Ladies and gentlemen, good day and welcome to the Axis Bank conference call to discuss the Q2 FY 2022 financial results. Participation in the conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents or the proceedings of the call is strictly prohibited and prior explicit permission and written approval of Axis Bank is imperative. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of the briefing session. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your Touch-Tone phone. Please note that this conference is being recorded. On behalf of Axis Bank, I once again welcome all the participants to the conference call.
On the call we have Mr. Amitabh Chaudhry, MD & CEO, and Mr. Puneet Sharma, CFO. I would now like to hand the conference over to Mr. Amitabh Chaudhry, MD & CEO. Thank you, and over to you, sir.
Thanks a lot for opening the call. We welcome you all to a discussion on Axis Bank's financial results for the second quarter and half year ended September 2021. We also have on the call Rajiv Anand, Executive Director and Head of Wholesale Banking, Ravi Narayanan, Group Executive, Branch Banking and Retail Liabilities, Sumit Bali, Group Executive, Retail Lending and Payments, and Amit Talgeri, Chief Risk Officer. The past 18 months were tough for the nation and the economy. The bank has emerged stronger out of this, thanks to our colleagues who kept their focus on serving our customers. The rapid pace of vaccination, continued support of the regulator and the government, and the receding threat of a third wave give us confidence. We expect the strong pace of economic recovery to continue in second half of this year.
We continue the disciplined execution on three GPS vectors of growth, profitability and sustainability. I'll give an overview of the performance of the bank and elaborate for few areas thereafter. The strong granular growth in our liabilities franchise continues. The engine is humming now. We opened 2.3 million new liabilities accounts in second quarter, highest ever in a quarter. In retail assets, too, the number of customers who chose us for LAP, car loans and small business loans were the highest ever for any quarter. Retail disbursements are up 54% on both year-on-year and quarter-on-quarter basis. We added 5.5 lakh credit cards in this quarter, a growth of 132% quarter-on-quarter. The festive season has begun well, and we expect further momentum. Also, we took the Mastercard portfolio migration during this quarter in our stride.
In corporate bank, we won multiple new mandates with strong performance in transaction banking. Wholesale banking fee income grew 15% year-on-year. We became the first private sector bank to do a Secured Overnight Financing Rate, SOFR funding trade credit transaction for one of our marquee clients. On asset quality and earnings, we saw a sequential decline in retail slippages by 23%, resulting in lower provisions and credit costs. Net slippage trend is lower with better recoveries across all segments. Retail net slippages declined 81% quarter-on-quarter. Restructuring at 0.64% of gross customer assets is lower than larger private banking peers. 93% of retail restructuring is secured. Overall fee income growth of 17% year-on-year and 21% quarter-on-quarter remains healthy.
Our quarter two earnings have grown by 86% year-on-year and 45% quarter-on-quarter. The one Axis approach is bearing fruit with our subsidiaries sustaining their superlative performance. The combined first half PAT of our domestic subsidiaries stood at INR 513 crore, up 61% year-on-year. If I were to take a consolidated view of the past 18 months, we have put our legacy asset quality issues fully behind us, strengthened our balance sheet, invested deeply in digital and technology capabilities, and we are now clocking strong growth in retail SME and transaction banking businesses. We have been careful about picking up business within corporate bank, opting for granularity in better rated corporates and shorter-term exposures.
The 8 key transformation initiatives that are underway and upfront investments in digital technology and people that we have made give us confidence that there is more headroom for growth. Increased granularity, continued loan mix change, low credit costs and market share gains will gradually lead to margin expansion, with them growing over the next four to six quarters. Puneet will take you through financial performance in detail, in greater detail later. Let me elaborate further. On deposits, CASA deposit growth in recent quarters is trending above medium-term industry growth of 17%. The persistency of our deposits, defined as average CASA deposits as percentage of period at balances, improved 600 basis points from 86% to 92% in the last 10 quarters.
In quarter 2, our average SA balances grew 23% year-on-year and 5% quarter-on-quarter, while the average CA balances were up 18% year-on-year and 3% quarter-on-quarter. The rigor and rhythm across distribution channels and key projects, Triumph and Aram, now show up in NTB performance. 71% year-on-year and 58% quarter-on-quarter growth in new retail savings customers. 1.2 lakh SA accounts opened via video CIP in quarter two FY 2022. 36% year-on-year and 58% quarter-on-quarter growth in new current account customers. 150 basis points year-on-year improvement in the share of premium segments as a percentage of overall existing to the bank retail savings account balances. On premiumization, combined AUM in wealth segment is in excess of INR 2,58,300 crore, up 52% year-on-year.
Burgundy Private now manages nearly 2,790 HNI families, up from 1,225 families last year. The total AUM here is in excess of INR 75,950 crores, up from INR 34,591 crores last year. On retail assets, we have improved our stage two journeys and reduced cycle times for disbursing to our customers. The business momentum has increased month-on-month, and we expect stronger second half growth. Demand for homes is back and interest rates continue to be low and real estate prices stable. Builders have reported reduction in inventory and a good demand for new projects. Our Asha loans portfolio, which is the affordable home loan segment, crossed INR 10,000 crores in the quarter.
Auto loans have been hit due to supply side disruptions, but we continue to onboard new dealers in our dealer financing portfolio. The passenger car sales industry de-grew by around 40% year-on-year, while we grew by 37% year-on-year in the month of September 2021. Quarter two also witnessed growth in gold loans, working capital, farmer funding and microfinance. Collection efficiency improved for this portfolio too. On credit card and payments, the Axis Flipkart co-branded card saw highest ever monthly acquisitions through Flipkart platform in September 2021. We see growth continuing through both organic acquisitions and partnerships on the back of increased card spends. The cards book was up 11% quarter-on-quarter. The Google Pay, Freecharge and other partnerships are also contributing to the growth in new cards acquisition.
Over 25% of cards closed sourced in the second quarter were through non-bank channels as compared to 21% in FY 2021. We also have few large partnerships in the pipeline that will add to this momentum. On Bharat Banking, our Bharat Banking-focused 2,065 branches saw 45% growth in disbursements in Q2 FY 2022. The rural deposits also grew at 19% over previous year. We have added new partners to create multiple agri-focused ecosystems. Our overall count of VLEs is at approx 90,500. Bharat is the big opportunity of this decade as the farm sector reforms, infrastructure investments and digital inclusion story plays out in rural India. We have created a growth-focused Bharat Banking unit to build for Bharat. During the quarter, Munish Sharda joined us as Group Executive for Bharat Banking.
