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Federal Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Federal Bank Limited Q2 FY '21 Investor Conference Call. [Operator Instructions] Please note that this conference is being recorded.I would now like to hand the conference over to Mr. Shyam Srinivasan, MD and CEO of Federal Bank. Thank you, and over to you, sir.
Good afternoon, everybody. This is Shyam here. I do have our senior colleagues. We're all in different places. So I just want to reestablish that Shalini, Ashutosh, Anand and my other senior colleagues are there on the call. So once again, good afternoon, and thank you for joining in. I hope everybody is safe and keeping well through this challenging times.We will spend a few minutes, only a few minutes, I will give a quick rundown on how the quarter went by, our own view on how things are shaping up and, of course, then take questions from everybody.Q2 was, in some sense, one of our best-ever quarters. Not some sense, it was our best-ever quarter on certain key operating parameters. Our operating profit was INR 1,007 crores, you'd have seen that. The overall NII growth was strong at INR 1,380 crores. Other income at INR 509 crores. All 3 were all-time best, leading to a significant improvement in our cost income ratio.This gave us a substantial space to increase our prudent provisioning. So after -- the slippages for this quarter were almost nonexistent, just INR 3 crores. We've also said, in case the Supreme Court order was not there or the judgment was not there, we would have had to provide for about INR 237 crores, which would have been the slippages for the quarter.So we did make both the provisions required for that, but we've also made some judgment on what could potentially be the outside range for restructuring requests because given where we are, we haven't seen much by way of request, but our conversations with customers and they are sort of waiting and watching, we built a meaningful buffer of about INR 400 crores as standard asset provisions in the quarter.So a strong operating profit for Q2, driven by very, very, very strong gold loan growth, business banking growth, of course, the GECL-led growth and selectively picking up in retail and selectively picking up in other areas. Fee income has been strong. And on -- treasury had a very -- yet another strong quarter. So blended operating profit growth. We had no material cost increases.The efficiency efforts have all starting to play through. So we built -- we had a strong operating profit and built a buffer of about INR 400-odd crores of standard asset provision, in addition to about INR 170 crores of the regular credit provision, where we've provided for aging accounts, we've provided for accounts that were dodgy or increased the coverage on those accounts.So blended, the quarter, I would characterize as a strong quarter. But what is more important and probably the question that you would ask in the few minutes that follow, our outlook, my own personal outlook. I think the worst, probably from a point of view of economic bad news, is probably troughed out.And I do see, and I do believe you will see reasonable pickup. The level of pickup will be sort of defined by how the health-related matters pay out, but I do see things coming back from a volume momentum. And over the coming 2 quarters, Q3-Q4, there will be a reasonable comeback, and we are positioned for that. On the health side, yes, even about 450 people -- employees of the bank have been affected, members of the families of the bank have been affected. So every now and then you have instances of having to shut down 1 or 2 branches for a week or 2 days, 3 days, depending on the local events and the local rules. And we've implemented all the best-in-class care and protection programs to ensure people are safe -- our employees are safe and their families, as also the customers we sell.But there are challenges. We have to deal with it on an everyday basis. And in the context of that challenge, I do believe our people have turned out a remarkable performance because many of the areas that grew were all field effort related growth. Gold loan business, savings products, fee income products are all field-intensive afford products.So it is noteworthy that people have gone through personal challenges and dealt with and delivered on these counts. So I think it's a coming off -- coming together of many good things. And I do hope the intensity that we've had all comes together for the quarters ahead.So let me just summarize by saying strong momentum on operating profit. We did not have any material one-off related gains. These are structural improvements that have been put in place. The repositioning of the bank in areas of focus around the higher-margin businesses are playing through. We took some disciplined calls on deposit pricing, which is helping us. Our liability franchise continues to be, I would argue, one of the best in the marketplace. I'm willing to be challenged by many on that count.We will be top quartile in the country, and we stand gaining share on most -- all our businesses are gaining share. And in particular, the nonresident business continues to do extremely well, and we've seen growth in that business. Our market share is now well into the 17%, from 16-odd percent, it's gone into 17.2% or 17.3% of the remittances that come into India. So our share gain is visible. So it's driven largely by our automation digital effort. And that momentum should keep us in good stead for the quarters ahead.So with that as a sort of introductory remarks, let me invite questions as Ashutosh, Shalini, many of my senior colleagues, Harsh and Babu and other team members are all on the call. We will be able to respond to questions.I would only request Anand to sort of do the traffic moderation so that the questions are directed to the right people. Wherever possible, we'll clarify on the call. If there's something that we need to clarify off-line, we're happy to do that. So let me open it up for questions.Anand, you can take it up from here.
Sure, sure, sir. We'll take care of that.
[Operator Instructions] The first question is from the line of Arav Sangai from VT Capital.
Yes. Hello? Am I audible?
Yes. Please, go ahead.
Firstly, I hope everything is good at your end. So my question for Q2, sir, I wanted to understand the status of the 24% morat that we had last quarter. So since you were saying that we are expecting the 2% to 3% restructuring of the book and not very major slippages, so could you give us a road map of how the -- what is the current status of the 24% people? Because I remember last quarter also 12% of people didn't pay any dues.
Babu, sir, would you want to take that?
Babu and Anand...
Yes, I'll take it. See, after 31 August, there is nothing called moratorium as such. Now this moratorium is only because of the apex court's direction that no new NPAs to be declared and all.Now please remember that 6 installments that were deferred, there was no demand against that because these were deferred. So what has happened is in the month -- towards the end of August and beginning of September, these customers have been contacted. And all those customers -- majority of those customers who have this EMI-related accounts like your term loans and short-term loans and all that, they have been provided 6 additional months to repay, that means the original maturity period gets extended by 6 months.And the new EMIs have been such settled, which would take care of these deferred -- 6 deferred installments. So that part is out of restructuring. So whatever we are deferring these 6 installments with, that is not part of the restructuring book, and there is no regulatory requirement of any provisioning on that and all.And based on that, our first installment was due in September. Our September collection efficiency is close to 95%, which is higher than our January collection efficiency and is at par with February because February was amongst the highest which we had in the previous financial year. So we are back to our normal collection efficiency.Now from here on, we certainly would need 4 or 5 or 6 months to really see and as per the new repayment schedule where the EMIs have been revised and all, whether these are paid the way they have been paid in September. So this is about that.So I think that 12% did not pay does not think there was a default because they're opting of a moratorium and, therefore, from bank's side itself, there was no demand of payment. So this, I wanted to clarify.
Babu, sir, would you want to supplement this?
Yes. See. Am I audible, Anand?
Yes, yes.
