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HDFC Bank Ltd
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Ladies and gentlemen, good evening, and welcome to the HDFC Bank's Q1 FY '20 Earnings Conference Call on the financial results presented by Mr. Srinivasan Vaidyanathan, Deputy Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Srinivasan Vaidyanathan. Thank you, and over to you, sir.
Thank you, Lisan. Good evening to all. We appreciate you taking the call this evening. Getting to the highlights for the quarter now. The bank's total income for the quarter ended June 30, 2019 at INR 32,361.8 crore grew by 22.7% from INR 26,367 crore in the corresponding quarter of the previous year. Net revenues for the quarter amounted to INR 18,264.5 crore, an increase of 24.8%. Net interest income for the quarter was INR 13,294.3 crore. This is showing a growth of 22.9%. The core net interest margin for the quarter was 4.3%.Other income for the quarter amounted to INR 4,970.3 crore. Fees and commission income constituting 71.5% of other income grew by 12% to reach INR 3,551.6 crore. As you know, the fees and commission for the quarter were impacted by changes in regulations concerning mutual fund commission payouts, which happened in the preceding quarters. Excluding income from mutual funds, fees and commission, fees and commission grew by 15% over the corresponding quarter of the previous year.Now to the breakup of the other items in the other income. Foreign exchange and derivatives income at INR 576.7 crore, grew by 15.4%. Trading income at INR 212 crore compares to a loss of INR 283 crore last year same quarter. Miscellaneous income, which includes dividend and recoveries, at INR 630 crore, grew by 46.3%. The total other income, as I said, INR 4,970.3 crore, grew by 30.2%.Operating expenses for the quarter were INR 7,117.3 crore, an increase of 18.9% over the corresponding quarter of the previous year and at the same level as quarter ended March 31, 2019.In the current quarter, the bank incurred higher fee -- self fee cost, excluding which, total operating expenses increased by 16.9% on an year-on-year basis. Core cost-to-income ratio for the quarter ended June 30, 2019 was 39.4% as against 40.1% for the corresponding quarter ended June 30, 2018. Total provisions were INR 2,613.7 crore for the current quarter as against INR 1,629.4 crore for the corresponding quarter in the previous year. General provisions include additional provisions of INR 85.9 crore for standard advances to NBFC/HFC sector.Profit before tax for the quarter ended June 30, 2019 was up 21.6% to INR 8,533.6 crore. Net profit for the quarter grew by 21% to INR 5,566.2 crore.And now to some balance sheet items. The bank's balance sheet size as of June 30, 2019 was INR 1,265,253 crore against INR 1,080,409 crore as of June 30, 2019 -- 2018, an increase in size of 17.1%.Total deposits as of June 30, 2019, amounted to INR 954,554 crore, an increase of 18.5% over June 30, 2018. CASA deposits grew at 12.8% with savings account deposits at INR 253,338 crore and current account deposits at INR 125,663 crore. Term deposits at INR 575,553 crore grew by 22.5% over previous year. CASA deposits comprised 39.7% of total deposits as on June 30, 2019. The bank's continuing focus on deposits helped in maintenance of a healthy liquidity ratio at 126%, well above the regulatory requirement.Total advances as of June 30, 2019 were INR 829,730 crore, a growth of 17.1%. Domestic advances grew by 17.9%. Advances to the vehicle loan segment, where sales volumes have seen some reduction, grew by 8.3% over previous year. As per regulatory Basel II segment classification, domestic retail advances grew by 16.5% and domestic wholesale advances grew by 19.6%. In this quarter, the higher proportion of PSL certificates were used to meet PSL requirements.Moving on to CapEx network and asset quality. With regards to capital adequacy, total capital adequacy ratio as per Basel III guidelines stood at 16.9% as against a regulatory requirement of 11.075%. Tier 1 capital adequacy ratio was 15.6% compared to 13.1% in the previous year. CET 1 capital stood at 14.8% as of June 30, 2019. As of June 30, 2019, the bank's distribution network was at 5,130 banking outlets and 13,395 ATMs across 2,764 cities and towns, a growth of 326 banking outlets and 587 ATMs over June 30, 2018. 53% of the branches are in semi-urban and rural areas. Number of employees increased by 7% to 104,154, as on June 30, 2019.Gross nonperforming assets were at 1.40% of gross advances as on June 30, 2019. 1.17% excluding NPAs in the agricultural segment as against 1.33% as on June 30, 2018, again 1.09% excluding NPAs in the agricultural segment. The coverage ratio was stable at 70% as on June 30, 2018 and June 30, 2019 and 71% as on March 31, 2019. Net NPAs were 0.4% as on June 30, 2019. The bank has been creating contingent provisions of certain pool of accounts in certain sectors over a period of time. In this quarter as well, we have created net additional contingent provision of approximately INR 165 crores.The bank held floating provisions of INR 1,451 crore as on June 30, 2019. Total provisions, comprising specific, general and floating provisions, were 115% of gross nonperforming loans as on June 30, 2019.Now a couple of paragraphs on subsidiaries. For the year ended June 30, 2019, HSL, our securities company's total income was INR 189.3 crore against INR 193.5 crore for the quarter ended June 30, 2018. Profit after tax before comprehensive income for the quarter was INR 66.5 crore as