The Karur Vysya Bank Limited (KARURVYSYA) Q4 FY23 Earnings Concall Transcript

The Karur Vysya Bank Limited (NSE:KARURVYSYA) Q4 FY23 Earnings Concall dated May. 15, 2023.

Corporate Participants:

B. Ramesh Babu — Managing Director and Chief Executive Officer

R. Ramshankar — Chief Financial Officer

J. Natarajan — President and Chief Operating Officer

Analysts:

Mayank Gulgulia — SBI Life — Analyst

M.B. Mahesh — Kotak Securities — Analyst

Jai Mundhra — ICICI Securities — Analyst

Pranav Tendulkar — Rare Enterprises — Analyst

Prakhar Agarwal — Elara Capital — Analyst

Rakesh Kumar — B&K Securities — Analyst

Madhuchanda Dey — MC Pro — Analyst

Krishnan ASV — HDFC Securities — Analyst

Anand Dama — Emkay Global — Analyst

f Chintan Shah — ICICI Securities — Analyst

Sushil Choksey — Indus Equity — Analyst

Arvind R. — Sundaram Alternates — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY’22-’23 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. Ram Shankar, CFO; and Mr. Srinivasa Rao, Company Secretary and Compliance Officer. [Operator Instructions]. Please note that this conference is being recorded.

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 questions. Thank you and over to you sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you. Thank you very much. Good evening to all of you. On behalf of our Karur Vysya Bank, I welcome you all to our Bank’s earning call for the quarter for our financial year 2023. I am pleased to mention that Bank has been consistently performing well during the four quarters of the year 2023 and the outcome numbers in terms of growth, profitability, and asset quality are in tune with our guidance.

You will be glad to note that Bank has in the exit quarter achieved 1.5% ROA, 16% ROE, 4.37% NIM, less than 45% cost-to-income, with overall business growth of 16% and four-digit net profit for the year and for the first time. We have declared three-digit dividend subject to shareholder approval. I am sure you will not disagree If I say that the outcome was 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 Q4 and full-year of performance. I would like to share some of my thoughts on the performance of the bank during the quarter and our guidance for financial year ’24.

Net interest margin increased marginally by one basis-point on sequential basis during the quarter at 4.37%. Based on our historical pattern of renewal of deposits and fresh deposit acquisition, we expect that there’ll be a further increase in the cost of deposits to the extent of 40 to 50 basis-points in the next two quarters, assuming no change in our deposit rates.

As we already passed on interested rate hikes to majority of the loan book under EBLR and MCLR, there may not be an equivalent increase in the yield on advances. Yield on interest rates have gone up by 39 basis-points during the year and it is estimated to go up by 25 basis-points in the next two quarters. Considering all these factors, and without taking into any policy rate changes, we expect a compression in our NIM in the next two quarters and accordingly, we estimate that our NIM will be in the range of 4% in the next two quarters. We have achieved ROA of 1.5% in the exit quarter and we expect that we will continue to maintain this during the year 2024.

In spite of estimated lower-margin, our estimated business growth, fee income, lower credit cost and recoveries in written-off accounts will support us to keep ROA at 1.5% levels. Our adjusted growth in advances for the year ’23 was at 16% and it could be noted that there was an inclusive growth across business segments, led by MSME and agriculture. On account of various initiatives bank has taken, we expect to continue this trend in these segments, supported by retail and corporate, and we expect a growth of 14% for the year 2024.

Our deposit growth was at 12% during the year and term deposits and the CASA deposits were grown by 15% and 6% respectively. We expect 14% growth in deposits with higher-growth share in CASA segment. As indicated earlier, Bank has created consumer banking department by merging personal banking liabilities and personal banking assets. A set of senior and experienced officers have already joined to head the CASA acquisition, corporate salary accounts, government business, third-party products, etc. The structure is in line with large private sector banks having sizable CASA book. We are in the process of recruiting down the level sales team and feet-on-street.

In the first phase, we have gone for 1,300 resources and of which 480 resources have already joined and another 820 resources are expected to join before September 2023. In view of this, we will be incurring an additional expenditure of about INR61 crores, which is a full-year cost. Though the cost of income –cost-to-income ratio will go up marginally this year and we expect that it will be helpful for the bank to scale up the CASA book to 40% over a period of three years and better growth in third-party product business.

Our cost-to-income ratio for the quarter continues to be below 45 and considering our business expansion plans, we expect that the ratio will be in the range of 45-50 for the year 2024. Our slippages are under control and our gross slippages for the year, it was at 75 basis-points and net slippage ratio for the quarter is at 0.06%, and for the year, it is negative.

Our estimated slippages during the year 2024 will be in the range of 1% of our loan book. And we are confident that we will continue to keep the ratio 1% in view of our better underwriting, customer engagement, monitoring and collection process. During the year, we have recovered a sum of INR208 crores from the technically written-off book. For the quarter under review, we have provided a sum of INR287 crores towards NPA migrations, restructured accounts, and standard assets.

For balance sheet management and tax benefit, we have made certain prudential provisions and on account of this, the credit cost is at an elevated level of 146 basis-points. Our net NPA book now is at INR468 crores and expect that lower slippages and better collection system will support us to keep credit cost at 75 basis-points for the year 2024. We continue to maintain net NPA at less than 1% of our loan book and gross NPA will be less than 2% at the end-of-the year 2024.

Our standard restructured loan book is further reduced to 1.5% of our loan book and we hold a provision of 21% for the standard restructured book. Our CRAR continues to be robust and is at 18.56%, providing us a comfortable headroom for growth. Our liquidity is well-managed and our CD ratio is at 85%. Our digital systems are helping us to scale up our business volume with ease and better control. We continue to add many new features DLite app, which is our customer on-boarding application. We have recruited a Chief Digital Officer from the market and exploring other digital features, which will support our growth and enhance customer experience.

During the year, we opened 10 branches and we propose to open around 35 to 40 branches in the coming year, besides opening couple of digital banking units during the year 2024, Bank has recommended a dividend of 100%, subject to the approval of the shareholders.

Other business performance highlights are given in our presentation. Let me conclude by saying that our performance has been consistently improving over a period of eight quarters and I repeat that the numbers are as per our guidance. A set of experienced executives are managing the business, support and control functions for the bank and the details are furnished in our presentation. We continue to outperform our cost performance and I am grateful to all the 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 very much. [Operator Instructions] The first question is from the line of Van Koon from Mayank Gulgulia from SBI Life. Please go-ahead. Mayank, your line has been unmuted, please go-ahead.

Mayank Gulgulia — SBI Life — Analyst

Hi, am I audible?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Audible, audible, please go ahead, Mayank.

Operator

Hi, sir, congratulation on good set of numbers. We have 50% of our loan book [Technical Issues] MCLR. Can you share breakup of reset period in terms three months, six months, one year.

