ICICI Bank Ltd

NSE:ICICIBANK

Earnings Call Transcript 2021-Q3

[Sandeep Bakhshi, MD, CEO & Executive Director]

Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q3 of financial year 2021. Joining us today on this call are Vishakha, Anup, Sandeep Batra, Rakesh and Anindya. Thank you all for joining us today. We hope that you are safe and in good health. India has embarked on what we hope would be the last stage of its fight against the COVID-19 pandemic with the launch of the nationwide vaccination drive. We would like to extend our gratitude to the relentless efforts of the medical and research fraternity, health care staff and all the essential service providers who have helped to put up a strong fight against COVID-19. I would also like to take a moment here to thank our employees for their service to customers in these challenging times. The bank's Economic Research Group's proprietary Ultra Frequency Index, which comprises several high-frequency indicators, reached a record high of 106.3 for the week ending January 17. The index has remained above 100 for the last 4 weeks, indicating that economic activity has crossed pre-COVID levels. Several high-frequency indicators, such as rural unemployment rates, rail freight revenues, power consumption, e-way bill generation and electronic toll collections, were above the pre-COVID levels consistently in the last 4 weeks. The month of December registered the highest-ever monthly collections of GST, primarily on the back of festive season sales and rise in collections on imports. The record agricultural output across kharif and rabi seasons last year, steady rise in rabi crop sowing in the current season and increase in tractor sales point towards a strong rural economy. There has also been an uptick in property registrations in December compared to September. These trends are also reflected in the business and results of ICICI Bank as we continue to steadily grow our business within our well-defined framework. Number one, growth in the core operating profit in a risk-calibrated manner through the focused pursuit of target market segments. The core operating profit increased by 14.8% year-on-year to INR 80.54 billion in Q3 of 2021. The profit after tax increased by 19.2% year-on-year to INR 49.40 billion in Q3 of 2021 from INR 41.46 billion in Q3 last year. Number two, further enhancing our strong deposit franchise. Deposit growth continued to be strong with 22.1% year-on-year growth in total deposits at December 31, 2020. During the quarter, average current account deposits increased by 26.5% year-on-year and average savings account deposits by 15.9% year-on-year. The liquidity coverage ratio for the quarter was 146%, reflecting significant surplus liquidity. Our cost of deposits continues to be amongst the lowest in the system. Our 360-degree customer coverage, digital platforms and efforts towards process decongestion has played an important role in the growth of our deposit franchise. Number three, growing our loan portfolio in a granular manner with a focus on risk and reward. The continued pickup in economic activity and tailwinds from the festive season, combined with the bank's digital initiatives and extensive franchise, reflected in an increase in disbursements across retail products during this quarter. Mortgage disbursements increased further in this quarter over the previous quarter, driven by our efforts to offer a convenient and frictionless experience to customers by digitizing the entire underwriting process with instant loan approvals. Disbursements of auto loans have continued to increase from the September levels and have crossed pre-COVID levels in December. Until January 27, 2021, we have disbursed about INR 120 billion under the ECLGS 1.0 scheme and about INR 6 billion has been disbursed under the ECLGS 2.0 scheme. The overall retail portfolio grew by 15.4% year-on-year and 6.8% sequentially. The growth of the performing domestic corporate portfolio was 9.6% year-on-year and 8.5% sequentially. Overall, domestic loan portfolio grew by 13.3% year-on-year and 7.5% sequentially. The overseas branches portfolio and within that, the non-India linked corporate portfolio, declined both year-on-year and sequentially, in line with the approach which we have articulated earlier. Fourth, leveraging digital across our business. We have continued to reimagine existing digital journeys in order to decongest service delivery and enhance the customer experience. The ICICI STACK helps us to curate and offer hyper-personalized solutions to our customers, suiting their life stage and business needs. During this quarter, we expanded our state-of-the-art mobile banking app, iMobile, to iMobile Pay, which offers payment and banking services to customers of any bank. iMobile Pay can be used for making payments using UPI and also offers instant banking services, such as opening savings account, investments, loans and credit cards. We have seen about 0.5 million activations of iMobile Pay from non-ICICI Bank customers since it was launched just 2 months ago. We offer bespoke digital solutions for corporate and institutional customers, which enable us to tap into their ecosystem. The steady increase in adoption of these solutions and fund flows through our digital financial supply chain and trade platforms have contributed to the growth of our deposit franchise. We have launched an online platform called Infinite India, offering not only banking solutions but also other value-added services for foreign companies looking to establish or expand business in the country. Number five, protecting the balance sheet from potential risks. The indicators around economic activities have been positive. And this reflects in the trends of our portfolio. The trends in collections and overdues across loan portfolios continued to improve during the third quarter of the current fiscal year. Rakesh will expand on this later. Loans amounting to INR 82.80 billion at December 31, 2020, compared to INR 14.10 billion at September 30, 2020, were not classified as nonperforming, pursuant to the Supreme Court's interim order. In addition, the total fund-based outstanding to all borrowers and the resolution as per RBI's framework, not included in these pro forma NPA numbers, is INR 25.46 billion or about 0.4% of the total loan portfolio at December 31, 2020. These are in line with or better than our expectations of NPA additions and loans under resolution. During Q3 of 2021, the bank made contingency provision amounting to INR 30.12 billion for borrower accounts not classified as nonperforming, pursuant of the Supreme Court's interim order, and utilized INR 18.00 billion of COVID-19-related provisions made in earlier periods. Accordingly, the bank held aggregate COVID-19-related provisions of INR 99.84 billion at December 31, 2020, compared to INR 87.72 billion at September 30, 2020. This includes contingency provision of pro forma NPAs amounting to INR 35.09 billion at December 31, 2020, compared to INR 4.97 billion at September 30, 2020. On a pro forma basis, the provisioning coverage ratio continued to be robust at 77.6% as of December 31, 2020. As mentioned in our previous earnings calls, our aim is to be proactive in provisioning with the objective of ensuring that the balance sheet is robust at all times. We have further strengthened our provisioning policies on NPAs during this quarter. Our contingency provisions on pro forma nonperforming loans during the quarter also take into account the revised policy. The provisions during the quarter were higher by about INR 21 billion due to this more conservative approach. To summarize on asset quality, the provision coverage ratio on a pro forma basis is robust. Less than 90-day overdues above the normal pre-COVID level are substantially lower at end December compared to end September. We are confident that the COVID-19 provisions we hold as of end December will completely cushion the balance sheet from potential credit losses, which may arise due to the pandemic. As we have stated earlier, we expect credit costs to normalize in fiscal 2022 based on our current expectations of economic activity and portfolio trends. Number six, maintaining a strong capital base. The capital position of the bank continued to be strong with a CET1 ratio of 16.79%, including the profits for 9 months of the current fiscal year. This strong capital position does not include the market value of the bank's investments in listed subsidiaries of about INR 764 billion. Looking ahead, we see optimism in the economy, supported by the indicators of resumption of economic activity and continued growth in digitization. We believe our extensive franchise, high-quality digital platforms and solutions, our approach of 360-degree customer-centricity, our prudent risk management practices and our strong capital ratios put us in a good position to capture opportunities that will arise in the near and medium term. We will continue to focus on delivering consistent and predictable returns to our shareholders. With these opening remarks, I will now hand the call over to Rakesh.