against the INR 72.6 crore in the previous year.HDB Financial Services Limited net interest income grew by 12.9% to INR 962.7 crore. Profit after tax before other comprehensive income for the quarter was INR 221.9 crore compared to INR 228 crore in the prior year.HDBFSL had 1,381 branches across 996 cities. Gross impaired loans were at 2.3% of gross loans and net impaired loans were at 1.7% of net loans. The total capital adequacy ratio was at 18.1% with a Tier 1 capital adequacy ratio at 12.5%.Now a few lines on consolidated results. Bank's consolidated net profit for the quarter ended June 30, 2019 was INR 5,676 crores, up 18% over previous quarter -- previous year. Consolidated advances grew by 17.2% from INR 751,386 crore as on June 30, 2018 to INR 880,939 crore as on June 30, 2019. Kindly note that the financial results of the bank's subsidiary companies have been prepared in accordance with notified Indian Accounting Standards. However, the bank's consolidated financial results include the financial information of the subsidiary companies based on the recognition and measurement principles as per Indian GAAP.With that, that concludes the prepared remarks. We get back to Lisan to see -- open it up.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from IDFC Securities.
What would be your mark-to-market provisions on your bond portfolio this quarter? And what would be your total nonperforming investments?
We had a mark-to-market gain in this quarter of INR 81 crores, that is recouping losses that have been previously taken.
Sir, your increase in specific provisions is not because of any mark-to-market on bonds?
No. No.
No. It is not.
So then why has it increased so sharply?
Mahrukh, if you had listened to Srini, it is -- there are couple of parts to the increase in specific provisions. One is the fact that -- let's keep agri aside, agri is one of the reasons. We've always been mentioning right from June '17 onwards that the agri portfolio, especially in the quarters of June and December, will have a bit of a stress. So that is -- that continues even as we speak unless and until all the federal governments in the country have a resolution for the same. That's number one. Number two is, we have also sort of stepped up some of the provisions in the unsecured book. For example, it's all program-based where you have certain rates of provisions that we have created. We have kept up the provision for the unsecured book as well, that's number two. Number three is the growth in balance sheet side or the loan side also will have a bit of an increase in the absolute increase in the provisions. Number four, as Srini was mentioning, in addition to the specific provisions, the bank has created additional contingent provisions for a pool of accounts in certain sectors. So optically speaking, you are seeing a slightly higher growth rate of almost about 60-odd-percent, et cetera, but on a pure specific basis, it's about 36%. And if you were to adjust the charge, the charge to ANR is about 1.07%. If you exclude the agri charge and if you exclude the one-off on account of the heightened rate of provisioning on the unsecured book, it's about 0.8%.
Okay. So the general provision is included in the general line, right, not in the 24 billion?
That's right. That's right.
Yes. Okay. And what would be -- what was your slippage during the quarter?
The slippage during the quarter is about 2.03%. But here also, you need to sort of look at the core slippage ex-agri, which is about 1.4%.
In absolute terms, that was?
In absolute terms, the slippage number is INR 4,225 crores for the quarter. I don't have the number exactly, but we will sort of give it to you during the course of the call.
Okay. And I just have another question on deposits. So in terms of the CD ratio, do you have any target in mind so you're happy with holding it at 85, 86 or do you want it to go lower?
We always would love to have this lower and right from Jan of 2018 onwards, the company -- the bank has been endeavoring to push up the deposit mobilization. And I think you have seen that we've been steadily increasing the deposits, including the fixed deposits to support the kind of growth that the company has been seeing right from -- for the last couple of years. Having said that, as you know, we are also a large cash management bank. And right -- so when you adjust for the cash management and floats, which are lying outside the deposit accounts, so the credit deposit ratio comes down. In addition to that, since we also sort of rely on institutional funding, we've been diversifying our funding by resorting to institutional funding, long-term institutional funding or sub-debts, including some infrastructure bonds and Tier 2., the credit deposit ratio, when you adjust for all that, comes down to a far more palatable around the 75% leverage. But of course, deposit is one of the key strategies for the bank. We have been sort of stepping up the new customer acquisitions. It will take some time for the balances to build up there, but as a part of this strategy which is embedded in every customer segment, we have been pushing up liabilities as one of the key drivers of business as against assets.
Again, just one last question on the impact of 0 MDR on fees going forward?
We'll not size that up, Mahrukh. I mean it's too premature at this juncture.
The rules are expected. The finance bill is passed as of yesterday. The rules will come. The notifications will come specifying exactly what that is, and only then we will know which kind of segment and what is impacted.
