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Indusind Bank Ltd
Earnings Call Analysis
Q1-2025 Analysis
Indusind Bank Ltd
Sumant Kathpalia, CEO of IndusInd Bank, started the call with an overwhelming positive view of the Indian economy. Despite external challenges like election disruptions and extreme heat waves, India sustained strong GDP growth of 8.2% in FY24. This translates into overall optimistic sentiments for the banking sector, which saw minor improvements in liquidity conditions compared to previous quarters.
IndusInd Bank showed strong deposit growth, up by 15% year-on-year and 4% quarter-on-quarter. Retail deposits led the way, growing 16% year-on-year, indicating a robust underlying consumer confidence. Loan growth was similarly impressive at 15% year-over-year, driven by retail loans growing at 18% and corporate loans at 13%. Post-election, these figures are expected to further improve due to pent-up demand and seasonality benefits.
The bank's net interest margin (NIM) remained stable at 4.25%. Revenue for the quarter saw an 11% year-on-year growth, reaching INR 7,849 crores. Despite a challenging quarter, the bank managed to maintain a healthy core profitability with operating profit growing by 3% year-on-year to INR 3,952 crores. Core profitability, adjusted for contingent provisions, grew by 10% year-on-year and 2% quarter-on-quarter.
IndusInd Bank’s asset quality showed some improvement despite external challenges. Gross NPA and net NPA stood at 2.02% and 0.60% respectively, with a provision coverage ratio (PCR) of 71%. The restructuring book continued to decrease, now at 0.34% compared to 0.40% last quarter. This demonstrates the bank’s effective risk management and prudent provisioning.
Vehicle finance saw a 15% year-on-year growth, although disbursements were lower due to election-related uncertainties and seasonal weaknesses. The microfinance and merchant loan book also grew 16% and 25% year-over-year. Despite a typically weak first quarter, the bank remains optimistic about higher growth and improved profitability in the latter half.
The digital banking platform INDIE continued to gain traction, amassing 1.3 million users. This demonstrates a successful digital transformation, enhanced by the bank's various initiatives including affluent and NRI banking, which grew at 23% and 33% year-over-year respectively.
IndusInd Bank remains confident in achieving its full-year credit cost guidance of 110 to 130 basis points. The bank aims for an overall growth rate in the range of 18% to 23%, supported by robust deposit and loan growth, improved asset quality, and the successful integration of technological advancements. The management expects normalization in OpEx growth, with revenues projected to exceed operational expenses in the upcoming quarters.
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Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sumant Kathpalia, MD and CEO, IndusInd Bank Limited. Thank you, and over to you, sir.
Good evening, and thank you for joining this call. Let me start with some macro commentary and then get into bank-specific details. Domestic economic activity sustained momentum during quarter 1 after delivering a robust GDP growth of 8.2% in financial year '24. Manufacturing activity continued to gain traction on the back of strengthening domestic demand, while services sector maintained its buoyancy.
In banking system, liquidity conditions remain inefficient, but improved marginally compared to the last quarter. Looking ahead, recent budget has maintained continuity while laying down the future policy agenda for new development towards the goal of becoming a developed economy. Adequate budget allocations have been made to support the rural economy, including allocation to the flagship NREGA -- MGNREGA scheme compared to last year. These, along with the steps taken budget auger well for the rural recovery and rural spending would be outpacing urban segments.
Coming to the quarter specific developments. The bank navigated a challenging quarter where a typically seasonal weak first quarter was coupled with issues from heat weaves and election-related disruptions. The key highlights for the quarter were healthy deposit growth. Our deposit growth accelerated to 15% year-on-year and 4% quarter-on-quarter. We maintained our traction on retail deposit mobilization with the sale as per LCR deposits growing at 16% year-on-year, ahead of our loan growth. Increase in cost of deposits at 5 basis quarter-on-quarter also remain under control despite ongoing liquidity conditions.
Loan growth trajectory. Our loan growth was at 15% year-over-year and was driven by 18% year-on-year growth in the retail loans and 13% year-on-year growth in corporate loans. We were cautious on disbursements in vehicle and microfinance during the election phase and run rates have already picked up this month. Corporate growth continues to be driven by mid and small corporates. Overall, the headline loan growth should see pick up going forward with seasonality benefits.
New initiatives. Our Digital Banking offering INDIE continues to see strong traction, and we now have 1.3 million customers of the INDIE app. Our liability initiatives of affluent and NRI Banking maintained robust traction growing at 23% and 33% year-on-year, respectively. Our home loan growth book grew by 31% quarter-on-quarter and now stands at INR 2,348 crores.
