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Karur Vysya Bank Ltd
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Ladies and gentlemen, good day, and welcome to Karur Vysya Bank Q3 FY '21 Earnings Conference Call hosted by Spark Capital Advisors India Private Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Abhinesh Vijayaraj from Spark Capital Limited. Thank you, and over to you, sir.
Thank you, Aisha. Good morning to everyone on the call. On behalf of Spark Capital, I welcome you to the 3Q FY '21 earnings call of Karur Vysya Bank. We have with us today the management team of KVB, represented by MD and CEO, Mr. Ramesh Babu; President and COO, Mr. Natarajan; CFO, Mr. Ramesh Murthy; Company Secretary and Compliance Officer, Mr. Srinivasa Rao.I now request Mr. Ramesh Babu to take us through the highlights of the quarter gone by, after which we will open the floor for questions. Over to you, sir.
Yes. Thanks, Abhinesh. So at the outset, I welcome everyone to this call from the KVB team, and thanks a lot, for first of all, for joining the call.So it's a good quarter despite challenging times as we have done well in business growth, cost of deposits and few other parameters. Business is growing sequentially, and total business has crossed 1,14,000 crores as on December 20 with a YTD growth of 6%. So growth in areas that we focus on have been strong and is showing encouraging signs of revival. Our franchise is coming to the work every day despite the pandemic, and they're really helping us to grow our low-cost deposits as much as our retail as well as gold loan business. Retail has also picked up, and we have entered quarter 3 quite well. We are able to manage and navigate the storm better than the worst belief we've had.In our command area, business is picking up, and that's encouraging. So that way, it looks quite bright, the future prospects as well as the business prospects are concerned. The total deposits grew by 5% YTD, driven by improved CASA of 35% as against 31% as at the end of December '19, up by 400 basis points. So first time bank has crossed 35 mark -- 35% mark.As the economy is coming back on track, we need to see there would be withdrawals and growth in TD, which will start now also, but to some extent impact the ratio in the days to come. Idle cash, which was lying in our accounts, may also start moving out once normalcy in the economy restores. However, our endeavor is to protect these balances and to grow further from here.Cost of deposits have further improved and improved by 96 basis points Y-o-Y and is currently at 4.8% as against last year 5.76%. So we may not be able to maintain the low rates forever because if the liquidity gets drained, naturally, the cost goes up.So TD growth is muted. Time deposit growth is muted as the bank is having surplus liquidity, and a conscious decision over time deposit growth was taken, not to give a great trust. So even if you grow well under time deposits during the year passed through, you need to invest in low-yielding treasury assets because the credit growth is not to the extent what we visualized. Now we have started giving focus on TD as asset growth started picking up.Coming to the credit growth, on a YTD basis, so it was higher at 7%. And if you exclude IBPC, which was in the books last year, it comes to 9%. So we do not have any IBPC outstandings now. Advances have grown sequentially, too. So all of you would have observed last year March '20, we had a degrowth for the whole year as far as advances are concerned. So I'm happy to share that. So we are clearly reversing the trend, and every vertical started delivering.So growth has been achieved through improved offtake and retail portfolio with YTD growth of 9% and if you exclude the IBPC of last year. And jewel loan portfolio also continued to witness and the YTD growth currently is at 31%. Our business verticals have also started growing in numbers progressively.NEO, so which we started 1.5 years back as a nonbrand channel created, continues its robust performance, and the portfolio has crossed the landmark INR 1,000 crores AUM. Corporate book has degrown Y-o-Y and have come down to 24% as against 26% as at the end of March '20 despite GECL disbursements of INR 541 crores. As all of you know, it's a conscious decision to go slow on the corporate book and to focus on rest of the segment itself.The commercial book also further granularized. Average ticket size is currently at 33 lakhs, and 86% of the loans, you would have noticed from our investors deck, are less than INR 5 crores. CD ratio has improved to 84%, which was at 82% at the end of March. Business per employee has also improved. So CRAR has further improved to -- from 15.87% December '19 to 18.52% now.NIM stands at 3.29% and is almost flat despite consciously exiting few weaker accounts, which are high yielding. And also, we had to offer competitive pricing to our customers. Our endeavor is to maintain the stable links. However, further growth in TD portfolio and composition of the credit growth may have some bearing on the NIM. Volume growth in the business, what we are planning, should make up this reduction in the NIM.I will come to separately for the XI bipartite. As XI bipartite settlement expense is a onetime expense, if we do not recon the BPS, cost to income, profit per employee and business per employee, all of them have improved during the quarter.So now I'll come to few other points. First thing on the pro forma slippages. Pro forma slippages, in terms of the honorable Supreme Court orders, bank has not classified any