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Karur Vysya Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '21/'22 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. B Ramesh Babu; President and Chief Operating Officer, Mr. J. Natarajan; CFO, Mr. Ramesh Murthy; 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. Over to you, sir.
Thank you. Thank you, Sanford. A very good morning to all the attendees of today's call. So I think all of you have enjoyed the Diwali last week. I welcome everyone on behalf of Team KVB to this quarterly earnings update call. After darkness comes the light, a saying by a Roman historian. After about 1.5 years, we all celebrated Diwali last week, with the almost sales [ pivot ] we used to have during pre-COVID times, thereby indicating positive vibes that good times are ahead. We witnessed the COVID-19 pandemic and the resultant lockdowns which pushed the growth downwards last year. It was expected that the growth would be rapid in financial year '22. However, owing to the advent of second wave in quarter 1 of this financial year, several state-induced lockdowns negated the resumption to a certain extent. The positive note is that it further looks less likely or could be muted and the vaccination drive is progressing very well. As a nation, we have successfully completed 100 crores of doses last month. The overall belief that the economy is on the right part augurs well for the business growth in the coming quarters. Being an essential service, we have continued to deliver uninterrupted service to our customers while taking all necessary precautions to safeguard ourselves, our families and our colleagues and our customers. More than 97% of our employees have already taken at least 1 dose of vaccination. The pandemic crisis created an opportunity for the growth of digital banking. Our bank continued the growth in this space. In the second quarter, about 92% of the transactions were routed to the digital mode, as against 88% of the previous corresponding period. The growth in UPI transactions was 134% more than the corresponding period. The Indian economy appears to be back on the growth path in quarter 2 post the opening of the economy with several elements falling in place. This year, thus far, the growth in the major banking indicators has been mixed. Growth in deposits has slowed down. Why is that? The credit growth is almost flat after witnessing a dip of 1% last year, as of September '21 over March '21. With the economy picking up in the second half, it is expected that there will be higher demand for the credit and overall growth of around 8% to 10% for the year may be expected for the banking sector in general. So coming to our bank, with the relaxation of lockdowns by various states in a phased manner, we were able to report a steady performance in the growth of business. Our total business as on 30th September '21 stood at INR 1,19,261 (sic) [ INR 1,19,260 ] crores, with a gross advance of INR 53,851 (sic) [ INR 53,850 ] crores and deposits of INR 65,410 crores, a growth of 7% on a year-on-year basis. Let me take you through the numbers in detail. We have been highlighting to all of you, the initiatives taken by the bank for a superior performance in the earlier commentary and interactions. We are now witnessing positive momentum in many of the business metrics of the bank that we are glad to share with you. We have been continuously improving our disclosure standards and published the relevant information and data for your ready reference through our investor presentation. So yesterday also we uploaded, all of you would have gone through that. Now I would like to share my observations and guidance on certain important parameters. Coming to net interest margin. We have achieved a NIM of 3.74% for the second quarter of the current year as against 3.47% for the quarter ending September '20 and 3.55% for the quarter ending June '21, which is very encouraging. This has been made possible mainly on account of higher interest spread. Our cost of deposit is also further reduced to 4.32% as against 5.06% for the quarter ending September 2020. Further, higher NIM is supported by lower slippages and recoveries in NPA accounts. There will be lesser scope for further reduction in deposit interest rates and yield on advances is likely to come down by a few basis points due to reduction in MCLR and interest rated option for the existing loan book and strict competition prevailing in the market currently due to the liquidity. We continue to focus on this parameter to sustain NIMs at the existing levels and maintaining it [ above ] 3.5% plus levels. Coming to operating and net profit. Before discussing our profit numbers, I would like to draw your attention to Slide 7 of our investor presentation, wherein we indicated such significant accounting changes impacting other income, operating profit and provisions, which we implemented in compliance with the resultant of India Master Direction dated 30th August 2021. Of course, there is no change in [ operating ] net profit numbers. Prior period numbers have been recast for the ease of comparison. Thanks to higher NIM, our net interest income has increased to INR 680 crores as against INR 601 crores during the quarter ending September 2020. Core fee income has increased to INR 143 crores from INR 119 crores. Investment in trading profit has reduced to INR 17 crores as against INR 120 crores during the corresponding quarter of the previous year, and this is mainly on account of hardening of interest rates and our conscious strategy to keep the MTM risk at the lowest level. Employee expenses include a sum of INR 27 crores which comes to around 1/3 of the total estimated onetime expense of INR 80 crores on account of enhancement in family pension. Though as the Bank of India permitted, banks amortize these expenses over a period of 5 years, we have decided to account for it during the current year itself in covering 3 quarters. So earlier, we had indicated a sum of INR 1,050 crores under employee expenses for the whole year, and we estimate that we will be within these limits. There was a marginal increase in the other operating expenses. Major reason for the increase constitutes sourcing cost for the business and ATM and digital transaction-based expenses, where corresponding income is booked in income [ provision ]. We have initiated several cost-control measures, and we continue to closely oversee this. As you could see, all around positive performance indicators are visible and our operating profit, after making adjustments as per the new disclosure and reporting requirements, increased to INR 374 crores from INR 360 crores for the quarter ending September 2020, despite a reduction in treasury income by INR 103 crores due to interest rate hardening. Due to lower slippages and recovery initiatives, our credit-related provision requirement reduced INR 169 crores from INR 205 crores, which includes restructuring provision of INR 56 crores. There is no significant NPA provision on investments other than SR and certain non-SLR investments. Our net profit increased to INR 165 crores for the quarter as against INR 115 crores for September 2020 and INR 109 crores for June quarter of the current year. This is mainly on account of increased net interest income, sustained other income, controlled expenses and lower provision requirements. This is the highest quarterly profit earned by the bank during the past 17 quarters and feel very happy to mention this. We are confident and motivated by our performance, and going forward, we aim to have consistent improvement in our results. Our ROA was at 0.86% for the quarter as against 0.63% for the quarter ended September 2020. And for the half year ended September '21, ROA is at 0.72% as against 0.61% for the half year ended September '20. We had indicated achievement of ROA of 1% in the year 2023, and we are on track with our guidance. Coming to slippages and asset quality. One of the significant and notable performances during the quarter is that our gross slippages have come down to INR 164 crores for the quarter, which is 0.3% of our loan book. Our recovery surpassed the slippages resulting in negative net slippage of INR 196 crores during the quarter, and reduction of NPA book to INR 3,972 crores from INR 4,167 crores as of 30th June 2021. There was no technical write-off or sale to ARC during the quarter indicating best efforts made by the bank. We are now confident and working towards keeping the gross slippages well within 2% of the loan book at the end of the financial year and negative net slippages in the coming quarters. SMA 30+ balances at the end of quarter 2 stood at INR 104 crores, which is 1.86% of the loan book. If people can recollect, in 2020 and in those years, our