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Federal Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Federal Bank. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shyam Srinivasan, MD and CEO, Federal Bank. Thank you, and over to you, sir.
Thank you very much, and good afternoon, everybody. I'm assuming that all of you are keeping well. On the call, I have all my senior colleagues. We're all in different places. So I can't see them, but I know they are on the call and would be happy to answer questions. I'll keep a very -- give a very brief opening remarks, and turn around -- turn it over for questions and answers. We've published our Q3 results. I'm sure you've all had a chance to see the headlines and probably the investor deck. The quarter would go by as one of our better quarters in terms of overall performance. There were a few significant milestones this quarter. Our overall income crossed INR 2,000 crores for the first time. Our net profit crossed INR 500 crores for the first time. And importantly, our ROA for the quarter was 1.02%. It's been a mile important deliverable for us for quite some time. So I'm pleased that on all the accounts, they are being progressed. By no means the journey is complete. I think there's a lot of work going around, and these are early signs of all that coming to fruition. Asset quality of the bank has been good for quite a while, and I think this quarter has been no exception. Credit costs, well under control, provisioning on the committed lines. We've added some extra provisions for the restructured book. We've created a meaningful buffer to ensure that should going Phase 3 have challenges, we come out well protected. Operating income of the bank this quarter was its strong move from INR 830 crores core operating income. INR 830 crores, the previous quarter of INR 881 crores on a sequential basis. Our strong suite of liabilities continues to be performing well, very granular. CASA hit an all-time high of almost 37%, and CASA grew Y-on-Y almost 15%. So granularity of the book continues. And our strong suite, the NR remittances, is now touching 20% of India's limit and [ assists ] to Federal Bank and it's growing well. We're gaining share meaningfully, as is visible, because what we hear is that the overall numbers are contracting, but ours are growing quite meaningfully. So evidently, we are gaining share. We saw good pickup in credit this quarter, the one that went by. For quite a while, retail was carrying the burden of credit growth. We saw corporate come back strongly in Q3. And when I say corporate, I also mean commercial banking. Both of them saw quarter-on-quarter growth and Y-o-Y growth annualized almost 14%, 15%. You may have observed our very strong presence in the fintech ecosystem. We are, I believe, one of the most important bank partners that most of the up and coming fintechs seek to work with. Our API stack is formidable. Our partnership capability is robust. We've created an institutional architecture, which focuses on fintech. Personally, me and the team believe that it will serve as well. It is serving us well. And I think it's beginning to show. Over 75% of our new accounts booked come through the fintech partnership, and I'm sure there will be a few questions. I'll be happy to answer them as we go along in the call. So on balance, Q3 was good. We do think many of the material drivers of progress that we put in place are working well. The teams have done a great job in navigating COVID and its challenges. No different for our banks than it has been for everyone in this -- in the country or in the world. It has been particularly in the last 3, 4 weeks, leading up to today have been quite challenging because productivity has been impaired. People have to deal with either personal COVID challenges or family members or customers and a combination of it. But through all this, the teams are dealing with it very well and have delivered on most comps. Post the quarter, as in the first few weeks of this month, we've actually had a Tier 2 bond issuance, which went very well. We had about INR 700 crores raise of money about a few days ago. So Q3, like I mentioned, from a net profit, from an income, from a margin expansion, from a credit standpoint, quality of the book and liability franchise continues to be granular. So I'll pause here, happy to take questions. Me and the entire senior team is there. We'd be happy to answer any of the questions or any clarifications that you may need based on our investor deck and the details that we put out. Thank you very much.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Gaurav Kochar from Mirae Asset.
A few questions. Firstly, on the personal loans book, I mean, it's fairly small right now, but it's been sluggish for the last 4, 5 quarters, it has not grown. Any specific reason? Is it a conscious call of not growing this book? Or what has been the reason for this?
Yes. I think in part, you answered that, Gaurav, our credit choices are relatively more conservative. We don't go gung ho on an unsecured book till we are very sure that it's good to go and the course is clear. We did see -- through the pandemic, we did not want -- not that the pandemic is over, through the peak of it, we didn't want to be sort of very cavalier about it.As we saw things improve, we started picking up. Normally, in the pre-pandemic period, we're running close to INR 100 crores a month of disbursement. As you know, we don't do new-to-bank PLs, we only do existing to bank entirely digitally originated based on data mining. Through this period, we were more cautious. As things started improving, we started picking up, and you saw some uptick, and I believe that uptick will continue as we go into FY '22 -- I mean, FY '23.
Okay. So we've started clocking the INR 100 crore disbursement run rate on a monthly basis?
Not just yet, but we are on course.
All right. All right. Sure. And my second question is slightly more, say, medium to long term. Right now, congratulations on that 1% ROA mark on delivering that. Now my question is taking a slightly longer-term view towards that journey of 1.2% to 1.25% ROA. What are the 2 key drivers or 2, 3 key drivers that you'll be focusing on in order to achieve that? Because right now, NIMs are at -- I mean, you guided for a NIM range, and I think we are at the higher end of that guidance. So is it -- do you see further margin improvement from here on driving ROA? Or will it be driven by the other levers?
No, we've already mentioned, Gaurav, that we don't have one silver bullet. It's many little things all adding up, and we are pleased that the things that we promised we will are working well. So we had said the NIM expansion by 5 to 10 basis points, 5 of that 10 is accomplished. We hope we will do another 5. Credit costs tend to be in the right space, and I believe that has some space to be even better because we made some incremental provisions now just a buffer for future period challenges. Those may not be required. And as we get our digital performance even better, I think the cost benefits that we are seeking out will play through. So the 1.2% ROA that we are more near-term giving attention to all look possible over the next 4 to 6 quarters.
Okay. So cost would be -- I mean, margin expansion by another 5 basis points and the remaining would flow from credit cost and OpEx?
Yes, you're right. There are only 3 lines that you clear within a business date.
Yes. With fee income is one. It was because of...
If you noticed, our core fee income this quarter, as you would have seen in the deck, is about INR 414 crores, highest ever in the life of our business, essentially because the treasury-related business fee income, they're modest this quarter.
Right, right. Sure. And just lastly, on the NPA. I mean, can you give some color around since most of it is secured from either housing or business banking, what is the known sort of repayment rate of this? Are the customers servicing existing installments? Or there may be some of them who may be less than 90 days DPD and be NPA for technical reasons, because you cannot normalize them or standardize them until they pay all the dues. So such cases exist in our book of NPAs?
