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Bandhan Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '21 Earnings Conference Call of Bandhan Bank Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Hiren Shah, Head, Investor Relations, Bandhan Bank Limited. Thank you, and over to you, sir.
Thank you, Margaret. Good evening, everyone, and thanks for joining this conference call. We are glad to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter ending September 2020. We will take this opportunity to update you on the recent development in the industry and Bandhan Bank during this quarter. To discuss all this in detail, I've brought with me our Founder, Managing Director and CEO Mr. Chandra Shekhar Ghosh; our Housing Finance Head, Mr. Sudhin Choksey; our Chief Financial Officer, Mr. Sunil Samdani; and myself, Hiren Shah, Head of Investor Relations. Now I'd like to request our Founder, MD and CEO, Mr. Chandra Shekhar Ghosh, to brief you all about the bank's performance and development during the quarter. Over to you, sir.
Good afternoon. Welcome to all of you. This is in quarter 2 financial year 2021 results we published to that today. It's my pleasure to talk to all of you in the time of COVID. We know that the lockdown has calmed down recently, and economic activities improved significantly. The rural economy is on a much stronger and footing reflecting good momentum, record [indiscernible], several government initiatives and the Puja also going well. A number of our customers who are typically small entrepreneurs that depends only on local supply chain and cater to demands for essential goods and services, and they are bounced back strongly in this quarter. Result shows that. Within this situation, bank's performed very strong growth, which I like to mention in here. Disbursement approach moratoria, we are close to pre-COVID levels. Advance growth has come 19.5% year-on-year. Gross NPA has come down 1.20% from last year the same quarter, 1.8%. And we could say that the net NPA 0.36% compared to the last year, the same quarter, 0.6%. And all are happening, the team performance of the collection [indiscernible]. And team performance collection is [indiscernible] month-on-month basis saw that the improvement has come. And we are earlier mentioned about it on that June collection is the CMC and are now [indiscernible] collection efficiency. September overall banker collection efficiency has come at 92% in the overall bank, which was 76% earlier in the June quarter. And out of this 92% collection in CMC, 89% by [ Microdata ] [indiscernible] entrepreneur business partner. And if I see that there is a September [indiscernible] quarter is the 89%. But in October month at closing, we find out on that, the election efficiency in micro banking has come 91%. Very good thing, which we won [ last 10, 20 ] years, microcredit borrowers that normally, they are very discipline based, and they are also running their business, and they are coming -- they are builders here we see. Sometimes we would like to discuss. But again, they have been taking some time and return back on that. And this time also, they are showing very good. In October, the 95% of the Microcredit customers started repaying, which is displaying very good future and make sure that they pay back that within 90 days, the normal of the collections eventually come nearer to before COVID situation. And we saw also that the deposit growth in the bank, 95% -- sorry, deposit growth in the bank, there is a 56% of the CASA growth in this quarter we have been seeing, which is the best quarter in the last the couple of quarters we have been seeing. And our CASA ratio, 38.2% of the total deposits. This has a result in best-ever quarterly profit before the tax, which is INR 1,233 crores. Profit after tax INR 920 crores, which is 67.3% [ quarter-on-quarter ] growth. And the profit, whatever has come, INR 920 crores, after taking additional COVID provision INR 300 crores. Now total -- the provision, INR 2,069 crores in the bank. Banking is the focusing to expand more networks with building human capital and the technology initiatives. We have a plan on that this financial year by March '21, will be opened 574 new banking outlets across the country. And this outlet is in [indiscernible] is coming from South, North and West and not in a Eastern [indiscernible]. Because of the growth strategically and continual focusing in the area of EEB, which is our new name of Microcredit called Data Emerging Entrepreneur business, housing vertical, commercial banking vertical and the newly -- we have been developed retail loan vertical along with the deposit, the growth, we are focusing. Because we are focusing from this, the results, how we can get more growth in the bank in the future. I already mentioned about these 574, the banking outlets will be opened by March '21. I also again mentioned on that our -- another focus vertical this is in housing loans. We'll be expanding this year, another 500 banking outlets the [indiscernible] housing loans will be expanded on that. I -- earlier, I also mentioned in a different quorum, I'd like to address in here also. The first 5 years of the bank was the build up of the base, build up the team and merger of the team, and that to be there working on that. And suddenly, we say that, that COVID. And COVID also 2 quarters we have covered, we spend out on that how the trend of the customer in the business on that. That has been very positive feelings we got on that. Then we have been taking a new 5-year focused plan. The first of the plan on that, we added that EEB, Emerging Entrepreneurs Business, which we feel better that within 5 years, our ratio of this business will come 30%. We know that this is a vertical where the group loan is there, individual loan also is there. We have developed the individual loan products under this. The comment from the group loan to individual, mainly the [indiscernible] and the micro housing loan. And we are developing on back about it such as way. How did the -- all of the 3,500 [ microselling ] branches gradually will be focused on that all the products and services, which is immediate in the low-income group and middle-income growth, including deposit. And that their housing loans, their gold loan, their consumer loans, all could be provided centrally with this or the microcredit branches. And that will help us to grow the different types of the portfolio in the bank. And the second vertical is in the housing loan that also we are looking in there to build within 5 years, it will be come to the issue of the total advances is at 30%. And we are dividing on that the 2 types of housing loans. One type so is a micro housing loan, another is a prime housing loan, which is affordable housing we called it on that. And usually we will like to gradually increase the number of branches . Where the branch customer is there, they will get that housing loan service facilities from us. And other than the branch, also from the market we would like to attract the customers to provide this housing loan. And the third point, you know that we have a commercial banking, which we also feel that the 30% will be like to issue in the next 5 years. And they are also promoting existing customers from micro credit as a called