Ladies and gentlemen, good day, and welcome to the Q3 FY 2022 earnings conference call of Federal Bank. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shyam Srinivasan, MD and CEO, Federal Bank. Thank you, and over to you, sir.
Thank you very much, and good afternoon, everybody. I'm assuming that all of you are keeping well. On the call, I have all my senior colleagues. We are all in different places, so I can't see them, but I know they are on the call and will be happy to answer questions. I'll give a very brief opening remarks and turn it over for question and answer. We've published our Q3 results. I'm sure you've all had a chance to see the headlines and probably the investor deck. The quarter would go by as one of our better quarters in terms of overall performance. There were a few significant milestones this quarter. Our overall income crossed INR 2,000 crores for the first time.
Our net profit crossed INR 500 crore for the first time. Importantly, our ROA for the quarter was 1.02%. It's been a milestone, an important deliverable for us for quite some time, so I'm pleased that on all these counts there's been progress. By no means is the journey. I think there's a lot of work going around, and these are early signs of all that coming to fruition. Asset quality of the bank has been good for quite a while, and I think this quarter has been no exception. Credit costs well under control. Provisioning on the committed lines. We've added some extra provisions for the restructured book. We've created a meaningful buffer to ensure that should COVID wave 3 have challenges, we come out well protected.
Operating income of the bank this quarter was its, you know, strong move from 830 crores core operating income, 830 crores the previous quarter to 881 on a sequential basis. Our strong suit of liabilities continues to be performing well, very granular. CASA hit an all-time high of almost 37%, and CASA grew year-over-year almost 15%. Granularity of the book continues. Our strong suit, the NRE remittances, is now touching 20% of India's remittances is through Federal Bank, and it's growing well. We're gaining share meaningfully as is visible, because what we hear is that the overall numbers are contracting, but ours are growing quite meaningfully. Evidently we are gaining share. We saw good pickup on credit this quarter, the one that went by.
For quite a while, Retail was carrying the burden of credit growth. We saw Corporate come back strongly in Q3. As when I say Corporate, I also mean Commercial Banking. Both of them saw quarter-over-quarter growth and year-over-year growth annualized almost 14%-15%. You may have observed our very strong presence in the FinTech ecosystem. We are, I believe, one of the most important bank partners that most of the up-and-coming FinTechs seek to work with. Our API stack is formidable. Our partnership capability is robust. We have created an institutional architecture which focuses on FinTech. Personally, me and the team believe that it will serve us well. It is serving us well, and I think it's beginning to show.
Over 75% of our new accounts booked come through the FinTech partnership, and I'm sure there will be a few questions. I'll be happy to answer them as we go along in the call. On balance, Q3 was good. We do think many of the material drivers of progress that we put in place are working well. The teams have done a great job in navigating COVID and its challenges. No different for our banks than it has been for everyone in this in the country or in the world. You know, it has been particularly the last 3-4 weeks leading up to today have been quite challenging because productivity has been impaired. People have to deal with either personal COVID challenges or family members or customers and a combination of it.
Through all this, the teams are dealing with it very well and have delivered on most counts. Post the quarter, as in the first few weeks of this month, we've actually had our Tier 2 bond issuance, which went very well. We did about INR 700 crore raise of money, about a few days ago. So Q3, like I mentioned, from a net profit, from an income, from a margin expansion, from a credit standpoint, quality of the book and liability franchise continues to be granular. So I'll pause here. Happy to take questions. Me and the entire senior team is there. We'd be happy to answer any of the questions or any clarifications that you may need based on our investor deck and the details that we've put out. Thank you very much.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. First question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead.
Yeah, hi. Thanks for taking my question. Good evening, everyone. A few questions. Firstly, you know, on the Personal Loans book, I mean, it's fairly small right now, but it's been sluggish for the last 4, 5 quarters. It has not grown. Any specific reason? Is it a conscious call of not growing this book, or what has been the reason for this?
Yeah, I think in part you answered that, Gaurav. Our credit choices are relatively more conservative. We don't go gung-ho on the unsecured book till we are very sure that it's good to grow and the coast is clear. We did see through the pandemic, we did not want, I mean, not that the pandemic is over, through the peak of it to be sort of very cavalier about it. As we saw things improve, we started picking up. Normally in the pre-pandemic period, we were running close to INR 100 crores a month of disbursement. As you know, we don't do new to bank PL. We only do existing to bank entirely digitally originated based on data mining. Through this period, we were more cautious.
As things started improving, we started picking up and you saw some uptick, and I believe that uptick will continue as we go into FY 2022, I mean FY 2023.
Okay. We've started talking that INR 100 crore disbursement run rate on a monthly basis.
Not as yet, but we are on course.
All right. Sure. My second question is slightly more, say, medium to long-term. Right now, congratulations on that 1% ROA mark on delivering that. Now, my question is taking slightly longer term view, you know, towards that journey of 1.2%-1.25% ROAs, what are the two key drivers or two, three key drivers that you'll be focusing on in order to achieve that? Because right now, NIMs are at, I mean, you guided for a NIM range, and I think we are at the higher end of that guidance. Is it do you see further margin improvement from here on driving ROAs, or will it be driven by the other levers?
No, we've always mentioned, Gaurav, that we don't have one silver bullet. It's many little things all adding up.
Right.
At least that's the things that we promised we are working well. We had said the NIM expansion by 5-10 basis points. 5 of that 10 is accomplished. We hope we will do another 5. Our credit costs tend to be in the right space, and I believe that has some space to do even better, because we made some incremental provisions now just to buffer for future period challenges. Those may not be required. As we get our digital performance even better, I think the cost benefit that we are seeking out will play through. The 1.2% ROA that we are more near-term giving attention to all look possible over the next 4-6 quarters.
Okay. Cost would be, I mean margin expansion by another 5 basis points and the remaining would flow from credit cost to OPEX?
Yeah. Yeah, right.
Sure. Sure.
There are only three lines that you can play with in a business, right?
Yeah. I mean, fee income is one. It's not because of.
If you noticed our core fee income this quarter, as you would have seen on the deck, is about INR 414 crore.
Right.
Highest ever in the life of our business. Essentially because, you know, the treasury-related business, fee income were modest this quarter.
Right. Sure. Just lastly, on the NPA, I mean, can you give some color around, you know, since most of it is secured, you know, from either housing or Business Banking, what has been the, you know, sort of repayment rate of this? Are the customers servicing existing installments, or there may be some of them who may be less than 90 days DPD, and you know, be NPA for technical reasons because you cannot, normalize them or standardize them until they pay all the dues. Such cases exist in our book of NPAs?
No, I think, NPA recognition has, in case they don't service all dues, they are NPA anyway.
Yeah.
They have slipped and don't pay up all the dues. They don't get upgraded by, so, you know, to that extent. Sorry, I'm not sure what the question is.