No, I think our NPL recognition has -- in case they don't serve in all new -- they are NPA anyway. They have slipped and have not -- don't pay up all the dues. They don't get upgraded by -- so to that extent -- sorry, I'm not sure what the question is.
So my question was, are there any less than 90-day DPD customers in the NPA book? Because customers who have -- who may have not repaid all 3 EMIs, but would have repaired only 1 EMI out of the 3, which is outstanding. But they have the intentions to pay and hence, they're at least servicing the existing EMI for more than 1 year now.
They will be, but if they're due in the subsequent quarters, they will be either upgraded. So that's how it will -- maybe Babu or Ashutosh, would you want to add anything to that question? Ashutosh or Babu? Am I audible? Hello? Go ahead, Ashutosh.
So if I understood the question, you mean to say that if they have not become 90 days DPD, they have not turned into NPA. And before that, instead of serving 3 installments, they have serviced 1 installment, right? Is that the question?
No, my question is they've turned NPA. They have turned NPA. They have been 90-plus DPD.
Yes but -- but if they have turned NPA, they have to first become 0 DPD, not only that particular account. All the accounts, all the related accounts as well. Everything has to become due and be pretty on a day, then only the upgradation would happen. Otherwise, they would lie as an NPA even if the assessment is DPD -- or 30 DPD.
Yes, that's my question. So in the NPA that we report of the total entity that we have of INR 4,000-odd crores, are there NPAs, which are 60 DPD also intact? Is that maybe a majority chunk or a large chunk of NPA?
I think there would be some. I think the overall number, if you see a SMA-2 number is mix of both. The ones which are not fully cleared, all the deals have not yet become 0 DPD and therefore, they continue to be NPA, though they may be 60, 61, 64, 65 DPD.And the ones which have migrated from SMA-1 to SMA-2. So that number, which you see that 4.5%, 5% number of SMA-1, SMA-2 all put together because our collection efficiency is above 95%. So what remains is your SMA.So I think if you see that number, that particular number, you would find, I mean, that SMA-2 would have both. They would have some who have not fully cleared all the dues, so therefore, could not be upgraded. And sorry, in NPA, you will have some -- not in SMA-2, but in NPA, you will have some of those, which would be 60 DPD as you are guessing. But I don't know exactly the number, but it can continue separately. It will have some.
Sure. So I would take that offline probably.
Fine. I think, Gaurav, your line is also just -- I think we should move on to other people.
The next question is from the line of Arav Sangai from VT Capital.
Congrats on the good set of numbers and hope well at your end. So sir, my first question pertains to the yield moderation that we have seen. So we have grown our NIM this quarter, but most of it is regarding the cost of funds decline. So from a medium-term strategy, I wanted to understand since this quarter also, our corporate book has grown better than the retail. So how are we looking at the broad mix of the book and the yield coming in, especially when we are hearing there's a lot of competition in the corporate segment? So from a 1-year, 2-year perspective, how are we looking at the segments which we are trying to grow and increase the yields on our book?
I think we've been mentioning that our mix of business, 55%, 45%, 55% retail and 45% wholesale. And we are pretty much in that space. And within that, the businesses that are higher margin are being pursued quite aggressively, and we're seeing growth in all counts. But I do want to point out that these things can be at the risk of later phasing of credit issue, so we balance that out. Credit cards, beginning to see traction, gold loans coming back, businesses like commercial vehicle are strengthening, and I see opportunities there. The commercial vehicles, business banking, gold loans, credit cards, all seeing traction. In the wholesale banking, commercial banking, which is a little more higher yield than corporate, will continue to grow. So the business mix would be 55%, 45%. And within that, the yield enhancing products are seeing traction. We'll see -- that will give us the opportunity to increase margin by another [ 5% ].
Sorry to interrupt you, sir. Should I reconnect your line?
Is that my line, which is the problem?
Yes, sir.
Please go ahead.
Thank you. Ladies and gentlemen, request you all to please stay connected while we reconnect the Chairperson. Thank you. Ladies and gentlemen, thank you for patiently waiting. The line for the Chairperson has been reconnected. Thank you, and over to you. Mr. Sangai, you can go ahead, sir.
Sir, my second question is on the OpEx front. So as you mentioned that you are making a lot of investments with all these fintech initiatives and all. So right now, we have a cost to income of 55%. And as you mentioned, that cost is a very big lever of us. We're achieving that 1.2% ROA mark. So by -- in the next 1, 1.5 years, where can we expect this cost to income? Any bank that you would like to guide us for?
Yes. We were at 50% in the last 2 quarters. There's a shot up, because I think, as explained in the last call, there have been an impact on the wage related partly because of the -- some announcements that came on the wage side. I think that's getting normalized. Over the next 2, 3 quarters, that will start trending down.And some of the volume-related costs, which are good costs are going up, but that's something that we're willing to live with. Some of the digital initiatives will start seeing sort of improvements in the cost income in the quarters that follow. So over -- our financial year FY '23, we will see about 200 basis point improvement on this. And I do think a similar number in the following year. We saw some pickup on that because there were some guideline changes and also some unexpected bump up on pension and family pension and gratuity and PF. All that is now factored in. So I think somewhere 200 basis point improvement in each financial year from here on.
The next question is from the line of Dhaval Gada from DSP Investment Managers.
I have 3 questions. First was on the -- going back to the retail credit growth point. Just wanted to sort of touch base. Relative to some of the larger peers who have reported, it seems that the sequential momentum was a little bit soft and especially in personal loan is on one hand. Also in other products, we've seen, relatively, the momentum was slow. Any comments that you have? Is it more temporary, we are seeing momentum will [ be ] back? And if you could specifically give some comments on MFI and [ TBC ] as in it seems that those are the other portfolios we intend to increase mix.
Yes. I think in personal loans in particular, like I mentioned at the beginning of the call, we are a little more, by choice, conservative on that count. I would not try to be very aggressive on that count. That said, we are seeing pick up, as I mentioned. Our non-unsecured growth in retail was, as usual, in the 20% or so, blended with lower. So that will continue. The secured products are doing well. And unsecured, we are seeing both personal loan and credit card will grow, but I want to caution, saying that, that's not something that we'll grow in the very high numbers initially and then run into a problem later. That price, we're willing to take -- I mean, that pain, we're willing to take and grow slower and do it in a more graded fashion. But that said, it's growing.Commercial vehicles is doing well, but on a small base. And here, again, we've been more conservative. As things open up, we are seeing that catch-up. We have further strengthened the team. We've got a senior leader joining us as the business head for commercial vehicles. So he is putting out a plan to make sure that this business will see meaningful growth going into FY '23. But I do want to point out businesses like commercial vehicles, credit cards, personal loans, microfinance, all of which are exciting and high margin, won't dominate our incremental growth. So to that extent, that's a philosophy of ours. Combined, these businesses, we put up about INR 3,000 crores in a financial or in a business year. But on a business that may grow INR 20,000, INR 15,000, INR 18,000 crores of credit, this will not be material, but it'll add up in the quality of the business. And over a longer period of time, it will sustain us.
