Ladies and gentlemen, good day and welcome to Q2 H1 FY 2025 earnings conference call hosted by Karnataka Bank. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srikrishnan H, MD and CEO from Karnataka Bank. Thank you and over to you, sir.
Thank you, Adell. Good evening everyone. Warm welcome to our Q2 FY 2025 earnings call on behalf of Karnataka Bank. I am Srikrishnan, MD, CEO. I have with me here, Sekhar Rao, who is Executive Director, Abhishek Bagchi who is our CFO, Vinay Bhat who is our Chief Compliance Officer and Raghuram who is our Chief Risk Officer. In addition to that, we have a couple of other executives who are from the investor relationship team. Greetings for the festive season and wish you all and your families a very happy Diwali in advance. The bank has ensured that we are fully prepared to capitalize on the opportunities that are coming up due to the festive season, during the second half of this year. As I mentioned during the previous earnings call, the bank has been undergoing major restructuring and transformation process. During the quarter, a couple of updates.
We have brought in a new leadership for Head of Retail, MSME, SME, Agri Assets, that is Sreenivas and Head of Liabilities plus Third Party Sales to focus on the business growth, that is Venkat M. Both of them come with very rich experience and banking as well as sales experience. Besides this, we also brought in a new Head of Retail Collections, Ramasubramanian, to ensure that maintenance of our portfolio health on the retail side. With this addition, I wish to also confirm that all the senior restructuring and the leadership is now in place. We have the Karnataka Bank veteran leaders who are also participating very actively and wholeheartedly in our transformation journey. The major transformation processes that are underway are credit transformation, a national back office, where we have made substantial progress by centralizing clearing and we will also centralize treasury operations in a couple of weeks.
We have created the sales and the product organization, both for retail assets, mid-corporate and corporate business, and also the retail deposits and CASA accretion. We do have them attached to various locations. We are, as you are aware, 22 states and two union territories, and most of the regions are covered. All these organizations are rapidly progressing and we really hope to see some benefits in the same during the upcoming quarters. To support this growth, we also have enhanced our tech infra and operational capability. All the enhancements are in place and we have done some major enhancement both in terms of our storage, processing and also a lot of other functional features in our overall tech stack. We have seen some improvement and a significant improvement in the book quality, which will improve even further as we go into the future quarters.
During this Q2, we have taken a conscious decision to focus on portfolio quality over growth. During Q2 2025, we will continue to maintain that focus on critical parameters. Basically, we define our bank's performance on growth in advances, deposits, improvement in quality of advances book, profitability and NIM and favorable ROE and ROA. These are the critical metrics that we will be working towards. In the past few quarters, we have been focusing on growth, but we took a pause during this quarter to focus on quality as well as profitable growth.
We believe that the numbers are speaking for itself based on this strategy, which is a short term, but we will accelerate the rest of the other defined parameters and metrics as we go forward because all the engines, which is related to the retail business, the corporate business and so on, have all started kicking in. I will be talking about it as part of the commentary. Overall aggregate business, the business turnover of the bank stood at INR 175,284 crores, up 12% on a year-on-year basis against INR 156,468 crores in September of 2023, the corresponding quarter last year. On the profit after tax for Q2 FY 2025, the current quarter, it was INR 336.07 crores as against INR 330.26 crores in the corresponding quarter previous year.
The PAT for the half year stood at INR 736.4 crores versus INR 700.96 crores as part of the H1 of the last year, an increase of about 5%. The same was INR 400.33 crores, that had the previous quarter, that had a one-time interest refund, IT refund of INR 81 crores. So which effectively means that from INR 320 odd crores, we have moved towards [INR 336 crores] this quarter on a quarter-on-quarter basis.
Due to the accounting policy changes, I think we called it out the last time also, on investments and available for sale, the AFS portfolio, we have classified effective April 1, there is a credit lying in our AFS reserve and the opening revenue reserve, to the extent of about INR 106 crores and also about INR 24 crores respectively. Had the bank continued the earlier accounting policy, the income on investment and the other income, which would have been higher, the profit before tax would have been higher by about approximately INR 71 crores. But that is something that is possible to really recognize only if there is a sale in the securities that we are holding in AFS book. This is something which is common across all the banks due to the revised RBI regulations.
But this, on a comparative basis, previous year and corresponding quarter, there is a difference and which is why I am also stating this number. As far as the gross advances book, the total of the advances remained at INR 75,306 crores as of September 2024, and this reflects a year-on-year growth of about 12.5%. The industry growth for the same corresponding year-on-year was about 13%, so we are very much in the same trajectory as far as the industry is concerned on the gross advances. Our overall strategy was to grow retail, agri and mid-market, RAM, and where the growth has been led by retail, housing and gold loan for us, with a net book accretion of about INR 3,691 crores on a year-on-year basis in this segment.
The bank has also committed earlier that we will reduce our exposure to large mid corporates that were opportunistic to deploy for short-term better yields than our treasury deployment. The bank also took a conscious decision in this quarter not to go for the low-yield bulk PSU advances, which would have locked us up for a couple of years at very low rate. And because of the interest rate and outlook which has been there in the next few quarters, we didn't want to get committed, which is also one of the reasons that the advances book has not grown. But in terms of quality and the churn, this is something that we have ensured during this quarter also. With our new heads of businesses for retail and corporate that I had mentioned earlier and their respective regional structures are also in place now.
The focus on acquisitions from these segments will increase going forward. On a year-on-year basis, retail advances have grown by 12.2%, and this is something which is very good from our perspective because the yield is also something going forward will be beneficial for us. So let me move to the aggregate deposits. The deposit number stands at INR 99,967.99 crores, reflecting a year-on-year growth of 11.66% over September 2023. And the industry growth, again here among scheduled commercial banks, is about 12%. So we are very much in line with industry growth. Our CASA deposits stood at about 30.82%, up 28 basis from the 30.54% in June 2024, but lower than the last year. And I don't have to really elaborate much on the industry phenomenon, which is happening on CASA or liability.
The CASA, as the overall deposit of scheduled commercial bank, has declined about 43.66% in March 2022, to 39% in March 2024. So even during the Q4 of the last year, as per published numbers, the CASA dipped by about 271 basis points, that's 2.71%, and this trend has also continued in September. Liquidity reasons and other banks offering high lucrative rates for one-year short-term, the deposits that were reflecting a lower number as, again, confirmed by the Reserve Bank of India statistics and various news that has been coming out on this subject. There is a flight that is moving away from CASA and term deposits and into other instruments outside of banking system as well.