Asset quality, focus on collections resulted in gross slippages improving to 0.45% versus 0.47% year-on-year despite the external challenges this quarter. Our gross NPA and net NPA were at 2.02% and 0.60%, respectively, with healthy PCR of 71%. Our restructured book continues to run down to 0.34% compared to 0.40% quarter-on-quarter. We maintained a contingent provision of INR 1,000 crores.
Robust core profitability. Our net interest margin was stable at 4.25%. We have not used any contingent provision this quarter. Adjusted for this, the core profitability remains resilient for a seasonally weak quarter. Our core PAT adjusted for contingent provision and reversal grew by 10% year-on-year and 2% quarter-on-quarter. Our capital adequacy remains healthy with CET1 of 16.15% and overall CRAR of 17.55%.
Now coming to individual businesses, vehicle finance. Our vehicle finance disbursements grew by 15% year-on-year and 2% quarter-on-quarter. Vehicle disbursements for the quarter were at INR 11,260 crores. The quarterly disbursements were lower due to subdued demand during the election phase, extreme heat in most regions and quarter 1 being a generally weak quarter. Within Vehicle segment, we saw sequential growth in commercial vehicles, cars and construction equipment. 2-wheeler and tractor segments were weaker and degrew during the quarter. The gross slippages in vehicle finance improved to 0.75% versus 0.77% year-on-year, showing stable asset quality in spite of external disturbances last quarter. The restructured book in vehicle finance also reduced to INR 417 crores from INR 547 crores quarter-on-quarter and majority of the reduction was due to upgrades and recoveries.
First quarter of the financial year was generally -- has generally been a seasonally weak quarter and the second half of the year contributes a larger share of disbursements as well as recovery with election-related uncertainties also behind us, we expect to trend to continue this year, too. The timely onset of monsoon and government CapEx push in recent budget has also augurs well for the outlook of vehicle business. Overall, we have seen activity levels improving from July. We expect vehicle demand to pick up pace as the government spend resume post the budget and monsoon period gets over we should thus see acceleration in the weaker loan growth as the year progresses.
Bharat Financial Inclusion Limited. Outstanding loan book originated via Bharat Financial now stands at INR 42,350 crores, growing at 17% year-on-year with microfinance and merchant loan book growing at 16% and 25% year-on-year, respectively. Growth was driven by client acquisitions and active loan clients increased by 11% year-on-year.
Share of non-MFI book stands at 13%. The collection efficiency was impacted during the quarter, as mentioned earlier. The organization, however, prioritized collections over growth and was able to contain forward flows. The gross slippages from Bharat Financial were at INR 338 crores for the quarter. Total liability franchise source through vehicle now stands at INR 2,346 crores, driven by new customer acquisition, cross-sell of liability products, and now 93% of loan disbursements are done on IndusInd accounts.
Microfinance. While quarter 1 disbursements are typically lower, we were also watchful for any upward development due to election activity. Our average loan outstanding per customer at INR 42,031 was reduced by 4% quarter-on-quarter. The collection intensity continues this quarter, and we aim to restore normalcy in the overdue book in a few months. We remain comfortable with our full year microfinance credit costs to be broadly stable Y-o-Y.
Bharat Super Shop. We now have 700,000 merchants borrowers under this program. Our merchant loan book stands at INR 5,304 crores with 25% year-on-year growth. Bharat Money Stores or the Kirana stock model. We have 88,000 Bharat Money Stores, up 27% year-on-year, providing banking at the store set in remote areas. These merchants have sourced around 2.6 million savings accounts, registering a growth of 68% year-on-year. Overall, we focus on asset quality during the quarter to mitigate impacts of several external challenges. We are already witnessing center meetings disciplined restoring with good monsoon predictions and external disturbances getting behind the industry we are well pleased to participate in the large rule of opportunity and a deep distribution network while transiting from a microfinance to micro banking.
Corporate Bank. The corporate bank book grew 13% year-on-year, with growth continues to be led by mid and small corporates. Within corporate, large corporates grew by 10% year-on-year, mid corporates by 14% year-on-year and small corporates by 22% year-on-year. The healthy growth in the mid and small corporates continues with increasing current focus on this segment and focus on selected industry segments.
The Diamond business tool showed sequential growth after a few quarters of contraction due to weak global demand. The asset quality and diamond remains pristine with no NPA or SMA 1, SMA 2 customers. The proportion of A and above rated customers has been at 79% versus 76% year-on-year with weighted average rating improving to 2.48 from 2.6 months Y-o-Y. The gross slippages in corporate book were only INR 48 crores for the quarter, and net slippages were only INR 4 crores only. Overall, we continue to progress on building Corporate Bank franchise focused on selective areas of competitive advantage with granular risk profile.
