Thanks to all the investors for dialing into the investor call that we are hosting today. My name is Siddharth Sharma and I represent the Financial Institutions Group team at HSBC India. We're delighted to have a very senior level team from HDFC Bank, and it's my privilege to introduce them to you. We have with us Mr. Srinivasan Vaidyanathan, Chief Financial Officer of HDFC Bank, and Mr. Ashish Parthasarthy, who is Treasurer at the bank. We'll start the call with a brief overview on the bank and the recent financial performance. We'll then open the line for Q&A. With this, let me now hand over the call to Mr. Vaidyanathan. Over to you, sir.
Okay. Thank you. Thank you, Siddharth. Perhaps the way we go, as you described, we'll give you some high-level overview and we'll talk about the quarter in brief, and then we'll open it up for any other questions, comments or topics that anybody wants to cover. Right? The recent quarter that got over, we announced the results on sixteenth. The context of the quarter, and as it continues to, as we see now, the activity indicators during the quarter and now indicate that the economic activity is holding up well despite the various global risks. Right? GST collections, manufacturing PMI or industrial production or credit growth, rail freight, services PMI, all of them show robustness and opportunities that are in the economy. Right?
RBI has been quite accommodative, raised the policy rates in phases by about 100 basis points. Now the repo rate stands at 5.4%. It remains calibrated in such a way to manage or to allow for good and supporting good growth, both from a monetary and fiscal policy point of view, right? Accordingly the lending rate increases we have passed on whatever is required from that sense. There are a few themes we can go through before we jump straight into financials. We've been focused a lot about the distribution expansion, right?
Over a period of several years, and certainly in recent times that you've seen us grow branches as a predominant way of reaching to the customers in foreign places across the country. 36 branches in the quarter. There are 250 more branches that are in various stages of readiness. We have 15,600 correspondents, another 277 increase over prior quarter. We are opening up our gold loan offerings across various centers, now about 2,000 branches as against 1,300 odd branches in prior quarter. We intend to take this to most of our branches. Our payment acceptance points, 3.2 million payment acceptance points, growing at the rate of 42% year-on-year.
We are opening up many wealth management centers is now offered in 357 locations through hub and spoke model. We have expanded 141 new locations in the quarter for our wealth management offering to reach deeper geographies. In the commercial and rural, we again expanded our offering to 640 districts. Little more than a year ago, we were 500 odd districts. Now we are at 640 districts where we are offering to drive our SME market share. Right? From a franchise building point of view, if you think about the people addition, we add people to support our branch and our frontline sales force. We've added almost 10,000 people in the quarter.
We brought in 2.6 million new liability relationships in the quarter. Now it's almost a run rate of 10+ million annualized run rate. Right? That's a 59% over last year. We have also acquired 1.9 lakh MSME accounts in the quarter. Right? Cards, we have issued 1.2 million cards in the quarter, highest ever, right, with a 47% growth over prior quarter. Total card base stands at 17.6 million. Now leading all of this into the balances, right, granular deposits, INR 16.4 lakh crore of deposits increased by approximately INR 46,000 crore. Right? The deposit growth reflected in year-on-year increase of 19.2%.
This is an increase of INR 46,000 crore in the quarter, out of which retail deposits grew INR 50,000 crore in the quarter. You know, focus on the granularity of the deposits that we want. CASA deposits recorded a strong growth of 20% year-on-year. Time deposits grew 18.5%. Now on the lending side, on the loans, INR 13,95,000 crore grew by 22.5%. Those are sell downs that we did. Our retail advances continued the growth, grew by 21.7% or 4.9% quarter-on-quarter. And excluding auto and two-wheelers, which had supply chain disruptions, the year-on-year retail growth was close to 25%. Right?
Allowing for auto and two-wheeler to come back with their supply chain constraints behind them. Current grew by 24% over prior quarter. Payment advances has a 27% growth over prior year, 4.4% prior quarter. CRB, which is the commercial and rural banking, had a year-on-year growth of 28.9%. Wholesale segment grew by 15.7% year-on-year. That's in terms of our top line, deposits and lending type of momentum.
