Ladies and gentlemen, good day, and welcome to the Q2 FY 2024 earnings conference call of IDFC FIRST Bank, hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chintan Shah from ICICI Securities. Thank you, and over to you.
Yeah, thank you, Yashaswi. Good evening, everyone, and welcome to the Q2 FY 2024 results conference call for IDFC FIRST Bank. We have with us from the senior management, Mr. V. Vaidyanathan, Managing Director and CEO, along with the senior management team. Without further delay, I would now like to hand over the floor to the management. Thank you, and over to you, sir.
Hello, everyone, I'm Vaidyanathan.
Yeah, hello, everyone, I'm Sudhanshu Jain. I'm the CFO and Head of Corporate Center.
Hi, everyone, this is Saptarshi Bapari , Head of Investor Relations.
Hello, everyone. First of all, thank you very much for joining us this Saturday afternoon. We just announced results just a very short while ago. The key highlights I'd like to call out for this quarter is as follows: Number one, as far as our broad direction of deposits, loan growth, profitability, asset quality, all of them are quite stable, and I think things are proceeding very well at our bank. The numbers briefly are as follows: Number one, on the deposit front, I think it's one of our big strengths I'd say now. It has been established for many, many years in a row that we're able to raise deposits in a very strong manner.
So our deposits have now reached over INR 165,000 crore, and it's grown by over 50,000-odd crore. Now, it grew at around 44% over the last year. So, the second thing that I'd point out is that the CASA ratio, as all of you know, the CASA ratio, there is a movement of money from, you know, from current saving into term deposit, et cetera. But we have seen a CASA ratio being quite stable at 46.4% this quarter, down marginally from 46.5% last quarter, but that's really, that's marginal. Number three is that our plan to diversify our liability base, the strategy which we started about four to five years ago, continues.
Now we have close to about 77% of our loan book, is of our... Sorry, of our deposit side, is now retailed diversified deposits. And, of the total deposits of INR 1.65 lakh crore. Just for context, by the way, that, you know, when, at merger when we started, 73% was institutional, was wholesale, and 27% was retail. Now it's the other way around. That's one massive progress I'd like to call out, and that process continues.
What is interesting is that our ability to raise deposits is so strong that we are able to fund our growth of the loan book at 25% comfortably, and also be able to repay the high-cost bonds as and when they're maturing. As you know, we had close to about INR 25,000- INR 26,000 crore of high-cost bonds at the time when the merger started. Today, that number has come down to something like INR 15,000 crore. Even I think for the rest of this financial year, another INR 3,000 crore coming up for repayment. We are quite confident that our deposit-gathering machine is so strong that we can fulfill our obligations for the past as well as fund growth of the future.
The next thing on the asset side is the second part I'd like to speak about. On the asset side, the really good thing is that our asset side is very, very, very diversified. The only book that is 28% of the book is mortgage-backed. So except that book, which is a big block, let me say, of 28%, rest is all highly diversified. You know, there's vehicle financing is close to 10% of the book. Commercial vehicle is 3%, you know, rural finance is 11%, you know, consumer loans such as personal loans and digital loans, et cetera, all that is, like, 13%.
Education loan is 1%, the credit card is 2%, other retail loans are 8%, gold loans are, like, less than 1%, SME loans are 5%, large corporates are 1%. You know, it's small enterprise emerging, you know, mid-enterprises are, like, 6%. Financial institutions like NBFC, 6%, that's 8%. So, and other corporates, so you get the drift. They're all, like, you know, 2%, 3%, 4%, 5%, 6%aa, 10%. So this makes the book very diversified, and now we are feeling quite happy about the way, you know, we are feeling, feeling good for the future because we feel that such a diversified book, we can stand the test of time up, you know, up and down.
Now, we've wanted to call out, you know, there is a talk about unsecured credit, and what is the performance of the unsecured credit, as on so forth, and a lot of media stories are on that. So I'd like to speak two minutes about that. The key thing I'd like to point out is that the entire lending of unsecured credit, minus only the credit cards and, you know, BNPL kind of loans, I'll call them out separately to you in a moment. Our entire lending book of the retail book, whether it is secured or unsecured, it follows a fundamental philosophy that we do cash flow assessment. This is very important to note. Our cash flow assessment is done. What is cash flow assessment?
Cash flow assessment means we pick a bank statement of our customer and see, you know, through PDF file, et cetera, what is the balances customer is maintaining in their bank account. If you see, for example, customer is keeping, say, INR 200,000 in the bank account, then you know the customer can only honor an EMI INR 100,000. If the customer can honor EMI INR 100,000, then you give a loan that can fit within that INR 100,000 of EMI. Similarly, we do GST filing. That's a cash flow. You can see what kind of cash flow. Third is there are a lot of data in the bureau which indicates a certain cash flow. For example, if a customer is honoring a particular EMI of INR 50,000 with another bank on...
So you know the customer is having you estimate the cash flow on that basis. So these are various examples of understanding cash flow. So our entire book of the bank is built on this concept of cash flow. And that is the main reason why, frankly, our book has been doing well all this period. But, you know, we want to specifically call this out. Now, the second part of the point to understand is that cash flow supported with what? Now, suppose there's cash in your bank, how do you pick it up from there?
So there is a point B that goes along the cash flow, and that point is we take a debit instruction to your bank account, if you take a loan from us. It could be from any, any bank, it could be any other bank, it could be our own bank also. So, you know, we take a debit instruction. So if money is trapped in the natural activity of the customer's bank account, natural activity, and then we also take a debit instruction to that account, then on the due date, we simply pull the money from that account. So this is a very fundamental point. And these two, we are in a way, this is security. Just want to let you know.
You know, if you hear Nandan Nilekani speak about this, Nandan calls it a digital security. So this is very important to understand, and this is a very, this is the reason why, you know, our portfolio, we treat this concept for both secured and unsecured, everything. Now, the other thing is that we saw some bureau information and data which says that, less than INR 50,000 rupee ticket size loans, the delinquency is relatively higher in the industry. So we want to call out that the number, of the extent of, of our loan book at less than INR 50,000. Just one second, while I speak that out, my colleagues will pull it out for you. I think 5.40%.
Yeah.
Five, five forty. Five forty. That exposure for us, personal loans, is, that is, is INR 540 crore, which is about, what percentage of the overall exposure?
It's 0.3% of the overall funded assets.
Okay. Let's call it 0.4%. Sudhanshu will talk about this number. I want to just call out the amount to you so that gives you a full picture. Frankly, the short point is that we don't lend in the really small ticket size, less than 50,000 ticket size, et cetera. That's really a small portion of our book. Now, does not include our BNPL book, right? It is the, you know, e-com, kind of, kind of book which we have.
