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Indusind Bank Ltd
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Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q3 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kathpalia, Managing Director and CEO. Thank you, and over to you, sir.
Good evening, and thank you for joining the call. I will start with some macro commentary and then go into bank specific details.
Domestic economic activity continues to strengthen over quarter 3. Improving credit supply with resilient banking system is supporting the economic recovery. Gross NPAs fell to a 7-year low of 5% in September 2022 and net NPAs dropped to a 10-year low of 1.3% of total assets. Monetary policy tightening is also likely to take pause for after another possible hike in February. On the fiscal front, the budget for 2023, '24 is likely to continue to support economic recovery and help address overall macroeconomic stability through fiscal consolidation.
While domestic activity remains strong, risk from a challenging global economic environment would remain going forward. Indian economy has shown resilience during 2022 in the face of extraordinary external shocks. India is thus likely to be the only major economy growing in excess of 5.5% per year over the next couple of years.
Coming to the quarter-specific development, some of the salient highlights for the quarter were acceleration in loan growth driven by retail segments. Our retail businesses grew by 5% quarter-on-quarter and corporate grew 4% quarter-on-quarter, driving overall retail growth of 5% quarter-on-quarter and 19% year-on-year. Within retail, vehicle finance growth was robust at 7% quarter-on-quarter with another quarter of record disbursements. Bharat Financial originated MFI loans and merchant loans grew by 2% quarter-on-quarter. Non-vehicle maintained steady growth of 6% quarter-on-quarter.
Deposit mobilization with momentum on retail. We achieved a 3% quarter-on-quarter and 14% year-on-year growth in deposits during the quarter. We saw healthy momentum in retail deposits with retail as per LCR accelerated to 21% year-on-year versus 16% in previous quarter and was up at 6% quarter-on-quarter. All key segments of branch banking affluent and NRI contributed towards the retailization momentum.
Stable asset quality. Our gross slippages during the quarter reduced to INR 1,467 crores from INR 1,572 crores quarter-on-quarter. Our Restructured book 2 reduced from 1.5% to 1.25% quarter-on-quarter. Our gross NPA is down to 2.06% and PCR remains healthy at 71% with net NPA at 0.62%.
Our contingent provisions are at INR 2,192 crores with a total loan-related provision at 130% of GNPAs. Our credit cost has reduced from 44 basis points to 40 basis points quarter-on-quarter.
Healthy profitability of the franchise. Our core operating profits grew by 20% year-on-year, driven by improved NIMs as well as strong client fees. Net interest margin was at 4.27% versus 4.24% quarter-on-quarter. Client fee income grew by 28% year-on-year, driven by retail fees. Our cost to income was steady at 43.9% and our PPOP margin remain healthy at 5.7%. Our profit after tax grew by 9% quarter-on-quarter and 58% year-on-year to INR 1,964 crores with annualized EPS of INR 101 per share. Our return on assets improved to 1.87% and return on equity crossed 15% mark in quarter 3 for the first time in 3 years.
Now coming to individual businesses. Vehicle Finance. The vehicle finance business continues to achieve a record disbursements every quarter, and the third quarter has been the best ever by a significant margin. The disbursements have been broadly across all vehicle categories. The disbursement during the quarter were at INR 12,713 crores driven by 19% quarter-on-quarter and 44% year-on-year. The cumulative 9 months financial year '23 disbursements were at INR 33,450 crores, and are up by 52% year-on-year and already ahead of full year disbursement for last year and with one more quarter to go. The vehicle finance loan growth as a result, continued to accelerate with the robust 7% quarter-on-quarter growth and a year-on-year growth -- and Y-o-Y growth improving from 13% to 18% during the quarter.
Within vehicle categories, commercial vehicles, utility vehicles, cars and construction equipment saw more than a 40% year-on-year growth in disbursement. 2- and 3-wheeler segments too, which were stagnant since COVID saw demand coming back with healthy quarter-on-quarter and Y-o-Y growth in disbursements.
Vehicle asset quality remained steady with gross slippages at 0.9% versus 1.1% (sic) [1.0%] quarter-on-quarter. Standard slippages were higher quarter-on-quarter due to impact of mining duty in Orissa or freight availability. The duty has now been rolled back and freight availability has started improving.
The restructured book in retail finance reduced by INR 400 crores to INR 1,868 crores from INR 2,270 crores quarter-on-quarter. The reduction in restructured was broadly equally driven by collection and slippages. The collection efficiency of the remaining restructured book customers was stable at 84%. Overall, we continue to see healthy operating environment for the freight industry and thus, we expect to maintain our disbursement momentum in the current quarter as well as supported by New Year purchases and income tax benefits.
Bharat Financial Inclusion Limited. Our microfinance and merchant acquiring loans related to BFIL grew by 16% year-on-year and 2% quarter-on-quarter. Our microfinance businesses disbursements were at INR 8,928 crores, grew 27% year-on-year. The disbursements were lower by possibly a few hundred crores due to bunching of festivals in the first half of the quarter. The member addition nevertheless were at 593,000 for quarter 3, up by 20% quarter-on-quarter, of which December was the best month of the year so far. The disbursement for these members would gather pace further for the current quarter onwards.
