Karur Vysya Bank Ltd

NSE:KARURVYSYA

Earnings Call Analysis

Karur Vysya Bank's strong Q1 FY'25 performance

Karur Vysya Bank reported strong results for Q1 FY'25, with total business reaching INR 170,059 crores, a growth of 4%. Advances and deposits both increased by 4%, with advances at INR 77,710 crores and deposits at INR 92,349 crores. Retail advances grew by 7%, driven by jewel loans and mortgages. The bank maintained a healthy Net Interest Margin (NIM) of 4.13% and expects to keep it above 4% next quarter. Asset quality improved, with gross NPA reduced to 1.32% and net NPA to 0.38%. The bank aims to keep gross NPA below 2% and expects credit cost for the year to be 75 basis points.

Strong Start to FY 2025

During the Q1 FY 2025 earnings call, Karur Vysya Bank (KVB) affirmed that it achieved solid performance across key metrics—growth, profitability, and asset quality. The total business for the bank stands at INR 170,059 crores, reflecting a growth of 4% in total business, with both advances and deposits showing similar growth trajectories.

Advances and Deposits Growth

The advances of KVB grew to INR 77,710 crores, while deposits reached INR 92,349 crores. The growth in advances was notably sustained across retail assets, which recorded a 7% increase quarter-on-quarter, largely due to demand in jewel loans, mortgages, and personal loans. Key strategies such as the integration of the open market channel and strong management changes have contributed to this positive trend.

Net Interest Margin Performance

The bank reported a Net Interest Margin (NIM) of 4.13%, with expectations to maintain it above 4% in the upcoming quarter as well. KVB is shedding low-yielding corporate advances and focusing on better-yielding secured advances in Retail, Agriculture, and MSME segments, contributing to this healthy margin.

Asset Quality Enhancement

KVB has managed to maintain a strong asset quality with a Gross Non-Performing Asset (NPA) ratio down to 1.32%. Gross slippages were controlled at INR 174 crores, reflecting steady monitoring practices. Management aims to keep gross NPAs below 2%, showcasing a solid recovery effort, including INR 101 crores recovered from technically written-off accounts.

Cost Management and Efficiency

KVB's cost-to-income ratio stands at 47.20%, with ongoing efforts to keep it below 50%. Establishment costs for the quarter were INR 333 crores, within the communicated guidance range, indicating disciplined expense management in light of expansion plans.

Future Guidance and Outlook

Going forward, the bank has estimated a credit cost in the range of 75 basis points for the current year. The guidance on improving the NIM and maintaining the ROAA above 1.65% showcases the bank's commitment to profitability and efficient operations. The management remains optimistic about continued growth in the RAM verticals.

Strategic Focus on Retail Assets and Branch Expansion

KVB continues to enhance its retail offerings, particularly in the jewel loan segment, which grew at a robust 24% this quarter. The bank is also expanding its branch network, with two new branches set to operationalize in the second half of the year, aimed at further boosting its customer outreach and deposit base.

Forward-Looking Risks and Adjustments

The management has acknowledged regulatory changes by the Reserve Bank of India concerning the valuation of investments and is adapting to these changes with a focus on compliance. KVB's strategy also includes cautious expansion in the MSME and NBFC segments, guided by current market conditions to mitigate potential risks.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of the Karur Vysya Bank. We have with us today the management team of KVB, represented by Mr. Ramesh Babu, MD and CEO; Mr. Natarajan, Executive Director; Mr. Chandrasekaran, Chief Operating Officer; and Mr. Ramshankar, CFO.

[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. B. Ramesh Babu, Managing Director and CEO to take us through to the highlights of the quarter gone by, after which we will open the floor for questions. Over to you, sir.

[Ramesh Boddu, executive]

Thank you. Thank you, Sagar. Good evening to all of you. On behalf of Karur Vysya Bank, I welcome you all for our bank's earning call for quarter 1 of the financial year 2025. We trust that you, your colleagues and family members are keeping well and are in good health. We have uploaded our financial results along with the presentation on our website, and I hope you have had a chance to go through it in detail ahead of this call.

Before I go into the numbers, let me begin with senior-level changes happened during the quarter. Sri Natarajan, who was President of the Bank, has been inducted in the Board and designated as Executive Director. He will be overseeing all business verticals, including treasury operations. His quadrennial experience in various assets of banking would further shape our future growth.

Mr. Dolphy Jose, Chief General Manager, looking after Consumer Banking, resigned during the month of June, and we have already recruited Mr. S.T. Gopal, who now head liability business. Mr. Gopal has been a domain banker for 34 years and is in the liability acquisition business for more than 16 years.