And sir, just 1 data point. If you could provide on personal loan, what percent or how many customers have we offered these preapproved personal loans? Any data that you could share compared to, let's say, last year or the year before, some perspective? So basically, are we in the process of doing that? Or we've already done that? Some perspective, if you could provide, that would be useful.
It's a base that is ever generating, right? Because it's a base that every month, the scrub runs on the existing client base. And the whole 1 crore customer base, whoever is eligible based on our internal criteria, gets scrubbed every month, and there's a continuous offering. And the existing customers top up, repay, top up. So it's a perennial source for both cards and other personal loan and other cross-sell opportunities. That said, the take up is usually about 3% to 5% of our base every month.
Understood. The second question was on the fintech partnerships. So you've been sharing your experience with these players. So if you could just give some quantitative numbers around how much is the saving balance with these accounts that are coming with these fintech and then current account balances with the merchant acquisition business fee pool, if any. If you could just quantify where are we today, and any, like, 1-year, 2-year down the line, what size these -- each of these metrics could be?
I think the first thing I would say as I think one of our slides, Slide 16 in our deck, and beyond talks about the fintech partnerships, how we have consciously indexed it to X and what percent -- I mean, how many times X has been growing every month. And you would see or you would notice both in balances and in number of accounts, and it's growing quite rapidly, as you would observe. Our numbers, we are consciously not sharing, not because that we don't want to, but I think the partners seek that confidentiality because there are many partners. And we put out -- they shouldn't get into their own -- they have other commercial considerations. So we are sharing it, indexed to a particular number. But suffice to say, it's growing quite well. It's -- yet not very meaningful in the wider scheme of our CASA balances, which is well or not, INR 50,000 crores. These are yet to -- a speck the horizon. But we believe on the margin. They are doing well. The 3 MOB, 6 MOB balance build of these accounts match up to some of our segments of the business. And we are giving ourselves calendar '22 to make sure that these are actually catching up and providing us cross-sell opportunities as we mature into these businesses.
Would these be like more than 2% of CASA today, these partners of the flow that...
No, no, no, far from that. Not there yet.
Understood. Okay. Just one last point. On the provision line, just a data keeping question. I think we have adjusted -- based on the RBI circular, we have adjusted recovery from return of account from the provision. Is my understanding correct? And if yes, then if you could provide the recovery from return of account during the quarter. Yes, those are the questions.
Venkat or Babu, you want to take that?
Babu here. Let me understand, the question is related to appropriation of [indiscernible] line. If that is the question, I would love to share. But otherwise, somebody else can take that question.
I'm here. This is Venkat here. On the question about the RBI circular. Last -- if you recollect, in August, there was a circular where there were changes in the presentation, which was prescribed on the financial statements by RBI, where recoveries from fully written off accounts, earlier, which we have shown as other income, was to be netted off from provisions. So that's what we followed in the Q2. But subsequently, based on certain representation in November, I think November 15, there was another circular where they revised it and made changes and not just to go back as per the earlier presentation. So we have restated the previous quarters as well in line with the change.
In Q3, that number was marginal, maybe like a few crores.
The next question is from the line of Sumeet Kariwala from Morgan Stanley.
Yes. Congratulations on a good quarter. I had a question on margins outlook that you have historically given, which has been in the range of 3.15% to 3.2%. We are running at 3.25% now more than that. And you're sitting on a lot of liquidity. That is -- the rate cycle is turning. You're very well positioned for that. You'll open up risk appetite with respect to lending and so on. Do you see the need to revise that guidance or casually assume some upside risk?
Sumeet, as you know, we are quite conservative on this guidance. But I do believe, like I said in the beginning of this call, there's another 5, 7 basis point opportunity that is there in the near term, which we are working through.
The next question is from the line of Manoj Bahety from Carnelian Capital.
Let me first congratulate you for achieving 1% ROA. So my question is mainly on digital initiative, which Federal Bank is taking. So I just wanted to get some color on this digital initiative, especially when on one side, there is a risk of disintermediation from new fintech players. And on the other side, when I see like larger banks, they are also coming with open architecture and innovative solutions. So in that respect, I just wanted to understand that how Federal Bank stands. And secondly, whether whatever digital initiative which we are taking, how it is going to enable our growth going forward, especially on the personal loan side or especially on like making our loan book more granular. So on that, if you can give some perspective, that would be helpful.
Sure. I'll give you some remarks, and I'm sure Shalini will also add in. Let me just begin by saying our approach to digital. I think I said this in the last time call also. I and the team, believe very firmly, that fintech partnerships is a very or should I say it, smart way for Federal Bank to extend our reach. We could have added 2,000 branches to accomplish the same outcome. We believe that, a, we built a good house of fintech stack, if you will, and that's attracting a lot of fintech players to come to us or mobilize our partnership. You did mention some large banks. In the area of fintech, I think large and small is irrelevant. It's technology and agility that makes a big difference. I can publicly challenge anybody. I don't think we are less than any of your bigger banks that you have in mind. And its evidence. I mean, if every fintech in the country is talking to us, it's probably because we are willing and capable and swift and give attention at the highest level. Me and Shalini are personally involved in many of [ these things ]. We created a fintech team whose only job is to breathe and deliver on this count. So I don't think we are lagging, and I don't want us to be lagging. That said, will it be profitable? Will it turn out to be the next money spinner for us? That jury is out. We are working very hard to make sure that it's productive and profitable. But I also recognize the fact that this is an investment, right? If you add 1,000 branches, it has an 18-month gestation period. So we are seeing this in that context. We may get a few things right, a few things wrong. And where we don't get it right, we'll exit it. And where we get it right, we'll expand it. Most of the partnerships are outcome-based compensation for either of us. We gain, they gain. We don't gain, they don't gain. And thankfully, we've chosen partners who are willing to sort of -- with us and they find our engagement quite productive. So I think, therefore, we have a pretty structured exercise. And I'm not saying these are instant wins, but the exercise is quite structured. We have created a full-fledged team whose only job is live and breathe fintech and make it productive for us and for the partner. And I believe we must be at the forefront of it. So Shalini, would you like to add any points?
