balances, that number has been slightly on a higher side. So how do you see it, going ahead?

Ramshankar — Chief Financial Officer

As MD mentioned, the TD cost because of your special deposits, which we had launched in February, March had an little impact. Now impact we have already taken steps to with the surplus liquidity what we find in our system. We have reduced the special deposits by 20 basis points already in the — for our existing products. So, we don’t think would have a major — given the similar lines, it will go on for the next two quarters or three quarters.

Rakesh Kumar — B&K Securities — Analyst

Okay. So out of the total TD, like as per the ALM that we have, like what percentage would be like, would be remaining to reprice? I joined late actually, there was another call going on. So —

B. Ramesh Babu — Managing Director and Chief Executive Officer

I’ll tell you, I’ll tell you. In fact, I have to clarify. In fact, we have seen our data. So on an average, if you look at it in the next quarter, around 25% or 23% of the TD will be maturing. I was telling at that time around 2,000 crores on an average. So it is ranging between 4,000 crores to 4,500 crores and subsequently third quarter onwards it is coming to 2,000 crores. So that’s way around 23% will be repriced in the next quarter, September quarter. And after that, it will come down to around 12%, 13%.

Ramshankar — Chief Financial Officer

Rakesh, one more point here. Initially, when the deposit rates was hiked, there was lot of pre-closures were there. So what we are noticing is, that is almost it all stopped now. So that is why we are indicating the coming quarters, the increase will be slightly lower than whatever we have done in this quarter and the earlier quarter.

Rakesh Kumar — B&K Securities — Analyst

Okay. Got it, sir. And sir, credit moment like you know, so because right now there is no change taking place on the — like on the EBLR side. So, change that we have on the [Indecipherable] side. So how do we manage the increase in the [Indecipherable] because TD cost is rising. So how do you manage that? So what other tools that we have in mind for that?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah, there are two to three tools, which we can think of. One is, as we said, because our MCLR is around 47%, though 10% it has moved EBLR and this way. So that way up to February, we will be able to get some benefit on account of the MCLR pricing. And second thing, I also told you about few other products which we are working on that. So where actually our yields will be relatively better. And third thing the CASA vertical where we are working, that may overall reduce the cost of deposit. The TD may be there, the CASA portion on the other side goes up, it may reduce. And fourth thing what we are saying is, we are critically looking at our portfolio depending upon the rating of and other weaknesses what all are there, are we correctly priced it or not, if it needs to be re-priced, we are engaging with the borrowers to modify and revise the pricing, so that the usual improve. All these, what all I have said, simultaneously, we are working on that to see that the — what best we can get out of yields.

Ramshankar — Chief Financial Officer

Rakesh, in addition to that, if you notice our yield on investments, we’re continuously for the past six quarters or seven quarters, it is increasing, because when the yields are bottomed out, we went for a short dated. Now converting everything into the long dated securities. So that is also giving a support. We have given the guidance of 10 more basis points increase in the coming quarters on the yield on investments.

Rakesh Kumar — B&K Securities — Analyst

Great, sir.

Operator

Thank you. Our next question comes from the line of Lakshmi Narayan with Tunga investments. Please go ahead.

Lakshmi Narayan — Tunga Investments — Analyst

Thank you for taking the question. Two questions I have. First, in terms of your attrition at clerical and above clerical, what is it approximately?

B. Ramesh Babu — Managing Director and Chief Executive Officer

I think exact percentage I will not be able tell you. But one thing I’ll tell you, compared to last year last six months, eight months attrition has come down. The reason is simple. Last year few of the public sector banks, so they offered a local posting where the nearer to the native place something like that, that is the reason some sort of an attrition is there. But compared to that the attrition levels have come down this year. I think the exact number I may not be able to tell you, Mr. Lakshmi Narayan, now.

Ramshankar — Chief Financial Officer

It is actually for a clerical, normally we don’t get — we don’t — there is no much attrition. Only in the offices level it is 5% to 7%, is the average.

Lakshmi Narayan — Tunga Investments — Analyst

The second question is regarding the commercial advances. I believe you mentioned that everything is secured advances. Now within commercial, what is the split between the micro, small and medium, because you have mentioned that 69% of your advances is less than INR5 crores. So, if you can just expand that a bit and say how much is the micro, how much is small and how much is medium. And I mean, what kind of stress level you are seeing whether that stress is actually now it’s passing because we hear that there is still some stress in that in MSME space? So, if you can just elaborate, it will be helpful.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Before that, Lakshmi Narayan, I have got the number of the attrition rate. From April to June it is 1.22%.

Lakshmi Narayan — Tunga Investments — Analyst

Okay, okay, okay.

B. Ramesh Babu — Managing Director and Chief Executive Officer

So, Ramshankar, anything you can tell about MSME? Otherwise, Lakshmi Narayan, in fact we will do one thing, our CFO will engage with you and he will provide you separately.