Munish has over 27 years of rich leadership experience in financial services and has managed a company and large distributed teams. On wholesale banking, over the past two years, we have demonstrated industry-leading underwriting standards, deepening our talent pool in products and digital and focused on transaction banking, mid-corporate, government and MNC businesses. The corporate digital bank transformation program, Project Neo, that we initiated in April is starting to bear results. Our focus segments, mid-corporate and commercial banking business, grew 32% and 18% on year-on-year basis. They were up 10% and 7% on quarter-on-quarter basis respectively. The current account deposits from the commercial banking segment grew 10% year-on-year, with 50% growth in average balances for new to the bank customer accounts, reflecting the quality of strong relationship-led franchise we are building. The asset quality in this matrix has been better than our expectations here.
During the quarter, large corporates continued to deleverage and working capital utilization levels remained below pre-pandemic levels. The overall corporate loan book therefore stood nearly flat on a year-over-year basis. Like I said here before, we are investing in Project Neo to build a world-class digital corporate bank. There are over 70 colleagues working in 16 pods in an agile mode to deliver this. We saw strong digital adoption of corporate APIs with growth of 45% in this quarter. On digital, we witnessed best ever growth in our digital business this quarter. The number of customers acquired for the digital buy now, pay later product were up 14 x quarter-over-quarter. Our VKYC Insta Savings Account product crossed INR 1,000 crore in savings account balances in less than a year of launch. On WhatsApp Banking, we have now 1.9 million customers within nine months of launch.
We maintained our strong position in UPI with a market share of 15% as payer PSP and 19% in UPI P2M acquiring. About 85% of customer service requests in branches are now digitally available and served through a proprietary cloud-based system. Our mobile banking app continues to have the highest rating from users among banks in India, and we have 5 million non-Axis Bank customers using our Axis Mobile and Axis Pay apps. We upgraded our developer portal, which is now amongst the largest set of open banking APIs in the industry with over 250+ APIs live. On tech transformation and capability, over 1,000+ people are now dedicated to the digital bank, with cross-functional squads and pods working on 30+ key initiatives that are transforming the core and building future-ready capabilities. We had shared a detailed document on this, which has been loaded on the website.
Our cloud, on cloud, our leadership continues. We are the first bank to create 3 landing zones to support our multi-cloud strategy. We have 50 applications on cloud, and the migration is getting quicker every quarter. We are leveraging our in-house product design and engineering teams to create proprietary digital products. We launched Jarvis, our in-house developed cloud-native, API-oriented lending platform that powers the BNPL platform for us. We are working on data architecture 3, where we are building automated data platforms to auto underwrite the next 100 million customers. This will be critical when our account aggregator model picks up. We are also integrating unconventional and unstructured data for risk-moderated business expansion. The impact of these initiatives is already visible. We won the Best in Future of Operations award at the first-ever International Data Corporation Future Enterprise Awards.
On ESG and diversity, we became the first financial institution in India to set up an ESG committee of the board, and we raised $600 million in India's first ESG-compliant sustainability-linked bond in the overseas market. We have made a set of commitments under the Paris Agreement to achieve the sustainable development goals, which includes a target of incremental lending of INR 30,000 crore over five years to sectors with positive social and environmental outcomes. Incremental disbursements will be INR 10,000 crore by financial year 2024 for affordable housing and increasing share of women borrowers, reaching 30% female representation in our workforce by financial year 2027. The steps we have taken in diversity, equity, and inclusion are widely recognized as pioneering in India.
We won the Leadership in Social Impact and the Leadership in Transparency awards at the ESG India Leadership Awards 2021. In closing, we believe consumer and business confidence will continue to trend upwards in the second half as the vaccination coverage rises and the economy opens up with pent-up demand and spends materializing. Pandemic notwithstanding, we continued our progress on our strategy in the past 18 months. We have sorted legacy book issues, underwriting has stood the COVID test, growth in multiple retail segments in quarter two was at all-time high, and credit costs are upgrading fast. We have significant headroom for growth based on our distribution strength, continued digital leadership, the 8 transformation projects that are underway, and the business we are choosing not to pick. We are looking forward to the second half. Let me now hand over the call to Puneet.
Thanks, Amitabh. Good evening, ladies and gentlemen. Thank you for joining us this evening. I will discuss the salient features of the financial performance of the bank for Q2 FY 2022, focusing on our operating performance, capital and liquidity positions, growth across deposit franchise and loan book, journey of becoming a more prudent and conservative franchise, asset quality restructuring and provisioning. During the current quarter, the RBI issued a direction that resulted in change in the classification and presentation of certain P&L items. These changes have adversely affected reporting revenue and profits and are marginally positive on credit costs. We request you to please see slide 69 of our presentation to better understand the impact. Our operating performance is healthy, reflected through continued build-up of granular fee and NII growth.
We continue to invest in the franchise to be able to capitalize on market opportunities once COVID stabilizes. Net interest income for Q2 FY 2022 stood at INR 7,900 crore, representing a YoY growth of 8% and a sequential quarter-on-quarter growth of 2%. NIMs for Q2 FY 2022 stood at 3.39%, representing a decline of 19 basis points YoY and 7 basis points Q-on-Q. NIMs on a YoY and Q-on-Q basis are impacted by product mix changes. For example, growth in our overseas loan book, interest reversals have impacted NIM on a YoY basis. Increase in LCR by 3% and 5%, on a YoY and Q-on-Q basis has contributed to the NIM. Timing impact of our Tier One capital raise, market pricing pressures in the wholesale segment and mortgages business are the key contributors.
Improvement in NIMs over the medium term will be driven by loan mix changes, continued improvement in low-cost deposits, and the quality of our deposit franchise, and reduced share of our IDF bonds, which currently stand at 4% of our balance sheet size. We saw a strong growth in average CASA YoY and Q-on-Q, resulting in a decline in cost of deposits by 68 basis points and 9 basis points respectively. There is no incremental allocation of RIDF due to PSL non-compliance in FY 2021 through organic loan origination and PSLC purchases. Hence, we have moved on one of the structural drivers for NIM improvement. The bank has been improving the risk profile of its loan book. If we look at our NII as a percentage of average risk-weighted assets, it stands at 6.95%, improving 10 basis points YoY.