Yes. Here, if we discuss about what is the EMI that was paid during the moratorium period, maybe the EMI that is not at all paid out of this 6 months' time, it is very, very negligible. It may be less than 1.5% of the total moratorium book. So it is not that matter that we should discuss whether a customer has paid at least 1 EMI during the moratorium period, it is definitely less than 1.5% of the total moratorium book. Otherwise, maybe for 6 installments paid, customers are coming to nearly 50% of the moratorium book. And our moratorium book is not giving that kind of stress to us even when we go forward.And rescheduling exercise is completed in all those cases, and we look forward that the remittance and collections will happen. As Ashutosh, sir, rightly said, 95% collection efficiency we could get back in the month of September itself. It is at par with the pre-moratorium period or pre-COVID period.
Sir, I just have 2 follow-up questions on this. So could you give us some details about the restructuring guidelines that the bank has formulated?And with regards to the provisioning that we have done, so based upon our models that we have forecasted a 2% to 3% restructuring on the required provision, so have we provided for it completely based upon our current projections or are we waiting to provide something in the future quarters as well?
We have provided completely in September itself. If you see, 3% of our portfolio would come to something around INR 3,500 crores or so. If INR 1,25,000 crores is the total portfolio, more than half of that is either gold loan or Corporate AAA, AA, who were not into moratorium, who had not even have 1 DPD and all. They are all 0 DPD cases and all. So around INR 65,000 crores is that portfolio.The remaining INR 60,000 crores is the one from which you have the moratorium, nonmoratorium restructuring expectation or whatever it is. So if you take 3% of total portfolio, it would be roughly 6% of this remaining half, which I'm talking about. So 3% of INR 1,25,000 crores would be nearly INR 3,500 crores, INR 3,600 crores or so. We have provided 10% of it straight away right now in September itself.
And sir, guidelines of restructuring?
See, guidelines of restructuring is exactly as per what RBI has stipulated. Number one, the account should not be worse than SMA-0. So SMA-1 and 2 are not eligible. Number 2 point is the extension of the period -- repayment period cannot be more than 24 months. For MSME, you can take even SMA-1. And -- but that is only an extension of the earlier scheme. So earlier scheme was earlier available up to December '19, then it was extended to March '20, then to December '20 and now to March '21.So for MSME, the scheme remains almost the same. So this is it. I think the guidelines are exactly as per -- the policy is exactly as per the guidelines given by Reserve Bank of India on this front.
The next question is from the line of Rahul Nandwani from Centrum Broking.
So in terms of the sectors that you are looking at, which sector do you think will be the -- will there be the more -- will there be more restructuring in terms of sectors? Sorry.
See, these are all those 26 industries, which have been listed by Kamath committee. So our experience is not going to be different. So it's going to be those many -- I mean those very sectors also where you may have the requirement of more of restructuring. But fortunately, for us, we have very less exposure, comparatively lower exposure in all those areas.So whether it is hotels or travel or various other segments listed in that, we have comparatively lower exposure in those, the extreme ones. The moderate stress ones, yes, I mean, as usual, like any other bank, steel, cement, we are also there.
The next question is from the line of Nitin Aggarwal from Motilal Oswal.
Congratulations on good set of numbers. So I have a few questions and some clarifications to seek. Like, firstly, this collection efficiencies are -- I believe we are, of course, not including any arrears or any past dues for the month of September, when we talk about 95% collection efficiency?And secondly, this provisioning that we're saying INR 400-odd crores towards potential restructuring, will this be enough or we would look to scale it up as we go along?
So I think if you just compare with September '19, we had PCR excluding technically written-off of somewhere around 45%, 46%. From there, in 1 year itself, we have -- we are now closer to 65%, 64 points around that number. So about 19 percentage points increase has happened in 1-year period. Gradually, we started it in March itself. So for March, then June and September. But that doesn't mean it was underprovided earlier. Fortunately, I may say so, we have never been picked up for declaration or some disclosure about underprovisioning or divergence on the NPA side and all.So provisioning was always above the IRAC requirement and all. The thing is our portfolio is like that, that our LGD comes to less than 40% -- used to come before COVID. So now we have to see how it changes over a period of -- because right now, we have just come out of moratorium period. We can't give any guidance on that and all.But I understand still would be comparatively okay because we don't have much of an unsecured portfolio. We don't have credit cards. We don't have too high personal loan book or so. It's only to existing -- to bank customers to the extent of about INR 1,600-odd crores or so, which is less than 2% of our -- 1.25% of our total loan book.So I think -- based on that, I think we had been providing, but because of the uncertainties of COVID, we thought in March itself to gradually increase our PCR. It's not that we are having certain apprehension about it or so. But maybe whatever collateralization or security what we have, earlier if LGD was, say X, so it may -- that LGD may increase almost, depending upon the cash flows of the affected clients also.So as a prudent pressure, we gradually raised our PCR in March to about 53%; in June, it went to about 58.5%, nearly 59%; and now to 65%. And I think going forward, it should be in this range, between 60% and 70%, because that's what we think would be adequate for our book.
Right. And just for clarification, the collection efficiency is not including any arrears from the prior month? It is just the recovery that was...
See, arrears would be there when demand -- when is a demand. When you've agreed for moratorium to someone and said, okay, we'll give you 6 months pause and then later on, it has been, as my colleague Mr. Babu shared with you, the reschedulement has happened. So all these EMIs have been now redrawn in such a way that the original maturity period extends only by 6 months -- up to 6 months only.Then in that, whatever demand is made in September has been met. So based on that denominator, you have the collection efficiency. You can't take as arrear for those. It has already been granted as extension.
Sir, Babu here. Collection efficiency, again, let me give the numbers. Our collection efficiency with nonmoratorium book is as high as 99 percentage. And then that is why even in the case of moratorium book, our efficiency is very high, that is why we could come out with 95 percentage total loan book collection efficiency in the month of September itself.
Okay. Okay, fine. And sir, the other question is on the current account deposits. We have seen some good traction this quarter. So how much of this was driven by the RBI's revised guideline? And has the benefits like on this -- from this new guideline accrued fully?
Shalini, would you respond to that?
Sure, Ashutosh. Yes. So I think on the current deposits, the RBI guideline has 2 parts to it. There is a part relating to new-to-bank acquisition and existing to bank customers. The new to bank one has gone live as soon as the circular came out. We have seen some benefits of it, but it's honestly not as very large because it's also new to bank customers.On existing to banks, we have time till the early November to do the required actions. The teams are underway at these actions as we speak right now. So the 30 September book doesn't contain the benefit of that.What we've really seen on the current account has been underlying growth from the franchise across both our branches as well as our relationship managers, Corporate commercial, et cetera. They've been actually sourcing new relationships in line with the RBI guidelines as well as enhancing our relationship with existing customers. It's obviously been assisted by the fact that we've introduced a range of digital technologies that enable the Corporate customer to deal easily with the bank.From a Corporate FedMobile to a Corporate FedNet to a Fed-E-Biz, we have a range of digital technologies, and that has increased stickiness and has got us funds. So to your specific question on the RBI circular, early to say the benefit of it or otherwise because we've got time till November, but this is underlying growth from the franchise.