Ramshankar — Chief Financial Officer

We have provided our SME 1 and 2, 30-plus data. So including all sectors, it is less than 1%. So, we don’t see any —

Lakshmi Narayan — Tunga Investments — Analyst

No, no. My question is slightly different. It’s about the micro enterprises, medium enterprises and small enterprisers. Do you see stress in that thing? And how do you split because you give a single number on commercial. I just want to do little bit granular and if there do you find stress in the micro enterprises or small enterprises or medium enterprises?

Ramshankar — Chief Financial Officer

Okay. We’ll keep in touch.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. So, yeah, please he’ll provide that. Thank you.

Lakshmi Narayan — Tunga Investments — Analyst

Okay. Sir, just one other question. Yeah, so, do you see any risk of balance transfer in or transfer out, do you see in your commercial book?

B. Ramesh Babu — Managing Director and Chief Executive Officer

It will be there in every vertical, okay. As it retail as well as commercial, balance transfers will be there. Likewise, we also have — many inward-balanced transfers are also there for us.

Lakshmi Narayan — Tunga Investments — Analyst

Have you seen a spike or I mean,

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, no, spike is not there, I’ll tell you. This was peak during COVID and post-COVID to some extent. At that time, few banks, what they were doing, they were either cutting the pricing what all is there or they were reducing the collateral drastically or they were revising the value of the collateral what all is there and they were taking a — giving a higher exposure. We didn’t resort to all those things at that time. If anyone were coming and all, if the risk-reward pricing is not there for us, we were leaving it. Now the position has come under absolute control. If at all, we are leaving the accounts something like that and all, consciously instigated by us where the quality is not good we are told, otherwise that earlier set of poaching, it has come down now and all, absolutely there is a surplus [Phonetic] in the market now.

Lakshmi Narayan — Tunga Investments — Analyst

Sir, one last — thank you. One last question, sir, in terms of your advances growth in particularly in commercial retail, how much of your incremental advances are coming from existing borrowers and how much is coming from new borrowers? Is it like a two-third, one-third, or is it like half-half?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, I’ll tell you, ETB is concerned, agreed, maybe around 60% is coming from NTB, I can say. The reason is, you see, if the capital expansion is not there and the utilizations are not there and many times even the textile what we have the utilizations are coming down day by day. So that way the working capital limits are coming down and the existing players are not using, the customers are not taking any fresh term loans also for the expansion. So that way, majority of the growth is coming NTB is from the NTB only, and it is more or less 60% you can think off.

Lakshmi Narayan — Tunga Investments — Analyst

Okay, okay. Thank you so much.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, thank you.

Operator

Thank you. Our next question comes from the line of Amit Jagwani [Phonetic] with Jagwani Investments [Phonetic]. Please go ahead.

Amit Jagwani — Jagwani Investments — Analyst

Yeah. Hello, sir, first of all, very congratulations for the good set of numbers.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you. Thank you very much, sir.

Amit Jagwani — Jagwani Investments — Analyst

I just want to understand on our co-lending model, like if you can share some granular details like what is the structure, what role we play and what role they play, it will be very helpful.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. Amit, actually as sort of the co-lending is confirmed, currently our bank is have a relationship with the three NBFCs. And the number one is the Cholamandalam. For Cholamandalam, we do co-lending business for the construction equipments and commercial vehicles. So this arrangement is there for the past two years and working well. And number two is there is another NBFC called Axio, where we are doing BNPL program for the Amazon checkout finance. That also we have been doing this business for the past two-year, two-and-a-half years. And it’s so far our performance is well. And third is the IIFL, where we are doing further gold loan — gold jewel loan business. We just started during the last quarter. It is progressing well. In addition to that, another couple of NBFCs where we are creating the technical support and all, probably in the next two quarters we’ll have — we’ll give some news about it.

Amit Jagwani — Jagwani Investments — Analyst

Okay. So in this they are basically acquiring the customer and give to us and we just lend them?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, in this case, the co-lending model, normally it’s a 80:20, where 80 is bank’s book and 20 is with the NBFC. End-to-end work is done by the NBFC. Starting from the sourcing, operations, collections everything is done by them.

But Mr. Amit, you need to understand one point. They cannot — something they refer what all going on the road at all, they cannot push it to us. Both the partners initially itself will seek together. They will finalize a criteria and parameters on which the borrower has to be sourced. If that the borrower is meeting those standards, then only they can originate. Once it comes from their system, our system also does it checks and balances looks at it, if it is meeting their criteria, then only it allows our system to enter into that one and to release our amount. If it is not fitting into those criteria it will be rejected straight at that particular point of time. We will not even entertain that. This one point.

And second thing is, periodically we will be checking the portfolio, how it is running and all, that also will have a check and balance on that.

Amit Jagwani — Jagwani Investments — Analyst

Understood. Got it. Thank you. Thank you very much.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you very much. Thank you.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments.

B. Ramesh Babu — Managing Director and Chief Executive Officer

So, I once again thank each one of you for your patience and the interest you have in Karur Vysya Bank and the questions what all you have asked, very informative. I once again thank and seek the support of every one of you for taking the bank forward. Thank you very much once again and good day to all of you. Thank you.

Operator

[Operator Closing Remarks]