I now hand the conference over to Mr. Sandeep Bakshi, Managing Director and CEO of ICICI Bank. Thank you, and over to you, sir.
Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q1 of financial year 2022. Joining us today on this call are Vishakha, Anu, Sandeep Batra, Rakesh and Anandya. We hope that you are safe and in good health. The 2nd wave of the COVID-nineteen pandemic was far more severe compared to the first in terms of cases and fatalities and a wider geographic reach. As banking is classified as an essential service, Most of our branches were opened even during the months of April May when containment measures were in place in various parts of the country.
Our colleagues have shown resilience and strength and continue to serve our customers even in this challenging environment when a number of our colleagues were themselves impacted by the virus. We are happy to share that now about 80% of the bank's employees have received at least one dose of vaccination against COVID-nineteen. We would like to thank the medical and health workers and the other essential workers for their tireless efforts in this fight against COVID-nineteen. With the decline in numbers of COVID-nineteen cases since June, there has been a gradual easing of restrictions across various states. The Ultra Frequency Index, comprising several high frequency indicators Tracked by the bank's Economic Research Group, which declined from 107.9% in March to 70.9% in May, has improved to 99.6% in the 1st week of July.
High frequency indicators such as power demand, e waybill generation and the unemployment rate have shown significant improvement in June. Vehicle registrations have also improved in June compared to April May. Going forward, the pace of normalization in economic activity will depend on the trajectory of the pandemic, the level of containment measures in place and the pace and effectiveness of vaccination. At ICICI Bank, we continue to steadily grow our franchise and maintain our strong balance sheet. 1, growth in the core operating profit in a risk calibrated manner through the focused pursuit of target market segments.
Our aim is to achieve rich calibrated growth in core operating profit through a 3 60 degree customer centric approach, Tapping opportunities across ecosystems, leveraging internal synergies, building partnerships and Decongesting Processes. The core operating profit increased by 22.7% year on year to INR86.05 billion in Q1 of 2022. The profit after tax grew by 77 point 6% year on year to INR46.16 billion in Q1 of 2022 2, further enhancing our strong deposit franchise. Total deposits grew by 15.5% year on year to INR 9,300,000,000,000 at June 30, 2021. During the quarter, average current account deposits increased by 32.4% year on year and average savings account deposits by 21.7% year on Term deposits grew by 8.7% year on year.
The liquidity coverage ratio for the quarter was 130%, reflecting continued significant surplus liquidity. Our cost of deposits continues to be amongst the lowest in the system. Our digital platforms and solutions, presence in various ecosystems and process decondition initiatives have played an important role in the growth of our deposit franchise 3, growing our loan portfolio in a granular manner with a focus on risk and reward. Retail disbursements moderated in April May due to the containment measures in place across various parts of the country. With the gradual easing of restrictions, disbursements picked up in June July.
Credit card spends declined in April May but improved to March levels in June, driven by spends in categories like consumer durables, Utilities, Education and Insurance. The retail loan portfolio excluding Business Banking grew by 20.2% year on year and was flat sequentially at June 30, 2021. Credit summations in the overdraft accounts of Business Banking and SME customers also picked up in June July after declining in April May. Our business banking and SME franchises continue to grow on the back of digital offerings and platforms like InstaBiz and Trade Online. The Business Banking and SME portfolios grew by 53.4% and 42.8% year on year, respectively.
The Business Banking portfolio grew by 6.3% sequentially, and the SME portfolio saw a marginal sequential decline. The growth of the domestic corporate portfolio was 11.4% year on year. The growth in performing domestic corporate portfolio, excluding the building the builder portfolio, was about 15% year on year at June 30, 2021. Overall, The domestic loan portfolio grew by 19.6% year on year and was flat sequentially. The non India linked overseas corporate portfolio declined year on year and sequentially, in line with the approach which we have articulated earlier.
4, leveraging digital across our business. Our open architecture based digital platforms provide end to end seamless digital journeys and personalized solutions to customers and enable more effective data driven cross sell and up sell. These platforms also enable us to reach out to non ICICI Bank account holders. We have shared some details in Slides 17 to 28 of the investor presentation. We have seen significant increase in adoption of our mobile banking app, Imobile paid with over 2,500,000 activations by non ICICI Bank account holders since its launch 6 months ago.
The transactions by non ICICI Bank account holders in terms of value and volume have grown by 8x and 7x, respectively, in June 2021 compared to March 2021. The financial transactions on our digital platform for businesses, Instabiz and our supply chain platform have grown steadily in the past few quarters. The increasing adoption of platforms and growth in the value and volume of transactions supports growth in profit deposits and provides a rich base for analytics and cross sell. The value of financial transactions through Instabiz more than doubled year on year in Q1 of 2022. The value of transactions through supply chain platforms grew by more than 8 times year on year in Q1 of 2022.
We have taken a number of initiatives to offer a convenient and frictionless experience to customers by digitizing the credit underwriting process with instant loan approvals. The proportion of end to end digital sanctions and disbursements across various products have been increasing steadily. About 34% of our total mortgage sanctioned by volume were end to end digital in Q1 of 2022 compared to 19% financial year 2021. About 46% of personal loans, Personal loan disbursements by volume were end to end digital in Q1 of 2022 compared to 42% in financial year 2021. Of the total asset and liability accounts opened as well as third party products sold during June, about 40% was end to end digital.
About 95,000 customers were onboarded using video KYC in June 2021. We continue to strengthen our position in the digital payments system by building seamless user journeys, facilitating higher transactions through ports and driving repeat transactions. Our strategy is to participate both directly through our own platforms and partner with 3rd party players in the P2P and P2M space of the UPI ecosystem. We are seeing high customer engagement through repeat usage of features like pay to contact, Scan2Pay and bill payments on ImobilePay. The volume of transactions through pay to contact has grown by over 5 times in Q1 of 2022 over Q4 of 2021.
The value of UPI, P2M transactions more than doubled year on year and grew by over 30% sequentially in Q1 of 2022. We have recently launched a digital platform called MerchantStack, which offers an array of banking and value added services to retailers, online businesses and large e commerce firms such as digitally current account opening, instant overdraft facilities based on point of sale transactions and instant settlement of point of sale transactions amongst others. We've also introduced the ICICI stack for corporates, which a comprehensive set of digital banking solutions for corporates and their entire ecosystem of promoters, employees, dealers and vendors. These solutions enable corporates to seamlessly meet all banking requirements of their ecosystem in a frictionless manner. We continue to invest in technology to enhance our offerings to customers as well as the scalability, flexibility and resilience of our technology architecture.
We actively monitor and improve our technology infrastructure to minimize disruptions in service to our customers. As a part of our 2025 technology We are creating an enterprise architecture framework spanning digital platforms, data and analytics, microservices based architecture, cloud computing and other emerging technologies 5, protecting the balance sheet from potential risks. The measures imposed by authorities in various parts of the country to contain the spread of second wave of the pandemic had a significant impact on collections and recoveries in April May. We sought to adopt a sensitive approach to the difficulties faced by our customers and prioritize their health and safety as well as that of our employees. Unlike last year, regulatory dispensations such as moratorium were not available to borrowers this time.
This has led to an increase in overdues and gross NPA additions in Q1 of 2022 for the banking system, including us. The gross NPA additions during the quarter were INR 72,310,000,000, of which INR 67,730,000,000 was from the Retail and Banking and Business Banking Portfolio. The Retail and Business Banking gross NPE additions included additions of INR 11,300,000,000 from the Jewel Loan portfolio. UL Loan is a fully secured product and the loss given default in this portfolio is negligible. In order to be sensitive to the difficulties faced by And give them time for repayment.
We have delayed sending the auction notices to customers in default. We expect near complete recoveries from this portfolio in the coming quarters. As mentioned in our previous earnings calls, our aim is to be proactive in provisioning with the objective of ensuring that the balance sheet is robust at all times. We have further strengthened our provisioning policies on NPS during this quarter. The provisions during the quarter were higher by INR 11,270,000,000 due to this more conservative approach.