Our fee income stood at INR 3,231 crore, growing 17% year-over-year and 21% quarter-over-quarter. 63% of our fees is from our retail business, the balance coming from the wholesale franchise. Granular fee is 90% of our total fees. We continue to see good traction in our CMS, Forex and trade finance businesses that have resulted in an 18% year-over-year and 15% quarter-over-quarter growth in non-credit related fees in the wholesale segment. Commercial banking fees grew by 6% on a year-over-year basis and 34% quarter-over-quarter. Fee on cards grew 19% year-over-year and 21% quarter-over-quarter. Fees from our digital channels grew 42% year-over-year and 39% quarter-over-quarter. Trading income stood at INR 473 crore, we growing 36% year-over-year, mainly of, on account of lower government security sales and consequent profits.
Other income stood at INR 95 crore, grew 24% YoY basis post reclassification of recoveries from written off pool to credit costs. Core operating revenue grew 11% YoY and 6.5% Q-on-Q. Operating expenses for the quarter stood at INR 5,771 crore, growing 36% YoY and 17% QoQ. Staff costs increased by 36% on a YoY basis. The increase in staff cost is not comparable, as Q2 FY 2022 has an impact of increments for two years. If you recall, we had offered increments last year effective first October, and this effect should neutralize itself from the third quarter reporting. We have added 10,322 people from the same period last year, mainly to our growth businesses and our technology teams.
We have continued to top up the gratuity expense for the Social Security Code, something that we have taken ahead of others. The bank has, in the current quarter, booked an ESOP cost of INR 72 crore on account of the change in the RPA guidelines for accounting for such costs. Other operating expenses grew 37% year-over-year, mainly attributed to higher business volumes, higher collection expenses, IT expenses, statutory costs comprising of PSLC certificate purchase and our DICGC premium. If I was to look at the sequential cost increase in rupee crore terms and break that up for you, the growth can be attributable to the following reasons: 30% of our cost growth sequentially is driven by volumes. The upfront loan origination cost as an expense while income comes through the life of the loan.
20% of our cost increase sequentially is for future growth and technology. We are confident that the franchise can grow well, and we're investing in it today. 30% of our cost growth is attributable to collection expenses, COVID expenses, and statutory expenses. Collection expenses have more than paid for themselves through the lower provisions that I will discuss later on the call. 20% is our BAU expense growth. On a holistic basis, about 7.5% of the sequential quarter growth is from one-off items that are not likely to repeat. Operating expenses to average assets stood at 2.12% for Q2 FY 2022, higher by 15 basis points YoY, and 7 basis points on a sequential quarter basis.
The adverse impact of netting of the balance sheet that we commenced from Q1 of the current year is 2 basis points on that ratio. We continue to believe that we will fall back to our long-term target of 2% cost to assets in the next few quarters as growth accelerates. Operating profits for Q2 FY 2022 was INR 5,456 crores. We grew 7% YoY and 3% Q1Q. The decline on a YoY basis is mainly on account of expenses growth, which I have discussed previously. The decline in core operating profits sequentially is entirely attributable to reclassification. We would request you to see slide 69 of our presentation. Provisions and contingencies for the quarter were INR 1,725 crores, declining 60% YoY and 47% Q1Q. The bank has not utilized any COVID-19 provisions in the current quarter.
The provisions and contingencies include an amount of INR 525 crores of additional non-NPA provisions made by the bank during the quarter. The annualized credit cost for Q2 FY 2022 stands at 0.54%, declining 116 basis points quarter-over-quarter. Profit before tax stood at INR 4,193 crores, growing 81% year-over-year, 45% quarter-over-quarter. PAT at INR 3,133 crores, growing 86% year-over-year, 45% quarter-over-quarter. Annualized Q2 ROE stood at 12.72%, improving 477 basis points on a year-over-year basis and 361 basis points quarter-over-quarter. The strength of our balance sheet is reflected through the cumulative non-NPA provisions as of September 30, standing at INR 12,951 crores.
The key components of these provisions are COVID-19 related provisions of INR 5,012 crores. We have not utilized any provisions in the current quarter. The size of our provisions are not to be construed as our assessment of relative weakness of the quality of our loan book, but purely prudence-led provisions. Restructuring provisions of INR 1,455 crores are at Stage 1 NPA rates, translating to 24% cover, with 100% unsecured loans being fully provided for. Weak asset and other provisions stand at INR 6,484 crores. Our standard asset cover, which is defined as all non-NPA provisions by standard advances, stands at 2.11%, improving 6 basis points sequentially.
Our provision coverage, all provisions, NPA plus non-NPA divided by GNPA, stands at 124%, improving 617 basis points on a sequential quarter basis. The bank is well capitalized. We carry adequate liquidity buffers. Our overall capital adequacy ratio, including H1 profits, is 20.44%, and our CET1 ratio stands at 15.81%, improving 66 basis points and 43 basis points on a YoY basis, respectively. The prudent COVID provisions we carry as at 30th September provide us with an additional capital cushion of 67 basis points over and above the reported capital adequacy as spoken of. Our average LCR ratio for the quarter is at 120%. Our excess SLR stands at INR 85,580 crore.
The risk-weighted assets of the bank as of 30th September 2021 stand at 62% as compared to 68% as of September 2020. This improvement in RWA is reflective of the quality improvements being done by the bank. The bank has a call date on its Tier 1 capital falling due in the next quarter. If the call is made subject to prior regulatory approvals, the Tier 1 capital will have an impact of 58 basis points. Moving on to growth across our granular deposits. We prefer to focus on quarterly average balances instead of month-end balances. CASA grew 21% YoY and 5% Q1Q. CASA ratio stood at 42%, improving 201 basis points YoY on an average balance basis. CASA growth was strong with 23% YoY growth and 5% Q1Q.
CASA, 18% YoY, 3% Q1Q. Our term deposits on a quarterly average balance basis grew 15%, of which retail deposits grew 11% YoY and 3% sequentially. A large part of our incremental NRCD deposits over March 2021 are LCR accretive and non-callable. Our focus on premiumization continues with 69% YoY and 9% Q1Q growth in quarterly average balances for our Burgundy and Burgundy Private accounts. The NII segment also witnessed a 19% YoY growth. Our salary segment QAB balances grew 13% YoY and 4% Q1Q. Our structured cadence between the corporate and retail teams is already in progress. We continue to leverage the wholesale banking relations to remain focused on increasing our share in top 100 marquee corporate names. Our focus segments comprising retail, assets, SME, and mid-corporate segments have been our key loan growth drivers.
