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Earnings Call Analysis
Q2-2024 Analysis
CSB Bank Ltd
The company has navigated a volatile gold market with caution. Despite a recent increase in global gold prices potentially indicating a risk-averse portfolio, the company remains conservative. They are wary of how long high gold prices will last considering other economic indicators such as high U.S. bond yields. This conservative mindset is reflected in their approach to business and is expected to maintain a net interest margin (NIM) above 5% for the year, aligning with previous guidance.
The company has seen a decline in yields from gold loans, decreasing by approximately 70 basis points this quarter. Despite this decline, the organization anticipates yields will rebound in the following quarter, indicating that the decrease was a strategic decision rather than a sign of weakness. Additionally, the company is maintaining a loan-to-value (LTV) ratio limit of 85% to ensure better earnings and manage risk effectively.
The company is experiencing a 21% growth in deposits, outpacing systemic growth, and is aiming to manage this alongside maintaining a credit-deposit (CD) ratio within 90%. In addressing the challenges of reaching new geographies, they clarify that competitive rates are essential but dismiss the effectiveness of high pricing as a customer attraction strategy. The management emphasizes the importance of strategic branch distribution and acknowledges that while they may not compete with large banks on sheer scale, they find their 'sweet spot' and leverage their branch distribution for sustainable growth.
This quarter marks a shift for the company as gold loans were not the primary driver of growth, with retail and wholesale segments outpacing gold loan growth. This diversification indicates a strategic move away from relying heavily on gold loans and towards a more balanced portfolio of assets.
Changes in term deposit costs are anticipated to be minimal, with projected growth of no more than 20 basis points unless there is a significant global shift in economic conditions. A rate of 7% is deemed highly unlikely by the company, suggesting a stable outlook for term deposit costs in the near term.
Despite experiencing a negative credit cost this quarter, the company expects to maintain their long-term credit cost guidance between 40 to 50 basis points, with a view that their gross non-performing assets (NPA) will be below 2%, and net NPA will be below 1%. This stability is reflective of the company's risk-averse nature and strategic financial planning.
Strategically, the company plans to expand operations within existing branches, potentially doubling their business output without significant investment in new physical locations. This approach aims to control operational expenditures (OpEx) to assets and prepare for a cost-to-income ratio below 50% from FY '25 onwards, as part of their 7-year structured growth plan.
A discrepancy was identified in reported yield and LTV data when compared to the prior quarter. The executive explained that the yield of gold loans has dropped, and the data issues will be reviewed. Nonetheless, the misalignment raised questions about the accuracy and tracking of these financial metrics.
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Ladies and gentlemen, good day, and welcome to CSB Bank Q2 FY '24 Earnings Conference Call hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Shivaji Thapliyal from YES Securities. Thank you, and over to you, sir.
Thank you, Enzo. Good evening, and a warm welcome to all those who have joined the call. The CSB Bank management is represented by Mr. Pralay Mondal, Managing Director and CEO; Mr. B.K. Divakara, Head, Strategy and Corporate Legal; and Mr. Satish Gundewar, Chief Financial Officer.
We specifically thank the management of CSB Bank for giving YES Securities the opportunity to host their result call. The management will first be making some opening remarks, after which we will throw the floor open for questions.
I now invite the management to make their opening remarks. Pralay, over to you.
Thank you, Shivaji. And thank you, everybody, for joining the CSB Q2 earnings call. And I would like to also wish everybody a very happy Navaratri. And today, the Durga Puja is starting, so happy Durga Puja to you also. To make things a little more brighter, there is a lot of sound in the background, I think people are celebrated Navaratri. So hope it doesn't disturb while we are talking. Please bear with us because there's a lot of background music happening around.
Coming to our today's call, First, I'll start with a little bit of a macro on the global scenario and domestic scenario. And then I will quickly move to CSB specifics. And I'll keep it short, so that we can spend more time on the call in terms of Q&A.
On the global side, while the inflation has shown signs of some moderation, the economic data continues to remain strong, leading to the prospects of current red cycle staying higher for longer. With escalation in geopolitical risks, oil remains in [ 90s ]. As a result with high interest rates and higher commodity prices, global growth is forecasted to get slower from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024.
On the domestic side, in contrast to the global trends, the economic activities exhibits resilience on the back of strong domestic demand. With the start of busy festival season, the demand for currency with public is likely to remain strong. RBI has projected the growth at 6.5% for the year and their commitment to bring inflation to 4%.
Added to that, the volatility of the global factors like rates, currencies and commodities, the liquidity in the system is likely to remain in deficit. Also, the currencies are in circulation, is expected to be slightly higher. And in view of that, we expect the liquidity challenges as well as the deposit rates to remain a little elevated in the system for a while.
Coming to CSB specifics, overall performance on both top line and bottom line was good on a Y-o-Y basis. Highlights of the performances are improved profitability, with net profit of INR 265 crores for H1 FY '24, up by 13% from H1 FY '23. Q2 FY '24 PAT at INR 133 crores, 10% increase over Q2 FY '23. Operating profit witnessed a growth of 14% on a half yearly Y-o-Y basis. Q2 FY '24 is up by 11% over Q2 FY '23. Provisioning buffer of more than INR 170 crores over and above the regulatory requirements. And despite the margins are under pressure for most of the banks in a highly volatile market, we could maintain a NIM of 5.12% for the half year ended [ 39.23 ]. For Q2, it is that tad lower at 4.84. However, I'm confident that our NIM has bottomed out in this quarter. And as per our plan, we should be able to report our NIM higher than 5% on a full-year basis.
On a sequential basis, while cost of deposits increased from 5% to 5.22%, yield on advances declined from 11.18% to 10.88%. We are, though, confident that we should be able to address this decline in the coming quarters. Held the ROA of 1.76% for H1 FY '24 and 1.73% for Q2 FY '24 annualized. On the liability side, I think we have improving the funding base. Deposit growth of 21% Y-o-Y as against the industry growth of around 13% and CASA growth of 4% Y-o-Y for CSB.
On the asset side, the net advance growth of 27% Y-o-Y, industry has grown by around 15% Y-o-Y, if we don't consider the [ HDFC ] margin. Gold loan portfolio registered a growth of 32% Y-o-Y, portfolio buildup happened across all the sectors. Now we have more balanced growth trends across all the franchise, be it retail, gold, SME and wholesale, and which will sustain now and actually grow. Yields on advances for H1 FY '24 is at 11.04%, with an improvement of 34 basis points from H1 FY '23.