The next question is from the line of Augustya Dave from CAO Capital.
Questions on provisions and...
Your line got blocked. We can't hear you.
Mr. Dave? Hello, Mr. Dave? Ladies and gentlemen, the lines of the current participant seems to have dropped off. We'll move on to the next participant, that is from the line of Abhishek Mody from Asit C. Mehta.
Few of my questions already answered. Just one thing. The -- earlier the quarter, the management's focus strategy, there is nothing -- that did have exposure to NBFC and micro finance. What is the strategy being current quarter and future? Are you still cautious on the NBFC side? And in terms of micro finance, do you see still reversal of demonetization in fact coming through because you expect any delinquency in that micro finance part to increase?
This is Jimmy Tata. Yes, we continue to look at NBFCs with caution. That is not to say we do not extend credit to NBFCs, but the caution remains. We have seen them look after liquidity scenario over a few months. There has been various ways in which each of them has addressed this problem. There would be impacts and effects of the manner in which they have addressed this problem as well as looking into the individual portfolios and businesses of each of these companies. So we remain cautious, but as before we are not precluding ourselves from...
And sir, in terms of micro finance, I think last quarter you rolled out that because of reversal of demonetization, you saw delinquency increases. So is it still being continued this quarter, the micro-finance part?
We do the micro finance largely ourselves. We create our own groups. We propagate them in terms of financial literacy. We try to propagate the businesses and the channelization of those. We think it is a very good initiative for us to take. So yes, we do continue with that initiative. With respect to the delinquency and the impact of macro factors like demonetization, et cetera, that is wearing off and things are improving.
The next question is from the line of Nagraj Chandrasekar from Laburnum Capital.
At your recently held Analyst Day, you've apparently guided to being able to get cost-to-income down by 300, 400 basis points over the next few years. What really will drive this? Is it purely a shift we're seeing towards the corporate bank given these are lower operating expenses in terms of loans? Or what are some of the other things that should drive this decline that you've guided to?
So thank you for that question. It's a good question. Number one, if you've really seen the kind of mix in our business, that's been pretty much stable over a long period of time. So whether it is -- yes, there could be some quarterly variations in the pace of growth and also function of what's happening in the economy, but broadly over -- through a 3- to 5-year period, we should see similar kinds of business mix, i.e., which is about 53% to 55% in retail and about 45-odd-percent in wholesale. So this -- with this kind of a mix, we're seeing -- we will still like to continue to see the cost to earnings down over a 3- to 5-year frame and that is the context at which we had mentioned that it will be in a range of almost about 300-odd basis points over the next 3 to 5 years. The way we're planning to do that is not by -- it's a combination of 2 things. Number one, of course, digitizing our processes whether it's a front-end, whether it's the -- or the back end, whether it's credit or operations, just improving and enhancing the productivities from our -- at our stock. The second aspect is, how do we sort of try and see how we can enhance our digital marketing initiatives so that the unassisted digital origination of products is also increasing over a period of time. So combination of all these things is what we are trying to -- we believe that there is still a headroom to reduce our cost to earnings.
Just -- and if I follow-up on the second part, when you mentioned unassisted digital lending, could you give us a sense of proportion within the retail book of these loans either by volumes or by disbursements, what they would be now or targeted to be in the next few years versus in the recent past?
Sure. Currently, it's a pretty low number. It's in single digits. So we want to take it to at least double-digit or slightly higher than that over the next 3 to 4 years at least.
And just within the corporate book and the corporate loan categories, they're hearing that you're hiring employees from other banks for this function and a lot of pressures from campuses. How are we making sure that these new hires are being sort of institutionalized into the HDFC way of underwriting and risk management?
See, I don't think we are sort of dramatically changing the composition of our teams out here. I mean we do have a fair amount of stability at least from the mid-level to the top level across segments and across verticals and across sections, including the -- whether it's the front-end wholesale banking or even the back-end credit risk teams. What we're trying to do is, as a part and parcel of where we are, we constantly try and see whether we can take in a breath of fresh air so that we are not just inwardly looking, we try and see how we can sort of learn new things because things are changing and we need to constantly be sort of challenged in terms of what are the things that we need to do differently, and we need -- this is something that we had been doing in the past and this is something that we will continue. So if you've seen a slight step-up in that, it's just that it's bunching up at this time. But having said that, we always would like to have a balance between continuity and a bit of fresh air. I don't think this is taking intake of some new members from other banks is what already changed our credit architecture or culture or our thought process in the company. So Jimmy would also like to sort of add some words on that.
Just to add one line on that. As far as -- since you mentioned the underwriting, whether it is retail or whether it is wholesale, in the risk management department, you will get a few freshers in. Once again, it's very good to have an outside perspective. To mitigate any risk that may come culturally as you mentioned yourself, there is a considerable seasoning period, there is an internal training, there are several products and departments of the bank where there is actually a testing process prior to which anyone receives a credit initials. So it is not that they join the bank and receive initials.