R. Ramshankar — Chief Financial Officer

See, as already indicated, 47% of our book is in MCLR. And the EBLR book is 37%. And in the case of the MCLR, the last-time we have made the changes in the month of March. In March, we have changed the MCLR and out of that, next six months, I think completely we’ll be — repricing will happen.

B. Ramesh Babu — Managing Director and Chief Executive Officer

And, Mayank understand, majority of the working capital loans which are linked to MCLR on an ongoing basis, depending upon the renewal, when it comes, it will be happening. So that way, you cannot talk about a fixed bucket that way because the cost of deposits — what all are there, we are passing onto them. So, still some more headroom is available for the MCLR loans to be repriced, whereas EBLR has already been passed on. So that way, we will take care of that, next three, four — fourr months at least I can say, because last year from more lesser October onwards, MCLR spike started. So next three-four months the renewals of one year what are will happen, we will be getting the benefit for the next three-four months.

Mayank Gulgulia — SBI Life — Analyst

So next two quarters, probably deposit repricing will happen faster than the loan side, and probably net interest margin will be 4% plus. So like, going-forward, we will be able to maintain net interest margin of 4% plus even after two quarters as well.

B. Ramesh Babu — Managing Director and Chief Executive Officer

The visibility, first of all, Mayank, if you look at it, absolutely it’s a dynamic world. [Speech Overlap] which variety it comes and what rate it comes, we will not be knowing now. So based on the past trend, you cannot say that the deposits will go into a particular bucket or dependent upon scheme what all is there, they will be going. So that’s why what we thought is the visibility is there for the next two quarters. We thought wherever some losers are there in respect to the loan repricing, likewise with MCLR and other ABRR wherever some concessions are, there we we can withdraw. These sort of homework we can do for improving the yield.

Likewise, on the cost of deposits where you have no control because the renewals will be happening. fresh deposits also will be happening, so conservatively, we thought that our endeavor is to maintain that 4%. May be once second-quarter is over, we’ll have a better clarity and visibility. Then, we will guide you.

Mayank Gulgulia — SBI Life — Analyst

And in terms of growth, just trying to understand like whether in Tamil Nadu [Technical Issues] competitive intensity has increased much higher than rest of India. Is that market becoming more competitive, because it’s more lucrative. So, what brought on that?

B. Ramesh Babu — Managing Director and Chief Executive Officer

I agree, but you understand, we have been here for the 170 years. So that’s where our footprint and basis here and not only Tamil Nadu, we are based out of — our footprint is there in other states also. So, currently, what all is there, the customer connect what we have and how our people are able to attract the business and all, more or less, every segment we are able to do that.

One more thing what I found is the last year was also more or less a competitive year. Many of the verticals, if I see, the disbursements have gone up by 40% to 50% over the previous year. So last year was also competitive. So, that way, we are fine-tuning our product additives also. So with that, we feel that we’ll be able to continue our tempo and that is the reason, the indication what all we have given that 14% loan growth.

So not only Tamil Nadu, other areas what all we have, so we will be able to grow, that’s what we see.

Mayank Gulgulia — SBI Life — Analyst

Okay, great, thanks a lot. I’ll come back in the queue. Thank you. Thanks, Mayank.

Operator

The next question is from the line of M.B. Mahesh from Kotak Securities. Please go ahead.

M.B. Mahesh — Kotak Securities — Analyst

Good evening, sir.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, good evening, Mr. Mahesh.

M.B. Mahesh — Kotak Securities — Analyst

How are you?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Fine, thank you, how about you?

M.B. Mahesh — Kotak Securities — Analyst

All well sir, the good, great numbers. a few questions on my side. One is, what would be the income from written-off accounts for the quarter?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Quarter is INR100 odd crores. INR108 crores. For total year is INR208 crores and INR100 odd crores has come during this quarter.

M.B. Mahesh — Kotak Securities — Analyst

Okay, and what will we the outstanding stock of technical written-off now?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No but Mahesh, my point is the technical written-off. let’s say, if we look at it, may not be a good indicator. The reason is, it may look like INR3000 crores INR3500 crores something like that, but the problem is, majority of the old corporate accounts where under consortium, which are there with NCLT, you may be getting 5%, 10%. So that is still uncertain, how much we will be getting there. So that’s why if you look at it, overall, the realizable portfolio we can think of is around INR1500 crores portfolio where we can do some[Technical Issues]exercise and we’ll push it. Rest of them — so it depends upon various other factors and all. So because Corporate is there. So many of them were may not be able to get there. So we will focus on that in the next two years also on all these things but one thing I’ll assure you, so the last two years, we have given enough effort on wherever we have security, personal security, [Technical Issues] ports, all these things. The majority of them are in different stages and people are coming forward for the OTS also. So that way, this year also we feel that this progress, what all they have made, continue under the write-off, might be 2024 also.

M.B. Mahesh — Kotak Securities — Analyst

So just to clarify, this INR1,500 crores of possible recovery pool that is sitting there, you would — you could say that you could hit a number closer to INR200 crores again for next year.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah definitely, definitely.

M.B. Mahesh — Kotak Securities — Analyst

Okay, and my last question is INR110 crores for provision for restructured accounts. Any specific reasons for it?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Nothing like that. Actually you see, so, earlier when we were looking at our past on an average 15% to 20%, we were actually delinquency was there. So what we thought was a good year that way. So it is better we make up that way so that if at all unforeseen eventuality will take a hit also, so we need not worry about that, because the restructured book has become a miniscule portion of our total book at 1.5%. Out of that, this portion also we keep it aside. It should not bother us at all. With that intention only. we’ve kept it.

M.B. Mahesh — Kotak Securities — Analyst

Perfect. And in this INR976 crores of outstanding restructured, what is the outstanding provision sitting now, including this INR110 that you made this quarter?

B. Ramesh Babu — Managing Director and Chief Executive Officer

21% — 21%, we have provided out of this.

M.B. Mahesh — Kotak Securities — Analyst

So, approximately INR200 crores, right?

B. Ramesh Babu — Managing Director and Chief Executive Officer

That’s it, that’s it, Correct, correct.

M.B. Mahesh — Kotak Securities — Analyst

Okay, perfect, sir. Thanks a lot.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you. Thank you.

Operator

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

Jai Mundhra — ICICI Securities — Analyst

Yeah, hi, sir, congratulations.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, Jai. Thank you.

Jai Mundhra — ICICI Securities — Analyst

Sir, just to clarify,[Technical Issues]is INR1976 crores, right. So, net of provisions, the number is even lesser, right?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Very correct, very correct.

