Ladies and gentlemen, good day and welcome to the Bandhan Bank Q1 FY2023 Earnings Conference Call. 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. Ritesh Mehta from Bandhan Bank. Thank you and over to you, sir. Mr. Ritesh, please go ahead.
Thank you, Raju. Good evening, everyone, and thanks for joining this call. It's a pleasure to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter ending June 2022. We will take this opportunity to update you on the recent development in the industry and Bandhan Bank during the quarter. To discuss all this in detail, we have with us our founder, Managing Director and CEO, Mr. Chandra Shekhar Ghosh, our CFO, Chief Financial Officer, Mr. Sunil Samdani, our Head Assets, Mr. Kamal Batra, our Housing Finance Head, Mr. Suresh Iyer. Now, I would like to request our founder, MD and CEO, Mr. Chandra Shekhar Ghosh, to brief you all about bank operational and financial performance, along with the developments for the quarter ending June 2022. Over to you, sir.
Thank you, Ritesh. Good afternoon and namaskar to all of you. Thank you for your time to joining today. I hope all of you and your loved ones are safe and healthy. I'm pleased to state that the April to June 2022 quarter has been a balanced quarter for the bank. I'll take you through the key figures. Quarter one of the financial year is a lean period for the financial services industry, and therefore, the quarter-on-quarter comparison shows a minor dip. It is no different for us. I'm trying to give this the figure, compared to this, the first quarter of the last year to this year first quarter. The overall advances have shown 20.28% growth year-on-year, and a marginal decline in the 2.71% quarter-on-quarter. Why is the decline?
Primarily due to the quarter-on-quarter decline because of microcredit book declined at the 6.8%, which is the seasonality of the bank. Second point on that, there is a flood in Assam. That is the two cause. Third cause is coming on that because of the RBI have the new regulation has come, and impact date on that the first April, effective from first April, so that one and a half months is a delay. That is the three points have been given this, the decline of this, the quarter-on-quarter growth of microfinance. If we look at loan growth other than microcredit, it will be the 4.3% growth on quarter-on-quarter basis.
The very good point I have been mentioned in here, the 27% year-on-year growth has come to our housing vertical. This is a very big achievement have been done. You've seen that the last three quarters, this vertical have been growing very good. It has been very helped us to increase the CICO loan of the bank. This vertical, 4.5% growth have been given this quarter and if this quarter-on-quarter basis. Even in a muted quarter, we have managed to show good growth in the housing finance book. We are planning to grow it more than that growth in this financial year and future.
The retail loan book other than housing finance book, consisting of personal loan, gold loan, two-wheeler loan, and auto loan, has grown 61% year-on-year and 9.1% quarter-on-quarter. That is also the second focus of the bank to grow in future. The commercial banking vertical, consisting mainly NBFC, FCL, and the SME loan, with 81% year-on-year growth, which is the quarter-on-quarter growth has come 3.2%. This the other than microcredit, the three vertical have the future growth will come to the bank, which can be diversify the bank portfolio across the all vertical, which we are projected significantly. The growth of this segment is a welcome sign for the bank as this is aligned with the bank's portfolio diversification agenda.
The first quarter of the current financial year saw economic growth revise strongly as many business return to normalcy, given the significant increase in the confidence among the population of managing COVID. We are happy to see signs of strong demand for credit in the most of the business in the first quarter. Due to the implementation of new regulation, growth in microcredit little bit is muted. Coming to this, the liabilities part. Our deposits have grown 20.33% year-on-year, and CASA also have been grown 21% year-on-year. So CASA ratio has come 43.2%, which is 160 basis points higher than the last quarter. The retail deposit is our focus, which is 78.4% in this quarter, which was in the earlier quarter 77.3%.
As we are meeting here, the liabilities growth also has come very good, strong, and, given a focus on that, we will continue our retail deposit and CASA deposit in future to manage our advance growth. Along with the business growth in advance and deposits, we have also seen very encouraging collection efficiency trend during the quarter. The overall collection efficiency of the bank has come 97% in quarter one. If I come to this, the micro-credit, excluding NPA and restructuring, overall EEB collection efficiency is 98%, which is a very normal collection efficiency. West Bengal is 98%, Assam is 95%, and rest of India, 98%. If I go to this, including restructuring loan, excluding NPA, overall EEB collection efficiency, 94%. West Bengal, 94%. Rest of India, 96%.
Assam is 77.8%, which means that the flood has had a little bit of impact on the collection efficiency. Microcredit loans that have been disbursed after the second wave of COVID till June 2022, 99% of our customers are paying back. Our NPA is just less than 2% in that portfolio. This shows that the loans given after the COVID second wave are mostly standard and are as per our usual pre-COVID experience. That has given the strength of the bank, the future, our growth of this microcredit will not be likely to again any of this, the critical position on that. With the people's livelihood coming back on track, we have observed and engaged among our customers to standardize their accounts in order to continue to enjoy the benefit of formal credit by maintaining a healthy credit record.
We have seen strong collection efficiency despite the flood in Assam. For the first quarter, our gross NPA ratio stood at 7.25%, which was in the last year first quarter, 8.18%. Net NPA has come 1.92%, which was in the last year first quarter at 3.29%. We see that the business growth, customer confidence, credit demand, and we have the confidence on that will be likely to continue our net NPA less than this amount, which is 1.92. We are more than covered in terms of our provisions. Total provisions of the bank as on, cumulatively as on quarter one financial year 2023 is INR 8,847 crores, compared to INR 8,197 crores in the last quarter.
