Good day, and welcome to Q1 FY 2024 earnings conference call hosted by The Karnataka Bank. As a reminder, all participant lines will be in listen-only mode. 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 and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to MD and CEO, Mr. Srikrishnan H. from Karnataka Bank. Thank you, and over to you, sir.
Thank you very much. Good afternoon, ladies and gentlemen. This is on behalf of Karnataka Bank. I am the MD and CEO, Srikrishnan, and on behalf of the Board of Directors, I thank you for participating today. I am joined with me here, Sekhar Rao, the Executive Director, and the senior management team comprising of Balachandra, who is the Chief Operating Officer, Abhishek Bagchi, who is the CFO, Mr. Gokuldas Pai, who is the Chief Business Officer, and Sham, who is the Company Secretary. We have had a historic day today because of the new management which has come in. Just to kind of give you the disclaimer, all of you, I have been in this bank about little less than two months. We have also had a new executive director who has been here for about, let's say, four to five months now.
This is representative of the flavor that you will be hearing from Karnataka Bank as we go forward. Because this is one tagline that we want to really promote, which is banking with a legacy and embracing the future. The future for the bank is what we are going to be talking about based on the quarterly results that we have published today. Just a while ago, we have intimated the stock exchanges as well as released the press note in this regard. I am sure that most of you would have read through that by now. The historic part is about the highest net profit for a quarter that we made today, which is the declaration of INR 370.7 crore as against INR 114 crore pertaining to the same quarter last year. Overall, there are three parameters that, as a bank, anyone takes a look at.
One is the growth, the growth in advances and the growth in the book. The advances growth has been encouraging. On a YTD basis, on an annualized basis, we have grown by about 10%, while on an absolute term, we are about 5.4% for this quarter. Likewise, on the deposit side also, there has been a reasonable increase of close to over 8%. Here, the encouraging part is that we are still maintaining a very healthy CASA mix in our overall deposit constitution. The CASA continues to be in the 32%-33% range. This is also historic because, the CD ratio for the bank is the highest so far, which is at 70%. That is the first parameter that we wanted to let you know today.
The second is about the net NPA, and here again, it has come down drastically by almost about 73 basis points. We are at 1.43% compared to the corresponding period last year. Even compared to the last quarter, there is a reduction of about 27 basis points. This has been achieved through a lot of actions related to not just the recovery side, but also the fact that there's a containment in the overall slippages and so on. This is also something that I'd like to record to say that the slippages is about 0.5% as against 3.31% during the corresponding time last year. The other historic high is that our provisioning, which is a PCR, is actually at all-time high above 83.47%. This has grown from the 80.86% for the corresponding quarter last year.
The good news is also about the core provision, which stands at about 62% as against 55%. The NIM guidance that was given earlier, the last couple of quarters, we have always maintained that the NIM guidance would be about 3.5%-3.71%. I think we are well within that same range, and we do not expect anything. I'll also talk about the future growth of the bank as I read out the rest of the other metrics, and then I'll go to that. ROE, again, a historic high, which is at 17.7%. ROA is at about 1.47%. Cost-to-income ratio, very comparable to other peer group in the Banking segment. We are around 47% there also. The last metric that I would like to call out is on the CRAR, where we are at 17%, despite the growth that has happened in the assets.
This includes, of course, the tier two which has been steadily there for a while. Overall, the asset quality has been healthy and I think the bank is poised for the next level of growth. So what are we doing about that? Essentially, the bank is a very traditional legacy, but very excellent in customer service. There are a lot of the physical branches all over the country. Of course, the concentration has been in Karnataka, where the strength of the bank lies. More than about 60% of the branches are in Karnataka out of the 900- odd branches that we have. However, from an economic zone perspective, we are located in 14 economic zones, and that includes about eight in Karnataka and six outside of Karnataka.
The stated objective here is that we want to take this bank from being a regional story to a national story. Now, how are we going to do this? One is that the existing bank, that is the first category that I would call out, to say that run the bank. Now, run the bank is essentially on making sure that all of the processes and all of the technology and whatever the baseline issues that are there for the bank, we sort them all out, make them all more efficient. A lot of centralization of processes and making sure that there's optimal efficiencies that we derive, not only on the cost, but also the turnaround time as far as the customer journey is concerned. That is run the bank, but run the bank more efficiently, more organized.
This is something the existing management team who has been running are pretty aligned to this new vision that we are bringing in, and this would essentially create capacity. Now, the capacity is in two parts. One is related to the operations side, the other is related to technology. Both are something that we are definitely augmenting here as the new management. The second part is that along with that, we need to grow the bank. Now, when I talk about grow the bank, we need to change the culture of the bank. The culture of the bank has been not so outward-looking, and there is not much of a sales culture, which is including deployment of sales teams outside of the branches. So far they have been only looking at the channels of sale, which is the branch channel.
We are introducing essentially the sales channel both on the asset side as well as on the liability side for CASA as well. These are teams that will be deployed in branch serving areas in and around the branch to get the new to bank acquisitions. So the NTB numbers, which is currently at about 4,000 odd accounts per day, is going to move up, and that's the second piece of growth. The other part related to grow the bank is also to make sure that in addition to the DSA channel, there is a huge amount of digitization that we have already invested into. We are just on the verge of launching many such journeys whereby the digital channels to the bank, which include the mobile as well as our browser-based internet banking channels, will be just not transformational, but also everything to do with transactional.
Which means that we would actually be in a position to acquire clients end-to-end in most of the journeys almost 100%, some of the journeys near 100%, whereby all of new customer acquisitions need not necessarily have to be physical. That's a new channel that we are building. That in addition to the existing channels, which is the branch channel, which we are activating fully, and this also now would be helped by the sales channel, which is the DSAs, as well as the sales teams feet on street who are deployed on the ground. The last one, which I talked about, is digital. So this is essentially the grow the bank culture that we are bringing in. Here, there's a lot of reorientation that we need with all our existing workforce, and most of them are resistive.
The last about 40 days that I've been going around the regions visiting them, etc. , I have a fair pulse of the bank of the ground level impressions as well. The third piece is change the bank. Now, this is a very transformational journey in the overall scheme. What we are trying to do is that organically, while I was talking about the growing part related to the three channels of client acquisitions, new customers, etc. , there is also an existing customer base of 1.3 crore customers that we have and we need to make sure that there's a lot of upsell and cross-sell that is possible for this huge customer segment. Now, what we are trying to do is that we have set up a huge center for one, digital, as well as two, analytical center of excellence.
