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HDFC Bank Ltd
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Ladies and gentlemen, good evening, and welcome to HDFC Bank earnings call on the financial result for the quarter and year ended 31st March 2018, presented by Mr. Paresh Sukthankar, Deputy Managing Director; and Mr. Sashi Jagdishan, Chief Financial Officer.[Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Sukthankar. Thank you. And over to you, sir.
Thank you. Good evening, everyone. And first of all, apologies for having to start a little later, but then we got the results in a machine-readable format uploaded and so on. It took a few minutes, but we had indicated that we might start it 5:15.So without much ado, let me read out some of the key financial data parameters. And then we'll be happy to take questions thereafter.So as you're aware, the Board of Directors approved the bank's quarterly and full year results at the meeting held today. The [indiscernible] accounts, of course, have been audited.For the quarter ended March 31, the bank's total income was INR 25,549.7 crores. This was up from INR 21,560.7 crores for the quarter ended March 2017. Net revenues increased by 19.1% to INR 14,886.3 crores. Net interest income was up at INR 10,657 crores, which grew by 17.7% over the INR 9,055 crores for the quarter ended March '17. Average asset growth was 16.9%. The core net interest margin for the quarter was 4.3%.Other income was 28% of net revenues, so net interest income was 72%. So other income at 28.4% of net revenues was -- grew by 22.7% over the -- and touched INR 4,228 crores for this quarter over INR 3,446 crores for the corresponding quarter of the previous year. The -- there are 4 major elements in the other income. Commissions, which are the largest piece, accounted for -- were about INR 3,329 crores out of the total INR 4,228 crores. So fees and commissions grew by 22%. FX and derivative revenues were INR 416 crores, grew by 16.7%. The profit and loss on sale of investments or bond gains and losses, there was a loss of INR 22 crores, as against a gain of INR 180 crores in the corresponding quarter of last year. And the recoveries and miscellaneous income was at INR 504 crores, as against INR 386 crores for the corresponding quarter of last year.So once again, the total other income grew by 22.7% to INR 4,228.6 crores.Moving on to the expenses. Operating expenses for the quarter were INR 6,050.6 crores, and these increased by 15.9% over the corresponding quarter of the previous year. The core cost-to-income ratio, therefore, was at 40.6%, as against 42.4% for the corresponding quarter of the previous year, of March 2017. Total provisions were INR 1,541 crores, as against INR 1,261.8 crores for the corresponding quarter of last year. If you look at the breakup of those provisions: INR 1,132 crores were specific loan loss provisions, and general provisions were at INR 153 crores. And other provisions, including contingent provisions, were at INR 255 crores.After providing for taxation, the bank earned a net profit for the quarter of INR 4,799.3 crores, which was an increase of 20.3% over the corresponding quarter of the previous year.For the full year, for the year ended March 31, 2018, the total income earned was INR 95,461 crores. Net revenues were INR 55,315 crores, up 21.7%. The core NIM for the full year was 4.3%. The core cost-to-income ratio for the full year was 41.7%. And the full year net profit was INR 17,486 crores, up 20.2% over the -- over March -- the year ended March 2017.Total balance sheet size touched INR 1,063,000 crores. This is up from INR 863,000 crores in March 2017. Total deposits were INR 788,000 crores, up 22.5%. Savings account deposits at INR 223,000 crores were up 15.6%. Time deposits were up -- were at INR 445,000 crores. They were up 33%, so CASA ratio was at 43.5% as of 31st of March 2018. Advances at INR 658,000 crores increased by 18.7% over the previous year. The both wholesale and retail have grown, and the mix now is about 57% retail and 43% wholesale. On the Basel II classification basis, the retail loan growth was 27%, and the wholesale loan growth was 9.4%.On the capital adequacy, the bank's total CAR ratio as per Basel III guidelines was at 14.8%. This compares with 14.6% as of March 2017; and as against the regulatory requirement of 10.875%, which is -- includes the capital conservation buffer of 1.875%. So 9% as the basic CAR requirement, plus the CCB of 1.875%, that makes it 10.875% as the requirement. And we are at 14.8% as against that. The Tier 1 capital adequacy ratio was at 13.2%. That's as against 12.8% in March last year. The CET1, common equity Tier 1, capital ratio was at 12.2%.The Board of Directors recommended a dividend of INR 13 per share of -- for per equity share of INR 2, as against INR 11 per equity share of INR 2 for the previous year. This, of course, will be subject to approval by the