Now, the next thing that I'd call out, the short point is that we are very careful, and with the kind of, you know, heightened attention to this matter, we have also become very, we have been very cautious anyway, frankly, but I think we've become more cautious now. We have tightened many of our norms because we don't want to be caught on the wrong foot. You know, there's a long list of tightening that we have done over the last two years, which we presented to our risk management committee of the board in today's board meeting as well.
And then, and one is we want to demonstrate the seriousness about the issue, and, but also, also wanted to be sure for ourselves, because we don't want to spoil our own track record of asset quality. The next thing I want to bring out to you is that, what is the total asset quality of the bank? Now, the good news is that the bank, gross NPA has come down to 2.11%. The net NPA has come down to 0.68%. The breakup is more important because if you exclude infrastructure and all that, because we know they're a known issue and they will go away with time, the bank, you know, NPA without infrastructure is 1.69% gross. Net NPA, 0.46%.
So you can see that that's also really very strong. We have not seen any disturbance, so frankly, investors should take heart that nothing is disturbing us at the bank, and asset quality, and that's only improving. The last thing is that I want to specifically call out is that the retail, rural, and MSME finance, this is the three what, you know, traditionally banking system also calls it RAM. That portfolio, our gross NPA is 1.53%, which is ditto same as last quarter, and our net NPA is 0.52%. So the long and short of it, I want to share with you that please, nothing to worry here at this bank. Things are absolutely stable and, you know, we'll, we'll try to maintain it like that going forward.
Then, we also want to call out one more important piece of information, because you might say, or anybody might say that, "Okay, asset quality is good, but what about how do you feel good for it for the future?" So our... There's one point I want to share with you, that we monitor collection percentage, because after all, it's collection percentage that leads to, you know, SMA and NPA and, you know, all that. Now, our collection percentage in the current bucket continues at 99.5%, and it's been so, if you've been tracking our bank for a while, it's been close to two and a half years since the COVID ended.
Those days it used to be 99.1%-99.3%, and now it is being at 99.5% for little like, what? 12, 13 months in a row. And frankly, it's been that way for a long time now, for not just 13 months, like 12, 13 years in a row, it's been quite strong. So, my quick comment therefore is that as long as or as, you know, these numbers are what they are, our, you know, Net NPA will also remain low, only because Net NPA is after all a derived number from how much collection efficiency is. So we disclose in our bank these numbers month by month every quarter.
I mean, every quarter we disclose for the three months of that quarter, and then we also historically trend it for two, three years stretch also. I mean, why we say it's important is that if we were to have a, if we were to have a credit quality problem, as in gross and net NPA in retail, you will first see it in our collection percentage dipping from 90.5. The day you don't—until the day you don't see the number dipping from 91.5, you ca- it's a lead, think of it as a lead indicator. I mean, it, and, and therefore, frankly, if you were to know, we'll know maybe just three months before you, because every quarter we are now duty-bound to report it, and we can't not report it, any quarter.
The last thing that SME continues to be very low, it's 0.77%. It's probably the lowest we've seen it, and, for the reason I told you earlier, we, we feel confident about that. Now, we have also disclosed, you know, product by product, the, our gross NPA, net NPA, and we've been disclosing it for quite a while now, maybe I think four or five quarters, where we actually disclose our NPA in, loan against property, specifically in consumer loans. Specifically, for example, in consumer loans, our gross NPA is 1.96% and net is 0.5%.
Vehicles, credit cards, digital loans, SME, home loans, rural, we disclose every one of them, and the sum total, sigma, sigma is tending to 1.53 and 0.5, I told you. So long and short, I'd like to say that it's a pretty stable quarter. We feel quite confident on the overall growth prospects and gross net, everything looks good. So you should expect this kind of a stable performance from the bank for a while now, because we don't see anything fundamentally changing in our story. And if there's anything changing, we'll of course constantly make changes to our strategy. But you can, we assure you from our side that you can feel comfortable about us on all the parameters.
So I'd like to pause here and thank all of you for being here with me. And maybe Sudhanshu can give some more color on any of these in case, and in fact, try to avoid it any of my numbers have been said, gotcha. Mm-hmm. Thank, thanks so much, folks. Thanks, thanks, Sudhanshu.
Yeah. Thank you, Vaidya. First of all, again, good evening, everyone. I'll touch upon key numbers for the quarter and the half year ended on September 2023. To start with, the balance sheet size now stands at INR 264,000 crore and expanded by 24% on a YOY basis. We continue to witness a strong momentum on our lending book and in deposit mobilization, as Vaidya said. Customer deposits, he already said that we had a very strong growth of 44% on a YOY basis, to reach INR 164,000 crore. In fact, the growth in retail deposits was higher at 50% on a YOY basis. CASA ratio was also very stable at 46.4%. CASA deposits increased by 26% on a YOY basis.
Average current account deposits increased by 31% on a year-over-year basis, while average CASA increased by 24% on a year-over-year basis. We continue to see a faster growth in term deposits, which grew by 68% on a year-over-year basis and 11% sequentially, as customers are looking for locking in the higher rates, interest rates in the system. The growth here was predominantly driven by retail. We opened 38 branches during the current quarter, thereby taking the branch count to 862 branches. The high cost legacy borrowings has come down by about INR 1,000 crore in the current quarter. In the balance half of this year, there's about INR 2,600 crore, which is scheduled to further run off. Moving quickly to assets, the overall funded assets grew by 26% on a year-over-year basis to reach INR 1.8 lakh crore.
I will cover this in four parts. First, is that the retail book, which comprises of mortgages, consumer loans, credit cards, and vehicles, that grew by 29% on a YOY basis and 7% sequentially. We have seen strong growth across all categories, like, to mention few: home loan book grew by 26% on a YOY basis. Vehicle segment, which includes two-wheelers and cars, it grew by 41% on account of increased distribution. Consumer loans increased by 22%, and credit card, which is coming from a small base, that also had a very, good growth. The bank has now issued more than 1.9 million cards. The gross spends on credit card increased by 64% in H1 of 2024. Rural book, which primarily helps us to meet the PSL requirements, also registered a strong growth of 51% on a yearly basis.
Funding for SME, for business purposes and corporate segment increased by 22% on a YOY basis. Infrastructure book now is just merely 1.8% of the total funded assets at INR 3,300 crore. You can refer to slide 93 for more details around the product growth. Moving on to asset quality, the gross NPA of the bank further improved by seven basis points during the current quarter to 2.11%, and net NPA improved by two basis points to 0.68% during the current quarter. If we exclude the rundown infrastructure book, this GNPA is more like 1.69% and net NPA 0.46% at bank level. PCR gross of technical write-off was at 84% as of this quarter.
GNPA in retail, rural and SME segment on a combined basis stood at 1.53% and net is just at 0.52%. The corporate non-insurer book is well provided and has a net NPA ratio of only 0.11%. The restructured book continues to come down-
Ladies and gentlemen, please stay connected. Ladies and gentlemen, we have the management team back on the call, so please go ahead.
