Ladies and gentlemen, good day and welcome to Bandhan Bank Limited Q4 FY 2023 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. Vikash Mundra, Head, Investor Relations, Bandhan Bank. Thank you, and over to you, sir.
Thank you, Tanvi. Good evening, everyone, and a warm welcome to all the participants. It's our pleasure to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter and year-ending March 23rd. We will take this opportunity to update you on the recent developments in the industry as well as on 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, Executive Director and Chief Operating Officer, Mr. Ratan Kumar Kesh, Chief Financial Officer, Mr. Sunil Samdani, Head, Retail Banking, Mr. Shantanu Sengupta, myself, Vikash Mundra, Head of Investor Relations, along with other senior management team of the bank. We'll be happy to provide you with any clarity if required from the current quarter numbers and way forward. I would like to request our Founder, MD, and CEO, Mr.
Chandrasekhar Ghosh, to brief you all about our bank's operational and financial performance, along with the development for the quarter and year-ending FY 2023, strategies going ahead, and way forward for FY 2024. Over to you, sir.
Thank you, Vikas. Namaskar. A warm welcome to all of you to the result announced for the fourth quarter of the financial year 2022, 2023. Firstly, please allow me to introduce to Ratan Kumar Kesh, who has just joined the bank as an Executive Director in the role of Chief Operating Officer. With nearly three decades of stellar experience, Ratan has a track record of leadership in operations, including some complex ones like the transformation, automation, customer experiences, quality improvement, and other related functions. Coming to the result, I am pleased to state that the January to March quarter of this financial year was a good quarter for the bank. It was actually better than our expectation. We have seen growth across all parameters. On this, the quarter basis, if I analyze the full year, I think that it has been ended very strong financial year.
All the asset quality has coming back. Within these circumstances, deposit growth has become very strong. I feel that from 2023, 2024, very strong and sustainable growth will come to the future. In quarter four, we see that the 2022, 2023 we bank have increased in the three core customers. Out of that, the 37 lakh new customer added in the financial year 2022, 2023, which has shown that the future growth is very potential for the bank. Coming to this, the advances. Advances, the first point I like to highlight it to all of you on that, our secured book has come 42% in this financial year compared to the last year, which was in a 36%. We expected approximately by 2026 we'll be like to go to this, the secured book and advance 50%.
Quarter four, we have been seeing that as advance has been recorded at 10% year-on-year growth. Asset quality, I'll come to that later also. Next point is there, the way this growth has come and how the diversification of the bank are maintaining. We see that the personal loan, gold loan, two-wheeler loan, and auto loan, which is consist as a retail loan other than housing loan, has grown 233% year-on-year and 110% quarter-on-quarter. The commercial bank vertical, SME and NBFC lending, it has been seen that 72% year-on-year growth and 29% quarter-on-quarter growth. The housing finance book has registered the growth of 13% year-on-year. We have it a little bit, one fact we'll be like to raise in here.
The last quarter, the January and February, we have been shifted from old application of the GRUH to the new application, which is called the LOS system in the bank, which is the FLEXCUBE. It has two months of challenges, it has been little bit hit to my growth of the housing loan. Again, we have been seeing that the last month in the March and April has come back, we are expected this financial year, 22%-25% year-on-year growth will be come to the housing loan. Now to deposit.
Deposit, we've seen that the 12% year-on-year growth has come, which is amount-wise INR 1.08 lakh crore, which is seen that the total business of Bandhan Bank increased in this financial year more than INR 2 lakh crore. I would like to specially highlight that MFI customers contribute is a less than 4% of the total deposit. Due to our focus on the deposit, our CASA has increased 290 basis points higher, which is the 39.3% is in CASA ratio has come in this quarter, which was in the earlier quarter was in a 36.4%. The total CASA deposit has been increased at the 6% and CAR increased at the 35% year-on-year. If I come to this, the another key point for our deposits, we are focusing to the retail.
Retail deposit has come 71% of the total deposit, which was earlier, it was 69%. We have seen a good improvement in the overall collection efficiency. For the bank overall collection efficiency, excluding NPA stood at 98.5% in the month of March, up from the 96% in the March of the last year. A minor improvement from the 98% in December 2022. If I say that the December 2022, we have been seeing that the March 2023 has been 0.5% increase, which is we see that the microcredit industry, it is 98.5%-99% is a normal collection efficiency. I want to particularly highlight that traditionally, West Bengal and Assam have been our largest market for banking unit, which is called the microcredit.
Now markets like UP and Bihar also have the significant promise and are seen in the top three markets, West Bengal 36%, Bihar 14%, UP 10%, and Assam 7%. These are the microcredit portfolio consisting of that. Of the loan disbursement in the last two years, our on-time repayment rate is more than 97%. I am saying that the 2021 and 2021, 2022 and 2022, 2023, whatever the loan we have been disbursed to the microcredit on-time repayment rate means in the same day they are paying the full installment, it is a 97%. Other side we saw that which of the customer received the loan is a 394. All disbursement customers have been paid 99%+ of the repayment rate.