SMA 30+ used to be around 3.5%. Now it is at 1.86%. The book also includes dual loan balances of INR 389 crores. And other individual loan, SMA 30+ is at 1.14% of our loan book. This is considered very much significant as it clearly indicates consistent improvement in the quality of our loan book. Due to lower slippages and recoveries, gross NPA level has come down to 7.38% from 7.93% as of 30th September '20, and we continue to focus on this segment and are aiming to bring it below 7% level during the year. Our net NPA has been brought to below 3% levels on account of recoveries from NPA book, lower slippages and higher provisions. Bringing net NPA down to less than 2% will be one of our most focused endeavors in our agenda, and we are working towards achieving this. So restructuring book, when we discuss about the restructuring book, as at the end of quarter 1, we had disclosed standard restructured loan book of INR 1,028 crores, and our standard restructured book as of the end of September 21 increased to INR 1,579 crores. And the details are published in Slide #34. It could be seen that a substantial portion of the book comprised of retail and commercial segment and corporate sector consists of around 7 customers. As of 30th September, we have invoked 159 reports for restructuring amounting to INR 251 crores, pending for processing, which should be implemented on or before 31st December 2021 if they meet our criteria. We do not see much challenge as we did restructuring based on current business status, cash flows and their ability to come back to normal situation. And further, this loan book is secured by sufficient immovable properties. Having said this, as a matter of caution, we have created a suitable system to oversee this book carefully and conducting periodical review meetings at the senior management levels. In terms of regulatory guidelines, we have provided INR 63 crores during the half year towards this book. When coming to the growth, considering the economic outlook and environment, we plan to grow responsibly. And we have indicated during our quarter 1 commentary that we have planned to grow at 12% in the normal environment. We have achieved a Y-o-Y growth of 7% on deposits and advances, 14% in service bank and 8% in current account balances despite the current account discipline. We continue to maintain a CASA-to-deposit ratio at 35% levels, and we realized that improving CASA is a major source to reduce cost of funds as interest rates have bottomed out. The recent approval by the Ministry of Finance on government business, particularly collection of tax on behalf of Central Board of Direct Taxes and Central Board of Indirect Taxes and Customs, will be helpful in building the float funds. Efforts are on the technology integration with these departments. We continue to add many features in our DLite app, which will be the face for the bank for the retail liability business. On the loan book, agricultural book grew mostly on account of dual loans by 15% year-on-year and sequentially 10%. We expect that the growth will be generally better in the second half of the financial year and aim to sustain the momentum. Retail loans have grown by 10% year-on-year and sequentially by 8%. This is predominantly on account of residential mortgages and dual loans. We have soft launched our retail credit card during the quarter and issued cards to employees and plan to roll out preapproved program starting from 15th November to our existing customers. Commercial loan book has grown by 5% year-on-year and about 18% sequentially on an annualized basis during this year. There has been a visible increase in the sourcing and disbursement of loans, particularly from the MSME connected with textile sector. Bank has made highest disbursement of INR 650 crores in the month of September. Considering the ensuing busy season and good monsoon, we expect credit requirement will pick up and we plan to achieve 10% growth at the end of the year under the commercial loan. Corporate book, though shown muted growth year-on-year, there's a positive growth of 10% sequentially on an annualized basis. We also see good flow of proposals post-September, and we anticipate a decent growth during the second half. We have kept maximum exposure at INR 125 crores per borrower and we'll be cautious in building the portfolio. Our NEO and precious metal divisions continue to grow well at the desired levels. Our core lending business model with NBFCs is building well. We have built a portfolio of about INR 200 crores under this. We participate in BNPL program with Amazon and Razorpay through one of our fintechs. All these programs are run end-to-end digitally. Overall, we plan to achieve a growth of 10% plus under advances during this year. Our CRAR continues to be robust and is at 18.82%, giving us comfortable headroom for growth. Our liquidity is also comfortable, and we continue to maintain LCR at about 200% levels. The financial performance for the quarter ending September '21 is an important milestone considering the fact that we are moving towards our -- best of our times. So with these things, I can leave it to the floor for the questions.
[Operator Instructions] The first question is from the line of Prashant Poddar from ADIA.
First question is on the margins outlook. This quarter had a very significant pickup in margins. Could you break up that into some one-offs if there are? And what is the outlook on this with the -- given the mix of business that you have indicated in corporate, SME, et cetera?
Yes. In my initial address itself, I was mentioning 3.74. So this is on account of a few factors that are also there, because the yield for the cost of deposits have come down. Over the last year, you have seen that, that has also helped us. And the business, what we have booked also, has helped us despite giving lower rates of interest to many of our customers because of [ elective ] competition. So this -- in addition to that, our next slippages are negative as far as NPA is concerned. The interest reversal has come down drastically, all this has helped us.So as far as deposits are concerned, as I was mentioning, the headroom is very meager for coming it down. So that way, we cannot expect that sort of an additional benefit of lower interest rates and yield also, we may have to more or less consider a few other cases where we need to compete with the competition. So that way, we expect that to be planned at above 3.5%, plus we will try to maintain that.
Okay. So very quickly on the competition you talked about, if you can talk about in SME, we are hearing the bank -- the business banking customers or SME commercial customers that you have, many large banks are taking interest in regional markets now. Further, you are also turning to growing corporates. So if you can give us some idea about the competitive environment in that. And incrementally, are you seeing pressure on spreads in these 2 businesses?
Yes. I'll tell you the competition is there, but the niche of KVB, all of you know, the customers connect. So this is the major strength of the brand is in the culture. Culture of organizations there. That is the reason if a customer wants to leave, he'll think 10 times, because whether he'll be getting the same level of response and comfort in the next bank. So this is our major strength. That is the reason when we are going to the market also when we are able to grow INR 650 crores disbursement when they make. Then despite all this competition and all, we are able to do that. So I -- though I agree a few banks may offer a lower rate of interest and all, so to the extent wherever possible we are also offering and wherever it is not possible or the accounts where we feel we are not comfortable with those sort of accounts and all, it is better they go. In the normal course, they may not be going. It's an occasion for us to allow them to grow. So that's why in those cases, we have allowed them to grow. Otherwise, competition is concerned, we are able to face it. It's not an issue. Particularly in the business banking and SME, a lot of traction we are finding and so many proposals are coming. So that way, it is not a big issue, actually. So our CFO also wants to comment.
Regarding competition, I just wish to add to what our MD said. We have also seen some of our customers leave for larger banks and come back. That has also taken place. Actually, we witnessed that within months. Within months they have come back, talking about service standards and the culture. So that way, we are fine.
Yes. Sir, just one last question on the employees. It has come down from 7,746 to 7,478 in the last 6 months. If you can help us understand the outlook on that as well as the mix of the new hires that you are doing and the retirements exactly.