If you look at the backdrop of all of this, from our capital ratio point of view, CAR total capital adequacy ratio 18.1%, CET1 16.5% right, including the profits for the current quarter. Our average PCR was at about 108 at the end of June, as we announced previously, about 120% plus. Now, if you think about the P&L lines as we progress through, our core net revenues are at INR 27,181 crore. That is excluding the trading in the mark-to-market, which can be volatile depending on the rate movements. That grew by 19.8% over prior year.
Net interest income for the quarter, which is a component of that income of the core net revenues that I mentioned, INR 19,481 crore grew by 14.5% over prior year. The core net interest margin was at 4%. Now, based on net interest margin measured with the denominator of interest earning assets, which is the norm across many places and our peers, the NIM was 4.2%. Now moving on to expenses for the quarter at INR 10,500 crore, an increase of 28.7%, representing the various investments that I alluded to some time ago. The total network strength, we have 6,378 branches and 15,294 business correspondents.
The core cost-to-income ratio for the quarter, that is excluding the trading and the mark-to-market losses, was at 38.6%. Asset quality, GNPA ratio 1.28% compared to 1.47% in prior year. GNPA ratio excluding agricultural segment, because agricultural segment has got a seasonality that every year in the month of June and December there is a seasonality depending on crop cycle. It does have a slippage in the quarter, but excluding agricultural segment it was 1.03. Against this 1.03%, prior year was 1.26%, prior quarter was 1.01%. More or less at that kind of level. Now getting to the provisions for the quarter, they were INR 3,200 crores. Last year same time, INR 4,800 crores.
Prior year was at a similar level, INR 3,300 crores. That was the provisions that we had. Our provision coverage ratio, 73%. Then at the end of the current quarter, the total of the contingents and floating and all those provisions add up to INR 11,100 crores. If you think about the floating and contingent and the general provisions, when you add them up, they are about 1.25% of the gross advances as of June end. Coming to the credit cost ratios, the annualized credit cost ratio for the quarter was 91 basis points. Prior year was 1.67%. Prior quarter was 0.96%.
Recoveries, which are after we write off, when we recover, we report them in miscellaneous income. That's about 23 basis points of advances that we recover. Now that results in a profit after tax. Profit before tax of INR 10,180 crores, which grew by 18.2%. Profit after tax at INR 9,196 crores. Growth of 19% over prior year. After factoring in the mark-to-market losses. That means after taking the mark-to-market losses of INR 1,312 crores in the quarter. With that's the kind of high level I want to give highlights of, certain things in the quarter as well as the financial results.
With that, maybe we get back to you, Siddharth for any other comments, questions and process. Siddharth, are you there?
Yes, sir.
I will take process from here. Carol, do you want to start the Q&A process? If you could remind my listeners on how to ask their questions again? Yes.
Sure. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on telephone keypad now. If you have keyed your mic, please press star followed by two. Thank you.
I hear a lot of echo in both your voices, so maybe, you know, want to come closer to your microphone or just check.
As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on telephone keypad now. Thank you. We have a question from Nitesh Joshi from Millennium. Please go ahead.
Hello? I'm getting a lag here. I'm getting a lag.
Nitesh Joshi at the top of the queue, right?
We are ready, but there is a lag in whatever you are talking or the operator. Go ahead and indicate. Just go ahead with whatever you have.
Hello, Nitesh, your line is now open. Please go ahead.
Nitesh Joshi, Millennium. Do you want to go ahead with your question, please?
Nitesh.
Hello.
We are not hearing you. Now you are okay. Yeah, go ahead, Nitesh.
Sorry about that. Thank you. Thank you, sir, for making time. I just want to check what is the bank's current opinion around the hype cycle, from our view, where do you see it peaking out at? What kind of a demand impact do you see on the loan growth portfolio, going forward in next couple of quarters? Thank you.
Nitesh, this is Ashish here, our house view on, you know, the rate cycle is that, you know, maybe RBI will end up somewhere between 5.75%-6% as the policy rate out there, and should be more front loaded than otherwise. From a, you know, portfolio perspective.