We believe that our bank is well-positioned for Q3 because of the agricultural harvest season and the expectation of RBI easing up on rates, and we expect that the CASA will continue as far as our growth is concerned. During the quarter, we shifted the growth to the CASA book and retail deposits to replace lower-yielding bulk deposits. As a policy, we did not bid for much of this higher bulk deposits at very low rates and the market was not really rational at some point of time we felt, because it just did not suit our book. Which is why probably you are not seeing a growth in the book, but in terms of quality, we have improved because there is a substantial reduction in the overall bulk deposit as a percentage.
I wish to confirm to you that 92% of our liability book comprises of retail liabilities and only about 8% is in the form of bulk deposits, and these are also at our card rates or favorable rates. We have not been really chasing deposits based on very high rates as far as the market is concerned. Going forward, we have a set of new products that are being launched in this quarter and the next quarter. I will be calling out because most of these are focused on liabilities and increase in deposits and also in retail loans.
A couple of examples, we are launching KBL Genius, which is a student savings account, KBL PEAK, which is an education loan, a premium savings account, a merchant payment app which will be QR code-based, and also enhancing our Mobile Plus and Mobile ONE applications for pre-approved personal loans and also launching for specific medical equipment loans and a wealth management advisory platform, which will be integrated with our app in terms of the access and functional features. In the last quarter of this year, we will be launching a supply chain financing program, exclusive women's savings account, flexi recurring deposit RD scheme, and also a family banking program, whereby all of the family members will be part of one group account, and we will be offering basically benefits across the family members as one unit.
Last but not the least, we are also working towards developing an MSME super app, which will basically capture the life cycle of our MSME customers, right from the Udyam registration and renewals and GST and their entire working capital cycle, as well as the payment of taxes and so on. Basically, what we are trying to do is to provide digital access to this community, which is huge for our bank and will definitely act as a center of growth for the bank in terms of the overall assets and also the promoters business from their personal relationships. The NII for H1 FY 2025 was INR 1,736.92 crores. It was up 6.1% on a year-on-year in comparison. The NIM, we have clocked at 3.38% for the half year.
There has been a dip in Q2, but overall we still have done better, and we are still within the guidance for 3.4%-3.6%, and we are about 3.38%. There is a minor reduction, but we will definitely make it up as we increase our retail advances acquisition and also direct to customer acquisition on the corporate book. The loan yield, with the slippages being under control, NPA is coming under control. The bank is definitely increasing the focus on loan yields and improve the overall profitability. Bulk opportunistic advances will be replaced by direct to corporate advances and retail advances. We will still show a growth in the book, but also a churn in the book, which will be more swinging towards the higher-yielding advances.
This is something which we believe that the necessary infrastructure, the people, the technology products, and benchmarking in terms of turnaround times have all been done, and we are ready to go on this. Likewise, a combination of these various products between Q2 and Q3 into high-yielding segments such as mortgage, vehicle loans, and education loans, et cetera. We definitely expect that the overall yield will improve progressively over the next quarters. Our CD ratio is still at 75.34%, continuously improving every quarter, but we still have a headroom there, and we believe that our ambition to grow the overall advances book with our capital and our CD ratio and our deposit acquisition engine, which will definitely show much better results as we go forward. We believe that we still have a lot of headroom here.
On the strength asset, this is one area where we will be very proud on this quarter because the gross NPA has significantly improved from 3.54%- 3.21%, and this is something that we had committed in the last few quarters to say that we will come closer to 3%, and I think we are well on track as far as this is concerned. Just for reference, the same was 3.47% in September of 2023. So this again reflect that over the last one year we have been moving very well. On the net NPA similarly, there is a significant improvement to 1.46%, down 20 basis from 1.66% as of the last quarter and about 1.36% as of last year, September 2023. So this again reflects and well on target for our commitment that we will move this closer to the 1% range in the following quarter.
I believe that with our significant recovery and reduction, not much of additions into our overall NPA book, we believe that we are on the right track. This has been achieved because the gross slippages has come down drastically, and we are at 0.33% in Q2 as against 0.59% in Q1 and as against 0.52% in Q2 of last year. For the six months ended September 2024, the half year H1, the slippage ratio stands at 0.94% as against 1.03% in six months. Here again, this has been fully through recoveries for the quarter. Excluding the upgraded accounts, we have had a recovery of about INR 148.01 crores versus INR 133 crores in Q1 and as against INR 117.82 crores in Q2. There is also some more good news on the standard restructured advances.
Without related accounts, the restructured book has come down to INR 1,051 crore compared to INR 1,160 crore as of June 30th and as against INR 1,338 crore as of 31st March, 2024. The significant metric that we actually measure is a combination, and this is published in our investor PPT also, where we normally combine the gross NPA plus restructured book as a percentage of our gross advances. I am actually happy to report that as of September 2024, our percentage has come down to 4.89% as against 5.39% in the previous quarter and as against 6.78% in the previous year, the same quarter.
As a result of this, our PCR, which is including technical write-offs, has crossed 80% and as against 78% in June, and it was a little higher last year, but of course, post that, we have had a lot of events that happened, including the expiry of the COVID moratorium period, et cetera. The entire restructured book has now completed its term as far as the COVID one and COVID two regulation are concerned. Our LCR, as all of you are aware, Reserve Bank of India, based on a study that they had done across all banks, and because of certain, I would say, inconsistencies that they had observed among many banks, they have come out with a revised draft guideline, which actually is to be implemented only from April of next year.
But as a conservative mechanism, we at Karnataka Bank have tested the LCR based on the revised guidelines. Even after the revised guidelines, as of September 30th, we stand at 143.93% on the LCR, which is very comfortable and as against the statutory target of 100%. As far as the cost of funds is concerned, despite the market volatility, we have remained stable at 5.58%, and it was the same number almost for the Q1. The cost of funds for the entire half-year was about 5.42%, and comparing to the half-year last year, it was 5.36%. Overall, because of our strategy not to chase high-cost deposits, we have been extremely guarded on that, and we believe that it remains stable. There is one other good part which we need to report, which is credit cost.
Our credit cost for the Q2 was at 0.09%, which is actually the lowest that we have had so far compared to 0.11% in the previous quarter and as against 0.17% in the quarter two of last year. The total credit cost for the half-year stood at 0.2%, that is like 0.11% plus the 0.09% that I talked about. This continued reduction was a result of significant lower slippages, and we believe that the same trend will continue as we go forward. One of the areas of concern for us is the cost to income. We have incurred extra as far as elevated one-time costs in technology, some lateral recruitment, and also increased provision for superannuation benefits because of the fact that the rates have moved and the rates have decreased as far as the superannuation benefits of our staff, the actuarial calculations.
