HDFC Bank Ltd

NSE:HDFCBANK

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen, good evening, and welcome to HDFC Bank Limited's Q4 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.

[Srinivasan Vaidyanathan, Chief Financial Officer]

Okay. So thank you, Steven. I appreciate calling -- all of you calling in today, apologize it was 5 minutes delayed. People are still getting in, but we'll get going.I do want to start -- use this time to start with some environmental context how we operated in the recent quarter. That gives you a good backdrop of what some of those results are. You know that, in 4Q, the high-frequency data remained robust, right? For most part and certainly for the early part, it was quite robust, as we saw, particularly the consumer durables production, good growth, 6-odd percent, reflecting that the consumption demand was holding up, with PMI 57.5 in February, 57.7 in January more or less similar kind of levels, right? While the tractor sales were slower in February, the overall auto sales recorded quite a good growth of 6-odd percent year-on-year. Both the 2-wheeler and passenger vehicles contributed to that. Double-digit [ exports ] and power generation augurs well. Record GST collection, INR 1.2 trillion, that's also great.Those were all case for building a positive growth, right? So that's why our house view has been and is that the GDP growth in the quarter that ended is perhaps at 1.5% year-on-year growth, which will make the full year at about -- contract by 7.5% or so, all right?Then for -- getting to the RBI policy. It was [indiscernible] more [indiscernible] than expected, recognizing the risks associated with rising infection cases in the country. And continuing to support the growth, several measures to keep the liquidity in surplus, extension measures like the on-tap TLTRO, et cetera, those were supportive measures that are helping. While the pandemic situation and vaccination drive are expected to be critical factors for economic recovery, we do expect -- our house view is that India will be one of the fastest-growing economies in the world in FY '22; and reach the pre-pandemic levels, which are 2019 levels, by end of the current calendar year, right? Of course, we need to watch out for anything to do with the pandemic and the vaccination, how it progresses, but assuming they're all progressing, that's where the growth is coming from. The resurgence of COVID cases across the country presents some uncertainty, but we'll talk more as we go along, in selective micro segments, more than broad-based.Coming to the Q4. Equity capital markets, we saw trends driven by -- positive trends driven by global liquidity compared to the prior quarter. A private issue was raised, approximately 25,900 crores, mix of IPOs, rights and QIPs; and approximately 44,000 crores via block deals, all right? Retail participation in IPOs have been strong during this quarter. The equity fundraising pipeline both in public and private market continues to be robust. During the quarter, we mandated 4 IPOs, including 2 IPOs where we were appointed as left lead merchant banker.And the debt capital market, Indian debt capital market, saw a slow start in Q4. The market took a breather after a -- heavy issuances in the year till date. Market yield showed some sign of hardening. Q4 saw a fund raise of about INR 2.24 lakh crore, which was marginally lower than prior year and prior quarter, right, about [ 1% to 3% and 3% ] lower. Our bank improved its ranking in second -- to second place amongst the ranges for INR bonds in FY 2021 from third place in FY 2020. Our market share during Q4 was about 15.5% or so, right?Now talking about our partnership in the CSC, in the semi-urban and rural strategy. As of March 31, we have signed up approximately 1.67 lakhs village-level entrepreneurs, of which 1.12 lakhs are onboarded as business facilitators and about 15,565 as business correspondents acting as -- expanding our distribution in some form, right, non-branch form, as business correspondents. The BCs are not only executing financial transactions through the use of Aadhaar-enabled payment system, which works on biometric authentication, but are also enabled to sell multiple products, including CASA, fixed-rate deposits, different types of loans. We have recently enabled our BCs with a EMI collection facility in selected cases.On the health care initiative, which we have talked over the last 1.5 quarters or so, we've started reaching out to 500 large hospitals in the country to provide patient finance from their counters, including providing EMI facility on credit card and debit card. We have activated 37 hospitals, and customers are appreciating access to funding at hospitals.On the retail branch front, during the quarter, we have opened about 2 million new liability relationships; and about 7 million liability relationships during the year, FY '21. The bank has successfully acquired a little more than 2.5 million corporate salary customers during this year. [ Personalized link ] for account opening has been started for each corporate, which is yielding good results. Also, unique bulk account opening process has been launched for large corporates, which make it very easy to open large number of accounts, thereby reducing manual interventions. A new approach towards customer engagement was put in place in Q4. The concept is that, before every customer engagement, the RM is checking about service-led next best action for meaningful engagement and furtherance of business.On the digital, to ensure seamless KYC process complementing the digital CASA acquisition, the video KYC delivered good results. The highlight of this process is the seamless "less than 5-minute" journey for a customer to fulfill the entire KYC. The video KYC will serve both the liability and asset acquisition of the bank.On the payment side, issuance spends continued to show progress that we made in the previous quarter. Previous quarter, as you remember, is a big festive quarter. Now coming to January, March -- January to March, it continued to progress. There was some revival in the previously dormant merchant category costs like the air travel, et cetera. That was coming back, but that pushed some spends up. We are also seeing good spend growth in categories like business cards for SMEs, where digitization has helped in awareness building and more spends on cards. We are working on summer treats, which is currently the program is on, which is our platform to bring consumers and merchants -- for consumers and merchants together to motivate spends on key customer segments. Spends such as electronics, daily grocery needs, online spends will be the key focus in the summer treat program.We're showing the trends in the acquiring business with increased digitalization prompting merchants to accept more spends across cards, UPI and wallets. Bank strategy of offering one-box acquiring solution, coupled with business value add such as customer marketing tools for merchants, the CASA facility and merchant loyalty, digitization for home delivery, et cetera, have helped to target the entire business of merchant coupled with current account balances.On the asset -- retail asset front, the momentum picked up during -- picked up -- what we observed in Q3 continued its stride in Q4 as well, with disbursals registering a 21% year-on-year growth and a 6% growth sequentially. We will -- as we go along, Arvind will give more color on what's happening on the ground on the retail assets front.Wholesale business across large, mid and SME performed at pre-COVID levels. Growth in mid-sized corporates and SME was particularly robust, aided by new-to-bank customer acquisition, deeper geographical penetration and higher utilization. Corporate banking saw lower year-on-year growth due to higher base effect, large prepayments as a result of surplus corporate cash flows, general deleveraging sentiment, reduction in corporate liquidity buffers that was built up in the first half. The bank continued its progress in gaining market share due to diligent adherence of sales process. And we'll have Rahul give more color, exactly a little more detail on what's going on, on those fronts, right? Collection, the bank continued to remain sensitive to