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Bandhan Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Bandhan Bank Q1 FY '24 Earnings Conference Call. [Operator Instructions]
Note that this conference is being recorded.
I now hand the conference over to Mr. Vikas Mundra. Thank you, and over to you, sir.
Thank you, [ Ravi ] Good evening, everyone, and a warm welcome to all the participants. It's our pleasure to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter ending June 2023. We will take this opportunity to update you on the recent development in the industry as well as on Bandhan Bank during the quarter.
To discuss all this in detail, we have with us our Founder, Managing Director and CEO, Mr. Chandra Shekhar Ghosh; Chief Operating Officer, Mr. Ratan Kumar Kesh; Chief Financial Officer, Mr. Sunil Samdani; Head Retail Banking, Shantanu Sengupta; and myself Vikash Mundra, Head of Investor Relations, along with other senior management team of the bank.
We will be happy to provide you with any clarity required from the current quarter numbers and the way forward. Now I would like to request our Founder, MD and CEO, Mr. Chandra Shekhar Ghosh to brief you all about our bank's operation and financial performance, along with developments for the quarter ending June 2023. Over to you, sir.
Thank you, Vikash. Warm welcome to all of you after the strong financial year '23. I am pleased to state that April to June 23 quarter has also been a stable quarter for the bank. I will take you through some of the key figures. The macro backdrop continues to strengthen. India looks set to remain world's fastest-growing large economy.
India's GDP is expected to grow at above a strong 6.5% during financial year '23, '24 with the prospects of strong private consumption and services sector growth. Despite the late onset of moonsoon, whether disruption in few states and delayed showing during quarter 1 '24, the gradual improvement in rural demand may continue in the coming months, if the forecast of a near normal monsoon by [ IMDC ].
Despite the policy, -- under uncertainties in advanced economies, India's inflation of 4.6% year-on-year during quarter 1 financial year 2024 suggest the limited risk of further hiking interest rate in the near front.
Prospects of decent GDP growth and stable interest rate environment should help the momentum in Indian BFSI sector in the coming quarters. Having said that, one must note that the first quarter of the financial year is often seasonally a somewhat softer patch for several entities in the financial services industry. Thus quarter-on-quarter figures, sorry, quarter-on-quarter figures should be analyzed and interpreted it carefully.
During quarter 1 financial year '24 Bandhan Bank's overall advance have shown a 6.7% growth year-on-year and a marginal decline in quarter-on-quarter. The quarter-on-quarter decline in loan book is primarily because of 2 reasons. We have seen a quarterly declined in the micro finance book around 10% quarter-on-quarter, primarily due to seasonal factors and because of weather disturbance in a few states. Historically, also, if you see for the last 2 financial years, we have always shown a quarter-on-quarter drop in a similar range in quarter 1 in our micro finance book.
Second point, we've also seen that, as indicated earlier, we had a short-term loan against the fixed deposit of which single large account of INR 2,151 crores has been repaid in quarter 1 '24, which helped us to be grown of the book of advancing. However, growth in case of retail asset and commercial banking continued to be impressive. The retail loan book other than the housing finance book consisting of personal loan, gold loan, two-wheeler loan and auto loans has grown by nearly 87% year-on-year.
The commercial banking vertical consisting of financial institution group and SME registered a growth of 78% year-on-year and nearly 7% quarter-on-quarter. The housing finance book -- sorry, the housing finance book, which faced issues last quarter has come back to normal and has registered a growth of about 9.5% year-on-year.
The share of secured assets as a part of our total loan book continues to increase. It crossed 44% in quarter 1 financial year '24 as against 36% in financial year '22. We expect that approximately half of our book should be secured book by financial year '26.
On the liability side, deposits at [ INR 18,000 crores ] as at end June 2023, recorded a growth of 16.6% year-on-year, stronger than the industry growth rate of around 12%. Due to our focus on granular retail deposits, our retail term deposit book has grown by around 8% -- 17% year-on-year. The retail to total deposits ratio continues to hold above 71%. Customers continue to response their trust in the bank. Let me put forward a few data points in substantial [indiscernible].
Our total number of liabilities customer increased by 11.5% year-on-year and 3.4% quarter-on-quarter. Volume of total customer transaction increased by more than 50% year-on-year, 9% quarter-on-quarter. Total value of transaction has also increased by 15% year-on-year, 5% quarter-on-quarter. Our overall digital transition have recorded an increase of 49% year-on-year with average digital transaction for account going up by 33%.
All these parameters shows that the bank are performing the deposit, especially in the retail segment is very good and future it will be like to continue very good growth of this deposit.
