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Indian Bank
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Jain sir, can we start with the call?
Yes, sir. Yes, sir, we can start.
Yes. Welcome, everyone, to Indian Bank of Fourth Quarter Results Con Call. We have with us the Indian Bank top management, including Mr. Shanti Lal Jain. We also have the Executive Directors of -- including Mr. Imran Siddiqui, Mr. Shuni Kumar, Mr. Mahesh Kumar Bajaj and [Vishesh]Ashutosh Choudhury. First, sir, I would request you to briefly touch upon the fourth quarter results, the outlook for FY '24 particularly in terms of gross margins, asset quality. Over to you, sir.
Good evening, and welcome to the post results conference call. So as far as our business is concerned, it has grown by 8% in the FY '23 and the deposit has grown by 5% and advances by 14%. And the deposit side, our serving deposit has grown by 7%. In the credit side, 14%, again, RAM has grown by 12%. Corporate has grown by 12%. And the RAM sector retail has grown by 13%, housing loan by 11%, auto loan by 28% [indiscernible]. So you must be seeing that continuously, we are growing between 12% to 15%.
Agri side, have grown by 16%. And the agri side, crop loan can, but 70% of the crop loans is as [jewel] loan, which is growing 20%. So virtually, [indiscernible] this loan is more or less same. Investment credit has grown by 30%, agri allied by 13% and [ECLGS] is growing by 44%. So agri has grown by 16%. MSME has grown by 7%, but the MSME, you see the ECLGS load, we have given around 11,800 to present outstanding is around 7,000. So 4,000 days come. So if you factor in here ago, we are growing around 11% or so.
In a standard corporate, corporate, of course, we are seeing 12%, but since we are writing it up also. The standard corporate is growing 17% and the mid-corporate, which is growing by 19%. So you see all components of our credits are growing. In the deposit side, we are growing by saving 7% and deposits by 5%.
This is the business. Now profitability side. So you see on a Y-o-Y basis on a Q-o-Q as well. The operating profit has grown by 20% on a Y-o-Y basis and a net profit by 34%. And in the quarter, operating profit and net profit, both have grown by 47%. So the growth of the operating profit is based on NII growth. So 47% on a quarter-to-quarter. This 29% is the NII growth. That is the main reason. Bad debt recovery is 337%. Fee income has grown by 12%. The [indiscernible] fee processing has grown by 20%, cross-selling 41%. If the issue the year-on-year again, so NII has grown by 21%, bad debt recovery by 35%, fee by 16% under fee processing has grown by 21%, again, cross selling 58, 4x, 46. So you see in all segments of our NFR income is growing. Our business is growing.
So as far as our margins are concerned, the margin was 2.91 for the last financial year. The current financial year, it is 3.41. If quarter-on-quarter, you see it has come down from 3.74 to 3.59. This is a [indiscernible] for the year is 0.77 but you see the quarter, it is 0.82. Likewise, the ROE for the year is a 14.73 .But in the quarter, it is 15.48 Cost income ratio, which was 46% in the last year is 44%, and the cost of deposit has grown -- increased from 3.97% of last year to 4.09%. But the yield on advances from 7.21% to 7.76%. So here, you see that our cost -- yield on advance has grown higher than the cost of deposit, but in the last quarter, of course, the cost of deposit has grown slightly higher. And the 1 reason is that the interest reversal is also 1 factor.
The GNPA, GNPA has come down from 6.53% of the last quarter to 5.9% and net NPA from 1% to 0.9%. And the PCR at 93.59 to 93.8%. So growth has come down, both Y-o-Y and as sequentially, net NPA has also come down,PCR also improved. The capital adequacy ratio, 16.49, but you see the CET capital is increasing in spite of increase in credit by around [indiscernible]. So which -- we are telling that our generation will be adequate to take care of our growth, which has been proved by this numbers.
Now you're talking about the margins for the next financial year and credit growth versus deposit growth. So credit growth, we are -- of course, we have grown by -- given a guidance of 12% plus minus 2%. So as against this year ended with a 14%. So we are always conservative in giving the guidance. So here again, our credit growth is 10% to 12% for the next financial year, and the deposit is again 8% to 10%. So you see at the deposit is 5% or 7%. So we have done a number of changes in the deposit side. Not only we are onboarding the customer through tablet banking, we have organization structure wise also, we have better huge changes here in the [indiscernible] office level at the GM level also because deposit is a challenge. But as far as our liquidity is concerned, we are at 158% LCR. We are having, again, a 35,000, 36,000 excess SLR. So that liquidity wise, we are comfortable.
So I read to you the business number, the net NPA number, of course, going forward, the net NPA and the gross NPA should also come down. And you see our ROE is already we are at 15 points. So this should be better than we expect that '23, '24 will be better than again this '22,'23. So I [indiscernible] are here. If you -- or 2 or 3 minutes, I want to talk about the digital [indiscernible] Mr. Bajaj will tell you where we are in digital.
Thank you, sir. Can I show the PPT?
No, no, [indiscernible].
As far as the -- good evening, everyone. As far as the digital is concerned, during the last financial year, Bank has taken various initiatives on the existing core banking and new technologies, the existing platform announcement on the cybersecurity. Our UPI transaction now per day is INR 1.25 crore and mobile banking has INR 22 crores. Apart from that, the digital channels or Q1 March 22 was 77%. Now the digital transaction was 85% and branch transactions go down to 15%. Same way, the mobile transaction also gone by 68% and that in the UP also, we have grown by more than 100%.
