AU Small Finance Bank Ltd
NSE:AUBANK
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AU Small Finance Bank Ltd
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Ladies and gentlemen, good day, and welcome to the AU Small Finance Bank Q4 FY '23 Earnings Conference Call. [Operator Instructions].I now hand the conference over to Mr. Prince Tiwari, Head of FIG and IR. Thank you, and over to you, sir.
Yes. Thank you, Yashasvi and good evening, everyone, and welcome to AU Small Finance Bank Earnings Call for the Fourth Quarter of FY '23. We thank you all for joining the call today. The format for today's call will be very similar to last few quarters, where we will start with opening remarks from senior management for the first 20, 25 minutes of the call. And we'll follow that with the 30 to 35 minutes of question and answers from all the analysts and investors.To start the call, we'll have our MD and CEO, Mr. Sanjay Agarwal, share his thoughts on FY '23 overall performance and outlook for the bank. He will be followed by our ED, Mr. Uttam Tibrewal, who will share his thoughts on operating highlights for the quarter and the financial year. Besides then, we also have a few senior members of our management team on the call today to answer any questions that you may have. For the benefit of everyone, and so that we can take everyone's questions, we'd humbly request everyone to keep the number of questions per participant restricted to 2 and join back in the queue in case you have further questions.With that, I'll now request our MD and CEO, Mr. Sanjay Agarwal, to share his thoughts on the bank's performance and outlook.
So thanks, Prince. Hi, everyone. Good evening. Namaskar. I'm very happy to speak to you on this call today as we recently celebrated 28 years of our existence and 6-year of banking. It has been an incredible journey and a wonderful experience to build a bank like AU. I met so many of you last year during the road show, while raising capital, where we got tremendous support, acceptance, not only of our business model but also for me [indiscernible]. Today, I'm happy to share that we have fulfilled all our promises made last year during the Road Show despite many headwinds like inflation-led high interest rate cycles, liquidity issues and unnecessary negative perception around us.We promised to grow our business around 30%, and our numbers speaks like this. Our deposits grew by 32%, now standing at INR69,000 crores plus. Assets after securitization grew by 26%, standing at INR59,000 crores plus with pristine asset quality. We delivered sustainable and superior ROAs and ROEs at 1.8% and 15.4%, respectively, without any one-off income from treasury or PLC and of course, despite high interest rates. Our tech outlook remains very strong. Key highlights being upgrade of our core banking system, enhancing data center capacity and scaling our digital propositions further with launch of innovative products like credit cards and current account.We actually serve 38 lakh plus customers at 1,000-plus touch points in 21 and 3 UTs by winning team of around 20,000 people. My reappointment as MD and CEO and my colleagues Uttam as Executive Director, for a full 3 years reinforces that we are walking on the right path with strong compliance sales, robust governance and sustainable business model. I'm really thankful for you for this. The past couple of years I've been personally trying for being as a seasoned entrepreneur of 28 years as we have been the subject for numerous unfounded, unfavorable rumors causing unnecessary commercials and [ averse ].I hope that now we can all move forward with focus on our performance. I would like to thank all my shareholders for their patience unwavering support and being there with us through thick and thin. Another feather in our cap is receiving of AD-I license on our foundation deal. It is not only completes our product offering to the existing customers but will also help acquire newer segment of customers. I'm thankful to the regulators for validating and strengthening the small finance bank platform by not only giving us the AD-I license but also to another 2 SFB friends. So that product offering at SFB platforms are complete and at par.Coming to India. We remain on a very different trajectory as a country of optimistic, determine and hard-working people. We at AU are very excited to participate in India story of 1.4 billion people, with economy expected to grow at 7% in next 10 years by providing excellent protective services to build India. With a market share of just 0.4% in both deposits and assets, the opportunities are immense, then the sky is the limit. Our business model is well settled. We will remain in identified market segments like urban markets for garnering deposits and for lending the core and rural markets. Our focus is to build sustainable, low-cost granular deposit franchise, where the challenge as of now is around interest rates. But we will continue to manage with strong emphasis on CASA and granular deposits, especially on a current account proposition.Last year, we grew current account deposits by 43%, bringing our CASA ratio to 38% and CASA plus retail deposit base at 69%. This helps contain our cost of money at similar level to last year at 5.96%. In FY '24, our margins may be impacted as the cost of money is higher, and the peak is not over yet. Further, our loan book has been fixed rate, which also gets impacted in a rising interest rate scenario, although share is coming down and now it stands at 66% versus 74% a year ago. The share of commercial bank and affordable housing goods are increasing, which are important franchise business, but with lower yield.However, these businesses have lower credit costs and lower FX and thus has similar ROA as per our other retail businesses. Further our margins will be protected by continuous investment in strengthening current account propositions, transition banking, focus on data and its capabilities, automation of credit and process reengineering. As we are investing to build capabilities, thus our cost-to-income level can be high. Moving ahead, we expect the advantage of scale to start kicking in. And by the year end, our investments in investor lending, video banking, unsecured lending and cross-sell will start positively impacting the P&L. There will be more pool of revenues from AD-I license, well product ETC.Credit card business is also expected to breakeven in the next 1 year. Further, we [ boosted ] our strength at the board level by inducting 3 independent directors last year, out of which 2 are women directors. We are now 10 members strong board with 8 independent directors.The talk about my own focus area, I mean, very importantly as a CEO, I'm very excited for my next 10 year. My area of focus is to build brand, which will eventually -- which will eventually help us in deepening trust in the entire ecosystem, strengthen our deposit franchise, invest in innovation, data first and digital culture with emphasis around understanding our customer, which we call UIC and to build a strong HR practices. Tech and innovation remain my top focus areas. I'm not attacking myself, but I'm investing a lot of my time these days, in tech discussion with IT team, partners and ecosystem stakeholders. We are working across all aspects of technology, be it core technology stack, digitization, automation, data analytics and digital customer-facing propositions.This quarter, we made significant progress in strengthening our core technology stack. We upgraded our core banking system to the latest version and we're also upgrading capacity of our data centers. In wheels business, which is the oldest one, we are implementing Salesforce LOS along with underwriting tool by SICO to enable straight-through processing of legal loans. While we started this journey from our oldest business, we invest -- we are in charged to implement similar processes of all the loans in the bank. Another step towards operational excellence is to automate processes using robotics process automation and AI.I personally believe that in the next 10 years, every Indian will have a digital footprint, and that would be to generate large data sets. And as a bank are the golden source of data, those with capabilities to leverage data to personalize customer experience with standard winners. At AU, we're enhancing our understanding of customers through in-house and alternative source of data for the long-term vision to have a customer data as a good and is a vast as what Google has, keeping in view all required norms around previous year data protection. On the digital front, we continue to deliver innovative products and upgrade existing offerings.We have recently launched digital current account proposition, SwipeUp card, credit card upgrade program and industry-first offering