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Bandhan Bank Ltd
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Ladies and gentlemen, good day, and welcome to Bandhan Bank Limited Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Hiren Shah, Head of Investor Relations. Thank you, and over to you, sir.
Thank you, Aman. Good evening, everyone, and thanks for joining the conference call. We are glad to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter ending September 2021. We will take this opportunity to update you on the recent development in the industry and Bandhan Bank during this quarter as well. To discuss on this in detail, I've got with me our Founder, Managing Director and CEO; Mr. Chandra Shekhar Ghosh; our Chief Financial Officer, Mr. Sunil Samdani; Housing Finance Head, Mr. Suresh Iyer; 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 our bank's operational and financial performance, along with the development for the quarter ending September 2021. Over to you, sir.
Good evening to all of you. Welcome to our conference call. Thank you so much for attending today. I hope you are taking care and safe. I hope you all had a nice Durga puja and Dussehra. I would like to extend my best wishes to you and your loved ones for Diwali and the rest of the festival season. It is heartening that to know that the situation in India with regard to the pandemic is looking much better than it was before. Number of COVID-19 case have considerably reduced. The pace of vaccination has gathered speed, which has reached to this 100 crore doses, 50% people as a single dose, 30% people has received the double doses. This is a very comfort for our country. Lockdown restrictions have been removed in most parts of the country, and business are gradually coming back to normal. The improvement situation reflects in our credit growth in the last quarter and collection efficiency numbers, which have shown considerably growth in the last quarter. Credit growth, disbursement and collection efficiency are all on their way to returning to the pre-pandemic level. During the quarter, Bandhan Bank has continued to grow stronger as a robust and granular liability franchises. During the quarter, our deposit growth has come 24% year-on-year, which is the amount-wise, INR 81,898 crores. CASA deposit growth has come 45%, ratio as a 44.6%. As usual, in our focus of the retail deposit, which is that out of total deposit is raised on that 84%. Earlier, it was in a 82%. Growth in loans and advances for the bank in this quarter was 7% year-on-year, which is stands on INR 81,661 crore. We have seen good demand for credit ahead of the festival season, which started in September. Collection efficiency in the pan-bank has come to this 94%, which is the non-NPA customers. If I come to this now sector-wise, EEB collection efficiency has considerably improved by 16% from June to September. The bank reached in the collection efficiency 93% from 77% in June. Collection efficiency with NPA has reached 86% from 72% in June. With arrears, given the comfort on that, that is 129% collection efficiency from 83% in June. Yes, if I go to this, our major portfolio in Assam, there has been significant improvement in collection efficiency from 49% to 82% from June to September, which has increased 33% from June to September. Due to such provisioning -- sorry, if I come to this, West Bengal, of course, we like to mention it here. The collection efficiency has risen from 73% to 92% in the same period, which has increased 19% improvement from June to September month. There is an also customer -- normally microcredit customer are paying installment as their full installment. But it's because of this COVID situation, there is a customer allow now partial installment also. For that region, we are finding out that the -- which is best the -- the no paying customer, earlier, it was 9% in June, it's improved to 4% in September, and partial payment was in at 29% in June and September has come 17%, and full paying has become a very big change. 79% of our customer are paying full installment, which was the June [ cut ] given 62% only. All together, we see that the other than EEB portfolio, our collection efficiency, 98%, excluding NPA and 97%, including NPA. All these together, we'll find out on that collection efficiency month-on-month basis improving good way. So we remain hopeful that if things continue to improve in the country from here on, we may be able to go back to the level of pre-COVID situation from today. It is a very critical quarter. Exceptional situation for all of us, but not just for us, everyone is undergoing the same. But more or less, the situation is over. To recognize this reality and strengthening our balance sheet to be prepared for the future period, we have taken onetime additional provision of INR 2,100 crores on our standard asset and another INR 1,500 crores we have been taken for NPA. This takes our total provision in this quarter, INR 5,578 crores, and total provision of the bank is at INR 10,642 crores. Due to such provisioning, bank has reported a loss INR 3,000 crores in this quarter, and it is in 6 months loss is at INR 2,636 crores, but this loss is not that actually real loss. We believe that this provisioning should be sufficient to take care of any previous asset quality issue on account of the pandemic as well as protects the bank against the disruption caused by any potential [ target ]. Even after provisioning, the bank's capital adequacy ratio, Tier 1, stood at 20%, which is double around from the regulatory requirement. PCR, we are raised -- improved from the 61% to 74%, and LCR is 139% impact. We do not foresee the need of undertaking any more similar provisioning in the near future. Whatever needed, we have taken now. On the NPA front, our gross NPA for the July to September quarter stood at a little over 10.8%, and net NPA has come 3%, excluding additional provision on standard assets. Majority of our customers are either part paying or full paying their dues, and we are confident that these are not loss given default. There is a very clear visibility on asset quality, improving day by day. In the last month alone, we have seen that. The part [ pay ] 14,000 customers standardized their overdue accounts every day. I firmly believe that the most difficult period with respect to COVID-related disruption and asset quality challenges are behind us, and we are now in a position to accelerate the next phase of our growth with a strong balance sheet. With economic growth coming back eventually as this recoveries come in, there is a strong possibility of a part of this provisioning getting written back. With credit growth rising, collection efficiency improving, recoveries gathering pace, we are confident as a bank that our NPA level will reduce substantially in the next few months. I have spoken to you earlier about our vision of 2025, as per which the bank wants to become a bank for all Indians wherever they may reside, whatever financial products they make and whichever channel they prefer, physical or digital. As a part of this transformation, we also want to build a strong asset book with a healthy mix of secured and unsecured assets. I'm very happy to report that our non-EEB retail business has shown impressive growth in the last quarter. Our housing loan business has shown good growth with a disbursement rising 93% quarter-on-quarter. This is an indication of potential future growth in this business going forward. Our gold loan business has grown 48% year-on-year, and disbursement have been grown 50%. Our personal loan business has risen 144% year-on-year, and the disbursement has been grown 3x. Our 2-wheeler loan business has grown 236% quarter-on-quarter, and 30x growth has come as a business as disbursement. And all these products, quality of the portfolio, we are not comprising. It's a very good quality of the portfolio. Also, we had earlier mentioned our strategy of graduating our high-vintage EEB group customers into individual borrowers who have a very good capacity to running the good business and catered to their evolving financial needs better. There has been a -- 155% of year-on-year growth has come to this individual loans, which is quarter-on-quarter basis has come 23%. Individual loan customers now comprises around 14% of that EEB book from last year. Last quarter, it was 11%. We have introduced a technology-based EEB loan disbursement and collection, which is going on good and future, it will be like to help us to maintain the very good quality portfolio and assessment of the customer in a better way. The share of EEB group loans has fallen to 57% from 60% of the bank's overall portfolio. And we are targeting that by March, EEB individuals for 50% and above, with the other half coming from vertical such as EEB individual personal loan, gold loan, 2-wheeler loan, SME loan and housing loan. We have seen very strong in our SME lending business as well, which is reflecting of the support we are providing to small and medium business as business sentiment and the economy revives. On a year-on-year basis, the SME lending business grown INR 4,418 crores in quarter 2 from last quarter. In the end, I would like to mention, India's imminent economic revival will not be complete without the development and welfare of its micro, small and medium enterprises, which we are focusing. Many strong short-term and long-term measures taken by the government will help revive the sector and ensure its long-term wellbeing. [ Despite ] along with the transformation journey that Bandhan has embarked on will help the bank capitalize on the future business growth and secure its future from today. Thank you.