Thanks, Shyam. I think you've covered most of it. I'll just add that a couple of things, and I think you alluded to on the lending side of it. Absolutely, this is another area where partnerships are designed to play a very key role for us. If you go back in time, even the little bit of personal loans that we do or even through the COVID period, we were one amongst the first banks to kind of offer our loans on platforms like Google Pay and -- G Pay and [indiscernible] Even today, we work with both of them for our existing bank customers. So yes, on the lending side, we've got that. We've got a very good example of how we've been able to scale up as still, our credit target as you may see some of the data in one of the slides on the investor deck. So it's more about collaboration with fintechs, is working with them closely across the spectrum, whether it is credit cards, personal loans, general savings accounts, rural India through DGB, merchants through BharatPay. So we've got all of these kind of working with us and using fintechs as -- more as a collaborator. We don't see them as a competitor. Having said that, our regular digital stuff is also making good progress. You'll see some of the metrics in one of the slides. Digital migration at 88%. We kind of offer a whole, whole range of financial and nonfinancial services through our mobile banking platform. We've touched 12,000-odd crores of mobile banking volume. So one is not in lieu of the other. Both work in complement with each other.
Just a follow-up to that. How do you measure your success on digital initiatives? Like it should be in terms of acceleration in getting good quality assets with lower rates, so how do you monitor a success or failure of this collaboration along with your in-house digital capability?
Should I answer that?
Yes, go ahead. Please, go ahead.
Yes. So I think what we've done at this point in time is carved out the whole fintech partnerships as a separate vertical by itself. It's a business division on its own. And it has a set of KPIs, which are normal business KPIs. So that team of people is mandated to grow balances, whether it is in the form of credit card outstanding, personal loan outstanding, savings bank balances, term deposits, et cetera, has a set of KPIs on cross-sells with these customers, has a set of KPIs on income from these customers as well as cost of acquisition, cost of maintenance, et cetera, just the regular business division on its own, the whole fintech kind of vertical that we've carved out or the team that we've carved out. And they are measured very, very carefully on these metrics. And through robust reviews with our fintech partners, we ensure alignment and objectives and the commercial model is also aligned to those objectives. To the broader point on digital and how do we measure digital, again, we've got a set of metrics in place. But I think the overarching point is every transaction migrated out of a branch and moves to a digital gives us that much more leeway in the branch to be able to sell, either an insurance to a customer or a credit card or a regular savings account, et cetera. So the business growth that we've seen, and if you map that against the growth in staff numbers, you'll realize that our business has grown X times, whereas our staff hasn't grown to that extent. And that could have only happened if we've migrated about 85% of our transactions away from the branch. So broadly, both fintechs, as well as regular digital stuff that we do, have a set of very strong financial KPS that are measured and initially reviewed by the management team on a monthly basis.
No, Shalini, I'd also added only one more point to everything you said. We probably are -- probably only bank, which has added just 20 branches in 5 years and grown 2.5x business.
Yes. Yes.
The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.
Congratulations on reaching an important milestone. My question is on the corporate book. It has shown a sharp growth. Is it more -- are you seeing it more as a working capital kind of growth? Or do you see investment-led growth where the loan will stay on a book for a longer period of time?
Mixed, Vivek. I don't think it's either-or, it's both. We've seen good progress this quarter for 2, 3 reasons. One, corporates themselves are bringing to come back to banks. For the greater part of last year, corporates were literally keeping away from banks. And we were keeping away from some of them because the pricing was obnoxious. Both have started showing some trajectory change. And so we were in the right place in Q3, and we started picking up share. The mix is both working capital. Our investment-led is much less, but 3-year loans are picking up.
The next question is from the line of Mona Khetan from Dolat Capital.
Congratulations on a good set of numbers. So firstly, on the cost of deposit side. Is there still scope for improvement in there? Or do you feel we've bottomed?
When the rate cycle is pitched for a turn, no, I don't believe there will be too much of an opportunity to lower cost. Yes, if our CASA picks up even further, there may be some. But I must be honest, that's not a material number. At 4.27%, we are at our lowest in terms of cost of deposits and compare very favorably with banks. Here, I will admit there are bigger banks than us. And I think we are at the -- probably at the lower end. I don't believe there will be too much of an opportunity.
Sure. And just a follow-up on the wholesale book. You've seen a healthy growth despite the pricing, the competitive environment. What are our incremental yields for both commercial banking and CIB book?
I don't know how sure a couple are there. Incrementally, commercial banking is seeing some pickup. Corporate, though, if you're going after the best NIMs, which we are, I don't see much of an opportunity for yield pickup on that in a hurry. But we are seeing other opportunities to cross-sell into that. That's why you saw this quarter, our core operating income showed up quite materially because in corporate, where we are lending at very competitive rates, we are able to pick up other businesses. Commercial banking, I think the yield picked up as well.
But where would the incremental yields be? If you could give some color on that?
Commercial banking will see the bigger picture, bigger opportunity.
But the rate, where would it lie, if you could give a broad range?
It would be about 10, 15 basis points higher than our current run rates. And the commercial banking is somewhere around 7 -- mid 7to 8, and I see that picking up even further.
Okay. Okay. And just finally, on this, the whole fintech and investments around that, what could be the growth you could see in other OpEx owing to the technology investment?
I think the -- where we see this are roughly in a quarter, we expect INR 30 crores to INR 40 crores of cost going towards investing in technology or investing in the partnership in terms of acquiring the customer. To analyze. It should be somewhere in the INR 70 to INR 80 crores. In the near term, it will produce less in the revenue side, but it'll establish the presence of the bank in this segment. And in the longer term, it will start seeing. The lending relations selected Fintech have quicker breakeven, The liability related have a little more gestation. So we think this, whatever, INR 60 crores to INR 80 crores or whatever that number is going to be will have a mix of benefits, brand establishing our presence, getting customer base, building a cross-sell database and establishing a credit relationship, which turn out to be much more productive very early.
Sure. And just one data keeping question, in fact 2. Firstly, how much of your book would be EBLR linked? And secondly, SMA, you -- I think somewhere you mentioned 4.5% of total SMA book. Is that the right understanding?
My last number, 4.15%, I think, is the total SMA book network. And EBLR, I don't know, Ashutosh or [ Babu ], do you have it on top of your head?
40%, Shyam. 40%.
Around 40%, yes.
40% of the total advances would be [ DLI ] linked?
Yes.
Or is it floating -- share of floating rate?
Total, that one.
[Operator Instructions] The next question is from the line of Ajit Kumar from AMBIT Capital.