customers' needs, providing customers clarity on their options under the relief packages announced by RBI and supporting them through the processes to avail the same. The bank resolution rates both in the front end and mid buckets will be discussed in detail by Jimmy in a short while.On the society and community. The bank spent 2% of the average profits after-tax for the past 3 years towards the various projects undertaken as part of our community initiatives under CSR. While we continue to support areas of financial literacy and inclusion, health and sanitation, education and rural development, we plan to substantially increase our focus on livelihoods and skilling. We have initiated a multiyear project impacting the livelihoods of close to 3 lakh farmers. Additionally, we'll be creating over 42,000 skilled entrepreneurs, promoting education. [ Our intervention ] expansion is to include additional 25 lakh children in an endeavor to improve learning-level outcomes, reduce dropouts rates, enhance retention and enrollment rates in formal education.Now let's talk about certain balance sheet strengths before we dive into the P&L. Franchise building continues, as I mentioned, in terms of bringing the customers in, persistent focus on deposits, bringing new customer relationship, gaining the -- market share across the board. Liquidity is consistently strong, reflected in our average LCR ratio for the quarter at approximately 138%; a little more than 80,000 crores of surplus, or approximately [ $11 million ] considering 110% LCR as a floor.Capital adequacy at 18.8%. We have 7.7 percentage point more capital than regulatory minimum of 11.075%. Our CET1 at 16.9% is 9.3 percentage points more than the regulatory minimum of 7.57%. The balance sheet remains resilient. The floating and contingent provisions totaling to 7,300 crores built over a period of time helps in derisking the balance sheet. We continue to originate loans in conformity with proven credit models. As I said, we'll cover more on credit as we go, so I wouldn't cover here now.Now getting on to net revenues, which grew by 16.4% to INR 24,714 crore, driven by advances growth of 14% and deposit growth of 16%. Net interest income for the quarter was at INR 17,120 crore, up 12.6% over previous year, and grew by 4.9% over previous quarter. For the quarter, the core net interest margin was at 4.2%. Prior year was at 4.3%, and prior quarter was also at 4.2%. As mentioned earlier, the bank's average liquidity coverage ratio was 138%. The excess liquidity position of the bank impacts current NIM, call it, 10 to 15 basis points or so. This drag was offset by monetizing some of the investments in the form of trading gains, which we have described in the past quarters too. That's always part of the ALCO strategy. We have managed that.Moving on to other income. Total other income at INR 7,594 crore was up 25.9% versus prior year and 2% versus prior quarter. Fees and commission income, constituting about 2/3 of other income, was at INR 5,023 crore, grew by 19.6% compared to prior year and 1% compared to prior quarter. Retail constitutes approximately 94% and wholesale constitutes 6% of the fees and commission income. FX and derivatives income at INR 879 crore was higher than prior year and prior quarter of INR 501 crores and INR 562 crores, respectively, reflecting pickup in activities both sequentially and year-on-year. Trading income was at INR 655 crores for the quarter. Some of the gains from excess liquidity investments were monetized in line with our ALCO strategy. Other miscellaneous income, INR 1,036 crores, includes recoveries and dividends from subsidiaries.On the operating expenses for the quarter, which is at INR 9,181 crore, an increase of 11% or so versus prior year. During the year, we added 354 branches, which is approximately 1 branch per day; and added 123 branches during the quarter. Since last year, we have added 1,100 in -- ATMs, cash deposit and withdrawal machines; and 546 during the quarter. We have 15,756 business correspondents managed by Common Service Centres, including 2,054 opened during the quarter. During the financial year 2021, we added 10,177 business correspondents. The staff count increased by 3,100 during the last 12 months and is at 120,093.Our cost-to-income ratio for the quarter was at 37%. We anticipate the spend levels to increase, driven by sales, promotional activities, discretionary spends and investments. As we have said in the past, the cost-to-income ratio will be reverting to a recent trend of 38%, 39% in the short run as the activity volume picks up and we make some investments, while our goal remains to bring it down in the medium term to longer term.Moving on to PPOP. The pre-provision operating profit at INR 15,533 crores grew by 19.9% over prior year.Coming to asset quality. Last quarter, we mentioned about the supreme court passing an interim order stating that those accounts that had not been declared NPA till August 31 should not be declared as an NPA until further orders. The interim order granted not to declare was vacated on March 23. Further to that, RBI, on April 7, issued a circular in this connection whereby directing the banks to continue with asset classification of borrower counts as per extant RBI instructions and IRAC norms. The bank has complied the said directive of classification.The bank had estimated potential NPAs which were identified and reported during the previous 2 quarters on a pro forma basis. These pro-forma-basis NPAs have now been reported as NPAs. As we have -- as we had mentioned, the bank had created contingent provisions of approximately 3,600 crores towards those pro forma NPAs. That is now being utilized and specific -- against specific provisions for these NPAs. The bank holds provisions, as of 31st March '21, against the potential impact of COVID-19 based on the information available at this point in time.The core annualized slippage ratio for the current quarter is at 1.66%, as against 1.86% on a pro forma basis in the prior quarter and 1.2% in the prior year. GNPA ratio was at 1.32% of gross advances compared to 1.38% in the prior quarter and 1.26% in the prior year. GNPA ratio excluding NPAs in the agriculture segment was at 1.2%. Prior quarter was also at 1.2% on a pro forma basis, and prior year was at 1.1%. Net NPA ratio, at 0.4% of net advances. Preceding quarter was also at 0.4% on a pro forma basis, and prior year was at 0.36%. Restructuring under the RBI resolution framework for COVID-19 was approximately 60 basis points.Provision -- the core specific loan loss provisions for the quarter were 3,153 crore, as against 3,170 crore on a pro forma basis during the prior quarter; and 1,918 crores for prior year. The specific loan loss provisions reported were 6,762 crores for the quarter. As mentioned earlier, this includes approximately 3,600 crores of pro forma specific provisions of prior quarters, which has no effect on P&L as the contingent provisions that were created against this pro forma was adjusted to that.Total provisions reported were INR 4,694 crores, against INR 3,414 crores during the prior quarter and INR 3,784 crores for the prior year. Total provisions in the current quarter included additional contingent provisions of approximately INR 1,300 crore. Included here is approximately INR 500 crores for interest-on-interest provisions which is being worked with IBA to standardize the computation across the system. The reported specific provision coverage ratio was 70%, as against 71% pro forma in the prior quarter and 72% in prior year. There are no technical write-offs [ when office branch books ] are integrated.At the end of current quarter, contingent provision towards loans were approximately INR 5,900 crore. The bank's floating provisions remained at INR 1,450 crore as of March end. General provisions were 5,300 crore. As on March quarter end, the total provisions, comprising specific, floating, contingents and general, were 153% of gross nonperforming loans. This is in addition to the security held as collateral in several of the cases.Coming to the credit cost ratios. The core credit cost ratio that is the specific loss ratio is at 1.10 for the quarter, as against 1.16 on a pro forma basis for prior quarter and 