This makes our PCR at 75%. If it is a PCR with a pro forma include, it is a 101%. Bank has not taken any restructuring in this quarter, and we have also not feel that it is needed to future, and there is no write-off which have been done this quarter. During the quarter one, the bank has seen improvement in the gross NPA and the net NPA level compared to the quarter one of last year. On a sequential basis, we have seen some increase in the NPA figures, mainly due to three causes. One is a restructure loan. Though the restructure customer, 57% are paying. MFI role because of the delayed disbursement and the Assam flood.
Bank has seen total fresh slippage INR 1,125 crores, which was lower than the last quarter, which was INR 1,365 crores. Within our fresh slippage in the EIB segment was INR 908 crores in quarter one versus INR 1,181 crores in the last quarter. Most of the fresh NPA which we are seeing in this quarter are the ones to whom we have lent during the COVID period. Many of our customers have been paying regularly and have nearly regularized their overdue account.
Until the entire overdue amount is not recorded, they cannot be categorized as a non-NPA customer. Finally, in the first quarter, we have seen that the 73% of our NPA customers are paying and 57% of our restructured customers are paying, which gives us the confidence that the growth in net NPA will be. The future will calm down. No fresh slippage happened in a very big way on that. From there it is only the matter of time because customers are paying. These two types of customers, they are paying not in full at all. They are paying the partial installment, so there is a swing in that, some of the buckets of their risk. But their interaction with us, we think that they are giving the confidence to us. They will take some time, but we pay that full amount on that.
With the business growth and improvement in the collection, we have seen our profit growth has come 138% year-on-year, which is this quarter has come INR 887 crores against the net profit of the last year in the same quarter, INR 373 crores. Our net interest income has shown a growth of 19% year-on-year. It has increased to INR 2,514 crores in quarter one, financial year 2023 from INR 2,114 crores in quarter one, financial year 2022. Our net interest margin for this, for the current quarter is 8%, which is the range of our expectation. Total credit cost for the quarter, financial year 2023 is 2.7% compared to the last year first quarter, 7.2%.
I like to mention in here the credit cost and NPA percentage has given the confidence to us that we'll be like to continue in this, the record in this financial year. Coming to this outlook for the rest of the year, as you all know, we are seeing the economic activity picking up and business coming back to normal across the country. The bank has a focus on that, the business growth in this financial year, which is that the pre-pandemic situation. Credit cost, I already mentioned, and NPA has stabilized. Diversification is our core area. We are like to continue to do it so that housing, retail other than housing and SME, we also like to continue to grow on that. All this together, we see that this quarter we are added 6 lakh new customer. Bank is growing.
Not only that the existing portfolio growing, that is also new customer adding and then our liabilities and asset both are making growth on that. I wish you and your family all the very best. Please take care and stay safe. Thank you, for all of you to listen me and you have the question, you can. Thank you.
Thank you, sir. Now we will have an opening remark from our CFO, Mr. Sunil Samdani. Over to you, sir.
Thank you, Ritesh. Good evening, ladies and gentlemen. I will take this opportunity to run you through few slides of our presentation. Starting with slide number five, which talks about the CEV collection efficiency. Here we are talking about collection efficiency excluding the restructured portfolio to make it like to like and comparable with the previous quarter. As it's visible, for the month and for the quarter, West Bengal and rest of India, the collection efficiency stands at 98% and Assam for the quarter is 95, but for the month of June is 93. Assam has been impacted by floods in the month of June, and hence, the June collection efficiency is lower. We are seeing an improvement there starting July, and we hope that by September we will reach to the pre-flood level as far as the Assam collection efficiency goes.
If we talk about the share, the paying customer and customer paying profile, 94% of our customers pay their full installments, 1% are not paying, and 5% are paying partial installments. The similar numbers, including restructuring is available. It's on the same logic, so I will not read the same. I'll go to the slide number seven. Here we talk about the NPA customers and the restructured customers' payment pattern. How are they behaving? As far as NPA customers go, 73% of the customers continue to pay us either in part or in full, and 27% of the customers don't pay, those who are already in the NPA bucket. Which is a healthy sign, which means the recovery from NPA will continue to happen, the recoveries and upgrades. Now, coming to the restructured customers' paying pattern.
About 57% of the customers have paid partial installments. In the quarter and about 43% of the customers have not paid their installments. Slide number eight, we talk about the DPD movement. Here you will see the increase in DPD. That's largely because of the restructured customer demand getting generated from April onwards and the impact of Assam floods in the earlier bucket. Other than the restructuring impact, the DPD movement has been less than 0.3-0.4 basis points in each of these buckets. Now coming to slide number nine. Here we talk about the stress pool and the coverage analysis. What we've seen is the total stress pool, which the way we calculate here, which is the restructured NPA, SMA 1 and SMA 2 for the EEB portfolio, stands at INR 121 billion. Against that we have a provision.
Before we get into the coverage, let me explain this pool of INR 121 billion. You will see the restructured amount at INR 21.4 billion. That's because half of these restructured customers, their demand has started, and those customers are either in current or the SMA buckets, or the NPA buckets. Accordingly, what we show here as restructuring is only those customers which will come out of restructuring in the current quarter. Those who have already come out, their positioning is on the respective SMA buckets or the current buckets. Now, as against this INR 121 billion, we have a provision of INR 76 billion. So the coverage on the provision has improved by 3% quarter-on-quarter.