borrowal account as NPA after 31st August 2020. Pro forma slippages for the period ending December was at INR 885 crores. Bank has not recognized unrealized interest, which amounts to around INR 53 crores. About 93% of the slippages are from the moratorium book. Estimated pro forma slippages for the current year will be in the range of 2.25%. Our SMA 30-plus balances as of 31st December '20, after netting the pro forma slippages, is at 2.42% of these advances.Coming to restructuring. In terms of RBI guidelines, onetime restructuring was permitted up till December 31, 2020, for eligible borrowal accounts other than MSME. And for MSME accounts, existing restructuring guidelines will continue till the end of March 2021. During the last quarter review, we have guided our restructuring advances would be in the range of 2.25% of our advances. During the quarter, under non-MSME, we have received 1,524 eligible applications amounting to INR 668 crores and restructured INR 373 crores and 93 applications amounting to INR 295 crores are under process. Under MSME, we have restructured about INR 98 crores during the quarter ending December. And overall, we have restructured INR 471 crore during the quarter.Our restructured book as on 31st December was at INR 680 crores, which is 1.3% of our loan book. Our estimated numbers, we feel, will be within the range of 2.25 of our total advances at the end of the year.Coming to establishment expenses. Bank is a member of IBA and concentrate for the employee wage settlement negotiations in July 2017. Bank has been paying 10% of the pay bill component as ad hoc to employees from November 2017 onwards. We have reviewed and made an additional provision of INR 24 crores during June 2020 quarter. The base settlement was signed in the month of November '20. The cost impact on our bank works out to 14.8% of our wage bill as of 31st October 2017. Total arrears payable to employees for the period from October '17 to December '20 on the pay bill component works out to INR 239.28 crores, and bank has so far paid or provided for INR 134.26 crores. The balance amount of INR 105 crores was debited to establishment account and kept as a provision during the December quarter. There are certain connected expenses on account of pension, gratuity and encashment of leave, retirement, et cetera -- retirement benefits. So we have provided an additional provision of INR 70 crores based on certain estimates. Overall, we have created additional provision of INR 175 crores for this. The incremental impact on our establishment expenses on account of wage settlement is INR 56.16 crore per year on our normalized establishment cost.Now coming to the provisions. During the quarter, bank has made a provision of INR 61 crore towards restructured advances and INR 80 crore towards COVID-19-related package. So this includes the pro forma slippages also. So bank has, up to September '20, has provided INR 220 crores towards COVID-related stress accounts, which is inclusive of INR 47 crores during quarter 4 of previous year. During quarter 3, including the additional amount of INR 80 crores as stated above, our overall provisions for COVID-related stress is INR 300 crores. After factoring the pro forma slippages requirement of about INR 135 crore, there is a buffer provision of about INR 165 crore available for contingencies.Now if we look at the collection efficiency, we have a slide also in the investors deck. Our collection efficiency during the quarter -- current quarter is provided in the investor presentation. The numbers indicate payments made when demand is raised for the first time. There are many cases where installments were paid on subsequent dates. As of 31st January, our collection efficiency for the dues for the month of October, November and December was above 94% levels. Considering this, our collection efficiency is at satisfactory levels. We continue to focus on our collection capabilities to sustain this level.So this is from my side. So though it's an extraordinarily difficult year for all of us, so we feel we have managed to do reasonably well. Over to Abhinesh and moderator for the questions.
[Operator Instructions] The first question is from the line of Renish Bhuva from ICICI Securities.
Yes. Congrats on a great set of numbers during this really difficult time. So sir, just one clarification on the restructuring part. So you have said that our -- so total restructured book as on December stands at INR 680 crore. So what is the pipeline we have, you said? I missed that number.
So we have given those numbers also. What all in the pipeline also we have mentioned here. If you look at it, 93 applications amounting to INR 295 crores are under process, so which, under the corporate, what we have got it. But however, MSME, the window is open up to 31st March. So that, they are going ahead. But MSME, as it is -- if earlier also, if you look at it, the numbers are not that great. If you look at it, 98 crores. Up to December, we have done that. So that way, we feel that 2.25, what we thought, it would be well within that.
Okay. Got it. Got it. So basically, for MSME, we don't have any pipeline as we speak today.
No. No. But if they're not going, they have time up to 31st March. So we cannot convey anything now at this stage.
Got it. Okay, sir. Sir, secondly, on this provisioning part, okay. So you mentioned now we have a COVID-related buffer of INR 3 billion. And maybe arriving at a pro forma NPA, we have used something, and now INR 165 crores is left as a contingency. Is that the right reconciliation, sir?