Thank you, sir. Now I'd like to request our CFO, Mr. Sunil Samdani, to give you some more details on a few financial parameters, including NPA, provision, coverages, et cetera. Over to you, Sunil.
Thank you, Hiren. Good evening, everyone. I would want to take this opportunity to help everyone see how we look at the business and the key developments and the key areas which we have undertaken in this quarter. I would want to take you through at least a few of the slides, which will help us be on the same page. Starting with the Slide #5, which talks about the collection efficiency of the EEB vertical. As Mr. Ghosh mentioned, we have seen an improvement, a marked improvement in our collection efficiencies. We ended June with 72%, including NPA and 77% excluding. That has gone up in September to 86% and 93%, respectively. What is more important is to look at the including arrear collection efficiency for the month and for the quarter. For the month of September, our including arrear collection efficiency has been 129%, which means we are collecting more than the demand for the month, and that's a healthy sign. Similarly, for the quarter, that number stands at 111%. And this improvement, we have seen across all geographies and more so in our core geographies of Assam and West Bengal. Our West Bengal collection efficiency, which was 73% in June, is now 92%. Assam improved substantially from 49% to 82%, and rest of India at 94%. Next, I would want to take your attention on the DPD movement. We would call this quarter as a turnaround quarter. The reason we say this is quarter, we have seen the increase in disbursements, we have seen increase in collection, and we've also seen improvement in our DPD position and the asset quality position. While on the face of it, it will look like a difficult quarter because NPAs have gone up. But if you look at the overall stress pool, which is the overdue customers, that has come down substantially. On the whole, about INR 7,000 crores improvement has happened from the EEB portfolio between June and September of the overdue pool. Of course, this have been aided by restructuring, which is around INR 3,490 crores, but the balance INR 3,500 crores is the actual recovery that we have made from the overdue customers, over and above their demand for the quarter. Our DPD bucket, whether it's 1 to 30 days, 31 to 60 days, 61 to 90 days, have shown improvement, and that gives us the confidence that the worst is over and from here on, we will only see an improvement and near normalcy position going up. The customary paying nonpaying customers, NPA customers, 2/3 of them continue to pay despite being an NPA and which has helped us improve our collection efficiency. The restructured customers though they are under moratorium, and as per the agreement, they are not supposed to pay till 31st of March, but we still see 2/3 of these customers continue to pay us. That's a healthy sign. That gives us the confidence that these customers have come back to normalcy or are coming back to normalcy. What we have also done this quarter, as Mr. Ghosh mentioned, and you can see from the results, we have taken the accelerated provisioning to identify -- we've identified stress, taken the provisioning to ensure that going forward, we need not worry about the COVID-related issues. We have, in fact, considered the entire NPA pool -- when we looked at the stress pool, we considered the entire NPA, the entire restructuring despite 2/3 of the customers paying within those pools. We've also taken the 60-plus customers, which are the customers who are not able to pay their full installments, they are largely part paying. And in the second scenario, we have also considered the 30-plus customers to identify the level of overdue NPA and the restructured pool in the bank. So in scenario 1, where I don't have -- that we don't consider the 30-plus, this pool stands at INR 156 billion, about INR 15,600 crores. And in the scenario 2, including the 30-plus customers, this pool amounts to INR 19,500 crores, about INR 195 billion. Now how are we positioned against the coverage and the recovery that we wish to do from this pool and the confidence -- how confident we are. We are very confident. We have already provided INR 9,520 crores of this pool by taking this additional provision. We also estimate the recovery from this pool, which I will explain to you in detail how we have come to this estimate when we say that, we will recover INR 6,000 crores from this pool in scenario 2 and about INR 4,500 crores in scenario 1. We have the benefit of CGFMU guarantee that we have taken on this pool, and we expect a INR 3,000 crore recovery from that pool. Now this recovery and the recovery that we would do are mutually exclusive, and there is no overlap here. In addition to this, we have the microfinance Assam relief scheme going on, which will also help our customers and in turn, the lenders to recover the stress pool from that [ date ]. The exact estimate today will be difficult to make, but we hope that there will be a substantial recovery from there because as per the report, the pool for the Assam relief, the budget taken by the government is about INR 7,000 crores, and we have close to 60% market share there. Now let's understand the key aspects of -- when we say that, by 31st of March, we will be able to recover INR 6,000 crores. Why are we so confident? And what gives us that confidence? Clearly, the confidence that we derived is from the collections that we have seen during the quarter and what we see in the month of October. As we have already seen, our including arrear collection efficiency has been at 130%. And if that rate continues for next 3 months, I don't think we will have a challenge to recover the INR 6,000 crores. The other way to look at is the recovery that we have actually made in the month of October from this stress pool. We have made close to INR 1,100 crores of recovery from this pool in the month of September. And the trajectory of this recovery has only -- is only going up. The resolutions are only going up day by day. So even if we continue with this current run rate, we are very confident that we should be able to recover this amount from the customers. So what this actually does, it takes care of the entire stress -- possible stress, I would say, which includes the NPA, the restructuring, the 60-plus and including the 30-plus. And I would want to repeat, a large part of these customers are part paying customers. So whether we look at from the paying customer pool, which is 2/3, or we look at from the collection efficiency point of view, excluding arrears, or we look at the actual collections made out of this pool in the month of October, all the 3 indicators indicate that we should be able to recover this from -- by 31st of March 2022. What gave us this confidence, right? We looked at all parameters. We looked at the collections that has improved substantially. We looked at disbursements and the demand from customers. Our disbursement this quarter is more than 2.2x of previous quarter. Our DPD position in this portfolio, as I mentioned earlier, has also improved substantially. So we believe this is the worst, and we will only see improvement from here on. And that gives us the confidence to estimate the total stress in this pool, and this is what we have done. I would take a pause here. I'm sure you will have a lot of questions. Happy to take those. Thank you.