Yeah. So, I got cut off in between. I'll just repeat my last few points, which I would have mentioned otherwise. GNPA in retail, rural and SME segment stood at 1.53%, and net NPA is just down to 0.52%. The corporate non-insurer book is well provided and has a net NPA ratio of 0.11%. The standard restructured book continues to come down and has further reduced to 0.38% as compared to 0.47% last quarter. More than 85% of the restructured book is secured in nature. The SMA-1 and SMA-2, as Vaidya mentioned, that has reduced to now only 0.77%, which is a good indicator of a better portfolio.
Even in the corporate book, the ratio of SMA-1 and 2 is very low at around 0.3%. Moving on to profitability. Profit after tax for H1 FY24 increased to INR 1,516 crore, versus INR 1,030 crore in H1 of last year, and this was up by 47%. For the quarter, profit grew by 35% YOY to INR 751 crore, versus INR 556 crore in Q2 FY23. This was largely driven by strong growth in corporate core operating income. Core operating profit, which is NII plus fees, excluding trading gains, for H1 grew by 41% YOY to INR 2,883 crore. For the quarter, it grew by 28% to INR 1,456 crore. NII increased by 32% on a YOY basis to INR 3,950 crore.
The net interest margin was steady on a sequential basis at 6.32%. Fee and other income increased by 46% to INR 1,376 crore for Q2 2024, and this was largely retail-led, which is at 93% of the total fee. Operating expenses increased by 34% on a YOY basis due to increase in business volumes, branch expansion and increase in some tech expenses. We had a trading gain of INR 54 crore during the quarter, and provisions came in at INR 528 crore for the quarter. The credit cost on an annualized basis as a percent of average funded assets, was at 1.19%, which is well below our guidance, which we had given earlier.
On an annualized basis, the ROA stood at 1.2% and ROE stood at 11.36% for H1 FY 2024. Moving on to capital adequacy. The bank has maintained strong capital adequacy, and capital adequacy, including profits for H1 2024, was at 16.54% at September 30, 2023, with CET1 ratio at 13.49%. During first week of October 2023, the bank successfully raised INR 3,000 crore through a QIP from a set of marquee investors. Considering this, CET1 and total capital adequacy would be higher by about 150 basis points at September. We continue to maintain healthy liquidity levels, and average LCR was at 122% for Q2 2024. We would like to maintain it around these levels going forward as well. With this, we can move on to the Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone 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. We have our first question from the line of Lalit Deo from Equirus Securities. Please go ahead.
... Yes, good evening, sir. Congrats on a good set of numbers. So sir, I just ask a couple of questions. So first, in the retail loan portfolio, so like we are seeing a strong growth in the digital loan segment. So could you give us more color? Like, how is, like, what is the nature of those loans or these loans, and how, what is the ticket size over there? Like, who are the major customers as well?
These are the digital loans, like how every other institution is doing digital loans, because these are loans that you can originate either through partners, where loans are originated digitally. They could come from a partner. This could even be loans that are maybe we advertise, let's say, in Google or somewhere, and people, customers click on it, or prospective customers click on it, and then we process them digitally end-to-end.
Got you. And what would be like, like how would it be different in terms of ticket sizes as compared to our consumer loans? Like, in terms of between consumer loans and the digital loans?
No, no, much bigger, much bigger.
Okay.
For example, consumer loans of, of durable financing for, that we do, that ticket sales could be as low as even INR 30,000-INR 50,000, but these loans could be even maybe INR 150,000, INR 300,000.
Got you. And so the second question was on like, why we have indicated that our collection efficiency has been strong at about 99.5%. But in, like, if we see the segment-wise GNPA in the retail segment, we see that in the credit card, consumer durables, there has been a small increase in, on a sequential basis, there's been a small increase in the GNPA. So, like, like, do we see some... On a sequential basis, do we see some higher slippages in these segments, or, like, could you give us more color in this?
No. I mean, if you see the numbers, they are like marginal movement of in a 10 basis points up or down, can keep happening in any business or any month. But if you see, for example, you know, the credit card, 1.87 gross, 0.46 net. If you see vehicles, 1.76 gross, 0.73 net. Now, I don't know what it was last quarter, but it is unlikely to be any materially, any different than the last quarter. So, like, that's how it works. For example, if you see SME loans, gross is 1.42 net is 0.7. So, like, last quarter, it could be like 1.52 or 1.32. So I mean, why don't I say they're all operating in the particular range, and nothing has fundamentally changed.
That's why you focus on sigma. The sigma is 1.53 and 0.4252.
Right. Got you. Got you. And so this last data, could you just, could you give us the gross and net slippages for the quarter?
Pardon?
The gross and the net slippages during the quarter.
Yeah. So gross slippages for the quarter was about INR 1,350 crore, and net slippages was around INR 850 crore.
Got you. Thank you, sir. Thank you.
Thank you. We have our next question from the line of Hardik Shah from Goldman Sachs. Please go ahead.
Can you hear me?
Yes, yes. Hi, Hardik.
Hi, sir. Thank you for the opportunity. I had just one question. The bureau data is indicating that the unsecured loans per borrower has been increasing in last couple of years. Can you share some color around this for your book, in terms of what the data is like?
See, we, I called it out earlier, but specifically for less than 50,000, I called it out earlier in the discussion. I'd asked Sudhanshu what it constitutes as percentage of the book. Our book is INR 540 crore is a book that is below ticket size of 50,000, which is what was flagged. For us, by the way, even that book is behaving well, because when you have an overall composition, what the numbers I read out to you, it works out at 0.3%. I think I called it out. It works out to 0.3% of the overall funded book of the bank, and it works out to 0.37% of the retail rural and MSME book.
That is a number that we are calling on because it was specifically. But other than that, as we discussed earlier, there are three categories, just to give you a little more color. The way we do it is that whether secured or unsecured, we follow the concept of cash flow. I described it earlier, so I request you that I don't repeat that. So, so we follow the concept of cash flow, whether it's secure, whether it is secured through physical security or whether it is not. And, because we believe this, this trapping of cash flow is itself a security. So we follow that model. Now, that, we believe that is a discriminating factor. For example, let me give you a color.
For example, if there is a product in which a customer has to pay you on due date.
Mm-hmm.
Vis-a-vis, there's a product in which you take the money from the customer's bank account on the due date. The performance is very different between the two. The former is an example, like a credit card. Now, imagine I give you a credit card. On the due date, what do you do? You pay us. I can't touch your bank account and take money from your bank account. Imagine you take a personal loan from us. What do you do? You're not paying us. We are taking money from your bank account. There's a fundamental difference between the fact that we can pull money from a bank account, or we have to wait for you to pay us.