MFI standard book net collection efficiency for quarter 3 was strong at 99%. The gross slippages during the quarter were down to INR 409 crores compared to INR 435 crores during the previous quarter. Our 30 to 90 DPD, including restructured customers who are at 2.4% on December '22 compared to 2.0% at the end of September '22. The increase was largely contributed by the eastern states. We have slowed down on disbursement in these geographies will increase focus on collection. Overdue position for BFIL continues to be better than the industry at all DPD levels.
We continue to expand our merchant acquiring business under the banner of Bharat Super shop. Portfolio sourced through BFIL under this business has grown 16% sequentially to INR 3,094 crores with 4.9 lakh active custom borrowers. Our liability book sourced from customer service through BFIL has increased by 65% year-on-year to reach INR 1,633 crores through INR 1.35 crore accounts, savings accounts, RD, FD and CA with us. Overall, we continue to be cautiously pivot towards the growth on the microfinance business.
The rural economy continues to improve. However, the pace of improvement seems to be slower than expected. We continue to leverage vehicle franchise to diversify into allied businesses. And within microfinance, the disbursements are driven by low ticket sizes and reducing geographical concentration.
Global diamond and jewelry business. The business continued to maintain its global leadership position of being the largest lender to this industry. Our diamond portfolio saw a growth of 20% year-on-year. Asset quality remains pristine with more restructuring in SMA1 or SMA2 customers. We remain watchful on the implications of the prolonged Russia-Ukraine crisis and remain compliant with all the extant guidelines and facilitating cross-border trade. The COVID relaxation in China is likely to help the overall demand for in this year.
Corporate bank. Our corporate business delivered another quarter of healthy growth and no asset quality concern. We achieved a growth of 20% year-on-year during the quarter with more net slippages. The growth was broad-based across segments with large corporate growing 3% quarter-on-quarter; mid corporates 4% quarter-to-quarter; and small corporates 11% quarter-on-quarter, resulting in the overall growth of 4% quarter-on-quarter. The segment driving the loan growth was steel, services, petroleum segments.
Growth in small corporates were driven by continued scale-up of our SME segment and agribusiness seasonality, resulting in ramp-up of our commodity finance book.
We continue to actively reprice the loan book. Our yield in the corporate book improved by 37 basis points during the quarter. The portion of A and above-rated customers is now 74% compared to 72% year-on-year. The overall weighted average ratio to improve was 2.64 from 2.67 on Y-o-Y basis. The gross slippages from the corporate saw reduction in both standard as well as restructured accounts. Overall, slippages were down to -- down from INR 179 crores to INR 119 crores quarter-on-quarter.
Exposure to stress telco was stable at INR 17.3 billion, including fund based exposure of INR 10 billion and balanced non fund based exposure. We remain watchful on the developments of this account. Overall, we continue our journey of corporate growth driven by higher rated, granular, shorter duration generation load. The asset quality performance remains comfortable and growth broad based across client segments.
Other retail assets. Our non-vehicle non-microfinance retail loan book too saw growth momentum accelerating during the quarter to 23% year-on-year and 6% quarter-on-quarter. The growth was driven by credit cards, personal loans as well as steady momentum in business banking. Our credit card spends continues to remain strong with spends of INR 20,000 crores for the quarter. As a result, our credit card loan book grew by 9% quarter-on-quarter.
Our new acquisitions remains robust with around 88,000 acquisitions in December '22. We also recently announced world's first tri-partite co-branded card in partnership with Qatar Airways and British Airways. We have done a pilot launch of our old home loans in September, and we progressed on rolling it out of the various markets in the country. With this disbursements of over INR 200 crores in the quarter, our aim is to scale it up meaningfully in the coming quarter. Overall, the share of consumer banking loan has increased to 16% of overall loans now. We expect this to continue to increase as we scale up the home loans merchant acquisition to maintain -- and maintain traction on credit card and personal loans.
Now coming to liabilities. Our deposits grew by 3% quarter-on-quarter and 14% year-on-year. We saw healthy acceleration in the retail deposit mobilization during the quarter. Our retail deposits as per LCR group accelerated to 21% year-on-year from 16% in the previous quarter. The absolute addition of retail deposit is INR 7,978 crores, which are also the highest in the last 6 quarters. The share of retail deposit as a result increased from 41.2% to 42.4% during the quarter.
All our business units, including branch banking, affluent and NRI contributed towards the growth. The growth momentum comes in the backdrop of the heightened competitive intensity in the industry. Our new initiatives affluent and NRI banking saw growth accelerating during the quarter. Affluent banking, net relationship value grew 5% quarter-on-quarter to INR 66,700 crores, of which deposits grew by 8% quarter-on-quarter to INR 41,950 crores. Our NR segment too maintains the momentum with deposits growing by 16% quarter-on-quarter to INR 32,900 crores.
We also recently went live on the income tax portal TIN 2.0 and our customers can now pay direct taxes instantly through our IndusInd Bank accounts using our digital channels and our branch network.