0.77 for the prior year. As you are aware, recoveries are in miscellaneous income. The recoveries amounted to 25 basis points of gross advances for the quarter, against 24 basis points that we recovered prior quarter and 21 basis points in the prior year. The total credit cost ratio for the quarter annualized, including contingent provision created, was at 1.64%, as against 1.51% in prior year and 1.25% in prior quarter.The reported profit before tax at 10,899 -- INR 10,839 crores grew by 18.1% over prior year. Net profit for the quarter at INR 8,187 crores grew by 18.2% over prior year. Net profit for the year ended March 31, that's the full year, was at INR 31,117 crore, up 18.5% over prior year.Some balance sheet items. Total deposits amounted to INR 1,335,060 crores, an increase of 16.3% over prior year and up 5% over prior quarter, which is an addition of approximately INR 64,000 crores in the quarter and approximately INR 188,000 crores since prior year. Retail constituted about 80% of total deposits.CASA deposits grew by 27%, ending the quarter at INR 615,682 crore, with savings account deposits at INR 403,500 crore and current account deposits at INR 212,182 crore, stemming from our enduring focus on granular deposits. CASA deposits also registered a robust sequential growth at above 12%, 12.6%. Time deposits at INR 719,378 crore grew by 8.5% over previous year; and marginally declined, minus 0.7%, right, over prior quarter. CASA deposits comprised 46% of total deposits. Credit-deposit ratio was at 85% for the current quarter, against 87% in prior year.Now advances, INR 1,132,837 crores, an increase of 14% over prior year and a sequential growth of 4.7%. This is an addition of approximately INR 51,000 crore in the quarter and about INR 139,000 crores since prior year. Retail advances on a Basel basis grew by 6.8% year-on-year and sequentially grew by 4.5%. And wholesale advances, again on a Basel basis, grew by 21% year-on-year and 5.2% sequentially.Getting on to capital ratios, capital adequacy. The total capital adequacy ratio as per Basel III guidelines stood at 18.8%, as against regulatory requirement of 11.075%. Prior year was at 18.5%. Tier 1 capital adequacy was at 17.6%, as compared to 17.2% in prior year. CET1 capital stood at 16.9% compared to 16.4% in prior year.So now let's get on some highlights on HDB Financial Services under IGAAP, which are made for consolidation with the bank. The supply-side shocks have impacted the livelihood of self-employed segments that HDBFS caters to. Throughout the past year, HDB Financial Services has made provisions and taken elevated credit costs while ensuring the new business written was through tighter credit filters. The company has seen its business and collection reach pre-COVID level [ in Q4 ]. Disbursements for Q4 were up 15% over Q3 and 32% over Q4 of last year which had an impact of -- first impact of the lockdown then. All business lines continued their growth momentum, with secured business of LAP and vehicle segments providing the largest contribution to sequential growth. HDB Financial Services will manage growth depending upon how environment plays going forward. And their large distribution footprint, 1,319 branches, will allow to pick and accelerate growth according to opportunities.The AUM reached 61,358 crores. Net interest income for the quarter at INR 1,252 crore, a growth of 15.4% over Q4 last year, while sequential growth was at 23.9%, driven by favorable product mix, lower cost of funds. PPOP for Q4 was at INR 989 crore, growing 20% over previous year and 32% sequentially. Provisions for the current quarter were INR 613 crores. Core credit costs in Q4 have reached pre-COVID levels. And the credit reserves going forward, where warranted, is a good opportunity to build, where warranted, particularly if the outlook remains uncertain then.For the quarter, HDBFS had profit of INR 284 crore. And for the full year, profit was INR 502 crores. As of March end, the gross NPAs for the NBFC recognition methodology was at 3.9%, as against 3.5% as of last year, March; and 5.9% on a pro forma basis prior quarter.HDBFS has adequate liquidity. LCR is at 265%. And it's able to borrow at attractive rates. Coupled with strong capital position of 19%, they are well positioned for market opportunity.Now coming back to the bank.At the outset, let me talk about the outage. You have some details about the November '18, December '19, November '20 outage incidents. I will not go into detail again; however, a couple of minutes on our recent incident of March 30. It was an intermittent issue on net and mobile banking that occurred due to a server hardware component failure and has no correlation with any capacity issues. On NetBanking mobile banking, quite a few users closed their browsers or quit their apps without logging out. The back-end system monitors this and clears the inactive sessions periodically. The hardware failure impacted the session clearance. However, the minute the inactive sessions were cleared, a fresh set of users were able to log in. Substantial number of customers were able to carry out their transactions despite impairment on that particular day.We continue to make good progress on our plans short, medium, long term, addressing various matters. Like many other things, we set higher standards. It broadly covers the areas of security enhancements; the fast recovery, resiliency, optimizing both recovery time and the recovery point; automation of orchestration; obsolescence management, including consolidation of data centers; infrastructure scalability, like the cloud strategy; application network monitoring tools, right? These are some of the focus areas that we are working on, right? The audit by independent third party is in the final stages, and we'll update further as we get to know more from the regulators. In the meantime, we continue to focus on the design and development. It's an ongoing process, as you know, working with various partners.We continue to build capabilities in the area of core systems to keep it stable, always on and scalable by partnering with OEMs like Oracle, as an example. And they draw their expertise given our landscape of applications. We are also working on migration to cloud for resiliency; export of functions and data services to -- from core through APIs, micro services and data exchanges by partnering with major tech companies; building customer-friendly experience on cloud-native engagement platforms. We are leveraging data and AML for personalization, underwriting, risk and fraud control and analytics. We are also building new muscle and infusing new talent to execute these strategies by establishing a digital factory.Now on another front, which is the cards front, right, all of you know that the cards' life cycle management, to mature, takes a couple of years, [ the stages on ] cost management, sourcing, onboarding, activation, engagement, [ deepening ], et cetera. Investments are continuously made in increasing spend depth and width, [ evolved ] behaviors, product updates, line enhancements, loan on cards, et cetera. The impact of the non-issuance of cards is on new employees in corporates, new corporates onboarding, et cetera. This loss of new customers can normally be made up within a few quarters of stoppage being lifted since the bank continues to source liability customers, who will be preapproved. About 3/4 of sourcing comes from existing customers of the bank.In the meantime, the focus of all the channels and feet on street is on engaging with existing card customers which is dormant or inactive or -- to resuscitate them. This way, portfolio activations and card dynamics are up, improving portfolio quality and increasing downstream activity.In summary, we are proud of our staff, who have intensely managed customer relationship in executing our strategy by delivering products and services despite complex environment, pandemic situation throughout the year. Our results reflect robustness across various parameters, deposit growth of 16%, advances growth 14%, operating profit growth 20%. Profit after tax increased by 18%, delivering the return on asset of about 2%.With that, Jimmy, do you want to give some color on some of those credit and market dynamics?