This is the very, very fundamental point, and all our unsecured loans or secured loans, with the exception of credit card business, is where we take money from the customer's account. I mean, think about it like, we have a retail book of, you know, actually, retail book, and MSME book, and rural book all put together of about INR 1.3 lakh crore. Of that, the only, the credit card book of INR 3,000 odd crore is where you pay us. In everything else, we pull money from your bank account. Okay. I'll give you a break up if that gives you a little more color. Our retail financing book, there are three categories of financing we do. Just to, one is retail financing book.
That includes home loan, vehicle loans, consumer loans, education loans, credit cards, gold loans, et cetera, et cetera. So that book is INR 104,000 crore. Second is rural finance. That's INR 22,800 crore. Third is SME finance. That is INR 52,500 crore. SME finance, actually, sorry, my, my... I'll, I'll hold it. It's about INR 5,000 plus INR 9,500 crore. Okay? Now, corporate, so basically, if you take these products, in all of these products except credit cards, which is a INR 3,000, sorry, INR 4,282 crore product, exposure, everything else is where customer- we take money from the customer's account.
Mr. Shah?
Understood, sir. But sir, my question was coming from the fact that what we are seeing is that, the borrowers who are taking unsecured loans, they are taking those unsecured loans from multiple institutions. So if, if we can share the color on our borrower, wherever we are lending-
Mm.
If you have that kind of a cut in terms of whether that customer is an exclusive customer for us, or if that customer is borrowing from multiple institutions, if you have any color on that stuff.
No, I don't have the color on that.
Okay.
Yeah.
Okay.
Mr. Shah, are you through with your questions?
One more question, sir, is that we had one more company reporting yesterday, SBI Cards, which sounded caution on the stress building up in the unsecured loan book, and that is also showing stress in their credit card book. So are we seeing any of that sort in our book?
No, interestingly, to take out credit cards as an example, I-
Mm.
really believe that frankly, every product, whether secured, unsecured, credit card, whatever, everywhere we should be careful, okay? Because that's the nature of lending, we should be very careful. But specifically, since you, you know, brought up SBI Cards, by your own words, now, that's a credit card matter. I told you the difference. In credit cards, you should be extra careful. Everywhere you should careful, but in credit cards, you should be extra careful, because credit card customer pays when they pay.
Mm-hmm, mm-hmm.
So even if the customer has money in the bank, we can't touch the money, right? So you should be extra careful in credit cards. So I'm, well, maybe they should, they, whatever name you pointed out, maybe they should bother about their book. But as far as we are concerned, our credit card book, I told you the number, is 1.7% growth. We don't see a 1.87%. We have no problem. And our Net NPA is 0.46. Particularly in credit cards, what we do, because we want to be extra careful, we lend largely to give credit cards largely, I don't exclusively, but largely to our customers who have our relationship, maybe savings, et cetera. So it just makes it a little better for us, I think.
Understood. Okay. Thank you, sir.
Yeah, that's fine.
Thank you. We have our next question from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead.
Yeah, thanks for the opportunity. Can you hear me?
Yes, sir, very much.
Yeah, thanks for the opportunity. So, just one question: so almost on all the fronts, the advances, the asset quality, deposits, we are doing exceedingly well. Just one question is, if I see our H1 or even the Q2 numbers, the operating income growth is around 37%, 35%. But at the same pace, our operating expenses are also growing. So we are in that 71%-72% cost to income from last almost three quarters now. So when do you see that... Obviously we are, you know, expanding the branches for the growth also, but when do you see we will see, start seeing the material reduction in the cost to income ratio? If you can touch upon that. And my second question is regarding the credit card business.
At some point you were saying that in earlier calls that by FY 2024 end we may touch breakeven. So, where do you see that? Do you feel that we'll be breakeven by this year and maybe start making profits next year? Thank you.
Yeah. On the cost income front, yes. I mean, as long as expansion is continuously going on, because remember, we are growing our deposits very strongly, by INR 50,000 crore a year. So probably next year we'll need to raise INR 60,000 crore or INR 65,000 crore. So yeah, we'll continue to incur the necessary expenses, and frankly, the drag is coming on the liability side. Our asset side is our retail asset side is posting a return on equity of 20%, even though we give a transfer pricing at some attractive rates from the liability point of view. So, so as long as we keep expanding, I guess, on the liability side, there will always be a bit of a drag.
But we should look at it in composite sense, you know, as long as you meet the return on equity, because after all, cost income is a component that is going to deliver ROE. So since we have a slightly higher NIM than we initially guided the street for when we did the merger, we had guided 5.5, we're running 6.3. So our fee income is also very strong at about 2.2%-2.3%. So therefore, even with a slightly higher cost income ratio than what we initially guided for, you know, the way the economics fall in the P&L, the ROE, return on equity front, we will broadly be quite confident that by exit quarter of 2025, we should be able to meet our guidance.
So that's one important thing to remember about cost income, that look, after all, it's an input material, it's not an output item. Output item is ROE. Now, what's the second question?
Credit card business, profitability.
Yeah, credit card profitability. Yeah, I mean, broadly, we don't see any major discomfort to it. We had said that by 2025, we should be able to break even, and 2026, we should start making money. That broadly, the direction continues.
Okay. And one last, if you can throw some update on the merger. So have we already applied to the Reserve Bank and all, or just an update?
Yeah. [audio distortion]?
Yeah. So we have applied to Reserve Bank of India as well as to SEBI, to NSE and BSE. As you would have also noted that we have already received the approval from CCI. There are a few other bodies where approvals needs to be sought. We are very much into the process. I can say that this is very much on track. Of course, it takes its own time, difficult to predict, but things are moving smoothly on this front.
It's much more different. I know, you, you people may want to know more details, but usual process, right, writing regulator, you know, BSE, NSE, Competition Commission, all the process is working and there is no hiccup anywhere.
Okay, thank you. That's it from me.
Thank you. We have our next question from the line of Kaitav Shah from Anand Rathi. Please go ahead.
Yeah. Good evening, sir-
Good evening.
Congratulations on the good set of numbers.
Thank you, [audio distortion].
So first question from my side would be on the interest rate on the deposit side. So are we largely through, you think, on the interest rate pricing on the deposit front? Or do you see that there is still some sort of increase left for your deposits to get repriced?
Yeah, Kaitav, I'll take that. Kaitav, sorry. So I would say large part of the catch-up cost has already come in. There could be another 10, 15 dips, which could happen in H2. Having said that, as I mentioned earlier, we have also some legacy borrowings which would retire. So that came down by 1,000-odd crore in Q2. Another 2,500 crore, which is broadly evenly spread between Q3 and Q4, that will come off. That is at 8.9%. That should give us some relief on the interest cost. So we feel that cost of fund could go up marginally from the current levels, but the large part of the term deposit pricing has sort of come in. Maybe some increase could happen in Q3, and then things could play too.
Or if the interest rates have to come down, then we could see some benefit down the quarter.