the individual loan, which will become to care as an MSME. And also we usually like to source from the market. And we'll be keeping our mind on that. We will not go to the corporate lending in the bank. And the fourth vertical we have been developing, we call the retail loan, which is we feel that the retail loan means the personal loan to be the loan, called loan and vehicle loans and consumer loans. And these all loans, will be like to provide to the bank branches. Wherever we have it at 1,071 bank branches, this vertical will do work through this the bank branches to provide this type of product. And this product all together within 5 years, the 10% of the total advances, which can be like to reach. And we are -- you know that we are recruited in the book ahead of this loan. And the building is a collection vertical separately to support this business. And also, we are developing on that by using technology in source and assessing this customer level. So this is a good vertical, and we also saw that there is a good demand from the customer level existing and new customer level, which can be help to the bank to grow focus of that bond book. Other than this, of course, we'd like to mention on that, we will be continuously building the human capital to provide the best services to our customer. And technologies we would like to develop the gradually time to time whenever needed on that. And the digital channel, we are focusing in this -- from this year, we are recruited another senior-most person that focusing on that on the bank also simultaneous with the present model, how we can also provide the digital based product and services of the banking industry to the customer. So these are the 5-year plan also we are placed to you. So we feel that India is a big country. Focusing to the rural until now is a very small number of opportunities already taken by the banking industry, but the big opportunity in the future is abundant is we like to focus and grow the book size in the balance sheet, the liabilities and the CapEx. And India base is not in their concentrated only the eastern region. So I'd like to help all of you support on that to grow this and particularly. Thank you to all of you. I hope that you have answered question, we would like to share on that thought.
Thank you very much. [Operator Instructions] The first question is from the line of Antariksha Banerjee from ICICI Prudential AMC.
Sir, I have 3 questions. First is in the microfinance business, if I look at your average charge deposit balance of the micro finance customers, while the deposit from the normal retail function has been excelling, this deposit balance of the microfinance customers is consistently coming down over the last 2, 3 quarters. It was around 2,100, 2 quarters back; then it came to 1,900; now it's at 1,600. While the overall deposit mix is very small, but if you calculate this as a percentage of the repayments, these borrowers are making monthly or quarterly, this is a fairly large number. So any idea why this deposit balance is consistently coming down?
Okay. If you see that this is a time, which is very much not in a normal situation on that. So in that time, it cannot be like to mobilize the deposit in this time. So if they have a need, they can withdraw, the confidence of the customer we like to build up more. So in that sense, we are -- feel that it isn't good. It is not in long-term views, but in the short term in this is the time, they can be sure they can deposit that have been happening on that.
Okay. So they are drawing money to make the payments for their loans, is that a fair assessment to me? Some of the borrowers were probably having some stress?
See, typically, the way we collect these deposits is that along with the installment, they pay INR 30, INR 50 extra. So in which time, the focus is more on installment rather than extra amount for the deposit. So that's what we are saying.
Sure. Okay. And the -- I mean, you have acquired some [ SLA ] customers in the microfinance business. You are starting disbursements again. I just wanted to ask, what are the changes operationally or logistically because of COVID and social distancing that you need to follow now? I'm sure you cannot gather 20 people in a small room and conduct the meetings in this new world. So what are the changes that this business is undergoing operationally? It may be temporary, but you're starting to grow again so it matters.
If you see that we are -- after the COVID situation, that the last quarter, we have given the extra 1 star to the [ ad ] of the banking outlook. Because you know that is a normal position, maybe the 20 or 25 forward can we come to the 1 group meeting, it will not happen in this moment. So that is the hard split in a group on that. Some house maybe the 10 people or 5 people or 3 people. And then to speed hit where they are going to collect on that.
Okay. But the meeting is happening. It's not like the entire group leader collects everything on everyone's behalf and then give it to the collection leader?
No, that is not in the normal. This position is not we are expected. We are not also insisting that.
Sure. Okay. That's helpful. And then last question is actually on the mortgage portfolio to Mr. Choksey. So it's been a while since this portfolio has been stagnant. Obviously, the segment itself has had its own issues. Now I heard Mr. Ghosh, in the opening comments, talking about this portfolio now going on growth path and becoming 1/3 of the books in 5 years later. What's your medium-term outlook on this entire mortgage portfolio? Would you like to grow it the way you did it and improve where the mix would be some 85% housing and the 10%, 15% would be [ map ] and construction? I heard that you are splitting the book into normal and affordable housing and microfinance. What could be the RE profile? Would it be was it grew or it is going to be a more modest profile? Any medium term thoughts on how you're going to build the business here?
Yes, sure. See, if you look at it, micro housing would be undertaken by the EEB vertical, okay? it's far closer to those customers. And therefore, they would be handling the micro housing finance business there. As far as other housing finance vertical is concerned, we would continue to do affordable housing, what we have been doing. Besides now that we would be using the bank's branch network across the country, as Mr. Ghosh mentioned. Obviously, therefore, we will look beyond affordable housing segment. So I think average ticket loan, which has been so far steadily at 9, 9.5 lakh, I think there, you will see an increase in the average ticket loan size. And obviously, our post merger, our penetration and the contribution has started coming from the eastern states, Begal, Jharkhand, UP. So I think over a period of time, I think we should be able to see quite a good growth coming in the medium term. I cannot quantify the figure into groups. But I think at the existing network of 1,000 branch -- branches. And as Mr. Ghosh mentioned, I think if we are looking at [indiscernible] retail outlets and there are many states where erstwhile grew had not penetrated. So I see there is a huge potential possible to achieve the good growth over a period of next 5-year period as vision articulated by Mr. Ghosh.
