Axis Bank Ltd

NSE:AXISBANK

Earnings Call Analysis

Axis Bank Reports Strong Q3 FY'24 Performance

In Q3 FY'24, Axis Bank showcased robust sequential growth across loans and deposits with an 18% ROE for six quarters. The CET1 capital organically grew by 39 basis points over nine months. Specifically, retail, SME, and corporate loans grew by 5%, 4%, and 3% respectively. The bank's digital initiatives such as the high-rated 'open by Axis' mobile app and the corporate-focused digital offering NEO continue to strengthen its market position. The integration of Citibank's Consumer Business is progressing well with the completion of data migration and system integration expected by H1 FY'25. Q3 saw a 4% quarter-on-quarter PAT increase to INR 6,071 crores, and improvements in asset quality with GNPA and Net NPA declining by 80 and 11 basis points respectively year-on-year. The bank remains well-capitalized with a CET1 ratio of 13.71%, and has a positive outlook on India's growth momentum despite global challenges.

Robust Performance and Strategic Direction

In the iterative journey of growth, Axis Bank has persistently crafted its destiny with a defined GPS strategy, focusing on customer-centricity and innovation, resulting in a noteworthy Return on Equity (ROE) exceeding 18% for six consecutive quarters. This stability is fortified by a rising CET1 capital organically by 39 basis points over nine months in the financial year 2024. The bank's mastery in loan growth is evident in the substantial sequential increments across retail, SME, and corporate sectors by 5%, 4%, and 3%, respectively.

Deposit Franchise Strength

The bank's deposit strategy has reaped best-in-class Liquidity Coverage Ratio (LCR) outflow rates and Current and Savings Account (CASA) ratio, with retail term deposit growth hitting a 12-quarter apex. The focus on a performance-driven culture has also led to a 17% year-on-year growth in retail term deposits and a 42% low-cost CASA share, compounded at 14% over three years.

Cutting-edge Digital Initiatives

The innovation streak bleeds into the digital realm with 'Open by Axis', the highest-rated mobile banking app, and the introduction of 'NEO' for corporates and SMEs, which is deepening transaction banking relationships. Axis Bank's drive in transaction banking APIs indicates a robust interest from corporates, with transactions growing by multiples quarter-on-quarter. Furthermore, the digital banking unit witnessed a 48% increase in deposits and an 86% uptick in loans.

Fostering a Culture of Excellence

Axis Bank's quest for excellence is demonstrated through its commitment to their ‘Sparsh’ customer obsession program, which has notably lifted the Net Promoter Score (NPS) to 141, underlining the improved customer relationship. The consistent branch network expansion, adding 100 new branches in the current quarter, mirrors the bank’s dedication to amplifying its service outreach.

Strategic Integration with Citibank Consumer Business

Seamlessly proceeding is the merger with Citibank Consumer Business, expected to culminate in the first half of financial year 2025. This acquisition highlights the strategic intent to enhance cross-sell opportunities, sales productivity, and operational synergies, with its progress in alignment with the targeted objectives.

Financial Stability Amidst Macroeconomic Tides

Axis Bank stands resilient in the face of global adversities and surging interest rates, sustained by robust consumer sentiment and private sector capital expenditure. The bank's strategic posture is poised for differentiation, especially in the loan market, with an anticipated convergence of system credit growth toward a 13% deposit growth forecast.

Unwavering Focus on Core Financial Metrics

The bank's financial backbone is reflected in its robust operating metrics with a steady net interest margin (NIM) of 4.01% for Q3 FY '24. A notable 9% year-on-year Net Interest Income (NII) growth and a 29% surge in fees signal substantial economic vigor. Capital adequacy remains sturdy with a CET1 at 13.71%, while asset quality improvements are showcased by a Gross Non-Performing Assets (GNPA) dip to 1.58% and Net NPA to 0.36%.

Prudent Cost Management and Performance

Operational efficiency is at the forefront with operating expenses controlled at a 32% year-on-year incline, largely due to investments in technology and staff costs linked to the bank's growth trajectory. The provision of a cumulative non-NPA buffer standing at INR 11,981 crores reinforces the bank's risk mitigation strategy.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to the Axis Bank conference call to discuss the Q3 FY '24 financial results. Participation in this conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents or the proceedings of the call is strictly prohibited, and prior explicit permission and written approval of Axis Bank is imperative. [Operator Instructions] Please note that this conference is being recorded.

On behalf of Axis Bank, I once again welcome all the participants to the conference call. On the call, we have with us Mr. Amitabh Chaudhry, MD and CEO; and Mr. Puneet Sharma, CFO.

I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you, and over to you, sir.

Sir, your audio is not coming, I believe you're on mute.

[Amitabh Chaudhry, executive]

Thank you, Nirav. Sorry. Didn't realize I was on mute. Good evening and welcome, everyone. Wish you all a very happy new year. We have on the call, Rajiv Anand, Deputy MD; Subrat Mohanty, ED; Munish Sharda, ED Designate; of course, Puneet Sharma; and other members of the leadership team.

Over the last few years, we have set Axis Bank on the course of a predictable and sustained high-performance guided by our GPS strategy, which is centered on our customers and our colleagues. We had the opportunity to highlight our execution rigor, distinctiveness and differentiation at our Analyst Day in November 2023.

The Indian economy continued its upward momentum in quarter 3 and remains the beacon of optimism globally. A mix of judicious and bold policy moves has placed India in a sweet spot, which bodes well for the sector in the medium term.

In quarter 3 financial year '24, we, in Axis, delivered strong operating performance, led by robust sequential growth across loan and deposits. Let me briefly highlight them. The bank has delivered an ROE greater than 18% for the last 6 quarters now, while maintaining a better credit profile as compared to the past, instilling confidence and its sustainability across economic cycles.

The bank has organically net accreted 39 basis points of CET1 capital in 9-month financial year '24. On loan growth, all the 3 segments delivered strong sequential growth with retail, SME and corporate book, gross of IBPC sold, growing 5%, 4% and 3% quarter-on-quarter, respectively.

On deposits, we have improved the quality of our granular franchise significantly with our LCR outflow rates and CASA ratio being the best in class in the sector today, and our retail term deposit growth improving to 12-quarter high. On cards and payments, we saw strong traction in new card issuances, cards in force and spends led by our strategic partnerships.

On the merchant acquiring business, too, we have now obtained leadership position with terminal market share of close to 19% as of November '23 with widespread adoption of our innovative technology-based product offerings. On digital and technology, opened by Axis, continues to be the highest-rated mobile banking app, with a rating of 4.8 on the Google Play Store, on the iOS App Store as well opened by Axis, rating has increased to 4.7 this quarter from 4.6 earlier.

NEO, our cutting-edge digital product offering for corporate and SMEs is deepening our transaction banking relationship amongst clients. Axis Bank has been recognized in the highest leadership category with score of 77 in the Indian corporate governance score card recently published by Institutional Investor Advisory Services, with the valuation framework built around globally accepted G20/OECD standards and principles.

We have tried to be ahead of the curve towards building a bank for the future with deep investment of management time and resources and our chosen areas of distinctiveness, namely digital, Bharat Banking and customer obsession. We stay focused on 3 core areas of execution of our GPO strategy, namely embedding a performance-driven culture, strengthening the core and building for the future.