So a couple of questions from my side. First, in last couple of quarters, NRE deposit growth has come down. This quarter, the absolute NRE deposit amount is broadly flat on Q-on-Q basis. And last quarter, it declined. And even as per your press release, your market share in inward remittances has declined to 19.23% this quarter versus 25.4% last quarter. So at least 130 basis point decline is there. So is there any pressure on due to the stable of deposits?
I think it's public fact that the gross remittances coming into India have dropped 25% or so, right? So our share gain is what we make sure that will happen and which -- something that's part of the territory that the country is working through. So I don't see that as a material issue. But our gain in share and gain in share momentum will continue.
Okay. Okay. So this decline in market share in remittances is basically temporarily, yes?
No, I think these are a point in time. Literally, only its lease cover it. So I can -- it just happens to be '19, '20, but that's the difference. I don't see it much of an issue.
Okay. Okay. And sir, second question is on the MSME segment. So almost all the large banks have seen very high growth in SME and business banking side, I mean, more than 30%, 40% Y-o-Y growth. How do you look at this situation? Is the opportunity by itself is increasing in this segment? Or large banks are gaining market share at the expense of midbanks and NBFCs probably by offering lower rates? Your assessment on this would be quite useful, sir.
I think it's probably the latter with credit opportunities in the top end being more limited, banks sitting on a fair amount of liquidity and having this keen desire to grow credit may have extended themselves. Because we have encountered, sometimes, irrational pricing for smaller customers. And pricing, which don't otherwise make too much sense.
The next question is from the line of Jai Mundhra from B&K Securities.
Congratulations on a steady and good quarter. First question is, sir, on asset quality. So there is a Q-o-Q rising slippages in business banking and commercial, while it looks marginal. But just wanted to understand if there is any more color there in terms of is it due to, let's say, RBI clarification, which demands now daily recognition or clearing full overdue? Or this is something to do with some ECL [ days ] or restructuring may be trending bad? Or this is just business as usual?
I would categorize this absolutely business as usual as in -- I mean, if you look at our own deck, take business banking. In 5 different quarters, it's 5 different numbers, and they are not in any trajectory or trend, right? If you've seen 49 in 1 quarter, you've seen 196 in another quarter. So I don't think you could draw any peril from 49 to 84. And I think normally, somewhere in the 60 crores to 80 crores would be a predictable number. But these tend to be very in that range. I can't quite comment its anything due, because this daily recognition and RBI circular practice, we've been following for very long. So it hasn't materially affected us any in this quarter in particular.
Sure, sir. And anything on GECL, sir? If you can highlight what is the quantum and how much has been -- had already slipped?
Sure. I think the GECL slip is less than 5%. But Babu, if you want to add?
Well, sir, on the last point, in the core within...
The slipping of GECL. GECL book slippage.
Yes. We feel -- the further [indiscernible] it is almost [indiscernible] it's 2 percentage, this project.
Did you hear that? 2%.
2.12, yes. That's right. Yes.
And there is no -- is there any -- I mean what is the total number, sir, for GCL book outstanding, an absolute number?
So on number, the number...
And Anand. Anand, you have...
It's about INR 3,600 crores.
INR 3,650 crores, SPG 0.
Yes, INR 3,652 crores and 2.12%.
Sure. Yes. And second is, sir, I think in the PPT that you mentioned, that in the recovery include some ARC transaction. If you can provide some more details there as to...
Yes. One of the ILFS roadways we sold and made a cash transaction and got the deal fully out of our books.
Right. Okay. Understood. And the last thing, sir, from my side is, if I look at your retail loans, right? So mortgage is still double-digit growth. Auto is also growing reasonably well, actually better than industry. But the other portion of retail is showing Y-o-Y decline, if I were to see that. So broadly, what is included in other of retail? Is it like education loan or something else, which is degrowing. So if you can help us which segment is degrowing there?
Right. Personal loans and auto loan. Personal loans, education loans.
The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities.
A couple of questions. Like what is the growth outlook that you see in the gold loan portfolio? After a robust, like, FY '21, we have seen barely 4% growth in this portfolio in the 9 months FY '20. So how do you see the trend side?
Yes. We did see this business cool off this financial year. Thankfully, the December month did well. We see that probably repeating itself. We are now looking at between 10% and 15% growth for this financial year and the mid-20s growth next financial year.
Okay. And second, on to the restructured assets. Now so far in this earnings season, we have seen a decline in restructured assets for most banks. While we have reported a very, very small increase. So if you can provide some color on this? And how do you see the reduction in this portfolio over the next 1 year?
No, the residual -- see, restructuring ended at the end of September. There were residual, I think, about INR 400 crores or something that got restructured in Q3. After that, the restructuring book is 0 because there will be, for example, nothing in Q4, the restructuring book is behaving well. I think we've met anticipating whatever challenges wave 3 can throw up. We've made a significant increase in provision for that. Average restructuring book is performing quite well because 98% of our restructured book is secure.
The next question is from the line of Ajit Kabi from LKP Securities.
Congratulations for the good set of numbers. So I have 1 -- already, I had 2 questions, 2 bookkeeping questions. One was asked by Mona Khetan. So I had the question of what is the contingent provision you have? Contingent provision mean, what is the provision you have outside PCR?
INR 730 crores for our standard restructure advances.
Apart from that standard restructure provision, how much is the COVID provision? Any counter-cyclic COVID booster you have?
No, this is the universal operations.
The next question is...
Just -- allow me to just clarify so that everybody understands. Each bank has their own measure of LGD segment, secured, unsecured book profile, forecast of what can slip. So in our case, we've made a judgment based on our restructured book, its past behavior, its likelihood of slippages, what is the LGD. And we want to make sure that at all points in time on our book, we keep our provision coverage at 65%. On that strength is what we've made our coverage provision.
The next question is from the line of Renish Hareshbhai Bhuva from ICICI Securities.
Congrats on the great set of numbers. Sir, just a couple of questions. One is on this -- all the new products put together, like MFI CV credit card, what is the total outstanding book currently?
INR 5,000 crores. Sorry, if you had commercial vehicles, it's about INR 2,000 crores.
Okay. Including commercial vehicle is INR 2,000 crores.
Right now, MFI, plus credit cards, plus commercial vehicles.
Got it. And what is the target, I mean, over the next 2 years? I mean, is there any target or...
Yes. I did mention earlier. Annualized, we think these businesses put together will grow between INR 2,500 crores to INR 3,000 crores. So if we take 2 years, you can say post runoff, about INR 7,500 crores on today.