[Operator Instructions] Our first question is from the line of Saurabh from JPMorgan.
So Sunil, can you first share the movement of NPA during the quarter, what was the slippage recovery in the write-off? And secondly, on the Slide 8, is there a reason why you would not include SMA's growth? And if you can also provide what will be, let's say, a lower bound for how much the Assam can get you this is whatever you have? I mean, just a lower bond numbers will really help. And just last question is, given the provision that you have taken, would you expect that next quarter, December quarter onwards, you should be back to normalized? Or you think that is still some time away given your collection efficiency is still notching, that 90%, 99% mark? So these are 3.
Thank you. To your first question on the movement of NPA, at a pan-bank level, we have seen a gross slippages of INR 2,943 crores. The recovery is an upgrade of INR 619 crores, and the net addition up to INR 2,323 crores. We have not done any write-off. What is also important here is the timing of recovery in our core geography, particularly East India, we started recovering from mid-August. So this improvement that we are seeing in our delinquency position is effectively the impact of last 1.5 months. And to your question, why would we not take SMA 0 or 1 to 30 as the stress pool? Clearly, they are not. And we always see 1 to 15 days with the 70% of this pool, right, is overdue due to technical reasons. In India, we have a lot of activities which comes with the last minute holiday declaration. The repayment schedules are made without considering those. And hence, you would always have 1 or 2 installments, which will become overdue, but that's not because the customer doesn't want to pay. And if you look at this movement in this bucket as well, it has dropped substantially. So clearly, we would not take that as a stress bucket. Historically, we've not seen any material movement from this bucket in a steady-state scenario. To your question on how the next quarter will look like in terms of normalized activities on the provisioning and the collection side? We expect by the end of next quarter, we should be in a near normal positioning, right? The NPA is a function of DPD movement. We have a 60-plus pool. There will be some flows from there. But as I said, the recoveries are also equally strong. So we will have to see whether the recoveries and the flows, when do they interchange, whether it takes 2 months or 3 months, but we are very confident at least in next 3 months' time, we believe higher recoveries than the slippages into the NPA bucket.
Okay. And I would just ask since you made the comment, as you know, you provided -- or in your assessment, you have provided for the stress book. So if that is true, the next quarter onwards, what you just need to provide for us on the incremental book where I'm pressing pre-collection efficiency would be better at. Fine, I can take it off-line.
Correct. So that's what we are saying that going forward, we should see a normalized level of provisioning, which is around INR 400 crores to INR 500 crores a quarter. That's what we would expect if this trend continues.
The next question is from the line of Kashyap Javeri from Emkay Investment Managers.
Hello?
Hello?
Mr. Kashyap, please go ahead.
Am I audible?
Yes, you are.
Yes. Sir, just one question on Slide #8, again. So when you said provisions are about INR 95.2 billion, and there is Assam relief scheme money which you probably at this point of time wouldn't know. But as and when that money comes, would that INR 95.2 billion will be offset against that? Or these are also exclusive numbers?
So as far as CGFMU goes, we have the clear picture customer-wise and we can actually estimate where is the duplication, which we have done. And this number that we have given for CGFMU is mutually exclusive of the recoveries that we are targeting. Assam, unfortunately, we are not in a position to ascertain that customer-wise because the NPA recovery what will be the exact amount from there, we are not in a position till the scheme actually announce that. And that's where we don't want to put that number because for the same reason because we don't want those duplications between the other 2 schemes and Assam relief.
So to rephrase this, sir, let's say, if there is -- whatever the recovery comes, let's say, whatever, INR 1,000 crores, INR 2,000 crores, whatever the number. But so far as there is a provision against those account that INR 95.2 billion number will be coming in the write-back, like in line with the -- one of the answers that you gave to the previous participant, that incremental provision will be net off of the slippages and recoveries?
Yes, but there will be a timing difference.
Yes, yes, of course. And there would also be a difference in the sense that for some of this Assam relief scheme customers, there might not be -- there might be a provision, which is higher or lower than the recovery also.
Yes.
Sure. Yes, that is the only clarification I needed.
The next question is from the line of Kunal Shah from ICICI Securities.
So if I have to look at in terms of rest of India portfolio, so be it in terms of 61 to 90, that's also rising during the quarter, undoubtedly NPAs have also almost doubled from 3.5 to 6.5. So -- and 31 to 60-day pool is also sticky out there. No doubt, Assam and West Bengal, it's coming off. But rest of India, I think it's sticky and it's rising. So how should we see the behavior of this portfolio in particular? And maybe collection efficiency is still 94%. It's not getting back to the -- so when do we see it getting back to 98%, 99-odd level, which will help to bring down this delinquency buckets, yes?
So as we mentioned, right, we are seeing an improvement in the collection efficiency every month, right, whether it takes 3 months, 2 months or 4 months, if anybody guess, we don't want to crystal gaze that. But directionally, it is surely going up. More importantly, the customers who are regular otherwise, but they were not earlier and they were in the DPD pool and they were consistently paying in the DPD pool, we see them coming back to normalcy as well. There has been an improvement in the NPA collections as well. So if I have to -- it's very difficult to give you a time, exact timing, but we would tend to believe that if this trend continues, maybe in 2 to 4 months, we should be in that near normal position.
But it's not like a larger part of the disbursement happened in last 12 months. So in fact, there would be further forward close in rest of India bucket. Would that be the case because maybe it's not entirely getting...