Jai Mundhra — ICICI Securities — Analyst

Sure. And secondly, sir, on your loan mix, on your 14% loan growth, do you envisage any subsector to grow at a slightly faster pace or do you think the loan mix will more or less be similar?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Jai, if you can look at our past performance where corporate used to be 30%, 35%, and all, finally, in this quarter, it has come down to 21%. Earlier it used to be 22%. So that way, our — first of all, the first focus would be on the MSME commercial banking group, because where our yields are better and many places are 9.5%, 10% also will get the yields and all. So after that, we are focusing on our retail segment because retail mortgages are doing well. Jewel loans also we are going to focus and the third thing is agriculture. Agriculture, because there are two advantages, one is the gold loan and other agri also, we are focusing on that. Last year was a bad year as far as the PSLC is concerned. Otherwise, you are making some money out-of-the PSLC also in addition to taking care of our own PSLC. So, in the order of preference, if we look at it, commercial followed by retail and agriculture and then corporate.

Jai Mundhra — ICICI Securities — Analyst

Right. And sir, you have some growth, right, so you have a staff cost for FY23 at around INR1,000 crores. You said that we are adding people, 1200, 1,300 people in the — in the staff and hence you would have an extra INR60 crores, INR61 crore opex number for next year, but how should one look at the opex growth for next year. I mean, one part is of course slightly higher because of proposed staff addition. But in general, as loan growth is, let’s say 14%, how should one look at the opex growth?

B. Ramesh Babu — Managing Director and Chief Executive Officer

So opee. Jai, in fact, generally, our opex is, opex to assets is in the range of 2.3%, 2.4%. So here, maybe it will be in that range, slightly elevated here and there, but we have to see a bigger-picture, what we are planning is these feet-on-street, we are going to engage. We are going to work on the CASA, as well as the third-party also. So what all we are going to spend, more or less to the extent what all we are spending we will be getting on the income side also. So it may look opex is on a higher side, but our focus is on the [Technical Issues] income also[Technical Issues] also how to grow. So, overall after doing all these adjustments, we thought that 1.5 ROA, we will be able to manage with this increased the cost also.

Jai Mundhra — ICICI Securities — Analyst

Sure. And lastly sir, on your credit cost guidance of 75 basis-points, isn’t it — I mean, you already have a net NPA, which is, let’s say 75 basis-point and you have a 20% coverage on restructured.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct.

Jai Mundhra — ICICI Securities — Analyst

And even this quarter, you have seen almost negative or negligible slippages — or negative slippages including TWO recovery.. So your credit cost guidance, is it more conservative or you think basis, look at the portfolio, the credit cost, incremental credit cost can be much, much lower than what you are suggesting?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, I agree, Jai, we are in the first-quarter. Then during the whole year, what will happen, at least, we will not be able to estimate at this stage though our endeavor you see, our 0.56 is our SMA, We would like to have a tighter control on that, but still you may have to provide for some standard assets, migration assets, these sort of things will be there. And with this, we thought that at the max, it may go up to 0.75. It may not go also. It may not go also. So that’s why, we we took it saying that maybe after six months, we will have a better clarity. We may give a revised guidance for this but this is what for the whole year, very unknown, unknowns if at all come up also, we want to factor them. That is the reason we’ve given a 0.75.

Jai Mundhra — ICICI Securities — Analyst

And lastly sir, related to this, you must be doing parallel run to the ECL framework, right, every six monthly. Is there any, I mean, what could be the proforma provisioning under Ind AS versus the IRAC? Is there any meaningful difference?

B. Ramesh Babu — Managing Director and Chief Executive Officer

CFO will respond, yeah.

R. Ramshankar — Chief Financial Officer

Not a major difference we find in our half yearly — what we are submitting to RBI. We are — we’ll be able to manage the whatever provisions what we make. We don’t see any big change in the new system terms.

Jai Mundhra — ICICI Securities — Analyst

So there is not material one time transition provisioning needed, right? Is that what you’re saying.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Jai, my point is the guidelines itself, they are not out on what basis you need to do. At back-of-the-envelope, when the risk management and those people, they have done that, they found saying that the existing provisioning, what all has been made, would be relatively sufficient. There will not be any big shocks, which bank will not be able to absorb. But that was the understanding we had. So, now, it unfolds as and when some sort of guidelines come up and all, we will be able to know that. But currently, that is not a major issue, which is going to impact the bank.

Jai Mundhra — ICICI Securities — Analyst

Sure, sure. And the SMA number that we disclosed is the total loans, right.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah, total loans.

Jai Mundhra — ICICI Securities — Analyst

Correct. Okay, thank you, sir Thanks a lot.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, Jai, thank you.

Operator

Thank you. [Operator Instructions], The next question is from the line of Pranav Tendulkar from Rare Enterprises. Please go-ahead.

Pranav Tendulkar — Rare Enterprises — Analyst

Hello, hello, yeah, can you hear me?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Pranav, we are able to hear you. Please go-ahead.

Pranav Tendulkar — Rare Enterprises — Analyst

Yeah, yeah, sir. I just have two questions. So one is that you have actually highlighted that you are investing more in the people for cross-selling and feet-on-street. So also, can you just highlight what are the targets to cross-sells, various products that we have in our bucket and how are we tracking how many branches are actually enabled to sell all the products in our bouquet. Thanks a lot, sir, thanks a lot.

B. Ramesh Babu — Managing Director and Chief Executive Officer

I agree,[Technical Issues] when we are taking, the different sets of people are coming maybe for the[Technical Issues]corporate salary other accounts that way, each one depending upon the profile of the customers whom they are going to market, particularly the CASA, the feet-on-street what we are acquiring is for the CASA and their focus will be majority on that.

The products, which we are going to focus are the Life Insurance, General Insurance and the mutual fund, these three would be the major products. Now, currently enablement is concerned, we have already partnership with many of the partners in each of the Life, General Insurance, everywhere partnerships are there. So recently we have entered into an arrangement with SBI Life also to add bouquet to our total portfolio. So now, every branch is equipped to handle that, not that a particular branch can do it. We are going to utilize our analytics also in this process, what can be done, the next best product will be offered and the feet-on-street also will be on-the-job. Together, we want to give a focus on this, but one thing I will tell you, the feet-on-street actually, they’ll be coming into the field and most probably from us up to September in the process. The recruitment process going on, but those whoever have already come, they are converted from the existing lot. They are on the job and we will be monitoring on the third-party income.