Our overall loan book grew at 10% YoY and 1% on a sequential quarter basis. The composition of the loan book continues to remain balanced, with 56% of the overall advances is retail, 34% is corporate, and 10% is CBG. The book represents healthy characteristics with 80% of the retail book as secured, 86% of the corporate book being rated A and above, and the CBG book being well diversified across geographies and industries, 96% secured and 70% on shorter tenors. Retail disbursements grew 54% on a YoY basis and sequentially. Our branch sourcing of retail loans was 51% Q2 FY 2022. The number of loan accounts opened in Q2 FY 2022 across most retail secured assets like home, car loans, personal gold loans were the highest ever.
While home loans, Q2 was the second-best quarter ever in disbursement terms. Home loan disbursements were 86% up YoY and 54% Q1Q, with SBB disbursements at 103% and 72% YoY Q1Q respectively. Domestic retail loans grew 15%, led by secured products like home loans growing 19% YoY, LAP 24% and Small Business Banking 43%. Over the last couple of quarters, we have become more comfortable in growing our retail unsecured book on an incremental basis within our risk framework. Personal loan disbursements were up 72% YoY and 21% Q1Q. The credit card spends for Q2 FY 2022 were up 64% YoY and 34% Q1Q and were trending above pre-COVID levels. We continue to drive growth in cards and unsecured lendings via our new-to-bank and existing-to-bank franchise.
With strong partnerships and huge KTB customer base of over 140 million customers, we intend to grow our unsecured retail loan book faster over the next few years. We continue to maintain our strong positioning in the UPI space with a market share of 15% on payer PSP by volume and 19% in UPI P2M throughputs. Our DBCO coverage stands at 2,065 branches, which Amitabh discussed earlier. Our progress on corporate banking is to build a profitable and sustainable corporate bank. Corporate disbursements were up 24% QoQ and flat YoY. 93% of the incremental sanctions are A-. We remain focused on delivering higher loan growth from our chosen segments. The mid-corporate segment grew 32% YoY, 10% QoQ. Our commercial banking segment grew 18% YoY, 7% QoQ.
These segments help us bring greater granularity to our books, reduce risks and meet our ROC criteria. Our letter of credit book grew by 48% YoY, with a market share in foreign currency LCs up 63 basis points on a YoY basis to 9.4%. We continue to have a strong position in NGC and RTGS payments with a market share of 9% and 8%. The offshore assets grew by 42% YoY. The growth in our overseas corporate loan book is primarily driven by GIFT City branch exposures. 97% of our overseas standard book is India-linked, and 86% is rated A and above. Commercial banking disbursements rebounded strongly with a 76% Q1Q growth, aiding a loan growth of 18% and 7% YoY Q1Q respectively.
Early results of our tech-led transformation on our commercial banking business is measurable too. CBG CA deposits now contribute 24% of the overall CASA for the bank and grew 10% YoY, reflecting the quality of the commercial banking franchise we are building. Non-interest fees in commercial banking grew 17%. The depth of our CBG relationships is demonstrated by the fact that our commercial banking group contributes 19% of our Burgundy Private and Burgundy account acquisitions. Our subsidiaries have delivered a strong performance. Overall, the H1 profit stands at INR 513 crore, 61% YoY growth. Axis Capital continued to maintain its leadership position in ECM. H1 PAT up 72%. Axis Finance over the last two and a half years has been investing in building a customer-focused franchise.
Its retail book grew 5 x YoY and now constitutes 23% of the book, compared to 8% last year. Axis Finance book quality continues to be strong, with near-nil restructuring and net NPAs at 1.3%. Its H1 PAT grew 80% to INR 138 crore and ROE stands at 18.5%. Axis Mutual Funds quarterly AUMs were up 52% YoY, driven by fund performance. Axis AMC's H1 PAT was up 60% YoY to INR 147 crore. Axis Securities added 0.12 million customers in Q2, up 43% YoY, PAT up 59% with an ROE of 42.4% for the quarter. We are seeing an improvement in our asset quality metrics, and we have well provided for known stresses.
The gross slippage for the quarter was INR 5,454 crores, lower than Q1 FY 2022 by 16%. Retail and CBG gross slippages declined 23% and 46% respectively Q on Q. At the bank level, 28% of the gross slippages on a same account basis were upgraded in the same quarter as compared to 22% from the last quarter. On a segmental basis, the same quarter slippages and upgrades in retail were 31%, corporate 14% and CBG 46%. Therefore, it's better to focus on net slippages insofar as we are concerned. Further, 23% of the gross slippages are attributed to linked accounts of borrowers that were standard when first classified. Net slippages for the quarter are INR 707 crores down from INR 3,976 crores, an 82% sequential quarter decline.
The net slippage ratio for the bank on an annualized basis stands at 0.46%, improving 214 basis points quarter-on-quarter. The asset quality on the wholesale business is holding up well, with a net slippage of an absolute INR 26 crore on the size of books that we run. Net slippages for SME book are negative for the quarter. We have negligible restructuring here, and that has not contributed to the lower net slippages. Net slippages in retail stand at INR 697 crore, down 81% sequentially. The net slippage ratio on an annualized basis stands at 0.83%, declining 370 basis points quarter-on-quarter. On the collections front, check bounces remain marginally elevated in Q2 FY 2022 as compared to pre-COVID levels.
Our concerted collection efforts and investments in collections has resulted in demand resolution for the retail portfolio in the month of September being 98.8%, which is better than levels we saw pre-COVID. This is a key trend we continue to remain focused on. Recoveries from written-off retail accounts in Q2 FY 2022 is 64% higher than Q1 and has been the best quarter in the last 18 months. We expect the second half of the year to have lower net NPA additions as compared to H1 FY 2022, given the collection intensity and moderation of delinquency outcomes. The intensity, length, and time and government policy action emanating from a COVID wave three event remains a key monitor for us. The bank has undertaken prudent, limited, and largely secured restructuring.
The outstanding implemented fund-based restructuring one and two stand at INR 4,342 crore, representing 0.64% of our gross customer assets as of September 2021. Invoked but pending implementation COVID one and two restructuring stands at INR 118 crore or 0.02% of our GCA. Hence, in aggregate, COVID restructuring will not exceed 0.66% of our GCA, which we believe is lower than larger private sector peer banks. 96% of loans restructured on-under COVID one and two are standard as of 30th September 2021. 93% of retail loans restructured under one and two are secured. The LTVs of secured loans range from 40%-70%.
On a segmental basis, COVID one and two restructuring on loans is 0.68% on the wholesale book, 0.8% on the retail book and 0.02%, which is zero, near zero, for the commercial banking book or the SME book. We were able to upgrade INR 501 crores of restructured pool one and two that was NPA as of thirtieth June to standard as of thirtieth September. The linked non-fund-based exposure on restructured loans is INR 1,002 crores. The net slippages from COVID wave one restructuring stands at 3% of the wave one pool. Details of our BB and below book and restructuring are set out on slide 48 of our presentation in greater detail.
