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HDFC Bank Ltd
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Ladies and gentlemen, good evening, and welcome to the HDFC Bank Limited Q3 FY '21 earnings conference call on the financial results presented by the management of HDFC Bank. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir.
Okay. Thank you, Stanford. Appreciate the participants calling in today. We'll start with some background on the market context, on what we have seen and are seeing to provide a backdrop, so that that's the backdrop on which we will talk about the results and some of the business dynamics. As you know, after recovering sharply in the months of August to October, the tailwind of the festive season provided good economic relief. The trend was good, suggesting that the overall economic activity remains in the positive territory, and there has not been a reversal in the recovery process. For instance, PMI manufacturing continued to strengthen in December, and GST collections rose to a record high of INR 1.15 trillion in the month of December '20. Looking forward, we expect the economic recovery to gather pace in Q4. We expect the rural economy to fare better than the urban centers and provide support to overall growth. Agriculture sector is likely to expand by 3.4% in FY '21. Overall, the share of agriculture is estimated to rise to 16.3% of GDP in 2021 compared to 14.6% in '19, '20, led by a healthy kharif output. That augurs well for us with our -- fitting in well with our SURU strategy. We expect GDP growth to turn marginally positive in Q3, 0.5%, and recovered further in Q4, 1%, after witnessing a contraction of minus 24% in Q1 and minus 7.5% in Q2. For the full year, our house view is that we expect GDP growth of negative 7% to 7.5% for full year '21, which is in line with our previous estimates. On the inflation, it cooled off sharply in the month of December, coming in at 4.6% versus 6.9% recorded in November. Moderation of CPI inflation was largely driven by contraction in food prices. Our core inflation remained firm at 5.5% as inflation in subcategories like health, education and recreation picked up. The near-term inflation outlook has improved, and we expect CPI to print close to 4% in January. That's again a house view. For February and March, we expect inflation to inch up somewhat as the base effect impact wears off. On an average, we expect inflation at 4.4% to 4.7% in Q4 '21. We expect RBI to keep rates on hold until at least first half '22 at 4% and keep its terms accommodating. Further, we anticipate a greater CRR cut rollback in Q1 '22. The liquidity surplus in December continued to remain high, average of INR 6.4 trillion. Given concerns around the high liquidity in the system, we expect RBI to use special OMOs to manage the yield curve. Some moderation in liquidity is expected in Q4 as the Central Bank slows down its intervention in the FX market, and the government goes into collection mode in the last quarter of the year. The fiscal deficit, again, a very important indicator in the macro, for April to November touched 135% of budget estimates as tax collections continued to remain under pressure. We expect the central fiscal deficit to raise to 7.6% of GDP in FY '21 versus a target of 3.5% on the back of sharp revenue receipt shortfall while expenditure is likely to be slightly above the target. The combined fiscal deficit for FY '21 central plus state is likely to be 12.3% of GDP. Now during the quarter, the equity capital markets -- in the equity capital markets, the private issuers raised INR 24,000 crore as against INR 80,000 crore in the previous quarter. Retail participation in IPOs and rights have been strong. The equity fundraising pipeline, both in public and private markets, continues to be robust. During the quarter, we, along with other syndicate members, executed a handful of deals. On -- the debt capital markets and the index capital markets continue to witness good activity in Q3. The total debt raised, approximately INR 219,000 crores, was 25% higher than the corresponding quarter of previous year. For the 9 months ended December 31, our bank was ranked #2 arranger for INR bonds. On the CSC and SURU front, with a rapidly evolving rural economy, there is a need to have a robust digital and rural strategy. Our association with CSCs is helping us offer cost-effective services to semi-urban and rural parts of the country, which in turn is working as a stimulus in ushering the digital era through the creation and spreading of socially and financially inclusive banking model. We have signed up approximately 1.6 lakh village-level entrepreneurs, of which 1.02 lakh are onboarded as business facilitators and 13,502 business correspondents. These business correspondents are not only executing financial transactions through the use of other enabled payment system, which works on biometric authentication, but also -- but have also enabled them to sell multiple products, including CASA, fixed deposits, loans, including gold loan, 2-wheeler loan, car loan, tractors and home loans. On the CSC business side, we have been able to keep the momentum and have seen good uptake in CASA accounts where more than 2.3 lakh accounts have got opened during the year so far. Now on the retail branch banking side, during the quarter, our sustained efforts on new customer acquisition complemented with video KYC, like full KYC accounts and digitally powered smart accounts has enabled us to register a growth of 20% in savings account acquisition and 15% in current account acquisition over the corresponding quarter of the previous year. On an overall basis, we have opened 2 million new liability relationships in the quarter, an increase of 18% over the same period in the previous year and 9% over previous quarter. During the quarter, we have launched Next Best Action, an AI/ML-led analytical tool for engagement with customers, giving our staff sharper recommendations to follow through for conversion. This has improved conversions and maximized return on efforts of our colleagues in the branches. QuickLoanShoppe, which was launched on -- from 1st of September onwards as an integral part of the branches' permanent in-house elements of merchandise and shopper activation with an aim to transform the branches into a financial solutions supermarket, has helped increase retail assets throughput by way of higher customer inquiries on leads. With the launch of the video KYC, liability and personal account -- personal loan customers are onboarded through VKYC through digital channel. This facility is also being extended to auto loan, 2-wheeler loan and card customers in the future. On the payments business, Q3 showed an even better recovery compared to Q2 on both issuing, acquiring and consumer finance, which is the financial point-of-sales business, albeit helped by a festive season, which spanned both October and November. Card sales volumes is sequentially up 32% in Q3. Spends were up smartly riding on the wave of enhanced customer engagement programs. Further opening up of markets post-lockdown enhanced acceptance of electronic payment modes as an ecosystem trend and enhanced marketing spends by most luxury and high street consumption brands. Festive Treats lent a boost to consumption with its larger-than-last-year format covering larger numbers of participating merchants across physical and online formats as well as close to 15,000-plus local and regional physical merchants offering a wide variety of discounts and offers, smart, customized and personalized digital marketing. Significant penetration of small-ticket spends on to debit and credit increased activation and engagement levels. December spends matched October, leading to optimism and growth prospects in '21. Strategy will be