Good evening, ladies and gentlemen. We sincerely thank you for spending time out of your busy schedule and, of course, quality family time. We also thank your families for sharing the stress of you reaching home a little late today. Thank you so much. Meeting investors and analysts have always been part of our endeavor. We are in process of fine-tuning this process. Please note, this is a journey, not a project. We will keep improving, we will keep improvising. We get valuable insight from each one of you, and sometimes to our surprise and delight, we realize that you know our numbers as good as we know, and sometimes better than what we know, if it relates to hair splitting. We meet and discuss with analysts and investors. We meet analysts who are bullish about us.
We also meet those analysts who are not so bullish about us. We meet and discuss with those who are invested in us. We also meet those who have left us. People who have invested their money and have paired their fortune with us must have dived deep and taken note of our past, present, and must have discounted our futures also. We appreciate that. In many ways, this great community of analysts and investors have shown us mirror on many occasions, and it keep helping us. Two-way feedback help us to build a bank which is consistent, predictable, and sustainable. Broad contours of this program will be as follows. Presentation by CFO, Mr. Ravi Kumar, followed by presentation by MD and CEO, Mr. Praveen Kutty, highlighting important landmarks and important pit stops, and question and answers.
After Q&A, we will proceed for our dinner, and we request your participation in Q&A. A well-worked questions and answers thereon benefit not only the concerned person or persons, but analyst and investor community in general. It also help us DCB management to discover some of the facets of financial landscape which may not have come across or which may not have thought through. We would like to inform you that our senior management team is here. You can interact with them during the dinner and discuss different aspects of the bank. They are actually the people who run the bank on shop floor. A brief introduction of our senior management team, not in any specific order, will shortly appear on the digital wall. Idea is to introduce those people to them. Vikas, can you run this? Sorry. Sorry, it is coming with a lag.
I think I am pressing a little faster. These are our senior managers. They will keep interacting with you after this is over. Now I request Ravi to join with his presentation. Thank you.
Am I audible?
Yeah.
Thank you, Ajit. It's my absolute pleasure to be welcoming you all for this first-ever investor meet of our bank. I'm sure the entire management team also joins me in welcoming you all for this meeting today. I want to start by saying that you are a very important stakeholder for us in this, our journey, under leadership of Praveen, in our next growth phase. We interact with some of you more frequently than others, and we take your feedback and inputs seriously, and take actions wherever it's possible to do so. Since Praveen took over about six quarters ago, he embraced the philosophy of this bank in terms of its core DNA and what we stand for. He also made a few changes.
He also made a few changes, which he believed that will take us into the next or propel us into the next phase of growth. I would like to call this phase as readying for take-off. What I'm going to do in the next 20 minutes is take you through the financial impact of some of the changes that the bank has ushered in over the last six quarters on some of the critical financial ratios. Now that the engines are rolling, the seat belts are buckled in, seats are upright, the tray tables are tucked in, we are now on full throttle for our take-off. What I'm going to also do is to give some context and background.
I've picked up about 12 ratios, which I'm going to talk about today, to drive home the point of how this change has impacted, or what is the impact on the financials of the changes that we have done in the last six quarters. These are critical ratios cutting across growth, product quality, portfolio quality, profitability, and return ratios. To give you a context and a comparative benchmark, I looked at our own history. We have 15 years under Murali and now with Praveen. I looked at 15 years to say which period in this 15 years journey we were consistently, or as a bank, we attracted a good price to book value. Why am I doing that? It is because with all the quantitative and qualitative inputs that we have, eventually it boils down to the value that is there in the market.
You guys understand this better than I do. So we looked at what is the best phase for us, and then I looked at what these 12 ratios that I'm going to talk to you about today in that particular period, which I'm going to call it as a reference period. Fine. So that will give you one comparison of current ratios versus the reference period for the bank, where there was a value that is a decent price to book. The second comparison I'm going to give you is, across the industry with other banks. For the purpose, I looked at private sector banks, which are of our size or thereabouts. I'm not going to call them peer banks because there's a difference of views on who's peer, who's not, depending on when or in which context we're talking.
But I am going to call them as comparable banks. These are banks which are less than INR 300,000 crore balance sheet size. That is the second reference point. The third reference point obviously is the quarter-on-quarter movement of these ratios on the six quarters that we had. This is the 15 years period where we looked at our price to book. If you notice the yellow pillars in that histogram, this is a phase when from Q4 of FY 2016-2017 to just before COVID, Q3 of 2019-2020, we were above 1.5 price to book every quarter on a consistent basis. So 12 quarters where it was in that range. You will see that around this, there are other quarters where also the PB, price to book, went up and down, but I was looking for consistency.
There was a peak of 252, but the 12 quarters is where, as I said, is our reference period for today's comparison. What are the 12 ratios that we are going to talk about today? We are obviously going to talk about growth, both on deposits, very normal thing to do. We are going to talk about the yield advances, Cost of Deposits. We are going to talk about portfolio quality in terms of gross NPA credit cost. Of course, NIM also is a derivative there. We are going to talk about cost to average assets. We will look at operating leverage. How I define operating leverage is the rate of growth of operating income to rate of growth of operating expense. So every one basis point of operating expense, what is the corresponding growth in operating income? Of course, a favorite ROA and the ROEs.
For sake of completion, I have price to book here, but I would refrain from talking about it. That is for you to talk. Okay? But it is an important item, and we got it there. Let us look at in the reference period. I do not know if you can see the pointer there, but this is a simple average of growth of advances in that reference period of 12 quarters. Please remember this because we go to the next slides, you will see how this pans out. Growth in deposits, we have been growing 20.5% in the reference period. Our yields were at 11.46. Our Cost of Deposit in that 12 quarters was 6.63. Some of this may be from a, you may want to say that, "Listen, the environment was different then. The repo rates must have been different."
But I get all of that, but this is just a comparison in that sense. The NIM was 3.94. The gross NPAs were at 1.87 sub two in that reference period. Our credit cost was 50 basis points. We were clocking in a cost of average assets of 2.72, and an operating leverage of close to 1.6, with a ROA of 0.96 and a ROE of 11.3. You do not have to really work hard on remembering this because I have these numbers again repeated in the subsequent slides. How did we fare in the last six quarters in these total ratios?
And as I said, for every number, I will give you three-way comparison, except for yield on advances because, I personally do not believe that I have a relative comparative bank which has a 94% secured book and a granular book as we have. So it is a very different and difficult comparison. What we will compare is the NIMs, because ultimately it boils down to NIM. So for yield and Cost of Deposits, I may not have the bank comparison, but for NIM, I definitely would have. Let us look at growth on advances over the. As I just said, in the reference period we grew 21.17%. And the last six quarters we have been growing at the last 24.17% in Q4, 18.90% in Q1 of last year. But where I want you to draw your attention to is the yellow band at the bottom.
Hope people in the back can see the entire numbers. Are the numbers visible in the back? Yeah? All right. I think there is a screen on your both right and left as well, just in case. So if you look at the yellow band and randomly look at any of this, t here is a good 4%-10% delta between the averages of these 10 bank versus DCB Bank. And the delta is in our favor. We grew at a much higher rate than these 10 banks put together. And the average for these six quarters is about 21%, which compares favorably with the average in the reference period of 21.17%. Growth in deposits. Again, the similar story unfolds here. If you look at the comparison with other banks, the so comparable banks, and look at the delta, it is somewhere between 6%-10%.
And this is coming within a very difficult phase. At least in the last four quarters, deposit has been a struggle. We have achieved a growth rate of close to 19%, 20% without altering the structure of our deposits and reducing the Cost of Deposits in the last two quarters, which you will see in the subsequent slides. So it has been a lot of hard work from our branch banking team, and you see the reflection. The market has grown at, for example, in the last quarter, the 10 banks put together grew at 13.2%, whereas we grew close to 19%. Let us look at how the yield on advances have panned out. In the reference period, as I said, I am not going to give you the comparison here of the other 10 banks, the comparable banks.
But what is good to see is how we were in that reference period. We were at 11.46. And you look at the histogram of the remaining, the last six quarters, they are more or less around the same range. If in fact the last two quarters, there was a repo cut in February, started from there, the series of repo cuts, 100 basis points of repo cut. And how much did we shed? I mean, we were at 11.54 in Q4. We are at 11.11 in Q2. This is coming in the backdrop of 100 basis point cuts in repo rate. You would have heard our MD and CEO say in multiple earnings call that this bank will not chase high-yielding assets just to enhance yields. That is not our DNA. That is not what we stand for.
And you will hear from Praveen in his presentation on how the bank will move forward on these matters. But what will happen is the yield enhancement will come through a very, very hard steps of product mix change. We speak about changing the mix from HL to LAP. So that is something that we will continue to do. This is my favorite slide. I really love this story and my branch banking team knows this. Cost of deposits. For us to grow deposits in a very, very tough environment, with a growth delta of close to 10% against the average comparable banks is no sort of a miracle. And to do that by reducing cost is a fantastic achievement. The last two quarters, our cost has gone from 728 to 696. And you all know this. We are a heavily term deposit sourcing.
I mean, our deposit side of the mix contains a lot of term deposits, and the repricing benefit will continue to flow over the next three to four quarters. So in the reference period, we were at 663, we are at 696 in the last quarter. And how the remaining quarters will unfold, I would request you to wait until Praveen has a say on it. On the net interest margins, the comparables are back. If you notice, the yellow band is back. So, we were at 394 in the reference period, and we are at 323 now. And we have said that the Q2 is bottomed out and we expect a NIM uptick from here onwards, primarily because we expect the repricing benefit on cost of deposit to flow through. But that is not the only reason why there will be an NIM uptick.
I also want you to focus on comparables with other banks. And you see across the bank, across the quarters, there is a delta between us and the average, which is not in our favor. And I want you to register that in your mind, and I will talk to you about this when I get to the credit cost slide. Gross NPAs, in the reference period, we were sub 2, and we are at 291, which by straight looking, you might see there is a big task ahead of us. But what I want you to look at is the trajectory from 333, 329, 311, 299, 298, and 291. Six quarters consistently, some action has happened and gross NPAs are the trajectory of this is in our favor. Having said that is not what we aspire for. There is an aspiration, and that has been spoken about.