Sir. And sir, what would that imply for your profitability or return profile? Would the -- I mean, because you're going into prime segment, I'm assuming the RO will be lower because of the competition. So as an aspirational level, on a blended basis, how are you looking at the return for value?
I'm sure, I think there would be slightly yield, obviously, which we have sustained today on our portfolio of around close to 10.5% or 10.75%. That yield the mix -- as the mix will change, I think yield will also accordingly change. Today, I'm not in a position to tell you what portion of the prime housing would be component. But I think as we move forward and as we start sourcing, I think we will know better as to how much yield will get compromised. The desire is to sustain the yield.
And just to add, while the prime housing will come at a lower yield, we will also have a micro housing vertical, which will come at a higher yield. So on the whole, we still hope to balance this.
The next question is from the line of Karthik Chellappa from Buena Vista Fund Management.
I have 3 questions. For the collection efficiency of about 91% by value and 95% by volume, could you give us some color on state-wide strength, specifically which are the states that are lagging, both in terms of customers not paying as well as by value.
We can see on that, if you see the statement in our -- with Bandhan is the highest portfolio, the portfolio -- the amount was the collection that CNC has come in October, 90% in West Bengal, but pan India has come 91%. But if I come to this, the customer point of view, how many customers have paid. And the percentage-wise, pan India is a 95% customer have been paid, but West Bengal has a paid at 96%. So this is in 1 side. And if you would add it up -- trains on that, we are finding it on that. The very good percentage, the 1% to 2% in a monthly is improving on that collection efficiency. That has been very good. We -- I hope that it can be reached, and the next quarter is a very good amount of collection efficiency, which is near to the -- before COVID.
And just to add, last quarter also we had mentioned that 1 big factor which can dramatically change the collection efficiency is running of the train in a business-as-usual scenario. Today, the train services are not running the way we would have liked. Once we see these train services running, whether it takes 15 days or a month, and you know we see close to 5% increase in our collection efficiency on the overall base. So that's what will be a big factor or a delta to move the collections.
And this is the train, we are talking on that, the more is a local train, which is the small entrepreneur, they can -- they like to come to the nearest SCT to sell their product on that. The demand is there, but it is not available at that -- the local train.
Can you share the similar figure for Assam, both the collection efficiency and the percentage of customer scheme?
Yes, we are seeing that a very good performance has come to Assam also is an amount wise, it is that October has come 86, 87% and the collection efficiency and the customer, 0.80% in the customer also. And we also see that a very good of trend, we are looking at. And this is a -- we are always, as mentioned over the many times, I can repeat on that, the plus 20 years in my experience, the customer behavior, customer discipline. And sometimes the break. And again, they are returning back after a couple of weeks or a couple of months and depend on that, what types of situation they face on that. So it is we see better than now. The bigger crisis has come in that because of the COVID and also in floods or tornado, that many things that happen. But after that, also the movement we are seeing that the customer has come to regularize on this the repayment rate. That can be big hope and are aligned with the earlier my experience on that.
Great. My second question, sir, is on the easy disbursement this quarter of about INR 10,000-odd crores, what portion of that would be to your existing borrowers in the form of data and emergency loan or top-up loan?
See, just to clarify, we have not given any government guarantee loans, so to speak, right? Yes, we have changed our model from being a single loan policy, and now we are allowing the top-up loans. But if you look at the number of new loans that we have given this quarter, that number stands at 21 lakh, 47,261 loans, right? And this -- if we compare it with the previous year same quarter, this was 21 lakh 27,817 loans, right? So the -- it's in line with what we use to differ in this time of the year. The only difference now is earlier we used to have a 1 loan policy, where the customer used to close the earlier loan and take the fresh loan, now we are allowing them to take a top-up loan. They need not close the old loan.
Okay. Got it. So of this quarter, about 21 lakh has been the new loans and the balance loans have actually been to existing borrowers, either in the form of a top-up loan or borrowers have completed their loan and taken a fresh loan?
Yes. So 21 lakh is the overall loan, which includes new loans, top-up loans, everything, including the borrowers who have closed their loans and taken a fresh loan. In terms of percentage, the percentage of top-up loans today stands at 7.6% of the total EEB book.
Okay. Got it. And my last question, sir, is are total standard asset provisioning on the micro book, which stands at about INR 356-odd crores today, what portion of those [indiscernible] about 0.75% of our book? Now given that in October, the collection efficiency is 91%. Even if it continues to improve, do you think that the standard asset provisioning that we have is sufficient? Or why have we not chosen to have a higher standard asset provisioning upfront and write-back in subsequent quarters, if the collection efficiency turns out to be much better?
See, there is always 2 thoughts, right? One will say that we take excess, which we have always the impact. We believe in upfronting the right provisions but upfront debt. So that's the policy we always believe in. Then initially, when the pandemic hit, we had estimated a credit cost of 3.5% for the pandemic. So we are continuing to hold that guidance though we are seeing a better-than-expected collection ratio, right? At a bank level, we are already 93%. So -- are and more importantly, at a customer level, we've already reached 96%, right? So if 96% of the customers who have started paying to us, if they continue to pay, then we are there as per our original guidance. We don't need to take any more provision. So we clearly believe that things have improved, and they have improved better than our expectation in terms of timing. And so the [indiscernible] for now, we wish to continue. And if things continue to move this way, maybe there could be an option of -- in Q4 to see whether we need that entire 3.5% or not.