to continue to keep customer engagement to enhance wallet share, thereby making bank cards as the primary source of electronic spends. We ran exclusive TV campaigns during the IPL and also increased our presence on digital and OTT platforms. Festive Treats microsite attracted over 7 million unique visitors to the offers. On the merchant acquiring side, the similar recovery of spends were reflected in all acceptance form factors, which is the cards, UPI, NetBanking, et cetera. Enhanced merchant sign-up, deep customer engagement through One Bank approach, bank staff visitations, value-added services, driving EMI at point of sale have helped in gaining counter share and float. Merchant acquisition volumes is sequentially up 20% in Q3. Lending across merchandise to take care of short-term working capital needs will be the core component of strategy going forward. On the retail asset front, retail advances continued a pointed recovery aided by the festive season, the disbursal surpassing pre-COVID run rate. I'm talking of 40% sequential growth. Given the solid foundation of our retail asset franchise, we are confident of sustaining this momentum and making strong gains in market share. Arvind will have more color on this as we go later in this call. On the wholesale and SME segment, the performance of wholesale business across large mid and SME corporate was at par with the pre-COVID trends. Bank continued to gain market share due to diligent adherence to sales process. We'll have Rahul cover this later as we go along. On the collections front, the bank entered Q3 with a cohesive strategy to manage the volume increases and is better going to the end of moratorium release. The bank's primary goal was to stabilize resolution rates within short order to progressively reduce the quantum of accounts flowing through into higher levels of delinquency. Jimmy Tata will talk more about credit and collection as we go along in this call. Now getting on to a few comments on the franchise balance sheet strategy. We are further built on the strength of the franchise and continue to be positioned well to reap the market opportunities. The recent customer relationships that we have built are performing well in accordance with our vintage models. This has enabled a robust buildup of deposits, thereby maintaining strong liquidity position. The bank's average LCR for the quarter was at 146%, which is INR 95,000 crores of surplus or approximately $13 billion, considering 110% LCR as the floor. Capital adequacy ratio is at 18.9%. We have 7.8 percentage point more capital than the regulatory minimum of 11.075%. Our CET1 at 16.8% is 9.3 percentage points more than the regulatory minimum of 7.575%. The balance sheet is resilient. The floating and contingent provisions totaling to approximately INR 10,000 crores built over a period of time helps in derisking the balance sheet. We continue to originate loans in accordance with our proven credit models. We have handled diligently the restructuring requests, which we'll cover more as we go along on credit. Now getting to the results highlights for the quarter. Net revenues grew to INR 23,761 crore, driven by an advances growth of 15.6% and deposit growth of 19.1%. Net interest income for the quarter was at INR 16,318 crore, up 15.1% over previous year and grew by 3.4% over previous quarter. For the quarter, the core net interest margin was at 4.2%. Prior year was also at 4.2%, and prior quarter was at 4.1%. As mentioned earlier, the bank's average liquidity coverage ratio was at 146%. While the excess liquidity positions the bank to cater to potential demand in the future, it impacts current NIM by around 15 basis points. This drag was offset by monetizing some of the investments in the form of trading gains as we have done in the past quarters. Moving on to the details of other income. Total other income, INR 7,443 crores, was up 11.6% versus prior year and up 22% versus prior quarter. Fees and commission income, constituting about 2/3 of other income, was at INR 4,975 crore, grew by 9.9% compared to prior year and 26% compared to prior quarter. Retail constitutes approximately 94%, and wholesale constitutes 6% of the fees and commission income. FX and derivatives income at INR 562 crore was higher by 7% compared to prior year of INR 526 crore and was almost flat to prior quarter. Trading income was at INR 1,109 crore for the quarter. This represents the ALCO strategy of monetizing some portion of the gains from excess liquidity investments, similar to prior quarter levels. Other miscellaneous income of INR 797 crore includes recoveries. On the expenses, operating expenses for the quarter were INR 8,575 crore, an increase of 8.6% over previous year. Year-on-year, we added 282 branches and added 55 branches during the quarter. We have opened 231 branches during the 9 months of this financial year. These levels of branch build accomplished on an average are slightly above one branch build per working day. By the end of this financial year, we expect to open approximately another 100 branches or so. Since last year, we added 1,080 ATMs, cash deposits and withdrawal machines and 249 during the quarter. We have 13,502 business correspondents managed by common service centers, including 1,532 opened during the quarter. During the 9 months ended December 31, we have added 8,123 business correspondents. The staff count increased by 3,579 during the last 12 months and is at 117,560. Cost-to-income ratio for the quarter and year-to-date was at 36%. Our expectation is that the spend levels will increase driven by sales, promotional activities, discretionary expense and investments. Thus, the cost-to-income ratio will be reverting to recent historical trends of 38%, 39% in the short run, while our goal remains to bring this down again in the medium to longer time period. Moving on to PPOP. The pre-provision operating profit at INR 15,186 crore grew by 17.3% over previous year. Now coming to asset quality. As mentioned in the past quarter, the Supreme Court passed an interim order dated September 3, 2020, stating that those accounts that have not been declared NPA until August 31, '20, should not be declared as NPA until further orders. The bank has complied with the said directive and has not classified any account which was not NPA as of August 31, '20, as per the RBI IRAC norms and will not be classified as NPA until such time the Supreme Court rules finally on the matter. Similar to previous quarter, the bank, as a matter of prudence, used its analytical models to estimate potential NPA in an expedient manner on a pro forma basis and has provided for corresponding contingent provisions towards the same. The bank holds provision as on December 31 against the potential impact of COVID-19 based on the information available at this point in time, and the same are in excess of the RBI-prescribed norms. For the credit update that we will provide in the next few minutes, we will first mention the reported number, and it will be followed by the pro forma number, which is analytically arrived. If you consider the potential NPAs, as just mentioned, using analytical models, the pro forma annualized slippage ratio for the current quarter is at 1.86% as against 2.31% in prior year and 1.98% in prior quarter. Year-to-date 9 months pro forma annualized slippage ratio is at 1.67%. The GNPA ratio reported was at 0.81% of gross advances. The impact to the NPA ratio by use of analytical model in determining the NPA, as I mentioned earlier, is about 57 basis points. Therefore, the pro forma GNPA ratio for the quarter was at 1.38% as compared to 1.37% in the prior quarter and 1.42% prior year. GNPA ratio for the quarter on a pro forma basis, excluding NPAs in the agricultural segment, was at 1.2%. Prior quarter and prior year levels are