[Jimmy Minocher Tata, Chief Credit Officer]

Sure. Hi, everyone. Good evening.I'll first just take up the wholesale and SME portfolios from the risk perspective. Then I'll just hand over to Rahul, who will take you through the forward-looking [ business vision ] on that front. And I'll come back a little later to talk on the retail before handing it over to Arvind for the same.So on the wholesale, business is, frankly, a rather boring report from my side. It's all pretty much the same and no changes in any way. So we once again -- I think I've mentioned enough about our HDB rating scale, which we [ trust in ] and has served us very well. It's a 1-to-10 scale. 1 is best. 10 is worst. 7 is the threshold for investment grade. So just looking at the incremental portfolio initially, and the average rating of the incremental portfolio is 4.24. And we have -- I must say, when I put all these in, that there is -- I don't know if it sounds right saying it this way, but there is considerable scope for deterioration in this score before we even get below a AA kind of average portfolio rating. So just to put that in perspective. The externally rated portfolio -- this will probably give all of you a better idea, but from the incremental portfolio, the externally rated portion of it, 62% of that is rated AA and above. And that is weighted much more in favor of AAA than AA. And if I move now into the static portfolio. The static portfolio has an average rating of 4.33, if you look at the outstanding advances; and a 4.22 if you look at the actual exposure [indiscernible], but it's better to look at the outstanding advances because that's the [ real gist ] on the book at that point of time. So take the conservative number.The weighted average rating of the top 20 borrowers of the bank is 2.92. So the large exposures are definitely better rated than the average portfolio. The unsecured exposure, because this is often a question that you ask, has an average rating of 3.36, if you compare that to the secured book, which has an average rating of 4.57. This just reflects the extreme caution that we exercise before we take any unsecured exposure because we do understand and recognize the incipient risk in such an exposure.So that's pretty much where we stand. We had a pretty good quarter when it comes to the wholesale bank. NPAs were really small. And a good chunk of the NPAs actually are being booked right now because we are part of the COVID resolution, which as soon as the resolution is put into effect will be upgraded [ as standard environment ].If I move on to -- is there anything more for me to tell you here? No, except that the higher grades, the HDB 1s to 4s, have seen better growth, but I think that is kind of obvious if you look at the incremental and the [ stock book ] portfolios. So I'll just move into the SME book right now, which is of interest to many more.In the December-to-March period. And let me add December into this because it's been a -- 4 months of the return of cash flows into our accounts. As you know, we run the book on a very holistic basis. We don't just give loans. We look at holistic banking. We rely a lot on the cash flows of the companies, and those cash flows are coming back in a reasonably good and healthy way. So that's something that we have seen across accounts. The resumption in these cash flows have also been beneficial to the 30-plus book of the bank, which has come down. The bulk of the 30-plus reduction has been through repayments. A very small part has been through the COVID restructuring.On the restructured accounts, the COVID-restructured accounts, not very large, there was around 550-odd crores, but I must mention that, of this 550-odd crores, a little over 200 crores, somewhere between 200 crores and 250 crores, were actually in some form of delinquency at the time of restructuring, so a lot of it was precautionary. The approach we had to the restructuring was given the circumstances in which we find ourselves, all of us, in the circumstances, so when there was a requirement earlier on that someone had to demonstrate that he needed it and he was in distress, et cetera, we were obviously following that, but as soon as it got opened up and it was allowed on request, we were much more forthcoming in permitting the restructuring. And that's pretty much reflected in the fact that a very large chunk of it is not delinquent at this point in time. I must also mention, through the credit of a lot of our clients, that several of them whom we thought they might want to restructure actually refused and assured us that they will be paying us back because they did not want the tag of being restructured. So rather heartening, in a way.Moving on to industry granularity, again nothing to report, pretty mundane. It's pretty much where we've always been. Apart from agriculture which is directed lending, everyone was below 5%. By the time you hit the 10th-odd industry, you're at around 3.5% or so, so the portfolio is genuinely very, very granular. And it's always been that way. It remains that way.If I look on the delinquency trend. We are now -- either if you look at very early, which is a 7-plus, which we measure; or a 15, 30, 60, all these levels are virtually back to where they were pre COVID. So the 7-plus is maybe around 10 to 15 basis points away from that level. And the 60-plus is barely 5, is less than 5 basis points away from that level. So we're pretty much back to where we were in that front.Moving on to the -- I'm not getting into the numbers of nonperforming assets, but we have, frankly, had a good quarter. I think Srini [ talked about the ] numbers on that front. So it has gone better for us than it was previously, if you look on a Y-o-Y position as well.The 2, 3 metrics that I always mention to you which we rely on as indicators: The self funding ratio of the promoters, which again I emphasize is not security but it is reflective of their wealth and liquidity, that has held up now for well over a year. The entire year of COVID, we've not had any appreciable changes. It's been a couple of percent this way, that way; and not much more to say on that front, frankly. The wealth of the promoters is holding up. And in this segment, in the SME segment, it is demonstrated. And we always expect that they will bring their money in to fund the business whenever the need arises, so that is a comfort to us.The collateral coverage, again at our portfolio level, holding up very well. We have between 80% to 85-odd percent covered with collateral. This is over and above the current asset security that we, anyway, hold. The current asset covers the portfolio completely. And we are talking of incremental real estate collateral, which is usually the office or the residence of the promoter in question. This 86% is again on a conservative basis, assuming full drawdowns. If you look at it basically outstanding, the coverage is actually in excess of 100% at this point of time.Just to put out that the flows have come back. They actually started coming back in around October, which actually if you look at it, as soon as the moratoriums, et cetera got lifted, that's when they started coming back. And they have been coming back in good measure since then. One more thing that we have done recently, just to corroborate that our views on the flows are all right and genuine, is we -- when we increase or decrease in flows along with the GST collections of the country and we found that there is a considerable correlation between the two, only -- I would say maybe, in the quarter from Jan to now, maybe our collections have a little bit bucked the trend in the positive direction. The GST collections dipped a bit, but collections pretty much have held up at the same level. But that's not much to talk about. I think the correlation is a great comfort to us that the flows that are coming in are genuine revenue generation by these people and they're not some capital inflows or something like that. So our measurements are not off track.So all this is good. While I'm saying all this, one has to now consider that we are into a second wave, when we look at medical condition. Has not yet impacted the financial system the way one may expect. At least let us -- if you look at it, the medical condition versus the financial condition in the first wave and the second wave, I think the gap is much wider in the second wave. The financial conditions not yet deteriorated to that extent. Lockdowns have been sporadic, localized. Most restrictions are in benign times for economic activity like weekends and night time. Manufacturing has been allowed to continue. Logistics and transportation have been allowed to continue, so it has been muted. It has been a muted level of [ restrictions ]. Up till this point in time, this can change. We don't know. At this point of time is all I can speak about. I think we should also mention that, wherever [ restrictions ] have been imposed, the observance as well as the enforcement has not been as strict as it was the last time around. So I think we should put this caveat out versus everything that we are saying at this moment in time. That said, at this point in time, our behavioral scores on our SME portfolio also show that we have a higher level of the portfolio in the better scores than we previously had, et cetera, et cetera. So with that one caveat, things at this point in time are moving along.And quick thing on the ECLGS. ECLGS 1, as all of you know, we were among the prominent banks to be disbursing this amount. I must emphasize once more because I think some confusion arose a couple of quarters back as to whether ECLGS disbursement should be equated with stress. At least in ECLGS 1, they should not because it was universally available to anybody who met certain criteria of having a particular level of exposure being an SME and not being delinquent beyond a particular level prior to the February date. So in ECLGS 1, it does not count. ECLGS 2 and 3, one might say that it was [ expressly for the ] Kamath Committee stress [ that ECLGS 3 further for certain steps that have become liberalization ] very recently, I think yesterday or day before, allowing a higher level of DPD to avail the ECLGS 2 or 3, but frankly, we have not done very much over there because we don't have very much in this sector. So it's been quite low for us and will remain so. If you don't have the exposure in the stress sectors, you won't be giving the ECLGS for those sectors. So that's about it on the ECLGS.And I think that's pretty much what I have to say, so Rahul, why don't you [ come in here ]?

[Rahul Gopalprasad Shukla]

