Indian Bank
NSE:INDIANB
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Indian Bank
Earnings Call Analysis
Q1-2025 Analysis
Indian Bank
Indian Bank has demonstrated robust growth in its business metrics for the first quarter of FY25. The overall business of the bank increased by 11%, driven by a 10% growth in deposits and a 12% rise in advances. Segment-wise, the RAM (Retail, Agri, and MSME) credit saw a 13% uptick, with retail credit specifically surging by 14%. Particularly noteworthy is the remarkable 55% growth in auto loans and a substantial 25% increase in gold loans within the agri segment. This reflects the bank's strategic focus on diversified growth across various lending categories.
The bank's profitability saw a significant boost, with net profit soaring by 41% to INR 2,403 crores. This increase was anchored by an 8% rise in Net Interest Income (NII) and a notable 11% growth in non-interest income, which includes a substantial INR 504 crores from bad debt recovery, marking a 180% increase. Operating profit grew by 9%, underpinning the bank's robust financial performance.
Indian Bank reported a marginal improvement in Net Interest Margin (NIM) from 3.52% to 3.53%, reflecting efficient interest income management. Additionally, the Return on Assets (ROA) improved to 1.20%, up from 1.15% in the previous quarter, and Return on Equity (ROE) increased to 19.76% from 19.06%, signaling enhanced returns for shareholders.
The bank maintained a high collection efficiency rate of 95%, while the Gross Non-Performing Assets (GNPA) ratio improved to 3.77% from 3.95%. Similarly, the Net NPA ratio saw an improvement to 0.39%, down from 0.43%. The Provision Coverage Ratio (PCR) also improved to 96.66% from 96.33%, indicating a strong buffer against potential credit losses.
The bank's digital journey continued to advance, with digital transactions now accounting for 90% of total transactions, up from 85% a year ago. Mobile banking users increased by 33% year-on-year, and UPI transactions saw a 56% growth. The bank also reported significant progress in its digital onboarding initiatives, with 6 new digital journeys added in the last quarter and plans for an additional 44 journeys within the year.
For FY25, Indian Bank had set guidance for deposit growth at 8-10% and advances growth at 11-13%, both of which were met with actual increases of 10% and 12%, respectively. The bank expects its recovery efforts to yield INR 7,000 crores for the year, with INR 1,937 crores already realized in the first quarter. The management has projected maintaining a NIM of 3.4% +/- 10-15 basis points, and the current quarter's NIM stands at 3.53%.
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Good evening, ladies and gentlemen. I welcome you all to Indian Bank's post results conference call for the first quarter of financial year 2025 hosted by Emkay Global Financial Services Limited.
From the top management, we have with us Shri Shanti Lal Jain ji, MD and CEO; Shri Mahesh Kumar Bajaj, Executive Director; Shri Ashutosh Choudhury, Executive Director; Shri Shiv Bajrang Singh, Executive Director; and Shri Brajesh Kumar Singh, Executive Director.
Please note that this call is for analysts and investors. So if you do not fall under these 2 categories, we would request you to kindly exit the call. I now request the MD to briefly summarize the key highlights from Q1 FY '25 results, followed by strategic direction, particularly in terms of growth, margins and asset quality, post which we will have the Q&A session. Over to you, sir.
Thank you, Kunaal. Good evening. Warm welcome to all the participants. Today, we declared our first quarter results. Our main highlights are the business of the bank has grown by 11%, of which deposit has grown by 10% and advances have grown by 12%.
In deposit, the CASA has grown by 6%, and we could maintain our CASA ratio at 41%. The term deposit has grown by 12%. In credit growth of 12%, RAM credit, retail, agri and MSME has grown by 13%. And under RAM, retail has grown by 14% and under retail, housing loan has grown by 13%, jewel loan grown by 10%, auto loan by 55%.
So put together is the 14%. Agri has grown by 18% and the crop loan or farm credit has grown by 17% and 78% are basically gold loan, which has grown by 25%. Investment credit has grown by 11%. Allied agri has grown by 58%, infra by 18%, SHG, Self Help Group, grew by 14%.