Okay. Okay. And sir, again, just apologies to repeating the question on this fintech journey. But just a very basic question, let's say, the customer acquisition helping through this fintech partners. Customer ownership remains with home. I mean, let's say, for example, if we are acquiring customer via the neobanks and we'll start with offering the -- maybe savings account. And then if you want to offer something else. Are we allowed to offer something else? Or it will be the neobank who will drive the cross-selling thing?
I think, Renish, this question last, I must also clarify. Varies from partner to partner. One of the first partners we signed up for origination of accounts, those accounts are now roughly coming up to 6 months old, some of them, the first month of origination in July last year. We have the opportunity to cross-sell based on the client behavior for credit cards and personal loans. And the relationship with each partner depends on what other products they offer. So sometimes we have the right to offer the entire suite of products. Sometimes we have the right to offer products that they don't have. Sometimes it's a joint marketing. Each partnership varies. But for example, the first set of clients, which we booked in July 21, which is the first cohort of good customers we booked with one of the neobanks, those are maturing up. Based on 6 months past experience, we can do cross-sell of some of our credit products.
Got it. I mean just to clarify, the neobank is just an example. So we have 50-plus partners. So basically, you are saying the arrangement will be different for each and every partner.
Yes, the big client originating partners are 4 to 5. The rest are technology-enabling partners. So there's a difference.
Okay, okay. Okay. So basically, these regenerating partner would be from 4 to 5?
The large cohort of new customers come through 4 or 5 important partners.
Got it. Got it. And so then, overall, I mean, where we stand currently? I mean what percentage of our business comes from these 4, 5 partners?
I think we mentioned it roughly in a month, we were doing 4,000 accounts, and now we're doing 15,000 to 18,000 accounts, sorry, in a day.
In a day, okay. Okay. So we already moved from 4,000 account to 15,000 accounts a day now.
I think we've been saying that. And one of the slides, we did have a number.
Yes on the first few slides, Shyam. I think it's...
28% of our new origination is now through fintech partners. I think we've got about 12 lakh customers through this. Yes.
75% of new accounts have been booked. I think it's 1 of our first slides, Slide 3.
And just a last follow-up on that. So I mean, of course, let's say, the acquisition cost will be far higher than our blended cost-to-income ratio, which is at 55%. Any sense, I mean, where do we start sourcing customer at the current cost to income?
Pardon me?
So I'm assuming, sir, since this partnership are in very early stage, and we might not be able to leverage the customer fully. The cost of acquisition will be slightly higher than our blended cost to income ratio currently, which is at 55%, right? Because the revenue potential from those customers will be lower currently and cost equation will be higher.
Yes.
So the -- any sense and I mean when this partnership will turn breakeven or...
I did mention that our annualized whole fintech cost base, depending plus or minus based on the volume between INR 60 crores and INR 80 crores annualized. And that is encountering after assuming the cost income improving by 200 basis points next year. So that should answer your question, yes?
The next question is from the line of Sameer Bhise from JM Financial.
Thanks for the opportunity and a good quarter. Just wanted to get a slightly medium-term sense on how you think on fees because, obviously, you have been a bit conservative on chasing high-yield assets. So any levers that you see from the fee side incrementally, say, a couple of years out? Or what are the possibilities there?
I think on all the fee enablers, we've been making sort of sustained progress. For example, this quarter, our non -- our core fee income, probably, was its all-time high. And that every quarter, I say that, it's at an all-time high. So evidently, that there's progress on that front. And I think there's -- in one of the slides that breakup is also there.
Slide 27, Shyam. Slide 27 has a fairly detailed breakup.
So yes, there it is. So that will continue, Sameer. And we believe that on all metrics, it's making progress.
So sorry to kind of stick around here a bit. So when we probably look at the next leg of our ROA expansion journey, obviously, you have some bit of inch-up or lift up from margins, maybe costs. Does this rely on a reasonably high priority? Or it is -- because when we compare with some of the larger peers in the sector, there is a gap which needs to be filled. So -- which is where I was coming from.
You're right. But ours is more, what should I say, sustained progress. I wouldn't want one quarter to have some extraordinary and the next quarter, it falls off one period at a time. And you see our numbers across the, even in the income deck, the other income distribution, vertical-wise, you'll see progress. On every line, it's making progress. And I believe that it will continue. So it is only one thing that is final, whether it's FX, it will do well. We have para banking, it's making progress as cards lines, sequentially, every quarter has been making progress. I think that'll continue. Processing fee, as volume pick up, you'll see progress. All of them are -- I mean, we've given it as granularly as possible in the Slide 26 that Shalini -- 27.
The next question is from the line of Deepak Gupta from Reliance Nippon Life Insurance.
My question has been answered. Thank you so much.
The next question is from the line of Aditya Jain from Citigroup.
Just wanted to ask about the fintech partnerships, the commercials of it. I wonder if you can talk about them at a qualitative level. Roughly, how are the commercial structures. So you touched upon it when you mentioned that there is alignment of incentives. But is it like for every account opened, the partner will get a certain amount? Or is it linked to transactions happening. So for every transaction, there's a payment or how -- broadly, how is that arrangement structured? Is it possible to just give us color on that?
Sure. I think we did mention -- first of all, just to clarify, there is no one fintech partnership, right? Each one, as we mature and as we relate, sign up new partners, each one varies in its structure. They are all not sort of cookie cutter and it's not the same. And second, generally, it's outcome focused. So if we have success and they have success, then the gains are shared. If there is a -- it's not catching on, there may be some sunk cost and we'll exist at an appropriate time so that customer is not left high and dry. And the lending relationships have a different kind of payout, the liability originating customers have a different kind of payout. And the cross-sell that we can do will determine the productivity and the profitability of the customer. So I would just say it's quite bespoke and not one size fits all. And as we graduate in that process, I think we are getting better and better with each of our engagements.
Sorry, sir. If we were to just think about the liability side for a second. So if there's a customer who's completely with the bank and not come through a neobank, then on an incremental transaction, the cost, obviously, for the bank is low. It's predominantly a fixed cost. But with these neobanks, does it become a more variable nature just for liability relationships?
Linked to balance builds over a period of time, 6 MOB,9 MOB, 12 MOB balance on the account, we'll get them the works.
The next question is from the line of Abhishek Murarka from HSBC. Mr. Murarka?
Hello?
Yes, sir, your audio is not clear from your line. So please check.
Is this better now?
No, sir, the audio is breaking from your line.
Give me a second please.
So we request you to rejoin the line.