All right. And just one data point. Could you give us the gross NPA ratio ex agri as of fourth quarter FY '19?
It continues to be at 1.17. Both are more or less the same.
Mr. Chandrasekar, are you done with your questions?
Yes.
The next question is from the line of Manish Ostwal from Nirmal Bang.
My question on the growth of the -- our customer segment, we have seen that there is a considerable slowdown in the consumer segment, both automobiles and other categories. So how do you see the growth especially in your consumer business for at least this year?
See, the vehicle segment, be it an auto loan or a two-wheeler or a commercial vehicle segment, whether used or otherwise, I think have seen a bit of a change over the last couple of quarters. I think that's the moderation, which is probably reflecting a slightly tepid kind of growth numbers that we're seeing. Now probably you guys are -- and I think Srini also did mention that ex of that vehicle segment as in the growth rates are somewhere around 19.3%. Now as I was mentioning, really enough even if -- when you hear the industry experts on that particular aspect, I don't think even the vehicle manufacturers have got a arrears having this lower demand for vehicles, whether it's the auto or the two-wheeler side. I mean one of -- some are saying that it normally happens once in 4 years. And I think couple of quarters later, it should sort of pickup. But having said that, when you look at the other numbers, you may see that on a pure absolute numbers. There could be a bit of a slowdown, it's not really a slowdown, what is masking some of the numbers is the fact that, especially on the corporate side, we had some large one-offs in the recent March quarter, which is a runoff. But adjusting for that, I think it continues to be reasonably stable on the wholesale or the consumer side ex-vehicle segment.We'll have to wait and watch how the vehicle segment spans about in the next couple of quarters. But I think on an absolute term, we should continue to add what we are focusing on every quarter on an average basis, what are we trying to add incrementally to the book. When you compare on a year-on-year basis, let me also sort of alert you that exactly a year ago, in June, we had one of our best quarters in terms of what we mobilized on an absolute basis in the June quarter. So there is a bit of a base effect as well which is playing out here. But notwithstanding that, as we speak today, I don't see us -- we believe that our outlook continues to be reasonably stable. Let's see how the vehicle segment spans out.
The second question on the NBFC/Housing Finance Companies, so there is a liquidity pressure for that segment and lenders are risk-averse to lend it to that particular segment. So at HDFC Bank, how do you see that portfolio? And secondly, what was the growth of last 6 months in that portfolio for us?
So the housing companies are amongst the institutions and NBFCs to whom we do lend. Our portfolio continues to be good. You used the word adverse I think, I'm sorry if I don't remember it correctly, but we are cautious, as I mentioned to one of the earlier participants on this. We are cautious and we continue to remain cautious. We have a portfolio. Our portfolio is not troubling us at this point in time, and I don't have the growth number, but there -- since you asked for growth over what period?
Last 6 months, sir. Last 6 months.
I don't think it's appreciable at all. If it is, it would be.
The next question is from the line of Nirmal Bari from Sameeksha Capital.
My question is relating to provisions. You earlier said your core components were the increase in provisions. One of which was the increase in provisions for unsecured loans. So in the previous quarter, our -- we had kind of slowed down on the unsecured loan part though the portfolio was doing well. And this quarter, we are increasing provisions on that. So is there some kind of increase in NPAs or -- some kind of delinquency increase that we are seeing there in terms of SMA1, SMA2 because of which we are increasing provision? That was first.And secondly, if you can also talk about the specific provisions for certain group of companies that we've made of INR 165 crores? And how is this group of companies different from the NBFC/HFC provision of INR 85 crores, which we have done?And thirdly, even after combining both of these, the year-on-year jump in provisions is way higher than the jump, the increase in NPAs as well as the growth in book, so is there some portion relating to seasoning of NPAs?
Okay. So a lot of questions embedded in this one question. The first part of it is, as I said, yes, with consumption slowing down, we believe that it is better to be slightly more conservative in the rate of provision that we do on the unsecured book, which is the reason why for a certain bucket size, we have sort of stepped up the provision rate. And this is a onetime impact that will be there, and of course, it will continue at the same rates even going forward. So as I said, we are all in the same economy. We are also seeing this, but it doesn't mean that there is a problem with our book. It continues to be well within the product program that has been defined thus far. So this is just a kind of a conservative approach in terms of trying to be to ensure that we are able to reflect kind of an outlook that we have. Number two is on the second question, which is...
Contingent.