It has been shown this OTR, the pandemic has been over and crisis has been over. New way our credit growth is coming and quality is coming back. Bank has registered a net profit of INR 808 crores for the quarter four financial year 2023, against the net profit of the last quarter, INR 291 crores. For the full year of the financial year 2023, Bank has registered a full profit INR 2,195 crores compared to the last year, which is INR 126 crores. Our net interest income has shown in increase in the 19% quarter-on-quarter, which was seen that in the fourth quarter it was in a INR 2,472 crores, but the third quarter, INR 2,080 crores.
Our net interest margin have been increased 80 basis point from the last quarter, which is now 7.3% compared to the 6.5% is at quarter three. Total credit cost for the quarter four financial year 2023 was in a 2.9% compared to third quarter, 6.4%. Our Gross NPA in quarter four stood at 4.9% and which is that 7.2% in the last quarter. The Net NPA has come 1.2%. Last quarter it was in a 1.9%. It shows that the Gross NPA and Net NPA both has come down from the last quarter. We have already seen significant improvement in our SMA book, which has come down across all buckets.
We have seen 1% increase in our PCR at 76.8%, which was increased from the 70.4% in the previous year. Bank delivered ROA 2.2% and ROE 17% in this financial year quarter four. We have added about INR 14 lakhs to the customer in this quarter. Coming to this, the digital performance of the bank. 94% of the total transaction of the general banking customers have taken place in a digital mode. INR 53 crores transaction took place on UPI through Bandhan Bank. 31% of the retail deposits are coming from the online channels. We have seen very successfully we have been launched new plus digital Savings Bank account. We have that the 30,000 of the tab used to open the bank account with a biometric.
It has been shown us very good, the way we are opening the account and customer will be like to board on the bank. We are working on that. That is a digital sanctioning of the loan asset, retail asset loans, and it will be also successfully running now. Strategy. That we will continue to dominate our traditional basis in the east and the west. While building greater momentum in high potential and premium pan- India markets through targeted geographic diversification, deeper market penetration, localized hiring and leveraging of the Bandhan Bank. Other than this, we are three product are focusing in this financial year, which is newly started in the bank. Commercial vehicle lending, loan against property and government business operation. Among others, these three are our focus area for this financial year.
We are taking multiple steps to drive cross-sell and branch lead sales to grow the retail assets and liability portfolio. We'll fully utilize our branch presence to increase our liability and asset portfolio and also increase productivity for employees supported by digital and analytics. What is the way forward of 2024? Coming to the outlook for the next financial year, that is 2024, 2023-2024, we expected to grow our advances by nearly 20% and a little higher rate of deposit growth will come 2024. We feel that we'll be like to focus remaining strong on the retail segment and diversification. Our CASA ratio, we are targeted on that 40% will be like to full year we find out. We see that the our NIM will be like to 7%-7.5%. We expected our credit cost around 2%.
Over with, we expect a ROA 2.6%-2.8% and ROE 18%-20%. Thank you to all of you to listen patiently me. You have some question, I like to give my best experience share with all of you. I'm confidence on us, and we are doing very good on that. Thank you.
Thank you very much. We will now begin the question and answer session.
Tanvi.
Yes.
Just a second. now I would like to request our CFO, Mr. Sunir Samdani , to give you some more details on the financial parameters during the quarter.
Good evening, everyone. I'll take few minutes to take you to the highlights for the quarter. Few material events which I feel need discussion. Overall, I would say this was a good quarter for the bank, with asset growth and the deposit growth was at a year high. On the asset quality side, particularly the bank did well. On the collection efficiency side, as Mr. Ghosh mentioned, we crossed 98.5%. The Stress Loan Pool came down from INR 56 billion to INR 55 billion. On the DPD movement side, we have seen the overall overdue, you know, the zero plus DPD in the EEB segment. Even without considering the ARC sale, we have seen a reduction of INR 518 crores. The asset quality continues to improve.
This is the second consecutive quarter where we have seen the reduction in the DPD over the previous quarter. I think we'll happy to take the questions. I'm sure you will have few. Happy to take them. Thank you.
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 headsets 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 Mahrukh Adajania from Nomura. Please go ahead.
Hi. Congratulations. Firstly, what explains the flattish interest expense in the quarter? That's my first question. Also, if you could give the absolute number of slippage.