Maybe, on the portfolio front, at the moment what we see is we see good demand at the field level across various business segments, right? We talked about the retail segment sequential 4.9%. Quite good on that and excluding the auto and the two-wheeler which has various disruption in the supply side. It was growing quite robustly, almost the sequential is close to 6%, year-on-year 24%-25%. So we are seeing good momentum on that front. Consumer spending is quite high. I talked about the card spending that continues to be a feature that we see, both from a card spending point of view as well as from various savings account customers, fund utilization. We do see spending happening.
That means people are doing the right kind of spending that they desire to do, right? That's on that front. If you look at the SME segment, commercial and rural segment, there also we are seeing quite a bit, which is the middle market, merchants and various small businesses, and the agri side. We are seeing quite a good amount of take on that credit also. I also gave you the rate of growth in recent times and year-on-year on that. That is doing well and we see continued momentum building from a growth point of view on that front. Lastly, on the wholesale front. Wholesale front is a mixed bag, right? There are two things to think about.
The working capital that keeps happening and we had a year-on-year growth of 15.7% or something which is good. That is coming off a very robust growth last year that we had. We had a sequential growth in March quarter in wholesale of 11%. It's a strong offtake that happened in the March quarter and June quarter was slightly subdued but that is okay. The second aspect of the wholesale is also the capital CapEx spending which to some extent only we have seen. We have not seen that come back from a large extent. We are waiting and watching that space to see when there will be either capacity augmentation or investments happening or participation in various infrastructure projects happening.
We are waiting to watch that, but that's some space that we need to give a few more quarters for various government spending to take its roots and take off, and then we expect some private participation coming in there.
That's perfect. Thank you very much for that. May I just further check among all these segments looking out next one year, which will be the top one or two segments out of the that will have you a bit more concerned about the credit quality? Like in terms of what you would watch for any sign of deterioration in the portfolio quality. Thank you.
Okay. There are two aspects to what you're asking. One is, how are we seeing? The way to perhaps shape this answer is like this, right? More than our outlook or a forecast something which we don't give a forward looking. But I do want to tell about what is the inherent driver, so you'll get an idea of what it is. See, the country's GDP has got a significant composition of consumer spending. Slightly above 60% is the composition of the GDP on the consumer spending. Then you got the balance 40% between government and various investments that happen, right? That's the composition. As the economy is moving, which by all accounts the GDP is expected to be 7%+, right?
Somebody gives a forecast of 7.2% GDP. Call it between 6.8%-7.2%, that is what various GDP estimates forecasts are coalescing around that level, right? With that and what we have seen in recent times, which is the retail coming in with a sequential 4.9% or a 6% with the automobile and two-wheeler aside and the payments card spending pickup that we are seeing. We are seeing that that is more or less what the country's GDP composition is from a spending point of view. That is what we are seeing from the retail and the consumer spending following that, right? That is. If you think about us, we have had a composition of our balance sheet between wholesale and retail.
Wholesale between 45%-47% of total, and retail between 53%-55% of total. That, if you go back about 10 years tracking the bank, we were more or less like that. That is how the economy composition, as I described to you, about 60% or so is consumer spending related. That is the kind of composition we have had. With the major event disruption, pandemic event disruption that happened last couple of years plus, the consumer, there was a good pullback that you saw, we saw, and we also tightened on the credit to bring that down, right? Whereas the wholesale was performing very well with very good profits, very good liquidity, and with the ability to, with very less debt on the balance sheet.
It was powering very well, and we were happy to be good lenders into that. Currently our composition became wholesale 55% and retail 45%. Now it reversed over a period of two odd years. Now you are seeing that the retail momentum is picking up, and that is how we are expecting that we will go back to what we have had over a period of last 10 years, which is move towards that kind of a predominant retail, right? That's how we have been, and that's how we are structured with the branch distribution and sales force and so on. There is no kind of a need or a particular target that we want to chase. It depends on our independent credit architecture, what they process and approve.
It will go in accordance with whatever credit sets their policies and their approval process. Directionally, over the past years with the economic, kind of, economy positioned like that's how we expect to grow. That's part A of what you asked. Part B of what you asked is from a credit point of view, right? Of course, we are quite watchful across all the three categories of credit, right? We are quite watchful across all. At this moment, as you saw some of our credit numbers for us or for the industry remain benign, right? Coming from the COVID where lot of tightening happened across various segments and coming out of that, we are seeing credit lower than the historical average. That is what we are seeing.