CASA deposit came in slightly lower on account of seasonal impact compared to the previous quarter, but still stand at a healthy 36% at INR 39,077 crores. This drop in the quarter has been seen across the industry, but we have the confidence on our customers. And my team will be again come back on that, which is projected 40% of our CASA growth -- CASA percentage.
I would like to specially highlight that microfinance customers contributed only less than 4% of our total deposits. We have seen good improvement in the overall collection efficiency for the bank. Overall, collection efficiency, excluding NPA stood at 98% for the quarter end June '23, up from 96% from the quarter ending June '22.
The bank has registered a net profit of INR 721 crores during the quarter 1 financial year '24 against a net profit of INR 887 crores in quarter 1 financial year '23. Our net interest income in quarter 1 financial year '24 came in at INR 2,491 crores, broadly similar to INR 2,514 crores during quarter 1 financial year '23.
However, sequentially, it is also stable at INR 2,472 crores in quarter 4 financial year '23. Our net interest margin stood at 7.3% in quarter 1 '24 same as that during quarter 4 '23.
It is a very strong parameter for the bank on that. The NIM has continued from the last quarter also the same in this quarter. Total credit cost for quarter 1 '24 was 2.4% compared with the 2.9% quarter 4 '23. Our gross NPA in quarter 1 '24 stood at 6.76% compared to the first quarter of the last year, 7.25%. Our net NPA has come [ 2.19% ] and what was in a 1 year ago, 1.92%. The bank delivered an ROA of 1.9% and ROE, 14.4% in quarter 1 '24.
This quarter, we have added about 130 branches over 70% of which are in Northern, Southern and Western zone. We have added about 7 lakhs new customers in this quarter. What is the future? We have made considerable investments in people, technology and infrastructure in recent years. We expect that from the current financial year, the bank will start yielding positive results of this investment. Of late, we have initiated several steps to boost cross-sell and brand-led sales to grow that retail assets and liabilities portfolio and also to increase productivity for employees supported by our digital and analytical initiatives.
Financial year '24 we expected to grow our advances by nearly 20% plus and a little higher rate for deposits growth throughout '24 with our focus remaining strong on the retail segment and the diversification with lean, which are projected 7%. We expect credit costs to remain around the 2% with a variance of 20 basis points, Puja is coming near future, which is this quarter, which is the second quarter, we feel that Puja have been helped us to credit growth, again, will we start for this year. And whatever we have been declined, we will be like to recover by the March and with our growth of the bank of advance 22% plus. I wish you and your family all the very best. Thank you.
Thank you, sir. Now I would like to request Mr. Sunil Samdani to give you some more details on the financial [indiscernible] during the quarter. Over to you, sir.
Good evening, ladies and gentlemen. I would now take this opportunity to take you through some of the key highlights of the quarter in terms of financial numbers. Starting with collection efficiency, the collection efficiency excluding NPA customers continues to be healthy at 98%. The full paying customer continues to be reasonably high at 96%.
Now moving to the DPD movement, you would witness that quarter-on-quarter, the movement in DPD has been stable with 2 major changes. One is 61 to 90 bucket, and the NPA bucket. As far as the movement in 61 to 90 buckets, I would want to mention here that the ECLGS loans which we have classified as NPA during the quarter pursuant to change in IRAC norms by the regulator. These were earlier shown expressed assets and performing part of 61- to 90-day bucket.
And the NPA, as we discussed the slippages numbers, we'll make it amply clear as to how to view these NPA numbers. Now first, let me take you through this adjustment of ECLGS. At Bandhan, we have taken this guarantee under NCGTC, 2 schemes. One is the ECLGS 1 and the second is the CGFMU guarantee. As far as CGFMU guarantee goes, since it was in the nature of insurance where we pay the insurance premium to get that guarantee whenever the customer cross 90 DPD, we used to market as NPA.
And accordingly, take provisions against them. As far as the ECLGS loan goes, these are 100% guaranteed by the NCGTC fund, and they were -- and since there is no insurance premium, there is no premium paid, and it is not in the nature of insurance. As per the IRAC norms then, since they are government guaranteed, we had not classified them as NPA. However, looking at the nature and the repayment track record, we feel that these are stress customers. Accordingly, we used to classify them in SMA 2 buckets which is 61 to 90. Now what changed? Starting first April, the new IRAC norm circular came in, which made it amply clear that all loans granted under the umbrella of NCGTC and the CGTMSE should be treated as NPA. Further, they said that banks are permitted not to make provisions against these exposures.
So where do we stand against these new norms? So as mentioned earlier, the ECLGS pool, which was part of our stress pool under SMA 2, we marked it down to NPA. As far as CGT -- CGFMU pool goes, that pool always was marked as NPA and continues to remain NPA, while the circular clearly says that the banks are permitted not to make any provisions as a prudent and conservative measure, we have a coverage of 86% in terms of provision over these loans of NCGTC under ECLGS and CGFMU. So that's the material change for the quarter.