Pranav Tendulkar — Rare Enterprises — Analyst

Sir, last question from my side. So some two years ago, there was a competition increasing in our core competence market which is SME, MSME in South. So how is competition panning out right now? Thanks a lot. Yeah, Pranav, in fact, agree. At that time, the position was relatively different because the COVID was there. Other Banks were unable to grow. There was no other opportunities. That’s why at that time people were poaching onto those accounts. Now that the market is opened and all everyone has other opportunities, that’s sort of the competition steep we were facing at that time, because at the, but particularly we are basing on three counts, one is on the pricing — rock-bottom pricing quoting and taking. And second thing is the lowest security coverage and third thing is undue enhancement. So we were looking at the quality of the portfolio. If, by doing this one, if you do it and all, we’ll be having a problem tomorrow, we were leaving the accounts, but all those issues have come out. But even today, if that sort of an undue undue enhancement where someone do not require, we are still not allowing that because there are today, tomorrow it will be a problem. So that’s sort of a cutthroat competition going on the pricing all these things have come down to a major extent because other banks also, they are facing the heat of the enhanced cost of deposits, so that’s where off rock bottom pricing and all, that issues have come down now. Superb sir, thanks a lot.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, thank you.

Operator

The next question is from the line of Prakhar Agarwal from Elara Capital. Prakhar, your line has been unmuted. Please proceed with your question.

Prakhar Agarwal — Elara Capital — Analyst

Hi, sir, am I audible?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Audible, audible, please go ahead.

Prakhar Agarwal — Elara Capital — Analyst

Si, most of my questions are answered, Just a couple of things I missed out in between. So what is the growth guidance that we have set for FY ’24, which is one. And second is in terms of — I don’t know whether you’ve answered this, any impact of EPL that you probably would have seen?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah. And at both were answered, but it’s good I’ll repeat once again. So the advances what we thought is a 14% plus we wanted to grow. The same is the case with the deposits so that we’ll be able to maintain the CD ratio of around 85%.

As far the ECL is concerned, our CFO has clarified the working what our risk department does it. So they found out with the current framework, what all has been spelled out — so our provisioning currently what all is there, we’ll be able to take care of this one, and there may not be any major shocks for us to absorb the ECL provisioning. So that’s what — but as and when these guidelines unfold from reserve bank of India. So we’ll be looking at that. But one good thing Prakhar what I can say, the transformation journey what we have performed is with this, the total clean up has happened now. We have sufficient muscle to take care of these shocks, if it all comes up also. Has it been two years back, our position would have been chattered totally. So now we are relatively much, much better to absorb this sort of a shock comfortably.

Prakhar Agarwal — Elara Capital — Analyst

Sure. And just two more questions. In terms of margins, when I look at Q4, the reported number is 4.37, and in case it increased one basis point sequentially — when I look at last presentation, it was 4.32%. Is that because of the base regimen that we have seen during the quarter?

R. Ramshankar — Chief Financial Officer

Correct. Actually, I will need to clarity here. Based on the RBI [Indecipherable], on the financial statement presentation disclosures, interest [Indecipherable], but not due on advances and deposits have to be [Indecipherable], and we had undertook that in the March quarter. They see, there’s a small difference in the numbers that we reported in December on the revised number.

Prakhar Agarwal — Elara Capital — Analyst

Got it. So on the revised number, that margins would have been 4.36 last quarter.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct

Prakhar Agarwal — Elara Capital — Analyst

And sir, if I look at your presentation Slide #15, so again, on advances, we have given that INR56,000 odd crores and after write off INR64,000 odd crores — and then a similar number we have given a INR64,400 crores?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct.

Prakhar Agarwal — Elara Capital — Analyst

What exactly is the difference between the two. Is that a previous classification and new classification. Sorry, but I missed that number.

R. Ramshankar — Chief Financial Officer

No, no. This is only the whatever critical write-off which we have done in the current year that we have added that to show the exact growth which growth because whatever growth we have done this year because of fixed rate of [Indecipherable] miles, it appears at a lower sale. Just to ensure — show the current growth, what we have done this year, we have added that and showed it as advances.

Prakhar Agarwal — Elara Capital — Analyst

So that number is INR66,000 crores, but if I look at INR64,420 crores, what exactly is that number?

R. Ramshankar — Chief Financial Officer

INR64,420, including — Yes, INR64,420 crores. The difference would be the technical write-off.

Prakhar Agarwal — Elara Capital — Analyst

After technical write-off, it is INR64,168 which is similar. But if I look at two columns, which is slide $15, one is INR64,031 and there is INR64,420. Just wanted to understand the difference between the two.

B. Ramesh Babu — Managing Director and Chief Executive Officer

You are right. You are right. We’ll come back, Prakhar, on this number. Okay, please. CFO will send a communication to you. Otherwise, what our intention is that INR1,893 crores what all have been written off, had we not done, our growth is 16%, actually because one year is a good year, we thought of clearing up. Intention is to convey the message, but anyhow, CFO will clarify that point separately to you.

Prakhar Agarwal — Elara Capital — Analyst

Sure sir, thank you so much.

Operator

Thank you. The next question is from the line of Rakesh Kumar from B&K Securities.

Rakesh Kumar — B&K Securities — Analyst

Hi, sir.

R. Ramshankar — Chief Financial Officer

Hi, hi.

Rakesh Kumar — B&K Securities — Analyst

Thanks for the opportunity sir. So first question was related to the SAAR deposit blended cost. So what is the SAAR deposit blended cost now for this quarter?

R. Ramshankar — Chief Financial Officer

SAAR deposit sales bank is a 2.5 not the because savings bank is 2.5%, current account is not there, because saving back, our average rate is 2.5% and current account, we do not pay anything.

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, no, only for SAAR balances because there are different rates we pay for the different balances. So what is the blended cost that we have on, SAAR?

M.B. Mahesh — Kotak Securities — Analyst

So our average cost for this 2.5%. For the deposit… For a product. The cost is 2.7%.

Rakesh Kumar — B&K Securities — Analyst

For the SAAR deposit.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, for the SAAR, the cost is 2.57 for the Q4.

Rakesh Kumar — B&K Securities — Analyst

And how much it was in the previous quarter, sir?

B. Ramesh Babu — Managing Director and Chief Executive Officer

The same range because we are not changing anything during this entire one year because, for example, Q1, it was 2.55. Now it is Q4, it is 2.57.

Rakesh Kumar — B&K Securities — Analyst

So last, I think we changed in January sometime, 28th of January or something?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, that we have not only own bucket. For example, more than INR100 crores, we have created a separate bucket. Otherwise, we have not changed anything in the layer category.

Rakesh Kumar — B&K Securities — Analyst

Okay, okay, and secondly.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Once second Rakesh, our CFO has to clarify.