As indicated earlier, Mr. Nitin Rangaswami heads Retail Assets business, including open market channel. Earlier, he was handling the open market channel. Bank has now a strong management team, and business support and control functions are headed by seasoned executives.

Bank had another strong quarter of performance, built on our guidance on 3 metrics: growth, profitability and asset quality. Bank's performance indicators are in line with our guidance, and bank is seeing consistent and steady growth. It is encouraging to note our consistent and inclusive performance highlighting a strong start to this financial year. The same will be continued whether we will aim for further improvement of the performance in the ensuing quarters.

The bank's total business stands at INR [ 170,059 ] crores as on 30th June 2024. We were able to sustain the growth impetus during the first quarter as our total business registered a growth of 4%. The advances stand at INR 77,710 crores, and deposits grew to INR 92,349 crores with a growth of 4% each. We have been guiding in our earlier calls about our focus on inclusive growth from all verticals with respect to advances.

I am pleased to share that the same is being sustained in RAM verticals with 6% quarter-on-quarter loan growth under that. Retail advances grew faster at 7% Q-o-Q, driven by growth in jewel loans, mortgages and personal loans category.

We have integrated our open market channel that earlier we were calling as NEO with our brand channel as a combined retail assets team from the beginning of the current year. The integration would help us to accelerate the growth in this segment. Commercial advances clocked 6% growth quarter-on-quarter. And agriculture advances achieved a growth of 4% during the quarter.

Corporate book has degrown by 2% during the quarter, mainly due to lower availment in certain seasonal sectors, lower disbursement and repayments. And of course, a few accounts consciously [ were ] left due to pricing. Deposit growth remains one of the key focus areas for the bank, and you are aware that bank had initiated various strategies for deposit growth, including establishment of sales acquisition channel for both term deposits and CASA growth.

Our deposit growth was at 4% during the quarter, and term deposits and CASA deposits have grown by 4% each. We have now revamped a liability business model, particularly on the CASA. Besides creating exclusive acquisition channel, we have launched 24 new variants of CASA products.

Further, we have created a separate channel for corporate salary, institutional, NRE, government business, trade and ForEx, business correspondent. And we have recruited national sales managers from the market to manage this business.

The last-year trend of depletion in existing book on account of other opportunities available for the depositors is still being witnessed in the current year also. However, we are confident that our conscious efforts in improvement in our engagement with our customers, supported by dedicated channels would result in stemming the above reduction.

All of you are aware of the September 2023 Master Direction of Reserve Bank of India, wherein banks are to follow new regulatory guidelines on a classification and valuation of investments effective from 1st April 2024. Accordingly, we have implemented the new guidelines, and the transition is P&L neutral. The net positive impact on reserves is about INR 81 crores.

We had indicated in the last call that NIM would be above 4% levels till first half of current year. I'm happy to say that the NIM for the quarter is 4.13%. Our continued journey on shedding away low-yielding corporate advances on one side and focused more on better-yielding, granular, secured advances in RAM verticals, both have helped us to retain about 4% NIM levels during the quarter. We are hopeful to continue our effort in maintaining the NIM above 4% for the next quarter, too.

The cost of deposits increased by 12 basis points sequentially and yield on advances by 2 basis points. Yield on investments increased by 12 basis points during the quarter. Based on our historical pattern of renewal of deposits and fresh deposit acquisition, we expect moderated raise in the cost of deposits by 12 to 15 basis points in the next quarter. Yield on advance is expected to go up by 5 basis points, and yield on investments would be in the similar range for the first quarter.

Considering all these factors and without taking into any policy rate changes, we expect that the NIM will be above 4% in the next quarter, as I told earlier. We have achieved [ ROAA ] of 1.7% in this quarter. We had guided that our effort would be to ensure [ ROAA ] is always above 1.65 levels, and we are confident to maintain the same going forward also.

Our gross slippages during the quarter continue to be under control at INR 174 crores, which is 0.22% on an annualized basis [ ACC ]. It comes to around [ 0.8%, 0.10% ] of the loan book. With our continued close monitoring of accounts, we are confident that we will continue to keep the ratio below 1%, as guided in our earlier calls.

Our efforts on recovery of technically written-off accounts is continuing to yield results as we have recovered a sum of INR 101 crores during the quarter. Due to lower slippages, recoveries, upgrades and write-offs, our gross NPA has come down to 1.32%. And we expect that we will continue to maintain it below 2% levels.