Two things. One is, our cost of fund has remained flat quarter-on-quarter. That's one. While we have seen in the slightly increased quarter-on-quarter the interest expense, largely, we've done well because our cost of fund has remained flat quarter-on-quarter. On the slippage side, our total slippages for the quarter, I'm talking about the gross slippages, is INR 1,118 crores. The recoveries and upgrades is INR 468 crores, the net slippage is INR 650 crores. This is at the bank as a whole. If we look at the EEB vertical, the gross slippages are INR 730 crores, recoveries and upgrades are INR 200 crores, the net addition is INR 530 crores.
Got it. Just on cost of funds, everyone's seeing a lot of pressure on cost of funds. What's a little different for you?
Our mix improved. you know, if you look at our growth in deposits, the growth in CASA was higher than the growth in overall deposits, and even the share of current account improved. That helped maintaining the cost of funds.
Okay. Thanks a lot. Thank you.
Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Prakhar Agrawal from Elara Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. Two, three questions. First, you mentioned about the mortgage portfolio that there was some disruption on growth because of changing core system. Is that activity planned for other portfolio as well? In that context, could there be some disruption on growth? That is my first question. I'll come with second question sometime after.
You know, as we discussed last previous few quarters, the bank is looking at an IT transformation. We are getting a new CBS, including the loan LOS and the LMS system. As part of that transformation strategy, we first migrated our housing finance portfolio, which was in a different system, the Grid System, which our whole group was using. And later on, sometime in Q2, we would look at migrating the other businesses, the entire other piece, to the FLEXCUBE. For us, the reason, one reason why we did it in these two tranches is because we wanted to first have a feel of, you know, the transformation, have that learning of transformation.
With this learning of housing finance transformation, we are confident that the larger transformation that we'll go through in Q2 will be relatively smoother.
20% growth that we spoke of includes of that particular disruptions, if there are any.
Yes, because the disruptions, if any, are not a perpetual disruptions, right? These are one-month distortions. We can always cover that back. Given that now we have the learnings from the housing finance transformation, we are that much more confident now.
Got it. The second is on the slide, seven that we spoke about.
Prakhar, Ratan would like to add here something.
Yeah, sure.
I'll repeat little bit what Sunil said. First of all, we have a learning from the housing finance that we will utilize for the next tranche. More importantly, there may be disruption for few quarters, but the transformation will more than offset that in the subsequent part of the year and therefore we don't see any disruption from the overall period of time for the whole financial year.
Got it. just on the EEB stress that you probably said about INR 55 billion outstanding as of March. When I look at your SMA two number in there, that number has not yet declined. any particular reason as to why that number continues to be sticky? I'm just particularly talking about SMA two number in that pool.
It's at 2.4%, right? It has come down, so to speak. Yes, you will always see some, forward flows.
That forward flows, the forward flows has declined or probably that intensity of that forward flow remains probably an elevated number?
When I say that SMA zero, one, two, and NPA put together, we have seen a reduction of INR 5 and INR 8 crores without considering the ARC sales, clearly shows that the asset quality is improving and the forward flows are coming down.
Got it. Just one last question from my side. When you talk about CGFMU recovery and you say that INR 11 billion is expected in Q1 and INR 6 billion in FY2025, why is the timing different? When you talk about credit cost of 2%, does that include this INR 11 billion that you probably expect to recover?
As you all aware that we can claim only once in a year. While the total eligibility for us stands at INR 17 billion, it depends on the timing. If I claim this in October month, I can claim the entire INR 17 billion together, right? If I need to claim it in the first quarter, then the eligible pool is only INR 11 billion. That's how we are spreading it into the two tranches. What was your next question? Repeat.
The credit cost that you guided, that you gave about 2%, does that include this INR 11 billion recovery that is expected in Q1?
No.
Okay.
Which means I'm not taking the benefit of this INR 11 billion.
Got it. That is it from my side. Thank you a lot. Thank you.
Thank you. The next question is from the line of Yuvraj Choudhary from Anand Rathi. Please go ahead.
Thanks for the opportunity. I have a couple of questions. Firstly, EEB saw strong growth in disbursements during the quarter. Were there any specific states, regions where the growth was strong, or was it a broad-based growth across regions? Would be helpful if you could throw some color on that. Secondly, if possible, if you could provide average ticket sizes of our EEB book.
Yes, the growth firstly has been broad-based. Tactically, we've been slightly lower in terms of growth in the state of Assam. Other than that, you know, we've been growing across all states. We've identified few states which are the growth areas for us. Particularly growth in those states will be higher. States like UP, Bihar, Telangana, Andhra, Madhya Pradesh, Gujarat. These are the states where we see huge potentials, and we are opening branches in these states. The incremental addition to new customers are also increasing in these states. That's how their share, you know, Mr. Ghosh in his opening speech mentioned that if you now look at the top five states, it's West Bengal, followed by Bihar, with and then UP, and then comes Assam.