Now, all of the IT operations of the bank, which include service delivery, operations, engineering talent, information security, plus the digital center of excellence and the analytical center of excellence, basically the digital factory and the analytics factory. Now we have housed them all in a 40,000 sq ft new office in Bengaluru and here, talent acquisition is also possible currently. The very reason being that we are sitting in the heart of the Silicon Valley of India, that is Bengaluru.
Given this change that we have instrumented over the last about 30, 40 days, we believe that this digital journey that we are undertaking will be far more easier because the investment not only in technology, but investment into processes and we have also taken some help from external consultants here, whereby analytics related to our existing customers on their behavior, on what product they use, based on their transactions, what other products they could potentially use, is being extracted. Those cuts are being given to the branches and to the sales channels for them to actually go and acquire new customers. Along with that, the existing customers for new products. So this is the upsell whereby the share of the wallet is going to very much increase. This is step number one as far as the change the bank is concerned.
Step number two is all about innovations and collaborations. The bank will innovate, but obviously we are not a fintech, so we are not like some of the technology companies which are innovating and creating breakthroughs and really looking at some kind of a new product which is completely digitized, but we cannot scale up. So we have already launched this program called KBL-FinOne, which essentially is a fintech collaboration, whereby we have identified three or foue product areas, which include some of the asset side, which is related to co-lending, as well as consumer loans, and also a lot on the MSME side. These are the fintechs or some of the new age companies who are focused on certain segments, and they will collaborate with the bank and we will scale that up, whereby we acquire clients.
We also give them a wider range of services, including other banking services, which we can offer. But on the other side, the fintech benefits a lot because scaling up is something that the bank is ready to do. So this is the other area of innovation and collaboration that we want to partner. So here, a lot of co-lending opportunities and a lot of related consumer loan opportunities, etc. , are coming up, and we will be completing the pilot here. The last one is about the fact that while we can do all of this, how do we make sure that the product or the sectoral focus comes into the bank? Where are the strengths of the bank? We want to work on the inherent strengths of this bank.
The inherent strengths of this bank lies, one, in Karnataka as a geography, but we want to expand to other regions also. Whatever we do well in Karnataka, we want to make sure that we do it even better in the other states where we have the presence. This is not a small presence because most of the states that even typically take Maharashtra or even take some of the other South Indian states, we have in excess of 50 branches each in some of the states. What we are trying to do is to make sure that the geographical strength that we have acquired in Karnataka is something that we will replicate. Which are the sectors? The bank is very good in MSME lending. There are a lot of relationships and a lot of products that have been developed.
If you package it well, along with some of the fintech collaborations whereby the MSME portals, which are there available through this partnership, the engagement with the new MSMEs, the entire life cycle of the MSMEs taking care of the financial requirement, but also help them for value-added services, which include a lot of payments that they need to make. Karnataka Bank is well-positioned there because we have already certified for customs duty for GST, and shortly we are being certified for direct and indirect taxes, that is CBDT. We are the actual Karnataka-based player who is going to be actually able to collect all the three types of government payments also.
We are in the process of creating online as well as portal-based, which is a complete revamp of our website, and also allow all of these third parties to come in, and make sure that we are working with a very open but very system and information security controlled portal. The last part is that we are very big in agri lending. As a percentage of our total loans, agri forms a very, very major part. Between agri lending, retail, and MSME, I think the growth in those three sector segments. We believe that we can help a lot in agri also. The reason being that here again, there are a lot of value additions that we can provide because the fact that access in terms of telecom access and connectivity has already been provided by a lot of service providers in the country.
Thereby, we are able to actually get going with just adding more products to it and delivering them digitally. This is the other piece which is related to change the bank. In terms of the overall summary, ladies and gentlemen, what we are trying to do is to run the bank more efficiently and simplifying a lot of processes, grow the bank organically, and change the bank to introduce a lot of inorganic but not acquisition-based, but collaboratively, from other third-party players. The bank, in addition, offers a complete suite of personal loan products. That includes insurance, investment, as well as broking. These are again run through the third-party initiatives that we have already put in place. The bank can help in protecting our customers for both life as well as non-life and health.
And likewise, we can also help them to facilitate trading in case they are interested and so on. This is basically a quick summary of where we are and what we want to do. The results are very encouraging. The reason being that The Karnataka Bank on a financial positioning is also well-placed. From the overall management team, yes, there could be potentially a lot of lateral hiring that we need to do for a lot of focus that we have talked about in the existing plan. But we do have a very, very good management team already. We will supplement them with a lot of specialists. One, two, three, depends on whatever kind of specialists are required where we cannot fill up the gap from internal resources. And we believe that we are really creating a digital bank of the future.
Now, on that note, I think I have done my introductory talk, and I will hand it over back to the moderator for the next steps here. Sekhar , is there anything else you want to add?
Perfect. I think so, you have covered it all. I will just add couple of comments in the closing remarks.
Sure.
This is a very good summary of where we are headed and where we are.
Thank you. Moderator, back to you, please.
Thank you very much, sir. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headsets while asking your question. Ladies and gentlemen, please wait for a moment while the question queue assembles. You may press star and one to ask a question. We take the next question from the line of Sushil Choksey from Indus Equity Advisors. Please go ahead.
Congratulations on a great set of numbers and best wishes for all the aspiration which you have just highlighted. Question number one. Sir, you had given a broad vision in one of your media interaction when you commenced, what a journey to get to INR 1 lakh crore, which means 18%-20% growth year- on- year. Can you highlight a bit on that?
Sure. Thank you, Mr. Sushil. Currently, our annualized growth on the advances book is closer to 10%. On the liability side, it is closer to 8%. Essentially, we need to, by the end of about three to three and a half years, really double it. What it means is that if we start looking at about 18%- 20% growth quarter- on- quarter on a compounded basis annually, then in about three to three and a half years, definitely, we will be more than double of what we are. So the first stated objective was that in about three to three and a half years, we will cross INR 100,000 crore as far as the overall asset book is concerned.
Now, as I speak to you today, post the June result, I am not making any forward-looking statements here, but the fact of the matter is that we actually have crossed INR 150,000 crore threshold on the overall growth in business as we speak, and we are actually in the first week of August. So that is a considerable jump even from the result that we have declared today. That reflects on the changes that are working as far as the front-end channel, which is currently only the branch channel is concerned. In the next quarter, we will be actually deploying the channel number two on sales, channel number three on digitized acquisition.
If we are able to do this, we believe that we are well on the path to acquire as committed, and there is a good growth possible, which is on the asset as well as on the liability side. We need to control the rest of the parameters, the metrics also on essential parameters which are critical for success. That is to make sure that our net NPAs and the growth NPAs remain within control, and also making sure that the NIMs are in control. Obviously, there is a challenge on the cost of funds because the cost of deposit is going up. What we have also figured out is that despite the increase that has happened globally, Fed had increased the rate, etc. .