If you look at our earnings call, there is a commentary on what our aspiration is and where we want to be. Well, it is quite interesting if I move to the next slide. And before I do that, not only between the comparable reference period and now, but also with reference to the comparable banks, we have a delta which is not in our favor. So please register that then. But look at this slide. It is quite fascinating to me that while our gross NPAs are slightly higher than everybody else, our credit costs are much, much lower than anybody else. What it does tell you that we are a high slippage, high recovery bank, largely because of our segment that we operate in. And that is something that the management is working on. It is not that we are happy with it.
ECL kicks in, we will have an issue with some of these slippages, and we have started our work right now. Look at the delta of comparable banks in Q4 against a 1.08 with 36 basis points against 1.20 in Q3 of all the 10 banks put together, we are at 38 basis points. Even the 59 basis points here had a one-time 21 basis points provision for microfinance. If you knock off the 21 basis points, even in this quarter, Q1 of this year, it was 38 basis points as a BAU credit cost. There is a high GNPA in the previous slide. There is a delta which is not in our favor, but there is a huge delta here which is in our favor.
Cost to average assets, there is a lot of times you have asked us about our business model, our OpEx, and our cost to average assets and cost income ratio. I intentionally picked cost to average assets because in our view, this is a better reflection of the underlying business model and the machinery. Cost to income ratio sometimes gets distorted because sometimes you could have a one-off income, and therefore, the ratio does not really gel well. This is a core ratio. Cost to average assets will tell you at any point of time how the company is operating. 271, 275. A peak of 275 in Q2, and thereafter, a consistent quarter-on-quarter decline in cost to average assets. It does not happen by coincidence. It takes a lot of effort to reduce one basis point of cost on an overall asset.
I know it is a big number when you look at one basis point on overall assets. It takes a lot of effort to reduce costs. To do that from 275 down to 243 in a matter of one year requires some effort. This is operating leverage. As I said, we defined it as rate of growth of operating income to rate of growth of operating expense, which basically translates to, if you have one basis point increase in your cost, today in the last quarter, we have given you 2.23 basis points of income. 1.6 was what was in the reference period that we spoke about, the 12 quarters where our price to book was above 1.5. Again, a consistent performance quarter-on-quarter, showing the trajectory on where we are heading in this. Is 223 repeatable? Perhaps not. Which is the ideal number?
Where do we think we will settle down? Maybe around the 1.6 number. Maybe that is our sweet spot for the operating leverage. Return on assets, very favorite topic. I think a lot of discussion happens on this. Consistent performance, again, I think I have probably overused the word consistent here in the last 20 minutes, and pardon me for doing that, but that is the belief and that is what is coming out of these numbers. 0.82 going to 0.93, 0.86, considerably around that 0.94. Look at the last few quarters. 0.94. What will happen going forward? Because one thing is for sure that Praveen has gone ahead and said our next year ROE will be 13.5% when we exit year 2027.
But once the Cost of Deposits unfolds fully, the repricing benefits unfolds fully, and the yield kicker happens through the mix change in product, one would expect that that will flow into the return on assets. And of course, the big there is the credit cost. I do not have any reason to believe that what you saw in the six-quarter chart on credit cost could be any different going forward. Return on equity. I really got too many numbers. The good news is I am towards the end of my number slide, so you can have a breather. I am sure most of you come here to hear Praveen speak about his vision and going forward, how DCB Bank plans will unfold. I really appreciate and respect that sentiment, but perhaps you have to bear with me for some more time before Praveen comes over with his presentation.
We have already said this. We have said that when we exit year 2027, we will be at 13.5 ROE, and when we exit year 2028, FY 2028, we will be at 14.5. Where is the confidence coming from? The confidence is coming from the fact that the previous quarter that just went by, we are at 13.2. So if you have any belief in terms of the trajectories and history repeating itself, then 13.2 is not very far from 13.5, or 13.5 is not very far from 13.2. Price to book. So in the reference period, we were at 2.12 on an average basis, as I said, with a peak of 252, and consistently over 1.5 and across those 12 quarters, until COVID happened, and thereafter, we have not had a rerating. What I want you to look at is look at the book value.
156 going to 161, going to 165, going to 171. There is an addition of INR 4, INR 4.5 every quarter in the book value. I really want you to absorb this because I think that the reflection of what we do is in the book value, and the price to book is a derivative which we do not control. I want to summarize what I just said in terms of last six quarters before I invite Praveen. We had a consistent growth of over 18%. You all know we are a bank which is on a growth trajectory of 18%-20%. There is no surprise there. We had a consistent increase in core fee income, highest ever fee income in the last 16 years. We had step-by-step reduction in cost to average assets.
We believe that NIM has bottomed out, and from here on, there will be an uptick. Credit cost has been consistently under 40 basis points. Highest business per employee in the last 16 years. Highest full year ROE in the last 10 years. Highest earnings per share in the last 16 years, and most efficient capital utilization in last years. Our RWA is under 50 now, we are 49 point something. All of this has happened in last six quarters. I want you to remember that in the six quarters, these were some of the highlights, and these are only select highlights. Now, before I invite Praveen to share his plans and vision, I want to respond to the question that I myself asked in the beginning. How did we fare against these 12 ratios in the six quarters against the reference period?
Well, I think I've answered that in each of the slide. Let's look at- So this is the average for the reference period, and this is the average for the last six quarters. Advances growth, deposits growth, we can comfortably say there's a positive movement there. Yields on advances, as I said, we're pretty okay with 11.46. We don't want to be chasing every butterfly in the town or the garden. We have avoided in the past, and we will avoid the temptation of getting into high yield, high-risk products. Cost of deposit, there's a work. There's a task cut out for management team. We are aware of it and we're working on Cost of Deposits as a management action item. Consequently, the NIM will be a reflection of the effort that goes into the Cost of Deposit.
The others on GNPA, while our credit cost is controlled, GNPA is also something that at 2.91, it's a far number away from where we want to be. There's a concentrated effort from the management in terms of improving collections, recoveries, and also certain other management actions to address this ratio. I don't think anyone in the room would have a question mark on credit cost for us. We're sub 40 throughout in the last six quarters. Even in the reference period, we were quite decent about it. Our cost to average asset is at 2.43 for the last trailing quarter. So, at 2.50 is where we have said that's a guided number, and we're comfortably placed on the cost to average assets. Operating leverage, we are at much higher number than where we want to be at 2.23.
We said around 1.6 is perhaps the number where we would end up with. ROA, 0.96 is not good enough. 1.0 is good enough. But that's a derivative. To get our Cost of Deposit right, keep our credit cost in control, then ROA is what will happen. ROE, we are at 12.32, as I said, and 13.2 for the trailing quarter, and 13.5 is what our stated number or goal is. I'm not making an effort on the last one. I want to leave that open for you all to reflect, contemplate, and then tell us what you think we should be at. Thank you, ladies and gentlemen. Thank you for listening. My pleasure to be talking to you and sharing these numbers with you. I now request Praveen to share his plans and vision for future. Thank you so much.
Thank you, Ravi. Thank you very much. Thank you very much, Ravi, and good evening, everybody. It is so nice to see so many faces here, many known faces here. Ravi talked about yesterday. I am going to talk about tomorrow. Why yesterday is important is because yesterday gives you the confidence that the tomorrow can happen. But before we get into tomorrow, we will talk about the story behind some of those comparisons and some of those outcomes Ravi had mentioned in the previous presentation. For us, there are some things which have changed and something which remain constant. Let us look at what are the things which remain constant. First thing is, for the foreseeable future, I see us being in the secured space, which basically means lower loss given default. Granularity is very important for us, higher stickiness, better risk on both sides of the balance sheet.
We are geographically diversified. There are many pan-India banks, but where we stand is that there is not a single state in India where we have more than 20% concentration. We are low regional concentration. Lastly, sorry. We cater probably exclusively to the self-employed segment, which is large, you know that. In my opinion, it is underserved, severely underserved. If pandemic has taught me anything, it is this one thing that this bunch of folks are supremely resilient. What you are seeing so far is the top part of the duck. What I am going to talk to you right now is about this furious paddling that you see underneath, that you do not see underneath, which is what my team has done, which has made some of these outcomes possible. What exactly are those? What has changed? We spoke about what has remained constant.
Now let us talk about what has changed. The first thing that has changed, and this will be a surprise to many of you. In the last two and a half years, we have had a new CFO, a new MD and CEO, a new executive director, a new CRO, Chief Risk Officer, a new Head HR, and a new Chief Internal Auditor. These are massive moves. The part of the duck above the water remains. No news is good news. It does not come out. When things happen smoothly, it is not news. Even at Niyo also. Cleanup makes up heroes. No errors, seamless does not create heroes. It is a part of the job. But what is good news is that every single one of these folks, I am including myself in it, has come from within the DCB Bank system.
Over cocktails and dinner, you will be able to interact with many of these folks in governance who are not usually exposed to you. In governance, in support. Business scene you probably know of. Just interact with them. The depth of talent in this company is something I have been blessed with. You will get to know of it when you spend time with them. Otherwise, you would not find so many of these internal phrases coming in this particular slide. So that is the first thing. There has been a transition. No, sorry. There have been transitions. What is the second thing? What have changed? There has been a lot of tweaking. What have we tweaked? If you look at my transcripts about 6-8 months back, eight quarters back, sorry. I have spoken about changing this home loan and business loan mix, which today we are 60/40.
It took time. Getting 11,000 people to change track is not easy. I found out even when I'm. It does not matter if you are a CEO or not, but getting this whole large ship to change direction takes time. Happy to say, when the repo rate cut hit, we have done what it takes to ensure that there is a change in business mix. It is not just on one element alone. When pandemic hit on March 25, 2020, we had an INR 800 crore gold loan book, organic gold loan book. Today, it is four times. Without incremental cost. In-house valuation, existing people who were doing their jobs took on additional responsibility and did this work. Did the gold price increase help? Of course, it did help. But the fact is, you are getting incremental income, you are getting a larger book with very low underlying cost.
You are just sweating the existing sunk cost. Many of you may not know this. We have started an educational institution finance program. It is an INR 1,000 crore book with really good portfolio quality. These are funding done to build a new laboratory, buy computers, a swimming pool, a new school building. Primarily, which are a INR 2 crore-INR 3 crore average ticket size, INR 1,000 crore book. Built silently, strongly, and with a new National Education Policy coming in, a new education policy coming in, we believe there is a segment which will really grow. It is a huge segment for us, and you will see growth happening on this front as well. Headwinds on microfinance, we talked about it enough, everybody knows about it. But that does not mean that our lending apps are left aspect. We do not have the deep pockets to buy PSLC certificates.