2 years back you all remember it used to be West Bengal, followed by Assam. That's how this diversification to the new states have happened.
Thanks, sir. Sir, if you could also possibly provide average ticket sizes of our EEB book.
On the disbursement side, our average ticket size is about INR 50,000, for the group loan, and about INR 120,000 for the individual loan.
Okay, sir. Sir, last question. Our CD ratio is now almost at 97%. Is there a target CD ratio we have in our mind?
Sorry, you're talking about CD ratio?
CD ratio. Credit-to-Deposit ratio.
See, given our capital base and our portfolio which are eligible for refinance at an attractive rate and at we get a longer tenure of funds also from these refinance companies, we believe the CD ratios for us should be in this range of 95%-97%.
Okay, sir. Yeah. That was helpful. Thank you.
Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star followed by one. The next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead.
Hi. Good evening, Mr. Ghosh and Sunil and everyone. Bunch of questions. Just to start with, the slippages, Sunil, EEB, you said about INR 700 crores, and the residual is INR 400 crores. Can you give me further split between, within EEB, what's the group slippages and what's the individual? That's one. Second is, within the non-EEB, which segment would be contributing to those slippages?
firstly, the overall slippages in the EEB in Q4 was INR 730 crores. split, I will get it, but broadly it's in the proportion of the portfolio that we have. The non-EEB slippages is INR 388 odd crores. If I have to break it into the four key components, the SEL, the small enterprise loan, which is part of our commercial banking here, that stands at INR 66, the gross slippages. recovery is INR 18, the net slippages is INR 48. SME, which is the BBG and the MMG together, the gross slippages was INR 68, recovery was INR 49. This was more of a technical in nature, that's why, the slippages and recoveries both are higher.
housing finance, because of the disruptions for 1 and a half months that we saw, we had again, a technical slippage of INR 231 crores and a recovery of INR 191 crores. Because of that transformation, we had 1 month of slippages, but it again came back to normalcy in the next month. The retail is the balance small amount.
This 191 is already part of upgradation and recoveries in this quarter? Within the quarter?
Yes. Yes.
Okay. Fair. That's helpful. Second is on the provisioning strategies. We talked about a 2%. You're not taking the benefit of INR 1,700 crore. That will be over and above 2%, is what you're guiding for?
Yes.
What I mean to say is the income comes in and you take it in the provisioning line or, and top of it you've got 2% provisions.
Yeah. But, see, there will not be any P&L impact for that.
Yes.
When the CGFMU money comes, right, I have to necessarily allocate it as provisions of NPA. Right, we will have to do that at the accounting wise. The idea here is to not utilize that money and keep it in the balance sheet. We will have to see how do we again re-provide it, whether as the standard asset provision or as the contingent provision. At that stage, the board will take that call.
Got it. Okay. Whatever, you know, INR 1,700 crores could be applied towards building contingent provisions or standard asset provisions for future use. Is that understanding right?
Yes.
Just one more point, wanted to understand on what's the existing contingency provisions that we have right now, apart from the specific provisions?
You know, if you see, we have increased our PCR. Right?
Yeah.
It has gone up from 75.5%- 76.8%. Essentially large part of these provisions we've allocated to the customer accounts. The additional provision other than the specific provisions will be a small amount of about, you know, INR 500 odd crores, which is the additional standard asset provision over and above the RBI requirement.
Okay. Okay, that's helpful. Just one or two last questions. The sell-down, I think which you've done about close to INR 5,000 crore, which buckets would those be from? Of course, two and a half is I think write-offs, but remaining two and a half would be from what buckets? If you can just help elaborate that.
They were NPAs.
Okay. Okay.
Yeah. They were all NPAs. We did INR 2,614 crores from the technical write-off bucket and INR 2,316 crores from the NPA bucket.
Got it. Got it. All right. I think that's very, very helpful. One last question, small bit you talk about the EEB loan portfolio, which now has West Bengal, UP and Bihar being the top three contributing states. If you can also help us with the mix of what is it as of today and what was it, let's say, a year back, just to get some color around the diversification strategy within the MFI book?
Yes, I'll come to that. I'll get that number. In the interim, you know, I just want to extend the previous conversation on the ARC sale. Right, the portfolio we've so done the ARC deal in two tranches. One, we did it in the December quarter and the other one in the March quarter. Just to give you an update how the recoveries are panning out on that whole.
Mm-hmm.
Total recoveries that we have made on the portfolio that we sold in the month of December stands at INR 342 crores. Right? We had taken INR 414 crores from the ARC and the investor. We've already recovered from the customer INR 342 crores. The reason this is important is because once we repay the ARC and the investors along with the assured IRR, the entire recovery comes to the bank.
Okay.
So that's, uh-
Yeah.