On the asset quality mattresses, I think we have some good news, stable asset quality with GMV of 1.27%, NNPA of 0.33%, PCR of 75% without write-off and 92% with technical provisions, prudential provisioning policy in excess of RBI requirements. SR portfolio is fully provided, which we communicated before.
On the capital base, CRAR of 23.96%, almost 24%, low proportion of risk-weighted assets compared to the industry. Shareholders -- on the shareholder value creation, our intent is to maximize the wealth of shareholders, [ rectified ] with attractive EPS, book value per share, ROA and ROE. Book value per share has reached INR 191, which has caused consistent growth quarter-on-quarter. EPS of H1 FY '24 is 30.51, ROE of 17.08 in H1.
In conclusion, I'd like to say that our endeavor has always been to deliver consistently and create a compounding growth story. The quarter gone by is no exception. We have done well in both top line and bottom line parameters. On the top line, while the advances and the deposits grew by 15% and 13% Y-o-Y in the industry, our growth is higher by more than 50% at 27% and 21%, respectively. And this is what I told in my previous call also that our endeavor is to grow 50% faster than the system.
Gold loan portfolio grew by more than 30% Y-o-Y. Due to systemic liquidity challenges, deposit growth has come at a slightly elevated cost. And CASA growth has remained muted, which is true for the industry as well. As communicated earlier, our cost-to-income has remained elevated due to significant investments we are making. As this investment starts paying back in terms of operating leverage, our cost-to-income ratio will start tapering from FY '25 and should go down below 50% by FY '30.
On the other front, we are taking rapid strides in strengthening the building blocks that will help us in leveraging our full-service banking license and build a 360-degree pan-India franchise across wholesale, SME, retail and gold loan business.
Our primary focus is to build a solid liability franchise by acquiring quality customers and onboarding them with all banking products and services. We are significantly investing in leadership, people, distribution products while transforming the technology stack to provide our valued customers our good service and the 360-degree banking facility.
So in short, I would like to say that while every quarter, we will deliver the numbers what we are delivering, but the bigger picture for us is as we are [indiscernible] vision and how we are sustainably and consistently moving towards that vision step-by-step. And so far, we are completely on track [ to achieve ] the milestones we have set for ourselves.
With that, I stop here, and I'll welcome questions. Thank you very much.
[Operator Instructions] The first question is from the line of Mona Khetan from Dolat Capital.
So my first question is around the yield on advances, which sequentially declined 30 bps. So is it to do with the rise in gold NPA and the related interest reversal?
So Mona, you have asked the right question that yield has come down a little bit, and that is primarily because of gold loans. So what we did is, I'll tell you, last quarter, you would know that the gold prices have started dropping, okay? And being a very risk averse kind of a question, what I told our gold loan business team is wherever we -- generally, the yields are higher where the LTV is also higher.
So as prices are coming down, I just wanted to take some of these customers off our books, and we get that option -- for exit option for these customers and various ways this can be done. So you use the process of generally what we all know. And in the process, a lot of these high-yielding, high-LTV customers had moved out of our book.
In a way, you can also describe them the way you described, not necessarily [ NPHS ], not NPA. It's also customers who are getting an LTV, which is higher than our comfort level. And hence, we exited out of those relationships. Given that perspective, our overall portfolio looks very good in terms of risk parameters.
And after that, because of the Israel prices and things like that, global prices, gold prices has gone up again. And hence, now it is looking like a very, very risk-free kind of a portfolio. And also, we are adding more businesses. But again, I'm very careful because this gold prices, how long it will remain high, given that global U.S. [ tenure ] is almost 5%, dollar index is where it is, our bond is also high in India?
So given all these perspectives, I'm just not willing to take that kind of a bit, saying that let's go all out and book this business at this kind of a price. So we have been very, very cautious and conscious on this business. So that's a combination of two, three factors why you are seeing what you're seeing. But I think it's a risk averse kind of a mindset, which made us do this because I always say that this come first and after that, profitability and yields.
Having said that, I must say that this is a kind of a one-time kind of a situation. We don't see the -- we have bottomed out on NIM, which I just said. And our overall half yearly NIM is around 5.12 or somewhere like that. And I don't see us -- and I think that what we had committed before that will be above 5% for the year, we should be able to hold on to that commitment.
Sure. So while you're saying that you let some of the higher-LTV portfolio go and also high-yielding portfolio go, if I look at your reported LTVs and weighted average yields of the portfolio on the presentation, both of these have increased. The LTV is at 81% for the book, and the weighted average yields are at 11.7%. So what explains that?
No, no, weighted average yields, where did you get 11.7%? Our yields in gold loans has come down this quarter, right? I don't know where did you get this 11.7%.
So I was referring to the presentation on Slide...
[Foreign Language], this one, okay. Okay. Okay. But I'll tell you that yields on gold loan has come down by around 20, 30 basis points for us, okay? I'll tell you the numbers. It was 11.78% last quarter. And this quarter, we had 10.99%, around 11%. So we have got a real down in gold loan. And it will again go up immediately this quarter, it will go up. So our yields have come down by around 70 basis points in gold loan this quarter, and this is exactly the reason why I'm saying what I'm saying.
And on the LTV, as you rightly said, if you do a little more detailed calculation and see that what our yield was and whatever mix -- I mean, mix was and what our mix is right now in terms of LTV and then kind of a compare it with gold prices, which dropped, you will see that we have got rid of a lot of higher LTV booked from the bank, okay?
Okay. So basically, this 11.7% number is incorrect on Slide 12 of your presentation?
So what happens, Mona, is that, that is a half yearly number. We are talking about -- what Pralay is talking about is the Q2 FY '24 number, which is 11%. So on a weighted average -- now Q1, our yield was pretty healthy. And so an average of that is what is shown...
So whatever has changed has changed in Q2, right? Because you know that the gold price has dropped in second half of Q2, okay? So when you look at H1, it might be that number is correct. But when you look at quarter-on-quarter, which I have in front of me, it has come down by 70 basis points, right -- 79 bps, yes.
So -- but this is -- again, I'm telling you this will again go up this quarter. So we -- that why I'm not so worried on the NIM and gold loan yields because this was a tactical decision we took, which has been taken care of.
So this 11.70% whatever we have stated in the investor presentation, is carrying yield. So that is why that has been at 11.70%, it's [ created ] against the outstanding balance.
Sure, sure. Got that. It pertains to the full H1 of the...
Yes, yes. Yes, that's right.
Okay. My second question then is around the margins. While you said that you'll be able to maintain that 5% or so for the full year. So in that case, we expect essentially that the margin should rise here on?