We definitely do not want to increase our NPA in the future by doing microfinance at a time when headwinds are very heavy. What is the alternative? Tractors came in to fill the gap. Reasonably good yield, reasonably good NPA, distribution is a strength. We brought that in. We leveraged partnerships on both sides of the balance sheet, and we will talk about it in detail at some point in time. On the deposit side, with our fintech partnership with Niyo. On the asset side, co-lending. Co-lending started in 2021. May 2021. Four years. I have put a curb on them, said, "You cannot be more than 15% of the total balance sheet." I put a curb on that. That is the kind of growth you are getting. Homegrown. Homegrown over DSA grown. We own the customer, not the DSA. Are we there yet? No, but it is a tweak.
It is a good change. These are the sourcing mix changes that have last 18 months. All these things, I want to tell you, are not just for 18 months. We are hoping that this becomes a part of our DNA, a part of our culture, and these go through the foundational who we are when we talk about the company forward. So I covered transitions, we covered sourcing mix. Now we are going to cover one more, the last change. Please. What is not changing is the slide. It toned up a bit. Core strength is increasing. It toned up, shedding fat, becoming slightly leaner, bringing energy into it. Improving productivity. We have raised the bar. If you cannot handle the heat, get out of the kitchen. Ordinary is not good enough anymore. It is never good enough, it is definitely not good enough. The bar has been raised.
Building deposits, decreasing Cost of Deposits. Emerging story. I still wouldn't give it credibility until a few more quarters, but a good beginning. Relying on technology, controlling cost, and finally expanding assets while conserving capital. We'll go through each one of these in detail. That's okay, I'll go back. Building deposits, decreasing CoD. What do you see here? What you see here is a comparison of India's three largest private sector banks and public sector bank. We looked at the peak retail deposit rate entities and compared with DCB Bank's own peak retail rate. Six quarters back, there was a gap of 89 basis points. You've seen how that's progressing quarter by quarter. Today, it's 60 basis points, the difference. Are we happy with the difference? No. Are we happy with direction? Of course. You're not compared with pure banks or less than INR 3 lakh crore, 10 banks.
No offense to you, Ravi. We're compared with the largest in the country, and that's the comparison we're bringing in. That's the comparison, not at my level. This is done at our branch banking heads one down level. It's not easy because we've been selling price. Today, we've changed that. So it's a hard task for them, I understand that. That's the way we want to build this franchise. We also talked about performance, raising the bar. Just look at the business per employee. It has gone up from 830- 981. That's 18% increase in 15 months, and that's not a big thing. You know when that becomes a big thing? When you can increase the business per employee by 18% in 15 months without changing the granularity of either the deposits or the assets. That is something which we are proud of.
Will this number of employees keep coming down? Of course not. We'll continue to invest. We are a people-led company. That will happen. Will the business per employee grow? We're doing everything that we can to make it grow. Busy slide. I'm going to talk about four items alone here. How is technology helping us? In DCB Bank, less than eight months back, if you were to open a gold loan, it takes you somewhere around 150 minutes. Today, it takes you 30 minutes. Many of you do go visit our branches. Many of you do. I know that, right? I mean, we have talked about it openly. Check it out. See whether I'm right or wrong. 30 minutes. Second thing I want to talk about is something called CUBE. Account opening, no paper, no courier, no storage, no errors. Fantastic turnaround time.
There is something called MyDocs which our technology folks have. You should have interacted with CTO during our break. Brilliant, MyDocs. Imagine you can call 24/7 and then on IVR, request for what document you want without even getting into internet, and then get that particular statement or document emailed to you any point in time. No human being involved. Absolutely no human interface. Of course, you can go through the internet banking as well and collect it. You don't need to have passwords. OTP based, go to the website, collect the information. Brilliant stuff. If I have to say it myself. Lastly, we can talk about secured credit card. For every eligible credit card holder in the country, there are close to 16 ineligible people. We are betting big on secured credit card.
I ran the credit card portfolio of Citibank about 25 years back, and I am convinced that a company which is running a normal credit card cannot give the same emphasis and focus to a secured credit card. A secured credit card is not a revenue-making proposition on the loan side. While it is, we consider it as a liability proposition. We consider it as a mechanism for eternal gratitude from a customer who cannot really participate in the mainstream because of some behavioral impact, educational impact, he or she had. We believe secured credit card is going to be really, really big, and we are looking at liabilities on that, even though it is a buy now, pay later, fully secured instrument. What has changed? 20% growth Ravi showed on assets. I will tell you, Q1, our Tier 1 grew despite growing 20%.
In Q2, our Tier 1 grew again. Two consecutive quarters where we are growing 20% whereabouts, and our Tier 1 capital is increasing. Strange as it may seem. Will it continue? No. We will use. Having seen these four slides, what is the takeaway for you? What are you taking away on the last four slides? Let me repeat. We spoke about calm transitions, about the depth of talent in the company. We talked about sourcing exchanges. I showed you four slides. In my opinion, the common thread between these four slides is one word: discipline. We have ensured that the resources that we have are being spent wisely, whether it be capital, whether it be employees, whether it be cost, whether it be waiting. Employee, capital, cost. Cost of Deposits.
Every single parameter, if you were to see the common thread, it is about establishing a bit of an order and discipline on how we utilize these resources that you have. Enough said about the past. Let us talk about the future. Let us talk about tomorrow. What do you want to do? What do we want to do? Change is difficult. I never difficult. Keep pressing this word, change is difficult. My management team and I, this is not a vision statement. This is genuine. We believe, and possibly one of the reasons why we come to work is because the 19 of us genuinely believe that we can be an organization that can scale up and provide timely and tailor-made solutions that meet all the financial needs of a self-employed customer in every single neighborhood that we operate. It sounds like one giant statement, right?
Let us break this up. First thing I want to tell you is about tailor-made solutions. As a bank, we have been giving cookie cutter products. Nothing wrong with cookie cutter products. They are templated products. Fit in? Yes. Goes through. Does not fit in, does not go through. Nothing wrong with that. But we want to be a bit more customized. How will we do that? Have the patience, see what we plan to do about it. Second thing, we want to be a full solution provider for all the financial needs. What are all the financial needs? You have surplus money. You have a need for money. You need a risk protection solution. So many insurance folks sitting here, I cannot avoid saying that. Fourth, trade finance solutions. All the four. We want to provide all the four. The people we compete with provide only one solution.
That's why we need all the four, and we'll talk about who we compete with. We will do it in every neighborhood that we operate. When India's stack of technology becomes stronger, when you're able to do more products online, we probably will drop this "every neighborhood" from our sentence. The rest will remain. That's the reason why we come to bank for some people who do not know who we are, what we stand for, what defines us. The market defines us. The canvas on which we operate defines us. What is the canvas on which we operate? For the people who know us, this is ad nauseam. How many times will you say the same thing? Self-employed is the canvas where we work. Geographically diversified. We don't have a Karnataka risk, we don't have a Tripura risk, we don't have a Maharashtra risk.
We are at maximum 20% in one particular state. Not just pan-India, low regional concentration. We do lending, but genuinely we want to become a banker. Not just a lender, a banker. Nice little cusp of the Venn diagram. That's where we want to be. That's the canvas in which we want to operate. The core of who we are. What do we stand for? What are the immutable, unchangeable parts that we need to stand for? Secure. Even when the temptation, credit cycles happen. There'll be times when the margin looks very rosy. Will we deviate? Probably not. We want to be in the secure space. Granular. You'll keep hearing this word. Tech-driven. How much of a tech-driven we are, I'm not happy. The appetite for tech driving in our bank is infinite.
Every area where there is a paper, paper is a symptom of a poor process. Driving the tech agenda. User interface. Make it simpler. Why would you need training on Finacle, Fin1, many other core banking systems? It has to be as intuitive. Nobody taught you how to do WhatsApp. Make it intuitive. Tech-driven, both at the customer end as well as the back end. We think of the bank as a train, where each compartment should be automated and also the entire train should be. What happens is there is part compartmentalized automation which happens. Integration, it has to be through the bank. Critical for us. That's the core of who we are. Secure, granular, tech-driven. The culture that we are driving. Regardless of what our strategy says, we want to be a high growth player, we want to be low credit cost, and consistent and predictable.
This is what defines who we want to be. We may not be that, but that's where we want to go. This is extremely clear. It'll be very clear when you interact with my team members of how we think, how we define ourselves. What are we going for? I'm going to talk to you about two big ideas we are pursuing for the future. Two big ideas. One is the treasure within. What's the treasure within? Look at every single unique customer that we have. 76% of these customers have only one single product with us. Fairly simple, right? It's an indictment, but I think it's an opportunity. For every one DCB Bank gold loan, for every one DCB Bank home loan, for every one DCB Bank business loan, for every one DCB Bank overdraft, there is 1.7 gold loan taken by our customers outside of DCB Bank.
3.3 home loans taken by our customers outside DCB Bank. Of course, you can read this. 1.7x business loan taken by our customers outside DCB Bank. 0.9x overdrafts taken by our customers outside the bank. Are these products that we don't do? Of course not. In gold loan, in my opinion, we are competitive on price. Far more competitive. But still people are taking this from somewhere else. On home loan and business loan, we may not be that competitive on price. I have no problem if the customer goes out and takes a loan, and I'm telling you publicly, provided the customer has asked you and you have said, "Look, I cannot drop the price or you're ineligible." My guess is these customers and our relationship officers, our internet banking have not even spoken about this. But this can be the future.
Every month, there are a bunch of customers, if you look at the onus, and where do you get it from? People in the back. Bureau scrub. You exactly get to know what's happening. Remember, 2 slides. 76% of our customers are a single product customer. These are people who are real customers. We compartmentalize them as home loan customer or LAP customer. There's nothing called a home loan customer. There is a customer who at different stages of life have different requirements, and which a bank of our kind has the product to satisfy. Why don't we do it? Maybe because we are verticalized. We have business verticals. Affordable housing. Anything else but affordable housing. That's all you do. You have somebody who's a business loan, we look only at that.