We have taken the extra provision of 335 crores this quarter, which is over and above required provision to improve the coverage. Of the total provisioning line item of 640 crores that we have for the quarter, 335 crores is the additional provision over and above the required provision that we have taken. The CGFMU recovery stands at INR 25 crores. The first claim we will make in the first week of October, and that claim will be roughly in the range of INR 1,150-INR 1,200 crores. The estimated recovery we expect going forward to be INR 25 billion. Recovery, as you all know, for us, the second half is more focused on the recover.
The recoveries in the second half is much higher than the first half, so we are confident of this recovery going forward as well. Of course, the diversification side, which Mr. Ghosh has already spoken about, so I will not take much of your time. Thank you very much for your patient hearing. Happy to take questions.
Thank you, sir. We'll now take question and answer. Over to Renju.
Thank you. 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 Sameer Bhise from JM Financial. Please go ahead, sir.
Yeah, hi. Thank you for the opportunity. Just a few questions, primarily on the other income bit. Is there any MTM angle to the lower other income during this quarter?
The other income is lower primarily because of two reasons. One is on the treasury portfolio. In the previous year, same quarter, I'm comparing it with Q1 of FY 2022, because Q4 clearly is not comparable because disbursements in Q4 is almost four times of Q1, so the processing fee is very high in Q4. The better comparison is Q1 of FY 2022. There in Q1, we had booked a profit on sale of investment of INR 174 crores. This is the movement from HTM to AFS that we do once in a year. That sale has not happened this financial year due to adverse yield curve movement. Secondly, the mark-to-market provision that we do. In Q1 of FY 2022, there was a reversal of mark-to-market provision of INR 86 crores.
Effectively in Q1, there was INR 270 crore income on the treasury book, whether it is on sale of investments or mark-to-market. Against that, there is a mark-to-market provision or loss that we have done of INR 79 crore this quarter. That is effectively INR 330 crore movement, if we compare last year's same quarter to this quarter. The second piece is on the PSLC income. This quarter, our PSLC income is lower by almost INR 130 crore compared to last year's same quarter. That's because we've not sold PSLC this quarter, particularly on the agri portfolio, where we are awaiting a clearance from the regulator. The moment we get that, in the second half, probably you will see an uptick in the PSLC portfolio as well.
These are the two main reasons.
Okay, thank you. Just talking about PSLC, the annual report also mentions that there is a change in the recognition of priority sector loans. Could you please elaborate, because the outstanding PSL-eligible loans have come down on a year-over-year basis, so that would be helpful.
This pertains to in FY 2019/2020, the RBI had an observation that we don't have the land records for our agri portfolio. Clearly, a bulk of our agri portfolio comes from microfinance customers which are landless laborers. In such a scenario, there is no question of having the land record. Accordingly, we had represented to RBI explaining the positions as to why we cannot have the land records here. But since this was an observation in the 2019/2020 report for which there was a demand raised to deposit the funds in RIDF in Q4 of last financial year. Accordingly, we had deposited the RIDF there. In 2021 and 2022, there is no such requirements.
The assessment is complete for 2022?
We are yet to receive the report, final report, but the assessment is complete, and we don't expect that to come in for FY 2022.
Okay. Just one final thing. If we look at the DPD movement in the 61-90 bucket, West Bengal shows quite a bit of a jump. Is it primarily the restructured book of that state or is there something else to it?
No, it is the restructured book. Excluding restructured book, the movement is less than 20 basis points.
Okay. Just one final thing. Do you think there is a case for revisiting the credit cost expectations that you had put out in the previous quarter around 200-225 basis points?
We've kept it at 2.5%, and we continue to keep it at 2.5%.
Okay. Thank you and all the best. Thanks.
Thank you.
Thank you.
Thank you. Next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead, sir.
Hi. Thanks. Listen, just dwelling a little in this PSL part, when we go through the annual report, it's the FY 2022 PSL loans which seem to have compliant loans dropped from 88%-58% or some percentage. Just wanted to understand, does this have a bearing on how the bank's PSL income would be? Because your stock of PSL compliant loans as marked for FY 2022 is down. Just trying to understand if this can be an issue for our PSLC income.
There are two things here. We have conservatively not considered the agri, the piece of agri pool, which is the non-aligned agri part, as PSL based on the RBI observation of 2019-2020. Once we have the clarity on that, then if it is on the positive line, which we expect, then this pool can go up and accordingly we can look at PSLC income. At this stage, we will not be able to confirm either way.
Just to clarify, your FY 2021 and 2022 PSLC income was how much?
My FY 2022 PSLC income was about INR 650 crore.
Got it. If it is adverse, like a large part of this goes away or how does it work? Or you can still get a material part of this?
About INR 150-200 crores is what we can look at.
Okay, your income, so you may lose about INR 400-INR 500 crores, is it?
Yes, that's the worst-case scenario.
Got it, Sunil. Now coming to the DPD movement, right? The INR 2,100 crore of restructured book, that's something that starts to service the debt in this quarter or how is it?
Yes, that actually start this quarter.
It seemingly when you look through the numbers, majority of the restructured book has found its way into the DPD buckets, and there is a restructured book which still is not servicing. Two questions here. One is that, going by the same experience, most of it could be DPD, and then some of this DPD is late stage, so your NPAs will likely rise in Q2 and Q3, right? As some of this goes along. Just wanted to understand if we should have ideally provided more or you seem comfortable because you will get those guarantee related recoveries that are expected.