The next question is from the line of Kunal Shah from ICIC Securities.
Yes. Sorry, coming back to this question of adequacy of provisioning at 3.5% credit cost. So 3.5% is of the overall book, not the MFI is what we were looking at in terms of the credit cost? Because when we look at the contingency buffer, when we look as a proportion of MFI, that is still at around about 4-odd percent.
Right. So what we are saying is the total pandemic cost. We are not seeing this financial year cost. So part of it, we have already booked in the last financial year. The 3.5% is what we estimated as the total credit cost because of pandemic for all products put together. Against that, we have already provided 2.8% for now. And as we said, that our collection efficiency has improved better than our expectation than what we had earlier in cash. So for now, we are continuing with that guidance, and we will -- and as Mr. Ghosh mentioned in his opening remarks, in next 90 days, we expect to go back to the pre-COVID level collection efficiency level.
Sure. And secondly, in terms of the top-up loans, you mentioned, 7.6% of the book. But in terms of the customer base, how much would that be in terms of the number of customers whom we would have given the top-up loans? Because that quantum would be still lower than the outstanding. So if I were to just look at it in terms of the number of customers.
In terms of number of customers...
The proportion of customers to whom we would have given top-up loans.
Yes. So that is about 12.3%.
Okay, 12.3%. Okay. And if we have to look at it in terms of any sort of lower interest rates our customers seeking or they are thinking maybe whatever is the EMI is getting added or pushed back, they are still willing to continue with the existing interest rates?
They are -- we are continuing the existing interest rates.
Okay. So there is no change in terms of the interest at all? Maybe with this 6 months or what they are, they would be further seeking an extension as such?
No. I didn't get this question. Could you please repeat, Kunal?
Of course. I am saying maybe since the interest rates are on the higher side, okay? And the accumulation really hits them, so are customers, maybe when we are going in for the collections of for -- and when we are resetting the entire EMI, are the customers seeking for the lower interest rate? Or it continues that the way wherein the tenor was contracted for maybe or the rates that were contracted for?
So in EV business, which is the erstwhile Microfinance, we never compound the interest, right? So we have never charged interest on interest. So the question of reset the interest rate does not arise -- or the EMI does not arise. And even otherwise, we are the lowest cost lender. So we have not heard a single instance in the field where they are pushing for interest rates or any change.
Sure. So it's a mere extension with the same EMI?
Same EMI, we are collecting.
Sure. Sure. And 1 last question in terms of the addition to employees. So they were like 4,000 odd during the quarter, no doubt Mr. Ghosh also articulated that we are building up the human capacity. But the way in terms of the branches we have added on the employee side, are we more or less done? Or that will also continue at such a huge pace? And finally, in terms of this addition. What is the kind of impact it can have on cost to income?
If you see that, there is 2 things in here. One thing on that is we are going to open 574 new branches. So when we are opening on that, before the opening, we'll be like to recruit the people and giving that to the branch, existing brands to build up their scheme and understand the culture and the working environment, everything on that. And they are feeding on that. And new branch to open, they will be transferred from this branch to that branch. And automatically, it will be absorbed by the new branches. So this is the way we are making on that. It will be not a matter on that cost of the ratio.
Okay. So on employees, that's more or less done, branches will be over the quarters?
Yes. And whatever the number is [ immediate ] on the gap because we cannot be like to open all branches to open at a time. Whatever we have been open for that time being to collect the money from the splitted group. So there is a need on that, the extra staff that will be needed. Some staff is going to this the COVID affected, we can give the staff to there. So this is a different situation. We can give the staff support to them. And gradually, when this -- the new branch will open, they will be transferred and that extra start from there.
Sure. And 1 last question in terms of the second half growth, normally what we see over the last 2, 3 years, are we confident of maintaining that, given that we have invested in the franchise? Collection efficiency is great. So should we get back to that kind of maybe quarter-on-quarter growth, which we see every year in the last 2 quarters?
Yes, it will be. Because you know that always in the last 2 quarters, business growth is coming better than first 2 quarters. And which usually happens. But again, we are showing very good performance. So that, I have been better hope on that. The next 2 quarter business also will come on that in a good way.
The next question is from the line of Nitin Aggarwal from Motilal Oswal.
Congratulation on the good results. 2 questions. First is that, what are the key criteria that we follow while extending top-up loans? And how does this differ versus the earlier process? And secondly...
You are not properly audible, sir. We are not the -- we can go to you. Can you repeat your...
Nitin actually -- your voice is breaking a bit. Nitin, your voice is breaking.
Sorry, is [indiscernible]. Am I audible now?
No, sir. It's not very clear. It's not very clear, sir. Can you please check on your phone line and join again?
Is it any better now? Or I'm still [indiscernible]
You Just please go ahead. Go ahead.
Okay. Yes, thanks. So first question is like what are the key criteria that we follow while extending on top-up loans? And how does this differ versus early tactics? And secondly, more of a clarification. Have you seen any change in interbank business operations to ongoing state divisions in Bihar? I'm asking because next year, we will have elections in this state on all level. So just some color on this.