The verticals that we've created gives you focus, it gives you growth, but there is a price that you pay. For every give me, there's a gotcha. I could give you very nice sounding names because AI is an item which everybody loves. I could talk about recursive learning or conversational AI, but I'm not going to do that. I'm going to talk to you about dhandha. The end result of that recursive learning or AI or conversational AI or natural programming language. Let's talk about the basics. What the BIU team does, the business intelligence unit team does, is they give you a bunch of customers who have a low bureau score, who are an outstanding goldmine for gold loans. Secured cards, massive set of. We have our savings account customers with a low balance, in our mind, is a perfect match for the secured credit card.
They've got terrible bureau scores. They're marginalized. In our opinion, it's a big mover number which you can get entirely from within. High bureau score and low balance. Let me tell you how a normal relationship manager works in a branch. Your balance determine your worth. I mean, if Bill Gates had an account with us and is keeping INR 1,000 in our bank, you wouldn't treat him like Bill Gates, because Bill Gates is not defined by who Bill Gates is. He's defined by what balance he keeps with us. But that's not the person. Lastly, this is on CASA, more importantly on SA. We're all chasing float because float is low cost. But the way to float is through flow. If money is going to go outside from your account to the outside world, there is a greater chance of you getting a better CASA.
We are actively encouraging our customers to use money. Don't keep a balance, just use it. Because SA customers who come for interest is nothing but TD customers masquerading as SA. While CASA ratio may improve, we are not in the CASA ratio business. We are in the Cost of Deposits business. There's an active encouragement of using UPI, driving the flow, and by doing that, you get the float. The way I tell my people is this. Sorry. Sorry? There's opportunity disguised as deadwood. There's opportunity disguised as deadwood. Low balance customer.
No single RM will pay any attention to this customer. But the moment our analytics team is able to build a straw man, and every single customer you're building a straw man based on information within and information outside. Who you are is not defined by how much money you keep with us. Who you are is defined by the information, a straw man which is being created by our BIU team. Did any one of you know this? Did you know this? You knew this? Amazing. Oh, you knew this? Awesome. I didn't know that you would know this. Forget the first part. 10.1% of the debit card international spends in a given month, I took June as an example, is done through DCB Bank, through the Niyo program.
Many of you may be Niyo customers, right? That's no big deal. But the second one is a big deal. 2.1% of all the debit, credit, and prepaid card, this is from RBI data. The denominator is RBI data. Numerator is our own data. The spend, 2.1%. This includes all the behemoth, big card issuers. This is a flyweight fighting a battle with a super heavyweight. 2.1%. Am I thumping my chest? I want to tell you what we are not doing, not what we are doing. You know what the sad part here is? Next slide. 27% of these people who are doing their foreign exchange transactions outside the country is keeping less than INR 1,000 balance with us.
The moment you get down the flight, finish customs, before you buy the liquor bottle, you're transferring money from your Niyo account into your main primary banker's account. Is it a problem? I see it as an opportunity. They love our cause, otherwise the 2.1% wouldn't happen. No way. What's happening? People who raised their hands are using us as a service provider. We are a bank. You're not using us a bank because we have not told you we are a bank. What are we going to do about it? We'll talk about what we're going to do about it. This is a slide which will be new to many of you. You may have an inclination as to what it is, but you never got it this clear. Who's our competition?
Balance transfer out in a particular month of a LAP customer, of a LAP database, of a business loan. Loan against property. It is one particular month, I think it is June or March 2025. I do not know if I can reach one of the two. 35% of the money comes in from private sector banks. They take away our customers, 35%. Who is the next? HFCs take 24%, NBFCs take 20%. I am not getting to the rest. They may get the customer because of higher exposure or because of better pricing, mostly better pricing. 44% in that particular month has gone to NBFC and HFC. What do we have that they do not have? What do we have that they do not have? Thank you so much. Now you are going to take over my presentation. Term loan to overdraft. Easy.
You remember how much struggle I had from moving the HLBL ratios 50/50 to 60/40? It took a year and a half to get it done. Similar kind of thing is happening. The duck is paddling underneath. You are not seeing it. The surface is calm, but the legs are moving. From one time use to multiple use. For us, it is critical to capture the flow. You want to meet, settle N number of times. It gives you sustainable fee income, it gives you lesser run-offs. It is a fantastic early warning system indicator. Gives you better retention. So many positives. What I have not written there is a multi-fishing. Look at a normal LAP. Four months of work is to fill what is being repaid. It is like a treadmill for those of you who run. Four months of work is to keep the book where it is.
The rest eight months is for it to grow. OD, very different. Is this a panacea for every ill? No. For certain kind of customers of a certain size and above, fantastic thing. Are we trying to solve all competition? No. We are targeting at the 44% who is eating our breakfast. We are targeting. All is fair in love, war, and banking. We have been doing the lending business for too long. It is time we played the banking business. Will it happen overnight? I really wish we would. We have the ability. This is not some God-given skill. It is just that you are using the licensing moat, and you can compete with a large proportion of the 44%. What is this changing? How is tomorrow going to be different? I spoke to you about the opportunity.
Now let us talk about, what are we doing about the opportunity? All the while we have been building business verticals. Now we are building a business horizontal. We are building it. You may want to ask, I am sure questions will come in later. You may want to ask, all products, everybody sells all products. There is a benefit in full. We want to grow 20% consistently, 18%-20%, 18%-22% consistently, need focus. We will still continue to be business vertical focused to get the customer in. Once the customer comes in, the business horizontal takes over. How do we do this? First element, a unified cross-sell engine. When you meet our BIU, Shashwat is there, you will meet him during the course of tonight, the evening. He will talk to you about the centralized intelligence layer that is being built in. I envy the PSU banks. They got this ready-made.
Relationship managers who understand multiple products and cater products to suit what the customer needs. We are going to build that in. We are already on the anvil building it up, improving depth, the literacy of the relationship manager. Third item. The efficiency of the flow, the process flow. We talked about tech a while earlier, making it seamless not only for the customer, but also for the frontline, integrated across all departments. We don't want a man in the ATM. We want the entire thing to be seamless. Analytics led, so that right products can be offered to the right person at the right time, at the right price. Rewards. You get what you measure, you get what you reward. Wallet share of the customer becomes a part of the RM scorecard. Finally, the tone of the talk. What happens is what you want to make it happen.
This is one of the things that we want to make it happen. Why will it happen? I will give you two examples. Look at co-lending. Look at the kind of strides that we made on co-lending from 2021 onwards. If we can execute that, if we can do school finance the way we have done it, there is no reason to believe that this cannot happen. This execution challenge is entirely within our ecosystem. There is one important segment that we missed out. If you were to look at- y ou are all mathematically well-evolved. Look at R into T being 72. Similar to R into T being 72? 1.09 or 1.08 raised to the power of 9. Right? If T is 9 years, rate is 8, 72, you double. In 2016, we were doing loans of INR 3 crore to INR 5 crore.
Just by inflation, that INR 3 crore to INR 5 crore is INR 8 crore- INR 10 crore. I generally think we missed a little trick there. We are introducing INR 3 crore- INR 10 crore secured sole banking preposition, run within, w e have a corporate bank, we have an SME proposition, and what fits in the middle is this INR 3 crore- INR 10 crore position. In summary, what do we have to say? Unchanged foundations. Continued discipline on cost, credit provisions, and capital. That discipline continues. Trust area, employee productivity, tech option. Business horizontal to supplement business verticals. If you have a moat, if you have a leverage, if it can be leveraged, why not leverage it? Continued focus on inorganic opportunities. Portfolio purchase, asset purchase. If there are good opportunities coming in, inorganic co-lending, multiple areas where we look at strategic fits.
Finally, fill the key segments which do not violate the first point, which is? The unchanged foundations. That's in summary of what we intend to do, to become that institution which scales up and provides timely and tailor-made solutions to self-employed customers to meet all their financial needs in every neighborhood that we operate. That's what we want to do. What are the milestones for the next two years? We want to ensure that the growth continues. We want to ensure that the foundational nature of the growth is unimpaired. These are the ratios you can- you can assess our progress by. We will be publishing this, and tracking ourselves to this quarter after quarter, all the way till FY 2028. We as a team are extremely excited in this particular journey.
We really believe that there's a purpose, there is energy, there's a drive, there's a cohesion within the team to take up this opportunity and take the bank forward at a pace which is similar to what you've seen in the last six quarters. We really believe that there is a team which can reach out for the stars. Thank you for your patience and you can ask both Ravi and me all the questions that you need to ask for what we have presented, plus some others which we may not have presented as well. Right. Thank you.
Are there people with mics around?
Yeah.
Great. In the meantime, some housekeeping announcements. One is that this entire thing is recorded. Both the presentations are on the exchange websites. So, if anyone wants to refer it back, it's always there. The question and answers also will be recorded so that people do not lose out in terms of information. There's no information asymmetry during the course of the Investor Day.
Hello. Hello, sir. I'm Aadesh Mehta from Motilal Oswal Asset Management.
Hi, Aadesh.
Thanks for a wonderful presentation. We understand that you are aspiring for an 18%- 20% growth. But if we see the recent trends, if we exclude portfolio buyouts, ex of portfolio buyouts, our growth is still lower than double digits. How are we thinking about growth in that segment? Ex of partnerships, how can the growth quickly ramp up?
First of all, the ex of partnerships, the growth is not single digits. In fact, let me give you some figures. If you go back to Q2 of last year, our single biggest co-lending, we had only one co-lending partner a year back. That was IIFL. From March 4, 2024, all the way to October, there was zero incremental sourcing on this book. And we had a INR 2,800 crore book, which ran down. It entirely ran down. Despite the rundown, we still posted between 18% and 22% growth. And where did that come from? It came from organic ability. Having said that, yes, our learning from that was we have to have multiple partners because for whatever reason, I do not want to get into the reason why that embargo happened, that stoppage happened, regulatory embargo happened.
We now diversified, but the fact remains that our organic growth is pretty much in the high teens. Going forward also, I see that happening. We are making a conscious effort to move away from the lower ticket segment to the higher ticket. You would have got a sense of it anyways. You cannot do overdraft to a INR 20 lakh customer. You can do, but you will pay the price for it. But a INR 50 lakh plus is something which where overdraft will come in handy. Your run-offs will be less with overdraft coming in.
Now, let me take a completely different aspect to this. From a loan growth perspective, the INR 3 crore- INR 10 crore which you are consciously getting into is an element where we see a higher ticket size coming into play, which we think is of normal organic risk. It is not a higher risk segment. Our school proposition, which I told you, is a INR 2 crore- INR 3 crore proposition. All these are indicators to see that we are moving up the ticket size ladder. So that is how we are compensating for lower employees and not just through the partnership alone.