[Rakesh Jha, Chief Financial Officer]

Thank you, Sandeep. I'll talk about the balance sheet growth, credit quality, P&L details, capital adequacy, portfolio trends and performance of the subsidiaries. Starting with the balance sheet growth. The overall loan portfolio grew by 10% year-on-year at December 31. The domestic loan portfolio grew by 13.3% year-on-year and 7.5% sequentially at December 31. The retail portfolio grew by 15.4% year-on-year and 6.8% sequentially. Within the retail portfolio, the mortgage loan portfolio grew by 15% year-on-year; business banking by 39.4%; rural lending by 24.6%; commercial vehicle and equipment loans by 8.1%; and auto loan portfolio by 6.9%. Growth in the personal loan and credit card portfolio was 9.1%. This portfolio was INR 636.56 billion or 9.1% of the overall loan book at December 31. The disbursements in the retail portfolio have increased substantially in Q3 compared to Q2. Sandeep has already talked about the trends in the mortgages and auto loans portfolios. While the disbursements in the commercial vehicle and personal loan portfolios have increased in Q3 compared to Q2, they continue to remain below pre-COVID levels. Credit card spends have reached pre-COVID levels in December, led by increased spends in categories such as health and wellness, electronics and e-commerce. These trends resulted in healthy sequential growth across portfolios. The SME business, comprising borrowers with a turnover of less than INR 2.5 billion, grew by 24.6% year-on-year to INR 270.93 billion by December 31. The growth of the performing domestic corporate portfolio was 9.6% year-on-year and 8.5% sequentially, driven by disbursements to higher-rated corporates to meet their working capital and capital expenditure requirements. While various sectors and corporate clients contributed to this growth, some focus segments were highly rated PSUs and large established corporate groups. The overseas loan portfolio declined by 25.7% year-on-year in U.S. dollar terms at December 31. The overseas loan portfolio is now 6.2% of the overall loan book at December 31. We had mentioned in our previous quarter earnings call that we would be progressively exiting our non-India linked exposures in a planned manner. The non-India linked corporate portfolio reduced by 48% year-on-year and 14% (sic) [ 14.1% ] sequentially at December 31. Coming to the funding side. We continue to focus on growing the daily average CASA balances and retail term deposits. Average savings account deposits increased by 15.9% year-on-year and average current account deposits increased by 26.5% year-on-year during the quarter. Total term deposits grew by 26.1% year-on-year to INR 4.8 trillion at December 31. Coming to credit quality. Loans aggregating INR 82.80 billion compared to INR 14.1 billion at September 30 were not classified as nonperforming at December 31, pursuant to the Supreme Court's interim order. Of the INR 82.8 billion at December 31, INR 75.2 billion was from the retail portfolio and INR 7.59 billion was from the corporate and SME portfolio. The reported gross NPA additions during the quarter were INR 4.71 billion. Recoveries and upgrades, excluding write-offs, were INR 17.76 billion in the current quarter. There were recoveries and upgrades of INR 9.33 billion from the retail portfolio and INR 8.43 billion from the corporate and SME portfolio. The gross NPAs written-off during the quarter were INR 27.36 billion. The gross NPAs sold during the quarter was INR 0.88 billion. The net nonperforming assets were INR 48.61 billion at December 31 compared to INR 71.88 billion at September 30. Our gross NPA ratio was 4.38% and the net NPA ratio was 0.63% at December 31, 2020. The gross NPA ratio on a pro forma basis was 5.42% at December 31 compared to 5.36% at September 30. The pro forma net NPA ratio was 1.26% at December 31 compared to 1.12% at September 30. We had mentioned in our previous quarter's earnings call that the corporate loans under resolution via the framework announced by RBI in August would be less than 1% of the total loan portfolio of the bank. Excluding pro forma NPAs, the total fund-based outstanding to all borrowers under resolution is about INR 25.46 billion or about 0.4% of the total loan portfolio at December 31. Of the above fund-based outstanding, INR 8.37 billion was from the retail loan portfolio. The bank holds provisions of INR 3.85 billion against these borrowers, which is higher than the requirement as per RBI guidelines. Going forward, the asset classification of corporate and SME borrowers under resolution would depend on the timing of implementation of resolution schemes and payment performance in the interim. As you are aware, there is time until June 30 for the resolution to be implemented. Resolution has also been invoked for pro forma NPA loans, which have crossed 90 days at December 31 amounting to INR 8.88 billion. Compared to the normal pre-COVID trend, the percentage of the retail EMI products and credit card portfolio, which was overdue for less than 90 days, was about 1.5% higher at December 31 compared to about 4% higher at September 30. The percentage of the performing rural portfolio, which was overdue at December 31, was about 1.5% higher than the normal pre-COVID trend compared to about 1% higher at September 30. The percentage of the SME and business banking portfolio overdue for less than 90 days was similar to the pre-COVID levels at September end and remains so at December end also. In the domestic and overseas corporate portfolio, less than 2% of the portfolio was overdue for less than 90 days at December 31 compared to less than 3% at September 30. Coming to the P&L. Net interest income increased by 16% year-on-year to INR 99.12 billion. Interest on income tax refund was INR 1.96 billion this quarter compared to INR 0.26 billion in the previous quarter and INR 0.16 billion in Q3 of last year. We have reversed the interest accrued on pro forma NPAs and the same is reflected in the net interest income for the current and previous quarter. The net interest margin was at 3.67% in Q3 compared to 3.57% in Q2 and 3.77% in Q3 of last year. The impact of interest on income tax refund and interest collection from NPAs was about 11 basis points this quarter compared to about 3 basis points in Q2 and about 10 basis points in Q3 of last year. The domestic NIM was at 3.78% this quarter compared to 3.72% in Q2 and 4.04% in Q3 last year. International margins were at 0.34%. The cost of deposits was 3.97% in Q3 compared to 4.22% in Q2. Noninterest income, excluding treasury income, declined by 3% year-on-year to INR 39.21 billion in Q3. Fee income was INR 36.01 billion in Q3. Compared to a decline of 30.8% year-on-year in Q1 and 9.7% year-on-year in Q2, fee income grew by 0.1% year-on-year in Q3. The sequential growth in fee income was 14.7%, reflecting the continued normalization in customer spending and borrowing activity. Dividend income from subsidiaries was INR 3.56 billion in Q3 of 2021 compared to INR 3.67 billion in Q3 last year. The bank's operating expenses increased by 3.7% year-on-year in Q3. The operating expenses increased by 12.6% sequentially. The employee expenses increased marginally by 0.4% year-on-year. The bank had 92,103 employees at December 31. We expect the employee count to increase during Q4. Nonemployee expenses increased by 5.5% year-on-year in Q3 due to increase in retail business-related costs and technology-related expenses, partly offset by decrease in advertisement and sales promotion expenses. We would expect business-related expenses to increase in future quarters as business volumes increase further from the current levels. We continue to make investments in technology and to grow our franchise. As a result of the above, the core operating profit increased by 14.8% year-on-year to INR 80.54 billion in Q3. The core operating profit grew by 15.9% during the 9 months ended December 31. The treasury income was INR 7.66 billion this quarter compared to INR 5.42 billion in Q2. The treasury income this quarter includes INR 3.29 