To your first question on any how we access the top-up loan, as I said, it's just a facility that we have offered to our customers, which is already prevalent in the industry, Bandhan was the only exception. And the reason we started it during this time because we thought it's a good time to start there. We don't need to put more pressure on the customer to repay the entire amount to take the fresh loan. And two, we saw that competition used to take advantage of our policy of 1 loan, and they used to take top-up on our behalf. So these are the 2 primary reasons why we started it. In terms of the assessment, it is in the same line as if we were to give them a fresh loan. Because this is a new offer of fresh loan. So although the assessment that is required to give a customer a fresh loan is done for the purpose of top-up loans as well. And the conditions like the customer has to be regular, he should not have missed the single installment, the credit capacity -- repayment capacity, overall indebtedness. So all those criteria are still considered at the time of top-up loan.
Okay. And secondly, on the Bihar state election can there be any change in operations that you will see because of that?
At one stage where we have seen an improvement in collection efficiency higher than the national average to impact post, pre, plus, the Bihar state has really come up very well. And in terms of number of customers, almost 99% of the customers have started paying their installment in Bihar. And in value terms, it has touch 97%. We don't see it directed, and these are October numbers, which is the election fever.
The next question is from the line of Arjun Bhatia from Makrana Advisors LLC.
For your micro book, what percentage of disbursement will be to existing customers for pre closure of loan? And directionally, how is that -- how has this pre closure rate move?
So we never give loans to pre-close the loan. In fact, our policy is the customer has to give the close loan first and then the full off period of 2 days. And after that, we gave a fresh loan. So it is never the other way around where we give the loan, first loan and then they close the earlier loan. It is never that.
Got it. No, that's what I meant. So after that cooling-off period, sir, what would be that number?
So typically, if you see we keep adding 15% to 18% new customer every year. But since it's a 1-year loan, the entire loan gets recycled in 1 year. So about 80% of the customer -- loan goes to the existing customers in a year's time.
Okay. And just on this new strategy of growing the commercial banking and MSME. So one, where do you feel the need for this? Is this more because you're feel that the NFI reaching some saturation level or some ceiling level and you want to branch out other areas? Or post-COVID?
No. This is in line with the practice that we have always spoken about right? We always said that we want to move our high vintage micro banking customers to an MSME segment and migrate them to the next level, right? So that is exactly what we are doing. Once we give an individual loan to these customers, the next stage is to migrate them to MSME. The idea was twofold: One, these are vintage customers, their business have grown beyond micro banking. These are the customers who've been with us for 10 years. Why lose this business to competition? And in fact, we can be a sole banker, which will not only give us the entire business, but also a better control on credit and their leverage position.
And then gradually, also, we are strengthening to assess the risk of the customer. But we cannot be like to continuously in the group loan with their group process system on that. So when these customers are coming at a bay, and that they are also has a need in the bigger support, they are going to the multiple of the vendors to take the loan. And I'm not assessing properly on that. So better on that, we can we proceed the assessment of this -- the risk of this customer. And accordingly, we'll provide on that. And that is a big opportunity for us to grow of the business and also mitigate the risk of the weakness.
Okay. Right. So 1 is growing with your existing customers. And -- but I think another part of the strategy would also be to acquire new and MSME customers because I mean historically, you see on a very top-down level, business growth, income grow or job growth in India has not been very, very strong. So I guess another part of the strategy would be to acquire new customers. So on that part, what sort of advantages do you think Bandhan has, especially outside of your core or stronghold of Northeast to really grow this MSME versus other lenders in this space?
As our presence has moved beyond East India almost 10 years back, right? And our strength is our deep distribution, right. It is where we believe that we have the opportunity to pick and choose customers. There is enough opportunity in rural India today for the MSME segment to pick and chose those customers. The key is to build a right process and system, which is what we have done over the last 2 years when we were building this individual loan. These individual loans today, even in the COVID environment, our collection efficiency is at 99% level. So that gives us the confidence that we can replicate this system and processes across India, and that's this opportunity.
[Operator Instructions] The next question is from the line of Saurabh Kumar from JPMorgan.
Sir, 2 questions. One is this interest on interest, the reserve bank waiver, is it allowed for your micro finance customers? So that clarification I wanted. And what is the amount right now? And the second is on Slide 25, where you outlined your 5-year loan book mix, I just want to know what it does to your return on assets? So clearly, I see micro banking mix comes down. Will it be fair to assume that your ROA also kind of compresses down?
If you see that the ROA part, I mentioned from my -- the micro credit life and today. Micro credit life also we are charged on that to that 24% -- or 22.4%. Now we are charging 17.95%. Till now, my ROA is in very good, we maintain on that. That is in 3.5% to 4% on that. So we see that when the bank has been like to growing more, their efficiency of the employees have been increased and customer, the growth has been coming on that. That has been held to the banker to get to that -- the good ROA on that. So we'll be -- and also the NPA is minimized on that. So we feel that whatever the new vertical we are going to expand in next 5 years, we are keeping our mind on that we are of this type of issue will be aligned on that way. And accordingly, we are banking on that. Because you see that the one kind of that banking service is in corporate. So that is the total that is coming, and after that, very, very, very low ROA on that. But if you see that the bottom of the pyramid is the micro credit and a little bit higher level, which is not in the corporate -- net corporate is then lighter then small corporate. Altogether, if you see that is a big opportunities on that to grow the bank and to maintain this ratio. I feel that it can be possible.
Okay, sir. And the interest on interest part, sorry, again, what is the total amount? And is the waiver allowed?