Sure. Thank you, Jimmy.I'm going to talk about basically commentary in terms of our performance and at least what is basically the big learning or the big story for me that I came through seeing this time around.Wholesale banking between large, mid and SME corporates closed at approximately 6 lakh crores in customer assets. To clarify: Customer assets include advances as well as investments. This was a 26.4% Y-o-Y and 5.8% Q-o-Q growth. I would like to thank our people who have worked very hard to serve customers during very difficult personal circumstances amidst the pandemic. In terms of averages, the Y-o-Y asset growth for the quarter was 31.1%, which is even higher than the [ EOP ] growth rate, which just points to the earnings momentum. And in terms of the large corporates out of the wholesale bank, that number was 41.8%, providing a strong earnings momentum.Between the businesses, wholesale SME grew at approximately 10% quarter-on-quarter. The mid corporates grew at 9.2% quarter-on-quarter, while the large corporates grew between 3.5% to 4%. Now we have to keep in context that this growth came in large corporates, despite unscheduled prepayments and [ non drawals ] in large corporates, to the tune of 8% to 10% of our overall [ customary ] assets in that segment. Large corporates also had a high base effect given borrowings by clients a year ago, during end March, to shore up liquidity as a safety measure. So the overall performance has been satisfactory.Given that the book is high quality, yields did move with market. If it didn't, one would have to question the quality of the portfolio. However, NIMs expanded or were stable in different customer groups due to a reduction in funding cost but also due to a careful yield management through a combination of asset tenors, loans-versus-bond opportunities and early identification and execution on those opportunities. We also released recently that our MSME book had crossed INR 2 lakh crore in advances as of December 31, 2020. Now this is -- why is this significant? Of course, when we released it, it was under the old MSME definition. The size is about 1/5 of the overall advances of the bank. The context of this is very simple. For every rupee of lending in wholesale SME, for example, the earnings is 2.2x of equivalent lending to large corporates, which is understandable given different risk profiles. To the extent that OpEx and credit quality is managed well, this is a significant earnings stream, and today, it is a very large critical mass for the bank. At the current rate of growth, the MSME book is poised to surpass the private sector large corporate book in 12 to 18 months time frame. It adds a new, third solid earnings pillar for the bank in addition to just looking at it from the perspective of retail and wholesale.In wholesale SME segment, the bank has seen very strong growth in terms of regions and geographies. Our credit book has seen 25% to 30% growth across. We are still not getting requests for enhancement in working capital limit compared to, say, a couple of years ago, if you were to [ discuss it with the activity ]. It did saw a pickup in third quarter but is relatively muted presently. We saw credit demand in pockets like agri processors, ready-to-eat food processing units, tiles and ceramic exports, textile exporters, pharma players, chemical players, auto ancillaries, paper industry who are looking for CapEx and additional funding. We are seeing CapEx formation in exporters, agri processors, packaged products, packaging, consumer durable; and some demand from the PLI-identified segments also. Those clients [ who have formalized ] are in pretty good shape.For large corporates, economic activity has started gaining momentum across the country given the budget announcement and prevailing economic environment. While all the sectors are likely to witness growth, some sectors stand out, for example, infrastructure, pharma, metals and commodities, cement and materials, food processing, auto, et cetera. Reported credit flow in the sector is a lower number, which is what a lot of people always ask me, but it is impacted due to corporate borrowing in the bonds and CP markets as well as a dramatic deleveraging trend that we have observed. The bank has continued to extend credit flow across sectors. CapEx is largely from the PSU sector, as corporates are working at 65% to 70% capacity utilization, which is much lower than 75% peak levels in recent times in pre pandemic. Given strong corporate financial performance, earned profits have gone in foreclosing term loan and paying down working capital utilization. As we've mentioned before, we expect private corporate CapEx picking up in second half. Of course, second corona wave, as you know, is something that is to be looked at.The big heartening point for me is that -- in the last 1 year, we've gone through the pandemic. We've gone through the state of the economy, and as Srini mentioned, outages, but the biggest thing is that -- the support of our customers, both old and new, who continue to gravitate to us for our physical as well as digital platform. And so the pull of the brand continues to get stronger. Now let me just give you some data to say why I make the statement.Let's look at the large and mid corporates. In the last 3 working days in March 2020, when the number of transactions increased quite dramatically, we had executed certain fresh limit releases as well as limit enhancements. Between large and mid corporate segments. This year, if I take the same last 3 days, Monday, Tuesday and Wednesday -- and Monday was a Holi, and so it was a holiday in the North. It was working in the South. The number of transactions that we effected saw a 93% increase, reflecting a significantly strengthened market position. You would recollect that number of transactions had increased last year-end, which had come immediately post the lockdown. And for this, I would like to give a special callout and thank our operations people, who have just been very diligent in terms of, even in the difficult conditions, going out and executing transactions.The second is just CASA for wholesale banking, which was up 15.2% Y-o-Y and 30.8% Q-o-Q. Customers come out and continue to use as transaction bank of choice. And the CASA effectively, what I shared with you, the [ EOP ] growth rates, go out and reflect that, but flip it on an average basis for the quarter end, right? It was up 25.4% Y-o-Y, which was even higher than the [ EOP ] growth rate. So that remains very strong. This came around the strength of the brand, our market share and also some initial impact of the current account [ circular ].Let's turn our attention to wholesale SME. In this particular quarter, we acquired roughly about 2,500 new customers during the quarter. And that is a 60% Y-o-Y increase, a large proportion of those in SURU; a lot of them preparing, given the pandemic as well as the waves that are hitting them, getting onto more digital platform and which is where clients continue to gravitate towards us. So despite a difficult customer acquisition environment in the first half of the year, when nothing much happened, number of new clients acquired during the full year was 6% higher than prior year because, the prior year, we had a significant addition of new client base.Let me move to an area where the wholesale intersects with retail, which is the corporate salary acquisition. In this quarter, the Jan to March, number of new salary accounts that we acquired was 34% higher than comparable period last year, which again I think to my mind is a very strong endorsement of just the client voting with their feet and coming out and doing more business with us, for which we are very grateful and thank them.ECLGS, Jimmy touched on it. As of 5th April, to give you an overall position: We have disbursed across 1 lakh 20,311 cases under both 1.0 and 2.0, largely towards 1.0, an aggregate amount of 26,534 crores. That puts us towards basically the top of across all the banks. And we continue to go out and support the government's initiative to support a segment that needs support. So we are in sync with where the political and government leadership is taking the country, and we continue to do our bit.Lastly, to round it up, we remain confident about continuing to gain market share at our historical trend line.And with that, I will stop and hand it back to Jimmy. Thank you.

[Jimmy Minocher Tata, Chief Credit Officer]