For the quarter under review, we have provided INR 100 crores towards NPA migrations and INR 33 crores towards [ standard ] assets and restructured prudential provisions aggregating INR 133 crores, which is 0.56% of our advances on an annualized basis. We estimate that the credit cost for the current year would be in the range of 75 basis points, as guided earlier.

Our net NPA has come down to 0.38%, and we will continue to maintain net NPA at less than 1% of our loan book. Our standard restructured loan book is further reduced to 0.85 of our loan book, and we hold a provision of 40% of the standard restructured book. Our establishment costs were INR 333 crores during the first quarter, which is within our guided range of INR 325 crores to INR 350 crores.

Operating expenses were INR 333 crores, sequentially gone up by 4%. Our cost-to-income ratio is at 47.20, and we will continue our efforts to peg it to and always to maintain within 50%. Our CRAR Basel III continues to be healthy and is at [ 16.47 ], providing us comfortable headroom for growth. Our liquidity coverage ratio continues to be well above the regulatory requirement of 100%.

Bank has added 2 branches during the current quarter. The setting up of the branches is under progress, and the first set of such branches are expected to function from the beginning of the second half year.

To end, keep moving ahead because action creates momentum, which in turn creates unanticipated opportunities, [ Nick Vujicic ]. Our endeavor is to keep up the momentum created, and we have started the year as planned. We are mindful of the challenges, particularly on the liability side, and are taking every step to increase the low-cost funds, which would also help us in improving the margins.

I am grateful to all our investors, analysts and stakeholders for the confidence and continued support, which we will reciprocate our better performance in the days to come. Now I'll be glad to respond to your questions.

[Operator]

[Operator Instructions] Our first question is from the line of Jai Mundhra from ICICI Securities.

[Jai Prakash Mundhra, analyst]

Congratulations on good numbers. Few questions. First is, sir, on yield on advances. So we had increased MCLR at the beginning of the quarter. And I think we had also revised [ reported link ] by 5 basis points. In this quarter, corporate book has actually degrown. Still the yield on advances rises only 2 basis points. And I think in your opening remarks, you mentioned that it could be -- it could rise by another 5 basis points.

So just wanted to check, is there -- I mean, I believe the yield on advantage should have risen a little bit more. So I was hoping if you can provide some clarity.

[Ramesh Boddu, executive]

Yes. In fact, if you need to look at it, there are few more aspects here. MCLR, what all is there, our total book is not on MCLR. So around 40% book is covered under the MCLR. So that way, out of that, at the time of repricing, only you can pass on this, unlike other things and all.

So second thing, so there is some sort of a pressure and the pricing pressure from other competitors also. So wherever actually you need to retain a customer because for a long time, they are there; if you need to look at the other value, so those cases, you may have to give you some sort of a concession. The aggregation of all these together and above all, as you've also seen, the corporate actually, so a few of the accounts where we have this, we have degrown also.

So that's why if you look at it overall, that 5 basis points you may not be able to find straightaway in the yield. But over a period of time, progressively, it will start coming, though not now immediately in this quarter.

[Jai Prakash Mundhra, analyst]

Understood. Understood. And secondly, sir, there is a sharp growth in the jewel loans in retail segment. We have been looking to increase growth in gold loan in retail category. But this 24% Q-o-Q growth, is there any specific reason? Have we introduced a new product or new geography? Or what is giving such kind of a growth, especially in this quarter?

[Ramesh Boddu, executive]

There are two things we need to see there. The 24% number looks good. But you look at the base. Base amount, it is not on a INR 5,000 crores, INR 6,000 crores base or INR 10,000 crores base, it is not there. Because the base is low, the percentage looks high, first thing. And second thing, yes, we consciously made some sort of efforts in this, many of the customers with whom we were dealing actually.

So on a win back, we had a campaign, wherein our branches started calling them and stating that this is what we can do. And we [ sort of ] streamlined our delivery numbers what all is there. So with these things, we were able to see some sort of a traction this quarter under the jewel loan.

So some sort of a conscious effort has been made to win back the existing customers whom -- and currently, they are not dealing with us. 2 years, 3 years back, they were dealing with us. So this has, to some extent, supported us and in getting the growth.

Product-wise, more or less same product going on because our existing product is quite appealing. I'll tell you, Jai, in fact, the jewel loan, other than the product and pricing, the major thing is the delivery. If someone comes, how fast we'll be able to deliver, and the second thing is how fast you're going to release the [ ornament ]. Though both are important. So that, we have focused on that.

Our, anyhow, pricing is quite competitive compared to the market what all is there. So that all factors together, it supported us in this quarter.