Abhishek, don't worry. Just call Anand. He'll give you your answer to all your questions.
The next question is from the line of Akhil Hari from Robo Capital.
Am I audible?
Yes, you are.
So I just want to know what is the normalized credit cost that you have going forward?
This is one area which is working positively wrongly for us. I mean every time I think it's 60, 70, 80 basis points, we end up coming much better. But I think steady state, you could plug-in within 60 and 70 basis points.
Makes sense, okay. And I just want to know the credit growth guidance that you have given, 10% to 15% and mid-20s. Was that for the overall credit book? Or is that a specific book?
No, I was mentioning that in the corporate, when I think one of our colleagues had asked about corporate.
Right. And so what would be the overall credit growth going ahead for FY '23 and FY '24?
We certainly will seek to deliver much higher than the industry growth. We believe calendar '22 will look good. FY '23 will look good for the country. And our mid-teens and higher than that growth is very possible.
The next question is from the line of Krishnan ASV from HDFC Securities.
I just wanted to ask a couple of things. Number one, I'm assuming whatever you have showcased in the investor presentation from Slide 15 onwards are your signature partnerships within fintech. So just wanted to understand how far you believe or purely from a potential of these partnerships perspective? How scalable are these partnerships? If you could just give us some qualitative inputs there, that'd be great. That's number one. And number two, what would give you confidence to grow in this environment? You're already seeing the larger banks are around the mid-teens. Assume at our scale, it should be -- we should find those opportunities to at least be on par on that kind of growth, even if you eliminate some element of fraud that's going on with the large banks. So just wanted to understand what would give you that comfort in terms of being able to accelerate a little part?
On the first one, no, I think the ones that we have showcased are all of them are both potentially scalable and are already on the scale. I think the names mentioned every 5 Jupiter and some of those that we are tying up are all -- like we were saying, on a daily basis, we're adding 8,000, 10,000 new customers, and some of them may be even bigger. So I think some of these names are material and scalable, and that'll continue and it will be visible. And the moment we see signs of that not working, then we have certain filters that we will put in. So the conversation opens up and saying, does it make sense? Do we need to part with it? That's a model that's working. And the team that Shalini pointed out is exclusively focused on that.The second question around growth. I don't want to sound like we are bigger than anybody else. We are not. But certainly, we are not guided by what big banks are growing or what others are not going. We're guided by our appetite and what the market opportunity is for the appetite we have. And I think growing at the levels that we promised or looking to grow, I think it's very possible. Where we don't score and we have chosen not to score has been unsecured growth. And that sell the bank well despite all the criticisms that we face of being less courageous. But I think it's a sustained business that we've built. And as things open up and our capabilities to do unsecured business increase, we are confident of growing at good rates.
The next question is from the line of Mahesh MB from Kotak Securities.
Just a couple of questions. One, if you -- looking at the way interest rates have gone up in the last 6 months out there, how does the OpEx line on the provisions move for you during this financial year? That's number one. Second one for Shalini, the subsidiary, which is the fed operations one, where are we restricted the transition on that?
So first one, Ashutosh can take. And second one, Shalini. And maybe Shalini can answer -- but go ahead, Shalini and Ashutosh.
So I think I'll start with the expected provisioning on the investment book. I just wanted to share that we have a very low modified duration in our AFS book. In fact don't have much of a surplus SLR and that even from the fall in our LCR from about 240%, 250% stayed to about 160% or so. So that fall of 80 percentage points, 78 percentage points itself suggests that whatever surplus SLR, which else, classified as HQLA and all that we have shed. And we have shed that good profits and all, and that shows in the capital gains made in quarter 1 and quarter 2. So I think in a nutshell, the portfolio itself is very light. And because the portfolio which is subject to mark-to-market is light, the provisioning requirement for that would be minimal.
Sorry -- Ashutosh, sir, sorry, can I just -- so the question is more from an OpEx line, sir. We are just kind of trying to understand the impact of the retirement-related provisions now that interest rates have gone up. Sorry for not having been clear on the question.
So it's about the employee cost?
Yes, absolutely. Absolutely.
Yes. So on that, I think we traditionally do not reverse the provision. So even if interest rates move up or so, we'll hold on to what we are having. We have provided for superannuation. Maybe the additional accretion would be a function of how the yield curve shapes up. For us, most relevant part is 14 to 22 years, bang, of the yield, sovereign yield curve because of the requirement for provisioning, for gratuity and for pension. So I mean, that segment of yield curve would be actually to be seen to be watched. And I mean, 10-year benchmark maybe anywhere, but what we are concerned with is where is 14 to 22-year segment. And as of now, what we are seeing is the steepness of the curve is reducing, and you are having more of yield moving up in the lower segments. So yieldco is becoming flatter. To that extent, yields are not moving in that particular segment. In fact, the most liquid bond is a 14-year bond presently, and we paid over 10 years quite less. So I mean -- I think, to that extent, I have answered your question, but it's very difficult to predict when it's going to land as at the end of the year.
Absolutely. On the OpEx transition?
On the subsidiary, maybe I'll get started and Venkat can admonish. I think, again, against our objectives with which we formed Federal operations and services registered, made considerable progress. Headcount has moved, is about in the range of about 600 or more right now. A couple of my -- the key migrations we've done to it as examples of what has been achieved. One, we've migrated one of our call centers completely into that. So the entire call center capability now is handled by FedServ. So we've migrated a lot of our telecollections capability into FedServ. We've managed -- we've migrated a lot of steady sales services into FedServ. And therefore, we have a unit now functioning out of FedServ, which is doing inbound service, outbound sales, outbound collections, and doing quite well from a productivity standpoint. You've seen the gains on that. In terms of operational processes, Venkat will add to what I'm saying, I'm sure, but about 100-odd processes have already been migrated. And both units, the one in Cochin and the one in the Shago, Putnam are kind of literally working now 24/7 to keep our operations going. Venkat, you may want to just add to it in the last 6, 7 months.
The question is more for the -- from the question that -- the question is that given that we can't observe what all changes is happening at the back end, the best we can observe is either a cost or an income for the bank. Is there any way we can look at this transition from that perspective?
Yes. From a productivity gain perspective, right, Mahesh? Or impact on the income -- impact on the CI ratio?
Because we have -- it's impossible for us to understand which costs are moving and what are the gains of it sitting here. So just trying to understand what has this transition reached out in terms of numbers as external stakeholders.