If I say one point and then, Sunil can add on that. The beginning on that, our restructured loan is at INR 7,400 crores.
The balance now has come to INR 4,600. More or less it's been INR 3,500, which is more than around 50% of the loan recovered and customer are paid on that. Second point on that those are outstanding are spending, there's 57% of that the restructured customer are paying. Their payment maximum are given as is because of the given partial amount, so that automatically they are going to movement to the different DPD bucket. We are with the confidence on that they are coming back because they have need in their credit for running their business. It has been starting the business from the second quarter, which is before the festival. That is a hope on that they will be return back.
This is my confidence on my customer.
Yeah. Thank you, sir. Specifically to your point, as I mentioned, these are part paying customers, hence the DPD bucket. We can see them moving the DPD bucket. On the provisioning side, I think we are adequately provided. On my entire restructured book, I have an 80% coverage already provided for, right? I have a position where 53% of the customers are paying. Top it up, we have the guarantee cover, which is over and above this. On the whole, I think we are adequately, more than adequately provided, and hence we are sticking to our credit cost guidance.
Got it, Sunil. My last question is on the operational changes done to comply with RBI's norms, right? In terms of how you underwrite. Can you just walk through what all changes was required? Are we fully done and now it's back to disbursements as usual? Or what are like what were the changes?
Yes. The changes were broadly on the household income and you know, identification and recording and calculation of FOIR. Which we used to do as part of our individual lending customer, which was roughly 20-25% of our network. Now we have to do it for 100% of our network, which is the household income calculation and the FOIR calculation. That training for the entire network has happened and that is why the first 30-40 days of the quarter, the disbursements were impacted. Now we are back to normal, both on disbursements with the new guidelines.
Got it, Sunil. This has been helpful. Thanks.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to re-rejoin the queue. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead, sir.
Yeah. First question on restructured pool. If you can just share the movement of this restructured pool. INR 4,900 crores becoming INR 2,100 crores. This INR 2,700 crores, how much is recovered? How much is flowing into, say, NPA, SMA 2 and SMA 1? The question where I'm coming from, just want to sense how much is the incremental stress into this entire pool because of Assam flood and how much is because of restructure. Yeah.
Let me first give you the numbers. My total restructured pool outstanding, whether it is part of DPD or it is still part of restructuring, is INR 4,661 crore. Of these 4,661, so 4,900 has become 4,661, which means we've collected about INR 300 crore this quarter, from the restructured pool. Of these 4,661, we have INR 2,141 crore which is still in the moratorium, and INR 2,520 crore we have customers which have moved buckets. They will be either part of SMA 0, 1 or 2. On the whole, if you see about 70% of the customers are part of SMA 1, 2 or NPA.
That's because of the part paying nature. Though 54%-57% of the customers are paying, we will have these customers move buckets.
Sure. Fair to assume that overall stress pool is going up by INR 200 odd crores and 300 is something which we have recovered from, restructured. Net-net, the increase is only INR 500 odd crores in the stress pool, including the Assam impact.
Yes. That's a fair way to look at it.
Okay. Maybe in Assam we have seen delays that could be already pertaining to either the delinquent book or the restructured pool that would have also got impacted to that extent. Again, Assam, there would be a flow-through which will largely come in Q2 because it would have not maybe the DPD buckets would have not got over. Then again, in Q2, we could actually see the real pain coming in from Assam. Would that be a fair assumption?
No. We in fact expect things to normalize by the end of Q2 as far as Assam goes.
We are expecting collection efficiency of back to 97% mark where we were, by the end of Q4. It will not be fair to assume that the June month behavior or the July month, you know, the one-month behavior, because that was the month when we had floods, that behavior will continue throughout.
If you see that is a result, the Assam collection efficiency 95% other than restructuring loan in June. In that sense, if we just say that is the flood have been started in the May and up to the June, that is in one side we see that impact. In July and onwards, it will be again coming back on that.
Okay. One last question on this, CGFMU, SME. I think last time you highlighted that we will start the process in this fiscal and we expected recovery in first half, but I think now you said, like, you will apply in October. Why this delay? And maybe we should see some delayed recovery with respect to that of INR 25 crore or maybe INR 2,500 crore odd, which we are expecting. Yeah.
No, there is no delay. The process of CGFMU is they process claim only once a year. They process claim based on the NPA which has happened six months back. If I claim, let's say I could have done the claim in Q1 itself, but then I would have got the NPA, which was NPA as on 31st September or December, and not as on 31st March. My eligible amount to claim would have reduced. Put it shortly, if I claim it on 1st of October, right, which is when I can claim the entire NPA of 31st March 2022, I could claim as around INR 1,200 crores, INR 1,150 crores-INR 1,200 crores. But if I have to claim it today, the claim would not have been more than INR 500 crores-INR 550 crores.
That is why we took that call that we will make this claim in the first of October or the first week of October to have the full benefit of INR 1,100 crore for the year, because we can claim only once a year.
Sure. Got it. Thanks. Thanks and all the best. Yeah.
Thank you. Thank you.
Thank you. Next question is from the line of Saurabh from JP Morgan. Please go ahead, sir.
Sir, did I get this right that on slide nine, the overall collection is INR 300 crores and you're projecting INR 2,500 crores for next two quarters?