On embedding a performance-driven culture, there is visible improvement in the retail deposit growth and the quality of our deposit franchise. The growth trajectory of retail term deposits continued to improve with 17% year-on-year and 2% quarter-on-quarter growth on period-end basis and 15% year-on-year and 3% quarter-on-quarter on QAB basis.

Our low-cost CASA share at 42% is among the best in the industry and has compounded at 14% for the last 3 years. In quarter 3, we added 100 branches, taking the overall branch additions to 349 for the 9 months period for financial year '24, which is among the highest in the industry. Further, we are doubling down on our deposit mobilization strategy led by 2 large transformation initiatives, Siddhi which is a super app for our employees and Project Triumph. We spoke about them during the Analyst Day.

We have enabled every business vertical and channel through tools and platforms like video-based customer identification process, bring your own device, and it could be app, to serve our customers real-time and onboard new customers with minimal friction.

We have a strong foundation for our liability franchise. We continue to work on the deposit leadership road map we set a year back, and we expect to realize the full potential of this transformation in the next 6 to 7 quarters.

We are also seeing all-round growth across businesses. We have market-leading growth in our focus segments, while retail lending -- within retail lending, we continue to drive balanced growth across the product portfolio. The retail disbursements, in quarter 3 financial year '24, were the highest ever for the nonfinancial year closing quarter aided by improved customer sentiments and strong festive demand.

Domestic corporate loans, gross of IBPC sold, grew 23% year-on-year and 3% quarter-on-quarter, led by healthy pickup across sectors. The disbursement pipeline for quarter 4 continues to be healthy.

MSME segment continues to remain a key growth driver for the bank. The combined portfolio, mid-corporate SMEs and small businesses, grew 30% year-on-year and 5% quarter-on-quarter and now constitutes 21% of the loan book, up 620 basis points in the last 3 years.

On strengthening the core, on Wholesale Banking, we have replicated the success of our digital consumer banking app with NEO for corporate. We have been on this journey for 2 years and we now have validation for the strong product market fit based on how quickly our clients have embraced this.

On transaction banking APIs, we continue to see strong interest from corporates across industry segments with 3.7x growth in corporate onboarding, along with 7x growth in transactions and 4.8x growth in throughput.

NEO for business, our mobile-first transaction banking platform tailored for SME, continues to scale up in terms of customer onboarding. We saw an increase of over 25% in digital usage amongst these customers with the introduction of business banking specific features. We are in the process of rolling out a host of beyond banking features, which will include things like ERP integration, payroll and inventory management.

We have also rolled out NEO for corporates, our Internet banking proposition for large corporates to all new customers, and we are in beta testing with existing corporate clients. With full rollout of NEO, Axis remains on track to become the operational bank of choice for our wholesale banking clients.

As far as building for the future is concerned, digital banking performance continues to remain strong. The open by Axis Bank, balance sheet has an increase of 48% in deposits and 86% increase in loans. We launched a new digital savings account proposition Amaze that provides customers attractive joining offers and spend-based rewards for a nominal monthly fees. We also launched and scaled new products, including FD for stand-alone credit card customers, U.S. dollar FDs and GIFT City for NRI customers and new loan [ and initial ] products on open.

Our bank-wide programs to build distinctiveness continue. Our bet on Bharat Banking is growing from strength to strength. The quarter 3 financial year '24 disbursements were up 46% year-on-year. Rural advances were up 34% year-on-year and deposits from Bharat branches are 11%, thereby aiding the PSL and profitability metrics.

We have expanded our multiproduct distribution architecture to 2,420 branches complemented by 63,500 CSC VLE network and 80 partners across the industry. Our digital co-lending platform is live with 10-plus partners, and the volumes are growing 80%-plus quarter-on-quarter. We are building a pioneering end-to-end omni-channel and digital delivery model for the RuSu markets using the Salesforce platform. This will help us scale sustainably over the next 3 years.

Sparsh, our customer obsession program, is helping improve relationship and transaction intensity with our customers. Over the last 21 months, NPS across 12 retail customer journeys has moved up to 141 over an index baseline of 100 as we listen to and act on the voice of our customers. NPS is now an important indicator for us to invest in areas that matter to our customers. Sparsh is a bank-wide priority. It is embedded in rituals and practices across all the 5,250-plus branches, all our customer touch points and in the conduct of every employee.

On Citibank Consumer Business integration, the Citi integration remains on track, with acquired business portfolio metrics trending in line with internal estimates. Deposits are stable. And there has been improvement in cross-sell metrics across wealth insurance and retail assets. Nearly all the [ 77 ] initiatives, that were identified across cross-sells, deepening, sales productivity and cost rationalization, remain on track and monitored by the Board. We expect to complete data migration and system integration by end of first half financial year '25.

In closing, the growth momentum in India continues to be strong. We have taken global headwinds and higher interest rates in our stride. The consumer sentiment remains healthy with improved capacity utilization across sectors for corporates. The factors are ideal for an uptick in private CapEx.

The deposits growth in the system is a challenge with a tight liquidity environment. We expect this to continue till inflation reaches the lower bound of the range. We foresee the system credit growth to converge towards deposit growth of around 13%. We see this as an opportunity to differentiate and serve our customers better. All of us are building in all-weather institution that will stand the test of time.

I will now request Puneet to take over.

[Puneet Sharma, executive]

Thank you, Amitabh. Good evening, and thank you for joining us this evening. We continue to make good progress towards building a stronger, consistent and sustainable franchise. The salient features of the financial performance of the bank for Q3 FY '24 across operating performance, capital and liquidity position, growth across our loan and deposit franchise, asset quality restructuring and provisioning is as follows: Our operating performance for Q3 FY '24 was steady across NIMs, cost and credit cost lines.

Consolidated ROA at 1.84%, consolidated ROE at 18.61%. Subsidies contributed 9 basis points to consolidated annualized ROA and 54 basis points to consolidated annualized ROE this quarter. The bank's CET1 including profit stands at 13.71%. Organic CET accretion in 9 months FY '24, including profits, was 39 basis points. Change in regulations impacted CET1 by 70 basis points.

COVID provisions translate to a cushion of 43 basis points over and above the reported CET1 ratio. Our net interest margin for the quarter was 4.01%, declining 10 basis points Q-on-Q. Yield on interest earning assets improved by 69 basis points Y-o-Y and 6 basis points quarter-on-quarter. This increase was offset by increase in cost of funds thereby impacting NIMs. We have always maintained that NIMs should be looked at on a full year basis. For 9 months FY '24, NIM was 4.08%, better than 9 months FY '23 by 13 basis points.

NII was at INR 12,532 crores, growing 9% Y-o-Y, 2% sequentially. Fees at INR 5,169 crores, growing 29% Y-o-Y, 4% sequentially. Our granular fee is 93% of our total fee.

Operating profit stood at INR 9,141 crores, growing 6% Q-on-Q. Core operating profit at INR 8,850 crores, grew 1% quarter-on-quarter. Cost to assets at 2.49%, increased 25 basis points Y-o-Y.