Other retail assets. During the quarter, our retail assets grew by 23% year-on-year. Our MSME book under business banking is at INR 16,683 crores, which grew 13% year-on-year, and LAP book maintained a steady traction with 12% year-on-year growth. We track our branch operating -- we tweaked our branch operating model last year to facilitate sourcing MSME asset customers. We have also redefined our SME branches enhanced capability and upskilling of the branch staff. This is showing results in terms of increased contribution by branch-led origination.
We are also revamping our onboarding journeys and credit assessment engines by bringing them in the desired digitization and database analytics in credit assessment and onboarding of the customer. With a focus on the brand sourcing and digitization in process and client capability, we expect MSMEs to become a meaningful growth driver for the bank. Our home loan product continues to scale with loan book now at INR 2,348 crores as of June '24, growing 31% quarter-on-quarter. We recorded a healthy credit card spend at INR 24,019 crores growing by 19% year-on-year. Our spend market share has further improved to 5% as per latest available RBI data. We have been cautious in maintaining share of unsecured card and PL share of 5% to 6% of the overall loan book.
Overall, we continue to focus on growing our consumer assets while improving the balance towards secured mix with the scale-up of home loans and MSME. Now coming to liabilities. We accelerated our deposit mobilization to 15% year-on-year, narrowing the gap of the loan growth. We also maintained traction on retail deposit mobilization with retail as per LCR deposits growing at 16% year-on-year.
Share of retail deposits now stands at 43.7% versus 43.4% year-on-year. Cost of deposits increased by modest 5 basis points quarter-on-quarter, driven by the mix in favor of term deposits and some repricing. The bank opens its milestone 3,000 branch in Mumbai last quarter with a total branch count of 3,013 as of June '24.
We continue to scale our initiatives on affluent NII during the quarter. Affluent segment grew 23% year-on-year to INR 54,679 crores during this quarter. Affluent AUM was also up 25% year-on-year to INR 86,000 crores. The bank is slated to take the affluent banking to the next level with the launch of Pioneer Private Banking next month. This will be curated offering for customers with over INR 30 million net worth relationship value. We are confident that this addition will provide another growth leg up for our already sizable affluent franchise.
Our non-resident Indian that is the non-resident Indian segment continues to see robust growth momentum on the back of strong NRI deposit flows. NRI deposit grew 33% year-on-year and 9% quarter-on-quarter. During the quarter, and further achieved a milestone of crossing INR 50,000 crores of deposits based in July. Our market share in resident segment now stands at 3.7% as per last data -- available data versus 3.3% year-on-year. We continue to invest in our brand. We saw a strong lift in our brand awareness during the quarter, driven by marketing campaign during the ICC T20 World Cup and where India was crowned as a champion.
Our reliance on bulk deposits remains low in the certificates of deposits at 2.5% of overall deposits and borrowings at 8% of total liabilities. The liquidity position remained healthy during the quarter with an average LCR improving to 122% versus 118% quarter-on-quarter and average surplus liquidity at INR 43,000 crores for the quarter. Overall realization of liabilities continues to be the cornerstone of our strategy and our balanced approach towards traditional as well as investments in new initiatives to support our growth ambitions.
Digital traction. During the quarter, INDIE, the digital banking app of the bank completed first full year of operational launch. We have now more than 1.3 million clients on the INDIE app, including 1.1 million new to bank and 200,000 existing clients migrated to INDIE. The migrated client has shown an increase of 35% in terms of liability per client and a 20% increase in transaction per client. We are in the process to soon open this app as a platform to all clients of the bank to manage their existing relationships while new products and services continue to get launched on the app and continuous innovation happens in parallel.
We are also going to launch a revamped wealth management offering, INDIE for Business and revamped experience for NRI clients on the INDIE app within the coming weeks. We are building a new and existing platform continues to sit -- while we are building the new apps, the existing platform continues to scale up as well. Indus Mobile has a monthly active user base of 3 million plus and registered a growth of 30% year-on-year in recurring bill payments. The rating of the app improved to 4.5 on the app Store and 4.3 on the Play Store.
On Indus Merchant Solutions, we launched a new feature for merchants, whereby they can add or manage sub-users and delegate store operations such as collections to these sub-users. On WhatsApp Banking, we have registered base of 9.2 million and conversations all active users grew at 200% and 30% year-on-year.
IndusEasyCredit, the flagship digital retail lending platform of the bank continue to see scale and now 100% of personal loans, credit card, small ticket business loans and working capital loans happened digitally via the platform. The platform is now also integrated with the account aggregator and for MSP clients enabled with CGT SME.