There is a gentleman right behind you. Gentleman right behind you, and then we will come to you. Can you give the mic here?
Oh, sorry, there is somebody else also.
Yeah.
Sir, I wanted to ask. Am I audible?
Not so much.
We are saying that we maintain a guidance of growing our book by 18%-20%. During our Q1 con call, we said that we are going to focus a lot on 360 degree banking, SME-led businesses.
Right.
While in Q2 you said that our SME or 360 degree led book will be only INR 200 crore, and this will be franchise that you will be growing for next 5-10 years. Most of the growth for next two years should be coming from LAP and mortgages, if I understand it right.
What it said there was SME had this element called TReDS. TReDS is a 90-day product, it is a working capital product which is low yield and low tenor. We have kind of gone slow on that, reduced it. In fact, if you were to see the whole of Q2, our balance sheet grew only by 14%. Even though there has been 18% growth in the customer advances and deposits. Why that happened is because we have gone kind of heavy on lower earning assets and on borrowings, which are of higher cost. We gave up both sides of the balance sheet. Growth for growth sake is not what we are clearly looking at. It has to make money. We just cut down on the TReDS element and SME completely.
Most of the overdraft, not all, but most of the overdraft which we are doing, will come within what we show in the investor presentation as SME. That is where the growth. It is not just LAP and home loan alone, but the SME book also will grow. The composition of the book will be different. It will be more of the INR 50 lakh plus overdraft loans coming and sitting there, and not the TReDS, which is a high velocity, quick closing loans.
The growth guidance remains the same, but the composition-
18%- 20% is-
The composition shifts from SME to LAP and mortgages more. This is what I wanted to understand.
No, no. Only TReDS is going down. Overdraft is critical for us. Otherwise, I wouldn't have even said that for all the reasons I told you. It genuinely makes sense. When you can compete with a top quality NBFC who's coming at a lower rate by telling the customer, "It's not the interest rate, it's the interest paid." Our customers understand cash flow very well. It's a very important element in our armory. SME will grow.
If you can give us some light on 360 degree banking, as there was a lot of focus there and how you plan to grow for next 5-10 years, as you mentioned in Q2 call.
It's the same thing which I repeated here. I just call it treasure within, because if 76% of our customers are only having one particular product, and you see so many of our customers taking a same product which we offer at a more attractive rate, but taken from outside, it's a sin. It's really ridiculous. That's why we are building up all those things which I told you, to ensure that it stays within. Or even if it doesn't stay within, it is after a full effort that the customer is going out. We're okay with that. But it can't be because you are verticalized, right? You don't even have this question which is being asked. So that's what we're trying to plug.
Lastly, do you fear from the gold prices that have increased? The number of customers might have increased by some 5-10%. All the more our co-lending has doubled almost. That is mostly due to the value of gold increasing and the loan.
Not at all. We don't allow. We do allow, but very little enhancement happens in our bank. So most of the gold is at the rate at which the customer came on board. So while we do an MTM, the customer does not get the benefit of it. So just because the value of gold has gone to, let's say, INR 12,000 per gram, the customer who came at INR 8,000 remains at INR 8,000, right? Even on the internet banking, he cannot enhance that. We don't allow it. That's more from a risk perspective because we said, "Look, there's no point in getting the incremental gain and then chasing the customer in case the gold rate falls." So for us, it's a cushion.
Lastly, on cost to income side, how much juice is left? We reduced-
If you see, we never mentioned cost to income.
Yeah.
The whole presentation, we talked only about cost to average assets. Right? We can talk about cost to income also.
So-
How much juice is left? I do not think there is too much of juice left because we need to invest in people. We need to build that. We do not want the growth in the next year to get impacted because we do not have the right kind of people to take the proposition forward. The whole game is about leverage, which Ravi spoke about, which is the incremental cost to output. Right? We need to invest in people. I think 2.5 is a good percentage of cost to average asset to go for.
Given that most of our loans are sourced through DSA, a good part of loan are sourced through DSA. Given that, if some more rate cuts come, is there a risk of getting beat out? What is our view? How will we contain it?
We have been through 100 basis points cut, that is a very good graph. Have a look at it, because it is publicly available. 100 basis point reduction has resulted in the NIM moving from 329 down to 320 to 323. Just have a look at how it moved for the 10 other banks. See what the difference is. That gives you an indication as to how strong the franchise is so far.
Thank you, sir. Thanks.
Yeah. Hi.
Yes.
Sir, this is Jai from ICICI Securities.
Of course. Hi.
Sir, excellent presentation.
Thank you.
Very refreshing point of view.
Thank you.
To you also and the CFO presentation also, and your presentation also. I have first question for CFO presentation, and it is an observation.
You want me to answer or-
No, no. This is an observation and maybe you can answer. The reference point that you showed, those 12 quarters, Q4 FY 2017 to third quarter FY 2020, that was actually one of the worst period in Indian banking because of AQR, because of February 12 circular and everything. You were, of course, not impacted to the extent others, even including all large banks and mid-tier banks. I would draw your attention that the ROA in that 12 quarters for system was zero. Yours was 0.9. You have come back to 0.9. But system has moved from zero to maybe 1.3 or maybe 1.4. So you are there where you were. System has moved, very high times because the period was very poor. Versus that reference point, of course, the point that you made out is very clear.
There is a lot of, let's say, undervaluation at this point of time. But the gross slippages as well as net NPA, these are the two things which are still above that. Given the way that you are, let us say, you are running a secured book, and ideally, the credit cost is okay, but your net NPA is still also on the higher side. Other banks, even including PSU bank, et cetera, the system net NPA would be like 0.5% at this point of time. That is one observation as to why there could be seemingly mismatch, what you showed there, but I take most of the points there.
I totally agree with you. I think your observation is right. The moment we get our NPA story also, gross NPA, net NPA story. We may not get the slippage story right. You didn't talk about slippage, but I'm bringing slippage also in. But if you reduce our gross NPA and net NPA, and we would like to make it below 2% and below 1%, in an ideal world. It's a question of time, but if you can work out some method of debt transfers or other modes in which you can bring it down, it still is a good thing to do. We're exploring opportunities. We don't know when that'll come in. But till the time organically, we kind of presume that it'll come down the way we're seeing it. But yeah, take your point fully on the GNPA and then-
System ROA. We have done-
NNPA part of it. Yeah. It's a work in progress. For us, it's not about what has happened so far. It's about what can happen in the future, Jai. What you saw till now just shows you capabilities. The whole idea of what I want to talk about is a possibility of what can happen.
Right. Secondly, sir, on your SME, OD transition, et cetera, system or a lot of fellow banks, they have gone very big time on unsecured SME. Business banking is a segment that they call. What is your view? When you transition to, let's say, multi-product bank from a single or let's say one solution to multi OD, et cetera, do you intend to catch on the business banking segment or you intend to do the secured SME portion only?
Secured. Clearly secured only. Not because of any other reason. Let's assume a 20% growth. In 2030, we will be what? A 2.5 lakh crore bank. You are at, let's say, 80 now. In, let's say, another 3 years or 3.5 years, you double that 160. Maybe some 225,000 crore bank. Still think that there is a large proportion of secured lending possibilities still in India, even in 2030. So why do you want to get into that area? I agree with you if you exhaust that opportunity. Our opinion is not really. Organically, we can get to a, mathematically at least, 225,000 crore book by, let's say, April 2030. If you have to do the math. It is not a guidance, but just telling you. Still, there is so much play left. So we stick to secured lending.
Right. And sir, on this, the last slide that you summarized in terms of financial outcomes, if I see this, the numbers that you showed as an NII as a percentage of assets was 3.15%- 3.2%. The last slide that said NII-
Not earning assets.
Okay.
Total assets.
Total assets.
Yeah. There is a difference between the NIM that we showed.
Yes, that is right. The like-to-like number for Q1 and Q2 is actually 3 and 3.05. That is the right comparison. We are saying that 10 basis point on asset improvement for the full year versus what we are doing right now. That is the right understanding? [crosstalk]
We may have to say that, look, this is assuming that there is no incremental rate cuts coming through. But if it does come through, then there is some benefit you will get on the fee like we saw earlier. But the key thing is this. You see, earlier it is a bit of an unknown. Today, it is a known. You know how the NIM changes per percentage point cut for us as well as for others. So you can look at the math and figure out what the sensitivity of a rate cut to our bank is, assuming that the liabilities team also acts in a similar way. I will tell you where the confidence is coming from. Whatever savings account cut that you can do or should do has been done. You are seeing the benefit of the long tail duration of the term deposit.
We did term deposit of a longer tenure only for one reason, because 54% of our book was mortgage. So we needed that long tenure term deposit. Now, hopefully, with every passing month, if we renew exactly the same percentage of term deposits, we should be sitting on an incremental Cost of Deposits. So that is a game we are playing.
And lastly, sir, see, 1% ROA is maybe two years back when the system was under COVID, that was sort of one of our benchmark. But how do you propose or do you intend to do, let us say, 1.1% or 1.2% ROA? Because that is where the inflection point comes. 1% ROA is actually below system. So what are your thoughts? When do you think you will be crossing that hump of maybe 1.1% ROA?
Instead of when, I will tell you how. The play is on Cost of Deposits. At INR 78,000 crore balance sheet, I think the time has come where we get the deposit that we want at the price that we want. That is the challenge. And what you should track us on is our ability to grow liabilities at our trajectory on Cost of Deposits. That is what I am tracking myself on. Probably you should look at that. That gives you an indication as to when it will happen. We will not play the yield game. We will not. When you said, will you do unsecured, there is a temptation of who does not want to make a higher NIM? All of us want to.
But strategy involves sacrifice. If you try to catch every single butterfly in the garden, you will land up catching no butterfly at all. So it is okay. That is a cost-
That gives me one more question.
Yes, sir.
Tracking yourself on Cost of Deposits could be a slippery thing in my view, and hear me out why. We have seen other banks where there have been management change. The first thing that they do or say is that we want to improve the franchise. The way they do it, they will be cutting bulk deposit, keeping the Cost of Deposits a bit lower. That sacrifices growth. You can easily up or down the bulk deposit, manage Cost of Deposits, but the sacrificing part is the growth. Now you are saying 20%+ growth while keeping a tab on the Cost of Deposits.
18%- 20%.
Yeah, 18%-20%.
Can be more than 20% also.