So that's what I said that we have bottomed our margins. Obviously, cost of funds is sort of flattening, but -- we still don't know if there is some more increase on the cost of funds.
But we believe that our yield expansion in spite of mixed mix going up now on the retail, on the SME, on the wholesale side, things are starting to improve, you will see that our increase in yields will be higher than the increase in cost of funds. And hence, our NIM will be higher than what it is today. So eventually, we will be able to manage our NIM in line with what we had guided, which is about 5% for the whole year.
Got it. And just one final question. On the noninterest income, there is this INR 60 crores of other income. What does that pertain to? And -- yes. And just again on this part, if I look at the other income [ ex treasury ], it's almost 1.9% of your assets, which is close to what some of the large banks are making. So is it fair to assume that other income growth will slow down in [ eventually ]?
So if you remember, Mona, what I said before that one of the critical focus areas for the bank was a sustainable fee business in the bank. And a few years back, we used to be below 5% ex treasury and ex PSLC. And you must have noticed that this quarter also, like last quarter, we didn't take any PSLC income.
So given this perspective, you can assume that whatever businesses we are showing, our franchise fee businesses, and hence, sustainable and will continue to grow -- I mean the issue may be that right now around 17%, 18% [ users ] may come down or go up a little bit here and there.
But broadly, our fee income will continue to sustain in line with the balance sheet growth right now because a lot of these are processing fees, insurance-related businesses, other franchise [ TFX ], all of these things have started picking up. We have put a lot of effort around it, and it is starting to show results, and it will sustain. There is no one-off in this at all. In fact, one-offs have not come, PSLC has not come.
Got it. And just kindly, what is the INR 60 crore in the noninterest income, the other income part?
It could be including some of the insurance income, liability income, some of the credit cards, as you know, that we have started, enhancing our book on the credit card side, which we do to the partnerships, so it could be some of these income. So it's a combination of a host of a lot of granular sustainable compounding growth kind of income.
The next question is from the line of Pallavi Deshpande from Sameeksha Capital.
Just wanted to understand on the deposit growth that it was quite healthy, but just the LCR has declined. And so do we see a situation where this limits our loan growth, going ahead, the LCR regulation of 100%?
So Pallavi, thanks for your question. So deposit growth is, right now, in a systemic challenge right now, in a [indiscernible] system, though we have grown at 21% in a very small balance sheet vis-à-vis overall growth of 12% to 13% in the system. But this growth has to be managed by 3, 4 ratios in consideration: One is NSFR, one is LCR, one is CD ratio, one is CASA ratio and one is cost of funds, okay?
So there are five balls in the air constantly when we look at our deposit growth. And the deposit also has a certain amount of increase coming from CDs, a certain amount of refinance, certain amount of deposits and a slight increase on the CASA. So it's a combination of all these four.
Coming to your question, will LCR become a limiting factor, the answer is no because we know structurally, there are four or four things which leads to the LCR issue, and we are monitoring, I myself monitor, LCR, Satish also does it on a daily basis. So I don't see that becoming a limiting factor.
But if systemic liquidity remains very, very tight, we are also very clear that we don't want to increase our cost of funds beyond a point when we cannot -- we're -- as I said before that, I will not sacrifice growth for NIM. But at the same time, we also can't have a situation where we'll buy business, buy liability business, that we will never do.
To give you an example, our validation on that, our CASA or our [indiscernible] still are below 3%, okay? Our effective [indiscernible] cost is well below 3%, okay? So -- which shows that we are not in the business of buying liability. We will continue to grow, and we are -- on a smaller balance sheet, we can do that.
And as we create our overall franchise, there will be automatic growth on the liability side. So to that extent, yes, when our CD ratio is almost 87.5 or somewhere like that, we also have to have our deposit growth which is closer to the asset growth, and we'll sustain that. And hence, you're right, deposit growth will decide our asset growth as well.
Sir, just taking that one step forward, the loan growth -- we will be maintaining the CD ratio here now, if that's what you're saying then?
Yes, yes. I've said that we will keep -- we'll try to keep a CD ratio within 90%. We have been able to do that so far, and we hope that we'll be able to maintain that.
[Operator Instructions] The next question is from the line of Vikas Kasturi from Focus Capital.
Yes, sir. First of all, congratulations on a fantastic half year. Sir, my question is more to do with the industry, if you could just help paint the picture for me. So we hear that even some of the large banks like HDFC Bank is adding a lot of branches and trying to get more of the retail business and so is another bank like IDFC bank and so on.
So in such a situation, could you just tell us, sir, how -- what is the kind of competition that you're seeing in the segment that you are operating, like SME, wholesale and even retail? So how is the competition? And how are we -- are we targeting a different set of customers than these other banks? Could you just help paint the picture for me, sir?
Sure. Sure. Thank you very much for the question. So yes, I think the larger banks -- see, I have said it before, a bank like HDFC is creating on CSV in how many days in a year, I don't know. So we really are not competing with such large banks. But there is always a sweet spot for everybody if they know how to execute the strategy.
And that's how all big banks have also become big. They are not big day 1. People have become big over a period of time. So every bank has started like this and then gradually started playing in the mainstream.
For us, the first principle is, which is our Board guidance as well as our management philosophy, that we are in the business of taking risk, but we are in the business of bringing the money back of the risk we take. So anywhere we have any doubt that we'll not be able to get the money back, we don't do that business. So basically, net-net, what it means is we are extremely risk averse to a point, number one. And anywhere we see a risk, we don't do that business, as simple as that.
B is, our balance sheet size is small. Our opportunities are also small. But within that balance sheet side, a percentage growth, there is enough scope. India, the kind of distribution, the kind of opportunities which are there, everywhere, HDFC or SBI or [ Kotak ], access cannot reach, right, all the time. So there is always be a scope, and we have to be at the right place at the right time. And hence, we have to find out sweet spots, that's what we are doing.
Third point is branch distribution, yes, there is branch distribution, which I always said is going to be key for banking in India. And finally, I think there's a realization that between digital and physical, both are very important. Digital augments physical distribution. That's why I fundamentally believe that branch distribution is required, especially as you go into deeper geography.
And in the main markets, even for wealth management, all those businesses, you need to be asking an industry question. We are not into wealth management ourselves, but I have done that business before. You need that kind of a presence in metro markets. And as we go deeper into deeper geography, the Bharat banking, whichever way you call it, micro finance or agri kind of businesses, you'll need your distribution.