also at 1.2%. Net NPA ratio reported was at 0.09% of net advances. NNPA ratio for the quarter on a pro forma basis was at 0.40% as compared to 0.35% in the preceding quarter and 0.48% in the prior year. The restructuring under RBI resolution framework for COVID-19 was approximately 50 basis points of total advances. Now on to the provisions. Specific loan loss provisions reported were INR 691 crore. If you were to follow a regular recognition process without any constraints of court directives, the specific loan loss provision would have been higher, resulting in the specific loan loss provision on a pro forma basis of INR 3,170 crore for the quarter as against INR 2,884 crore for prior year and INR 2,371 crore during the prior quarter. The total provisions reported were INR 3,414 crore as against INR 3,704 crore during the prior quarter and INR 3,044 crore for the prior year. Total provisions in the current quarter included contingent provisions of approximately INR 2,500 -- INR 2,400 crore. The contingent portion in the form of incremental specific loan loss provision is reflected here. These pro forma contingent provisions will be reversed to a specific provision as and when final court order becomes available. The reported specific provision coverage ratio was at 88% as against 84% in the prior quarter and 67% in the prior year. There are no technical write-offs. Our head office and branch books are fully integrated. At the end of the current quarter, contingent provisions towards loans were at approximately INR 8,600 crore. The bank's floating provisions remained at about INR 1,450 crore as of December 31, and general provisions were about INR 5,000 crores. As on December quarter end, total provisions, comprising specific, floating, contingent and general, were 260% of reported gross nonperforming loans or 148% of pro forma gross nonperforming loans. This is in addition to the security held as collateral in several of the cases. Now coming to credit cost ratios. The reported credit cost ratio, which is the specific loan loss ratio, was at 0.25% of advances. If we were to follow a regular recognition process without any constraints of court directives, the specific loan loss ratio would have been higher by 91 basis points, resulting in the specific loan loss ratio on a pro forma basis of 1.16% for the quarter as against 1.22 for prior year and 0.91 for the prior quarter. As you are aware, recoveries are recorded as miscellaneous income. The recoveries amounted to 24 basis points of gross advances for the quarter as against 35 basis points for prior year and 21 basis points for the prior quarter. After factoring in the contingent provisions, as previously mentioned, which has an impact of 91 basis points, the total credit cost for the quarter -- current quarter was at 1.25% as against 1.41% in prior quarter and 1.29% in the prior year. The reported profit before tax at INR 11,772 crore, which is roughly INR 128 crore per day during the quarter, grew by 18.9% over prior year. Net profit for the quarter at INR 8,758 crores grew by 18.1% over prior year. Net profit for the 9 months ended December 31 was at INR 22,930 crore, up by 18.6% over the corresponding 9 months of prior year. Some balance sheet items. The balance sheet size as of December at INR 1,654,228 crore is an increase of 18.6% over the prior year December level. Total deposits amounted to INR 1,271,124 crore, an increase of 19.1% over the prior year and up 3.4% over prior quarter, which is an addition of approximately INR 42,000 crores in the quarter and INR 204,000 crores since prior year. Retail constituted about 80% of total deposits and 100% of incremental contribution during the quarter. With our persistent focus on granular deposits, CASA deposits grew by 29.6%, ending the quarter at INR 546,747 crores, with savings account deposits at INR 374,639 crore and current account deposits at INR 172,108 crore. CASA deposit also registered a robust sequential growth at 6.9%. Time deposit at INR 724,377 crore grew by 12.2% over previous year and 0.9% over prior quarter. CASA deposits comprised 43% of total deposits as of December end. Credit deposit ratio was at 85% for the current quarter as against 88% from the prior year. Total advances were INR 182,324 crore, an increase of 15.6% over prior year and a sequential growth of 4.2%. This is an addition of approximately INR 44,000 crores in the quarter and INR 146,000 crores since prior year. Retail advances on a Basel basis grew by 5% year-on-year and sequentially grew by 4.3%. And wholesale advances on a Basel basis grew by 26% year-on-year and 3.8% sequentially. Moving on to CAPAD. With regard to capital adequacy, total capital adequacy ratio as per Basel III guidelines stood at 18.9% as against a regulatory minimum of 11.075%. Prior quarter was at 19.1%, and prior year was at 18.5%. The Tier 1 capital adequacy ratio was at 17.6% in the current quarter as compared to 17.7% in the prior quarter and 17.1% in the prior year. CET1 capital stood at 16.8% in the current quarter compared to 16.2% in the prior year and 17% in the prior quarter. In the 9 months ended December 31, the bank generated net capital of 40 basis points. To provide further context during the financial year '19/'20, the net capital generation was 140 basis points to the total capital ratio. Now some highlights on HDB Financial Services under IGAAP, which was made for consolidation with the bank. Disbursements for Q3 were at last year levels and sequentially up 23% over Q2 with business across product lines gaining traction. Total AUM reached INR 60,176 crores. Net interest income for the quarter was at INR 1,010 crore, a growth of 1.5% over Q3 last year, while sequential growth was at 9.3%. PPOP for Q3 was at INR 748 crore, growing 7.5% over previous year. Provisions for the quarter were at INR 818 crore, which included general provisions made during the quarter. For the quarter, HDB Financial Services has reported a small loss of INR 44 crores. For the 9 months ended December 31, the profit reported was INR 218 crores. HDB Financial Services has given impact of Supreme Court order and paused NPAs at the end of August and held the status of these accounts as standard. As on December 31, gross and net NPA were 2.7% and 1.7%, respectively. If HDB Financial Services had classified borrowers' accounts as NPA after August 31, '20, along with the NBFC recognition methodology, the pro forma GNPA ratio would have been higher at 5.9% as on December 31 as against 5.1% as on September 30 and 2.9% as on December 31 last year. However, no benefit of standstill is taken in the P&L as adequate general provisions have been made to neutralize the benefit. HDB Financial Services had adequate liquidity and the LCR as on December '20, which was at 285% LCR ratio. HDB Financial Services is also able to borrow at attractive rates, coupled with the strong capital position of 19.5% and are well positioned to maintain growth momentum built in Q3. Now coming back to the bank and particularly on the December 2 RBI order, we want to mention that progress is being made on the plan of action provided to the regulator. We have taken it positively as it will raise the standards. The regulator will institute a process to inspect the action plans and the progress, which I'll give updates in the future. In summary, our teams across functions enthusiastically handled customer engagement and implementing our strategy regardless of the challenging atmosphere. This is reflected in deposit growth of 19%, advances growth of 15.6%, operating profit growth of 17%, profit after-tax increase of 18%, delivering the return on assets slightly above 2% or so. With that, may I request Jimmy, Jimmy Tata, to give a few comments on credit? And then we'll have some business highlights coming, too.