Based on all this, there is an increase, but we believe that we will be able to control this through rationalization of costs, through also increase in income and making sure that we are back to the mid-50s and then, of course, reducing it to closer to 50 in the following quarters. Our commitment earlier also was that we will commit to bring it down to about closer to 50% by the end of this year. I think we might take a little one or two more quarters more, but all the cost rationalization exercises initiated across the bank to negotiate with all the vendors and rentals and IT, non-IT expenses, and also not consciously going in for some expenses going forward. We believe that we are on the right track as far as our overall earnings are concerned.
Because of this, the ROA has come to about 1.13% for Q2 and as against 1.19%. Our guidance is in 1.2%. I think that we will get back to the 1.2%- 1.25% in the following quarters, and we have reasons to support this. The ROE has dipped to 11.63% compared to the earlier quarters. This again, is because of-
Additional.
Additional equity that we have raised, which all of you are aware. Our CRAR without the half-yearly profit being folded into the reserves, stands at 17.48%. If we add that, it would be more than 18.5%. So we are very comfortable both on Tier one and Tier two. In comparison to the last quarter, we were at 17.64%, which is not much of a change at all. As of last year, of course, it was much lower. Because of the capital raise that we did, completed between September 2023 to March of 2024, we have been quite all right on this front. On this note, I would like to end our commentary from our side, and I would request Adell to go ahead and for all the calls.
I would like to also make sure that we will try to answer all the questions, and in case that there are some questions that we might need some time, we will either respond by mail, and I have my investor relation team, comprising of Soham and the EY team to get back to you. So over to you, Adell, for the Q&A.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Agastya Dave from CAO Capital. Please go ahead.
Hello, am I audible?
Yes, Mr. Dave. Good evening.
Good evening, sir. Thank you very much for the opportunity, sir, and I must congratulate you for your work on the NPA side. It seems pretty promising. Sir, I have two questions, both of them related to the third slide that you have added in your presentation today. You have mentioned certain corrections in the low yield bulk deposits, PSU advances, and also on the high cost deposit sides. So the first question is, can you quantify what was the impact of this entire exercise? Is it over completely or will we see impact in the coming quarter as well? The second question, again, related to the same statement in the same slide. You have mentioned that we are going through a transitory period, which I understand, sir.
Can you put a particular timeline on when do we see incremental improvements happening in the NIMs on the growth side and when do you see the retail engine starting fully for you? These are my questions, sir. Thank you.
Sure. Thank you, Mr. Dave. Both are relevant questions. One, is that in the last three to four quarters, we've been growing the book on account of the opportunities that we had because we did have very low CD ratios in the past, and we had excess liquidity that we were deploying into treasury. As a first step, as a strategy, and this is very tactical, we had moved to clearly line of credits and also some kind of a short-term credit, loans to PSUs and a couple of other large corporates, which were yielding and more or less on EBLR range, EBLR plus something. This was not long-term also. This was short-term deployed because our earnings, we had to take care. That is the process that is getting replaced by, one, retail growth.
The last quarter and this quarter, the last quarter, our retail net accretion was about INR 1,250 crores. This quarter also, we have clocked more than INR 1,300 crores. Now with our DSA structure in place, corporate DSA structure in place, we would be in a better way where we will be able to increase this run rate. In the following two quarters, we believe that we will be much higher than the current run rate. That is one. The second part is that we have recruited in the last quarter itself, a new Head of Corporate and Wholesale Banking business, where we were not really pitching for relationship-based banking for corporates. This is something where we have now got a zonal structure where we are covering all the four regions.
Through this national leadership, we are able to pitch not just for loans, but also some products which are essentially some liability-based products like payroll processing or something related to non-funded business or Forex and trade finance business. This cross-sell penetration plus the lending side would have much better yield as far as the bank is concerned because not only the rates are favorable, but also the fact that we get other business to increase our other income. This is a process whereby we do have a pipeline which is healthy and as much as we grow the retail, a similar number would come from the midsize corporate and the large corporate business, which is direct to corporate business.
What we are doing is basically the large corporate business, which was at the EBLR plus very minimal higher premium that we used to add for this large PSU advances, et cetera. We are replacing, and this will be a gradual process which will take at least the next three to four quarters, but it will start reflecting from Q3 onwards. That is one. The second question is that the NIM, would it have an impact?
Yes, it will have an impact because if for a moment I say that between the retail book and our mid-corporate and large corporate book, direct to corporate lending, if you are able to grow the business by about INR 4,000 crore- INR 5,000 crore every quarter, then that amount would actually fetch on a book size of INR 75,000 crore and you can do the math there, where there will be a yield kicker of at least about 70 basis points- 90 basis points. If that happens, then our overall NIM will have a positive impact, and this is the strategy that we had articulated in the last quarter and the previous quarter, but it has taken time for us, and we will ensure that we are executing this without any loss in focus.
We believe that in the next about three to four quarters, this will start yielding better results for us with our focus on RAM. Our NII will go. But again, I don't have to tell you that this is all a journey, and the journey is something that we have now started. In the last about a year and a half, we have now got all the senior management, the new and the old, everyone into one unit, and we got them in place. We now have the operations and technology capacity. We now have the processes on turnaround times, as well as credit process evaluations, et cetera, done on a very rigid basis with very stricter TAT. Last but not the least, there are very clear products and new technologies that we have been putting into place, including CRMs, et cetera.
All of this will start yielding results both in the retail as well as in the corporate side of the business. I hope I have answered your question, Mr. Dave.
You have answered, sir, very nicely. Thank you very much for your time and patience. Thank you very much. All the best.
Thank you.
Thank you. Next question is from the line of Yash Dantewadia from Dante Equity. Please go ahead.
Hi. Am I audible?
Yes, Mr. Yash go on.
I just have a couple of questions, especially regarding why is the employee cost up INR 30 crore quarter-on-quarter and other expenses INR 20 crore quarter-on-quarter. The employee cost is up quite significantly. Could you explain? Is this a one-off?
Between the last quarter and this quarter, let me explain, I am including in March.
Right.