More from our own perspective, we believe that our deposit rates in India have peaked out. That means that there is a good chance that we will be able to maintain the same NIM ranges by tweaking and by making sure that our asset growth is done at the right pricing. This is how we are looking at managing as we go forward, Mr. Sushil, and I hope that it answers the question that you asked.
I will just add to the reply you gave. Where do you see your cost of deposit of 5.1% currently to by the year-end, and cost of funds, which is at 4.7% by the year, 5.2% at the year-end?
Our cost of funds, in fact, were in the region of about 4.7% to about 5.5%. This has been the stated objective, and I think we will very much be sticking to the range. Depending on the quarter, there is also a seasonality to this. Just as an example I am giving you, but there are much more factors to consider on the seasonality part. We deal with a lot of contractors. We deal with a lot of agri farmers. When they are sowing the seeds and making sure that the crop is coming up, they withdraw a lot from the CASA.
Once the harvesting season is done, and it has been our trend in this bank, we find that in end of Q2 and Q3 onwards, actually, we see that the CASA improves because of the money that they make out of harvesting and selling the crops actually comes back into the bank. So that way, this bank has got a tradition of stickiness on the CASA side. Likewise, on the contractor also. There are a lot of payments which are in pipeline from the government and from various contracts. Because of that, there could be some withdrawals that happen from CASA. But sooner than later, actually, they come back to the bank because they do maintain some very healthy deposits. So these are all some just examples of how we will be able to not only maintain but improve on the overall.
The last part is that we have not kicked off our government business and the government business, the float part is actually going to reduce the overall cost of funds by at least a few basis points for sure in the beginning, and then as we grow that business further. Which means that we have other avenues to make sure that the cost of fund is within the control.
My next question is your vision is more about co-lending, growing retail, and the bank was ready on technology, but I think the current management team brings a lot of bandwidth with the vision to empower that digital technology transformation to a next level. The next support which will be required for that is human resource. So how are we planning that our tech which was brilliant in the first half of last year. I do not know the reason we slackened a bit, but all these measures are going to bring in a fantastic change as is visualized in the stock price too. So what kind of spend are we going to do annually for this year or next three years to enable all this growth path and the vision which you are carrying today?
So that's an interesting point that you're making, Mr. Choksey. So essentially what has happened is that the investments into technology have been made, which is the core solution, which has been running for more than 23 years on Finacle. And then a lot of ancillary systems that have been added on top of that. The investment that are required for the digitization, which means digitizing customer journeys for onboarding and also the analytics part related to massaging the data and making sure that various cuts are provided for branches and sales channels to actually cross-sell. Now, the investments have been made, but the products have not been released.
So the focus will be essentially on new product development, product launch, and then finally, obviously, we need the new age technology and the new age business processes people to come in. So that's where I said that there are a lot of this lateral hiring that we will be doing. But having said that, the cost-to-income ratio for the bank has been at about 47%, even with some increase that we have to provide for related to certain statutory actuarial valuations on the superannuation and especially related to something on the bipartite settlement, which is not something we have signed up, but yet we want to provide for it.
So increased salary and various costs, plus this lateral hiring, but we still believe that we could be in the 48%-50% range initially, which would come down as the revenues increase. And this is just the investment that we'll make for the future. So yes, we need specialists, but the kind of pedigree that we come from, both me and the executive director, we believe that we'll be able to attract good talent and we have the right story to narrate for them in terms of their professional career growth aspirations.
See, your transformation journey is moved from Bangalore to Bangalore. Bangalore, as you keenly highlighted, the Silicon Valley of India. How is the bank enabling. I understand we have dominant share in Karnataka.
Mr. Choksey, we would request you to kindly rejoin with you, sir, because there are several participants who are waiting for their turn. Thank you. We will take the next question from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Good afternoon, sir, and congratulations on a good set of numbers. Sir, what would be your guidance for the growth rate in terms of both credit and deposit as well as CASA? Where would you want to reach by end of or the exit quarter of this financial year?
Mr. Sarvesh, good afternoon. Thank you for the question. From an exit for end of the year, I think, whatever that we talk about on the advances, the current rate that we are at about 10% on an annual basis. Our total advances figure is about close to INR 63,000 crore right now. Give or take whichever way, I think, reaching about INR 73,000 crore- INR 75,000 crore is what could be an exit number as far as this end of financial year is concerned. The CASA, our CD ratio is at about 68%, 70% right now. Obviously, we want to improve that, which means that the improvement in assets will be faster than improvement in the liability. Having said that, liability will not lag behind.
On the liability side, we would definitely believe that there will be from where we are, about closer to 10%-12% growth there, and that would hit the INR 1 lakh crore target as far as the bank is concerned. That would actually make the turnover of the bank look much healthy, where we would actually cross the INR 175,000 crore mark, whereas as we speak today, we are at the INR 150,000 crore mark. That gives you overall sense on the size of the book, Mr. Sarvesh.
Understood. And one problem which I think most of the small and mid-sized banks have been facing is the troubling gathering enough CASA. You did talk about making it more sales-oriented and all, but if you can throw some more light on your path towards sort of doing a better job on gathering of CASA. This has been sort of ailing most of the banks at your size and scale. That is one. Secondly, you talked about a lot of transformation related hiring as well as technology. Will that affect materially any of your cost-to-income ratio in this financial year? Or you feel that you have enough cushion or the investments have already been done?
As I was telling you, in the earlier question also, I had answered this, that we will look for new talent, but this will be specialists who are not really available within our existing team. That's the fundamental rule. The second part is that, yes, there could be an immediate blips as far as the cost to income is concerned. That's where I qualified also to say that our current 47 can become probably even 49 or even a 50. But then what happens is that we will definitely reduce that automatically in the following quarters. Because one, the capital will also be taken care of. Secondly, we would also be in a position to reduce it because the revenue side also will continue to increase. The NIM is something that we will not give up on. Whatever has happened, has happened.
I don't know whether we could have been more effective, other banks were effective, or the other banks in the same midsize segment were not effective, etc . I agree with you. But as far as our path is concerned, I think we got a lot more clarity and focus right now.
On the CASA side, what's the sort of aspiration in the next one to three years, where can we reach?
As I told you that three and a half years, we want to grow. Then automatically, if I have to maintain a simple map there, which is to make sure that our CD ratio is also about, let's say, closer to the 80s and from the current about 70. That means that our CASA and the whole funding part has to cater to at least that number, which is INR 100,000 plus other on the math that you can do. This is where I think we are heading. But of course, this is the larger vision. We need to execute this granularly, and which is what the new management has kind of really got into. We are all on an execution path right now. The whole team is supporting us on this.