billion from the sale of 2.2% stake in ICICI Securities compared to INR 3.05 billion in Q2. These stake sales were undertaken to meet the minimum public shareholding requirement by March 2021 as required by applicable regulation. During Q3, the bank made contingency provision amounting to INR 30.12 billion for pro forma NPAs. We utilized INR 18 billion of COVID-related provisions made in the earlier periods. Accordingly, the bank held aggregate COVID-19-related provision of INR 99.84 billion at December 31 compared to INR 87.72 billion at September 30. This includes contingency provision for pro forma NPAs amounting to INR 35.09 billion at December 31 compared to INR 4.97 billion at September 30. On a pro forma basis, the provision coverage ratio continued to be robust at 77.6% at December 31. At December 31, the total outstanding COVID-19-related provisions, provisions for non-fund-based outstanding to NPAs, general provisions on standard assets and other standard asset provisions were INR 164.01 billion or 2.3% of loans. This includes contingency provisions of INR 35.09 billion on pro forma NPAs that I talked about earlier. As Sandeep mentioned, we are confident that these provisions will completely cushion the balance sheet from the potential credit losses, which may arise due to the pandemic. The profit before tax increased by 11.2% to INR 60.78 billion in Q3 compared to INR 54.65 billion in Q3 last year. The tax expense was INR 11.38 billion in this quarter compared to INR 13.19 billion in the corresponding quarter last year. The tax expense declined due to lower effective tax rate in Q3, mainly because of higher gains from sale of stake in subsidiaries in fiscal 2021, which are subject to lower tax. The profit after tax grew by 19.2% to INR 49.40 billion in Q3 this year compared to INR 41.46 billion in Q3 last year. The consolidated profit after tax was INR 54.98 billion this quarter compared to INR 48.82 billion in Q2 and INR 46.7 billion in Q3 last year. The consolidated ROE was 14.6% in this quarter. The CET1 ratio, including profits for 9 months of 2021, was 16.79% at December 31 compared to 16.54% at September 30. Including profits for 9 months, the Tier 1 ratio was 18.12% and the total capital adequacy was 19.51% at December 31. Coming to some details on the portfolio. We are focused on growing our loan portfolio in a granular manner with a focus on risk and reward. Our retail portfolio is built based on proprietary data and analytics in addition to bureau checks and well-priced in relation to the risk. Our strong deposit franchise enables us to offer competitive pricing to the selected customer segments. We have given further information on our portfolio in Slide 31 to 34 of our presentation. The loans and non-fund-based outstanding to corporate and SME borrowers rated BB and below, excluding pro forma NPAs, was INR 180.61 billion at December 31 compared to INR 161.67 billion at September 30, details of which are given on Slide 35 of this presentation. Other than 4 accounts, 2 in construction sector and 1 each in the telecom and power sector, the maximum single borrower outstanding in the BB and below portfolio was about INR 6 billion at December 31. On Slide 36 of the presentation, we have provided the movement in our BB and below portfolio during Q3. The rating downgrades from investment-grade categories were INR 22.39 billion. The downgrades were largely from the construction sector. There was a net decrease in outstanding of INR 1.45 billion. There was a reduction of INR 1.5 billion due to inclusion of some borrowers in the pro forma NPAs and devolvement of INR 0.77 billion of non-fund-based outstanding to NPAs. And there were upgrades of INR 0.27 billion from NPAs to below investment-grade categories. Except one lease rental discounting account, all corporate and SME borrowers under resolution as per RBI's framework were rated below investment grade at December 31. The builder portfolio, including construction finance, lease rental discounting, term loans and working capital loans, was INR 225.57 billion at December 31, which is 3.2% of our total loan portfolio. As mentioned in our earlier calls, our portfolio is granular in nature generally with the larger exposures being to well-established lenders. About 13% of our builder portfolio at December 31 was either rated BB and below internally or was classified as nonperforming. The total outstanding to NBFCs and HFCs was INR 576.29 billion at December 31 compared to INR 501.31 billion at September 30. The total outstanding loans to NBFCs and HFCs were about 6% of our advances at December 31. The details are given on Slide 38 of the investor presentation. Our exposure is largely to well-rated entities with PSUs, long vintage, entities owned by banks and well-established corporate groups. The sequential increase in the outstanding to NBFCs and HFCs during the quarter reflects this. The proportion of the NBFC and HFC portfolio internally rated BB and below or nonperforming is about 1%. Coming to our overseas portfolio. Excluding exposures to financial institutions and retail lending against deposits, the total corporate fund and non-fund outstanding of overseas branches, net of cash or bank or insurance-backed lending, was INR 5.2 billion (sic) [ USD 5.2 billion ] at December 31 compared to USD 5.47 billion at September 30 and USD 8.62 billion at December 31 last year. 69% of the outstanding at December 31 was to Indian corporates and their subsidiaries and joint ventures. 16% of the outstanding was to non-India companies with India or India-linked operations and activities. The portfolio in this segment with well rated and the Indian operations of these companies are target customers for the bank's deposit and transaction banking franchise. And we will continue to pursue risk-calibrated opportunities in this segment. 6% of the outstanding was to companies owned by NRIs or PIOs. 9% of outstanding was to other non-India companies, which is less than 1% of the total portfolio of the bank. Coming to subsidiaries. The details of the financial performance of subsidiaries is covered in Slides 43 to 44 and 63 to 68 in this presentation. Just briefly, value of new business of ICICI Life was INR 10.3 billion in 9 months. The new business margin increased from 21.7% in fiscal 2020 to 26% in this 9 months. The new business margin was 25.7% this quarter. The protection-based annualized premium equivalent was INR 7.03 billion and accounted for 17.8% of the total annualized premium equivalent in 9 months. The new business premium was INR 78.99 billion in this 9 months. The gross direct premiums income of ICICI General increased by 9.2% year-on-year to INR 40.34 billion in Q3 this year compared to INR 36.93 billion in Q3 last year. The combined ratio improved to 97.9% in Q3 compared to 98.7% in Q3 of 2020. The profit after tax grew by 6.6% year-on-year to INR 3.14 billion this quarter from INR 2.94 billion in Q3 last year. The profit after tax of ICICI AMC was INR 3.58 billion in the current quarter compared to INR 3.05 billion in Q3 last year. The profit after tax of ICICI Securities on a consolidated basis was INR 2.67 billion in the current quarter compared to INR 1.37 billion in Q3 of last year. ICICI Bank Canada had a profit after tax of CAD 5.1 million in the current quarter, which was at a similar level compared to Q2 and compared to CAD 22.1 million in Q3 of last year. The profit after tax was higher in Q3 of last year due to recoveries from India-linked impaired corporate loans during that period. The loan book of ICICI Bank Canada at December 31 declined by 77.5% year-on-year and 3.7% sequentially. ICICI Bank U.K. had a profit after tax of USD 2.2 million this quarter compared to USD 8 million in Q3 of last year and USD 4.9 million in Q2 of 2021. The loan book of ICICI Bank U.K. at December 31 declined by 28.9% year-on-year and 11.6% sequentially. ICICI Home Finance had a profit after tax of INR 0.03 billion in the current quarter, which was at a similar level compared to Q3 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions.

