Bank of Baroda Ltd

NSE:BANKBARODA

Earnings Call Transcript 2024-Q1

[Operator]

Good afternoon, everyone. Hi, and welcome to the analyst meet for Bank of Baroda's financial results for the quarter ended June 30, 2023. Thank you all for joining us. We have with us today Mr. Debadatta Chand, the Managing Director and CEO of Bank of Baroda. And he is joined by the bank's Executive Directors and the Chief Financial Officer.

We will start with a short presenter followed by opening remarks by Mr. Chand, followed by a Q&A session. Over to you, [ gentlemen ].

[Debadatta Chand, executive]

Good evening all. I'm D. Chand. I'm the MD and CEO of Bank of Baroda. To introduce you to the management team, we have Mr. Ajay K. Khurana, who is the Executive Director looking after the Recovery Vertical and also the MSME and agri along with other platforms. So we have with us Mr. Joydeep Dutta Roy. He's the Executive Director. He looks after the digital and also the retail asset and retail liability. We have Mr. Lalit Tyagi. He's the Executive Director. He looks after the corporate credit, the international banking, treasury and the HR functions. We have Mr. Ian De Souza, the CFO of the bank, to whom I believe that you know him from last many quarters now.

So with this, I request Ian to run through the presentation. Thereafter, I will have my opening address, and then we'll go for the question-answer.

[Ian De Souza, executive]

Thank you, sir. Good evening, everyone. So we start with the headline numbers in terms of business growth. In terms of advances, we had a strong growth in global advances of 18%. So this was largely broken down into domestic advances growing by close to 17%, international has grown 23%. There is some element of exchange movement that resulted in a little [ rockier ] growth than would have been reported otherwise. In terms of retail, we have retail growing 25%, leading the growth in advances across the board. Agri has been growing at 15%, MSME at close to 13%, corporate advances growing strongly at close to 15%.

Within retail, we've had the entire secured book growing strongly. Home loans at 18.5, mortgage growing 16, education growing 21 and auto loan growing 23. While personal loan has been a small base for us, that too has grown very strongly, but continues to be a little more than 2% of the overall book size. In terms of total deposits, total deposits grew at 16%, led by international and domestic, which is the bulk of our deposits, growing at close to 16%. As has been a secular trend across the industry, CASA has been growing at a little lower rate. And we'll talk more about it as we get into our discussion as to what we plan to do on our CASA growth.

Term deposits grew around [ 24% ]. In terms of domestic CD ratio, we have adequate headroom, and you would see our CD ratio gradually inching up over the last few quarters. Global CD ratio is at 84%. In terms of yield of advances, year-on-year, our yield of advances has gone up smartly. But in terms of the exit yield on advances, if we normalize that for the more-than-expected recoveries that we had in Q4, you would actually see a 10 basis point increase in yield on advances. In terms of cost of deposits, as has been the sector, that has been inching up over the last few quarters. And this quarter, the cost of deposits is at 4.7% almost.

Our exit NIM at the end of FY '23 was around 3.53. If we normalize this for the strong recoveries I spoke about in Q4 of last year, that would be a normalized NIM of 3.41%. Against the normalized yield of 3.41%, we have seen some compression of around 14 basis points to end this quarter at around 3.27%, slightly below the full-year NIM of 3.31%. In terms of NII, we've grown strongly at almost 25% year-on-year quarter ago. And in terms of operating profit, it's up by 73% over the last year. Profit before tax is 106% up, and profit after tax is almost 88% up.

In terms of GNPA that has been steadily coming down, and it is almost half to end the quarter at 3.51%. And the NPL, we're happy to report is below 0.8, at 0.78. We've strengthened our PCR. And our PCR, including TWO advances, is now at 93.23%. Our slippage has been coming down quarter-on-quarter and is now at 1.05 against a slippage of 1.71 a year ago.

In terms of credit cost, our reported credit cost is 70 bps, and it's on account of the fact that we took a floating provision of INR 200 crores in the June quarter as well as we made certain provisions -- account-specific provisions of around INR 420 crores to strengthen our PCR. Combined together, if you adjust for that, the credit cost on a normal basis would be 0.44 basis points.

In terms of SMA 1 and 2 for credit loans above INR 5 crores, we've seen that ratio coming down steadily. It was more than 2.5% about a year -- more than a year ago. But consistently, we've been reporting it below 50 basis points. This quarter as well, adjusted for 1 large aviation account, which we spoke about last quarter and which we have prudentially provided for, adjusted for that, which is an SME 2, we would be just at 0.29 SME 1 and 2 above INR 5 crores.

In terms of collection efficiency, we've seen that strengthening quarter-on-quarter and maintaining a level of around 98%. This quarter, there was just 1 account which was collected after the quarter end. And if that account has been collected on the last day of the quarter as was scheduled, we would have reported a collection efficiency of above 98% and 98.86%.