Yes. We did a study recently to evaluate what are the benefits of having the subsidiary. The business case, which was initially put up and what it is now. We did that very recently. It clearly establishes the fact that we have gained productivity in terms of lower cost, better quality as well from the subsidiary, which gets translated into the numbers which we have. And like Shalini mentioned, over 100-plus processes, and we are looking at moving more and more of the incremental activity which comes to the bank which we're putting directly into the subsidiary. It's not like we're moving work into the bank and then from the bank to subsidiary. So that way, do it right first time, build the efficiency in the operations subsidiary, and better risk mitigation BCP. We have now about 750 people, 150 in Visak and 600 in Cochin, and it's growing. So very clearly established as the study establishes, the business objective, and we have full confidence that it will continue to deliver the business benefit.
Let me just add, Mahesh, I think if you're trying to get a more crystal sort of something that you can latch on to. Just 2 elements, Mahesh, one is the non-incurrence and the second is what Shalini and Venkat explained. Given our employee cost structure and wage structure, if that 750 were in-house, there would have been a different cost structure. So you have to see it in that light.
The next question is from the line of Darpin Shah from Haitong Securities.
Yes. Just to clarify, our second restructured book, you mentioned 98% of the borrowers are paid.
98% of our book is secured, I said.
Okay. Sorry. So how much of your borrowers would be paying?
I think our collection efficient drive...
[indiscernible] 96% of the collection.
It is in the restructured book as well?
Restructured book as well as it is on the concentrate line as of now.
Sorry. Sorry, sir, come again?
Yes. You're right, Darpin. As of now, that's the same number, is what Babu saying. I think we should bring this to a close, operator, it's past 10 now in and a quarter. Are there any more questions in the live pipeline?
Yes, we do. Should we take one last question?
Yes, please. You can take 2 more, if there are many, then Anand can chip in. But we could close in about 5 minutes, please.
Okay, sir. The next question is from the line of Anand Bhavnani from White Oak Capital.
Sir, quick 3 questions. One is of our liabilities, what percentage are kind of linked to any external benchmark? Second, if you can give us some sense on the IPO and what's the time line? And would we be doing any sales, which can help our capital adequacy? And thirdly, with the guarantees on -- FLDG guarantees unlikely to be now allowed with our fintech partners, how does the equation change? And if you can give us some color on it will have an impact on growth fintech partnerships.
Okay. Question one, I don't know, Ashutosh, Venkat, you can look at it.
I answered that earlier, Shyam, 40% is the external vision..
I think he's talking about the liability business, deposit business.
The profit side, it should be around 30%, 32%. Okay.
The second question that you asked was around the IPO Fedfina. All I can say is the Board of the bank has approved and Fedfina Board is considering. They are in the process of going through the motions. First is to file the DRHP, which may happen between now and, say, end of February, March. And then the approval from SEBI takes between 2 months to 3 months. So we are into somewhere around May is probably when we'll have the approvals in hand. And then after that, as you know, depending on a bunch of things like market timing, so on and so forth. But I don't have a comment on that at this juncture. So the motion has been -- the profit is in work. Timing and related approvals, regulatory clarifications, the bunch of stuff that needs to happen is underway. So I don't have any sort of time line for it. We'll see how it goes. And the third question, sorry, I can't quite recall the third question.
The FLDG guarantees, yes.
Shalini, you want to go on the digital fintech partnership, FLDG? I just want to say that our digital lending and ex credit card is actually very marginal. So it doesn't have any impact on us. But Shalini, you can give more texture.
Yes, one is this is in the stage of a discussion paper and a working group. And as Shyam mentioned, the kind of the one that is growing currency for us is the credit card partnership. We are not very concerned about it because we do have models in place, which indicate how we can make sure with collection efficiencies and commercial considerations, we should not get unduly impacted with the removal of an FLDG. Suffice to say that, I think the discussion paper is still out. I think there may be some changes in the final version. But it doesn't place us in any uncompetitive sentence here.
Thank you. Ladies and gentlemen, we will take one last question from the line of Manish from Fiducia Capital.
I think last couple of quarters, we've been, like, going in a very, very determined and a very defining manner. So my [ compliments ] to that. So you had mentioned that there's something that we could not have been completely demonstrating. So how much of our total book is secured. Hello? Hello?
Sir, I request could you please hold the line. Ladies and gentlemen, the line for Chairperson has got disconnected. Request you all to please stay on line while we reconnect them.
So I think the meanwhile, the question is -- just to clarify the question, how much of the total book is secured. Was that the question?
Yes, I think, Shalini, that is the question, how much of the book is secured. If you were talking of total loan book, just exclude the AAA corporates and all, where there are some unsecured portion Other than that, we have only personal loans and a small portion of credit cards and all which is unsecured. The rest of it is all secured.
Okay. And the AAA would basically be forming part of the corporate book, so I can get a sense that as to how much of that could be.
Yes. AAA, AA plus type of top-notch corporates, there could be some unsecured portion in that. But that is, I think, something where the risk of default is practically nil.
Yes, I get that. I get that. But see, the next question for the madame was, basically, we see going to Slide #17, which demonstrates the kind of fantastic growth that you've seen on your BharatPay relationship. My question was how will the bank make money out of this relationship? Like now the numbers are, like, really exploding, like, 50 lakh merchants, then 20 lakh transactions on a daily basis. So I mean, how would the bank make money on this particular, say, relationship?
A couple of things. One, from the merchant side of things, we do have floats that we get, the current account floats. And these are also, again, commercial discussions that are held with the partner and with the merchant. Some of them, T plus 1, some of them T plus 2, some of them T plus 0, depending on the kind of category of the merchant. So there is a float benefit that we get from it.On the transactions, we do have a cost-sharing arrangements under the commercial negotiations that we have with BharatPay. So that updates some of the costs that we may incur on the transaction. And the broader point is as this book matures, as we get to understand the customer behavior better, we understand the flows of the merchant, BharatPay, as you know, is already offering loans to their -- in their own books and we are working with them to see what alternate data scoring methodologies can be put in place. We're quite cautious about this because it is unsecured. It is something that we've always been a little cautious about. But there are opportunities for risk calibrated approach to cross-sell. So there are various opportunities, but the underlying is the current kind of configuration is the CASA, the current account balances that's set to come in. Yes.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Shyam Srinivasan for closing comments.
Well, I think thank you very much. I think the line signals everybody was tired of answering questions, so it got cut. Thank you very much. Stay safe. And hopefully, we'll connect back in after Q4 results to have a better conversation. So thank you very much, and all the best, everybody.
Thank you. Bye.
Thank you. Bye, everybody.
Thank you. Thank you.
Thank you. Ladies and gentlemen, on behalf of Federal Bank, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.