[Operator]

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

[Mahrukh Adajania, Analyst]

Congratulations. My first question is could you give the breakdown of pro forma slippages?

[Rakesh Jha, Chief Financial Officer]

So Mahrukh, we talked about the fact that the actual slippage was INR 4.71 billion. And the pro forma as of December 31 was INR 82.8 billion, which was an increase of INR 68 billion compared to September position. So the INR 68 billion and INR 4.7 billion, about INR 72 billion, INR 73 billion is the increase that we have seen during the quarter. A large part of this has been from the retail portfolio.

[Mahrukh Adajania, Analyst]

Okay. But would there be any breakdown on how much is from unsecured, how much is from secured, any such breakdown?

[Rakesh Jha, Chief Financial Officer]

So Mahrukh, normally, on the retail side, we give the aggregate additions and deletions on the portfolio. To give a sense, I think we have seen across portfolios, the slippages. If you're comparing it to an earlier period, of course, it is higher across products. I think during this quarter, we have seen that the entire portfolio has got tested for payment because it has come out of moratorium. So the increase that we have seen on the NPA or the pro forma NPA is largely in line with what we were expecting across portfolios or slightly better in some of the portfolios. So that is the color that we can give on this. Going forward, we would expect to see somewhat lower additions and taking pro forma as the comparator number as the moratorium period has got over and the full impact has been seen in the December quarter.

[Mahrukh Adajania, Analyst]

Okay. So going forward, you said some bit has been on the INR 67 billion. Shouldn't it be substantial?

[Rakesh Jha, Chief Financial Officer]

Look, Mahrukh, we don't want to really comment on how that number will pan out. But it should be lower than where we are in the December quarter in terms of addition. I think that's the reason we gave also a color on the portfolio, which is the overdue portfolio. We had talked about that in September also. So we have seen there, the trends have improved on the retail, now we are about 1.5% higher than the pre-COVID normal trend compared to 4%, that was the case in September. So overall, the overdue portfolio also has come down. So yes, we should see improvement going forward. How substantial it is, we will have to see how it plays out. There are a lot of moving parts there. But again, to reiterate what we said, Mahrukh, I think we have taken provisions upfront in March and June quarter. We have utilized some of that provision this quarter of about INR 18 billion. We have tightened some of our provisioning policies to take more provision on NPAs. So overall, we are quite comfortable with the trends that we are seeing on the portfolio. And especially, the one variable which was there in October was around the restructuring or the resolution pipeline, which could be there. As you see, that number is pretty much -- pretty similar to actually the pipeline we had in October and we have not seen much of an increase there. So these are the trends which give us some comfort that going forward, the numbers should decline. But again, the numbers will be higher than trend for March quarter. And that will be the case because the overdues are currently higher than the normal pre-COVID level.

[Mahrukh Adajania, Analyst]

Got it. And whatever is downgraded in BB, does that overlap with the restructuring in book?

[Rakesh Jha, Chief Financial Officer]

So there will be an overlap there. So if you look at the closing book, Mahrukh, the INR 180 billion of BB and below, that includes all the corporate and SME restructuring. Other than one account, which I mentioned is not a large account, it's an LRD account, so it continues to be investment grade. But the INR 180 billion includes all the corporate and SME restructured pipeline. The downgrade that we saw of INR 22 billion during the quarter would also have come largely from the restructuring proposals that we have received and we have invoked. There will be a couple of other smaller-sized accounts also, which have got downgraded. That's why that number is INR 22 billion during the quarter.

[Mahrukh Adajania, Analyst]

Got it. But most of the restructuring is corporate only?

[Rakesh Jha, Chief Financial Officer]

So of the total, about INR 25 billion, as we said, so this INR 25 billion is the set of accounts which are not overdue for more than 90 days at December 31. Because those which are overdue, we are anyway counting in the pro forma, so we don't want to double count there. The INR 25 billion, which are less than 90 overdue, INR 8 billion is retail and about INR 17 billion fund-based is corporate.

[Mahrukh Adajania, Analyst]

Got it. And just one last question on the provisioning policy, what policy has changed?

[Rakesh Jha, Chief Financial Officer]

So what we have looked at is that we have made our provision policy for some of the NPAs as more conservative, so essentially, increasing the provisioning on the early buckets and also preponing a bit when we reach the 100% provision level. And that's the reason you would see that on the pro forma NPAs for the quarter of INR 80 billion, we are already at INR 30 billion, INR 35 billion of provision between the INR 5 billion we did in September and INR 30 billion we did in this quarter. So we are pretty much at 40% in the first quarter itself. So we have kind of increased the early bucket provisioning for the NPAs. This is not a onetime change in policy, this is something that we will continue with in future as well.

[Mahrukh Adajania, Analyst]

So now the first bucket will be around 40%, is it? Or this is just because of the mix?

[Rakesh Jha, Chief Financial Officer]

Mahrukh, that varies. The first bucket will vary across portfolios. It will definitely be different for, say, a mortgage or a car loan or an unsecured retail or corporate. I was saying that because this quarter will have an impact on the stock. The entire book impact will be there in this quarter as well. So we have increased the provision that we take in the early buckets on the NPA.

[Operator]

The next question is from the line of Jai Mundhra from B&K Securities.

[Jai Mundhra, Research Analyst]

Sir, if I were to look at this pro forma GNPA number of INR 8,200 crore, so this is just the net number, right? I mean the gross minus gross for the slippages for the quarter. So it should be, I mean, INR 8,200 crore plus INR 1,800 crores of recovery plus INR 2,700 crores of write-off. Is that the right way to look at it? I mean...

[Rakesh Jha, Chief Financial Officer]

No, no, no. That's not right. So if we have -- the table that we have on Slide 26, if you have it in front of you, we have given the movement in NPA based on the reported NPA as per the current guidelines of RBI and not classifying accounts which are more than 90 days overdue. So the retail -- so the total gross addition is INR 4.71 billion, correct. And that is the gross addition. That has nothing to do with recoveries and write-offs. So in addition to that INR 4.71 billion, we also had INR 82.80 billion of loans, which was overdue for more than 90 days at December 31 and we could not classify them as NPAs because of the Supreme Court ruling. That INR 82.80 billion number, the corresponding number in September was INR 14 billion. So there was a INR 68 billion increase in the 90-day overdue, which we were not able to classify during the quarter. So the INR 68 billion plus the INR 4.7 billion, that INR 72 billion to INR 73 billion, would be a reflection of the gross additions that you are looking at. And then you would have arrive at recoveries of INR 17.76 billion and write-offs and all of that. So that is how one has to look at it. And this INR 82.80 billion, again just to clarify, this is loans which are at a borrower level outstanding for more than 90 days. So if a borrower has 2 or 3 accounts, even if 1 account is more than 90 days, all the accounts are categorized as pro forma NPA in this number.

[Jai Mundhra, Research Analyst]

Right. Great. Right. So understood, sir. So actually, this is becoming [ INR 404 billion ] plus relative INR 62 billion minus recovery, that comes to INR 431 billion. So I think that is clear.

[Rakesh Jha, Chief Financial Officer]

Yes, yes, yes.

[Jai Mundhra, Research Analyst]

And second question is, sir, on BB and below book. Now we have been carrying this book for some -- so many quarters. And I think even in this -- in the last 6 months, this was further credit-tested. And probably only a small portion have asked for restructuring. So a, I mean, how should one look at the riskiness going forward? Or would it be too early to sort of comment here?