Hi, good evening, everyone, and thanks for coming again. I'll do what I usually do and just take you through segment-wise, wholesale and SME and then take a small break, while Rahul would then step in and give you some brief on the business momentum, after which we'll go through retail, which would be followed by Arvind's views on the business again. So on the wholesale portfolio. The wholesale portfolio is now reasonably large at around INR 580,000 crores. It's been growing well. It continues to grow well in pretty much the same way as we've been reporting over the last 2 or 3 quarters, most of the growth coming from well-rated public sector and private sector enterprises. Everything is pretty much steady state. So there's not too much news to give you in that sense. The gross incremental portfolio, I don't know if I need to explain our HDB ratings again. But I think if you go back to the previous calls, we have the 1 to 10 HDB rating. It's a model that we keep sharpening and has served us very well for 25 years. 1 is the lowest risk. 10 is the worst risk. 4.37 was the gross incremental portfolio during the quarter, which corresponds well into the AA/AAA category. Around 68% of the portfolio is rated HDB 5 and above, which measures into AA again. This is just for external reference. It's not that we benchmark it that way. So we have around 67% of the externally rated portfolio -- actually, no, I should phrase that again. 67% is externally rated at AA and above. And since I'm using the word above, maybe I'll just let you know that it's a 50-50 between AAA and AA by and large. The average rating of the portfolio itself remained very steady, and it's been that way for the last few quarters, at around 4.4. 70 -- the high 70 percentage is -- I would say, is where the externally rated book. And so at this point of time, it's 79%, but it's usually in the high 70s of the externally rated book is either AAA or AA rated. 90-plus percent is A and above. Moving into what we usually mention on the unsecured book. The unsecured book always has a better rating than the average portfolio because we do take great caution in what is done in the unsecured space. The weighted average of the unsecured portfolio today is an HDB 3.4 as opposed to the average of 4.4. And thereby the secured booking of 4.57, that's how the average gets determined. So things are pretty much as they were, going well. We are confident, and it seems in order. I think Srini commented on the NPA numbers and the pro forma NPA levels. Within the wholesale book, there is really not much distance between the actual and the pro forma NPAs because the book itself is quite steady and stable. Just take a minute to move into the SME book and let you know what is taking place there. So over the last 2, 3 quarters, given the injections of various benefits that have come in from the reserve bank and from the side of the government, be it ECLGS or the various measures for agriculture and various other methods, we've once again had a fairly good ability to manage. As we had mentioned earlier, cash flows into customer accounts, which we monitor very closely, had slipped in the months of April and May. From June onwards, quite happy to report that there has been a strong bounce back, and I'll come back to this in a minute. I'll just give you a better flavor of that there, but I'll leave this there for the moment. The 30-plus since the month of September, which is when you can actually measure it, has again shown an improving trend month-on-month. And I could tell you that the FITL in the SME book is 0.74, 0.75 percentage range, which effectively shows the inherent strength of this book. We would, over the last few quarters, have done a lot of analysis and tried to explain to you why we think it is strong. But I would think that this is one of the actually manifested demonstrations of the strength of that book, that not more than this much required to be put into FITL. We also have been doing stress tests on this book, as we mentioned to you some time ago. And initially, in the early days, of course, we were very conservative about it, and we reported that 9% could end up being under stress. We revised that last quarter, if you remember, and it came down. It was much better than we had imagined. So it had come down to around 3. There is again a small positive movement. And today, around 2.3-odd percent is where we consider there may be vulnerability, which we watch rather closely. The utilization of facilities in the SME book has been steady over this entire period at around low 70%. The number itself doesn't matter. It's the fact that it is steady that we look at because this is based on working capital limit. It is based on availability of drawing power, et cetera, et cetera. So that once again puts things in a good light, and it carries on the same way. So I'm not dwelling too much about it. It's pretty steady state. Industry classification and diversification, once again, very granular. Nobody except agricultural, which is, once again, as I mentioned, is directed lending, so you have to have a particular percentage in it, crosses 5%. All other industries in this SME book are below a 5% level. And I think if you go to industry numbers, 6 or 7, it starts moving down to 3 and then to 2 then much lower than that. So there's a tremendous granularity in that. The delinquency trend quarter-on-quarter has also showed an improvement across all buckets. So be it the 7 plus, the 15 plus, 30, 60, whatever, there is an improvement across all buckets in the -- so there has been good recovery seen even in those areas. Coming to the few points then that we usually mention, which are some of our own individual metrics. Our self-funding ratio, once again, I must caveat, as I always do, this is not security. This is the bank's internal measure of the customers' wealth and liquidity in the SME space. We had mentioned to you in the early days of the pandemic, we were concerned and we were watching whether this would stay to -- maybe to our surprise. We are not surprised anymore about because we've now determined the reasons as well. But the self-funding actually grew from that point in time. I think the customers ended up with larger savings and larger balances in the bank than previously there. So that's -- that remains in the 70s now for a considerable period of time -- I mean between 70% to 80%. The collateral coverage, again, rather steady, currently around 85%. And it's usually been in the 85% to 90% kind of range. The other good thing, which I alluded to right in the beginning, which I could report to you now, is since the month of June, we have seen a very steady flow of receipts into our accounts. And this is something we monitor very closely. It's not just steady. It is actually growing. And at this point in time, I think I would be able to say that it's around 14% to 15% higher than the levels of the inflows in February. Thus, this once again, I think, reflects the health of the portfolio and the superior customer selection that the group has had. The ability of these customers to bounce back in terms of business receipts to pre-COVID levels and actually cross that shows that the book is in reasonably good health. That, of course, is all that we do internally. So we decided to do something a little more outward-looking. And we decided to plot the receipts in our customer accounts and the collections vis-à-vis the GST collections of the government. And the plot shows 2 almost parallel lines. So once again, this shows that the flow of funds into our accounts is mirroring the recovery in the economy as well, puts things into a good perspective for us. From the risk perspective, all I can say to conclude is we have our behavioral score. Just like we have the HDB ratings in the wholesale, we have behavioral scores, which focus a lot on customer behavior beyond just the balance sheet and the metrics. These are also gravitating once again back into the pre-COVID days. So all in all, comforting from our perspective. Just thought, Rahul, why don't you just speak a bit on the business side?
Sure. Hi, good evening. With commencement of the vaccination drive today, it finally feels that we are on the road to normalization. Well done, India, on that. Wholesale banking remains on very strong footing and had a satisfactory performance. Corporate banking and business banking continue to track better than originally anticipated before COVID. This was a quarter that not only saw strong quarter-on-quarter and year-on-year pickup but also an extremely strong growth in averages in both customer assets and CASA in the range of 30% to 35%. As per CSO data, advance estimates indicate mild positive growth in second half of current fiscal. Continued improvement across high-frequency indicators bodes very well for sustained recovery. Data points for December improved and continued to show a positive year-on-year growth trend even as the impact of festival-related holidays normalized. Manufacturing PMI, as Srini just mentioned, recorded expansion for fifth consecutive month, remaining at a very high level of 56.4. In December, GST collections, record high, 11.6% growth year-on-year in December. E-way bills for December were up 15.9% Y-o-Y. Power demand increased 5% Y-o-Y in December. Rail freight grew 8.5% in December. Weekly registrations for passenger vehicles remained robust, growing at a double-digit rate even in December and so on. However, as a very large transaction bank, we look at our collections and the collections of large corporates that pass through our cash management system. The quarter 3 collections were higher 11% year-on-year, which is how strong it was. This is in a sharp contrast to first half of the year when the collections were down 16.3%. For the month of December only, as people continue to debate what happens post the festival season, collections this year were higher plus 20% year-on-year. Normalization was also reflected in -- for example, in our wholesale SME book, where in the 12-month period, OD utilization moved to positive terrain over a year ago level. The bank added new-to-bank customers in excess of 2,000 in the quarter, which was 30% higher than prior year December quarter. It was a quarter of highest-ever disbursements that we have done. In light of this, here is our performance very briefly on business volumes. On customer assets, advances and investments put together, corporate banking and mid-market group saw a mid-single-digit quarter-on-quarter growth. The year-on-year growth for corporate banking remained at a healthy approximately 40%. Business banking saw a high single-digit percentage quarter-on-quarter growth in its asset book and a high-teens percentage year-on-year growth. We continue to receive responsible share of customer CASA across all our customer segments. Our growth is a result of our adherence to our institutionalized sales process, philosophy of service to customers and going deep into these rural geographies. We are not in a race to be #1 or widen our lead. The market is large for all participants to grow. What aided growth very importantly was government's efforts towards macro stabilization. Amongst a slew of measures, just to name 2, the 20% ECLGS scheme, its various modifications, 1.0 followed by 2.0, and changes in line with ground realities, all effected by the government, has helped stabilize the MSME segment, provider of jobs in the country. Liquidity flow through the measures of government and RBI supported the para-banking and banking sectors tremendously. As we look to next fiscal, it wouldn't be out of place to remain optimistic for after a long time, we have the position where you can look a little bit longer other than just a quarter or 2 quarters ahead. The first half will possibly continue to be aided by government-directed spend and CapEx in public sector activity while I believe the odds have considerably improved for private sector participation in CapEx formation from the second half of the year. Always one wonders that while growth in NIM performance have given a strong earnings momentum in the wholesale bank, has it led to deterioration in book? Given the quality of the book, as Jimmy described, there is no unusual bad debt formation or restructuring to make a commentary on. Thank you.