The third one is MSME, which has grown by 6%. But standard MSME has grown by 11%, of which macro is 14%. The corporate loan has grown on a 9% and a standard corporate loan has grown by 10%. So you're seeing all the segments of our credits are growing. Our CASA we are able to maintain at 41%.
Now coming to the profitability. The net profit of the bank has grown by 41% and we reached to INR 2,403 crores. The operating profit has grown by 9%. The growth of the operating profit is basically the growth on NII, which has grown by 8%.
Noninterest income, too, has grown by 11%. Under non-interest income, bad debt recovery, we've done around INR 504 crores, and it's 180%. Fee income has grown by 17%. And you see the PSLC from last year, we started amortizing over a period of 4 quarters. So we had earned a profit of INR 627 crore. INR 157 crore we booked as an income for the current quarter.
So this was the main reason of our profitability. And now coming to the margins. So NIM has improved from 3.52% to 3.53%. The return on assets improved from 1.15% of March quarter to 1.20%. Likewise ROE improved from 19.06% to 19.76%. The cost to income has improved from 47.99 to 44.
If you go deeper into the margin part. So cost of deposit has increased from 5.01% to 5.05%. And the yield on advance has come down by 8.81% to 8.69% and there are 3, 4 reasons for that. One is the reason is the penal charges we have booked as other income. Second is interest reversal part. And third one is that there's a lesser recovery in MOI or you can derecognize interest. These are 3 factors.
And as a result, the yield on advances come down, but you see our yield on investment has increased from 6.88% to 7.15% because we are -- from last 1 year we are working on investment and you'll see the investment yield is 7.15%. Here the HTM holding yield 7.08%, and AFS is 7.17% and FVTPL is 7.79%.
Now coming to the asset quality. 95% collection efficiency, we are maintaining. The GNPA, which was 3.95% in March quarter improved to 3.77% and the net NPA, which was 0.43% has improved to 0.39%.
The PCR, which was 96.33% improved to 96.66%. The slippage was INR 1,928 crores, which was 1.5% as against 1.57% of the last year. So there are 2, 3 reasons for that. Seasonality is also involved and the slippages came from INR 900 crore on the MSME book, close to INR 600 crore from the agri book and INR 400 crore on the retail book.
So INR 1,900 crore, we could recover around INR 312 crore post June. But this time, again, of course, the slippage or recovery is more than the slippage. The recovery is INR 1,937 crores as against slippage of INR 1,928 crores.
As far as capital adequacy is concerned, we are better than the last quarter, 6.44 to 6.47. And if you add the profit, it is 17%-plus. So this is all about our gross NPA, net NPA, our businesses, profitability margins.
Now I request my colleague, Bajaj-ji to discuss about the digitization initiative, and then we will be open for question-and-answers.
Thank you, sir. Good evening, friends and investors and the analysts. [indiscernible] story on digital initiatives continues as far as the transaction at branch and digital transactions, it was 85% in June '23 and it has gone to 90%. So now digital transactions at the bank is 90% and 10% at branch level.
As far as the mobile banking users are concerned, it has gone up from 131 lakhs to 175 lakhs, which is Y-o-Y 33% up. And the transactions, 138 lakhs to 169 lakhs which is 22% Y-o-Y up. UPI users have gone up from 142 lakhs to 185 lakhs, which is 30% Y-o-Y growth.
And the transactions from 7,574 lakhs to 11,829 lakhs, which is 56% Y-o-Y growth. Net banking -- Internet banking users have gone up from 87 lakhs to 109 lakhs, which is 26% Y-o-Y growth. Debit card users from 323 lakhs to 324 lakhs. Credit card user 1.70 lakhs to 2.38 lakhs, which is Y-o-Y 40% growth.
POS, we have gone up 13,000 to 21,658 which is Y-o-Y 66%. As far as our digital journeys and digital initiatives are concerned, last year, we completed 78 journeys, which gave us digital business of INR 81,250 crore. This year, we have added another 6 journeys in the last quarter and planning to add another 15 journeys in Q2.
And the year as a whole, we are planning for 44 journeys. As far as the business is concerned. For this quarter, it has gone up from 9,000 to 36,678, which is close to 4x, which is e-RAM, which was 6,700 has gone up to 29,987.