The approach. The provision coverage ratio on NPAs was 78.2% at June 30, 2021. Based on its current assessment of the portfolio, the bank has written back INR10.50 billion of COVID-nineteen related provisions created in the earlier periods. As of June 30, 2021, the bank held COVID-nineteen provisions of INR 64,250,000,000, which are about 0.9% of our total loans. The over dues in the performing portfolio across various segments to either marginally higher than pre COVID levels or at pre COVID levels at the end of March 2021.
These increased in April May due to the 2nd wave of the pandemic and related restrictions. With the easing of restrictions and pickup in economic activity in June, The overdues across various segments of the performing portfolio have declined. We expect further improvement in collections and decline in overdues in the coming quarters. In the absence of regulatory measures such as moratorium, the gross NTA formation due to the recent wave of COVID-nineteen is being up fronted in the first half of the current fiscal for the system, including us. Based on our current expectations of economic activity and Portfolio Trends, we expect our gross NPE additions to be lower in Q2 of 2022 and decline more meaningfully in the second half of fiscal twenty twenty two.
There would be also be some to the loans under resolution as a part of the various frameworks announced by RBI. We have a robust provision coverage ratio in NPAs. And in addition, We hold COVID-nineteen related provisions of INR 64,250,000,000 or about 0.9 percent of our total loans to address potential future credit losses arising out of the pandemic and its economic impact. The performance of the portfolio and the strength of the balance sheet give us significant comfort. 6th, maintaining a strong capital base.
The position of the bank continued to be strong with a CET1 ratio of 17.01 percent at June 30, 2021, including profits for the quarter. Further, the market value of the bank's investments and listed subsidiaries is about INR 1,000,000,000,000. Looking ahead, we see many opportunities to grow the core operating profit in a risk calibrated manner. We calibrate our growth in the near term based on operating environment and the future trajectory of the COVID-nineteen pandemic. We continue to focus on creating holistic value propositions for our customers and capturing opportunities across customer ecosystems, leveraging internal synergies, building partnerships and simplifying processes.
We have a wide physical distribution network and our best in class digital platforms provides seamless onboarding and transacting experience for our customers. We have opened 8 ecosystem branches that house multifunctional teams required to nurture relationships and bring the entire bouquet of services of the bank to the corporates and their ecosystems. We will continue to make investments in technology, people, distribution and building our brand. We are guided by our philosophy of emphasizing the need to deliver fair cash value to customers while creating value for shareholders. We continue to focus on delivering consistent and predictable returns to our shareholders.
With these opening remarks, I will now hand the call over to Rakesh.
Thank you, Sandeep. I'll talk about the balance sheet growth, credit quality, P and L details, capital adequacy, portfolio trends and performance of subsidiaries. Starting with the balance sheet growth, Overall loan portfolio grew by 17% year on year at June 30. The domestic loan portfolio grew by 19.6% year on year and 0.3% sequentially at June 30. Up to the last quarter, we used to report Business Banking as a part of the retail portfolio.
From this quarter, we are excluding it from the retail portfolio and reporting it separately. The retail portfolio grew by 20.2% year on year and 0.7% sequentially. Within the retail portfolio, the mortgage loan portfolio grew by 24% year on year, rural loans by 24.2%, commercial vehicle and equipment loans by 1.5% and the auto loan portfolio by 15%. Growth in the personal loan and credit card portfolio was 13.5% year on year. This portfolio was INR66.26 billion or 9% of the overall loan book at 30 June.
The The banking portfolio grew by 33.4 percent year on year and 6.3% sequentially at 30th June. The SME business Rising borrowers with a turnover of less than INR 2,500,000,000 grew by 42.8% year on year and decreased by 1.7% sequentially to INR297.78 billion at the 5th June. The growth of the domestic corporate portfolio was 11.4% year on year. The growth in performing domestic corporate portfolio, excluding the builder portfolio, was about 15% year on year at 30th June, driven by disbursements to higher rated corporates and PSUs across various sectors to meet their working capital and capital expenditure requirements. The overseas loan portfolio declined by 14.7% year on year and increased by 6.7% sequentially at 30th June.
The sequential increase in the overseas loan portfolio was primarily due to increase in the India linked trade finance book. The overseas loan portfolio was 5.4% of the overall loan book at 30th June. The non India linked corporate portfolio reduced by 58.8% or about US1.4 billion dollars year on year and 21.6 percent or about US270 $1,000,000 sequentially at Satya June. We have provided the breakup of our overseas corporate portfolio on Slide 16 of the presentation. Coming to the funding side, We continue to focus on growing the daily average casa balances and retail term deposits.
Average savings account deposits increased by 21.7% year on year and average current account deposits increased by 32.4% year on year during this quarter. There would be some impact on the sequential growth in the current account deposits in the next quarter due to the implementation of RBI's guidelines on opening of current accounts by banks. The total term deposits grew by 8.7% year on year to INR5 1,000,000,000,000 at 30th June. Coming to credit quality, the gross NPE additions were INR 72,300,000,000 in the current quarter compared to about INR55.23 billion on a pro form a basis in the Q4. The recoveries and upgrades during the quarter were INR 36.27 billion, which is about 50% of the gross NP additions.
The gross NP additions from the retail and business banking portfolio were INR67.73 billion in the current quarter compared to INR43.55 billion on a pro form a basis in Q4. The Retail and Business Banking gross NPE additions included additions of INR9.61 billion from the Kisan credit card portfolio and INR11.3 billion from the Juel loan portfolio. As Sandeep mentioned earlier, we expect near complete recoveries from the JELD loan portfolio in the coming quarters. We typically see gross NP additions from Kisan Credit Card portfolio. In the 1st Q3 of the fiscal year, the gross NPE additions from the Kisan credit card portfolio were relatively low last year due to moratorium extended to the borrowers from March to August.
The Tissaint credit card portfolio and Jewel loan portfolio were about 3% each of our total loan portfolio at 30th June. In the Retail and Business Banking Roth and P additions, excluding rural, the proportion of mortgages was similar to what we saw in FY 2021. Commercial vehicles and equipment loans was higher than what we saw in FY 2021 and personal loans and credit cards was lower. The gross NPE additions from the corporate and SME portfolio was INR4.58 billion in the current quarter compared to INR11.68 billion a pro form a basis in Q4 of 2021. Pro form a corporate and SME and P additions in Q4 included one account in the construction sector, which was rated BB and below at December 31 and was classified as non performing during Q4 and upgraded in the same quarter post the implementation by all lenders of a resolution plan as per RBI's framework.
As I mentioned earlier, recoveries and upgrades from NPAs excluding write offs and sales were INR 36,270,000,000. There were recoveries and upgrades of INR 22,640,000,000 from the retail and business banking portfolio and INR 13,630,000,000 from the corporate and SME portfolio. The recoveries and upgrades in the corporate and SME portfolio during Q1 mainly represents a few accounts which are upgraded post the implementation of the revision plan as per RBI's framework by all the lenders. The gross NPAs written off during the quarter was INR15.89 billion. The bank sold gross NPAs amounting to INR2.4 billion in Q1, All the sale was on a cash basis.
The gross NPAs sold during the quarter were entirely from the corporate and SME portfolio. The net non performing assets were INR 93.06 billion at 30 June compared to INR 91.8 billion at March 31. The gross NPA ratio was 5.15 percent at 30th June compared to 4.96% at 31st March. And the net NPA ratio was 1.16% at 30th June compared to 1.14% at 31st March. The non fund base outstanding to borrowers classified as non performing was INR 41.01 billion at 30th June compared to INR44.05 billion at 31st March.