Jimmy, on retail, please?
Sure. So moving into the retail. I think last time I had spoken to everyone about the demand resolution and created that metric for ourselves. So I had mentioned we were at a 95% level at that point in time. Just to reconfirm or in case there's new participants on the call, what we mean by demand resolution is what is demanded during the month and collected during the month. So it was at around 95%. We had predicted it would move to around 97% by December. And that has actually happened. Just to compare it with pre-COVID levels, this would be levels a little over 98%. So we are very close to it, and we would be getting there. There has been a month-on-month improvement in all these months and in this as well as several other metrics. So we do intend to get there shortly. Looking at the check bounce trends. These have also been improving month-on-month since September when we naturally started measuring it again. There was no point during the moratorium. And those are also moving and once again gravitating very close to the pre-COVID levels all over again. Of course, these vary product by product, but on an average across the bank, that is how it is going. And let's not use that word average lightly. This is happening across products. So it's in every product, and that's how the average is effectively being built. If we move into the collection resolution, by which we mean the resolution of the cases that have actually bounced, this also is improving month-on-month and therefore is a very encouraging trend. And in fact, the bounce resolution has actually gone better than the pre-COVID numbers in the recent months. If we look at the higher buckets, the resolution is not over and above the pre-COVID months like the bounce resolution is but once again getting there in a sense. So all in all, the collection situation is improving as we move along, and we hope it stays that way, of course. And not much else to report in that particular direction. Agriculture has been a sector that has performed relatively well during this entire pandemic. It's holding up well. There are, in fact, a few signs we have observed recently that might lead us to say that things are getting better than the historical levels. But at this moment of time, we'd like to continue doing some more research on those and wouldn't want to put them on the table. So let's just continue to say that things are holding up well in the agri front. Recoveries also, which means recoveries on written-off cases, doing rather well since the last few months. And we are now around 15% over the pre-COVID levels when it comes to the month-on-month recovery as well. So all in all, I would think reasonably good situation on the collection and recovery front for all of us. To just take a minute on 1 or 2 other things that have been a little peculiar to the quarter. One is the restructured assets. So I had mentioned in the last call, if you recall that the restructuring, while it had gone live, was a little damp and not very enthusiastic in terms of its response. But I'd also mention that it was very early days, and something could emerge going forward. That turned out to be true. Two things happened. One is perhaps customers themselves felt that they should apply while the opportunity was there. But I think what helped it beyond that was the regulatory environment changed, in which it was permitted to do the restructuring on a mere request rather than to insist on a lot of documentation and justification for the same. So what we did was we tried to approach customers dynamically because we did see this as an issue, and we did want to be human about it. And whoever did apply and was basically eligible on absolutely basic grounds was offered the restructuring. And therefore, the restructuring numbers did go up towards the end of the quarter. A lot of this restructuring, therefore, I just would want to draw one distinction for the benefit of everyone. The restructuring that has been done is largely based on customer request because we did want to take a human approach to this. The -- it is not reflective of the bank's view on what would happen to that particular asset or the portfolio. The pro forma NPA that Srini referred to and also gave the numbers for earlier on is what the bank's view is on what would happen in terms of the -- any asset turning nonperforming. So I just thought I'll draw that distinction between how we handle the restructuring and the pro forma. They are 2 different things.
And the restructuring is 0.5% of total.
Yes, Jimmy mentioned that. You mentioned that.
We had had mentioned that. Also a small update on asset sales. We are -- we have always, in the bank, been looking at -- and we're also required to do it regulatory, but we do it anyway. We periodically examine the entire portfolio of bad assets, and we decide whether it is worth disposing some assets or retaining them for recovery. Whether we write off or not, of course, as you all know, we do not stop recovery efforts. So we do examine whether a sale could provide us a better return than our own recovery efforts in various assets as well as pools of assets. And whenever we do see that opportunity, we do sell the assets. Historically, as you would know, in the Indian context, the market has actually really been strong for wholesale stressed assets. And there hasn't been much of a market for retail stressed assets. As you know, our wholesale stressed assets have not really been fortunately very large. And for that reason, there hasn't been that much of a sale. But in the recent quarters, there has been a growing interest from various participants for retail assets as well. And hence, taking advantage of that, we have examined the portfolio. And since we did receive offers, which we thought were commercially in our interest and viable, we have sold some assets in the retail space as well. All I would say is, of course, the entire financial impact of such assets would have been taken in the current quarter as well -- to the extent it had not been taken in previous quarters. But there would be no further impact in the future going on over there. When we move into -- Arvind, of course, will get into the business aspect of it. But from the risk dimensions of the product growth, I would just be able to say that we are now pretty much approaching pre-COVID levels in terms of the business momentum. And in several products like the auto and 2-wheeler space, we are actually ahead of those levels. Personal loans are more or less on an even keel with those times. And it is a few products like business loans, et cetera, where things are not yet completely up to scratch. That is for 2 reasons. One is, of course, the market in this area might not be that aggressive. And of course, we would also be cautious in certain segments where we wanted to exercise that level of caution. But of course, Arvind will speak more on the business momentum as things progress. I think that's pretty much it from my side, except for let me just tell you a little -- I think comparing industry delinquency at this point of time is not going to be very meaningful because of the Supreme Court judgment. We, of course, are trying to work out and communicate our own pro forma delinquencies. But there is no consistent methodology for that. It's probably not good to compare that. But what I could give a small flavor on is the future portfolio because the assets that we are putting on in the current environment, if we just take one metric -- and this is again for the external world to give a reference, it is not the metric that we use internally. But if we look at the bureau scores of the new acquisitions, across all products, we are considerably higher than the average of the rest of the industry. So if you take one of the most significant unsecured products, around 52% of our portfolio is above what is generally considered a very high cutoff score in the bureaus compared to 35% for the rest of the market. If you take one of the largest secured products, those 2 numbers are a 42% for us and a 33% for the rest of the market with the same high bureau triggers that we are talking about. And if you look at products considered a little more risky even in the current environment like commercial vehicles, this actually becomes a 2x factor. It's virtually double the injection into our portfolio as compared to the rest of the market with these high-scored customers. Not the way we would want to actually describe this, but probably from an external reference perspective, the best flavor that I could give at this point in time. So that's a little bit on the new acquisition and the quality of the portfolio because you should know that what is being onboarded at this point of time is of the usual, if I may use the term, HDFC Bank quality. And I'll hand over to Arvind now so he can take it along.
