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Karur Vysya Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '22/'23 Earnings Conference Call of the Karur Vysya Bank. We have with us today the management team of KVB, represented by the MD and CEO, Mr. Ramesh Babu; President and Chief Operating Officer, Mr. Natarajan; CFO, Mr. Ramshankar; Company Secretary and Compliance Officer, Mr. Srinivasa Rao. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, to take us through the highlights of the quarter gone by. After which, we will open the floor for questions. Thank you, and over to you, sir.
Thank you. Thank you, Mr. Steeve. So good evening to all of you. Welcome to our bank's earnings call for quarter 1 of the financial year 2023. Trust that you, your colleagues and family members are keeping well and are in good health. I'm sure that you would have gone through our presentation on our quarter 1 performance, and I'm glad to share that the results reflect the outcome of the plans, strategies and efforts put in by us.
My brief on the performance highlights during the quarter and guidance for the remaining quarters for the current financial year is as follows. As you are aware, we have reported a consistent improvement in our performance during all 4 quarters of financial year '22 in terms of growth, profitability and asset quality. I am pleased to report that the trend continues in quarter 1 also, and I'm confident that the same will continue.
Rather, we will aim for further improvement in the performance in the ensuing quarters. Based on economic indicators as well as the prevailing uncertain environment and geopolitical issues, at the beginning of the current financial year, we have cautiously estimated a business growth of around 12% on the deposits as well as advances front.
Considering the current trends, particularly on the demand for credit in certain specific sectors as well as the growth witnessed during the first quarter, it is likely that the growth will be higher than 15% on advances and deposits for the year 2023. We continue to hold our NIM at the north of 375 basis points, so it was 382 basis points during the current quarter as against 355 basis points last year and 379 bps during quarter 4 of 2022.
Our consistent efforts to keep the cost on lower side coupled with improvement in yields on investments and advances during the quarter supported the improvement in the NIM. During the quarter, we have increased our deposit rates for select maturity buckets by 50 basis points, which is likely to impact cost of funds going ahead.
Nevertheless, we expect that our yields also will proportionately move up, enabling us to manage NIM at 3.75% levels. Net interest income has gone up by 17% year-on-year and sequentially by 5% on account of lower cost of funds and increase in yield on funds and further supported by growth. Yield on investment has moved up from 5.36% at the end of first quarter of last year to 5.64% and sequentially improved by 11 basis points. As indicated earlier, it was a conscious call taken by the bank to keep the duration of AFS investments at a shorter level for quite some time. The securities now maturing are replaced by those with higher yield as per current market trends.
Our yield on advances has remained flat at 8.27%. About 30% of our loan book, there is pricing linked to EBLR. So policy rate changes have been transmitted to working capital accounts concurrently. And term loan accounts are repriced as per the terms of the contract. MCLR has not been revised during the quarter. Factoring the deposit and other costs, it will be reviewed based on the market trends.
Noninterest income has marginally declined by INR 4 crores over corresponding previous quarter. This is mainly due to higher depreciation on investments amounted to INR 37 crores and lower investment trading income of INR 4 crores, which have offset the improved fee-based and other income. We do not expect any significant depreciation on our AFS-SLR portfolio considering the low duration.
Investment portfolio includes interest-earning non-SLR bonds and debentures of INR 1,507 crores. In tandem with the yield movement, there is likely to be some MTM losses in case of further hardening of interest rates. Operating expenses have gone up by 10% in view of the increased scale of operations and higher business volumes. However, increase in revenue is to the tune of INR 104 crores while the increase in expenses is only to the extent of INR 63 crores, enabling a lower cost-to-income ratio of 49.68% which is lower than the previous quarter and previous year.
We continue to focus on this and aim to keep the ratio at around 50 levels. Operating profit for the quarter increased to INR 475 crores, up sequentially by 8% and 15% on year-on-year basis. This is on account of increased NIM and lower cost-to-income ratio. Provision for NPA for the quarter was at INR 140 crores while net slippages were negative. The provision requirements in respect of migration aging needed to be undertaken and also to further improve the PCR.
Overall, the credit cost including standard and restructured advances fees, 1.09% as against 1.25% for the last year. Credit cost for the NPA is at 0.95%. And for the year 2023, we expect that it will be at about 1%. Net profit has risen to INR 229 crores for the quarter, which is more than double the previous quarter, previous year and also sequentially up by 7%.
ROA for the quarter is at 1.09% as against 0.57% during the first quarter of the previous year and 1.06% during last quarter. As indicated earlier, our estimated ROA will gradually move up. And for the whole year, it would be around 1.1%. And for exit quarter, it would be in the range of 1.15 to 1.2 subject to normal market conditions.