In March, again, this is a residual effect, but it will taper off as we go forward. In March, as you are aware, the IBA settlement that happened where almost like, I would say, 85% of our staff are covered by IBA scales, and whereby the IBA revised the whole pay scales to about 17%, and we had an arrears, and we had a provision earlier made for 15%, and this was made to 17% in the final settlement. And we had made that also between the December and March quarters. And we had completed the payment in April.
However, in March of this year, which is the year-end, we had to do an actuarial calculation because there were leave encashment, pension, and a couple of other benefits where the changes happened as per the overall process in terms of the structure due to the IBA settlement, also salary increase and also the pension part. As a result of all this, we had to make INR 162 crores provision on our total employee expenses as of March. Thereafter, the superannuation benefits, we need to do a quarter-on-quarter actuarial valuation, and as of June, the actuarial valuation was INR 34 crores, but as of September, it is INR 55 crores. That itself is about INR 21 crores. In addition to that, we have also, as you are aware, done some lateral recruitments, and which is also the other reason.
There is about INR 10 crores or so increase as far as our overall salary wages is concerned. Overall on the establishment, I would say that there is an increase of approximately, give or take, about INR 30 crores, INR 319 has become INR 349. We believe that it will stabilize at this level. If interest rates are favorable as we go forward and not much volatility, the actuarial valuation, any reversals, et cetera, will not happen. That gives you a fair sense of what we are doing as far as our employee costs are concerned.
Also the other expenses, are we putting in new branches?
Yes, we are doing that. It is not as if we are expanding by the dozen. But yes, over the next last quarter, two quarters, we have added about 10- odd branches, including some shifting of branches. Also, we have set up a national back office in Bangalore. We also got centenary building, which is being set up in Bangalore. So the depreciation and the maintenance, et cetera, have gone up. But all this will yield results because we have just shifted our national clearing into Bangalore. We are shifting our treasury back office as a next step and our treasury BCP from Mumbai into Bangalore. So Bangalore will become the national back office for other areas also as we go forward. As of now, also, our centralized account opening.
Basically what we are doing is that we are decluttering our branches and moving a lot of operational processes from branches into the centralized site so that the branches can focus on sales and service.
Also, one more last question. Based on the loan book, would you be able to share the unsecured and secured mix? Are you making a change to your guidance? You, I think, guided for advances growth of close to 18%. Would you revise that and also the unsecured, secured mix?
Unsecured and secured mix has always been 90% fully collateralized book for us, and that continues. There is no change to that. The balance 10% also has been more to large corporates, PSU, et cetera. Technically, you know we do not have any unsecured retail exposure per se other than some co-lending and a couple of other arrangements that we have. There, the total book has not even crossed about INR 200 crore- INR 250 crore. I don't think that anything significant is there as far as our unsecured is concerned.
Agri is gold-backed, most of it, is what you're saying?
Agri is gold and land- backed, both. We do have both.
Okay. 90% of your book is secured, right?
Yeah, 90% includes the agri book, which is also secured because we either have commodity as asset collateral, or whether it is land from the agriculturist, or it is gold. One of the three.
Right. And the advances, please?
On the advances, what was your question?
I am saying you have guided for 18% gross advances growth. Are you going to revise that downward?
I think, we will grow probably about in the next two quarters at about 15% and then grow to the 18%, because this is a transitionary phase where we were growing with some bulk advances in the past, but the bulk has come down drastically, and obviously, we are now doing this mid-size corporate, where the ticket size is about INR 30 crores-INR 40 crores, and then large corporate, which is about INR 200 crores-INR 250 crores, et cetera, but all supported by other products and the retail book. So there will be a 50/50 mix, which we will continue. Overall, what it will mean is that we will be, let's say, if the market is growing at about 12%, 13%, we will definitely be ahead of the market by the year-end, despite this more or less flat position as of this quarter.
But the earlier quarters and the earlier year, we grew at about 18%-19%. So we will definitely be ahead of the market, but may not be 18%, 19%, but anywhere, let's say, between 15%-18%.
15%-18%. I just want to understand one last thing from you. On the gross advances front, you said 90% of the book is secured. Just confirming that, MSME, that includes your entire book, right? Your total book. You are telling me that 90% of the book is secured assets.
Yes. Other than the ones which are NBFC lending, which is about 18% of our overall book. The NBFC book is through corporate guarantees and collaterals from the company's receivables.
What rating are these NBFCs? What is their rating?
All AAA, top-notch, and also a couple of them who are AA.
None of these new fintech sort of companies, right? Just want to confirm that.
No. We do not have that.
Right. Perfect. I'll just come in line. I just want the ROE guidance, but I'll come in line.
Thank you, Yash.
Yeah. Thank you so much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit yourselves to two questions per participant and come back in the queue for follow-up questions. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Yeah. [Non-English content], sir, and thank you for the opportunity. Firstly, sir, on the cost-to-income part, we are at 58% for this quarter. So, taking into account this transition period which you have articulated, where are we going to settle in terms of this H2, and what's our longer-term outlook on the same?
See, fundamentally, Mr. Kapoor, we have made some investments in technology, and these are elevated costs which have been done because of the investment. So basically, we have increased our processing capacity, we have increased our storage capacity and so on to cater to growth. So this is an upfront investment that we have done. That is one. The second is the actuarial cost, as I was mentioning to the previous caller, you might have heard that, is an amount of almost INR 21 crores. So based on this, our overall cost structure has increased right now. And of course, the third part, which I also alluded to earlier, about a couple of senior recruitment that we have done. And I wish to confirm that all investment in technology have been done completely.
Everything related to lateral leadership hiring is completed. Also we believe that we will flatten this curve, and we will not grow from here. Our cost income will come down, moderate itself in the next two quarters. It is not by only the denominator, but also on account of rationalization of costs, which will happen, and also making sure that there are vendor renegotiations on rentals or IT, non-IT, all kinds of costs. All services costs, et cetera. Also we believe that there are a lot of operational efficiencies that we will be bringing in because of this centralization efforts. All this is work in progress, which is where there is a temporary transitionary period where there will be a reversal to the curve, but we will get back to the curve that we want, both on cost and revenues in due course.
Right. So, sir, this bracket of 52%-55% would be there for the H2, or we will hover around 58% as cost- to- income?
For H2, we would come back to about 55% onwards.
Okay. Sir, when we compare our numbers, the September quarter last year with the current, we need to take into account the INR 71 crore [ASF] part. So that should be deducted from the operating profit. That is what you articulated and the slide speaks about?