Now coming to the financial performance for the quarter. Net interest income grew by 11% year-on-year and 1% quarter-on-quarter, with net interest margin remaining steady at versus 4.25% versus 4.26% quarter-on-quarter and within our expected range of 4.2% to 4.3%. Our cost of deposits increased by 5 basis points quarter-on-quarter, while our cost of funds increased by 3 basis points quarter-on-quarter. The increase was offset by a 2 basis point increase in yield on assets, maintaining margin steady. Our other income grew by 10% year-on-year.
Core client fee, excluding trading income, too, grew by 11% year-on-year. Share of retail fee remains healthy at 78%. Our total revenue for the quarter was at INR 7,849 crores with 11% year-on-year growth. We continue to see sequential moderation in OpEx growth. The OpEx growth reduced to 20% year-on-year versus 24% year-on-year in the previous quarter.
The sequential growth was curtailed further to 2% quarter-on-quarter. The cost to income, however, increased largely due to slower revenue due to seasonally weak disbursements in vehicles and microfinance. We should see cost to income improve as revenues pick up during the course of the year. The operating profit for the quarter was at INR 3,952 crores, growing 3% year-on-year. On the asset quality and the provisioning front.
Collections and cautious disbursements were key focus areas during the quarter, given the external disturbances. As a result, we were able to improve gross slippages ratio at 0.45% versus 0.47% year-on-year in an otherwise challenging quarter. The gross slippages by key segments were vehicle finance INR 660 crores, Bharat Financial, INR 338 crores; corporate, INR 48 crores and other retail INR 490 crores. The restructured book reduced during the quarter from 0.34% -- from -- to 0.34% to 0.40% quarter-on-quarter with the bulk of reduction due to upgrades and recoveries.
The net security receipts were reduced to 32 basis points from 34 basis points in the previous quarter. Overall, the GNPA and the net NPAs were at 2.02% and 0.60%, respectively. We have maintained provision coverage ratio of 71%. Our SMA 1 and SMA book collectively is at 25 basis points. Total loan-related provisions are at 2.2% of loans and 106% of gross NPA. The bank has not utilized any amount from the contingent buffer during the quarter. The annual credit costs were at 121 basis points for the quarter without using contingent provisions. We thus remain confident of achieving a full year credit cost of 110 to 130 basis points given a turbulent and seasonally weak quarter is behind us and with credit cost outcomes within our expected range.
Our core profitability adjusted for contingent provisions remained robust during the quarter. Our core PAT adjusted for contingent provision grew by 10% year-on-year and 2% quarter-on-quarter. Our capital adequacy ratio remains healthy with CET1 of 16.15% and overall CRAR of 17.55%.
Overall, we comprise the quarterly performance. Quarter 1 was a subdued quarter wherein a seasonally weak quarter got added disturbances from external factors. The disturbances are -- the disbursements are already picking up, and we remain committed to the PC-6 growth guidance of 18% to 23% growth. Our deposit growth is accelerating along with narrowing speed on -- spread on deposit rates with larger banks. Our balanced approach on traditional and new initiatives would drive achieving our loan growth aspiration.
The OpEx growth has started normalizing, and we should see revenues exceeding OpEx growth in a few quarters as the operating leverage and seasonality in key businesses play out. Our asset trends remain healthy, especially still in the context of turbulent last quarter. Our quarter 1 credit costs were in an expected range of 110 to 130 basis points without using any contingent provisions. We are thus confident of delivering higher growth and improved profitability in the rest of the year.
With this, we can open the floor for question and answers.
[Operator Instructions] The first question is from the line of Kunal Shah from Citi Group.
Congratulations. So firstly, you indicated that in terms of growth, even though it has slowed down to 15-odd percent you would still want to manage that into 23-odd percent range...
Kunal, sorry to interrupt you. Can you speak with your handset, please?
Is it better now?
Yes.
Yes. So I was just saying in terms of the growth advances and -- were out because of seasonality and the disruption you had cautiously slowed the disbursement but getting towards 18% to 23-odd percent growth, how much time would it take and maybe growth remains at this level we saw some kind of maybe the resolution to raise the equity as well. You mentioned it's healthy capital adequacy, then what was the need for that resolution, yes.
So let me answer the first question -- second question first, it's only an enabling clause. We take it every year. So we take a clause every year. It's just an enabling clause. You're absolutely right. We're well capitalized as of now. And I think -- like we said, every 6 months, we assess our capital needs. And as of now, when we assess in September, I really don't feel we have a need to raise capital as of now.
Coming to your first question, which is our growth. Our growth remains -- we want to be at 18% to 23% growth. I think if you look at where we lost out this quarter was the microfinance. And I think there is enough growth headroom available there. We were very cautious because we wanted to make sure that our portfolio was pristine and we do not have so many flows, and we wanted to remain range bound in that flow.