Got it. Got it. The second question is, more on the exposures that you have towards the, NBFCs. And if you can kind of, give us some sort of, numbers that you look at to get comfort on the lending to NBFCs, because the exposure to below INR 50,000 or smaller ticket size has largely been through the NBFC route. So what sort of comfort do you look at? And, you know, if you can just make us understand a bit more about.
Yeah. So on the NBFC book, we are seeing a very, very, I would say, a very strong performance on this book. Again, we have been doing this for quite a while, right?
Uh-huh.
That book is broadly about INR 15,000-odd crore today. On a rating, just to give you more comfort, more than 80% of the book is rated A and above, right? And with this, and the rest is triple B, triple B plus, right? And only 1% of the book is less than double B, is double B and below. So we, we see very strong performance on this book. We have not seen any blown ups.
And to your question about how we think about it, okay? And how we... See, the one fundamental thing in NBFCs is that we should be very careful about the NBFCs' ability to manage cash flow. It is never really the underlying, you know, whether the lending for less than 50,000, more than 50,000, because they also have a strong amount of capital, and the capital cushions on most NBFCs are running at 15%, 18%, 20%, or some of them even more. So unlikely that you're going to blow up so much of the book and the capital get wiped out. That's pretty less likely. But, it's more important to understand the cash flows. So when we lend to NBFCs, we look at basically the level of capitalization.
Their ability to raise capital, that's also very important, and that make a reasonable, reasonable assumption and guess based on the based on understanding of the people or the, or the founders, promoters, their own track record, their ability to their historical record of how they've raised capital from time to time. We also understand the discipline of their lending practices themselves. We understand their reputation. As all of you know, there are reputations and reputations, and makes a very big difference. Then we also understand their you know trends of their asset quality, their flows, et cetera. All the usual stuff that people do. So when we look at this and we feel that, look, we feel comfortable, then we lend.
Oh, thank you. Just one last question. So, given what has been, you know, kind of alluded to within the retail space, and of course, a lot of players have been going gung ho on the unsecured lending piece, personal loans, a lot being said there. Does it in any way change the growth trajectory for you, or you will be more data dependent on what's happening within your firm and, you know, you will be going ahead with the show as it's been going?
See, it is our job to very carefully heed the markets. Heed, heed, heed, heed the markets.
Okay.
The, the, because when there is a particular news flow, we have to look at it, and we have to immediately call for the data and double-check, triple-check. To be honest, frankly, we evaluate a portfolio at a, at a really at a microscopic level in the bank. To give you one idea, we have, like, four or five or maybe six levels of controls, and let me read them out to you. Let me speak them out to you. Number one, the teams which are doing the underwriting themselves, so they have their own KPIs that they should, their NPA should not cross X, and the net draw should not be more than X and Y and all that.
Then beyond that, there is a risk management, you know, the policy management team, the people who approve the policy, they have their own conditions, and they are an independent team. Then thirdly is the risk management division of the bank, which runs independent of the underwriting teams. Now, not the risk management committee, I mean, the risk management team, which is independent team. So they have no track with the first team that either wrote the policy or the people who wrote the underwriting. They are independently evaluating and then saying, "Okay, what's going on?" Every month, they're looking at every city, every state, every location, every segment.
Everything is micro-monitored, and they all track the numbers and see the numbers going up and down. Anything goes up, they keep identifying what went up, and they keep making changes. Then that I said is level three. Then next, at my level, because after all of this, I'm responsible to the market, I'm responsible to the board, I'm responsible to shareholders. So I am keeping a very hawk eye on this issue because we have, like I said, we have a very proud record of, you know, 13 years. Well, don't count on 13, unlucky. It's even the thirteenth, thirteenth year is doing well for us. So we have a record of 13 years where our gross NPA never crossed two, and net has never crossed one. So why would we disturb that? So it comes to me.
I, when I look at it, I take it very seriously. Even if I find an incident in the marketplace, where I find that, oh, my God, how did this customer of our bank get this offer from the bank? We go and do a, you know, we turn the unit upside down, think that how did this loan go through our bank? That becomes a big issue because for me, it's very important. After my level of evaluation, this is, I can call myself the fourth. After that, the risk management committee of the board.
The risk management committee, the fact runs into, like, 160, 170 pages, and there everything is, you know, presented to the RMC, where we present it by like a full trend line of the, you know, of 12 months or, you know, or a six quarter or four quarters, eight quarters as required. There, it is presented by ticket size, by LTV, by, you know, geography, everything. Then, after the risk management committee, then it come to the board. Then we finally all present all of these numbers to the board, and literally every single board meeting, we present all the key parameters to the board.
Just for your information, I hope this will give you some comfort. To the board, we don't present saying, "Oh, retail NPA is running at 1.555, and net is 1.5." That would be really very basic and, you know, that doesn't give any color. So back to the, you know, to the board, we present all these numbers, and then we present all the trend lines and everything that are material, secured, unsecured, unsecured, but secured by cash flow, unsecured, unsecured, like products like credit cards, there's no ability to take the money from the customer, et cetera. So, and then finally, it is you, the shareholders and everybody and analysts, et cetera.
So imagine it is just going through so many levels that almost everybody here is becoming a PhD in retail credit, in terms of asset quality monitoring. So I'm only assuring you that as I'm saying this, I'm on record, so all of you can keep this record if you're interested, that we have so many checks and balances. I'm personally focused on it, but it's not only me, because the whole team has to work. And that's how we focus on it. So, you know, hopefully our board will hear this call, and they will take their response. They will take it even more seriously because I'm invoking their name as well. But I can only say that we are that first.
In fact, in today's board meeting, we, you know, in yesterday's risk management committee, we presented a vintage analysis.
Right.
Vintage analysis, what we do is that we see a loan booked in, say, January of 2019, and then we see that six months later, i.e., June of 2019, what was the delinquency?
Right.
So then we take a loan that is booked in January of 2023, and then we see after June of 2023, the exact six months, so that is very comparable, what is the delinquency? So then we see, oh, is it, has it gotten better over time, or has it gotten worse? And, if it's gone. So we present every single data like this. Every single product, we present vintage analysis. Only yesterday we did it with RMC. So we do this level of details, so I can tell you that, it's very unlikely that so many people can mess up an item.
Sure. Thank you so much. That's it from me.
Thank you. We have our next question from the line of Manish Shukla from Axis Capital. Please go ahead.... Mr. Manish Shukla, your line is unmuted. Please go ahead with your question. As there is no response, we'll move on to the next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Yeah, hi, congrats on a good quarter. Two questions.
Yes.
One is on margins, like, while we have reported a stable margin, but this quarter we have also raised a lot of liquidity, and deposit growth has been very strong. And, but for this, looks like margins could have been better this quarter. And now that we have sailed through the entire last year, and with a relatively higher mix of fixed rate book, how do you look at the margins going ahead? What levels will be comforting towards giving that, that some risks on the delinquency side that the industry is watching for? And, how, how do you want this to progress going ahead?