Yes, Prashant, Natarajan here. With regard to these employees, the substantial reduction is in the lower level. It's the clerical level. We already indicated during the earlier quarter's commentary. The bank is doing a lot of, I mean, transformation with regard to these -- the operations. So we have created a central operation center. We have created a central expenditure management center. Like that, our focus will be in the branches more towards sale than on the back office operations. To that extent, so if lot of our own people are retiring, if a lot of people are resigning in the lower segment, so we are not going for fresh recruitment. But if you read the other side, for example, the officer and specialized cadre, we continue to recruit people based on need-based requirement. So that is why the number looks to be fall, but at the senior level and at the sales level, we continue to add people. Only on the operational level where the need for people, because of the centralization, is low, so the number has come down.
The next question is from the line of Renish Bhuva from ICICI Securities.
Congrats on a great set of numbers. So sir, just one strategic question on the retail assets. I mean if you look at the break-up, which you gave in the equity, except the home loan, the rest of the retail asset product, big retail, personal loan, LAP or other products. So it's been static around same level what we used to have 2, 3 years back. So sir, what is the strategy going forward to sort of scale up the retail asset book? Of course, we hear you on your commercial and corporate strategy. But if you could throw some light on retail asset strategy, would help us, sir.
Thanks, Renish. So I'll give you a drop on product-wise. I mean if you look at the personal loans, so this was pandemic, so we have created an artificial intelligence and data analytics wing and all. With that, we were taking out the data and all we were marketing, the preapproved personal loans. So that were good. During pandemic, we took a conscious call because if at all something happens and the delinquency is there. The first level will be at that level. That's the reason we have totally tightened our norms. And more or less, it has come down drastically. So our total portfolio also, if you see earlier used to be INR 500 crores, it has come down by another INR 100 crores now. So now that normalcy is restoring, so we are planning and all to restart this personal loan portfolio so that we can go ahead this way. So this is a concentration. Coming to the LAP also, unlike home loan -- home loan is concerned, you look at this salary depreciation, the continuous income or rental, all these things. Whereas LAP is concerned, you will see the cash flow of the business [ units ], something like that. So when during the pandemic and all the business flows got affected, so we started going slow when we found out from [ SARFAESI ] strain in the LAP portfolio. We thought that if you take further exposures under this segment, it may create a problem tomorrow. So consciously, we reduced the LAP there. The same is the case now that the position is good. So we are growing. But if you look at our NEO portfolio, NEO is basically doing the LAP business and all. There, we are growing well. So when we have got confidence there. Under the normal retail segment, the branch sourcing model also, we are lapping our norms. And on these 2 products, we are going to restart now because we have that clarity now.
And sir, let's say, under both these products, the PL and LAP, the yields will be significantly higher than the [ bended ] deal what we have?
Absolutely. Because as customer is concerned, it's definitely unsecured, it is the highest we have. And the next comes LAP.
Yes. Anything on vehicle loans? And...
Yes, vehicle loans we are doing. But in-between, as you must be knowing, there was a shortage of supply and these sort of things and all. So that is the reason. Otherwise, we are there in the market and all, still the focus is there, we'll ramp up our vehicle loan portfolio. No issue at all.
Got it, sir. yes. And just last question from my side on the credit cost guidance. So I think in Q1 call, you had highlighted the credit cost will remain at 2%. Now since we are expecting net negative slippages in second half, does it also -- does that expect the debt cost could be lower than what we have envisaged earlier?
Renish, I agree with you. But for the time being, let us keep it at 2% as it is. So though, our efforts will be always there to keep it at the rock bottom.
The next question is from the line of Rakesh Kumar from Systematix.
A very strong set of numbers, sir. Congratulations for that. I also have 2 questions. Firstly, now the gold loan book, agri and all that, we build on is around 25% of the book. So like going forward, when the credit growth comes back to system, this number would certainly come down as the competition. So how we are planned? Like what the plan we have how to manage or how to maneuver the credit yield when this gold loan book as composition is coming down?
Rakesh, if you look at it, gold loan has 2 components. One is the agriculture component as well as personal component. Agriculture comes around [ 8% ] to 8.3%, something like that, where you will get the benefit of currency sector, and whereas personal segment is unserved retail, that is around 9.5%. So coming to 25%, if you look at it, agri once the loan book grows, this percentage may come down. But dual loan portfolio also will grow. So that way, the 25% more or less. And initially, also in one of the calls we have mentioned, when one of the analysts asked what is the comfort level of the bank, at what level percentage bank wants to retain this percentage, so we have indicated saying that it will be between 25% to 30%, we can go ahead. And last year, when we have gone for the gold loan, it was a strategic decision because it's totally a secured loan and all total focus was there on that. Because we reduced our focus on the LAP as well as PL. So now that the focus is coming on other products, gold loan also will be -- focus will be there. Now if you look at the products which we are going to focus, all of them, the yields will be better than the volume. So that's a LAP portfolio, as well as PL portfolio and commercial, what we are going to focus now, all of them will be above this portfolio. So that was, there will not be any dilution of margins as far as gold loan component is not growing proportionately.
Okay. But sir, actually, capital consumption rate would go up if we go to some other segments like as you mentioned, LAP, the capital consumption rate wouldn't be the same. What is it right now in the case of the gold loan?
You see, suppose the capital, dual loan will be having 0%. But that doesn't mean that the whole bank, the entire business has to be dual loan. If you look at our CRAR also, it is more or less 19%, with -- as much of capital what else is there, we need to take the risk. If you look at the risk-weighted assets also, the risk-weighted assets to total assets, the weightage has come down to 53%, it has come down over a period of time on account of the gold loans. So we can increase that risk and all, so that the yields also will go up. So we have enough headroom as far as the capital is concerned. So we need not worry about growth in retail as well as the commercial for the time being, for next 2 to 3 years.
Understood. Just one last question, if I could ask, sir. Sir, on the provision side, so apart from the provision that we have for gross NPA, what are the other provisions outstanding is there in the book for restructured loan or maybe further standard advances? So put together, what is the provision not utilized for PCR?
So Rakesh, if you see the Slide 8 of our presentation, in the provisions, we have very clearly mentioned, that we have [ around 69 ]. It consists of our regular IRAC plus our restructuring provisions. In Page 29, also Rakesh, if you can look at it, we have given the breakup NPA 113, which includes the migration provision there, and standard asset is INR 8 crores, as restructured to INR 6 crores. Part of our PCR purpose, so we take only the provisions of -- for NPAs, [ as I have announced ], but the standard assets and restructuring, we don't account for our PCR.
Actually, sir, I was asking outstanding provision. So standard as a total provision -- provisions for the restructured group, and if any at all provision -- contingent provision we have. So this is the flow numbers I was asking for outstanding, sir.
The line for the management has dropped. [Operator Instructions][Technical Difficulty] The line is reconnected. Mr. Kumar, may we request you to repeat the question, please?