[Rakesh Jha, Chief Financial Officer]

No. I think like we have said earlier, it is the -- it is below investment grade for us. So by definition, this is relatively higher risk. And ideally, we would want it to be 0, but in banking business that can never be 0. So I think the level at which it is right now, it's not a number that we overworry about. If you look at the INR 180 billion, and out of that anyways, INR 44 billion is nonfund outstanding to NPA. So it's not really BB and below. It's nonfund outstanding to NPAs on which we already hold provisions. We hold about INR 14 billion of provision. We disclose that on a quarter-on-quarter basis. So if you remove that, the rest of it is INR 135 billion. A lot of it is granular. INR 40 billion is individual priced, less than INR 1 billion. So it is a part of the overall portfolio that you'll always have some amount of BB and below. And the reason we call out the larger exposure -- so we have 4 accounts which are larger than INR 6 billion within this BB and below, out of which, one is account in construction sector, which has further restructuring. So that has got included this quarter in the BB and below. There is one nonfund base outstanding for a construction company, which is already classified as NPA. And then there is one each in telecom and power where we have been getting the payments. The telecom one is nonfund. The power one is where we have been getting payments. Some delays are there, but it's a large promoter there as well. So overall, of course, it's a risky book. So I don't want to say we are comfortable, but that is the color of the book which we can give.

[Jai Mundhra, Research Analyst]

Sure, sir. And just last clarification. This -- so I think you had clarified, but just to double check. This INR 1,700 crore restructuring request which has come from BB and below book, they are sitting at both ways, right? So if one were to add restructuring plus BB below, so INR 1,700 crores is -- of restructuring is actually part of BB and below.

[Rakesh Jha, Chief Financial Officer]

So if you look at the position at December 31, you are right, that INR 180 billion already includes the corporate restructuring request that has come, other than one account, which is a lease rental discounting account which is still investment grade. So that is a position at December 31. The downgrades that we have seen during the quarter of INR 22 billion, that would include a few cases which were investment grade and would have sought [ new ] restructuring. But at the end of December 31, the BB and below includes all the restructuring, barring one case.

[Operator]

[Operator Instructions] We take the next question from the line of Nitin Aggarwal from Motilal Oswal.

[Nitin Kumar Aggarwal, Research Analyst]

My question is again on the BB and below book. Now we have not seen as much of slippages or restructuring requests as to how much one can really expect in this book Q4. Because despite all the focus this book remains, it's still around INR 13,000-odd crores. So this has been like pretty sticky and increasing very marginally. So are we being too conservative here in terms of our classification? Because like our peers have actually reported a decline in the absolute size of the book.

[Rakesh Jha, Chief Financial Officer]

So I think we have, we believe, a pretty standard process which our risk team runs for the rating of the portfolio. Of course, the risk is completely independent of business. The business team may have a different view on some of these accounts. But it's a very consistent process. So I don't think we have become overly conservative on these ratings. I think -- like I gave you an example of the larger accounts. There are some challenges or the other in each of these accounts. And it's a regular review that we do. So even as December 31 and now, there would have been some accounts, I think, which would have got upgraded during this period, maybe downgraded. So it is a continuous process which is there. And at the end of the day, there will always be a certain amount of book, which will be there in the BB and below bucket. I think largely, it is not lumpy other than the accounts I talked about. So it is not something which we overly worry about.

[Nitin Kumar Aggarwal, Research Analyst]

Okay. And 2 clarifications. One is on the margin. Like we have reported a 10 basis point sequential improvement, but both our domestic and overseas margins have expanded by 6 and 8 basis points. So what am I missing here? Like what is driving this 10 basis point improvement? And secondly, our tax rate for the year so far is around 19%. It's moving between 18% and 19% every quarter. So where do we expect this for the year-end for FY '22?

[Rakesh Jha, Chief Financial Officer]

So on the tax rate, this year, as I said, I think we have got the benefit of the lower tax which is applicable on the capital gains. And we had a good amount of gain in the 9-month period, especially in Q1 from the sale of shares in the subsidiaries. So the tax rate this year -- and the tax, as you know, what we provide every quarter is based -- of the 9-month period is based on the full year estimated tax rate. So the tax rate for this 9-month period is what you can extrapolate as our estimate for the tax rate for the full year. Going forward, next year, I think we will be at marginal tax rate which is there. We get some amount of benefit, maybe 1%, 1.5%, which will come because of dividend income and all of that. So that's how -- the tax rate will go up next year. Exactly very difficult to say because it will still be a function of the composition of the income which is there. On the net interest margin, Nitin, don't do this domestic-overseas and try to tally that. As you would appreciate, we have lending from domestic into overseas also. So it will not always net off. The domestic and overseas margins here are the gross ones. For domestic book and overseas book, when we report at the bank level, the -- if there are some lending from domestic to overseas, that would get netted off. So that's why a few basis points up and down will always be there. The [ commission ] overseas is on the gross book which is there. So there's the interbranch elimination that will happen. That's the only reason.

[Operator]

The next question is from the line of Parameswaran S. from Jefferies.

[Prakhar Sharma, Equity Analyst]

Rakesh, this is Prakhar. And congratulations to all of you for being able to manage in such tough times. Just a couple of things on the retail side, Rakesh. You did indicate the split of slippages across retail and corporate on a pro forma basis. Just to get a hunch, would it be fair to assess like your peer group in this quarter, unsecured slippages would have been elevated much more? So peers have seen something like 4% to 5% of the unsecured book slipping into NPL or hopefully it normalizes. So would it be fair to assume that the numbers would be somewhere in that handle or probably even lower because you've been fairly conservative on the lending side?

[Rakesh Jha, Chief Financial Officer]

So Prakhar, I actually talked in response to an earlier query in terms of how the numbers are. I think we have seen even slippages across portfolio. For example, on the secured side also, we have seen slippages to be there. For example, on mortgages, there the installment amounts are large. So at times, customers are not able to make those payments. I think what will -- we have to just see over the next few months how it kind of eventually plays out. But we have seen it's not that unsecured is a very disproportionate contribution to the gross NPA addition. We have seen on the secured side also -- and again, like I said, Prakhar, when we had done our analysis, we were assuming that on the secured side also, we would see slippages. For example, in card loans, the proportion of salaried customers are generally lower. So you will have [indiscernible] coming in there. Mortgages, I said the EMI levels are higher. So people take some more time to kind of become current as well. So it is spread across portfolio. But across all portfolios, it is in line with our expectation. And in some of the portfolios, rural, business banking, SME, corporate, it is better than what we would have estimated.

[Prakhar Sharma, Equity Analyst]

Sure. And so just a connected question on this one. So now that the portfolio has broadly behaved well and within your expectations, it's great to see that last quarter, you didn't make any provisions. From now on you are being able -- you have the comfort to start digging it. So would it be fair to also assume that from a strategy perspective, you don't need to really make any material changes in terms of new client acquisitions and the level of leverage you gave, et cetera, on the retail loan? Wouldn't that be a fair assessment?

[Rakesh Jha, Chief Financial Officer]

Yes. I think the fact that the growth that you're seeing across portfolios on the retail side, business banking, SME, corporate, that reflects the comfort and the confidence that we have in terms of the framework that we have for underwriting. So there, we are pretty comfortable. Of course, we have tightened some of the parameters based on the current environment. The entire focus is to ensure that we get a set of customers who we are comfortable with in terms of return of capital, and that's the philosophy across all portfolios.