Our CRAR continues to be robust and is at 19.21%, providing us a comfortable headroom for growth. Our liquidity is comfortable, and we continue to maintain LCR at around 200% levels. I'll now brief you on some aspects of our credit portfolio.
First thing is slippages and asset quality. Gross slippages were at INR 139 crores during this quarter, which works out to less than 1% of the loan book on an annualized basis. Our recoveries as well as upgrades have surpassed the slippages during the quarter 2, resulting in a negative net slippage to the tune of INR 21 crores.
You may have observed that the bank has been showing net slippages -- net negative slippages without taking write-offs into account during the past 4 quarters, technical write-off of INR 303 crores during the quarter has been undertaken. There was no sale on SR basis during the quarter. Our estimated gross slippages for the year ahead will be in the range of 1% to 1.5%. And considering estimated lower slippages and possible recoveries from the existing NPA book, we aim to achieve negative net slippages in the coming quarter also.
SMA 30-plus balances, at the end of quarter, stood at INR 579 crores, which is less than 1% of the loan book. SMA book includes jewel loan book balance of INR 48 crores. Due to lower slippages, recoveries and technical write-off, gross NPA has come down to 5.21%. Our aim is to reduce it to below 5% levels by 2023.
Our net NPA level has further reduced to 1.91%, and it is our endeavor to keep this at below 1% levels. Restructured book. Our overall standard restructured book stood at INR 1,525 crores, which is 2.56% of our loan book. This book consists of INR 215 crores of working capital and INR 1,310 crores of term-loan portfolio.
As of 30th June, about 63% of the term loans are in repayment demanded category. About 11% of the restructured book is in SMA 1 and 2, and we hold a provision of INR 166 crores towards the standard restructured book. Further details are available in the Slide #28 and 29 of our presentations.
Coming to the growth. During the quarter, bank has recorded 14% year-on-year growth in CASA and 11% in total deposits. Sequentially, we have achieved a deposit growth of 4%. About 92% of the term deposits are from the retail segment, that is INR 5 crores and below. Considering the need for building up deposits to meet our asset growth and to be competitive in the market, we have raised interest rates and term deposits on certain buckets and operating team is activated for aggressive mobilization of retail term deposits.
We also continue to keep our focus on building good CASA base to reach 40%. During the quarter, we made a fresh loan disbursement of INR 4,200 crores as against INR 1,662 crores during first quarter of last year. Jewel loan disbursements are not included under this. We achieved a year-on-year growth of 14% and YTD growth of 4%, and we are working towards achieving a minimum growth of 15% during the year under the advances.
Retail loans under personal segment have grown by 11% year-on-year. This is predominantly on account of residential mortgages. As indicated earlier, we have made certain significant changes in our structure, and this will help us in building a sound retail book in the ensuing quarters. Our agri loan book, which consists mainly of jewel loans, grew by 15% year-on-year and sequentially by 4%, and we expect that this trend will continue.
Our overall jewel loan book has grown by 13% and constitutes 25% of our loan book. LTV stands at 71%. Commercial loan book has grown by 16% year-on-year and sequentially by 3%. We are focusing on this segment very closely to maintain the trend and to make use of the opportunities. Corporate banking book has achieved a sequential growth of 4% and year-on-year growth of 13%.
The growth reported is mainly on account of availments in existing working capital accounts supported by fresh disbursements to existing and new customers. We are planning for a growth of 12% in this segment during the quarter. Let me conclude that by saying that our performance during the quarter is in line with the expectations and business plans. The qualitative changes and transformation processes brought in during the past few years are helping us to scale up our business, improve asset quality and aid increased profitability.
I am sure our business numbers will continue this trend in the coming quarters. Once again, I thank you all for taking time to join this call. I will be glad to respond to any questions which you may have. Thank you very much.
[Operator Instructions] The first question is from the line of Prashant Poddar from ADIA.
Yes. So congratulation sir for a very strong performance in both balance sheet and profitability. Two questions. One is, if you could help us understand the investments, you're planning to make in strengthening the liability franchise as well as the retail asset franchise. There were some changes restructuring related. We did some restructuring of retail business in the last quarter. If you could tell us the progress of that and how that is likely to help you improve your retail assets growth in the future? So these are the 2 questions I have.
The first one is the retail -- investment in the retail. And frankly, thank you, first of all, Prashant. So you were asking about the deposit franchise, how we are going to restructure and what is our approach, correct?
In the investment -- so you talked about some branch additions as the last time. So [indiscernible] whatever, I mean any -- what are you going to support them with -- for getting deposits?