In terms of CET, the bank continues to be strongly capitalized. And this quarter, we reported a CET1 ratio of 11.94%. If we had added back the profits of the quarter, we would have been at 12.39% at CET1, higher than the exit CET1 of FY '23. This is despite the fact that our RWAs grew by almost INR 20,000 crores. Similarly, overall CRAR were reported at 15.84%. If the profits have been added back, CRAR would have been 16.3%, a tad above our exit March 2023 CRAR.

With that, I come to the end of my presentation and hand it back to Firoza, the moderator.

[Operator]

Thanks, Ian. Chand sir, will you make opening remarks, please?

[Debadatta Chand, executive]

Yes. So once again, all ladies and gentlemen, good evening to all of you. And again, we are thankful to all of you for sparing you a Saturday afternoon for us. Let me have my opening remarks on the entire presentation run through by Ian. .

Normally, the June quarter is considered as a moderate quarter, but as a bank I'm quite delighted that we have shared a very strong all-around performance for the bank that has focused on the profitability and also some aspect of the balances strengthening. We maintain our journey towards the asset quality. That is very core as far as the bank is concerned. We are also reinforcing our commitment towards excellence and sustainable growth.

If I have a credit outlook, the quarter has seen a strong quarterly quarter-to-quarter growth of 2.2%. And normally, in many quarters of June quarter would have seen last earlier years, the sequential decline normally happens. But then this is one of the strong June quarter, wherein our loan book has gone up by 2.2% quarter-to-quarter and also on 18% Y-o-Y, which is a very strong growth.

At the same time, the retail growth has been 3.4% quarter-to-quarter and the full year is 24.8%, highlighting our emphasis on the retail loan book growth as a portfolio mix. We continue to have the same guidance that of last quarter, to grow above the industry by 1% to 2%. And on the retail side, we wish to grow almost 4% to 5% above the industry average. The full year FY '24 estimate would be, we expect the loan growth to be in the range of 14% to 15%, the corporate growth would be 12% to 13%. The retail growth would be 18% to 20% and can be higher also.

But as the international, which is one of the strong growth we have seen in the earlier year, would grow in line with the book growth that is at 15%. The strategy, as I said, we'll continue to pursue our retail strategy to grow significantly on the retail side of the book. And in a couple of years from now, we look for a corporate share of 35% and noncorporate would be as high as 65%, fostering the same growth in all segments of 15% on the corporate and slightly higher in the noncorporate segment.

On the NIM side, the last year full-year NIM was 3.31%. There is -- if you compare the last full-year NIM, there is a marginal dip in the quarter ending June. And this is obvious because of the trend that we have seen in the market also, with [ cost for us ] in terms of deposit has come up to the books, and that has resulted in marginal dip. But if I compare the NIM of that of last June quarter of last financial year, there is a significant improvement therein. So we keep our guidance of putting a NIM of 3.3% for the FY '24 estimate also.

On the cost-to-income, although we have not given any guidance, but again as a bank, as a strategy, we tend to post a lower cost-to-income ratio. We have seen some traction in this quarter itself on the cost-to-income and pursue the lower trending of cost-to-income in the consequent quarter also.

On the corporate side, we have introduced the concept of share of wallet and relationship management. And we have created a relationship vertical for the corporate, and we are again getting the same relationship management vertical in account planning concept to mid corporate and MSME customer also.

One important strategic initiative that we have taken this year, as this is a year of fees and flows, that is F&F. What I exactly mean by fees and flows? The fees talks about channelizing the bank entire resources to augment the fee side of the book. At the same time, flows talks about capturing the flows of each customer, whether it is a retail customer or a corporate customer.

One other tool to capture that, I do have strong CMS tool. We have onboarded a large number of customers this financial year and also last year and will be aggressively pursuing for more and more CMS onboarding of customers. At the same time, the retail customers who are transacting with us will try to capture the more flows of those retail customers. The idea is to have more cash flows in the system so that I can customize product to the requirement of the customer.

The profitability has been very strong. As I said that the 88% jump in the Y-o-Y growth for the June quarter is a substantial growth that we see. At the same time, we continue to maintain our guidance of 1% ROA, going forward. Another important thing, I'm happy to announce that if you compare the last full-year profit of [ 14,110 ], the first quarter profit is almost 30% of the last full-year profit. Asset quality is one of the important aspect of it, and as we said that we're also making efforts to strengthen the balance sheet further.

The PCR is at all-time high up, almost above 93%. The GNPA improved by 275 bps Y-o-Y. The net NPA is now less than 0.8%. As I said -- as we said earlier, saying that we have uniquely created the collection vertical, and because of the efforts in terms of close monitoring and collection, on the asset quality, the trending is positive. And the net slippage we had talked about in terms of [ net ] slippage and also the cash recovery plus upgradation, it would be very less or [ negligible ] in that respect.

Deposit is one of the core areas for this financial year as far as the bank is concerned. There's is the same trend that we see across the industry. The CASA growth has not been very strong for most of the banks. And this is obviously because of the rate cycle we are in. But having taken a note of the lower CASA growth, there will be a lot of focus would be on the CASA growth, going forward. We have taken a lot of initiative in terms of extending our franchisee, strengthening the relationship management on CASA, so that at least we wish to grow higher than the growth that we have achieved for this quarter.