Just to add, we never had a very strong current account portfolio. We always had it between 4% to 7% at different times also. So I think it's not something where we would lose materially in case some accounts are required to be closed or probably gain that much also. And it's -- I mean jury is still out. So I think we can wait for that.But yes, this quarter, there has been some traction. This is all because of the digital products rolled out, Fed-E-Biz and all those, through which these are cash management products and all. So that is giving us more of cash flow coverage.
Right. And last question is like how do you view the competition in the gold loan segment? We have been delivering very strong growth in this business. What is driving this? Any change in LTVs that we have done after the recent relaxation by the RBI? And how do you see trajectory going ahead?
Yes, let me give you -- Shyam here. I think beginning of this financial year -- not beginning of financial year, from last year itself, we've been signaling that this is a good opportunity for the bank. We have been sort of growing. Last year, we grew 29%. This year, of course, has been almost double that run rate. So we've been positioned for this growth.And as you know, gold loan business is countercyclical. When all other unsecured lines of credit are generally off, gold loan business picks up. And we've been a gold loan-sensitive, gold loan-capable bank, so we decided to dial that up. I would believe that we are growing at maybe like many multiples and gaining share, driven by, virtually, I think across the entire franchise of the bank, like I said in the beginning of the call, the 2 businesses that grew our gold and savings and fee income have all been branch led.Branches have been hyperactive. And with regard to LTV, even if the RBI allowed 90%, we went up not more than 80%, 85% at the top. And it's anyway daily recalibrated to the price of gold, So we don't see much of an issue on that. Our advantage has been that we have activated our entire franchise. The offerings are very competitive. Our Digi Gold is a product which we have is making a lot of sense. We have about 6 or 8 variants in gold loans, which are tailored for the local communities. It's a combination of product offering, digital, distribution being very competitive. And I think the fact that our pricing is way better than NBFCs.
Okay. And if I can just squeeze in one more question. If you go to Slide 10 of the presentation, the other piece of the Corporate advances, so if you look at the FBR1, that has gone up from 2% to 12% in the internal rating of others, while FBR4 has come down sharply on a sequential basis. So anything to read into that? Anything specific that has caused [indiscernible]?
Anand, do you want to give any texture on that?
Yes. Nitin, I think there is a minor change only. You're talking about Slide 10, right? So this is only a 1% move here and there. So it's not a very...
No, no. So the composition of others, if you look at, okay? So FBR1 has moved from 2% to 12%.
One second.
The table below that on Slide 10.
Okay. That's Slide 9 for me, maybe there's some difference in what you're seeing.
Sorry, yes, Slide 9.
Okay. Yes, yes, yes. Fine. So this is nothing but typically, one large account moving from one bucket to another one can lead to this kind of a thing. So -- and it is actually a good thing that an account has already -- has been upgraded of sorts.
The next question is from the line of Renish Bhuva from ICICI Securities.
Sir, congrats for a great set of numbers. Sir, just 2 questions. So on our Corporate portfolio, which fell by almost 4% this quarter. So is there any specific exposure we are exiting or how one should read these number, sir?
Renish, there is -- as you know, there is no part of a book that we are seeking to exit. But some AAA names may be getting money at even lower than our bank rates. And some have got significant money from overseas investors pouring in money to that company or that group of companies. So they have paid us off. And to that extent, that's a reduction. We've added 54 new names in Corporate this last 6 months.
Right, sir. Okay. Okay. So basically, it is just that the churning is happening, maybe from a large corporate side?
Yes, yes, yes. Absolutely.
Harsh here. Can I...
Yes, go ahead, Harsh. Please go ahead. Harsh, go ahead.
Just to add. We, on a very ongoing basis, keep looking at our portfolio. So we always have a derisk, debulk portfolio, which is reviewed on a quarterly basis. In the last 2 quarters, specifically given COVID, we have been keeping a very close watch on that part, but there are no challenges in that sense apart from a little bit of a heightened risk because of COVID, which is across the system itself. But otherwise, it's holding on -- the quality is holding on.
Okay. Right. Okay. So sir, my second question is on the sort of stress book outside the restructured book? I mean what is your internal analysis say that what could be the potential maybe slippage or NPA outside the restructured book, which you have highlighted, would be around 2% to 3%, sir?
See, in the normal quarter, Renish, if you take, say, last 10 quarters, if there's -- unfortunately, there's one large ticket Corporate, it's close to about INR 500 crores. Otherwise, it's between INR 330 crores to INR 350 crores -- INR 300 crores to INR 350 crores is the slippages in the quarter, right?Now we -- as you know, we don't have any, hopefully, no large ticket that we visualize would slip between now and the next 4 quarters. We can have only visibility for 3, 4 quarters. So this INR 300 crores, INR 350 crores can go up if the environment in the nonrestructured book continues to be stressed out. We are building in for at least a 30%, 40% pickup on this -- increase over this. That should be the increased slippages for 2, 3 quarters is what we believe.
Okay. 30%, 40% on the normal run rate of INR 3 billion to INR 3.5 billion.
Yes. Maybe 50%. That's the kind of run rate you can expect unless something dramatically caves in.
Okay. And -- superb. And secondly, just a follow-up on that. So maybe I'm assuming large part of this would be coming from the business banking and commercial banking or would it be spread over 3 portfolios?
It would be across portfolio. In fact, if business banking was a big challenge or commercial banking was a big challenge, there'd have been a huge drawdown on [indiscernible] [ GCS ]. Of the [indiscernible] book, only INR 1,800 crores were drew down, I think 48% or 49%. So 50% of our customers didn't even want to take it. Otherwise, people would have [ locked ] it up, right?
Correct, correct, correct. Yes.
I just wanted to add in that, Renish. See, there are about INR 237 crores of -- worth of accounts that otherwise would have become NPA in this quarter. But for the direction from the court, we could not classify it. So certainly, in third quarter, if the number increases, that partly could be because of this carrying forward also. But then provision for that has already been made in this quarter itself and even interest has been adjusted -- reversal of interest also has been adjusted.So that also has been -- so bottom line will not be impacted, but gross number may increase because you have some carry forward of September which would come in December after this embargo is lifted. So just don't go by that number in December suddenly that why this number, I mean, suddenly is shooting up? One is, of course, because of COVID, there could be some increase in the NPA number, and the rest would be the carryforward of September.
Got it. So you're saying the interest reversal on this INR 2.4 billion portfolio, we have already adjusted in this quarter itself?
Yes. Yes, yes, yes. Interest reversal as well as provisioning, 15% provisioning -- 15%, which is required for substandard.
Got it. And sir, just last question from my side. So this interest on interest waiver case which has been now hearing on the 2 November, so sir, what sort of impact do you foresee, let's say, that has to come out in favor of the borrower, where they might get some extra money...