Yes, yes. Thanks. Thanks, Prashant, first of all. There is a multipronged approach we want to take for the deposits. One is, branch addition is one part. Last year itself, we tried to open 15 branches. Because of the first quarter we had issues, we could finally open 9 branches. And this year, we are trying to open, and we are planning to open another 15 branches, including the backlog also. We will try to cover it up and down as many advances as possible we will try.
The main focus of these branches would be mobilizing the deposits, and smaller level, the loans what all are available, the retail as well as the commercial also to do that and all. But in addition to that, we are making some more efforts. Actually, internally, we are making some more efforts to -- because we have got the approvals for the government. And we are trying to focus now on the institutional as well as task also. So we have capacity building also we are doing and all. And that is the [ debt ]. Our focus will be on the CASA as well as the task.
These sort of segments we'll focus on. And we are focusing on our [ ETV ] segment because, as you know, 106 years, the bank's legacy is there. After last year, we didn't focus much on these term deposits because that growth was not that much and all. Even if you mobilize profusely, you may have to deploy them at a lower rates and all. So that is the reason now we have activated all our branches. Even if you look at our renewal percentages also, it is more than 80% in respect of many of our branches.
So that way, if you look at it, so we are focusing on that particular, and senior citizen is another segment where the bank is pretty strong. [ And this ], we are going for that. And the channel what all is there, Feet on Street, other channels other than the brand channel. So we are strengthening that particular channel. Currently, that is there. And now, we are further strengthening, and we are making it active by taking people from the market also. So that way, if you look at it, overall, we feel we will be able to manage.
If you look at it, our overall, the growth of the deposits in the first quarter on a year-on-year basis is also 11%. Even the current account as well as savings bank also, it is more or less much, much better than what we were doing last year. So that way, what we feel. So with the existing setup, and the additional measures what we are going to take, so we'll be able to meet the requirement, what all is required for the credit growth.
And one more thing also, Mr. Prashant, just I want to say one more thing, sorry. The BC partnerships also, we are actively working on that. Already one BC, business correspondent, so we've worked with that technical -- technology integration has been completed, and we are in dialogue with a few more because that will be a light touch model and all. We did not open a full-fledged branches. The BC will have their outlet, and their main activity is to mobilize their deposits. So that way, BC also -- simultaneously, we are working on that.
This is good figure, sir. And on the asset side, if you could help us? On the retail asset, we have done some restructuring, the progress of...
No, you want to know about restructuring or asset growth?
No, sir, you talked about the restructuring. So what is the progress of that? Has the team integrated now?
What we are trying to do is -- so we have created a channel for the NEO for a few other products, which are going. So what we are planning actually is, NEO is a channel with feet on street. Currently, the home loans, these sort of things and all are being handled by the branches.
So now, we are planning to have NEO team also used for this purpose currently when they are using the [ lab ] and the same customers, they have the requirements of the home loans with other banks and all, so that way, the feet on street currently available with them.
We are going to use them also for mobilizing the home loan structure. So that way, home loans will be another focus area. Mortgages and home loans, we will try to do. Another focus area would be the gold loan. So internally, we are making some more restructuring, they are trying to do it and all. Gold loan will be another focus area because there the yields will be better as well as NPA is low.
And already many of our branches, they know how to do it and all. So some more strengthening we are doing and market-related practice we are trying to bring. So that way, these mortgages as well as gold loans will be the whole areas which are going to take the retail segment forward.
Okay. If I can just add one more question, sir, related to this. So you've been entering into certain partnerships in the last few years. If you can tell us about some of the relevant partnerships, which are kind of contributing currently to the growth? And any incremental partnerships that you have entered into, not excluding, but entered into. That's all from my side sir.
No issue. No, no. One thing is last time also, we were discussing on the gold loan front, the Rupeek. With them, we have entered into an arrangement. So with a few districts already we have covered and all. Now the momentum started getting and all. Around INR 150 crores, something like that, we have bought it. Now further fine-tuning the commercials, all these things, we are finalizing. With that, we are going to take it to the next level. That is with the Rupeek. Like with Cholamandalam, what we have entered so -- for the vehicle financing, these sort of things and all. So this is working well and all. We started getting a lot of traction into that one and all. And we are in dialogue with a few more people. So once we work on that, we would like to do it under the MSME segment so -- for these of -- for lending and partnerships.
On the one side, Amazon is working well. It's going on pretty well that way. That is not an issue. And Razorpay also, we have entered. So that also started giving some sort of numbers and all. So that way every -- instead of entering an arrangement for the sake of entering. So we are seeing the value wherever it makes sense because it requires an investment on our part. That technology also. So selectively, we are entering and all. So we are in dialogue with a few other players for the liabilities also, digital players who can support us and all. So that way, whichever way it affects our liabilities, we are in discussions with the players and all. So we'll take it forward, Prashant.