Yeah, 18%-20%, along with a tab on Cost of Deposits. Good luck to you, but I'm saying we are already at maybe the top tier in terms of Cost of Deposits. So best wishes. To do both growth as well as improve the Cost of Deposits, at least historically, has been a very tough job.
It's not easy. And you're right, it's not easy. But if you want to get the kind of premiums that we think we deserve, then we should demonstrate that. Second thing is, honestly, there has been a transition, but there's not been a management change. The entire set of new influx has come from within. If I have to blame somebody, I have to blame myself. There's no point in blaming. Thirdly, whenever a transition happens, you said in other banks, we're not like other banks. We never took a huge provision when MD and CEO transition happened, and we didn't live off some mega provision for the next three quarters. We lived life normally. Some bit of it is that Venn diagrams, which I showed you, some of the values that these are important things for us. This is not about cosmetically making a difference.
We may do something cosmetically, but honestly, there is a franchise we need to build. There is an opportunity. It is a crying need. We can fill it. If we do not fill it, somebody will fill it. So that is where we are. Is it going to be easy? No. I think over coffees and dinner you will know that we have the team to do it.
Thank you. Thank you, sir.
Yeah.
Am I audible?
Yes.
Just continuing this GNPA and NNPA targets, which you said are like 2% and 1% respectively. Are they coinciding with the two years assumption or they are a little far off?
See, it's a tough question to ask and answer. I will tell you why. What we are really concentrating on is to get the right kind of assets. Even if the slippage is a bit high, whether GNPA is a bit high, NNPA is slightly a bit high, as long as the credit cost is okay, you are anyway on your model to get where you want to get in terms of guidance. These are the things which you spoke about. But I understand this, and this is a painful lesson from the pandemic. When we had a 7% odd of restructured book. One of the reasons I think that the market was spooked was because it's 7%. It's like a problem or an overhang which can happen in the future. But internally, both on slippage and Gross NPA, even when an ECL model comes in, there is strong recovery.
That also goes into the model.
Right.
Out of INR 100 which slips, INR 81 you are showing. That goes between as low as 79 or 77, as high as 85. So that model will still hold good on the credit cost side. In an order of priority, I would think the credit cost maintenance is paramount. We need to work upon GNPA and NNPA. That's the way I see it. Slippage, because of the market that we are in of gold loan, if we didn't have so much of gold loan, probably we will not have an issue. It needs improvement. So there will be marginal improvement happening. Drastic reduction, unless we do some ARC sale, etc., it may not happen in a falling off the cliff manner. So it will still be gradual as we speak.
Okay. This repricing advantage which we are assuming, can you translate in basis points over a year or-
Repricing of the term deposit-
Yeah.
-or the-
Term deposits. Bulk deposit, term deposit, whatever you-
Can I put it another way?
Yeah.
You look at our peak rate or our Cost of Deposits, two and a half years back, and look at the Cost of Deposits today. It will give an indication what the differential is. Because most of the deposits are longer tenure, which will come up on maturity. You will know each month approximately how much comes from maturity and what the incremental differential is. And our renewal rate is in the high 70s.
Thanks for the input.
Not at all.
Yeah.
Nitin. Yes.
Hi, Praveen. Thanks for the elaborate presentation.
Thank you.
I have a question on your ROA. The number that we are targeting, we are already broadly there, and in terms of 0.95, approximately kind of ROA. With the potential improvements in margins, somewhat of further cost optimization, credit cost remaining in control, should ROA not surpass one? Is it something that you are keeping as a cushion that is limiting the guidance that you are giving?
In fact, Nitin, I usually talk about ROE, consciously not talk about the ROA. The reason for that is very simple. Quite a lot of products that we do are low margin, low OpEx. The margin is extremely thin, and they are very low capital consumption in that sense. I would tend to think that we've hit the nadir in terms of the cost to average assets. Now it'll probably be, because investments will continue to happen, somewhere around 245, 250 would be the cost. There'd be slight uptick coming in there. NIM, let's wait and see. Look at us for a few quarters and see how the improvement is and how the change is. That would give an indication as to where we are. Also the growth, the interest rates on average assets which comes into play. So have a look at that.
I don't expect the credit cost to be above 45. For the half year, we are 45, probably even be lower going forward. So 250 OpEx, 45 kind of provision cost. Fee, a lot of insurance folks are here. We do a reasonably good job of the third-party distribution. You'll get a sense from many of the folks who are sitting here. We genuinely do a good job. At least compared to how we were doing, there's a difference happening. Treasury has more or less dried up, so you'll see that will not be contributing. NIM, let's wait and watch. Let's see how the NIM journey goes. So it'll give you an indication. Whether I'm keeping a cushion is a different matter altogether. If it's happening, it's happening anyways. But very high probability that NIM has bottomed out.
What one or two things are you most wary of over the next two years as you now go on to deliver as what you are talking today?
What am I most-
What wary of? Like, most cautious about. Is it the ECL transition? Is it any potential rate cut if it comes through, which is still kind of uncertain?
Not really. We have seen the rate cuts impact. We are reasonably confident because we had worked the math out. We knew how much it would impact us. I will tell you what worries me. What worries me is what I was speaking to Jai about. Will we be able to grow our liabilities in the same granular fashion at a lower Cost of Deposits? That is a worry for me. I will tell you why. Because for 15 years, our frontline folks have gone ahead and sold it saying that we give you the best interest rate. We give you one of the best interest rate. To change that pitch for so many other people right in the frontline, retrain them, give them the confidence that you still can. It is a very difficult task for Pankaj.
If you meet up with him, speak to him, it is not an easy task. That is one area which I worry about because the whole premise is built on our ability to continue to grow and bring the cost deposit down. Doing any one of the two is very easy. Doing both is probably, I think, the real challenge. The second challenge is, it is very easy for me to stand here and say, cross-sell, customer 360, surplus need, deficit need. No bank has really got it right. Genuinely not got it right. They have the BIU. They have horizontal, vertical, diagonal, you can call it by any fancy management term, but most guys have not got it right. Public sector banks have got it right because that is a culture. It is from the ground kind of thing.
We are attempting to do a matrix and every matrix is not easy, right? Even as a matrix reporting is not easy. These are the two execution challenges I think which are really the problem area. On asset growth, I have told you this earlier, the co-lending book will not be more than 15% in Q4. There will be some challenges in terms of the new rules coming in. Originators has to change the way they are looking at it. We have to change. There is a question of blended rate. There is this thing happening. I am seeing some bit of kerfuffle, some bit of thing to happen before it settles down. But that is a known known. I do not see. I can only think of two real issues in the way we grow things.
Right. The last question is about the capital ratios. You plan to operate around 15.5%-17% capital adequacy. How should we rather look about the RWA optimization? With all the improvements that the bank has shown over the prior years, RWA to total assets is one of the best in class. Do you see further scope of improvement and with the kind of growth that you are looking at, will you not burn capital at a higher rate or you see you will plan to raise capital successively? How should we look at that over the coming years?
RWA would be in the early 50s, max. Upper limit is early 50s. That is how we see RWA. On capital, we are genuinely comfortable with the capital that we currently have for the kind of growth projections that we spoke about in this room. But in India today, there are a lot of opportunities. There are opportunities. If we get additional capital right now, we can fast-forward ourselves about two and a half years. That opportunity is there. If we do not fast-forward, that opportunity is not lost forever because India is really doing very well. We are at the moment on capital, there is no real requirement for the projected budgeted growth, but for opportunities that may come our way, we would like to have the capital of the right kind of partner at the right kind of price.
Yeah, sure. Thanks, Praveen. Thanks for answering.
Not at all.
Hey, hi. Here.
Yes.
Hey. Hi, Praveen.
Yes.
[Bhavik] here from Mangrove Capital.
Hey. Hi.
Thanks for the opportunity.
Not at all.
Great presentation, great perspective.
Thank you very much.
I just want to understand, when you say your NII will be, NII to assets will be 3.12% approx over the next two years, do you assume the spread between the term deposit spread between the savings between Large Private and you to remain constant or reduce further?
Ideally, we will be happy if it is, if I have got the peak TD rates which I presented, right?
Yeah.
I will be very happy if we are within 50. This number, and you can go back and check this out-
Yeah.
was 1.27% about nine odd quarters back. We have brought to 8 to 9, brought to 60. It is an indication-
Okay.
right, as to where things are. Even from a Cost of Deposits perspective, people who have a large savings account can make a quick difference in terms of bringing the Cost of Deposits down. We are cognizant of it. A lot of it has not got to do with the bulk deposit because I know, I think Jai mentioned bulk deposit. Bulk deposit is super sensitive to price. Okay? But retail is not. When I speak about half a million Niyo Card customers and publicly saying 27% of them who have used the card abroad. If you have a passport, you are in a different section of the society. Not only that you have gone abroad, you swipe the card some places and come back and keeping less than INR 1,000 in our bank account is a tremendous opportunity. Right?
For those who do not know, there is something called liquidity coverage ratio. Are you familiar with liquidity? So INR 1 a bank gets from an individual is very different from INR 1 that you get from a financial institution. If you get money from an individual, you can afford not to keep surplus money in your SLR, which gets you what, 6, Ajit, how much do you get?
6.5.
Around 6.5, right? While a rupee is a rupee, in a YoY growth, it shows nice 18, 20 kind of percent, but there is a mandate. Our branch banking guys have three mandates. You have to grow 18%, 20%. You have to get a lower Cost of Deposits. Where you get the money from also matters. It has to come from individuals. Not all of it does, but that is a drive.
If you get this horizontal, which we spoke about right. There are customers there. The KYC is already done. All you need is damn money, and let us not even chase savings. Need to gauge the savings. It is not about Cost of Deposits. Even if you get term deposits from these individual customers, it will help me considerably. While it is not showing Cost of Deposits, it will show in interest on investments. There will be much less money there. This is a three-pronged game that we are attempting to play. When I showed you that, it seems like only two items. One, treasure within, two, filling the gap of 3- 10. But there are wheels within wheels there, which will help the bank become stronger, more robust. Forget about cost and P&L for a minute. It is difficult for all of you to do that.
From a risk perspective, the stickiness that comes in with the individual customers, immense. It is not just your trader. These are not your chosen segment of customers, the Niyo customers. These are people like you and me. They are not your typical DCB Bank customers. It gives you an opportunity, and they love you for it.
Just the last question here. Yeah. Here, Bhavik.