My question was, are there any less than 90-day DPD customers in the NPA book? Because customers who may have not prepaid all 3 EMIs, but would have repaid only 1 EMI out of the 3, which is outstanding. Here the intent is to pay and hence, you know, they're at least servicing the existing EMIs or more than 1 EMI.
There will be, but you know, if they do subsequent quarters, they will be either upgraded, you know. That's how it will. Maybe Babu or Ashutosh, would you want to add anything to that question? Ashutosh or Babu?
Yeah.
Am I audible?
Please do, please.
Go ahead, Ashutosh.
If I understood the question, you mean to say that if they have not become 90 days DPD, they have not turned into NPA, and before that, instead of serving 3 installments, they have serviced 1 installment, right? Is that the question?
No, my question is, they have turned NPA. They have been 90+ DPD, but-
If they have turned NPA, they have to first become zero DPD, not only that particular account, all the accounts, all the related accounts as well.
Sure. Sure.
Everything has to become 0 DPD on a day, then only the upgradation would happen. Otherwise, they would lie as an NPA, even if they are 60 DPD or 30 DPD.
Yeah, yeah. That's my question. In the NPA that we report of the total NPA that we have of INR 4,000-odd crores, are there NPAs which are, say, 60 DPD also in that? Is that maybe, I mean, majority chunk or a large chunk of NPA?
I think you have missed.
There would be some. I think the overall number, you know, if you see SMA-2. SMA-2 number is mix of both the ones which have not fully cleared all the dues, have not yet become 0 DPD, and therefore they continue to be NPA, though they may be 60, 61, 64, 65 DPD. The ones which have migrated from SMA-1 to SMA-2. That number which you see, you know, that 4.5%-5% number of SMA-1, SMA-2 all put together because our collection efficiency is above 95%. What remains is your SMA. I think if you see that number, that particular number, you would find, I mean, that SMA-2 would have both. They would have some who have not fully cleared all the dues, so therefore could not be upgraded.
Sorry, in NPA you will have some, not in SMA-2, but in NPA you will have some of those which would be 60 DPD as you are guessing. I don't know exactly the number, but can give you separately. It will have some.
Sure, yeah, I will take that offline probably.
No, fine. I think, Gaurav , your line is also disturbed. I think we should move on to other people.
Sure, sure. Thanks.
Thank you. The next question is from the line of Arav Sangai from VT Capital. Please go ahead.
Somebody's line operator has got disturbance.
Sir, we'll check the line. One moment.
Yeah. Hi, sir. Congrats for good set of numbers and hope all well at your end. My first question pertains to the yield moderation that we have seen. We have grown our NIM this quarter, but most of it is regarding the cost of funds declining. From a medium-term strategy, I wanted to understand, since this quarter also, our Corporate book has grown better than the Retail. How are we looking at the broad mix of the book and the yield coming in? Especially when we are hearing there's a lot of competition in the Corporate segment. From a one-year to two-year perspective, how are we looking at the segments which we are trying to grow and, you know, increase the yields on our book?
I think we've been mentioning that our mix of business, 55, 45, 55% Retail and 45% wholesale, and we are pretty much in that space. Within that, the businesses that are higher margin are being pursued quite aggressively. We are seeing growth in all counts. I do want to point out that, you know, these things can't be at the risk of later facing a credit issue. We balance that out. Credit cards beginning to see traction. Gold Loans coming back. Businesses like Commercial Vehicle are strengthening, and I see opportunities there. The Commercial Vehicles, Business Banking, Gold Loans, Credit Cards, all seeing traction. In the Wholesale Banking, Commercial Banking, which is a little more higher yield than Corporate, will continue to grow.
The business mix would be 55%-45%, and within that the yield enhancing products are seeing traction, and we see that will give us the option, opportunity to increase margins by another 5 basis points.
Sorry to interrupt you, sir.
Right.
Sir, should I reconnect your line?
Is that my line which is a problem?
Yes, sir.
Please go ahead.
Thank you. Ladies and gentlemen, request you all to please stay connected while we reconnect the chairperson. Thank you. Ladies and gentlemen, thank you for patiently waiting. The line for the chairperson has been reconnected. Thank you, and over to you, Mr. Sangai. You can go ahead.
Yes. Sir, my second question is on the OpEx front. As you mentioned that you are making a lot of investments with all these FinTech initiatives and all. Right now we are at cost to income of 55%. And as you mentioned that cost is a very big lever of ours, we are achieving that 1.2% ROA mark. By say in the next one or one and a half years, where can we expect this cost to income? Any band that you would like to guide us for?
Yeah. We were at 50. In the last two quarters it has shot up because I think as I explained in the last call, there have been impact on the wage-related margin partly because of s ome announcements that came on the wage side. I think that's getting normalized over the next two, three quarters that will start trending down. Some of the volume related costs, which are good costs, are going up, but that's something that we are willing to live with.
Some of the digital initiatives will start seeing, you know, sort of improvements in the cost income in the quarters that follow. Over a financial year, FY 2023, we will see about 200 basis point improvement on this. I do think similar number in the following year. We saw some pickup on that because there were some guideline changes and also some unexpected bump up on pension and family pension and gratuity and PF. All that is now factored in.
I think somewhere 200 basis points improvement in each financial year from here on.
Right. Yeah. Thank you, sir. That's it from my end and all the best for the coming quarters.
Thank you.
Thank you. The next question is from the line of Dhaval Gada from DSP Investment Managers. Please go ahead.
Yeah. Hi, Shyam. Thanks for the opportunity. I had three questions. First was on the going back to the Retail credit growth point. So, you know, just wanted to sort of touch base relative to, you know, some of the larger peers who have reported. It seems that the sequential momentum was little bit soft, and especially in, you know, Personal Loan was one and also in other products. We've seen relatively the momentum was slow. Any comments that you have? Is it more temporary? We are seeing momentum build back.
If you could specifically give some comments on MFI and CVC as well, since those are the other portfolios that we intend to increase, you know, mix.
Yeah, I think on Personal Loans, in particular, like I mentioned at the beginning of the call, we are a little more by choice conservative on that count. I would not try to be very aggressive on that count. That said, we are seeing pickup, as I mentioned. Our non-unsecured growth in Retail was as usual in the 20% or so. Blended was lower, so that will continue. The secured products are doing well. Unsecured, we are seeing both Personal Loan and credit card will grow, but I want to caution saying that that's not something that will grow in the very high numbers initially and then run into a problem later. That risk we are willing to take. I mean, that pain we are willing to take and grow slower and do it in a more graded fashion.
That said, it's growing. Commercial Vehicles, it's doing well, but on a small base, and here again, we've been more conservative. As things open up, we are seeing that catch up. We've further strengthened the team. We've got a senior leader joining us as a business head for Commercial Vehicles, so he is putting out a plan to make sure that this business will see meaningful growth going into FY 2023. I do want to point out businesses like Commercial Vehicles, credit cards, Personal Loans, Microfinance, all of which are exciting and high margin, won't dominate our incremental growth. To that extent, that's the philosophy of us. Combined, these businesses may put up about INR 3,000 crore in a financial year or in a business year.
on a business that may grow INR 20,000 crores, INR 15,000 crores, INR 18,000 crores of credit, this will not be material, but it'll add up in the quality of the business and over a longer period of time it will sustain us.