The bank holds provisions amounting to INR16.55 billion at 30 June on this non fund based outstanding. The total fund based outstanding to all standard borrowers under resolution as per various guidelines, was INR48.64 billion or about 0.7 percent of the total loan portfolio at 30th June compared to INR39.27 billion at 31st March. Of the total fund base outstanding at 30th June, INR21.80 billion was from the Retail and Business Banking portfolio and INR26.84 billion was from the Corporate and SME portfolio. The bank holds provisions of about INR9 1,000,000,000 against these borrowers, which is in excess of the requirements as per RBI guidelines. The overviews across various portfolios increased in April May due to the reasons which Sandeep highlighted earlier.
With the easing of restrictions from June, collections and recoveries have improved and over dues have started to decline. We had mentioned in our Previous quarter's earnings call that overuse in the performing portfolio across retail EMI products and credit cards, SME and Business Banking portfolio was either marginally higher or at pre COVID levels at 31st March. The percentage of over deals in the performing portfolio across most of these segments at June end was similar to or lower than the December 2020 levels. Less than 1% of the performing domestic corporate portfolio was overdue at June end. As Sandeep mentioned, we expect further improvement in collections and decline in overdue in the coming quarters.
Coming to the P and L, net interest income increased by 17.8 percent to INR109.36 billion. Interest on income tax refunds was INR0.14 billion this quarter compared to INR0.11 billion in the previous quarter and INR0.24 billion in Q1 of last year. The net interest margin was at 3.89% in Q1 of this year compared to 3.84% in the previous quarter and 3.69% in Q1 of last year. The impact of interest on income tax refund and interest collection from NPAs was about 2 basis points this quarter compared to about 4 basis points in the previous quarter and in Q1 of last year. The domestic NIM was at 3.99% this quarter compared to 3.94% in Q4 and 3.91% in Q1 last year.
International margins were at 0.27% this quarter. The cost of deposits was 3.65 percent in Q1 compared to 3.80% in Q4. Non interest income excluding treasury income grew by 55.7 percent year on year to INR 37.06 billion in Q1, primarily due to the base effect from last year's Q1. Fee income increased by 53 percent to INR 32,190,000,000 in Q1. Retail and small business fees grew by 65.4% year on year and constituted about 76% of the total fees this quarter.
Total fee income declined by 15.6% sequentially, reflecting the decline in investment and borrowing activity by customers during Q1. Dividend income from subsidiaries was INR4,100,000,000 in Q1 compared to INR1.87 billion in Q1 last year. The dividend income in Q1 of this year includes final dividend from ICICI Prudential Life Insurance. On operating costs, the bank's operating expenses increased by 29.9% year on year in Q1. The employee expenses increased by 9.6% year on year and by 18.2% sequentially.
The bank had slightly over 100,000 employees at 30th June. Non employee expenses increased by 47.7% year on year in Q1, primarily due to the base effect. The non employee expenses declined by 8.3% sequentially due to lower business volumes during the quarter, partly offset by expenses like technology and other investments that the bank is making. The core operating profit increased by 22.7% year on year to INR86.05 billion this quarter. There was a treasury gain of INR2.9 billion this quarter compared to a loss of INR0.25 billion in Q4 and a gain of INR37.63 billion in Q1 of last year.
Treasury gains in Q1 of last year included gains of INR30.36 billion from sale of stake in ICICI Life and ICICI General Insurance. The total net provisions during the quarter were INR 28,520,000,000. We have further strengthened our provisioning policies or NPAs during this quarter. The provisions during the quarter were higher by INR11.27 billion due to this more conservative approach. During the quarter, the bank wrote back INR10.5 billion of COVID-nineteen related provisions created in the earlier periods.
This was based on the updated position of various Portfolios underlying these provisions after taking into account the NPS already accounted for and specific provisions held against the same as well as potential future credit losses arising of the pandemic and its economic impact. The provisioning coverage on NPAs continues to be robust at 78.2% as of 30th June. In addition, we continue to hold COVID-nineteen related provisions of INR 64,250,000,000, which is about 0.9% of loans. We are confident that these provisions will completely cushion the balance sheet from the potential credit losses which may arise due to the pandemic. The performance of the portfolio and the strength of the balance sheet give us significant comfort.
The profit before tax grew by 89.8% year on year to INR 60,430,000,000 this quarter compared to INR 31,830,000,000 in Q1 last year. The tax expense was INR 14,270,000,000 this quarter compared to INR5.84 billion in the corresponding quarter last year. The profit after tax grew by 77.6 percent to INR46.16 billion this quarter compared to INR25.99 billion in Q1 last year. The consolidated profit after tax was INR47.47 billion this quarter compared to INR48.86 billion in Q4 and INR31.18 billion in Q1 last year. Coming to the capital adequacy, the CET1 ratio including profits for Q1 was 17.01% at 30 June compared to 16.8% at 31st March.
The Tier 1 ratio was 18.24 percent and the total capital adequacy ratio was 19.27% at 30th June. Coming on the portfolio, we have been growing our loan portfolio in a granular manner with a focus on risk and reward. Our retail portfolio has been built based on proprietary data and analytics in addition to bureau checks, utilizing the existing customer database for sourcing in key retail asset products through cross sell and up sell and pricing in relation to the risk. Our strong deposit franchise enables us to offer competitive pricing to the selected customer segments. As Sandeep mentioned, disbursements across key retail products declined in April May.
However, these recovered in June and trends in July also appear promising. We continuously monitor the performance at a sub segment level and recalibrate the customer selection and underwriting norms in view of the current operating environment so as to leverage the demand while operating within our risk appetite. The bank had calibrated its credit filters and underwriting norms following the outbreak of the COVID pandemic last year. With the gradual unlock and subsequent recovery observed, some rollback of the measures were carried out. The bank reviewed the same in view of the 2nd wave of COVID-nineteen and considering the measures already in place, no significant further action was deemed necessary.
However, due to the evolving environment, policy rationalization measures are being continuously taken as per our analysis of various micro segments. We have given further information on our Retail and Business Banking portfolio in Slides 34 to 45 of our presentation. The loan and non fund base outstanding to corporate and SME borrowers rated BB and below was INR 139.75 billion at 30th June compared to INR 130.98 billion at 31st March, details of which are given on Slide 37. Other than 3 accounts, 1 each in construction, power and telecom, The maximum single borrower outstanding in the BB and below portfolio was less than INR 6,000,000,000 at 30th June. At 30 June, we held provisions of INR9.76 billion on the BB and Below portfolio compared to about INR3.32 billion at 31st March.
On Slide 38 of the presentation, we have provided the movement in our BB and below portfolio during Q1. The increase during the quarter primarily reflects a few accounts which were upgraded from NPA category post the implementation of the resolution plan as per RBI framework. Except for fund based outstanding of project under implementation accounts in the commercial real estate sector amounting to about INR3 1,000,000,000, All corporate and SME borrowers and the resolution were rated below investment grade at 30 June. The builder portfolio, including construction finance, Lease rental discounting term loans and working capital loans was INR230.05 billion at 30th June or 3% of our total loan portfolio. As mentioned in our previous calls, our portfolio is granular in nature with the larger exposures being to well established builders.
About 13% of our portfolio at 30th June was either rated BB and below internally or was classified as non performing. The total outstanding to NBFCs and HFCs was INR593.67 billion at 30th June compared to INR645 1,000,000,000 at 31st March. The total outstanding to NBSCs and HSCs were about 7% of our advances at 30th June. The details are given on Slide 44 of the investor presentation. Our exposure is largely to well rated entities with PSUs, long vintage entities owned by banks and well established corporate groups.
The proportion of the NBSE and HSE portfolio internally rated BB and below of nonperforming continues to be less than 1%. Coming to our subsidiaries, the details of the financial performance of subsidiaries is covered in Slides 5950 and 69 to 74 in the presentation. Value of new business of ICICI Life grew by 78.1% year on year to INR 3,580,000,000 in Q1. The new business premium grew by 70.6% year on year to INR 25,590,000,000 in the current quarter. The new business margin increased from 24.4 percent in Q1 of last year to 29.4% in Q1 of current year.