Last year, we onboarded DLP, data lending platform as well as the omnichannel. On the -- recently, we started certain journeys. On the ram sector, we have completed close to 20 journeys and to [indiscernible] digital and we garnered -- we canvas digital business close to INR 5,200 crores in retail and INR 300 crores in agri and MSME INR 60 crores. And we are planning to do another 15 to 20 journeys by July end. With that, we are hopeful of doing the business almost 7 to 8x from the last year. As far as the DLP as well as omnichannel, omnichannel, we are coming on the new app in the next, the first half, where we have the device [indiscernible] omnichannel experience, the customer will be having the mobile Internet banking kiosk on other channels of access, the same experience and the same kind of facility.
Apart for that, we have -- because our CBS is old date and what of customization was done. We are coming -- we have already gone with the middleware the CVS APIs, where we can now have the partnership with the other fintechs as well as within the bank also, we have onboarding various vendors, the APIs are easy. And on the cloud technology also, we are already on the public cloud in the smart office and the private cloud, we are planning for the core banking in the next financial -- this financial year.
On the information and cybersecurity also bank has taken a call to strengthen. And last year also, we spent a good amount of money on this. And this year also, we are planning to go for the advanced cyber [soft] and new vectors. And Bank has created another center of excellence for the new initiatives on the analytics side for the new journeys, apart on the data warehouse, data owners, data cleaning, et cetera, is going on in this part.
On the customer relation management, we are onboarding the vendor for the CRM for the Customer 360, marketing and operations side. And we have created 1 more vertical file for the benefit of our corporate customers, the CMS.
On the HR side, we have created the 100-plus person dedicated digital or measures set up. And to -- because various journeys and various new initiatives have been taken, we have this 900-plus dedicated digital banking champions are onboarded to drive this digital agendas in the team and already have told more than 20 journeys completely another 20 we'll be doing in the next half year. Thank you, sir.
Thank you, sir. Are we good to take Q&A?
Yes.
Sure, sir. First question is from Mr. Ashok Ajmera. [Operator Instructions].
Good evening, sir. And yes, compliments for yet another good set of numbers for the quarter and as well as the whole year and a very good progress, especially the credit growth is also I mean, more than the guidance given. And what is happening to note is that almost about INR 10,000 crores growth in the corporate book only in the last quarter is in as against many of the other peer bank where we traded in the last quarter is a little bit muted. So going forward, don't you think that your target of 10%, 12% is a little bit conservative on that the way our bank is going? This is 1 thing where we would like to hear more about a little optimistic numbers.
And sir, now with our CD ratio going 76.24%, of course, you have the extra SLR. So how do you plan to grow the book as well as they match the CD ratio also? And up to what level you will be comfortable to go up to in the CD ratio? This is 1 on the credit and risk.
So the other thing is on the -- this recovery in NARCL side, our recovery -- cash recovery in this quarter is good, even SMA 2 is also under control. But now the major recoveries will come through the NARCL and the NCL team. So some -- a little more information and color on that? At what kind of recoveries we are -- I think we had 22 accounts in NARCL and then 9 accounts have already been bits are received. So a little more detail on that, if you can give?
And sir, on the treasury side, now that the things are improving, and the rates are softening up. Of course, treasury performance is that we -- I mean, we can call it as good more than INR 1,100 crores of the income in the segment wise[if you seen it], but it is lower than the last quarter and even the MTM or the loss on the sale of valuation of the securities, I mean, the profit is also very bigger as compared to what it was in the last quarter. So some of these points are there, sir. And 1 thing about the extra provision which we hold because we have seen the 2 notes where the INR 1,556 crores and INR 1,071 crores, the provisions are there. So more than the IRC, like you have INR 520 crores more than the IRC in note #20 also. So if you can give the color, the buffer which we have of the provisioning because you are a very prudent banker and execute banker, I would say, a chartered account and must be playing well with the numbers. So some of these are my questions and observations, sir, in this round.
Thank you, Ajmera. So I'll give 1 by 1 answer of all your issues. So you know we are a little bit conservative in our guidance. So that is about 10% to 12% we have given you. Earlier also, we have given you guidance 12% if we ended with the 14%. So that we'll continue to that have that kind of -- but you see the growth virtually 17% we have grown in corporate at 19% mid corporate. But we are focusing more on a mid-corporate. We already opened around 25 branches for mid-corporate to take care of big corporate, which is where the margins are there, right? And all our engines are growing, you see agri side,jewel loan is growing 20%. We are having a [270,000 Crores] of book, which is growing. So in the retail also will continue to have that growth. So we are sure that we'll be able to achieve this 12% number.
So second point is your treasury number, you said the profit is a little bit [indiscernible]. So you see what we have done. We have done a lot of churning in the last quarter in a treasury book. And as a result, our AFS holding has -- yield has improved to 7.15. Current rate is around 7%. So due to the churning of this, they are -- the profits are not appearing more in the P&L account, [infact remain] will continue to have a good profit time to come. In the time to come -- likewise, [indiscernible] book has also increased. So this is a conscious call to have a better relate investment. So when the interest rate will increase, even then we will continue to have a good interest income. That is a whole object of doing so to protect our margins in all. This is a strategic call which we have taken.
Now the third point you will talk about the NARCL and all. So around INR 6,200 crores of book, which is with identified port to be by the NARCL, half the accounts we already given issued the bid and around a quarter is under process. And quarter intentionally, NARCLs are kept on hold. So what we think that these are all accounts 100% provided because PCR is 94%, 95%. So when the bid is received, we are expecting money in some account even we are expecting the government guarantee, you know the SR is to be guaranteed by the government. So we are expecting a guarantee then some of the accounts we will ship. So going forward, we should have a recovery in the recovery fund.
Sorry to interrupt you, sir, on this SR when you resume, or you received government guaranteed that also you are going to provide 100% or that you are going to take the income or hit in the investment book on that SRs'?