No. Rest of India bucket is in this moment, 94%, is a good number has come because if you recall on that the last couple of days, in the Bihar and Orissa has applied it. And that is also sometimes need to give some few days to them. So that is the 1, 2 case that have been happened in the [indiscernible] of the corner of that. So for that reason, it has come to this. And we are seeing that the month-on-month basis, they are also improving very good on that.
Okay. And secondly...
Sorry, just to add, we would, in fact, look at it differently. If you look at the behavior of these customers, they just know 3 simple things. What is my installment amount, whether it is a 52-week installment or 104-week installment and when does my loan gets over? So as the maturity date of the loan come, they are more eager to regularize their account because they know that this is the time to get a new loan.
Sure. And secondly, this incremental disbursements which are there. So again, we are back to almost like INR 13,000-odd crores on EEB, which is a 20% of the outstanding book. So what is the profile? Is it like more of a -- now given it's a largely to EEB group, so this would be vintage customers, but are we equally confident in terms of disbursing this kind of an amount okay, at this stage when we are struggling in terms of the collection efficiency?
Whatever the new disbursement is happening -- and you know that we are not -- now are not given to this the multiple loan. We are giving the single loan after close on that one loan. And their collection efficiency is very much fair with a near to 99% of that.
So just to give you that comfort, the loans that we have disbursed in this financial year, the collection efficiency is close to 99%. So that does not give us any indicator or any sense that this is not the right time. And of course, we are there on the ground. You've seen us being conservative for 2 quarters when the environment was not good. When we see the improvement, that is when we disburse.
Sure. And one last question on housing finance. So overall, the underlying momentum and the opportunities are huge. So are we done largely in terms of transitioning through the merger integration? And when do we actually start seeing the scale-up in this -- in our portfolio? Disbursements have gone up, but definitely not to the extent the kind of the growth we are seeing for the other players in the industry.
See, Kunal...
So now what would be the outlook out there, yes?
Yes. So you've observed it right. If you look at the disbursement, we have disbursed almost 2x of what we did in the Q1, right? So clearly, this shows that the momentum is back. This has not resulted in the book growth for 2 reasons. There have been the subsidy -- government subsidy, which has come this quarter and because of the pricing pressure that we have seen in this quarter on the housing finance business, we've seen a slightly higher level of pre-closures. But these are all timing issues. We don't see those things continue it for another 1 or 2 quarters. We -- as our cost of funds reduced, we've also become more competitive. So clearly, there is a demand. Once we see -- this rate normalizing, we should see the balance sheet growth also, which we are confident from the next quarter onwards. We have Suresh also on the call. I would want him to share his views as well.
Yes. So what will be BT out? You mentioned there are prepayments. So what should be BT out?
Suresh, can you handle it?
This is Suresh here. So last -- this Q2, we've had a prepayment of almost close to INR 700 crores, and we have had an additional -- this CLSS subsidy coming from the government close to around INR 85 crores. So total, it's about INR 780 crores is what we've seen the portfolio going down, not to mention the amortization, the normal amortization which happens because of the EMIs coming in. So this is the reason -- the main reason, and prepayments have been a little higher to the tune of about 15%, which has been a little higher than what we have even earlier experienced of about 13%. So it's something for this quarter, it's been a little on the higher side. But as we mentioned, the disbursement is looking up. The sanctions and the log-ins have seen a very good improvement in the last couple of months, which gives us a lot of confidence that we'll be able to grow the book and the disbursements coming -- coupled with the rate -- the reduction that we've been able to pass on off late. We feel that we will be able to definitely see a growth in the book in the coming quarters.
[Operator Instructions] The next question is from the line of Shreya Shivani from CLSA.
Sir, I have a question on the collection efficiency. So on the slide where you've given the collection efficiency, including arrears, that is for the total bank. Can you help us with some numbers or at least some estimates of West Bengal and Assam collection efficiencies in September versus June for increasing arrears? Just to get an idea how those portfolios are performing when talking about including arrears?
So for West Bengal, including arrears, the collection efficiency has been 138%.
In September? Okay.
In September -- for the month of September.
Okay. And Assam?
Assam is almost 100%, but this includes all receipts that we have received from the customers, right? The current, the due, the previous, disclosures, everything.
Got it. And sir, the trend of -- trends -- this trend continue -- I mean without numbers, if it continues into October and the including arrear trend, so these 2 continues in October? Or has there been a decline or improvement? Any comments on that?
So this has continued in October, and that has given the confidence of this recovery.
The next question is from the line of Dhaval Gada from DSP.
Two questions. One on the EEB disbursement. Could you give some sense of what percentage of disbursement share is there from Assam and West Bengal this quarter compared to, let's say, last year, just some perspective? And then the second question was on the restructured book side in the EEB portfolio, could you split that between Assam, West Bengal and rest of India?
I don't have the disbursement numbers state-wise readily available. By the end of this call, as I get it, I will share it with you. And what was your next question?
Sure. The restructured book split into Assam, West Bengal and rest of India, like you've done for NPA buckets? Yes.
Yes. Just a second, we have that. So the total restructured book of Assam stands at INR 1,958 crores and for West Bengal, INR 3,172 crores.
Next question is from the line of Mahesh M.B. from Kotak Securities.
Just a qualitative question. You seemed to be suggesting that the collection efficiency is going up. And you've kind of indicating that these slippages would be lower compared to recovery. What would explain the need of this provisions today in this quarter?
No, Mahesh, I've said that whether it takes 2 months or 4 months, eventually, we will be at a situation where the recoveries are more than the slippages, right?So in the interim, there will be a timing difference. We have a 60-plus pool of almost INR 1,350 crores. So there will be a timing difference. We have a restructured pool, which, of course, will not impact my NPAs or delinquencies today, but there will be some slippages from there next year onwards. So while we are identifying the stress today, we are looking at the entire tenure of this portfolio, not for this financial year.
But Sunil just to understand this, the situation appeared to be far worse as compared to -- far worse than the previous quarter as compared to what it is today. Then what has changed between last quarter and this quarter to explain these provisions? We understand the [indiscernible] part of the provisioning. But just trying to understand you had a much larger SMA-1 -- SMA-0 book, which you have disclosed this quarter. Why was it not done in the last quarter? And why this -- why are we closing this quarter?