That's, update on the ARC pool performance in terms of how are we recovering money from that pool. To your question on, what has been the, share of...
Top three states, Bengal, UP, Bihar.
Yes.
versus last year. Yeah.
Let me tell you. In March 2022, my Bihar was INR 6,900 crore on a book of INR 62,400 crores, which is now INR 7,900 crores on a book of INR 56,900 crores. UP was INR 5,320 crores on a book of INR 62,400 crores in FY 2022. Currently, it is INR 5,729 crores on a book of INR 56,800 crores.
Mm-hmm.
West Bengal was INR 25,315 crores on a book of INR 62,400 crores in March 2022. Currently at INR 20,364 crores on a book of INR 56,800 crores.
Got it.
I don't have the percentage ready. Instead of calculating, I thought in the interest of time, I'll be able to.
Sure.
have it.
That's very helpful. Thank you so much, and I wish you all good luck for the future quarters. Thank you so much.
Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Himanshu Taluja from Aditya Birla Sun Life. Please go ahead.
Hi, sir. Thanks for the opportunity. Just couple of questions at my end. Firstly, sir, a few questions on the asset quality. Given you have highlighted that we are from the MFI book, EEB book, we have seen a slippages of INR 700. If you can just further give a breakup in terms of how much you are seeing from the incremental book and the existing stress book, how are we seeing those trends? Secondly, from your total stress book of INR 55, which has come down from INR 76- INR 55, some bit of apart from the ARC sale as well, how we are going to see this increment in the coming quarters? That's my first question.
Yeah. Coming to your first question, INR 730 is the gross slippages in EEB. About 99% is from the existing stress pool, which is EEB 1 and.
Okay. Hardly something has contributed from the new business, from the recent business.
Yeah. I mean, unless it's a non-starter case, you can't have a situation where a zero DPD customer becoming NPA in one quarter.
We just wanted to say how is the collection trends of the new business, basically.
That Mr. Ghosh told in his initial update.
If I say that on the last year, whatever we are disbursed the loan, last year means 2022-2023. The out of those loan, they are paying us 99% plus. That means if I say that this is the slippage has come, this is not from the 2022-2023 disbursement customer. This is the one cost.
Sure.
2022, 2021, 2022 customer who received the loan and 2022,20 23 received the loan, that together it is a 97%+. That very few people have come from this. If it has come from, then it is coming last to last year, not to the last year.
Sure. On this pool of 76%- 55%, how one should expect this in the coming quarters from now probably?
See directionally we've seen this risk pool coming down, and that should continue. The good part is that there is no element of any, you know, doubt in terms of coverage there. Because of the INR 55 billion, we have INR 38 billion of coverage and INR 17 billion of CGFMU. Whatever we recover will help us reduce the pool, the stress pool. We are at a quite comfortable position here.
Sure, sir. second is on the growth when you're guiding for a 20% sort of a loan growth for FY24, where housing is expected to grow 20%-25%. What is in your estimates for the MFI business? secondly, how much you are seeing this growth of MFI business will be contributed from the new borrower base?
If you see that the MFI growth will be expected in the 17%-18%, and this is one. Second point on that, always we've seen that the new customer is coming to this MFI book is in 10%-12%.
Clear, sir. Thanks. Sir, last question is around your deposits. how are you seeing the retail deposit traction, and how one should expect these trends, probably the CASA ratio, probably the retail deposits, how you are seeing the trends for the coming year?
We have Shantanu Sengupta. I'll request him to take this.
Thank you, Sunil. Thank you for the question. Look, our outlook for deposits for FY 2024 looks quite robust because we have over the last many years seen consistent growth in our deposit book. We have, we have done some specific interventions in the portfolio to make sure that our percentage of CASA goes up. Therefore you can see that in our CASA ratio. Our outlook for 2024 remains quite strong in terms of growth. We would focus on granular growth because of the fact that we have a network which we are expanding, and we believe that we will get value from those incremental branches. We also have, you know, invested in, you know, specific segments that will help us bolster the growth on the savings and current account side.
We also are looking at reinvesting into the business banking proposition so that we can focus on current account. Our outlook would be strong. We believe that the focus would be on CASA, current account, savings account growth, and that's what we're going to look forward in the coming year.
Sir, anything that you want to highlight from a new initiatives that you have taken to improve your liability franchise? That's my last question.
There are two or three things that we have done. One, we, you know, we are coming up with new branches as we mentioned last time. That is coming up. We've already got, you know, we had a plan to open 561 branches. Over half of that is already done. We expect the balance to come in by end of this quarter or maybe spill over to the next quarter. That's one. Two, we are also invested in the digital platform, and we believe that with the investment of, you know, account onboarding being completely digital, we expect and anticipate the growth to come in those, you know, on those lines. We believe that with good customer journeys, we will be able to get, you know, deeper into the customer wallet.