Point is that we are having 100% provision. We'll continue to hold that. So whatever cash we receive will be income. Otherwise, we will be keeping our balance sheet strength honestly, all along like this. The point you raised about the extra provisioning we have made on INR 2,200 crores. So what is the weakness of the balance sheet? All others are good, our net NPAs, 09. So [indiscernible] restructure book basically, restructured book. And [indiscernible], you see the -- even the ECL guidelines -- draft ECL guidelines of the a Bank of India. But this -- the restructuring should be near to the NPA numbers, and all the provisioning may increase if the situation so arise.
So what is happening in the restructuring book, of course, our restructuring number is coming down because when you receive a 20% or 30% amount, it is out from the restructuring book. Even then, we thought it fit that we should increase our provisioning in the restructured book. But we are having restructured INR 11,000 crores of a restructuring number we are having as far COVID is concerned. In addition to that, around 3,000 or 4,000 [indiscernible] this is where the 2 years has already been. When you enhance the DCCO by 2 years per [RBI] guideline, it is to be classified as a restructure of asset. So around INR 15,000 crores. So we have met 20%, INR 3,000 crores. Now fact remains what is the risk we are having in the book that is important. So in the DCC against INR 3,500 crores, INR 3,000 crores already COD has achieved. But as for the existing guideline, it will be out from the NPE after 2 years.
So that is 1 part of it. The second part of the -- this is that restructuring book, what we have done restructuring and INR 18,000 crore we have originally done the restructuring. How much have been slipped. So around 92%, 93% of the restructuring, we are getting money. So NPA is 7% or 8%. Even then to prepare ourselves, we have created additional buffers. And as is always said that in a good times, 1 should create a buffer to take care of future. That is where is on the prudence, we have done this. This is the [third] point of that. And 1 risk is that in restructuring, if any account goes back now, what happens, it goes from the retrospective effect, always. Of course, based on the conduct of account, there is no issue. But we should have to have adequate provision. I suppose the ECL guidelines come next year.
This year, bank should be fully protected. That is our object and when you are passing through a good times. This is on [indiscernible][prudence]. So what is this at the third point of yours, right? But is any other point, sir, which I have missed?
No sir,you covered all the points. Just like I just wanted to understand that other than the IRAC norms and RBI requirement, what aggregate total offer -- so around, I think, am I right, if I take it at around INR 3,000 crores, INR 3,500 crores of total?
No, we are having a standard asset provision of INR 6,000 crores and we are having a net NPA of 4,000. A bank I think that way fully protected sir.
Okay. So anyway, thank you very much, sir. And I'll come back again because otherwise [indiscernible].
Margin point is a big point. But as I could not complete in my earlier -- 3.74% to 3.59%. And going forward, everybody is seeing that when the interest rate will increase the cost -- and the cost of deposit will increase your -- how will you able to protect your margin? This is a big question, even as the initial point. So 1 aspect I've already clarified you an investment what we are doing.
Second point is that we think that we are in the near to peak levels. So what we are shifting some of the repooling we are shifting to MCLR. So our MCLR number, which was 56% in December, we have moved to 59% and repo, which was 36 34 because what happens if the repo will come down in -- of course, that maybe we expect the last quarter, it again, depends on the inflation and inflation depends on the monsoon and all, right? But we should be ready to that. In addition to that, we are also coming out with a fixed loan products. So what will happen is the situation that interest rate will come or repo will come down, we should be able to protect our margins and all.
The third point, how you can protect your margin. So you should take that deposit base on the need. So you see what happened. We have not taken grown the deposit in the last quarter. But at the time, the deposit rate is 7.8%, you see the CD rate, so March and the CD rates are now, you will find that the interest rates is softening. So that has a call considered call we have taken -- of course, the growth you are seeing that growth is not happening, but it was a part of considered call when you are having a 158% of the LCR, when you have excess SLR, not borrow at 6.5% is against 7%, 8%. And we have -- you see we have built it up treasury also at that time at a 7.4% was a rate. So there is a time for us to make money. So these are all a part of our decision making or your -- how you run the organization.
We have next question from Satyan.
Great set of numbers. My question is just leading on from where we are set up on them. So I guess NIM guidance, you're seeing is 3.7% to 3.9%. Is that right?
The NIM guidance, actually the NIM 3.41 year as a whole, right? 3.59 I'm sitting right, 3.59. So our endeavor is to protect this 3.41 number and all, which we should be able to -- [indiscernible] will be on that. There is 10 bps here and there 15 bps here and there, time will tell, sir, but [indiscernible] will be less.
Okay. Great. And next question, again, on provisioning. So you are still provisioning at a pretty high rate of 2.5% of, I guess, loans. Just wondering, and now I guess net NPAs are down to 0.9%. So what sort of provisioning are you going to do towards NPAs? And what excess provisioning are you thinking of doing for FY '24? [indiscernible] that question, but given how aggressively you provisioned, I think provision should come up materially going forward?
The point is that we are having a 0.9% is a net NPA. So going forward, our proving needs will be less as compared to the last year because we started from 2.27 now ended with a 0.9, naturally the going forward of promising need, and we have created the buffers in the process also because the time was good. So going forward, our provision will come down substantially.
So any guidance on how much excess buffer you still want to create for FY '24? And what -- I mean, how much actual [indiscernible]?
[indiscernible] ideally, since our net NPA has come down, so provisioning will be less, sir.
Okay. Substantially less [indiscernible].
It should be because INR 4,000 crores is net NPA now and SME book, you have seen the restructuring book, where 92%, 93%, we are going good. So going forward also, we are not seeing much challenge here.
So that 9,300-crore number should probably come down by 50%, I would imagine, going forward? I'm not right.