Just one data point, if you could provide on Personal Loan, what % or how many customers have we, you know, offered these pre-approved Personal Loans? Any data that you could share compared to, let's say, last year or the year before, some perspective. Basically, are we in the process of doing that or we've already done it? Some perspective, if you could provide, that would be useful.
It's a base that is ever generating, right? Because it's a base that every month the scrub runs on the existing client base and, you know, the whole 1 crore customer base, whoever is eligible based on our internal criteria, gets scrubbed every month and there's a continuous offering. Existing customers top up, repay, top up. It's a perennial source for both cards and other Personal Loan and other cross-sell opportunities. That said, the take-up is usually about 3%-5% of our base every month.
Understood. The second question was on the FinTech partnership. You know, you've been sharing your experience with these players. If you could just give some quantitative numbers around how much is the savings balance with these accounts that are coming with these FinTech, and then current account balances with the merchant acquisition business, fee pools, if any. If you could just quantify where we are today and any, you know, like, one year or two year down the line, what size each of these metrics could be.
I think the first thing I would say, as I think one of our slides, slide 16 in our deck and beyond, talks about the FinTech partnerships. We have consciously, you know, indexed it to X and what percent, I mean, how many times X has been growing every month, you would see or you would notice both in balances and in number of accounts, and it's growing quite rapidly as you would observe. Numbers we are consciously not sharing, not because that we don't want to, but I think the partners seek that confidentiality because there are many partners, and if we put out, they shouldn't get into their own. They have other commercial considerations, so we're sharing it indexed to a particular number. Suffice to say it's growing quite well.
It's yet not very meaningful in the wider scheme of our CASA balances, which is well north of INR 50,000 crore. These are yet to, you know, speck on the horizon. We believe on the margin they are doing well. The 3 MOB, 6 MOB balance build of these accounts match up to some of our segments of the business, and we are giving ourselves calendar 2022 to make sure that these are actually catching up and, providing us cross-sell opportunities as we mature into these businesses.
Would these be like more than 2% of CASA today? These partnerships, the flow that-
No, far from that. Not as yet.
Understood. Okay. Just one last point on the provision line, just a housekeeping question. I think we have, you know, adjusted recovery from written-off accounts from the provision based on the RBI circular. Is my understanding correct? If yes, then if you could provide the recovery from written-off accounts during the quarter. Yeah, those are the questions. Thanks.
Venkat or Babu, you want to take that?
Babu here. What I understand the question is like a sale of Corporate accounts as per the latest guideline. If that is the question, I would appreciate if Venkat may take that question.
This is Venkat here. On the question about the RBI circular. Last, if you recollect, in August, there was a circular where there was changes in the presentation which was prescribed on the financial statements by RBI, where recovery from fully written off accounts earlier, which were shown as other income, was to be netted off from provisions. That's what we followed in the Q2. Subsequently, based on certain representations in November, I think November 15, there was another circular where they revised it and made changes and asked us to go back as per the earlier presentation. We have restated the previous quarters as well in line with the change. In Q3, that number was marginal, maybe like a few INR crores.
Okay, thanks. Thank you. All the best.
Thank you. The next question is from the line of Sumeet Kariwala from Morgan Stanley. Please go ahead.
Yeah. Hi. Hi, Shyam. Congratulations on a good quarter. I had a question on margins outlook that you've historically given, which has been in the range of 3.15%-3.2%. We are running at 3.25% now, more than that. You're sitting on a lot of liquidity. The rate cycle is turning. You're very well positioned for that. You'll open up this capital with respect to lending and so on. Do you see the need to revise that guidance or should we assume some upside risk? Yeah.
Sumeet, as you know, we are quite conservative on this guidance, but I do believe, like I said in the beginning of this call, there's another 5 basis points -7 basis points opportunity that is there in the near term, which we are working through.
Got it, Shyam. Thank you. Thank you.
Thank you. The next question is from the line of Manoj Bahety from Carnelian Capital. Please go ahead.
Hi. Good evening, Shyam, and entire senior management team of Federal Bank. Let me first congratulate you for achieving 1% ROA. My question is mainly on a digital initiative which Federal Bank is taking. Just wanted to get some color on this digital initiative, especially when on one side there is a risk of disintermediation from new FinTech players, and on other side, when I see, like larger banks, they are also coming with open architecture and innovative solutions. In that respect, just wanted to understand that how Federal Bank stands and secondly, whether whatever digital initiative which we are taking, how it is going to enable our growth going forward, especially on the Personal Loan side or especially, on, like making our loan book more granular. On that, if you can give some perspective, that will be helpful. Thank you.
Sure. I'll give you some remarks, and I'm sure Shalini will also add in. Manoj, let me just begin by saying, our approach to digital, I think I said this in the last time call also. I and the team believe very firmly that FinTech partnerships is a very, what should I say, smart way for Federal Bank to extend our reach. We could have added 2,000 branches to accomplish the same outcome. We believe that, A, we built a good house of, you know, FinTech stack, if you will, and that's attracting a lot of FinTech players to come to us or, mobilize our partnership.
You did mention some large banks. In the area of FinTech, I think large and small is irrelevant. It's, technology and agility that makes a big difference. I can publicly challenge anybody. I don't think we are less than any of your bigger banks that you have in mind. It's evident, right? I mean, if every FinTech in the country is talking to us, it's probably because we are willing and capable and swift and give attention at the highest level. Me and Shalini are personally involved in many of the things. We created a FinTech team whose only job is to breathe and deliver on this count. I don't think we are lagging, and I don't want us to be lagging.
That said, will it be profitable? Will it turn out to be the next money spinner for us? The jury is out. We are working very hard to make sure that it's productive and profitable. I also recognize the fact that this is a investment, right? If you add 1,000 branches, it has 18-month gestation period.
We are seeing this in that context. We may get a few things right, a few things wrong. Where we don't get it right, we'll exit it. Where we get it right, we'll expand it. Most of the partnerships are outcome-based compensation for either of us. We gain, they gain. We don't gain, they don't gain. Thankfully, we've chosen partners who are willing to sort of with us, and they find our engagement quite productive. I think therefore we have a pretty structured exercise. I'm not saying these are instant wins, but the exercise is quite structured. We have created a full-fledged team whose only job is live and breathe FinTech and make it productive for us and for the partner. I believe we must be at the forefront of it.
Shalini, would you like to add any points?
Thanks, Shyam. I think you've covered most of it. I'll just add a couple of things, and I think you alluded to on the lending side of it. Absolutely. This is another area where partnerships are designed to play a very key role for us. If you go back in time, even the little bit of Personal Loans that we do or even through the COVID period, we were one amongst the first banks to kind of offer our loans on platforms like Google Pay and GPay and Paisabazaar. Even today, we work with both of them for our existing bank customers. Yes, on the lending side, we've got that. We've got a very good example of how we've been able to scale up FPL, our credit card with HDFC.