The fund-based investment and investment BB books stood at INR 7,307 crore, declining INR 1,370 crore on a quarter-on-quarter basis, which is a 16% QoQ decline. The 79% of our profits slippages in this quarter were from the BB and below book. 21% of the fund-based BB and below book is rated better by at least one external rating agency. All accounts downgraded in the current quarter were individually less than INR 80 crore, and the average ticket size of accounts downgraded was INR 12 crore. The average ticket size of fund-based exposures in the BBB plus, BBB and BBB minus is INR 40 crore with no individual exposure in four-digit crore, showing the granularity of book that we have been focused on. We request you to see slide 48 of the investor presentation.
It sets out more details. The GNPA of the bank was 3.53%, improving 75 basis points YoY and 32 basis points Q-on-Q. The GNPA is the lowest that the bank has been since Q2 FY 2017. The net NPA stood at 1.08%, improving 12 basis points Q-on-Q . The net exposure of the bank to two NBFCs where RBI superseded the board in Q2 FY 2022 is nil. The bank has a healthy PCR of 70%. Greater details are provided on slide 47. As I close, we summarize the bank's journey so far and broad outlook on key performance drivers. Our capital adequacy ratio at 20.04 is best we've had in years. Our balance sheet is resilient, visible through declining NPA ratios, stable provision cover, buildup of non-NPA provisions, prudent, limited and largely secured restructuring.
The average CASA balances on a closing balance basis has improved to 92%, showing the improvement in the quality of the CASA franchise we're building. Annualized H1 FY 2022 earnings for subsidiaries will cross INR 1,000 crores for the full year. Our return on investments from subsidiaries now stands at 58%. On ESG, Axis is now the first bank to establish a standalone ESG committee of the board and is moving forward on its ESG agenda. Our reported net interest margins have moderated, though when adjusted for risk-weighted intensity of our assets, we see an improvement over time. We have clearly identified, discussed, and are seeing traction on the building blocks for improving our reported margins in the medium to long term.
We expect FY 2022 net margins to remain at or marginally above H1 levels, but will improve structurally over the medium to long term based on initiatives that are in place today. We will continue to invest in the franchise and have seen a short-term cost escalation. The pace of growth in costs will moderate in the second half as base effect corrections like salary costs take place. While we stay committed to the cost to assets target of 2% in the medium term, for FY 2022, we will be between 8-12 basis points higher than that number. We believe our businesses are resilient, and we are well-equipped to capitalize on opportunities, are investing in the franchise to deal with contingencies that the pandemic may pose. We reiterate our stance of stopping specific guidance.
We thank you for your time and we will pause now, and we will be happy to take your questions.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Yeah, hello, good evening. Thanks for giving me the opportunity. Sir, two or three questions. One, on growth. Your commentary is pretty strong, and I'm looking at the corporate portfolio, which has declined about, you know, 4%-5% on a quarter-over-quarter basis. Just, can you guide or rather can you give some color on what led to this? Is it some end of period balance or is it something that you stayed away from? What's the outlook on growth here? The retail and SME growth seems to be pretty good. Just some color on the corporate side.
Within the corporate side, SME, as you said, continues to grow strongly. Even on a Q-on-Q basis, growth is strong in the sectors that we have chosen. Mid-corporate, MNC growth continues to be strong. We've seen some deleveraging repayments, prepayments, et cetera. The one point that I want to make, which is, I think, important, the way that corporates, particularly in the large corporate space, are thinking about their capital structure and funding patterns is really a diversity which includes bank loans. What they are choosing to use is offshore loans, offshore bonds, local loans, local bonds. Axis is participating on each of those opportunities. Not all of those opportunities may convert into loan growth at a point in time.
Most important, it will ensure that we are engaged with the customer across the capital structure and will obviously ensure that we are driving fee incomes, et cetera. Our preeminent position on the DCM side is well known. We've been around for the last 13 years on the debt capital side. We have a very, very strong loan syndication book, and we are now the only Indian bank that is focused on the offshore debt capital markets as well. And we've had a fair amount of success within this space. The way to think about loan growth is I think one needs to look at it on a much wider basis, particularly in the large corporate space, as
If one wants to engage with a set of customers that they have chosen to engage with.
Incrementally this book, when does this book start expanding? As in, or and what are the particular opportunities you see out there? Because I believe private CapEx is still, you know, a bit far away from, you know, picking up.
I think what happened in the first half of the year is. I think what I'm fairly certain about is that the CapEx cycle has bottomed out. We would have probably seen a stronger CapEx cycle at this point in time. You know, two things have impacted that. Wave two and the probability of wave one. I mean, you know, there were various news reports that wave three would hit us in October, November, December, has probably held that back. You know, whether the festive season will bring the kind of demand that we expect, were some of the reasons why perhaps the CapEx cycle has got postponed by anything between six to 12 months.
I think what one is certain is that the CapEx cycle has bottomed out, and we should certainly see that begin to kick in. There are various initiatives, the National Monetization Program, PLI schemes. We are seeing small levels of CapEx in chemicals, in steel, in cement and so on and so forth. Some of that is also being funded by internal accruals. We are also seeing that corporates at this point in time are preferring to deleverage, use their own cash flows to support CapEx. I think it's just a question of time before that begins to kick in. Two is, you will hear commentary from Puneet and you've already heard some of that, is that the festive demand has been, you know, fairly strong.
What that means is that the working capital cycles, which hitherto where utilization of our working capital cycles were, working capital lines were relatively weak, we think that will start to pick up in the second half of the year as well. We are also, I think, Puneet mentioned this point about the overseas book growing. I just want to reiterate that, a few quarters ago, we mentioned that the overseas book will be only focused on India-linked NIMs. So what we are really doing there is to follow the customer in terms of their client needs around transaction banking.
If you look at trade finance, which is where predominantly the overseas book has grown, we are now 2.5 x in terms of the size of that book as compared to some of the foreign banks who dominate this business at this point in time. We are getting increased franchise breadth, depth of client conversations and cross-sell opportunities across transaction banking as a result of the growth in our overseas trade finance book. The associated cross-sell revenues and balance arising is not factored into NIMs, but is certainly showing up in strong fee growth that you're seeing in our transaction banking franchise.