It is very difficult to say in terms of numbers, but it should be substantially down, sir.
The next question we have from Dixit.
A couple of questions. First question was just related to what the previous participant had asked. So this quarter, the provisions of NPA was only INR 1,040 crores but we did almost INR 1,450 crores. So is this kind of run rate in standard advances will continue or so it will come down? Because as you rightly pointed out, the net NPA is now INR 4,000 crore only. So obviously, this NPA provisions will come down. But we will see the overall provisions will also come down. And second question was by when we have to dilute the government holding below 75%. So any update on the [indiscernible]?
Okay. So point is that there is no doubt, sir, by provisioning will come down. There's absolutely no doubt because the net NPA has come down and buffers we also created, right? So going forward, it should come down. The second point is that your capital raising and all right. So what we have said that our generation will take care of our growth. So if CET capital at the beginning, when we started the year, it was 12.53%. No, it is 12.89%, 36 bps higher. And we see the advances from [4.15 to 4.70 crores]. So around [58 59,000 crores ] advances we have done, even then our CIT is higher than this and in spite of that, we have declared the dividend of 86%, right?
So this is clearly showing that my generation will take care of my growth. Even then we have taken a Board approval for raising both CET capital and the Tier 1 and the Tier 2 capital. These are the enabling provisions which you have taken the last time also, sir. Now that remains if the portion time comes, we will take, otherwise, what happens these are opposed Tier 1 and Tier 2, won't we take, it is at a higher rate than the interest rate, but we are getting. So in that situation, you will be losing whereas you are having a good capability to see. So based on the need and all, we will take a call during the financial year.
I agree with you that our present Government holding is higher than 75%. So this all provision will take care of -- in case we come out with the capital [indiscernible] it will come down from 79.86% which is presently 80%. But everything will depend in the next financial year, how profitabilities will come. But yes, we will be having the enabling provision from Board as well as our shareholders.
Okay. And so just to confirm what you have said. So as you rightly said that since the net NPA is now only INR 4,000 crores. So NPA provision should come down, and therefore, we were expecting from last few quarters, but that was offset by the standard provisions on the standard advances we did. Now you are seeing the overall provisions will also come down since we have created enough buffer [indiscernible]
Right, sir. Right, sir.
Our next question, we have from Mahrukh.
My first question is on current deposits. So what drove the slightly stronger growth in current deposits. And then my other question really is on deposit costs. So just over the weekend and today, suddenly, a lot of banks are guiding that there has been so much of premature withdrawal of deposits that there has been an early repricing of the outstanding of bank deposit book and because 90% or 80% of whatever that figure is of outstanding or back book deposits have already repriced. Now cost of deposits and funds can stay stable, which then kind of suggests that margins can actually move up slightly in the first quarter. Do you subscribe to that view?
I mean you also guided to a full year margin expansion from the 4Q levels? But just in terms of how it will play out in the first quarter? And how much -- what percentage of your deposits have actually repriced and how much is pending?
Margin expansion, basically, margin expansion is 2 factors. One is advanced side whether we'll be able to pass on increase in repo on the second time the cost of deposits. These are 2 factors. In fact, in the credit side, if you see how 250 bps are the increase in the repo rate, but in a housing loan, we could be able to pass 170 bps, on auto loan 180 bps, or jewel loan around 190 bps or so. So we could not pass the entire 250 because of the market competition. If we increase 250, then become less competitive in the market. So this is 1 part of this credit side.
On the deposit side, again, it depends on the duration of your liabilities. So -- but the point is that from May '22 onwards, this repos has increased, right? But it is over a period of 7 or 8 months. And generally 1.5 or 2 near our duration may be around 1.5 or so. 1.6 is our liabilities, right? So some part of it will be come for repricing. But you see 59% of my book is MCLR. So this will take care. Second point is that you see excess SLR and all. So what will happen there is some optimal use of money also sometime when we will convert this money into credit naturally, the interest rate will be high.
The third point is what happens when the earlier time when there was an excess liquidity, so pricing power is virtually with the with customer. Slowly, slowly, we are getting the pricing power because of the increased interest. So we will be able to pass on a higher goods at a higher price. So putting all these things together, but I told you that we will be able to maintain our margin of 3.41 of the last financial year because these are all based on liquidity. You can't -- earlier, people used to take money at 6%, 6.5%. Now nobody is giving this money at 6.5%. But in case of my marginal yield on advance that amount was that, and that's lower rate of interest. So first point or your increase in the credit growth second is our pricing power, right? Third is the MCLR increase. These are one side of the lever; other side of the lever is that we are increasing cost of deposits. So we will have to match this [indiscernible].
Got it. But your deposit maturity has not gone higher or there has not been any accelerated repricing of deposits. Is that -- would that be a correct statement?
No madam, point is that accelerated cost means there are 2 parts of the deposit. One is a bulk part and 1 is a stable part, right? So in our bank, we are bulk deposit, same number, which was having in that '22, we are more or less the same number in '23 as well. 17%, 18% of that part remaining is all our stable deposits. And you see in CASA side also, we are 42%. So basically, we are not on that we are going to have [indiscernible] 30% bulk,35% bulk or 25% bulk where the repricing may be the issue. For us, we are a stable bank, and we are not growing 20% that you need money at this rate.
I was not talking about bulk versus retail. What I was saying is that a lot of banks are complaining that even within retail, there is a premature withdrawal of deposits for [indiscernible].
We are not in that -- we are not doing that kind of [indiscernible]
Thank you, Mahrukh. Our next question we have from Mona Khetan.
So firstly, we have seen higher MSME slippages this quarter. So just wanted to understand if this is primarily from the restructured book? Or is it from the normal standard book?