Yeah. Compared to the last year, the profit for this quarter is INR 71 crore. You are aware that in a mark to market, it is a comparative number with the previous month, where the previous month MTM gets reversed and then the new MTM comes in. Right? It is a function of the rate. As we speak to you for this quarter and for our current book that we have, which is the AFS book, if the old policy which was allowed by RBI prior to April, where we could show this in P&L was allowed, our profit would have been higher by INR 71 crores.
A small point, sir. When you were speaking about this gross advantage growing by now lower teens rather than at 18%, if you could give us some color on how the economic activities are currently shaping up, since our focus is more towards the RAM part. Are we seeing stress or lower demand from the verticals where we are focusing? Also on the mid and the large corporate, what is our thought process of increasing the loan book going ahead? I think now a lot of stress from the corporate part is already out of the system, and every bank is pursuing RAM as their incremental portfolio. What is the thought process on these two understandings, sir?
I will just tell you that we are 100-year-old bank, and we have relationships that transcends across generations. Obviously we have had some relationships in this sector, which is the RAM sector, MSME, or even SME sector. Who have been with us right from the time we started the business and now the second and third generation are banking with us and with an increase in business. There is a lot of loyalty as well as the bank. That is one. The second is that our overall focus, while it is on RAM, it is for the selected markets that we are strong in. Take Karnataka. Karnataka itself, we have over 575 branches out of our 921. Actually, we are in every economic center in 22 states.
Which means that, we have not been able to capture the cash flows and the vendor flows, et cetera, for all these SMEs and MSMEs and corporate, et cetera, which is where we believe that our supply chain program, which we are launching will come in handy. We would definitely use this strength, one on technology and our physical network of branches in order to make sure that we actually do this from an overall value chain perspective rather than doing it on a standalone lending or a deposit relationship. The last part is that our overall growth trajectory, I have mentioned to you that we will be growing our advances book by about 15%-18%, but the good part is that major portion of this would come from retail and from direct to corporate advances where the yield will be higher.
So as far as the overall economy is concerned, I do not think that there are any major shocks. I think the country is recalibrating itself. The RBI guidance is also quite positive. Unsecured and NBFCs, you know the story, and we are not in that space. And we believe that we will not have any shocks as far as that is concerned. So our focus is on retail and direct to corporate and moving away from the large PSU corporate, which were not so yielding, but better than treasury deployment, which was a short-term strategy. Now we are shifting the gears as far as that is concerned, and it takes time for this turn to be completed, but we are actually in the middle of that turn right now.
Thank you for the reply, sir. What do you mean by direct to corporate lending? If you could explain, you have also mentioned the slide that 8%-10% of the overall advances will be replaced by direct to corporate lending and at higher yield. So if you could explain the terminology, sir.
Just as an example, I will tell you, we had surplus liquidity in the last year. We have deployed it in interbank participation certificates, and we have a total of about INR 4,000 crore that was deployed last year. Now, that is like where we have bought some paper. But having said that, today, we will be able to grow the same INR 4,000 crore by directly lending to the underlying corporate who is part of that paper rather than having to do it to another bank.
Okay.
We have stalled that entire INR 4,000 crore book, and we are not going to grow that book anymore. But we will now start the growth with lending directly to our own new relationship, which has a new label, new to bank customers on the corporate side and the mid-corporate side. That is what we were talking when we said that we will be doing direct to corporate relationships.
Right. Thank you and all the best to the team, sir, and my festive greetings should be followed, sir.
Thank you so much. Yes, to you and your family as well. Thank you.
Thank you, sir. Bye, sir.
Thank you. The next question is on the line of Prabal from Ambit Capital. Please go ahead.
Yes. Am I audible?
Yes, Prabal. Good evening.
Good evening, sir, and thank you for the opportunity and also thank you for giving detailed disclosures in the presentation. My first question was, in the GNPL breakup that is there in the presentation, the other component seems to be increasing quarter- after- quarter. What exactly is this other and what explains the rise?
What? Prabal, just a minute, please.
Sure, sir. Meanwhile, should I ask my next question?
Please do that. We will meanwhile pull up the number related to that. Go on.
We have seen a very sharp drop in slippages at somewhere INR 420 crore- INR 240 crore. What has driven this? Any particular segment, or is it more about our efforts?
Very focused effort. We have a recovery team which has been deployed into action, a collection team, and also making sure that there is senior management focus. At my level, we meet with the restructure team. We have got SPOCs at every region, and we have got other people at every cluster. As a result, we get on calls on a fortnightly basis as a cadence. Both the restructured book as well as our overall NPA has come down due to these higher recoveries and also the last part is that monitoring. The credit monitoring mechanism that we have stepped up now due to our credit transformation process. That is something which we believe that is yielding immediate results, which will probably reflect in the number going forward also.
As I said, we focus a lot on quality this quarter because of the market conditions, and we believe that we have really done well there. That is a quick.
The other is primarily one account.
Others were a mix of.
He is answering the other question which you had, the first question, Prabal.
Others is just I'm saying that doesn't fit into any of the standard nomenclature. So it is one or two accounts that have slipped in this particular category. So it is not a consistent kind of reflection of how others is performing. So it's one LRD account and one in the pharma kind of sector, which has contributed to this increase.
Why don't we get you the breakup on this later, Prabal?
Sure, sir. Sir, and the follow-up question to the second part was, how do you see the slippages going ahead? This quarter it was INR 240 crore. How should we think about it going ahead with all these efforts in place?
[inaudible]
There are two parts to our recovery, which you are aware. One is the recovery from technical write-off. The technical write-off recovery this quarter was INR 32 crores. Our target was higher. There are some recoveries which are under progress, which basically got shifted from Q2 to Q3. We believe that the technical write-off amount, which is recovery from two accounts, will be much higher than what we have today. That currently is about INR 32 crores for this quarter. The regular NPA recoveries, we have recovered a total of about INR 148 crores this quarter, as I mentioned to you, and which we believe that will continue the same way.
The reason is that on the restructured, where the slippages are coming down, most of them have actually come back to, I would say, normal standard and the reason being that the moratorium period which was allowed expired, as you are aware, in July and August. As a result, most of the engagement that we have had with our customer sets, the standard accounts conversion is happening, which is reflecting in the overall number because there was INR 100 crore reduction from, more than INR 110 crore reduction of the restructured book from INR 1,160-INR 1,050- odd. That is also the other phenomena which is happening.
0.5.
Slippages target will be about 0.5.
Five.
For the entire year.
Annualized.
0.5%.
Yeah, for the annualized the entire year.
Meaning 2% for the entire year.