[Jai Prakash Mundhra, analyst]

Sure, sure. And last 2 data [ citing ] questions, sir. One is, if you can quantify the treasury gains in the total fee. I think you had already quantified [ TWO ] recovery at INR 101 crores. But what would be the treasury gains in the other income in this quarter? And if you have the number of staff -- outstanding staff count?

[Ramesh Boddu, executive]

No, no, it's not -- as I was mentioning, it is INR 11 crores, investment in trading profit is INR 11 crores this year, this quarter. And last quarter, it was INR 10 crores. March quarter was INR 10 crores, and this is INR 11 crores.

[J. Natarajan, executive]

The employees number is 9,403, Jai.

[Ramesh Boddu, executive]

But another point we need to keep in mind, Jai, in fact, we used to be 7,700, something like that. But of late, whom we have taken, more or less, majority are at the bottom, in a sense that they are the running sales team, who will be on the feet on street, those sort of things. So that way, overall, they will be adding value into the sales and growth over a period of time.

So the higher-level taking the people is very true in this lot.

[Jai Prakash Mundhra, analyst]

And sir, all these people that we have added in the last 18 months, they are not on IBA model, right, that they are on CTC basis?

[Ramesh Boddu, executive]

Absolutely.

[Jai Prakash Mundhra, analyst]

Then, sir, on the total 9,400 people, how much -- how many would be, let's say, ballpark IBA and CTC?

[Ramesh Boddu, executive]

Around 33% would be CTC, and 67% will be IBA.

[Operator]

The next question is from the line of Prabal Gandhi from AMBIT Capital.

[Prabal Gandhi, analyst]

Sir, my first question was on the MSME segment. We are seeing the growth of 22% here. And it seems that this is largely driven by increase in ticket sizes. So how sustainable is this growth? And have you tweaked any strategy to focus more on the higher-end or larger ticket-size customers in the MSME segment?

[Ramesh Boddu, executive]

Yes, yes. There are a few aspects, Prabal. If you see, agreed, continuously, we have been tracking the average ticket size. And based on our past confidence, higher ticket, the relaxations what we have given at the lower ticket, we try to pass on slightly to a higher level also.

We have seen the checks and balances what we have got up to INR 50 lakhs, and the delinquency level is low. And these relaxations if we give it to INR 75 lakhs, how it works. So that way, we have experimented, and we gave few relaxations that is working to some extent.

And second thing, so the teams in the branches and others also have started working well. And the third thing, there was some demand. Due to that, the availments also have gone up. So these 3 factors have helped us.

So regarding the trend going to continue, I may not say that this is 20%, 21%, but our efforts will continue, so -- which may more or less yield. Our focus majority, first of all, if you look at it over a period of last 3 years, the commercial segment composition in the total advances has been going continuously up.

The simple reason is that is a granular portfolio, secured and better yielding for us out of all the verticals. That is the reason all branches, every resource is working on that. So we will try to maximize what best we can you get use under the MSME segment.

[Prabal Gandhi, analyst]

Okay. And when you shift from the INR 60 lakh to INR 75 lakh, is it the same customer who you are giving higher loans or it's the new customer...

[Ramesh Boddu, executive]

New also. Earlier also, up to [ INR 50 lakh ] new customers we were doing. And those things, actually, when we look at it and back test it, what results we are getting out of that, what is the rating, all these things, so over a period of 2 to 3 years when we saw, so it is absolutely bearable, that sort of a risk is bearable. Having seen that we thought we can take some more risk with these sort of relaxation, we have gone ahead in the last 6 months.

But once you do it, it's just like an Indian [ straight away ], it will not start, slowly started working on this and on. So over a period of time, we will start seeing an average ticket size going up.

But there are 3 combinations here. One is the average ticket size. Second thing is the disbursements also have gone up, fresh acquisition. And third thing, availments also have happened. It's a combination of all 3 that have resulted in this growth.

[Prabal Gandhi, analyst]

And sir, we are also seeing current deposits grow on a sequential basis in a seasonally weak quarter. So is there some correlation of maybe the MSME growth picking up for us and we are also able to tap offload for the customers?

[Ramesh Boddu, executive]

No, I cannot say that directly. There's an effective linkage there between these two. So these two are independent levers as it is. So that way, tomorrow MSME growth, maybe their current account may not be there because the reason is many of them, they may not place their money in current account.

So they are all absolutely conservative. They are conscious about the pricing. Instead of leaving the money in the current account, they may keep it in the cash [ rate ] account itself so that they'll save the interest. So that's why I cannot say that current account growth will -- can be linked to the MSME growth.