The annualized premium equivalent grew by 48.1% year on year to INR12.19 billion in Q1. The protection based annualized premium equivalent was INR 2,700,000,000 and accounted for 22% of the total annualized premium equivalent in Q1. ICICI Life had a net loss of INR1.86 billion in Q1 this year compared to a profit after tax of INR2.88 billion in Q1 last year. During Q1 this year, ICICI Life had claims on account of COVID-nineteen net of reinsurance amounting to INR5 1,000,000,000. Further, at 30th June, ICICI Life held provisions of INR4.98 billion for future COVID-nineteen related claims, including incurred but not reported claims compared to INR3.32 billion at 31st March.
The gross direct premium income of ICICI General increased by 13% year on year to INR 37,330,000,000 in Q1 compared to INR33.02 billion in Q1 last year. The combined ratio was 121.3 percent in current quarter compared to 99.7% in Q1 last year, primarily on account of the COVID-nineteen pandemic related claims. The profit after tax was INR1.52 billion this quarter compared to INR3.98 billion in Q1 last year. The profit after tax of ICICI Asset Management Company was INR 3,800,000,000 in the current quarter compared to INR 2,570,000,000 in Q1 of last year. The profit after tax of ICICI Securities on a consolidated basis was INR 3,110,000,000 in this quarter compared to INR 1,930,000,000 in Q1 last year.
ICICI Bank Canada had a profit of tax of C5 $1,000,000 in the current quarter, which was at a similar level compared to Q1 of last year and C5.1 million dollars in Q4. The loan book of ICICI Bank Canada at June 30 declined by 10.4% year on year and 1.3% sequentially. ICICI Bank U. K. Had a profit after tax of US2.9 million dollars this quarter compared to US5 $1,000,000 in Q1 of last year and US2.8 million dollars in Q4.
The loan book of ICICI Bank UK declined by 22% year on year and about 2% sequentially. As per India, ICICI Home Finance had a profit after tax of INR0.17 billion in the current quarter compared to INR0.01 billion in Q1 of last Yes. With this, we conclude our opening remarks, and we'll now be happy to take your questions.
Thank you very much. We Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Marukarjania from Elara Capital. Please go ahead.
Yes. Hi. So Juel loans and rural loans, Those will be, the Juel loans and Agri loans would both be part of the rural portfolio. Correct?
Yes.
Okay. And even if you so I know that you commented that most of it would be recovered. But were these the loans that were lent at Hi, LTV or you never really increased your LTV last year?
So, here the issue is not About LTV, I think like we mentioned, given the current environment, the collections could not take place. And typically, as you know, in the dual loan portfolio, if the loan goes into overdue, you send option notices to customers. In the current environment, we have not done that in the month of April, May and May and large part of June as well. So that is something that we have started now in the month of July, and we have already started to see recoveries from this portfolio. From an LTV perspective, the LTV currently, of course, which is allowed by RBI is about 75%.
We had increased that during the last year. We also had increased our LTV. But as I said, that is not an issue. These loans are completely covered by the value of the gold in the collateral that we have.
Okay. My other question is that even if you You would agree and dwell loans NPLs. The slippage rate is higher because Okay. And in the Q4, you had mentioned that mortgage NPLs were also on the or mortgage slippages were also on the higher side. So does that continue?
As in would the slippage ratio in mortgages have increased q o q? Any color?
So Like I said, Manu, earlier that if you look at the overall additions to the NPAs in the retail portfolio last year And you compare that with this year Q1. Last year as a whole, I'm taking because there were so many moratorium and be input judgment and all of those issues, so quarter on quarter numbers were varying a lot. If you look at it from an annual perspective last year and quarter 1 this year, On the retail side, the trend on I would say home loans is pretty similar actually to what we had last year. We have seen higher slippages relatively speaking to last year on the commercial vehicle portfolio. And on the unsecured side, actually personal loan credit card, It has been somewhat better than last year.
That is what we have seen in the Q1. And again, The overall numbers have to be seen in the context that unlike last year, we did not have any of the regulatory dispensation, which was this year. So we were expecting to see the impact of the 2nd wave in a more upfront manner during the current financial year. And that's what we have seen. So from here on, we should see a decline in the pace of addition to NPS.
Of course, there will still be somewhat elevated in the coming quarter. But again, taking out any assumption on a 3rd wave, we are not kind of But if you keep that aside for a moment, into the second half of the year, definitely we should start seeing meaningful reduction in the addition to NPLs. And of course, the current environment has also impacted to some extent the collection and the recovery which happened from the NPL portfolio. But despite that, if you look at it from the retail portfolio itself, we have recovered about INR 22,000,000 in the current quarter compared to the additions of about INR67 1,000,000,000. So about 1 third of that overall has been the recovery level the retail portfolio.
Yes. So that is my next question, but the retail recovery is actually much higher than Q4 was a much better environment for recovery. So has some classification change, which is why you have higher slippage and higher recovery or its Total recovery and what drove that during the 2nd wave?
So again, as I said, last year, because of the Moratorium and all of that, those numbers were up and down during the
No, I'm talking about Q4 only, not Yes.
Because the classification of NPLs happened only in the Q4, no, Mark. There was NPLs were not added in the previous quarters at all. So recoveries could not have been there, if you look at it. Okay. Yes.
So Q1, just to say that on Q1, these recoveries are all normal recoveries and upgrades which have happened on the retail portfolio. There is Change in any manner of reporting or any such thing which is there on the recoveries?
And in provisioning, you have tightened your provisioning policy even last year. So why did you need to tighten it again this year? Is this different segments that you have tightened or what has been tightened now?
So I think there could be a couple of portfolios where we would have tightened in December and we have done some further tightening this quarter as well. Well, the way we look at it is purely from a view that we have made it more conservative. We are very conscious about the coverage ratio that we want to maintain on the portfolio. And when the NPE additions are higher like we had this year on a gross basis, on a net basis, the early buckets, we have increased Some of the provision on that. Again, I don't think it reflects anything in terms of our expectation of eventual recovery From these NPL categories in which we have increased the provision, there could, of course, be some delay in recoveries.
For example, The level of recoveries that we would be expecting in this quarter sitting in February versus what it turned out to be was definitely lower than what we had thought. So there could be some You know delay in recovery which could happen, but otherwise it is just ensuring that our balance sheet remains strong in terms of the net NPLs that we have, in terms of the coverage ratio that we have. If you look at our net NPLs Through the COVID period starting from last year, March 2020, it actually has come down Compared to March 2020 in the last five quarters, if you look at the net MP outstanding, when compared to March to June again, it's like a marginal increase which is there. So we have looked at all of these aspects as well.
Got it. And just one very last question that in interest income recap, The other interest has gone up from like RMB 9,800,000,000 to RMB 12,000,000,000. That's normal? Or is there some one off recovery there?
No. So we called out the collection number separately and as you that was not a material number. The other interest income, actually there were some opportunities for the bank to deploy some of our surplus liquidity in the form of FX swaps. So that is something that we had done. So it was just a change in the form of liquidity that we maintained And that shows up as other interest income as swap income instead of in the normal course would have shown up as either interest income or investments or some other So that is the only thing.
There is no one off there.
Okay. Thanks a lot. Thank you.
Thank you. The next question is from the line of Nilanjan Karfar from Nomura. Please go ahead.
Hey, Rakesh. Hi. Just want to delve on that last question also on the higher recoveries in the Retail and Business Banking. So Last year, we had a pretty high slippage. I think between 202021, the retail slippages had more than doubled.
So But I find it quite curious that while the environment was challenging and collections could not happen, loans could not be given,
We had seapages and we
had also collections. So would you elaborate where these what kind of sweepages actually we had Seen last year, because I'm guessing is all of these collections that have happened from the last year's slippages, where they and therefore, color of the recoveries that had actually That's my first question. Yes. So again, this is saying, in last year, if you look at it, bulk of the NPL additions, It all happened in the March quarter, correct, of the if you look at the Slide 31, Of the INR 128,000,000,000 of additions that we had, close to INR 100,000,000 of that was in the Q4 On an actual basis, not a pro form a basis. So the stock of NPLs did go up quite substantially in the last financial year.