How does it impact our stress pool, it has absolutely no impact on our stress pool because the ECLGS was earlier also classified as stress assets as part of SMA 2, and it continues to remain stress asset now under NPA. So what's our stress pool looking like. March '23, this amount was INR 65 billion with a successful coverage of INR 55 billion with a provision of INR 38 billion and the CGFMU guarantee of INR 17 billion. In June '23, this amount goes up to INR 62 billion, and the coverage increases to INR 103 billion, with INR 21 billion of guarantee cover and INR 43 billion of provisioning increase.
I would also want you to take you through the slippages during the quarter. During the quarter, we had a slippages of INR 13.6 billion, I'm talking here the gross slippages.
And if I have to break this number of INR 13.6 billion, about INR 9.2 billion comes from the EEB, INR 2.2 billion comes from housing and the rest from the other businesses.
How do we read these slippages, and what's the status on the recovery or upgrades. As you are all aware, during the last 6 months starting December 28, we had sold a substantial pool to ARC and have also got a guarantee repayment from the NCGTC of INR 916 crores. So as a result of that, any recovery in those accounts, we have to first pay to the NCGTC, if it's an NCGTC customer recovery or if it's an ARC customer recovery repaid to ARC as per the terms of agreement still their claims are satisfied.
Now let me first clarify on the slippages number. The INR 2.2 billion or the INR 220 crores of slippages that we saw in housing is more of the initial issues that we faced during the system -- new system implementation. These customers flipped and we had an immediate upgrade out of which of INR 1.6 billion or INR 160 crores. So technically, the other way to look at the slippages of INR 13.6 billion would be to reduce this INR 2 billion from that.
Secondly, since we have sold this portfolio, a large chunk of this to ARC and we've received the claim from CGFMU in the month of December, the recoveries that we do from our customers are allocated towards repayments to these 2 entities. So while the recoveries and upgrade numbers in our balance sheet looks at INR 2.8 billion or INR 280 crores, the real recovery from the customer stands at INR 550 crores. The rest either goes to ARC or to CGFMU.
So this being the first quarter, after those material transactions, which happened at the end of Q3, which is 28th of December and in March, the real impact of recovery is felt in these quarters, wherein the bulk of the recoveries go to the outside agencies. Now where do we stand on the ARC pool that we have sold, how much more we need to pay to them? As you all know, we did this transaction in 2 tranches, one in December and the other one in the March. In the December end, the contribution from the ARC and the investor was INR 414 crores.
Of that, the total collections we have made is INR 424 crores, so which effectively means that by the end of this quarter, I mean, the second quarter, we will completely repay our obligations towards the tranche we did in December 22, including the IRR. This effectively means any further recovery towards this portfolio will start flowing into the bank's P&L, and that's where we will see these numbers improving in terms of recoveries and upgrades.
As far as the other pool goes, which is the pool which we had done it in the month of March, the total receipt of those 2 pools between the write-off and the NPA portfolio was about INR 362 crores of which INR 150 crores -- I beginning your pardon, INR 250 crores is something that we have already collected. So clearly, we see a scenario starting H2, this recovery of close to INR 300 crores per quarter should start flowing into the bank's P&L. Thank you very much for your patient hearing. I'm sure you will have few questions. Happy to take them. Thank you.
So [ Ravi ] please start the Q&A part.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama.
So over what time frame do these ECLGS, NPLs lead the book?
Mahrukh, can you please repeat your question, please?
My question was that these are covered by guarantees. So over what time frame do these ECLGS, NPLs move out of the book as in gets resolved, you can recover the guarantee and I mean you can get the guarantee and resolve them, right?
Sure. so here now, there is a difference between the processes of claims that we do between CGFMU and the ECLGS. Currently, under ECLGS you have to upload a single case-by-case detail into their portal. And that's where they have a constraint in terms of the processing. And that's why this process of claiming is slightly slow because of the capacity constraints. On the other hand, the CGFMU, it's a bulk upload that happens faster. What we are given to understand that similar facility of uploading bulk or through a confirmation through CIC is underway, and that should help speed up the processes of recovery, the ECLGS guaranteed loan. And hopefully, in another 3 months or max 3 to 6 months, we should be able to recover the entire ECLGS claims.
Got it. That's helpful. And my next question is -- just on the SME pool, right? So on an average, how much do you see would accrete to the SMA pool every quarter from now on? .
Before I take your next question, just to add to your first question, that of this ECLGS book of INR 580-odd crores. This quarter, we have recovered from our customers close to INR 85 crores. Even organically, that recovery from the customer is happening faster and as the claim comes, we expect this to be clear -- sorry. I interrupted you. Can you please repeat your next question?