With this, I close my initial comments, and then I open the forum for question and answer. Thank you.

[Operator]

Since there are no questions at the moment, we'll wait for 30 seconds for the lineup to populate. The first question is from Nitin Aggarwal .

[Nitin Aggarwal, analyst]

Congrats on a good quarter. So first question is on the margins. You are suggesting that NIMs will remain stable hereon at 3.3% for the year. So are we not looking at any further compression at all, say, in the second quarter? Has the cost of deposits peaked out? And what is the extent of asset repricing and the deposit repricing that you are looking at when you make the guidance?

[Debadatta Chand, executive]

Thanks, Nitin, for asking this question. When we say the guidance of 3.3% for the full year, it's for the full year, point one. Secondly, the cost of deposit impact could be there in this financial year, but there are two positive upsides we have in the book. One is with regard to the resetting of the MCLR book, all the book has not reset as of today because there is a 1-year resetting time period. So there is a bit of upside available therein. And that typically compensate part of the cost metrics, cost push, whatever you say the impact of the cost push on the deposit side.

Secondly, if you look at our -- because earlier also, we articulated that we typically try to have a high cost deposit on a lower turnover. So thinking through a scenario wherein there's a rate recycle reversal happening, maybe something Q3 or Q4, will be one of the bank taking advantage of the repricing because of that, so to [ summit ] of the entire thing. And if you look at my international book, the NIM is rather increasing in that way because you have seen the global market, how it is behaving. And we do have a 15% significant international book in the entire book.

So considering all the factors, we're still hopeful to maintain the 3.3% margin. But any update further, we will let you know in subsequent quarters, but we are quite hopeful that will maintain the 3.3% NIM for the financial year FY '24.

[Nitin Aggarwal, analyst]

Right, sir. And so related towards the other question on the yields. Now this quarter, the yield improvement has been very calibrated. And I believe MCLR loans would have got repriced this quarter also. And -- but probably the improvement is looking small because of the one-off recoveries that you had in the fourth quarter. So how much benefit did you really get? And are you able to pass on the MCLR-linked rates to the borrowers?

[Debadatta Chand, executive]

I think MCLR-linked, it is like the entire resetting. See, there is a lag in terms of the book in terms of MCLR and BRL, right? BRL is external [ deposit ] portfolio. But at some point of time, both would converge, right? That is what the lag effect of that. So in terms of passing on the MCLR impact, we are fully -- we're able to pass on the impact to the customers. And that is how the market is at this point of time. But Ian, anything further want to supplement on this question? .

[Ian De Souza, executive]

Yes, sir. So in terms of if you normalize the Q4 year on advances, then we actually see a 10 basis point sequential quarter increase in yield on advances. So I just wanted to add that point to give you a context.

[Nitin Aggarwal, analyst]

Sir, if you could just quantify the restructured assets, the number as to how much it was outstanding?

[Debadatta Chand, executive]

Yes. I'll pass on to -- Khurana sir, can you to take this question?

[Ajay Khurana, executive]

Total restructured book is INR 13,000 crores, which is below -- around INR 2,800 crores has been reduced from there. And almost 90% is upgraded or closed.

[Nitin Aggarwal, analyst]

Right, sir. Okay. Okay. And sir, the last question is on the tax rate. This quarter, the tax rate was slightly elevated. So what has driven that?

[Ian De Souza, executive]

Can I take the question, sir? .

[Debadatta Chand, executive]

Yes. Yes, please.

[Ian De Souza, executive]

So essentially, from time to time, we have been strengthening our balance sheet. So we had certain tax provisions, which we had taken, which we put actually close to take this quarter. That has slightly taken up the effective tax rate from around 25%, 27%, which you used to see earlier, to around 29%, which you see this quarter.

[Operator]

The next question is from Saurabh Kumar.

[Saurabh Kumar, analyst]

Yes, sir. First, on the restructured book, what are the provisions you're carrying against this? The second specific provisions you did highlight why it's gone up, but any -- I mean, any other reason which is driving the specific provision increase? And third is basically on the credit card subsidiary. I mean, any plans of when you can consummate a transaction?

[Debadatta Chand, executive]

So Khurana, can you take the first two questions? .

[Ajay Khurana, executive]

For restructure provisioning, total is around 1,154. And the standard assets, we have 5,981 for standard assets also we have. For a few accounts, we have provided specific provisions also.

[Debadatta Chand, executive]

So just to add to Khurana's statement, on a strategic basis, we wish to strengthen the balance sheet of -- the PCI is almost at 93 plus at this level. And on the [ standardized ] provisioning also, we do have a significant amount. But going forward, also, we'd like to strengthen the balance sheet more so that any headwind subsequently can be handled with. And [ Joydeep ], can you take this question? Yes. Sir, just give a minute. Joydeep, can you take the credit card question, yes?

[Joydeep Roy, executive]

Yes. So the credit card divestment process that was already initiated by the bank, the process is still continuing. We have gone into the financial due diligence and the legal diligence portion completion. And the prospective investors who have evinced interest or expressed interest, they are evaluating those reports and the data that has been provided to them. And with the strength of those data points, et cetera, they will come back with their final bids or offers, which we can consider that and take forward, number one.