You'll see some of the data in one of the slides on the investor deck. It's more about collaborations with FinTech, working with them closely across the spectrum, whether it is credit cards, Personal Loans, general savings accounts, rural India through BGV, merchants through BharatPe. We've got all of these kind of working with us and you know, using FinTechs as you know, more as a collaborator. We don't see them as a competitor. Having said that, our regular digital stuff is also making good progress. You'll see some of the metrics in one of the slides. Digital migration at 88%. You know, we kind of offer a whole range of financial and non-financial services through our mobile banking platform. We've touched INR 12,000-odd crore of mobile banking volume.
One is not in lieu of the other. Both work in complement with each other.
Yeah. Just a follow-up to that. How do you measure your success of digital initiatives? Like, it should be in terms of acceleration in getting good quality assets with lower risk. So how do you monitor a success or failure of this collaboration along with your in-house digital capability?
May I start?
Yeah, go ahead. Please go ahead.
Yeah. I think what we've done at this point in time is, you know, carved out the whole FinTech partnerships as a separate vertical by itself. It's a business division on its own. It has a set of KPIs which are normal business KPIs. That team of people is mandated to grow balances, whether it is in the form of credit card outstanding, Personal Loan outstanding, savings bank balances, you know, term deposits, et cetera.
It has a set of KPIs on cross-sells with these customers, has a set of KPIs on income from these customers, as well as cost of acquisition, cost of maintenance, et cetera. It's a regular business division on its own, the whole FinTech kind of vertical that we've carved out or the team that we've carved out. They are measured very, very carefully on these metrics. You know, through robust reviews with our FinTech partners, we ensure alignment and objectives, and the commercial model is also aligned to those objectives.
To the broader point on digital and how do we measure digital, again, we've got a set of metrics in place, but I think the overarching point is every transaction migrated out of a branch and moves to a digital, it gives us that much more leeway in the branch to be able to sell, you know, either an insurance to a customer or, a credit card or, you know, or a regular savings account, et cetera. The business growth that we've seen, and if you map that against the growth in staff numbers, you'll realize that our business has grown X times, whereas our staff hasn't grown to that extent, and that could have only happened if we'd migrated about 85% of our transactions away from the branch.
Broadly, both FinTechs as well as regular digital stuff that we do have a set of very strong financial KPIs that are measured and usually reviewed by the management team on a monthly basis.
No, Shalini, I'll also add only one more point to everything you said. We are probably the only bank which has added just 20 branches in five years and grown two and a half times business.
Yeah. Yeah.
That's important. Thank you. Thank you for taking my question, and wish you good luck.
Thank you.
Thank you.
Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Good evening, and congratulations on reaching an important milestone. My question is on the Corporate book. It has shown a sharp growth. Is it more, I think of it more as a working capital kind of growth, or do you see investment-led growth where the loan will stay on your book for a longer period of time? Thanks.
Mix, Vivek. I don't think it's either/or. It's both. We've seen good progress this quarter for two, three reasons. One, Corporates themselves are beginning to come back to banks. In the greater part of last year, Corporates were literally keeping away from banks, and we were keeping away from some of them because the pricing was at obnoxious. Both have started showing some trajectory change, and so we were in the right place in Q3, and we started picking up share. The mix is both working capital. The investment-led is much less, but three-year loans are picking up.
Oh, excellent. Thank you very much, and good luck.
Thank you.
Thank you. The next question is from the line of Mona Khetan from Dolat Capital. Please go ahead. Mona Khetan.
Hi, sir. Good evening. Good evening, and congratulations on a good set of numbers. Firstly, on the cost of deposit side, is there still scope for improvement in there or you feel we've bottomed?
When the rate cycle is pitched for a turn, Mona, I don't believe there will be too much of an opportunity to lower cost. Yes, if our CASA picks up even further, there may be some, but I must be honest, that's not a material number. At 4.27%, we are at our lowest in terms of cost of deposits and compare very favorably with banks. Here I will admit there are bigger banks than us, and I think we are probably at the lower end. I don't believe there will be too much of an opportunity.
Sure. Just to follow up on the wholesale book, we've seen a healthy growth despite the pricing, the competitive environment. What are our incremental yields for both Commercial Banking and CIB book?
I don't know if Harsh or a couple are there. Incrementally, Commercial Banking is seeing some pick up. Corporate, though, if you're going after the best names, which you are, I don't see much of an opportunity for yield pick up on that in a hurry. We are seeing other opportunities to cross-sell into that. That's how you saw this quarter, our core operating income shoot up quite materially. Because in Corporates where we are lending at very competitive rates, we are able to pick up other businesses. Commercial Banking, I think the yield pick up is very good.
Where would the incremental yield be, if you could give some color on that?
Commercial Banking would see the bigger picture, bigger opportunity.
The rate, where would it lie, if you could give a broad range?
It would be about 10 basis points-15 basis points higher than our current run rates. The Commercial Banking is somewhere around 7%, mid-7% to 8%, and I see that picking up even further.
Okay. Just finally, on this, you know, the whole, FinTech and investments around that, what could be the growth we could see in other OpEx, owing to the technology investment?
I think where we see this is, roughly in a quarter, we expect INR 30 crore-INR 40 crore of cost going towards investing in technology or investing in the partnership in terms of acquiring the customer. To annualize, it should be somewhere in the INR 70 crore-INR 80 crore. In the near term, it will produce us less in the revenue side, but it'll establish the presence of the bank in these segments, and in the longer term, it'll start seeing. The lending relations related FinTech have quicker break even. The liability related have a little more gestation.
We think this, whatever, the INR 60 crore-INR 80 crore or whatever that number is going to be, will have a mix of benefits: brand, establishing our presence, getting customer base, building a cross-sell database, and establishing a credit relationship which turn out to be much more productive very early.
Sure. Just one housekeeping question, in fact, two. Firstly, how much of your book would be EBLR linked? Secondly, SMA, you, I think somewhere you mentioned 4.5% of total SMA books. Is that a right understanding?
My last number, 4.15%, I think, is the total SMA book. EBLR, I don't know. Ashutosh or Damodaran, do you have it at the top of your head?
Forty percent, Shyam. Forty percent.
Around 40%, yeah.
40% of your total advances would be EBLR linked?
Yes.
Is it floating, share of floating rate?
Total advance.
Okay. Thank you, and all the best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Ajit Kumar from Ambit Capital. Please go ahead.
Thank you for the opportunity, sir. So a couple of questions from my side. First, in last couple of quarter, NRE deposit growth has come down. This quarter, the absolute NRE deposit amount is broadly flat on a QoQ basis, and last quarter it declined. Even as per your press release, your market share in inward remittances has declined to 19.23% this quarter versus 25.454% last quarter. Roughly thirty basis point decline is there. Is there any pressure on this stream of deposit?