around bill payments over video banking. Our digital insurance and wealth proposition have also started gaining traction. And this year, we will further enhance and scale this and will be soon launching [ merchant act ]. We're also enhancing our digital payment stack with more powerful propositions around UPI, BBPS, FASTag, EDC. I believe I'm sounding like a techi guy. So we have been preparing ourselves to leverage the opportunities available through the emerging public digital infrastructure in India. We are live on the account aggregator. We are one of the first few banks to live on the [ open ] platform, and we are in discussion with OMDC team to implement innovative use case around digital commerce.We're also working with an RBI Innovation Hub Fintech to enable financial inclusion. We remain on a journey to build one of the fast -- one of the best tech-led retail banking franchise for this country. To execute on our vision, we have strengthened our tech team and are working with leading global tech companies, be it Amazon, Salesforce, Accenture, Adobe, Oracle and PCI, et cetera. All these asset partners have been engaging well with us, and I'm personally meeting their global leadership to further strengthen our relationship and to explore areas of innovation. Another area of focus for me is to build strong HR practices because I feel people are the greatest asset.I'm happy to say that our senior team is quite stable with an average vintage of 7 years, well balanced and is driving the business with a lot of passion, purpose and pace. On the hiring front, we are seeing a great action on people wanting to join us. Our recent HR practice are getting knowledge, policies like menstrual leave for women employees and AU for Forever Pass, is among the first in industry inspired by our philosophy of Badlaav Humse Hai. I'm delighted to share with you that we have received a Retail Banker International Asia Trailblazer Award for our HR practices as this is a great place to work third in a row and are one of the top 25 organization in the [ BSFB ] segment.Among the many awards that we received last year, the prime one is to adjust as the Best Small Finance Bank of the country by Financial Express and Business Today. We are really humbled and grateful to all of you who have been an critical part of this journey. In the end, I can assure you that we are more committed to build one of the finest institutions of the world. I believe that building up banks may take at least 10 years to understand all the nuances of this platform. I'm very happy to say that we have -- the way we have progressed in the last 6 years despite so many real and unrealized challenge that we faced, navigated and [ sailed hard ].There's a time for consolidation to build a long inning. As the batsman gets more confident with every passing over, similarly we are getting more confident with every passing year at this banking platform. We continue to lay foundation of building a sustainable, well-governed Pan-India bank with a mindset of playing a long inning. We are willing ourselves to take advantage of the India opportunity over the next decade. We have figured out approach by offering the right product in the right market, deposits from urban assets in core offered by the right team with the right tech, walking on the right path, building practices and processes, which are standardized, scalable and sustainable.Thank you so much for listening to me. And let me hand over to Uttam for the operation highlights. Thank you so much.
Thank you, Sanjay. Namaskar. And very good evening to everyone. I hope you all are in good health. FY '23 witness a [ see ] surges of the demand across various industries with domestic consumption on the rise, along with increase on ground activity and a positive outlook for India's GDP growth. Our [Technical Difficulty] for FY '23 remains well on track. As we conclude Q4 FY '23, I'm pleased to report that AU Small Finance Bank has delivered a consistently strong and stable performance across all our businesses throughout the quarter and also the entire fiscal year.From readout of our digital properties to deposit growth to CASA growth and improve granularity to consistent loan growth with ever-strengthening asset quality, we are diligently focused on excelling in every aspect of our customer-centric business. Notably, we have managed to keep our gross NPA below INR1,000 crores, thereby bringing down our GNPA to 1.66% and net NPA to 0.42% on the back of strong collection efforts, while stemming to our philosophy of deep customer engagement and proactive problem solving. Having recently completed our sixth year as a small finance bank and 28 years as an institution, I'm proud to say that we have built a winning team of over 28,000 plus employers, dedicated to transforming our organization into an institution that commands the competence of regulators, the love [ enters ] of its customers and the backing of its investors.I'm pleased to share that bank customer base has grown to over 38 lakhs in FY '23, representing a growth of 40% over last fiscal year. During FY '23, we added 108 new touchpoints to expand our distribution to a total of 1,027 touch points and serving our customers physically fund 711 unit locations across 21 and 3 union territories. Similarly, our digital distribution has also seen strong traction with our AU 0101 app saw 90% growth in user growth registration to 19 lakh customers with more than 10 lakh active users in March 2023.Our video banking channel has evolved into a comprehensive and self-sufficient digital franchise offering 400-plus services and handling over 1,000 customer calls per day. On the other hand, our attrition of savings from customers while the video banking channel grew 100% during the year with 2.9 lakh plus customers, adding over INR1,150 crores of deposits. And 15% of customers also holding an additional product from bank. I'm excited to inform you that we have started acquiring current accounts using Video Banking starting April 2023, and we are confident to get a similar success on this journey too.For credit cards, the journey of our sourcing to video banking started in October 2022. And in less than 6 months, we issued over 1 lakh credit cards via this channel. Our overall credit card position now goes more than 5 lakh cards and the monthly issuance reached 50,000 plus cards and monthly spends reaching INR1,000 crores in March 2023. Also in line with our commitment to innovation and customer centricity, we introduced SwipeUp, an industry-first instant card upgrades program, featuring a digital compare and purchase journey.On the merchant side, I'm pleased to inform that we have reached the milestone of 10 lakh UPI OR codes with UPI QR transactions doubling over the past year, reaching 40 lakhs in March 23. Not only payments, but our QR-based lending solution has also seen a good start with close to INR200 crores disbursed in merchant lending in Q4 FY '23. Also in Q4 FY '23, we disbursed INR146 crores in personal loans, taking to total disbursement of [ INR804 ] crores till date, all through the AU 0101 digital backlog. The success in digital acquisition and engagement is also attributed to the growth in brand awareness with over [ INR31 ] crore brand impressions and more than [ INR1.6 ] crores [indiscernible] in Q4 FY '23.Not only did the brand search volume increased by 30% in the fiscal year, but the [indiscernible] traffic has also grown by 2.7x year-on-year with 50% lift in organic traffic, translating to growing brand affinity towards the bank. We have also witnessed a 200% growth in number of existing customers using our website to explore products and enabled services. Moving on to our business numbers. Despite macro uncertainties and significant competition in the deposit market, we are seeing consistently strong performance in our deposit resize throughout the year.In Q4 FY '23, the total deposits for the bank grew to INR69,365 crores, a growth of 70% year-on-year. With the bank having 25.6 lakh deposit customers as of March '23 compared to 19.8 lack customers in the previous year, representing a growth of 28% year-on-year. This fiscal year, we [ totalized ] customer engagement and deepening to [ function ] our customers accounts to the primary accounts. Our focus on customer satisfaction, better product proposition and continued engagement with the customers has led to impressive [ 20% ] of current account and 57% of savings from customers regularly transacting with us. On an average, our transacting customers transact 33 transactions per month in savings account and 69 transactions in current account.Similarly, our product per customer ratio improved to 1.61 for savings accounts customers, excluding government and [ BSB accounts ] and 2 products per customer for our current account customers. We have