Net credit cost at 0.28%, improved by 14 basis points on a Q-on-Q basis and 37 basis points Y-o-Y, aided by higher recoveries and an upgrade of a large corporate restructured account.

PAT at INR 6,071 crores, increased 4% quarter-on-quarter. GNPA at 1.58% declined 80 basis points Y-o-Y and 15 basis points Q-on-Q. Net NPA at 0.36%, declined 11 basis points Y-o-Y. Our standard asset coverage ratio is 1.29%. All provisions by GNPA stood at 153% at 31st December 2023, improving 1,385 basis points Y-o-Y.

We achieved the financial closure of the Citibank transaction. We request you to refer Note 6 of the UFR for details. There is no material impact as the transaction was fully accounted for in FY '23. We remain on track to achieve LD2 per earlier estimated time lines.

Our progress on structural NIM drivers continues well, with improvements across all variables on a year-on-year basis. Improvement in balance sheet mix, loans on investments comprised 89% of total assets as at December '23, improving 154 basis points Y-o-Y. INR-denominated loans comprised 95.8% of total advances, improving 250 basis points Y-o-Y. Retail and CBG advances comprised 69% of total advances, improving 264 basis points Y-o-Y.

Low-yielding RIDF bonds declined by INR 8,170 crores Y-o-Y. RIDF comprised 1.8% of our assets as at December '23 compared to 2.73% of our assets at December '22.

Quality of liability is measured by outflow rates improved by 600 basis points over the last 2 years. Given the liquidity and rate situation in the market, average CASA was 42%, declined 196 basis points Y-o-Y. However, this continues to be amongst the highest in the private sector bank space.

We have good fee performance in the quarter. Total retail fee grew 36% Y-o-Y and 6% Q-o-Q. Fee on retail loans grew 26% Y-o-Y, 7% on a sequential quarter basis. Retail card fee grew 58% Y-o-Y, 12% Q-on-Q. Commercial card fee grew 35% Y-o-Y, 10% Q-on-Q. Fees from our third-party products grew 42% Y-o-Y, 4% Q-on-Q. And our commercial banking business fee grew 13% Y-o-Y and 6% Q-on-Q.

Trading profit and other income at INR 385 crores was lower by INR 178 crores Y-o-Y and grew by INR 314 crores sequentially, mainly on account of better DCM and trading performance and reversal of MTN booked in previous quarters.

Operating expenses for the quarter was INR 8,946 crores, growing 32% Y-o-Y and 3% sequentially. It is pertinent to note that there is no Citi BAU expense in Q3 FY '23. Integration expenses contribute 4% of the Y-o-Y growth in operating expenses in percentage terms and 13% of Y-o-Y cost growth in rupee terms.

The balance Y-o-Y increase in rupee crores of expenses other than above can be attributed to: 10% linked to volume, 47% technology and growth-related investments and 30% from our BAU activities.

Technology and digital spends grew 36% Y-o-Y and constituted 9% of our total operating expenses. Staff costs increased 19% Y-o-Y. We added 12,075 people from the same period last year, mainly to our growth businesses and technology teams. We've opened 350 branches in the 9 months FY '24 with 100 branches being opened in quarter 3 of FY '24. Q-on-Q increase in operating expenses is largely attributable to higher volumes.

Provisions and contingencies for the quarter were INR 1,028 crores, lower by 28% Y-o-Y but higher by 26% Q-on-Q. Adjusted for the prudent provision made for AIF investments, provision and contingencies for the quarter would be INR 847 crores, flat quarter-on-quarter. The bank has not realized any of its COVID-19 provisions and this provision is entirely prudent.

The cumulative non-NPA provisions as at December 31, 2023, stood at INR 11,981 crores, comprising INR 5,012 crores towards COVID-19; restructuring provision of INR 587 crores, including unsecured retail being provided at 100% and the rest at first bucket NPA rates; standard asset provision at higher than regulatory rates of INR 2,216 crores; weak asset and other provisions of INR 4,166 crores.

Moving to growth across our liability and loan franchise, we gained 20 basis points market share on a year-on-year basis across our deposit and loan franchise. Please refer Slides 19 and 20 for details around the quality of our liability franchise on slides on our loan business.

The bank sold IBPCs in the current quarter, aggregating to INR 5,754 crores, grossed up for IBPC sale, the Q-o-Q loan growth was 4% and the Y-o-Y loan growth would be 23%. Total deposits on a QAB basis grew 18% Y-o-Y. Our CASA ratio on a QAB basis grew 13% Y-o-Y and 1% sequentially.

Our loan book is granular well balanced with retail advances constituting 59% of overall advances, corporate loans at 31% and CBG at 10%. 69% of our loans are floating rate, 48% of our fixed rate loan book matures in the next 12 months. Breakup of the floating rate loan book by benchmark type and MCLR repricing frequency is set out on Slide 11 of our investor presentation.

Our retail advances grew 27% Y-o-Y and 5% sequentially. 75% of the book is secured for internal classification. Q3 FY '24 retail disbursements grew 47% Y-o-Y and 10% sequentially. Unsecured disbursements were 22% of retail disbursements for the quarter as compared to 25% in the previous quarter. Disbursement growth in home loans was 37% Y-o-Y, small business and auto loans 33% Y-o-Y, retail agri business 46% Y-o-Y and personal loans at 61% Y-o-Y.

Moving to our wholesale banking business. Details of rating compositions, incremental sanction quality is set out on Slide 36 of our investor presentation. The domestic corporate loan book grossed up for IBPC sales grew 23% Y-o-Y and 3% Q-on-Q. The offshore wholesale advances are largely trade finance related and primarily driven by our GIFT City branch. 95% of the overseas standard corporate loan book is India linked and 91% is rated A- and above.

The commercial banking book grew by 26% Y-o-Y and 4% quarter-on-quarter. The quality of the CBG franchise we are building and the strong relationship-led approach is reflected through CBG new-to-bank book growing by 28% on a year-on-year basis and 84% of our CBG loan book is PSL-compliant.

Moving to the performance of our subsidiaries. Detailed performance of the subsidiaries is set out on Slide 69 to 77 of our investor presentation. Domestic subsidiaries reported a total 9-month FY '24 net profit of INR 1,108 crores, growing 17% Y-o-Y. The return on investment on domestic subsidiaries was 50%.

Axis Finance Q3 FY '24 overall assets under finance grew 38% Y-o-Y. Retail book constitutes 44% of total loans. 9-month FY '24 PAT for Axis Finance grew 25% Y-o-Y to INR 425 crores, and Axis Finance has a healthy CAR of 18.79%.

Axis Finance's strong asset quality is reflected with a net NPA ratio of 0.32% and negligible restructuring. Axis AMC overall quarterly average assets under management grew 6% Y-o-Y to INR 2,62,398 crores, 9 months PAT stood at INR 297 crores. Axis Securities' broking revenues for 9 months grew 42% Y-o-Y to INR 757 crores and PAT grew 31% Y-o-Y to INR 198 crores.

Moving to asset quality, provisioning and restructuring. Asset quality continues to improve, with slippage, gross NPA, net NPA and PCR ratios of the bank and segmentally for retail CBD and corporate are provided on Slide 60 of our investor presentation.