Those are some of the initiatives besides what I already spoke about, which is on, you know, the new segment that you're looking at.
Sure, sir.
I'll add one just line with what Shantanu said. Given that we are going ahead with our technology transformation, the new core banking system will enable us to launch many more new products, which will not only improve customer experience and transaction capability, but the new product lines will build more stickiness and more hooks for the customer to bring more deposits to us.
Sure, sir. Thanks.
Thank you. The next question is from the line of Param Subramanian from Nomura. Please go ahead.
Hi. Thanks for taking my question and congratulations on the quarter. Firstly, again, you know, picking up from the last question, you know, Mr. Ghosh, in your opening comment you highlighted that, you know, government business is going to be a key area of focus for the next year. Could you highlight, is there something in the pipeline, especially on the deposit side, since, you know, you put out a guidance of 24% deposit growth for next year, which is, you know, substantially higher than this year. Some color on the government business that you're talking about. That's my first question.
Yes. I ask it to Shantanu, will be like to give that details.
Okay.
Thanks. It's Shantanu.
Yes, government segment will be an important segment of growth. We have invested in our people, so we've created a separate vertical with expertise across across the market. This is a specialized function and therefore we have the right skills right now available.
We have, we are investing in a platform to make sure that we can act as agency bank for some of these government organizations. We've also seen some success coming in through, you know, empowerment with some of the government agencies across the country. I think, you know, we have, this is a great choice that we've made because this is one area that we do believe has quite a few upsides. I do think that this particular segment will add, you know, value to our overall deposit sizes. Just to add one more thing to this, we obviously will have features and benefits for this particular segment. Some of that includes tax collection, et cetera.
The value-added proposition around this segment is something that we are also working on, so that we get the right impetus and we go forward, specifically for this segment.
Got it. That's helpful. My second question is on the MFI portfolio, you know, how much of this... We took that, you know, rate hike around, you know, November of last year. How much of the MFI portfolio has repriced upwards? You know, some rough color on that and, you know, how much more to go in terms of the lending yield, you know, picking up further on this book?
We had taken a 300 basis point increase in the last financial year. Starting 1st April, we've further taken a 100 basis point increase. To your point on what percentage of the portfolio is repriced, typically, you know, given our portfolio of about INR 57,000 crores and the disbursement of the last two quarters, we've I would say close to 60% is what which has got repriced.
Okay. Okay. You have 100 basis points further increase starting from April. Got that. My last question perhaps, on slide 14, you know, you called out this OD against FD, or the overdraft against FD. What exactly is that, you know, sequential uptake? If you could give some color on that. Yeah. That's it from me. Thank you.
These pertains to few large deposit accounts where they had taken loan against fixed deposits at the end of the financial year. These are very short-term loans. That's why we wanted to highlight that this is not something which is a focused area for us, but it comes with customer request. Since this is a very short-term in nature, we thought prudent to tell that these are short-term in nature.
Okay. Sunil, are these chunky accounts? Yes.
Yes. As I said, these are few accounts. These have been with the bank for the last two years.
Okay. Got it. Thank you, and all the best.
Thank you. The next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Hi, sir. Sir, if we look at your SMA, you know, one, zero , one, two, so we are at about 5.6%, when your collection efficiency has been ranging between 90%, 70%, 98%. Fair to say that on a normalized basis, this number needs to settle to 3%?
Yes. When do we reach that normalization?
Yeah.
Is it Q3, Q4? Is it something that we'll have to debate? You are right. If my collection efficiency is 98% and all of this is full-paying customers, then ideally, the delinquency should not be more than 3%.
Okay. Understand. In your credit cost guidance, you would be assuming this 3%, right, in your next credit cost guidance?
Yes. Yes.
Okay. Okay. Got it. The last question, sir: How should we think about your non-interest income? If you can give some breakout of your non-interest this year, hopefully I listen.
Non-interest income, you know, if you look at the key contributors, the top three, four. One second. Let me just get you that. Yes. The highest for us is always the processing fee. In this INR 629 crores, INR 300 crores was the processing fee, followed by third-party product distribution of INR 134 crores. The third, you know, now that we sold our portfolio to ARC, you know, the recoveries from bad debts or the return of account, we can't account for it. We have to park it in the liability account to repay back to the ARC. What we get is the collection charges on this portfolio. The third contributor is the collection fees on account of collection from ARC portfolio, which is about INR 55 crores for the quarter.
Okay. Is there any chance that the SLP income recovers next year or?
We are not budgeting for it. There is always a possibility, but we are not budgeting for it.
Okay. Thank you, sir.
Thank you. The next question is on the line of Manish Agarwal from PhillipCapital. Please go ahead.