Thanks, Rahul.So just to talk a little bit on the retail portfolio, I'll first talk about the quality. And Arvind will take over for the business [ part of it ].So the demand resolution since around October or so was improving steadily, continued to have improved steadily up till the point in March. So where has it reached? I think, across all products, barring 1 or 2 like SLIs, which is not very big for us but, as you'll understand, is a product that will be very hard hit by such circumstances, you are within a whisker of where you were pre COVID on the demand resolution. Check bounces also looked at the same way. That said, while we are covering the March quarter and the year-end, I should make a mention here that the check bounces in April -- we're like halfway through April, so I can't really comment on the demand resolution for April, but the check bounces in April have taken a bit of an upward blip, probably some panic due to the medical condition worsening of late, et cetera. We don't know what it is, can't say whether this is a blip or whether it is a trend, but check bounces in April have been slightly higher than they were in March, some sort of a trend reversal. How much, if you want to know? Probably, as I said, from October till March, there was a clear improvement in the check bounce as well as the demand resolution across products. Maybe you're back to a January kind of level, the -- varying from product to product but around that much. So it's not that the whole thing has been reversed, only a little part of it. Whether it stays, doesn't stay just remains to be seen. It's just too early. We've been -- we've only come across this, as you will understand, in the last 5 or 6 days because that's when the [ check depositions ] typically start. They don't start on the 1st first of the month.So that's to be said. 3, 4 states to point out: So Maharashtra, MP, Punjab and Telangana is what has little bit pulled us back on the demand resolutions, or we probably would have crossed our pre-COVID levels. So if we get these states tightened up a bit, we will probably pass it.Recoveries have been rather good, if I may say. We are around 30% over pre-COVID levels on recoveries. That said, I must point out that the accounts on which the recoveries take place are obviously those who were delinquent -- a large part of them at least, would have been delinquent before COVID struck because the obviously late-period collections. When it comes to the restructured book, I think, numbers, Srini covered along with you, so -- and I think whether it is the retail products or the SME, I think, are pretty much the same thing to say, how we handled it, the approach. The bank book was the same whether it was SME or retail. And we also here had several customers tell us that they didn't want the tag and that they will definitely pay even if they are a little bit behind us now. And they will not turn nonperforming, and they just refused to take it.The policy dispensation remains cautious. We are optimistic on how things are, but we'll continue to remain very cautious on this. Disbursements in the last quarter across many products have almost hit pre COVID. I'll let Arvind talk about all this a little later on, good demand in the auto and 2-wheeler sector, et cetera. Credit card spends are up naturally, you'll understand, because the e-commerce world has taken a boost because of the physical world being slowed down.Just personal loans, I will say -- is that 0 inquiries are not up to scratch where they were before the -- so the sourcing for us has been very high quality. We've -- as I mentioned last time as well, the entire team is on the ground. The entire team is looking out. We never let anybody go. We never -- we kept the entire sales channel motivated. There were no salary cuts or anything of the sort in the bank. There was no action taken at all. In fact, people were -- the spirits are, frankly, quite high, credit to everyone.We have measured, in terms of our internal analytical metrics, the sourcing quality, the recent book obviously going to be much better than the historical book was because there was -- if you'll remember the conversations I've had with you a few quarters ago. We had already started tightening before COVID hit, and then we tightened even more after COVID hit. So the recent book is definitely going to be of high quality and now, in addition to that, constitutes around 35% to 40% of most product lines in retail assets. So it's now a significant part of the book that has this quality.For the salaried customers, we focused on the higher income, on the AAAs, on the government sector, all the usual ones, obviously focused even more there. And I must say that, even if there is an economic impact of the second wave, we are not expecting in this segment, at least, to see salary cuts and job losses again this time around. On self-employed, the policy liberalization has been even less than what it has been for the salaried segment products. And we will continue that way till we see things getting better.The bounce resolution now, if we come a little separate from the demand resolution. So what we managed to cure within 30 days of what bounces is actually back on track with the pre-COVID levels across products, so that is again a little bit heartening. That said, the bounce in April has taken a bit of a blip. And we're hopeful, but jury is out now whether the demand resolution will not be affected by this.If we look on -- I'll just take a minute on the sale of assets because, last time, we had a couple of questions on that. So this quarter as well, we sold assets, approximately 1,000-odd crores. As we always said, this is going to continue. It's a policy now. We examine the portfolio, and wherever we believe that there is economic value in disposing the asset at this point of time versus the cost and effort and recovery that we would get through our own efforts over time, including present value, we take the decision to dispose the assets. So that's a continuing factor.And let me just now move into anything else I need to put out for you. Yes, let me just get into the asset quality versus the market. So if you look at -- and we've got this from the bureaus, so this data, I must say, will actually reflect around a 2-, 3-month lag because of the data coming out. It always does, but once again the higher bureau scores, our shares, has a proportion in every product either steady or increasing; versus the rest of the industry, our share in higher scores, always more than the rest of the industry, thanks to our marketing efforts, thanks to our cost of funds as well.So we have a -- this is reflected both in the bureau inquiries, which you might be able to see yourself, as well as in the monthly disbursements that go across. So in both respects, it's corroborated. And further, if you look at how things have progressed, I think the delinquency differential between HDFC Bank and the rest of the industry pretty much remains. So the portfolio holding up on a comparative basis quite well despite, of course, our high market shares in several of these products, which the differential remains. In several cases, it is perhaps half the market and even lower than that.I think that's about all. I think not much to say on agri. It's held up pretty well. The agricultural sector, fortunately, was largely unaffected by this. We had a good harvest. We had a good crop. We have good clients, so we've done relatively well on the agri front.And nothing else to put out over here. Is there anything else I need to say? Let me just -- in my notes. I'm so sorry. No, I think that's about it. Thanks.Arvind, [ take over ].

[Operator]

Sir, shall we start with the Q&A?

[Unknown Executive]

No.

[Jimmy Minocher Tata, Chief Credit Officer]

No, no, just...

[Srinivasan Vaidyanathan, Chief Financial Officer]

Arvind Kapil is on the line. He is going to talk.

[Operator]

Okay.

[Arvind Kapil, Country Head of Retail Assets]

Thanks, Jimmy.Okay, retail assets. I think, both on secured, unsecured, retail working capital is alike. I think industry, in our assessment, is getting back to the pre-COVID levels and in some cases actually exceeding it. I can clearly see that the resilience in the middle class is coming back. And we see good growth opportunities, if I were to look at quarter 4 and even in the first 2 weeks. We are witnessing a healthy trend in auto, housing segment. We also see robust growth in personal loan and business loan. We see that the ground-level retail SME business environment, if I look at the quarter 4, is showing pretty robust. And we are -- whether it's [ grocery ], sports, wellness, bicycle, the trends, we keep at the ground levels. The demand remains intact and -- keeping the quarter 4 in mind and even the first 2 weeks. Wheat arrival on the agri side, if you take a feel of the ground level, I think wheat arrival has seen a positive upward trend. If we look at -- sowing itself is also on upward. The price is up. So that gives you a sense on the rural and the supply chains thereafter.If we look at the pharmaceutical industry at the ground level, and I'm talking more of the smaller retail businesses. They continue to show good demand actually. Even if you look at down South or up North, you're seeing almost 25% to 30% growth. Chemical industry in places like [ Gujarat ], imports stopped right now. The [ certain ] demand is looking pretty intact.I think, specific to our bank, if you look at the last -- 2021, a quick sense. Every quarter, we've had sequential growth, whether it was quarter 2 to quarter 3, quarter 3 to quarter 4. And we -- as we move into the quarter of the financial year, the new financial year, we have prepared, if you look at -- like I mentioned, if we look at the first 2 weeks and even if I were to compare with 2019, it's looking a very robust growth right now. I guess, having said that, we are closely watching the COVID situation, how it pans out. And the plans are to beef our resources to ensure that this financial year stays on course for a solid growth. And I -- we're going to fight our way through to make sure that this happens.Yes, one has to run these kinds of extra micro management [ in ] business plans. Whether it's going to be the internal customer franchise that we're going to leverage or it's going to be the external distribution [ strength ] where we have a first right of refusal in all touch points, we are beefing ourselves up, keeping the present external environment in mind. I think -- looking at the resilience that I see and the demand opportunity I see, I think we are going to focus on expansion in a couple of businesses, and we're going to focus on segmental expansion for market share. That's going to be our strong strategy for robust growth this year; and we do expect solid, robust growth this year.Thank you.

[Srinivasan Vaidyanathan, Chief Financial Officer]

Okay, Steve, can you please open it up, please, for Q&A?

[Operator]

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara Securities.

[Mahrukh Adajania, Analyst]

Congratulations. My first question is on the movement of NPAs during the quarter. So slippages are around [ 47 billion ]. Could you give us the breakdown of upgrades and write-offs recovery?

[Srinivasan Vaidyanathan, Chief Financial Officer]

Okay. You've got that 1.66% annualized. So that's how you've got the [ 4.6 ], something like that. The write-off of [ 3.5 ], that means 3,500 crores or so approximately. The balance is upgrades and recoveries.

[Mahrukh Adajania, Analyst]

Okay. And my question on slippage is that of -- this [ 47 billion ] or 1.66% would include pro forma of the previous quarters, right? So what will be the quarter -- or slippage for the quarter excluding pro forma of the previous quarter?

[Srinivasan Vaidyanathan, Chief Financial Officer]

We reported pro forma. In the prior quarter, we gave you 1.86%. That included pro forma slippage.

[Mahrukh Adajania, Analyst]

Correct. So this is the slippage for the quarter.