0.5% is the annualized for the year.
Okay. Sir, in the balance sheet, my third question was on the balance sheet. Your other assets seems to be quite large. Is that limiting your ability to increase CD ratio? That others could be maybe RIDF deposits that you would have kept with [NABARD]. Is that limiting your ability to increase CD ratio?
We had the RIDF calls, which were all on account of the previous years really because the previous years we had these subsectors, somewhere it was not met. The numbers are reducing. The second part is that we have some old RIDF also maturing this next half-year to the tune of almost about INR 2,000+ crores. We believe that with 74% CD ratio, even now we are at 75%, so we believe that there is a lot of headroom. There is no limiting factor as far as our overall ability to lend and grow the book is concerned.
We had to improve the liquidity as also.
Just to add what Sekhar is prompting is that as of September 30th, we had lent to the market despite this about INR 4,000 crore from treasury, including our non-SLR securities. The reason being that we did not choose to deploy into corporate assets that were low yielding, so we did not want to get committed there. It was a very conscious call that the bank took.
Got it. This RIDF of INR 2,000 crore when they mature in, say by March of 2025, would that be accretive to your margins because your loan yields will be better than your [RIDFs].
As opposed to 4% we can be deploying it. There will be a yield opportunity there also because what we earn on RIDF is much lower as you are aware.
Got it. Understood, sir. Thank you so much. All the best.
Thank you so much.
Thank you. Our next question is from the line of Sushil Choksey from Indus Equity Advisors. Please go ahead.
Good evening. Congratulations to Karnataka Bank on a stable result.
Thank you.
I may be sounding a little critical, but can you explain that growth has not happened between Q1 and Q2 in advances, maybe because we have withdrawn our facilities to PSU and low-yielding corporate advances. At the same time, you have deployed in IBPC, Interbank and various things, so those rates are reasonable. Why is the NII drop by INR 70 crores, first is that, and secondly, how much of CD we have raised in this quarter, what we have on our books right now?
Sushil, just to kind of clarify there, the IBPC exposure the bank had taken not in the previous quarter or it was much ahead, like even as much as last year. Because last year we had surplus liquidity in the bank, which we could not find assets and which was deployed. From then on, as you are aware, IBPCs are normally for six months tenure, so we have been renewing that. We are not increasing the overall IBPC exposure, which we took up to INR 4,000, and then we are staying at the same level. That is one. The second part is that the churn that I talked about is that this quarter we have not grown, but then there is obviously, you are aware that in the retail book of 36 months tenure, there is one-third which gets repaid every year.
As a result, on a month-on-month basis, there are repayments. The second is that for gold loan, the tenure is one year, which means that it gets repaid over 12 months in terms of EMIs or whatever ways. Despite that, the net accretion of our retail book has been about INR 1,300 crores for this quarter. So we have chosen not to do this because we deployed our excess liquidity into the market through treasury rather than having to get into a corporate asset, which is PSU, et cetera, which was all at interest rates of ranging between 6.9% and 6.95%, et cetera. And where we could have watched up in a market where it is widely expected that the rates will come down. Despite the reset option that we have, there would always be a lag, which is why we took a conscious call. That is one.
The second part is that you talked about the CD ratio. The CD ratio part is comfortable for us, and even going up to 80 is something that is a possibility because liquidity is not an issue. It is just that we wanted to be very sure on the assets that we deploy and the positioning that we wanted to take for the next, let us say, foreseeable quarters and half years. Which is why The Karnataka Bank took a conscious call not to kind of grow over profitability or quality. That is, I think, a quick summary of what we did.
My question is more pertaining to operating revenue was INR 4,178 crores in 2023, INR 4,618 in 2024. The current year run rate is visible that we should be getting somewhere in the vicinity of INR 4,600 crores at max.
Yeah.
The second question is, you would have received all your payments from large corporates on day one, and the deployment in retail and other takes time. The strategy change would have costed The Karnataka Bank a little bit for the quarter. That is the general assumption, I should take?
What happened, Sushil ji, is that we have, you are aware that when there is some uncertainty in the market as far as the interest rate is concerned, then The Karnataka Bank takes a conservative step, and this is exactly what we have done. Yes, you are right that our interest income has come more or less at the same level or probably INR 30 crores here or there. That is because we have remained stable and our loan yield also we have maintained at the same level. It is again, compared to the previous quarter at 9.5%, 9.55%. That is something which is the same, and our cost of funds also remains the same.
All that we are saying is that there is a conscious strategy basis this, and our overall income on our expenditure now is being stabilizing, and we want to make sure that the same thing remains with the growth, that opportunity that we are sitting on in the next two quarters and foreseeably future quarters thereafter, whereby we will be able to increase profitably and also making sure that our deployment is to higher-yielding assets, which has been the focus. Our Mr. Giridhar Rajaram, who is our corporate business head, and between Sreenivas, who is our retail business head, I said they have pipeline, which definitely is very healthy, and we believe that our numbers will get achieved, but more profitably rather than the 6.9% and 7% loans that we were deploying in the past.
My next question is the transformation and aspiration which Karnataka Bank has showcased the world in last 12- 24 months is very wonderful experience in terms of what we have rolled out. I am sure initial cost is borne. When do we see the result of this in this next second half, or we will see it from next year in terms of 75%-80% of the target what we are seeing? I am not saying 100% would be achieved in six months or not.
This transformation is a journey. It is not something which is like start and stop, start and end. Basically what we have done is the following, that one, the bank did not deploy their liquidity to its fullest extent. From our mid-60s CD ratio, we have moved towards 75, and then the 75 can go up to 81. Secondly, the liabilities were not growing. Earlier, it was growing at about single digits, and now we have doubled it and we are growing at double digits and more than the market or equivalent to the market on the liability front. Third, CASA, we are maintaining and will continue to grow. As a result, our deployment opportunities are also high.
The second is that within the bank, the deployment, as you know, immediately we had done this, which is like to deploy into short-term, immediately yielding assets better than treasury. But I would say the rate differential was hardly some about 50 basis points- 70 basis points, but still it was good. But from that level, now we are increasing it to the next level, which is basically where our yield will be more like closer to 9% on those kinds of corporate assets, et cetera. But with same security or not kind of reflecting on anything related to quality and also getting other income through that. Basically, this is a very conscious strategy. To play this out, it will take the next two quarters to stabilize, and then the growth engine whereby quarter-on-quarter we will see this.