Yeah. We expect that because if you look at the seasonality, the historical trends also, you know, with every quarter our collection in absolute amount as well as in percentage terms improve. You know, between, you know, the Q2 is better than Q1, Q3 is better than Q2, and Q4, of course, is the best for us. As we move to the second half, the collections should improve materially, and that is why we say that we should be able to recover.
Okay. Secondly, on this interest rate hike, as you know, there are a lot of microfinance companies have taken these hikes. I remember you also took one, but has it started going through your EEB book now?
As of now, we've not decided on any further hike. We had taken one in September 2021. We will continuously monitor our cost of funds, and if there is a need, we may look at it.
Just one last thing, sir. On your, you know, borrowings have gone up sharply this quarter and deposits have gone down. Can you just explain what's happening there?
See, in this quarter we have, you know, so this, the RIDF requirement which was there.
Mm-hmm.
That was partly done in Q4 and partly in Q1 of this year, in April of this year.
Mm-hmm.
Right? Hence for meeting that RIDF requirement, we have taken the borrowings. Borrowings for us is cheaper, because it's a refinance and it comes at a cheaper cost than the bulk deposits because there is no CRR, SLR requirements there.
Okay. Sir, your outlook for loan growth this year should be in that 20% ballpark?
Yes.
Okay. Thank you, sir. Thank you.
Thank you.
Thank you. Next question is from the line of Sameer Bhise from JM Financial. Please go ahead, sir.
Thanks for the follow-up opportunity. Just one question. Sunil sir, can you provide the breakdown of slippages across business lines?
Yes. Thanks for asking that question because that's the one big positive that we've seen in this quarter. The overall slippages for the quarter was INR 1,125 crore. This number was INR 1,365 crore in Q4. The gross slippages have come down quarter-over-quarter. More importantly, of these INR 1,125 crore, the slippages from restructured customer is about INR 315 crore. Excluding restructured customers, my slippages quarter-over-quarter has reduced by half from INR 1,365 to about INR 750 crore.
Okay. Just finally, of the balance restructured portfolio, when do you think the entire portfolio comes out of moratorium?
By September everything will be out of moratorium.
September. Okay.
Yeah.
Thank you. Thank you so much.
Thank you.
Thank you. Next question is from the line of Param Subramanian from Macquarie. Please go ahead, sir.
Yeah. Hi. Thank you for the opportunity. My first question, Sunil, we are budgeting for in terms of recoveries from the stress pool of INR 25 billion, which was the same as what we were doing before, but if I'm looking at the collections, including the arrears, that seems to have come off, you know, pretty sharply. You know, any outlook, do you think this number as in there is scope for a little reduction over here? Your thoughts on that?
No, not really. Because you know, as I explained, that recovery for us is also seasonal. In a sense, the recovery amount is lowest in the first quarter. It increases as the quarter progresses. Historically, if you see last 20 years, Q4 has the highest recoveries and Q1 is the lowest recovery. We are confident that this year will be no different. Now that the pandemic is behind us, we don't see a challenge here.
Sure. Okay, thanks for that. Also on the new MFI norms, has it impacted the ticket size of your disbursements? Could you give some color on what your ticket size of disbursements is currently? Has this norm of, you know, 50% EMI cap, you know, 50% of household income, impacted the ticket size of your disbursements in any way?
Well, I'll take that point. You know, that is the last two years we are practicing on that. Those are the very seasoned customer and very good business. We have graduated them to this individual as a MSME. Larger ticket, bigger ticket size are shifted in there. In that sense we have not found out on that because of new rule, it has come to our help on that to reduce the ticket size. Who are eligible for that loan, the graduated loan, their income of the household is more than INR 3 lakhs. That will be like to more help us on that to not making on that. But after that, if you see that micro group loan, which is called the EEB, other than that the individual loan, their ticket size has come INR 39,890.
Okay. What would it be, as in this 39,800, what was it, if I can, you know, get a sense of what it was probably a year or so ago?
It was in a 55. No. That would not be a like-for-like comparison because now we have an individual loan or we call it small business and agri loans, which is separate and group loan is separate.
Higher ticket customers are migrated to individual, and that's why you're saying the income is more than INR 3 lakhs. Is that the right understanding?
Correct. Yes.
Okay. Got it. Sunil, just one last data point. If you could just share the restructured portfolio split between West Bengal, Assam and rest of India. Since we have the SMA and NPA numbers in that you know split between West Bengal, Assam, rest of India, if you could share for the restructuring as well. That's my last question. Thank you.
Just a minute. My total restructured book, whether they are part of still restructuring or part of SMA, those who have moved out or those whose demand has started, is INR 4,661 crore, as I mentioned. Of which West Bengal is INR 2,123 crore and Assam is INR 1,502 crore.
Assam is?
1502.
Okay. Thanks, Sunil. Thank you, team, and all the best. Thank you.
Thank you.
Thank you. Next question is from the line of Abhishek Murarka from HSBC. Please go ahead, sir.
Hi, sir. Thanks for taking my question. Just one clarification I required on this Assam relief scheme. I think the portfolio eligible for this was around INR 35 billion or so last year. What is the update here? Is there any progress or any allocation that would have come to you?
If you see that the Assam government has given INR 1,700 crore as on today, which the customers are regular. That it is not all customers on demand we have. Second point is here, there is category two and three, which is overdue and NPA customers. The government in the last budget has been allocated INR 1,500 crore now, and it said that if further need, they will be again given on that. That INR 1,500 crore, that is in tentative time was in this quarter, but because of the flood has come, it has been deferred and maybe the next quarter it will come on that.