So out of INR 2,500 crores of slippage, INR 1,300 is MSME. So around 50%. Out of INR 1,300 crores, INR 700 crores is from the restructuring book. So this -- because this is slipped from the restructuring book, it is impacting my NIM also slightly. And again, the INR 110 crore is from the ECLGS book where, of course, we'll get our money.
Okay. And so since you mentioned in restructured, there is this retrospective effect on interest reversal. So what are the total interest rate reversal this quarter?
Just a minute, I'll tell you. My interest reversal for the current quarter, INR 236 crores. It's against INR 139 crore of the last quarter. So INR 100 crores more virtually.
Got it. That's useful. Secondly, you mentioned MCLR book of 59%. So how much of this has already been repriced so far?
No, this is an ongoing situation, ongoing situation. My point is 1 year out of this, again, 59% around 40% is a 1-year MCLR, right? And around 6 months is a 14%, 14% is on a 6-month MCLR. So this is an ongoing basis point. What is the issue? Issue is that 730 was the original rate in May '22 and 855 today, we are having, right? So then 125 bps. So those which have been priced 730 a year back, we'll have a repricing of 855 in the first quarter. 125 bps. So this will take care of our whether part of increase in cost.
Right. And when you say 40%, this is 40% of advances, the 1-year MCLR book?
So 40% of the total book.
Which is the total advances of [indiscernible].
Of the bank.
Got it. And just finally, do you have any sense of the ECL provisioning requirement that we may come across over the next few years?
ECL, we are making provisions, right? What is the ECL, actually I'm telling you, ECL again, we have given INR 11,800 crores of ECL, yes, entirely. So today, the outstanding is 7,000 [indiscernible]
ECL.
Okay, ECL. No, ECL final guidelines are yet to come. But 2 things are sure 2 things are sure based on that. There will be higher provisioning requirement for restructuring book, right, and the SME, these are the 2 things, basically. This will going to happen. So we -- and all banks are having higher provision in NPA because we are 94% PCR. So there, we are having a surplus provision which we can use partly for the restructuring book.
Got it. But no early calculations as to how much could be the overall requirement?
Let the final guidelines come. We have given our observations. They have come out of the draft guideline.
That was useful.
But we are preparing ourselves.
So when you say that you're preparing yourselves, does it mean that you have already started building additional provisions, assuming that normal [indiscernible]?
Yes, that is -- the crux of the ECL is expected loss. Expected is -- but [indiscernible] you know, expected is out of what expected is out of your structure out of our SME. The difference between the incurred and expected is only expected.
So we basically I think the question which came from Mona was also primarily because [indiscernible] Bank in earlier call said that the overall ECL incremental requirement for them is like INR 420-odd billion, which is almost like 7% of their capital percentage could you [indiscernible].
I don't know there, but we are preparing ourselves. So our issue, which I came -- I understand that I need to build some provision for restructure, which you are already built.
Sure, sir. Next question we have from Mr. [indiscernible].
Congratulations on very good numbers to Team Indian Bank. So my single question as you have answered most of my questions. Your outlook on treasury, you answered, but do you estimate huge profits in the current year? And second is knowing your past track record with Bank of baroda and allahabad Bank. What is the road map for Indian Bank to be future ready? So you've rolled out many products. But what are the other enablers you will put along with these products that Indian Bank will take all the peer banks and the bigger banks also on various segments?
Thank you, Choksey. There are 2 issues basically AFS book. So I told you that we were holding yearly 7.15 and current is around 7%. So there's a gain there, right? This is 1 point. So that we have to decide -- again, we will lay our interest, we will have. That is the decision to be done by us based on our own -- decisions. On second point is how to make banks which are ready. So you know that we have already -- the way the Bank of baroda the State Bank of India has got the permission to create a subsidiary for your operational needs. We also have a [indiscernible] permission. We have a third bank from we got the permission from the Reserve Bank of India to create our own subsidiaries. So we are in the process of creating or subsidiaries. What will happen subsidiaries, then we will also have -- some of the work we'll outsource to them, even the marketing work, even our day-to-day back-office work, so that will save my operational cost in the time to come. The second thing which we are doing. And the third thing is a digital where we are doing a number of things bajaj has told. But we have -- but we are doing a digital 1 in a core and other is a customer side. So the core side also, we are doing a number of things. Core side, we are -- is a middleware, the omnichannel, right?
The cyber operation centers. The number of things we are doing in the core side also as well as the customer side also to offer more and more products to our customers digitally and in the mobile banking. So what we have done, again, first, let us -- first, we decided let us do increase our mobile decisions. So we have double 58 become 150. And we, again, want to go double, we are working totally on that. So this is a market is available. If your mobile penetration increases your market, you created. Now the second point is that to offer the product. So offer digital journeys, we have started. And 3 of whom to give this digital journey. So analytics center of excellence we have created. So this analytics center of experience based on the past trends, based on our rural Indian will decide this particular customer, we can offer this product, whether the preapproved personal loan, preapproved business loan, top up in-housing top-up auto and what other non the past or even the MSME, based on the GST based on the have integration of the GST. It's a third thing we have done. So that journeys' we already launched. But we are doing the change management office, we have created along with the [indiscernible]. So we are giving training to our people to understand the digital. And again, in digital, we have gone with the 3 different ways. One is that we are going with the mobile, we go the Internet, the 3rd one is assisted journey. So I suppose my customer -- all of the customers are not so digital savvy because we are having a 10 crore customers. So assisted mode is also there the customer comes to the branch, you even -- you go digitally.