shareholders at the next AGM.On the network side we closed the year with 4,787 banking outlets. These were across 2,691 cities. We also have 12,635 ATMs. And 53% of the total banking outlets are in semiurban and rural areas. The total employee strength went up from 84,325 employees in March 2017 to 88,253 employees as of March 2018. On the asset quality front, gross NPAs were at 1.3% as on March 31, 2018. This is as against 1.29% in December 2017 and 1.05% as of March 2017. Net nonperforming loans were at 0.4%. As of March 31, the bank was holding floating provisions of INR 1,451 crores.A word or two on our subsidiaries. As you know, we have 2 subsidiaries.HDFC Securities Limited, which is amongst the leading retail broking firms in India. And the bank holds a 97.7% stake in HSL. For the year ended March 2018, HSL's total income grew by 42% to INR 788 crores. Net profit for the year was INR 344 crores, which is a growth of 59.5% over the INR 215.9 crores in the previous year.On HDB, which is a nondeposit-taking NBFC which offers a wide range of loan and asset finance products to individuals and emerging businesses and micro enterprises. Again, the bank holds 95.9% in HDB Financial Services. As of March 2018, HDB's finance -- balance sheet size was at INR 44,754 crores. The total loan book grew by 34.9% to INR 43,573 crores. Their net interest income grew by 36.9%. The net profit for the year was INR 951.7 crores, which is a growth of 39.1% over March 2017. Gross NPAs for HDB were at 1.6%. Net NPAs were at 1%. And their CAR, total CAR, was at 17.9%. And Tier 1 CAR was at 13.2%.Finally, the consolidated net profits for the year ended March 31, 2018, was INR 18,510 crores, up 21.4% over March 2017. Consolidated advances grew by 19.6% [indiscernible] INR 700,000 crores as of March 2018.I think we've, I've pretty much walked you through almost all the financial data a little more in detail since maybe some of you might not have received the -- or might have received the call -- received the press release only as the call was starting. So I took that additional time to read the results, but we'll be happy to take questions now.
[Operator Instructions] First question is from the line of Mahrukh Adajania from IDFC.
I just wanted to -- could you share there the number of slippages for the fourth quarter?
Yes. It's [ 1.72% ]. Do you want the absolute number or just the percentage?
The absolute number.
Okay. It's INR 2,790 crores.
And my second question is that, with so many banks now being under PCA [ plus the ] PNB scam, the corporate -- the growth opportunity in corporate loans has been getting bigger, so would you like to grow your corporate loan book at a faster pace? Or how do you view this opportunity? Anyway, there has been a traction in your corporate loan growth, but from here on.
So I think the...
[ The base effects ] [indiscernible].
The corporate loan growth has been fairly healthy. It looks a little muted for March over March and because, March 2017, actually, that quarter, we had seen a very sharp spike in corporate loan growth. But to your point, are there opportunities to gain market share in corporate? In fact and actually, I will say wholesale, which includes corporate, the middle market and SME. The answer is yes. So that's been something we've been doing, and we remain focused on it. I don't think -- I wouldn't say that only tactically issues which are currently being faced are the only reason. I think we are focused on gaining share based on what we [ immediate ] offering in terms of reduction in turnaround times, the technology and digital backing of our products. So yes, I think we'll remain focused on growing our wholesale book within our risk appetite.
And [indiscernible] or core asset quality now stabilizing? Or there's still an issue with the rules and staff [indiscernible].
Yes, I don't think we can say that the [ agri ] piece is completely settled yet. The -- typically because these news come up every second -- every [ odd-next ] quarter because of the corp loan cycles. And yes, there are other issues which impact asset quality beyond just the [ foremost ] cash flows, whether it is issues like what you mentioned in terms of potential labor promises or anything of that sort. So I think this is a portfolio which still we sort of remain focused on growing but in a cautious manner.
The next question is from the line of Manish Ostwal from Nirmal Bang.
My question, on the balance sheet growth in this quarter. There's some mismatch in terms of our total deposit growth and loan book growth on quarter-to-quarter basis. Secondly, timed deposits also grew 13%, whereas our loan book growth, only 4.3%., so can you throw some light why there is a mismatch in that kind of growth rate?
Interesting. Yes, actually if you look at the previous couple of quarters, loan growth has sort of stayed a little ahead of deposit growth. And we have seen that deposit growth had been...
Lagging.