And of course, in the vehicle finance business also because of the reasons that explained in the rural economy our growth slowed down in the -- in fact, our disbursements were down to INR 11,000 crores instead of INR 13,000 crores to INR 14,000 crores. And I think these should come back next quarter in these growth areas.
The second area where we slowed down was the unsecured business in PL and card. That was intentional, and we were -- we wanted to wait and watch I think the election results playing out. And I think that was an intentional decision to slow down a bit and see what is happening in the market before we do that. So I think we should see growth coming back. And I think we should be in the range of 18% to 23% for the full year. I cannot say next quarter or anything. I can't give that timeline. But I can say for the full year, we will deliver 18% to 22% growth.
Okay. And secondly, if you can just share the color with respect to MFI any particular states, any particular districts, there has been disruption. And how the collection efficiency and the behavior of the pool has been given maybe obviously, there have been a lot of concerns out there.
Kunal, first of all, let me tell you, we slowed down. So Orissa is one such state where we thought there were a lot of overleveraging happening. And we slowed down 2 quarters ago our business in Orissa. We actually reduced our exposure by INR 3,000 crores in Orissa at that point of time. And actually, we've slowed down.
The other -- so I think that's one. In UP, too, we slowed down our business in Eastern UP, and we saw that there were stresses and there was a huge growth, which was coming from other microfinance institutional lenders. We slowed down. In Punjab, if you would have realized that [Foreign Language] which has started, we actually started slowing down the business about 3 quarters ago.
And we took the hit last quarter itself and our business has now become very, very small in that area. Jharkhand is another state where we've a little bit slowed down the business. We think that there is some issues which are developing there, and we started pulling out on that stage. Otherwise, if you look at the business, I think there are good places like Karnataka. I think we are seeing business some parts of West Bengal we are seeing very good business.
We are seeing good business in parts of Jharkhand, Rajasthan, and Maharashtra. So I think we are seeing very, very good quality business coming out in these areas. And we feel confident our range -- we're range bound in our credit flow. So if you look at gross flows are 3.5% and credit cost is 2.5%. And if we think that, that is the reason this is a big business, which delivers a very decent ROA for us. The success on this is to take early calls and see the breadth. And I think the processes of Bharat Financial are too strong. They are able to see early drags and exit those businesses and [indiscernible].
And one data point just in terms of general banking fee, why is it up to such a large extent.
No, no. This has PSLC fees, which comes in the quarter 1 of INR 260 crores included into it.
Next question is from the line of Nitin Aggarwal from Motilal Oswal.
So Sumant, first question on like did I hear you right about saying 18% to 22% growth for full year?
Yes.
Okay. So like how should we look at the CD ratio then like any compulsions arising from that because 18% to 22% will imply like 6%, 7% growth every quarter in respect to loan growth. So how should we look at that equation?
So if you look at the credit deposit ratio, we are at 86.5%, 87.2% right now. And we always said that we will be between 88% to 90%. So we are well within that range. And I think also, please understand that stable funding is also very important. And I think our NSFR as well as LCR is well within the range. I also feel that we have enough initiatives and enough capability of raising deposits. We've now reached 15% year-on-year. We should see 17% to 18% this quarter. And I think we -- I remain very confident of doing that growth, which we have set in our call today.
Okay. Okay, sure. And secondly, on the LCR draft guideline that RBI came up with yesterday. Any early thoughts as to what can be the impact, any broad range? Would it be possible to give any color on that?
We can't give any color right now, but I think we are assessing. And I think if you look at the preliminary and this is just a preliminary -- it will be in the range of 4% to 5% for us.
Okay. Okay. Sure. And lastly, like I'm just taking queue from another bank results call wherein they increase the risk weight on the MFI loans after the RBI increased the risk weight in November '23. So have we also done any change on the risk weight in respect to MFI?
There's no such guidance or any circular from the regulator to us to increase the risk weight on microfinance loans from 75%.
Next question is from the line of Piran Engineer from CLSA.
Congrats on the quarter. Just a follow-up on microfinance. I appreciate we've been taking certain steps on...
Piran, sorry to interrupt you. Can I request you to speak through the handset and come in a better reception area, please the audio is breaking.
Yes. Is it better now?
Slightly better?
Okay. Should I go ahead with my question.
Yes, go ahead.
I just wanted to understand on microfinance. So I appreciate you are taking steps to curtail risk, but our NPLs keep rising, so -- and are significantly above some other players. So really, what's going on here? Are we not writing off loans? Is that the thing is our write-off policy very different from the others?
No. I think we write-off the loans and this was as per the approved policy of the bank, we don't keep retail loans more than 180 days to 240 days. So we never keep microfinance loans. The issue is if you look at -- there are 2 things which have happened. One is that the base effect has come in. I think if you look at the disbursements have been lower and as a consequence, the book has fallen down by INR 2,000 crores. And as a consequence, you're seeing a larger number out there.