INR 165 crores is left for the contingency, absolutely right.
Okay. And the INR 58 crores, which we have provided towards restructured, is also available if something, let's say, slip from this asset going ahead separate?
Yes. Yes. Yes. Because this INR 300 crores what we are talking is, this INR 58 crores is in addition to the restructuring what we have provided.
Got it. So basically, INR 358 crore, right, including restructuring pool, which is total provision buffer we have?
You are right. INR 358 crores, absolutely, you're right. You are right. INR 300 crores is provision, and INR 58 crores, separately, we have provided for the restructuring, which is not part of the 300 crores.
Got it. Okay. Yes. Just wanted to reconfirm that. Yes.
Just listen to me. That since restructuring is removed, the plan envisages that account will continue in the same status, and we'll have to maintain the provision as long as the account is performing.
Got it. Got it, sir. Yes. Yes. Yes. So sir, just last question from my side, a bit on the strategic front. So sir, when we look at our cost of fund at sub-5%, I think this would be, by far, one of the lowest in the industry. So sir, what is stopping us to accelerate the -- expanding the retail portfolio, including SME? I mean at our cost of fund, we can compete with any other bank. So is there any process or any infrastructure which is stopping you from expanding this portfolio? We are just waiting for economically to turn more positive, and then we sort of start looking at expanding this portfolio?
Yes. Yes. Your question has a part of the answer. So once it is -- coming to the -- I'll split this into 2 parts. Retail, if you see, the housing as well as the personal loan and vehicle loan. So we are relatively selective in identifying and taking it because we -- ourselves, we are not clear, the economy pans out. Even today, if you look at it, many other suppose self-employed, these sort of people and all, so still they have not yet come back to the normalcy. And people may not be getting their full salary also. So rather than taking a plunge at this stage, it's better we wait for this quarter and see and then go ahead. Otherwise, we have activated all our teams and all, so everyone will be on the job. So product is ready. This risk, everything is ready and all, we will take it forward. That is not a problem.Coming to SME also. So a lot of activity we have generated during last quarter. And many of our people, they are meeting the new customers, borrowers, all these people and all. So that way, if you can see, so earlier when continuously you were seeing a degrowth in the commercial segment. And now this quarter, you found out -- YTD also, you found out a growth there and all. So that way, we are better off, both under SME as well as retail is concerned. So to go forward, so it should not be an issue at all. Just wait and watch. Otherwise, also, if you look at it overall, the 9% growth in the credit YTD, it is a decent number compared to the market what others have grown.Yes, one second from CFO. Yes.
All I wanted to add, Renish, is that we do not have any infrastructure bottlenecks or any constraint on infrastructure. We're fully geared up to take the volumes.
Renish, one more point also. Despite corporate book coming down by 1% year-on-year, and overall, we grew by 9% in the advances YTD.
[Operator Instructions] The next question is from the line of Aakash Dattani from HDFC Securities Limited.
Yes. So my first question is I wanted to get your thoughts on this efficiency of our stock of provision in terms of the balance INR 165-odd crores.
I'm sorry, I'm not clear about that. INR 165 crore provision, what that you wanted?
So I wanted to get your views on your -- on how sufficient you think our stock of provision of this?
Sufficiency. No, 2 things we have to keep in mind. So one thing, if you look at this quarter, as a onetime expenses what we have provided, we have told you, so that INR 175 crore. Now if you look at the 2.25%, what we have estimated the slippages also, so which comes to around INR 1,180 crores for the whole year. So INR 880 crores already pro forma when we have already indicated there. So at the most, another INR 300 crores, it may go up. But simultaneously, we are focusing on the recoveries also, that way the reversal of the provisions, what all will be there from recoveries also will be there. That is one point.So if INR 169 crores also, if you look at it, we'll be able to provide from our own sources what all are available, which we are generating from the March quarter also. So that as well as this, even if you look at it, INR 169 crores, even if you do not touch the March quarter also, ideally, it should be sufficient enough with the 2.25% slippages gross what we have estimated, so without even factoring the recoveries and reversal for the provisions.
The next question is from the line of [ Anand Bhavnani ] from White Oak Capital.
Sir, my first question was regarding growth. How do you see the outlook for next couple of years? And if you can give us a sense of what kind of loan book growth are you targeting and which specific areas do you see leading this number growth for us?