Okay. The outstanding portfolio now there is about INR 1,700 crores, is it?
This claim is as of March 2021, right? It has nothing to do with current outstanding. The eligibility is of the earlier.
Okay. Just a few housekeeping questions. Can you share the movement of NPA, as in the write-offs, recoveries and upgrades as well?
Yeah. As I mentioned, the slippages, including slippages from restructured pool, stands at INR 1,125 crores.
Right.
The recovery and upgrade is INR 538 crore. The net addition to NPA is INR 588 crore. There is no write-off during the quarter.
Okay. Finally, just state-wise breakup of the restructured MFI. You gave an overall restructured breakup, just MFI INR 2,140 crores, if you can give a state-wise breakup.
2,140 is the restructured portfolio which will come out of restructuring in Q2. In addition to that, what has already come out in Q1, those customers are part of DPD. The total restructured pool, the one which is yet in restructuring as of 30th June, and the one which has come out of restructuring, as I mentioned, was INR 4,661. I've already shared the top two states, which is 90% of it.
Okay. Just the EEB, you wouldn't have West Bengal and Assam, how much that split would be?
Yeah. As I mentioned, of the INR 4,661 crores of EEB restructuring book, INR 2,100.
Okay. Got it. Yeah, got it.
Yeah.
Yeah. Sorry. Clear now. Yeah.
Hmm.
Thanks. Those were my questions.
Thank you.
Thank you. Next question is from the line of Anand Dama from Emkay Global. Please go ahead, sir.
Yeah, thank you, sir. First of all, in case of Assam, we talked about the SMA pool, but have we done 100% billing in Assam, or the billing is still incomplete?
when you say billing means the demand, so we.
Yes. Yes. Yes.
Come out of restructuring, the demand has been started to generate from first April onwards.
No, but for the standard pool, would you have done basically the entire billing for this quarter or, because of the floods and all, you would not have raised demand and because of which that may not reflect even into SMA pool?
We have not stopped any demand even for a day.
Okay. We have not done that. What is the situation over there? Basically, the floods have visited, the meetings have again started or like, how do you see the, you know, collection panning out, over next two to three quarters?
The meetings have started happening. The collections for July.
Okay.
Is better than June. We expect by September we should be back to normal.
Okay. When you say normal, means that there will be still some stress which will flow into the SMA pool, barring what we are seeing at this point of time or, the current SMA pool itself will come down?
No, it should come down because those customers who have already loan, once the repayment starts, the impact of floods goes away, even the stress pool should reduce. Because if my collection efficiency improves from 93% to 96%, 97%.
Okay.
The overall outstanding will also reduce.
Okay. Sir, is there any scope of, because of this kind of natural disaster being there, so there possibly government or basically RBI could allow you to do further restructuring in the Assam specifically?
That is a possibility if they notify this as a natural calamity, then there is an option for the bank to avail that facility.
Okay. That basically state government has to notify or that is a natural disaster of the central government?
State government has to recommend and then the SLBC will take up.
Okay. Sure. Sir, lastly, your staff cost is quarter-on-quarter higher. Is there any one-off over there or like this is a new normal that we're gonna see?
Quarter-on-quarter is higher because we continue to recruit people in our non-micro segment. We had increased people in our micro segment previous year, as we had to do the door-to-door collection. We are strengthening our retail and commercial banking.
Okay.
The growth coming in, that will be the next growth driver. Also the impact of remits.
Okay. Well, thanks. Thanks a lot, sir.
Thank you. Thank you.
Thank you. Next question is from the line of Karthik Chellappa from Buena Vista Fund Management. Please go ahead, sir.
Yeah. Good evening. Thank you very much for the opportunity, sir. Just two questions from my side. Firstly, if we look at the various buckets, whether 1-30 and specifically 60-90 as well as NPL, West Bengal has seen a far higher increase than the rest of India. Although in your opening comments you mentioned that's because of the restructured pools spilling over. Are there any specific factors at play in West Bengal which is making the ratio inferior, at least to the rest of India?
Not really, because the restructuring was more in, you know, we've already shared the number. If the restructured portfolio is more in West Bengal and Assam, the flow to DPD will also be higher from those states. The reason they are part in solvents.
Okay, got it.
We have started to do.
The second question is on the housing portfolio, despite the growth actually starting to revive the NPA, the NPA ratio still seems to be sticky at 3.4%-3.5%. Why do you think that is the case? Can I also have the restructured number for the mortgage book separately?
Hello, good evening.
Yeah.
Sunil here.
Yeah, Sunil, go ahead. Go ahead.
Yeah. Yeah.
One sec.
On the housing book, actually, because you know, the recovery efforts could, particularly in terms of the resurfacing, have been initiated only post September 21 when the Supreme Court embargo came out, that you cannot take any coercive action. The impact is now getting visible, and we should see some improvement going forward. Actually, we have seen some turnaround in the kind of books. You know, as the restructured pool also keeps coming out and some more new things keep getting added, overall there is not much of a improvement which is seen right now. The impact of the recovery efforts that are being initiated are kind of getting visible, and we should see some improvement going forward.
That's in terms of the portfolio. Second question as regards your restructured pool. We have a total restructured pool in the housing portfolio, which is about 1,171. The entire portfolio has come out of the moratorium period because the last pool actually got over in March. Now the entire pool is out of the moratorium and the EMIs have started commencing, and there again, there has been a little bit of a, you know, gap in terms of the collections, which again, will be covered in the coming months, because after 18-month gap, when you are again going back to the customers, there's a slight difficulty in them coming back into the, you know, mode or habit of coming to a payment every month. That's what is the issue.