The second way to look at it is the gross flow. The gross flows in Bharat Financial has been INR 338 crores. And I think that's well within our reach of 3.5%, and we are very comfortable with that business.
And what was the same number last could share the corresponding number for...
Yes, INR 331 crores.
Okay. That is useful. And just secondly, from Mr. Sriram, I just wanted to get your thoughts on where we are in the auto cycle and not refer to the next 2, 3 quarters, but just in general, are we in -- still in the middle of the cycle? Do we see that we are closer to the top of the cycle, I would appreciate your comments on that.
The heavy commercial vehicle, yes, as we said, like we are in the peak, like there is no further movement we are expecting like it's more or less in the peak. But the rest of the segment, there will be at least high single-digit growth at least. And tractors, we are expecting a double-digit growth. Rest of the areas at least high single-digit growth is our expectation.
Including cards?
Including cards.
Next question is from the line of Abhishek Murarka from HSBC.
So my question is again on this deposit growth actually. So if you see the proportion of retail deposits, the growth there has been tapering off in the last 3, 4 quarters. Now if you have to accelerate to 17%, 18% overall deposit growth, incrementally, where does this come from? And do you have to take any kind of rate increases? And then what is the impact on NIM of that. So just trying to figure out that relationship.
Obviously, if this question has been asked to me 10x now, and I'm answering the same question. if you look at our NIM, the NIM are very range bound, as we've been able to manage our NIM between 4.2% to 4.3%. And I think that's the range which we will be in. I can't say specific numbers, but it's a range bound for us. And we've always been able to manage our NIMs between that range.
Coming out to the -- retail we would like to -- we've always said our stated intent is to be between 48% and 52% SDR by the end of panning side next year, which is -- and I think we are focusing on that. There will be some quarters where the growth is slow and intentionally so because we expected an interest rate reduction to happen. And we said that we will play 2 different games at this after -- do different views at this point. And I think we see our processes very closely. We also don't want to be stuck with large retail deposits at a very high rate at some point.
So we do play -- we do manage our book in a different manner because we have stable funding some developmental associations which come in and our stable funding remains intact. Having said that, I think we do not see a risk to 18% to 22% of our growth. And I think we should be able to manage our LDR between the range of 88% to 90% going forward. And that's been our guidance and we are very comfortable with that.
Sure, sure. Understood. And the second question is on card fees. I think there was a fair bit of drop this quarter. Just can you share what's the way forward? And what led to the drop this quarter?
So there are 3 things that led to the drop this quarter. One, I think the regulator came back with our directive that overlimit fees cannot be charged and that was a INR 24 crore drop on the card fee as a consequence of that in a quarter. So that's an ongoing basis, which you will see happening in the card.
Second, our acquisition was lower. And I think as a consequence, our card fees for higher-end accounts. And I think we slowed down the acquisition.
And the third was the rentals, the rental, the interchange on rentals was eliminated, and we stopped doing the rental from the card. And I think that was leading to delinquency, and that was also a INR 10 crore income for us in the quarter, and that dropped.
Okay. So this is all actually structured. So this is not going to revert.
I don't think so it will reverse because rental yields have gone down, and I think rental interchange is disappeared. Overlimit charges have disappeared, and this is the -- no, the third thing is we will build up the card business again. So it's not that we will stop the acquisition, and I think high-end cards are a priority for us.
Right. And can you just talk about the asset quality in cards. You've seen a bit of inch-up in NPAs you've said previously. I think on the previous call that you are seeing some stress there. Can you just give directionally how...
I think you will see some stress in the card business for next 2 quarters. Let me be candid. I think there is stress building up. If you look at the 60-plus and 30-plus, I think the 30-plus looks 7% right now. So it's not that it's not looking good. It is looking at that. So I think you will see some flows which will happen on the card business. And I think -- but it's well under control and the ROEs are under control. So we have to just see how to manage it. We are putting all our efforts, but there is some stress on the card business right now.
Next question is from the line of Sameer Bhise from JM Financial.
Just wanted your thoughts on the draft guidelines on liquidity, which came off yesterday. Any initial comments there if they were to come in the current form?
See, I think it's very difficult to comment. I think whenever a regulator add just a draft guideline, there is a lot of thinking which goes behind it. I think if you look at one of the regulations, which have come in, I think they want to make sure that the banks are liquid and there is no run on the bank. And that's why they are increasing the LCR percentages flow from 5% to 10% on a stable deposits, the retail deposits. And we believe that through mobile or through electronic banking, this can be immediately moved. And I think the stability of the system and the liquidity is more important to that. And I think these are directed in the right manner.