also found that engaged customers generated a lift in average monthly balance by 2x to 8x and those who are not engaged. As I have mentioned earlier, another important area of focus for us has been our current account deposits, which has resulted in remarkable growth of 43% year-on-year, reaching INR3,680 crores on March '23 as compared to INR2,570 crores in March '22. This help us optimize our cost of deposits for the full year.The overall CASA deposits grew by [ 26% ] year-on-year from INR19,608 crores to INR26,660 crores, helping and improving our CASA ratio from 37.3% as of March '22 to 38.4% as of March '23. The increase in CASA ratio is a marketable achievement in an environment where there was notable competition for deposits across the banking system. After resounding success of our first Union banking offering, [ AU OM ] we are excited to announce the launch of the AU IV program, a one of a kind product in the industry, this is an invite-only super HNI category product, and we look forward to receive the same attraction and acceptance from all.Our strategy of focusing on urban markets for liability products as been successful, and we opened 58 new branches in urban and metro markets in FY '23. We have already seen a few branches, which are less than 1 year old, ramping up the deposits to INR50 crores to INR100 crores, reflecting the positive response we have received from high-quality retail customers in urban markets. Our strategy of asset cross-selling to our liability customers has proven effective in engaging our customer base and deepen the relationship. Cross-sell of asset products to [ branch ] banking customers increased by 25% to INR2,500 crores in FY '23 compared to INR2,000 crores in FY '22. Credit cards, personal loans and business banking are among the key assets for liability customers, and we will keep ramping up our efforts here.The gold loan is another area where we are focusing on branch banking and currently offering this product from 50 locations. We are in the process of scaling up our gold loan business, and we'll keep you updating as we progress. On bancassurance, our partnerships with HDFC Life, ICICI Prudential, Future Generali, [indiscernible] Care and Chola has helped us to drive customer activity and engage customers for life, general and health insurers. Through these partnerships, we sold and renewed over 5.9 lakhs insurance policies in FY '23 for a premium of INR640 crores.Last year, we applied a greater focus on wealth management and have completely digitized our wealth journey, making it paperless and signatureless, resulting in a seamless and superior customer experience. As a result, the number of customers having SIP has doubled from 22,000 to 56,900 in March '23. Consequently, our mutual fund AUM has increased by 62% from INR103 crores in March '22 to INR167 crores in March '23. We have also started distributing PMS offerings to serve our HNI customers through our partnership with Motilal Oswal Financial Services. We have acquired over [ 31,031 ] saving accounts taking the total number of search accounts to more than 90,000.Now let me turn to our asset business. Starting with wheels. For Q4 FY '23, the vehicle industry sold a total of 48 lakhs units registering the year-on-year growth of 7%. Coming to the full year, commercial vehicle segment saw a year-on-year growth of 27% while tractors, personal vehicles and 2-wheeler segments also exhibited good growth, registering growth of 19%, 12% and 5%, respectively. Keeping up the industry plans, we disbursed INR3,716 crores, a [ 1.34 ] increase from Q4 FY '22 with an IR of 14.44% marking a year-on-year increase of [ 101 ].In addition, we achieved the highest quarterly disbursal for used vehicle financing at INR1,750 crores in Q4. Our average figure size and investments was around INR5.02 lakhs and around INR3 lakhs at portfolio level, excluding premiums. As of 31st March '23, [ Batura ] portfolio stood INR22,833 crores to INR8.42 lakhs live loans, comprising of 52% new vehicles, 36% used and refinanced vehicles, 10% tractors and 2% 2-wheelers. The portfolio of commercial segment contributed to 46%, while the purchase segment contributed 44% and tractors contributed 10%. Our used business asset quality further improved with gross NPA at 2.25%.Moving on to our secured business loans. In Q4 FY '23, we saw our highest ever quarterly disbursals of INR2,300 crores in SBS segment. [indiscernible] stood at INR6,717 crores, with year-on-year growth of 39% with an average figure size of INR11.6 lakhs and across 60,000 loans. The business [indiscernible] portfolio stood at INR19,509 crores, an annual increase of 18% with portfolio higher of 15% and GMP at 2.5% across 2.5 lakh live customers. For the increasing number of MSEs and rapid formulation in the sector, we believe the size of the pie will keep expanding. [indiscernible] 7 new segments for the last few years, we have built a sustainable business model to serve the majority of our customers in rural and semi-urban areas. We are well equipped to penetrate existing markets and venture into new ones.Moving on to our home loan businesses. As a relatively general book, the portfolio of housing book grew by 63% year-on-year to INR4,283 crores across 42,400 loans with an average ticket size of INR11.81 lakhs and IR of 11.8%. In Q4 FY '23, we disbursed INR722 crores, taking the total annual deposit to INR2,200 crores. Currently, home loans are available at 240 branches of the bank, and we have scope to expand coverage to all our touchpoints in due course to encourage retail cross-sell. Our GNPA was stable at 0.33%. And it is noteworthy that much of our affordable housing book is also eligible for long-term refinance for MHP.Moving on to Commercial Banking. Commercial Banking disbursed INR2,848 crores in Q4 FY '23. Of which, business banking and agri banking accounted for 63% of the business. Our total Commercial Banking portfolio grew by 56% from FY '22, reaching to INR13,006 crores and now accounts for 22% of bank gross advances. Gross NPL Commercial Banking has reduced from 0.84% as of 31st March 2022 to 0.38% as of 31st March 2023, which further validates our underwriting approach and customer finish. The business banking portfolio reached to INR4,938 crores as of March 2023, showing a year-on-year growth of 70% with the systems of INR1,005 crores during the quarter.The agri-banking business reached a INR3,964 crores portfolio mark, showing a year-on-year growth of 75%, with disbursements of INR800 crores during the quarter. This growth was a result of several factors, including expanding our footprint in new geographies like Uttar Pradesh, East India and Southern markets. Newer product initiatives increased synergies with contract. Furthermore, our NBFC funding book has reached at INR2,551 crores mark, showing a year-on-year growth of 25%, with disbursement of INR601 crores during the quarter. Our R&D book has reached to INR1,224 crores portfolio mark, showing a year-on-year growth of 57%, with disbursement of INR442 crores during the quarter.To sum up, looking ahead, the strong credit demand will keep the pressure on deposit rates, and we will need to manage our cost of funds. Thus, growing our current account business will remain a key focus. Our focus in liabilities business remains on acquiring low-cost granular individuals, small business and transacting customers as building a predictable, scalable and sustainable deposit franchise. On our asset businesses, focus will be on bringing efficiency, productivity and automation, digitization and leveraging existing customer base through cross-sell. We are grateful for the authorized dealer category 1 license granted by the regulator, which completes our suites of banking service for CASA and commercial banking customers.We will now be able to offer ForEx services for existing customers as well as acquire new customers for cross-border trade, and [indiscernible] and guarantees. Looking back at the 28 years of our journey, I reminded of a few which starts with a [indiscernible] growth which is happening and new adequate merchandise and care before going to a fully grown tree. In the past 6 years of our banking journey, we are tried to lay a strong foundation to build a forever bank and our efforts towards offering customer focus services and products have become visible. We are successfully transformed into a primary bank for a sizable part of our customer base, which is specified with growing active users on AU 0101 an increase in customer transactions.We look forward to continuing this journey and serving our customers with even greater dedication and commitment in the years to come, and I look forward to sharing more with you in the coming quarters. Thank you. I'll now hand you over to Prince for taking the call forward. Please take good care. Thanks.