Thanks, Jimmy. Okay, the retail assets umbrella of all 11 businesses, whether it's secured, it's unsecured, the retail working capital, the microfinance, I think in the last quarter, when I covered the July to September, I'd mentioned that we have grown by the double-digit sequential growth. This quarter, October to December as well, we are mirroring a similar sequential double-digit growth on the disbursals. So we have surpassed -- a, we have surpassed the pre-COVID run rate this quarter, which you heard Jimmy just sharing with you guys on the retail assets as a whole. Another point to note is that on a December to December, if I compare '20 and '19 Decembers, we're running a double-digit growth on the incremental business for that month as well on the overall retail assets business. We are observing bullish growth rates in the retail working capital, home loans, auto loans, loans against property businesses, our secured arms as well as the unsecured piece of the retail assets franchise. Let me also give you some ground-level feel on what's happening quickly, a quick snapshot. I think the retail working capital, we've seen a massive robust growth on a year-on-year basis. The SME side of the business has been ably assisted with our distribution strength, the bumper crop, a good agri uptake. The government credit line guarantee scheme added substantial value. We are also noticing a Tier 2, Tier 3 cities robust growth in the last quarter. The home loan business has also registered substantial growth as the market continues to be dominated, I think, more by end users in our observation. The stamp duty relaxation in certain states has given it a boost. Of course, the interest rates also have fueled this growth for the quarter. And we're expecting this kind of growth over the next quarters as well. The gold loan franchise, as you guys have seen, are experiencing an unprecedented high year-on-year growth rate. And looking at that opportunity, we are also sizing up our physical distribution accordingly with the liability branches to grow this in the coming financial year and the quarter that we've entered. In the auto loan business, we've already started inching on the growth path. This December versus last December, we're on a growth path. And we are hoping to strengthen this and consolidate this further this quarter itself. As a matter of fact, Jan itself, I think we should see a much higher growth rate on that. On the unsecured piece, we've noticed, like you heard Jimmy talking about, showing some confidence on the book. So I'll probably give you a quick sense there that we've increased our sourcing from the internal customers of the bank, one. Second, there's also an increase in the government segment contribution by almost a double digit. And another important aspect there on the unsecured loans is we have -- the sourcing is tilting towards a slightly higher market share in the highest-income segment. So that kind of echoes with what you heard Jimmy talk about, the quality of the portfolio, the confidence that probably he shared on that. In our microfinance business, I had mentioned that we have deliberately taken a more cautious and guarded path. However, I think our collections is in place. In Jan itself, we should resume the normal run rate on this business as well. And we are optimistic from here on. Last quarter, I also mentioned about the digital endeavor both on 4-wheeler and 2-wheeler loan sites. We've had already a representation with the regulators for the same. We believe that the bank's retail asset franchise is on a solid foundation, and we see robust growth indicators on the ground for most of the businesses, almost all of them. And we like to consolidate with both physical and digital, keeping a 3-year vision in mind. So I think that's a quick sense on the optimism that I shared with you, and I continue with that optimism from here on for this year as well. Thank you.
Thank you, Arvind. With that, may I request Stanford to open up the line for questions, please?
[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara.
Congratulations. My first question is on slippages. So you indicated slippages of around INR 51 billion for the quarter. It is very similar to the previous quarter even after 4 months of aging of moratorium loans. So could we -- is it fair to assume now that slippages have peaked? Because even with so much aging, pro forma slippages are not really higher than what we saw in the previous quarter.
Mahrukh, the way to think about slippages is that this is a pro forma slippage, which is that there is a standstill as of August 31. Even in last quarter, you know that we did tell you that we did a pro forma, including acceleration, right? That last quarter, we did do that. And in this quarter also, we have done a pro forma through an analytical approach. While I'm not going to venture into giving a forecast of where we will end, we believe we are fairly reasonable in making these kind of approaches to get to the pro forma in terms of slippage.
Okay. And could you share the movement of NPLs as in what was upgraded and what was written off and recovered during the quarter?
Yes. I believe you got -- the slippage is 1.86%, which is, say, call it, 4,900 and change. That is the slippage. Then the difference is between upgrades and recoveries and write-offs.
Okay. And my other question is on how much would you have disbursed under ECGLS 2. What would be your incremental disbursals under ECGLS in the third quarter? And how much of it would be ECGLS 2?
Jimmy here. There were 2 ECGLS, as you know, and I'll just ask Rahul to give you the numbers if he has them. But ECGLS 1, the bank was pretty much a dominant player and a leader in this because it was general, it was across the board, it was for all the MSMEs, and we actually had a very good output over there. ECGLS 2, as you know, was for specific stress sectors and a few other such constraints put out. Bank would usually, in its usual portfolio build, not have got the same level of exposure fortunately into such sectors. So we would not have had the same level of output. But for numbers, Rahul, you got any, too? Or...
Yes. So Mahrukh, just to give you a sense, at this point of time, as of yesterday, under ECGLS 1.0, we have disbursed INR 22,102.68 crores across 119,599 customers. In ECLGS 2.0, we have disbursed INR 579.16 crores across 58 customers. Thank you.
Okay. That's very helpful. Just one last question on restructuring. Would there be any corporate restructuring under implementation, which is not included in this 0.5?
No, I don't -- there are a few corporate cases. But I would think they're included as -- I would just ask him to come check that and get back to you, Mahrukh. But there are a few corporate cases. But I don't think there's anything more than what has been put out there.
Okay. Sorry, just one last question in terms of interest reversals on pro forma slippages. So would you have reversed interest also on these slippages? Or...
Yes, Mahrukh, it has been done.
The next question is from the line of Suresh Ganapathy from Macquarie.
Yes. My first question is on the qualitative front. On the technology side, I know the last time it happened was because of a power outage. But then how confident you are that you can really handle higher and higher volume? What are the qualitative changes that have been done, if you can just reflect upon that? And also, when do you think you're going to call RBI for a review? And by when this could get resolved? And the second related question to this is that your inability to add credit card customers, does it necessarily affect account openings? Has there been some kind of a reduction in account openings because of that? And sorry, finally, the last question is a clarification from Jimmy Tata. So you are saying that 1.38% is the pro forma GNPA and 0.5% is restructured asset. Does this mean that this 1.38% pro forma NPA also includes part of this 0.5%, which can potentially go back because this is basically an analytical NPA number that you are giving? Yes.
Taking the last piece first, Suresh, you -- yes, there would be some of it included. But I did mention earlier and I would take pains to point out that the restructuring has been done very genuinely based on customer requests and what they wanted and not on what the bank's view was in terms of the performance or ultimate slippage of the asset or not. And therefore, the pro forma NPA is a separate methodology and calculation, and the restructuring was based on customer request. That said, would some of the customers who requested for restructuring be included in the pro forma NPA? Yes, I would think so.
Okay. That's clear, yes.
But definitely not all, definitely not all.
Okay.