This is a kind of a. We expect that for some more time to continue like that. But that's the part of what the tightening credit policies of the last two years is what we are seeing reflected in the credit costs and the behavior currently and in short time to come.
Thank you, sir, for the time. That's all I have.
Thank you, Nitesh.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on telephone keypad now. If you have changed your mind, please press star followed by two. Thank you. We have our next question from Joanne Huang. Please go ahead.
Hello. I would like to ask, and thank you very much for the presentation. What are the latest timelines for completion of the merger with HDFC Limited? Will the proposed merger with HDFC Limited have any impact on the overall funding requirements of the bank about maybe one or two years down the line? Is this likely to impact the cost of funds for the bank, please? Thank you.
Okay. Yes. Thank you for the question. What the first aspect is in terms of the timelines for the merger, which around the April timeframe, we had shown a particular calendar based on what the attorneys had advised us as a possible timeframe. More or less it is going in line with that kind of a timeframe as we speak now, right? The application process to the Competition Commission has happened, and the review process is in progress. The application process to NCLT has happened, and that review process is soon to come in, right? This journey, particularly the NCLT journey, is expected to take 9-12 months.
The estimate that we gave in April is to have an effective date consummate the process, legal process and have an effective date sometime in September 2023. Our attorneys say that is still a valid kind of a timeframe to think about. That's part A of what you asked. Part B, what you asked is that once the merger is consummated in a year, two years' time, what will be the funding requirement, right? The funding requirement you can think about what is the funding requirement for the bank, what is it for growth in the bank books, and what is the funding requirement from a replacement of the fundings that will not get rolled over in HDFC Limited when it merges with the bank, right?
The funding for the bank growth on a merged basis is part of what we generally drive, right? What drives the funding requirement is the asset growth requirement. That is what we first lead that into say, what is the appetite and what part of that appetite process goes through our credit process and so thereby what is the determinant. That is the key determinant for what the funding is. We're quite comfortable from a bank growth on a merged basis to fund out of our deposits, right? That's something that business as usual approach that we take. The aspect of what part of the funding of HDFC Limited we need to replace it with the bank funding. HDFC Limited runs quite a good matched book across various tenures.
We expect three to five years. Over a period of three to five years, we expect, as the maturity profile of HDFC Limited's funding happens, to take that and replace it with the bank funding, bank deposit funding. In order to augment that is part of our strategy to open branches and go into various places where we see opportunities for getting deposits by reaching out to the customers in the catchment area, which we have already started in terms of opening branches. Irrespective of what happens, we want to get it and get the deposits in, right? That's part of what we have started to do.
The other aspect of it is that as part of the RBI application process, we have asked RBI that the borrowings of HDFC Limited moves as is, as borrowings of HDFC Bank and then follows the maturity profile that is contracted with HDFC Limited. That is part of our process of discussing with RBI and going through the review process on that. That is going on. The third aspect of your question is relating to cost of funds. What does it mean to cost of funds? The cost of funds, the way you think about it is it follows the interest rate cycle of up and down. We have not historically, and as our current strategy stands, we don't intend to lead the market with any price increases.
Which means we are not going to buy funds by a premium pricing. That's not an approach that we have taken in the past. That's not an approach that we are taking today in terms of how we get the funds. If the rates go up, it's a function of the mix, which is at various interest rate cycles you get higher fixed deposits in one cycle, lower fixed deposits in another cycle, which is the term deposit cycle. And then due to the mix, the rates can go up or down. From a pricing point of view, we expect to price ourselves competitively in line with our peers. That's in terms of cost of funds. We don't expect to get on to any premium pricing approach on this.
Thank you very much for answering and nothing further from me. Thank you.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on telephone keypad now. Thank you. We have our next question from Lu Gao. Please go ahead.
Thank you. I would like to ask how do you see the Net Interest Margin trajectory for the bank and what is the likely steady state mix between retail and corporate book for the bank? Thanks.