I think it's a public fact that the gross remittances coming into India have dropped 25% or so, right? Our share gain is what we make sure happens and which is something that will, that's part of the territory that the country is working through. I don't see that as a material issue, but our gain in share and our gain in share momentum will continue.
This decline in market share in inward remittances is basically temporary.
No, I think these are a point in time. I mean, literally only 15 basis points less, only 15 basis points ka farak. I can't see it. It just happens to be 19/20, but that's the difference. I don't see it much of an issue.
Okay. Sir, second question is on the SME segment. Almost all the large banks have seen very high growth in SME and Business Banking side, in more than 30%-40% year-over-year growth. How do you look at this situation? Is the opportunity pie itself is increasing in this segment or large banks are gaining market share at the expense of mid-banks and NBFCs probably by offering lower rates? Your assessment on this would be quite useful, sir.
I think it's probably the latter. With credit opportunities in the top end being more limited, banks sitting on fair amount of liquidity and having this keen desire to grow credit may have extended themselves. Because we have encountered sometimes irrational pricing for smaller customers and pricing which don't otherwise make too much sense.
Okay. Thank you, sir. That's it from my side.
Thank you. The next question is from the line of Jai Mundhra from B&K Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity and congratulations on a steady and good quarter. First question is, sir, on asset quality. So there is a QoQ rise in slippages in Business Banking and commercial while it looks marginal. But just wanted to understand if there is any more color there in terms of is it due to, let's say, RBI clarification which demands now daily recognition or clearing full overdue? Or this is something to do with, you know, some ECLGS or restructuring maybe turning bad or this is just business as usual.
No, I would categorize this as absolutely business as usual. As in, I mean, if you look at our own data, take Business Banking, in five different quarters it's five different numbers, and they are not in any trajectory or trend, right? If you've seen 49 in one quarter, you've seen 196 in another quarter. I don't think you could draw any parallel from 49 to 84. I think normally somewhere in the 60-80 crores would be a predictable number. These tend to be, you know, very in that range. I can't quite comment it's anything to. Because this daily recognition and RBI circular practice we've been following for very long, so it hasn't materially affected us in any in this quarter in particular.
Sure, sir. Anything on ECLGS, sir? If you can highlight what is the quantum and how much has already slipped.
Sure. I think the ECLGS slip is less than 5%. Babu, you want to add?
Well, sir, in that point I was saying that the.
The slippage of the ECLGS book.
Yeah. ECL, sir, slippage is 2.2% because it is almost maybe less than that of the normal book. It's 2% this quarter.
Did you hear that? 2%.
2.12. Yeah. That's right. Yeah.
Okay. Is there any, I mean, what is the total number, sir, of ECLGS book outstanding in absolute number?
Total ECLGS number, the number is around 12.5 lakhs.
100,000.
It's about INR 3,600 crores.
INR 1,650 crores is the ECLGS amount.
Yeah, 3,652 and 2.12%.
Sure. Yeah. Thanks. Second is, sir, I think in the PPT deck you mentioned that in the recovery includes some ARC transaction. If you can provide some more details there as to the transaction.
Yeah. One of the IL&FS roadways we sold and made a cash transaction and got the deal fully out of our books.
Right. Okay. Understood. The last thing, sir, from my side is, if I look at your Retail loans, right? Mortgage is still double digit growth. Auto is also growing reasonably well, actually better than industry. The other portion of Retail is showing a year-over-year decline, if I were to see that. Broadly, what is included in other Retail? Is it like, education loan or something else which is degrowing? If you can help us tell which segment is degrowing there.
You're right. Personal Loans and education loans.
Okay. Sure. Thank you, sir. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities. Please go ahead.
Yeah. Hi, sir. Congrats on a good quarter. A couple of questions. Like, what is the growth outlook that you see in the gold loan portfolio? After robust like FY 2021, we have seen barely 4% growth in this portfolio in the nine months, FY 2022. How do you see the trends there?
Yeah. You know, we did see this business cool off this financial year. Thankfully, the December month, you know, did well. We see that probably repeating itself. We are now looking at between 10% and 15% growth for this financial year and mid-20s growth next financial year.
Okay. Second, onto the restructured assets. Now, so far in this earnings season, we have seen a decline in restructured assets for most banks, while we have reported a very, very small increase. If you can provide some color on this. How do you see the reduction in this portfolio over the next one year?
No. The residual. You see, restructuring ended at the end of September. There were residual, I think about INR 400 crore or something that got restructured in Q3. After that, the restructuring book is zero because there'll be, for example, nothing in Q4. The restructuring book is behaving well. I think, you know, anticipating whatever challenges wave three can throw up, we've made a significant increase in provision for that. Otherwise, the restructuring book is performing quite well because 98% of our restructured book is secure.
Awesome. Thank you. Thanks so much.
Thank you. The next question is from the line of Ajit Kabi from LKP Securities. Please go ahead.
Hi, sir.
Hi.
Congratulations. Congratulations for the good set of numbers. I have one. Already I had two questions, two bookkeeping questions. One was asked by Mona Khetan. I have the question of that what is the contingent liability provision you have? Contingent provision mean what is the provision you have outside PCR?
INR 730 crores for our standard restructured advances.
Apart from that standard restructured provision, how much is the COVID provision or any counter-cyclic provision buffer you have?
No, no. This is the universe of our provisions.
Okay. Got it, sir. Thank you. Thanks.
Thank you. The next question is.
Just allow me to just clarify so that everybody understands. Each bank has their own measure of LGD segment, secured, unsecured, book profile, forecast of what can flip. In our case, we've made judgment based on our restructured book, its past behavior, its likelihood of slippages, what is the LGD, and we want to make sure that at all points in time on our book, we keep our provision coverage at 65%. On that strength is what we've made our coverage decision. Provision.
Thank you. The next question is from the line of Renish Bhuva from ICICI Securities. Please go ahead.
Yeah, hi, sir, and congrats on a great set of numbers. Just a couple of questions. One is on this, all the new products put together, like MFI, CV, credit card, what is the total outstanding book currently?
Sub-1,000 crore. Sorry. If you add Commercial Vehicles, it's about INR 2,000 crore.
Okay. Including Commercial Vehicle is INR 2,000 crores.
Right now. MFI plus credit cards plus Commercial Vehicles.
Got it. What is the target, I mean, over next two years? I mean, is there any target or?
Yes. I did mention earlier, annualized, we think these businesses put together will grow between INR 2,500 crore-INR 3,000 crore. If we take 2 years, you can say post run-off, about INR 7,500 crore from today.
Sir, again, just apology for repeating the question on this FinTech journey. But just a very basic question. Let's say, you know, the customer acquisition happening through these FinTech partners, customer ownership remains with whom? I mean, let's say, for example, if we are acquiring customer via the neobank, and we'll start with offering the maybe savings account. Then if you want to offer something else, are we allowed to offer something else, or it will be the neobank who will drive the cross-selling thing?