So we are not doing niche, niche in terms of products, we will do everything. But we will be finding our sweet spots where we think that we can give the right service to the right customer and the customer segment, which is probably not getting the kind of attention which they deserve in a larger bank and in those kind of banks vis-à-vis what we can give. So the number of workings that happens in our branch is much lesser in some of the banks, which you're talking about.
And hence, the personal attention we can give is probably much better. We may not have all the services today the way they can give. But some of the customers need personal attention, which we can give better. So we are trying to find out which are the things which we can do much better.
SME, for example, which are the industries, which are the kind of locations, what kind of solutions we can provide, which some of the larger banks may not have the time or the bandwidth because they're doing much larger businesses. So we are finding those. But what we don't do is we don't take any risk, and we are also elevating the quality of the portfolio on the liability side also. So our average balances are going up in our bank.
On the acquisition side, the quality of acquisition is going up. And clearly, our growth in value is faster than the growth in number of accounts. So some of those parameters start showing up. We have built businesses like this in various banks before, so we know what to do. And so far, we are on track.
Thank you for that explanation. Sir, I just have a specific question. Could you just give me some example of the segment or the niches where you can operate, but a larger bank would not find it profitable to operate?
No. What happens is that having -- see, we -- most of our management team here have worked in larger banks and a fairly large portfolio they have handled. So we know that it's not a question of segment. It's a question of -- or location.
It's a question of which customer gets what attention in which kind of a bank because when you have much larger set of customers to address, okay, some of the customers may not get that attention which they will get in our kind of a bank because our branch managers, our relationship managers and our customer service officers are a little more focused.
So when you look at our customer pyramid -- I'll answer it in a very different way. But when you look at our customer pyramid, our customer pyramid is different to a customer pyramid of bank A, different to a bank B, different to a bank C. So -- and FY '25, our customer pyramid will be very different to what our customer revenue will be at FY '27 than our customer pyramid will be in FY '20 -- FY '30.
So defining this pyramid is very important because if I pick up customer, which is the higher end of the pyramid of HDFC Bank, you will never stay with me, okay? So we are finding those sweet spots, which are premium for me but at the mid kind of a segment for any of these banks. And that is good enough for me to start with because then if I can do life [ cycle ] banking with these customers, as we grow and build our kind of other production services, which we are doing, then it will help us.
So -- and as I said before that our core banking, we are just starting to implement any time next month onwards. And LMS, LOS, all these -- API already is done for us. Corporate net banking, we have done. I mean I'm just talking about the entire tech stack which you're building around the kind of products and services, transaction banking, SME, supply chain, CMS, we are working on solution on CMS.
So a lot of these things which we are doing, which eventually will attract the right set of customers to us. So ultimately, I'll say that service, attention to detail, the attention to customers and being closer to customers is something which we can do, which maybe for this segment of customers, the bigger banks don't have the bandwidth to do. That's what we have chosen as our sweet sport.
Got it, sir. And if I may ask one more question. Sir, so as you're opening, let's say, 100 branches every year and you're going into geographies where they may not be familiar with the CSB Bank, do you have to raise the deposit rate to attract customers? I know you said that you will not buy liabilities. But my question is to attract customers in new geographies, do you have to raise rates?
I have, in various organizations I've worked in, whether it is Wipro, HDFC, in various products on both liability assets, et cetera. [ CSB ] Bank was a slightly different story because the brand we created there as a 7% on the savings, not that it was my strategy.
I never believe in pricing as a way to attract a customer because then, that's not the way to build a franchise. The only way to build -- because if I give 5%, somebody else will give 6%, somebody else will give 7%, they will go away. So I don't believe in pricing as a strategy.
At the same time, we have to be competitive in the market. And hence, we have to be at par with whom we are competing with. So we will not attract. If you look at our rate chart, everything you will see, principally, we do not believe, either on the asset side or on the liability side, to play the pricing game out there.
Because in a sales situation, what happens is the sales guys gravitate towards the -- naturally towards the lowest kind of price or highest kind of price, depending on when you're talking about liability on assets. And once you open it up to the sales channel, then there is no control. So I do not believe in pricing as a strategy.
We'll always believe in execution, service, products, delivery, all those kind of things are going to create our brand over a period of time. I don't think -- I don't like pricing as a brand for the bank.
The next question is from the line of Prabal from AMBIT.
Am I audible?
Yes, Prabal, you are audible.
My first question is sequentially, we saw growth being [ driven ] by gold loans. What then explains 12% sequential growth in weighted -- risk-weighted assets?
No. Can you just be a little louder? Risk-weighted assets growth, you're saying, is it?
Yes. I'm saying that credit risk-weighted assets grew by 12% sequentially, whereas the gold -- whereas the loan growth is being driven by gold loan, primarily. So why is -- is there a [indiscernible]?
So if you look at it, while the mix has broadly remained the same, gold loan has remained around 47%, the mix has gone down slightly on the wholesale side, has gone up slightly on the retail side -- on the mix side, and SME has almost remained the same.
So what it means is, and if you look at the growth, for the first time, as I said before, all the 4 segments have grown. I think wholesale has grown by 17%. SME has grown by, I think, 22%, if I remember it correctly. Retail has probably grown by 38%, 40%, and the gold loan has grown by 32%.
So to that extent, for the first time, some other businesses are growing faster than the gold loan as well. It's just that their quantum is lower, their base is low. That's why still, gold on mix has not changed. And as and when this quantum starts getting bigger and the momentum starts picking up, you will see the gold loan mix FY '25 almost starting to go down.
So given this scenario, and given that some of the risk [ swaps ] on the SME and on the retail side is slightly higher, there could have been some risk [ swaps ] change in -- some basis points change could have happened on the overall risk [ swaps ]. Satish, do you want to add to that?
Prabal, if you see, our capital usage is very limited because my RWA to my assets is always in the range of 43%, 45%. So year-on-year, my balance sheet has grown by, say, INR 2,100-or-something kind of crores year-on-year. My risk with...
My question is more on a sequential basis. What I'm saying is that gold loan has RWA of [ 0%]. And since the growth was primarily driven by gold loans, so why was there a risk [ RWA ] on sequential [ basis ]?
No, no, no. Growth was not primarily driven by gold loans actually. If you look at -- our retail growth was faster than gold loans, okay? The wholesale -- our SME growth was almost similar to gold loans, slightly lesser. Wholesale growth was also higher. .
So it's not driven primarily -- this is actually the first quarter where gold loan didn't drive the growth as much. Gold loan grew by only -- very close to -- gold loan growth was very close to the bank's growth, right?