Thank you, Uttam. As usual we can now open the call for question and answers.
[Operator Instructions] We have a first question from the line of Bhavesh Kanani from ASK Investment Managers.
I have 2 questions. One, when we look at the ROA profile for this year and when we think about the key trends likely next year, one would expect that NIM could be under a little bit of pressure, provisions, which have been delayed this year, can be addressed of going out? And all the while, we'll continue to spend heavily on strengthening our franchise rates. So is it right to expect that the ROA for next year, it could be lower than when we have ended this year. Your thoughts on these. And if you can help us understand the lower effective tax rate for this quarter.
Bhavesh, this is Prince here. So maybe I'll start and then probably Sanjay Ji can add. So as you rightly said, for the last 2 years, if you see, overall, our margins have actually expanded quite well. And we have got the benefit of the tailwind on the cost of funds, given the lower liquidity post-pandemic. And even as of today, as we have mentioned in the presentation, we have managed to maintain our overall cost of funds for the last financial year in FY '23 at the same level of FY '22, right? So of course, there will be some amount of catching up. That's going to happen with the lag that's happening with the entire industry, and that will happen with us as well.So you're absolutely right that there will be some amount of pickup in the cost of funds in the next financial year, right? And you also mentioned and rightly so that we have also been using this tailwind to invest in our future capabilities and businesses. Like if you look at the entire tech investments that we have done, coming out of lower cost of funds or higher margins and lower freight cost, we have used that money to upfront invest in our capability, and we are now nearing somewhere near the end of that investment phase.Of course, we probably have one of next 12 to 18 months still to go. But the pace -- the returns have also started crystallizing, right? So by the end of this financial year, you will see us monetizing our -- some of the key initiatives around video banking around your entire merchant lending, UPI QR code or unsecured lending, personal loans, cross-selling that we have been piloting or even towards some amount of distribution capability around the insurance side as we have added some new partners, right?So all in all, I would say -- and then obviously, we have AD-I coming up. And of course, it will take some time for us to implement it. But at least by the end of the year, we are hoping that we'll be live up and running. And there will be some amount of benefits will start accruing. And then obviously, we have the credit cards coming up sometime in FY '25 when we are looking for the credit card business to breakeven. So all in all, there are some of the investments that we have made during the last few years, which will start leading positive results beginning end of FY '24.So honestly, while we may have some cost in chop, but we are not too worried around ROA trajectory. The ROA trajectory will definitely be maintained. And probably, you might see some positive impact by the end of FY '25 because for all the things that I mentioned. And even on the cost of funds, if you look at currently, we are in a pause mode. We obviously saw a very heavy or very strong March in terms of competitive intensity. But of course, we are beginning FY '24 with slightly pause, regulators have put a pause on it. The 10 year even if you look at, we are at about [ 710 ]. So while there will be an intense pressure, but as we have said, we might look at -- as Uttam Ji also said in his speech, we are looking to add current accounts.We are also trying to see how we can play with the mix. We securitize some of the portfolios last year to get advantage. So keeping all of those factors in line, will the margins be impacted? The answer is yes. Would it be really, really large, I would not really think so. I think it will be somewhere in the range of historically where we were between pre-COVID to now. And however, the ROA trajectory definitely is not going to be compromised.Boss, if you want to add?
So, Bhavesh, my simple answer is, is that NIM will get pressurized maybe around 30 bps, 40 bps in this year. And because already, we are starting our cost of money around 6.4 instead of 5.96 the cost of money was last year whole, right? So there will be a pressure on our NIM that is clearly there because it's not easy to also transfer the entire pressure on the borrowers because there is not much competition also there. But banks are generally not meant to only build their profits from NIMs. We have the other pools.And like last year, there was no pool from full income from PSLC or from any kind of investment right. But I hope -- I mean, we should hope that there will be other pools like maybe insurance income can inch up this year. We'll have AD-I, we'll start monetizing our QR business. Next year, it will be credit cards. So overall, as since Prince narrated that we would able to save our ROA. And ROE, the golden -- I think the data is around 2%, right? If you earn 2% ROA in this few years of our journey, it's really good enough for us, but maybe around 1.8% to 2% range. We are hoping that we will click that kind of ROA next year too.
Okay. Wonderful. And just the small clarification on the effective tax rate being at 20.
So, Bhavesh, Uttam this side. So for effective tax rate, we have received one refund and assessment order in our favor in this quarter. So that income has been considered here as a reversal of income tax. So that's why this reduced the tax rate.
We have our next question from the line of Renish Bhuva from ICICI Securities.
Sir, just 2 questions from my side. So one is on the vehicle book. I mean, after a long 6, 7 quarters, we have seen the absolute decline in the book despite there is a illustrated win. So just trying to get a sense what is happening there.
So before Bhaskar Ji answers, Renish, let me just clarify, the vehicle book hasn't really declined. In fact, it has gone up. But yes, you have to -- we have also securitized some business this year or this quarter. And because of that, you are seeing in the absolute terms only on gross advances. If you look at the overall deal book, then the growth has been upwards of about 32%. You need to...
In the overall to figure out the growth.