But again, as we go through the process, it has a sort of a regulatory and a market element also, which we will have to look at and then go forward. So the entire process, which is the usual processes of diligence and the RFP and the binding offers, et cetera, coupled with the market as well as the [ regulators ]. So that is how we are planning to take it forward.

[Debadatta Chand, executive]

So to add to what Joydeep said, all my decision will be based on the valuation, the market conduciveness and also subject to regulatory approval.

[Saurabh Kumar, analyst]

Got it. Sir, if I can ask, how much is the airline account provided for now, what is your exposure?

[Debadatta Chand, executive]

Yes. If you look at the book last time we said, there was almost a 30% exposure which was backed by the [ ACNGS. ] Out of the balance, 70%, almost we have a collateral back up almost to the extent of 35%, is half of that. And the balance, again, we had provided last time and this quarter also we have provided, and that provision is exceeding the balance portion, right?

So in terms of accounting provision, everything we're well provided on this point of time. As far as the recovery is concerned, we are expecting it's a good asset and we recover amount in full, first in the primary and also on the collateral.

[Operator]

The next question is from Kunal Shah.

[Kunal Shah, analyst]

Can you hear me?

[Debadatta Chand, executive]

Yes, Kunal. Go ahead.

[Kunal Shah, analyst]

Yes. So firstly, with respect to the deposits, if we look at it between the wholesale and retail, how would have been the growth this quarter? Last time we have shared between the wholesale and retail, actually, I'm not able to see that. So how much of the term deposits, maybe what has grown almost like 3.6-odd percent sequentially, be the wholesale and the retail TD? And what would be the rate differential on an incremental basis between the two?

[Debadatta Chand, executive]

See, it's right that if we look at the system, the growth has been more on the -- like on the term rather than the CASA. So that's the point we have taken note. In my initial address also, I said that going forward, we will be focusing on the CASA. In terms of term deposit, there is not much of difference at this point of time because you have seen a lot of retail schemes. There are a lot of schemes that many of the banks are running. So in terms of the cost metrics, I don't think there is any difference between the cost of raising a wholesale deposit and retail deposit at this point of time.

The only difference would be that the retail deposit of that cost would be slightly for a longer tenure as compared to wholesale deposit of that cost. So any -- I suppose, going by the rate outlook at this point of time, thinking through some kind of a rate reversal happening maybe in Q3 and Q4, the benefit because you're not carrying a high-cost deposit for a longer tenure. And in that way, the bank would be beneficial in terms of repricing all these deposits at a cheaper cost, in case the rate reversal was happening.

But you are right, the cost of -- I mean, the growth in term deposit is high. And within the term deposit, the growth of, let's say, the retail and the rate of wholesale, wholesale is higher than the retail, but the tenure is much less as compared to the retail. In terms of cost metrics, there is not much difference at this point of time because most of the banks on retail are also having a large number of schemes like we do have the Tiranga Plus kind of a scheme. Many other banks have their different schemes.

[Kunal Shah, analyst]

But this 3.6, so if we have to look at the exact number in terms of the wholesale TD growth on a sequential basis, would that be -- last quarter also, it was quite high. So would that be upwards of 6%, 7%? How would that be?

[Debadatta Chand, executive]

The cost side, you meant to say?

[Kunal Shah, analyst]

No, no, overall growth quarter-on-quarter. So what would be the amount of bulk deposits? Like last time we have clearly highlighted. So what would that number be?

[Joydeep Roy, executive]

I can take this.

[Debadatta Chand, executive]

Yes, please.

[Joydeep Roy, executive]

Yes. So the 3.6%, Kunal, that you are seeing on the sequential side, the bulk is around 11% and retail term is largely flat.

[Kunal Shah, analyst]

Okay. Got that. So bulk is 11% and retail TD is flat.

[Joydeep Roy, executive]

Yes.

[Kunal Shah, analyst]

Yes. And in terms of fee income, so again, good traction on what we are focusing, maybe that's one-off, again, the strategic focus area of fees and flow. But in terms of the ROA contribution, how do we see the delta coming through over the next 12 to 18-odd months from -- particularly from the fee income side?

[Debadatta Chand, executive]

See, that's a very fair point. And as a strategy, actually, the strategy has been done through in the first quarter, right? So a lot of journey has to be traveled on that. But the traction is clearly positive. The growth in fee income this time is 18%. And this is one of the highest in last 5 or 6 quarters I could see, where the growth has been 3.5, 4 and 4.5 kind of a level. So the traction is there. But how much delta it would generate with the ROA, we cannot quantify at this point of time. But definitely, it would be ROA-accretive.

But the overall guidance that we are giving ROA more than 1. So in a worst-case scenario, let's say, going forward, let's say, not this year or next year, but a couple of years going forward, if there is a bit of NIM squeeze happening also, this would compensate to a substantial scale for ROA. So although our guidance is 3.3, we'll maintain that. And if you look at the ROA this quarter, it will 1.11, although our guidance is above 1. So it has created some delta, right? So in that way, the delta would continue to be accretive. But the quantification, we are not in a positon to do at this point of time.