R. Ramshankar — Chief Financial Officer

Before the previous Prakhar asked for the — on the difference on the fourth column, there is a INR250 crores of technical let of what we’ve done in Q4 alone that we have shown separately. The last two columns talks about the growth in– quarter-on-quarter growth. The first column talks about the year-on-year growth. That is the difference

Prakhar Agarwal — Elara Capital — Analyst

Sir, secondly, sir, I wanted to understand the capital consumption pace that like because of the return ratio number, we were adding capital every year, so this year, we have seen some depletion in the capital — core capital number. So is that due to kind of a selection of credit that we are doing? So what is the reason that we have seen SAAR price and a credit risk number. So if you can help us understand.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Rakesh, see, we have shown in the table risk-weighted asset moment, 53 has become 54, that 1% cannot be considered and construed as a sharp price, okay? Here, when the [Indecipherable] subsequent period, the focus was majority on the gold loans, where the capital risk weight was not there. So that was the reason the share has come down straight away in the graph. Now that across the board, all verticals we are growing, so naturally, there is a slight growth in the credit risk-weighted assets. But one thing also we need to understand if it is too low, the risk reward ratio also will be low, you’ll not be able to make money. So we need to strike a balance between the risk and what sort of pricing where we can manage so that we can optimize your yields and you can protect your NIM. With that intention, keeping in view, how to maintain asset quality, the yield and the top line growth, altogether, we are going ahead. But we need not think saying that there’s a sharp spike in the risk-weighted assets, it is just 1%.

Rakesh Kumar — B&K Securities — Analyst

No, no, sir, I was referring only to the credit risk rate, sir. So if you look at.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Under that you find a table there, you will find a table we have shown that credit risk rate is assed, how in our board. It has moved from 53% to 54%. That’s 1%. Graph it shows.

Rakesh Kumar — B&K Securities — Analyst

No, no. I’m saying, sir, only about the credit risk rate, sir, which has increased from INR34,000 to INR41,000.

R. Ramshankar — Chief Financial Officer

Understand generally that 100% retail of the general credit, for example, whatever the MSME loan, we are doing it. So that increase is INR7,000 crores is reflecting our growth in the MSME sector and the corporates and the other retail.

Rakesh Kumar — B&K Securities — Analyst

Okay, thanks a lot sir.

Operator

The next question is from the line of Madhuchanda Dey from MC Pro. Please go ahead.

Madhuchanda Dey — MC Pro — Analyst

Hi, congratulations on.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, thank you very much.

Madhuchanda Dey — MC Pro — Analyst

Yeah, I just had a couple of questions. One is FY ’23 has been an exceptional year for the banking industry in terms of we call high-margin and low credit cost, if you think at FY ’24, although you have given a specific guidance, what are the middling worries that you see going ahead, which was pretty much not there in FY ’23? That is my first question.

And the second question is deposit has been a challenge for the system, and it has been a challenge for you also. You are [Indecipherable] the organization, adding feet on street. But are these the answer to the deposits challenge? And how confident are you about your deposit guidance of 14%. These are my two questions.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank you, Madam. In fact, one thing I just need to say, for the banking industry, ’22, ’23, maybe an except full year. But for us, it’s all the more exceptional. The reason is the baggage what we were carrying in the earlier years. So last two to three years, the journey what we had to perform, a lot of cleanup has to happen in addition to other things also. So the baggage also we could clear and we are in a decent position now. So the worry is if you look at it, as it is, if you look at three broad parameters, if you look at it, business growth, profitability and asset quality. So I talk about asset quality. So we have formed the collection teams and centralized and a vertical head has come last year. So from then onwards, we started seeing a lot of improvement in our SMA one and two. So then we started focusing on the SMA 0, which flows into SMA, 30 plus. So that way, we have got a fair control on what the asset quality because these only will flow into this one. And the next thing is that corporate used to be a big pain for us at a point of time. So under that now the corporate SME has come down to the miniscule. So that way, the bigger worry what we used to have has gone out. Now what all we are acquiring now. So what we did in the year 2019, we have gone for a loan origination system with chips and balances with the tie-up with many other agencies for surrogate data to check what we are doing is correct or wrong.

So what we do on an ongoing basis, we will do an analysis of pre-2019, what all accounts have been underwritten and post ’19. So when we see, particularly the commercial banking and the retail, if you look at it, pre-2019, the stress may go up to 4%, 5% odd. And subsequently, what all we have booked with all checks and balances so this is more or less around 0.5, 0.6. At this level, it is there. Maybe in the process, we may not have grown so well because we have not opened the floodgates. But what are acquired, we are reasonably confident that has only helped us during the COVID period without having much of a stress under that.

So with all these things in mind, so the asset quality should not be a major problem for the bank. Now coming to the business growth, so we thought that having brought the momentum vertical-wise for each vertical contributing, we thought that each vertical will be able to contribute 14%. That should not be an issue, but provided the market and economy also support. Then the question comes, the worry part is the cost of deposits where absolutely some sort of visibility we can have for the next six months. And beyond that, we do not know how it pans out, whether the rate how it moves out and all.

So now there is a limit also. Beyond that you may not be able to pass on the yield to the advances on the pricing. So how much you’ll be able to pass on how we are going to maintain the NIMs at this 4%? This is one of the worry, which we need to keep in mind. But we are looking at other factors like fee to assets and how to improve the NII also by improving the yield. These things, we started working on. To address this particular issue of cost of deposits and NIM.

Now coming to the deposits. I agree with you. There’s a fierce competition in the market. And last year also, though we were trying our level best for the CASA, many of our customers, other banks were wooing them for shifting them into the time deposit at higher rate. Then after three months, we were realized of losing the relationship, it is better we only convert them into time deposits, though it involves additional cost for us, but we tried to do that. Now the people, the feet on street everything, what we have told them, these are the people actually in the field. So currently, what all is not there, even if they add a grain of gain to the game, overall, it will be a gain and that [Technical Issues] so the fee income as well as the CASA, which is what our intention. So currently, first set of people who have come, if you look at it, their performance is reasonably okay. But we need to test the water for the another six months. So we are hopeful that so with the initiative, what we have [Technical Issues] the deposit growth, what all we have planned, will work.

Operator

This is the operator, yes. Sir, we could experience audio loss from your connection. So, we will reconnect your line, sir. We have the management line reconnected. Sir you may proceed.

B. Ramesh Babu — Managing Director and Chief Executive Officer

In fact, can you just tell me which of the points you have missed because I thought that I understood that intermittently, the call got missed. If you can tell me, which is a point I missed out of my what are clarifications I have provided, I am willing to clarify that once again.

Madhuchanda Dey — MC Pro — Analyst

No, sir, I think, I mean, it was just part of the sentences, which were not audible fully, but I could make a sense of what you are trying to convey. So if I understood you correctly from all the initiatives that you have taken, deposit growth and at what cost remains the key worries as we all look to FY ’24. Is that what you wanted to convey?

B. Ramesh Babu — Managing Director and Chief Executive Officer

No, I just want to clarify here. Deposit cost at what cost — suppose if you are acquiring the CASA and if you add this cost for the acquisition also if you add, it may be slightly costlier. That is the reason what we are working is those people whom we are acquired now, they will be focusing on a third-party also that income also they’ll be generating. And there will also be some other business. So, we want to make that vertical what all we are creating self-sustaining and profitable on its own within a one year. So that way initially on year, there can be lead lag. Otherwise, some subsequent years onwards, it will be working on its own.