Sure. So on a normalized basis, now how much -- what is the ballpark range of accretion to [ SR ] 1 to 30 GDP. I mean, any range you could suggest?
So see normally, this 98% collection efficiency, that accretion should not be more than 2%, right? We've always seen in our business, there is an element of seasonality where the Q1 disbursements are lower. And because of the flood season, the monsoon season, the movement into -- the movement into the DPD bucket is slightly higher in the first 2 quarters, vis-a-vis the last 2 quarters, particularly Q1, where the slippages are the highest and then keeps on reducing as the quarters go by. So we expect the slippages number to reduce starting sitting quarter onwards.
Okay make sense, and my last question is, sir, what kind of recovery through the income statement would we expect from ARC sale say in FY '24?
So as I said, for this quarter, between repayment of ARC and CGFMU, the total amount is INR 270-odd crores between INR 2.3 billion in the ARC pool and INR 42 million in the CGFMU pool -- INR 420 million -- I beg your pardon. So both put together, it's about INR 270-odd crores in Q1. And as I said, Q1 is historically the weakest quarter, so that's the minimum we should look at.
We have the next question from the line of Nitin Aggarwal from Motilal Oswal.
So firstly, if you can share a data point on the interest reversal that we had during the quarter. And how do you see, therefore, the margin because despite the reversals this quarter, margins have still held up well. So how do you see that going ahead? .
So here, again, Nitin, I'll break this portfolio into 2 parts. The ECLGS pool we flipped and the other than ECLGS pools. ECLGS, we had reversed the interest long back as and when it became 90 plus, though it was never classified as NPA as per the extend RBI guidelines, and we never accrued interest on that. So the reversal on that pool was not there. For the other businesses, that reversal number -- I'll just get that number, and I'll tell you.
Right. And secondly, while on ECLGS, you mentioned that the money is expected in 3 months maximum 6 months. But on CGFMU like how that organization taking up to the big claims that you are placing with them? Do you expect the money to come on time because there is 1 more tranche that is expected in FY '25. So can there be delays here?
No, sir, we don't see a delay there rather than the procedural delay. We expect that money to come in by July end or at best, August, first half, and that's the expectation we are working on.
[indiscernible] If you can later on just tell me the reversal number?
The next question is from the line of Jay Mundra from ICICI Securities.
My first question is on provisions. So total provisions, I think last quarter was some -- I mean, what is the quantum of total provision. We have given INR 4,300 crores provision for EEB but what would be the total provision, including all continuing [indiscernible].
The total provision as on June end stands at INR 57.5 billion.
So it is largely changed right from last quarter, around INR 50.8 billion, something.
Yes, so it's gone up by INR 7 billion now.
Sorry, you said INR 57 billion.
INR 57.25 billion.
Okay, sure. So sir, that suggests that -- so I mean, what I'm trying to calculate is the PCR on the non-MFI businesses also while, of course, they are more secured, they have housing and commercial. But still, it looks like there is a PCR on the non-MFI business is relatively lower. Maybe that is the nature is secured, so maybe that is still okay. But is that the math roughly right?
So I'll give you the broad break up. On the SME loans, we have covered around 58% in terms of PCR, the retail is about 45%, and the housing is about 40%.
Okay. Sure. Good. Second question, Sunil is on SMA [ 012 ] number, right? So despite -- I can adjust the INR 580 crores from which have been -- which have gone out of SMA 2 pool. But if I look at SMA 1, 2 adjusted for this INR 580 crores loan that is fairly unchanged, right? Even the SMA 0 has actually gone up only. So while the collection efficiency help marginally lower from 98.5 to 98, the SMA pool is still unchanged right? So any thoughts there?
So in a scenario where the collection efficiency has dropped by 50 basis points, and the SMA numbers have remained flat. I think one should look at it positively because a steady state credit cost number, we are saying 2%, to which effectively means the flow rate from current still NPA at some point of time has to be in that range of 1% to 2%.
Okay. Right. Okay. And safe to say that all this -- I mean, the entire ECLGS linked loans have already been downgraded to NPA and nothing of such kind can reoccur, right? because it would have done at the entire portfolio level across people who are, let's say, even -- okay. So mostly all these were the only technically 90 DPD only.
Yes, 90 DPD. So if you recollect my total ECL disbursements -- ECLGS disbursement were close to INR 4,000 crores when we did it in 2021. The outstanding pool today is less than INR 600 crores, which effectively means that I have recovered close to 90% of that customer.
[Operator Instructions] The next question is from the line of Saurabh Kumar from JPMorgan.