The next question is from the line of Renish Patel from ICICI.
Congrats on the set of numbers. Yes, and so a couple of questions.
Mr. Patel, your audio is not clearly audible. If you can take the phone on handset mode, please.
Is it better now?
Yes.
Absolutely, better, better.
Yes. Yes, sir. So a couple of questions. So one was on the restructured book, okay? So as per our presentation, our NPA in the restructured book is close to INR 360 crores -- and when we look at the demand portion, it is almost 63% of the total restructured book, which works around, let's say, almost 40% of the book has already slipped into NPA. So when we are projecting this 1%, 1.5% kind of a slippages, are we sectoring our slippages from restructured book as well, right, sir?
Yes. Actually, see, you're right. See, we are including what our restructured book also. For example, if you see our SMA 1 and 2, that is 30 plus, it is still less than 1%. So it includes all the restructured assets. But basically, the restructured assets, whatever you are mentioned, predominantly, it's all MSME. So the predominantly MSME, we started restructuring 2 years before. So that is why the delinquency was slightly higher there. Otherwise, if you -- for example, if you see the corporate side, we don't see any issue there because the -- all the restructuring is more predominantly on account of DCCO. So the projects are going on well. We don't see any problems there. So only thing is the MSME is a little bit challenging, and we are putting our best efforts in clearing it. But one point you have to see that all the -- whatever loans -- these are all completely 100% collaterally secured.
Got it, sir. And sir...
Renish, Renish, one more point just I want to share with you. I think now that the further restructuring, COVID, these things have -- are not there. Now the inflow will not be there. So that way over a period of time, the denominator will start coming down. whereas the what all flow -- forward flow will be there into NPA, the numerator will be going. In terms of percentage, if you look at it, maybe 2 years back and now, it looks the percentage is high, but if you look at it overall, the movement is there. So that is quite reasonable. Initially, itself, 1.5 years back, when we were doing the restructuring, we gave an indication the overall NPA can come around up to 15% to 20%, it's going to come up and all. So that is the reason we are working. But whatever it is, as our President has mentioned, it is within the ambit of the total SMA 30 plus, which is 1% we are working in that way.
Got it, sir. And sir, in current quarter of INR 1.4 billion of slippages, how much has flown from the restructured book?
INR 61 crores, in fact, you have seen, and I suppose if you look at our Page #29, so we have shown that the slippages during the period is INR 61 crores. Out of INR 139 crores, what all slippage is there during the quarter, INR 61 crores has come from restructured book.
Got it. Got it. And sir, again, maybe kind of a follow-up what Prashant was asking on the retail restructuring side, I think, sir, on NEO, we have been talking things long about having this a separate channel. So in terms of the business contribution as on June quarter, sir, what percentage of disbursements are coming from the NEO channel?
I can say, on an average, the monthly growth is around INR 125 crores, we can expect. That's what is a run rate going on. Now we are looking at a few more areas which are actually a deeper hinterland. So where you need not have a branch and all, but the Feet on Street can go and do it and all. So that way, we're then focusing on the metro centers. If you go deeper into the semi-urban and Tier-2, Tier-3, the business opportunities are much better. So we are going into that one. So 125, that range we are going. So we will see how to scale it up.
Okay. But sir, in terms of the contribution, any ballpark number would you like to highlight?
The contribution, you mean to say that -- which way you are saying that?
So let's say, if we are disbursing INR 100 a month, how much of that is coming from this NEO channel?
No, that's what if you look at it before, the overall growth, what all you see, if I say 125 for a quarter, if you look at it, it is coming to -- INR 375 crores is coming from NEO.
No, sir. Can you please repeat that, sir? I missed that.
No, no. In the quarter, what all advances growth is there. So you can see INR 375 crores because 125 is the run rate for the NEO, if I say per month the growth. So INR 375 crores, suppose overall for the whole year, if you look at it, around INR 1,500 crores will come from the NEO channel.
The next question is from the line of Mahesh M.B. from Kotak Securities.
Sir, just one question. One is on the -- if you look at your portfolio in terms of yield repricing on the loan side, could you just tell us how does it work in the next couple of quarters?
Yes. If you look at it in the inaugural listing I was mentioning, so -- this repo is concerned, working capital straightaway we have passed it. And within -- already -- 1 month is already over, next 2 months, so majority of the other EBLR link, so we will be passing it on. So that way, there should not be any issue. Here and there, wherever the customers -- the value of the customer, these things and all, we may give a concession and all.