Our CASA ratio has more than 41.9% versus 42.1% year-on-year. The CASA deposits saw growth into current accounts, whereas saving accounts contracted sequentially. The saving accounts contraction was due to customers moving deposits towards fixed deposits, and we're letting go some of the expensive and bulky accounts. This also ensures continuing the increase -- containing the increased cost of savings account and as we have taken savings account rate hikes in October. The share of top 20 customers in the overall deposits has also come down from 17% to 15% quarter-on-quarter.
We opened 64 branches during the quarter, taking the branch down to 2,384 and aiming towards closing the year at 2,450 to 2,500 branches.
Contribution of the certification of deposits low at 3.6% of deposits. We continue to maintain healthy average surplus liquidity of about INR 44,000 crores during the quarter with liquidity coverage ratio of 117%. Overall, we remain focused on the retail deposit mobilization despite the challenging environment. We continue to invest in the franchise, both through distribution capabilities as well as offering competitive rates.
The new initiatives, branch delivery, availability of long-term stable refinance sources as well as surplus liquidity on the balance sheet has helped us comfortably fund our acceleration in the loan growth.
Digital traction. Overall, the digital stratergy of the bank is geared at driving three major objectives: a, build direct to client digital platform; b, drive superior client engagement; and c, transforming existing lines of business.
Building their direct-to-client platform. The EasyCredit platform, direct platform marketing-led business in PL and card grown 6x Y-o-Y and 75% sequentially quarter-on-quarter. The partnerships business continued to grow strongly and grew 5x Y-o-Y and 17% sequentially quarter-on-quarter. More than 35% of the business in savings account and cards by volume is now digital and partnership led.
Drive superior customer experience and engagement through digital platforms. Digital transaction intensity continued to grow with 93% of transactions processed digitally and 74% of service requests processed digitally. The mobile app continued to show a robust user base growth of 26% Year-on-Year in terms of monthly active user base. The engagement on the mobile app will further accelerate as the bank integrate a state of art event-driven real-time engagement stack in the app in quarter 3.
We further enhanced the IndusEasyCredit for individuals stacks with integration of new fintech partners, leveraging the open banking capabilities of the stack and increase in STP percentage to 30% through advanced analytics.
Transform existing lines of business and making them more efficient. We continue to digitize the business with nearly all deposits and wealth business done digitally. With EasyCredit stack -- now we have 95% of credit cards sourced digitally and nearly 80% of the personal loans sourced digital. Nearly 50% of small business banking is digital and wealth -- and on track to grow at to 80% plus by the end of financial year with the addition of full working capital product suite. Close to 80,000 accounts are onboarded digitally every month across personal loans, credit cards, savings accounts by the bank.
Sustainability. Sustainability is core to our strategy, and we continue to progress on our agenda of Sustainable Banking. To promote greater thrust on our ESG linked products, we are launching a series of ESG-linked products. We have already launched two such products, including EV finance for passenger cars and green fixed deposits. We also have a couple of more initiatives planned for launch in the coming quarters, such as green personal loans for solar roof-top finance and new platforms supporting women entrepreneurs.
During the quarter, the bank's board also approved an upgraded robust ESG Risk Assessment Policy and Governance Framework for all our corporate exposures. This will help us prudently manage bank's exposure to high ESG risk industries as the country transitions to a low carbon economy. Bank has also selected for a pilot of TNFD, Taskforce on Nature-related Financial Disclosures, a UN supported initiative of Sustainable Agriculture. Our efforts are well acknowledged and this quarter saw us release of our ESG ratings from 2 marquee international rating agencies, carbon disclosure projects, CDP and S&P Global ratings. And I'm happy to share that we have once again scored the highest rank among the five large private sector banks.
Now coming to the financial performance for the quarter. Net interest income grew by 18% year-on-year broadly in line with the loan growth. Net interest margin improved sequentially to 4.27% from 4.24% quarter-on-quarter. Our loan yields improved by 24 basis points quarter-on-quarter and yield on overall assets improved by 34 basis points quarter-on-quarter. The cost of deposits increased by 37 basis points and the cost of funds increased by 31 basis points during the quarter.
The core fees maintained strong traction, growing at 28% year-on-year and 4% quarter-on-quarter. The treasury income was positive and stable quarter-on-quarter. The overall other income grew by 11% year-on-year and 3% quarter-on-quarter. Share of retail fees remained healthy at 71% of the total fees.
Our total revenue for the quarter was at INR 6,572 crores, with 16% year-on-year and 4% quarter-on-quarter growth.
Operating expenses grew by 4% quarter-on-quarter. We continue to invest in talent, and we hired 1,800 employees during the quarter and around 8,500 during the current year. Our overall cost-to-income ratio was stable at 43.9% quarter-on-quarter.
The operating profit for the quarter was at INR 3,686 crores growing 11% year-on-year and 4% quarter-on-quarter. The PPOP margin to loans continues to be healthy at 5.7%. Our core PPOP grew by 20% year-on-year.