Sir, just 2 questions. One is you've guided for this 20% loan growth. So that means nearly 30% growth from your first quarter numbers. So how do you think about that, especially in the context of -- you said that the diversification needs to be higher. Is it fair to say that you -- one should expect a very sharp pickup in GRUH, I mean, actually with the housing finance business going ahead? [indiscernible]
Combine [indiscernible] will add. On the number side, let me tell you. We've always seen a growth in first quarter. So last year, when we ended at 10%, 11% growth, it was on the back of almost 11%, either written off or sale to ARC. Adjusting for that, it was a close to 20% growth with the same situation of close to 8% drop in first quarter. So I think that's on the number side, and [indiscernible] to add on the growth.
No. What do you say that if you look on that the last year first quarter, there is an also micro credit, there has been -- INR 5,000 crores have been down -- declined. And this year also INR 5,000 crores declined, and micro finance loan, we have disbursed in the last year INR 8,200 crores. This year also, first quarter, we are disbursing it, INR 8,000 crores. So in that sense, if we see that a similarity of the last year first quarter and this year first quarter is the same [indiscernible].
The next point on that, this growth actually start has coming from the 1 month before from Puja and it will be like to September, it will be in the CRL income. Sometimes Puja will like to September, then it will be starting August
So this is the way we have been seeing in the trend of the last 20 years. So I have the confidence on that this year, it will be again -- this quarter, it will be come to again. Again, another point, I will tell that. So whatever we have seen the decline in April and May, June, we have been seeing that very much a very minor INR 200 crores is a difference between outstanding and the decline -- on that.
And whatever we see that in July, it is going on that in such a way. I feel that the July will be also not going down for that. For that reason, I have the confidence on that. The 20% plus growth, it will be happened in the bank, not any problem.
Sir, if I can just ask on this 20%, how much would you expect the micro finance business to grow back?
Micro finance growth, we have been given the 17% on that.
Okay. Okay. And the second question, sir, is effectively if your first quarter collection efficiency is 98%, so I just want to know if this 2% which slips into this SMA 0. What should be the expected credit loss now on this? Because this is just, I mean, on-time collection, right? So what should be the credit cost, it should be around 1.6%, 1.8%?
No, I have been looking in a different way on that. The one quarter, which is in my portfolio has come as a decline. That is also a little bit impacted to the collection efficiency. This is also as a seasonality but not since it will be continued in the full year and quarter-on-quarter basis in line no. If you go to that it will be improved again from the second quarter. And it will become on the -- if you say that compared to the last year first quarter, it was a 96% collection efficiency. It has come to this the 98 percentage within 1 year on that 2% increase.
So we expected on that this financial year when it will be like to next financial year, it will become to better than that percentage. So in that sense, on the basis of quarter 1, it cannot be count only the credit cost. Credit cost count the total year performance.
No, I got that, but effectively, if new collection efficiency is 98%. So 2% is slipping forward. I just want to know, typically, what is the loss rate on this or the NPA rate on this 2%?
I hope that it will be that we are thinking on that the 2% will come under credit cost.
Which is overall, not on this pool. So broadly, between the SMA bucket, right? We've seen that 30% to 40% remains in the SMA, once it crosses the 60-day DPD and the rest flows between 30 and 60 day DPD. So that is how one should look at.
Sunil bhai, my limited point is basically, you are basically presenting to us that the SMA pool and the NPA pool is fully covered. So I just want to know from an incremental basis, if your collection efficiency remains at 98%, the -- what should be the core micro finance credit cost, I mean from an incremental slippage basis, that's the limited point I'm trying to get at.
So then on the incremental side, it should be around 2.5% on the EEB portfolio. Because there are 2 things. You look at 98% collection efficiency. The other number, which is also important to look at is the full paying customer. The full paying customers today stands at 96%, which means there are 4% customers whose DPD is constantly going up, right? They are paying half of their installments which means that benefit is coming into the collection efficiency, but that benefit doesn't come to the DPD. That's why we say that.
We have the next question from the line of Prakhar Agarwal from Elara Capital.
Just 2 questions. One is you at the start of the call mentioned that the credit cost guidance will be 2% with a variance of 23 basis points. what makes you add this 20 basis points because last quarter, we said last time when we had this call, we said that credit cost will be around 3%. And with the type of confidence that we are showing in our improvement on asset quality, what makes you increase the guidance on this or now the variance on this credit cost?
No,no. I'm not confirming that, right? We would want to keep that something in our hands for future, which is unknown. Our endeavor is to keep it within 2%.
No, sir, the though process of asking this is we did not highlight this in the last quarter. So has something changed in 1 quarter for just to add this variations or nothing.
Nothing, nothing that 1 should read here.
So always, we are talking about that 2% credit cost, 20 basis points up and down.