I think, Renish, this question last time also I'd clarified. Varies from partner to partner. One of the first partners we signed up for origination of accounts, those accounts are now roughly coming up to six months old, some of them. The first month of origination, July last year. We have the opportunity to cross-sell based on the client behavior for credit cards and Personal Loans. The relationship with each partner depends on what other products they offer. Sometimes we have the right to offer the entire suite of products.
Sometimes we have the right to offer products that they don't have. Sometimes it's a joint marketing. Each partnership varies. For example, the first set of clients which we booked in July 2021, which is the first cohort of good customers we booked with one of the neobanks. Those are maturing up based on six months past experience. We can do cross-sells of some of our credit products.
Got it. I mean, just to clarify, sir, neobank is just an example. We have 50-plus partners. Basically you are saying the arrangement will be different for each and every partner.
Yeah. The big client originating partners are 4-5. The rest are technology-enabling partners, so there's a difference.
Okay. Basically business generating partner would be 4-5.
The large cohort of new customers come through 4 or 5 important partners.
Got it. Overall, I mean, where we stand currently, I mean, what percentage of our business comes from these four or five partners?
I think we mentioned it. Roughly in a month we were doing 4,000 accounts. Now we're doing 15,000-18,000 accounts, sorry, in a day.
In a day. Okay. We already moved from 4,000 accounts to 15,000 accounts a day now.
I think we've been saying that. If one of the slides, we did have the numbers.
I think it is, yeah, one of the first few slides, Shyam, I think it's recent.
28% of our new origination is now through FinTech partners.
Yes.
I think we've brought about 12 lakh customers through this. Yeah.
75% of new accounts have been booked. I think it's one of our first slide three.
Yeah.
Just a last follow-up on that. I mean, of course, let's say the acquisition cost will be far higher than our blended cost-to-income ratio, which is at sub-55%. Any sense, I mean, where do we start sourcing customers at the current cost-to-income?
Pardon me?
I'm assuming, sir, you know, since these partnerships are in very early stage.
Yeah.
we might not have been able to leverage the customer fully, the cost of acquisition will be slightly higher than our blended cost-to-income ratio currently, which is at 55%, right? Because the revenue potential from those customers will be lower currently and cost of acquisition will be higher.
Yeah.
Any sense on, I mean, when this partnership will turn breakeven or-
No, I did mention that our annualized whole FinTech cost base, we're, you know, depending ± based on the volume, between INR 60 crore and INR 80 crore annualized. That is expected after assuming the cost-to-income improving by 200 basis points next year.
Okay.
That should answer your question, yeah?
Got it. Yeah, sir. Okay. Yeah. Thank you very much, sir, and best of luck for coming quarter, sir.
Thank you, guys.
Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.
Yeah, hi. Thanks for the opportunity and a good quarter. Just wanted to get a slightly medium-term sense on how you think on fees, because obviously you have been a bit conservative on chasing high-yield assets. So any levers that you see from the fee side incrementally, say, couple of years out, or what are the possibilities there?
I think on all the fee enablers, we've been making sort of sustained progress. For example, this quarter, our core fee income probably was its all-time high. That every quarter I say that it's at an all-time high. Evidently that there's progress on that front. I think that's in one of the slides that breakup is also there.
Slide 27, Shyam.
Sure.
Slide 27 has a fairly detailed breakdown.
Yeah, there it is. That will continue, Sameer, and we believe that on all metrics it's making progress.
Sorry to kind of stick around here a bit. When we probably look at our next leg of our ROE expansion journey, obviously you have some bit of inch up or lift up from margins, maybe costs. Does this fee lie on a reasonably high priority, or it is. Because when we compare with some of the larger peers in the sector, there is a gap which needs to be filled. Which is where I was coming from.
No, you're right. You know, ours is more, what shall I say? Sustained progress. I wouldn't want one quarter to have some extraordinary and the next quarter it falls off.
Sure. Absolutely.
One period of time.
Yeah.
You see our numbers across, say, the even in the income deck, the other income distribution vertical-wise, you'll see progress. On every line it's making progress. I believe that it'll continue. It will not be one thing that will fire, whether it's FX, it'll do well. Few, you know, para banking, it's making progress. As cards lines, as you know, sequentially every quarter has been making progress. I think that will continue. Processing fee as volume pick up, you'll see progress. All of them are. I mean, we've given it as granularly as possible in the slide 26 that Shalini 27.
Okay. I'll probably take this offline later.
Sure.
Sure. All the best to you. Thank you for the opportunity.
Thank you.
Thank you. The next question is from the line of Deepak Gupta from Reliance Nippon Life Insurance. Please go ahead.
Hi, my question has been answered. Thank you so much.
Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead.
Hi. Thank you. Just wanted to ask about the FinTech partnerships. The commercials of it, I wonder if you can talk about them at a qualitative level. Roughly how are the commercials structured? You touched upon it when you mentioned that there is alignment of incentives. But is it like for every account opened, the partner will get a certain amount, or is it linked to transactions happening? For every transaction there's a payment or, you know. How, you know, broadly, how is that arrangement structured? Is it possible to just give us color on that?
For sure. I think we did mention. First of all, just to clarify, there is no one FinTech partnership, right? Each one-
Sure.
As we mature and as we relate, sign up new partners, each one varies in its structure. They're all not sort of cookie cutter, and it's not the same. Second, generally it's outcome focused. If we have success and they have success, then the gains are shared. If there is a, you know, it's not catching on, there may be some sunk costs, and we'll exit it at an appropriate time so that customer has not left high and dry. The lending relationships have a different kind of payouts. The liability originating customers have a different kind of payout. The cross sell that we can do will determine the productivity and the profitability of the customer. I would just say it's quite bespoke and not one size fits all.
As we graduate in that process, I think we are getting better and better with each of our engagements.
Got it. If we were to just think about the liability side for a second. If there's a customer who is completely with the bank and not come through a neobank, then on an incremental transaction, the cost obviously for the bank is low. It's predominantly a fixed cost. With these neobanks, does it become a more variable nature, just for liability relationships?
Linked to balance built over a period of time. 6 MOV, 9 MOV, 12 MOV balance on their account will get them rewards.
Understood. That helps. Thank you.
Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Mr. Murarka?
Hello?
Yes, sir. Your audio is not clear from your line, sir. Please check.
Is it better now?
No, sir, the audio is breaking from your line.
Give me a second, please.
Sir, we request you to rejoin the-
Abhishek, don't worry. Just call Anand.
Okay. Yeah.
He can answer all your questions.
I'll do that.
Thank you.
Yeah.
The next question is from the line of Akhil Hazari from RoboCapital. Please go ahead.
Hello, good evening. Am I audible?
Yes, you are.
Thank you. I just want to know what is the normalized credit cost that you have, you know, going forward?
You know, this is one area which is working, positively wrongly for us. I mean, every time I think it's 60, 70, 80 basis point, we end up coming much better. I think steady state you could plug in between 60 and 70 basis points.