On the contingent provision, where we provided on a net basis an additional INR 165-odd crores. As I said, we do have certain sectors not necessarily emanating NLP, NBFC or HFC sector. It includes all sectors, other sectors as well, where we have taken using the property of default and loss given default, a certain amount of contingent provisions where the occurrence or the non-occurrence of an event is something that could lead to a potential loss in the future. It doesn't mean that it is there already. So this is very similar to the Stage 2 provisions in Ind AS to some extent and very loosely coined. So that is what we have done. As the general provision on NBFC and HFC is independent and separate of whatever we have done thus far. So that's part 2 of your question.Part 3 was on increase in provisions. So as I mentioned to you, the increase in provisions, yes, you're right that it has increased, but when you look at this and which is what I had -- I thought I had mentioned it, sometimes it's better to look at it as a ratio when you sort of look at the ratio, ex agri and ex these kind of -- the one-off adjustments that we have done on account of unsecured books and some -- et cetera, the charge to ANR is more or less similar, around the 0.75 to 0.8 levels, which has been the case over the last 4, 5 quarters. So obviously, the book has also grown. So when you really look at the book that has grown over the years, you -- probably after getting that right from June quarter onwards, some of the core book has been growing pretty sharply, like, for example, unsecured was growing at about upwards of 30% and so was auto for -- until March quarter. See, December quarter, it was still a very healthy growth. It's only in March quarter, I think, it started to beat it down on the vehicle segment. Otherwise, we did see a fair amount of healthy growth of all the consumer retail products. And so on a year-on-year basis, when you look at the ratios, it's more or less similar excluding agri and the one-offs that I just spoke about.
Okay. Sir, just to reconfirm, on the first part of my question, that whatever increase in provision that we are taking on the unsecured book is largely to do with the consumption slowdown and the external environment and not because of anything internally with the product program?
Yes, that is correct and it is cautionary about just the slowdown, it is cautionary and we feel it is advisable at this point.
The next question is from the line of Prakhar Agarwal from Edelweiss Securities.
Couple of questions. First is on your corporate books. We have been highlighting that we may see some growth moderation in corporate given the rundown in a couple of cases of NCLT that we financed. Apart from that, if you exclude that, how do we see -- have we gone cautious in that number also or probably the ex of that growth then continues and we maintain the numbers?
No. I think -- I'm not trying to give you an outlook, but surely I can explain what has happened during this quarter on the wholesale side. You are right, some amount of maturities or some short-term loans that happened during this quarter in addition to that, we've got some repayments from certain on account of some government accounts and we did sort of also provide short-term facilities to mutual funds in the previous quarter. So all that sort of early ran off during the particular quarter, which is what is reflecting in the kind of a tepid net accretion to the wholesale book. But also adjusting for that, I think it's been a reasonably normal quarter, which is what we've been seeing over not many quarters, excepting that, of course, let me also tell you that is it as good as -- even if you adjust for that is it as good as what we saw in June of last quarter or September of last quarter? May not be. So there is a bit of work to be done. We are confident, but let's see how it works about. We're not seeing anything untoward, but it's not going to be an easy thing as well, let me also tell you that sure. I mean we are part of the same economy. We hear a lot of noise levels in the economy in terms of consumption slowdown, economy, which is pretty much evident the way in the last few quarters, it's been coming down, the GDP growth rate. So there is a bit of kind of struggle in terms of what are the kind of good assets that are available in the market for us. We have to work harder, but let's see how this stands about in the next couple of quarters.
Yes, sir. Sure. And second is in terms of, sir, last quarter, we have said that on unsecured part, we have gone cautious. What are the signs that probably you look at for stepping back that growth probably, again, starting to grow that part of portfolio?
Yes, we have been cautious. We are always cautious, and at this point of time, we don't look at steps to step it up. I think we would keep our policies intact. We would look out for new markets. We would look at new segments. We look at new geographies, and the growth essentially comes from there. So if your question was, are we looking at releasing our caution that previously existed, no.
No, sir. So my question was in terms of, we would have had cautious because of some particular red flags that would have come in. What are the things that we probably monitor just to get that caution out if at all be? So what are the things that you probably look at why have we gone cautious if that is the case on this sort of portfolio?
I think we had a period of relatively good and healthy growth. That level and trajectory need not always remain. And if you don't see that kind of a trajectory, I wouldn't put it down to us becoming cautious. I would put it down to us looking and seeing where opportunities are and booking what we can within our policies and parameters based on what opportunities exist. There was a very high level of growth sometime back, and it is going to moderate at some point in time.
Sure, sir. And sir, last thing, in terms of HDB Financial, so we have seen some step-up in their asset quality numbers. Anything to read into it or some comments on that would be helpful.
So the -- I think the primary increase in NPLs in the subsidiary companies on account of the construction equipment and commercial vehicle segment more so the asset prices having come down sharply. So I think that is sort of increased losses on reposition and that is what has sort of increased the charge to the P&L for this particular quarter. So other than that, I think he has had a reasonably stable numbers as such. But yes, he is also very clear that he doesn't want to sort of change anything for the sake of growth. They're also equally conservative set of players. Cost of funds have actually gone up on a year-on-year basis that which all of us know about it. So margins have taken a knock off almost about 30, 40 basis points for him this quarter, which is reflected in the earnings as well. In addition to that, I think the asset reposition losses has sort of reflected in higher losses for him, which is the reason why he has a slightly tepid growth rates in the numbers -- in the bottom line numbers.