Thank you, sir, and all the best.
Thank you so much.
Thank you. We will take the next question from the line of Suraj Das from B&K Securities. Please go ahead.
Yeah. Hello, sir. Thanks for the opportunity, and congratulations on your appointment. Just a couple of questions. Can you lay the vision for next couple of year in terms of what-
Mr. Das, can you please use your handset to ask the question? Your voice is muffled, sir.
Okay. Is it better now?
Yes, sir. Please continue.
Yeah. Sir, I was asking, you laid the foundation or vision for what you are going to do in next couple of years in terms of growing the bank or couple of changes that you have highlighted. I just wanted to know, let us say, from a longer term, next three to five years, what kind of, let us say, products or segments will be in your focus? In terms of loan mix, what kind of loan mix we will see, let us say, by 2026, 2027, when you build that INR 100,000 crore of asset side book. That would be my question number one.
Okay. As normally everyone says this, Mr. Suraj, we will have to play one game and one session at a time. This is something that we have realized both in any format of cricket that you have noticed, that there is always different ways to play. To forecast something within the three to five years is something that we really have to think through on the basis of how we are executing right now. I think on a three-year outlook is what I will be comfortable in telling you, and that is what I have told during the other questions also. The real trick here is that, if we look at current focus, which is MSME, agri, and retail, if these are the three that we really want to focus on and grow those. The growth path is on through three different ways.
One is the physical branch channel, the second is the sales channel, the third is the digital channel and collaborations. What happens is that from one engine, we are actually going to be firing from three different engines. I believe that all of them in due course would be firing at the same levels, whereby the business would also kind of get distributed easily. On the growth path, this is very essential that we actually create more engines on growth. That I think, is the way that we are contemplating right now, Mr. Suraj.
Okay. Sir, currently the share of retail, if I see in your agenda, sir, that is something like 50%, 51%. Over the next couple of years, is it fair to assume that this share would increase to something like 60%, 65% or so?
On advances about 50%, 51% is the current version on retail. The growth path there is obviously that we are growing a lot on the gold loans. We are growing a lot as far as home loans and a couple of other areas. What happens is that this will grow, but then the focus, if we actually dedicate a lot on the MSMEs and the midsize corporate, which this bank has not done as much.
I think that pillar will also grow. It is not that I can attribute a percentage of just retail will only go up. It is actually going to be all the three segments that I called out, which is MSMEs, retail, and agri. All the three will grow. How the percentages look like, I think, let's wait for a couple of quarters for actually the trends to emerge, and then we'll be in a better position to align our goals to that.
Okay. Understood, sir. Thanks. The second question is on the underwriting side, have you done any changes or, let us say, you see any gap where you can fill in or any kind of action you have taken? Just wanted to know. You have said many things about many changes on the product side, on the sales side, on the marketing side. However, on the underwriting asset quality side, have you done any changes or you are taking any action there?
Sure. I'm glad that you asked this. One of the things that I noticed after coming into this bank is contrary to all my past experiences. At the branch level, the branch manager and the assistant branch manager, be it even the smallest of branches in a rural or even a semi-urban location. They have got the skills on writing credit proposals and credit evaluation and monitoring. That is a very big strength as far as this bank is concerned. The second strength is that we have over 100 agricultural field officers in the bank who are in different parts of the bank, and I'm trying to consolidate all of them into being back in the field.
Now, what it means is that suddenly from, this is a real challenge for many other peer group banks, where they will not be able to gather 100 such people skilled who know about agriculture because they have been academically trained, and also in the bank, they have been trained on the skill to actually pursue that opportunity, which is the agri loans as well as the agri business, which is a supply chain. What we have done is that the underwriting capacity is being enhanced from the current five regional processing centers to eight centers. That is going to turn around the loans and the approval processes much faster. The second is we are actually investing a lot into technology, which is basically workflow processes and document management processes, which are already there.
We are trying to get these journeys also included in that, whereby the transfer of information rather than transfer of papers would actually facilitate much efficient processing. The third is that if you scale up digital origination, then we have to develop a lot of credit scoring models for the digital side because we need to get a very quick approval on the loans, and this has to be done digitally, subject to certain parameters and scores that they score. This is what is the change that is being affected on the digital side. This is again, an all-round effort based on the data that we have analytically. Actually, work on that and make sure that we are able to deliver the scoring models and actually create more and more surrogates based on the behavior.
Okay.
All right.
Yeah. Thanks for the detail. Sir, last question from my side, sir. In terms of your return ratio, ROA and ROE, whatever kind of vision that you are having and the kind of transformational journey you are on. Upon completion of this journey, let us say next two to three years, what kind of ROA, ROE on a steady-state basis the bank can generate? Have you given any thought on that, or have you made any projections with that, with the kind of business model that you are developing, what kind of ROA, ROE on a steady-state basis you want the bank to deliver?
Mr. Suraj, I think ROE is a derivative of how well we do on the other parameters. What happens there is that, if we do all of this right, then the outcome of that will be the ROE and the ROA. Currently, what we are doing is that, we do have a current healthy ROE of almost 17%+. That is a very good kind of a sign. The other is that the ROE currently is at 1.4% and 1.47% rather. But we would definitely be hovering in the same region of about 1.2%-1.4%. And that is, I think, a stated objective again. This would bring in a lot more value back to the stakeholder on a long-term basis, and that's something that we are quite confident about.
Okay. And one more last data-driven question if I can squeeze in.
Sir, I would request you to kindly rejoin the queue.
Sure.
There are several participants who are waiting for their turn.
Thank you, Mr. Suraj.
Thank you, sir.
Yeah. Thank you, sir.
Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two or three per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We will take the next questions from the line of Chintan Shah from ICICI Securities. Please go ahead.
Good afternoon, Chintan.
Yeah. Good afternoon, sir. Thank you for the opportunity. Sir, just two, three data-driven questions from my end. Sir, firstly, if you could just provide the makeup of GNPA movement into strip edges, write-offs, recovery, and update for the quarter.
Okay. Yes.
Yeah. Okay. Secondly, sir, also could you just provide the breakup of loan book into fixed and floating and how much would be linked to repo rate and MCLR? Lastly, sir, on the CASA breakup, if you could just help us with the number of current CASA, I mean, CA and CASA. Yeah. Lastly, sir, on the other income part. Other income breakup as well. Yeah.
First part related to the gross and the net NPA and the additions and reduction. That is what you wanted, right?
Yeah.