Correct. So that's what I explained in the beginning, right, as to why today and why not yesterday or tomorrow. So if you look at the movement in my DPD, if you look at the collections, if you look at the disbursements, so things suggest that the worst is over, right, am I? And when I see that happening, the turn happening from the bottom, that gives me the confidence that, okay, this has seen the worse. Till last quarter, the delinquencies only went up, right? The overdue pools only went up. That was not the time where I could have estimated that this is the worst, right?Today, there are indicators, which say the collection efficiency is almost 130% for September. My delinquencies are down. My customers are coming back and paying, they are asking for more loans. That gives us the confidence that this is from where the recovery is happening. And when I estimate stress, this will give me the entire amount of stress because the bottom has already happened.
Okay. If I were to ask this in a different way, do you think it makes sense for you to build the provisions as the stress builds up rather than building the provisions after the peak stress have been created?
No. See, we have to strengthen our balance sheet. We have to build loan loss reserves, right? And we have to be sure that once we take this provision, we are doing it at a time where we have seen the worst.
Mahesh...
Yes, yes, Mr. Ghosh.
Mahesh, if you see that the -- everyone is agreeing that the pandemic is a severe in a second wave compared to the first wave. And that pandemic severity has come in, in May, which is the last quarter. That means in the first quarter of that. So that time, we are not predict about it how much it will like to come as a stress that you see that.After that quarter whatever the severe happened and stress happened, now, it has been moving up, then we have taken that this is the right time to take the decision, the stress is over, more or less, we will like to start the new growth of the business. For that reason, in this quarter, we are quoted on that.
Perfect. Sir, just, as a thought, is there any possibility that you would consider certain standard provisions, always getting built up, assets lift into the SMA buckets? Because it's a kind of puts the earnings in a completely volatile setup if you're doing it this way and passing it. We understand the impact of COVID. We're not disputing that. We're just saying that, designing of this provision was a bit surprising and hence, kind of asking this, this has been considered internally?
So that has been, right? I mean, to your question, whether we continuously want to keep provisioning, that we have mentioned that we will want to keep a reasonable provision in the balance sheet. But if we take COVID as a base, that may not be a right base to estimate risk and make provisioning.
No, no, I'm -- When you're looking at SMA-0, 1 and 2 movements over a period in time, why not make provisions as it builds up because that is far more useful for understanding the risk. But anyway, we'll leave it off on this.Sir, the second question is on that credit guarantee scheme, have you been -- what is the timing in which you get this repayment?
So CGFMU guarantee post March '22 is the first time we can assess and start claiming.
And if you were to give a, let's say, a claim today, is there a defined time line under which it has to be paid? Just a clarification if you [ lifted ] -- if you had this conversation in the previous quarter.
No. The process for CGFMU is fairly simple, right? It doesn't require any court decree. It doesn't require any all avenues available to recover before we file for it because it's an insurance, right? Our base premium. It is not something which is coming as part of release. So I don't think timing should be an issue there.
Our next question is from the line of Param Subramanian from Macquarie.
So my question is on Slide 8. So the stress pool that you've disclosed, firstly, what is the collection efficiency that you're seeing over there? That's my first question. I'll come back for my second question.
So as I said, we are not looking at the collection efficiency, specifically that we've not looked at it, but we surely looked at what is the amount of collection from this pool in the month of October, right? And that amount was more than -- is more than what we are budgeting on an average recovery every month.
Okay, okay. Sunil, you've mentioned the number INR 1,100 crores. So what is that -- what is the demand against that? So it would help us get some color on the collections that we're seeing on this portfolio.
So that's what I've said, we've not mapped the demand against it. We can do that, and we can share it with you.
Sure, sure, sure. My second question is on the collections that you've shown on the West Bengal portfolio on Slide 5. So that -- if I look at it quarter-on-quarter, 85%, 86% is more or less flat, and this is despite NPA is going up on the West Bengal portfolio. So there has been some NPA recognition. So why is it that the collections have remained sticky because I would assume Q2 has been better than Q1 in terms of business on the ground?
No. So 1 has to look at it on the timing of the difficulties we've say, the COVID second wave and the recovery post that. For Q1, we went into restrictions only in the month of June, right? When the rest of India was in restriction starting end April, because we had elections in these geographies, right? There was no restrictions imposed.So our collections in Q1 was comparatively much higher because there was no restrictions on movement on account of the second wave, and those restrictions continue until mid-July or end July, rather, before it actually opened up. So the way to look at it, my April was best, May came down, June was the worst. And from there on, I've started improving. So on the whole, on an average, the number remains more or less the same.
The next question is from the line of Karthik Chellappa from Buena Vista Fund Management.
3 quick questions. The CGFMU recovery of INR 30 billion, the way you estimate it is you take 75% of the NPL about 3%. Is it? So for example, INR 540 billion portfolio, 10% NPL of [ 54 ] . So the first 3% NPL you have to take it on your book. So the balance, 7%, which is INR 38 billion to INR 40 billion, 75% of that is this amount. Is that the way you arrive at this number?
Yes. And there is a 1 more rider, which is, it is capped to a maximum of 15% of the guarantee of [indiscernible] and that's on the disbursement. So when we had taken INR 14,500 crores worth of portfolio under guarantee, the disbursement amount was INR 20,000 crores on which we had to pay, right?So 15% or INR 20,000 crores is INR 3,000 crores. So that's the maximum cap. This is the formula I should -- I will be able to get much more, but the cap is at INR 3,000 crores, which is what we are giving you.
Okay. Got it. And sir, the total provision amount this quarter, which is about, let's say, about INR 56 billion, if I look at the split, It's basically INR 15 billion provision on NPA, INR 21 billion standard assets, INR 10 billion restructured assets, what about the balance INR 10 billion? What would that be?
So those were the normal provisions which we have taken on the NPA, which went. So this INR 15 billion that you see is the accelerated over and above the normal provisioning. So the normal...
So the normal provision INR 10 billion, accelerated provision INR 15 billion, standard asset provision of INR 21 billion and then restructure of INR 10 billion. So that's as of about INR 56 billion. Is it?
Yes.
Okay, okay. Got it. My last question is on housing finance. The INR 700-odd crore [ BP ] out or prepayment that you have seen, typically, which are the institutions that you have lost to in case if you know or can provide some color? Is it predominantly banks or other HFCs or -- because it looks like it is driven basically by a very competitive rate?