The liabilities e-deposit, which was 2,414 for Q1 '23, this time, it is 6,670, which is up by 176%. And the journeys as far as are concerned, we are adding another 44 journey during this financial year. And 1 more thing, last quarter also, we were telling in the last year, we started with our new omnichannel app, which we have launched for the customers also -- active user customers with app store rating is 4.4.
And we launched in '24 June for the public -- our customers and now we have onboarded 13.71 lakh customers and it has various the added features, with better UI/UX and the marketplace. It is -- whatever the other apps are providing, so this new app is giving us all those functionalities. Thank you very much.
Sir, 1 more thing. The guidance versus actuals, actuals we told that the deposits will be growing between 8% to 10%, and we have grown to the 10%. In advances, we said that we'll grow between 11% to 13%, we are at 12%. And we said that the CD ratio is close to 80%, we are at 79%. We said that recovery will be INR 7,000 crores, we are at INR 1,937 crores. We said that our margin will be 3.4% plus/minus 10, 15 bps, we are at 3.53%.
Yes, sir, now we are open for question-and-answers.
[Operator Instructions] We have a first question from the line of [indiscernible].
Just 1 question. In terms of CD ratio, what would be -- is 80% the upper limit or can we exceed 80% in the event that deposits are still hard to come by?
So Darshan, the point is that there is no prescription from the Reserve Bank of India for LDR. But for -- in our own interest that we should have LDR within the manageable limits. If you see on a year-on-year basis, our deposit growth or advance growth, same 100% we have grown by deposit also INR 60,000 crores, advance is also INR 60,000 crores, if you go -- even the domestic business, domestic INR 54,000 crores, INR 54,000 crores both side.
So we -- in the deposit also, we are growing in a very calibrated way. So we are not having any excess, which we can deploy at a lower rate. So we are growing at the same speed. The issue is basically raising up deposit in CASA and all. So for that, we have done a number of things. And as a result, we are growing 6% or 7% in the CASA side. So we will endeavor to maintain our CD ratio LDR close to 80% or so. And we are having excess SLR of close to INR 44,000 crores, and we are having an LCR of around 120%.
Got it. But if it exceeds 80% also, that's not a problem, essentially. There's no prescribed limit per se?
But it is in our own interest to have this LDR within the manageable limits.
[Operator Instructions] In the meanwhile, sir, we have some questions in the chat, maybe I'll read that out for you. So people are asking what will be the impact of the new LCR, the draft LCR norms which has come up? Most banks, large banks have talked about impact to the tune of 17% to 14%. So what do you think will be the impact for Indian Bank?
So the new guidelines have come around 2 days back. Basically, 2 things have happened. They increased the runoff factor for retail deposits, 5% and also other than the retail also 5 points (sic) [ 5% ]. So those who are having the Internet banking and mobile banking, so close to around 4 bps, there will be impact -- 4 to 5 bps, there will be an impact on us.
And the second one, what they have done in HQLA also, they have come out where the discounting factor will be applicable. As on date, even the -- even our HQLA assets basically, excess SLR we are having a market value is more than the book virtually because you see the market value is 6.96% [indiscernible] 10 years our holding is 7.15%. So you can say 4 to 5 bps impact on us -- 4% to 5%. Close to 120% will come down to 115% or something.
The next question is 1 of your peer PSU bank actually reported 2 large accounts in SMA bucket. So do you also see some stress in the corporate book and how much is our SMA 0, 1 and 2 book?
We have disclosed our SMA number. I think for our SMA, which was 0.48% came to 0.47%, right? So in our SMA basically, in SMA 2, 2 accounts are coming INR 263 crores and one is INR 102 crores. So INR 365 crores is a -- which is not a -- not a higher amount considering our size.
The next question is from the line of Darshil.
Sir, just wanted to ask, what would be your guidance for ROA and credit cost?
Your audio is not clear, sir.
Darshil, your voice was not clear. Can you please repeat your question?
Yes, I just wanted to ask in terms of guidance for ROA and cost -- and credit cost in terms of slippages.