[Prakhar Sharma, Equity Analyst]

And just one last question. The credit card part, nice improvement and probably supported by the festive lending or usage. Would the level of revolvers, et cetera, come down in this period? Or they are like -- it's a different way because there is a lot of, a, later stuff that is happening in the market? So would the proportion of revolver be stable as it used to be? Or would it have moved a little more than usual?

[Rakesh Jha, Chief Financial Officer]

I [ don't ] think in a period of 3 months much changes, I think. The growth that you see on the credit card book, please look at it in the context that in the festive season, the December quarter, every year, that growth is there. So it is not something which is -- indeed, it has grown by 10% this quarter. Would have been similar last year, December over September also. So there is nothing different there.

[Operator]

The next question is from the line of Amit Premchandani from UTI Mutual Fund.

[Amit Premchandani, Fund Manager]

In the restructuring number that you have given, is this all invoked restructuring or whatever you have actually accepted?

[Rakesh Jha, Chief Financial Officer]

The invoked and accepted will be the same number. So it is the -- so these are loans which will get -- which are invoked. So it will get restructured. These will get restructured.

[Amit Premchandani, Fund Manager]

Sorry, so are there any proposals still left?

[Rakesh Jha, Chief Financial Officer]

No. So December 31 was the last day for actually invoking. So on the retail and corporate piece anyway, there will not be any increase which will be there. I think on the MSME piece, they signed until March 31, we have not seen much restructuring there. So it will not change materially from there for sure.

[Amit Premchandani, Fund Manager]

And any DCCO extension for the real estate projects which are not part of this restructuring number that you had given?

[Anup Bagchi, Head of Retail Banking & Executive Director]

Well, DCCO extensions have been normal, and the [indiscernible] was covered also. In fact, I must add that post-radar, I think things have become just more organized than unorganized. So 2 things have happened. One is it has become more organized. I think certainly it is moving towards stronger builders, and people certainly are more conscious about completion on time and things like that. But DCCO, not because of COVID. In fact, if at all, sales have only increased. You must be reading it everywhere. For DCCO, whatever was there was there.

[Amit Premchandani, Fund Manager]

But sir, still if you can answer the question. Actually INR 22,000 crores of builder portfolio, what was the DCCO extension plan in the last 9 months?

[Rakesh Jha, Chief Financial Officer]

I mean, I don't have that number offhand. What I can say is that it's not something which is abnormal or which will have any impact on the portfolio. I think we are comfortable with the portfolio. We talked about some of those details in terms of the granular nature of the portfolio. And wherever we have slightly larger exposure, those are 2 well-established builders. Overall, we are comfortable in that portfolio.

[Anup Bagchi, Head of Retail Banking & Executive Director]

Because of -- well, I don't think we have done any material DCCO extension because of COVID.

[Operator]

The next question is from the line of Saurabh from JPMorgan.

[Saurabh S. Kumar, Senior Analyst]

Sir, a question on the corporate and the SME growth. You've grown 8% quarter-on-quarter and 16% quarter-on-quarter in SME. Could you just comment on the quality of the book you are originating in the corporate book and how do you see the ROA profile of these loans? So that's one. The second is essentially on the international book. Where do you think these net interest margins can go to? Or should we just assume it will be flattish or around each other?

[Rakesh Jha, Chief Financial Officer]

On the corporate portfolio, the growth that we are seeing, I gave some color on that. This is largely the new business that we have done during the quarter is predominantly A- and above internal rating clients. It is a mix of short-term, long-term lending that we have done during the quarter. About half of it would have been short term in nature, meaning less than 1-year maturity. Balance would have been longer-term loans. Loans are -- of course, the longer-term loans are all floating rate loans. On pricing, when the credit is good, pricing is always competitive. For us, the cost of deposits are also pretty low. You have seen during the quarter also the cost of deposits have come down. So we look at -- this lending is not looked at as a stand-alone lending in almost all the cases, it is looked at from a client profitability point of view. So what we track for each of the clients is the client level return on equity. And that is something where we are happy with the numbers that we have. Of course, there's a lot more that we can do to improve that. We have seen good amount of growth on the transaction banking side, FX. The current account growth that we have seen during the quarter y-o-y, a lot of that has come from the corporate clients. So on overall basis, Saurabh, we are comfortable with the returns which are there. But yes, the markets are very competitive. And so we get to look at all the deals virtually, where we believe it would make sense for the bank from a return perspective, sometimes from a liquidity deployment perspective, we go ahead with those transactions. So that is how we have looked at it. On the SME business banking, I think if you look at the last couple of years, we have been growing quite well. I think the moratorium tested the portfolio. The portfolio has come out pretty well. These are portfolios where our market shares are generally lower than what we have on an average on the portfolio. So there's a lot more that we can do. There's a lot of synergy outcome that we have seen as we do more and more of this business through our branches. We have talked about during our analyst day about all the digital initiatives that we have taken. We have made the process also, the underwriting and all of that, much more decongested. So I think all of that is what is flowing through this growth. And again, if you go back to last year, this was the growth trend which was there for these portfolios as well. On the overseas margins, difficult to say. I think, yes, you should just assume it is around the level where it is because we will not be doing corporate lending there really. So a lot of it is trade finance kind of business, loan against FD or those kind of businesses where the margins will be lower, the capital deployed will be lower. Overall, anyway, the book has now come down to about 6%, 6.5% of total loans. So it's difficult to give further guidance on the margin per se. That's not a specific focus area for us to be able to project that out.

[Operator]

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

[Manish B. Shukla, Director & Lead Analyst]

Of the ECLGS disbursement of about INR 120 billion, how much would have been under the SME segment? And how much will be retail segment the way you report it for your loan book?

[Rakesh Jha, Chief Financial Officer]

So if you look at SME, business banking, I think both put together would have been about maybe 1/3 of that. And the balance would have been across the rest of the retail portfolio.

[Manish B. Shukla, Director & Lead Analyst]

Okay. The other question is that on the retail book, for the last 2 quarters, you had fairly phenomenal growth, right? Previous quarter was 6%. This quarter is almost 7% sequential growth. Just want to understand what's driving this in your view. And can this kind of pace of growth sustain because you are among the largest retail balance sheet in the country?

[Rakesh Jha, Chief Financial Officer]

Here, again, we are not very focused on a particular number of growth per se. I think the opportunity is there. We have seen, at least in the last few months, the economy has been recovering. There has been demand. So if the demand sustains and the -- from our point of view, the pricing is appropriate, the customer profitability is appropriate, we believe we are very well-positioned to grow. So in terms of -- we have enabled -- we have talked about all that we have done on the processes of underwriting, on the digital enablement, especially in the mortgages that we have done. So from a growth point of view, we would be happy to grow as long as it meets our return criteria. On the risk part of it, we are very clear in terms of what we want to underwrite, what we don't want to underwrite. And as more and more we start -- we have started looking at customers on a 360-degree basis. So as we drive some of this business through our ecosystems, like for example, we have seen a very good amount of growth coming in from the corporate ecosystem, the corporate salary accounts that we have. We have had a lot more focus on the liabilities. We also are doing a lot more on lending there currently. So all of this, we believe, are things that we can do without taking any undue risk or diluting our returns. Of course, the near-term liquidity surplus, you can see in our balance sheet also. We are sitting with significant surplus liquidity. LCR is 140%, 150% So some of it on pricing and all will always be a tactical call also in the near term. But from a growth point of view, we -- that is how we look at it. There is no specific number that we are chasing on retail or corporate side.