And as I said, we were expecting recoveries to be pretty high this year. And quarter 1 sitting in February or early March, we would have thought of even higher number than what we eventually had in the quarter. So the collection, for example, in the 1st couple of weeks of April was still relatively okay. June, as we mentioned, Things started to get better from especially from the 2nd week onwards. And again, The benefit of the retail portfolio is that it is a very granular portfolio.
These are home loans, car loans, personal loans, credit cards. So there will always be additions and deletions that will happen on this portfolio. And again, I don't want to put out a number on this, but if things remain, the 3rd wave He's not at all as intense as what we saw in the 2nd wave and is much, much milder. And then we would definitely expect to see better recoveries into the second half for the year as well. Okay.
Maybe I'll need a little more color. But To cut to the chase, I mean, given that we are staying the second half, I think Q2 itself, I think you are calling out to be slightly better in terms of lower additions. Let's keep aside third wave for a while. And then you're saying the second half will be a lot better in terms of addition time collections equally. Would you want to call out that gross additions will be lower than last year.
I think last year, we did something around INR 15,000 crores. Would that be the case? Do you want to result a guess? And secondly, will you still want to manage a 25% provision to CPOP ratio? So on the gross additions, it is difficult to say.
The fact is that in the Q1 itself, the additions on a gross, gross basis has been INR 72,000,000,000 Compared to INR160 1,000,000,000, will the additions fall off as sharply as keeping it at the same level as last year? That looks difficult. But again, the way we look at it, especially on the retail portfolio, is that we have to take into consideration The deletions and the recoveries that happen as well because it's a portfolio in which you will see additions and deletions all the while. So even if the gross additions were to be higher than last year, I think if you look at the recovery number, that would also be meaningfully higher than last year. So other than saying that we expect some improvement in the September quarter and then meaningful improvement into the second half of the year, is difficult to have had any specific numbers on that.
And again, all of this is also subject to How the pandemic plays out from here and so many other factors, this is the best estimate that we can have right now. So Rajesh, I thought I'll just give a color on the consumer behavior because I think there is an angle of consumer behavior here. We have seen last time also that the moment there is uncertainty and there is a A bit of anxiety, generally the trend is to hold cash and get into emergency funds. So emergency fund this time around also we saw that there was a shift and obviously the bounces and the overdue position was sent in April May. This is on the asset side.
We also saw on the liability side, people taking out cash from ATM and taking the cash and keeping it at home. So we also saw withdrawals and which is why you will see across the banking system in general the retail empty growth rates have been lower this quarter. So actually we have to see this liability movement, asset movement with the consumers here. And as And in the 1st 15 days, 2 quarters, 1st fortnight of June also, the anxiety hadn't fully gone on. It is in the 2nd fortnight of June that some bit of confidence started to come back.
And once the confidence starts to come back, there is an unwind of the Emergency funds that people want to keep. Emergency funds they keep by way of delaying repayments and also if they have got balances in their liabilities upon keeping it in cash because this time around for hospitalization and buying of medicines, etcetera, actual cash was required, Not digital. So it was actual cash flow record. So we saw that consumer behavior as well. So which is why you will see that in upgrades, etcetera, it will move a bit also with the sentiment, which is why we saw a higher upgrade in quarter 1.
Bulk of it also came in June. So April May, bounce rates and overdue At Versum, it had improved substantially. July also, the trends are better. So I thought I'll just overlay the consumer behavior and what are consumers thinking and how and its impact on the asset side as well as on the liability side. Right.
Anup, just to follow-up on this, I mean given the kind of customers, let's say, these are, I don't have a lot of color. Do you have to actually go out and collect or these are like more You know, in the sales and the industry? Yes, yes, yes. No, no, no, very good question. Actually, very good question.
So actually, in the dual loan, for example, So we have to look at it product by product. So in Jewel Loans, people because Jewel Jewelry is there with us as collateral, people walk in and pay Most of it. We don't go out and collect. So people walk in and pay generally. So that got impacted More in the Q1 and then of course the issue of auction was there.
On the others, most of it our 90% now we are collecting digitally most of the stuff. So we are not sort of sending people and doing all of it. We are collecting digital and over a period of time for us Most of the collections also selling is happening to our own consumers, so there are auto debits happening, NHI happening. So bulk of it is all digital collection. So our dependence on actually people going out and collecting, It does get impacted to some extent.
I'll not say that it doesn't, but our dependence on that, let's say, 1 year back or 2 years back, now is much, much lesser. So to that extent, we are okay. We are more driven by the consumer behavior and the anxiety levels in the market. So if we were to sort of plot An anxiety meter versus movement on the overdue as well as on the liability side, you will see that they are fairly correlated. So I would say that is a much bigger driver than sending people and collecting.
Our dependence is much, much less now. And we would continue to make it less and less and less dependent on
Perfect, perfect. That's very helpful. Thanks. If I
have more questions, I'll come back. Thank you.
Thank you. The next question is from the line of Suresh Ganpati from Macquarie. Please go ahead.
Yes. Just two questions, Horat, Three quick questions. One is to Vishaka. What are you seeing on the corporate side? Because obviously, a lot of people are expecting that Credit growth, survival in general for the system will happen from corporate as the economy gathers steam.
So I just want to know the outlook on both working capital as well as CapEx demand, what exactly is the recovery that you're seeing there? And the second question is to both Anoop and Sandeep. First, To begin with, what is the impact of Mastercard? Have you guys assessed? And the other aspect is, these Fintechs coming and you guys also have partnership with them, What is the value add you see in them bringing to you?
I mean, what is it that you guys can't do that FinTech guys are doing it better, be it technology or be Any color on that would be very helpful. Thank you so much.
Yes. So, Suresh, on the corporate side, 2 things, of Because the capital expenditure and the working capital. So let's take Q1 out because in Q1, because of pandemic wave 2, Clearly, in April, May, one did see some impact on the capacity utilizations and stuff like that. But if you look at generally In the corporate side, the capacity utilizations have gone up, the commodity cycles are at its peak and therefore general requirement of working capital has gone up, and we have seen an improvement in the utilization on the working capital side. Having said that, many of these corporates have actually gone and raised monies either in the form of Equity because of the buoyant equity market or they have relied on raising money in form of debt bonds in the market to fund those capital, the working capital.
Going forward, I expect this momentum to continue the way one has seen in the last year. Coming to capital expenditure, I would divide it into 2 parts, of course, the Private Corporate and the Public Sector. As far as the private sector is concerned, one must admit that one has not seen much capital expenditure in terms of large projects and so on and so forth. Of course, people have taken the opportunities in the last two years to balance their capacities and do a normal capital expenditure or I would say a slightly more than the normal capital expenditure in the last 9 months or a 1 year, but really not anything to expand the capacity because typically the corporate would look at expanding the capacity when they see their existing capacity getting swept on a consistent basis or a sustainable basis. So that kind of capital expenditure demand, I must admit, has not been seen from the private sector.
As far as public sector is concerned, I think they continue to grow in terms of they have their capital expenditure And they have been growing, and we have seen a robust growth, the demand from there. And as we As said in our remarks, we have focused, therefore, on the large corporates, well rated corporates and the PSU And you see a growth of almost 15% for us year on year in our cost rate.
Let me take the second part of the question. So one is the Mastercard impact. The Mastercard impact on us is Virtually negligible because for all the bills of Mastercard, we also have Visa. So we will we have shifted over to Visa. And Mastercard is very, very little actually.
It is in few 1,000 per month. So it is very, very little. And our flagship, which is Amazon card runs on Visa. So to that extent sort of large part of the cards is also protected. The second question is very interesting, which is the fintech and what is it that we get and why banks cannot do.