So you were asking about which are the provisions which will be returned for the purpose of PCR. So what we were responding was NPA provisions what we have made that only will be [ present ] as branded asset as well as restructured what we have mentioned in Page 29, they will not be [ present ] for the purpose of PCR. That NPA provision what we have made, that includes the migration provision also for the earlier NPAs.
The next question is from the line of Jai Mundhra from B&K Securities.
So first, if you can highlight what is the gross slippages for this quarter, if I were to not do the interim or only if we have done inter-quarter net off?
Jai, see, in the Slide #26, we have indicated these numbers. So accordingly, the opening balance, INR 4,167 crores. In addition, whatever we have mentioned, INR 164 crores is the graph slippages during that particular quarter. So whatever recovery is happening, that will be separated. For example, if any account slipped during that particular quarter and then recovered within the quarter, we don't count. So at the end of the counter, whatever slippages are there during the quarter, which is not recovered, we'll take it as an addition. And whatever the recoveries from the NPA book, that means from INR 4,167 crores, the other INR 360 crores we have mentioned, that is the recoveries we made, before we mentioned, that's the reduction.
Right. No, understood, sir. So if I were to use only the -- all slippages one -- I mean, even if it has slipped and then recovered, what would be that number, sir, the gross number? Because most other banks would be giving -- would be counting that number in slippages as well as recoveries. So just to a like-for-like number.
So, Jai see -- the NPA automation, we have done for 10 years back. It's a daily basis, it moves. So it's very difficult to move every day how much there has slipped to NPA and again, to reverse that. So it's very difficult to track. So that we are only at the end of the month or the end of the quarter, we use to track that.
And Jai, one more point also just see, suppose if we have slipped today and tomorrow or day after tomorrow, you upgrade and all, so you cannot literally brand it as an NPA. So in the quarter, I suppose this movement here and there happens and all that sort of small lever, we have to give it. It's not a chronic case. So that it is an accepted practice which has been going on. So to net NPA fees and all during the quarter, what all is yet to show it.
Understood. No. Fair point, sir. Second thing, sir, if you can bifurcate the reduction into recovery upgrade and write-offs at [ mid sit ]?
There is no write-off during the quarter.
Okay. Great. And now, sir, if you have this data handy or otherwise, I mean we can hand it offline. So you have given segmental gross NPA, right? And I mean, so let's say, agri would have -- I mean, the outstanding agri is 260, retail, commercial and corporate. It looks like around 50% of the GNPA is in corporate book, right? But what would be the corresponding provision if you have on corporate and commercial, because agri retail looks anyway very miniscule, just to understand this slightly better.
Yes, I can tell you, earlier I did back of the envelope working on this. As far as corporate is concerned, it is coming to between 75% to 80% of the amount as PCR.
Understood, sir. Okay. And now a third question on your opening remarks, you mentioned about that you are participating in BNPL loan via Amazon and Razorpay. If you can throw some more light, sir, as to what are the checks and balances do you have in originating those loans or intent on those loans? Or this is -- or is there any loss sharing between the originator and you? And what kind of credit decisions are being taken by bank and the originator? I mean how much control do you have? And what is the sort of setup?
Yes, Jai, I will take this question. See, as far as the BNPL is concerned, with Amazon, we have been doing for more than a year. It is done through fintech NBFC. So the Amazon model is Amazon, by themselves, they have some sort of underwriting system in that system. For example, data pulling and all the things they check, and then they will pass it on to the NBFC. And between NBFC and also we have -- internally, we have certain general underwriting metrics. So once it crosses, if everything is completely digital and there is no manual intervention at all, and once the data -- after the data comes, like a summary is created and all due diligence, everything is completed. But as and when any buyer of Amazon goes to the site and [ load ] this checkout option at the time of checkout, they can opt for this facility. So other times, based on the approved process, that loan has got disbursed. So everything is done seamlessly without any minor intervention. Second question is about this delinquents, very, very negligible number. And in fact, we have certain FLDG arrangements with the NBFC as well as the Amazon. And as of now, the -- for example, we are doing almost for more than one year. The NPA and all these things was nothing, very, very negligible small numbers are there. That is with regard to Amazon. The Razorpay, recently, we have started with the same fintech and the NBFC. Only just 3 months back, we have started and not much numbers are -- loans are disbursed. We are still in the initial phases.
All right. And this NBFC that you mentioned is your third-party NBFC. It is not Amazon Web NBFC or Razorpay NBFC?
No, no, you're right. It's a third party. And they have the agreement with Amazon.
Right interesting, sir. Okay. And this thing, sir, again, on digital, so you have mentioned a slide on digital where you have said that your digital DLite app or the number of registered users of DLite around 16 lakh. But that number looks very small if you compare your overall account holders. I mean what is your total number of accounts and why this number looks low? I believe this is like -- I mean what is the total number of accounts that you have on users or customers that you have?
Jai, on an average, active number of customers currently are around 45 lakhs, okay? So -- but you start looking at the 59 lakhs, the pace with which the registrations are going on, that needs to be seen. Because the profile of the customers also need to be seen. So we are actively promoting this and so many features when we have brought this, we are advocating saying that it's a substrate for the branch. So that way, when we are promoting the existing customers, fresh accounts, whatever we are opening, majority we are doing through DLite only. And existing whatever is there this early we are migrating, our focus is the majority to push, indeed to migrate the customers to this product. It is convenient for them. And for us also, the majority of the load will go into the system. I request, please download because we have added a lot of features. Kindly download and see. Jai, next time, you have to give us feedback also. How is our DLite? Are you really using DLite?
On account user cannot use this as much or how would it end? I think as of now for one part of the user...
Jai, it implies you can't open an account with us.
Yes. Good, good.
You're right, Jai. Actually, considering the universe, the numbers are -- but as mentioned by our MD, the numbers are, every month, it is continuously increasing. And every day, the accounts are getting open without any manual intervention. And today, the kind of customers using the DLite app, not only opening up account, you can do any type of transaction as far as the retail transactions are concerned. So very shortly, we are going to implement a complete wealth management package, not in the real sense. But for example, they can go -- they can invest in the mutual fund. They can book the insurance policies. And whatever it is required, so they can buy a gold. So there are today the -- a lot of fintech companies, we are all continuously discussing it. So every month, we are continuously adding in there features. Very interesting application. You can see the -- it is almost similar to SBI or Kotak 811 models.
Jai, actually, we can say that the features are there. It is comparable to many of the best mobile banking apps we have in the market.
Great. Great. So -- okay. And sir, just to summarize this, the uptake is strong. But as of now, let's say, 1/3 of the customers have been migrated to digital. But it is strong and, hence, [ in 6 to 9 months ] that would be a very high number. I mean, going forward.