Was lagging loan growth in both the September and December quarters, so we did want to step on the accelerator a little in terms of getting more deposits flowing, which is what we have done. I mean, if you now look at not just the sequential growth in a particular quarter but if you look at the total deposits and the loan growth, you'll find that we are very comfortably funded. But our loan-to-deposit ratios are still in a range which is sustainable. So from our perspective, we still continue to look at pacing both our loan and deposit growth on an annualized basis at somewhat similar growth rates. And of course, we'll try and maintain a healthy mix of those deposits as we get them. So you're absolutely right that, in this last quarter, there was a bit of a catch-up in fixed deposit growth, which had been lagging in the previous couple of quarters.
Second. So employee expenses growth has been quite muted over the last few quarters. And why [indiscernible] addition such a slow pace or digital banking making a reduction of roles or jobs. How do you see employee cost trend over next 2 years?
So I will say not just from an employee cost trend point of view, but from an overall OpEx perspective the move towards increased digitization both in terms of proportion of transactions which are moving to digital channels; as well as our sales, credit and operations processes, especially on the retail lending side, clearly both of those are helping improve our productivity and cost efficiencies. And as a result therefore, you have seen in the last 4 to 5 years in baby steps the cost-to-income ratio has continued to increase -- improve. It's coming down. Having said that, because the bank has been growing very substantially and we continue to increase our presence in some of the semiurban and rural areas, and there are some other segments and initiatives that we keep driving, the total number of employees, of course, has grown this year. It was, again, a little muted last year, but -- in fact, it's had come down last year from the previous year. And now it's back again at a slightly higher level than where it was in March 2017. So if at all, we've got an increase in staffing. It's because of purely increased growth requirements even after the scale that we had achieved, even after the improved productivity and efficiencies that come from digital and other process reengineering.
And in this year, in this particular year, sir, when I compare the fee income growth over the last couple of years, this year the growth is very, very strong, 30% on a full year basis. So is there -- on a full year basis, is there many -- I mean, any large one-off in the core fee income? Secondly, how do you see the sustainability of this growth rate?
So you're right that this year -- I mean, from a couple of years of roughly mid-teen growth, this year, we've seen most fee lines grow in the -- somewhere in the mid 20s or sometimes even higher. And the 3 areas where we did see a pickup in fee growth in the last year has been third-party products, both mutual funds and insurance. Retail asset fees, as the retail loan book, continue to grow; and credit cards, of course, again because of continued growth in terms of both card issuances and expense...
Especially after demonetization, we have seen a large shift to credit card spends, both debit and credit card spends. So that has also helped us to have a higher income growth from the transactional side of credit cards.
Of course, the -- within the other income, given the increase in bond deals in this quarter, there is a small negative on the bond yield side, but the fees and commissions and FX revenues have done visibly well. Regarding to your question is there any large one-offs, no. There may be some small one-offs here and there, but there is no large one-off which distorted it too much. But -- and therefore, if there were a couple of percent growth which could have been accounted for by some one-offs here and there, it could still have been a fairly healthy growth for this year somewhere in the mid 20s or thereabouts.
And very quickly, 2 comments on -- one is capital raise update. And the second, listing of any subsidiary in near term.
Well, on the capital raise, after the shareholder approvals, we are awaiting the government approvals. So that's the next step. And until that time, there will be no further visibility or road map that we can lay down. So at this point of time, we are still awaiting the approvals. And at this point of time, there is no immediate plan, as far as any other -- as far as the subsidiaries are concerned in terms of capital raising.
The next question is from the line of Kunal Shah from Edelweiss Securities.
Yes. Again touching upon this deposit base. So now what will be the proportion of the retail and the wholesale? And if you look at this 13% sequential growth, whether it's more of a wholesale deposit, short-term deposit or it's still the retail one which has led to this entire growth.
So in this last quarter, we have seen a good pickup in retail deposit growth as well. And of course, wholesale, that's a little mix of our fixed deposits. The fact that in this quarter deposit rates moved up a little certainly has helped the sentiments for fixed deposit. I think 2 things happened. Perhaps the increase in bond yields perhaps meant that some of the -- let's say, who were investing in bond funds or debt funds might have figured that or might have preferred moving to bank deposits. So you will see fixed deposits gaining interest again with retail sellers. And that was further sort of given a nudge by the improved -- by the increase in fixed deposit rates. So as of fixed -- as of March, the -- or it's...
[indiscernible] March.
No. [ Let's look at total position ].
[indiscernible].
As of March, the total retail component of our fixed deposit was 73%.
And how much will that be in Q3, December?
About 77%.
Okay, so from 77% it is [ off ] to 73%.
Yes.