[Operator]

The next question is from Jay [ Mundra ] of ICICI Securities.

[Unknown Analyst]

Sir, first question is on your floating provisions that we have created of INR 200 crores this quarter. Is that in preparation to Ind AS? Or what is the rationale here? And is this going to be a recurring quarterly phenomenon?

[Debadatta Chand, executive]

I just -- before I have a couple of comments, then I'll hand it over to Ian. As far as strengthening balance sheet is concerned, I mean, that's a clear glide path we'll be looking forward, going forward. ECL is not an immediate necessity, but then it is yet to evolve.

And in terms of the impact migration, on my book, I'm better prepared because my -- this PCR is 93 and above, I'm holding substantial standard asset provisioning, with floating provision also one of that. So I'm better prepared to migrate to that scenario. One of the guidance that you have given last time, if there is an ECL impact, we said our credit cost would be maintained below 1 guidance that were given. So that's the product. Anything further, Ian, you want to supplement?

[Ian De Souza, executive]

Yes, sir. so I think what we had called out in the last quarter when we were doing the analyst call is there are several things going in our favor. For example, we have a standard asset provision of almost INR 7,200 crores. And in terms of the floating provision, I think it is more in terms of our own policy, which requires us to make floating provisions if our profit estimate for the year is above a certain level. So at that stage, we are following our policy.

As to whether we would be able to utilize this floating provision towards ECL from a regulatory standpoint, it's still not clear. But once that clarity comes, we'll be able to tell you whether this can be utilized towards ECL. But at this juncture, there's no regulatory prescription saying that floating provision can be used towards ECL, though the regulator lays out various scenarios in which floating provision can be drawn down on.

And as to the future outlook in terms of quantum, it is within -- it will depend on our risk appetite. And if we feel that the credit cost is trending below -- much below what we estimate, then we may take further full [ revenue ] provision, given that our PCR is at all-time high, but we may take some floating provision.

[Unknown Analyst]

Great. And coming back to yields again, right, so loan yields, even adjusted for the recovery -- for the differential and recovery, has increased at 10 basis points. But that rise seems substantially lower if we compare to last 2 quarters, wherein we had said -- wherein we had witnessed 50, 60 or even 70 basis point rise in the yields. So would it be fair to assume that the 10 basis point rise will flatten further as we go ahead into the coming quarters? Or would you say it is too early to save [ that ] guide back?

[Ian De Souza, executive]

So you would have the -- as Chand said, the MCLR book still has to fully reset. So as of now, the -- that is one of the levers. Another lever would be the change in mix of the retail portfolio, so that would contribute. Though it wouldn't greatly contribute, but there would be some 5 basis points we estimate on that regard. But I wouldn't say it's totally flattened. But you can't compare it to last year. Last year, you had a whole sequential quarter-on-quarter increase in repo. So you can't really compare this year's outlook with last year, unless there's a further repo hike. So it's not comparable at all.

[Unknown Analyst]

Okay. And sir, in that context, if you can quantify the MCLR book, which got repriced in Q1 and which is likely to reprice in Q2 in book escrow, I mean, that will help us .

[Ian De Souza, executive]

I'll speak to you offline and get back to you. But [ still ] is in portion, which is yet to reprice.

[Unknown Analyst]

Sure. And last question is, sir, on staff cost, right, so I see that we have provided INR 460 crores range bipartite in this quarter. But if I look at the slide where we give salary and the provisions, I'm not able to understand where this INR 460 crores have been shown.

[Ian De Souza, executive]

So I'll explain it you. So there are two lines. One is provisions. Provision is largely a retirement provision, which is your AS-15. That is in line with previous quarters. So essentially, it is in the main first line itself, where it is factored. Then you will notice a significant increase year-on-year and quarter-on-quarter. So if you normalize for the INR 460 crores of wage revision provision, then the employee cost only increases by around 6%, 7% year-on-year.

[Unknown Analyst]

And sir, in your broader context, when you intend to push more retail versus wholesale, right, 400, 500 basis point differential, do you also see a case where OpEx -- because when you do more retail, it is more cost intensive. So how do you look at your OpEx growth for FY '24 and beyond because when we are more focusing on mutated, it sometimes tend to have more cost intensive?

[Debadatta Chand, executive]

No, that's a very fair question. See, the retail in terms of growing at 4.5%, 5% extra, doesn't require much of -- on the HR resources on the underwriting side. The only requirement that we are adding with regard to more of a license management side, more tie-ups. So one thing that we said that we need to have more project approval for the housing loan kind of stuff.

The digital penetration in terms of return is significantly going off. So now we have a couple of products which are entirely end-to-end digital on the retail side. We again intend to make to a lot subject to a particular ticket size, more of digital in case the attributes, everything can be digitally processed and the sanction can be given.