Not only that, if you talk about digital, you need to look out the Internet banking users also. So a few of them, they are comfortable Internet banking, they are using, that number also needs to be added. So there will be a few people, those who are concurrently using both. But we have to look at some Internet banking also. That is the reason 88% of our non-branch transactions have come to 92% now.
Right. right. That is there, that is clearly there. And the last question, sir, is on -- I think someone had already asked on the competition, especially in commercial segment. So I see a majority of our commercial book is below INR 5 crore level. And so far, I mean, a large private bank and not many [ that is, activity ] in this business banking space. But in the last 1, 2 years, they have become very aggressive. Are you also feeling that the competition from large banks, large private banks have increased? And I think you have given 10% Y-o-Y guidance here. I just wanted to get a lot of views on the competition. And at the same time, I think CFO also mentioned that a lot of customers who are seeing reverse migration. If you can also highlight -- I mean, what is the -- I mean what did you observe as to when would they come back? Is it only due to yield surveys or something else? But first on [ what is ] your view on the -- in the last [ 9 months ], if you have seen any heightened rise in the competition from last [ year ]?
Before as I said, but I will -- I would like to add here, see, the world competition, which we mentioned when we talk about the NIM and you talk about the yield on advances, we expect that because of the competition, that will be falling interest rate. But as far as the accounting, account sourcing and retaining the customers are concerned, we have not lost any customer, at least during the last quarter. I can very clearly say that we have not lost any customers, unless otherwise specifically agreed account and all these things. That's number one. And number two, yes, competition is there, particularly in some of the new gen banks as well as some of the public sector banks. But the issue is the customer will come back to us. Knowing I'm getting this much operate, you please reduce this rate. We'll also work out and based on the credit risk and all. We are considering it. Industry only, the competition is affecting. But as today, we have alerted all our business groups, all our operation teams. We are continuously in touch with the customers. And we are also using the systems, we track which customer is making any -- something like that, we have created the system. So in that way, we have a company control on the accounts, but the competition definitely, it will pull down the yield. So that is what we have mentioned when we talked about NIM.
Yes, Jai, in a broader sense, if you look at it, I feel that competition is a must for every organization, then only the organization will be as well and active. So the core strength, as I said earlier, the culture is nimble-footedness for the organization. So this one, someone can buy an AC or a computer, but the culture is very difficult for any bank to buy. So the customers connected nimble-footedness, these things are there. So we'll be able to compete. And absolutely because someone is a competitor to us and we are a competitor or someone perceives we as a competitor. So this is a part and parcel of the market. So we need not worry about that. We need to focus on our business growth strategy, how we are going forward. And if some competitor is there, we are still happy saying that. So we are doing well. That's why someone is able to, in addition, to compete with us.
The next question is from the line of Sumit Bhalotia from MK Ventures.
Congratulations, sir, on a great set of numbers. If I may, we are only talking about quarters, 2% [indiscernible]. I wanted to ask a [ gold ] question. Between 2008 and 2016, we had an absolute golden era for the bank. So within our gross [ income ] was significantly below 2% on an average and net NPA was below 5%, and we are at 0.5%. And we have an ROE of around 20% in that period. So what is your [ reasoning ] on when do we return back to that golden era? How many years will it take for us to make it there?
In fact, I -- just let me tell you that every journey has to begin. So you have seen that the baby steps, what we have taken during the last 1 year, they started yielding some positive results and all we started getting confidence off that. The fact that in a quarter net key figures are there. But if you look at the earlier era, what you have mentioned 2008 to '16, that was relatively a different era. Because everyone were mentioning at the time, so India is growing, infrastructure is the key and all -- without that [ however that goes ].So that's why everyone moved into that one. We also moved into that particular portfolio. So that infrastructure, whatever high value all were there and all. So the low value -- the focus was low. That is the reason the NPAs were not there, when actually the problem has come up and all many of the big corporate accounts, we had a problem. So now we have put in so many checks and balances that earlier situation may not come up. That is for the first point. Second point is now that we are granular and activated all these outlets. And overall, we have restructured also. Earlier, the focus was only branches are doing all these things. Now we realize that the focus is something different. So we -- for the corporate, we have created a separate structure, and the business banking have created a structure. So likewise, different verticals are created. Each vertical is focusing on the potential availability in their area. And in addition to that, we are not losing focus on recovering the past NPS. Someone had asked saying that what is your NPA, INR 1,900 crores out of the [ INR 800 or INR 900 crores ]? In fact, that I can say it is one of the results for the bank. Because many of the cases are with NCLT in different stages are there, consortium and all. Once we start getting money back from those accounts, where more or less 75% to 80% has already been provided, they'll all be adding back to our profit in addition to the normal operations, what we do. So the process that gross NPA percentage will ultimately come down. And the second thing is the sort of onetime getting the benefit of these things will be coming down. So that's what we feel. Maybe next 3, 4 years, we can think saying that. So the best of our times, we will be able to move forward. And that's why when some 6 to 8 months back, when the things were actually gloomy, when all analysts were asking what is your view about [ our full year ] 1%? That was more or less a utopia 1 year back. When actually, we were looking at it, whether we can do that or not just because they were [ mired in these ] issues, business was not growing, NPAs, and many things are not happening. So with the initiatives, what we have taken, now confidently we can say. So this year, though, we will try because you have seen the movement of ROA also. 2023, we have indicated and given a guidance in the market, that 1% we'll be able to achieve. So absolutely, we are on the track, keeping a full focus, absolutely fully lean on the capital letter. On the slippages, NPAs, recovery is a major focus on that. Because on one side, we grow and second side, NPAs are getting generated and the [ prospectus ] of growth is difficult. So it's a two-pronged strategy we are working. And that's why, as I said and finally in my inaugural address, that we are moving towards our best of our times. So we need the good vision for all of you, and we will definitely work towards what we have planned and what is expected by all of you.
Mr. Babu, I've known you and you're a man on that -- back from the front foot and very, very influential leader. So what I'm asking is, is it in the realm of possibility that by 2025, so 3 more years, we will see the gross [indiscernible] below 2% and net NPA below 5%?
That I think -- there will be a challenge, I need to go back and work.
Okay. No, I'm not asking for guidance, sir, who can give the guidance.
Absolutely, sir, until and unless we have a goal post, we will not plan for that. It is a good thought you have injected and we'll sit with our team and how we can plan towards it, we'll see that.
And sir, is it possible again, 20% plus ROE will come in this time period? See, we are only asking what aspirations, sir. [indiscernible]
20% is our aspiration also, sir. Because if you look at the current quarter, more or less it has come to 9%. So average, it has come to 6%, sir. So that way compared to earlier, if you look at it, the ROA of the last 4 years, never it has crossed 5.5%, never it has crossed. So first time, the momentum has come and moving forward, if you look at the profit per employee, business per employee, all the parameters are going in that direction. So the question is we need to accelerate the pace from here, which we are doing, and we'll aim for the 20% ROA, what you have mentioned also.