So that way, slowly, slowly, we will be able to create digital asset. Again, 2 or 3 things will happen by data quality become better and better and better. So I will use my analytics center of excellence and offer the products. One thing we will go in to do. Second line, my OpEx cost will come down. In all this way we are working, in addition to the digital side, in the entire year last year, we changed that the performance management system of each and every employees -- each and every officer of the bank as a KRS. And the KRS, we have given based on the work is good doing and we have capital lever. Suppose this time the deposit is a challenge. So we are increasing the number for deposit early at 12 parts. Now we will be having 20 marks. So everybody will work for deposits to get their better PMS score to get the promotions and everything. So this is also we are doing. So in a number of ways we are working from the employee side, from the digital side, from the customer side, from the IT side, from the cyber side, we have recruited people from the market also in IT in the cash management and a number of other fields.
Sir, based on all the initiatives that we've taken, one is what is our total spend you would like to achieve over a period of 2, 3 years to make things ready. And second is, you are sitting in a hub, which is a very knowledge-based states, Southern India. Your competitors are big NBFCs, like Sundaram Finance, Chola, [indiscernible], many other Manappuram. Are you seeing your initiatives giving you a higher market share compared to competition with your products being rolled out at your customer level?
So let me tell you my number itself is saying, the first year of amalgamation, we were having a profit of INR 3,000. Second year, we are having a profit of INR 4,000 crores. In the third year, we are having a profit of INR 5,300 crore. So you see that our business is growing, or profitability is growing our synergies coming. Now Bajaj will tell about our expense this technology cost, we are incurring used cost.
Here on the IT investment, we have a couple of the categorization. We are on the capacity build in IT infrastructure, then analytic then consultancy then cybersecurity and new technology. So in last 3 years, almost, we have spent INR 1,600 crore. And the next year also is in the line of maybe INR 500 crores to INR 600 crores spend will be there.
So you see 1,600 because you see every project takes time to give you results. So we are making bank future ready for the digital side as well.
So how much of loan growth are you seeing in gold, auto and [indiscernible]?
Sir, you see auto is 28%. We are growing. We'll continue to grow. Gold, we are growing 20%, will continue to grow.
So can I take that more or less a guidance over the current base?
Yes, this is our history says sir. So we will continue to grow on that number.
Thank you, sir. And all the best. Congratulations and best wishes for the years to come.
Thank you, Mr.Choksey, Our next question we have from Rakesh Kumar.
Very strong performance on the provisioning side and creating buffer for future that is a great performance. But sir, on the balance sheet growth side, the growth, especially on our deposit is quite low. Yes. So deposit growth has been quite low as compared to the system, and we are still looking at around 3.4% margin. And next year also, we are projecting margin, giving guidance of around the same level. So are we also going to use the lever of excess LCR that we have and the LDR, which is -- which we can further improve? So are we going to use these 2 levers to further enhance the margin? Is there a room? Is there any thought process on that front?
We will be increasing our deposits and this excess part of the money also we can use. The fact remains active. Last time we could have grown more, but we take the deposit base on the need in the wholesale market and all. But we would like to grow granular part of the deposit, salary counts. So what we have done here, again, we have created 4 or 5 GM even for liability, which earlier used to be the 1 GM. We have created a government relationship sell at various locations Tamil Nadu, Chennai or Lucknow or kolkata or Delhi or Bhopal, a number of places.So, we are creating infrastructure organizations, people to garner granular deposits. And we came out with various products as well. So that aftersales we can suppose we are taking a salary account from any over, then we can open them offer them insurance at all. We have created a number of products, which we call a sampoorn suraksha,[indiscernible]where we are giving insurance also free, right? We are giving other benefits as well. So these are all products we are offering to our customers. We do understand that we need to grow more in the branded part of the deposit.
So this guidance of 3.41 a stable margin in the next year, is that considering utilization of excess liquidity and increase in the year or without using that?
It's a combination of all these. You can't say but point fact remains, what will be the increase in cost and what will be the revenue. So we have considered all calculation and come to that we should be able to protect. But of course, everything 10, 15 bps here and there can always happen.
Thank you, Rakesh. Next question we'll take from [indiscernible].
So we have turned deposit of INR 6.2 crores. What portion of the term deposit is likely to come for repricing in next 12 months?
Just a min. But you see. 1,6 is our duration, right? So naturally, 1.6 divided by [4 6] 15%, 16% per quarter. 15%, 16% per quarter.
Okay. And what would be your outstanding cost of time deposit?
Time deposit? Outstanding?
Time deposit we [indiscernible] crores which we have, what will be -- what would be the cost of deposit of that amount?
So we are having term deposit of INR 360,000 crores right, sir. And our cost of deposit is just [indiscernible]. Our cost of deposit is 4.33%, right? That includes the CASA part, right? So 40%, you exclude. So you do have 1 math for me, right? So 4.33% is a [core] and 40% is at 3%. Remaining will be the cost of deposit for time deposit now.
Sure. And like this quarter, we created INR 1,400 crores of provisioning. So how much of this is for restructured loan? And how much is this for other standard assets?
No. What we have done, we have done it a 20% provision for the restructured book, which includes INR 15,000, INR 11,000 crore plus DCC and all trends even translate to all put together. So additional position we have created.
And this where would be a comfortable level of provisioning for the structured loan?
The fact remains that we should need to build our provision. That was an object, right? And you see that 92% of the advances are -- we are getting money. So to my mind, the issue is only the 7% or 8%. So 7% or 8% of INR 15,000 is INR 1,200 already [indiscernible].
So 20% is comfortable levels for provisioning?
As of date seems to be comfortable levels.
So we'll take next question from [indiscernible].