Madhuchanda Dey — MC Pro — Analyst

Okay. Okay. And sir, just one last question. The unionized employees and the cost, etc., had been a kind of an issue with the private sector bank like yours. So, if you could just clarify, going forward in the next couple of years, what is your take on the employee cost increase, what kind of increase should be captured?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Ma’am, in fact, for the last 4 years, if I look at it three, four years, whoever we are taking, we are taking them on a CPC basis. So, we are not taking them on the IBA based and all. So that way — so those who are coming, they are absolutely linked to their performance, their performance and all. So not only that, the existing team also, we need not think like unionized and all because the productivity of the people have gone up like anything. If you can look at our presentation in the last page, the business per employee and the profit per employee, how it has moved, the same set of people, it has moved. If you can look at it our 2017, our total staff strength was 8,000, now it is 7,700. After five, sxx6 years, it is 300 down, the productivity has gone up by manifold. So if you look at the costing also, more or less, we’ll be able to manage this establishment costs, what all is there for them. And with that itself, we feel that 1.5 ROA what we have conveyed so we’ll be able to achieve that.

Madhuchanda Dey — MC Pro — Analyst

Just one small housekeeping here. Of the 7,700, what percentage is IBA and what percentage is normal CTC, as you mentioned?

R. Ramshankar — Chief Financial Officer

Around 90% for IBA only.

Madhuchanda Dey — MC Pro — Analyst

90% is still ideal, right? Okay. And given the retirement profile of this people, how — what would it be in maybe in the next three, four years’ time?

B. Ramesh Babu — Managing Director and Chief Executive Officer

[Technical Issues] We are also thinking of it. We will have to see it Ma’am. because our current focus is how to get the productivity from the existing team rather than meddling this thin and all. So if you can get the best productivity from them and we are able to maintain our ROA, ROE, all these things and all so we will try to see that then we can think of addressing rest of the issues.

Madhuchanda Dey — MC Pro — Analyst

Okay, thank you sir, thanks and all the best for this.

Operator

The next question is from the line of Krishnan ASV from HDFC Securities. Krishnan, your line is open. Please go ahead.

Krishnan ASV — HDFC Securities — Analyst

Yeah, hi, am i audible?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, yeah, Krishnan, audible, please go ahead.

Krishnan ASV — HDFC Securities — Analyst

Yeah, So my questions are more to do with cost of deposits on one hand. And just in terms of our current MCLR, what is the pricing that we have on MCLR? And where is the current blended book on your MCLR portfolio, which is 45% of your portfolio.

B. Ramesh Babu — Managing Director and Chief Executive Officer

So what is it you want to know about cost of deposit?

Krishnan ASV — HDFC Securities — Analyst

Just in terms of — for a 14% kind of growth that you’re building in, given your CD ratio 85, okay, right, where is it that that you expect your cost of deposits to settle over the next year? The reason I’m asking that is the — obviously, we are in an environment where there is a crumble for deposits. For some banks, it is showing disproportionately higher. So just wanted to understand in terms of what you are seeing in the market where you are looking for the deposit too.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah. I just — first question, I’ll respond and second one, our president will respond. First of all is on the cost of deposits, if you can recollect our guidance, what initially I have mentioned there, so we were thinking saying that with the back of the envelop box when we did it, the current renewal pattern for the existing deposit renewal and the fresh inflows at all are coming, which will land into which bucket. So we thought on an average around 40 to 50 basis points growth may come up in the cost of deposits. But simultaneously, I was also mentioning the losers what are there in the prices of the loans. But also we are going to tighten up. So that is the reason we were indicating a NIM of 4%. But with the existing rates on deposits, we can expect around 40 to 50 basis points going up in the next six months to eight months.

Krishnan ASV — HDFC Securities — Analyst

So of the MLCR?

B. Ramesh Babu — Managing Director and Chief Executive Officer

MCLR, our president is going to respond.

J. Natarajan — President and Chief Operating Officer

So, as indicated earlier, so our MCLR book is something around the 47% percentage. So based on the reset plus whatever we have arrived, and out of this INR30,000 crores, almost 15 %– I mean, I can say 25% we will reprice with the next six months period. That is after September. That’s what the MCLR working we have done. So currently, we are charging the MCLR is 9.35%. And then if you take the blended rate, it will be something around 9% to 9.2%.

Krishnan ASV — HDFC Securities — Analyst

Understood. That’s helpful. Just the other thing, I think this kind of resonates with one of your earlier questions as well. Just in terms of credit costs, with technical write-offs, you have a coverage of about 90% plus 92%. 75 basis points again for FY ’24 seems to be overshooting your — I mean, so is that excessive conservatism at your end? Or is there any uncertainty in the [Technical Issues]? I’m just trying to understand.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Absolutely, all of we have been very clear. absolutely, there is no uncertainty. We also do not have an iota of doubt about the quality of the credit. If it is there, it would have reflected comfortably in the SMA 30 plus. So the depreciation, none of you need to have. It is more or less on a conservative basis, we have given. We do not have any sort of apprehension on our portfolio.

J. Natarajan — President and Chief Operating Officer

Krishinan, in addition to that — see, there are certain tax benefits are available. If it is rural advances, something like that, we need to provide the minimum quantum. And secondly, if you see, we have indicated 1% slippages for the entire year. So whatever wherever the new slippages are coming, we need to provide for that. But recovery is whatever it is coming. It will go to the technical written-off account, so in that way only, we just estimated that number, not because of any specific stress we are seeing.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct. Absolutely. So that represent no one need to have because the others, we don’t have any apprehension about that.

J. Natarajan — President and Chief Operating Officer

Certain migration provisions we need to make. So all these things put together only we are doing it.

Krishnan ASV — HDFC Securities — Analyst

Ot it. I might — I mean if I could just squeeze in one more question. This is to do with how you read the environment for MSMEs right now, given the kind of seeds hiking pricing that MSMEs have seen? How are MSMEs doing in terms of their own health today vis-a-vis what you might have seen a year back?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, Krishnan, one thing we need to understand. The bank’s pricing is one of the factors for the MSME in the whole scheme of things. Now suppose if he is going to get the business and he is able to make money out of this, this pricing of 1% here and there doesn’t make any sense. Whenever we deal with sheer MSMEs, they are dealing with NBFCs paying at 13%, 14%, 15% also. With that, they are making money. So that way, the 1% on account of that MSME is going to colllpas That’s a myth. So this is not going to have. There are a few sectors which are doing well, and we focus on that where their margins are better and they are established. So that way, this pricing — higher pricing on account of delinquency till date because last six months, one year, we have been passing on particularly coming sort of weakness in delinquency, which we didn’t find because providers are profitable and making money, this 1% doesn’t make any difference for that.