Great. Thanks so much for that. My second question is on NIM. You've mentioned in your EBT that there's an adverse mix impact of 13 basis points. If I look at the broad mix, you know, retail SME has gone up, corporate has come down. What exactly, why exactly is this mix impacting NIM unfavorably?
Abhishek, thanks for the question. The way I request you to think about that number is the liability franchise has grown exceptionally well. The asset is now growing on an incremental basis. Given the fact that you've originated liabilities in advance of assets, the surplus money, which I called out earlier in the presentation, about INR 85,000 crore parked in excess SLRs.
Okay.
The mix change, the mix between investments and advances, which is a material contributor to that.
Understand. How should we look at or think about NIM going forward? On a just a loan basis, are your spreads improving and just how do you think about it going forward?
Structurally, Abhishek, the way to think about NIMs are there are three structural drivers to our NIM. One is the loan mix change. One part of the mix change will come from the fact that as advances growth comes back, which you will see the recalibration between advances and investments.
Right.
That should aid NIM coming back. The second bit is we have improved the quality and the percentage of our low-cost deposits. As the quality of our deposits improves further, we should see a release of available liquidity to lend to be a driver. The third element that I would like to call out is 4% of our balance sheet is RIDF loan. These are negative spread as we stand today. For the last year, we've incurred OpEx and purchased PSLCs, which is why you also see an OpEx cost increase. What we are doing is we're solving for the RIDF problem. No incremental allocations. They should run off between three to four years on a weighted maturity basis. Just this run off should be able to give us anywhere between 10-12 basis points uplift on NIM.
I'm not saying a full run off, I'm saying run off to the next period time. As we work through each of these, you've heard us speak on where our loan growth is going to come from. You'll see the NIM improve structurally over the coming quarters.
Sure, sure. Thanks for that. Finally, just a question on slippages. Looking at the gross number and, I know you said, you know, focus on the net, but just if I were to talk about the gross number, still a little high, right? At about 3.9% annualized. Just to know, where is this slippage really coming from? And given the pickup in the economy, do you see this normalizing in two quarters or four quarters? What is your outlook there?
Abhishek, we can annualize the slippages number and come to a percentage that you've computed. The first way I would request you to look at that number is I specifically called out in Axis' context. We report on a gross cross basis. 28% of the gross slippages fell in the same quarter and recovered in the same quarter.
Yeah.
Effectively 1/3 of your computed number will disappear basis the same quarter upgrade, downgrade reference point. I had also called out for your consideration this across product segments. That plays through. Adjusted for the same quarter upgrade, downgrade, the inventory that got built up because of wave two is playing out. Just to give you context, in the retail business, our net slippage for the month of September was 0. We will continue to track asset quality and see how our net slippages move ahead. We are reasonably positive that asset quality should improve in the second half of the year on the slippage front.
Abhishek, I'd also request you to give us some credit for lower level of restructuring. If I do lot of restructuring, I will not see these slippages. You know, if I've taken the hit upfront, give us some credit, and I think it is coming through very clearly in the second quarter where we took the hits. We are taking them through. You know, they are going through NPA, but they're recovering also. I think you need to take into consideration that fact too.
Sure, Amitabh. That part is very well appreciated actually. The only thing I was trying to figure is this inventory buildup, and I understand one third of it gets resolved quickly. This is happening from which sector? Is it secured? Is it unsecured? Is it retail or, you know, should be mostly retail SME. I'm just trying to figure out where it's coming from.
Net slippages on the wholesale and SME segment is near zero. Of the INR 707 crore net slippage that I spoke of, if I net down CBG and wholesale, that number is zero. Largely coming from retail. Like I said, in retail for the month of September, the net slippage is zero. The INR 707 is a buildup of July and August numbers.
Yeah. I mean, because the flow through coming from COVID to COVID, right?
Yeah. Sure, sure. Thank you so much for answering those questions and all the best for the coming quarter.
Thank you.
Thank you. The next question is from the line of Gautam Jain from GCJ Financial. Please go ahead.
Hello.
Please go ahead, sir.
Yeah. My question pertains to your one-off OpEx. You did mention there is a one-off in, you know, other expenses. Can you just elaborate in absolute number? What was that?
I said the one-off OpEx, Gautam, thank you for the question. What I called out was 7.5% of the sequential quarter OpEx growth was on account of one-off items. The one-off items are in the nature of catch up on ESOP costs.
Mm-hmm.
We raised registered Tier 1 bonds in the current quarter, where expenses on fundraising are charged to our P&L upfront. We do not amortize it over the life of the bond. Those would be one-off items that are not likely to repeat, and that constitutes about 7.5% of ₹ crore expense growth in the quarter.
Okay. My second question pertains to the credit cost. You did mention that credit cost in the second half will continue to fall. Can you just give us some qualitative comment on credit cost going forward on a sustainable basis? Would it be 1% or around 1%? Your comment would be appreciated.
Gautam, we don't specifically guide on credit costs on what it should be.
Mm-hmm.
The way we have structurally driven our balance sheet and created prudent provisions and provided for seen risks, we believe that we have come to the end of our wholesale credit cycle, so there should be a moderation from our long-term average. We don't offer a specific guidance on what that number would be for the next quarter or the next one.
When you look at your contingent provision compared to your peer banks, we have the highest provision to our loan book. If we don't see slippage going forward in next two, three quarters, will there be a case of, you know, some reversal in the provision what we provided already?
Our COVID provisions are rule-based, and the release thereof is also rule-based. The way we run our COVID prudent provision is we determine a risk threshold that the pandemic wave will throw at us. If that risk threshold is breached, we utilize the COVID provision. If the risk threshold is not breached, we continue to provide through the PNL. Based on data points that we have today, we do not believe COVID wave two thresholds are likely to be breached. Therefore, these provisions will be carried forward on the balance sheet. When COVID wave three, if and when COVID wave three were to hit us, we will make a similar assessment and price it. What I simply want to say is it is structured and rule-based. We do not release or create provisions on a quarterly basis or on an ad hoc basis.
Okay. How soon can we reach to our target-level NIM 4%?
I don't want to comment on what the level of NIM we will get to. Like I said, structurally, we think we have the right drivers to deliver a NIM expansion in the medium to long term. The three drivers specifically discussed were loan mix change, our RIDF reduction and improvement in cost and quality of our deposits.
Uh-huh.
On CASA, you've seen improvements happening on a sequential quarter basis. RIDF incremental allocations have stopped, given our compliance with PSL requirements for the last year. Asset mix should play out as loan growth comes back in a meaningful way.