One is on the operating profit. We have seen your numbers for '23 are very good. But Q4, there is a slowdown. There is effectively no incremental growth in operating profit. So can you elaborate and explain? [indiscernible] and how much growth we can expect in FY '24? And number 2 is on capital adequacy. And there were a few questions and issues on ECL. Now we have seen on the ECL side, RBI is having responses from many banks at the top private banks, softer, top-tier PSU and also the secondary PSU. Now there is a talk of a hybrid system. One is ECL and also based on the circular on actual, which has not been implemented anywhere in the world. But the current system of EQR and provisioning has resulted in healthy banks in the last few years.
So -- and also another point coming on this is some of the banks have represented to RBA and the government to defer the implementation of this ECL for next 2 years and also the spread instead of 5 years should become 7 years. And the private banks are already doing models and sharing it with the RBI, and they had done accelerated provisioning. Indian Bank is known for very high asset quality particularly in the last 3 years and you are strengthening the asset quality every year by accelerated provisioning. I would like to know your views, particularly on this ECL consultation paper, which was issued, consultations going on the hybrid matter and what is your view? Are you ready? Because along with SBI, you are known to be a very high-quality bank in terms of asset quality and also among the lowest in cost of deposit.
Another thing, last few days, in fact, for quite some time, the second peer the PSU bank like Bank of India, Canara Bank, Union Bank have started sharing their number. Bank of India mentioned about INR 25,000 crores based and Canara Bank talked about the -- Union Bank of about INR 35,000 crores. Canara Bank number is much, much higher, mainly, I think, because of the Syndicate Bank merger earlier absorption. So what is your view and what can we expect? And for this reason, the RBS encouraging banks to do fundraising and take the money when the market is good. And today, the valuations are quite good, and some of the banks have started having the plans. So why not raise the funds and build up capital adequacy further. If you can address it, then I can take it, maybe 1 more point later. [indiscernible] question your accountant ECL and hybrid system very, very well among the very few MDs of PSG Bank.
So thank you, sir, the 2 points you raised. One is our operating profit on a sequential basis. It was -- is it [indiscernible] first question. So what we have done, sir, in the current quarter, we have made a salary provision of INR 177 crores is against INR 75 crore. Last quarter, INR 100 crore extra salary revision because the salary was due from November, so earlier only 2 months, now it is a 3 month. Second 1 is employee benefit, which we have made a INR 700 crore provision this in INR 548. And the third point is that in the March quarter, there are 90 days as against in the December quarter, 92 days, and we are earning interest on a daily basis. So naturally, that has [100 150 crores] of INR 5,000 crores of NII to impact my NII. These are 3 major reasons. The fourth 1 is the interest reversal because of this.
And these are the 4 major reasons for -- otherwise, you see the numbers are going good, sir. So you asked about the ECL and all. Of course, the forum to discuss this ECL provisioning and all -- just a minute. This is not the forum to discuss ECL and all because unless the complete guidelines comes from the Reserve Bank of India with the planned reading of the secular, which comes to my mind, which plain reading of that, there will be a higher requirement for restructuring; and second, with the SMA where the 12 months PD will be calculated is and in a restructuring lifetime PD. And then the NPA as a lifetime PD and on is an undrawn part. These are 3,4 major things, which I observed from that. From the my bank's perspective, what should be my call. So my call is that I'm already having 95, so NPA is no issue. The second issue is the restructuring, let us take that into account. And I'm telling you, as for the guidelines also the RBI is still the 5 years' time. In number of circulars RBI allows a 5 years' time, even when the pension provisions came even, they allowed 5 years' time to amortize in fraud, they allow 4 quarters to amortize. This is the higher side they allow us so that as to strengthening of the system. But the banks generally do earlier than this. earlier than this. And those banks who are having strengthened their balance sheet would like to do earlier than this and move forward. So the approach -- our approach will continue to be of that type of a bank.
Just 1 question on this. Are you giving the calculation of ECL based on certain models to RB on a regular basis, or no?
We are calculating, but things are not stabilize sir. So different banks have different when the things are not clear, how will you compare each other right? So it is in an evolving stage actually. In reality, it is an evolving space. And that is why RBI itself has said that in the that circular, if your existing provision is higher than your ACL provision, you keep that provision. The way they have done in the capital adequacy guideline when the Basel II and the Basel III came.
Next question we have from Mr. [indiscernible].
Sir, I had a first question on the ECLGS. So what would be our outstanding portfolio on the ECLGS and what is the from that portfolio as of now? And sir, secondly is on guidance part. Also, sir, any qualitative comments on the guidance on asset quality that is GNPA and NPA repetition recoveries for FY '24 would also be helpful.
GECL, one-by-one I'll tell you, GECL, we have given 11,800, right? Today, outstanding is 7,200, right? So it means 4,000 had come. So around 40% of the money has come. What is the NPA? NPA is INR 537 crores out of the 12,000 crore. So around the NPA is at 4%. So it is 96% of ECLGS is behaving. So just a minute -- are you getting my wise? Hello? Hello. Are you getting my question, sir?
Yes, sir.
This is ECLGS. So as on date, we are having 7,200 and the NPA of this INR 537 crores. But what happens is 4,000 has come from the MSME book and as the result, MSME growth is appearing at 7%.
Okay. The second point?
The second point is the GNPN and NPA, right? You see quarter-on-quarter basis, our GNP is coming down, right? It is now at 5.95%. Our endeavor will be to bring below 5 as early as we can. And are .9 is -- 1 is our number. Maybe a slight bit here and there. 5.95 is my current number in GLPN or [indiscernible]come it below 5.
Okay. sir. And any guidance on slippages? Any thoughts on that?
Okay. The recovery was last time the target was INR 8,000 crores, we ended with INR 8,500 crores. So last time our recovery was better than our targets. Second point, if you go slippage versus recovery. INR 7,000 crores slippage INR 8,500 crores recovery. You see last quarter, even slippage recovery is more than the slippage. December quarter recovery was more than the slippage. September quarter, recovery was more than the slippage. So our India will continue to be having more recovery than the slippage base. So that in that way we will be able to do -- In that way, we'll be able to control our GNPA numbers and all.