Okay. So you've talked about 2 things, ROA and credit cost. So credit cost, which was around 0.73% last quarter has come down to 0.71% or so. So our credit cost will be lower than this 0.71%. We are continuously declining. As far as ROA is concerned, it is increasing, 1.15% was last quarter, now it is 1.20%. So our endeavor is to do better.
Okay. Fair enough, sir. And just wanted to understand the market dynamics like with deposits, maybe a bit harder to get, will there be further -- like will there be an impact on NIMs maybe coming in H2 or something? Because I just wanted to understand the landscape.
So you want to know the deposit cost or the deposit amount?
No, no, like how is the deposit market? Are we facing competition...
Okay, okay, okay. So point is the market is tight, you know, and the credit growth is happening. So we are seeing that the credit growth will be more than the deposit growth. Even the FSR of the Reserve Bank of India also said that the cycle of high credit growth and high deposit -- and the low deposit growth will continue even for 1 year-or-so. So we think that going forward, also the deposit will continue to be a challenge. But what we are doing for that is that we are managing our portfolio both side, liability side and asset side.
You know on the asset side, 61% of our book is in MCLR. So what happens with the increase in cost, we are also increasing our MCLR, so increased price will be -- increase in MCLR will take care of increase in our cost. At the same time, the investment book is also giving us a good read. So that interest rate may slightly increase, sir, because of the tight liquidity condition and because of the need because the credit growth is happening.
Okay. Fair enough, sir. And just wanted to know, in case RBI cuts rate this financial year, what kind of impact would that be for us? Will that be positive for our NIM? Because the deposits are secured and maybe how would it happen, in case if there is a cut?
But if you see the CPI inflation is still -- above the RBI comfort level of 4%, right? Of course, globally, that interest rate can come down. But domestically, I'm seeing that the interest rate will take time to cut down. Even if hypothetically, it happens, it happens, then what will happen the -- our -- whatever our advance is -- the repo will slightly come down. But at the same time, the deposit cost will also come down if the situation so remains. But we are adequately covered by way of MCLR, by way of investment.
So yield side, we are fully protected. On a cost side also, our endeavor is to maintain our cost. So you see even in the increasing interest scenario and all, we could maintain our cost of deposit growth by increase by only 3, 4 bps.
The next question is from the line of Sushil Choksey.
Congratulation to management and team of Indian Bank for excellent performance. Sir, my first question is on cost to income. Can we see 40% within a year's time?
Thank you, Sushilji. You see that our cost to income ratio has come down from 47% to 44% in the current quarter. But our endeavor is to come down, but below 40, it may take time, sir. So maybe 1 or 2 basis points here and there.
Sir, with the digital initiatives and the capabilities which you have created within a bank, can enhance a lot of capabilities within your bank in terms of cross-sell, business, relationship, tapping multiple channels, which cost cannot be high, rather the profitability will grow, so will it not impact the balance sheet or you feel that expenditure will exceed the revenue side for right now?
No, I agree with you, so but it will not change dramatically. Some benefit we'll get and slowly, slowly we'll be getting in the time to come. But immediate, it will not change dramatically. But point is that we are working on digitization, we are working on cost reductions as well and at the same time, you see CASA is a challenge. So if you grow further, naturally major part of your funding will be through the term deposits.
Sir, today, our G-sec stands at 6.92% at close. The likely scenario based on LCR and mobile market, if we head to 6.8%, how would you rebalance between treasury and credit because I think there would be substantial profit, which may arise to the bank? At the same time, credit demand at your end is very high. So win-win situation for Indian Bank to capitalize on it because you being among one of the most efficient banks compared to peers. How do I see the profitability stack up?
The profitability point is that you see today, I'm sitting in a holding yield of 7.15%. Even the FVTPL or HFT, the holding is 7.79% and AFS is 7.17%. So of course, as against the 6.92%, we are at a better position. And we are having the excess SLR at INR 44,000 crore. So these are -- naturally, there is a good amount of cushion is available here, good amount of cushion is available. So if the opportunities will come, naturally, we will encash that opportunity and grow.
Sir, I would like some view on your retail book, international book.