So firstly, interest on interest benefit is applicable to all customers. So that has been very clearly clarified by the government, not only to the -- even we have to offer this benefit to customers who -- where we are not compounding. So even if the customer is not charged compounded interest, we still have to offer them this benefit. That's what the RBI circular and the FAQ clarified. So it is applicable to all -- across all segments, and it will be applicable to 99% of our customer base, which is less than 2 crores. And in terms of quantum, we are still working on the exact amount. But we believe at a bank level, that quantum will be around INR 150-odd crores.
The next question is from the line of Sameer Bhise from JM Financial.
Just wanted to ask what is the size of the individual micro loan book? I think it was around INR 22 billion last quarter. Basically, customers with larger vintage.
So not all customers with larger vintage have been moved to individual loans today. And this size, I did that number, but should be in that range of...
INR 8,000 crores.
INR 8,000 crores and I'll give you the exact number.
Okay. And secondly, what was the write-off of -- also for the quarter in the micro loan book?
INR 109.21 crores.
The next question is from the line of Nishant Shah from Macquarie.
I have like a 3 or 4 questions. Sir, firstly, could you explain the difference between the erstwhile small enterprise loans, SCL, which used to classify. Between that and the microfinance individual that you're now showing as a part of the EEB book, and the [TLTRO] book, which you are now showing under retail. What is like the characteristic difference between these 3 portfolios, either in terms of like ticket size or type of customer or something?
The first point on that you see that the -- whatever the SCL, we called it in the -- particular under the commercial banking, and with all customers are coming from the market, not in a microcredit promoted customer. And under the EEB and whatever that the customer we are talking about the individual loan, that is only the customers who are promoted from the group loan to the individual loan. And ticket size, if you see that the micro credit ticket size is a disbursement point of view, INR 1.65, INR 1.75 lakh. And if I coming to this, the SEL, that is INR 3.5 lakh.
Okay. Perfect. Second question on just the broader kind of diversification that you're talking about. In the South or in like West or some of these newer -- relatively newer geographies that you're planning to enter, sort of have like a last mover kind of a disadvantage in terms of like your comment to be competing against well entrench players. So what does that do to your cost-to-income to your credit cost outlook for the microfinance pool? Because all the advantages that we had in the core geographies, we will probably have those disadvantages heading into some other newer geographies. So could you talk about that a little bit?
There is no geography where we are new. Actually, we have a presence, but presence is not that much big like it in Bengal or Assam or like on that. So we are like to open the branches more in that areas. And we have a good plan earlier, so that we are gradually increasing the capacity of the people in that branch -- those branches. When it will be open, so those with the old brands staff will be transferred to the new branch, and the new staff will be joining there. So that can be helped to maintain that cost-to-income ratio or cost of operation ratio in the bank on that. So we are practically in such a way where it cannot be like to a big jump of the cost of operation will become on the bank.
Okay. And just 1 last data taking question. Could you quantify what is the zero-day [ PAR ] in Assam for this quarter and the last couple of quarters, please?
Our collection efficiency in terms of -- we will -- for Assam particular state, we will have to come back to you. But overall, our second plus has been in the range of around 20% to 23%.
22%, 23%? Okay.
Yes.
And so do you expect like some bit of problems to occur over here, because the industry data seems to suggest that all these overdue accounts are progressively moving towards the 180-day plus kind of order buckets and are likely to be written off? So what is the -- what are the kind of write-offs that you've done in Assam so far? And what do you expect to do in the future?
Yes, as we mentioned earlier, our collection efficiency in Assam has reached 87%, and about 88%, 89% of the customers have started retail. So we see a month-on-month improvement in Assam, and we don't see any reason to be panicking so much about Assam. Yes, it is below the national average, and there are reasons to be below the national average because this is 1 state, which had a CAA impact. It was coming out from the CAA impact, and then immediately, there was a big flood, which hit the state of Assam. And that -- this is also one of the states along with Bengal, where the lockdown was extended till the last possible day. Even the first 15 days of September, there were pockets which were under lockdown. So clearly, we are seeing a month-on-month improvement, and we don't see things going out of hand there.
My experience also see that in the -- this type of borrower, they are on a onetime, they are very peak, the regularized their portfolio. The trend -- if some crisis has come, they'll take some time on that, but I saw that the maximum number of borrowers return back and sometimes maybe that 3 months take the time or someone will be the 6 months take the time. So that is the 1 point, which I learned from my past experience of the micro credit borrower. And these -- the people they should keep in mind on that. They are to get the access of credit other than the lender. So that it is been very keen. They will be like to return back to, again, to start their business or running their business, go to the money lenders to take the loan for a 100% interest rate. So they know that matter. But it will be some prices has come, that they will take some time. But gradually, they are returning back and they are returning back way earlier compared to the other industry. So that is my confidence on this borrower. I honor this borrower on that.
Okay. Perhaps we can continue this offline. That's it for me.
The next question is from the line of Anand Dama from Emkay Global.
So the collection efficiency that we have seen in the month of September and now in the month of October, there is hardly any improvement. I mean, just about 1% has been achieved in the whole month. So why is that so slow, despite we had much of business normalizing happening in the month of October?
So just to correct, the improvement is 2 percentage point and not 1. And there are two factors here: One is in the month of October and September, we had Puja holidays as well, that impact; and two, as we mentioned at the beginning of the call that the one big factor, which can impact the collection efficiency in a big way starting of trade. So the day we see the paying services functioning in a business-as-usual scenario, we see a big jump in the correction efficiency. Because there are a lot of businesses we have extended in and around the movement of print, either for their supply chain or their businesses are in and around their stream related to functioning of [indiscernible].