[Prabal Gandhi, analyst]

And sir, secondly, in the BNPL portfolio, we have been growing that portfolio. But this quarter, it seems that we have paused the growth in that portfolio. So any stress that you are seeing on the ground or maybe the cautious call can that you have taken?

[Ramesh Boddu, executive]

Prabal, it is not the question of a cautious call or staying. You see, we used to have around INR 350 crores, INR [ 370-odd ] crores last March. And last year, Dussehra as well as Diwali, so there was a huge demand from the Amazon customers. So that's how it has gone up to INR 1,100 crores, something like that.

So though we are trying to maintain in those levels, we will see. Again, the opportunity comes this Dussehra, Diwali, what best can be taken and all, depending upon our risk appetite, we will try to do.

Currently, if you look at it, the stress is under control. As we always told earlier also, we have a FLDG of 5%. So that we currently what all default or NPA is coming up, so all is covered under the FLDG. So we are not out of pocket as far as the stress is concerned. So currently, I think everything is going on well. Let us see when the next festival season comes. Whether how much we can take, we will see, rather than overnight opening the floodgates.

[Prabal Gandhi, analyst]

Got it. And so far as per your monitoring systems, [ space ], there'll be no challenges on the spot?

[Ramesh Boddu, executive]

Yes, absolutely. As on date, everything is going on well. And as per the tolerance limits what we have for the stress, it is moving in those limits only.

[Prabal Gandhi, analyst]

Sir, and last question was on the management bandwidth. So I understand that you have got a lot of people from outside at the senior level. But how are you grooming people at the second and the third layer? Because eventually, this also comes with key managers. We have seen that happen in recent months that when a senior person leaves, there is a risk that the systems below it cannot work that efficiently. So how are you grooming the second and the third layer in order to make it more institutional?

[Ramesh Boddu, executive]

Yes. We are quite mindful of the fact about the succession planning. So that's why every senior position what all is there. We have a buffer for 1 or 2 people always under that. That is the reason anytime -- because someone leaving is not new to the bank, it has been happening. But we never had that shock anytime in the last few years because the way we have groomed the people, many of them, they can handle multiple tasks, they have expertise in different areas. And we have a concept of rotating them in different verticals also.

In addition to that, as you mentioned, institutionalizing this one, so we started providing them this institutional training also for developing their management capabilities. And so they are effectively working as number 2, number 3. So that's why we have an effective planning mechanism, which someone can take over seamlessly if there's a gap.

[Operator]

The next question is from the line of Rakesh Kumar from B&K Securities.

[Rakesh Kumar, analyst]

And quite a good set of numbers in this quarter. So sir, just had a few questions on these quarterly numbers. Firstly, so just like -- you mentioned this -- the gain on the treasury book that is -- that have got [ routed ] into the reserves, that is INR 23 crores plus INR 58 crores that we have [ reversed ], the depreciation of the previous quarter, correct?

[J. Natarajan, executive]

This is actually the -- it is effective from 1st April and the transmission date on 1st April when we work out, based on 31st of March, this is the impact that whatever you mentioned the numbers, that's got the results.

[Rakesh Kumar, analyst]

And sir, another number which has -- like from the investment result that we've also [ reversed ] this quarter. So if you can explain that number, sir, INR 203 crores, which has like transferred from the investment [ results ], so if you can elaborate on that? Pertaining to the notes to accounts, number 2, sir.

[Ramesh Boddu, executive]

Yes, yes, our CFO can respond to that.

[Ramshankar R., executive]

We've got two [ results ]. One is for investment fluctuations reserve, other is investment reserve. See, 2% of the average [ formulatory ] we had to transfer it and keep it under investment fluctuations. If that is adequately covered, the [ guidelines ] have [ been formed ] that the investment reserve can be shifted to -- can be moved to a general reserve. That's what we have.

[J. Natarajan, executive]

So for your question, the net impact, net impact out of the entire guideline, whatever the INR [ 82.25 ] crores we have mentioned, is a net impact.

[Rakesh Kumar, analyst]

Correct. So this is INR 23 crores plus INR 58 crores reversal on the provision?

[Ramesh Boddu, executive]

Correct. That comes to INR 81 crores.

[Ramshankar R., executive]

The INR 200 crores impact is neutral because between the reserve and surplus, it has moved from investment reserve to general reserve.

[Rakesh Kumar, analyst]

Correct. So the [ investment ] reserve plus investment fluctuations, [ both ] the results of INR 203 crores transferred to the general reserve?

[Ramshankar R., executive]

Investment fluctuation reserve stands as it is. There is no change in that. It remains as it is. Only the investment reserve has moved from investment reserve to general reserve between the reserves and surplus.