Yes, sir. Okay. I just want to know the credit growth guidance that you had given, 10%-15% and mid-20s%. Was that for the overall credit book or is that a specific book?
No, I was mentioning that in the Corporate, when I think one of our colleagues had asked about Corporate.
Right. What would be the overall credit growth, you know, going ahead for FY 2023 and FY 2024?
We certainly will seek to deliver, you know, much higher than the industry growth. We believe calendar 2022 will look good. FY 2023 will look good for the country and our mid-teens and higher than that growth is very possible.
Okay, fine. Okay. Thank you so much, sir. That's all mine.
Thank you. The next question is from the line of Krishnan ASV from HDFC Securities. Please go ahead. Krishnan ASV, your line is in talk mode. Please go ahead with your question.
Good morning. Thanks, Shyam. Wish you and Team Federal a very happy new year. I just wanted to ask a couple of things. Number 1, I'm assuming whatever you have showcased in the investor presentation from slide 15 onwards are your signature partnerships within FinTech. So just wanted to understand how far you believe or purely from a potential of these partnerships perspective, how scalable are these partnerships? If you could just give us some qualitative inputs there, that'd be great. That's number 1. Number 2, what would give you confidence to grow in this environment? You're already seeing, you know, the larger banks are around the mid-teens.
I assume at our scale it should be, we should find those opportunities to at least be on par, on that kind of growth, even if you eliminate some element of fraud that's going on with the large banks. Just wanted to understand what would give you that comfort in terms of being able to accelerate a little fast.
On the first one, I think the ones that we have showcased are all of them are both potentially scalable and already on the scale. You know, I think the names mentioned, FI, Jupiter and some of those that we are tying up are all, you know, like we were saying, on a daily basis we're adding 8-10 thousand new customers, and some of them may be even bigger. I think some of these names are material and scalable, and that'll continue and it'll be visible. The moment we see signs of that not working, then we have certain filters that we have put in. The conversation opens up in saying, "Does it make sense? Do we need to part?" That's a model that's working, and the team that Shalini pointed out is exclusively focused on that.
The second question is around growth. I don't want to sound like we are bigger than anybody else. We are not. Certainly we are not guided by what big banks are growing or what others are not growing. We're guided by our appetite and what the market opportunity is for the appetite we have. I think growing at the levels that we've promised or looking to grow, I think is very possible. Where we don't score and we have chosen not to score has been unsecured growth. That served the bank well despite all the criticisms that we faced of being, you know, less courageous. I think it's a sustained business that we've built. As things open up and our capabilities to do unsecured business increase, we are confident of growing at good rates.
Great. That's it. Thanks.
Thank you. The next question is from the line of M. B. Mahesh from Kotak Securities. Please go ahead.
Good evening, Shyam, and team. Just a couple of questions. One, if you're looking at the way interest rates have gone up in the last six months or out there, how does the OpEx line on the provisions move for you during this financial year? That's number one. Second one, to Shalini, which is the Fed operations one. Where are we with respect to the transition on that?
First one, Ashutosh can answer. Second one, Shalini and maybe Shalini can answer.
Venkat.
Venkat can add. Go ahead, Shalini and Ashutosh.
I think I'll start with the you know expected provisioning on the investment book. I just wanted to share that we have a very low modified duration in our AFS book. In fact, we practically
Ashutosh, sorry.
Do not have much of a surplus SLR.
Sorry, Ashutosh, sir.
That is resulting from the fall in our LCR from about 240%-250%, straight to about 160% or so.
Sorry.
That fall of 80, you know, 80 percentage point, 78 percentage points itself suggests that whatever surplus, you know, SLR, which is classified as HQLA and all, that we have shed. We have shed at you know good profits and all, and that shows in the capital gains made in quarter one and quarter two. I think in nutshell the portfolio itself is very light. Because the portfolio which is subject to mark-to-market is light, the provisioning requirement for that would be minimal.
Sorry, Ashutosh, sir. Sorry, can I just interrupt? The question is more from an OpEx line, sir. We're just kind of trying to understand the impact of the retirement-related provisions now that interest rates have gone up. Sorry for not having been clear on the question.
That's why it's about the employee costs.
Yeah, absolutely. Absolutely.
On that, you know, I think, we traditionally do not reverse the provision. Even if interest rates move up or so, we'll hold on to what we are having, we have provided for superannuation. Maybe the additional accretion would be a function of how the yield curve shapes up. For us, most relevant part is 14-22 years, you know, band of the yield curve, sovereign yield curve, because of the requirement for provisioning for gratuity and for pension. You know, I mean, that segment of yield curve would be, you know, actually, to be seen, to be watched and, I mean, 10-year benchmark may be anywhere, but what we are concerned with is where is, you know, 14-22 year segment.
As of now, what we are seeing is the steepness of the curve is reducing and you are having more of, you know, yield moving up in the lower segments. Yield curve is becoming flatter. To that extent, yields are not moving in that particular segment. In fact, the most liquid bond is a 14-year bond presently, and the spread over 10-year is quite less.
Perfect.
I mean, I think I have answered. To that extent, you know, I have answered your question, but it's very difficult to predict where it's going to land as at the end of the year.
Okay.
31 March.
Absolutely. On the OpEx transition.
On the subsidiary, maybe I'll get started and Venkat can add, Mahesh. I think you know against the objectives with which we formed Federal Operations and Services FedServ made considerable progress. Headcount has moved. I think it's in the range of about 600 or more right now. Couple of key migrations we've done to it as examples of what you know what has been achieved. One, we've migrated one of our call centers completely into that. The entire call center capability now is handled by FedServ. We've migrated a lot of our tele collection capability into FedServ. We've managed...
We've migrated a lot of tele sales services into FedServ, and therefore, we have a unit now functioning out of FedServ, which is doing inbound service, outbound sales, outbound collection, and doing quite well from a productivity standpoint. We've seen the gains on that. In terms of operational processes, you know, Venkat will add to what I'm saying, I'm sure, but about 100 odd processes have already been migrated. Both units, the one in Kochi and the one in Visakhapatnam, are kind of literally working now 24/7 to keep our operations going. Venkat, you may want to just add to it in the last six, seven months.
Yeah. The question is that given that we can't observe what all changes is happening at the back end, the best we can observe is either a cost or an income for the bank. Is there any way we can look at this transition from that perspective?
Yeah, from a productivity gain perspective, right, Mahesh, or impact on the income.
Yeah.
Impact on CI ratio.
It's impossible for us to understand which costs are moving and what are the gains of it sitting here. Just trying to understand what has this transition reached out in terms of numbers as external stakeholders.
Okay.
Yeah. We did study recently to evaluate what are the benefits of having the subsidiary. The business case which was initially put up and what it is now, we did that very recently. It clearly establishes the fact that we have gained productivity in terms of lower costs, better quality as well from the subsidiary which gets translated into the numbers which we have. Like Shalini mentioned, over 100+ processes, and we are looking at moving more and more of the incremental activity which comes to the bank, which we're putting directly into the subsidiary. It's not like we're moving work into the bank and then from the bank to subsidiary. That way, do it right first time, build the efficiency in the operations subsidiary and better risk mitigation, BCP.