The next question is from the line of Anand Dama from Emkay Global.
My first question is on the risk-weighted assets. So can you please talk about the number of -- I mean the amount of risk-weighted assets in this quarter and what's the YoY growth?
Sir, this is the operator. Sir, your voice is breaking up.
Hello?
Yes, sir. Your voice is breaking out. Can you repeat your question?
Yes, sure. Can you hear now?
Yes, Anand, I can. But you need to probably reduce the volume on your handset or et cetera.
Sure. Is it better now?
Yes, that's right.
Sir, can you please provide me the details on specifically the risk-weighted assets? So what is the amount of risk-weighted assets in this quarter? And what's the YoY growth number?
Okay. It is there in the press release, but just to tell you, it's INR 965,635 crores, which is a growth of around 14% on a year-on-year basis.
Okay. Sir, there were some banks this quarter said that there is a higher charge on the unrated exposures in their book. So is that something similar that we have seen for ourselves as well?
So this was effective in June '18 of last year for us. So, Anand, we had sort of effect of this in last June itself.
Okay. Sure. Sir, second is about our HFC provision that we have done in this quarter of about INR 86-odd crore. So what's the percentage of provisions that we would've done? Is it 10%, 20%?
No. No. See, this is not just an HFC, but this includes NBFC and HFC as all the standard assets in that particular categories, number one. Number two is, I wouldn't know how much it is, but obviously, this is on the basis of PD and LGB (sic) [ LGD ], et cetera, that we run on the expected loss basis. So I -- Jimmy, you want to?
Yes, it's not determined in terms of a percentage of anticipation, et cetera. We have models within the bank that are used to calculate the probability of default and loss given default. So the expected loss after that is what has been projected. And based on those expected losses, these provisions have been arrived at.
Okay. Sure. And the other thing that you said in response to one of the participants is that we have, to some extent, actually stepped up the provisions on the unsecured loans. We have seen some impairments coming also in the HDB Financial Services. So what are the signs that you are picking up from the ground because of which you feel you need to step up the provisions now? Are you seeing some early bucket delinquencies or what is that?
No, no. I think one of the participants had asked earlier, whether it is environmental or whether it is some internal this thing. It is not internal, it is environmental and it is cautionary. So the signs that we are seeing are the signs that are visible to everybody. There is -- it is not because of any internal developments.
The next question is from the line of Anand Laddha from HDFC Mutual Funds.
Hello.
Yes, Anand. Hello? Good. Go ahead.
Sir, on the same question on the step-up provision on unsecured loan. Sir, can you give some color in terms of, are you seeing -- in terms of -- are you seeing over leverage in your customer like if you run the CIBIL score, are you seeing encouraging leverage in the customer within cities, within urban centers, within Tier 1? For -- incrementally, for personal loan, where is the demand coming? Is it coming from metros just or it is spread across like Tier 1, Tier 2? And lastly, on the CASA side, sir, slower growth in the saving deposit, once you believe this is a new norm, that's...
Do you want to take the CASA first and...
Yes, I think let me take the CASA first. So, Anand, the incremental accretions that we have seen, if you go back to about 8 quarters on what we keep on adding on the CASA, this is not the first time, in fact, it's slightly healthier than what we have seen in the third quarter of last year or what we've seen on the first quarter of last year as well. So you do have these kind of norms or what we net on a net basis agreed into the savings book. Now what you also need to look at it is that -- we also -- we have been growing the assets, the advances pretty healthily over many quarters now. You need a fair amount of funding to support that kind of a growth. So right from October '17 onwards, we have been trying to push the mobilization of FDs because we realize that we are comparing or competing with not just banks, but also with other financial services, participants like the mutual funds in terms of ease from a customer perspective. So if you really look at the kind of rates that we are offering especially on the retail side, the retail time deposit rates have been pretty much stable and attractive for us and across the banking system as well for some time. So we have seen a fair amount of mobilization of time deposits every quarter and that is also sort of reflected in a slightly healthier growth even in this particular quarter at about 22.5% on a year-on-year basis.Now when you do that, there will be situations wherein if I were to go to a customer and say that, "Sir, we have good rates. Why are you not parking your funds, creating FDs?" He will intuitively go to his NetBanking and sort of book his FD by debiting the savings account. We are all right with that. I mean you will see a bit of a dip in savings account, but at least, we now know that we have, which we did not probably in many years in the past that we probably did not even ask our customers saying that why aren't you keeping or FD'ing with us, probably we are not competitive now. So as long as we are needing liquidity and we are trying to drive adequate funding as a key strategy to sort of push growth and as long as pricing is in line with whatever increase in the incremental cost, I think we will see -- we are happy to see a bit of a slower savings growth. But the total -- the key is, the total liabilities, the core funding or the core granular deposit is what is key for us and that is what we have been driving. So a bit of a small shave off in savings account in terms of accretion, we're all right. As long as we know that he is dipping into his things and creating an FD for us, is good. Surely, we would love to have him sort of take it from other bank and put the FD, but that's not going to happen always. I mean you have to wait for maturities in the other banks. I guess, also, the FDs do have a premature penalty requirements. So that's where we are at this juncture. Let me just hand over to Jimmy for the first part of your question.