The bank has made investments in AIF aggregating INR 207 crores, details of which are as follows: 46% of the AIF investments are in AIF that are directly or indirectly government-owned or from sponsoring entities like NIIF, NaBFID and NABARD. The bank has not invested in any single AIF amounts greater than INR 50 crores. The portfolio overlap in AIF is 85% A- and above weighted exposures and 15% AAA rated exposures. The realizable value at 31st December is close to the holding cost of the investment. The bank has prudently provided 100% of its entire AIF outstanding agnostic of overlap as on date.

Net slippage ratio annualized stood at 0.5%, declining 43 basis points Y-o-Y and 9% Q-on-Q. Net slippages for the quarter were INR 1,117 crores, declining 35% Y-o-Y and 12% Q-on-Q. Net slippages segmentally were 1,988 in retail, 74 in our Commercial Banking business and negative INR 945 crores for our WBCG business.

Recoveries from written-off accounts for the quarter were INR 635 crores. Net slippages in the quarter adjusted for recoveries from written-off accounts was INR 482 crores, of which retail was INR 1,542 crores, our CBG business was a negative INR 11 crores and our WBCG business was a negative INR 1,049 crores. For the quarter, 35% of our gross slippages are attributed to linked accounts of the borrowers, which were standard when classified or have been upgraded in the same quarter.

So to summarize the performance for the quarter, Axis Bank is progressing well to be a stronger, consistent and sustainable franchise. This is visible through organic CET1 accretion of 39 basis points for the 9 months FY '24, our COVID buffer of 43 basis points of overall capital adequacy, our overall coverage at 153% of GNPA and limited restructuring of 0.16% of our gross customer assets.

Consolidated ROE for 9 months FY '24 was 18.86%, 82 basis points higher than 9 months FY '23 and outcome of disciplined execution. The bank has ample and sufficient liquidity visible in an exit LCR of 329%. Given the increased focus on the CD ratio as one of the multiple metrics to be tracked, deposit growth would be a key constraint to growth in advances in the short to medium term. We are well placed in the current macro environment. We continue to closely monitor geopolitical inflation, liquidity and cost of funds that impact our business.

Thank you for your patience. We will be happy to take questions now.

[Operator]

[Operator Instructions] The first question is from the line of Chintan Joshi, Individual Investor.

[Chintan Joshi, analyst]

This is Chintan from Autonomous. Before I ask, can I just quickly get your LCR deposit number for reference? And then the question I have, comment you made that deposit growth will be a constraint on growth overall. Now how should we think about this? Like do you think these liquidity -- tight liquidity trends will ease over the coming months? Or are we talking about a challenged deposit growth kind of outlook not just for Axis, but for the other banks as well? And then related to that, what are the actions you can take on the asset side to offset some of these pressures?

[Unknown Executive]

So I think he spoke about LCR at 118%, this is where we are on an average for the quarter. Typically, if you see over the last 18 quarters, we've bob between 115% and 120%. That is where we are quite comfortable, especially given the outflow rates that we have been able to sort of significantly improve over the last 3 years or so.

It is a tight liquidity environment. I mean, while the policy rates are at 6.5%, you can see that overnight rates are closer to 6.75%, and much of the curve is at 7% and beyond. That is the liquidity situation that we are seeing at this point in time. It will require intervention from RBI. And I don't think that intervention is going to come anytime soon. And so therefore, the pressure on deposits will continue as we go forward, which is, therefore, the point that Puneet makes that how much we will be able to grow will be determined by how much we are able to grow on the deposit side. You would have noticed that thanks to all the initiatives that we had put together over the last many quarters, setting the franchise, partnerships, technology like Siddhi, et cetera, have helped us gain market share. And I think that is a play that we will hopefully continue to play as we go forward.

On the asset side, I think we'll have to get a balance between continuing to build a long-term franchise with our customers on one side and being able to optimize for NIMs and ROE on the other side. And I think that is a balancing act that we will have to continue to play based on how liquidity and therefore, deposits for us grows in the coming few quarters.

[Chintan Joshi, analyst]

I was after the LCR retail deposit number, if you can -- if you have that handy?

[Puneet Sharma, executive]

Chintan, we will anyway be publishing that number as part of our Basel disclosures. You should see it on our website at some point in time later in the evening, please.

[Operator]

Next question is from the line of Mahrukh Adajania from Nuvama.

[Mahrukh Adajania, analyst]

I just wanted to check on bulk deposits. So the system liquidity got much tighter towards the end of the quarter. Would it be fair to assume that a lot of bulk deposits were mobilized towards the end of the quarter and the full impact on cost will be seen on the next quarter? That's my first part on deposits.

And my second part is on any comments on LDR, given that everyone seems to be worried about the LDR. Of course, you did mention about the deposit challenge. And then some banks have admitted to RBI having discussed this one-on-one with them. So where do you see your LDR settling, say, by FY '25, given the -- I mean, any broad range? I don't -- I know you don't give specific guidance, but...

[Neeraj Gambhir, executive]

So Mahrukh, this is Neeraj here. On your question around the bulk deposit pricing, I think bulk deposit pricing continues to be inching up steadily through the quarter. It's not just a quarter-end phenomena. As the system liquidity has remained tight and the overnight rates have inched towards the upper end of the corridor, it is kind of getting reflected in where the bulk deposit rates are and where the CD rates are, which are kind of very close to each other.

I don't think this trend eases off anytime soon. In fact, Q4 being the last quarter of the year, we'll probably see this continuing. The main driver will be how the liquidity in the system plays out and how Reserve Bank sort of deals with the liquidity. So I think that the trend is kind of there. It's -- it will play out steadily over a period of time.

[Mahrukh Adajania, analyst]

No, my question was that were most of your bulk deposits mobilized towards the end of the quarter?

[Neeraj Gambhir, executive]

We do it through the quarter, Mahrukh. Our deposit mobilization process continues through the quarter. There is no, in some senses, bunching up towards the end of the quarter, as you're referring to.

[Amitabh Chaudhry, executive]

We have -- we moved away from this -- we have worked very hard to move away from this quarter-end, month-end staff. So maybe that has happened in the system. But you would also notice that we are perhaps the only large private bank whose LDRs have moderated sequentially. And I think you should give us credit for that.

Also, we continue to have one of the best outflow rates in the industry, which will continue to be demonstrated even during this quarter. And as Neeraj rightly pointed out, even on the LCR side, we have always operated within the 115% to 120% band. The movement is almost -- has been within this band for the last 18 quarters. So talk about consistency in terms of how we have run the business and the liquidity coverage ratio through the cycle.

So just please keep that in mind. We raised large deposits through the quarter at the right price, it makes sense to us. And we'll continue to move forward. But there is nothing -- there is no quarter-end effect. I just want to move away from that. Puneet, do you want to add something here?

[Puneet Sharma, executive]

Mahrukh, thank you for the question. I think the direct pointed answer to your question is, if you look at Slide 8 of our investor presentation, you will see deposit growth resulted on a QAB basis, and you will see that the QAB basis deposit growth tracks [ QAB basis ] very closely, which will indicate to you that balances have grown through the quarter rather than at period end.