Correct. So Renish, Bhaskar here. Nothing changes, all well. It's just, as Prince rightly mentioned, it's just a matter of the [indiscernible] book, otherwise, all products in the market that we are -- the thing that we do, we continue to do, and we continue to do the same strategy of managing the product and rate the way the bank needs this.
Got it. So let me put it this way. So we have not lost our market share in Q4 in this business.
No, we've not lost market share.
Okay. Rather you would have gained right, Bhaskar Ji?
[indiscernible] because we usually do more. So market share, when they talk about, they talk about new vehicles more and then we play the new market. So that's the reference point. But in and around the same market share.
Got it. And sir, secondly, again, continuation of what Bhavesh was trying to highlight, is that -- let's say, in FY '22, given the like premium trajectory. And also this year, the credit cost was lower, which should idly normalize in FY '24. So when we will have 2 major components should drive ROE lower? One would be, of course, in contraction and the credit cost normalizing. So how confident we are that we'll be able to sort of sustain this 1.8% ROE in FY '24 as well?
So my take on the credit cost is a little different. I strongly believe that this year also we'll have the benefit because of the top asset quality around us. You are seeing how we are getting it now I think pre-COVID level also is better than that, right? So it was 1.6 net NPA is 0.4. And I think every day, and we are going on the ground, we are seeing a lot much optimism around credit growth, credit compliance, repayments. So I don't think that credit cost can surprise us in this year or even get to the normal level.And again, I want to say that somehow, I'm able to figure out in the last 6 years that sometimes some pool helps you sometimes the other factor helps you or sometimes there's negativity of some other things. So this year, it may be because of NIM getting pressured, but it can be helped out because of a good asset quality, the other income from other pools like AD-I or maybe demonetization of our QR business and all those things. So it's a mixed bag, and we need to carefully craft our journey. So that is why we are hoping that this year also to be very honest '22-'23, people were challenging us that we won't able to give this kind of ROA.But in the end, we are able to deliver that, right? Let's hope for best and see how the market also plays out in the next maybe 2 quarters because there is a pause of interest rate as of now, right? And we are seeing it like bonds are coming down at 7.10 today, right? So I think we need to believe more in hope and believe and see we will play our inning well, that's our sense.
We have our next question from the line of Shubhranshu Mishra from PhillipCapital.
Two questions. First one is on the deals. If we can split the book into various asset classes, what comprises of [ forward ] proportion, what would be LCV, SCV cars, tractors, so on and so forth. The second question is on the initial comments Sanjay Ji made about breakeven of the credit card business in FY '25. This seems very aggressive compared to any other bank in India. So there is no bank that can claim a breakeven in credit card business in flat 3 years, generally, it takes around 5 to 7 years. The largest of the banks in India have done it in as much time.So given the fact that you've pointed out the average credit limit and the new to bank customers and new to credit card customers, I think we are going very aggressive on those parameters to really have the breakeven faster and play to the gallery. Is that a fair comment to make on the credit card sir, if you can explain a bit answer.
So, the answer is the later one first. So, as you know -- so I think early on -- Shubhranshu, okay. So I hope you would have gone through our credit card presentation done maybe 3, 4 months back to really explain our strategy around it. So as you know, Shubhranshu, that we are more of a still employed kind of lenders, and we know how to lend in core markets over the years. So we are not playing to the galleries to be very honest because credit card as a business is very nucreative, post our all digitization across country.And now it's a first product to be very honest, for the payments and the oldest one. And the data which we are getting every month, and we have seen -- as you would have read in our presentation also that our average spend is around now INR20,000 per card per month. Our 84% is active. We are giving around 50% cards to our existing customer base. And we haven't done so much of investment to be very honest that its recovery happens in 5 to 7 years. And I'm saying with a lot of responsibility that our credit card will become profitable in quarter 3 of FY '25 based on our whole growth plan and the business plan in place.And Mayank and team is doing a fantastic job in adherence to the data is superb there, right? So I would like you to -- we can be touch with the IR team. They can be in touch with the bank and team and to figure out our strategy there. But I'm absolutely confident that we are very rational there. We are very confident there. We are doing everything in the way we want to build our franchise, which is a sustainable and which is forever. So we don't have any room to make mistakes, to be really honest, right.So I think there, you will find us in quarter maybe 2 and 3, maybe 2 or maybe 3 in FY '25, making us breakeven, right? So this is the credit card commentary I would say. Bhaskar Ji, can you comment on the wheels data?
Sure, sir. From a split point of view, that personal card is about 40%. We do a car taxi, which is about 12%. Our truck, which is the heavy commercial which you asked about is less than 5%, our LCV is around 4%. We do close to tractor of 10%. We have 4% of construction equipment. So this is how we get about 2% of 2-wheelers. So that's the story from the 2 to 22-wheelers that we generally have had a split on the book today.
Understood. Just a follow-up --
And one more data point here. Just to comment on your playing for the galleries. So this book is being handled and built by our ex CRO, his name is Mayank, right? And he -- he does not belong to a business or does not belong to a particular kind of mindset. He belongs to a risk mindset. And he's building this business from the last 2.5 years. And he's strong in his credit compliance, strong in his overall approach to do this business, right. So I hope he will make a surprise next year.
Just one follow-up question on the credit card. Sir, what is the sum cost? What is the total tech investment that we have done in credit card [indiscernible] breaking in even so part?
Shubhranshu, this is Prince here. So we have given the details on our P&L slide, right? So that comes to about for this particular year will come to about INR156 crores for the last quarter of -- I mean that's the total investment, but of which 70% has been on credit cards. So that will be about INR100 crores. There's also a corresponding income that we have shown in our other income breakup which has also been about INR100 crores. So for the full year, I think we would have invested about INR300-odd crores -- about INR250-odd crores on credit cards and we have a revenue -- sorry, fee income of about INR100 crores against that. And of course, there's NII. But be happy to -- Shubhranshu I think just to get into further details of this, may be a good idea for us to get you a meeting with Mayank to answer further questions specifically on credit cards. FYI, we have also given on Slide #31, specifically the overall ROA impact of all our digital initiatives, including credit card.
Best of luck for the credit card breakeven. I look forward to it.
We have our next question from the line of Ratik Gupta from Guardian Asset Management.
So my question is on the book -- the breakup of the fixed and the floating rate book. So currently, as we have a 66% in the floating rate and assuming that the repo rate will remain the same, so do we hope that the fixed rate breakup will go high? Or do we have a projection on what will be the sort of breakup between the fixed and the floating rate book?
Madhu, right?
Ratik.