I am sorry, if you could just give me the exact specific of your first part?
Just wanted to understand on the step-up provision we did on unsecured part. So obviously, increasing the customer leverage and incrementally on the personal loan where you are seeing the growth coming from? Is it coming from metros or Tier 2, Tier 3 cities? And what proportion of customer are salaried customer and what proportion are unsalaried -- self-employed customer?
Sure. So all 3 first to go along with. Yes, studies conducted across the Indian market are showing 2 or 3 things. Customer leverage is increasing, the frequency of borrowing is increasing and the ticket size is increasing. This is across secured and unsecured personal loans, and this is across the country. It's not peculiar to any particular geography or type of geographies. So the growth is coming from the metros and large towns. The growth is also coming from the semi-urban and rural areas. We have been looking at picking up assets in the retail space from the semi-urban and rural areas actively. For the reason that they are relatively unbanked, and therefore, we do seem to have a better choice and selection over there. That said, those areas do not necessarily have the required infrastructure, et cetera, to support secondary out repayments in case there is a problem in those geographies. And for that reason, there is, at times, difficulty in rural areas as well. But our selection process at this point of time is a little better because we are slightly ahead of the game as compared to competition in these areas. What was your last one, I'm sorry? Again, I...
Percentage of the unsecured loan in terms of net personal loan between salaried customer and self-employed customer?
Yes, salaried and self-employed. So we have various products. The personal loan is typically entirely to the salaried segment. The business loan is obviously out to the self-employed segment. There are several initiatives that we are going through many on a pilot basis, I must say, as well, across the country, and these would largely be out to the self-employed segment. They are looking at smaller traders, they are looking at the semi-urban and rural. So that is the way in which the mix would be changing, not because we are not finding adequate salaried people for the personal loan, but because the product suite and portfolio is diversifying and expanding on its own.
What could be the absolute amount of...
Absolute amount of, sorry?
Unsecured business loans you would have?
The business loan portfolio, if memory serves me right, is around INR 13,000 crores. If you give me half a second, I'll actually confirm that. Just one moment. Yes, I have just got it. INR 15,000 crores.
Yes. And sir, lastly, if you can share what proportion of our corporate loan are linked to external benchmark?
Sashi, would you know that?
Sorry, sorry.
External benchmark linkage in corporate loans? I don't think it's meaningful.
Very minuscule amount, but exact percentage. Is it Anand? Then we will get back to you, Anand, on this one. I don't have offhand what is the exact percentage of proportion of our loans, which is external benchmark. All I know is that's very minuscule portion of it, but let me get back to you.
The next question is from the line of Jai Mundhra from B&K Securities.
Sir, first question is, can you give me the breakup of recovery and write-off in this quarter?
Just a moment, please. Write-offs INR 2,115 crores. Recoveries, INR 1,002 crores.
Okay. Sure. And sir, this stepped-up provisioning that you mentioned, this would be applicable to already slipped account, right? Because that is why it is there in the loan loss provisioning and the contingency line item?
Already, what? Already...
Slippage. Slipped account.
It is. It is only for the -- okay, let me tell you. There is a -- when it's 90 days past due, there is a journey, which is sort of traverses from 90 to 180 days or 150 days of probably write-off. So all that we have done is in certain buckets, 90 to 120, 120 to 150, we have stepped up the provision in one of the buckets. That's all we have done.
Correct. Correct. Sure. Yes. Great, sir. And sir, if you can just mention, I think you said last quarter that this core fee income has been weak because of the lower retail disbursement and little bit impact from mutual fund and lower credit card. Is the situation still there? Or how should we see this core fee income growth?
So I think if you -- Srini did mention that ex of mutual fund, mutual fund, the kind of a drag is going to happen for some time till the base of it wears off until March of next year. So ex of that, I think we have been -- we have seen a 15% growth rate. The key drivers of that is the retail asset, again, because, let's face it, the disbursals are not as strong as in the previous year because, of course, the vehicle segment is the one which is dragging it down. On the balance, which is on the payment side of the business, the volumes have been increasing. So we are getting a fair amount of traction again back, which I think had a bit of a temporary blip in the fourth quarter of this year. Also on the third parties, the mutual fund -- not the mutual fund, the life insurance segment has started to see reasonable amount of volumes during this quarter. So combination of both on the payment side and also on the -- when I say payments means largely the credit card issuance fees and the issuance fees of the business, not just credit card, but even the debit card issuance and the life insurance volumes have helped us to get to that 15% growth rate, which is what was mentioned at the beginning of the call.