Next question we'll take from Jai.
First, sir, this year and this quarter, our tax rate has been very miniscule. For full year '23, this would be around 11%. So how should we -- I mean, earlier, we had said that we now should be seeing normalized tax rate? So how should we look at the tax rate maybe for near term or FY '24?
What happens in this quarter, we have created a standard asset provision and created [indiscernible] on that. And because of that, the tax rate has come down. Now going forward, we are at 25%. So in a PBT level, it will be 25%. And of course, at the operating level, it is a bit lesser than this.
Secondly, sir, while we have said that so far, there was the repo rate hike and MCLR hike was already there. still the yields on loans have declined 2 basis points in this quarter, right? So how would you explain this? I mean if repo rate were to peak, assuming repo rate have already peaked, then cost of yield on fund should anyway decline? I mean -- exactly happened in this quarter that yields declined? And now with at least 30%, 30% of the EBLR book will not reprice, then yields could have even more pressure going ahead.
I told you because of interest reversals, INR 236 crores, right? It is INR 100 crores higher than the earlier one. That is a 10 bps impact, sir. So otherwise that we would have been higher.
Yes. So sir, even if you adjust 10 basis points, that would mean that the yields have gone up by 8 basis points only.
But you see that I told you now, we will not be able to pass on that entire increase in housing loan or auto loan. We could pass on only 170 bps as against that 250 bps because market is like this. Likewise, auto loan also competition is there now.
So competition will stay only, right? So how will you?
That is why it cannot be linear. It cannot be linear. Market forces decides.
Correct. And so yields pressure may continue and cost of deposits should only rise, right, as earlier deposits will come for repricing as the term deposit maturity [indiscernible]?
This question I have replied. I will take this issue I told you 1 side on the investment side, second 1 is the MCLR side.
I think there is some disturbance.
We do know that the cost of deposit will increase it is writing on a wall. Cost deposit will increase the deposit will come for repricing. It will be repriced. So how to take the situation? So 1 is you have to tackle the from the income side. co-side it is increasing income side from the way the income comes from the investment, income comes from the credit book. So -- but the investment, I have told you that we have increased our holding yield on the same side on the credit book, credit book.
We are -- MCLR book is 59%. So this will also come in 59 means 14% .sir. I'm just telling you 59% is 15% per quarter. I'm telling you very simple 15% per quarter on an average, 1.6 duration of liabilities. So 16% will come for repricing. 16 will come for repricing liability side, 15% will come on asset side.
Sure. So that should ideally set off.
Not ideally set off because their price is higher, the price -- MCLR is not equivalent to our cost of deposit increase. So that is why we have taken the route of investment.
We'll just take last question from Mr. Ajmera. [Operator Instructions].
No, I was listening to Jain giving retail explanation. Sir, just 1 or 2 small data point. And in between the voice 1 also broken somewhere. So I might have missed. So 1 was sir on this -- when you said that in your cost, the employee cost, the provision of INR 100 crore additional. Sir, that was for the wage revision. But what about the additional pension where every bank is providing a larger amount every quarter? So in your case, it is not required, or you have passed it on to the next quarter, sir? This is 1.
No sir, this is that on actual valuation point. Second point is it is calculated with respect to the yield [indiscernible] yield on investment book. And if there is a shortfall, we provide.
So it is fully -- whatever is required is provided?
So if you hear as a whole, you see last year, we provided INR 1,800 crore. This year, we provided INR 2,100 crores, but we are now mark-to-market. So that is [indiscernible].
And sir, secondly, sir, I think we -- in Note #17, we bought some agriculture loan in the loan of INR 1,322 crores. If I'm not wrong, Note #17 because [indiscernible]
I mean no, not -- you asked I'll reply.
So INR 1,322 crore agriculture loan has been acquired with tangible security NIM. So what are these loans? What kind of loans you are [indiscernible]?
So what happens so we do purchases a pool. And the JLG is joined liability guarantee. So this is a part of our business we are acquiring from this NBFC some JLG loan based on the past track recorded.
So it means there's no chance of any [indiscernible]?
No, sir. Currently they're not because we know the behavior of the account earlier also we acquired.
All right, sir. And 1 more last 1 that hold on NPA where we got the provision reversed of INR 395 crores. So the total provisional reversal for this quarter only of that particular INR 395 crores?
This is the yearly numbers. No, we have yearly disclosed we have given side based on the ARC [indiscernible].
Okay. The amount realized is INR 439 crore on the [indiscernible] INR 37 crores. So the provision reversal was INR 395 crores. It is for the [indiscernible].
So point is that, sir, whenever we receive full amount, and we are having 100% provision, so provision needs to be [indiscernible].
So it is for the whole year.
Sir, 1 question which is coming the chatbox is on your NIM. And secondly is on the -- if you can just help us with like you have a exposure to spicejet, which has I mean, 1 of the -- you filed a case against the company.
[indiscernible]? But you asked spicejet?
Yes, [indiscernible].
NIM I already clarified.
Yes, NIM, I think you have already cleared.
And spicejet is a very, very minimum [indiscernible]. Very, very minimum, even less than [indiscernible]. Okay. So we are having actually expose under ECLGS and existing exposure is even done less than 20 [indiscernible].
So with that, sir, we'll close the [indiscernible]
Nothing [indiscernible]. Nothing will go in here.
So you have any final comments before we end the call?
Thank you. Thank you, all the investors and analysis for your continuous support, and we hope that the next year will be better than this. Thank you.
Thank you, sir.
Thank you, everyone.