[Rakesh Kumar, analyst]

Which was INR 60 crores as on March '23? March '24 numbers, we don't have...

[Ramshankar R., executive]

Fair value evaluation because of that new direction, this -- that we have taken to general reserve, INR 60 crores.

[Rakesh Kumar, analyst]

Okay, sir. And sir, I also saw this recovery rate that we have seen in the Slide 21, that has improved significantly, like if we compare with FY '24 number and maybe Q4 '24 numbers. So the recovery what we are doing, the provision write-back that we are doing on the recovery number, that has improved. So would that sustain that kind of a number, pertaining to the figures there in the Slide 21?

[Ramesh Boddu, executive]

No, Rakesh, in fact, a recovery, particularly from the written-off and all, so we cannot give any guidance on that because it is dependent on many factors, external factors like cohorts, NCLT, auctions, these sort of things and all. But our efforts we started having for more than 2 years in different stages, different cases, which are stuck, slowly they are getting released. So our effort is to push each one of them as much as possible to get that.

[Rakesh Kumar, analyst]

Correct sir. Sir, I was referring to, sir, this recovery number -- recovery and upgrade number of INR 90 crores and against that, provision write-back of INR 56 crores. So provision write-back of INR 56 crores on INR 90 crores of recovery, I think that number, comparable number for previous quarter and previous full year, there is a quite a lot of improvement that we have seen. So I was looking at that, sir.

[Ramshankar R., executive]

What -- your observation is correct.

[Rakesh Kumar, analyst]

Okay. And sir, thirdly, sir, investment in numbers, sir, like I saw there is an improvement. So it's now 6.53 for this quarter. And for March quarter, it was 6.41. But if I look at previous-quarter investment yield, which we had given, it was slightly lower. So is there any [ reason ] for the March quarter investment yield number, sir?

[Ramshankar R., executive]

Actually, what happened last in March, what happened was YTD numbers were given. The entire figures are given quarter-wise, end of June quarter, September quarter, December quarter, March '24 quarter. The last -- in March this thing, it was given till June figure, what is the...

[Ramesh Boddu, executive]

March one was for the whole 12 months, whereas up to December was only for the quarter. So that's the reason because 12 months when it is equated, so it has come to 6.41.

[Ramshankar R., executive]

We are [ June ] quarter-wise to have a comparable at -- for all quarters.

[Rakesh Kumar, analyst]

And sir, gross security receipts numbers, in March '24, it was INR 378 crores. And now, the gross security, which is somewhere in INR 263 crores, so I couldn't understand, sir. If you can explain, sir.

[Ramesh Boddu, executive]

So some recoveries have come already. Last month, last quarter also, if you see, INR [ 54 ] crores recovery, you're able to see that March quarter, we have a recovery. So the recoveries are coming in [ SRs ].

[Rakesh Kumar, analyst]

Actually, I was thinking for the closing figure of March and the opening figure of this June. So we don't have that movement of that number. So...

[Ramesh Boddu, executive]

Movement chart what all is there. [ Let us know ].

[Operator]

[Operator Instructions] The next question is from the line of Anand Dama from Emkay Global.

[Anand Dama, analyst]

Congratulations for a good set of results. So my first question is regarding the AFS reserve curation that we have done during the current quarter. So what is the positive impact on the CET1 during the quarter?

[Ramesh Boddu, executive]

This quarter is INR 5 crores.

[Anand Dama, analyst]

Sorry?

[J. Natarajan, executive]

INR 5 crores is the AFS reserve for this quarter. Whatever the gains under the AFS portfolio, which was transferred to AFS reserves, is INR 5 crores.

[Anand Dama, analyst]

So the CET1 would have improved by INR 5 crores. Is that the way to look at it? And in that case, how much has been the basis points?

[Ramesh Boddu, executive]

INR 5 crores on a INR 10,000 crores. So very miniscule, I'd say.

[Anand Dama, analyst]

Secondly, when you look at our, basically, loan book because through observations, one is that we are growing a LAP book at a pretty faster pace. And secondly, that we have also cut down our NBFC exposure on a quarter-on-quarter basis. So any comment on that?

[Ramesh Boddu, executive]

No, no. If you look at it, the LTV, more or less what we maintained for a home loan as well as LAP all of them, you are 100% secured. Then the options are -- different options are there. When you want to maximize the yield, the cost of deposits have gone up and you want to maintain the margins. So we do not want to aggressively go into the unsecured because tomorrow something happens, the first fall will be from the unsecured.