So how do we see -- so larger part of this piece would also come in towards the end of second of the -- quarter. And overall when we look at even on the advances side, so obviously the CD ratio has contracted to around about 83-odd percent. So how should we look upon this in terms of the overall margin for Q1 and going forward? So will there be like the lag impact which we could see through because of the deposits as well as maybe moving towards the better-rated profile on the assets side?
So to be honest, I wouldn't say that the deposit growth in this quarter was largely rear-ended. There could have -- it has been still pretty healthy deposit growth through every single month in the quarter, in fact, but on NIMs, whether it's the result of what's happening on the deposits and deposit-cost and loan yields or the mix of loans or generally the market environment, I think we sort of stay with the fact, while we don't have a specific guidance on a number, we've -- traditionally we've remained in this range of about 4.1 to 4.3 or something like that. And I think all of these potential impacts will probably keep us in that range. So within that range we can see a movement in both directions from quarter to quarter, depending on how the environment is and the liquidity position in the environment is, but I don't see us being outside that 4.1 to 4.3 or perhaps a 4 to 4.4 range at least in the near future.
Okay. And in terms of the advances, so obviously the advances have grown particularly on the corporate side given the opportunity which is that debt's still been, say, lower. So how are we looking at it in terms of maybe PSU banks not being active? Or what will be [ our certainly order ]? Are we looking at the businesses and in fact that sort of led to the better growth in this quarter and in coming quarters as well? Or maybe we are holding on to as of now because of the increased competition which will be there. So how are we playing this entire space as of now?
So clearly, on the retail side we are a market leader. A lot of these products are doing well. We continue to grow that building on our brand, our distribution, our product range, our technology based on the customer experience. On the -- and to be fair, on the retail side, since there aren't -- I mean we -- there aren't too many other banks who've been of significant size, our market share gains probably are a little lesser on retail side. Our growth is more linked to the underlying market. So the underlying demand for those products are still being fairly healthy. On the wholesale side, as I mentioned earlier as well, between the large corporates, the emerging corporates and what we call business banking...
[indiscernible].
There is a good momentum. It still remains a credit environment that one needs to sort of be careful about, but within our credit appetite there are opportunities, and we are tapping into those. This is across each of the 3 segments that I mentioned. Given that loan yields have been somewhat muted given the competitive levels, the competition levels; and the fact that good credits are getting rates which I think sort of while -- were not in line with the kind of growth that had happened on the deposit rate side, we've been growing, but we have grown that within our appetite and at the right rates. So we do see in this year as well both wholesale and retail growing in not very different growth rates. And we are -- we believe that we will be well positioned in both these. Some of that growth is obviously coming depending on what the competitive environment is.
Also, Paresh did allude to at the beginning of the conversation that in fact, March '17, in the quarter of March '17, we did see a bit of a spike in our loan accumulation. We added as a bank INR 60,000 crores. So if you adjust for some of the base effects there, I think the growth was pretty healthy even from -- even on the wholesale side.
Okay. And lastly, in terms of slippages, any impact of RBI's revised framework on our overall slippage number of INR 2,800 crores?
No, not during this quarter.
The next question is from the line of Suresh Ganapathy from Macquarie Capital Securities.
Most of my questions have been answered. Just I wanted to know, what is the largest [ plan ] you're requiring a government approval for capital raising? I mean, as long as you do incremental capital raising also and [ certainly for 25ths ] percentage format, why should you require a government approval?
So raising -- yes. This is a total capital raising that we have got crosses INR 5,000 crores. I mean, for a total foreign capital raising cost, it's INR 5,000 crores. We do need approval. In fact, what used to be the -- while the FIPB doesn't exist anymore, there is an equivalent approval from the...
[ Varying interests ] [indiscernible] ministry of...
From the [ parent ] ministry and then...
Kind of BIA approvals, a cabinet committee [indiscernible].
So there are already -- there are legal approvals which are required for us to raise.
So for anyone who raises more than INR 5,000 corers foreign capital.
Yes...
I guess that's...
So there was -- for a while, there was no limit. The limit has been put in, I think, about 6 months ago.
The next question is from the line of Sameer Bhise from JM Financial.
Can you talk about competitive intensity in some of our retail products, maybe fees or [ further marketing on the ] unsecured products?