I would say honestly that there is nothing technically which our Fintech does, which our bank cannot do. What are the positives there and what are the negatives there and what are the learnings for banks and banks like that? I think first things first, It is FinTech, there is a gap on the speed of imagination of the solutioning. So I would say that that is the first gap. We think because they are very focused on a problem that they are solving for the customers.
Generally, they are first of the block. And for banks, because we look at large breadth and large depth of customers and many problems to solve, sometimes in the prioritization, Some printers, not all printers, but some printers were very focused on that customer segment, they move off the block first. What is it that banks have to do? A, We have to have our tentacles far and wide which we have is to see that which problems are getting solved and are those problems relevant for our customer segments as well. If they are relevant for our customer segment, we have 2 choices.
Either we build our own or we partner. Generally, our approach is to partner because that is they are focused on that solutioning, they have done that solutioning and we have a much larger customer base to give and we can scale that up fast. Fintech, we are seeing they solve the problem correctly, but they find it difficult most of the Fintechs, they find it difficult to scale Yes, some of course they scale up very, very well. So that is 1. 2nd is that how fast can a bank does Because they are very focused on a particular segment, they don't have a complexity of a bank.
At times, they can be faster In solutioning and they could be more flexible in Agile. But in the past and Agile, they find it difficult. We have seen our They find it difficult to get into adjacencies. They are not able to move into the adjacencies that easily, which is that they focus on one customer segment, one problem and that is it and they are not able to move with us. And on the customer side, if we see, Customers require a full solution.
So if a solution requires, if a problem requires 10 solutions, if somebody is giving only 4 solutions, Generally that option is not that good. So because customers require 10, so from a bank perspective, we add 4 plus we add 6 so that we are able to give 10. So customer stickiness with us increases. And we are seeing it in, for example, IMobile Pay, IMobile Pay, as Sandeep had also mentioned earlier, within 6 months these are all non ICICI Bank customers. There is virtually it's all on full and customers are picking it up on their own.
So we are seeing almost 4 lakhs per month non customers coming, non ICICI Bank customers coming in and it is accelerating. So we look very, very closely on product and ecosystem and then our customer segment fit. And that is what we are continuously looking at and we partner with many fintechs. We of course do our own Stuff as well, but we partner a lot of them and we create our own solutions for that. So from a banking perspective, the big advantage that we have, which Many fintechs may not have it.
Our ability to give us give us give us which is know your customer and know their context is much, much better than any fintech in a broader sense. In a narrow sense, sometimes banks miss on prioritization. But if we keep our tentacles On, then we don't miss on then we become fast forward and we pick it up and we move fast. So I would say that this game of Fintech versus Bank 1 is certainly a partnership. 2nd, our ability to also cross sell other products to the same customer In banking system is higher than any of the Fintechs because they will be narrow in their definition of that.
And as I said earlier that to move across other products or to create across products because they build brand in a very narrow way. Bank branding is wider, so customers also expect That they can take a mortgage also from us and buy mutual funds from us and buy protection from us and take and give liabilities to us. That is difficult. It's a brand building exercise, which is a difficult brand building exercise. It takes some time to build that kind of broader appeal to the customers.
So I feel that at this point of time, anybody who is agile and has tentacles open and is very focused on Problem solving for the customers will do reasonably well and that is what we are attempting to do And done at all points of time and we see the product ecosystem fit and the customer segment fit and we Just keep on seeing the fit and whatever moves, moves. There are many, many initiatives and many solutions we come out with. It doesn't move, I mean, that fast. So we let it be, but there are we test and learn and get that feedback. The High frequency touch with us with the bank is generally higher.
And so with that digital footprint, we are also able to use them at other is like underwriting, getting the context of the customer, helping them cross sell. So overall, I feel like if banks are agile, if banks are alert, If banks have their tentacles spread out, we do have a very, very good chance of winning this market for sure. So I would say that that is one. Of course, on the banking side, we are a regulated entity, many other sectors are not regulated entities. To that extent, there is some short Some agility or flexibility is what they will add.
But as they grow up, there will be clamor for regulations to come in. And regulations, they are sometimes good because they increase trust in the system. But sometimes they also open up some small arbitrage, which makes them more flexible for some time at least. So that is a positive. So basically, the gain is evenly spread and Banks have natural advantages on it and it is for incumbents like us to actually win this market and serve the customers well across their needs across their spectrum In a broad way and in a deep way.
I'll just supplement to what Anoop said. 1, Suresh, one of the fundamental differences between a bank and fintechs is The liability franchise that we have and that changes but significant proposition. And for us, it is trying to manage Gail and complexity, which is of a very, very different order. So as you are aware, we have been focusing on this area. And as part of our disclosure, This time, you will see that we almost have about 10, 11 slides that we have put across on various initiatives that we are taking.
And we will continue to work on this journey. It is a journey and we will continue to learn from Fintech.
Thanks everyone.
Thank you. The next question is from the line of Abhishek Murdarka from HSBC. Please go ahead.
Yes. Hello. Good evening. So three quick questions. One to Vishakha.
So if I look at this Resolution framework under COVID, the disclosure that comes in the notes to accounts, and if I compare it to the last quarter FY 'twenty one end. It is higher by about INR 19 100 crores, out of which about INR 1600 crores is really coming from corporate loans. Plus, on top of it, there's some ECLGS offtake as well in the quarter. So if you could just explain which segments within corporate are you seeing? Is it Any particular segment or segments or some mid corporate or any kind of detail there could would be helpful?
And I can come back to the other two questions. Yes. Rakesh, I'll just take that question. So in terms of the disclosure, as you know, that is of The cases where the resolution has been implemented, so that is the reason why that number has gone up. And so if you look at our disclosure that we have put out on Slide 32, that gives total fund base outstanding under various resolution frameworks, that was about INR48 1,000,000,000 of loans Excluding the NPS compared to about INR39 1,000,000,000 at March 31.
And within that INR22 1,000,000,000 is retail, about INR26 1,000,000,000 This is corporate. So it is the same thing, there is nothing incremental which has happened on the corporate during the quarter in terms of restructuring at all. But on a Q o Q basis, even if we see this? So those NPAs got implemented and those cases got upgraded. So when we explained the BB Portfolio increased also.
Okay. We said that some of these NPAs because they had slipped because the revision was not implemented by March 31, that got implemented by June 30th and they have got upgraded, show up in this table as well and also in our double D portfolio. Okay. Okay, okay. Great.
The other question, Rakesh, is in this retail slippages, if I back out the Jewel Loan and the KCC portfolio. We still have about RMB46 1,000,000,000 there. So could you give some broad sense of How that is split, let's say, between mortgages and auto? So We don't give product wise kind of breakups. I don't want to get into that.
But Like I said, I think the trends across for mortgages is similar to what we saw last year, commercial vehicles. Basically, vehicles It's higher than last year, in specific, the commercial vehicle part of it. Personal loans and credit cards is better than last year As per the trend that we have seen in the June quarter on the retail additions other than rural park. Okay. And if we just look at the vintage of the retail slippages, not the segments, Would it have come more from the book, which is, let's say, underwritten in the last couple of years or anything like that?
No, but Abhishek, the loan tenure itself are shorter loan tenure, it's a mortgage which are longer loan tenure. Just to add to Rakesh's point, on the mortgage side, last year also it is similar to last year and it's a very large book for us. And if you look at if you remember the Morat on the mortgage book last year Of the largest mortgage lender, it was substantially higher. The reason is because they are low cost and they are large AMI and there is no prepayment. So it is a very good case.
If somebody wants emergency fund, I would much rather shift that payment a little bit Then others, let's say, PL and credit card and others in which are more expensive. I think logically, if a client is behaving logically, which normally they do, So that would be the general behavior of our bank. Okay. Okay. So I was just trying to get at whether we have seen a bit of growth the last one, one and a half years and maybe it's the seasoning in that portfolio which is driving slippage.