Yeah, Nitin, we expect the NIMs to be quite stable, right? In fact, as you saw for this quarter also, we came down by 1 basis point. There was 2 basis points impact, which came because of ICRR. As I said, large part of the deposit cost has come in on the term deposit front. There could be some increase which could happen, but at the same time, we are also seeing some benefit which continues to come in, in terms of repricing of investments when they get churned. In terms of the liquidity which we get deployed, interest rates have moved over a period of time. Even on advances, because we had certain loans which were linked to one year MCLR, some benefit is coming in. So we feel that NIMs will be quite stable for us, even into the remaining quarters of this year.
Okay. The other question is on the deposits. If I look at the deposits, the traction has been very, very strong over the last 4.5 years. The deposit per branch now is quite comparable to some of the large private banks.
Right.
While they have been in existence for more than two decades, and we have started our journey, like, say, four to five years back.
Right.
So how do you look at that trend going ahead? And if you can provide some color on the deposit productivity, therefore, as the branches they achieve vintage, and how are you looking at the... Because we have also opened a large number of branches in the recent years. So how do you distinguish in terms of productivity between the early branches that we opened and versus what we are opening now? And how good is this metric to really look back, like, deposits per branch for IDFC Bank?
See, I'll give you more specific response. Our deposit per branch is running, like, INR 185 crore. And, it is, like you rightly said, it's comparable. I think some large private sector banks are probably better than us. They're probably in the mid-200s kind of zone. But the pace at which we caught up, I think, is really something. In fact, I'd say that we've almost caught up with banks which have been there for, like, 15, 20 years in terms of deposit per branch. So the good news is that our brand has become very strong.
It's you know, you may have missed the annual report, but, one comment I will written out there: It's not about being, it's not about, how much a brand, how much, a brand is known. It is about... It's not about how many people know a brand. It is about what people think of a brand, and that is the hardest to track. If you advertise a lot or you're in some news for some good reasons or bad reasons, you can be in the news, but it's not the same thing as being known for the right reasons. I don't know how it came to us, but can't put a finger onto it, but our bank is really, I mean, just people say good things about us in our brand.
We've done our own brand surveys, and our brand surveys, our own employees, when I go and visit branches and talk to them, et cetera, and I do that quite frequently, somewhere or the other, I go. Employees are almost, like, jumping with happiness whenever I walk around. They say, "Oh, my God, customers are coming and, you know, appreciating our bank, and, and, you know, maybe our, our, products are well appreciated," et cetera, et cetera. The point is that, that is a good thing. Now, with that power of the brand, our products are, quite good. They're, genuinely clean. We don't charge any penny from customers through this route or that route, and, you know, don't change fee structures on the fly without the customer's knowledge, you know, all those things.
So when you, when you have a good image and a good brand and good products, then now you, now you open a branch. Straightaway we get a list of any location we go and put a branch, like, almost our bank gets, like, the flow of money to our branch is quite fantastic. So we, we think, we are very encouraged by all this, to be honest.
Right. This is very interesting. Thanks. Thank you, sir. Thanks a lot.
Thank you. We have our next question from the line of Manish Shukla from Axis Capital. Please go ahead.
Yeah. Thank you for the opportunity, and apologies, there was an issue with my audio line earlier.
Hi, Manish.
Sudhanshu, if you can come to slide 93, loans and advances. Firstly, could you give us the size of the trade substitute book?
It's a small book of about INR 5,000 crore, which includes certain bonds and also the PPC portfolio, which we have.
Sure. And then, unsecured retail, right, in all form and shape, if I were to look at this loan mix, where does it sit and what is the size of the total unsecured retail book? I'm not talking small ticket. I'm talking about overall unsecured retail.
We have given it more a product-wise cut in this portfolio, and that's the kind of disclosure we put out since the beginning.
... Which is what I'm trying to understand, that of the consumer loan book, for example, INR 22,000 crore, how much would be unsecured retail? Of the other retail, which is INR 14,000 crore, how much would be unsecured retail?
No, no. I think I've answered this to you already, that the it is for people to take a reasonably informed, you know, assessment of what portion is secured or unsecured. For example, you can imagine that home loan is secured, you can imagine LAP is, you can imagine vehicle is. A portion of consumers is, and some portion is not. Gold loan is, you know, tractor loans is, say, equipment financing is, commercial vehicle is, education is not. You know, consumer loans, these are, these are well-known products. Business banking is! Business banking is basically working capital for foreign finance to small enterprises. So it is for you to make a good guess. I think these are well-understood businesses.
Fair point. I mean, if I were to guess, I can get anywhere, guess between, anywhere between 25% and 100%, right? It will be better if we could have an estimate from you, rather than I was guessing it.
Okay. So then if you-
Secondly, Mr. Vaidyanathan, in the opening comments, you made a statement that, given the so much of noise around media, you have changed certain policies, if I heard it right, or made some changes and made that presentation to the board as well today.
Yes.
Can you make some qualitative comments around the same? What exactly is it that you are trying to do incrementally?
Incrementally, see, we are constantly identifying pockets that we— It's a continuous process, frankly, it's not just for this quarter. Any good organization would continuously do it. It's not like a, "Oh my God! This is appeared, let me go and try something." It doesn't work like that. We have to be sensitive to the news flow, but we have to do our own thing with or without news, proactively also. So what we do is that, for example, if you identify that in the course of your analysis, you find that. Let me give you an example.
Now, suppose the income installment ratio you play is 50%, and you are giving out loans at 50%, and then you find with this, this income installment ratio, in the, in one particular segment, you're finding that, delinquency is more than the other. You might then say that, "Okay, for this segment, I don't want it at 50%, I want it at 40%." Whereby in other words, we lend only INR 40 to the amount of income. So these are continuous criteria that we, that we touch like this. I mean, there are many more examples. It could be the location.
In the case of, another tightening could be, say, for example, if it's, let me give a secure example for the sake of argument, that, for example, if you find that if loan against property in a particular city is not behaving as well as other city and is off the means, then you might say, "I don't want to give 65% LTV to this, to this market, let's say 50%." That kind of stuff. It's a continuous process. I mean, it's a long list. It runs into, like, what we presented today to the board, I mean, we compiled this for the period of about like, for a quarter. It ran into some four pages of cuts, I mean, changes to credit policy. It's a continuous process.
Yeah. I receive that. Thank you. Those are my questions.
Thank you. We have our next question from the line of Jai Mundhra, from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, I wanted to check on your term deposit pricing strategy. Right. So if I look at your current structure of term deposit-
Mm.
Right now we are offering up to one year at 6.5%-
Mm.