On the asset quality and the provisioning front. Our provisions for the quarter have further reduced to INR 1,065 crores, and the provisions to loans are thus down to 39 basis points now. The gross NPAs were down from 2.11% to 2.06% quarter-on-quarter. And Net NPA was stable at 0.62% with healthy provision coverage ratio of 71%. The slippages during the quarter were down to INR 1,467 crores from INR 1,572 crores.
We utilized INR 461 crores from contingent provisions during the quarter with residual contingent provisions of INR 2,192 crores or 0.8% of loans. Cumulatively, for 9 months financial year '23, we had INR 1,833 crores of slippages from the restructured book. We have utilized INR 1,136 crores of contingent provisions so far. As the incremental slippages from the restructured pool continue to be range bound, we are comfortable with the contingent provisions.
The net security receipts have reduced to 56 basis points from 67 basis points quarter-on-quarter, and we carry provisions in line with the extant regulatory requirements. Total loan related provisions are at 2.7% of loans or 130% of gross NPAs. Our SMA1 and SMA2 book was at 8 basis points and 24 basis points, respectively. Total SMA1 and SMA2 are down to 32 basis points from 58 basis points quarter-on-quarter.
Profit after tax for the quarter was at INR 1,964 crores, growing 9% quarter-on-quarter and 58% year-on-year. Our CRAR, including profits remain healthy at 18.01%. Return on Assets continued upward trajectory from 1.80% to 1.87% quarter-on-quarter. Our Return on Equity has improved to 15.2%.
Overall, we are coming towards the end of our planning cycle 5 strategy and outcomes so far has been consistent with our objectives outlined in our earlier communications. We will be formulating our planning cycle 6 strategy in the current quarter and will present to you the contours in the next analyst call.
The key themes that will guide our strategy would be: Deposit retailization will continue to be the cornerstone of PC-6 too. We will add new growth boosters for increasing customer acquisition, including Digital 2.0 offerings. Loan momentum should accelerate in PC-6 with stable macro environment. The acceleration would be driven by retail segments.
We will continue to invest in franchise through distribution, technology, employees, adding and scaling new initiatives to diversify our revenue pools. We have maintained our PPOP margins in most turbulent and aim is to achieve that in PC-6 too. The overall return ratios have improved over the last couple of years and should continue to improve with normalization of provisions in PC-6. While we focus on scaling up our businesses further, the growth will be achieved with constant focus on governance and sustainability of the franchise.
With this, we can open the floor for question and answers.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama Wealth Management.
First of all, what are your views on the new ECL circular because you already have a good stock of contingent provisions, and provisions to loans are running at 2.7? Plus, you -- all banks have been doing mock runs with RBI on IFRS is what we are told. So how does that affect -- how does the ECL circular affect you even some rough estimate would be good enough, either positively or negatively?
It's too early to comment on it. I think the circular has just come out. But I think what you need to understand is that there are certain parameters, which RBI will define, which each bank will have to follow. So each one bank has been following their own process. So I think there will be some standardization, which will happen as a consequence of this new note. We have to give our feedback by the month of February. And as a consequence, a new module will evolve, which RBI and the bank will back test -- and as a consequence, a new model will emerge.
I agree with you, the bank carries very comfortably on contingent provision as well as good capital ratio. So I think we should be able to manage this over a period of time. But it's too early to comment whether -- how it will happen, but I'll ask Ramu to also give his views. Ramu runs the risk management.
So basically, I think the discussion paper that's come from RBI has several questions that they have raised with the participants and banks to address or come back to them on. And then we would get the guidelines as to what the minimum levels of required would be and when you can develop [indiscernible] No doubt, as we mentioned, we have been running these [indiscernible] We will have look at the probability of defaults and what else will happen.
Coming out of COVID, the probability of defaults may look higher, but it will get normalized over the next 1 or 2 years as the asset quality has improved across the banking system. Where we are at our different portfolios and where we look at it -- and over the years of work, we should be comfortably placed but I think we should be able to [indiscernible] it up -- but it depends only on how RBI gives the basic benchmark. And once we have that, then we'll able to work out our models, have it validated as expected by RBI and then we'll have to take decisions on what comes. But don't expect a material impact as we have looked at our numbers, but we have to wait for the guidelines from RBI.
Sure, sure. And my next question is generally on sector outlook and then how that comes down to IndusInd Bank. So obviously, loan growth has been very strong for the sector and given that fourth quarter is busy season, it may continue to be strong. But do you see any deceleration or any big time of falloff in loan growth in the first or second or third quarters because it remains strong for a very long period of time? And that -- in that context, what would be the guidance for your own loan and deposit growths be?
So if you look at the businesses in which we are in, I think our vehicle finance business is coming from cyclical lows. So I think you are seeing a fantastic vehicle finance growth across the vehicle categories. And I think quarter 1 is relatively a slower growth for them. But otherwise, they have done relatively very, very well. And I think that growth should continue in the next year also. So that's something which we are hopeful of and we are -- and we have diversified that book to a certain extent that I think we are not dependent on one single product to give our growth. So I think that's why this growth is coming in.