But otherwise, EBLR is concerned, not an issue. But if you look at our cost of funds currently at 4.09 which is the lowest actually. In the bank also if you look at it last 10 years, these sort of lowest cost of funds we didn't find. So with these cost of funds and the other costs remaining more or less stagnant are under control. The MCLR side, we will not be able to increase it immediately.
So once we have already increased the rate of interest by 50 basis points for the other deposits, making it more market-related compared to peers and all, our rates are relatively attractive. So with these things, once it kicks in, and the cost of deposits goes up and all, then automatically, we will translate into MCLR. If -- overall, if you look at our credit book, 85% is under floating rate. Suppose under this, 30%, 31% is under EBLR, so rest of the 55% is under MCLR.
The movement we start increasing the MCLR, automatically, there also the working capital will get immediately repriced and term loans also will get repriced over a period of time.
Yes, Mahesh, only with reference to your point, we already indicated 30% of our loan book is from EBR. So we drill it down further, 33% of our EBR book is towards working capital. So this already is all passed on to them. So out of the remaining 67% term loan portion, 56% this reset is already done. So what is left out is only 44% of the term loan component of the EBR, that weighs up roughly around INR 5,400 crores. So we expect another maximum 4 to 5 months, all these things will be repriced.
Okay. And on the cost side, how does -- in your sense that these margins that you have reported today, is it fair to say that you have at least a tailwind for at least another 2, 3 quarters before it starts coming back to where it is today?
Yes, yes, absolutely. Because the reason is the increase in the cost of deposits will not -- totally will not reflect. So over a period of time, it gets reflected. But whereas the MCLR as well as EBLR what all we are changing working capital, they are able to hit them straight and within 3 months term-loan also is coming. So that way, we will have the benefit for a few quarters definitely.
And you don't think spreads have come off because of competition in the market. It's kind of holding up as in you don't have...
No, no. How the competition has come down, absolutely that way. So the number of accounts, which others are taking have come down drastically because our pricing is also quite market-related. And last year, during COVID what all pressure we were facing and all, that currently we are not facing at all.
Okay, okay. And the second question is on your -- so you kind of indicated the gross increase will be below 5% this year. We're already at 5.2%. You don't seem to have a very large book in terms of stress portfolios. Is it -- you think this number is extremely conservative here?
No, no. It may be much better. In fact, you see how we were there at 3.3-odd in net NPA. And within 2 quarters, we have moved to 1.92. Okay. So the three-pronged approach we actually trying. One is the growth. And second thing is aggressively we are working on the NPA reduction. And the third thing is provisioning prudentially what all is required.
But -- when we are talking about the gross NPA reduction, there are many big accounts, which are stuck with a consortium, NCLT, courts and all. So these more or less at the fag end, if it takes as it is, we'll be able to get it. Otherwise, also we will start working and all, 5.5 -- below 5% is -- I will tell you, even 4.2% is also below 5%. So that way, we -- our focus is to clean up this one and all. Once and for all, we want to get out of this.
That's the reason I told Net NPA also, we are actually aiming to come to around 1% by '23, so that we can put all these to an end. In future, what all we are earning as a PPOP, it should straight flow into that profit. All these leakages, different holes and all should not be there. So that's why entire cleaning up operation is there, and business growth is on one side is there. This is our plan of action.
The next question is from the line of Bhavik Dave from Nippon India Mutual Fund.
Sir, a similar question to what Mahesh was asking. In terms of the upper credit growth guidance of 15%, and we've been talking about maintaining that 4.75% margin. Both these can be achieved in tandem, right? Like because you mentioned in the previous quarter even that growth is not a challenge considering that competitive intensity has come off and drawdowns or balance transfers that were taking from our book has reduced substantially. Is that a fair thought to have?
Absolutely. What you said is correct. Both will have to go in tandem. Suppose for the sake of growth, if we start compromising on the NIM, the purpose will be difficult. So that's why intention is if we grow only in a particular segment, so then the question of compression on the NIM comes up and on, but we want to grow under each of the segment. And that's the reason the introductory remarks we were giving; vertical-wise, we have given the guidance and all. So under the vertical also, whichever are the products, where you are going to yield better and with a lighter capital hit and all. So we are focusing on those lines. That way, these 2 will go in tandem, 15% as well as 3.75%.
Understood. And the second question is on the ROA [indiscernible] we are looking for a 1.15%, 1.2% exit. Sir, we already reached 1.12% for the quarter, right? And we've been maintaining...
1.09%.