Is that the case or it's just purely because of the No, no, I don't think it is really an issue actually. We have seen those calls. I don't think it is an issue. It is just the circumstances of the second wave and the anxiety and all of Okay. Okay.
Okay. Perfect. Commercial vehicles, you know when the input costs are high and you cannot pass it on. So there is obviously a mismatch in the cash flows. But then our book, we have not grown the book and it's not a very large book for us.
Right, right. Sure. Thanks, Rakesh and Anup. Thank you.
Thank you. The next question is from the line of Mahesh MB from Kotak Securities. Please go ahead.
Hi, good evening. Just one question for me to Anup, just trying to understand, just kind of taking the question from the previous one forward. If the customer does In the recoveries that you've done this quarter, especially, let's say, in mortgages, have you had to see A fairly large credit cost or do you think that the LTV was good enough that you had to make very limited provisions out there from write off perspective?
No, no. In general, Mahesh, even in 2008, we didn't do anything on the mortgage side. One is our LTVs are well controlled, Number 1. And number 2, many of them, most of them in fact, they are Either customers are staying there, so it's an SORP, they self occupied residential property or that is their source of income and They would not want it to get mortgage and sold and all of it. So essentially, that is the situation actually on the mortgage side.
Okay. So there is no mortgage. Actually, we don't have to sell. You mean mortgages, The fact is that even in 2008, why I'm saying 2008 is because it was a bigger cycle that we didn't have to sell that much actually to recover. And even when we are sold, I mean, again, it is all passed because we'll have to see if we have to sell what happens.
There is no great loss or anything like that. Credit costs are very, very low. Plus our provision coverage ratio is very good. So actually I would say that for a mortgage kind of business this kind of provision coverage ratio certainly will do better With high probability and high confidence, of course, there
is no. Thank you.
Second question, just that given the fact that you've been a little bit more, Let's say, he's just kind of giving a little bit more of a healthy hand to borrowers today. If the customer does remain in the NPL book, but is starting to repay the loans And given the fact that you may not be able to pay all the installments to term standard, your first option is to continue with the borrowers or you would want to kind of take some actions on this?
No, I mean what action to take I'm not clear actually on the question.
It is essentially a recovery activity through an auction of the underlying property or Vehicle or any form of
Okay, okay. I got it. I got it. See, our basically The stance we have is not to take the collateral and sell and recover. Okay, that is not the first choice we have.
Our first choice always is that Customers should keep the collateral and they should pay us back. So that is our first stance. And generally, we have seen that that is how it generally happens. So There are cases so we assess whether it is a complete loss of income or it's a temporary loss of income. If it's a complete loss of income and customer says That you know there is no way in which I can pay you and here is the collateral you may be willing to give them, then we will take that action.
But that's not the preferred route for us. And we have seen that in most cases, in fact, in majority of the majority of the cases, it is circumstantial And not intent or anything like that. It's a circumstantial and it goes ebb and flow. It happens and people do payback. And we don't have to seize the collateral and do.
Any case economically also, seizing the collateral and selling is a more involved process. If it is a vehicle, then it depreciates. If it is a real estate now, sale is slow, commercial real estate sale will be slow, Etcetera. So that's not our preferred mode of recovery. Our preferred mode is that customer should pay back.
Perfect. Thanks a lot, Gus.
Thank you. The next question is from the line of Manish Ostwal from Nirmalpang. Please go ahead.
Thank you for the opportunity. I have only one question. In your initial remarks, you said that In quarter 2, this decrease will be lower and meaningful reduction will happen 2H FY 'twenty two. So in this quarter, we have Some writeback also in COVID related writeback, and there is some INR 1100 crores of additional provision because of change of policy. So My question is how do you read the writeback in the context of the dynamic situation of pandemic and our assessment of the overall trade And the paid cost for the full year.
Yes. So, right, the COVID related provision that we are holding, We would reassess it on a quarter on quarter basis depending more on how the pandemic, in the state of the pandemic. For example, in December quarter itself, we had utilized about INR 18,000,000,000 from this COVID provision. And till February, we were actually definitely thinking of or planning to utilized more in the March quarter. But that changed post the second wave coming in towards the end of March, and we actually made a further INR10 1,000,000,000 of provision.
This quarter, we have reassessed and based on the portfolio, which is there based on The NPA slippage that we have seen from the portfolio, the provisions that we hold there plus the expectations for the rest of the year, we believe That the provision that we are holding currently of INR64 1,000,000,000 or so is more than adequate. So that is an assessment that we will have to kind of do on an ongoing basis. But since we are right there, so can we read the current quarterly trend of the provisioning will sustain in the coming quarters? How did how one should read it that? Yes.
So indeed in this quarter, we had An additional provision, like you said, of INR 11,000,000,000 also coming in because of the change in the policy that we have for NPAs. That is not something which one would be doing on an ongoing or a recurring basis. So aside from that, Hopefully, into the second half of the year, one should see provisions coming off, but very difficult to say. Our approach is that At all points of time, maintain a balance sheet which is strong in terms of coverage ratio, net NPL levels. So that is something that we will continue to factor in.
But directionally, given what we are seeing on the NPL additions, It should mean that the provisions, the gross provision should also come off.
Fair enough. Thank you so much. Thank you.
Thanks.
Thank you. The next question is from the line of Adesh Parath Rampuriya from CLSA. Please go
The question is on margin. The performance is
Your voice is not clearly audible. If you can take phone off speaker, please.
Okay. I hope this is better. So my question was on margins. It's been exceptionally strong. So just wanted to understand, exceptional growth is low, Corporate pricing is weak and we've had a very strong improvement in margins maybe because of loan mix and
liability. Are we
at peak margins or we expect the bank can sustain these levels of margins? So on the margins, I think like we have been saying, our approach is to kind of see What best we can do? I think the most important part of the margin is the deposit franchise and the cost of funds, cost of deposits that we have. We have seen that decline in the June quarter as well, the cost of deposit about 15 basis points. I think The cost is now coming down to a bottom because incrementally, the deposit rates have not come down for a while.
So it will bottom out soon. On the yields, it has been very competitive, I think, across Retail and Corporate, the business teams have been very conscious about the trade off which is there between growth margin profitability, of course, there is part of it as well. And especially on the corporate side, we have looked at the growth in a manner which is supportive of margins and operating profit. So That is something that we will continue to do. This quarter, I guess some of the liquidity did come off for us.
That would have helped a bit. We also got some bit of higher yield on the surplus liquidity. I mentioned earlier in response to Marisk query that we had put some of our liquidity through FX swaps where the yield was a bit higher. But those are not very significant numbers in the overall context. I think the risk to margin will continue to be from competitive pricing.
And secondly, I think balance sheet now we have a fair bit of market benchmark linked loans in the portfolio. And if we see any change in our funding cost or deposit rates without commensurate change in repo rate RBI, that could be a risk factor as well.
Got it, Rakesh. And the second question is how do you
So do you see the risk on the SME side because that's still has got a lot of dispensations Around 3 or 3 restructuring, still some of these LGS money is flowing in. So I can't hear you clearly actually. We heard the word SME, but nothing around that actually. Sorry, I'll just repeat, Parence, operator, The SME portfolio has got a lot of dispensation in the last few quarters and continues now. So what's the risk from that portfolio in the second half when retail normalized this?
How are you evaluating Any context to how their portfolio is performing there? Yes. So if you look at the business banking and the SME portfolio, So we have described how that portfolio has been constructed. The business banking portfolio, the ticket size It's pretty low. It is pretty well collateralized.
Last year through the moratorium and after that also the trends were quite stable, continue to be the same. The overview levels on that portfolio is pretty much the same as we have had in the past. So quite comfortable on that. SME is slightly larger ticket size than the business banking portfolio. So of course, with a slightly larger ticket size, the collateral levels are not the 100% that you have in business banking.