I think what we have is that more from an overall gross NPA, the additions have been for this quarter in the region of about INR 292 crore. And then the upgradations have been another about INR 90 crore. Recoveries have been about INR 167 crore. And the technical write-offs, if I take it away, that is a very small number. Another write-off included, that is about INR 10 crore. The total that has happened in this quarter is INR 269 crore. The gross NPA via the percentage is something that I had called out earlier. This is actually very healthy compared to the previous quarter last year as well as the previous quarter this year also. And that is where I think we are headed towards doing this. Your second was related to the EBLR rate, right?
Yeah.
The percentage to the overall gross credit. I think somewhere this is about what? 20%, 20.31% on the MCLR and EBLR linked to G-Sec rate has been about 6.54%. And then to the T-Bill has been about 46.94%. That is the overall percentage share related to the gross credit. The last one that you wanted was something on the CASA. Can you repeat that question, please?
Breakage of CASA, CA and CA
Breakage of CA and CA
Yes.
I think just give me a minute. INR 23,077 crore is on savings and INR 4,650 crore is on the current account. We do have some amount of float, which will be hardly less than INR 250 crore, INR 260 crore.
Float and OD accounts.
Float and OD and other floats.
Sir, actually this is very helpful. Sir, just lastly on the other income part that INR 324 crore other income, could you help us with the breakup between the treasury and on non-treasury or fee income? Something like that.
For the quarter, the total trading income has been only about INR 8 crore, and the depreciation on investment has been about INR 43 crore. The other, which is-
INR 273 crore
...INR 273. That constitutes-
Third party ATM.
All our fees and commissions. The fees and commissions is about INR 273 crore. We have a breakup on that. I think we can even give that to you offline. That includes all the service charges, guarantee commission, insurance commission, ATM interchange, then locker rental and so on.
Sure, sir. I will take the offline required. Thank you, sir. Thank you so much for patiently answering all the questions.
Thank you so much.
Thank you. The next question is on the line of Anand Dama from Emkay Global. Please go ahead.
Yeah. Thank you, sir, and congratulations for your appointment. Sir, first in your presentation, you talked about retail share. I think that is a RAM share, right? Because the retail aspect is very misleading. That is number one. If you can change that in your presentation going forward. Secondly is that because Karnataka Bank, we have been tracking it for long now. In that, the asset quality and particularly the NPA group always has been an issue in the bank, particularly whenever there are bad asset quality cycles.
How do you try and contain this? You said that, bank has a branch-led credit processing system right now. First, you would want to change that. You would want to change the underwriting the way it has been happening in the past across the legacy businesses that they have. Secondly is that, what are the new business lines that you would actually look at? Because bank is already into mortgages, they are doing gold loans. Any other new product that you would want to introduce going forward? These are the three questions that I have as of now
Good. Essentially, Anand, good afternoon. What we are trying to do is not to kind of reinvent much as far as the product and underwriting is concerned, because the bank has, with great difficulty, come to a level whereby it has limited everything related to slippages, related to NPAs, and related to the overall coverage and recovery. Given that fact, obviously, there are some parts of the bank which are working very well, and there are new parts of the bank which we need to start making it work. Now, we need to rely on some experiences. We also need to rely on a lot of digital data. This part on the digital data, whereby we are able to kind of actually predict on the basis of the behavior, which will be related to the data that they do with the bank, for instance.
If there is a consumer having a normal savings account, if he or she actually is in a position, we are able to take data from their operational account that they are paying X amount of rental, then there is X amount of bills that they are paying on a regular basis, which pertains to electricity and consumer, etc . Then what happens is that we know the purchasing power of that consumer, and based on the data, we will be able to throw a loan, a consumer loan, which is a pre-approved loan on an automatic basis. This is something that we are developing. I am just giving you a flavor of where the new product development will happen. In addition to that, there is some flexibility that we will be giving on the liability side.
Because what happens is that a lot of our liability customers who have been with the bank, and again, including our staff and customers, whoever I meet, are there for 23 years and 30 years at a minimum. That means that there is a lot of stickiness, both from a consumer as well as employee perspective here. The relationships that we develop, but the flexibility that we do not offer is something that we want to give. Example, if there are some customers who are holding a lot in savings and current account, then short-term liquidity, they are not in dire need. Then, we will give them kind of a sweep out option, which will be called the Flexi Current Account or Flexi CASA. All this could be done by the customer through the net banking or mobile banking platform. These are all things that we are doing.
We are also going to enhance the activity from each of these customers, because with Customs, GST, and CBDT, then three more very good, powerful use cases are being brought by our bank into the customer's hand. Again, here, they need not even come to the branch to do all of this. This is all done. One thing that I did not talk about earlier is that in addition to these three government-led kind of businesses where it is on the payment side, we will also be working a lot on creating a new government business vertical. That is yet another new area of growth that we would be looking at because the presence in Karnataka and the fact that we have been banking for a number of institutions which are prevalent in Karnataka.
This might include even some religious institutions, charitable institutions, colleges, and schools, and so on. I think, we have the ability to offer this to a couple of government departments also where we need to get empathy. All of those are the efforts that we are taking from an overall product definition, product redevelopment, and vertical kind of, let us say, new vertical targets.
But, sir, you talked about again the two initiatives that you will take, but how do you fix the past?
The past is something that is growing. Which is the cross-sell part that I talked about earlier, that we have the analytics related to each of those existing customers. So we will be offering more products on a very focused manner based on their behavior and transactions to the existing customer base also. And that is what is the analytics actually going to do. We are actually churning out so much of data and supplying it to the branches to say that these are the kind of people you can offer this product, based on certain values that we can derive, even if it is not directly, but on a mass basis related to those customers. So that is what the power of data can enable for us.
Sir, so basically, if you look at your specific PCR, obviously your NPA is still higher than as compared to some of the other peer banks. But if you look at the specific PCR, it is still somewhere in the mid-60s as such, if you take out the technical write-off. So any plans basically to improve that in the near term, consuming the profits that you are actually generating at this point of time, which is very high. So you run down your NPA book first, and then basically look at taking it past 70% and try and contain the credit cost that will actually be growing in the future. So any thoughts over there?
Yeah. What happens is that, if you focus on NPA and management of NPA, then the growth focus will be lost. So obviously, we are looking at a lot related to how to grow the book but contain NPA. And that is something which is there. So if you are asking is there an objective or a targeted rate of NPA, compared to the last year and last quarter, we have only been coming down. So the trend is looking good as far as the gross and net is concerned. The second part is that you talked about the PCR and the actual net of technical write-offs, which is correct. You are right, about 62% odd that we have. But if you really look at the coverage, even on the gross NPA, which is secured by land and building, that is almost like 76.5%.