Uh-
Therefore, I would say structurally, all drivers in place. NIM journeys are multi-quarter journeys, but you will see us making the right, directional improvements in the coming quarters.
Okay. Finally, credit to the team for good management of the credit quality, portfolio account and GBN user book. Thank you so much.
Thank you, Gautam Jain.
Thank you. The next question is from the line of Mahrukh Adajania from Elara Securities. Before that, I'd like to remind all participants, please limit your question to two per participants only. Thank you.
My first question is on credit costs. Of course, there was a fair bit of discussion earlier on this, but the specific credit cost is down to 60 basis points, which is lower than the long-term average as well. At some point in time, we'll be drawing down COVID provisions, maybe next year, may not be this year. Are we likely to see quarters of negative credit costs? Is this, I mean, have credit costs bottomed out? Or specific credit costs, has it bottomed out now? Or is it going to remain volatile? Because it has corrected more sharply than other banks, which is why I'm asking.
Mahrukh, thank you for your question. Again, the way I'd like you to think about credit costs in our context is we consciously took the decision to recognize pain early, and therefore we believe that should get us out of an adverse credit cycle early. Where we have restructured, we've ensured provisions cover us for first bucket NPA provisioning.
Sure.
To your point or observation on COVID provision release over the next few quarters, I will reiterate the comment I made earlier. The COVID provision is rule-based, based on the risk outcomes. We do not see a release of that provision, at least for COVID wave two, based on data points visible to us today. We will continue to watch if there is a phase three or an impact thereof. The way I would request you to think about our credit costs is in a three-pronged manner. One is, let's start with our long-term average credit cost. We have moved to a provisioning level that is about 15%-20% higher than historical provision coverage that we ran. You should see a marginal uptick from the long-term average credit cost because just the prudence that we built around our provisioning rules.
You will see an improvement from the long-term credit costs on account of the fact that our wholesale lumpy book is now granular and the underwriting quality is much better. Structurally, as we do a little bit of more unsecured business priced for risk, the income comes above the line and the risk comes below the line. Adjusted for risk, this business will be profitable, but you will see an uptick as we recalibrate from the 87% secured to 13% unsecured disbursement mix structurally as we move forward to a range of 80/20, 70/25, 75/25. Very difficult to give you a precise number on where the credit costs will be, but I think the improvements both in underwriting and portfolio quality are visible on our balance sheet.
Sure. Thanks. Could you please quantify the mandate? Of those provisions of INR 129 billion, what would be the mandatory general provision? Because I can't fathom the amount. Yeah.
The standard at NBI provision number, if you can just give me a couple of minutes, I'll come back to you, and give you that response.
Sure.
We could move to the next question, but Mahrukh, I will answer that question in the course of the call today.
Sure. I have just one more question, and again, it's on loan growth. You explained before, but the loan growth has lagged most other private banks. Of course, there has been a change of loan base. There has been a change of approach for you. But what is so risky that you are seeing that other banks are not seeing, especially in the corporate segment? Because that is one area where probably loan growth is slower and even in some other segments. What really explains the consistent difference in loan growth between you and the private banks, say for the last three to four quarters?
Mahrukh, I'm not worried about about that difference. If I want to bridge that gap between us and the peers at a price, it is very easy to do. Therefore, as long as it's meeting our underwriting standards and pricing standards, we will certainly put on those loans. Maybe they are not risky, but maybe the pricing doesn't work for us, which is why, you know, some of the stuff we've walked away from. But like I said, what is important to us is the depth of the franchise, right? I mean, there is so much more that we are doing with our customers. We are adding new customers within the wholesale and CBG franchise.
We think that, you know, some of the pricing that we are seeing at this point in time is not pricing for risk, so we are willing to wait it out. I mean, you've seen, for example, on our CBG book, we were, you know, pretty much flat for a couple of years. We are now much more comfortable with that book, and we're seeing growth. You've seen, what? About 7% growth even on a Q-on-Q basis. I'm not really too worried about, you know, that there is a gap between us and the peers.
Got it. Thank you.
Thank you. The next question.
Mahrukh, to answer your question on standard asset provisioning, you can assume that roughly INR 3,000-odd crore of the INR 12,900 crore that we call out is the regulatory standard asset provision.
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah. Hi. Sorry if I missed out, but in terms of the movement of BB and below, if you can highlight in terms of the downgrades from there, upgrades, downgrades, and how we are getting it lower by almost like INR 1,300 crore.
I think, Kunal, the way you should look at that number is of the INR 1,300 crore, 50% plus will be recoveries and upgrades, and the balance INR 680-odd crore
Hello?
Yeah, Kunal, sorry, did you get my response or was I not-
No. No, sorry, I missed the last part. In absolute term, if you can just suggest in terms of this, yeah, movement from 8,000 to 6,700, on the fund-based side of BB and below.
Kunal, roughly, like I said, the difference is about INR 685 crores of receivables, and the balance-
Okay.
of recovery. The balance of recovery is enough.
Balance is recovery. Okay. Okay. Yeah. Thanks a lot.
Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.
Yeah. Thank you. Basically on your cost, staff cost has again gone up during the quarter, and our other expenses have gone up. What really explains that expense? Are we doing ESOP expensing in the staff cost? Number one. In the other expenses, can you really highlight basically, apart from the collection expenses, what other expenses would have gone up, that we have seen such a jump up in the other expenses on a quarter-on-quarter basis?
Anand, thank you for your question. Yes, we account for ESOP costs as part of our staff expenses, and therefore, that expense is sitting in the staff cost line items. The overall increase in staff cost, as I said, is we feel confident of emerging stronger post-pandemic. We've added close to 10,000 people to our core growth businesses, September 2020 to September 2021. That's about 10,000 people added to the franchise, for our growth businesses across liabilities and assets. In terms of the sequential quarter growth in expenses, 30% of the expense growth is volume-led. You've seen our disbursements are higher as business momentum comes back. Loan origination costs are expensed upfront, so that causes an expense escalation. 20% of the increase in expense is attributable to future growth and technology.
We clearly have a large technology agenda that we are driving. 30% of the growth is attributable to collections, COVID, and statutory costs. The balance 20% is BAU cost increase given the franchise that we run. I hope that gives you a breakup of where the expense growth is coming from.
I just want to, you know, add to what Puneet said. I think as a bank
From a strategic perspective, we believe that, as Rajiv talked about the fact that as Indian economy starts growing, it will provide a position to the large banks to gain market share. It is very, very important for us to ensure that from an overall platform perspective, we invest today and are ready for capitalizing the growth across years as we move forward. I've shared with you, Puneet has shared with you some of the things that we have created. We did not have that many APIs. We have 250 APIs now.