But the current running rate that we have is about between these two segments, about, let's say, closer to INR 3,000 odd crores. How do we make that INR 3,000- INR 4,000? How do we make that INR 4,000- INR 6,000 is the next kind of stage of, I would say, developmental activity which we need to do so that we increase coverage teams. As we increase our capacity with this credit processing capacity, technology capacity, operational capacity, et cetera, we will be able to go. That is the precise transformation journey that we are undertaking, and we believe that the results will start showing up in the following quarters this year itself. But actually to mature and fully blown higher run rate bank would happen in the next financial year onwards.
Second thing is we have technically written a book of about INR 3,000 crores, including total asset write-off. What kind of recovery are we seeing in current six months, and what percentage are we hopeful in next 18 months?
In the last two quarters, we made INR 46 crores and INR 32 crores. So approximately we have done INR 78 crores. And we believe that we would be about, let's say, another INR 100 odd crores, which will come in for this year also, this rest of the year. So that means that we would recover about INR 170- INR 175 crores in all for the year.
What is the pool left as on today in the balance sheet?
INR 3,000 odd crores, I think. But less than INR 3,000. So INR 3,000+ crores.
INR 3,000 crores.
Fully provided for, or almost 80%-90% provided for.
Huh?
I am sorry. Yes. I am being corrected here. So they are saying 100% provided.
Yeah. We have INR 3,000 crores and you are hopeful of recovery, what, 40%, 50%?
We will step it up now, but the current outlook is that we would recover at least closer to INR 175 crores from that book for a year.
Second thing is global yields might have been-
Sir, please rejoin the queue for further questions.
Thank you.
Thank you.
Thank you.
The next question is from the line of Harshvardhan Agarwal from Bandhan AMC. Please go ahead.
Mr. Harshvardhan, good evening.
Good evening, sir. Just on the guidance of slippages, you mentioned 50 basis points. Wanted to check, we are talking about gross slippages or net slippages?
Gross slippages.
Just doing the math, our first half slippage is already INR 660 crore, which is anyways, even if our book remains where it is, it is more than 50 basis points. How is that on gross basis we will have 50 basis points for the full year?
What has happened is that, one, there is this restructured asset which we started with INR 4,500- odd crores, which has come down to about INR 1,050 crores without related accounts as of now. Obviously, the last residual on that which is something where these are very granular kind of loans. We believe that as we kind of engage with them post this moratorium period ending, we believe that there will be some kind of slippages there. That is why we have provided for this 0.5 compared to the 0.09% and 11.11% for the first two quarters. We believe that this 0.5 is conservative, but still, I think very doable. That is the first point.
The second point is that we have deployed very clearly some teams to focus on this net NPA because of this new collection head coming in for, again, loans lesser than INR 50 lakhs, et cetera, because that requires a lot of collection mechanism to be put in place. We believe that portion will also start kicking in now because currently the larger tickets are what is being chased by the bank for this recoveries and which is where the recovery is happening both in terms of the technical write-off book as well as the regular book, NPA book. We believe that within that NPA book, through deployment of this external collection agencies, et cetera, which will be more applicable to the retail side, we believe that we could see some kind of healthy recoveries there.
That I think is a quick commentary on the overall slippages and.
Sir, what is the understanding when we talk about gross slippages and when we talk about 50 basis points for the full year guidance, we are taking into account the recoveries or upgrades that we may have during the year. Is that correct?
Yeah. Correct. Absolutely.
Okay.
Even this quarter also, there have been some upgrades, but very minimal. Just to let you know, I'll just tell you the upgrades that have happened for the how much is upgrade for this year. Additions were almost like INR 200+ crores that have happened, but then we have also done the reductions through this INR 329 crores. The total is about INR 162+ crores and technical write-off all put together. We have the breakup, which we can share it with you.
Yeah. Got it. My question is answered. Thank you.
Thank you.
Thank you. The next question is from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Yeah. Hi, sir. Congratulations for the speedy quarter. Just again, clarifying on the quarter-on-quarter 30 basis points decline in the NIMs is what you mentioned is a INR 4,000 crore of a book, which was excess liquidity, which you deployed in the treasury, and because it was an AFS book and you couldn't report that INR 70 crores of income, otherwise it would have been higher by INR 70 crores. Is that understanding right?
So, let me just clarify that. One is that we had a one-time refund of IT and the interest on that, which was INR 81 crores for the first quarter, which I had
Yes
already mentioned during the last earning call. So that is an opportunity which was one time and which will not happen again. The second part is that the INR 4,000 crores that I was telling you is that between surplus liquidity and non-SLR liquidity that we had, we have deployed that into treasury yield rather than having to deploy them into corporate assets. That is a conscious call that the bank took, where even if the treasury yield was a little lesser, but still we would have actually made more as far as the longer term is concerned. The last part is that if we had taken the treasury income for this year, which is the H1, both quarters put together, because MTMs on treasury, as you know, is the latest position. It is not by quarter. So I'm saying it for the H1.
Last year, we could recognize that into P&L, but had we considered the same accounting policy, which is not allowed by RBI anymore, that would have been INR 71 crores. That is-
Perfect
-an addition that we have.
Perfect. That got answered. My question is on, sir, outlook on the fee income part, knowing that you have been building up a team. How should we look over a longer period of time, the fee income part, which is, I think we are almost half to what industry would be in terms of the percentage to the assets income. If you can provide outlook on the fee income and as well as on the retail loans, when they say that we would like to grow the book. Any particular segment of the retail which you think is the key focus area that we should think over next 6- 12 months, where you would grow your book substantially?
I will answer that last question first. I think I have already mentioned that before, but from the retail side, there is obviously focus on mortgage, vehicle and education loan and also gold, which is a shining product for us, where the yield is also good and the growth is also good. We believe that both agri and non-agri gold will also be part of this whole journey on the retail asset side. Now, coming to your first question, which is related to fee to assets. Yes, I agree with you that, fee to income as a percentage in comparison with many banks, we are very low. We acknowledge that, and which is why we are now putting in place all these products. The cross-sell penetration, which is very essential, both on the retail side as well as on the corporate side, is something that we want to look at.
For this, we have to put our technology in place. Currently, we do have the third-party income coming from insurance and investment distribution products. But again, with the wealth advisory platform coming in, already we are seeing this going up compared to the last year. In fact, compared to the last year, the number is almost like double of last year, and we are on that track. The second is that there is a cross-sell opportunity which is basically on trade and foreign exchange. This is something that will materialize in the next following quarters only. We do not have the infrastructure, product or related to the knowledge know-how to be delivered at the branch level. So we have now just re-structured our corporate finance branches in five locations and also the overseas branches and the nodal branches who can handle foreign exchange businesses.