Sir, yeah. Of course. Sorry.
Yeah. Then just a follow-up, maybe.
Right.
We want to focus on granular growth.
We are focusing, I hope we are.
We are focusing on granular growth. As in a scenario where our granular growth is less than 18%, would it be okay to compromise on asset growth?
I will tell you two things we are not okay with. There are times when you may not be able to meet that 18% number. It is okay, because you are looking at a three-year window, and there could be times when that exact number may not be reached. We are okay with that. As long as in a longer term, the graph is still growing at 18%, 20%, we are comfortable with that. But what we will not do is create an NPA problem for the future or create a mixed problem on the liabilities.
Okay.
Right? I would come to you and say, "Look, this quarter would not happen." Rather than meet it through, to keep up the word, we will not compromise the franchise. No, no way.
Understood, sir. Thanks for the opportunity. Good luck.
Not at all. Thank you so much.
Yeah.
Yeah, Anil Tulsiram here. Thanks for the opportunity. Sir, my question is on the co-lending. Can you explain what is the strategy and rationale of doing co-lending, and what is the profit? Because most of the banks are pretty much not interested in co-lending at all, and we are one of the few banks which have a 15% of the book on co-lending, and we have that target going forward also. What is the strategy and rationale? The profitability numbers.
I am going to talk about co-lending as per the current rules, not about the rules going forward. I am going to talk about only co-lending for gold. Co-lending for gold typically does not come with a credit cost. Typically. If it does, it is a very small basis point. We can live with that. It comes with zero expenses. Near zero expenses. You do some flying squad visits, surprise checks, et cetera, to see, "Banda hai, sona hai," and the same thing is not placed to other banks or other financial institutions. There are three risks that you carry. Strictly, we do the checking. Very nominal operation cost. You get a very small NIM for it. There is very little capital consumption. Capital consumption near zero, expense near zero, provision near zero, small NIM. Why do you think I am avoiding the conversation of ROE?
I am avoiding the conversation of ROE because this is highly ROE accretive business. It is not ROE accretive business. You get it, right? NIM is small. I am not going to tell you how much NIM is, but it is considerably smaller than. Why will somebody give you a 20% loan to you as a co-lending partner at 20? You get a much lower rate. That is my view on co-lending. On other products, it is yet to be played out. The credit is yet to be played out because you are taking a call on the other person's underwriting ability, and your guess is as good as mine. You are doing co going forward, you have seen the rules, right?
Yes.
That is my simple view. Why do we do co-lending? Because it helps ROE. It does not help ROA, it helps ROE.
Yes, sir.
Sorry. You can ask a couple of times.
Dheeraj, Aditya Birla Health. First, I would like to congratulate your team because of the wonderful performance of DCB Bank, because I think that the DCB Bank has seen many credit cycles and the time of volatile credit market where there is any bad news coming from many banks. I have monitored this bank for a long time, and I have not seen anything bad in the news, so wonderful risk team and management. The first question was related to the capital that you told me that you are not seeing any equity dilution or anything in the recent future for your projected growth. My second-
At the right price, with the right partner, with the right opportunity, you may see that.
My second question is that, do you see any branch expansion? What I see is that a few years back you were increasing your branch very fast, but in the last five, six years, I have not seen any. Personally, I have not seen any branches, more branches, ATMs. On that side, are you going to see any growth or any plan?
Next year we should be touching 500 branches. Our branch strategy is about putting up new branches in the locations where we have existing branches. Increasing the concentration is what we do. There are two distinct areas we build a branch. As far as mortgage is concerned, this is important. Mortgage, SME, secured lending against property is concerned. You need a physical presence. Despite ULI, et cetera, you really do require a physical presence. Then we go into locations which have a good credit history, where there is strong leadership, put up new flags in completely new areas. But for liabilities, it is still the big 10 cities. You can put 20, 30, 100 more branches in Bombay and still may not be enough. You take a call on what kind of cost comes into play. Liability is based on more branches in the same location.
Asset is based on expanding the footprint. I do not see us going into Northeast or into J&K, but everywhere else we see more branches coming in. In a calibrated fashion, 25- 30 branches every year. That is the way we will be going ahead with it.
Thanks.
Good evening, sir.
Hi, good evening.
This is Akshat from Smiths Limited.
Akshat.
Actually, I wanted to check, is there any target for BL versus HL? Historically, it was 85 to 15, and now you said that it is 60 versus 40, right?
On sourcing, not on portfolio.
Not on portfolio. What is the stock number? As in-
We haven't yet revealed it, but soon we'll be. I guess we'll be revealing it, right?
Yeah. We are going to.
Do you plan to go back to historical levels? You have in the past pointed out that PMAY-U 2.0 might hinder that. But still, is there any plan to go back to near historical levels?
I think 60/40 we are comfortable with. We should be in the similar kind of range going forward as well. And one of the big reason for that, for not going to 65/35 or a 70/30 is PMAY-U 2.0. It's clearly that, because it's right in the sweet spot of where we operate, and it has got so many things going for us. Maximum 11.5%. Cannot do BT out for a period of four years. If you default, you lose the subsidy. Subsidy given year after year, not as a lump sum. Why would you not do that, right? 11.5% we are okay. That's a yield that you saw, right? You saw that once when Ravi presented. Okay with that.
Yeah. But on the Cost of Deposits side, we have got a very comparative idea. But just trying to understand what kind of uplift we will have for, like, moving further into BL versus HL, right? On the NIMs part.
See, a lot of it will get negated. Sorry to be a negative wet blanket here. The reason is every passing month, there is some hybrid deposit, that is erstwhile fixed deposit, which becomes floating. And when it becomes floating, you pass on the repo rate that you haven't passed on earlier. Are you with me?
Yes.
There will be a dilution of yield on that count as well. So the advantage that you get from a better BL to HL ratio would, in some sense, get negated by incremental loans which are booked with a two-year or a three-year hybrid becoming floating now.
Right, sir. Just a follow-up on that. With this, there will be some impact on our RWA density, right? So you are at 49% and you said that you would be looking at early 50s, right? Is it all coming from this transition?
No, I tend to think that co-lending gold will continue to be a 15% growth only, right? They are 15% and a 20% kind of growth. The co-lending gold will continue to grow exactly at the same proportion of the rest of the asset book. There will not be a massive increase in co-lending. Because co-lending gold is very low capital consumption, you are getting the benefit of it. The moment it becomes proportionate to the normal organic growth, you do not get any incremental benefit coming through. The incremental benefit will come because the normal business that we do dictates a 53%, 54% kind of RWA.
Right, sir. My second question is on deposits. What is DCB Bank doing to grow CASA ratio? We are kind of lagging versus the peers. Because we are a small bank, so obviously CASA ratio would be kind of low. But still, what are your plans to grow that and become a slightly 35% or 33%, 34% kind of percentage kind of way?
See, personally, I am not a believer in CASA ratio. I am a believer of Cost of Deposits. Okay. Because there are two kinds of SA coming and sitting there. One is a term deposit. A INR 50 crore term deposit comes and sits at a 7% SA, right? That is not a SA. That is a term deposit equivalent, where the money can go out the next day. At least in term deposit, it stays with you for some period of time and if there is a breakage, you get a benefit. So at one end, you have customers who are keeping monies which they need to use for some specific purpose, where the timeframe is not known. They park their funds there and get a higher rate. It will improve your SA. But is that the kind of SA you want?
The SA that we want is where the float comes before, because a flow comes in. So we are activating most of our savings account, telling customers, "Please use your UPI. Use it for this particular purpose." Giving inducements. "If you electronically use our account, if you use UPI, you get a cashback." Can you imagine this? Every bank, including us, is suffering because the UPI transactions have gone through the roof. The technology cost of supporting this has gone through the roof, and we are saying, "Use UPI, you get a benefit." So we believe that flow will give you a float. Because that is what you want. You know our savings account rate at the lower end, less than INR 1 lakh? It is 1.5% or 1.75%. It is 1.5%. That is near current account.
We want more and more customers of a less than INR 1 lakh variety, and they are there. We need to get it activated. Their KYC done. Emails, mobile, everything there, and they are keeping very low balance with us. We are urging them to use our bank account, making it seamless, making it easy. That is the way we want to build a savings account book.
Very well, sir. In terms of credit cost, one of the reasons many banks have low credit cost is like recoveries which will dry out at some point, right? How sustainable are our recoveries? Because we do have a-
I really wish what you say is true, because the problem we are facing is we are having slippages. I do not know whether you really looked at slippage. It is like a never-ending pool. I wish we get into that kind of situation. Our slippage is so high, right? See, if you look at non-gold, our slippage is about 2.5. Should ideally be a 2, should be less than 2, ideally. Our recoveries are very good. When will the dry out happen? When the flow reduces, then they will dry out. That is a good situation to have. In fact, that is what we are trying to gun for, right?
Right, sir.
Within the bank, I will tell you this, we have a campaign where 90 DPD has been replaced by 1 DPD. There is a drive within the bank to move from 90 DPD. You understand DPD? Most of you know. It is Days Past Due, so how many days overdue that is. Moving from 90 DPD to 1 DPD. We are changing the battlefront, right? Right now, it is a slogan, but at some point in time, we will see the benefit of this coming through.
Right, sir. Thanks a lot, and all the best.
Not at all. Not at all. We have three hands. We still can have a discussion outside, right? Yeah, but still.
Yeah.
Yeah.
Sir, this was on the operating leverage, operating ratio that you have given. When we are moving from a LAP kind of a product to an SME kind of a product, OD kind of a product, which will have multiple interaction. See, LAP is a one-time interaction. You sanction it, and then you keep getting NIIs. In that, you get a servicing cost, and then you get a cross-sell and all those financials. If you were to compare these two products on that operating ratio that you have shown, how do they stack up in a medium to long-term?
We haven't done it, but what we see is so many possibilities. The bank's philosophy is moving from being a one-time lender to a proper banker, where lending is only one of the things that we do. That itself is so compelling, and whenever we tried it, we have seen sporadically benefits coming through. What we want to do is make it a program and move the needle. If 20% of term loan that we do, it's just an indicated number, don't take it for granted. If we can move 20% of term loan that we do into an overdraft facility, the pressure of runoffs, treadmill effect will go away. Our ability to generate fee. Today, we are very DPD-dependent recurring fee income thing. We're doing a reasonably good job of it, but we need more strings on the bow. We need the trade income to kick in.