So to some extent SME does have a bit of higher risk than Business Banking. But again, in terms of the numbers that we are seeing till now, There is nothing that we are finding which would be of a big worry. There have been some increase in the overview book in the June quarter compared to where we were in the March quarter, but that was to be expected. And a lot of that is in the early bucket, and we would expect that to resolve also. So we could see we would be quite comfortable on this book as we are seeing it currently.
Perfect. Thanks a lot, Akesh. Thank you.
Thank you. We take the last question from the line of Jay Mundra from B&K Securities. Please go ahead.
Yes, Ayesha, thanks for the opportunity. One is question on merchant acquisition business, which we have given reasonably good detail and looks like this is a clear focus area. If you can highlight what is the existing merchant base, How much is the addition on a monthly basis? And do you think that you are the late entrant here? And if you could also talk about the digital store management, I mean, it looks very interesting.
Are you managing this thing or this is with tie up with some other FinTech? So, yes, so first question on this merchant acquisition business. Yes. So I will just expand your question a little bit. So there are 3 kinds of Large flows that are happening.
There is a large corporate ecosystem where the flow happens, bigger builders, their own working capital that flow happens. 2nd one is the flow that happens on our BNG, SMEG and our trade customers who may have taken credit, may not have taken credit, But both of them are essentially B2B type. Now you have this merchant, which is a B2C. When I'm saying C, which is a Last leg is essentially with consumers and there is a payment leg involved. So you will see that most of the solution on the merchant side essentially happens on the payment side.
So with the payment, so first the flows happens to you. So that is one movement that happens. So there is a large consumption basket, which moves from savings account to current account or Okay, which moves on savings account to current account or reduction in ODI, etcetera, essentially to the business side every month. And that is where the flow is. Now this flow, A, we have a decent market share there.
So it is Not right to assume that we have low market share. We have decent market share, but the other players were stronger than us for sure in this space. One big opportunity that is now coming is that there is a divergence because there is a the number of payment modes have increased, number 1. And number 2, if you look at the consumer behavior that we are seeing, we are seeing that plan to pay, pay to contact, UPA payment, etcetera, those are also So P2M transactions are exploding and Sandeep talked about it in the opening remarks, how our P2M is moving and sequentially it is jumping. The other thing that we can do, the new merchant stack that we have come out with and the super current account, we are giving instant settlement.
Instant settlement is something which is of great value to the customer. And the reason why we are able to give instant settlement also is because the whole ecosystem belongs to us both on the Both on the savings side as well as on the current account and the merchant side. So that is one way of capturing this because there are new modes of payment which is That opens up newer ways of capturing that opportunity. The second one of course is that through aggregators, one captures those opportunity and you tie up with aggregators And there you partner with aggregators and then you capture this. The third, of course, is the traditional FOS method.
We think that You know from a POS perspective, they will be with very large retailers. As you grow smaller and smaller and smaller, Things will move towards Can and Pay and other more contactless methods. And that is where one big opportunity is there. From our perspective, that is the way we will be sort of thinking through this thing and making sure that the smaller merchants We have a very, very strong population why they should deal with ICICI Bank. We will partner.
We will create our own solutions and we'll make them more efficient and effective. And we will have more digital footprint. We'll be able to lend them. So essentially, everything we'll be able to do as against Some other players who might just be helping them with payment or some other players who will be helping them just with lending. And at this point of time, bank will be slightly better placed on lending if one has digital footprint and underwriting Amitaj, because we have more data about our own clients.
At this point of time, it is moving at a plastic. I think it's a very interesting area And an evolving area and not fully solved for. So that is the problem that we are trying to solve for and we think that there is a good play there. Right. So any vision?
I mean, how what is the base merchant base as of now and how big could it be? So, Merchant Day, just to give you some sense, there is no sort of direct data available, but we would think that they will be Close to 2 crore merchants of all chips and sizes, small, big, very large, etcetera, etcetera, of which maybe 80 lakhs to a crore Could be reasonably sized merchant. That is but there is no estimate available.
We are sampling and I am
just giving you data, I may be Of 2 percentages here and there, but there is no real data available. But I think that would be the size. Our also estimate again take it with a pinch of salt because there is no such data available. The movement monthly movement from savings account on the consumption per month ranges between 2 lakh crores per month to around 2.5 lakh crores per month. So that is the kind of movement that happens from savings account to So merchant account every month across all payment modes.
So this is across all payment modes. We might not have captured some, But that is our best estimate. We don't know. This estimate could be higher, certainly not lower, but it will be slightly delta higher. So that is the kind of money movement that is happening.
But as you know, only in payment, there is not that much of value As in profit pool available only in payment. So one has to put the payment because without payment you don't get the data and then using underwriting cross sell other products to make Try and generate profit pool out of that. And banks have a we are in a unique position because we are float and with that float You make some money. Many other players in the market may not be able to make money through the float alone because they don't run a liability type franchise. So that is the magnitude.
So I thought I'll just give you some sense, maybe 2 crore total, total, total of the 1 crore could be 80 lakhs to 1 crore could be some estimate. Don't hold me to estimate because these are not sort of these are our estimate from our own sampling. We'll give you some sense and certainly 2 lakhs Road plus movement on consumption from savings account to merchant accounts per month across all payment modes. Yes, I've been trying to help to size the market for that. Sure, sir.
That's very helpful. Second question that is on floating rate book. So I think Rakesh mentioned that Now the floating record rate, cash T bill link loan is around 54%, and that is a huge number. Limited understanding suggests that, as I think Rakesh also mentioned that in a I mean this should be linked accretive in a hardening cycle provided RBI also increases the rep rate. But any thoughts as to what could be the unwanted consequences because I suspect that the liability may not be this dynamic at this point of time.
Yes. So the risk here is essentially that our deposit rates or deposit costs go up Prior to RBI increasing the repo rate. So there will be the lead and lag problem will be there. And so over the cycle, hopefully, it should average out. But it is possible that it's not something which happens It should happen anytime soon.
But when the tightening happens, the market rates could go up before the repo rate at points of time that happens, especially on the wholesale deposit side. That is the risk of mismatch because liability side, like you rightly said, that is all fixed rate deposits or casa deposits. There is no Floating rate liabilities which are there. So we'll have to manage that I think when that plays out. But as I said, over the period, it should average out, but there could be a lag Right, sir.
And last thing on Business Banking SME, you have bifurcated I mean, you have Cut out in business banking from retail. As of now, this proportion is around 5% of the book. Not a guidance, but I mean A 2, 3 years vision is to how big can this be? I mean, business 19 SME, if you have a number there, there is a portion of total lines Yes. So in terms of proportion, we don't have any target there.
But in terms of the business opportunity for both The Business Banking SME segment, we believe there is a huge opportunity. Our own market share in this segment in the past has been somewhat lower than The share that we have in other businesses plus all the initiatives that we have been taking and Anoop talked about many of them On the digital and technology side, I think that is really enabling us to grow not just on the lending business, but also The current account and FX and transaction banking, so it's a portfolio on which we believe there is a lot of opportunity. We don't have any specific growth or Portfolio composition that we want to reiterate. Right, sir. And the last data keeping question, sir, if you can bifurcate The restructuring, so you have given the outstanding restructuring.
Is this the I mean, what is the what was restructuring done in 1.02.0? And is there any residual pipeline for 2.0? Thank you, Mr. This 1.0, 2.0 is all so this is that's why what we have given on Slide 32 is just aggregate restructuring whether 1.02.0, a project under implementation, extension of DCCO, MSME scheme. There are so many schemes, so we thought it was better to give an aggregate number of standard loans which are restructured and outstanding as of the date.
Going forward, I think like we mentioned that we will see some restructuring happening In the 2.0 on the retail side, for example, it could be for some of the existing NPAs or for new loans. So in the September quarter, We will see some increase on account of that. Sure, sir. Thank you and all the best.
Thank you. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, everyone. It got a bit late today on Saturday. Sorry for that. And for any follow on questions, you could reach out to us. Thank you.
Thank you. All the best. Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Bank, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.