The last is that our regular other income, fee-based products like locker, debit card, and broking, et cetera, are all more or less on track. We are making whatever that we were making the last year, but all that will increase because of these three areas, which is distribution products of third-party insurance, investment broking, and also the trade and forex. We will definitely see that happening, but that is currently in a build and execution phase.
Perfect. Just last question on the loan book composition. How much would be EBLR linked, how much would be fixed? A broader bifurcation if you can provide, and in case, what happens to the yields on the loans if, say, there is a rate cut coming up in next six months by RBI. So how would our loan book yields move?
Great question. About 50% of our book is EBLR linked. There could be some on the retail side also, but overall, I'm saying, I'm calling out to say that about 50% would be EBLR plus. Now, as and when there is a rate change, obviously the asset side will be the repricing first and followed by the liability side. But having said that, because our retail liabilities, which is forming almost 92% of our overall term deposit and whatever that we have, because we do not have bulk. As a result, while there will be a residual, but we can change rates at short notice and we will be able to match the ALM between the two. So it is not like other banks where there is always a lag between asset repricing and a liability repricing. That is something that we are confident about this.
But having said that, we have anticipated some in terms of these interest rate changes, scenarios, etc. And with our treasury and our advisors on the treasury, we are making the right calls, at least so far, and we believe we will be on the right side of those interest rate changes as we go forward.
Perfect. Thank you. Thanks a lot. All the best for the future.
Thank you so much. Thank you.
Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.
Sir, thank you for the opportunity. Sir, my question is on LCR. You said that you have affected the recent draft guidelines which actually came from RBI. There, in fact, RBI had asked to increase the runoff rate. Have you increased the runoff rate in your LCR calculation, or is it more to do with the recent RBI supervision where they had asked banks or select banks to basically reverse their LCR?
I am handing over the call to Raghuram, who is our Chief Risk Officer. While there is this high-quality loan book, etc., which there is a change, but he will exactly explain how the changes have happened compared to the earlier part of the year when we had done the LCR calculation. But now, on a conservative basis, we are sticking to the draft guidelines, although we are not compelled to do that.
Yes.
That is something which Raghuram will explain.
Currently, there were changes for the top line, that is HQLA, also there was a change from the way the level one assets were being taken. Basically, from the book value to the market value. Second point was the runoff factor changes to that based on the type of digitalization availability. That was the point. We agree there are certain gray areas still in the RBI draft circular. It is being addressed. Definitely, there is a jump in the runoff factors for certain kind of classes. That is why there is a downward trend in the LCR.
Across banks.
Yeah, across banks. It's a phenomenon across banks.
Again, we are awaiting clarity because we've asked these questions to RBI also. Having said that, this is being represented at multiple levels, including IBA, but this is not a Karnataka Bank phenomenon. This is across the banking industry where the changes are underway. We believed that if we test the waters on this and report, how would we be? We are still at 140%, which is a very comfortable state and which is what we wanted to report this quarter.
Sure. For the investors or the analysts, basically you reporting this kind of LCR is fine, but to the RBI, when basically the reporting goes, it will be a little bit higher LCR because then you will not effect these reductions. Is that understanding correct?
Yeah. Correct.
Correct. Secondly, my question is on your loan books, where you have reduced down your growth guidance from about 18%, 20%- 15%. What will be the share of retail loans as per your new classification that you have in your presentation? And what will be the
Our mix will remain the same, 50% from retail and the balance 50% will come from direct to corporate, as I explained earlier to other callers. Combination of various segments within that. But again, this is a conscious transitional strategy. It is not something where the bank has slowed down the engine or anything. Because of the market condition and the fact that we did not want to kind of get stuck on the wrong side, we believe that it is better to kind of deploy them back into treasury, which is how we have not grown our asset book. But we will come back. The engines that are building up now, which is the retail and the direct-to-corporate strategies, will start kicking in, and we believe that our asset accretion will be at a higher yield compared to before. And-
That is almost 60%.
For just to confirm, retail plus mid-market, MSME, etc., is about 60% right now on the run rate, and the balance 40% is coming from large corporates and other mid-size corporates.
And sir, your ROE guidance of about 1.2 to 1.4, there is a downward revision in that as well? Or like that, of course-
No, we would stick to that guidance. This is a temporary dip because of this quarter strategy. We would come back to our 1.2 range very soon.
Sure. Sir, the net slippage, I think there was lot of confusion around the gross slippage and so on. I think what you were referring was the net slippage number. So gross slippage minus the recoveries and upgrades, right? You are not taking a write-off from that slippage number of 0.5% that you were talking about.
No. Sorry, your question is not clear. Are you asking us a question that this gross slippage does not include technical write-off? Is that a question or?
What I'm asking. You said you have a guidance of about 0.5% slippage?
Correct.
And then I think Harsha asked you that basically means that gross slippage minus recovery, minus upgrades. You said that now that also, you need to reduce the write-off from that.
Correct.
I believe net slippage typically would be gross slippage minus recoveries and upgrades.
That's all.
And not the write-off. So what will be that guidance?
Yeah. Correct. We confirm that.
This 0.5% is gross slippage minus recoveries and upgrades, right?
One is additions to NPA, the gross slippage.
Abhishek is our CFO. He is just answering this question.
Yeah. Please.
Currently, it is the actual additions to NPA and the reduction and the recovery also.
I think we will take this offline. I think basically the nomenclature that we use and I think what you are using is slightly different. Nevertheless, let's take it up.
We can give you the-
We can align our system. Yes.
I can give you the actual information also.
Sure, sir. Thanks a lot.
All right. Good. Adell, back to you.
Thank you. Ladies and gentlemen, due to time constraint, we have reached the end of our Q&A session. I would now like to hand the conference over to Mr. Srikrishnan sir for the closing comments.
On behalf of Karnataka Bank, the entire management team and the board, I wish to thank you investors for your support, all the analysts for your questions and guidance. There has been a significant contribution and suggestions that we have received in the past on the disclosures and the changes to the presentations, etc. We have taken all that into consideration in the last couple of quarters. Every quarter, we are only improving on the overall delivery. Thank you very much for the support and we see that the future is good as far as the upcoming quarters are concerned. Once again, thank you all and best wishes for the festive season.
Thank you. On behalf of Karnataka Bank, that concludes this conference. Thank you for joining us. You may now disconnect your lines.