[Mahrukh Adajania, analyst]

Perfect. And on just the LDR thing, I know that it's improved. So it's rare that in this quarter, someone's LDR has improved, but any range you would like to give for FY '25?

[Puneet Sharma, executive]

Mahrukh, thank you for the question. We don't offer a range on LDR. We think there are multiple variables through which we manage our balance sheet. LDR is one of the variables. We do not have a targeted LDR that we discuss publicly.

[Operator]

Next question is from the line of Suresh from Macquarie Research.

[Suresh Ganapathy, analyst]

So 2 questions. One is on this deposit mobilization strategy expense, right? So I mean we were focusing a lot on retail deposits. But if I look at the same Slide 8, it looks like almost 60%-plus of incremental deposits this quarter has come from non-retail term deposits, right? It has grown 12% Q-o-Q. So should we read too much into this, it's just 1 quarter phenomenon where liquidity has been tight and therefore, you had to take recourse to bulk deposits? Or how should we read into this? Because it's a large number, almost 60% incremental has come from NRTD?

[Puneet Sharma, executive]

Suresh, thank you for the question. A couple of things. I think while we look at Slide 8, I will also request you to look at Slide 9 and Slide 8 collectively. On Slide 9, you will see that our retail term deposits have grown by 17% on a year-on-year basis. And if you look at the trajectory of growth in retail deposits, it was close to 0 in December '22, and it's up to 17%.

This is in line with all of the efforts we are making to granularize the franchise and the output of those efforts are visible in the RTD growth number. Yes, you're right that in the current quarter, NRTD has contributed to growth. But again, I think it is not a period in balance. It is coming from our corporate customers. And effectively, as Rajiv often says, we are a universal bank. We deal with retail customers and wholesale customers. And if the wholesale customers offer us an opportunity to pick up deposits from them, we'd be very happy to pick up deposits from them.

[Amitabh Chaudhry, executive]

Suresh, I would add -- you're asking a very fair question. I would add you to also think and take into account the outflow rates we have, right? So even if we are raising, let's say, deposits from our wholesale customers, please remember that they are coming at a certain outflow rate, which means that there could -- decent portion would be noncallable. So we are -- it's not just raising some short-term deposits. We're trying to ensure that the balance sheet is structured right on a consistent basis. Just keep them...

[Suresh Ganapathy, analyst]

The only problem, Amitabh, there is these deposits tend to be a bit more fickle in nature, right? If liquidity tightens, I know until the time it's noncallable, it's fine. But suddenly, the corporate moves to another bank in the market. And there is a lot of bidding war happening by the PSUs in the market. So you're confident that this doesn't distort the pricing curve on the cost of fund side for you, right, because you've gone ahead and raised a lot of bulk deposits this quarter...

[Amitabh Chaudhry, executive]

So pricing of the deposit is a market-driven phenomena. It is not just in the bulk deposit side, but also on the retail deposit side, we are making sure that our liability cost is in line with what our peers are offering. So it is competitive on both the sides, not just on the bulk deposit side.

Yes, bulk deposits tend to have a certain phenomenon that needs to be taken into account. But I've seen a good correlation between where the bulk deposit rates go and where retail rates go over a period of time. The noncallable feature, which actually helps us make sure that the outflow rates have got higher bulk deposits is the one real hedge against this deposit shopping in some senses.

[Suresh Ganapathy, analyst]

Okay. Clear. And just finally, one question on capital. I know you have, of course, repeated your stance, but still, again, for the benefit of everybody here, 13.7%, your peers, of course, are easily 200, 300 basis points above the number that you're reporting. Some of them actually, Amitabh and Puneet, they keep internal thresholds of 14% Common Equity Tier 1 under the new Basel III regime, whatever it is, each bank has its own threshold criteria. At 13.7%, are you comfortable to assure that with the outlook which is there? And I mean, can you share anything with respect to your internal thresholds there? Any guidance on that would be great.

[Puneet Sharma, executive]

Suresh, thank you for the question. I think the framework that we've consistently adopted with respect to capital as we think about capital on 2 pillars, capital for protection and capital for growth. Under the protection pillar, we look at regulatory capital as well as capital to protect domestic affiliates.

Even at 13.71%, we carry sufficient cushion over both those benefits. On capital for growth, I would just request you to look at what we've put out on Slide 16. On a 9-month period FY '24, we have net accreted 39 basis points of CET1 on capital. We are currently in an environment where we think we will organically continue to accrete capital. Amitabh did indicate in his opening remarks that our house economist expect advances growth at an industry level to be at the 12%, 13% range. And therefore, we're really not seeing capital being consumed for growth given how our organic business is accreting.

Can we continue to maintain our position categorically that we do not intend to raise capital? I think to your question in reference to Basel III norms, the one request I would have is the risk weights under Basel III are very different from the regulatory risk weights. So what we are seeing is 13.71% basis regulatory risk weights would be different in the Basel III construct. Therefore, again, putting that on to your question, we still categorically maintain. We do not need capital at the current stage and would not need it.

[Operator]

Next question is from an Pranav from Bernstein.

[Pranav Gundlapalle, analyst]

Just had a question on your loan mix. You've continued to move towards the higher yielding segments. Two questions on that. One, with the risk weight change that has been announced, do you see a change in pace of that transition? Number one. And number two, do you have an end state in mind in terms of the split between mortgages and other consumer segments that you have right now?

[Amitabh Chaudhry, executive]

So consumer business, especially the personal loan business, has been growing. But if you see Slide 22, in terms of retail disbursement trend, quarter-on-quarter, that number in terms of composition is down to 22% from 25% in the previous quarter, which really means that the other assets also are growing. We are kind of comfortable with that. As we earlier also said, we don't see any stress in the portfolio, the growth we see on the consumer loan side as a result of a few quarter effort in terms of transformation projects being run and a lot of partnerships scaling up. So that we intend to continue. The loan mix is in a desired state as we are progressing.

Can you just repeat the second part of the question?

[Pranav Gundlapalle, analyst]

Second part is more on a steady state mix that you're looking at. Are you at the steady state? Or is there some more transition that you expect to happen?

[Amitabh Chaudhry, executive]

Yes. So we have been around 70%, 80% secured; 20%, 22% unsecured. That's what we've been saying and holding for some period of time. If it goes to 75-25 over a period of time, that also is fine with us. It's something which we have to keep moderating and observing in line with the various developments happening in the industry. And currently, 75% of our retail book is secured. So...

[Pranav Gundlapalle, analyst]

Sir, my question is more related on mortgage growth. I think you've seen almost for several quarters now that, that growth has been muted. So I was wondering if that was part of an intentional shift to get to a certain loan yields. And therefore, if we should expect a recovery in the mortgage growth or if we'll see some more of this loan mix shift happening?

[Amitabh Chaudhry, executive]

I think I've mentioned in the previous call also that we are assessing every business based on risk-adjusted return on capital. And these asset classes stack up on that rough curve in a certain way. And whichever is higher on the rough curve within obviously defined limits, we will try to push that business more in comparison with the others.