Micro finance is an industry, which can see growth. But again, we are diversifying that industry and we are seeing the growth. I think time and growth depends on the global environment, and we have to see how the growth comes in. And going back to the corporate as well as this, our focus is on the MSME and the SME segment, where we are seeing growth coming. And on the retail, I think the consumption story continues in India, and we are seeing a huge growth on the...
On the loan, I think our assumption is within where we are and what we are doing, I think we should see a growth of about 20% to 25%, and we are going to present our PC-6 strategy very shortly in the next quarter. So you would see that growth and our CD ratio anywhere between 85% to 93%.
And would that require a lot of hikes in deposit rates from year on? Or are you seeing it cools down now for the sector and then for you?
I think we've always sat in the house view, has been that there will be one more hike, which will come in the month of February of around 25 to 35 basis points. And then we have to see how the global plays out and how the Indian inflation plays out. And I think we are very certain that I think then I think the stance should [ trend ] to neutral. And I think we should see the scaling down of the deposit rate maybe by the third quarter of this financial year, not earlier than that.
Next question is from the line of Kunal Shah from ICICI Securities.
Yes. So firstly, with respect to the asset quality on the consumer finance side, so there has been some deterioration on a quarter-on-quarter basis and particularly most of the product segments in vehicle have seen the increase in the GNPA. So is it more a function of lower write-offs? Or any higher slippages out there in the vehicle finance portfolio?
So I think the vehicle finance, if you look at [indiscernible]. The only thing that the slippages have happened is really on the commercial vehicle side of the heavy medium and heavy commercial side, and it was because of the Orissa issue on the duty, which has been rolled back by the government. And you should see that coming back to normal during this quarter itself.
Of course, the total loan portfolio continues to suffer, and we have an 8% delinquency there. And we've not done any sale to ARC also. That's something, which you would have noticed on the consumer side.
Yes, yes. Okay. So particularly, CV, CE, and tractor are also seeing some kind of a deterioration.
But these are coming back this quarter itself.
Okay. Okay. And secondly, in terms of the deposit rate, okay. So in fact, maybe earlier, maybe almost 8 quarters back, there was a good gap, which was there with the other private banks. Commendably, now we look at it, we are almost catching up with them and it's very near to where some of the leading private banks are. So what would be the stance out there? Maybe do we see that, okay, to accelerate further deposits, we will need to have a more gap with the private banks? Or this looks to be good enough for the overall growth, which is required on the lending side?
Our stated intent was that we will have a 50 to 75 basis points gap. So what we have observed is that people have fought in and we were able to mobilize the deposits and retailization with our branch expansion. Our branches were able to retailize deposits. So that's something we did not feel the need of increasing our deposit rates in the retail side.
We continue to watch that every month. And if we feel that our retail -- retailization is going down, we will increase the rate. So we feel right now, there is a big opportunity in the senior citizen segment. And I think where we find that if you get senior citizen account, you also get the savings accounts with the large balance. So I think there are opportunities and there are a cluster of opportunities which we go after and we feel that.
In the NRI, we saw the opportunities where we were able to garner that opportunity, and you have seen our NRI book grow to about INR 32,400 from INR 29,000 crores. So I think we see opportunities and strike the opportunities. And I think as of now, I think we will do some changes but those changes will be immediately not at a broad scale level, but at a specific tenure or a specific segment level.
Sure. Sure. Okay. So broadly, maybe currently, there is no need and we will just evaluate it further if need...
No, I did not say that today. I said that we always evaluate the opportunity, and we find that there are certain segments where we feel there are opportunities, and we will increase the rate in a short while from now in those segments where we feel we can get very good growth and very good money.
Yes. So also to do with the outlook on NIM, okay? So if we may go ahead and do the deposit hikes and given fixed rate nature on the lending side, should we see that, okay, the margin should be more or less over the year depend on the current level?
We should always say that our margins are between 4.15% to 4.25%. I've already maintained that. Don't get carried away with 4.24%, 4.27%. I've also said 4.15% to 4.25%. PPOP margins will be greater than 5%. We've been above 5.5%. But I've always said that in PC-5, we will continue to maintain, and that's the stability which we want to bring to our business and predictability, which you want to bring to others.
Sure. And one last question on restructured, so in fact of the improvement of 24 basis points, it seems 12 bps is kind of slippage from the restructured. So on the balance pool, you said that okay collection efficiency is better on the restructured side. But how should we look at it? Do we see the trend continuing in terms of slippage from the restructured book?
It'd be very bare minimum. So if you look at it, it's only going down and we'll continue to slip further. Yes. So I think by the end of the quarter 4, you will almost see the end of the -- by quarter 4 or quarter 1, you'll see the end of the restructured book for us. And that will be the end of it. And I think we will come back to normal credit cost as the other argument of that.
Next question is from the line of Rahul Jain from Goldman Sachs.
Just a couple of questions. The first one is I may have missed your comments, but when I look at the sequential NPLs in CV construction equipments and MFI, those have gone up sequentially, even though I think initially, your outlook that you talked about was sounding quite optimistic. So wanted to understand was there any technicality or the write-offs have been lower in this quarter? So was that reason why GNP moved up?