So clearly, competitive intensity in most retail products has increased because, I guess, many banks who traditionally were not so active on retail are perhaps on the rebound from the wholesale business, so they're not growing as fast; or maybe because they just are now looking to grow their retail books more than they had in the past. There are a few more players. And those players who've been around have been looking to increase their shares. So it's been competitive both from a rate perspective, from a PL perspective. Obviously, to the extent that we are well positioned, given the fact that we've probably been one of the few players who has been consistently in this space, has a market leadership and has constantly been evolving in terms of our offerings, the turnaround time that we deliver on our digital platforms and so on, we've been able to maintain and in our case even increase our market share. But from a pricing perspective it still remains fairly competitive. And if there are smaller pockets where we find that the rates have become odd, the risk-reward or the rates themselves or the payouts are not -- don't [indiscernible] to make sense for us, we've decided that a marginal business is not something which we would look to tap into. But that's -- those are small pieces. The larger parts, I think we still see a strong opportunity to grow across the entire range of retail loan products. We remind you these numbers are muted to the extent that, in the last couple of quarters, we've not taken too much of our home loan origination. In fact, we have taken none of our home loan origination in the last 2 quarters because we were seeking some...
[indiscernible]...
Clarifications and so on, on some issues...
On the GST...
On the GST and some other issues. So -- but once that is resolved, we will start taking what we have originated back. So our origination engine still remains strong and ticking away, but the actual retail assets growth on the books is muted to the extent of a couple of quarters of retail loans that we have originated but we haven't bought back.
Bought back.
And just quickly, any strategic update on the HDB Financial Services, from what products the growth has come from or where it is heading from a medium-term perspective?
Well, the logic of HDB has been very clear, that they are in many of the products that we do. However, they access a customer segment that the bank does not access, right? So they are clearly more in the segments which, as an NBFC, they are comfortable accessing. So they come in at a slightly different rate and risk segment. Their growth has come actually from a range of products. They have grown commercial vehicle and construction equipment business. They have grown business loans. They have grown LAF. So it's really a wide product range across 3 or 4 retail products. Many of these are products that we would do at a different price point. And from a medium-term perspective, we still believe that there is a large opportunity for them to continue to grow. They, today, do have a fairly healthy distribution themselves.
[indiscernible] 1,000 different...
About 1,160 outlets, so -- 1,165 to be precise. So there is, we believe, a good run rate for them to continue to grow.
The next question is from the line of Ravikant Bhat from Emkay Global.
Just 1 quick clarification, dimension of INR 500 million capital are through a mix of perpetual or AT1 bonds and infrastructure bonds. If I recall correctly, last year, you had this item on the agenda for the AGM. So I believe this [ consider ] enabling resolution?
That is absolutely correct. That's actually correct. There's a requirement for us to take shareholder approval which typically, I think, are valid for a year, right? So this is why we need to -- within that, the actual amounts that we raised tend to be smaller, but these are enabling shareholder approvals. We take what we believe is -- will be more than enough for us to be raising there. Last year, of course, we did ultimately within that limit that got approval, raised some AT1 bonds and in Tier 2 and infra bonds and so on. Clearly, the 50,000 is the shareholder approval that we are seeking.
And if you could just shed some more light on what your thinking is, and since we have mentioned infrastructure bonds, what's the bank's thinking over there? What kind of growth you would want to have, if at all, [indiscernible] start and collect it?
So the infra bond, and I'll just call infra bond, as you know, they had only senior bonds that banks are allowed to raise. And we can raise them to the extent of our infra portfolio and our affordable housing portfolio. So actually, a larger portion of the portfolio which becomes eligible for us to raise these bonds, again, tend to be our affordable housing portfolio, which is part of what we originate and then we buy back from HDFC. But separately, as far as the infra opportunity is concerned, in specific segments and for customers that we've been dealing with, we have seen a growth there. Again, it's not a large portion of our portfolio. But selectively, we do have the appetite to grow and we've been tapping into those opportunities in -- during the last few quarters.
The next question is from the line of Ravi Naredi from Naredi Investment.
So much cash withdrawing from bank now and there are a long queue. Are you getting good deposits yet?
Well, frankly, the deposit growth has, knock wood, and has little to do with the cash demand or cash withdrawal. If anything, the queue that one sees are really a function of, perhaps, the increased demand for cash. But I don't think the cash queues and ATM queues have really no, I mean, relationship or direct relationship with the deposit growth at all. Obviously, if you go back to the demonetization date, that is a different issue. As you know, people had to deposit cash in older currencies which was demonetized, and that led to a spike in deposit growth. But this is just normal currency which has been sort of withdrawn for whatever use by customers.
So now there is a news that some banks -- the new regulation, finance minister has imposed, that the [indiscernible] persons are fearing and they are withdrawing deposits and...