So retail book, you see, basically in retail, 70% is a housing loan. And even in housing, which is growing at 13%. And from the CIBIL point of view or from the Bureau score point of view, around 85%, 90% is even beyond 750-or-so. So we are underwriting a better quality customer.
And second one is the auto loan, we are growing at 50%. We have had a number of DSAs even for the auto loan. We are growing in the jewel loan also at 10%. So this entire retail piece is growing 13%, 14%. Virtually, we have sanctioned 22%, 23%. But you see in retail what happens the repayment too comes. So as compared to last year, our growth is 22% in sanctions and we are continuously doing sanctions to maintain this 13%, 14% of a growth and for that what we have done, we also opened 7 RAPCs more in the retail asset processing center so that our sanctions will grow and retail will continue to grow.
In the agri side, also, I'm telling you, 78% is a gold loan, which is growing 25%. So majority of is in the gold or even the SHG also we are growing at for this business, we are doing from 16, 17 years where the delinquency level is low. So we are concentrating where we are having better margin and a better asset quality.
Even I'm telling you in MSME also, I was discussing our onboarding -- of late, our onboarding is more of a low-risk assets, that analysis we have done. So that way, quality-wise, we are better, and we will continue to grow in that way.
And sir, the outlook on gold loan and international book.
International book, international book also, we are growing good. Basically in overseas, advances have grown 27%, right? So in -- we'll continue to focus on a syndication loan because there the margins are better as against in the buyer's credit or trade finance.
Even I was last week on -- in Sri Lanka because we are having 2 branches there also. There also, we are shifting our business from that buyer's credit, trade finance to, again, the syndication or even the customers who are having imports and exports from the Sri Lanka, so opportunities are there and there, the margins are also there, so we're growing there also.
Sir, the manufacturing sector is growing well from states where Indian Bank has a rich presence, so was your earlier [indiscernible] Bank. So how are we capitalizing and what kind of unavailed or sanctioned credit is visible over a period of next 1 year?
So you see, what you rightly said, we are sitting in Tamil Nadu, industrial manifesting is much, much better opportunities here. So what we are doing, we are -- we have started our mid-corporate branches. Mid-corporate center which is headed by a GM. There, we are having good growth, around 25% to 30% growth we are having in mid-corporate, where the margins are there.
And the customer base is also increasing and today, we are having around close 27 mid-corporate branches and we are adding. Two more we are adding. What happens in 2 more adding, we are adding at Erode and Namakkal, which is Tamil Nadu, huge opportunities are there. So we are focusing on that and growing our business. And that is why our NII is growing, our margins are better.
Sir, any color on the gold loan book, on the expansion side, I know you're doing very well.
We are having virtually close to INR 81,000 crores of a gold loan book, and of this INR 73,000 crores, INR 74,000 crores is in agri, which is growing 23%, and we are now having 650 gold loan branches, which is basically doing gold loan. And we are increasing the strength there. We are giving karatmeters to check quality and everything. So we are -- there are good opportunities here and margins are better and growth opportunities are there, we'll continue to focus on that.
Sir, can you surprise on the margin on the positive side ahead of your guidance in the year? I know you won't answer, but still my job is to ask.
Sir, we should always be conservative in giving guidance and performing better than what we say.
The next question is from the line of Vibha Batra.
My question is actually on fresh slippages. If we see fresh slippages at INR 1,928 crores for the quarter, they have gone up significantly vis-a-vis previous quarter and also previous year. And you've given the breakup here. So MSME seems to be worsening the most. And I think retail, maybe quarter 4 of last year was an aberration at INR 126 crores, that has gone back to its normal levels.
So on asset quality, I have 2 questions. One is that what is the outlook on slippages. Is this the new norm? And second is, there seems to be some OCA recovery. Is that abnormally high or do you think that will be the trend for rest of the year too?
So first point is that slippage INR 1,900 crore is definitely, we are not happy with this position. What happens, there are 2, 3 reasons for this. One is, of course, the seasonality is involved. Second one is in the first quarter because of election, because of the heatwaves and all, there is the problem in getting money, but what happened out of INR 1,928 crores, so far, we could recover INR 312 crores.