How do you get a trade income from a LAP customer? You have to have an operational facility. So even if he doesn't want an overdraft facility, have a current account. Life becomes easier. That's what you're driving at. It's a bit of a seismic shift, right? And that's important because 44% you saw, at least in June, of who our competition is NBFC and HFC. Do you want me to fight the battle on exposure and then create an NPA later on? Do you want me to fight this battle on price and create a NIM problem later on? When we have a third alternative there, which is overdraft. Not for every customer, but let's say for the bigger customers, very much there. And that is what we want to do.
Having gotten into the operation, if you want, is it something we can work out? I really don't know what the operations are. But there are so many compelling reasons why we should be doing this. Not only we, most banks who have that ability should be doing that.
And sir, second was on the deposits. When we are reducing the TD spread with large banks, clearly earlier, the rate itself was the selling point. How are you changing the strategy? Anything you may have partly covered, but how are you getting-
When I do not know the answer, I give it to Pankaj. Pankaj is our Head Branch Banking.
Many questions on the deposits. I was also already getting worried about next year, but here is it. I will give you some perspective on this. See, there are few things which we have learned in the last few years on the deposit front. Some of it we have executed. Some benefit has come because of the repo rate cut, and all banks have reaped those benefits, not only us, right? That trend we see. Praveen spoke about the book, the way it is, and we have next three, four quarters, that benefit will come to us. But that is the math of it. I want to give you a bit of a glimpse on what we do in branch banking. One, as part of cross-sell customer 360, one of the franchise within the system which understands engaging with customers very well is branch banking. Why?
Because branch banking acquires customers, acquires savings customers, acquires current account customers, cross-sells term deposit, cross-sells health insurance, cross-sells life insurance, cross-sells gold loan. Same branch banking. Collects gold loans. The overdue interest due and all, and also cross-sells trade products, bank guarantees, LCs and all. One competence which clearly we have is the ability to have multiple conversations with the customers that we acquire and which are there in the portfolio. That is one part. Second part, and I keep on thinking generally, since you are asking this question, but I myself keep thinking, how is some other bank acquiring term deposit at a 50 basis points lower than what we are offering? How is an SBI or an Axis Bank or an ICICI Bank or many other banks acquiring 25 basis points lower than us? 30 basis points, 40 basis points lower than us.
They are also doing something. I have learned at least part of the thing. One, own the neighborhood where you are operating. If you have a relationship, many of you have fixed deposits in various banks. I am sure you have. How many times have you shifted your term deposit for 25 basis points? How many times? On renewal of your term deposit, how many times have you figured out, "Nahi yaar, 25 basis points, 30 basis points kahi aur bank jyada de raha hai. I want to break it and shift." Many of you would not do it. You know why? Because there is some relationship manager who is engaging with you not only for term deposit, but for various other banking services. That is reason number one.
How well we engage with the customers through, and we have done programs like "Ek Mulakat Aur Kuchh Baatein" this is a signature program for us. Along with Praveen and management committee members, we go around the country and meet up with our 150 top customers in various cities, be it Mumbai, Pune, Hyderabad, Chennai, Bhubaneswar, Indore, Bhopal and all. What impact does it have? It has two impacts. One, we understand the customers better. Lots of insights come to us in terms of how do we make our branch banking engagement better, relationships build up and all. Second, multiple programs happen at a branch and cluster and regional level, which we call, because you asked the question, "Ek Shaam Aapke Naam."
So that engagement itself has given us a lot of confidence that we can run this engine much better as a structure. If you saw that pressure within, we have so many customers who can, for example, an INR 25,000 fixed deposit customer, trust me, doesn't hunt for rate of interest. A few things like this.
Two, three things I want to tell you. One, we talked about Niyo base. See, for 25 basis points, you may not transfer, but for 60 basis points, you may transfer. Why am I saying 60 basis points? Why not 50? Why 60? Do you remember the slide? The three largest private sector banks and public sector banks average is 60 basis points. Most of our Niyo customers bank with a large, the big, large customer base. They have a bank account with us, seamless, no KYC, no biometric, no video KYC, no nothing. Give money, get rate. At the lower rate, they're getting 60 basis points more than what they're currently getting. Guess what? They have had a superior international experience with us. Why is that not compelling? Number one. Number two, secure credit cards, while it's called credit cards, it has got a holiday period.
You get interest on it if you delay. It's a liability proposition. It's a massive liability proposition. Hopefully, a year from now when we meet again, we'll meet even before that. But a year from now when we meet, that could be a big mover for our savings account. Third is the set of analytics that we are driving in. It's not the balance that you keep. It is the person you are, and we already know who you are, how much you can keep. To my mind, it's not a strategy challenge. Is it a challenge? Yes. It's an execution challenge. How well we execute it, you'll know in a few quarters.
Yeah, hi, this is Krishnan from HDFC Securities. Partly, two things, what Jai said, what Nitin said as well. You seem to be indicating that you have exhausted most of the low-hanging fruits because you are nearly there, and you are saying in two years we are likely to remain more or less there. Most of the gains seem to have already. At least the low-hanging fruits seem to have gone. Yet I thought the productivity gains and efficiency gains are yet to play out. Given what you mentioned in the Q2 call, Praveen, you said we are high on slippages, but instead of focusing, and about 80% of that money does come back, so why should it take nearly three months to come back? Why not, basically free up. I am just saying your ceiling should be higher.
From whatever you have said so far, you are still not reaching for the stars, very honestly, right? I believe your ceiling can actually be higher. Why not?
I also believe so. I also believe. Much higher. But the indication I am giving to you is this, and when we reach this indication, we will give you more. Much higher. Much, much higher.
I guess the other thing that you mentioned was the cost of chasing delinquencies is fairly high today, right? Your OpEx, while you are focused on cost to assets, to my mind, you are still running almost like a G-Sec in portfolio, right? Which is why the cost to income is as elevated as it is. Right? I will give you a simple example. Supposing we both were working at 2.5% to assets, right? So on a 100 rupee asset, you are running a 2.5 cost, I am running a 2.5 cost, right? But on that 2.5 cost, if I am earning only 5%, right, my cost to income is about 50%, right? If you were earning 6.5 rupees, your cost to income is far better. Right?
Our sense is probably you should be also looking at cost to income. You can't control everything, but you also need to look at cost to income.
Look at the other perspective also. I buy your point. Look at the other perspective. Suddenly you get some windfall gain, and in banking you do get windfall gains, right? You never get a credit for that because that brings down the cost to income to some lower levels.
I'm talking sustainable income.
Yeah. So you see blips coming through. I'm just saying I want to modulate that blip by looking at two critical parameters, numerator, which is actual cost, and denominator, which is actually averages. So blips are removed. That's all I'm saying. So that if you want to compare, clearly, the comparison comes through in terms of what are you spending and on what you are spending. That comes through. That's it. On the low-hanging fruit, no. In the last 18 months, I haven't seen one low. There's nothing called low-hanging fruit. Everything is effort. It hangs upwards. Genuinely, there's nothing called low-hanging fruit. Everything requires effort, right? It is a question of which do we choose from a sustainability perspective? That's it. Let me try and explain this to you. Everything that we do is a trade-off. There is no clear-cut black and white. Right?
It is very simple if you play two out of the three triangulates. If Cost of Deposits and growth alone was a problem, we can play these two games, bring low Cost of Deposits and get growth of 20% and build three-month deposits. We will not do that. Whatever happens, I will not do that because there is a sense of purpose for the bank, which needs all the three to be met. We need long-term deposit, which are by definition costly because there is a risk element attached to it. So within the constraints that we have, which is the best way of moving this? While it may look like a low-hanging fruit, there is always a cost to pay. We talked about technology, right? How technology is driving down cost.
I can easily put up another slide saying how technology is driving up the cost, the kind of money that we pay on cybersecurity, the kind of money that we pay on UPI. I know it is a recorded call, but there is a- licensing norms change from software to user. Suddenly, you do not have a choice. There is no other player. Can you imagine? Instead of charge being on the server, per server you are paying something, you move to per user you are paying. Whether the user is using it or not. Because you have 11,000 employees, you will end up paying something, right? And you are already stuck. You are in bed with that kind of technology, you cannot get out of it. So there are enough costs which are going up also.
While you on the MyDocs and paper and courier, et cetera, you do some hard work and bring it down, there is so much of investment going in there, and you cannot compromise on cybersecurity. So what I am trying to say is, yes, there are competing cost. One good way of looking at this, for the kind of growth that we are getting, are we growing less than proportionate to that kind of growth? Are we growing less than proportionate to the income that we are getting? Is our operating leverage getting better? Would you like to reduce this flow and then recovery? 100%. You are having a waste of money, waste of time, waste of effort. And you get arteriosclerosis just by looking at it, because it has slipped. That is a fact. On fourth it has slipped. On first it slipped.
You want to wait till 27th, 28th to recover the money back, till then you are palpitating. Why do you want to do that? I mean, the same question you are asking me, I am asking you, right? There is merit. There is wastage. Is there room? There definitely is room. I genuinely think reaching for the star is not a 1% or a It is not a 13.5 or a 14.5. 13.5 and 14.5, in our opinion, are milestones in our journey. And I have given you a two-year perspective, not really, I have not given you a 2030 and beyond perspective. So that clearly it is important for our credibility to talk about our confidence on achieving something which we have not achieved so far in a time frame which we have not defined so far. That is it.
That is our objective for this thing. And it will change. The moment we touch that, and reasonably confident, hopefully we will touch that, then we go to the next milestone.
Okay.
Lastly, if your ambition is such that it is within your grasp, it is not an ambition. We will forever be reaching out for the star. We will never reach the star. That is what we want to do. When we reach our next milestone, there is another milestone which we will go for. There is so much of ambition in the company. There is so much of opportunity in this company. That is what we are here for.
Yeah.
Sure thing.
Thank you.
Thank you.
Thank you. Krishnan, I think we have to end in interest of time. If you have questions, you can come back to us. We would answer it separately, because it is getting late. One announcement, as a part of compliance and information symmetry, these presentations have already been uploaded on website of BSE and NSE. Video recording of the discussions today will be appearing on exchanges sometimes tomorrow. Link for it. If you decide, you can go through it. For questions, you come back to us. Thank you for being with us for such a long, I think almost it is 8:30 P.M. We will keep meeting going ahead. Thank you. Thanks a lot. You can join us for dinner. You can hit the bar. Thank you.