There are 2 outcomes of that. One is, it is borne by somebody else other than the bank. It could be government or whatever it is. That is one outcome. If that happens, nothing is going to impact the -- bank's balance sheet would become a receivable on the side from the government and to that extent, customer's account would be debited. So that's one scenario.The other scenario is suppose, worst-case scenario, banks have to bear it and all, we have provided for that also. We have provided for that also.
Okay. And if you can quantify that number, would be help, sir?
It's there in our disclosure. INR 9.7 crores. It's there in our disclosure.
How much, sir?
INR 9.7 crores.
INR 9.7 crores?
Yes. We've made a provision for it, and we've disclosed it. For less than INR 2 crores, if there is an interest on interest on the current portfolio, the impact for up to now is INR 9.7 crores, which we have provided.
The next question is from the line of Pranav Tendolkar from Rare Enterprise (sic) [ Enterprises ].
And really, congratulations for managing such a great performance in a such difficult quarter. So my question, one is that Loss given default, so if we see from 2013 asset quality cycle, the Loss given default was arising because of disinvestments. And in 2017-'18 cycle, obviously, it was [indiscernible] IL&FS and then GST and demand. But Loss given default in this cycle could have been very, very less because it's just a temporary capacity underutilization rather than disinvestment. So am I wrong here because there are some sectors like airlines and hotels which take -- which will take long time to normalize, but that has already been restructured.So Loss given default could be very less probably because there are not disinvestments or miscalculations from promotor's part. Am I right or am I doing some mistake?
No, no. I think you're right. The only 2 points to that, Pranav, would be certain amount of demand has been disrupted that is unlikely to come. So some demand is delayed, some demand is deferred, some has been disrupted. That, unfortunately, is unlikely to come back. So to the impact, how much demand has disappeared, to that extent, people would have lost income, people would have lost revenues and that may play through in nonpayments.Hence, there may be a higher increase, or, for example, if there are properties, the property valuation may have come down 30%, 40%. My personal belief sometime mid next year or later part of the calendar '21, things will come back. But through this period, we have to live through this pain and reduced income and, therefore, impairment in payment.I do believe restructuring is done sensibly and for the right customers. We will all win because customer, if he chooses to honor all his obligations, we're only deferring and it may not be denial. So I do think your observation is right, but not entirely in the context that some demand disruption has happened.And I'm not talking of airlines, cinema, theater and all that stuff, which is really genuinely gone. Because those -- and thankfully, we don't have any presence in those businesses. So I'm as much a watcher as many others are.Hello?
Really great in this quarter. Hello?
Yes, Pranav, we lost you for a minute.
Yes, yes. Yes. So the fee income was really good in this quarter. And can we assume that this kind of fee income will continue like card income was really good, third-party distribution was good. Rest of the fee income also -- loan origination fee, I think, was really good. So can we assume that this increased fee income would continue?
Yes. Let me explain some of these lines. Loan processing fee is driven by the businesses that we do. Gold loan has a processing fee. As we do gold loan, that will drive, and other credit businesses that are growing well. The Corporate team has done a remarkable job on 2, 3 transactions where they've got fee income. Those are transaction dependent, but we have the capability to do that.In terms of card and other fee income, continues to be strong. We have now entered as a top 5 banks in the retail bank -- private sector bank and debit card bank, so we've broken through barrier of being in the top 5, and our teams are working very hard to beat into the next branch. That's tough because they are much bigger and denominated. But our presence is now material.I do hope by end of today or if you're not already aware about our festival offers, it compares with the country's biggest bank which, thumbs-up, has superb offers, ours match that or better that in some instances. So I think our fee income on cards and related businesses will continue to be strong.
Great. Sir, and just getting through recovery, that is also a trend or it's just a one-off? Like [indiscernible]
We had a superb recovery in Q2 on 1 account, where there's a transaction on a written-off account, we got INR 53 crores. So to that extent, that's a little bit of help by that. We hope there may be other transactions. But yes, 1 transaction, we were -- which was a completely written-off account, we got a full gain on that.
The next question is from the line of Gaurav Kochar from Mirae Asset.
Sir, when you say restructuring of 3%, and you also guided for a slippage of around INR 500 crores, if I were to extrapolate INR 300 crores, INR 350 crores as normal slippage and around 40% up from there. So this is for this year or you're seeing this for the next maybe 6 quarters, which is still FY '22, along with the 3% restructuring?
I think it's hard to predict multiquarters from now because we don't know how Q3-Q4 will shape up because there's no trend line to establish. I only mentioned -- now don't catch my neck as the MD guided for INR 500 crores, normally I don't want to give a guidance, but because it's a pointed question, I only said that the normal run rate can be worsened by 30%, 40%, quickly you arrived at INR 500 crores, I didn't say that, but that's notwithstanding. We do think it will be higher in the next 2 quarters. But it clearly depends on how the restructuring holds and how the environment shapes up because none of us know how deep the inability to repay has happened.If I look at the hard data today and like Babu very emphatically gave you data, we are pleasantly and happily surprised that the 95% collection efficiency is kicking in on all demands made. And if that sustains, then we may not have adverse situation, but I don't know. So I would say, let's take it quarter-by-quarter, December would be a good index. And to my mind, worst will be in the December quarter.
Sure. Sure. And sir, coming to the Corporate book, we've seen that book degrowing as some repayments would have come in. But at the same time, you've seen some exposures to real estate and NBFC has risen sharply. So what's resulted in that one?
It's the same blue chip NBFCs that we always do business with, which are holding out well, and we are happy to do that and that continues. Real estate, there's only 1 LRD transaction, again, to a name that we are very happy with.
Also to add, in the NBFC, exposure in absolute terms has been well within the limits of the previous quarters itself. There's been no increase over there.
Okay.
I think I just would like to mention, for us, real estate, there is no [indiscernible] portfolio of builder loans as such. It's basically the LRD, where the lease agreement is for a period lesser than the loan period. So then I think as per RBI directions, it is to be classified as commercial real estate, CRE. So that's the reason. And these are very large lessees, MNCs, big names, I mean, which we are quite comfortable with. So they do not enter into agreements beyond 5 years or so, whereas the loan amount could be -- loan tenure would be 8 years, 7 years, 10 years like that.
Right. And then the HFC exposure has come down a bit. Is it because of the stressed HFC that's paying back, has that exposure come down?
No, increment...
Yes. One has paid back.
One large HFC has paid back, yes.
Okay. Okay. And sir, what would be the quantum of unlocked gains in the investment book?
My goodness, we normally do not share that, but I think I can simply tell you that those gains are held to maturity. So let's not bet on that. So whatever we have trading book, we keep churning it and realizing.
Okay. Okay. So we cannot -- I mean is it fair to expect...
It's a handsome 4-digit figure.
All right. All right. Sure, sure. And sir, last question, on the OpEx side, the employee cost was flattish despite there is this pension-related costs in this quarter. And on the other OpEx while last quarter, we saw some improvement there, but in this quarter, I think it has gone back to normalized level. So should we assume this run rate to continue going ahead or...