Okay. Maybe [indiscernible] sequentially gold loan?
Sequentially, gold loan grew by 5%. SME grew by 8%, okay? Retail grew by 10%, then agri and MFI grew by 16% -- 3%, what is the investment. Okay. If you look at it, gold loan was actually lower than 2 or 3 products growth sequentially. So gold loan didn't grow sequentially that much.
That's what the point I made in the first question, is you want to going to ask, right, that this quarter, we took a conscious call of not growing the gold loan as much because gold loan prices are going up. And we actually exited a lot of our gold loan, which are slightly on the higher LTV side.
Okay. My second question is just a clarification. So you said that we have INR 170 crores of contingent provisions. Is that...
INR 170 crores of -- [Foreign Language], I'll explain that. So before that, one more point I wanted to say before that we have around INR 170 crores, INR 175 crores of credit card portfolio, which grew, which was one of the highest growing because our base was very small. That would have also eaten up some amount of risk [ weights ] out there because some of these are unsecured credit, so that could have read out. .
On this INR 170 crores, what you are saying is that out of that, INR 107 crores is this thing, COVID provision we used to call it before. Now we have called it additional provision. Then we have -- and our this thing -- compared to regulatory provisions, our provisions are much higher. We have [ written ] the breakup somewhere. How it has come to INR 170 crores? It is somewhere in the -- this slide.
But -- so bulk of it is INR 107 crores, which is the COVID provision we used to call it, now it's additional provision. And then others are basically incremental provision vis-à-vis what RBI regulates. Based on that, we have over INR 170 crores. Out of that, I think tax is [ 33% ] benefits. So overall, it is around 133.
So I'll tell you the breakup. NPA provision, based on regulatory provisions, this is -- our provision is INR 67 crores. Others is INR 106 crores, which used to be before COVID provision. So total is at INR 273 crores. So net of tax, INR 43 crores, which comes to around INR 130 crores after a tax impact. So this is the point you are talking about.
Okay. And the INR 107 crores COVID provision, these are not earmarked away [indiscernible]?
So what we have done is we have -- because COVID is gone, right? So what we have done is we have -- internally, we have created a policy that these are earmarked against certain accounts. And as and when those accounts are gone, then we can use this for something else because it's very easy to immediately take it into the P&L, but we somehow believe that we need to keep slightly higher provisions as a conservative process.
That's why once the COVID was kind of -- the risk was gone, we didn't want to take it back into our P&L. We just wanted to keep this provision into the system. That's where we have kept it. I mean, as per our [ statutory ] auditors approval, we have taken it as other provisions.
Understood. The second -- third question was on the reconciliation of cost of term deposits. So the reported cost of term deposit is 6.5%. But if we see bank's website, then offering rate on 1-year and 2-year term deposit is just 5.5%. So why is there such a disconnect?
I didn't fully get your question, but I think I've got a flavor of what you're saying because there's some disturbance in your voice. So I'll tell you what is happening on term deposits.
Most of the com deposits, which are now coming for 1-year kind of term deposit, 1 year plus kind of a run, nothing is coming below 7.5%, and some are around 8 to 8.1 percentage. So that's where term deposit costs are definitely going up, which leads to our overall -- and also deposits gets repriced, right, based on various things.
So based on that, what you are seeing is cost of deposits -- term deposits has gone up to, in Q2, 6.43%. It was 6.21% in Q1 . It was 5.93% in Q4, 5.24% in Q3. And Q2, it was 5.18%. So overall, there is a 120 basis points increase, roughly, 125 basis points increase in term deposits cost. So this, you can divide it into two parts: One is repricing, and one is incremental term deposits.
And we are growing term deposits by almost 30%. So 30% growth is coming at a cost, which is at least 200 basis points higher than what used to be there because what was coming at 5% that time, 5.5% is coming now at 7.5% to 8%. So there is a 200 to 250. I'm talking from an industry perspective that incremental term deposit cost compared to 1 year back is at least [ 100% ] more, right?
So given that this is not our story, this is the industry story. And we are in the ecosystem. So naturally, we are mirroring what is happening in the system.
Okay. So would it be fair to assume that the cost of term deposit would be, for us, at maybe 7% or 7.25% [indiscernible] 70 basis point increase?
See, nobody knows that. But my belief is that typically, this is our franchise I'm talking about, we have seen our renewals -- obviously, we are -- like every other bank does, we do special buckets and things like that to ensure that renewals do not get impacted. And our renewals are very high, okay? So -- and they are coming at reasonable rates, okay? It is higher because even that rate charts are also higher, normal rate charts, not special charts itself, but they renew at the same tenors, and they're granular.
So to that extent, a lot of these deposits will renew at higher but not at this kind of high rates. And also, depending on where [ GSEC ] goes,10-year [ GSEC ] on the liquidity situation goes, in case we see that the -- by the end of this year, hopefully, if you see that 10-year [ GSEC ] is closer to 7%, 7.25% to 7%, somewhere in between, then I don't see how this will significantly go up.
So by and large, I think we are almost there, maybe another 10, 15, 20 basis points. Otherwise, we are almost there in terms of term deposit cost, is my view. Also, the yield curve is flattening, right, I mean, the shorter end than the longer end. That does not take the deposit costs up. What it does is face volatility in the deposits, okay?
But if eventually, we think that the [ GSEC ] is going to flatten, to start tapering down after this financial year, then that will not matter in terms of the deposit pricing. So given all this logic, I think unless the global situation changes and overall U.S. [ GSEC ], as you said, goes from 5% to 6% or something like that, I don't see this going up too much. 7% is out of question.
Okay. Can I ask one more question?
Yes, yes.
Okay. Sir, on LTV at 81%, and if I compare this to other regional banks who are operating at 65% to 67% LTV, so I understand that we are focusing on gold, so we are taking slightly higher. But compared to the -- but compared to other regional banks, this is significantly higher than what were they are operating. Any thoughts there?
You're talking about gold loans?
Yes, gold loans, gold loans LTV.
Yes, yes. No, no. I think the region which we operate in -- I don't know who's operating at 60% or 65%, I know most of them are 70% and above, okay? And some are even higher than us. Okay? So -- and I track it. So it is not -- I don't know how many people are at 60%.
Having said that, it's a function of what is it. It's a function of what is the size of your agri portfolio and what is the size of your non-agri portfolio because as per regulation, non-agri portfolio has to be below 75%, and we are well below 75% out there. And on agri also, we have kept a limit of 85%, okay? We'll not go beyond 85% in terms of LTV.