So that will impact will come in the next quarter. And what happens in here in the agriculture, the basically majority of this is basically a farm credit. So we are working on that. We are working on that, and we'll continue to show our recovery more than the slippage. And this is, of course, not a new normal.
It is not a new normal, you're saying.
Yes.
Okay. We hope for the best. And the OCA recovery, is there some chunky accounts here...
So what happens -- we said that close to INR 2,000 crores of OCA recovery, we will have. So out of that INR 500 crores we have recovered. Fact remains that today, we are having a gross NPA of INR 20,000 crores and INR 40,000 crores of [ PWO ]book. So major recovery naturally will come from the [ PWO ] book.
Okay. But it was in the same last I mean last quarter.
Last quarter was also more, but in the corresponding period, it was INR 178 crores as against this, it is INR 500 crores.
Okay. So do you think you can maintain, say, INR 1,500 crores for the rest of the year on OCA recovery?
Yes. We targeted ourselves the total recovery of INR 7,000 crores, INR 7,000-plus crores. So of course, the part of this can come in the OCA recovery.
Okay. And my other question is, if I look at your Tier 1 and compare it to your network, there is a difference of INR 7,749 crores. Your net worth as per the details that you've given is INR 60,803 crores, and your Tier 1 equity is INR 53,054 crores. So net worth is higher as compared to INR 7,749 crores. This haircut is on account of intangibles such as properties or it's -- there is something else?
Maybe you're talking about the networth? So there may be some adjustment on account of DTA or other CFO can clarify this. Why there is a networth difference of this. But fact remains, there should not be any difference because as per the new norms also investment new norms, our AFS reserve is increased by INR 204 crores and the reserve -- general reserve also declined by INR 200 crores. So what is -- this is a -- why is this difference of a networth? Maybe DTA? DTA is not INR 7,000 crores. So can you tell me what is the number from -- from where you are speaking, I will make it clear.
Yes, yes, yes. So I'll tell you. Just a second. So your Tier 1...
In our balance sheet also -- in our presentation also, we have given it in our balance sheet.
Yes, yes, yes. I'm talking from your balance sheet only, I'll just give you the slide numbers. I've done it on my excel sheet, I'm just opening your presentation. Just give me a moment. See your slide number 25...
Let me come back to you. So that reserve and surplus INR 59,000 crores, INR 60,000 crores, which was on March is INR 58,000 crores, the rest, INR 2,400 crores is a profit. This is the balance sheet. Now you are talking about...
No, no, no, No. So I'm talking about, see if your networth, if I were to look at just networth, which is as on 30th June 2024, your networth will be capital and reserves, INR 1,347 crores plus INR 59,456 crores. This is 1 number I have. And this is on Page #23, then if you go to Page 25, it is INR 53,054 crores.
Okay. Okay. Okay. Understood. Revaluation reserve is discounted in the CET capital. As per the RBI guideline, you can't take a revaluation reserve at a full amount, 45% you have to take there. So that is 1 factor.
Second factor is that you can consider your DTA only up to the 10% of your CET capital as per the Basel law. So always, there will be a difference, sir -- madam.
Okay. So technically, then when you're giving your book value, you should possibly give as per the net Tier 1 that you're showing and also as per networth because there is a huge difference, 14%, 15% difference, broadly speaking. And RBI may not allow it to be included as Tier 1 capital because it's not really available for risk absorption, but as far as shareholders value is concerned, shares book value is pretty much your networth.
Shareholder also net of revaluation reserve.
No. I mean if I'm a shareholder in your bank, so my share is basically your networth, it's not out of thin air, whether it is reval or DTA, this benefit is going to accrue to me if I continue to hold.
Madam, we'll discuss this offline. Madam, we will discuss this issue offline. I will clear you everything, madam. No problem.
The next question is from the line of Jai Mundhra.
Congratulations on your term extension, sir. Sir, a few questions. First, on this new guidelines on investment revaluation. There is a rise in the yield on investment, right, which is a sizable rise on a Q-o-Q basis. Now considering a part of that is because of the now amortization being allowed in AFS. Should we think that this yield on investment could remain here, I mean, broadly or it will -- it was like onetime exercise that helped increase the yield on investment?