So that is the reason when we didn't go further, at least out of these products, if you look at it, so one is jewel loan is giving more or less 9.5%, 10%, something like that they are giving. So fully backed. That's why we are focused on that. And LAP is also giving that 9.5-plus yield, where you have -- full security is there for you. And we are not relying only on the security here, we are looking at the cash flows. We are doing the assessment on those lines.

Where we are thoroughly satisfied that uninterrupted cash flows are there, you can service this loan, then only we are going for the LAP. That's why when we have seen a few years, the stress levels under the LAP is quite manageable. That's why we thought saying that when the opportunity is there, demand is there, why can't we go for that?

Now coming to the NBFCs, I agree, so we have reduced the portfolio. There's a lot of scope available there and all because RBI guidelines have come up for the additional capital, what we need to maintain.

And second thing, suppose there is some set of an issue, automatically, NBFCs will have an issue indirectly, we will have the problem. That is the reason we are -- relatively in a calibrated manner, we have grown on NBFC. And if you have NBFC exposure, you've have brought it down. So that's very manageable level. Keeping our risk appetite in mind, we are growing in the NBFC, not taking too many exposures on NBFCs.

[Anand Dama, analyst]

Sure. That's very helpful. Sir, one more thing is that recently, Telangana government has announced the farm loan waivers. Do you see any -- so basically, one is that how much is our portfolio in Telangana? And do you see any impact on this farm loan waivers at least intermittently?

[Ramesh Boddu, executive]

If you look at it, our total agriculture, even today, 90% is jewel loan. So just jewel loan is 90%. So out of these INR 18,000 crores, hardly less than INR 1,800 crores in the whole country would be other than jewel loan. So that is spread out in many locations. And many of these cases also, absolutely, either it is [indiscernible] security or cash flows, these sort of things, our clean loan of cash, Kisan Credit Cards, these sort of things are very low.

But one more thing we need to keep in mind. Even if we have a small portfolio in these states, but it is a waiver, when we talk about it, government will pay the money, and all they are not asking bank to bear the brunt. So that was the question of you'll get the money, but there can be a small shift in the culture of the people for the repayment. But we don't feel -- that's not of an issue, agriculture is so much of a deep penetrated -- other than jewel loan portfolio, is there in Telangana for us.

[Anand Dama, analyst]

Jewel basically is going to be a collateral for you, right? But in [indiscernible] is going to get the waiver is [indiscernible] pay, right? You are not going to...

[Ramesh Boddu, executive]

We will be releasing the gold only after we receive our dues only. Before that, I cannot release it. So why -- anyhow LTV, 75% is there. 25%, even if fluctuations, also have the money with me. So that why the worry should not be much because I have a backing here.

[Anand Dama, analyst]

So what will happen is that if the customer -- the farmer doesn't pay, it will slip into NPA. Your provisioning will be lower because you have security backing?

[Ramesh Boddu, executive]

That is correct, correct. Provision is here, entire amount I'll be able to recover because if LTVs is 125%, then the problem is there. So if I go and sell for sale in stuff for INR 100, I'll be getting INR 90. And my outstanding is INR 75, I'll be able to recover my money and balance the [ contract ] to the customer.

[Operator]

[Operator Instructions] The next question is from the line of Mahesh from Kotak Securities.

[M. B. Mahesh, analyst]

So just a couple of questions, sir. One, I know it's a small number, but just still trying to analyze. If slippages that you are seeing on the retail side, is there any product segment which is contributing to it? Because it's been rising on a consistent basis in recent quarters.

[Ramesh Boddu, executive]

Raising in the sense that you see, Mahesh, in fact, our total portfolio and retail, unsecured is marginal. And the rest of the product what all is there, everything is backed by either a home loan or LAP. These two are having comfortable security. Sometimes what happens, if you get these sort of slippages in the first and second quarter, it is relatively better for the bank.

The reason is you will have enough time for [indiscernible] getting it and all. By the time third, fourth quarter comes, many of them, the [ successive ] process is going on itself, will come for a compromise and settle it. So that way, we encourage, support a more or less, here and there, sort of an account is there.

Instead of prolonging this pain, it is better we bite the bullet and initiate the resolution process so that your ability to recover the money will be much faster. So that way, everything is backed by security. It's a question of time we'll be able to get. So nothing much to worry about. There are no unsecured portions much in this.

[M. B. Mahesh, analyst]

Just wanted to confirm that. Sir, second question on the OpEx line, which is currently running at about a little over 25%, the nonstaff [ rate ]. Any direction as to how are you looking at that number?

[Ramesh Boddu, executive]

Which -- OpEx, yes?