Another -- one more is that on the technology side, if you can just throw a little bit of light how much expenditure did we do in the last 3, 4 years? What is the plan over the next 3, 4 years? Because technology will play a very crucial role in terms of the bank getting integrated with the new digital economy. And what kind of transactions will be the digital foundation with a lending collection, deposit, over the next 3, 4 years? If you can play -- throw a little bit of light on this [indiscernible].
Yes. Our [ personality ] because many things we have done in that technology. [indiscernible] will just explain.
Yes. Thank you, sir. It's a very interesting to scale. As far as the technology is concerned, probably you have noticed for the past 15 years, we are always, in all the areas, we have the 4 vendors, whether it is the ATM, whether it is the core banking, all these things. So in continuous to that, 5 years back itself, sir, bank was start of it. And then today, we're completely -- all our loans, everything is in the digital mode. What I'm trying to say is the digital mode is retail loans. There is no physical paper we take from the customer. Today, India is a data rich, information rich, all the validations. For example, a home loan, that is a mortgage loan, we connect with the fintech. Online, we are able to -- within 10 minutes, we are in a position to give our [ input ] and sanction subject to the valuation report and the legal opinion of the property. And this is with regard to retail loan. Similarly, for our commercial loan, 4 years back, it was completely judgmental at the branches. Today, we put a proper loan organization system and proper business ruling deal. And most of the validations, system-based validations are done through our fintech. So ultimately, the branch adviser has to do some interview and then use the personal intelligence he has to use for the sanctioning of the loan. In that way, on the lending side, both retail as well as commercial, we are rating -- actually, the systems are -- the areas that can be scaled up to at least 5x of our existing portfolio. In that way, it is built up. We have created a center of excellence in Chennai. All of our -- the digital transformation initiatives we have created a separate team and our team has been continuously working towards improvements in our strong domains, particularly on the commercial loan sector. Recently, we have added all our corporate account also. Of course, it's semi digital, you cannot put 100% digital there. All the validations, everything done through digital. And finally, the underwriters do some manual check and then put up the proposal. In that way, we have reduced a lot of the manual work and put everything into the system with regard to the loan size. And now today, next week, we are launching our retail credit card. It's -- again, it's a completely end-to-end digital model without any physical paper. So we think that -- we ensure that on seventh day, our maximum 6 to 7 days, the credit card reaches the ultimate customer. So the underwriting also, we put the best of the class standards. And we know the ultimate risk in building this portfolio, and we have strictly created the underwriting rules. So in that way, on the [ underwriter ] side, we are 100% using the digital. And the days to come, we will be in a position to scale up further. So in this process, bank has reduced substantial manpower earlier. The bank also having 17 credit loan processing centers in different locations. Today, we shut down everything. There is no credit operation center in different places. So everything is centralized system because of the digitalization. On the liability side, we already mentioned our DLite app is going to be the sales for the bank as far as the retail liabilities are concerned. Today, what our account onboarding, account operations, everything can be done through our DLite app. In addition to that, we are continuously adding features, various features which are helpful for our normal savings account holder. So in that way, we have built a very robust system. Again, it's a very highly scalable, using the latest technology model for the retail customers. Now our focus on the ForEx business and corporate customers how to embed the latest digital technology. So overall, sir, we rely more on the technology. And as already our MD has mentioned, 94% of our total transactions are happening through the non-branch channel, which is more -- predominantly on the digital side. So there is a very clear road map the bank has drawn and what should be our portion of 2023, '24, '25. And regard the road map, we are going ahead, sir.
[ I say an immense ] action, what I can say, see, we are abreast of developments what is happening, and we don't compromise on upgrading ourselves as far as digital is concerned because we know very well. Actually, digital only can handle the load. Just for one example, I'll tell you, when we were working with this Amazon platform, during the festival period and all, they were expecting around 99% uptime and all. We maintained an uptime of 99.99%. So the lakhs of customers have been booked to this route and all, and they were fascinated with the work our digital team have done and all the abilities with which they are done and all. So we'll continue our strength and all, because we know very well that we need to be in this space to be the front runner.
Sir, one last question from my side, Mr. Babu, when I look at your cost-to-income issue, it is still around 53%, 55%, even if I exclude one-offs. While my friends at public sector banks also are talking of a 40% cost-to-income ratio at [ facing ] over the next 2, 3 years. What is your plan and where will this number be for us over the next 2, 3 years?
So there are 2 components here, cost and income. If you look at it, although we focus on the cost and reduction, the major cost component comes to employee cost. Very little you can do because last 3, 4 years, we started moving towards the CTC and the [ idea ] structure have come out. So it takes some time. It's not next 2 to 3 years, I cannot reduce the employee cost. So coming to other costs, we are trying to have a control. But rather than on the cost portion, we want to focus more on the income portion. So that way, at least we want to reduce the cost-to-income ratio. As the initiatives, what we have mentioned, the business development, other income, with these things, we would like to bring it down initially to 50% and all. But initially, we were thinking, aspirationally, around 45% over a period of time to bring it. We will work on that particular number, sir.
Sir, how many people are retiring from the bank every year? And how many are you adding?
Adding, I think, very few because wherever necessity is there, we are going to the campus and taking and all, there is no mass recruitment just yet. But do suppose wherever some sort of specialized positions are required, those we are taking and not in lots. Whereas retirements are concerned, it comes to around 50 to 60 people will be retiring every year.
[Operator Instructions] The next question is from the line of Mahesh M.B. from Kotak Securities.
Just one question from my side. When you look at the outstanding pool of NPLs today, of INR 2,000 crores for [ personal ] and INR 1,500 crores of commercial, you had alluded to the fact that the provisions are reasonably high and these cases are in the NCLT at various stages. Any broad idea as to what are the time lines that you're looking at? And what would be the content that we look at in terms of reductions of this book for the next 2 quarters and into FY '23 as well?
Mahesh, in fact, on the lighter side, if I have that information, I'll be the happiest person in the world because the cases are at different stages. Sometimes, it is taking 6 months, 9 months, 1 year, -- And so that way, when things are with NCLT. So the 2 few of the cases, which are there with the consumption, other banks are also equally trying. But only a rare hope is now that NCLT started functioning full-fledged way, and typically, also, they have started functioning and all, we expect some sort of a momentum and expected few cases we started getting orders also. So that's the case-wise time line and all to be very difficult because it is not in our hands. But whatever it is, we are not only trying this NCLT route, out of the court settlements also wherever possible we are trying. And so we are focusing on the smaller accounts also what we need to do. So that way, where the possibility for recovery is more we are focusing wherever the assets are higher than the loan amount. Naturally, the borrower will have more interest. So that to run the NCLT is going to give an order because 1 week or 10 days. We are observing saying that people are coming forward for the discussions. So that's also because they know it, once the order comes and all, the liquidation they think will come up and all. So it's really dependent on how that case is move.