No, sir, it will remain, sir, it will remain as per the new guidelines.
Right. Okay. And secondly, sir, I see in the notes to account that there is a credit in the AFS reserve, but there is a debit in the general reserve if you could explain, sir, what explains this negative...
So what happens, actually, the FVTPL, when you move to the new regime, naturally, there is a difference in the book value and the fair value. So the difference has been diverted to reserve -- to the general reserve. But what happens in an AFS book when you have an M2M gain which earlier used to come in P&L account is now going to a reserve account. So it is going to AFS reserve account.
For us, actually, we have gone with a different strategy I'm telling you. But we have done in the reclassification of our investment, the 2 or 3 objectives. One objective is to have a better HTM yield so that bank will consistently give a better result. So as a result, our HTM yield is 7.08% you compare with other banks, then you will find a difference because this is -- we think from the long-term perspective.
Second point is that even the AFS book, we are having close to INR 65,000 crores and our excess SLR is INR 44,000 crores. So this INR 44,000 crores, we have kept in an AFS in case of need, we can always have. Third point is that FVTPL or yield is 7.79% where we can always [indiscernible]. So we have gone with the different, different objectives.
Okay. All right, sir. Okay. So maybe I'll take with Treasury GM, but okay. And secondly sir...
No, if you are not clear, you ask me, no problem all of. Otherwise, offline also, we can discuss.
Sure, Sure. No problem, sir. Secondly, sir, if you can bifurcate your loan mix by benchmarks like repo and NCLR? And do you have any corporate loans linked with T-bills or the entire external benchmark is repo only?
We are in 61% book is on MCLR, right? And the external T-bill is maybe very, very -- INR 1,000 crores, not much. We are basically -- we are a margin-conscious bank. So we grow only in a profitable way. And see, within the MCLR also 60% is -- no, around 80% is on a 1-year MCLR. So that way, that will always give us a support.
Right. Sir, is it right to say that your MCLR proportion has increased? Because I remember it was slightly at mid-50s level. Has that increased?
No, it is from last 3, 4 quarters, it is 61%. Prior to that, it was slightly less, 59%. So continuously, we are maintaining that. .
Okay. Okay. And sir, why not do T-bills because it looks like that T-bills will give you more concurrent -- will capture more concurrent, let us say, change in the interest rate, right? Or that is not the right understanding?
Point is our deposits are not on T-bills.
Yes, but they are not on repo also, right?
But -- so that is the regulatory requirement. Rest is based on whatever increase in costs, I should be able to pass on.
Okay. Okay. Sure. And sir, lastly, on LDR, right? So we are at 79%, 80% LDR. You think now is that the optimum LDR or you think you have some still a few basis points more scope to improve?
LDR, LCR, right? So LDR also, we are at 79%, 1% or 2% here and there, we can go, right? And basically, what we do is we raise resources based on the need also because resources has a cost -- so we basically match everything. You see quarter-on-quarter how our deposit growth is happening and how our credit growth is happening.
Even the whole year last year, you see it is INR 67,000 crores is a deposit growth and INR 60,000 crores is credit growth, right? Likewise, whole year, you see from June to June, it is matching. So we are matching in this concept, and we can raise the resources. Point is that you have to pay slightly higher.
Right. And sir, any risk of -- so cost of deposit has been -- it has inched up only maybe 2, 3 basis points only. How do you look at cost of deposits, sir, because your capital is healthy and you're doing a calibrated 11%, 12% kind of a growth. In that context, how should one look at the cost of deposits? Would it keep rising up or it has plateaued? Or how do you look at it?
Sir, cost of deposit is because the banks are taking money at a special term deposit rate and all, right? So cost of deposit may further inch up, maybe 3, 4, 5 bps further. But what happens in MCLR too we increased in July by 5 bps and in June by again by 5 bps. So that income will come again in the P&L. Slightly cost will increase; slightly, income will also increase; and of course, the investment will also support you. So that we are trying to maintain our margins.