As we, you know, expand in various parts of the bank in terms of investment in technology, analytics, and generally the people, creating the franchise, investing in private banking and some of the other stuff, I think money spent today will give good returns in the future as Indian economy starts expanding. Yes, it means that our expense ratios are looking a bit higher today, but we believe they will moderate in the future, and hopefully the returns will also come through in the revenue line quickly. That's how we are driving it, and that's why when you kind of break it down, as Puneet has shown, you will see that some of it is obviously AUM, but some of it is related to obviously investing for the future and some of it is one-off or more a base effect than that.
Thanks. Is it possible for you to share the, you know, technology expenses that typically we have in a PNL as a percentage of our revenue? How basically this is really going to convert into higher growth, particularly into the non-mortgage group. Because, mortgage certainly, I mean, that will largely run through DSAs or through your branch model. The non-mortgage retail business, particularly consumer finance and all, will need a lot of technology spends. How that is really going to convert into growth also that is the concern, that would be great.
You know, we are running a number of multi-year transformation programs through almost every business of ours. I, you know, Rajiv Anand, Hemant shared how we're doing that on the wholesale side. We ran a similar project on the CBG side. We are running a couple of those projects on the retail liabilities and the asset side, and it does not stop there. We're looking at architecture. We're looking at how the employees can be enabled. So there are many, many transformation programs going on in the bank, and they are multi-year. They're not six months, nine months. It will take three years for us to land those programs completely. As we do that, technology obviously is a very, very important component of it.
The question we are asking ourselves is not only to be best in class, but look at things globally and see what is the platform we create which can take on some of the global practices. Now, we cannot say anything beyond that at this point because it does not make any sense. We have to show you the revenues coming through, and then we will talk about it as to what exactly we have done. I just want to assure you that the bank is working on, and we have shared some of those transformation projects with you, working on many transformation projects across various businesses. Our technology spend we shared with you is up 17% over the last two years. You know, that should give you a sense that the spend on technology has gone up significantly.
I shared with you that now 1,000 people are working on digital banking. Obviously this needs expenses, this needs people, and obviously this leads to higher cost to you know asset ratio, whatever, whichever way you want to look at it. We believe that given how we are catching up and in some areas going ahead of the others, it will start reflecting in our business and our revenues and our numbers.
Yeah. Hope that happens pretty fast. The last question is that, you know, we had one of our ED retiring. Any replacement that we have worked out about that?
We are not planning any replacement at this stage. The portfolio will be distributed among various senior leaders of ours. As again, I've been sharing that we have not only at the ED level, while one of them is going, we have very, very smart young and senior leaders that are group executive level. I was sharing with someone that at the group executive level, we have three people who are ex-CEOs of pretty large organizations. There was someone who was a ED of a large mid-sized bank. We have very, very strong leadership level at the, you know, next level from ED, which is the group executive level, and all these people are part of ManCom. Over a period of time, obviously we expect some of them to move up, but at this stage we are redistributing the portfolio.
By the way, those internal changes have already been announced.
Okay. We will operate with one ED at this point. Okay.
Yes, sir.
Thank you, sir.
Thank you. The next question is from the line of Rakesh Kumar from Systematix Group. Please go ahead.
Yeah. Hi, good evening. Can you hear us, sir?
Yes, please go ahead.
My one question is related to the loans priced on external benchmark. Like, you know, among the large three banks, we are on the lowest side, and the progression also if we see like, you know, from the March end to September end, the progression is also quite low, quite slow. Is it that, you know, just to protect margin, we are not progressing very fast on that front? What is the reason there?
Just give us a minute. What the regulator has said is that incrementally all retail loans and some of the SME loans need to be externally benchmarked. That's done.
You know, obviously, we are in compliance with that. If the question is, there is still some stuff that is at base rate or MCLR as the case may be, why is that not moving? There is a concerted, you know, conversation that is on with the consumer, with the customer. Some of these customers have made the choice of staying either with base rate or MCLR as the case may be. Because remember that external benchmark rates are good on, you know, when rates are going down, but when rates are going up, it will go up as fast because market rates, you know, typically will move very, very quickly.
In that sort of an environment, EMIs will get repriced, will increase, you know, quite sharply as well. Therefore, some of the customers have chosen to be either at base rate or MCLR as the case may be. Not sure what exactly the point that you're making.
The first point is that, you know, like if you see the case of, say, ICICI Bank or some other large bank, you know, they have got close to 50% of loans already linked to repo, and we have got close to around 31%. Is that a lower loan growth for us? That is the reason that, you know, in those segments where it is mandatory to, you know, price at EBLR, there we are not witnessing the growth. Is that the reason? Or that, you know, we are not, you know, asking customers to switch from MCLR to repo rate. That is one question.
Second question is coming from your answer itself, that we are at the bottom of the you know kind of an interest cycle. When the rates are going up, by having lesser proportion of loans on repo, you know, it will hit margin for us on a relative basis, as compared to other bank.
Rakesh, thank you for your question. Maybe I can respond to it in two different ways. First and foremost, I think if you look at the composition, let's start at the headline level of fixed versus floating. About 32% of our book is fixed and 68% of our book is floating, which is the disclosure we make on slide 12 of our presentation. Why is that? Within floating we have compositions of repo, base rate, MCLR and foreign currency floating. The reason that you see our repo at 31%, since that's the number you picked up, effectively will be a function of the product mix and the segment mix that we run our book at. As far as we look at the interest rate cycle, all floating rate benchmarks should be accretive.
It is just the pace of changes of floating rate benchmark that one will have to observe. As I stand today, I'm not sure repo will reprice faster than the other benchmarks on an up cycle. I think it's a wait and watch. We are very focused on ensuring that our balance sheet on a fixed floating basis is fully balanced. We fundamentally believe that the interest rate up cycle should benefit us no less than what it should benefit others.
Got it, sir. Thank you. Thank you, sir.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Puneet Sharma for closing comments. Thank you and over to you, sir.
Thank you, Janice, for assisting us with this call. A thank you to the participants for having spent the evening with us. It's festival season. Wishing your families a very happy Diwali. We hope that you and your families stay safe and enjoy the festival season. Thank you very much, and we'll be happy to answer any questions you may have. Please do reach out to us and we'll be happy to take it. Thank you. Have a good evening.
Thank you. On behalf of Axis Bank, we thank you for joining us. You may now disconnect your lines.