[Anup Bagchi, Head of Retail Banking & Executive Director]

Also I'll add, Rakesh, that our market shares -- so we track market shares in each of our micro markets. So they are quite low. I mean they are some 5% actually in this business. So -- plus micro market is there, plus we have worked a lot on process, plus because of ecosystem 360-degree banking, there is a lot more color we have on underwriting. So with this actually -- and plus, we have enabled and empowered our branches quite a bit. So net-net, I agree with Rakesh. There is a headroom for us to grow in these markets. In fact, across most products, we have headroom to grow. Because if you look at our market share compared to the potential that we have, I must say that we are still -- we have not done justice to the potential that we have. We should do more justice to the potential that is there in the market.

[Manish B. Shukla, Director & Lead Analyst]

Sure. Just one clarification. When you say that FY '22, you expect to be a normalized year on head cost, do you think it will be closer to your medium-term target of provisions, your PPOP, which you articulated in the past?

[Rakesh Jha, Chief Financial Officer]

Yes. So about 25% of core operating profit is what we would be looking at as a number. And that would translate to, I guess, 1.2% to 1.3% of average loans.

[Operator]

The next question is from the line of Mahesh from Kotak Securities.

[M.B. Mahesh, Director of Research & Senior Analyst]

Just 2 clarifications, sir, on the presentation. Slide 28 gives you glimpse. What is available to you which is outside these pro forma numbers, these INR 64.75 billion and INR 18.9 billion sir? Is that correct?

[Rakesh Jha, Chief Financial Officer]

The INR 35.09 billion is the provision that we hold against the pro forma NPA. That INR 82.80 billion, Mahesh, that we talked about, against that we cannot take an NPA provision. So that INR 35.09 billion is that. INR 64.75 billion is the balance COVID, which is not -- which is against, I guess, the entire other portfolio. So during the quarter, the movement has been that we have taken INR 30 billion provision on the pro forma NPA. So INR 5 billion -- INR 4.97 billion has become INR 35.09 billion. And we utilized INR 18 billion from the COVID other provisions. So INR 82.75 billion has come down by INR 18 billion. Is that clear, Mahesh?

[M.B. Mahesh, Director of Research & Senior Analyst]

Perfect. Yes, yes, sure. And if I remember, last quarter, you had indicated that the ECLGS was at INR 160 billion. This quarter, you've kind of indicated INR 120 billion.

[Rakesh Jha, Chief Financial Officer]

This is the disbursements which are there.

[M.B. Mahesh, Director of Research & Senior Analyst]

So the sanction is still at INR 150 billion? Or...

[Rakesh Jha, Chief Financial Officer]

No, no, no. Yes, this is actual business amount.

[M.B. Mahesh, Director of Research & Senior Analyst]

So the sanction still remains at INR 150 billion? Or has that gone up this quarter?

[Rakesh Jha, Chief Financial Officer]

I don't have that number right away. But it will be -- I don't have the number right away, Mahesh.

[M.B. Mahesh, Director of Research & Senior Analyst]

Okay. Sure. Sure. No issues. Sir, just one clarification on Slide 60. Is it fair to assume -- this is kind of -- just give me a minute for 2 questions. September, you have a gross retail NPA of INR 92.63 billion and in December it is INR 68.88 billion. So the difference between the 2 essentially represents upgradation write-offs? And if I hold the condition...

[Rakesh Jha, Chief Financial Officer]

Yes. Because INR 92.63 [indiscernible] only. So rest of it will be the upgrades and the write-off, correct, Mahesh.

[M.B. Mahesh, Director of Research & Senior Analyst]

Yes. So now if I just move from INR 92.60 billion to INR 144.09 billion, and I just do the back calculation, again, based on the initial numbers which I've said, it shows that the slippages in the retail book should have been about INR 75 billion, almost indicating that there was no slippages from the corporate side. I'm saying there will be a few upgradations for the numbers. Correct?

[Rakesh Jha, Chief Financial Officer]

But we have given you the movement. That will just tell you the numbers, actually. So if you look at it, we have given the INR 4.71 billion breakup into retail and corporate, And we have also given the INR 82.80 billion, how much is corporate and the -- if you look at the INR 4.71 billion, INR 3.94 billion is retail. That INR 82.80 billion, INR 75 billion is retail. So indeed, most of the slippage in the quarter, as expected, has come from the retail side, correct.

[M.B. Mahesh, Director of Research & Senior Analyst]

Perfect. Perfect. Perfect. Yes. That makes sense. And last question on -- to Anup. On the holding portfolio specifically, this massive shift that you're seeing today, is it because of, one, refinancing which is happening? Is it new loans, balance transfer? If you could just kind of broadly comment on it. That would be it. And also, if the portfolio yield correction has completely taken place in your books. Right, that's it.

[Anup Bagchi, Head of Retail Banking & Executive Director]

If we take the portfolio yield correction, I think broadly, yield collection has happened because everybody has put out so much of hedge that even if you were putting shares and gears, you will see it. So I don't think there is anybody who has not seen that the rates have come down. So number one, I think everybody has done it. That is number one. Number two, certainly, there is some element of balance transfer, but not much because everybody is matching the rates. So if you are giving it to new, why will you not hold on to your portfolio by correcting it? So that is the second thing, that by and large, people hold onto the portfolio. Certainly, there is a demand in the market. number one. Number two, we are also seeing a shift in shares because of our process and better distribution and better analytics of our own customers who have taken loan from others, et cetera, and plus engagement levels are much, much better. So I would say that partly, demand, a little bit of balance transfer, not -- certainly not a majority or anything like that. And I would say that large part also because of our distribution and process. Because we are seeing that the gap is decreasing. Otherwise, it would have been a parallel stuff with everybody else. But shares are increasing.

[Operator]

Next question is from the line of Adarsh Parasrampuria from CLSA.

[Adarsh Parasrampuria, Research Analyst]

Rakesh, question on margins, just that it's held up well and it has the NII reversal as well. So can you talk about outlook on margins, given that you're indicating that the bank book repricing is almost true? Where are we in the cycle?

[Rakesh Jha, Chief Financial Officer]

So Adarsh, if you can look at during the quarter, we have seen the yield on advances have indeed come down by about 44 basis points. It's there on Slide 49. But the overall interest earning assets has not come down as much because the yield on investments has not come down as much, plus the growth has happened on the advances. The rest of the portfolio, as the liquidity is getting deployed, has not grown. So going forward, I think we should hopefully see improvement in margin. But again, there are so many variables there. One, of course, is the interest reversal itself. In March quarter, we will still see NPL additions to clearly be higher than any kind of a normal level. So there will be some amount of that which will be there. But I think more and more, the liquidity will also start declining for us. The LCR numbers that you see should come down in the March quarter. That should help the margin. I talked about on the lending side that the market is extremely competitive. So there, the pricing pressure is definitely there on the new loans that we are giving. So in short, Adarsh, we are not giving any guidance there. But I think the objective is to improve our margin, and we hopefully should be able to do that.

[Adarsh Parasrampuria, Research Analyst]

And Rakesh, did you quantify the interest reversal impact on NII? You have taken the NII line, right? So how much was that absolute number?

[Rakesh Jha, Chief Financial Officer]

We have not -- we don't disclose that separately. That's there in every quarter. Whenever NPA addition happens, that reversal is always there. So...