Yes, 1.09%. So my point is incremental that will come from whatever 6, 7 basis points or 10 basis points that you are expecting? Will it come from lower provisioning or any other lever that you think is possible? And second question is, sir, what is the kind of ROA that we will aim for, right, like 1.1%, 1.2% is what we've achieved, and historically, we've been a little bit higher than that considering the kind of business that we have been running. Do you think that a higher margin -- sorry, higher ROA is also possible maybe in FY '24, '25 with the kind of balance sheet that you are running? Or do you think 1.2% is...
Sorry, sorry Bhavik, it got disconnected when you were at 1.1%, 1.2%, it got disconnected. We are back on the line again.
Yes, sorry. So what I was trying to understand is like we've almost reached where we want to, what would be the next target for us as a management team. Can we go above 1.2% ROA considering some levers on fees or maybe operating leverage via OpEx with growth coming back. Is there any chance of improving above 1.2%? I understand 1.2% is a reasonably good number. Is it possible to improve from there as well?
Bhavik, thanks to you because you have been tracking our bank. You know very well last year, before last year, 0.3%, 0.35% and all ROA was there. This reaching is 1% itself was a dream. So we were indicating that '23 March, we will reach, but concerted effort has been made on every lever of ROA to reach this 1.09%. Now our intention is to see on a sustained basis is 1.09%, 1.1% and 1.2% reaching, so let us cross the bridge this year, but we are equally interested in seeing that -- another question, what you're asking is, so to tinker the provisioning, what all -- sorry, Bhavik. Bhavik, second point you are asking is, by tinkering the provisioning are we going to make the ROA. No, intention is not that at all. So all of them will have to go in tandem, the cleaning of the balance sheet, provisioning, PCR as well as the net NPA reduction, ROA, everything it has to come from the growth as well as other income. Ideally, they must support and intention is also to grow from that and not to have cutting the corner from other side.
Perfect, very well understood. And we will continue to grow at 15-odd percent if this environment or the credit growth stays, right? I mean...
Yes, yes. Absolutely, absolutely. We are optimistic. So we are pushing the entire team on those lines only.
The next question is from the line of Jai from B&K Securities.
Congrats on a good set of numbers. Most of the questions have been answered. Just one question, sir, on your yield transmission. So I think during the call, you had mentioned that 50% of the book is EBLR, of which working capital you have already passed on the rate hike. Just wanted to understand, sir, when you pass from the hike to the borrower, is there a renegotiation on the effective rate to him? Or he -- by default, we would be paying 40 basis points higher? Or can we come back and renegotiate the rate? How does it work actually?
No, I'll be very practical with you, Jai. Thank you, first of all. So ideally, to the extent possible, we are straightaway passing on that 40, 50 basis points, what all 90 basis points and all we are passing on. But there are a few -- extremely sorry, Jai, the line got disconnected once again. So regarding the yield transmission, what I say, so the working capital is concerned, straight away, we could pass it on, not a problem, transmitted, and the term loan is concerned. So there are a few cases where depending upon the relationship, AAA accounts are there. Some sort of a negotiation was there. Otherwise, we are taking the total relationship value into account, few cases, we would have agreed. But I can say that majority of the cases, we could pass it on.
Right. So the -- by default, there is a transmission which...
Yes, yes, absolutely. Yes, yes, yes, by exceptionally. Exception as they will come to the MD level, for giving these sort of things and all, we will evaluate what overall service we are getting and all, all these things we will see. Otherwise, in the -- routinely, should not be giving anything, but delegation is not given at the lower level.
Understood. Great. And sir, on your restructuring, out of your 1,500 restructuring standard account, what is your sense of the default here over the next 12, 18 months?
See, very early, we have indicated based on our experience and also study, is roughly 20% we are expecting predominantly on the MSME and other sectors, not on the corporate.
Okay, okay.
Well, Jai, one more point, what I'm saying, this percentage, what we talking now is, it is because dynamic. The reason is so the denominator will be coming down. The many repayments are coming. If you look at this one also, there are close -- INR 26 crores being closed and all, recovery is INR 45 crores is there. With all these things, down rates will be coming down. So that way, we overall feel that from the original number, the -- overall, the NPA slippages will be around 20% on the overall number. That way, we can say. So tomorrow, suppose it becomes 30%, the denominator comes down to INR 1,000 crores, this may be 30% also.
No, that is okay, sir, but let's say, your restructuring in the peak was around this level only, right, INR 1,600 crores something.
Yes, correct, INR 1,800 crores it was there and all, so it's correct, correct, true, true. But now they have the employee stock...
[indiscernible] crores.
No, it is but in between the inflow was there. From April onwards, there's no inflow. There is -- only outflow will be there, repayments and recoveries will be there and all. So that way -- anyhow, we have a different model and closer monitoring of these accounts separately, unlike we didn't bundle it with rest of the account.