Ratik, so this is Prince here. What we have given and what we generally talk about is the mix on the overall asset level. So you see we have like 4 broad businesses on the asset side. Of course, you have lease and SBL, which are predominantly fixed rate books. And then you have home loans and commercial vehicles, which are predominantly variable rate books, right. So the overall composition of these books have already been given. And we broadly think that we'll probably try to maintain somewhere around this mix where retail assets, which is home loans plus SBL plus wheels would be anywhere around 65% to -- 60% to 65% and probably around the commercial bank is 20% to 25%.
No, Ratik, so I think what I'm able to understood your question is, is that how we will reduce our fixed rate book, right? So I would say that we started -- once we started a bank, right, it was 100% was fixed rate. Now in 6 years, we have reached at 66% at fixed rate and 36% as our variable rate. And as our retail book largely from home loan and commercial banking is going up, I expect my fixed rate book to touch down nearly 50% in the next 3 years. So there is no room that my fixed rate book will go up from here because I'm able to build my business banking book, agri banking, NBFC, real estate, housing book and all are actually growing faster than my fixed book, which is largely SBL and linked. So from here onwards, you will see a drop in our fixed rate ratio in asset very gradually. And in next 3 years, will turn down 50%. That's our overall assessment.
Okay. And my second question is on the borrowing and the deposit ratio. So if you see the borrowings have reduced. So are we looking forward to be reduced borrowings and focus on deposits for increasing our capital, like the borrowing side, liability side?
Yes. So I think around the CD ratio, if you see, obviously, last quarter was very good on deposit growth. And to that extent, the CD ratio is currently at about 84 and which is basically what is reflecting on the overall borrowing percentage lower. But historically also, if you see our borrowings has always remained anywhere around 7% to 8%, and bulk of it is refinanced so -- and that is the cost advantage.
Long term, without your...
CRR and SLR.
Right.
Right, so it's part of our strategy of liabilities, diversifying liability business and the cost of funds because we finance gives me that leverage in terms of a lower cost against our priority sector assets. At the same time, we don't have to maintain CRR and SLR on that book. So you see us borrowing somewhere around the ratios that we are broadly.
We have our next question from the line of Kunal Shah from Citigroup.
So the question is on the fee income side. So a lot many levers now available there in terms of the increasing contribution of credit card plus distribution and AD-I license would also help. So where do we see fee income to settle? What would be maybe our aspirational maybe ratio for fee income to assets? And when do we expect to achieve that over how many years here?
So Kunal, Prince here again. And if you see our entire fee, other income or fee income ratio to assets for the current year, it has been anywhere around 1.3%. And at the core other income, it has been about 1.4%, right. So obviously, this was a year when we didn't have any one-off in terms of fee income. There was no treasury gains, there was no PSLC fee income, right. So this is a pure and pure core operating fee income at about 1.4% of assets. If you move forward from here and for some of the levers that you talked about, definitely it should go up. Now the question is, at what level and to what extent we'll have to see, honestly as things materialize. But in the longer term, I don't think it should be any different from where most of the commercial banks are today as we go.
Yes. Just to add on, Kunal, as narrated that I strongly believe that there is a change in insurance payout also on the recent circular from IDA, right. So that will add up to the other income space. And we're also growing our insurance very well. Last year, we've done around INR600 crore premium. This year, we might be doing INR800 crores. We have started building a very well proposition also. It's a small start, but we've got some kind of income from there also. Our trade income, which is -- was -- without AD-I license, also we've got some decent amount and is getting traction. AD-I will start kicking from quarter 3, quarter 4. It's difficult to ascertain as of now, hoping it will take 2 to 3 years to really get to the real level of that income. But I think overall, I would say that we, as a bank, being an SMB, we didn't have much options also in our initial years. But we are now settling down as a bank, and we are getting traction from everywhere, right.So we are -- the fees income from our asset liability is getting stabilized. Insurance and income will get more on to the balance sheet now. We're expecting well to settle down. We are expecting AD-I to settle down. So in the next 2 or 3 years, what -- and of course, our credit card income, all those things, the monetization of QR code business, they'll start now is around the corner now, right. Something will start from this quarter 3, quarter 4. And definitely from next year, it will be coming up at a decent level on our balance sheet. And next 18 to 24 months, it will get a decent shape also. So I think we need to be a little patient with us. And now I think time has come where we'll start commenting very specifically that how much percentage it will be on our balance sheet side, right. So that's the overall sense we are getting internally.
Sure. And secondly, with respect to yield, so maybe you highlighted in terms of 20, 40 bps pressure on NIMs. And if I have to look at it in terms of the cost of funds, given that now it's stabilizing there will be some catch up. But given the pause in the rates, looking at the maturity of our advances, how much could be the improvement on the SBL side, which we could see, which was -- I think maybe we have not witnessed it over the last 3 quarters. So just things standing as it is and looking at the maturity, what could be the reply?
Kunal, I think if you go and see our assets built up, the mix has changed a lot. Like commercial banking book and the housing book is now coming up the size. And there, the yield is not high. Actually, you need to pay on NIM. And of course, you need to play on ROA, right because there's a lower FX, there is a lower credit cost. So I strongly believe that there is an incremental hike in our wheel business. We are able to pass on some kind of hike there. We are able to pass on some hike on our SBL business. There is some hike in our housing, even personal and space.But before we are also building a book like commercial banking in overall yield on book, it doesn't reflect, right. So that is why there might be a pressure on NIM because we will see that our cost of money going up, but -- and each are not there on the overall asset. But you will see the lower FX and lower credit costs in times to come. So there is a change in our business model also. And that's why I reiterated my speech that generally bank takes 10 years to build, right. And we have just done our 6 years without noises, right. So I think another 4 years, I think all these things will settle down, and you will see that we are able to comment specifically on our NIMs and all those things, it is so efficient, so you people to forecast our future, right.
Yes. So with change in mix, no repricing benefit at all from current level of 13.4-odd percent?
I would say -- I don't want to comment to you at your honest, but 5, 10 basis doesn't help us, right. So It won't be like 30, 40 bps.
We have our next question from the line of Param Subramanian from Nomura.
So I was looking at the Slide 35, where showing the deposit mix split between individuals, corporates, et cetera. So if you look at it quarter-on-quarter, there is an increased 5 percentage point in -- from government and corporates, while the individual deposits has come down. So just wanted to understand how sticky is this deposit flow that we are seeing more on the bulk side from government and corporates? That's my first question. I'll come back for the second.
Rishi, you want to comment?