So one way when there will be an additional requirement of OpEx, at the same time, as I said also earlier, we are also carrying out a huge process automation journey. So it would be a balancing out to a very large extent. But the only thing that retail will try to get is a margin more accretive as compared to corporate, right? So any bit of extra spend on the OpEx would be well compensated by a higher margin on the retail. So that fairly would maintain my NIM and also the ROA, going forward.

[Operator]

The next question is from Rakesh Kumar of B&K.

[Rakesh Kumar, analyst]

So sir, firstly, related to this stressed loan number which is there in the notes of accounts from 11 to 14, total number was coming to around INR 81 billion, around INR 8,100 crores. And provision, if I see like notes of accounts in 10, we have given a provision of around INR 1,100 crores that we have made. And there is another provision of INR 296 crores, that is also there that we have made in the notes of account number 12 or 13.

So here on the stressed asset number, we have a provision, a standard stressed number, provision is around 17%. So apart from that, the restructure number that you have, which you have mentioned just now, on that, how much is the provision, sir?

[Ian De Souza, executive]

Sir, can I just take one item...

[Debadatta Chand, executive]

Sure, please.

[Ian De Souza, executive]

I talk about note of accounts number 10. So largely, we spoke about a couple of large accounts which we have provisioned for. One is a power account, one is the whole go-first account. So we have INR 639 crores of go-first. And one par account, which I will not name, since it is not in the public domain, we have around 255. Then we have taken one hospitality account, INR 87 crores. So largely, broadly, that gives you the texture. These are not restructured accounts. These are accounts where we spend -- there could be imminent stress, including the go-first. So that largely explains you that INR 1,100 crore. So this is nothing to do with what we talked about restructured.

[Rakesh Kumar, analyst]

Got it. And so total standard stress number is around INR 8,100 crores. If we take the submission from 11 to 14 details? If you take the submission of numbers, the stressed asset number from notes of accounts number 11 to 14, so total stress number is INR 8,000 crores, INR 8,100 crores, correct? .

[Ajay Khurana, executive]

No, total SMA 1 and 2, that is around INR 15,000 crores. And restructure -- our restructured book is INR 13,000 crores. But the entire restructured book is not under stress. Most of the accounts are getting paid. Earlier also, if you look at that, only out -- only INR 5,000 crores which have already been slipped to NPL. And now stress is way less than that. So that is this stress book, includes a restructured as well as the SMA 1 and 2, which is -- that is 2.9%, [ 2.955% ] of total book.

[Rakesh Kumar, analyst]

Okay. The second question was pertaining to the power sector exposure. Like in the presentation that we have given, so there is a reduction, like we have seen constant reduction in that number, the outstanding exposure in the power sector. So is there any guideline coming from the regulator to reduce exposure in a specific state SEBs? Or is there anything pertaining to that? Or what is the reason for the [ those ]?

[Debadatta Chand, executive]

See, as far as the exposure to power sector, will continue to be long on power sector. So absolutely, there is no kind of any pullback on that. And secondly, there is no instruction from anywhere with regard to any particular state or so. The thirdly, normally portfolio churn happens, depending upon the timing of all these loans. So Tyagi, anything further you want to add on this?

[Lalit Tyagi, executive]

So in fact, there is no specific assets we can talk about right now. The only thing is that, as MD said, that there can be some portfolio churning, some redemptions or lack of drawdowns on the working capital side. But other than that, it's -- our portfolio is behaving normally.

[Rakesh Kumar, analyst]

Got it. This is pertaining to -- like Bank of India's management stated that they have got some guidelines from the regulators saying that they have to reduce exposure in some of the states. And there is some category also for -- the RBI has put different states in different categories. So have we also received any such guideline notification from the RBI?

[Lalit Tyagi, executive]

No, we....

[Debadatta Chand, executive]

See, that would be linked to the portfolio concentration. So if you look at our concentration, it's fairly balanced. So absolutely nothing there.

[Operator]

The next question is from Ashok Ajmera.

[Ashok Ajmera, analyst]

And congratulations, Chand sir and the entire team, especially to improve the asset quality of the bank. Like if you take gross NPA, dropped down substantially to 3.5, net NPA of [ 0.78 ], PCR 93.23. And you also have a buffer of the provision as per note number 10 of INR 1,107 crores. Though you are putting it into some specific accounts, but actually it is beyond the IRAC norms, which is strengthening the overall balance sheet of the bank.

Having said this, sir, I've got a couple of questions and observations. Sir, on the recovery front, especially in this quarter, if you compare with the last quarter, our performance is a little dismal because our overall recovery in this quarter has come down to INR 986 crores as against INR 1,795 crores in the March quarter. As well as the recovery in the return of account, it also has come down to INR [ 665 ] crores against INR 1,447 crores.

So on the recovery front, though we got the figures of the restructured account and all that, but what are our efforts? And why indeed this quarter did not perform so very well on the recovery side? Maybe some breakup of the what -- like any change in the OTS scheme or any change in the -- so some color on that, sir. And going forward, where do we stand in the recoveries, where we see the recoveries?

[Debadatta Chand, executive]

So thank you, Ajmera. Actually, I was expecting you'd be the first in asking questions, but then...

[Ashok Ajmera, analyst]

I was there right from the start. I don't know...