Now, what happens is that actually speaking, we are secure, but there could be a process which will take a little longer. But on the other side, I think the bank is well protected. I think that I would rather focus on growth and making the book size larger. That does not mean that the NPA comes as a percentage lower because of the increase in the book size. But on an actual number basis, we will tackle it. Actual account basis, we will tackle it with a strategy. I don't want to confuse the old bank and the new bank. The new bank is the focus that we are talking about. The old bank will continue to do all of whatever they are doing and in a much more efficient way. We are not going to give up on any of those two fronts.
Thank you. Mr. Dama , we will request you kindly rejoin the queue for follow-up questions. Request to all the participants to limit their questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We will take the next question from the line of Ketan Athavale from Robo Capital. Please go ahead.
Hello, sir.
Good afternoon, Ketan.
Thank you for the opportunity. I just wanted to know what is the expected credit cost for FY 2024 and 2025 in percentage terms?
Okay. Give me a second. The credit cost right now is about 0.28% and as we go forward, I think there is a good chance that we will be making this more or less and now maintaining at the same level. So end of the year exit also, I think it should be at more or less the same level return.
Same for 2025 also?
For 2025, we should see a little kind of a reduction. I will tell you why. Because if you start acquiring digitally, and if you are able to kind of create a book which is all salary loans and flexi loans and everything related to, let us say, combining it with some payroll processing companies where we will be able to kind of get the repayment guarantees because the next payroll automatically will be coming through the bank and so on. That is one area that will actually reduce it. Both the digital side as well as couple of these products will actually help us in reducing. But that is something that we will have to really focus on.
Okay. Thank you. That's it from my side.
Thank you so much.
Thank you. The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors Private Limited. Please go ahead. Mr. Dhariwal, I have unmuted your line. Kindly proceed with your question.
Hi, Manish. Manish, are you able to hear us?
Moderate.
As the current participant is not answering, we will move on to the next question, which is from the line of Alok from MMCL. Please go ahead.
Yeah. Good evening. Thanks for the opportunity, and sir, congratulations on great set of numbers. Also the presentation which you put out, clearly I can sense the vision which the management is looking forward. This is really commendable. Sir, I had two questions to understand from you. One is more on the asset quality. What is that you are looking in terms of the slippages and non-performing loan maybe in FY 2022 as a whole, including any element of restructuring costs that might come out in the coming periods. That is my first question.
Okay. Let me answer that straight away, Alok. As far as the slippage is concerned, we are currently at about 0.5 or so. Going forward, I think, compared to what we were last quarter, it has reduced substantially. Last year, reduced even more substantially. I think this is the best performance on the slippage so far, and we want to continue the same way, at least at a minimum to continue at the same level for the rest of the year. That would bring us to a very healthy outlook as far as the end of the year is concerned, because we would have actually crossed two more quarters where even some other stress in the portfolio would have gone through that life cycle at that point of time. If we are able to maintain at the same level, as management, we would be happy.
So would you like to give some numbers on GNPA maybe at end of FY 2024?
See, the market for our kind of mid-sized banks on the net NPA, we definitely want to aspire to come down by at least about 20- 30 basis points from where we are. Currently about, let's say, 1.43. If we are getting it down to about 1.20 by the exit of the financial year, we would be happy. Why, I'll tell you, is that our book size is low and in terms of absolute recoveries, absolute new additions, et cetera, we'll have to minimize to make sure that we are achieving it. The second part is that we are pretty much covered on the PCR, and we actually have the ability to negotiate. Even if there are some slippages, even if we have to take a haircut and make sure that we are settling it, we are actually adequately covered.
That is the other part. We have actually gradually got into a reasonable position. I would not say comfortable position, but reasonable position on the overall NPA. Barring any surprises that I can't predict, on the gross, if we are able to manage and the credit monitoring department actually does their work the same way that they've been doing, I think the renewed focus on this overall management of this NPA. I think gross slippages, PCR and the net. I think we should be definitely getting to the comfortable range, as I told you, about 1.20. But we'll still work on it in the next financial year to reduce it to lower levels because some of the most successful banks in this country actually are at one or lesser.
Sir, would you like to leave us with an SMA2 posture? How is that looking like?
I think I will ask my colleague Bala to answer that question. SMA2. Just a minute, please.
Sure.
Yeah.
Yeah, SMA2 as of 30th of June is around 1,197 or you can take it as 1,200.
Great.
And of course, if you compare years, it has slightly come up because of some specific reasons. Some of the sectors facing some realization problems on account of some political dispensations taking place in the particular state.
Sure. Sir, a question to you. Would it be fair to say that now all of the effort has realized more for growth and not at asset quality? Also because if I look at the way RP is positioned, there are drivers for margin expansion from here onwards as well. You are at a year of so that gives you a cushion maybe more on the lending side versus corporate side. Although NIM might see some increase, the kind of focus is on lending side, I believe it is going to circle more around growth. How are you looking at that number linking up?
Yeah, I think overall let's say on a blended basis, that monitoring is done at a level which is between me and Sekhar, who is the ED here. Right? Now at the respective vertical head level, they have a growth which is very focused, and that focus is there is one side which is managing the liability, there is one side which is managing asset. Obviously, between the two, they have to manage the growth as well as the quality. The quality does not apply to the asset side alone. The asset side credit quality is very important, but even on the liability, we do not want to kind of increase transactions and then not really derive the benefit in terms of balances because then the banks become a conduit for just unproductive volume. So obviously we are going in for quality on both sides.
That is something which has been the guidance given to the management team. But of course, we need to get into a lot of governance mechanisms and the monitoring systems to make sure that the quality is maintained. But on a broad, let's say, high level basis, the answer to your question is that yes, we will definitely insist on good quality health as far as assets is concerned, good and productive kind of CASA relationships that we bring so that we do not have, for instance, customers who just keep on depositing cash. That is really something that we want to convert them into the digital side then. So we will work on such migration projects also.
Thank you. Mr. Alok, we request you to kindly rejoin the queue. Thank you. The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors Private Limited. Please go ahead.
Yeah. Thank you so much for this opportunity and my apology for previously unable to connect. I think there was a problem at my side on the voice front. At the outset, congratulations and compliments to the new team, especially the new CEO, Mr. Srikrishnan. We wish you all the best as our fortunes are also very much kind of linked with how the management performs. My question basically is related to this playbook. It is a playbook that is across older banks where they already have a huge chunk of customers who have been banking with them for the last so many years.
But then these customers, these new products are being offered to in the line of personal loans or variety of other products like car loans, personal car, whatever. My question is that these customers typically, are they new to these products or they have experienced these products but from some other originator?