J. Natarajan — President and Chief Operating Officer

And you’re saying that the current economic environment allows them to absorb that?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Correct Provided that’s what, the economy what all is there, it runs well and all clear, sectors we are doing well, if it runs well, they’ll be able to absorb. And many of them, when they talk to them also, this 1% here and there, it is not a matter of big concern for them

Krishnan ASV — HDFC Securities — Analyst

.Understood, that’s helpful, thank you. Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.

Anand Dama — Emkay Global — Analyst

Yes, sir congratulations for a good set of numbers. Sir, I have a question on the cost. I think you said that this year, basically the cost ratio actually would go up primarily because you are expanding people on the ground and trying to get more business. Is there a deviation or basically recent that you’re having for this year where you want to expand business and where you’re basically investing more in the people? And if yes, how do we look at the cost-to-income ratio or cost taxation going forward after I think we’ve done the resetting FY ’22?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, I agree. So you’re perfectly right because a few of the initiatives, what we have taken, so those things initially investment we had to make for the future. So in the process also, but earlier, you have seen Mr. Anand that our cost-to-income ratio used to be 50 to 54 and all. But even then we have given a cautious guidance that our cost-to-income ratio will be in the range of 45% to 50%, it will not cross because rest of the levers on the income side also, we are working continuously. So going forward, we feel after the 24 these investments, what all we make and they start yielding the results, the cost income ratio can be in the range of around 45%. Our intention is to maintain that in the range of 45, that range.

Anand Dama — Emkay Global — Analyst

Okay. Sure. And sir, secondly, is it possible for you to give the SMA book number, including the low-value accounts below INR5 crores?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Everything at all, we have given that number, it includes even underpin also. So you would have seen that this SMA number actual number is lower than March ’22, although book has grown, because on the current SMA number is INR360 crores. Last year, it was INR470 crores. The advances have grown to 60,000, 56,000, but even then SMA has come down to iNR360 crores, which includes every loan account, every vertical.

Anand Dama — Emkay Global — Analyst

Sure sir, thank you.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Thank yo.. Dama The next question is from the line of Chintan Shah from ICICI Securities. Please go ahead. Yeah, sir. Congratulations on good set of numbers. thank you for the opportunity. Sir, just one question. Actually, I joined the call a bit later. I’m not sort if I missed this number. Have you given any guidance for ’24, ROA guidance for FY ’24? Yeah, yah, absolutely. So what we did, you see that cumulative for the whole year ROA has come to 1.27. For the exit quarter, it is 1.5. So last year also, the exit quarter what all was there, we have given a guidance we will try to maintain during the rest of the year. And that way, we finally landed 1.5. So for next year, the guidance given by is 1.5 plus, that’s what we want to maintain for the whole year of the next year.

f Chintan Shah — ICICI Securities — Analyst

Sure, sir, sir. And sir, secondly, I just wanted to understand what would be total provisions on our entire book? And can you break it up into the capex provisions and reset provisions on any other provisions?

R. Ramshankar — Chief Financial Officer

Yeah. On the standard overall book will be having around 1% of the advance provisions.

f Chintan Shah — ICICI Securities — Analyst

Yeah. On the standard overall book will be having around 1% of the advance provisions. I mean, as absolute terms, if you could just content total provision standard specific toward restructure any other continent provisions, what will the total pool of provisions on the book. Any number on that, on a INR55,000 crores book?

R. Ramshankar — Chief Financial Officer

It is around INR620 crores, yeah.

B. Ramesh Babu — Managing Director and Chief Executive Officer

INR620 crores, it cannot be. It is INR330 crores and another.

R. Ramshankar — Chief Financial Officer

Total purchase book is only INR630 crores. Other than increase [Technical Issues] only standard.

B. Ramesh Babu — Managing Director and Chief Executive Officer

That NPA. Other than NPA, what is saying in INR620 crores is the because entry are separately given 92% is the profit coverage you have given — so that’s why what we’re saying around 1% of the standard assets we are maintaining as a provision.

f Chintan Shah — ICICI Securities — Analyst

Okay. And this includes INR200 crores of restructuring as well, right?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Was restructured and standard. Not just restructured.

f Chintan Shah — ICICI Securities — Analyst

Yeah Sure, sir. And sir, one last question on the retail portfolio. So our retail portfolio has grown roughly 16 percentage for the year. And if you look under that, other loans, which is roughly 10% of the retail portfolio, that has grown 34%. And while housing and housing loan has only grown 12%. So any color on what the other loan comprises and where is the growth coming from?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Yeah, there are a few loans again is the time deposits, a few of them, they wanted alone and down there to kit. So that was the reason that growth has come up. And if it includes some staff loans, they comprise a small portion, but other loans comprised of majority deposit [Technical Issues] loans against time deposits.

R. Ramshankar — Chief Financial Officer

Correct. They have multiple products running its own product and the fixed product. It’s a combination of all. Sure, sir, that’s it from mine. Thank you sir.

Operator

The next question is from the line of Sushil Choksey from Indus Equity. Please go ahead.

Sushil Choksey — Indus Equity — Analyst

Congratulations on stable results, sir. First is, sir, what is your likely estimate digital spend for transformation journey?

B. Ramesh Babu — Managing Director and Chief Executive Officer

Digital, you know that we have started the initiated near 2018. So most of the capital expenditure at the time we already spent. So currently, whatever we are doing is just to maintain the operating expenditure only we are doing it. Currently, we are not planning for any major capital investment, except for trade finance. Now recently, we have tied up with the company, and then we are now in the process of implementation.

Otherwise, there is not much cost involved other than the operating. Another one also is corporate internet banking also we are working on that. These two, and one thing I tell you, Sushil, we have — there is a reason to have more focus on this particular area. So we have taken from the market, a Chief Digital Officer, who will be focusing on what are the investments we are making, what value we are going to get out at? What the expectation of the customer, what others are doing to look at the whole gamut, we have just reported a month, two months back.

And once we work, we’ll come back with a plan. Based on that what all investments are required, we will do. But somehow, we felt that the investment wade we have made, we need to get some more value out of that. That is the reason the first off what we have given to CDOE, to get some value and simultaneously look at what investments we need to make. Maybe another three months and all we’ll crystallize on that count.

R. Ramshankar — Chief Financial Officer

For your specific reference, for example, in the year 2021, we have invested around INR50 crores, which includes all other IT. In the year ’22, we have invested INR43 crores. In this year, last year, we have invested INR53 crores. So roughly INR40 crores to INR50 crores is our total IT spend.

Standard average is 50%. Secondly, the rates internationally or domestically have peaked based on MPC or fad or whatever norm you want to take — so what’s your outlook on treasury, specifically for based on our current book based on [Technical Issues] ratio?