No. I think that depends on business model also. In case you are looking for some partnerships or some assignment of [indiscernible] and all, then what happens is the interest gets credited to interest line, whereas the service fees, service charges, which are paid, go to OpEx. So you may gain on the interest side because you are recovering a particular rate of interest, while as in an assigned portfolio, the servicing fee is paid to the originator. And therefore, I mean, it increases the OpEx. So that's one reason. And of course, when the debit charge and all those fee-related thing happens, so based on that, I think you have on income side, what you receive from others, but on OpEx side, what you pay to others on usage of their ATMs and all. So these are 2 main factors. And third is, of course, 20% straightaway increase on deposit insurance. So when you compare with September last, you will have this additional DICGC fee on deposit, which has increased from INR 0.10 per INR 100 to INR 0.12 per INR 100 straightaway 12% -- 20% increase. And with an increasing deposit portfolio, growing deposit portfolio, it further gets aggravated, I mean, cost-wise. So this is something which is a welcome cost. So it's not something which we should worry about -- worry upon. On the staff side, as we have been repeatedly saying that it's a function of how the yield curve moves for the superannuation thing, pension provisions and all. And because yields were stable, yields were constant, we did not have any increase over previous quarter. So that's the story.
So this is the absolute cost that we should work with, at least for the staff cost?
Yes. In case yields do not fall further.
Yes, yes. Sure, sure. Yes. Sure. And sir, one last final question on this, any heads up from RBI on the 4% acquisition of IDBI ...
No, no. Not yet decided.
And just for clarity for everybody, the materiality is very insignificant, the INR 88 crores with the 4%. It won't move the needle one way or other.
[Operator Instructions] The next question is from the line of Manish Karwa from Axis Capital.
Congratulations for everyone. One -- the first question is that just wanted to reclarify that the interest income has -- yes, I just wanted to clarify that the -- on the interest income line itself, the derecognition of interest has happened on the accounts, which ideally would have become NPA. You said you have made a provision or you have already adjusted from the NII lines?
Already adjusted from the NII lines.
Okay. Could you classify -- do you clarify the amount of that?
If I recall right, it's about INR 30 crores.
Okay. So the reported NII is already less -- already reduced by INR 30 crores?
Yes.
Yes. Yes, Manish.
Okay. Okay. And the second question, Shyam, could you also update on the subsidiary, especially the Fedfina subsidiary wherein you now have INR 4,000 crore kind of a loan book. How much is the profits or NPAs out there? And how the trends have shaping up there?
They have performed incredibly well in H1 and continue to be well provided. So I think the profit for Q -- H1 after making a significant increase in provision is about, if I recall right, about INR 16 crores or INR 18 crores. They made a provision of about INR 38 crores in excess of requirement, just like we have done in the parent bank, and they continue to be strongly -- performing strongly on gold, all other businesses. Collection efficiency is running at 95% or more. They're doing well.
Fine. And would we be requiring more capital from Federal Bank incrementally?
We think in FY '21, unlikely.
Okay. And then last clarification I required was on the likely NPAs that would have happened, the nature of those NPAs would largely be from the SME book or they would be more from the retail side or what?
One corporate remaining is this thing SME and retail.
Is split by all businesses. And I would -- Babu can give, but it will be like a half and half of the INR 200 crores from the SME-retail and corporate INR 40-odd crores.
Yes. All inclusive, it's only INR 237 crores, so there is not much to -- there is no big tickets on this.
Okay. And you're highlighting that December would be the worst quarter in terms of slippages because this INR 237 crores will also probably get added to normal run rate, which is ideally around INR 300-odd crores.
Yes. Not only that, if the stress is to show the highest stress likely to show in this quarter because everybody -- you see, we've restructured one set of issues, but people either don't qualify for restructuring or for whatever reason are not in the restructuring pool, then they have to honor their commitments like normal. And if they have been stressed like crazy, this is a period that may show of more. So the INR 237 crores plus the incremental that may happen in the normal course.
Manish, restructuring eligibility is only up to SMA-0 for non-MSME. And for MSME also, it's up to SME-1. So I think all those ineligible accounts other than this INR 237 crores plus your normal slippage of INR 350 crores, so normal slippage, Shyam has already shared that, you can expect 40% to 50% higher than normal in a quarter plus this carry forward of INR 237 crores, that's why December could be worse.
Okay. But as you've also indicated, you do not expect a P&L impact because of provisions have already been made?
For this INR 237 crores, it has been fully provided for even interest reversal has been adjusted.
The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.
Congratulations. I hope your September optimism continues for the rest of the year and it sets the tone for the entire sector.
Thank you.
My question is -- I know you don't give guidance, my question was more like a kind of a strategic shift. Every corporate we see they're reducing CapEx and so the opportunities there are coming down, whereas retail is grown and is this going to be a growth engine going forward in terms of the corporate-retail mix? And will that also have a statutory effect on net interest margins as we go forward is one question. I'll also ask a follow-up question. In terms of retail it's also kind of like the cost income on retail depends on what you can do in digitization, what you can do on coordination and so on and so forth. Is there any statement cost income that we'll also see, which is going to be better going forward?
Yes. Let me try and give you a texture around it. I don't know if you had a chance when we were presenting in February before the COVID breakout, we gave some sort of direction on how the bank is positioning itself, what's the current mix, what's our desired mix, where is the incremental focus, where are the incremental opportunities. And just to remind everybody, we said, we are pitching for being 55-45 retail wholesale. And we are now at 52-48. We've moved already from 49-51 retail, wholesale to 52 retail, 48 wholesale. And that mix will nicely move to 55-45. So that is one data point. And within the retail, we are looking at business mix between gold, business banking, microfinance, the traditional retail, commercial vehicle or tickets below INR 5 crores, now RBI has made it INR 7.5 crores, within that space, we will keep growing, and there's a huge potential for us to grow in that. By definition, some of these businesses are higher-margin businesses. And if you take the security sensibly deal with, and we don't want to do unsecured in a big way, then the margin expansion is highly likely. And like you pointed out, digitization, leveraging the entire franchise should give us the cost income benefits. And that's how we guided for getting to -- closer to a 48% kind of run rate on cost income. Though we are happily at 46.7% at this point in time, that's also slightly flattered by an outstanding quarter on the income side and to some extent, the costs have not yet fully kicked in. Sorry, go ahead, please.
partly because of recovery in one write-off account that also contributed. So it's not going to happen every quarter.
Fair enough.
Small amount. I mean about INR 50-odd crores.
So going forward, sir, in terms of -- is there the opportunity in retail coming now more because of a vacation of the NBFC, smaller NBFCs struggling for funding? Or what is the opportunity that you see just going forward post-COVID?