While you are seeing [ high value ], the same 81% used to be 73% for me only a few -- 1 month back or 2 months back, okay? And that's the time we took the call of saying that we don't want to go beyond this, so let's get some of this portfolio out of the system. So given that perspective, it's a question of -- and now if I calculate my LTV, it will be much lower because the gold prices are again gone up. It's a sensitivity analysis one has to do.
Given all this, it's a function of how we are doing, what is the agri portfolio, agri portfolio gives the PSLC [indiscernible]. So -- and this gives a better earning. And there's a lot of more rigor in that because you cannot just classify agri without getting the right documentation, without gaining a scale of finance, without getting our unit cost, without getting the crop cycle, what are the documents you're getting against that.
There is a lot of operating cost in doing this business, it's not easy. Just because we want to do more agri business, that does not mean it just happens like that. So because we have been in this business for a while, we understand all this. I think we are able to manage this much better. This is a very clear strategy for us, and it gives us also benefits in terms of PSLC and other things.
The next question is from the line of Mr. Shivaji Thapliyal from YES Securities.
Yes. So I have one broad question, and perhaps there are essentially four related sub questions in that. So firstly, I wanted to understand the perspective, asset quality evolution. Right now, the bank is gold loan focused, so credit costs are obviously extremely low. I mean it's next to nothing. .
But just wanted to firstly understand the slippages in this particular quarter, what was the segmental contribution? I mean, which segments they emerged from? That's number one. And what is the slippage guidance for the future? And what is the credit cost guidance for the future, basically? So that's one.
And also secondly, in terms of growth, we are piloting a lot of retail segments. So where are we on that? And what will be the growth guidance as a consequence for FY '24 and '25? Thirdly, if you could comment on the yield of the businesses and fourthly, on the OpEx evolution as well?
Great set or questions. So let me try and answer one-by-one, and I'd request Satish to add whatever things he wants to add.
So on the slippages, what -- where we saw, mostly it is on the gold loan side, okay? And other than that, it's broadly in line with where it has been in the previous quarters. So -- and gold loan slippages eventually does not lead to the credit loss, based on our historic experience, because eventually, you have the [ mettle ] with you and eventually, you recover, okay?
So to that extent, our past experience is that it doesn't bother us too much. But broadly, that's what it is. The golden slippage was slightly higher than last quarter.
The second question is on overall NPA and how do you see the credit cost. I agree that we have a credit cost negative 15 basis points credit cost this quarter also. I keep wondering how long will we be on negative because this is not real. And in my previous commentary, I said that we'll be between 10 to 20 basis points this year on the higher side. And next year onwards, I have said that we are making it a 40 to 50 basis points credit cost when we are a full franchise level.
So I think that's what we have baked into our P&L and in our projections until FY 2030. So long term, our thinking is that our gross will be below 2, net will be below 1, and credit cost will be between 40 to 50. That's our FY 2030 guidance and that we hold on to that. But I'm not complaining that we are [ 1.27 ] in gross and 0.33 in net and minus 0.15 in net credit cost. But this is too good to be true. As the mix -- business mix changes, it will mirror the business mix eventually.
Coming to your question on segmental growth and OpEx cost and things like that, I'll take the OpEx cost first because that's very important.
For us, I look at cost as cost and investment as two different items, but we -- but Satish will take both the same because they both comes as hit to the bottom line from a cost perspective. But the difference is cost is something which is instantly gone, and investment is something which will give us long-term returns.
So a large part of our cost-to-income growth or cost-to-income escalation is primarily happening because of 3, 4 lines: One is technology. The largest investment is happening in technology. As I said before, in our bank, we almost have -- we'll have nothing what we had 3 years back in technology, and we are taking the latest and one of the best technology in everything which we're doing. And technology will give us operating leverage. And hence, that will help us in reducing our cost-to-income over a period of time.
Second part is leadership, people, distribution, and processes and kind of a real estate -- related to that, the distribution and people. And there, we are getting the best in the market to ensure that we -- the people who understand scaling of business, they are doing the business. So -- and hence, these are investments we are making. Eventually, it will pay off as the portfolio starts growing.
So -- and third, of course, cost, natural costs, the [ HF ] cost and other things which will happen. The third angle on the people side is also we need customers. We don't have enough customers to build sustainable long-term liability franchise. And ultimately, a bank is more about liability than assets. So there, we are investing significantly in terms of acquisition, machinery. And we are building acquisition machinery out there.
Along with that, of course, we are also building things like contact centers, outbound contact centers, VRM channels, so many other things, and this also includes real estate and things like that. So that is something which we are thinking like a bigger bank. We are small now, but we are thinking a bigger bank and investing into this.
Coming to your products, as I said before, we are not looking at becoming -- we know we are small, but we are not niche. I'm very, very clear on this, okay? So we will be large and wholesale. We will -- but wholesale is not corporate banking and all that in a large corporate. We'll be in the mid-market to emerging corporates because that's where we can play. The SME, we will be large.
Gold loan will continue to sustain because this is a good business to be in, but it cannot really scale that much because gold loan scaling at 20 -- 30,000 -- 25,000, 30,000 balance sheet, you can. But when you make it 250,000, then gold loan cannot be obviously at that kind of a scale, right, because it's not possible. It's not a scalable business. So to that extent, scalable businesses are wholesale, SME, retail. And these 3 will scale, and gold will continue to sustain along the way and do its own thing.
The fourth point, which you didn't ask, but I want to upfront it that on a strategic basis, while we are saying that we'll open 100 branches every year, but I'm thinking that if we make -- I mean a lot of our branches are just doing only gold loans because of historic reasons, okay? Actually, we can make 2 branches of the same branch, okay?
If we just -- because we are moving a lot of things centrally, a lot of operations which happen in the branches, et cetera, so a lot of branches will get fee in terms of real estate. So if I just -- I can actually make 2 branches out of the same branch by making one part gold and one part other businesses, okay? So I am starting to think strategically on those thinking.
And then without adding branches, just adding some people and adding some businesses once our product and technology is fully ready, I can leverage my branches to almost 2x, okay? So that itself will also bring down my operating cost, based on cost-to-income.
None of this will happen overnight. None of this is happening next quarter. But all this will happen FY '25 onwards. And the blueprint is in play, just waiting for the technology to deliver. So that's broadly the three, four responses to your questions, Shivaji.