It's not that the mortgage business is not important for us. It's a large business for us. But in a deposit-constrained environment, we will obviously have a waterfall. In that waterfall, we will push businesses, which give better return. So I don't -- we don't want to get caught up in specific numbers in each of the businesses. But we will play depending on what makes the most optimal sense for us. And in the deposit-constrained environment, the credit growth will get constrained. A lot of questions around LDR and so on and so forth, I think we need to prioritize where we want to grow and that's exactly what we're doing.

[Operator]

Next question is from the line of Jai Mundhra from ICICI Securities.

[Jai Prakash Mundhra, analyst]

Sir, on your opening remarks, you mentioned that the system in deposits and credit growth are likely to converge at around 13%. Is this like FY '24 or this is like FY '25? So any time line for that number?

[Amitabh Chaudhry, executive]

I mean if you look at all the commentary coming from RBI and the Governor and commentary around inflation, I think it is quite obvious that this is not just next 3 months, even this will continue into financial year '25 and I think stay during financial '25 for almost the entire year unless something dramatic happens.

We are still way off from -- or at least we are away from the target, which RBI is in mind on inflation. There are still risks to that inflation target. So I do not see interest rates coming down. I do not see RBI taking the pedal off the -- considering the liquidity. And frankly, the biggest factor, which is driving the -- why the deposit rates are high or deposit growth is constrained is RBI tightening the liquidity. And I don't see that going away.

So cutting long story short, we do expect the deposit growth has been constrained. And as a result, over a period of time, the credit growth has to temper down. They have to convert at some stage. They can't keep running in 2 different or at very different levels for a long period of time. And this is not what we've been saying today. We have been saying this for quite some time also, quite consistently.

[Jai Prakash Mundhra, analyst]

Right. So sir, in that context, at our current LDR, while it has improved quarter-on-quarter, it goes without saying that ASK rate on deposit for Axis Bank is much higher than the credit growth rate, right? That is how -- and you also indirectly mentioned that the deposit growth will be constrained because of credit growth at least in the near term. Is that the right interpretation?

[Unknown Executive]

So the -- one of the drivers of the LDR change over a period of time is how we've optimized the balance sheet. If you see our outflow rate on deposit has come down from roughly 26% to 21% -- 20%, 21% now. And that has meant that we have preferred certain kinds of deposits over certain other kinds of deposits, right?

The deposits, which attract 100% outflows, we've preferred not to increase that book or rather shrunk part of that book. And that has had an impact on LDR. So like we said, at LCR, LDR, NSFR, these are all important parameters that we look at while optimizing our balance sheet and seeing how the balance sheet evolves over a period of time. All of these are important parameters. But at times, there is a play between one versus the other.

[Jai Prakash Mundhra, analyst]

Right. And then last, a different question on -- I mean, I noticed that you have around 10 million non-Axis Bank customers using Axis Mobile and Axis Pay. And I assume these are not recharge customers, right, because that runs into millions or even higher numbers. So if you can provide some color as to what exactly is the offering that these non-Axis Bank customers are using and any medium-term plans to convert these known-to-bank customers to offer other services of concern?

[Rajiv Anand, executive]

So you're right, these are not free-charge customers. There could be some overlap, but in general these are not free-charge customers. We have been speaking about 3 types of customers: new-to-bank customers, existing-to-bank customers and known-to-bank customers, customers that we know something about. So this set of customers are customers where we know something about them. And we have various programs where we are able to underwrite these customers and we are able to sell personal loans, credit cards, et cetera, to these entities.

We are a leading player on the account aggregator platform. Much of the traction that you are seeing is through this route as well and, of course, through the various UPI platforms that we are present on.

[Operator]

Next question is from the line of Rikin Shah from IIFL.

[Rikin Shah, analyst]

I have 2 questions. First one is on the linking of the loan book to different benchmarks. So we see that the repo loan benchmarking, the loans linked to the repo loans are up by almost 10 percentage point in last 1 year to almost 48%, 49%. That is in the context of mortgage loan growth being slower. So just wanted to understand what's driving this change in the context of impending rate cut cycle that we may see? That's question one. And second, just a small observation. The cost guidance has been removed from the presentation. So do we need to read anything on to this or anything you would like to elaborate?

[Puneet Sharma, executive]

Thank you for the question, Rikin. I'll take the second question first. We were -- we commented on cost on the Analyst Day. And the comment that we made on costs at the Analyst Day, which we continue to carry since then is as long as the benign credit environment allows us to continue to invest in the franchise, we will continue to invest in the franchise. We are investing for the future. We're investing to build capabilities. Some of the investments are visible to you today, the NEO app, the mobile app, the tech stack that we have the built, the 350 branches that we've created.

So as long as we operate within a given viewpoint, we will continue to make the investment. So we remain focused on managing our expenses when the need arises and we do believe that we can pull back that expense if the need so arise. So I don't think there is that number that we used to put out was taken away when we discussed at length the bank's performance at the Analyst Day. It's not a takeaway in the current quarter commentary.

Sorry, Rikin, can you give me context to your first question, please?

[Rikin Shah, analyst]

Yes. So we look at the loan book being benchmarked to different rates and there, the loans which are benchmarked at the repo rate, the share of those loans have increased by almost 10 percentage points from 38%, 39% to 48% now to the repo link. So given the impending rate cut cycle, first, I wanted to understand as to what's driving this higher increase in the benchmarking to the repo? And second, does this mean that once repo rate cut cycle kind of begins the transmission of interest rate deals will now be faster or would you kind, of course, correct before that?

[Rajiv Anand, executive]

Firstly, we are not in the impending rate cut camp. So let me get that out of the way first. I think, as you know, that all of retail or much of retail and almost all of SME is repo linked and, therefore, as that book grows, it continues to be repo linked.

We've -- over the last 1 year, we've also seen increasing use of repo rate on the corporate side for corporate loans and that is driving that growth as well. So therefore, it is most of retail, almost all of SMEs and some part of -- on the corporate side, which is now repo linked.

[Puneet Sharma, executive]

Sorry, Rikin, I'll just supplement what Rajiv said. If you look at our December '22 presentation, 68% of our loans were floating rate. As of December '23, it's 69%, which is floating rate. So there isn't actually a movement. It's just a play between the benchmark site. And effectively, over a finite period of time, the benchmarks will have to behave similarly across a rate cycle.

[Operator]

Next question is from the line of Kunal Shah from Citigroup.

[Kunal Shah, analyst]

So I'm not sure if you answered that because I missed some part of the conversation. But given that you always have been highlighting in terms of the growth targets, but now it seems to suggest that our deposit is definitely a constraint. So would we still continue to grow at 4 to 6 percentage points higher than the system average when you are highlighting that loan and deposit growth would settle at 13-odd percent or does that also change given this steady ratio as well as the deposit constraint, which is there?

[Amitabh Chaudhry, executive]

Boss, you're trying to hold us quarter-on-quarter. I think we continue to maintain our guidance that in the medium term, we'll continue to be able to maintain that 400 to 600 basis point differential. We are not changing that.

[Kunal Shah, analyst]

Sorry, sorry...

[Amitabh Chaudhry, executive]

We have said that we'll maintain the 400 to 600 basis point differential between industry and our growth rate. I don't hold us quarter-to-quarter, but yes, in the medium term, we believe that we can maintain it and we are not changing it.