Okay, okay. And your corporate restructuring, you have a fair visibility, right? That these are viable account, right? Because usually, there is an issue at the corporate level.
Correct. I will tell you, many of the accounts because of the DCCO extension, they have come and landed here, but the repayments have not yet started. Whereas there if we are continuously monitoring them and all, they are on track. So that way we do not foresee any big hit coming from the corporate segment into the restructuring NPA.
Understood, sir. And last question, sir, on your OpEx, because of this common trend from the banks so far in the last 1, 2 quarters, I think there's a sharp increase in the operating expenses, staff and particularly non-staff? How are you looking at your bank in terms of OpEx growth for the, let's say, next 12, 18 months?
Yes. [indiscernible] is there, yes.
Jai, on the OpEx front, one thing what we're to see is the last year because of COVID [indiscernible] okay, that is the one reason if you compare before it seems on the higher side. At this point also, in certain things actually because of this COVID rule we are -- like rents were renegotiated and deferred. Moreover, the -- certain expenses because of the growth in this [indiscernible] it has to be -- cannot be avoided. For example, marketing expenses [indiscernible] literally not there in the last -- in Q1 of June. So those 2, again, we need to start doing it, likewise the DSA, Feet on Street, all these things because we cannot compromise on that now. If you compromise on that, it will [indiscernible] badly on business.
Okay. I want to know what was the [indiscernible] what we did that should compensate the -- to whatever any incremental cost, which [indiscernible]
Jai, [indiscernible] you need to appreciate 1 more point. You see when we were struggling at cost income ratio, everyone used to ask, 54, 55, when are you going to come down to below 50. So we are happy that at least 2 quarters, we are able to bring it down because all rounded, we try to do both on the income side and expenses side, 49.68 we could bring it down. Our endeavor is to continue and to further improve this point.
Another point also, this number is after considering the [indiscernible] if you exclude, the number is 47.78% or the lower.
Right, no. So you're saying the call -- endeavor would be to maintain cost to income at current levels, right, at 1Q level?
Absolutely, yes, yes. Absolutely.
[Operator Instructions] The next question is from the line of Dixit Sankharva from Emkay Global.
So regarding this DCCO restructuring, so what's the total amount of the funds that DCCO restructured in?
INR 969 crores something like that, so. INR 969 crores, right?
No, no. I'll just check that number that I hardly recollect, but I'll have to see that. Anyhow, we will -- before the call ends, we'll let you know.
Okay. And in the last call, you said that there are 2 big accounts, which have got the DCCO extension for the second [indiscernible] How much of this [indiscernible] the total of the restructuring book?
Yes, yes. From the corporate side, on account of DCCO, how much is there we will let you know. But one thing -- what I can tell you, there are 2 to 3 big accounts, which are under the hospitality. So what is more or less completed and all, we do not expect any issues in those things and all [indiscernible] will come out of the restructuring book. Anyhow, next call, we will -- suppose, next person is there, I'll let you know this number, readily available with me.
The next question is from the line of Praful Kumar from Dymon Asia.
Congratulations on one of the best results in the industry. I have couple of questions. First, on the deposit side. Now incrementally, we are seeing system growth -- loan growth picking up but deposits are slow to combine. In that background, you have done phenomenal work in terms of maintaining and growing deposits as well. How do you maintain and grow deposits given the fact that your branch additions have been slow for the last 1, 2 years? That's the first question. .
Yes, please. I'll respond. Praful, no, no, let me complete this one. Let me complete, Praful. [indiscernible] first of all, [indiscernible] complement. Now, as I was mentioning, branch channel is one of the channels. As we were mentioning last year and before last year, we were going slow on the time deposit because if we raise the money at 5%, 5.5% and all, the revenues were not there.
We were deploying the money in the reverse, 3.35%. So we were having a negative carry straight of 2% on a time deposit. So we were lying low on the time deposit without pressing an accelerator button there. So now that it is back. So all our branches are activated. The existing customers whomever are there and all, the branches are going -- on 2 fronts, they are working, one for the fresh deposit.
And second thing is the renewal of existing deposits, what all are happening. So this is one. As I was mentioning that senior citizens is one of our good force. So we are approaching them. And that is the reason, our rate of interest, if you can look at it, compared to our peers, we have slightly kept a shade above so that we can get our deposits also.
So that may earn deposits, our brand channel will bring it -- and as I was mentioning, CASA also -- CASA on the task, institutional, we have created a structure now and next 1 or 2 months and all, we will create that structure for the Feet on Street [indiscernible] so that channel also will be developing these fresh connections and all. So branches will focus on the time deposit, CASA channel will focus.