Got it. And second is on the update -- any update on the core banking transition that you probably asked that was to happen for other portfolio apart from housing? What is -- when it's going to happen? And what is the sort of impact that probably we see given what we are aspirationally targeting in terms of growth of 20% and the run rate that is required could there be some sort of impact on that front because of this core banking transition? Has that happened?
So I request Ratan to take that question.
Hi Prakhar, like we met last time a couple of weeks back, we said that we would definitely make an endeavor to make sure that in Q2, we do the migration, given that it's a mega migration, we are actually deciding whether to go big bulk in one go or we would like to sort of go in maybe two phases, that decision that we will take internally depending on how things go.
So Q2, definitely we will go live for a big chunk of it, for sure. Will there be some disruption for a period of 2 to 3 weeks in such a migration there could be. But the upside is significantly higher. And therefore, you may see some disturbance for maybe a couple of weeks or a little more than that, but it will come back with even more benefit in the next few weeks.
The next question is from the line of M.B. Mahesh from Kotak Securities.
Sunil, just one clarification, this INR 920 crores of slippages from the EEB book that has no one-off, right?
No, that has no one-off.
On that slippages also -- is quite high, right?
Sorry.
Even if you just look at that slippages, just the INR 920 crores coming from your core business, that itself is points to still a very high slippage number on the MFI book.
No, I agree with your point that it's slightly higher than our liking, but that typically happens in Q1, which is for a lack of better words, I would say, a sluggish quarter for us. But incrementally, if you break it between April, May and June, the June month has been around a little less than INR 200 crores or around INR 200 crores.
Okay. If I just kind of look back, 1Q FY '23, there the slippage has been much lower from the MFI book. But this year has been worser than even last year.
No, no. Q1 is not comparable last year. Our book was under moratorium. Half of the book came out on first April and the other half came out in 1st July. So any which way, April and none of them would slip into NPA in Q1.
Okay. Okay. Just another clarification. Since notification had come off in April 1 you flagged this in the previous quarter, right, in the quarterly results. Any reason why this was not kind of told at that time.
No, but that doesn't change, Mahesh, these were anyway part of the stress pool, and they continue to be the part of stress pool, right? We don't need to take any provision, but we continue to take provisions the way we used to have it. So nothing changes as far as the risk on the bank goes.
Do say that it's a material item for the quarter, the [indiscernible] had come on April 1, wouldn't that be better? This was told in the previous quarterly results.
Mahesh see, I appreciate that, whether we say it in the first quarter, then the question comes if you believe it is important, then why didn't you factor it in Q4 results, which I would not have been able to factor it in Q4 results because auditors would not allow it. It is applicable from this financial year.
So if I say that this is something which you need to factor in Q4 itself, then the other side, which is the auditor, will push me to -- [indiscernible] tell me that I won't allow you to factor it.
Perfect, sir. Just 1 question for Mr. Gosh, because expenses continues to run quite sharply for a business which has completely slowed down. How should we see into this?
No. If you see that the cost-to-income ratio in that sense, if you see that my cost to -- on asset are remain that 3.5%. It does not change anything on that. Only that point because of the seasonality and -- because of the seasonality, my income has come down.
And second thing is that -- I have been opened 130 branches in this quarter. And there is an also little bit cost have given. It is not the cost, it's an investment of the bank. So we are -- which is predicted on that, we'll be like to get back on that cost-to-income ratio.
The next question is from the line of Darpin Shah from Haitong Securities.
Just to continue on this migration or system upgradation part, well, when we are saying that most of the bulk EBITDA in 2Q after that, we are expecting a 20% growth in the overall book. Is that right to assume, yes.
Yes, we'll do it.
Okay. But Sir, [indiscernible] in the 4Q con call, you had mentioned growth of around 22% to 25%. So while there is a dip of almost say 300 basis points or 500 basis points in the GRUH guidance?
No, we are -- stick on that 20%. Always, we have talked about the 20%.
The next question is from the line of Param Subramaniam from Nomura.
I just wanted some clarity around the ECLGS exposure. So this INR 580 crore. This is the gross exposure to all those borrowers, right? Not just the 20% part that is guaranteed by the government, right, Sunil?
So 2 things here. Firstly, this is the entire exposure. INR 580 crores was at the beginning of the quarter. During the quarter, we've recovered INR 85 crores. That's one. Two, ECLGS, there is nothing 25-75. 100% of the loan is guaranteed.
Okay. So this entire INR 580 crore is guaranteed. And that is the gross exposure to all the borrowers to whom this INR 580 crores has been given out. Is that reading is correct, right?
Yes. And outstanding today is a little less than INR 500 crores.