Whereas our SAR rate above 5 lakh is 7%. Right? So, that looks a bit unusual. And, I mean, what, what does it mean? Could TD rates be revised upward, or you think there is a chance that, you know, SAR rate could move downwards? Or how should one, think of this? And, and what are we trying to achieve? Of course, you know, given a choice at 6.5% TD and 7% SAR, you would see a lot of inflow in SAR only. But from your ALM perspective, you know, does, I mean, is that the optimal way you would want to, strategize?
I will tell you our rates, and then we can derive the, our view from that. Our interest rates on term deposit, for, let me say 180 days, is 4.5%. There's some discomfort at your end. Kindly, if you can on mute, it'll be nice for others also, while I answer you. We pay 3% up to, say, 45 days. So 46 days to, say, 180 days, we pay 4.5%. Let me say 181 days to, say, a year, we pay 5.75%, and maybe one year and above, up to one year, we pay only 6.5%, just for information.
So one year, one day and above, we pay 7.5%. So by the way, these rates are not too high. Let me tell you, if you go and check out the interest rates for, let me say, even leading, leading state-owned banks, our rates are very competitive. Competitive meaning not high, in fact, it's on the lower end. And even one year, one day, 7.5%, it's fine, maybe 30-40 basis points more than some leading banks. So we find that our bank has acquired that sort of a stature now, or whatever goodwill now. I told you this before, that we are able to raise deposits like this.
Yeah. No, no, point taken, sir. What I was trying to understand the relative strategy of term deposit and CASA, right? So your term deposits are competitive and maybe, you know, a few basis points spread over other banks.
Mm.
But within your banks, you are offering SAR at 7% above INR 500,000.
Yeah.
You have the TD rates, which are much lower than even SAR.
Yeah.
So how does this benefit bank, you know, from ALM, what are you prioritizing, the CASA over TD or, you know, how should one look at it?
... Okay, that's a good question. If you can go on mute back again. See, we are, for our bank, whether frankly you brought money through the form of TD route or whether you brought, kept money in savings, end of the day, it's costing us a certain amount of money. So the banks, the banks which have traditionally been in business for maybe 20, 30 years, they hate to touch the savings rate because it changes the interest cost of the whole base. So they normally prefer to just raise the interest rates in the TD front and pick up money and hope for the interest rate cycle to change, where TD rates come down, and they can protect the low, low cost, you know, savings rate. You, you get? Did you get the point before I progress?
Yes, yes, yes, sir.
Okay, got it. So they, they are interested parties in never touching this. We come, we are free-footed people. We, we have no interest to say, "Oh my God, I've got to protect the whole base," because my whole base, it's a new bank. So we say, "No, no, we don't want to play this game." We just, we, if we are willing to, might as well keep the SAR rates what they deserve to be, from the customer's point of view, and even from our point of view, it makes sense. So that's how thinking on this issue. So we have nothing... So that's how we play our card. That's why I always say to all of you that, look, on the savings front, I make no forward commitments on what the rates will be.
They will be, sometime when it'll be tight, I will increase it, and not tight, I will drop it. That's how it works. And right now, just see what we've done. You may mistake. That 0 - 1 lakh, we have dropped savings rates to 3% now, 3%. Now, at 3%, frankly, it's in the league of your many other, you know, well-known banks, 3%. But amazing thing is that we still feel the deposit will come to us. So, and it's coming to us.
We feel that, frankly, it's a very epochal moment that we drop our rate to 3% on the savings rate zero to one, and if our deposit trend continues like this for another three, four, five, six months, et cetera, then we may even extend the 0-1 lakh, even two lakhs, three lakhs, who knows? It's a very important moment for the bank that we dropped, we dropped our rates to 3% in 0-1 lakh. That's how it is.
And just to add, as I said, that we continue to see strong inflows in the term deposit. As you see, the rates for one year, one day to two years is 7.5%. So if people want to lock, it's a sorry, it's a good rate, right? And we are getting deposits in that bucket. Of course, if you keep money in savings account, it gives you more flexibility, and we are offering the rates which [audio distortion] mentioned about.
So just finish this point, they have a water cluster. So the thing is that we feel very comfortable with our strategy at this point of time. And if you notice, see, we think of the banks as two categories of banks. Okay? One is the Big Four. The Big Four is another league. They've been around for 30, 25 years, 30 years. They have a great brand, maybe good product, good service, everything. And they have also, you know, been there. The entire ecosystem has been trapped by these, not I can't say trapped, but let me say serviced by these banks.
So over, you know, the whole chain of money coming from, let me say, a vendor to the principal, principal to the dealer, dealer to the distributor, distributor to dealer, distributor, dealer, the whole chain is there. The government banking money, government money from the government to the scheme, right to the taluk or Zilla Parishad level is all there. So people, a lot of these institutions have a very strong brand and good capabilities. So the good thing is that as far as our bank is concerned, despite being a new entrant, like I said, just a goodwill brand image, whatever you call it, even if you're paying competitive pricing, we are, you know, competitive to a peer group, we are able to get the deposits.
So let me just, since I made a, you know, I'll just put this in one more thing. So let me say Big 4, they have all the benefits I told you, legacy benefits. Now think of the next 4. Next 4, think of banks like, say, IndusInd Bank, Yes Bank, say, maybe Bandhan Bank, RBL Bank, maybe, you know, few banks, we say tier two banks, you know, in that sense. Among those banks, we are, like, very well priced, like, competitively priced. We don't pay more. In fact, now we are nudging in the bigger bank category by offering 3% from 0 to INR 1 lakh. And still, this kind of deposits are flowing to us, so it gives confidence to us.
Right. Right. Okay. And sir, small observation, and maybe you can correct, right? So FY 2023 slippages as a percentage of AUM was around 3%. And considering current quarter slippages are also around 3%. And so is this the normalized run rate for slippages, or you think this is your 99.5% collection efficiency, the slippages should ideally be around 2%, and hence there is some scope? So yeah, so that is the broader question.
You've gone, you've gone mute mode. You've gone mute mode. Just let me know when you're in. Yeah, yeah. So see, the thing is, the concept of slippages and et cetera, and the correlation with, you know, credit costs has to be very carefully understood here. Let me define what is our 99.5. 99.5 means 0.5% moves from zeroth bucket, that is current bucket, to 0-30. Means 99.5 is pinned, is collected from that current bucket. Okay? Now, from that bucket, that is 0-30, 31-60, some more customers slip. From 31-60 to 60-90, some more customers slip, and so on. When we look at slippage, there is also flow forward, flow backward.
As long as different business banks have different kind of product suites. For example, if you have a home loan, probably never slip at all. If you went to a company that commercial vehicle will probably have a lot of slippage, will have a lot of collection back, right? Even after 90 repeating. So therefore, different, depending on businesses, they all have different slippages, different collections. But the way to look at it is not only one metric. There are these five metrics you should track, and as far as we are concerned, the five metrics is to track, which has held us very well for like a long time now, over a decade now, and it makes sense as follows. Number one, what is our collection percentage? We told you the number, 90, 90.5%.