I don't think -- that is something which has been speculated upon long back. I think in the recent past, not of that is -- we haven't sort of got any of that as a feedback.
And one more thing there, now the cash is more in compared to pre-demon level. So can you tell what is going on about cash requirement -- excess cash requirement and I think can you tell something with what is going on?
Honestly, at a system level, it's tough for us to try and conjecture that. All I can say is that in our own experience, the digital transactions from the pre-demonetization time to now have gone up very sharply.
Yes, but that is the thing, that cash requirement is now too much that we can't [ keep ] the level -- or what is going on? That's the important point. That's why I'm asking you because you are a good banker and you can tell what is going on. That's why I'm asking.
I think, I'm sure, if there were 5 of us, we'll have 7 opinions on that. But to be honest, everybody is groping in the dark about where -- or the total cash level is. In fact, the numbers seem to indicate that the total currency circulation seems to be back to at or about where it was pre. But then it's been a couple of years, so the total -- the economy and, therefore, the amounts will have also gone up. But honestly, I think I have no specific knowledge or data which I can give you.
The next question is from the line of Nilanjan Karfa from Jefferies.
Paresh, a couple of data points. First of all, I think we did add some floating provision this quarter, is that correct? I think INR 1,326-odd crores, right, last quarter, December quarter?
So there will have been a reversal, right?
So there, if you recall, there are -- whatever we created in the third quarter comes back on a particular account. That provision has come back to floating provision. And also, way back there was another government account where we were asked to provide standard provision, that has also come back. One portion of that has come back this quarter in floating provisions.
So it's really a reversal of where the floating had been utilized in the past various quarters and those have been reversed; they have been put back into floating.
Okay. And any policy that you have in place right now as to how much high this number could be?
So I think there is a board-approved policy, but it's more to do with our assessment of various portfolios where we see something specific in terms of the outlook for our portfolio and the environment. But there is no numerical sort of policy that we are -- or number that we are trying to guide to or that we think we should target in terms of basis points for floating. Again, I think [indiscernible], as we move to Ind AS, all of these provisions will sort of [ forward ] into, converge into what the requirements will be under that. So I think this whole thing of specific, general and floating and so on, is really a current GAAP issue, which will get morphed into slightly different types of provisions, if you might, under Ind AS.
Absolutely.
Sure. And can I have the movement of gross NPL between addition, cash recovery, write-offs, et cetera?
Sure. So the -- no, for the...
For the quarter.
The additions during the quarter were INR 2,790 crores. The reductions were INR 2,417 crores, which -- you have breakouts of those, right?
Yes.
So which amounted to INR 807 crores of upgradations, INR 723 crores of write-offs and INR 888 crores of recoveries.
Great, okay. And are we carrying any security receipts? I think last quarter, last year, I think it was some INR 220-odd crores. What would be that number this time?
They might have -- I think they have very mildly run off, but they're roughly in the same range.
Right. And are we carrying any 5/25 accounts? Because I think we also had a similar number last year.
So I don't think there's any increment to 5/25 which are now remaining?
No. None.
No.
Okay, okay, okay. And then last qualitative questions on -- specifically on SME and further drill-down into exporters. Have you witnessed any improvement in those categories in terms of their underlying turnover volumes, et cetera?
In some segments of SME, we have seen a bit of a bounce-back. After the initial impact which they went through post the transitional phase of GST, they have obviously found their bearings and we have seen some of them bouncing back. On the exporters, we really haven't found any -- we haven't experienced anything which is meaningful in terms of a trend. And there are -- I'm sure there are pockets of exporters who are doing better and some who are doing as well or as badly as they were. So -- but from our point of view, SME is an area that we've been growing across what we call Business Banking and even what we call emerging enterprises group, which is even smaller than the Business Banking segment. And this is a segment which has, of course, risk associated with that. But we do find overall that our existing customers are seeing some growth, and there are opportunities to add new customers in this segment as well.
Okay. And have you, fundamentally speaking, are you going into areas which you, in the past, did not lend to? For example, could be electrical segment or something like that. Because of better availability of data, has that clearly been happening?
No. So I think that will take a little more time. So I think we are talking about the organized players coming into the organized player -- sector a little more, or better availability of transactional and other data. I mean, do we have policies or product -- programs which can leverage those sort of already? The answer is yes. But has that started moving the needle in terms of new origination, which is solely or largely based on that? Not yet. We are still hopeful that, that will help and we certainly have worked on how we need to rely on those numbers to add to the [ business ] of the data that we might have.