I think, see, in some sense, I think Pranav asked the question, right? And at the risk of sounding overoptimistic, the India story has not fallen apart. It's only got adverse delayed by a couple of years. All of us believe and believe -- continue to believe that retail will be a big growth engine for the bank -- or for the country over time. So I do believe this will continue. And in the near term, whatever the odds, we will see some whatever slowing down, but retail will continue to grow. So I don't see any reason why we should not be both growing and gaining share as well. NBFC's play in the near term will give us -- is giving us opportunity, but I don't think NBFC is the better one who'll lie low, right? They'll come back 3, 4 quarters out. There a lot of smaller fellows probably will consolidate, fall off. But the bigger fellows are gaining share as well. Everywhere the story is true. The strong are getting stronger.
Excellent, sir. And congratulations on your performance and the optimism and I hope it continues.
I don't know if I'm sounding more optimistic than I want to be.
It's a good time of year to be that way, sir.
Yes, absolutely. Absolutely. Please, so ahead.
The next question is from the line of Rahul Gupta from Morgan Stanley.
I have 2 questions. You earlier discussed about collection efficiency for the bank at around 95%. So can you give some more color on segment-wise efficiency like what is happening in mortgage? LAP and SME? And my second question would be that you earlier discussed that long-term target on coverage ratio is 65% to 70%. So is there any specific target that you -- that the bank is looking for in terms of NPLs and restructured loans combined for fiscal '21 exit?
Okay. Let me just -- Babu will give you some specifics, but let me just give you some highlights. I actually don't target a GNPA number and a net NPA number. I want to make sure that we have provided right and the quality is right outcome of that is a number, right? The history of the bank speak for it. For 10 years, we have never had more than 3% gross NPA barring 2 accretions. So that speaks to the quality of how we've been doing business, and we'll continue to make the best effort to keep our credit quality intact. And even through the pandemic, I -- if we can live through and just not get into a mess, we will be the happiest bunch of people. In terms of efficiency of -- so that should tell you the team is not 65%-70%. We may be at 60% also. I don't want to be guided by 65%-70% as any material number. We've brought it up from 46% to 60-odd percent. This quarter, by the fact that we've provided higher for existing NPAs and there were no new NPAs, the ratio has become 65%. I think 60%, early 60s is a good place to be in given our portfolio. I'm not guiding for 70% at -- in a hurry because 10% is INR 350 crores just for clarity. I want to make sure that we are doing sensible stuff on all counts. And we have got like INR 500 crores plus in the standard asset provisions, which if you add up does come up to the higher number. But in terms of collection efficiency, Babu, do you want to give any color?
Yes, yes. I do have the numbers. I do have the numbers right now. As we said, our average collection across the loan book is 95 percentage efficiency. And if you break into retail, it is 91 percentage. And then this commercial banking, business banking, it is 93 and 95 percentage. In corporate, which is 99.10 percentage. So everywhere it is more than 90 percentage, average is 95%.
The next question is from the line of [ Simranjeet Singh Bhatia ] from [ SMC Global ].
Yes. Hello? Hello?
Yes. Please go ahead. Please go ahead.
Sir, first of all, I want to ask that what is the percentage of the gold loans in your total advances, what is the percentage right now?
10.2%.
10.2%. Okay. And what is the maximum cap you're looking for it, means as a percentage of total advances in the gold loan going forward?
See, presently, we have a 15% cap as per [indiscernible] which is a very old cap continuing because I think in 2015, in the earlier era, we had seen that about INR 7,000 crores, which was closer to about 13%, 13.5% of our total book that was in September 15 or so, nearly INR 7,000 crores absolute number. So from there, it had fallen to INR 4,800 crores and again, risen -- now it is closer to INR 12,700 crores.
At the peak, we will keep it at 15% at the peak.
Okay. Great. That's great. Sir, secondly, my second question is, you have shown a provision of INR 592 crores in the Q2, which includes the INR 400 crore of COVID provision. So if I exclude that, it comes to close to INR 192 crores. Means, I want to understand, what is the -- going forward, what will be your provisioning maximums in the upcoming quarters? Because in the Q1, you have provided for INR 185 crore for the COVID provisioning, this time it is INR 400 crores. Is COVID provisioning is over with now or it will go further? I mean, if you can throw some new light on that.
So let me respond to that. I think we had this INR 186 crores of carrying forward, which you are rightly saying. INR 93 crores was made in March and another INR 90 crores was made in June. So total INR 183 crores we were carrying forward. Now we have added just because in the month of August, in the monthly policy, this restructuring thing came into exist -- came into picture. Before that, there was no such announcement. There was only moratorium. And we were going by our LGD, and we were trying to increase our coverage based on a loss given default, which was sub-40 always pre-COVID and all. We had been keeping about 45% to 50% PCR, excluding technically written-off. So we gradually, in March and June quarter, took it up to somewhere around 59% because of the COVID uncertainties. We said, okay, maybe earlier, LGD was below 40 somehow maybe because of a fall in price of the underlying collateral securities, there could be higher LGD and all. So that was the approach. In August, we had the monetary policy in which the restructuring-related thing was announced. So now we started running our risk engine to appraise 3 different scenarios and based on that, what is the most likely scenario. And based on that, when we approximated a sort of size of restructuring. So on restructuring, the guidelines came that we have to maintain 10% provision. So we arrived at the number and provided 10% of it. I hope that clarifies.
Great, sir. Yes, yes. And sir, your cost-to-income ratio is now at 46.7%, which is lowest of the 25 quarters we have. I was going through your presentation of Q1 also. And this time, again, it has come down to 46.72%, so will this trend will go forward? Means, it will go like this, like...
Yes, as we have said, I think it's basically because of more of income that has come in this particular quarter. And as a result of that, it has come to 46.72%. We have been guiding all through that it is going to be between 46% and 50%, around 48% or so in normal period because we need to invest in technology, we need to invest in the skill set areas where there are gaps, if any, and we also have to look at some brand building and all. These are some areas where we -- if we have room, we'll go for that at all, mainly in technology side and all. So this is something which we always have been sharing and all. I say going forward, depends, I mean, how the income streams play.
Yes, yes. And sir, your net interest margin is at 5-quarter high, we can expect this run rate to continue this high ...
This has been a trend for almost 3, 4 years, barring 3 quarters, September, December, March, when it had come down to 3%. Because this 3.13%, 3.15% this is the range we have been playing all through, 3.10% to 3.20%. That's our normal range where we have come back.
Okay. That's nice, sir. And -- means, how you see the going forward restructuring in the MSME segment? Means, any -- if you can throw some light on that. Means, how the MSME restructuring trend will be there going forward in the upcoming quarters? Or what's the sense you are getting at least right now in the present situation?