We have now about 750 people, 150 in Vizag and 600 in Kochi, and it's growing. Very clearly, the study establishes the business objective, and we have full confidence that it will continue to deliver the business benefit.
Let me just add, Mahesh, I think if you are trying to get a more crystal, sort of something that you can latch on to.
Correct. Yeah.
There are two elements, Mahesh. One is the non-incurrence, and the second is what Shalini and Venkat explained. Given our employee cost structure and wage structure, if that INR 750 were in-house, there would have been a different cost structure. You have to see it in that light.
Correct.
Yeah. Okay?
Perfect. Perfect, sir. This is yours, sir. Thanks a lot.
Thank you.
Thank you.
Thank you. The next question is from the line of Darpin Shah from Haitong Securities. Please go ahead.
Yes, thanks. Now, just to clarify, I'll check on restructured book. You mentioned 98% of the borrowers are paying?
98% of our book is secured, I think.
Okay. Sorry. How much of your borrowers would be paying?
I think our collection efficiency.
96% of the borrowers are paying, sir. 96% of the collection.
It is in the restructured book as well?
Restructured book, actually, it is more or less on the same line as of now.
Sorry, sir. Come again.
Yes, you're right, Darpin. As of now, that's the same number, is what Babu is saying.
Yeah. Okay. Yeah. Thanks a lot.
Welcome. I think we should bring this to a close, operator. It's past an hour and a quarter. Are there any more questions in the live pipeline?
Yes, sir, we do. Should we take one last question?
Yeah, please. You can take 2 more. If there are many, then Anand can chip in, but we could close in about 5 minutes, please.
Okay, sir. The next question is from the line of Anand Bhavnani from White Oak Capital. Please go ahead.
Thank you for the opportunity. Quick three questions. One is of our liabilities, what percentage are kind of linked to any external benchmark? Second, if you can give us some sense on the IPO of, you know, Fedfina and, what's the timeline, and would we, you know, be doing any, sales which can help our capital adequacy. Thirdly, with the guarantees on, you know, FLDG guarantees, unlikely to be now allowed. With our FinTech partners, how does the equation change and, if you can give us some color on it will have any impact on growth, of, you know, FinTech partnerships.
Okay. Question one, I don't know. Ashutosh, Venkat, you can look at it.
We answered that earlier, Shyam. 40% is the external benchmark.
I think he's talking about the liability business, deposit business.
Deposit side, it should be around 30-32.
Okay.
The second question that you asked was around the IPO for Fedfina. All I can say is the board of the bank has approved and Fedfina board is considering. They are in the process of going through the motions. First is to file the DRHP, which may happen between now and, say, end of February, March. Then the, you know, approval from SEBI takes between two months to three months. We are into somewhere around May is probably when we'll have the approvals in hand. Then after that, as you know, depending on a bunch of things like market, timing, so on and so forth. I don't have a comment on that at this juncture. The motion has been, the process is in work.
Timing, and related approvals, regulatory clarifications, you know, the bunch of stuff that needs to happen is underway. I don't have any sort of timeline for it. We'll see how it goes. The third question, sorry, I can't quite recall the third question.
The FLDG guarantees.
Which way you wanna go? On the digital, FinTech partnership FLDG. I just wanna say that our digital lending ex credit card is actually very marginal, so it doesn't have any impact on us. Shalini, you can give more texture.
Yeah, I think one, you know, this is in the stage of a discussion paper and a working group. As Shyam mentioned, the kind of one that is growing currently for us is the credit card partnership. We are not very concerned about it because we do have models in place which indicate how we can make sure, you know, with collection efficiency and commercial considerations, we should not get unduly impacted with the removal of an FLDG. Suffice to say that I think the discussion paper is still out. I think there may be some changes in the final version, but it doesn't place us in any uncompetitive sense. Yeah.
Thank you.
Thank you. Ladies and gentlemen, we will take one last question from the line of Manish from Fiducia Capital. Please go ahead.
Thank you for this opportunity. I think last couple of quarters you've been, like, going in a very determined and a very defined manner. Kudos to that. You've been mentioning about, you know, the conservative book that you've been demonstrating. How much of our total book is secured? Hello? Hello?
Sir, I request you to please hold the line.
Yeah, I think we.
Ladies and gentlemen, the line for chairperson has got disconnected. Request you all to please stay online while we reconnect him. Thank you.
I think in the meanwhile the question is just to clarify the question, how much of the total book is secured? Was that the question?
Yeah. I think, Shalini, that is the question, how much of the book is secured. If you were talking of total loan book, just exclude the AAA Corporates and all, where there is some unsecured portion. Other than that, you know, we have only Personal Loans and a small portion of, you know, credit cards and all which is unsecured. Rest of it is all secured.
Okay. The AAA would basically be forming part of the Corporate book. I can get a sense as to how much of that could be.
Yes. AAA, AA+ type of top-notch Corporates, there could be some, you know, unsecured portion in that. That is, you know, I think something where the risk of default is practically nil.
Yeah, I get that. Thank you so much. You see, the next question from the madam was basically, see, going to your slide number 17, which demonstrates the kind of fantastic growth that you're seeing on your BharatPe relationship. My question was that, you know, how will the bank make money out of this relationship? Like, you know, the numbers are, like, really exploding. You know, like, 50 lakh merchants, then 20 lakh transactions on a daily basis. Meaning how would the bank make money on this particular, say, relationship?
Couple of things. One, you know, from the merchant side of things, we do have floats that we get, the current account floats, and these are also again, commercial discussions that are held with the partner and with the merchant. Some of them T plus one, some of them T plus two, some of them T plus zero, depending on the kind of category of the merchant. There is a float benefit that we get from it. On the transaction, we do have a cost-sharing arrangement under the commercial negotiations that we have with BharatPe, so that obviates some of the costs that we may incur on the transaction. The broader point is as this book matures, as we get to understand this customer behavior better, we understand the flows of the merchant better.
BharatPe, as you know, is already offering loans to their in their own books, and we are working with them to see what alternate data scoring methodologies can be put in place. We're quite cautious about this because it is unsecured. It is something that we've always been a little cautious about, but there are opportunities for a risk-calibrated approach to cross-sell. There are various opportunities, but the underlying is the current kind of configuration is the CASA balance, the current account balances that come in. Yeah.
Okay. Thank you. Thank you so much, and all the best.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Shyam Srinivasan for closing comments.
No, I think, thank you very much. I think the line signals that everybody was tired of us answering questions, so it got cut. Thank you very much. Stay safe, and hopefully we'll connect back in after Q4 results to have a better conversation. Thank you very much and all the best, everybody.
Thank you. Bye.
Thank you. Bye, everybody. Thank you.
Thank you. Thank you.
Thank you. Ladies and gentlemen, on behalf of Federal Bank, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.