Rishi Dhariwal here. So basically, across the year, the deposits between the government and retail have actually moved more towards retail only in the last quarter because we continue to focus on getting more and more granular retail. So the composition between the individuals and corporate sort of looks a bit slightly lower than Q3. And we managed to win a couple of good government deals so which is where these are transacting accounts that we have. We won mandates from the government, the departments as well as businesses, where we have transacting accounts from them, and that is what has helped us to sort of get that number over there. So these are not bulk deposits, but these are project accounts where the transactions are happening through us. We are registered on PFMS for a state government project. We are registered on the PFMS for a central government project. We have the nodal account with us. So even the government account money which is there is actually a transacting account and it is a long-term sticky relationship that we have over there.
Okay. Got it. Is the funding cost here higher than what we see for the, say, the individual deposits?
I'm Yogesh Jain. So just to add, this government account, on your question, cost is absolutely less actually than my individual or corporate because this is transacting account in savings. So cost is lesser than my individual and this is a precision item that this is a nodal account. And in normal course of business, we get these accounts from central or state government. That is why you can see that government proposal is a little bit high. And in terms of corporate, also, these are very small corporates. These are not big corporates. Again kind of INR5 crore to INR10 crore kind of category, which we get a small corporate. So otherwise, we are on course.
Yes. If I can just add to that, Param, look what Rishi was also articulating, if you look at a year-on-year trajectory, then it is rather -- it is exactly same rather, right. In fact, it has come down on the government side and corporate is 14% itself. So as you were saying throughout the year, we have focused a lot on current accounts. We are focused a lot on savings account. And that has helped us to even manage the cost without necessarily looking for bulk deposits. But definitely, in the last quarter, there was a competitive intensity, some amount of -- as Yogesh-ji and Rishi-ji mentioned, we did get some savings balance money in some of the transacting accounts that we won, and that's the impact.
Okay. Fair enough. So what I understand is the mix will reverse back to something that we've seen in the last few quarters going ahead, right?
Our endeavor will be to grow individual and retail money, which is what we have always talked about, and that's the ratio that we track, which is basically CASA plus retail, right. So CASA plus retail for us is around 69%. That was same as last quarter at 69%. And in March '22, that was 67%.
Got it. So one other question from me. Just if I can -- Sanjay, if you could give some insight into how you're seeing loan growth going ahead? You closed this year at 26%, 27% on the gross advances side that you reported. But going ahead, how you are seeing the demand environment and the growth outlook for AU say for the next couple of years? That's it from me.
No, I think as I narrated in my call that there is not much optimism in every sector, be it wheel, be it SBL, be it housing, be it commercial vehicle -- sorry, commercial banking, so I think it's about us is not about how much really we can grow. The answer is we are looking at this, how much really want to grow, right. So I think last year also, we commented that we want to be in the range of 28%, 30%. And that we achieved, if you add on our asset reputation, we are near to that rate only. And so we really want to build more on rationality. We really want to build more on sustainability and being in the industry for so many years, I strongly believe that some time, the bad books are built in good times. So I want to be really cautious there. And because deposits is also not available at will, right, we have to put a lot much effort there.And as we were talking about that, whether we have -- whether we choose or we have a right to choose, it's not there, right. If government money is coming at a semi account, whether it's INR2,000 or INR4,000 crores or INR2,000 crores, I need to pick up, right. We being in a small finance bank, we are early in our journey. So we don't have a choice. But in the end, if you see our overall data profile, which says that our CASA is 38%, our retail is 70% and our cost of money is around 5.95%. And then, of course, we are building not much around digital. We are building not much around the other aspect. Then holistically, you see bank going very strong. And then, of course, our overall asset rationality around growth and then, of course, the asset quality. So that makes me more comfortable that we have the business model which is sustainable, which is scalable, and that's the way we really want to be in this business.
We have our next question from the line of Nitin Aggarwal from Motilal Oswal.
Congrats Sanjay and Uttam-ji on the results and also for the reappointment. I've one question.
[Foreign Language]
Yes, definitely. And so on the deposit side, we have done very well and you indicated that as an SSD, we have to take any good deposit that's coming out way. But the excess liquidity on the balance sheet is looking quite high. So if you can quantify that number? And now looking at the potential margin compression and also the SB profitability showing that additional investments are not adding anything to ROA. So what would be your approach on this front? Like would we look to reduce this excess liquidity? Or will you continue to raise the profits at the space?
No, so as we -- Nitin, I would say that whatever way we have done in the last 6 years, whether it's our deposit strategies, deposit buildup strategy, asset buildup strategy, the quality around it, the cost around it, the people around it, the tech around it, like I'm very happy to see that our credit card business becoming profitable next year. We are already started monetizing our QR code business. We have already started building up video banking as an option to branch banking, right. So I don't have a choice not to invest, to be very honest because we are looking to build this bank for next maybe 100 years, right. And tech is essential, whole tech innovation is essential. You will be left out, so you need to invest with NPCI.We need to invest with Amazon. We need to invest in Salesforce. We need to invest with Visa and FIFO, right. Those are coming like from everywhere now. So I don't think that for 1 year or 2 year to make my balance sheet very smarter or my ROEs and ROE is very attractive, I should not do investment, right. So I will -- we will keep doing investment because that's the need of the hour, and that's the way the bank should be built on because we are also earning very healthy ROE and ROA. Our ROEs are north of 15% in spite of raising so much of capital last year, right. And you will see that ROE is coming back maybe in the next 2 years, 3 years, whatever you expect. But I think then it will be more sustainable because we tech-led ROEs and ROAs, right. So that's one thing.Second, the other question because the excess liquidity, it was temporarily parked because the money we only got in last week over last 2 weeks of March, and we already have deployed it. And again, we are not in a position that we had a lot many choices to say no, right. We say no to many things. But if deposit is coming in current account or deposit is coming in semis around 4.5%, 5%, we need to accept because we are a banker on a street, which is available for customers to do banking, right.So I think there also, the access is not hitting us so much because particularly on March, it looks very heavy, but it's around 128%. But as of now, when I'm speaking to you on 25th of this month, it already got resolved, right. So that's the sense. So it's a very dynamic platform, very operational platform, many things we need to accept as we do our business on a regular course, but very confident and very excited that our 6 year has gone without much of disturbance around us, other than the perception, right. And we are deposit franchise, our asset franchise, our digital franchise, our governance, our overall aspect of banking, we are taking every box out of it.
And just to add, Nitin, one point that -- like as was said, obviously, LCR has already normalized. And for the last quarter as well, we had reported the average LCR was 128%, right. And again, being a small finance bank, relatively newer bank compared to some of the existing guys, we do have to keep some excess liquidity. I mean the resolution requires us to keep 100%. There is a certain amount of both mandate as well given the kind of intake that we have. And Nitin, we might have said so -- if you see the slide number 31, even in that excess liquidity, we are not losing money. So at least it's slightly positive side. So we are keeping the excess liquidity for keeping our balance sheet strong and not losing any profit.