See, MSME restructuring is going on for the last almost 3 years. Initially with Kerala floods in 2018, then subsequently, all India announcement. First, it was for the state of Kerala through SLBC in Kerala and all that. And later on for the entire country this MSME scheme came and all. So there is nothing -- no surprise element in it. It is only an extension of the existing scheme, which is getting extended by another 3 months. I mean, in fact, from March to December, already it was announced and now December to March 2021. So it's only extension of that and a good chunk of MSMEs who were already looking for it have already availed it off. So that you can see some minor addition in our restructured standard asset group. It's lying there.
Okay. And sir, last question is as Srinivasan, sir, has just shared the thought that some NBFCs are consolidating and they are going to be consolidated and stronger will become more strongest, my only question is that -- last question is that are you looking for some acquisition opportunity going forward or means in the NBFC space based on Kerala or in towns?
At this juncture...
Yes, at this juncture, there's nothing on hand. We haven't evaluated anything. Certainly, if something comes up and meaningful, we will. But I think our organic capabilities and ability to grow organically. And wherever selective portfolios are there, we are happy to look at it. But nothing on the cards right now.
The next question is from the line of M.B. Mahesh from Kotak Securities.
A few simple questions from my side. Shyam, just...
Mahesh, can you ever ask simple questions?
Okay, then let me just try and make it as simple as possible. So just one -- this question on collections, again, comes back from investors and rightly so. See look, they keep asking, look, how is it possible that the system is able to get back to 90%-plus collection efficiency in the month of September given what one has seen on the ground? And some of the anecdotal discussions that one has when you do your suggests that the ability to releverage the borrower has been quite high, either in the form of debiting interest on the working capital, giving him additional loans, using the credit guarantee scheme, it doesn't represent the operating cash flow of the customer. How have you seen in your portfolio on this aspect? And also on the retail side, how long is the savings going to sustain for the customer to make the repayment? Or is there anything more to read into this collection that you have -- number that you've shown for the month of September?
See, Mahesh, I'll tell you, these questions absolutely valid. We ask ourselves the same question, and we want to keep checking regularly. The answer lies in the fact that if the stress, let's say, economically, the worst is over. And if you've given customer, like Ashutosh pointed out, through the reschedulement an opportunity to defer by 6 months. And if they are beginning to honor their first commitment of September is the first demand and the sign is that everybody is stretching themselves to honor their commitments. So some hope is that it should continue. And that's why I said if this stays and doesn't get too adverse, then the level of intensity of badness comes down in the subsequent quarters. So that's one data point. The second is that the collection efficiency is also depending on if you're relatively the primary bank for your smaller customer, and you are at the doorstep, there's a chance that you will get the money as we have got the money. The third, I think the level of badness in the environment is probably a little more exaggerated at this point in time. In the mid and higher level of customers. In the lower end, I do think the intensity of the problem is higher. But the mid-level customer, particularly the kind of profile that we have, I don't think that the damage is as bad as we all visualize. And to some extent, our portfolio is more Tier 2 semiurban kind of profile, where the impact has been lower.
Perfect. And just one additional question on this. There has been some discussions that the borrower has been able to releverage himself through alternate mechanisms to repay the loan. How -- when you look at your portfolio, is that thought process correct?
No, some amount of GECL money has come back to repay, no. GECL money has come back to repay customers, particularly commercial banking and small businesses, they have used that money. But -- and the operating question is on the incremental demand, [ are they honoring ], which we will see in the coming quarters.
Fine. And one last question is that if this condition holds that you are able to sustain your collection efficiencies as closer to current levels, do you think you've reached a point where you can start focusing growth at a much stronger pace as compared to what you have done so far?
I'll tell you. I don't want to sound arrogant or very cocky. Honest to God, we have not been constrained by mental or physical time to get growth. If there was demand, I was happy to fulfill it. If we were in no business -- and no business we were saying, no, if the goodness of the client was there. It's just that demand was relatively modest. So if demand comes back, we are more than happy. We have liquidity, we have credit appetite, we have risk appetite, we have collection and distribution capability. It's just that demand have to come...
And we have capital.
Yes. Demand has to come, that has been very modest. Having said that, some pickup we have seen in September and even in October. Is that sustained -- and even now, while many are saying, it comes to 95% and 100%. In our case, it's come to 75%, 80%.
The next question is from the line of Prakhar Sharma from Jefferies.
Sir, just a little -- beginning on the collection data, you said that at a portfolio level you've had 95% collections. Can you clarify that within the loans that were under moratorium till August, what's the level of collection in that just to get a pulse? So I understand your 3% restructuring and all you've given us an overall picture, but I'm trying to understand how are the moratorium loans trending up?
See, the moratorium loans, if they had not paid, then they would have been in the SMA-1, 2 category because they would've had slipped right? I mean they would've had one bucket slip. I think in our disclosure, we said, Babu, if I am right, INR 764 crores, right? That's the number that we have shown in our disclosure where...
Yes. INR 764 crores.
That number is the number that Babu mentioned at the top of the call, 1.5% of the moratorium book INR 764 crores on INR 34,000 crores or something was the moratorium, right, Babu?
Yes. Yes.
So that's the number to you. It's there in our disclosure. I mean in our results announcement, I think point #11 or 10 or something, Anand, you may remember better.
I'm sorry for the repetition.
The next question is from the line of Manish Shukla from Citigroup.
As you mentioned in your opening comments, liabilities has been one big success story for you. At 5.1% on cost of deposits is a large part of benefit done or you see this blended cost of deposits falling further?
It's almost done. It's almost done. Hardly 10, 15 basis points.
Yes, it's at near top, near good.
Because the reason I ask is that, hopefully, in 3 to 6 months' time, we'll be talking about growth as well, which will make -- put you in a position of choosing between margins and growth, which is a good choice to have. How would you look at it then, given the cost of funds, assuming cost of deposits are 5%, 5.1%, choosing between margins and growth, how do you think you would approach it?
I think all along, I know I don't want to sound as though we know it all. But all along, we've tried to keep this debate on it's not either/or, we have to figure out both, but quality and the goodness of the portfolio would be a #1 priority. And within that, we have developed our metrics on where we should be giving higher trust essentially around the relatively higher-margin businesses, and that's where we will give our attention to.
Right. And just to clarify, the 3% likely upper limit for restructuring, that takes care of your entire loan book, right? Wholesale, retail, SME, everything?
Yes, yes.
Just one clarification, the Supreme Court standstill on NPA recognition, that applies to all loans or only to the moratorium loans?
Ashutosh?
Because you seem to have anticipated that...
All loans because it says after 31st August you are not required to -- I mean, you are not supposed to recognize any new NPAs.
So even if that asset was not under moratorium before 31st August, still you can't?
That decision doesn't talk of any moratorium. Babu, please go ahead, you wanted to say -- add to...
Yes, there is no separate discussion about moratorium or nonmoratorium. It is -- no account can be classified as NPA. So it is across the loan book, the restriction is existing.
Okay. But the last question is...