Yes. Suresh here. Yes, you are right. It is mainly because of the rate where this prepayment pressure is coming from. So obviously, it is more from the banks. There is very little coming from the smaller HFCs or other things. But yes, the banks -- the leading banks and even public sector banks, we've had a good amount of repayment going to that or our portfolio is shifting to them.
Is it confined to any specific geography, sir? Or is it pretty much across the board?
No. It is actually -- in the core markets, obviously, the portfolio has had -- so the volume also is higher in our core markets in the West, where the portfolio size is higher. But yes, it is -- otherwise, it is not -- there is no specific geography specifically where we have seen an extra kind of prepayment coming from. But yes, Gujarat, Maharashtra, Madhya Pradesh, where we've seen a higher prepayment.
This is very clear. Thank you very much, team. And wish the team a very Diwali and all the best for the quarters ahead.
Our next question is from the line of Shagun Verma from Goldman Sachs.
Just a few clarifications. Number 1, what were the upgradation recoveries and write-offs in this quarter?
Yes, go ahead.
INR 619 crores is recoveries and upgrades, there is no write-off.
Okay. And what was it previous quarter? I think it was about INR 5.5 billion or thereabouts, right?
Yes.
Upgradation recovery. Just to clarify. Got it. The second point is just in case -- I mean I've missed it, I just wanted to check if there's any -- I mean what's the overlap between the restructured book and the overdue book? I mean, where does this restructured book would be sitting in within various buckets?
Restructured book is in the zero DPD, right, because they've been restructured. So they are not part of the overlap. And that's how we have considered them as part of [indiscernible]
Okay, okay. Got it, got it. And Sunil, last quarter, you were providing, I think, 8- to 30-day portfolio on the call. This time, you've given 1- to 30-day. So when I look at September '21 number, what would be the comparable 8- to 30-day number in that? Within 11%?
So about 70% will be within 1 to 80 -- sorry, 1 to 8.
70% would be in 1 to 80 -- sorry, 1 to 8?
Yes.
Am I right?
Yes.
Got it, got it. The other point is, you have mentioned that on a BAU basis from next quarter, you should get down to a provisioning of INR 4 billion to INR 5 billion, depending on the slippages, et cetera. But again, the question would be, if you have taken accelerated provisioning and the scenario is improving, shouldn't this provisioning number be substantially lower or in fact, almost negligible?
So that this is how you look at it, right? If I want to consume my entire provisioning, which have done, then yes, this is not, right? We are saying that we want to look at it as a business-as-usual scenario, where we used to be at a 1.5% credit cost per annum and which is what we expect in the next financial year to be.
So of this provisioning that we have taken, in case the Assam recovery happens, would you be left with a substantial part into your loan loss reserves? Or this entire pool that you've created is likely to get consumed, just to clear up the stress that is there in the books?
No, there will be excess.
Okay. And do we know that number? I mean, have you estimated that? I think Slide 8 is where you put out. But if you were to do this internal math, how much would you be left with as an LLR on the balance sheet?
So we don't want to estimate that today. But clearly, given that we have provided for the entire possible stress, though we don't believe this is stressed, given the recovery position, there will clearly be a good LLR available. We will be in a better position to say that probably next quarter.
Got it. And then just 1 last question. This CGFMU number of INR 25 billion and INR 30 billion, there is no contingency risk to this number, right? In case you want to recover this amount, we should be able to do that, right? Or there is any contingency that is attached to it?
No, not really because it's an insurance, right? I'm paying premium for it, not coming [indiscernible] . So it's relatively simpler process.
The next question is from the line of Abhishek Khanna from Jefferies.
This is Prakhar. I wanted to ask a few things. 1, can you help us reconcile this RBI -- sorry, this stock exchange release schedule on the restructuring COVID 2.0 because that number shows up a higher number in the restructuring category, the COVID wave 2 collection number?
Which 1 you are looking at?
That's basically the -- it's on Page 6, I think, of the exchange filing. The exchange filing of the P&L and all.
Correct.
Right? So if you look at fee, which is exposure to accounts mentioned in B before implementation of the plan, the business known part itself is some INR 7,500 crores and then on top of it, another INR 700 crores or something between personal loans and small business loans. Whereas your restructuring number is some INR 3,500 crores.So can you help us reconcile? Is it like this number, I think, is borrower wise and maybe that number is facility wise?
Yes. So this is the individual -- no. Let me just confirm this could be the asset position, not the incremental position.
Number can't fall so much, right?You can answer during the call break. Else if you can file a proper -- sorry.
Sorry, Prakhar, I'm still not clear on your questions. What is the confusion here?
My confusion is that if -- tell me if I'm going wrong. This schedule shows that your exposure to borrowers before you restructured them was about INR 8,000 crores, which is the sum total of these 3 aspects, the second wave restructuring. And your press release shows some INR 3,500 crore number.
No, that is the position as at, which includes first quarter and the second quarter put together.
So you are saying that the gap is collections only or the gap is also because this number, the BSE press release number, includes facilities which might not have been restructured. So they are borrower-wise numbers, whereas your number, INR 3,500 crores is a facility-wise number?
See my total restructuring pool that is outstanding today is INR 8,326 crores. Whether we had done it in Q1, Q2 or Q4 of last year, all put together the outstanding is INR 8,326 crores. Of which...
INR 8,300...
INR 8,326 crores.
Okay.
That's the outstanding. At the time of restructuring, it was INR 9,035 crores. So between these last 3 months, we have collected about INR 700 crores from that.
Okay. And can you split this between round 1 and round 2? Like this wave -- Like what would you have restructured of this INR 8,326 crores?
So round 1, that was around INR 695 crores. Half of which is already out, but we still want to -- we would still require to show it as restructuring until we receive 30% of the amount. These were the short tenure restructuring of 3-month moratorium.And round 2 was the rest of these INR 9,000 -- I'm talking about the initial amount.
Okay. So this is the initial amount, not the outstanding amount, INR 695 crores?
Yes.
Got it, got it. So -- okay. So we should basically look at INR 8,326 crores as your total restructured book, including all forms of loans and all times of restructuring, right?
Right.
Okay. And -- okay. And may I ask like at a broader level, what would have been the extent of moratoriums that you would have offered on these loans into the period?