Manish, good afternoon. One of the findings, at least for my own personal interaction that I've had with customers when I started visiting branches. In the last 20 days, I would have visited at least about four or five regions and at least about eight branches in every region. That will make it about almost close towards 40, 45 branches out of the overall branches that we have. I also have talked to a couple of customers who were there present or where we had invited them for just some discussions. One of the key findings that I've had is that these customers are very happy with the personal relationship that they have with the branch manager or with the branch staff, so they will not move at all from the bank.
Having said that, when this comes to some new products, digital products and so on, since they didn't find it in Karnataka Bank, they have gone and used somewhere else. Now, they are digitally savvy and they want to actually also find out if Karnataka Bank can offer. In fact, so many of them asked me personally saying that you sell me this product and we will use it in Karnataka Bank. That way, I think there's a lot of promise in this bank and it's just that in the past it has not been utilized and I intend along with this new management team to capitalize on this opportunity because nothing like offering more products to the same set of customers who are already very brand loyal.
Absolutely. That has to be the first area. I realize that and which is why I was trying to understand whether these were new to these products or what can you explain that?
We are pretty much aware and in fact in Karnataka, the advent of, let's say, technology platforms and the opportunities here are actually very digitally savvy, let me tell you.
Wonderful. Now, what is now sww a very nice and a focused plan has been shared. You've shared that with us as well. Now, what would be your thoughts on the equity dilution? Because if you want to be growing fast then maybe there'll be requirement of fresh capital.
See, I really can't take any questions which are forward-looking statement. But having said that, I don't have to tell you are an expert in this field when you analyze banks. The raw material and the fact that if a bank has to grow, we need to kind of raise capital, which is a given, right? But at this stage, we are still at the 17% on the overall and we do have a tier two structure also in place. Now, if there is something that we need to do to let's say churn the tier two or make some changes, et cetera, of course, as and when there are some opportunities, the bank will do. This is a continuous process for such bank. Just to let you know, if you are on the growth path, we definitely have to look at growth capital.
That is what we are aspiring. But at this stage, I can't really tell you anything related to our fundraise plan or anything because I don't think that the bank has crystallized anything to that level. Also, it is the second month as far as I'm concerned here and we are still assessing the overall situation. If there's a desperate need to do, of course, we would have done that first. But right now, actually we are in a comfortable position now.
Yeah. I think that is what I was trying to understand. Yes, that there is no plan in the immediate term. At a personal level, what do you think are the personal milestones that you are setting for yourself when you have taken up this very interesting opportunity of helming a 100+-year-old bank and infusing it with new ideas, new technology, new way of doing things? You are waking up a very old organization. How are you taking your personal milestones as you go forward?
Thanks for asking me this, Manish. I think it is a very interesting opportunity. In fact, having done many of the startup kind of organizations in my past life, which is at least three new banks, this was a very interesting opportunity as I walked into the bank on the 100th year. On the 100th year, I actually have declared that this bank will be a startup bank, and that is actually the story that we are creating and revolving all our efforts around that, please.
Thank you. The next question is on the line of Jai Mundhra from ICICI Securities. Please go ahead.
Yeah. Hi, good evening, sir. I wanted to understand a bit on the verticalization in the non-corporate products. So retail, MSME, agri. To what level these products have been verticalized, and I think you had said that the branch managers or the select branch managers, they also have a good understanding of the underwriting practices. So I also wanted to check that some of the banks of your size, they have a business and risk responsibility lying with the same individual. Is this the same process here or the business and risk are entirely separate functions?
Thanks for asking that, Jai. This is actually how do we kind of work on the strengths of the bank. The bank has certain strengths and obviously we need to use it in the right direction. Verticalization-wise, we have already taken some steps. We now have, in the last about a month or so, we have MSME national head, we have agri national head. We have very clearly within retail, some are only focusing on branch banking, some focusing on assets, and then we have a credit marketing team which takes care. And there again, there is a bifurcation between retail credits and mid-size corporate credits and MSME credits and so on. Obviously, this starts all the way from the top.
I do not think that we are in any way making a compromise and having a conflict related to business and risk approvals or business and let's say, credit monitoring, etc. , because we have clear segregation both at the regional level as well as at the head office level, where depending on the size of loan, there is a slab-wise structure that we have, where as said earlier in my commentary, that we have 5 hubs, which are the five regional processing hub on credit sanction, which we are making into eight. That means that all of this which happen at the branch level reaches the region. If it is not within the powers of the region, it reaches the national head or the national head office level and where there again, we do have segregation in terms of category-wise.
There's a retail part where the turnaround times are much faster. Then of course, there are the larger credits where the turnaround times are a little more slower than immediate approvals and all that. We have all those segregations in place and we will improve on that based on some process improvements that we are taking into consideration as we go forward.
Thank you, sir. The next question is on the line of Saket Kapoor from Kapoor Company. Please go ahead.
Yeah. Sir, I missed your initial commentary, so pardon me for repeating, sir. For exit of FY 2024, what should be our net NPA level and as a NPA, the provision of book, what percentage are we eyeing here?
Yeah. That's fine, Saket. I had stated this to the earlier caller. So exit target for us at the net NPA issue, we are targeting to be around 1.2% from the current 1.4%, and that's an improvement which will depend on a lot related to the healthy monitoring that we are going to do. And of course, no surprises there, we see. But as of now, we believe that all the regions and all the accounts have been reviewed and we believe that we are on the right track.
And the provision book, sir, as a part of the loan book, what should be the provision book percentage?
PCR is 83%, as I told you. And for the core book, it is about 62% right now.
Core provisions.
Core provisions.
Okay, sir. For the NIM trajectory, I think you were explaining that the cost of funds will go up going ahead. Taking that into, capturing that, what should be our NIM trajectory for the exit of the financial year and also going ahead, what's the NIM trajectory?
I think, the team has mentioned this in the past about 3.5%- 3.7% as our overall NIM target, and we are not changing that stance at all. The reason being that there is a pressure on cost of deposit, which you are aware. But on the other side there are some loans and new acquisitions on the loan book, which are taking care of a couple of this. But I think that we will still stay with the same guidance on this, 3.5%- 3.7% NIM.
Thank you, sir. The next question is from the line of Yaswanth Kumar Thippeswamy , a retail investor. Please go ahead.
Good afternoon.
Good afternoon.
Good afternoon, Srikrishnan. And congratulations on the results and there were I had a couple of questions with respect to asset quality and the growth. I think you have already addressed that, so I will not repeat that question though. The question that I have now is with respect to the yield and advances. Last quarter, I remember Mr. Sekhar had identified advances which were yielding less than then government securities . Having said this, there was some retiring of advances. Similarly, I would want your inputs. Have you noticed anything of that sort? And at the same time, can we expect that yield on advances to improve from here on?