[M. B. Mahesh, analyst]

The OpEx, the nonstaff line.

[Ramesh Boddu, executive]

Nonstaff. As earlier I was guiding, so normal course, what all is there, it will be growing just linked to the inflation. But -- so we have planned for around 100 branches this year. Out of that, 80 branches can be light and 20 branches can be normal branches, which we want to open. .

And these things are there, naturally, the overhead cost for these sort of things can go up. But we need to do all those things. But if we will not do it, raising the liability, getting the leads in many areas, which is the suburbs developing and all, we'll [ miss ] the opportunities there.

That is the reason what we thought, maybe it is better we bear the cost for 1 or 2 years. Then by the time 1.5 years, 2 years, they get breakeven. But next 10 years, you'll be able to reap the benefit of it.

Other than that, routinely, if you look at it, normal OpEx is going on, no spikes will be there. If at all, something is there, we will spend on IT upgradation, these sort of things. And second thing is the branch openings and the cost for that. These are the issues only which can come up. Other than that, nothing much.

[M. B. Mahesh, analyst]

Sir, last question. In the last few quarters, you reported INR [ 25 ] crores under floating provisions. This quarter, you reported under other potential provisions. Is there any difference in this [ setup ]?

[Ramesh Boddu, executive]

It's a good question, Mahesh, in fact. I tell you, when we were commencing this particular provisioning, we clearly mentioned that because at that time, unknown, unknown guidelines were there actually. Where we will be landing as far as ECL is concerned. So we thought that let us provide something.

When we have provided INR 100 crore and within calculations when we made, more or less the provision what we have made would be sufficient enough to take care of any shock if the RBI releases the guidelines.

So that is the reason there is no point in bloating that particular provision. INR 200 crores, INR 300 crores, doesn't make any sense for us. So that is the reason we have shifted this side so that it can be helpful on the stress side. If at all, tomorrow comes up, those things will be eventually taken care of. That's it.

[Operator]

[Operator Instructions] The next question is from the line of Nagesh [ Motamarri ], an individual investor.

[Unknown Analyst]

Congratulations for a good set of numbers. Just wanted to know why the tax provision has gone up, sir? When the profit in the last quarter was INR 573 crores, you have made INR 117 crore provision for tax. And this year, it is -- out of INR 612 crores, INR 154 crores has been provided. That is one question.

Secondly, any expectations of bonus issue or something because there's a gap of about 6 years, which you have done? And very small bonus has been given in 2018, 1:10.

[Ramesh Boddu, executive]

Regarding the bonus issue, I'll tell you. Currently, there is no thinking as yet in the Board also. At the appropriate time, whenever a Board feels we can think of. But currently, we try to strengthen the capital because the growth what all is coming, so it requires from sort of a capital as well. We do not want to make any shift here and there currently.

So -- but as you mentioned, at the appropriate time when the Board feels, definitely, we'll keep the particular point in mind, sir. Coming to the tax...

[Unknown Analyst]

[ Sales ] have gone up more than INR 10,000 crores for the first time.

[Ramesh Boddu, executive]

I know. I know. But you see the other side, the retail growth is also going at 21%. So there, in the meanwhile, RBI has also increased the risk weight for the capital for many -- of the products and sectors. So these things, we need to take care of that. So we will gauge all these things and all. But a call has to be taken by the Board. Appropriate call, we will take it, sir. We'll keep that point in mind.

[Ramshankar R., executive]

On the taxation, I just want to clarify. Last year, in the beginning of third quarter, we are not so clear on the amount of what will be the IBA settlement by [ product ], how much amount, though we are being [ providing ] it. Whether -- only when it is paid before March or when it is final, if then only you can claim as a [ reduction ]. A lot of unknown, unknowns are there. So our provisions are around 25% plus on the -- for taxation.

And when March quarter, when we had the full-year review, whatever is the provision, what we had made for the 3 quarters and the balance you get for the taxation for the full year, for the second calendar year, first quarter, even if you see the first quarter also, the effective tax rate comes to around 23.2%, which is as per the tax rates.

[Operator]

Ladies and gentlemen, we would take that as a last question for today. I would now like to hand the conference over to Mr. Ramesh Babu, MD and CEO, for closing comments.

[Ramesh Boddu, executive]

Yes. Thank you all for your interest and for the participation and serious questions you people asked, which are quite insightful. Thank you very much. As we assured earlier, we will strive to further and show better results than what we have been doing and with the support and guidance and all of you. Thank you very much, once again. Good day to all of you.

[Operator]

On behalf of Karur Vysya Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.