Sure, sir. And sir, just very small clarification. HDB Financial has consolidated as well as stand-alone reporting. What is included in HDB consolidated?
Okay. HDB consolidated, I mean when we are disclosing a consolidated reporting, it includes HDFC Securities and HDFC -- HDB Financials as per Indian GAAP. But as you know, both of them have moved on to Ind AS, which is what is regulatory required. So the consolidated financials are the Indian GAAP numbers of the bank plus HDFC Securities plus HDB. Now on a stand-alone basis, this is the stand-alone financials of the respective entities in Indian GAAP.
Correct. In Ind AS.
Sorry, my fault, Ind AS.
Sure, sir. Actually I was asking, HDB, what would it include in its console. So HDB has stand-alone as well as consolidated. What entity is included in the consolidated HDB, if you can answer?
No, there is nothing. Oh! that's the -- they do have securitization, okay? So whatever has been securitized, I think they're consolidating that, as per Ind AS, so you do have that, what is that called?
Those they have de-recognized the sale.
They have de-recognized the sale. You talked about this?
No.
Talk about this.
Just in Ind-AS, the de-recognition criteria is not met in case there is some credit enhancements that are provided, and we don't meet the Ind AS de-recognition criteria above a certain threshold. So that's why it is consolidated. It's not -- it's put back on the books. So it continues as an asset in the books.
There was one other question about the floating rate on the wholesale book, the one we put out as 5%, 6% of total floating rate there.
The external-linked benchmark loans is about 5% to 6% of the total book.
External-linked, yes.
The next question is from the line of Augustya Dave from CAO Capital.
Sir, can you...
Sir, your voice is breaking up.
Can you hear me now? Hello?
Yes.
Hello?
Yes. Yes.
Yes, we can hear you.
Sir, on the unsecured book, you mentioned that you made -- you just stepped up provisions and you said something which I missed after that. So this level of provisioning in absolute percentage of whatever you are doing, that will remain constant? Or this was a one-off absolute increase in overall provisions?
No, it will remain constant. What we have changed and what we mean and refer to by step-up is in the various buckets post-delinquency. The provisions as we previously applied will now be applied at a stepped-up or a higher rate. The impact of that effectively would be that, whereas we completely provided for a transaction in 180 days, that's between 90 to 180 days, we will now be completely providing for that transaction between 90 to 150 days, so that's what...
Perfect. I got it. I got it. And sir, other questions were answered. Just one last question. We have seen a huge move in the yields. And even though the spreads have not compressed, still everything else is going downwards and the liquidity from a deficit situation too has moved to a fairly substantial surplus. So in that context, do you think whatever we are seeing in the economy, a lot of the slowdown was being blamed on lack of liquidity and very tight spread, very -- I mean, increased spreads. So do you think that will reverse now? I mean will we see a better state of going forward because of this plus -- or is it something else?
Well, we have to wait and watch. Your question is right. That is one of the reasons or alleged reasons for which people were complaining about. Yes, with now the liquidity situation being comfortable, which, of course, even the certain yields coming off, but I'm not too sure in terms of the outlook or in terms of the risk aversion or the outlook in the economy, maybe that is also something that is very important, which will sort of define as to whether credit will pick up or not. But having said that, it's not that it is so bad. I mean I don't want anyone to sort of go out of this particular conference saying that it's such a bleak kind of an environment, it's pretty much stable. It's just that all of us are used to a certain levels of growth and now when you see a plus or minus 3% or 4% here or there, we are all trying to sort of understand what has happened, but if -- when you've come here, there is lot of curious activity within the bank and I think we are pretty much comfortable at this rate. We are not sort of really complaining about it. Let's see if there are any dramatic changes in -- of events during the course of the quarter or the coming quarters. But as we speak, we are pretty much comfortable with what we have and what the outlook we have on a very stable basis.
Sir, you wouldn't say that the retail portfolio on a macro level outside the bank, I'm not talking about HDFC Bank as of now but just, in general, the retail portfolio, in general, is showing signs of distress. You wouldn't go as far as that, right?
I have not studied these portfolios in detail, and therefore, I wouldn't like to comment on the stress or lack of stress in any other book. Bureaus, I just mentioned in one of my responses, so those studies are available through the bureaus. But beyond that, I don't think I'm really...
Ladies and gentlemen, that would be the last question. I now hand the conference over to Mr. Srinivasan Vaidyanathan for closing comments.
Thank you, operator, and thank you to the participants. If you still have questions or need any clarifications, feel free to call our Investor Relations. Ajit Shetty and the team would be very happy to handle it. Thank you. We'll disconnect now.
Thank you. Ladies and gentlemen, on behalf of HDFC Bank Limited, that concludes this conference call. Thank you for joining us. And you may now disconnect your lines. Thank you.