See, the net interest margin I alluded to, the DuPont type of analysis net interest margin, the core net interest margin was 4%. On an interest earning asset basis, the net interest margin was 4.2%. Right. If you go back to the bank's history in terms of how the bank, the band at which the bank's net interest margin operated between 4%-4.4%. That's the band at which it operated. Where you have the asset mix, where the retail in that 50s, right. 53%-55%, in that range, retail and wholesale 45%-47%. That is where over a period until 2020, until 2019, late 2019, early 2020, it was in that kind of a range.
The Net Interest Margin, depending on the interest rate cycle up or down, continues to be in that narrow band, 4%-4.4%. Then as the mix dramatically changed due to tightening of the retail and still there is a good demand of a very, very high-rated, quite good quality wholesale, it switched because wholesale comes with lower margin because you price for the credit, lower margin because highly rated wholesale book with extremely low operating costs because you don't need much to spend on that and with a very low expected credit. Provided from a returns point of view, wholesale or retail does not make a difference to the bank from a return on assets, approximately 2%, right?
In some cycles we go to 1.8%, 1.9%, somewhere 2%, 2.1%, call it roughly 2%. Even last year was 2.0%, right? That kind of a range in which we operated on the returns because irrespective of the product mix, irrespective of the net interest margin from 4%-4.4%, the returns are in that narrow band of about 2% ± a small difference, right? That's where it is. Now since the wholesale is at 55% and the retail is at 44%, we are in the lower end of that range from the net interest margin. As you see, if you notice that the retail is covering and going up, you'd expect that the margin goes up.
Credit costs, expenses, operating expenses go up before even the Net Interest Margin starts to come up because that is the nature of the retail. It calls for an upfront spending to get the volumes in and accrual comes over time. The credit cost, which is at a benign, normalizes over a period of time, right? That is the kind of an operating model that operates. As the Net Interest Margin is coming, we see some credit costs also coming because the maturity of the products go up and operating costs come right up front. That is the kind of a model in which the retail operates. I hope I gave you a broad picture of how to think about the Net Interest Margin as the mix goes through.
Thanks.
Thank you. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad now. Thank you. We have our next question from Seok Poh Yeoh . Please go ahead.
Hello, management. Thank you very much for the update. Just want to clarify one thing just now. You mentioned as part of the application for the RBI process. Sorry, could I just clarify, you mentioned that the borrowings of HDFC. Sorry, I just wanted to clarify how that particular point on the RBI application process on how the borrowing of HDFC would be moved over to HDFC Bank.
Yeah, that is correct. See, in the merger process, we expect the assets of HDFC Limited to move to the bank. Along with the movement of the assets, we are expecting that the liabilities also moves to the bank as is with the profile that it exists today.
Okay, understand. Thank you. Just maybe two questions. First of all, sorry, I think it was covered a bit earlier, but can I just hear again in terms of the specific deposit growth strategy that the bank has in place, given, I mean, the scale of HDFC Limited and its wholesale funded nature, can we hear a little bit more detail in terms of the growth strategy for the deposits replacement on the wholesale funding? Secondly, is there an intended steady state liability mix for the merged entity? Thanks.
Okay. You talk about the deposit strategy, which, let me try to explain, see if that makes any sense to you. One is, as part of all of this, is to leverage the brand. Leveraging the brand, we are opening up various distribution centers to get that brand recognition in various geographies that we would like the deposits to come. Because customers, we believe, still want to look at the brand, identify themselves with the brand and an organization to feel comfortable because their money is sitting in the bank, right? They want to ensure that that brand recognition is there, so we are opening up distribution centers. Our distribution centers, we are keeping it as minimalistic as it can be, but the process in the distribution centers branches are digital processes.
Just because we have an office, it doesn't mean that we are in a traditional type of a branch banking approach. It is a point where our sales and relationship managers locate themselves, huddle, and go to the cash interiors to bring the customers. That is part of what we've already embarked on. Now in an accelerated manner, we are moving in the direction to open branches, call it 1,500-2,000 branches or so per year over the next three years we want to open. That's one. The second aspect of the branches is to bring the customers in. Today we are bringing in customers 2.6 million a quarter. Last quarter was 2.6 million liability relationships coming in.