[Srinivasan Vaidyanathan, Chief Financial Officer]

This is the pro forma slippage for the quarter in similar basis in the sense that it will not include certain things that we included in the last quarter, in 1.86%.

[Mahrukh Adajania, Analyst]

Okay, got it. My last question is on technology. So to address all issues that RBI would have weighed, how long do you think will it take you? I mean obviously you will have already started work, but how long will the total upgrades take you? How many months? And would RBI's removal of the ban be contingent on completion of the upgrades, or will it happen in the interim only?

[Srinivasan Vaidyanathan, Chief Financial Officer]

So I can answer the first part. The second part is for the discussion of the regulator, right, so I can't talk on this now, but I'll tell you, in terms of the plans or what we are doing, I'll try to describe some of those action plans that we have. We have demarcated the actions between certain things that are short term, certain things that are medium and long term. Long term, keep it to the side. It could be 12, 18 months. Cloud strategy, as an example, is one such thing, right? That's long term. The short term, it is about the DR resiliency, where we tune the recovery time and the recovery point and so on; and some enhancements in security, some kind of -- in the medium term, some more security enhancements in terms of automation of the whole process, in terms of orchestration. And both in the short term and medium term, we will have application network monitoring tools coming through. So this is how we address it as short, medium and long. And some of these are, frankly, items that have new standards, which means that -- that's why I gave a preamble saying that we will set some higher standards in some of these processes that we are implementing. I do not have visibility what are contingent upon regulatory discussion, but that's our conversation with the regulator more than here.

[Mahrukh Adajania, Analyst]

Got it. And medium term would mean 6 months from now. Or...

[Srinivasan Vaidyanathan, Chief Financial Officer]

Medium term would be about 6 months or so.

[Mahrukh Adajania, Analyst]

From now. Okay, okay.

[Operator]

The next question is from the line of Manish Shukla from Citigroup.

[Manish B. Shukla, Research Analyst]

At one point of time, Rahul mentioned about yield management on the corporate book. I just wanted to get more color on that because, considering that you lend more to the larger corporates, they were borrowing more via bonds than loans which would probably be lower yield. So how does yield management on the overall corporate book work?

[Rahul Gopalprasad Shukla]

Yes. So Manish, when I talk about yield management, you can go out and give 3-month money, which goes, even 12-month money in large public sector, at sub 4%. We don't need to do that. Secondly, you basically do a tenor with a put call. You might as well get a slightly better position. So we have to pick our spots and we have to execute early. The transactions that were executed early maybe in January or maybe sometime in October, November, those, the yields are better compared to anything else. I understand that the bond yields have gone down quite significantly, but we don't need to participate in all of those. So we did what made sense for us given our ALCO RBP framework. What was not palatable, that was something that we were not looking to go out and do. And as I said, on the alternate side, the MSME was a pretty good progress that we continue to make where we don't have these sort of issues.

[Manish B. Shukla, Research Analyst]

Yes, sure. On the MSME, did I get the number right, that it's now roughly about 20% of the overall balance sheet?

[Rahul Gopalprasad Shukla]

So if you go back last quarter. We went out and disclosed the advances number. I don't have that -- I think it was 10 lakh 87,000 crore or so. Out of that, I think, when we said MSME book, that was about 2 lakh-and-odd crore, so roughly about 18% is what it was as of December 31.

[Manish B. Shukla, Research Analyst]

Sure. And on the wholesale book, what will be the approximate split between, let's say, "less than 1 year" and "more than 1 year" kind of loans, overall wholesale book?

[Rahul Gopalprasad Shukla]

Manish, we don't share that detail. And so we...

[Manish B. Shukla, Research Analyst]

[ Or on working capital and term finance ], if you want to put it that way.

[Rahul Gopalprasad Shukla]

We don't even do that, but I think in a large book, if I continue to basically keep 100% working capital, that would be running a lot of risk on the earnings momentum of the bank because [ you could get paid down ]. So we normally like to basically say that about 1/3 in term and the rest in short term, but this keeps changing from environment to environment.

[Manish B. Shukla, Research Analyst]

Sure. My -- a question to Jimmy: My -- I know the situation is evolving, but you rightly mentioned that, at the moment, the financial or the economic impact of this second wave seems to be less than what we had gone through last year as a country, but based on the current situation, do you think this impacts -- between growth and asset quality, what would you be more worried about, depending upon the well-being situation right now?

[Jimmy Minocher Tata, Chief Credit Officer]

So based on the current situation, should a financial impact manifest, we are currently in the process of finalizing various stress tests, which we have already completed, but I don't want to put those results out just now because they might be unnecessarily overly conservative as were when we did it the last time around. If you remember, we had to actually revise our stress test numbers because we were excessively conservative. So I don't want to do that now, but I think there is a lot of learning between last time and this time. The reason perhaps for our initial conservatism last time was that we didn't know what the government and the reserve bank were going to do. And as everyone knows now, they did a hell of a lot. So we would expect that, if there is the medical condition which is quite great manifesting into an economic condition, we would expect that there will be similar levels of assistance coming in from the government. And then if you look at our portfolio and client selection, the way it stands and the way it took the first wave, we would hope not to have any very serious consequences ourselves.

[Operator]

The next question is from the line of Suresh from Macquarie.

[Suresh Ganapathy, Head of Financial Research]

Srini, just 2 questions. One is on the contingent provisions which [ have been dipped into ]. There is some reconciliation of 400 crores in the sense that you had INR 8,600 crores of contingent outstanding. You made INR 1,300 crores, so it is INR 9,900 crores. And you [ dipped that ] to 3,600 crores, right, but the account -- the eventual number you have got is 5,800 crores, so there is some 300 crores, 400 crores of difference. So what is that?

[Srinivasan Vaidyanathan, Chief Financial Officer]

That is the interest on interest that we have set aside. It's going to give you the 5,800 crores or 5,900 crores. I didn't use that number.

[Suresh Ganapathy, Head of Financial Research]

Okay. So the interest-on-interest reversal totally is INR 500 crores, right, roughly?

[Srinivasan Vaidyanathan, Chief Financial Officer]

Correct, correct.

[Suresh Ganapathy, Head of Financial Research]

Yes, okay. And just so from a better understanding perspective, we can assume that these 3,600 crores are basically on the 10,000 crores of pro forma slippages that you reported in the previous 2 quarters. So that is how we look at it, right?

[Unknown Executive]

Yes.

[Srinivasan Vaidyanathan, Chief Financial Officer]

Correct.

[Suresh Ganapathy, Head of Financial Research]

Correct, okay. That's one thing. Second thing is I want to deliberate a bit more on technology, for the benefit of everybody else in the call. I mean, how much of this has got to do with your scale? Because you are 40%, 45% payments market share and stuff. So clearly your loan market share is 10%, so there is clearly an issue with respect to something or the other which is hampering, right? So it could be volume 2, 3 years ago. Now it is some server issue, disaster recovery. So do you really think this has got to do with the fact that you cannot digest more because of the fact that the volumes are really plenty? Or has there been an underinvestment in technology, underinvestment in some of the other things? Because the constant feedback that we're getting from the ground is that some of your peers have a better app, better user interface, better experience. Have you benchmarked against those and then come out with any report, something that we can have for the benefit of everybody in the call, please?