Yes. But just some incremental numbers. I mean what would be, a, the growth guidance for FY '24 and '25? And what will be the cost to assets? Secondly, in '24, '25 -- especially in '24, '25? And I think you already talked about credit cost. Yes, I think these two numbers [indiscernible].
Yes, I'll give you some perspective. On growth, I have already said and I have been saying consistently, banking is about consistency. So I've been consistently saying that we will continue to grow 50% faster than the system on asset side, of course, if we are able to build the liability franchise right. But if our liability franchise cannot support that, maybe we will grow by 45% faster than the system or 40% faster than the system.
But I think we'll sustain at least for the next 2 years I can see, easily, 40% to 50% faster than the system. So that's number one. Number two is on the -- what is the other question? On the OpEx-to-assets, right?
Yes.
OpEx-to-assets is around 4 points, how much right now?
4.12.
4.12 for this quarter. It is high because of various reasons, including gold loan has a lot of good things, but it also has high OpEx, okay? So -- and the fact that the lowest OpEx business, wholesale, I think we can leverage much more, which will look at it. Okay? OpEx-to-assets will come down once our SI business starts growing also as our wholesale business starts growing, that is also going to help our cost-to-income.
So -- and hence, as and when those businesses start picking up, our cost to assets will start coming down. So it's a fine balance between how do you want to do. I'm not in a hurry right now from our OpEx-to-assets because that is giving me the highest return on the gold loan side.
And also, the last part I must say that OpEx-to-assets will come down once I have other franchise, which allows you to cross-sell multiple products to the same customer and start creating the [ semblance ] of our business. We will take another 2, 3 years to get into wealth business. But once we're able to do that, that's the time you will see that OpEx-to-asset starts coming down because here, people will be a lot more productive in the branches and relationship and all that.
So that will start happening. But for that, we need the technology and the products first, and then it will happen. So maybe it will not happen by FY '25 onwards. That's why I said before that my cost-to-income will start showing a glide path towards 50% and below only FY '25 onwards. It's a very well-planned and well kind of articulated structure we have created for the next 7 years. And so far, we are on track on each of these.
The next question is from the line of Mona Khetan from Dolat Capital.
Just to follow-up, so can I have the interest reversal from the interest income in Q2 and the previous quarter as well versus Q1?
Even I don't know that number. I don't track that number also. So what I don't track, how do we put it in public domain?
Okay. So just digging a little bit more into the yield and LTV to the gold portfolio that we discussed earlier, so while you're saying that the yields in LTV quoted in the PPT are that of H1 and not Q2 particularly, still, if I compare it with the last quarter, yields have increased from, say, 11.64% to 11.7%. So if this quarter, yields have fallen so substantially, the average yield for H1 should have ideally declined. Now why is this increasing? And similarly with LTV as well.
No, no, I didn't understand. What has declined? I said that Q1 to Q2, yield has declined, right?
Correct. But the PPT says, it has increased. So even if it is...
Because the [ high yielding ] businesses we got rid of, that's what I said. Because they're high LTV, we didn't keep them or for various reasons, wherever we didn't want to keep the so the high-yielding gold loans, we didn't want. For example, so the [indiscernible] gold loans used to be high yielding, so we got rid of them.
So we didn't want to do all that last quarter because I saw that as the -- see, I was worried that if gold price falls further, okay, then we will get into a [ 90% ] kind of bracket. So we didn't want to do that. I couldn't guess that the gold prices will not fall any more, I couldn't know that there will be geopolitical crisis. So that's why we took [ that ].
Sure. But what I'm trying to understand is why are the data in the Q1 versus Q2 PTT not reconciling with what you're saying because the yields are actually increasing. So is it fair to say that there's something incorrect with the data we have in the latest PPT?
Where are you seeing this data, Mona? I'm seeing in front of me, the yield of gold loan has dropped...
It's on Slide 12. I'm on Slide 12.
Maybe there is a mistake, let me see.
Okay. Okay. So similarly on growth as well because the portfolio...
Let me check. Which Slide 12, what is the number?
So I'm seeing yields of 11.7% on gold loan and LTV of 81%. And last quarter...
That a carrying yield, Mona. There's a difference between a portfolio yield and a carrying yield.
Okay.
Carrying yield -- portfolio yield is what is realized in your P&L already, whereas carrying yield is what is the portfolio that I'm guiding today, what is the carrying need for that? So that is more of a futuristic -- carrying yield is a little more futuristic. Portfolio yield is what is actually baked in the numbers.
So when you say carrying yield, does it mean incremental yield that you're offering currently on average?
So carrying yield says that suppose I have written a loan today, say, on 30th of September, okay? That wouldn't have given me any returns in my P&L because it's just a 1 day. But that -- so it is the aggregation of all the loans which are there in my book. And what is the customer yield that is mapped against each of these loans? That is the 1 of [indiscernible]. Hopefully, it is what I have already consumed in my [indiscernible].
Okay. So the yield you're quoting here in the PPT is not a reflection of the weighted average yields in your portfolio?
That is a carrying yield. There's a difference. Carrying yield...
Portfolio yield is 11%.
Portfolio yield, we already told that in Q2, our gold loan yield was 10.99%, and Q1 was about 11.78%.
Okay. Okay. And can you share the LTV likewise?
LTV, I think currently, it is 81%.
Currently, it will be lower. But maybe quarter-end, it was around 80%.
Yes. So again -- I mean, since you have given away probably higher LTV portfolio, the LTV should ideally decline, right? But from Q1 to Q2, it's increasing from 77% to 81%.
No, maybe it's not an LTV issue. It's a higher-yielding portfolio, which -- see, I am not looking at just LTV, I'm looking at the portfolio which we don't want to carry. Okay, since you asking that question, let me tell you.
LTV is -- I'm just trying to guess. LTV could be 75 to 80, 80 to 85, 85 to 90, 90 to 95, 95 to 100, okay? It can be many. So which part of the -- part I have discomfort is where we got it up, right? That does not bring down your LTV there. Wherever I have discomfort, and which kind of yield -- which kind of hopefully I have discomfort, I've got it up there. That's what I'm saying. So it doesn't matter -- see, I may not have a problem with 80% LTV, but I may have a problem with a 95% LTV.
Right. So if 95% you're doing away with, then your average portfolio LTV will ideally come down, right?
[Indiscernible] could have cover 80 because these are short-term businesses. So these are typically -- so -- and we can share that number with you. Mona, what has happened is that the gold loan asset portfolio is also increasing, okay? So as I'm getting rid of, say, a high LTV kind of portfolio, I'm also writing new. So we write a lot new assets in gold loan. It's a treadmill, this gold loan business.