[Kunal Shah, analyst]

Okay. Okay. And second, in terms of maybe earlier, we highlighted last quarter that almost like the marginal cost of funds and cost of deposits have stabilized. So where are we in terms of -- maybe what would be the gap between the incremental cost of deposits and the outstanding cost of deposits? If you can maybe not give the exact numbers, but maybe the -- how much is the gap left between the 2, which will get caught up over a period, yes, particularly term deposits, yes?

[Puneet Sharma, executive]

Kunal, thank you for the question. What we've maintained is marginal cost of funding has stabilized. As long as the marginal cost of funding remains at where it has been for the last 4 to 6 months, we do expect our base deposit book to get repriced through quarter 4 and quarter 1 of -- quarter 4 of the current financial year and a spill over into quarter 1 of the next financial year.

[Kunal Shah, analyst]

Okay. Got it. And any levers on the loan book side now available given that unsecured pie is also coming up? Though, this quarter, we see sequential growth being strong in some of the high-yielding segments, plus now RIDF is also down to almost like, say, 1.8-odd percent, almost getting in line with -- or maybe much below where the other banks are. So maybe there were a couple of levers on the yield side, but what levers do we see now going forward on yields?

[Puneet Sharma, executive]

Thank you, Kunal, for that question. I think if you look at Slide 12 of our presentation, we've -- from a mix perspective, we've talked about retail, SME as a percentage of loan book. We've talked about the INR, non-INR book. And those are the 2 observations that you are pointing out have got into the 69% and the 4.2%, respectively. We also flagged off a third lever when we speak about our yield optimization journey, which is a subsegment shift within the wholesale business, which is still to play through.

The other element is that if you look at our bank balance sheet, only about 14% to 15% of our advances are unsecured. So we do still have some play at a full bank level between secured and unsecured exposure as we move forward. So short answer to your question, yes, there are some levers that have been optimized, but there are other levers that we can still work through in the coming quarters and coming years.

[Operator]

Next question is from the line of Saurabh Kumar from JPMorgan.

[Saurabh Kumar, analyst]

Just one question. Sir, on this wholesale credit side, so you've had a large recovery. So two things. One, can you help us with what is the quantum of the -- on the written-off book, what is the quantum left? And how long would you expect this negative credit cycle -- I mean, the recovery side in the corporate will last -- negative net slippage in the corporate to last?

[Puneet Sharma, executive]

Saurabh, thank you for your question. I think if you look at Slide 62 of our investor presentation, you will see a table that gives you the cumulative value of prudential write-off till date. The number at Q3 FY '24 is INR 40,211 crores...

[Saurabh Kumar, analyst]

Of this, how much is the corporate?

[Puneet Sharma, executive]

Sorry?

[Saurabh Kumar, analyst]

Of this, how much is the corporate?

[Puneet Sharma, executive]

We don't break this up between corporate and retail. But if I just give you a context, INR 40,211 crores, this is cumulative value. We have been recovering against this value over a period of time. I think to your specific question on data point on what is corporate and what is corporate recovery likely to be, we have directionally commented to say that we do expect credit costs to move up. In the first stage, recovery from written-off accounts will reduce. And over a period of time, we do expect gross credit cost to move up for the system and for us. All of us are operating below long-term through cyclical credit cost numbers. Hence, that's the trajectory that we expect to see over time.

[Operator]

Next question is from the line of Param Subramanian from Nomura.

[Parameswaran Subramanian, analyst]

My question again is on deposits. So historically, we've pointed out in the past that we are strong in the government business. And one of the reasons for the tighter liquidity is government money going out of the system. So when that money comes back, are we better placed compared to the rest of the system? Any sort of gearing you'd like to highlight over there? Yes, that's my first question.

[Rajiv Anand, executive]

So you're right. Historically, we've had a strong relationship with the government at the central, state government, district, panchayat, right down to the beneficiaries. And we continue to leverage on those relationships. Increasingly, what the government wants is technology solutioning to be able to manage this flow from the consolidated fund of India all the way down to the beneficiary. And we've been providing to the various governments -- various state governments, various departments and ministries these solutions, and we have a significant market share among private sector banks as far as government business is concerned.

It is -- the government is looking to get more efficient in terms of these cash flows. So in the long term, I think as much of these flows become more and more digital, the amount of float in the system will reduce. But I think that is not a problem that we will have tomorrow. But over a period of time, it could potentially sort of play out. But I think the point that you're making is that there is money lying with the government and, therefore, there's liquidity tightening.

I think to some -- the way that the government -- the RBI thinks about liquidity is the liquidity pool that is lying in the banking systems, the money that is lying with the government because that government money will either come through -- will either come through in terms of salary payments in the beginning of every month or payments to the state governments and for infrastructure spends, et cetera. So there is a bit of a lead lag as GST payments go to the government and some of these payments come through.

I think one of the things that's been happening is revenue numbers for the government have been very strong. And so therefore, their liquidity buildup has been quite strong. I do believe that, I mean, maybe for the next couple of months as the code of conduct for the elections, which has now pretty much been announced for April 16, begins to kick in, there may be some slowdown in terms of government spending, but all that will come through as we go forward.

[Parameswaran Subramanian, analyst]

Perfect. That's really helpful. But could you provide any, say, numbers in terms of market share? You did highlight that you have a significant market share, but market share also a percentage of your total deposits, say, contributed by the government business?

[Rajiv Anand, executive]

Sorry, can you -- market share?

[Parameswaran Subramanian, analyst]

Any numbers on -- the market share -- you highlighted your market share in government deposits is higher. So any numbers you can give over there? Yes.

[Rajiv Anand, executive]

We don't have -- I mean, one of the problems that you will always face is that there is no public data around this. So we know some of these numbers because of some of the work that we've done and some anecdotally. So we're not really looking -- not comfortable sharing that number.

[Parameswaran Subramanian, analyst]

Okay. Okay. No problem. And my other question is on the -- again, on repricing. So what are the price actions we have taken on unsecured retail and as well as loans to NBFCs. Of course, the RBI increase in this growth. Yes, those are my questions.

[Puneet Sharma, executive]

Thank you for your question, Param. I think on incremental disbursements, we have increased pricing on personal loans. Obviously, you would appreciate that it is a competitive market space and, therefore, how much you can pass through to the customers depends on market conditions, but we have increased pricing on the loans and we're seeing a better yield come through on our PL portfolio and incremental disbursements.

The back book is entirely fixed. So we are not likely to see that reprice and it gets repaid. On NBFCs, we are in the process of passing on the rate hike to the NBFCs. It's a function of when the loan is due for repricing, but we have seen a marginal uptick in gross yields on our NBFC book this quarter compared to the last quarter.

[Parameswaran Subramanian, analyst]

Perfect. Just one more question, if I could squeeze in. So did I catch it correctly that you are not going to be held to the 2.1% cost to assets exit ratio that you are guiding to, say, by end of FY '25? So that is not something we're looking at currently. Is it?

[Puneet Sharma, executive]

Param, what I said is if the environment permits us to invest, we would like to invest for the future. That's what I had said when we did our Analyst Day. Given the benign credit environment, we would like to continue to build the franchise for the future as long as we can deliver in and around our aspirational ROE metric.