As a context, if I tell you about four years ago, it was 3 million customers a year that we were bringing, right? One y ear, 3 million customers, four years ago. Now 2.6 million customers in a quarter. That's part of how we have accelerated in terms of bringing in new customers into the bank. When you get in the new customers, there are two aspects to deepening the relationship. One is the new customers bring in, that is the new account value. So you manage the new customers coming in with their value. There is another strategy to deepen the relationship, which is in terms of the existing customers and as the maturity of this customer cycle grows, deepen those relationships, wallet share, bigger wallet share coming in.
Those are two sub-strategies once you get the customers in that moves on. The third aspect of this is in terms of the branch maturity model, right? We have branches which have opened over the last 28 years, which have different vintages. They are in different cycle, different curve of the vintage model. About, call it 60% of the branches are less than 10-year vintage and slightly under 2,000 branches are less than five-year vintage, right? That's the kind of a vintage model we look at. As the branches mature, it gives much bigger value. That means in the first five years of a branch existence, say they give you X being attributed a value 500, right?
In the first five years of a branch existence from zero on day zero, it gets to approximately 100 in five years. Once it crosses and gets to five to 10 years, that x becomes 3x. That is the maturity model of the branch. Once it crosses the 10-15 years bucket when it goes, it becomes 10x. That's the scale at which it moves, right? We have published, I think recently, a couple of months ago, how many branches are in what maturity cycle. That means what are in that five year, 0 to five y ear cycle and five to 10 year maturity cycle and 10-15 year maturity cycle and so on. We publish.
That's part of harvesting investments that we have made, get that branch to do that deepening of that wallet share and bringing in new customers to get those balances. That's broadly another part of the strategy is to run that best-in-class branch operating model. Right? Then one more item I want to give. There are several things that go on, but maybe one more and I will close there. Time deposits, right? It's a very critical element of our current strategy. The time deposits we have, which is our last quarter's CASA ratio was 45%. 55% is time deposits. 82% of our deposits are retail, right? That we want to continue to focus ourselves on the granular retail deposits.
Now, these time deposits, which is at 55% of the total deposits, we have penetration of 14% in our customer base. We want to deepen that penetration even further because in the asset allocation model of any customer for that matter, there are several kind of investments they do, right? Something equity, something in bond, something in real estate and something in liquid assets like a fixed deposit and so on. We have capped this resource for a period of time, when we part of the engagement with the RBI.
Right now we are vehemently engaged with our customers through our relationship managers to ensure that we remain the primary banker and if the time deposit is not with us, but as part of their asset allocation they have time deposit somewhere else, we want to bring it in into the bank, right? So that's part of another one that we are trying to deepen the relationship by bringing in. And again, these are very granular targeted time deposits. As I alluded to earlier in this call, not led through price, not led through premium pricing. That's part of time deposit is another pillar of our deposit gathering strategy. I hope that explains for you.
Thank you very much. Yeah, it's helpful, just to understand a bit more, detail. That's really helpful. Thank you. The other question, if I may, when we think about the merged entity, and given the current liability profile of HDFC Limited, is there any kind of like a steady state liability mix that we would have in mind?
It wasn't clear. Can you, if you don't mind to ask again?
Given, I mean, post-merger of the banking entity and HDFC Limited, is there a planned liability mix, given you're looking to replace some of the wholesale funding that sits at HDFC Limited with retail and corporate kind of deposit funding? What would the combined entity, I guess, on a three to five year basis look like in terms of a liability mix?
I'll tell you our approach in the way we look at it. We are focused on retail deposits. Currently, 82% of our deposits are retail and that is part of the strategy just now I gave you in terms of how we continue to focus on retail to get that. One other element of our strategy. That doesn't mean that is why I said 82% is retail. The other 18% is non-retail, right? It can go, 18 can be 20 or thereabout in that range, right? At some point in time it was 75, 25, but that is the order of magnitude I want to leave you with, right? It's not that we don't want wholesale deposits, but our predominant focus and drive is for granular retail deposits because that is what gives maximum value. That's part of how to think.