Okay. Got that. Just a bit of clarity around this again. So you're saying here that you have a coverage of 86% on this, and you had this previously also. So I just wanted to understand how the -- you're estimating the PCI drop quarter-on-quarter to this ECLGS part? If you could just run us through that quarter-on-quarter PCI drop, how it's coming through because of ECLGS. Yes.
No, no. So what we are saying is between CGFMU and ECLGS together, we have a coverage of 86%. Since it's a 100% guaranteed loan, ideally, the law requires -- the regulator says that we don't need to make provision. But between the guaranteed portion of CGFMU and ECLGS together, we have 86%.
now let me tell you one more point. If you look at my Q4 FY '23 presentation, we have mentioned there that 99% of my NPAs our government guarantees, if I may lose [indiscernible] it is title called the ECGP SME or the NCGTC guarantee are covered under these guarantees. So that was the case in March 23, and it continues to be the case even in Q1.
Okay. Okay. Got it. Just 1 more question. This is on the DPD movement on -- so the slide on some portfolios is DPDs, so the quarter-on-quarter doesn't seem to show any uptick across DPDs for Assam despite the floods. So is there any impact that we could expect coming into Q2? Or is this largely recognized. Yes., that's it for me.
So the Assam flood impact is not material, even if it comes in Q2, we don't see it to be materially impacting our numbers because our collection efficiency rate continues to be healthy.
Okay. Fair enough. All the best.
We have the next question from the line of Abhishek Murarka from HSBC.
So the first question is around NIM and cost of deposits. right? So you said in your opening comment that loan growth would be around 20%, deposit growth would be higher. So LDRs would continue to go down. CASA ratios probably would end the year lower than 39.5% or your period end number for FY '23. And so incrementally, how do you see NIM sustaining at this level you gave a guidance of, I think, 7% plus or something. So do you think there should be NIM pressure going forward?
Clearly, we've given a range of 7% to 7.5%, and we absolutely not see any reason why should we change that range right? Despite our CASA ratio dropping and more importantly, the CAR share dropping within CASA, we have still been able to maintain them. Which we believe we will be able to reverse it. I'm talking about the CASA ratio. And if that happens, there is no reason to believe that we will not be in our guided range.
And Sunil, just to touch upon cost of funds or cost of deposits, particularly even if you start accreting more CASA, incrementally the rate differential between a TD and FSA, [ Saha ] rate is still pretty high. So your incremental funding will still come from TDs, plus there is a back book repricing. So your cost of deposits, which have gone up, I think, 50, 60 basis points Q-o-Q, what kind of trajectory do you see that taking from here, let's say, with over the next 2, 3 quarters?
See. So this cost of deposits, which has gone up is for 2 reasons. One is, you're right, the TD repricing will happen. And that impact, if I have to take March '23 as a base, is about 68 basis points. If everything has to reprice at today's rate. The large part of the impact in Q1 is because of the mix change, which we are confident that we will be able to bring back that mix.
So you're saying additionally around 60, 70 basis points of repricing is yet to be done or some part of would have happened?
Not on today's cost. I'm saying on March '23, please.
So on today's cost, how much is left to be done? I guess that's the more important number.
So I don't have that number handy. I will have to recalculate that. We had done that on the March '23 base. So we will do that, and we can share with you off-line. What is also important is the yield on advances, which we have seen going up and will continue to go up as our assets on the advances get repriced.
Sure. okay. And secondly, on your branch addition, last couple of quarters, you've added quite a bit of branches. Also we are hiring to probably man those branches. So what's the plan for the -- for the rest of the year?
So in all, we are looking at a 1,600 branch count by the end of this financial year. I would request Shantanu Sengupta to share -- take this question.
Yes. Okay. So first of all, thank you for the question. So we are getting closer to about 1,700 odd branches as we move forward. And to your question in terms of how we are evaluating this, we are seeing good traction in each of these branches as we come off. So that is the plan, and we do believe that some of these incremental branches, which will come out [indiscernible] and add value to our overall -- to the overall deposit book. So that's the plan that we have in the new branches.
And Shantanu, if I look at your, let's say, employee per branch ratio, it was a north of 50. Now we've added a lot of branches so that going to maybe 45, 46, so you'll probably get back to that 50% range or 50-plus range? Or do you see more structural, lower employee per branch kind of ratio.
Yes. So basically, if you look at the model, the way it works the recruitment happens upfront. As we sort of move forward, we'll start seeing the results coming out of additional resources that we have taken in. So I think to your point, as we move forward, we need to have people on board to actually start generating business from these branches. So that's the backdrop.
So we have to recruit at least 2, 3 months ahead of opening up a branch. So that's why that head count is cost and the number has already been factored there.
Understood. Got it.
[Operator Instructions] The next question is from the line of Nitin Aggarwal from Motilal Oswal.