But just clarifying this, would you have -- please have some sense of where the borrower has to -- the new borrower has been identified and the case has been given to the NCLT for approval, what is the likelihood of that quantum to come in, in the bank for this financial year release? Or even that is difficult to say?
Mahesh, see, these are -- the INR 1,900 crores is the corporate portfolio as updated. So what we are internally focusing. Of course, it's not a guidance. What we're internally focusing is at least the 25% to 30%, which is in a very, very final stage. So that way, we are also expecting that it will happen within the year. And one more point, we obviously all know that about the leading NBFC, all banks have got struck. So there is a statement that, before March, it will be settled. So we are not taken into account in the 25% to 30%. If it all happens, then it will be the addition. As far as the corporate accounts are concerned, at least 70% to 80% of all the accounts have a vintage of at least 4 years, 3 or 4 years and above. The recent part only very key accounts are there. So all these accounts are in a different state, but there -- because of the consortium, we are not able to commit. But internally, so what we are focusing, at least 25% to 30% of our captive portfolio, there is a very good prospects of recovery this year. Plus one of the NBFC, which is a company I'm talking about, so will be additional for that.
Okay. Sir, [ INR 2,000 crores ] is the outstanding book, and you're saying you have visibility of approximately 30%. And I assume that you don't need any incremental provisions on this based on the judgments -- based on the current value for those roles.
Yes, it's almost fully provided or mostly provided.
The next question is from the line of Prashant Poddar from ADIA.
Yes. So just one follow-up question. That is on the restructured assets pool. If you could give us some qualitative understanding of how the pool is behaving, particularly in the light of high collections efficiency of 97.5% for the overall corporate. I think that includes commercial, I'm assuming, in the collection efficiency. And the fact that almost INR 680 crores of that is retail. You also shared that SMA 30+ is -- I can't remember that number, is also limited. So what does this restructured assets mean? And how is this -- and if we look at separate team to look after that. So just wanted to understand how should we see this restructured assets of INR 1,579 crores.
Yes. Prashant, [ these things ] we already given the breakup. And as far as the corporate is concerned, already our MD has indicated, it's only 6 or 7 accounts. And -- but the major portion comes from the retail, particularly the residential mortgages in the retail and the commercial loans, which is the MSME sector. So as you noticed, many of these loans are in the standard category. But the customers, maybe because of they want to ensure that going forward, they want to be very safe. So like that they applied for the restructuring. But what we do internally -- that is why if you compare the other banks, our numbers are very low, because we do our due diligence. We have studied the cash flows. And first of all, the borrower should be generating and business would be generating. And then they are impacted temporarily on account of the environment. So that is what we have seen. We have built our system for the restructuring process. Accordingly, we have done the restructuring. And as you -- as already our MD has indicated that. Having said that, this portfolio needs to be nurtured so that they should be carefully followed up because of we have given some holiday period and all during that period, how they are behaving. So it requires a separate additional focus -- so that is why we are creating this department. But as far as the portfolio is concerned, it is only INR 1,500 crores portfolio. And all these -- most of the -- I can say, a substantial number of accounts that are genuinely business operations are there. It's only a temporary mismatch or a temporary problem, they have all the restructuring. As of now, we don't see any big challenge in this segment. And already our MD has indicated that all these loans are supported by the Pareto Securities by way of renewal property. That's one additional cushion for the bank.
Yes. Just one more question...
Prashant, I want to add one more point here. If you look at the retail, the personal segment, what we have mentioned, which construes the major portion of [ INR 679 crores ], majority of that are the home loan area. So very small portion is on account of personal loans. Because as you know, our overall personal portfolio is still INR 500 crores. So out of that very small portion here, the majority of this, even if some sort of an issue comes up also with the question of time next 6 to 8 months, we'll be able to [ record ] the money. But home is close to the heart of everyone. So at the material time when COVID was there, they were unable to service. But -- so once things are becoming normal, so they will try to bring it back to the normalcy and all. But we don't visualize many NPAs in the retail segment.
Actually, it is not -- the retail is probably the least concern. Because as you said, it is secured piece. These are small ticket items. In commercial and corporate, if you could give us some [indiscernible].
The same is the case. As I've already mentioned, as the business activity is back on track, commercial were actually facing the cash flow issues at the time and all, they all are getting majority of the cash flow and all, so there should not be a problem. But commercial also, as it was indicated, it is more than 100% backed by security in many cases. So corporate is concerned, you have seen that the delinquency stress levels are coming down day by day. The same is the case with these cases also until we are confident that the cash flows are there, we have not done that.
[Operator Instructions] The next question is from the line of Bajrang Bafna from Sunidhi Securities.
Yes, sir. One again on [indiscernible]. You have not opted for any restructuring majorly in the June quarter and the key figures are on the higher side, close to INR 500 crores. This quarter, you have opted for restructuring in a major way. And again, the number is close to INR 500 crores for the quarter and the slippages looks lower. So this is just the change in the purposes of not opting for NPA and going for the restructuring. This is what perhaps looks like during the quarter. Because last quarter, obviously, the slippages were higher. So going by the trend -- and we have also indicated during this quarter, again, the restructuring could be to the tune of INR 250 crore kind of number if I heard it properly. So when do you see this restructuring portfolio is also picking up and we might see this also starts deploying? So that's the question from my side.
Yes. Thanks for your compliment for the results. If you look at it, [indiscernible] earlier, the restructuring discussions were there, we were always indicating saying that our numbers will be around less than 2.5%. And if you can see in the first wave when it has come up and down, our numbers are much, much below the 2.5% only because we are putting more checks and balances where we are confident that the account will be that [ digit ]. But the second wave, which is unexpected, which has come up and all, which is much more severe than the first wave and all, so many of them got affected. During that time, again, the government as well as Reserve Bank of India have come back and had relaxed these norms also for the restructuring. That way, a few more requests have come. So now if you look at the guidelines also what they have given, the corporate can invoke the restructuring up to 30th September. And 31st December is the time given to all banks to complete the listing. So that way, even if you reckon the INR 250 crores also, so currently, we are below 3%, which is a decent number compared to the industry, what is happening and all. And even if we reckon is INR 250 crores, I'm not saying that INR 250 totally will be coming and all because while doing, a few of them may be ineligible also that the upper cap is INR 250 crores. Even if we do that also, it will be below 3.5%, which is a reasonable number, and we have created sufficient buffer as well as provision also for the purpose. And that doesn't mean that once we restructure, we are branding the account and the NPA, it will be under closer monitoring and they'll be coming back onto the track. The second question is because the liberalization, what the government and Reserve Bank of India has given out of the second wave -- in second wave, that has actually given a scope for a few others to come back, over are feelings [ prevail ].