We have noticed our investment book alone, we are maintaining very low duration during the past two years. And now we are trying to replace our — the low yielding security, which security with the higher-yielding security. That is why if you noticed, last year, there is a substantial increase in the yield from 5. 1% to 5.80%. So what we have guided is based on our initial estimates in the next two quarters, another 25 basis yields will go up based on our current book. So, we have around INR2,000 crores surplus SLA and the duration we are keeping it very low. For example, if you take our AFS, it’s only less than 1. Only in case of STM, it is at 3.2.

Sushil Choksey — Indus Equity — Analyst

Okay. In view of the elections coming up next year and the global and domestic environment specifically take auto ancillaries and value-added farm produce and the MSME sector, which we are supporting, be it in domestic or manufacturing, would you front end because the rates are high and expectation will be lower in the second half, accelerate your credit growth more in the first half or you would not look at it that way?

B. Ramesh Babu — Managing Director and Chief Executive Officer

It’s not like that actually. So we are actually planning actually, we need to see that by July ending, we are more or less at INR14,000 crores business levels as of the end of March. So we thought saying that by end of July or just middle of August, whether we can cross that 1.5, that is INR150,000 crores. That’s what actually we are internally planning. So once we plan and get that. So as you said, it gets front-ended because the advance are going, correspondingly we note there we need the deposits also for the 85% CD ratio. So we are on the job to frontend-loaded but the question is, we want to balance it in such a way that there is no dilution in the quality of the acquisition and simultaneously to grow. And before August, we are trying to do, this explains.

Operator

The next question is from the line of Arvind R. from Sundram Alternates. Please go ahead.

Arvind R. — Sundaram Alternates — Analyst

I just wanted to get a better color on the SME book, what kind of industries are we lending to? And like — which would be the top three or four industries who will be the case. And I want to understand like the other loans have actually grown faster rate year-on-year in comparison to all other books. Like are they predominantly credit cards? Like what kind of loans, ect., represent and on cost of funding part — so I can — I was able to see a lot of banks actually was trying to focus on time deposits. I just — I understand that you have — you spoke about this throughout the call, but I still want to understand like what kind of process can you give us like 40, 50 basis point increase in cost of deposits. So basically, like if all other times are focusing on end deposits because the rates are high and the competition is very forthcoming. So like, how do you — how confident are you like a 40, 60 to 70 basis points I thought it could be even higher.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Understood. I’ll just respond and our president will add also. The first point, what you mentioned, the commercial majority the way MSME is growing. So actually, the majority is coming from trade that is wholesale and retail trade, transport operators, commercial real estate and under manufacturing, the textile, food processing, construction, basic metal and metal products. These are the main sectors. Actually, we are growing there.

So these things are there because we are reasonably confident and we have some sort of an expertise in the trade. So that business, a lot of business we are getting it. Now on food processing also, a lot of scope is there. We are growing in that. Now coming to the unsecured, if you look at it, I can say that the personal loans in the retail sheet, what you are seeing, there is a row called personal loans, which is around INR337 crores. That is the clean portion of the book. And the rest, if you do other loans and all other loans comprised of two portions. One is the loans given to the staff numbers. And second thing is again the time deposits. And these two are the main. Otherwise, there is no much unsecured sitting there. And you can look at another slide where they have shown the security and unsecured portion of under slide is here. You can find how much is a very miniscule portion of our unsecured portfolio. So that way the other loans need not be a factor to be worried because it’s backed by either security or time deposit. Now coming to the cost of funds, what you are mentioning, 40 to 50, as I was mentioning earlier, so our ALM department, they did some sort of a homework based on the past renewals what were happening. And when the renewal is happening and which bucket they are growing and the current inflow of deposits model are coming, they are coming into which bucket and what is the rate of interest. Looking at all these things, we thought saying that there can be a spike as 40 to 50 basis points in the cost of depart. That was the worst thing we have done.

R. Ramshankar — Chief Financial Officer

Yeah. See, Arvind, if you notice during this year, our yield on advances have gone up by 120 basis points, whereas our deposit cost has increased only 52 points because of the lag effect, it’s an industry scenario. So what we are trying to work out is based on our historical data, very the renewal pattern and all these things, we estimate that in the next few quarters, there will be increase in the cost to the extent of 50 basis points based on the lag effect. And there will be some corresponding yield also because of the MCLR entire thing still are not passed on. Still, I can say some 30 to — I mean 40% to 45% of our MCLR book on the respective due dates, we’ll be passing it on. But we have conservatively, we estimate that the 50%, it may not be possible for us to completely pass onto the MCLR, but of course, we have other factors also, for example, I was mentioning about yield on investments. So yield on investment will support us by another 20, 23 basis points. So overall, we are just for conservatively, we are estimating it. And then we are trying to work out how to minimize this large effect.

Arvind R. — Sundaram Alternates — Analyst

Yeah, but just one more question. Like so the numbers you have mentioned so 16 percentage is roughly fixed book. So all of the fixed book is repriced by now? Or it will be repriced in the next subsequent quarters?

B. Ramesh Babu — Managing Director and Chief Executive Officer

MCLR, EBLR 16% of our fit book.

J. Natarajan — President and Chief Operating Officer

So fixed price mostly, for example, if you take a retail loan, vehicle loan, we take a fixed rate. So we don’t change during the tenor of the loan. Likewise.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Time deposit loans are fixed– so you cannot change even the currency of the loan because the underlying time deposit, what all is there over and above where the mark and we’ll give a loan um there. So it will not under change even if they are agnostic to MCLR and EBLR changes.

Arvind R. — Sundaram Alternates — Analyst

No, I understand that. Like I was trying to understand like maybe in the first second quarters, if there is going to be — I mean, there will be some maturities, right, in ebook also lie..

B. Ramesh Babu — Managing Director and Chief Executive Officer

Some maturities are there. The fresh acquisition model we are going to do will be at the current rate only.

Arvind R. — Sundaram Alternates — Analyst

Yeah. I was trying to understand like what would be the impact of that? That’s what I was saying.

B. Ramesh Babu — Managing Director and Chief Executive Officer

Don’t worry, there a small book of that one and all. Our real working and they’re going on, but they’re keeping all these things in mind only, we thought that the 40% to 50% and NIM of 4%, that’s what we were indicating.

Operator

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

B. Ramesh Babu — Managing Director and Chief Executive Officer

Okay. Thank you very much. And first of all, perform thanks to each one of you for taking out time and showing interest in our bank. So just to conclude, so I just want to reassure that the transformation journey plan has been showing promising results. The loan book is improving to more SME and retail, granular corporate book with better asset quality. And with all these things and the benign asset quality granular because the structure has changes what all we have brought out for a revamp of business model and a strong capital base with all these things, bank is well poised to go forward, and we will continue the journey the sales base and what all we have been guiding, we’ll go ahead on the same line, and we will try to deliver that. Thank you once again to all of you. Thank you very much. [Operator Closing Remarks]