And I think it will only make the system much more sounder. And I think it's for the fortification of the balance sheet and the liquidity in the system. So I think it's to me, there may be some impact, but I think 4% to 6% for us. But I think it's very, very important to make sure that I think we should not get worked down and we should we should see how to manage this, and it became a part of the BAU as we go forward.
Okay. And when we look at the credit cost guidance of 110 to 130 basis points, includes our prior comment on having excess provisions on microfinance and vehicle.
Absolutely right.
Next question is from the line of Anand Dama from Emkay Global.
So sir, one, basically there was a special deposit scheme which we had launched during the first quarter any impact of that is yet to come in the cost of fund and because of which should we see some margin pressure going ahead?
So I think we had launched a 7.99%. And I think we saw enough traction, we mobilized about INR 7,000 crores of term deposits on that campaign in the -- during the T20 World Cup -- it was during the T20 World Cup and specific -- for a specific duration. And we've stopped that campaign now. and gone back to 7.75%. So I think we mobilized INR 7,000 crores of term deposits at that point of time within that 15-day period.
The interest of that is largely being baked in into first quarter itself.
It's part of the thing. Yes. It's already baked in.
Okay. And When you look at our growth vectors, so basically, which are the segments, I mean, you said that you're still looking at about 18% to 22% kind of a growth. So microfinance, obviously not doing as well, cards -- at 15%. So which are the segments which are going to deliver this point of a high growth -- is it going to be a corporate book or the non-unsecured loan.
Our balance of book will remain tilted towards 55% to 56% retail and 44% to 45% corporate. We also continue to believe that our book on vehicle finance as well as microfinance, including merchant acquiring, will continue to grow. We believe that merchant acquiring and MFI business will continue to grow at 20% to 24% for us during this year. Our CFD vehicle finance business will grow at 18% to 20% per year. Our retail business will continue to grow at 28% to 30% for the year.
I think we've just seen a slowdown, and I think we will come back into that growth mode. In the corporate side of the book, I think we've always said that our mix segment and the smaller segment, [ mix segment ] growth at about 18% to 20% and our mid-segment growth at 14% to 16%, while a large corporate is at 10% to 12%.
Next question is from the line of Chintan Joshi from Autonomous.
Can I ask a question on NII. If I look at the quarter-on-quarter growth, it is 0.6%. And when I look at the end of period average earning assets, that's grown 4.4%, and yet your NIMs are stable. Does this mean that a lot of the kind of growth is back ended in the quarter? And is there any other reason for weakness in NII? Any kind of one-offs or any that kind of explains the NII weakness.
No, I don't think there's any one-off in the NII for us. We don't have -- there's no one-off in the NII.
It's just the averages, which are playing out. I think you will see in this quarter the -- this normalize. Some quarters, it happens. But overall, the 3 or 4 quarter period, it normalizes.
So can I take this that the weakness is purely management action to be cautious in a quarter where there is seasonality in elections? Is that the main message.
April and May were weak quarters, and June is when we started picking up the disbursements, even whatever disbursements we did in the MFI or in the vehicle financials.
The high-yielding businesses like microfinance, cards, they have not grown this quarter. So that's why there is an added impact on the NII versus the loan growth.
Understood. And my second question is on the GNPA on Slide 26. You've given a lot of color, but there's a general statement in consumer banking, practically every segment is seeing increase -- is there something kind of worsening across the industry? Or is this a seasonal effect?
It's just a seasonal effect. I think the only thing that you should worry about is the card business. I don't think there is anything else, which I think I'm worried about right now. I think -- and I think the 30 plus on the MFI is a little bit elevated right now. And I think we -- but I -- but we still believe that it will be between 3.5% gross loan and 2.5% credit cost.
And within other personal loans, are you seeing any kind of kind of deterioration?
Not at all. Not in personal loans, but I said cards.
Next question is from the line of Rakesh Kumar from B&K Securities.
So sir, just firstly, 1 question on LCR front. So we have improved on retail deposit composition over a period of time of, say, last 2, 3 years. But if you look at the outflow rate, there has been like no improvement as such in the outflow rate as per the LCR number. So what is the reason behind that?
We will get back to you on this question.
Sure, sir. Sir, secondly, sir, on the general banking fee, if I see -- I don't know if you had responded to this question, sir. So that there is a quite a lot of growth that you are witnessing here, they're on the Y-o-Y or Q-on-Q basis?
There is PSLC fees, which is included in this, which is PSL fee, which comes once in a -- once or twice a year, and that is the PSL fee, which has come in.
How much that number.
INR 260 crores to INR 270 crores.
This quarter, okay. So is that a reason sort like some of the PSL qualifying loan book, we are reluctant to write-off?