Having said that, one other pillar of this and that remains in HDFC Limited and when it comes here for us, that is how we also think about it is infrastructure kind of a borrowing. When we do affordable housing infrastructure borrowing, those borrowings are quite valuable to us from both from a maturity profile relationship matching with mortgages and various other benefits that it can provide us from an effective cost of funds or various other elements that we've taken apart. That will also be part of the strategy to go for. What is the exact mix? That is market dependent and time dependent through the cycle. There is no particular but these are the elements in which we operate.
Understand. Thank you very much.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. Thank you. We have our next question from Lu Gao. Please go ahead.
Sure. I would like to ask if you could throw some light on the overseas funding requirements for your international operations, both senior and AT1. Thanks.
Thank you. In terms of the Overseas funding requirements. I'll first start with the AT1. At this point in time, there is a regulatory restriction on how much of AT1 bonds banks in India can raise from overseas. We are quite close to the restrictions, having issued a total of $1.1 billion of AT1 bonds last year. In that sense, we do not have much headroom at this point under current regulations. That's something which is very unlikely, you know, to be issued by us. In terms of senior bonds, as in the past, we are really a very low, less frequent issuer.
Depending on how our international operations progress in terms of, you know, tenor of our advances overseas and our assets overseas, we could look at some senior bond offerings. At this point in time, most of our international operations asset side is of low duration. At this point in time, we are, you know, more reliant on bank loans and, you know, and such funding rather than through the bond market. Depending on, we have in the past also been a reasonably opportunistic issuer of senior bonds, and we are likely to continue in the same manner.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. Thank you. We have our next question from Joanne Huang. Please go ahead.
Hi. It would be great if you could please answer the below question. How do you see credit growth picking up for the rest of the financial year? Have you seen any compression in net interest margins in the corporate book, please? Thank you.
You talk about the credit growth in the current financial year. I think a few minutes ago, I was trying to describe the credit growth. The underlying credit growth seems to be quite robust across various segments, right? The retail was the leader of the pack for us as you saw in the recent quarter too with a good 4.9% sequential growth or excluding the auto and two-wheeler almost a 6% sequential growth. We continue to see the momentum. Card spending is also another kind of an indicator. We are seeing that there is underlying spend enthusiasm among the consumers. We see that.
Commercial and rural banking, the middle market segment also has seen quite a robust growth in the small merchants, which is a little more than a third of the country's GDP powered by that SME type of segment. Where both new-to-bank customers and existing customers are having adequate and nice cash flows with growing cash flows. We see that a good amount of traction is gained there. Wholesale segment I alluded to. We see quite a good growth. Last quarter was 15.7% year-on-year growth. We see good traction there. Working capital front, that is business as usual.
On the capital front, that means on the capacity augmentation or participation in infrastructure, to a limited extent we have seen, but we are waiting and watching that space because we do expect something coming there. That's in terms of how we are seeing the underlying credit momentum. Now, on the net interest margin that you talked about, I think I described that a couple of minutes, few minutes ago. Same thing. If you think about our net interest margin, it's a function of the mix of various products, right? Which is the wholesale and the retail mix that we have.
When the retail mix is at 53%-55% and the wholesale is at 45%-47%, the Net Interest Margin moves in the band of 4%-4.4%, more closer to the middle to the top end of the band. That's where it is. And with the wholesale at currently 55%, it is at the low end of that, at 4% or so. That's where the Net Interest Margin is for now. We do expect that as the retail, which we have seen in recent times, pick up, the margin starts to pick up as soon as the mix changes.
Thank you very much for answering. Nothing further from me. Thank you.
Thank you.
Thank you. We have our next question from Matthew Jung from PIMCO. Please go ahead.
Thanks for the opportunity. I just wanted to follow up on previous, given your AT1 is trading, to buy back some of these AT1s?
No. There's no plan because from a regulatory perspective, we are not allowed to buy back our AT1, so that's something which we're not going to do.
Thank you. I will now hand you over back to your host, Siddharth, to conclude the call. Please go ahead.
Thanks, Elle. Thank you, Mr. Vaidyanathan and Mr. Parthasarthy for your time. Thanks to all the investors as well for taking out time for this call. If there are any further questions, please do not hesitate to reach out to the HSBC team. I will now close the call. Thank you.
Okay. Thank you, Siddharth, and thank you to the participants. Appreciate you joining in.
Thank you. Thank you all.
Bye-bye.