Getting to the other 2, the first one in terms of the technology upgrades and technology process, what we're trying to address, see, we have several action plans from strengthening of the disaster recovery or the recovery point and the recovery time and automating the orchestration tool to get on to the DR side or architectural efficiencies, cloud strategy, et cetera. There are several strategies that we have. Some are long term, like the cloud strategy, we should put that to the side because those are long term. It could be 12 to 18 months, right? So leave that to the side because that's not an immediate thing. That's more of a longer-term thing. But the rest of the things that we have envisaged and the action plans we are working out anywhere could take 10, 12 weeks from our side. But then from then on, the further time frame is not something that we manage. We will leave it to the regulator to handle it from -- in the form of further inspection, as I mentioned in my initial remarks, where they can inspect and institute the process how they will inspect and look at the action plans and the progress around it. That's not something that we can manage or we can tell you. But certainly, we'll keep you updated in the future as we go along and get to know more about that. In terms of the card accounts, yes, as I alluded to, from a liability opening, account opening relationship point of view, 2 million accounts we opened in the quarter. It is not hindered, right? We have had -- we provided robustly on the liability relationship. And as you know, when we get the cards, more than 2/3 of the accounts are coming from the liability base. And so from that sense, we haven't seen any kind of an impact on that sense on an immediate basis. But to the extent that these are all temporary, we should get back, and we know that the life cycle of a card, to become a little meaningful, is actually a 2-year journey for a card to become meaningful in its life, right? When a card is acquired, there's a 30-day, 60-day, 90-day kind of a time frame by when there is a program for activation and engagement. And then from then on, it takes another year and 9 months for the buildup to happen before it reaches the life cycle top. So -- and there are several intervention programs that happen in between. And so there is enough room for having various intervention programs to accelerate, right? It depends on what sort of programs we implement at what time period so that we can crunch this buildup life cycle to a short term as we go along. But at this time, to answer your question whether we are seeing, no, the 2 million accounts liability relationship we opened is quite robust. Last quarter was 1.8 million. The quarter before, 1.6 million. And this 2 million -- all of last year, we are ending March '20, all of that year was 6.5 million accounts liability relationship was what we opened. So we are on a good track from that sense to build -- start building. The initial relationship-building approach is robustly going.
The next question is from the line of Kunal Shah from ICICI Securities.
Yes. Congratulations to the entire team for this set of numbers. Just wanted to get some sense in terms of the SMA pool, SMA 1 and 2, which would be sitting out there currently and if you can give it out for some of the specific segments of retail and also the SMA 1 and 2 pool for HDB Financial.
Retail, firstly, the SMA 1 and 2 wouldn't be very applicable because you have the INR 5 crore cutoff for classification to start with. That said, we don't put SMA numbers out in the public domain, but they have always been and remain well ahead of industry.
The same for HDB, too. Shouldn't be in a big deal there. And that's not something, Kunal, that is a published number for us to talk about.
Well, last time, we just highlighted that it's been in a very narrow range of 1% to 1.5% and not moving out there. So just reading from RBI's FSR wherein it is actually moving up to almost 7.2%, so how should we read it into -- sir, particularly for our bank as well? And how representative would that number be?
We do not have a creep, is all I can tell you.
Okay. Sure. And secondly, in terms of this collection efficiency for last term also, we were highlighting that 95% was in September and would have improved to 97% in October. And that continues to be 97% in December as well? Because last time, we just broke it up between the morat and the non-morat pool as well. So currently, what number we are highlighting of 97-odd percent? This is, again, the combined number, which is there because last time in the non-morat, it was 99% and morat, it was 97% by October.
So 2 things there, Kunal. Firstly, our collection efficiency is an extremely broad umbrella terminology. So the 95% and 97% that we are referring to is what we are calling demand resolution, which, as I said, was what is demanded during the month and what is collected during that same month out of that demand. We do -- so, yes, this was at 95% the last time we spoke. And we had thought we would be able to move it to 97%, which, as I mentioned earlier, is very close to the pre-COVID numbers as well. And we have managed to do that, yes.
Okay. Sure.
Did I manage to answer?
Yes. So maybe last time, we highlighted October also 97%. So just trying to gauge in terms of October to December, was it flat or there was month-on-month improvement, yes.
I don't know. I don't recall exactly, but this has -- it has progressively moved from 95% to 97% by December.
Okay. Sure.
It's progressively moving up. Kunal, let me answer you. It has been consistently improving. If that is the question you are asking, that's the answer.
Yes, okay. So nothing in terms of stabilizing from October to December, so that's...
We are not -- no, no, there is no plateau in this, if that's what your question is.
Sure, sure. Yes. And lastly, we highlighted in terms of sale of retail distressed assets. So how much was that pool -- overall pool was? And how is it coming? So we said that maybe we are seeing a better recovery than the internal, and that's the reason we are selling out. So at what haircut would that portfolio be going out? Yes, if you can just highlight, is it a significant one? Or what is the quantum?
The recovery that I mentioned and the sale are 2 completely different things. I'm not including the recovery under sale in what I was selling. The recovery is what we have recovered through our own efforts on return of assets.
No. You have highlighted that wherever we see that, okay, sales proceeds are better than what we would have recovered internally, we are -- we generally approach it in that particular way. And we sold out some retail assets. So I just wanted to get the sense in terms of what was the proportion that was sold out in this quarter. And at what -- and maybe in terms of what would be the -- any provisioning that would have been made of that sale as well, yes.
As it relates to the assets that we have sold, Kunal, any financial impact, P&L impact or the delinquency type of reporting impact either in this quarter or in prior quarters, it has happened, right? And so there's nothing more on that from that sense. What I mean is that they are either declared NPA prior or in this -- as part of the pro forma in this. So that's why I told you 1.38, and it has gone out, right? So there is nothing more on those -- that front, if that's what you're asking.
Okay, okay. No worries, yes.
And from a recovery point of view, for your information, I alluded to the miscellaneous income carries any recoveries. 24 basis points on the total portfolio, that was the recovery in this quarter. Last year, I think it was 30 basis points or so, and last quarter, I think, it was 21 basis points or so. That's the kind of recovery rate, which we have recovered. Yes, yes.
Okay. And nothing worth highlighting in terms of the quantum sold out, so not a significant one, I think.
No.
The next question is from the line of Jai Mundhra from B&K Securities.
Sir, first question is on asset quality. Now the asset quality has panned out very well and probably had entailed in your earlier interactions also and probably also entail that some of that could be due to multiple dispensation given by RBI, maybe FITL, moratorium, ECGLS, et cetera. So do you suspect that as this dispensation gets unwinded, there could be some, let us say, impact on the slippages as we go into FY '22? Or do think there should not be -- we should not have any meaningful impact? Yes, that is the question #1, sir.
So firstly, if you look at the series of measures taken, it was, frankly, very well done by the government. The first thing was a moratorium. What do you do when you have a hemorrhage? You tie a tourniquet and you stop the bleeding. So I think that was step 1. Step 2 was you start injecting. That was your ECGLS. You need a further injection to cure even further. Because some gangrene is spreading, you inject ECGLS 2. And lastly and finally, if there is anything residual at all, you had your restructuring option, which was given to the customer. And the entire power in all these measures, if you can see, was not left with the banks. It was put in the hands of the customer. He could ask for his ECGLS, he could ask for the restructuring, and it was done on his request. So that answers Part A of what you were saying. Part B of what you were saying is that there is no unwind here because they're real measures. See, what had to be unwound was unwound in August. You're seeing the impact of the moratoriums end, and you -- and now we don't need to talk about it anymore because it's more than 6 months away. The rest of it is, frankly, not being unwound. It's permanent. The ECGLS injections are there for the benefit of the customer for time to come. The restructuring is there to the benefit of the customer for time to come. So there is no unwind left. There may be time horizons within which you had to act on each of these measures. That's fine. But the impact of those measures is lasting. So I don't see what you were perhaps alluding to as a fear that as these unwind, there will be stress pouring out from all corners. I don't see that.