[Adarsh Parasrampuria, Research Analyst]

Rakesh, just the only point I wanted to understand is this quarter would be a little different that some accounts are under morat for 6 months and then they have become NPA. So the reversal is -- the easier question to ask is, is the reversal impact -- it should have been materially higher than past quarters because reversal could be for 8 months, 9 months here?

[Rakesh Jha, Chief Financial Officer]

Yes, that is possible. I think one thing which they added right now is that across all banks, right now, things are a bit difficult to compare because the pro forma basis which is happening in moratorium and all of that. So I think in terms of the interest treatment itself, given the period of moratorium, I think in some cases, you have excluded that as income. Some cases, you have put that as a deferred interest term loan itself. So the reversal, when it happens, happens only for a 90-day period. So I would say that it's not something which will result in a very sharp increase going forward. Of course, there will be a positive going forward because this quarter was slightly higher than normal.

[Adarsh Parasrampuria, Research Analyst]

Got it. Got it. And Rakesh, the last question from my side would be on how you'll see the ECLGS portfolio, right? It's a INR 12,000 crores sanction, and let's say, INR 60,000, INR 70,000 crores of ECLGS book. This portfolio, I think it's fair to say that it's -- we don't really know, the price, FX are missing, what's happening there. So how do you look at the risk in this portfolio on the lending that we were having outstanding in February, March in FY '22? This is a portfolio which could have its own stress next year, right, when all other portfolios normalize.

[Rakesh Jha, Chief Financial Officer]

That is a possibility. I think we believe where we have extended credit under this scheme. It's not that these are bad loans where we have kind of given this extended scheme. So it's not something that we are overly worried about this portfolio where we have lent. Will there be some challenges that could come up? Definitely, because these borrowers would have got impacted by COVID, generally speaking. So I think in the outlook that we give, for example, others for next year, say, credit cost getting normalized, this is factored in. And we don't believe it's going to really be of any material impact for us going forward, which is getting postponed due to this.

[Sandeep Bakhshi, MD, CEO & Executive Director]

Also actually, we have to see the disbursement-to-sanction ratio. And you will see that for stronger banks, the disbursement-to-sanction ratio is lower. So that is one marker. The second marker we always see is that -- in general, on the portfolio, how is the level of utilization. If economic activity has not picked up, but utilization is happening very fast, that's also not a very, very good sign. So these are the 2 big markers. So when you look at these 2 markers, it looks okay at this point of time for us. I mean there are no such red flags in that portfolio. So these are the 2 markets that we will have to see. Also, now we are seeing one by one, while sectors are coming back, as Sandeep has said, that if you look at our ultra-high frequency index, it is now above 100 for a few weeks now, which also means that if you are not there in those sectors which have not come up, rest is all business as usual. It is also showing up in the fact that what is your 1-to-90 or 0-to-90 above your BAU. That has also declined sharply, which basically means that people are now getting cash flows and they are paying up. So all in all, I would say that things are okay. Now the other thing that one can always surmise is that how much of it is by way of refinancing, how much of it is by way of balance transfer or how much of it is by way of pent-up demand. Although it's very difficult to say, of course, whenever interest suddenly fall, there is some activity on balance transfer and refinancing. That is for sure. It happens. But interest from hereon, we don't think it's going to fall that much, so then balance transfer activity will come down. So shift of portfolios from one bank to the other will come down. And we don't think that it is that much of a pent-up demand for long because now it has been open for 4, 5 months. Last quarter also, we had good disbursements and good book growth. This quarter also, we had good results and good book growth. And we look at shares, as I said, at the micro market level, where it is okay. I mean we have still quite a bit of unsaturation is there for our customers and their needs. So that's what it is. And we have spoken to the ECGLS customers. We have called 100% of them, and we have spoken to them as well. They seem to be okay.

[Operator]

[Operator Instructions] The next question is from Abhishek Murarka from IIFL Securities.

[Abhishek Murarka, Vice President]

Congratulations for a great performance this quarter. So most of my questions have actually been answered. Just a sort of a small data point. So the debit card trend that you show on Slide 21, there's quite a bit of a drop in the number of cards in the last quarter. Is there anything particular in terms of trend that you see there? Or I mean, anything to read into it? How do we understand this drop? Because it follows a number of quarters of increase.

[Rakesh Jha, Chief Financial Officer]

So it would be -- in the last quarter, we would have done some -- removal of the inactive cards would have happened. Nothing more to glean there.

[Anup Bagchi, Head of Retail Banking & Executive Director]

But in general, Abhishek, just to give you some sense on the payment landscape that's happening. Very, very clearly, UPI is coming up or debit card over a period. So it will first cannibalize debit cards. Credit, separate animals because you get credit-free period. So credit card is a slightly different agreement. So that is coming up, credit card in its physical format replaced by card-not-present transactions. So e-comm is going up. So payment system landscape is moving. And the good thing for us, banks like us, is that while everybody talks about other PSPs, well, the fact is that all those transactions also go through the bank at the back end. So if someone says that, "We have got 100 million transactions happening through us." We should also, by corollary, understand that 100 million is also going to the banks. So it is now up to us to input that data also in our underwriting and in profiling and making sure that we are able to utilize it better. I will also go on to the extent to say that many of them may not have fully utilized use cases. Banking system has use cases because you can lend to them, you can cross-sell to them with that data. So I would say that the data quality and the throughput of the data is certainly helping in understanding the client in a much, much, much deeper way. That also certainly is one of the drivers of our higher disbursement. It also helps us in pre-underwriting cases, and that is increasing. And so net-net, with data analytics, it does have an impact on the way you underwrite and the speed by which you can underwrite and take through the transaction and reduce, in a way, cost of acquisition because you get data. So net-net, I think we are in a decent position and positioned well. It helps in liabilities. It helps in assets. It helps in corporate. So data, wherever utilized, will have a better chance.

[Abhishek Murarka, Vice President]

Sure. And Anup, just a quick follow-up on the growth question. I know you said that most of the pent-up demand is now already in. So how do we look at the 7% Q-o-Q? This -- I mean, what part of this would be a normalized kind of growth number?

[Anup Bagchi, Head of Retail Banking & Executive Director]

No, it's very, very difficult. Actually the pent-up also, we don't know. Who knows when demand falls off. I will only say, Abhishek, that our market share is low, so we have room to grow. So I would call that more on market share rather than demand coming up. Of course, if there's demand, it is easier to grow, as you know. So it is difficult to see what is pent-up. Because housing, for example, because of the stamp duty reduction, because of work from home, so there are other factors which are there, which is leading to demand of housing. And if you look at the ticket sizes, we look at our ticket sizes, if you look at the ticket sizes, which are moving, that is also increasing. We were looking at our own data on salary. If you look at the number of people who are filing income taxes and if you look at the gradation of that on the salaries, et cetera, very clearly, you can include what kind ticket sizes will move on housing, what kind of ticket sizes will move on auto. And then if you have good micro market data, which we have, then you can allocate your resources, attention, energy to that and get some share. So in general, that's the format that we are pursuing, and we have been reasonably successful so far. And I feel that if we continue our market shares again will happen. So that is how I will put it, Abhishek.

[Operator]

Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

[Rakesh Jha, Chief Financial Officer]

Thank you, everyone, for joining today on a Saturday evening. Wish you all a healthy year ahead. Thanks.

[Operator]

Thank you very much. On behalf of ICICI Bank Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.