Number 2, what is the SMA? We told you the number, like 0.7-0.75. Number 3, which is, it could probably be in a band, even 1% is also good enough, but we're running less than that. Number 3, what is the gross NPA? Number 4, what is the net NPA? Number 5, what is the credit cost at our provisioning policy? So, if these five things are met, then, you know, the rest are taken care of. And we are following this for, for a long, long time. And mind you, I specifically flag credit cost because a bank or anybody can take more provisions and write off more and claim to have low gross NPA. But no, no, no, we don't do that.
We also show a credit cost, and we guide the credit cost, and we meet the credit cost.
Understood, sir. Thank you.
Thank you.
Thank you. We have our next question from the line of Suraj Das from Sundaram Mutual Fund.
Yeah, hi, sir. Thanks for the opportunity and congratulations on a good set of numbers.
Thank you.
Two questions have already been answered. Couple of questions. So if you can talk about more on the, you know, I heard that you are, you know, you talked about more on the, in a detailed way on the branch, vintage and all that thing. If you can also talk about on the customer acquisition run rate, what has been, in your bank for last couple of quarters, and vis-a-vis, I mean, what was the run rate for, let us say, a few years back, on that? And also, now, nowadays, I mean, when I hear a lot of banks, I mean, people are all talk about, you know, going, more penetration on the existing customers base. So on that front, I mean, what would be your product for a retail, customer?
How has been that trend, if you have any analysis or any thoughts there? Yes, that is the first question. I also have one more question.
No, no, wait, sir. Don't, don't, don't bunch questions. We'll take one at a time. So now this thing about number of accounts and how the trend line of product per customer, et cetera, is. See, we are, let me say, a little underperforming on product per customer. We, if any of your customer, you may notice that you're not getting aggressive calls from the bank, you don't get, you know, too many calls from the bank, saying that, "Oh, take this product, take that product." We are trying to tone down our team and our call outs, et cetera, so that we don't disturb the customers too much.
Of course, if any of you by chance may have, it's an exception to the rule, and if any of them are disturbed, I apologize for that, but generally, 99% of the time you will not get very many calls from the bank. So our approach, our product per customer is a little lesser than, and we find this an opportunity actually. But we want to keep the current strategy of keeping the smell of a bank good and all that. Number two, if you take any of the Big Four, or any of the established bank, not the Big Four, any of the established banks who've been there for maybe 20, 30 years, they have two engines that fire for them every year.
One is, imagine a bank that's already sitting on INR 1,000,000 crore of deposits, and imagine that ten lakh crores may be about 10% will come anyway growth, because Indian economy is growing. If you're a solid customer base, salary, salary would have gone up, and, some deposits come from existing customers anyway, just by the growth of economy and growth of financial services. Then they, then they raise a little more money through NTB. In our bank, since we don't have that base of 20, 30, 40 years, almost everything is coming through NTB. So we believe that, as the years progress, let me wake up in, say, 2027, 2028, 2029, 2030, then hopefully at that time our, you know, deposits will be like INR 300,000 crore or something like that.
At that time, you will find that a certain amount of good balances will come from existing customers and NTB. So we are, let me say, we are flying on one point, if other banks are running on two engines, we are probably running on only 1.2 engine, because we are largely an NTB bank. But that's the way, that's the price of being a new bank because you have to go and acquire and all that.
Sure. Understood, sir. Uh, but sir, you, you have any number on the customer acquisition side? What was the customer acquisition for last quarter?
We've not put it out specifically, so let me just keep it. It must be a few lakhs, maybe [audio distortion] , something like that. We also acquired digitally, but somehow, maybe 72,000 customers a month or so. Earlier we used to acquire more than that, but then later we figured out that these customers are not keeping enough balances. We are, at one point of time, we were acquiring 1.5-1.6 customers digitally. Then we figured out the customers are not keeping enough balances. We put a specific condition in the process that, please, you know, fund the money as part of the process itself. It dropped the number of volumes. It came down from 1.5 lakh to 60,000, 70,000, 80,000.
But at least now we're getting better quality because customers are coming in, are coming with the money.... And that's on the digital side. Then maybe on the normal account opening side, maybe, maybe 60,000, 70,000, 80,000 accounts per month. Yeah.
Understood.
So we are focusing more on quality customers. We are not like, we are not, we are not amassing millions of customers and reporting millions of customers to the market street. Those things don't give us any joy. We are trying to get customers, both digitally and physically, meaningful relationships, because we don't want to crowd our branches unnecessarily and spoil the relationship experience for our customers, existing customers. That's a, that's a strategy that gives you a little bit of color.
Sure, sir. Understood. And one last question, sir. If I see, I mean, obviously, you have a proven track record on the asset quality side in this retail book. And if I see your retail rather than SME loan, GNPA and net NPA, it is probably, you know, best in line in the industry and probably at par with one of the best, you know, large peers. But at the same time, sir, I mean, do you have any other contingent provision per se in your book that is not included in the PCR calculation? And do you intend to build, I mean, because few of the, you know, larger peers, you know, they have built contingent buffer over the last few quarters.
In your plans, in your strategy, do you intend to build any kind of, you know, countercyclical contingent provision, just to, you know, keep this retail asset quality? At least probably we are in the best time of asset quality, and probably next two, three years down the line, when any retail cycle comes, do we have any plans for that? You know, creating any, contingent or provision buffer or something like that? Yeah, that would be my last question, and thanks so much, sir.
No, first of all, no, that's also a good question, by the way. So the, by the way, it's just not because of the benign time. I request, I point out to you to look at our... In the world, the timing was not benign also. Look at demonetization. Our NPA never been disturbed. Look at, you know, you know, IL&FS crisis, whatever. So the, or GST implementation. So we've had good times, bad times, the quality has been good. But, I do agree that if an extraordinary event like a COVID comes, right, then India goes into lockdown and, you know, there's no moratorium for customers, then God knows. If those kind of situations happen, those things can happen, and we should be very, aware of that.
We feel that barring those situations, we are really, well, well covered. Now, as far as the contingency is concerned, we feel that what we have done is, we have taken a pretty, our provisioning policy itself is basically starts at 90 DPD in a pretty, conservative manner, and literally, depending on product category, either between 120 days to 150 days to 180 days, it's all provided for. So with that kind of a, you know, super conservative provisioning policy, it's pretty unlikely that we'll have a problem. But we'll be careful. We'll watch. We'll watch carefully.
Thank you.
Sure.
Ladies and gentlemen-
Yeah.
That was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
My God, it is like 1 hour and 50 minutes. Sorry, okay, an hour and 20 minutes, sorry. So that's a lot, more than expected. So maybe moderator, you can keep track of time next time for our sake. So, thanks very much, everybody, friends, for being with us today. That's all I have to say.
Thank you.
Thank you, everyone. Have a great weekend. Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.