Sir a small question on collection efficiency again. While -- so you mentioned that the drop is slightly due to seasonal factors and monsoon also, but Assam and West Bengal growth have still improved. Now that the other states are following [indiscernible] the book. So any specific states which have contributed to this decline?
If you see that the business is in Maharastra and Madhya Pradesh and Delhi.
Okay. And sir, will these be the 3 states in terms of the proportion of EEB book also in that ranking?
No, so for us, after West Bengal, it's Bihar followed by UP then Assam and then MP and Maharashtra.
Right sure.
The next question from the line of Prabal from AMBIT Capital.
Sir what is the outstanding restructured structure book to us?
Sorry to interrupt Prabal, but the line for you is not very clear. We request you to please use the handset while you're speaking.
So what's the outstanding restructured book for us?
0.
Sorry.
0. When I say 0 means none of my customers are currently under any restructuring benefits, whether it's moratorium or any change, that has come out long back since April -- September '21.
Okay. Okay. The second question is, sir, on the ECLGS loans. Were these already do 90-plus DPD and because of the RBI circular these are classified into 60 to 90 DPD.
So it's a government guaranteed loan. So as per the IRAC norms, the government guarantee loans cannot be classified as NPAs but since they were DPD loans, so we thought that if we can't classify them as NPA, if we call them as stress pool, and we showed them as SMA 2. And they were always part of our stress book for the last 2 years.
And sir, 1 clarification so in the beginning MD sir said that there was 1 account of INR [ 2200 ] crore which was repaid. So can you talk about that?
No, it's a loan against term deposit accounts. So we had a large deposit from a government entity. So they had taken a loan against that term deposit for a short tenure of 7 days, and that got repaid in the first week of April.
And just curious, why was the INR 2,002 crore account classified as the retail due to the retail book?
It was never classified into the retail book. These are time deposits and anything above INR 2 crores as per our definition at the customer level, is treated as bulk.
The next question is from the line of Manish Shukla from Axis Capital.
A couple of questions, Sunil. What will be your average cost of term deposits on the book today?
Just a minute, about 7.1%.
And the marginal TD rate that you're offering today would be in about what?
About 7.7%.
So that is the gap?
This is exactly the gap.[indiscernible] I was always talking about.
Yes. So assuming no further deposit rate increases from here on, that is the extent of repricing on the TD side that 1 can expect?
Yes. In fact, the last action on the TD was a drop in the last time.
Sure. No, no, sure, sure. Second, going back to the ECLGS point, right? So ECLGS, my understanding is that government scheme said that if you lend 20% to an existing SME customer that 20% was guaranteed. So let's say you had an exposure of 100, you give 20%. That 20% becomes guaranteed and not the 120. So now when you label those assets as NPA, is it that the 20% has become NPA or the entire 120% has been labeled as NPA?
In banks, we don't have that option. It has -- NPAs are always active levels.
Yes. So that's the clarity. So you labeled the entire 120% as an NPA, but the guaranteed portion will only be 20% out of that 120%.
So this is the total outstanding of those customers, guaranteed non-guaranteed all put together.
We have the next question from the line of [ Punit Bahlani ] from Macquarie.
On the total NFI pool, in EEB pool you had INR 62 billion, it looks like the bulk of the slippages are from SME 0 and other accounts. You're saying it's seasonal, but can you like comment more on this? Like what is it exactly? Because the number of [indiscernible] quite the great, the INR 9.2 billion on NFI book and overall increase in the -- from the forward pool.
No, no. So first thing, let's understand this concept of slippages, we have a large pool, which is part of NPA and there is a reasonable amount of customers who continue to pay us, those repaid Partners, right. There are instances where customers are 10 DPD, 20 DPD, but they are NPA since they've been marked as NPA, right?
So on 1 hand, there is slippages. And on the other hand, there is a recovery from slippages, right? So that's 1 per piece. If you purely talk about slippages, as I mentioned earlier that my slippages typically in Q1 after a strong Q4 and typically seasonality, Q1 is weak is slightly higher and that has been the case always. If you compare it with the last year first quarter, there itself, we had a slippage of about INR 950-odd crores, right, of the total slippages of INR 1,150 crores at a bank level. So this is not something unusual. That's the seasonality which always play out.
We have the next question from the line of Mahrukh Adajania from Nuvama.
I just want to had a clarification. So basically, before April 2023, it was your call where to classify these loans and as a prudent measure, you classified them as SMA 2. So it's fair to assume that probably in December 2022, also these were part of SME 2 only, correct?
Yes.
.
Thank you. Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, ladies and gentlemen. Thank you for the patient hearing and participation. Appreciate it. Thank you.
Thank you.
Thank you. On behalf of Bandhan Bank, that concludes this conference. Thank you for joining us. You may now disconnect your lines.