Sekhar is here to answer the question, but let me also tell you that more from my own perspective, as I have come into this bank, one of the first exercises that I did was in terms of tenure-wise percentage yield on the asset book. We did a complete review and obviously, there were some actions that we had to take to exit some and improve the rates on some, etc . The repricing and so on, which is a continuous process that is happening. But if you want anything specific related to what Sekhar said, Sekhar is right here. Sekhar, if you can take on that last part what he asked which is related to what was stated by you earlier and how it is improving.
Hi. Good to connect with you again. These are some tactical calls that we take from time to time. At that time, clearly we saw an arbitrage opportunity where we had advances that were yielding less than what was available through the investment options. Clearly took those calls to retire those low-yielding advances. Having said this, like Sri mentioned, we continuously monitor the opportunities where we can rationalize costs, exit buckets and tenures which are not profitable. That's a continuous process.
Yeah. All right. I think-
This clearly is reflecting on our corporate loan book yield. It has moved from mid 7% to slightly above 8.25%.
Good.
Thank you, sir. We take the next question from the line of Rakesh Kumar from B&K Securities. Please go ahead.
Yeah. Hi, sir. Thanks a lot. Well, I have a couple of questions. I will read out my question and you can respond to that. We have couple of low-hanging fruits currently in terms of the LDR number, LCR number, and we are in a scenario when the credit quality may remain fine for some time. You have that much time to ramp up your business in that time. The question is that, we would like to first take a fruit of some opportunities that we had in terms of techniques, LDR number being low, LCR number being very high.
Is that the first thing that you are going to do, or what is the plan that you have for the branch expansion side? Which are the vertical heads that we are going to build up? Which are the loan segments where we are going to increase the market share? These three things if you can highlight, and the first question also.
Sure. You are right that there are certain strengths in the bank, and obviously we do not want to move away from those strengths. We will work on those strengths to extract the maximum. We are not going to disrupt that journey for sure. That is point number one. Point number two is that all the branches and all the regions have been given this target clearly to increase CD ratio. That means that, let us say that when we walked into this, between me and Sekhar as new management in the bank, the CD ratio was definitely at the 60s to start with. From the 60, because of the push that has happened, it is not that it happened in the last two months or three months, but it is a continuous push that the bank has been trying.
But I think we did little tweaks on certain processes to make sure that the whole turnaround time is faster. We see a lot of traction and whereby the CD ratio is currently at 70, but are we happy about 70? The answer is no, which is why we want to kind of move into the 75 as an immediate target. That is the second part. Now, the third part is you asked about the branches expansion. This financial year, we do have plans to open about 15 branches, and we will continue our efforts to do that. But on the other side, I think early part of the commentary I said that the digital expansion actually has no boundaries. You are aware that we have already invested a lot on the digital side.
All the back-end systems and the front-end access, etc. , has been provided for. It is just that we need to add a lot of product journeys, which is what currently is being done. There are certain approvals on the loan side where the digital approval is actually 100%. There are many which are at the 70%-80% approval, but there is a manual repair or manual intervention of about up to 20%-30%. Obviously we want to get to all that, and thereby what happens is the cost of acquisition and also the fact that our reach is going to be not just limited to our branch presence, is something that we are really going to benefit from if we extract the maximum from this technology investment that has been done.
Thank you, sir. The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.
Yes, Mr. Kapoor.
Yes. The point I was asking earlier on the ROA trajectory also, what should be the trajectory shaping up. For the detection of NPA, how are we using technology, especially AI and the system processes wherein we will have early detection of NPAs going ahead? What portion of the loan book is towards personal loans and the unsecured part?
First question is on ROA. ROA is about 1.47, as I had mentioned earlier, and that continues. Here again, as I was mentioning to the earlier caller, that ROA is a derivative, and this is something that, as we grow the business, will keep changing. But on the other side, we will definitely not be working towards the target, but not giving away the raise also. It will definitely be almost hovering around the same region. The second part is that the investment that we have done in technology. You were asking about the NPA monitoring and automation related to that.
All NPAs are declared from the system, and we do have an application which is called VasoolSoft, which actually monitors, delivers, including early warning signals, EWS, as well as everything related to even sending out notices automatically in case of delays or probable kind of even foresight of some delay. There's a lot of automation which has been done in this, and this is the Reserve Bank requirement also because the Reserve Bank does not want any bank to actually monitor and declare NPAs on the basis of some manual system, because obviously they could be prone to errors. This is something which is already in play, and we will continue to enhance this because obviously there are a lot of interlinkages when it comes into the NPA bucket, and then the whole legal and recovery actions, etc. , also needs to be added.
That is what we are trying to integrate now. We have multiple systems which we will all integrate by getting the handoff from one and the other system takes over. This is something which will be a seamless interface that we are building right now. Have I answered all your questions, sir?
Thank you, sir. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to MD, Sir Mr. Srikrishnan H., and ED, Sir Mr. Sekhar Rao for closing comments. Over to you, sir.
Thank you so much for your participation. From my side, as a first time that I have met with analysts, we have uploaded our investment justification on our website. This is again very clearly articulating all of whatever is required. As you know, Sekhar is here, and he has been in the bank even earlier than me by a couple of months. I will hand over to Sekhar for him to do the concluding remarks of today's conference.
Good evening. Thank you, everyone, for the overwhelming response. On last count, we have around 285 participants. I thank everyone for taking the time out. As Sri articulated, this is an exciting time for the bank. We have declared record profits, but the template set for the future is very clear. We are a bank with a legacy, eager to embrace the future. There are clearly identified segments and businesses which we will leverage. That also he shared, primarily focusing on MSME, agri, and retail. We will also leverage our extensive presence in geographies that we are already there for growth and liabilities. All of this while focusing on asset quality. We have the necessary teams and structures in place. In my last call, I articulated how we have created those vertical structures focusing on retail and retail wholesale, asset quality, credit underwriting being separated from business.
All those best practices are now in place. We believe that we are fairly well-engineered for growth along the lines that we have projected. We will keep in touch with you and keep reaching out to all of you at regular intervals. This is a mandate that myself and Sri have taken up on ourselves. We look forward to having these conversations on a regular basis. Thank you, and thank you to the moderator for hosting us.
Thank you very much, sir. Ladies and gentlemen, on behalf of Karnataka Bank, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you, moderator, for handling this well. Thank you so much, participants.
Thank you very much, sir. Have a great day.
Bye.