Mr. Babu, one more point I'd like to add here. See, we are targeting this as a restructured account. Even though the account is performing, all these -- the servicing part, everything is 100% per site, even then, we have to keep it under the research and book at least for the next 24 months. That is 2 years that normally restructuring, they are permitting it. So in that way, probably from next quarter onwards, we also provide more information on this book. As of now, we are confident about this [ restart ] book because there is a proper system we have in identifying the genuineness of the borrower and the business.
[Operator Instructions] The next question is from the line of Surabhi Saraogi from SMIFS Capital.
Sir, my first question is what are the steps being taken to reduce gross NPAs?
Okay? Okay. I'll respond on this. Now so 1 year back -- 1 year, 1.5 years back, we have created a separate vertical for this headed by a general manager in the full [ pitch league ]. So now under that, we are looking at the possibilities, and wherever we need to auction where the properties are there, where to approach them and the real estate brokers as well as agents, enforcement agencies, collections, all these things we are now activated. That is the reason you are able to see the outcome during the last few quarters, our net slippages are coming negative. And not only that, now we have created a separate collection team also headed by a general manager grade and official and all. So the feet on street as well as call center, everywhere we are activating. So wherever possible, we are trying to go for the OTS where the asset is available and all. Other measures also, we are working on that. So that way, we are reasonably okay as far as the momentum what we visualize and what we have got. I can say much better than what we have got the results, I can say that. So we are on this job and we'll take it forward. Regarding the corporate GNPA of INR 1,900 crores, earlier we have given a detailed explanation about that. So now what I told you about, other than corporate, the commercial as well as the retail. So if you look at the NPA also, you see Page #28 of our presentation. So our gross NPA used to be INR 4,450 crores in March '19, okay?It has come down now to INR 3,972 crores despite a rough weather. Despite a rough weather it has come down. And during this quarter is another testimony, you can see that without a write-off, so we could bring it down. The percentage also, if you look at it, at 2019 March, we were 8.79%. We were 8.79% as the gross NPA. And today, we are at 7.38%. So the credit cost also, if you look at it, in 2018 and all, we were making more or less around 3% all as a credit cost. Now if you look at it last year, it is [ 1.44% ], and this year both the numbers are with you. So with the measures what we have taken, we are able to see the numbers actually what we thought is going on those lines.
[Operator Instructions] Ladies and gentlemen, we take the last question from the line of Renish Bhuva from ICICI Securities.
So sir, just one question on this digital side, okay? So historically, we used to operate at around of 40% to 45% kind of a cost-to-income ratio. Now whatever incremental business, we get either from the NEO banking or should be fintech partners. It is fair to assume that the business is slightly coming at those cost to income? Or it is slightly higher as we speak today?
Renish, yes, as far as the technology cost is concerned, you know that for the past 2 years or 3 years, we have been continuously building the infra sector for better. For example, the precious metal division, the infrastructure we have created. So this department has the capability of building at least 5x, 6x of the business. Currently, we are doing it. And similarly, for transaction banking group, the system platform, which we have created is a very high scalability. So similarly, for all the digital loans, we have created all the systems. We are not incurring any fresh expenditure. In addition, we've above whatever is required for our regular operations. In that way, most of our investments with regard to the infrastructure for creating the digital is already completed. If not anything, it's not only to manage these applications, we have to spend. So definitely, I was mentioning to you, before implementing the digital loans, we have a set of people sitting at the 17 or 18 locations doing all the manual processing. So we are completely dispensed. This center almost 10 people. 17, 18 centers used to hold around 80 people straight away, we are reducing that process. So in that way, 100%, the incremental cost for these loans will be lower. But whatever we are spending for this platform is slightly higher during the year. And again, one more point, we want to appreciate that the business model of the bank. For example, we have 20% of all new loan portfolio. All these [ notary persons ] unfortunately happening at the branches. So if it happens at the branches, naturally, you have to provide sufficient people for them to manage. In that way, the cost/income ratio basically depends on the business model of the bank. But we are very conscious about it. If you remove these -- the onetime expenditure, both in technology as well as the establishment, we definitely will be in a position to reach the comfortable level in the quarters to come.
Got it, sir. And sir, just last question, if I may. This is on the recovery side in the commercial book, okay, so which is roughly INR 180 crores this quarter. So sir, when we say for the next couple of quarters, we have a negative back slippage, which means a recovery going to stay a little higher. So where -- from where did these recoveries are coming? I mean we are selling the properties or this is just -- let's say, the account might be slipping last 1.5 years because of the COVID and with our rigorous collection efforts have been able to recover? So sort of what is the nature of this recovery?
See, Renish, I'll talk ahead and then our MD will be adding some points. See, why we are canceling this, about the slippages, already we have disclosed what is our SMA 30+. It was historically lower is the number of what we are seeing today. If you are removing the Jalan portfolio, so hardly is the 1%. So our confidence comes from the slippages. We are 100% sure that the underwriting models is doing well. And then onboarding of the customer is -- definitely it's improved over a period of time. And the immediate thing is we expect that the slippages pressure will not be there. And as far as the recovery is concerned, already we have indicated, if it is a corporate loan, it may be 4 years to engage. So there is a possibility that the normal recoveries are happening in a gradual way. And for the past year, because of the environment in the market, there was no proper DRG. The permissions that are not granted by the core. All the things are opened up. So we have laundry list items to be done as far as the recoveries are concerned. So these are giving a lot of confidence for that. Our recoveries will be better. Our slippages will be lower. So this makes us to confidently say that, coming quarters, there will be a negative slippages.
Yes, yes. So just to add a point here. If you look at it, suppose you are asking whether you are selling the property or other things and all, there are different tools that are available, we will go for the auctions last 15 years. And even if we are going for the auction, people were actually holding their purse. They are not opening gate, because they do not know how the COVID turns out and all, so they were not investing in the real estate. So that's where the lukewarm response was there for the auction. Of late, we started seeing some sort of a good response for the auctions we are making. And second thing also when people know that even if you auction is not going to go out, the response from the borrower also will be lukewarm. Now when you are able to dispose out the property, many of them are coming forward for a onetime settlement and to close this one and all. Wherever we feel the litigation is a costlier and a time table, the process and all, so we are going to go ahead. So that way, the normal recovery, [ OT ] years, with the sale of property, auction, all these we have in our pipeline and all. We are working all of them and fighting all guns together.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments.
Yes. On behalf of the entire team, KVB, I thank each one of you because for the interest you have taken in being in our call, it itself shows that so many hours you have spent with us in intricately asking the questions and all to know about what we are doing and how we are doing. So I'm greatly thankful to each one of you. And we will try to live up to your expectations and take the bank forward. And I wish all of you, all the best and the season's greetings and enjoy the festivals, which are there in the next 2 years. And a happy new year to all of you from the entire team at KVB. Thank you very much once again.
Thank you very much, sir. Ladies and gentlemen, on behalf of Karur Vysya Bank, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.