So when do you expect that to happen? I mean ending[indiscernible]
So this a -- this is -- will be depend on government. We cannot be like to take that decision. [indiscernible]to open [indiscernible]
[indiscernible]
[indiscernible]. We're expecting -- we are earlier expected in October before Puja, we can be opened. But they are a little bit scared about the [Tanakita ] Puja or the only -- it will give more people will be gathered. So that they have not opened as far my knowledge. So hope we can be after the Diwali maybe they can observe and then can be opened under.
So I mean, I -- we will see some more improvements happening in the month of November, actually. And by the end of November and turning into December, I think when we will [indiscernible] accounts in NPAs, which you are not able to connect, right? So that as of now the -- hello?
I am coming on that point on this. We cannot be expecting the one night, everything will be changed, and coming to this 5% or 7%, no. Because in the beginning, if you see that the September, when open this the coming of unlock in the beginning of the September -- sorry, June, and 69% collection in [indiscernible] on that. It is very fast to growth has come. In the second quarter, it has come to this the 92%. The next part, which was another 8% or 7%, it will be little bit -- not in that fast will become on that. Because it will be also depend on some circumstances of the area on that in that train and city to -- state to state, there is no transport is making on that. You will see that the Bengal is the hub of that some of the small entrepreneurs, they are- produced a lot of garments item and selling to the Kolkata and Assam, Tripura and Bihar, Odisha people will come to buy in a bulk and selling to their state. We are not also coming on that. So a lot of circumstances will be depend on that. So I think that, that will be not coming to this chunk from that [ to 28% ]. [indiscernible] Otherwise, [indiscernible] point. See [indiscernible] thing on to note here.
In fact it's also important to note we are at 95%, 96% of the borrowers that start operating. And as I think Ghosh initially mentioned that it's participating base here, the fact that we have seen [indiscernible] and state, we are confident that as these customers have already been activated. We -- I would cover with 95%, 96%. And I think -- so the better way to look at is how many customers are paid.
So basically, customer numbers is more important? And we believe that the [indiscernible] customers also [indiscernible]
That is showing their interest to repay that.
Okay. And sir, the number of banking outlets that you said you want to open in some new area in Northern India [indiscernible] . So far, these are the exclusive branches that you will have? Or it will be a smaller version of the branches that you will have, which will largely collect the liabilities and distribute some assets?
It is a mix of both. Some of the [indiscernible], which is called the banking [indiscernible] branch. [indiscernible] [ 3 to 4 ] bank branch would be like to 1 -- sorry, 3 to 4 microcredit branch, you need to go on bank branch. So accordingly, it has been proportionate on that.
And just to add, the last 3 years, we've been adding our distribution about 10% to 12% every year. So this is in line with the same strategy. We've been able to manage our costs despite adding those distribution every year-on-year 10%, 15%. So we don't see any reason why this year should be.
So how many branches that would be opening up and which are full fledge branches?
So about 100-odd out of these will be the full fledge branches, and the rest will be the small branches or the micro banking unit or the EEB branches.
Okay. And now in terms of approvals from RBI, is there any restriction or -- that is [indiscernible]
All restriction was withdrawn by RBI.
Okay. That has been intact. Okay. And so is -- on your compensation, is that right?
Yes.
[Operator Instructions] The next question is from the line of Aakriti Kakkar from Goldman Sachs.
This is Rahul here. Sunil, just to start, I actually got a couple of questions, so we'll keep it quick. So can you just tell us the average ticket size of the top-up loans that we're giving for the last 2 quarters or so?
INR 35,000 average.
Okay, sir. And this is lower than the normal average disbursal that we do in a quarter typically, which is about INR 50,000 to INR 60,000?
Yes.
Got it. Sir, the other question was, so since 95% of the customers are paying versus in terms of value, which is 91%, does it indicate that some customers are making part payments. So let's say, if they have got INR 500 of installment due in a week, they're paying about INR 200, INR 300 INR, what they are able to? Or it is that 95% customers are making full payment, which equates to 91% in other value?
No, no, there is a part payment element here.
76% of the customer are paying full.
Okay. Okay. Okay. Yes. So basically, the customer behavior is definitely there, just that as a purchasing or whatever income improves, they actually will -- that was the reason why I was asking. The other question was with regards to restructuring. Sunil, any thoughts which -- what category of loans could restructure and what the amount could be? Any rough sense? I appreciate the point about the cost of risk or the provision that you've already taken, but just wanted to understand on the restructuring angle, would you be doing any? Or will microfinance customer be eligible for micro customers? I mean, I was curious why you've change the name, but yes, then...
Yes. We change the name because of the -- under this, the EEB will be like to going to this. Because people micro banking names, people feel that it is a group loan. So actually, under the EEB, it's not only the group loan, it's the individual loan. There is a microhousing loan, so that there is an also deposit. We are developing on that branch. So that is the -- we can say that is a combo brunch like on that. There will be cater low-income and medium-income level customers, who are taking micro curriculum, but not taken expected loan. They can be like to get to the banking service from this unit. For that region, we are mentioning here today emerging entrepreneurs are banking unit of the retail bank -- banking vertical. So this is the objective.
Very useful, sir. But any thoughts around restructuring, sir, how would you think about it?
The restructuring, to be honest, we are not too very keen on restructuring per se. The way we look at restructuring is a customer who is paying -- needs couple of months more to close the loan more than the scheduled closure date. It's limited to that, not beyond that. And as far as current [indiscernible], we have hardly received -- we can count those requests of restructuring, maybe less than 10.