Together, we want to take it forward. That's the reason our intention is to progressively reach CASA of 40% also, simultaneously having a growth in time deposit. If time deposit starts coming down, automatically, CASA will be up. Intention is not that. So both in tandem, we need to move, 40% for CASA and time deposits. So even if you look at it, the industry on an average grew in deposits by 8%, and we grew at 11%. So we want to maintain that edge and all, even we have activated our branches.
Got it. That's great. Sir, second question, given the backdrop that on deposits, you are incrementally gaining share. On the advances side, you have done a lot of brand location, on the corporate side as well. Retail, you have done phenomenal work on the digital side. Now is there any visibility today that from 15%, you can pedal up to 18% growth over the next, say, 2 to 4 quarters in terms of the pipeline building.
No, I'll tell you, initially, till last quarter, we were indicating more or less 12% because last 1 or 2 years, if you look at it, now -- why 1 or 2 years, last 3, 4 years, the position was quite sluggish. So with these things, quite actually, we need to grow progressively rather than going at a breakneck speed. Because the issues what we had in corporate, we do not want to repeat in the retail. So that is the reason consciously looking at the environment, on our own we have revised the guidance from 12% to 15%. So let us see how it works and all. If actually it is working and all, no one needs to ask. On our own, how we have improved the 12% to 15%. The same way, we will come forward and all, we'll see how much we can grow.
No, it's phenomenon, sir. I think, Bhavik, also asked a very relevant question that you have reached 1.1% in terms of ROA. You people are generating enough and more, it's a good time to build pipeline and look at the next level of ROA...
Absolutely. We are absolutely on the job. We are on the job and not only particular vertical, we are trying to activate every vertical because what all contribution comes, [indiscernible].
[Operator Instructions] The next question is from the line of Prashant Kumar from Sunidhi Securities.
And on the profitability side, obviously, the banks have performed outstanding. Just on the balance sheet side, borrowing has increased around 150% year-on-year growth. And so I just wanted to understand that if the deposit is not growing at that level that advances can -- I mean the CD ratio can match. So why not we have cut the investment to some point of -- and we can manage because obviously, the borrowing must be a higher level. And investment can -- may have given us a lower [indiscernible].
See, whatever investments we are doing is absolutely is not from the borrowed funds. So whatever borrowing -- borrowed funds we are seeing on the end of the quarter or end of the year is on a -- maybe a 1-day, 2-day is against the government securities, the repo borrowings we are doing it. By and large, our CD ratio is something around 83% to 84%. If we are maintaining 84% CD ratio, naturally INR 3,000 crores, INR 4,000 crores of success fund bank will be having it. That's what the LCR is 264%. So that is what we are investing in the short-dated securities. And depending upon the yield, we are doing it. So in that way over a period of time, probably that very demand picks up, these are all short-dated securities. Very easily, we can come out from that investment, that is not an issue.
Yes, one more point just I want to share with you. It is a transitory that particular day, if you look at it, that number in the borrowing [indiscernible] but currently, if you look at it, it is less than 500.
Yes, yes.
Okay. So that way, as I said, it's a transitory number, on the particular day, it has come up and down, so it's a question of management of the funds such way, now it is below 500. Again, the balance amount of the borrowing, for example, refinance, we borrow from SIDBI. Refinance, we borrow from NABARD, so these all lower rates. So in addition to that, for example, [indiscernible] metal. So whatever we are -- the business we are doing is [indiscernible] borrowing of the gold, a bullion. So in that way, that [indiscernible] not a very [indiscernible] borrowing, will comprise of different combinations.
[Operator Instructions] The next question is from the line of Abhishek Tandon from Bowhead India.
Sir, what would be the overlap between your restructure and SMA book?
Sorry, sorry, please, you have to repeat it because it's not clear, please?
Okay. So what would be the overlap between restructured and the SMA book?
Restructured [Foreign Language] restructured, SMA book? No, overall, our SMA, you would have seen it, and it is less than 1%. That includes restructured also. But restructured separately as we -- that includes restructured also.
Yes. So that's what I'm asking, sir. So what would be the overlap? What would be the restructured book that's also will be coming in the SMA part?
Restructured book...
I think INR 93 crore is there in that. Out of the INR 500 crores odd, what we have told SMA 30 plus which includes some INR 40 crores under the jewel loan and INR 93 crores under the restructured book [indiscernible].
INR 93 crores, okay.
[Operator Instructions] Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments. Over to you, sir.
No, no. Thank you very much to every one of you for the interest you [ are having ] and for participating in the conference call. Thank you, and good day. Thank you.
Thank you, ladies and gentlemen, on behalf of the Karur Vysya Bank, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.