The restructured balance per se is zero, but it's either sitting in NPA or in SMA 1 or 2 bucket or they have started to pay, is it?
Yes, they have started. Those are those who have started paying. There are also a huge amount of regular customers also. Yes, there are some cases which continue to be in the SMA 1, 2, and a few in the NPA bucket also.
So, so.
All of them, the EMI has commenced. The last second tranche that had also been given, which was for 12 months, have also got over and the EMIs have started commencing from April onwards.
Okay.
Karthik, let me give you a sense of restructured book of housing.
Yeah.
Everything is out of moratorium as of 31st March 2022. Of that it's less than 4% which has flipped to NPA of the total restructured pools. 80% is still in SMA 0 or current. The balance 10% is in SMA 1 or 2.
Strictly speaking, out of the INR 530 crore, which was the fourth quarter balance in the housing book, only 10% is either SMA 1 or 2. The balance is either in NPA or has been collected, right?
Which number are we looking at, 500?
At the end of the fourth quarter last year, the restructured book under housing was it something like INR 5.3 billion?
Right.
That you are saying right now, 10% of that, which is basically INR 530 million or so, is still in SMA 1 or 2, whereas the balance either is current or has some of it flipped into NPA, right?
5% has flipped into NPA, rest is current.
Okay, rest is current. 10% is basically still in SMA 1 or 2. Okay.
Yes.
Okay, this is very clear. Thank you very much, Sunil. Thank you very much and wish you and the team all the very best for the remaining quarters. That's all from my side.
Thank you.
Thank you.
Thank you.
Thank you. The next question is from the line of Mayank Gulgulia from SBI Life. Please go ahead, sir.
Yeah. Hi, sir. Just a follow-up question on CBT MFI. Like we will be making application in the month of October when we will be receiving the M-fund from there.
Typically in two months time. In Q3 we should have it in place.
Okay. One follow-up on Assam guarantee scheme. Like, you shared previously that INR 1,500 crore was supposed to come in this quarter, which might get deferred to next quarter. This is for INR 1,500 crore for Bandhan Bank or for entire MFI lenders?
What the Assam government, what we hear, and this of course is from the media reports, right? There it says that INR 1,500 crores have already been allocated for the delinquent bucket. There are three categories, zero DPD, which is over. Second is delinquent, third is NPA. This INR 1,500 crore is for the delinquent bucket, which they have carved out from that budget, and that is for the entire delinquent bucket. And this was to start in Q2, but because of floods, we understand that they will do it in Q3 now.
What will be our share in that, INR 1,500 crore?
About 60% should be our share. Very difficult to quantify exactly, but since our market share then was 60%, we should assume 60% here as well.
Okay. That was helpful. Thanks a lot.
Thank you.
Thank you. Next question is from the line of Jay from B&K Securities. Please go ahead, sir.
Yeah. Hi, sir. Thanks for the opportunity. Most of the questions have been answered. I just wanted to get the total restructuring number at bank level, if you can provide that.
The total restructuring outstanding today as on 30th June is INR 5,800 crores.
Which is broadly unchanged, right? Because last quarter was also INR 5,890 crores something.
No. Unless we are comparing EEB to total because every quarter we recover 5% of the restructured pool.
Because the number that I have for the last quarter was INR 5,890 crores. I mean, if you can share the last quarter, if you have that. Otherwise
About INR 6,150 crores.
Sure, sir. The second question is, sir, on provisions. Total specific provisions at bank level, if I see from gross minus net NPA is around INR 5,200 crore. What is the over and above provisions which are not flowing into the PCR at bank level?
The overall provision that we carry is about INR 8,900-odd crores.
This, a part of this would be such provisions which are, you know, 100% provided, hence. I mean, see the You have given INR 7,600 crores provisions in EEB portfolio.
Right.
This includes specific plus non-specific everything, right?
Yes. Other than the regular standard asset provision.
Right. The total provisions is INR 8,900 crore at the bank level, specific, non-specific, everything.
Yes.
Sure. Last two things, sir, actually. One is if you have the ECLGS number handy, for the bank outstanding or disbursed, whichever way. If you also have the write-off for EEB for FY 2022. This quarter it was nil, the write-off number for 2022.
In 2022 we did INR 3,220-odd crores, INR 25-odd crores.
For EEB, right?
Yeah. INR 3,243 crores.
Sure. Yeah.
What was your next question?
Sorry, sir. ECLGS number outstanding.
I don't have it handy. I'll check and come back.
Sure. Just to double-check, sir, the total provisions is INR 8,900 crore of which INR 52 billion is specific at bank level, so around INR 3,700 crore is non-specific provisions. Is this right?
You can say that, but I will have to check how, whether we've allocated it to a particular. Because we normally have allocated some provisions to restructured customers as well.
Right. What is the provisions against, let's say, INR 5,800 crores? I think you mentioned some PCR on RSA also.
My restructured book of INR 4,661, which is the EEB, which is 90% of the restructured book, against that I have a 75% coverage.
Sure. I think that ties up then. Okay, great. Last thing, sir, on OPEX. There is a clear acceleration in the OPEX growth at a time when, of course, the revenue has been slowing down. How should one look at the OPEX growth for the full year, let's say?