So what we offered them in Q1 is until March and what we offered them this quarter is until June.
Okay, Okay. So until June, they don't have to pay, not even interest?
No.
But you're collecting 70% -- money from 70% of the customers or 70% of the original dues? Is it by customer or by number?
Customers are paying.
Okay. Got it. Second part, just wanted to reconfirm what is the interest income recognition policy for restructured loans and overdue loans?
So restructured loans, we continue to provide interest as per their rate of interest. Overdue anyway, there is no confusion because until the time they become NPA, you continue to accrue interest. And these are the nonpaying customers is only 4%, large part which are in overdue or part paying customers.
And just a little bit of color on the ground, what level of economic activity recovery have you seen in West Bengal and Assam, especially for your target level of customers, what is working, what is still not working, if you would give some pulse of that?
No. We are seeing that as a very big improvement has come on that because the people are dependent on this credit. And there is -- because of their business is now started to normal. And so that they cannot be like to go to this the private money lender to take the loan for very high interest rate, they are now started coming on that someone coming on that full installment, someone coming into partial installment.So that we find out on that, this is then no installment paid customers have been reduced from 9% to 4% and 49% of the partial has come down to the 17%. So that is a very good improvement that's coming on that collection efficiency across the country.
Got it. And sir, last thing, there was some news about the holding company looking to acquire a stake in some of the non-lending financial businesses, if you could clarify anything on that will be useful?
This is a part of our holding company. We cannot be answering here. And you have earlier questioned on that, more on that, the business across the all types of business in micro credit are saying character on that.
The next question is from the line of Anand Dama from Emkay Global.
On your Assam and West Bengal, particularly on Assam, so you will have the Assam relief money flowing to maybe in third or possibly in the fourth quarter. But on a normal basis, when do you believe that you will cross the 90% threshold recovery rate in Assam? And what are the basically underlying conditions, which will actually drive that price and efficiency?
So clearly, Assam, the issue was more about the credit culture, which was distorted during the time of elections. So if the normalcy has to come, it has to come if the same reasoning got it reversed, which means -- and this scheme that the government has announced is directed towards that to improve the credit culture, right?The scheme says the more you are regular, the more money you get. The scheme says I will give you overdue, make you regular. If you continue to be regular, you get another INR 25,000. So the whole idea is to bring back that credit culture. And as the scheme gets implemented, when people see that those who are regular are getting more money, that's the time we will see the normalcy coming back in Assam.
Sir, till the time, basically, the customers do not get the money, they will continue to not pay, right? I mean I think the scheme is largely known to the people, and I'm sure that your RMs also would be educating the customers that they have to pay and be standard so that they will get the money overdue from the government, right? So what is basically still making it not pay you as of now?
If you see that the Assam portfolio and customer recovered and the repayment was the best in the country in our life. But now it has been happening in that time, government declared directly. Now same government declared you pay. Otherwise, you cannot get my money also. That is a very big message. So that they are returning back on that. This is the 1 part.Second part, if you see there is 2 type of -- the government have been divided in a 2 category of the customer. 1 is in regular paying. Another is in overdue customer.And overdue customer, overdue money will be paid by the government declared. And those are regular customers, they will get that INR 25,000 per customer. But they have now decided, first, they will give to this to regular customer, INR 25,000. That means they are incentive given. And showing this as an example, if you are also come as in regular, you will get that then. But they are not given that who are overdue customer.So that is on 1 side, we have been seeing that the customer also understand very clearly that they have need to return back to normal. Otherwise, they will not get the money. So that people are moving on that and coming out.And your question was when do we see that 98% kind of a level in Assam, right? To that, I've said that for that to happen, big factors have to play. Otherwise, we have decent increase in the collection efficiency because, ultimately, people have to go back and do their business and they need money. So if you see, we are seeing, the maximum improvement has come in Assam.
30% improvement has come in collection efficiency from June to September in Assam.
So the economic activity is now largely normal, right, at this point of time? Or there has been customers over there as well?
No, that's largely normal and it's improving.
So it is mainly the Assam relief scheme that customers have confusion. And...
COVID, we covered a little bit late from the other states. That is also is there. Whatever the main, Bengal, and they are in July, August.
So what is really confusing is basically the economic activities there -- and I agree that, basically, they will not pay in full, but at least they should start making payments in part, right?So what is holding them up is primarily the Assam relief scheme money not going through? Or they don't want to pay? There is no intent to pay?
No, no. If you see, that's what I'm saying, right? We have seen the improvement. We are -- if we expect that from 50%, we will reach 90% in a quarter is a little difficult to expect, right, because there is a level of communication which is required to be done with the customers, education which is required to be given to the customers, it takes time for them to come back to the near normal situation. We are seeing that improvement. It will take us to that 85%, 90% mark.Your question was when do we reach that 98% mark? You will always have those customers, which will be a little tough nut who would only react last minute when they see the world around are getting money because they have become regular. I'm not getting money because I'm not regular.
Another point you have say that the business, the Assam is, their main business is the agriculture, and 50% their business depend on West Bengal. In the time of corona, everything have been stopped, no train, no flight, no people can be like to travel, even the goods.So there is in both sides have been affected both the states. So now it has been opened. Now movement have been started. So that the peoples demand also, both the side has increasing.
Sir, same question for West Bengal, like when do we expect we get to 98% kind of collection efficiency over there? And what is holding that back at this point of time?
So rest of India is at 94%. West Bengal is at 92%. So why do we isolate West Bengal, right? There is -- yes, there is a gap, slight gap, but that will get bridged. As we've said, there was a timing difference in opening up between the Eastern India and the rest of India.
Okay, okay. sure. Sir, last quarter, basically, you have provided the data on the NPA pool where you have provided how much -- how many customers are actually paying, nonpaying and stuff. If you compare that same data for the second quarter, the paying customers certainly have dropped from 74% to 66%. I understand it is not right way to correct -- compare basically, because I think the pool itself has changed from first quarter to second quarter.Is it possible for you to give the same comparable data for the first quarter, like the customers who are nonpaying at that point of time, whether they are paying or not? That will be really helpful. Because at 1 moment the portfolio changes and then you give the paying and the nonpaying customer data that really doesn't helps much?