[Debadatta Chand, executive]

Okay. so next time, we'll catch up physically. So giving a color on the aspect, thank you very much for complementing the entire management team on the performance. And second again, in before I hand over to Khurana, just let me give you some color.

Typically, if you look at the June quarter vis-a-vis the quarter 4 of last year -- I mean, previous year, they are typically not comparable because this is the beginning of the slack season, and then all those things do happen. And there are times when a lot of transfer happens, a lot of processes happens. And it impacts, what you can say, the normal momentum on the recovery kind of it, right? But one guidance that we are clearly giving that when I'm looking at the frustration vis-a-vis the cash liquidation. The net would be very minimal going forward for the full year. But to a specific point, Khurana, if you can answer the question.

[Ajay Khurana, executive]

I would like to add what MD sir has told. Actually, last quarter, there were some very big accounts which were settled. INR 1,700 crores came from some big accounts. And then it also depends upon the addition which is happening in the previous quarters. So quarter-by-quarter, these slippages have been reducing. If you look at Q1 of last year, in the March quarter, the slippage was INR 4,300 crores. which has been reduced to INR 2,200 crores in last quarter and now to INR 2,452 in this quarter.

So because this slippage is also reducing, the recovery also is reducing, in addition to that, what MD told because of the season and the staff. But otherwise, our efforts are on -- we are -- whatever targets we have are fixed for the recovery, we will surely achieve them. And so many other OTS schemes and many other proceeds are going on for recovery. Every step, whatever is possible to recover, we have been taking very efficiently.

[Ashok Ajmera, analyst]

What is the target, sir, for FY '24 for the overall recoveries?

[Ajay Khurana, executive]

INR 12,000 crores.

[Ashok Ajmera, analyst]

INR 12,000 crores, so out of that, INR 986 crores has come only in this quarter. So remaining INR 11,000 crores is...

[Ajay Khurana, executive]

No, no, it includes upgradation as well as the recovery in return of accounts. That comes to more then -- around INR 2,600 crore as of now.

[Ashok Ajmera, analyst]

Sir, my one last small question on just a point which I saw in the Note #18, there is some penalty by RBI of INR 57 lakh. So is it a routine kind of a penalty or some specific incident has taken place or some violation has taken place, sir?

[Debadatta Chand, executive]

Ian, can you take this point or otherwise offline, you can clarify on the matter?

[Ian De Souza, executive]

Offline, sir.

[Ashok Ajmera, analyst]

Sir, my other point -- question is that you have given that the entire fraud account in this quarter have been provided for, but the number has not been given. That's how much was the fraud account and how much -- so that we come to know that exactly in this quarter, how much provision on account of the fraud that makes?

[Ian De Souza, executive]

So in terms of -- there are two things. One is the opening balance of fraud at the end of March. That was about INR 13 crores. Second is, incrementals for during the quarter was around INR 16 crores. So not a very critical number together.

[Ashok Ajmera, analyst]

Sir, coming in last, sir, in the aviation account, of course, you have given some color on that, that how much has been provided for in the collateral. But in absolute terms, I understand that it is around INR 1,400 crores to INR 1,500 crores, our total -- because you and Central Bank are the 2 main banks, and I think Central Bank is around INR 2,000 crores and yours is about INR 1,400 crores, INR 1,500 crores. So in absolute terms, we understand. Then according to you, 30% of the provision was made in the last year itself on this account. The term provision is under Note #10 and at INR 1,107 crores, which is extra. And some provision which has gone into the provision of this, I think it's SMA2, into the regular provision also. So overall provision out of this INR 1,500 crores is how much so far extends in our book?

[Ian De Souza, executive]

So can I take that? .

[Debadatta Chand, executive]

Yes, please.

[Ian De Souza, executive]

So there's a non-ECLGS component of INR 1,200, out of which we have made a provision of INR 639 crores.

[Ashok Ajmera, analyst]

How much?

[Ian De Souza, executive]

INR 639 crores. INR 509 crores in the March quarter and INR 130 crores this quarter.

[Ashok Ajmera, analyst]

Then you said that you've got a substantial collateral of almost 60%, 70% of the value. So is it the consortium collateral or there is some stand-alone [ separate ] collateral also to you?

[Debadatta Chand, executive]

It's consortium collateral.

[Ashok Ajmera, analyst]

It's all consortium collateral, which may fetch almost about 50% of the total...

[Debadatta Chand, executive]

50% of the balance of ECLGS .

[Ashok Ajmera, analyst]

All right, sir. The point well taken. Sir, now going forward, like we have grown our credit book well in this quarter....

[Debadatta Chand, executive]

Just to add also on this point. Although the accounting provision we have made. But as far as the recovery is concerned, we expect full recovery out of this account. That is what our management's view on that.

[Ashok Ajmera, analyst]

And you will see the airline flying again now? I will...

[Debadatta Chand, executive]

I'm not commenting. I'm only commenting as far as collateral -- primary collateral ECLGS, we expect a full recovery. But accounting, we have provided what is required...