[Operator]

[Operator Instructions] Next question is from the line of Sameer Bhise from JM Financial.

[Sameer Bhise, analyst]

Just thinking around this liquidity tightness, I wanted to get thoughts from Amitabh on how do you think from the second order derivative perspective of this phenomenon? Would you worry on potential asset quality issues? Are we still some time away from that? And what would you see as signals if you fit -- kind of persists for a longer time?

[Amitabh Chaudhry, executive]

Well, it's difficult to predict at this stage. I think it's given where the Indian banking system is, where the consumer sentiment is. Yes, and the way regulators is watching the matrices so closely and so actively, I do not see the second order impact coming through in a big or significant way. But ultimately, we are in the risk-taking business. It's very difficult to say anything with surety.

I mean all of us are watching our numbers very, very closely. All of us are aware that the times are so good that we do need to watch our numbers closely because this is when we might be making some mistakes. No signs as yet. But this potential tightening situation, pricing might lead to a second order impact? Only time will tell. I can only assure you at least from Axis Bank perspective, we are looking at everything possible we can very, very closely. And trying to assess if there is any signal out there, which would be telling us that things could be going down -- going south in some form or shape.

[Sameer Bhise, analyst]

But at this point in time, you don't worry on that front. Is that fair?

[Amitabh Chaudhry, executive]

No, risk-taking business, I'm worried all the time.

[Sameer Bhise, analyst]

And just quickly, can I have a breakup of the gross slippages across businesses?

[Puneet Sharma, executive]

Thanks for the question. Our gross slippages for the quarter were INR 3,715 crores. They declined 2% year-on-year. Segmentally, it's INR 3,384 crores for retail; INR 2,138 crores for CBG; and INR 93 crores for the WBCG business.

[Operator]

Next question is from the line of Piran Engineer from CLSA.

[Piran Engineer, analyst]

Congrats on the quarter. And I don't mean to harp on this too much because it's been discussed quite a bit, but if you had to reduce your LCR, I just want to understand management approach. Would you rather slow down loan growth or get the required deposits through NRTD and compromise a bit on NIMs?

[Puneet Sharma, executive]

Thank you for the question, Piran. I don't think there is one answer to that question. It is not a choice of either/or. It will be a mix of both that we will work through. We can't really say that we are willing to pay any price for a deposit to fund our loan growth.

And similarly, we are not saying that if deposits are far too expensive, we will not grow at all. We operate in a model where we will optimize both variables. So the honest answer is there will be a path that we will find to grow with deposit cost increases in the future.

[Piran Engineer, analyst]

Got it. So in the interim, it is fair to assume that there is a chance your loan growth does not grow 4 to 6 percentage points higher than the industry, in the interim? That's a fair assessment, right?

[Puneet Sharma, executive]

Piran, I think the request I have of you is the 400 to 600 guidance that we had was basis the structural strength of the franchise. And we said that, that's a number that we will target in the medium to long term. We did not hold ourselves ever accountable to do that number on every sequential quarter basis. The comment that we've added through this call is given where liquidity is in the market today, we do expect deposits to constrain advances growth. We will operate within both those metrics, but we are not moving away from our medium-term guidance of 400 to 600 basis points faster than industry credit.

[Piran Engineer, analyst]

Got it. Got it. And just secondly, can you talk a bit about what has changed in LAP? Like until 2 quarters back, we were barely growing 1%, 2% Q-o-Q. Now it's picked up to 6%, 8%. So maybe if you could just help us understand what changes you've made to drive growth here?

[Unknown Executive]

So I mean LAP is -- LAP growth is an outcome of some of the transformation projects, which we have been running. During the last 12 months also, LAP was outgrowing within the mortgages business. This year, we've seen a lot of stuff come together in terms of delivering the growth which we are seeing. Portfolio quality remains strong. So we expect this growth to continue.

[Piran Engineer, analyst]

So it's like too much of turnaround time [Technical Difficulty] something would have changed [Technical Difficulty].

[Unknown Executive]

We can't hear you clearly.

[Piran Engineer, analyst]

Sorry, I meant have we improved, like say, a turnaround time, have we added distribution, a new partner, something would have changed that it picks up [Technical Difficulty].

[Unknown Executive]

It's a mix of everything. We've added partners. Turnaround time has improved. Our channel management has gotten stronger. Sourcing from branch has increased. We've got deeper distribution into our rural Bharat Banking branches. So it's a host of initiatives across the board, which we've been working on, and that's what has resulted into the south.

[Operator]

Next question is from the line of Shubhranshu Mishra from PhillipCapital.

[Shubhranshu Mishra, analyst]

I've got a couple of questions on the credit card piece, which is on Slide #22. So when we say 52% is ETB and 33% is known-to-bank, this entire 33% known-to-bank is coming from the Flipkart co-brand? That's the first part that I wanted to understand. And also the definition of known-to-bank.

The second part is what is the mix of revolver, EMI and personal loans here in the -- and transactors here in the mix? And what would be the ballpark ROA that we make on a steady-state basis in this business in the credit card business?

[Arjun Chowdhry, executive]

Yes, sure. Thanks for your question. This is Arjun here. So I'll try and cover all of it. KTB refers to known-to-bank, which is a set of customers where we have some information about them, but it's not exactly a customer who has an existing some other product of the bank, may not be account, may not be a loan, but they do, in many cases, come from our partners where we have compliant data sharing arrangements, which allow us to get a better insight about that customer.

No, all of them do not come from Flipkart. We have a similar arrangement with multiple partners. As you know, we've got partnerships with Airtel, we've got partnership with Samsung, we've got partnerships with Lulu and also Flipkart. So it's a mix of partners.

We do not share, unfortunately, portfolio-specific and segment-specific metrics at the third level, such as EMI and revolve rate. But suffice it to say that the broad trend we have seen in the past continue to hold out this quarter as well. I'm not sure I can say much more than that.

Your third question, I couldn't quite catch. Would you mind repeating that, please?

[Shubhranshu Mishra, analyst]

What's the ballpark ROA of the credit card business on a steady-state business, not like in this quarter or quarter gone by, that's...

[Arjun Chowdhry, executive]

Yes. No, that unfortunately is something we can't share at the product level. But we do track it, but we can't share it at the product level, I'm sorry.

[Shubhranshu Mishra, analyst]

Right. If I can just in that case just squeeze on one last question. What's the absolute dollar value of the cost of acquisition for existing-to-bank and known-to-bank and then absolute open source customer?

[Arjun Chowdhry, executive]

This is a product-wise, segment-wise question. And again, we can't share that level of granularity in terms of the metrics.

[Operator]

Ladies and gentlemen, we will take that as our last question. I will now hand the conference over to Mr. Puneet Sharma for closing comments.

[Puneet Sharma, executive]

Thank you, Nirav. Thank you, everyone, for taking the time this evening to join us. If there are any questions that remain unanswered or there are follow-on questions, please feel free to reach out to [ Avdeep ] in our IR team and we'd be happy to pick them up. Thank you, and have a good evening.

[Operator]

Thank you very much. On behalf of Axis Bank, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.