No. We are looking at a full year growth of 20%. So clearly, we don't see a scenario where the revenue is slowing down and the OpEx will go up. There is always a timing difference. Once you introduce the increments, the immediately next quarter gets impacted. For us, the growth comes in the second half.
Sure.
Our OPEX to assets continues to be in that range of 2.8%. That has not gone.
It should not go down, go up also, right? This is what should.
Yeah, it will not. Directionally, it will come down as my portfolio gets big, which typically happens in the second half.
Sure. Understood, sir. Yeah. That is all from my side. Thank you, sir.
Thank you.
Thank you.
Thank you. Next question is from the line of Manish Shukla from Axis Capital. Please go ahead.
Yeah, good evening, and thank you for the opportunity. Just taking first the OPEX question forward. As the business mix evolves towards your target over the next three years, how do you see the OPEX to assets trending?
We, you know, if you talk about three years, we see OPEX to assets at 2.5%-2.6%.
Okay. All right. The second question is on net interest margin. Now, you have the dynamic of changing business mix as well as rising cost of funds environment. How should we think of a steady state or normalized margin for you?
You see, net interest margin depends on the interest rate environment going forward, right? It depends on how the interest rate moves, how much the deposit cost moves, and how much we are able to move to the customer. Broadly, we are looking at in this range of 8% ±20 basis points.
Okay. Despite the rising rate environment and change in asset mix, you think you can hold on to the current level of margins. As the mix changes, you don't see margins trending downwards.
If we talk about FY 2023, yes. Longer term, clearly, the trajectory will be lower, but FY 2023, yes.
Okay, understood. Thank you. Those were my questions.
Thank you.
Thank you. The next question is from the line of Praful Kumar from Dymon Asia. Please go ahead, sir.
Good evening, sir, and thanks for the opportunity. Just, sir, a couple of basic questions. One, Bandhan is known for extremely loyal customer base. Over the last couple of years, there was a lot of turmoil. What has been the customer attrition at the bank level in terms of, you know, customers that we lost over the last two years?
Customer loss is that normally we are losing on a year-on-year basis 9% in normal times.
Mm-hmm.
Out of that, in the 5% we are rejected. 4% they are retired because of the age or they are not likely to take the loan further. This is a normal point of the customer profile.
That's a normal customer attrition?
Yes.
Sir, now you have a significant book that was in the moratorium. There was a significant book that is restructured. In that period, these customers being, you know, not very high on cash flows would need more funds. How does it happen then in terms of how they fulfill their needs in terms of money requirement?
As far as we are concerned, we have given them moratorium restructuring. That's the best we can do. Right?
Got it.
Our policy is one loan, so unless the loan gets cleared, we don't offer further loans.
Correct. That, that's what I was trying to understand, sir. Since it's restructured, it's an NPA, and they will need more cash flow. Generally, there has to be customer attrition, which logically has to be much higher in such scenarios because they will go to somebody else to borrow, and we can't talk it up in terms of, you know, our loans because either it's NPA or moratorium or restructured.
That's one way to look at it. The other way to look at it is, which is what we are seeing, the customer takes more time to repay. Right?
Mm-hmm.
They are under NPA. 73% of them pay, which means they are paying part installments. Similar is the case.
Okay.
For restructuring. They will take longer time to repay their loan.
Got it.
Once they clear their loans, they will be eligible for the new loan.
Correct. They start part p.
There is a connection.
Sorry.
Please. Yeah, please go ahead.
My question is, once they start partial prepayments, can we give them more loans or they have to clear up certain threshold before we disburse them or top up the loans? How it works?
We don't do top up loans, and we have a policy of one loan. Unless they clear the loans, we don't allow them fresh loans.
Got it. All right, sir. Thank you, sir.
Thank you.
Thank you. Next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Hi, thanks for the opportunity. Most of my questions have been answered, but just one clarification around the credit cost, which you talked about, that you're keeping the estimates broadly unchanged for FY 2023. How confident are we on this because if I look at, like, our SMA numbers have doubled on a sequential basis. What gives us the confidence to keep the credit cost numbers almost unchanged?
As I mentioned, my coverage on restructured and gross NPA is more than 75%. On top of that, I have the CGFMU guarantee, and there is a probability on the Assam relief scheme funds as well. The way to look at, if 73% of my NPA customers are paying, 57% of my restructuring customers are paying, we have confidence of recovery from these customers as well. With all of this, I think we are fairly confident that for the full financial year, we should be in that range.
Okay, sure. Thanks so much.
Thank you.
Thank you. Next question is from the line of Param Subramanian from Macquarie. Please go ahead.
Yeah. Hi. Thank you for the follow-up. Just one, you know, data query. The RIDF bonds that you have outstanding, in the annual report you're showing as INR 3,300 crore. What is it currently since you said, you know, in Q1 also you made incrementally some RIDF investments? And what is the margin impact that we are seeing in this quarter because of that?
The current outstanding is INR 5,632 crores. The margin impact on NIMs because of RIDF is about 20-25 basis points.
25-30 basis points. Okay.
20-25.
Got it. Thanks.
20-25.
Got it. Okay. Thanks, Sunil. Thanks for that.
Thank you.
Thank you. The next question is from the line of Hrishikesh Bishe from Money Works for me. Please go ahead, sir.
Well, thank you for giving me an opportunity for this, but I think most of my questions have been answered.
Thank you. Thank you.
Thank you. As there are no further questions, on behalf of Bandhan Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.