[Operator Instructions] The next question is from the line of Krishnan ASV from SBICAP Securities.
Two tough questions from my side. Number one, the SME 1 plus 2 portfolio, which could become eligible for resolution [ plan ] to your wholesale portfolio, how has that been behaving, say, over the last 12 months? Have you seen significant improvement in that book?
Actually, it's been fairly stable. Of course, though these numbers are not in the public domain, so I'm not going to comment on specifics. But while we had a little bit of fluctuation from quarter-to-quarter, if I look at it over the last 3, 4 quarters, it's been fairly stable, actually.
Okay. Got it. Number two, the HDB Financial Services, the NBFC, obviously, it caters to a certain customer class that HDFC Bank doesn't look at it. Have you seen significant migration of customers from HDB towards HDFC Bank? Does that happen fairly frequently?
No. Clearly -- to take an example, if there is a customer who's willing to pay, say, 10% or 11% for a particular loan, that customer is -- and for the same product, if let's say the bank is charging 9%, reality is that the bank customer is now going to pay the HDB rate and the HDB customer is unlikely to meet the credit [ screens ], which would qualify him for a 9% loan. So there rarely is -- and these are fairly distinct customer segments. So if it's -- or you consider some of these products are common or they're now being offered by both the bank and HDB. But clearly, they play a larger role in segments which might not have been able to access bank finance. And this is, I guess, the larger [indiscernible] -- and then if you look at it even on a -- not just for HDB and us, but banks and NBFCs have coexisted and the market clearly is large enough, where each of these financial services players is catering to a particular segment in various products. So we also see this as not a sort of movement of customers from 1 to the other or anything. Each of them -- each of us has a specific customer segment, and there is more than enough opportunity for us to grow in those segments.
The next question is from the line of [indiscernible] from [indiscernible] Credit Management.
My question is more on the macro picture. How do you see the credit growth in India going forward for, say, next 2 to 3 years? I also [indiscernible] the fact that the small finance banks or the NBFCs are now rapidly growing and taking up some piece of the pie in the credit system. How do we see the competition growing and the overall credit growth for the private banking space?
So I guess there are 2 parts to this. One is the overall system growth between private-public, all the banks in the system. And we've seen that the system loan growth tends to be a little ahead of the nominal GDP growth. So we do see a -- whatever, 50, 70 whatever basis point growth in real GDP. And with slightly higher inflation levels expected, if we look at the numbers, then nominal GDP growth is likely to be actually ahead of where it was in the last year. And therefore, as against a high single-digit loan growth at a system level, we do believe there's a likelihood of bank system loan growth picking up a little, whether it comes to 11%, 12% or something in that range. Loan growth is also -- bank loan growth is also going to be a function of the liquidity in the system overall. Last year, we did see some cannibalization of bank credit through the market, whether it was commercial paper or bonds, because there was an overhang of excess liquidity in the system. I'm not sure whether you'll see the same level of cannibalization this year because, incrementally, I think the flow of money into some of these segments is lesser than what it was last year. And in fact, bank deposit growth is more likely to pick up. Now within that overall loan growth for the banking industry, I still believe that there are specific segments and perhaps banks in each of the segments that will gain market share. So I think overall, private sector banks will continue to grow faster than the overall system growth, and that will be despite what might happen in terms of NBFCs or any other segment that is growing. As far as we are concerned, we remain sort of positioned to grow a little faster, a few percentage points faster than the industry. And we believe that we would -- because we have a diversified book across wholesale and retail, we will continue to gain market share on an overall basis in both deposits and advances. And finally, as far as other newer segments including small banks and NBFCs and so on, the market is large enough. The level of underpenetration in various loan products is fairly high, so there is a good opportunity for more -- any player who has their strategy worked out and can execute, I think the opportunity exists for them to grow.
The next question is from the line of Gautam Jain from GCJ Investment.
So looking at your [ recorded ] provision, you made other provision of INR 255 crores. What does that stand for?
So that includes a couple of pieces, but the larger piece of that is a contingent provision that we have made. This is in relation to a part of the agri portfolio, given the uncertainties that are associated with that. So that's a component of the other provisions.
That is -- again, form part of the floating provision?
No. Floating provisions are different. This is suitable against a specific identified portfolio, not on a customer-by-customer basis but on a specific segment of the portfolio. Those are contingent provisions for that.
Okay. Secondly, I was looking at your balance sheet and during this quarter, you raised around INR 89,000 crores of deposit and same money has been put into cash and balance sheet at [indiscernible]. So can you just make us understand the transaction? I mean....