Yes, absolutely. I think one is there is no ARC sale on the CV business, which we've done on the vehicle finance business. Number two, I think there's a specific Orissa issue, which came up and that impacted the business and which will have got resolved, and you'll see the roll back happening at this part.
This was which portfolio in the Orissa issue?
CV one, the vehicle for commercial vehicle. Otherwise we will see the -- on the other, we will see the rollback happening this quarter.
And why would the MFI NPLs go up?
It was in the Eastern sector where we found the collections because of the holidays and the grouping of the holidays, the NPA slippages happened, and it's very difficult to hold them back of 3 installments at that time. And that's why the slippages happened at that point. I think another quarter of pain, and I think MFI should be back.
Understood. That's helpful. Maybe just one more point on this, just a follow-on. Is it possible to know the 30 DPD, 60 DPD in MFI?
So I will -- I have told that.
30 to 90 DPD is 2.4% of the total book.
30 to 90 DPD in MFI is 2 point?
2.4%.
Okay. Understood. That's helpful. The other question is on the current account deposits, which saw the second consecutive quarter of strong growth. So can you just throw some color as to what's driving this?
Always remember that current accounts has a volatile business. We specialize in two -- three distinct periods in the current account business. One is we are a very good escrow business leader specifically in the real estate well part of it. Second, we are very strong in NBFC cash management business. We are very, very strong one. And third, on the trade aspect as a part of the current count, we are very strong. That and as a possible we get trade. So you will see some floors which come up as a consequence, and we get a lot of -- sorry, on the last part, we did a lot of dividend mandate from the government mandate business, which we do very well in the public sector undertaking.
So I think you will see some flows coming in. Normally, you should see a standard flow which was around 38 to 40 now moving up to 43 to 45. And that is our standard growth. And you will see some flows, which come in and they help us in managing our cost of deposits, but they are not able to some extent, the way you call stable with deposit. So you will continue to see volatile, but they do -- they are part of our core business. They get out because we do these businesses of cash management, you know that cash management money cannot last for us last with us for more than 3 days or 4 days because as per the new current account guidelines and RERA is with us, it's a part of our DNA to do the real estate and we get the RERA businesses as a part of the consequence of that. And of course, the trade effect is a part of our core businesses. So we follow this as a process. And I think that's where the current account business is growing for us, and we focus on these areas to get the business.
The other question is on the yields in corporate, which is...
Rahul, sorry to interrupt you. Can I request you to speak through the handset.
Is it any better?
Yes, Rahul, it's better now.
Thank you. The other question is on the yields on the corporate portfolio, which moved up quarter-on-quarter nicely. I just wanted to understand what will be the rating profile of these corporates where you're able to pass on the cost and can it sustain over the next few quarters?
As we have said earlier, bulk of the corporate book is the floating rate book. So it's not about to rating profile or anything as such. And every quarter, you have to reprice the book and that continuous repricing is happening. So overall, entire book, you will see the repricing happening as the -- every quarter, the book comes up for renewal and at every renewal, the repricing comes into play.
And the benchmark is a short-end benchmark or a year plus?
So it varies depending on the corporate demand. If you see overall corporate book, almost 40% of the book is linked towards MCLR and within MCLR it varies from 3 months to 1 year. And every corporate loan has to be repriced within a year and reevaluated within a year. So you can't take it beyond 1 year.
Another 40% is external benchmark linked. In our book, the external benchmark typically are the [ GSX ] and MIBOR, et cetera. So that book gets immediately repriced. And balance 20% is short term in nature. So while it is a fixed rate book, but it gets repriced within a short period of 2 months to 6 months. So there also, you get repricing happening in a short period of time.
That's very helpful, Indrajit. Just a last question on the ECL. So we were under the impression that the parallel run was happening for the last few years, particularly for the private banks. So what really has changed in the discussion before that RBI put out, which may or may not have impact on the number? You said it may not have any impact with numbers, but any particular observation that you want to point out to us?
I think every bank was doing something on the road. Now the parameters are going to be governed by the RBI, some of the parameters. And I think we will have to bypass this model basis a certain parameter, which the RBI will standardize across the industry. So that's one.
Number two, I think they will take into account what has happened during the COVID period and was there probability of default get affected as a consequence of the COVID period.
Just to add comment to what you mentioned. So we have -- banks depending on the data they have, they could use behavioral models or they could use standard SMA approaches. [indiscernible] followed during the period that we dealt with, we have followed our own approach is based on the data quality, richness of data and time length of data that we had.
We have to wait to see how RBI comes at. For example, we have 4 decades of data for our vehicle finance portfolio... So that's what we need to be because during -- in that case we have mentioned, there'll be certain levels that they want to have on the provision requirements. It will not be at the same level of asset quality, the IRAC norms are.
So those are the things we have to fine tune, but we have all the data. We have worked on it. So once we get clarity on that from RBI, we will be able to put it together and this is early estimates. It looks under control.