[Ashok Ajmera, analyst]

We are also concerned with that, whatever recovery you are expecting. Sir, coming to now this credit side, you have grown book -- our book very well in this quarter, 2.1 or 2.2 for the global as compared to some of the other banks, which couldn't carry the same as compared to the last quarter. So now going forward, your guidance is around 14%, 15% overall of the credit book.

Looking at Bank of Baroda and the way you all are, I mean, like major thrust you are putting on retail as well as you are also opened up the corporate, you have started the relationship managers, the full-fledged concept and this thing. Don't you think that our target, though, is good, it's a little more than the industry norm, but can we still increase to, say, 16%, 17% of the range?

[Debadatta Chand, executive]

I said one in of the [ conversation ] there, we have bit of trend of overperforming vis-a-vis guidance. So we'll take it in that way. .

[Ashok Ajmera, analyst]

All sir. Just one small end of the -- we have the expansion revision in the pension that amounting to almost about, I think -- it was about INR 880 crores something balance of last year. We have provided this quarter INR 72 crores, if I'm not wrong. So the INR 799 crores has been carried forward to be amortized, which your auditor has mentioned that had this been provided, our profit would have been lower net of tax of INR 589 crores.

So was there any need of mentioning that when it is allowed as a differentiation by RBI and you are permitted to do so? Was there any talk with the auditor on that? Because I don't see in some of the other banks at this point coming that had this been 100% provided, the profit would be lower by INR 589 crores. So this is number one. And going forward, if the ACL guidance comes, and I think all this kind of be amortized or to be amortized or unprovided thing also would have to be taken into consideration.

[Ian De Souza, executive]

Sir, can I take that question? .

[Debadatta Chand, executive]

Yes, Ian, please. .

[Ian De Souza, executive]

So there are two things. One is it is regulatorily permitted. But this is a special dispensation given by RBI. But this is a carve-out from the accounting standards. So as per the audit requirements, since it is a carve-out from accounting standard, we need to mention it and quoting the regulatory reference. That is the reason why it is mentioned. Secondly, this is something that we are evaluating on a regular basis. And well before the NDS guidelines coming, this will probably no longer be there.

[Operator]

We are taking a question from M.B. Mahesh of Kotak. The overall cost of deposits that increased Q-o-Q was 25 bps Q-o-Q. But the July interest rate disclosure does not see an increase in MCLR. The June disclosure saw an increase only in 1 bucket. Why is there a poor transmission of cost of deposits into MCLR? Thank you.

[Debadatta Chand, executive]

See, as far as MCLR computation is there, that depends upon a lot of other metrics. So it's not typical linked. It depends on the cost of deposit the bank has, right? So that is one point. The second aspect is some of the upside that we see on the loan MCLR book is a resetting of MCLR. Even the MCLR was increased earlier, but the reset has not happened, so that's upside available quarter-to-quarter. And this typically, I believe, is the answer to it. Anything Tyagi or Ian can take further, supplement further?...

[Ian De Souza, executive]

Yes. So the MCLR formula, as defined by RBI, is different, it is not typically taking it as we typically see it from a commercial sense. So I think what Chand said is correct. And it is a reset of the 1-year book that we are seeing as a guidance that we are giving, that there is an upside still left.

[Joydeep Roy, executive]

Yes, nothing to add, sir.

[Debadatta Chand, executive]

That's fine.

[Operator]

We have another question in the Q&A box from Krishna Kumar. What is the mix of growth plan for FY '24 and '25 in terms of corporate and retail? What's the pipeline looking like in terms of loan approvals and sanction?

[Debadatta Chand, executive]

Sure. I'll first just answer and then give it to Tyagi on this. See, we set a broader guidelines with regard to the portfolio mix of 35%, 65% in a couple of years from now. If we look at the current corporate book, is almost at 42%. So while I target, let's say, a 3-year target of 35%, so that trend would be -- you can ] that way, reduce it down. But anything, Tyagi, further you want to add on this?

[Lalit Tyagi, executive]

So in terms of the pipeline in corporate, there are good traction from the infra, renewable and some of the industrial sectors where working capital demand is now coming up. So whatever our goal projections are there in corporate, we are pretty confident that we will be able to make. And as MD said, in terms of the retail growth, we are consistently growing our retail book to rebalance our mix of corporate and retail. And we are confident to maintain the guidance which we gave at the beginning of the year.

[Operator]

Thanks, everyone. I'm sorry, but this is -- we're running out of time, so this is the last question. I'll now invite Ian to please give a word of thanks.

[Ian De Souza, executive]

Thank you, everyone, for joining us. And as usual, these questions have all given us food for thought, and we will be building some of them into the way we interact with you, going forward. Look forward to interacting with you some on a one-on-one basis. So I think many of you have interacted with us on a one-on-one basis. Looking forward to those interactions from Monday onwards. Thank you very much for joining us on a Saturday. I know it's already 5:30 on a Saturday. Thank you for the engagement. Take care.

[Debadatta Chand, executive]

Thank you all. Thank you very much.

[Ian De Souza, executive]

Thanks.

[Ajay Khurana, executive]

Thank you, everyone.