As far as the revenue lines are concerned, we have already recognized that. We may not have declared a particular account as NPA, but what is -- whatever treatment was required for that -- for the books, like provisioning for that, interest reversal, that has already been done.
No. Sure, sure. I'm sorry -- just to clarify, this was more for me to assume what will happen, it's not for you and not for the [indiscernible]. Last question is, can you give me some color around the SMA book as of end of September vis-à-vis how it was as of end of Feb, SMA-1 and 2?
SMA-1 and 2 is now at our all-time low, sub-1%. It's a little flattering. I don't want to misguide because to some extent, activities have been lower, so maybe the picture will emerge in Q3.
And also, I mean let's qualify by saying that because up to 31st August, there was standstill. So your meter starts from 1st September. So this is -- this could be one of the reasons of this being all-time low.
Yes, yes. Fair enough. I'm just talking about the new meter system and under that, how does the life look?
As of now, it's sub-1%.
The next question is from the line of Pranav Gupta from Aditya Birla Sun Life Insurance.
Yes. Sir, just a couple of questions. So first question is on capital. So we've seen all the large banks raise capital, but none of the small banks have done so. The sense that we have gotten is that it has been largely been a push from the regulator. Have we had any discussions with the regulator? And if so, what has the sense been there? And otherwise also, are we looking to raise capital in the near future?
Let me just give one fairly decisive answer on this. Answer is no. We haven't been in the market nor are we looking at anything now. We have had conversations, some very interested parties looking at preferential. If the terms were interested, we would have. But right now, as I speak, 0. We are not looking at any capital action just now. I said this in the last 3 calls. We thought early '21, after Q4 '21 would be the Q4 -- March '21 will be the right time. If you see this quarter, our capital adequacy has gone up, both CRAR and CET1. We have not had any conversation, either internal -- or I'm sorry, with the regulator or anybody to require to raise capital. We are well capitalized at this point in time.
This CRAR has gone up despite the true profit not being taken into consideration. So we are going by that because this improvement is more to do with the standard asset provisioning and also the reduced risk weight and all.
Right, right. Sir, and second question, [indiscernible] accounts, it says that amounts which were SMA and overdue where the moratorium or deferment was extended as of March was about INR 3,500-odd crores. So -- and now Shyam sir spoke about the SMA sub-1%. So is it fair to assume that the rest has regularized itself? Or am I misreading it somehow?
I think I have already responded to that, that the reschedulement of the EMIs and all has taken care of that, no?
No, no, no. Maybe I didn't articulate my question well. So SMA as on 31st of March was INR 3,712-odd crores and now it is sub-1%, which would imply a lower -- amount closer to INR 1,000 crores, INR 1,200-odd crores. So this reduction has been largely because these accounts are regularized themselves or what has led to this reduction was my question?
Sir, shall I take this question?
Yes, yes. Please, please.
So INR 3,713 crores, I believe that, that is the number that you are referring to. That is the number that we disclosed in the month of March as a part of our annual disclosure. That was for regulatory disclosure requirement for moratorium and standstill benefit book. And then out of which, in the month of March, we have again declared that INR 303 crores was the number that was given the standstill benefit, for which we had to provide and we did provide for that. Now against the INR 3,713 crores of August, now the number stands at INR 763 crores, which is also a part of the disclosure of this year annual -- this quarterly results. So if we discuss about what is the remaining part of that INR 3,713 crores, the balance amount is only INR 763 crores. What Shyam sir was referring to is the entire loan book. The INR 3,713 crores is from the moratorium book, out of which INR 763 crores is remaining. The entire SMA-1 and 2 together comes to only less than 1%, that is what Shyam sir was referring to.
The next question is from the line of Abhishek Murarka from IIFL.
Congratulations for the set of numbers. My questions have been answered. Thanks and all the best.
Thank you.
The next question is from the line of Darpin Shah from HDFC Securities.
Sir, just to clarify, you mentioned that slippages can increase 30%, 40% from the...
Mr. Darpin Shah, so sorry to interrupt, your audio is not audible, sir.
Am I audible now?
Yes, Darpin. Go ahead. Go ahead.
Yes. So sir, just to clarify, you mentioned that slippages can increase 30%, 40% from the average numbers of INR 300 crores, INR 350 crores, right?
Yes. I mean I think that line of mine is now etched in everybody's memory. But yes, that's what we think 50% increase from the INR 350 crores, yes.
And sir, this INR 300 crores, INR 350 crores is from the brand [indiscernible] book, that is excluding corporates, right? Am I understanding it right?
Yes, yes. You are right.
Yes, yes. Noncorporate.
Noncorporate. And any color on corporate?
Nothing in pipeline as of now.
Yes. Yes, right now, looks okay, Darpin.
The next question is from the line of Kaushik Poddar from KB Capital.
Yes. See, the point is, I think we are -- I mean, the performance was great, operating profit was one of the highest quarter wise.
Not one of the, it is the highest.
It is the highest. Okay. When you are investing in a midcap company or a midcap bank, the expectation is that their growth rate will be higher than that of the top, top ones. See, HDFC is still -- HDFC Bank is still growing at the rate of 20%, I think, on the deposit side and 12% on the advance side. And yours is nearly half or maybe 60% of that. Can we ever achieve -- I mean, all these quarters, I mean, it is constantly lagging that of, say, HDFC Bank.So can we expect ever to get that kind of growth level, both on the deposit or the advance side?
See Kaushik, I think on the growth side, I think we will not try to match up to those numbers in the sense that they are growing at 20% because the business model, risk appetite and maybe pricing muscle is different from ours. Ours -- in good times, we were growing at 20-odd percent. As markets have had challenges, we have scaled it down. And we've chosen businesses where we are growing at 50%, 60%. And that's how we will grow. Blended this year, like I mentioned, if you grow at 8% to 10%, we have done brilliantly. HDFC's growth, I seriously can't comment because they are willing to buy corporate credit at 4.5%, I can't afford to.
And March '16 to June '19, we have been growing above 20%. So this is only...
Is question around, can we match that? Answer is, in certain areas, yes, but not at a portfolio level.
Okay. And are you doing anything -- yes ...
We will be in the top quartile, and that will continue.
Okay. Okay. That's the kind of benchmark you have. Okay. And are you any -- doing anything to take care of the shareholder value front? I mean anything you are doing organic, inorganic, something of that sort?
I do hope I have an answer for that. Honestly, that's one question that dogs us. We don't have an answer saying despite strong performance, we are not getting the traction. So we believe that every quarter as we do better, one day it will click and it will come through. Other than that, nothing right now that's lined up. We have no merger or acquisition plans as we speak.
Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Shyam Srinivasan for closing comments.
Nothing to say other than thank you very much, stay safe, and we are doing our very best to live through this. And our team is doing a great job. And thank you for all your support. Thank you very much.
Thank you. On behalf of The Federal Bank Limited, this concludes this conference. Thank you all for joining. You may now disconnect your lines.