Yeah. Congratulations, team. Just data digging, a quick question. Would you like to call out what is the outstanding standardized provisioning apart from INR 500 crores which you mentioned?
Yeah. INR 488 crores.
Apart from INR 488, INR 500 is the additional standard provision, including standard restructure, correct?
No. Standard restructure is part of INR 488.
INR 488 and additional INR 500 is the contingent provision so-called.
Yes. What we do is.
Is it increased 0.25% or 1%?
This is 0.25%. It might be normal. 0.75%. What we do is we provide 1% on the micro-banking portfolio or the EEB pool. The regulatory requirement is only 0.25%. When we say our standard asset portfolio, including a standard asset provision, including the restructure is INR 488 crore, we are considering only 0.25%, which means 0.75% goes into the additional provisioning bucket, which is where it becomes INR 500 crore.
Okay, understood. Understood. Coming back to the short-term loan on TD. You know, in one quarter, if I were to look at, there's a huge jump of almost 6-7% of your retail TD equivalent to that. I noted that you mentioned that some key account. Are these non-retail account or these are retail accounts?
No, these are not retail accounts. The balances here is more than INR 2 crores.
I would understand that not any amount of this will be part of our current deposit in any which way.
No, not really. It's a loan which has moved out of the bank.
Sure. Sure. Got it. Thank you.
Thank you. The next question is from the line of Anand Dharma from Emkay Global. Please go ahead.
Yes. Thank you for the opportunity. For the exposure that we have of INR 55 billion now, if you look at the flow which happened to the current NPA market, particularly in the current quarter, the gap is just about INR 400 crores. What explains the balance?
Sorry, Anand, I didn't get that question.
Basically your SMA 1, SMA 2 pool, if you reflect, which was there in the third quarter versus what you reflect now. For last quarter it was about INR 25 billion, now it is INR 21 billion. There is a reduction of about INR 4 billion that we see in the SMA 1 and 2 pool. I believe this INR 400 crores are actually shifting to NPA in the current quarter. Right?
Yes. See, you can't really pinpoint, which customer has moved where. If you look at overall positioning, as we mentioned, the zero, one, two and NPA put together, there is a reduction of INR 5 and INR 8 crores without considering the ARC sales and NPA.
Okay. these slippages from the pool would have been higher, and then there would be a fresh flow of, you know, test consumption as we come into the SMA one to box. Is that right?
No. The recovery is also there, no, because there will always be a normalized slippage. There will always be recoveries from this. From zero, you know, from a DPD pool to the current pool. The recovery from DPD pool to the current pool is higher than the slippages from current to DPD pool. That's how one should look at.
Okay, sure. Secondly, Assam Relief.
Sorry.
Yeah. The Assam Relief Scheme basically... Sorry.
Yeah, go ahead. Go ahead.
Yeah. I was asking this second question. The Assam Relief Scheme, you know, we've been hoping for a recovery long, long now. When is it really going to come? Is it gonna come in 2024 or basically we do not expect that to come now in terms of it?
Yeah. It is very difficult to comment on anyone else's behalf. Since, you know, as a bank, we were very clear, this is not a right for us, right? Unlike CGFMU or ECLGS, right? This is kind of a grant.
Yes.
We have not budgeted for it, but we are positive that money will continue to flow from Assam government. Quantum and timing is very difficult to estimate.
Is there any procedure, you know, difficulty from the entrance side or from the bureau side that basically government is willing to pay or like, right now, they have not budgeted for this and that's the reason they are not paying?
You know, as I said, I'll not be able to comment that because I'm not in a position to know that.
Okay. Thanks.
Thank you.
Thank you. The next question is from the line of Jai Mundhra from ICICI Securities. Please go ahead.
Yeah. Hi, good evening. Thanks for the opportunity. Sir, I just wanted to get the number of total provisions outstanding. We have a specific provisions of around INR 4,000 crore, you know, and we are given some numbers which include restructured and some contingent. I just wanted to check, what is the total pool of specific I think we can calculate is INR 4,070 crore, but what is the number outside that?
INR 5,080 crore is the total provision in the books.
Sure. sir, if you can also specify, we have the total net NPA at INR 1,228 crore. How much of that would be in EEB? Just to understand that, you know, once. Yeah. what is more or less done and what is remaining?
That NPA of EB. Typically we have a 84% kind of a PCR ratio in EB, but I'll still check the exact number for you in terms of net NPA.
This is important. Sure. The last question is to Mr. Ghosh. Sir, we have added Mr. Kesh to the board. I mean, the bank has added one Executive Director. I wanted to check if there is any plan to add more or, you know, if there is any. Yeah, that is the question. If in the near term, do you envisage any more changes at the board level from management perspective, management executive perspective?