No, it's not that. I think we write-off as per the policy, which is there. We don't tinker with the policy. And if the policy state that you have to write off in 180 days we write-off. If it's 240 days we write-off in 240 days. So we don't tinker with that book at all. The rules are set by the policy and the bank approved both policies. And we go with that policy.
Next question is from the line of Jai Mundhra from ICICI Securities.
Most of the questions have been answered. Just 2 questions. One is -- if I look at the cash and bank balance as a percentage of assets, since COVID, we have been utilizing that and the proportion was coming down as a percentage of assets. But this quarter, that number has gone up. Is it like more opportunistic, as you said that you were cautious in disbursement and hence the buildup? Or -- this is something new sort of...
Is that the loan growth is down. And once the loan growth comes back, it will be there, okay?
Right. And secondly, sir, on the wholesale side, we have been following the strategy of large corporate growth being slightly lower and growth being more driven by small corporate...
And mid-corporate.
Yes, mid and small corporate. But if I look at the yield on the wholesale side, I would have expected them to be stable, if not rising. But this quarter, they have actually declined. So is there any clarification or this is like not so much of a...
See, the normal business, which happens. And I think it's a 4 basis point decline. It's just as a normal part of the business.
Next question is from the line of Rohan Mandora from Equirus Securities. Rohan, can you hear us?
Sir, I wanted to understand what is the impact of the P&L interest circular on NIM this quarter?
I think there will be an impact of about INR 35 crores to INR 40 crores on the run rate on the P&L interest. Tax impact, INR 30 crores for the quarter. But we have -- so there is -- we should be able to see what we need to do and increase the yield to manage that.
Okay. Okay. Sure. And sir, on the incremental disbursal yield because I just want to get a sense on that. So product-wise, is it flattish Q-on-Q? Is there an increase? Or has there been a decline on incremental disbursement deals?
On which product?
Across the key products that we work like the vehicle finance category and the LAP, MFI?
It depends on which product, I think we are very -- we are the vehicle finance, we have an overall disbursement yield of 12.9% to 13%. And we've been consistent in that yield over a period of time, and we've been very stable on that. On microfinance, we have fluctuated between 20% to 33%. And we've been very stable on that. On consumer bank, our yield depends on the secured and the unsecured mix this quarter.
We saw a dip on the disbursement yield because it was more tilted towards secure rather than unsecured. Otherwise, if you look at the yield, they disbursed at 13.4%, 13.5%. So that's what we are and in corporate bank, it depends on the large, mid and small corporates where we are pretty stable on our yields.
Sure. And sir, lastly, what will be 30-plus book in the vehicle finance?
Vehicle furnace, we don't give that number. We disclosed our SMA 1 and SMA 2 for the bank, which is 25 basis points and that's what it is.
Next question is from the line of Manish Agarwalla from PhillipCapital.
Sir, I had a question on yield on investment. The yield has been increased on a sequential basis. Anything to read there?
Yes. So I think some of our [indiscernible] was invested in CDs of various public sector AAA-rated banks, which led to a slight increase in that year.
And in terms of going back to P&L interest question, is that income now as a part of fee income or commission brokerage income?
Part of this is part of the fee income, which is already there, but part of it still has to start coming in.
Okay. Okay. And finally, if you can give some color about which are the geographies that you are witnessing stress in the MFI any specific cases if you want to highlight?
No. I told you that I think if you look at our MFI flows and the Bharat Financial flows is INR 338 crores for the quarter. So it's not that it's deteriorated. We told you that Punjab was an area where we were seeing stress. I think that's already done and dusted. And in my opinion, I think we reduced our book in Orissa, we slowed down our book in Orissa. And I just gave that answer.
Next question is from the line of from Gau Scofield Strategy Advisers.
Just 1 question on your tenure. Should are we definitely applying to RBI on extension or given that we are only in the first quarter it's too early.
So in my view, I think the Board will have to send a recommendation by September. That's the last date that they have to send a recommendation as of now. And I think they should apply whatever they have to apply by August end or early September. So I think that's where we stand. And I think we have to just wait for that announcement to happen as and when they do that.
Ladies and gentlemen, we will take that as the last question. I will now hand the conference over to Mr. Sumant Kathpalia for closing comments.
Thank you for participating in the first quarter call for the -- if there are any questions or any further clarifications which are required me and Indrajit are available. We can take your call and questions and get back to you. We have to get back to you on one question, which is on the outflow on the LPM -- we will get back.
I mean I don't have a comparative number right now. SO that's why I can't answer, but I know the outflow is what they are.
So we will get back. And thank you so much, and -- thanks a lot.
Thank you very much. On behalf of IndusInd Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.