[Srinivasan Vaidyanathan, Chief Financial Officer]

Okay, yes, okay. Thanks, Suresh, for asking that. See, on the technology front, the previous ones or even the latest ones, that's why I took some time to describe, had nothing to do with capacity or such, right? They were very disparate events. We learned from these events what these are. Continuously we learn, and they are not repeating. So it's nothing to do with -- from that sense, of capacity. Certainly there are inconveniences, which -- for which we have apologized. The customer experience is predominant in whatever we do, right? We have to be humble and modest in how we approach, and that is why we take this as something as trying to set new standards in what we do. And I described some of those actions that we are trying to say about how these will set new standards, right?From a transaction point of view, from a customer preference point of view, we gave you a few details to see what customers think, right? So for example, we added 2 million liability relationships in this quarter, a lot through digital approach; video KYC approach, right? And we did add -- and for the year, we added 7 million customers, the last 12 months; 6.5 million in the previous year. And the year before that was 3.5 million customers. So we have added customers. Customers prefer us for a reason, right? I'll leave it at that. And the second thing is that Rahul Shukla spoke to you about why SME or corporate prefers and what sort of transactions they put through. Capacity wasn't a constraint. Rahul quoted 93% higher transaction volumes in the last 3 days of the year compared to prior year. So there was no capacity constraint when 93% increase in the throughput that came through, right? If we think about the cards, for example, right? So the customers prefer us in terms of the spends, right, if you think about the spend market share on the issuance. Last year, February -- we have data for February '20 and '21, as an example. The issuance spend share was 29%, now 30%. Our customers do prefer us and they use us more. And they spend more on our costs (sic) [ cards ], all right? The same is the receivables, right, with the market share. Last year, [ since the time since February ], we were at 53%. Now we have a market share of 56%. Again, there is a reason why customers prefer us, and it is our digital approach. It is our technology. They prefer us.And let's look at the acquiring spend, right, the cards acquiring -- merchant acquiring. Last year -- we have January-to-January data. I don't have February or March, yes, but January last -- January '20, pre COVID, we had a market share of 47%. And the current January, the '21 market share is 50%, right? So there is a reason why merchants prefer us. There is a reason why customers prefer us, and certainly they like our digital. They like our approach. They like our products. They like to use our [ cards, right ]? Those -- that is the first part of what you asked, in terms of the capacity or what and I tried to describe what they are.In terms of whether we benchmark with the rest of the players in the industry, we do, right? And each one -- that is why the 5 fingers on your hand are slightly different, and each 1 has got a purpose to serve. And that is how we approach it. There are certain applications we have. It serves some purpose. There are certain other applications and features somebody else have. It serves their purpose. And whether we could look at it to improve, that is a continuous process we do. And that's part of various versions and upgrades that we do. That is part of that. And there is always -- that is why I prefer to say that we have to be humble and modest in our approach, because we do learn and we want to learn. We'll continuously take it. Copying from others is not something that we should be shy. Take the good things, and we'll take -- we'll put it in. And that is a continuous process. It is not an event that happens periodically. It continuously happens.

[Suresh Ganapathy, Head of Financial Research]

Okay. And what is the backup option if there is a delay in RBI approval? What are the contingent plans you have in mind to ensure that the business is good?

[Srinivasan Vaidyanathan, Chief Financial Officer]

I described that nearly 3/4 of our card sourcing is our existing customers of the bank, 3/4 almost, right? That's how it comes. And they all have debit cards they use. And we offer installment loan on debit cards, right? And at some possible time, we may also have a revolving facility on debit cards, revolving facility on salary accounts. There are several choices which are there, but then we always look optimistic and kind of positive in terms of how we approach it. And so we feel confident that some of our works that we are putting through should bear good results.

[Operator]

The next question is from the line of Kunal Shah from ICICI Securities.

[Kunal Shah, Research Analyst]

So on this second wave and the contingency buffer, if you look at it, of say incremental [ 800 ] which we will have created outside of interest-on-interest reversal. So this would also be outcome of the initial results of the stress tests which we are doing. Or maybe stress test is still outside of it; and there will be more kind of a contingency buffer, given the environment, that will continue even in the first half. What is our sense, looking at the contingency buffer which we have currently?

[Srinivasan Vaidyanathan, Chief Financial Officer]

Yes. As you know, we build a lot every quarter -- at least last 4 or 5 quarters, we have given how much we have built. And we haven't utilized other than the pro forma which because -- that was, of course, directed, so we couldn't declare it and put it directly. So that is the usage we have done. Otherwise, we've built. Again, part of the whole thing is that we want to keep the balance sheet resilient, quite strong and -- for any kind of shock that it can take. And that is purely the strength, right? And at any point in time, if there is justification, we will continue to build. If the -- it warrants, the situation warrants, we will take, but as of now, the assessments that we have done said that, if there is something that we could build -- we have built. [ Do you ]...

[Jimmy Minocher Tata, Chief Credit Officer]

I have nothing to add there. As we always said, our contingent provisions are precautionary, not anticipatory. They remain precautionary at this point in time. There is not enough information on the economic impact of a second wave right now to sit and dimension exactly what we have, but in a sense we do think, over the last several quarters, we have developed more-than-adequate buffer. And of course, given the learnings of the first wave itself, one would feel a little more reassured of that.

[Kunal Shah, Research Analyst]

Sure. And second question is on costs side. So we have highlighted that we will get towards 38%, 39%, but when we look at in terms of costs to assets, we are back to where we were, almost a pre-COVID level. So is there any line item wherein maybe with this COVID the efficiency would have set in and we will have completely shaved it off from our costs to assets and we could see it stabilizing at a lower level? Because that was not visible in Q4. Not sure if it was because of the branch additions which were there of 123. So is that the reason? Or maybe there is not much to look into the cost efficiency during the COVID [ time ].

[Srinivasan Vaidyanathan, Chief Financial Officer]

Costs -- the COVID side, what the COVID is there are some kind of retail asset origination type of costs that are lower that would come back. As we build more assets [ on books ], it would come, right? If you look at the -- on a DuPont basis, if you look at the -- not the efficiency basis but on a DuPont basis, when you look at the expenses, operating expenses, [ 2.25 ], right? When you look at it pre COVID, almost [ 2.4 ] or so. That is why we said. And then it went all the way to [ 1.8-something ] in first quarter, when hardly there were any activities happening out in the field from a sales and promotion point of view. And we have gradually gone up, right? Then it was [ 2-and-something, 2.1-and-something, now 2.2-and-something ], right, in terms of costs -- on the DuPont analysis, costs that you see. That is why we say that we will make investments. We will not shy when there is a market opportunity. We'll not be shy to run programs, promotions; or bring in more sales force, activate it to bring in. So that is why we said in the short run, that the costs -- the efficiency can go up to 38% -- or I mean, 39%. And then -- but our medium-term commitment, long-term commitment remains that how do we bring it back down to 35%. Once scaled through the reengineering process and straight through [ and ] digital approach, should bring the costs back down, right?Naturally, [ when we have just ] revenue growing more than costs, that there is a natural process of scale that brings it down. Then there are other kind of an additive action that also works on to bring the costs down. So that is over a medium term, long term.

[Operator]

Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand over the conference to Mr. Srinivasan Vaidyanathan for closing comments.

[Srinivasan Vaidyanathan, Chief Financial Officer]

Okay, thank you, Steven, for orchestrating and taking us through this. I want to thank the participants. And if we missed anybody -- I know we ran by 10 minutes late. If we missed anybody, feel free to call, get in touch with our investor relations, Ajit Shetty. We'll do our best to clarify anything that you have on our results.Thank you again.

[Operator]

Thank you. Ladies and gentlemen, on behalf of HDFC Bank Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.