Just to extend this point. So let's say, the property of default indeed come on the higher side because we still have some on the portfolios which are maybe above the historical trend in the delinquencies and credit cost. Would it impact the pricing of the loans as well because this would also be a number that are already going into the pricing of loans? And would it put you at any disadvantage versus the market?
Not at all. I don't think so. Microfinance, we are already the lowest. CV, not at all because we are benchmarked and the best-in-class in the market under CV portfolio.
How about corporate loans?
Corporate loans [Foreign Language] We've not seen the flows at all. You see our corporate book and see the flows this time also. There is nothing. Diamonds, we've nothing.
NPA is reduced.
Yes, there's nothing on corporate.
Next question is from the line of Abhishek from HSBC.
So my first question is on the MFI book. Can you quantify the disbursement? I think I missed it from your opening remarks.
Yes, I'll just tell you the number. It's about INR 8,928 crores.
And this is only for the MFI, right, not merchant advances in...
No, no, no.
In investor presentation, we give a slide on MFI.
So then sequentially, one would have expected the book to go up. So have you seen like accelerated repayments or something? Or basically, I'm trying to see when we will see...
Runoff is about INR 3,000 crores per quarter -- a month.
A month. That's the runoff on the book, yes. We have a shorter duration book and the runoff happens.
And what is the outlook on the disbursement, you see it going up?
I think this will go to about INR 11,000 crores. So that's the maximum that will go to. It'll never be a INR 15,000 crore disbursement. The growth will be limited to about INR 1,500 crores to INR 2,000 crores a quarter.
Yes. Yes. No. Actually, the expectation was that in this quarter it said we'd see that kind of accretion. So I was just trying to get a sense of the growth going forward.
Because of the holidays in the month of October and the bunching up of the holiday. So October was a complete write-off with 10 days -- 12 days working days. November, it came back a little bit, but December is where we saw the INR 3,300 crores of disbursements coming back.
Understood. Understood. And in terms of slippage, how much of it was from MFI this quarter?
I'll just give you the number. We'll upload a table Abhishek with the segment-wise slippages.
Perfect. And just one more thing on this telecom exposure to this particular company where you have, I think, INR 20 billion outstanding. Is it...
INR 1,700 crores.
INR 1,700 crores. So it is entirely provided for, right? There's nothing...
No, we have provided INR 990 crores. Funded exposure is provided.
Okay. Okay. Okay. Got that. Right. I think yes, those were my -- okay, sorry, one more question, just quickly squeezing it in. Contingent provisions. I think 2 or 3 quarters back, you had called out that you would probably use around INR 1,100 crores to INR 1,300 crores or something of that order. You've almost used, I think, around INR 900 crores...
INR 1,136 crores.
Yes, INR 1,100 crores. So incremental...
We will remain within that number. INR 1,300 crores or something. We'll not cross that number.
Next question is from the line of Saurabh Kumar from JPMorgan.
One question on the Slide 18, which you've given. So one is what is the overall fees you'll be earning on this entire LCBG book? And there is a low investment grade 4%. Could you quantify what that is?
Well, I'll ask Arun to answer this. Arun runs our -- the whole business.
Sorry, what was that LC book?
How much revenue you get from LCBG?
Okay. So it's all client-related businesses on the LCBG as well as mostly on the delivery because you have classified that actually in that fees line if you see. So there is a slide on trade and trade fees out there. So I think trade remittances was something like INR 201-odd crores and then FX on account of client income was INR 250-odd crores. So that's what we get, which is around of the total fee pool of core people of [ 1940 ]. So this is around INR 450-odd crores out of that.
Okay. And most of these exposures you have written public sector and all, but what would be the acceptable exposure, sir? .
Sorry. What was that? Most of the exposure was?
Sectors which deals will be happening into, like?
Yes, it's a mix of both. So trade is primarily corporate accounts, right? So because it's typical LCs and sort of that. Bank guarantees are typically the PSUs.
Okay. And sir, just last question, what this below investment grade, which is 4%?
That's to the telecom one that we just referred non-fund based facility to the telecom company that we have.
So of the four, one is telecom. What is the other two?
The...
Those are of smaller accounts. There is no one particular large chunky account there, won't be able to disclose the names of this.
Next question is from the line of M.B. Mahesh from Kotak Securities.
Just a couple of questions. One, if you look at the direction of these cost of deposits, which has kind of increased by about 35 basis points, about 30 basis points this quarter. Could you just kind of give us a rough indication as to how does this change over the next few quarters based on the current deposit rate and the maturity that you have in your books?
So I think you will continue to see in February if the rate of deposit changes, I think you will see a rate change. And currently, I think you should expect a 15 to 25 basis points rate hike of 15 to 25 deposits really high on the overall book as a consequence of that.
So just the question is the other way around, assuming that there is no change. This quarter, if you assume that it's about, let's say, about 35 basis points, would you say that the number increases to 50 basis points next quarter? Or do you sense that the number kind of remains where it is at 35 basis points each quarter?
I think it's more of the latter. I think you will have around 30-odd basis points increase somewhere maybe 5 basis points here or there on the number that we had as an increment in the last quarter.