We have our next question from the line of Ashlesh Sonje from Kotak Securities.
Congrats, on the good numbers.
Can you speak louder, please?
I hope you can hear. I hope being better. So first question is on the SBL book. If I include the securitized book, that segment has grown about 7% Q-o-Q, which is a healthy number. What run rate do you expect for this growth in the near future?
SBL book?
SBL book.
SBL book should grow in the range of 20%, 22% year-on-year, right, plus-minus 1%, 2% here and there because we have got a scale now is north of INR20,000 crores. So I think it will go around 20%, 22% range every year.
Okay. And secondly, you mentioned that you have taken some hikes already on interest rates on the new originations in both SBL and wheels. Can you quantify roughly a weighted average number or something? The hike which you have taken on new originations?
Incremental -- in the incremental, Bhaskar-ji, you have a data incrementally in 1 year term, how much incrementally you are passed on to the borrowers?
Yes. So we have already -- if you look at the entire year, we have gone up by 80 bps over what it was last year and Q-on-Q, but the last quarter of last year versus this quarter, it's up by 1%. So incrementally on a sequential -- Y-o-Y. But if you look at during the year, we have [indiscernible].
SBL, we have largely remained the same course.
Okay. Understood. Any idea what would be the sequential increase during fourth quarter in the wheels segment?
The rate?
Yes. The overall -- quarter 2 to quarter 4.
So it's around 10 bps.
We have our next question from the line of Pankaj Agarwal from AMBIT Capital.
What's the reason behind being more securitizing this quarter?
Sorry, what's the question?
Securitization.
Again, it's about optimizing your cost I think we have raised securitization 100% -- 100 bps lower than the cost of overall incremental money in March.
Okay. So at what time the securitizing deals are happening right now?
Sorry. So Pankaj, as we said during the Q4, we securitized INR3,000 crores, as we have disclosed, and the average rate there would be about 100 bps lower than where we would normally raise term deposits. So it was -- and obviously, it gives you a longer-term funding, which is matched. So it helps us to optimize our mix on the liability side and also helps us on the overall liability, how much growth that we can do and focus on retail business rather than chasing deposits.
The reason I'm asking is that any bank who is buying this portfolio might be at least demanding 7%, 7.5%, right? So you're saying that your incremental CD rates are more around 8%, 8.5%.
No. So this is more a priority sector loans, typically, you know that larger banks are short on priority sectors. And while there is a PSLC market, that they always prefer buying the portfolio because it goes directly into their investment book and still is with them for next 3 years. So to that extent, they are willing to pay a bit of subsidized cost or a premium on that.
We have our next question from the line of Nidhesh Jain from Investec.
So firstly, how should we think about cost-to-income ratio in FY '24 and beyond? It will remain at the same level [indiscernible]?
The worry is around cost-to-income, right.
Yes. So how should we think about cost to income in FY '24 versus FY '23?
No, so Nidhesh, maybe I'll start and Uttam, you can add. So on the cost to income side, as you have seen that Q1, obviously, we went up to 65%. But we have done well to manage the cost overall for the full year at about 63% where we had initially talked about 62%, 63%. And as we have been saying earlier in the call that there are many more profit pools, which is around the corner. So we have been investing and that's part of the reason why our cost to income has been higher. But as we move forward, maybe the end of '24 -- so this year, obviously, the cost of income should broadly be in the range that where we are. But as we move into FY '25 and as I said, some of the investments start tapering off and some of the revenue tools starts kicking in, including AD-I and credit cards and other things, hopefully, you'll start seeing a gradual decline in cost to income for us.
So Nidhesh, my take on subject is that we are focusing more and more on this. But as you know, we are investing a lot in our tech and our distribution and to build this bank in a very sustainable and with kind of forever mindset, right. So the best case for your own XL would be that it can be best it will be 60%, but it won't go above 64%, right. So I think that's the range. But ideally, we should be around 62%, 63%. That's the way I'm thinking. But it's too long a call. It's a full 1 year, right, we're just in April. So anything can happen. But for your own calculation, it can be done like this.
Sure. And secondly, do we plan to scale up consumer loans, personal loans or any other lending products over the next couple of years. We are as well on affordable housing.
Not really, Nidhesh. I think we have done enough on our product side. We are running around 15, 16 type of loans starting from wheels, the SBL and all those things. We want to focus on our unsecured book, but it has to come through credit card or we want to really see how our QR code business can build up that and also how our data analytics helps us to give us cross-sell option to our existing customers. And both all 3 are shaping up well. All 3 are shaping up well. As I think Uttam told you that we have done INR800 crores of disbursement and our cross-sell PL book, we have around INR200 crores on our QR code business. We have done around INR1,000 crores around credit card. So it all are shaping well. And I think we want to be really like that only for next couple of years, and then we'll see how we want to progress there.
We'll take our last question from the line of Sameer Bhise from JM Financial.
Congrats on a good quarter as well as the reappointment. As we mature in our investments over the next 12, 18 months and with the kind of credit quality that we have demonstrated over a large part of our history, what would you see as a steady-state ROA as the business matures in the next 3 to 5 years? Or will we be happy with the current range of 1.82%? Just from a construct perspective given that we have a large granular asset book, a liability franchise, which is improving on the right side and probably the curve of high investments will be over. So just wanted to get some of your thoughts on that.
It's a good question and thank you for understanding us because we are doing a lot many investments to really build future, right. And if you ask me about my 3 to 5 time horizon and with the interest rates doesn't go off the rack, right, and it remains in one range. I strongly believe that this kind of interest rates are not sustainable, right, for any kind of country. So I mean, it will come down. So because ROA depends on NIMs and other incomes and credit costs and all those things and ROA. So I think I strongly believe in the next 3 to 5 years, the way we are building ourselves and now, as of now, will be complete in terms of our product offering once AD-I start coming in. So anything north of 2% ROA will be sustainable because we do retail, right, and we do in high-yield assets, our cost of money can be managed. And you know that our collection and our ability to collect and manage our asset quality is always there. And by bringing a lot many tech-led innovations, we'll manage our OpEx also. So it all will start kicking in from next year itself, right. So for the next 2 or 3 years, if things remain strong, we can surprise many people in terms of our performance. So that's my sense. But anything above 2% is quite achievable, given what we have done in the last 6 years.
I now hand the conference over to the management for closing comments. Over to you.
Thank you, Yashasvi, and thank you, everyone, for joining the call and for your questions and for all your support. Look forward to interacting more. In case you have any further questions, kindly reach out to the IR team. This is Prince signing off from AU management side. Thank you so much.
Thank you. On behalf of AU Small Finance Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.