Sure, sir. That's helpful. And secondly, sir, on HDB Financial, so there is pro forma basis, the GNPA has moved from 5.2 to 5.9-odd percent. Anything specific or any products that you would like to highlight where you are seeing a relatively higher stress? Or any qualitative comment within the customer segment or within the product segment?
Not really. As you know, HDB operates in a segment that is of a higher-risk customer segment than HDFC Bank's. That has always been the case. They also operate in a product range that is a little different from HDFC Bank's. So it's never fair to compare. That said, there is nothing of any material note in terms of change between the quarters to report, no.
So sir, and then last question, sir. Correct me if I am wrong, but if I compare RBI data that we give on a monthly basis -- sorry, on the sectoral basis, it looks like that the retail growth is even lower than the RBI reported retail growth. So could you -- I mean that has been there for the last 2, 3 quarters. So could you provide some commentary around that?
We'll leave the growth in the bank...
Industry is talking about...
We gave our numbers. Jai, we talked about the growth that we have.
Jai, we have always said and maybe from that respect -- we have our policies and product programs, and we grow as much as we can within those policies and programs. We aren't really guided by how competition is growing from time to time. And we take guidance from our own programs. So I don't have the numbers you are talking of with me. But if at some point of time, we grow slower than the market, at some point of time, we'll grow faster than the market, what I can tell you is we grow within our program which we consider to be the safe limits for growth. Thank you.
The next question is from the line of Shagun Verma from Goldman Sachs.
This is Rahul here. And actually, a couple of questions. First one is on this restructuring. So can I just understand -- just trying to understand here, this 0.5% would largely be corporate and would we be done with it? Because I think there is an element of integrated agreement also, right, particularly for the larger cases. If at all, we have got exposure there. So could there be some more loans that can show up in this number in the fourth quarter? That's question #1.
Well, Rahul, it is -- in this one, it is predominantly -- a lot of it is retail. That's one thing. The second thing is that whether you're done with it, things in the pipeline where some documentation completion can happen subsequent to January 1 can happen. Will that be a big number, material number? No, it will be insignificant. We don't foresee big numbers coming through that process. What's your second one, second question?
Yes. Second one is actually on the retail growth. So quarter-on-quarter, the book has grown. So definitely, disbursals have grown much faster, as Arvind was alluding to. Just trying to understand, is there any -- I mean can you give us some flavor about the growth in number of customers versus the balances, which way the volumes would have moved in terms of number of customers? Because industry-wide, the check bounce trend still is fairly elevated. So are we definitely benefiting from the market share consolidation, which would reflect in value terms? So just trying to get some more color on that without getting into the numbers.
I don't have a particular customer count, but it will be broad-based in terms of growth rather than a concentrated growth.
Okay.
And that would be fair, yes, I think.
Okay. Just one data-keeping question, Srini. Can we get the write-off number for this quarter?
As we go along, I'll try to get it. I don't have it in front of me, Rahul, yes.
Yes. And just the last question, Srini. So the Reserve Bank of India had put out this draft paper for the NBFC's path forward. Just wanted to understand your preliminary views, if at all, from the bank side given the fact that we acquired HDB Financials, which could -- I mean, which could be affected by the new sort of regulation. So any preliminary thoughts that you may have on these draft guidelines or draft paper rather?
It's still in a working paper form with the views and suggestions and inputs to be given by 15th of January, which was yesterday. It still remains to be seen how this shapes up and evolves. We'll have to wait and see how this evolves into shape.
The next question is from the line of Manish Ostwal from Nirmal Bang Securities.
I have only one question. On our HDB Financial, we have a gross NPA of 5.9%. What is the total provisioning number? Because the way you shared for the bank number, contingent provisioning for the pro forma gross NPA, what is the total provision we have done to date?
In this quarter, I think the provisioning was about INR 800 crores. That's what readily I have.
Balance sheet number, sir. Balance sheet number I'm looking at.
No, I don't have it in front of me. I'll have to get back to you on the balance sheet there. You know that HDB Financial Services closes their books on Indian GAAP basis. We take and consolidate on an Indian GAAP basis. So Ind AS and Indian GAAP...
They close on Ind AS.
They close on Ind AS, and we consolidate on IGAAP. So 2 different bases we have, and I don't have readily in front of me what that is, yes.
The next question is from the line of Abhishek Murarka from IIFL.
Congratulations for the quarter. So just a couple of questions. The first question is basically on net interest margin. And if I see in the last 3 or 4 months, that's how far back the last TD rate cuts or rate cuts were. So is there a base forming in terms of cost of funds, whereas there is pressure on yields? So do you think the NIMs are largely at the higher end of your band? The second question would be on the unsecured growth. I know I think you've alluded to it. But I just wanted to know, on a gross basis, how much credit card do you issue, let's say, on a monthly or a quarterly basis? Just a ballpark will do over there. These 2 questions.
Okay. First is relating to the net interest margin.
Yes.
The bank has operated on a net interest margin between 4%, 4.1% on the low side, 4.4%, 4.5% on the high side. If you look at it over a period of time, that means if you look at it for the last 3 years, look at it -- don't look at quarter-to-quarter but look at annually, if you wish. Look at 3 years, 5 years or 10 years for that matter. That's the kind of range the bank operates. So at 4.1%, 4.2%, you can call it at the -- towards the lower end, right, to the left of the center. That is the kind of range this 4.1%, 4.2% is from where we are over a period of a longer cycle when you look at it.
Yes. Srini, but the point is in this part of the cycle, let's say, in the medium term, not immediate, but we are growing faster on the corporate side, and that is pressurizing yields, whereas on the cost of fund side, you would be close to a bottom in terms of the ability to cut rates further. So do you see the bank hugging, let's say, the lower end of the band for a while? Or do you think you can grow retail fast enough incrementally and sort of get NIMs back up?
There is no one particular target that we shoot for. But the way we manage in the ALCO is assets are priced based on our cost of funds. We run ALCO once in 2 weeks, and we price the products according to what we can do and what we want. And the way the bank as a whole, we have managed just to operate within this broad band of 4.1% to 4.4%, 4.5%. Within that band is what we target to manage. And what at the end of the day, the volumes come in, the demand comes in and shakes out, that's where it comes. And the -- so sometimes 10 basis points can go down, 10 basis points can go up. But that shakes out as a part of the process. But the way we follow is like this, we look at the assets are priced based on our cost of funds and according to the risk measurement that we have for different category and segment of customers.
Sure, sure. That helps. And regarding the credit card?
That's not something we have published, and so I don't want to put something new. That's not something -- unless it is there in the public forum, it is there. But otherwise, we have not disclosed that number, yes.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Srinivasan Vaidyanathan for closing comments.
Okay. Thank you. Thank you very much, Stanford. I appreciate the participants dialing in. And if you do have more questions, queries, feel free to reach out to us in course of time. We shall be happy to engage with you on anything. Thank you. Appreciate it.
Thank you very much, sir. Ladies and gentlemen, on behalf of HDFC Bank, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.