So constantly something is going on, constantly something is coming in. So what would have come in, I'm just guessing it right now because I think [indiscernible]. So as soon as you get new businesses, that could have some at 80%.
Sure, got that. But just a request on the yield side, if you could share the average portfolio LTV, that would be useful. .
Secondly, I just wanted to double check on the segmental loan book that you share across SME, gold, corporate and retail. So while you mentioned -- yes, just a reconciliation. So while you mentioned that SME has grown by 8% Q-on-Q, the number when I compare it with last quarter, it has actually degrown. So is there some sort of reconciliation in numbers or something or where am I going wrong?
Let me say. So what you're saying is SME has grown. SME has grown year-on-year by 22%. That's what I said.
Correct.
So -- and it is around, what, 11% of the whole portfolio, right? 11% or 12%, something like that. So where you're getting 8%, which one...
So I remember you having said that sequentially, SME book has grown. Last quarter, it was at [ 25.72 ] as per your PPT. And this quarter, it's at [ 23.77 ]. So according to me, it has degrown, is that a fair understanding?
Let me see [ page ] are you talking about? Which page you are talking about?
Whatever that you have seen in the investor presentation of last quarter, that is inclusive of prudential write-off also. [Foreign Language] And we have shown the figures net of prudential write-off. That correction has been done. That is why it is looking higher last quarter and lower this quarter. Actually, that has been through -- it is the net of prudential write-off this year, this quarter.
Okay. So can I have the SME number, just the SME number for last quarter likewise what we have this quarter?
So SME/MSME last quarter was [ 21.09 ], it is [ 22.82 ] currently, which is SME plus MSME.
[ 21.09 ] versus the [ 25.72 ]?
[ 22.82 ], which is a sequential growth of 8%.
I can see [ 23.77 ] on your PPT.
No, I'm telling you SME/MSME. So it's [indiscernible] including MSME.
So it's grown from [ 21.09 ] to [ 22.82 ]?
Yes.
The next question is from the line of Vikas Kasturi from Focus Capital.
In the annual report, I read that CSB Bank would start offering cash management services to its retail customers. So could you just throw some light on what would this do for the bank? For example, would -- when I say retail, I mean, the retail -- the small SME. So does it mean that those customers would be -- would tend to bank more with other banks? And what is the cost that we will incur in this business by offering the service?
So the way -- I mean all banks does it. So the way we're doing it is we are taking our software which will help us in getting new customers also and offering cash management services to our customers. It will help in two ways. It will help in getting more current account customers to the bank and effectively, it helps us in creating [ floats ] and then opportunity to do SME business out there.
And the reverse is also right that when we get and talk to SME customers, how SME customers are -- will work more with the bank through all these solutions on the CMS and things like that, schools, trusts and all this? So this as a solution-oriented approach which we are taking.
So we have got a team who is working on this. And this will leverage trust, association trusts, basically, and SME customers both to build -- basically to build solutions, which will create float, which will also, on a sustainable business, can help us getting not only current account but also savings account for some of these institutions as well, like schools and things like that, where you give the solutions.
So those are the kind of things we have done it in previous organizations also. We are going to implement here as well. And we already started working on getting some solutions around it already.
Right, sir. And the logistics part is...
I'm really sorry to interrupt you, sir, but due to time constraints, you would have to ask your question later. Is that fine?
Yes. This is just one follow-up question, and I'll be done with it . Sir, my question was the logistics part is something that the bank would do itself? Or is it -- is that going to be outsourced?
Logistics when we are talking about people who will be handling the cash?
Yes. Yes. movement of cash, who will be taking care of the...
So no, that will be outsourced. But the point is that, that is a different kind of a cash management. That is a part of the cash management process, but we are talking about also cash management solutions, okay? .
One is managing cash or handling cash. The second part is cash management solutions, which is more from a solutioning perspective, which is mostly digital and other things. So if you are talking about pure handling of cash, obviously, that will be outsourced.
The last question that we have is from the line of Jay Mundra from ICICI Securities.
I have one question only. So on your LTV, just wanted to check if you have any cap when you originate a loan or when you start lending relations upon gold loan? Is there any cap on the LTV? And does this differ in retail and non-retail gold loan?
Yes. We don't have non-retail gold loan as such, but I'll explain you how it is. So cap one is our regulatory cap, which is 75% for non-agri gold loan. Obviously, we follow that now. So non-agri gold loan will always be 75% or below. For agri, we have sort of kept a cap unless basically approved by somebody as per delegation metrics, around 85% cap on agri kind of a gold loan.
Coming to institutional, I don't know what you mean, but we do have some businesses where there are aggregators who also will have some -- what in popular terms, we will call [indiscernible]. Traditionally, there has been some business there as well, but that business is gradually declining in the bank right now.
Okay. Understood. Sir, and just on that, so if a customer, let's say, there is a 75% LTV, in your retail offering, does all the products are like 12 months bullet product? Or you also have 3 months, 6 months which are...
We have all kinds of tenors. I also don't know in as much of detail, but we have 12 months, we have 6 months, that much I know. Whether we have 3 months or not, I'm not 100% sure, we can check that. But we have 6 months and 12-month products for sure. 3 months can be too higher cost to do this.because then they'll keep coming back for renewals and all that. But I don't know, we may have -- I don't know, I have to check that out.
On the LTV, as you said, 75% and 85%, but what typically happens is depending on the gold on prices going up and down, okay, effective LTV at any point of time for a person who came at 75 also can go up slightly. And then that's a question of conversation with the customer to how to regularize that. So those things keep happening, depending on the gold loan prices.
Right. So sir, for a 12 months retail gold loan product, what would be the LTV that we would start with, right? Because if you add the interest of 10%, 11%...
We had interest when we talk about LTV .
Okay. This is not on the loan given, that is including the interest?
Yes, yes, including the interest rate. LTV calculation is always including the interest.
The customer in hand will be getting 10% lower?
Yes, yes, lesser. He will get 10% lesser.
As there are no further questions from the participants, I now hand the conference over to Mr. Pralay Mondal for the closing comments. Over to you, sir.
Thank you. Thank you very much. I think we had a very good interaction and interesting set of questions. And it was good that some of this question also challenged us because we had to go back to the numbers again and again and give it -- back the answers. Hopefully, we could satisfy with our responses.
Anybody who still wants to speak to us, we'd be glad to talk to them one-on-one. Thank you very much for your patient hearing. Thank you.
Thank you so much, Mr. Mondal. On behalf of YES Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you very much.