Okay. So[indiscernible] phasing no major restructuring in emerging entrepreneur group, and so far, in other segments, you've not received any restructuring requests, particularly SMEs and NBFCs, et cetera. Okay. Just 1 final question or actually second and last question. Cost of deposits, Sunil, how are you thinking about it? Because your TD rates are now below 6%. The savings deposit rates are, I think, 3.5% and 6%, but the overall is still above 6.2 odd percent. So would we see the changes reflect in the subsequent quarters from now on? Or how are you thinking about it?
Yes. We will see the change, see we had changed the saving bank rates from 4% to 3%, the minimum rate in mid of September. Right? So the full benefit of that, the annualized impact will come only in the next quarter, the fully annualized impact. Secondly, the term deposit rate for this to get reprice will take about a quarter or 2 more. But between last 6 months, we have reduced the term deposit rate by almost 150 basis points.
Wow. Okay. And just 1 more small one. Can you share the breakup between of the customers in savings deposits, who has less than INR 1 lakh and more than INR 1 lakh deposits?
So about 63% of the customers value wise is more than INR 1 lakh. I mean, the saving bank deposit, not the customer.
Yes, yes, yes. got it. Just one -- yes, got it. Sorry.
Yes. That's all.
Got it. Just 1 final question. Sunil, what was the fee income number, the overall fee income this quarter that we have booked?
10-point -- I mean [indiscernible]. Just a second. My total fee income for the month is INR 382 crore.
The next question is from the line of Rohan Advant from Multi-Act Equity Consultancy.
Just 1 question. Firstly, on this, you said 7 DPD is 23%. Can you clarify that, sir?
See, the way DPD calculation works, right. The moratorium got over on 31st of August. So let's say on first week of September, only 50% of the customer paid or only 60% or 80% -- 70% of the customer paid. Immediately, 30% of the customers will go on DPD. Right? So that's not -- in current scenario, I don't think that's the right way to look at. But since there was a question, we have responded to it. Because clearly, in a scenario where the collections are picking up, the DPD will be higher because some customers will pay part, some customers have paid full, so some started after 2 weeks. So immediately, the first week, the entire amount will look like DPD.
Got it. Got it. And sir, you said 76% of our borrowers are EMI? And the balance, which would be 19% would be paying partly. Is that correct?
So that was a September number, October number would be much higher. I think it will be above 80% for the full EMI. We will -- I mean, the October just got over, but we still have to work that number.
Okay. Sir, and collection efficiency that we are reporting. Is it from 1st to 27 total? And would it be very different, say, end of October versus beginning of October? That's the last question.
No, this is the cumulative collection efficiency, and there won't be much difference between 1st and -- I mean surely, it will improve between the first week of October and the last week because continuously more and more customers are coming up. But the point I'm trying to make is the average for the full month.
The next question is from the line of Jai Mundhra from B&K Securities.
Sir, if you -- most of the questions has been answered. Just 2 questions. If you can give the AUM breakup for West Bengal, Assam, Bihar and maybe Maharashtra for MFI book.
So Bengal will be about 47%, for Assam, will be close to 17%, 16-point something. Bihar is close to 9% and the fourth state you said was Maharashtra.
5% yearly.
Sure.
So Maharashtra...
less than 3%.
Less than 3.%.
Okay. And second question is, sir, on commercial banking. So just to understand this, because this is a very wide spectrum, It is catered by PSU Bank, regional banks and even large banks as well as NBFC, maybe probably fintech also. So what is your thought process here? Who would you be competing with? Would it be like NBFC customer or PSU Bank customer or private bank customers? Any broad thought process here? At the same time, this team, would it be like external team? Or I mean, how are you thinking on this them? And who will be heading it?
We have a commercial banking head. We are -- he is working with us in the more or less in the 3 years, and he's adding on that. This is one. And we are not recruiting in the new person. He has a very good capable on that.
So the earlier, wholesale banking is now the commercial banking.
Same vertical, we have been changing them because home sale people feel that is a corporate lending, so that we are not -- we have been changed the name. And the to next point on that is a big vertical in there, it's called the SEL, small enterprise loan. It has been developed in the 4, 5 years before, and that is a good amount of the portfolio in here, because of the size of INR 3.5 lakh disbursement basis. And this is in 1 vertical, and it is an individually assets and digitally also taken the decision on that. And this is then one. And second reason also under this vertical there is a small SME portfolio also in here, which is then not more than INR 50 crores is like on that. And measuring them that INR 10 lakh to INR 1 crore, INR 1 crores to INR 5 crores is like on that. And we have a separate article and credit underwriting people have -- or are assessing on that. And third is there, we have some portion of that, the lending to the micro finance institution. So that is also under the commercial lending on that.
Sure, sir. And any thought process? These customer profile, would it be like, as of now, these customers would be from your competition in this segment, would be from PSU, NBSC, private bank?
So there are 2 growth verticals there under SME. One is the average ticket size of INR 2 crores, where we compete with NBFC and banks. And one is the lower ticket size, where we have the average ticket size of almost in the SEL vertical, which is part of the commercial banking. There, the average ticket size is INR 3.5 lakhs. Then there are smaller SMEs, where the average ticket size is INR 30 lakh. So broadly, these are the 3 subsegments in the commercial banking.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Sunil Samdani for closing comments.
Thank you, ladies and gentlemen, for the time and patience here. We look forward for your continued support. Thank you.
Thank you.
Thank you. On behalf of Bandhan Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.