[Operator Instructions] In the meanwhile, there was 1 question in the chat from Mayank Gulgulia from SBI Life. He was asking what was the reason for increase in the slippages in the MSME segment and what is the outlook going forward?
So I told you because of the -- there are 3, 4 reasons, one is seasonality is also there, heatwave is also there, election is also there, right? There are a number of factors. And part of the money we have recovered also. So they are the 3, 4 reasons for the increase in slippage. But our recovery was higher than the slippage.
Right. The next question is from the line of Manish.
Yes. So my question is regarding the -- one of the budget proposal wherein PSU banks have been asked to develop independent assessment model to lend to MSME based on digital footprint. Since we are one of the prominent bank in the MSME space, do we have any model right now, have we back tested those model? How do you see this proposal by the government to the PSUs?
This is a good move from the government. We are having at present also because we are based on the GST, GST return and based on the CMR scores, right, based on the balance sheet, we are having own models based on that we are giving credit to the customer. And you see I'm telling you the delinquency level on those kind of a digital lending is lower than the others. So we are having our own system, which is based on the GST, based on the GST means your turnover, your purchase, your sales, financial statement and also based on the CMR ranking, CMR takes care of your credit or your conduct of account.
All these factors put together, we are giving the facilities. And further, we will develop based on the needs. So we are having sir, and we are open for others because it will be [indiscernible] and all. So we'll give our comments there also.
But sir, are you confident of managing the credit quality in this space, if you start lending without any proper records or account statement?
Sir, you see, I'm telling you, if you are giving based on the income tax return based on the CMR and all, but income tax return, you see return number 2, 3 and 4 what the returns says, return says your entire balance sheet. So you can take data from them also, in return also. And you have a CMR which takes care of your conduct. And the GST, which takes care of your purchases, sales, whether the same purchases sales, whether the buyer or seller is submitting the return and nowadays, all things are available. So you can do, sir, better.
Okay. Just 1 follow-up on this. Does it open new lending avenues for us in MSME space?
Definitely, sir. Definitely. Because what happens, there are 2 issues in MSME with access to credit. So if you offer a product digitally, naturally the access to credit will increase. So naturally, it will grow. Further now, the new schemes have also come that in Mudra, Tarun -- wherever the money has been paid, you can give more from INR 10 lakhs to INR 20 lakhs. So those who are paid, this is a good opportunity, my customer, they already paid, they will come back to me and I'll give more loan. So opportunities will be there, sir. And [indiscernible] also.
[Operator Instructions] Sir, there is 1 question in the chat. What will be the impact of the draft project financing and the ECL norms? And do you plan to raise capital to fend off the impact of ECL?
So first point is the guidelines are draft. Second point is that what they say in the draft guidelines, you have to make by '25, 2% provision; '26, 3.5%; and then '27%, 5%. And that 2% also you can amortize over a period of 4 quarters, so 0.5%.
Virtually, it comes to 0.5% per quarter, right? So what is my book as compared to my total book and 0.5%? It will not be a material amount. Of course, there will be an impact on my P&L because of the charging. But we will also charge the customer. So this is an opportunity also to make some money to us, and that will not be a major impact considering the present projects on hand and all.
Okay. And what is your view on RBI's comments on Mr. Ashish Pandey, who was designated as...
Sir, we are not the right person to comment.
Okay. How much of PSLC fees have been booked in 1Q and what is the outlook for the same?
So that INR 627 crores of PSLC commission we booked. And as per our policy, we amortize over 4 quarters, so INR 157 crores is booked in the current quarter and remaining we have carried forward to be booked in the remaining 3 quarters.
And was there any reversal of penal interest from interest income in the current quarter?
Yes, around INR 42 crores has been booked -- has shifted from interest income to the other income.
Got it. So we can take that as the last question. With this, we come to the end of the Indian Bank's post results conference call of Q1 FY '25. I now request the management to give their closing remarks.
Anybody wants, otherwise -- thank you all the participants for having active interest in the bank, and please keep supporting us and your support will give us more motivation to do better. Thank you.
Thank you. On behalf of the management, I thank all the participants for joining. Happy evening, and have a good day.
Thank you.