I earlier also mentioned, I have to repeat on that. That is in last year, board had been decided that two executive directors will be like to be taken. One for the non-business, one for the total business. Non-business already we have hired. It is Ratan Kumar Kesh already joined on that and we are now processing for the next one, which is the total business, looking by one executive director, which helps us to future growth of the bank
Right. It should be, let's say 1, 2 quarters. It should be in this financial year, let's say.
Yeah.
Is there any time hope here?
No, this is in this financial year.
Sure. Thank you and all the best.
Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Pankaj Agarwal from Ambit Capital. Please go ahead.
Yeah. Hi, Sunil. Am I audible?
Yes, yes, Pankaj, go ahead.
Sir, if I see your total stress pool in SMA, that really it has come down by around INR 400, INR 500 crores. If I look at 0-day-90-day DPD, it seems still there is a forward flow, right? Though there is a INR 500 crore reduction, but there is a INR 500 crore of forward flow as well, right? Given that now recoveries are picking up and we are seeing a lot of customers are paying, you know, partially paying or fully paying, right? Don't you think this forward flow should have stopped?
No, no. Ideally, we would have loved to have a zero forward flow. In any business there will be a steady state credit cost. As we have highlighted that the 2% would be a credit cost what we are looking at for this financial year. Accordingly, you know, the slippages from the current pool to the delinquent pool is well within that guidance range.
If I look at the reduction in this 0-day- 90-day DPD, essentially half is forward flowing and half is basically going out of the pool. Is it fair to assume that out of remaining 3,200 crores, you know, half of this would flow to NPA next year?
No. It's not that straight calculation. You know, it all depends on the environment, our ability to go convince the customers. We are focused. We would want to, you know, and we are seeing the environment improving, customers coming back. We don't want to put that number today. We've given a number on the credit cost side. We'll stick to that. The endeavor is always to be closer to customers and collect as much as possible.
Okay. Secondly, on your OpEx, if I see your OpEx ratio has gone from 3%- 3.5% over the last one year with cost to income going to up to 42% now. Do you think it's the peak or it has further scope to go up, next year?
I would say this is peak, but for it to come down, it will take a year or so, because we are still in investment mode, whether it's transformation, branch expansion, new business development. We don't see it going beyond 42%, but to go back to that 35% will take a year or two.
You think, this business can be done below 40% cost to income ratio on a sustainable way?
Yes, it can. Yes, it can be.
Okay. Thank you. Thank you.
Thank you. Participants, if you wish to ask any questions, you may enter star and one. The next question is from the line of Prakhar Agarwal from Elara Capital. Please go ahead.
Hi. Thank you for taking the question again. Two things. One is in terms of when I look at what you said in terms of funding cost being steady on a Q-O-Q basis. When we see why last quarter when we saw a decline in size, there was a rationale that probably a lot of guys have moved from star to retail TD. What has changed in terms of customer psyche or from bank side that we saw such a large attrition in star base essentially? Second, how do you look at funding cost moving from here on?
Let me start and Shantanu can add. Firstly, you know, nothing materially changes in three months, but what has surely changed is the pace of conversion from SA to TD, right. Typically, when the interest rate environment turns, those rate-sensitive customers wants to move from saving bank to the time deposits. Once those rate-sensitive customers move, the incremental flow towards TD from SA reduces, right. The pace of flow reduces, and this is what we have seen in Q4. That's how I will look at it. Shantanu, if you want to
No, I think that you've covered that. Yeah.
That's about it. Yeah.
The second part, how do you see funding cost moving forward if, assuming that RBI does not make any changes to the system rates, how do you think your funding cost moves from here on?
Directionally it will go up in this financial year, right? We are looking at, you know, at the end. Actually, it's very difficult to put a number, but I would say directionally, quarter on quarter till next two quarters, the cost of funds should go up because the repricing of TDs, if that happens, will happen at a current rate, which is a higher rate. From there on, we will have to see how the interest rate environment goes, and accordingly the cost of funds should move. On the same side, our yield on funds will also go up. The good part is, we face the difficult time having 70% portfolio on a fixed rate.
In an increasing interest rate cycle you tend to lose because the cost of funds go up faster and the yield on advances relatively remain flat. When the cycle turns, we would be the beneficiary of it, right? It's, Let's see when the cycle turns and that should help us.
Got it. What is our rate on MFI after the rate hike that we have seen after April first? Also we have taken 100 basis points of rate hike. What is the sort of rate that we are offering on MFI?
22.95%.
Are we still the lowest or probably in the Because we claimed at some point in time that we are the lowest in terms of that?
Yeah. We are the lowest.
Got it. That answers it. Thank you so much.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.
Thank you, ladies and gentlemen. Thank you for your time.
Good luck and good evening.
Thank you.
Thank you to all of you.
Thank you.
Thank you.
Thank you very much. On behalf of Bandhan Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.