No, no, no. Actually, a large portion of that, because there was a spurt in flows -- transaction money flows in the last 1 week of March and since there were a lot of holidays during that period of time, it was put in a reverse repo. So you had about INR 60,000-odd crores of reverse repo has been put out, which would be used in the early part of April.
So [ subsidiary ] [indiscernible]?
Yes.
Okay. And do you have any other subsidiary companies than these agency securities and agency financial services?
No.
And further qualitative comments on the fee income going forward and OpEx growth?
We've really -- I mean, since there are 2, 3 components to this, as we have said, we don't have any specific guidance on that. But it's a diversified set of fees. And on the bond yield, in any case, depending on what happens to bond yields, that will play itself out. But I don't have any specific guidance on that.
On the OpEx side?
On the OpEx side, while we've seen good improvement, we still believe there are some opportunities for us to continue to improve on the cost-to-income ratio, in baby steps towards the next few years. But I think a major portion of the improvement is what we have already delivered on in the last few years.
The next question is from the line of Saikiran P. from RW Advisors.
Just one specific thing, can you just comment on the overall systems liquidity, considering there's a cash crunch, which was widely reported in the media, and also the deposit rates being [indiscernible] off rate by various banks, even some of the large banks, including you?
Yes, so I think the overall liquidity position is a little tighter than what it was for most of last year. The cash piece, of course, has got less to do with the liquidity in the cash. Currency is a different issue. But overall liquidity, if you look at where the banking system is in terms of the credit deposit ratio and incremental -- and, for instance, what is going into LAF and so on, clearly, there is a slight tightening of the liquidity, which has resulted in the slightly higher deposit rates. And in fact, we've also seen those slightly higher deposit rates seeping through into MCLRs in some cases. But I would think that since the signal has been to move from a competitive to a neutral stance, I think that was only to be expected. So it's not unexpected, but it has played through.I think we started at 5:15, and we are -- we have finished an hour. And maybe I can take one last question.
The next question is from the line of Rakesh Kumar from Elara Capital.
Just looking at the performance on the deposit front and the commendable performance that we have done. So total net deposit increases in this quarter is equal to what we have done in the last 5 quarters. And assuming that if we maintain the LDR going forward, do we anticipate that margin would move from this level?
No. I think from a deposit and loan growth going forward, we are looking to pace our loan growth to a deposit growth so that we don't sort of -- in the first half of the year, we have raised AT1 and some other bonds. So we were sitting on nondeposit liquidity, which was being outlaid. Clearly, we have then had to sort of grow our deposit growth to keep pace with, or to catch up with, what has been a faster loan growth in the previous couple of quarters. But -- so there can be some leads and lags from quarter-to-quarter. But as a principle, we have always believed in matching our loan and deposit growth. As far as the impact on margins are concerned, really that's more to do with what our mix of -- deposit growth is. If we can maintain our CASA ratios somewhere around the 40% level and if our loan mix does not change too much, then the NIM range, which I have mentioned of between 4.1 and 4.3 as a broad historical range, also remains fairly relevant for the future. So I don't think the deposit growth will necessarily or will directly impact NIM. And that range still holds.
Just a last question on the cash recovery for this quarter, INR 504 crores, this number is looking slightly higher looking at previous changes. So where has it come from?
This also includes dividend income that we receive every fourth quarter, the interim dividend from the subsidiaries. So it is recoveries and other miscellaneous incomes. The miscellaneous income includes a dividend that we'll receive both from HDB and HSL.
Okay, so that dividend number will be higher this quarter?
It will be. It's, I think in the previous quarter, let's see... [indiscernible] the dividend...
I think it's about INR 40 crores.
Yes. We'll receive roughly about INR 160 crores. I think it's about INR 40 crores higher than last year.
Ladies and gentlemen, due to time constraint, that was our last question. I'll now hand the conference over to Mr. Sukthankar for closing comments. Thank you, and over to you, sir.
Thank you for your support and joining this call on a Saturday evening, Saturday late evening. Of course, Saturdays are working days for commercial banks [ second and fourth ], so for us it's a normal day, but thank you for taking the time to be on this call. If I were to look at this quarter, as you've seen, there's been fairly healthy growth across various balance sheet and P&L parameters. Margins have been stable. Asset quality has been fairly healthy. So it's -- really across various parameters it's been a fairly stable and healthy quarter. And I think we do remain well positioned as we enter this financial year. Thank you once again, and we'll end the call here.
Thank you very much. Ladies and gentlemen, on behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.