And Mahesh, you would also have to note that last quarter, we have taken a savings rate hike, which reprices the whole base immediately. So that is not going to happen every quarter unless we raise the rates again.
Perfect. Okay. Second question, sir, in the past, you've kind of mentioned that you will be kind of reducing these balances that you have on the balance sheet on the cash side. This again, it remains reasonably at a high number at about INR 54,000 crores.
Actually, it's around INR 44,000 crores. So we carry excess liquidity and we have been saying that as the loan growth accelerates, the excess SLR will keep coming down. But at the same time, we will continue to carry INR 25,000 crores to INR 30,000 crores of surplus liquidity at all points in time as a manner of prudence and conservative building buffers on the balance sheet.
This book fits in -- it earns any interest or it doesn't?
So if you see the split of the INR 44,000 crores, so roughly around INR 25,000 crores to INR 30,000 crores is in the form of excess SLR. So these are the [ GSX ] securities, which we carry beyond what is required from the regulatory requirements. So they give us returns in terms of whatever the [ GSX ] yields that are there in the market. And the balance INR 10,000 crores to INR 15,000 crores is pure cash that is kept beyond the CRR requirements.
Okay. Perfect. And Sumant, just last question to you. Any conversations with the RBI on the extension of tenure?
No, Mahesh. There's been no communication from RBI.
Next question is from the line of Manish Shukla from Axis Capital.
Contingency provision of INR 2,192 crore, how much is restructured asset provisions?
How much restructured asset provision. These are all.
Manish, what we have to carry is -- if you remember the RBI circular, we have to carry 10% of the...
5%.
5% to 10% depending on the security and all. So that is only what is required to carry by the regulations. That's around INR 500 crores, INR 458 crores. Beyond that then there is INR 1,000 crores for telecom asset and balance is pure contingent of surplus.
So both that telecom as well as INR 500 crores is part of the INR 2,192 crores.
That is correct.
Correct.
Yes. Okay. Secondly, on the yield on your consumer loans. If I look at first 9 months, December over March, that has moved up by only about 32 basis points. While I do appreciate that it's a fixed rate book. The book itself has grown 17% in the last 9 months, but the yields have not moved. I mean, could you just explain what's happening there?
So I think you also understand that the credit card yield have shown a decline over the last 4 quarters, where the revolving rates have come down on the credit card book. So that affects the book in a big way.
Second, I think in the CV business, the scooter loan businesses of the high-yielding business has come down, scooter loan a lot. And I think the yield has remained almost static while the disbursement in the other part would have increased, but the scooter loan business of the high-yielding the 3-wheeler business, those portfolios have come down and the reserves have come down on that businesses because they are still coming out of the COVID. So that's number two.
Number three, on the microfinance side, the disbursements have not been very high. And during this phase, I think runoff of the book has happened. The growth has been very, very different at this point of time. So I think you will see that growth coming back. And that's why we are so comfortable when we give a range of 4.15 to 4.25. So we'll see the growth coming back in these sectors and they will fuel the growth and the interest rate of the business.
Last question on housing loans that you're doing, what is the yield broadly that you are getting...
We are getting about 8.95 right now. That's the yield which we are getting the loans at right now. So that's the yield.
Next question is from the line of Shubhranshu Mishra from PhillipCapital.
Just on the vehicle finance part, sir, what proportion of our vehicle finance is for -- is to SRTOs and what proportion is to the fleet operators? And what is the credit risk management that we do? What kind of collection architecture we have? And what is that one plus DPD we have in...
I have got Sriram who runs this business. Let him answer this.
65% of the book is for SRTOs.
Right. And what is the one plus and the collection architecture in this business, sir?
So we don't share the one plus DPD because there are always operational delays that happen, people travel around the country. So there will be quite a bit of people between 1 DPD to 30 DPD. But over a period of time, you get back the collection. So whatever is the slippages -- which are only if you are 30 DPD to 90 DPD, then only that case comes in, but I'll let Sriram articulate about the collection architecture.
Yes. See, like below the branches, like we have a separate collection people. Like whether customers involve you or not, it gets assigned to a collection agent and generally has around 250 contracts...
Ladies and gentlemen, thank you for patience. We have the line from the management reconnected. Sir, you may go ahead.
Yes. On the collection fees, we have branches -- below branches, we have separate collection executives who handle not only like overdue new contracts, but also other contracts which are not -- which are in no due. So nearly 250 customers get alloted to each collection assistant.
And above branches, it is all we do business and collection together. Unlike other bankers, we do not have a separate vertical for collection and business -- above business like all the hierarchy for both business and collection together. And yes. And all the collection executives are DRA trained and we have certification. And even we position nearly 50% to 60% are handled in-house by our collection executives.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Sumant Kathpalia for closing comments.
So thank you for joining the call. If there are any further questions, then we will definitely -- you can definitely call up me or Indrajit then we'll, of course, have 1-on-1 calls starting tomorrow onwards, and we can discuss. Thank you so much.
Thank you very much. On behalf of IndusInd Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.