No, if you keep in the history point of, first quarter was in a worst because of second wave has come in May and June. So it is not comparable with the first quarter and second quarter, for that reason, but we are -- whatever the data we have been shown on that and seen that the 1 to 30 days, 31 to 60 days, in everything, we have been seeing that a very good improvement.Collection efficiency also seen that very good improvement. People have coming to the business, that is also very good. And Puja time, which is a very good way people have got the business. So that is the -- we find out on that as the future, it is coming to normal.
Okay. Sir, sir, last question. The nonmicrofinance restructured pool is somewhere about INR 21.3 billion or so. Is that right figure? And if yes, what is basically in fitting into this pool?
So 1 minute. The second largest restructured pool is the housing finance.
Second largest portfolio also is housing finance.
Yes, housing finance. So that is INR 1,300 crores. Out of this INR 1,300 crores, about INR 400 crores, INR 500 crores have also already moved out of the restructuring moratorium term because they were given a short-term moratorium of 3 months. But since their guideline says that till we receive 30% of the money at the time of the restructuring, they will continue to be shown as the restructured pool, they say here. And then there is SME, which is INR 200 crores.
Our next question is from the line of Antariksha Banerjee from ICICI Pru AMC.
May I, just 1 little qualitative question, not too much to with the current numbers. But given the experience of this last 1.5 years, I mean the USP of Bandhan has been that we have been 1 of the oldest microfinance lenders, and we probably have 1 of the highest vintage customers.My question is going ahead, when you decide ticket sizes, would you want to keep some cushion as far as the income of the customer is concerned, be it an 8-year-old or 10-year-old customer? So just so that when a crisis like this occurs or when there is a stress event, rather than -- I mean, there are 2 ways to go conservative, right? You take more provisions than you allow for that customer to lose or you just leave it at the customers end for them to survive without that 1 month, 2 months of income and sacrifice a little bit of growth.So in terms of ticket size, especially for your core geographies, is there going to be any recalibration when you grow fresh after the experience of COVID?
Before the COVID, we are analyzing our customers. And accordingly, we designed on that who are taken a loan as a micro credit. 2 years and above is, we'll find out on that how they are very good business running, and they will be like to shift as an individual loan, they will not continue as a group loan.So that automatically, our group loan ticket size will become down and the group loan will be like to treated as a initial entry level and make a very small business, not a big business. So automatically, our ticket size will be come down in group loan. And it will be good as ticket loan as high, and separately, we'll credit underwriting assist independently by other vertical and provided that credit to them, which is called the MSME.
And Antariksha, it is never and either or, right? You can't lend more or to a wrong customer saying that I will price it. So you have to give the right amount to the right customer. We have a policy of 1 loan, and that is why our ticket size look higher.The fact still remains. We have 20% market share in value terms, and 18% market share in number of customer terms. So with that being the case, we can't be very different.Yes, we are slightly higher because we have high vintage customers. And going forward, any which way, there are regulations, right? The new RBI guidelines, talk about the FOIR. We can't lend beyond the particular FOIR. So that -- it's going to be a regulation. There won't be any choice. It will not be that because it's a 10-year old customer, I will lend INR 1 lakh; 5-year old customer, I will lend INR 50,000.
The business...
Next question is from the line of Amit Nanavati from Nomura.Seems there is no response from the current participant, we will move to the next...
Hello?
Yes, Amit.
Yes, sorry. A clarification on the interest recognition on the [indiscernible] I kind of missed the comment. So basically, it's the nonpaying customers that is not recognized on your P&L, but the restructured pool, you'll still be recognizing -- accruing interest on our P&L, is that correct?
Yes. But even the restructured pool who are not supposed to pay, 2/3 of them are paying.
Yes, yes. But and -- I mean, as the non-NPA stress pool that you highlight, right, 30-plus restructured, whatever part of that lean into NPA as and when that happens in the transitory period, which -- 1 is still left with interest rate on that, right? That's the fair way to look at it, right?
So yes, non-NPA customers, there is no reason for not recognizing. Did I...
No, your restructured book, I'm saying where you've given moratorium, right? Will you still be accruing interest there or you will not be accruing interest? The interest rate is not a visible, at least for the 1/3, which is not paying?
So we will be accruing interest here. There is no reason why we should not accrue interest here. And at the same time, as I've said, 2/3 of these customers are paying, it gives us enough confidence to at least accrue the interest. These are [ added ] in my book. I have funded them with my deposits.
Understood. And secondly, if you can give some qualitative color on vintage how the collections or NPA trend has been in the last 6, 9 months that you would have seen, right, 1 year old, 2 year old, or beyond 3 years old vintage customers, where you -- which pocket you've seen maximum amount of [indiscernible].
So to be honest, this was more relevant in the pre-COVID environment, right? Because, essentially, what vintage does is build the credit culture. The challenge that we faced in COVID was an environmental issue. They were not allowed to do business, there was not enough opportunity to do business, right?So whether they were a 1-year old customer or an 8-year old customer So that differentiation or COVID impact, there is no particular trend that you can evaluate.
Yes. But frankly, if say, someone who is like a 4 years old vintage customers, whether you see them bouncing back, there is some loyalty factor that you are seeing? Or that's not the case?And where there has been slippages nonpaying customers, et cetera, because usually also kind of [ NPA ] see into the ticket size issues in the prepays.
No, that is always there. The loyalties and the vintage is clearly visible because if you compare geography-by-geography, you will realize that we are there right at the top. If you compare our collections in this Bengal and compare it with the others, you will see that we have a better collection rate.
No, what I mean is someone who's 4 years with you or someone who is 1 or 2-year-old customer for Bengal, there is any differentiation in the way they bounce back because you are getting collections from NPA customers, you are getting collections from restructured customers as well.So whether these are higher vintage customers who are still paying or the fresh customers which are lower than your vintage customers?
So high vintage, clearly, will have an advantage. But I'm saying when the challenge came, even the high vintage customers got impacted.
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Sunil Samdani, CFO, for closing comments. Thank you, and over to you, sir.
So thank you, ladies and gentlemen, for your time and patience hearing. Wish you all in advance a very happy Diwali. Thank you.
Thank you. Ladies and gentlemen, on behalf of Bandhan Bank Limited, we conclude this conference. Thank you all for joining us, and you may now disconnect your lines.