Yes. Anand, in fact, it's a good question. The question is, because we had to pass through this March quarter, how it pans out and how the economy actually comes back to the normalcy. So if you see with these difficult times also, so we could grow up to an extent of more or less 9% during this year, excluding IBPC, and better as I said. So we didn't touch on IBPC because we are totally relying on the organic growth rather than inorganic growth.So that way, if things goes on, I feel that 12% we should aim for that because -- so when the economy is growing at a particular level, if you try to grow double that of, triple that of the economy levels and all, we will be bound to have accidents. So that too the bank where last 2 years when there's a degrowth in the advances, so reversing the past trend and taking it forward, and that too with an accelerated speed if we take it, so we'll be creating problems for the future. So that way I would like to have a calibrated approach. And progressively, they need to grow with safety keeping in mind.So if everything goes on well, we can think of around a 12% growth. So this year, suppose we are at INR 52,000 crores odd and, as I said, INR 53,000 crores, INR 53,000-odd crores also if we reach by the end of the March, so 12% of that, around INR 6,000 crores it comes, more or less, we'll be reaching around INR 60,000 crores of advances by the end of '22. That's what I feel.
Sure, sir. And sir, with regards to the competitive intensity, how are you seeing competitive intensity changes like in any particular product category you are seeing higher competitive intensity or any particular product category you're seeing more opportunity for growth?
Competitive intensity, it depends on 2 factors. One is the built-in competitive intensity what all we have; and second thing, something is driven by the surplus liquidity in the system. Suppose currently surplus liquidity is there, sometimes -- I should not say, when I look at offers what others give, even for a fresh account this thing, the risk-reward ratio more or less is not kept in mind. So the rock-bottom pricing, what all the offer and all, even if that's a risky asset and all. So we are not interested in touching those sort of risky assets. And at a throwaway price, we don't want to price. So in the process, even if some good things are there, where we cannot price it at such a low level, which is not worth it, we are not doing. So competitive intensity.And the second thing, if you see, not only the pricing is the only factor. If pricing is the only factor, there has to be only a few players in the market and all, no player would be there in the market at all. So beyond competitive intensity pricing, there are few other factors like connect with the customer and support them at a material time. All these things matter. So we are internally stressing on those things, which is the basic DNA of Karur Vysya Bank, to focus on that to have the connect and TAT that all these things and on. So that way, so we are able to go back to the customers and all we are able to grow. With this, we are reasonably confident with the initial feedback what we have got from the customer, that the numbers what we have told 12% something like that, we'll be able to grow well despite the competition what all is prevalent.So I'll tell you, 12%, you don't hold me tomorrow. So this is what my estimates and all. I didn't talk to my management team also yet because you asked me, I indicated. So back to front, I need to work on these numbers and all to the extent possible, it is in my mind.
Sure. And lastly, sir, with regards to the COVID stress, you said you want to see how economy comes back in the March quarter. But in terms of our provisioning, do you see any significant provisioning that we'll have -- we might have to undertake in March quarter? Or are you done with all the pain things?
Yes. I'll split this again into 2 parts. All along, bank has the pain under the corporate segment. So when we look at our corporate segment, as against a portfolio of around INR 14,000 crores also, so nothing much, around INR 100 crores, INR 200 crores only under the stress we are able to see it also. So which, in a normal course, any bank will have to pass through that particular stress when you are in the commercial business.So the main component, which was lumpy and chunky hits we were getting earlier, if that is not coming, and rest has to be from the SME as well as from the personal banking. So if you split this again into this one, our SME 30-plus, if you look at it, so after netting out pro forma slippages also, it is 2.42% of the advances.But if you look at the retail segment, majority of these restructuring requests as well as the stress is coming from home loan as well as LAP. So personal segment, personal loans are concerned, we are very conservative with lot mitigating conditions and all. If these 2 -- currently, people are unable to service this because their cash flows have been impacted, because few of them are not getting -- they are getting delayed or not getting and all. But underlying asset is still with you. So -- but we will not be able to enforce because of the Supreme Court directions and all. So compared to the earlier stress what we had under corporate, which majority portion was unsecured, here, the stress what all even if you undergo also, it is relatively secured with a decent LTV. Even if after tomorrow, you go to the market and all and enforce that, you'll be able to get back the money. It's the question of only time.So same is the case as far as our SME portfolio and for commercial is also concerned. We have a slide in the investor deck you can see on the collateral coverage. The majority of our loans, even under SME, are also covered through collateral. So that way, compared to the corporate, as I was mentioning, major portion was a consortium pain, all these things. So this stress, even if it pans out, is relatively a better stress where chances of recovery are better compared to the earlier stress. But whatever it is, we foresee that because we are totally focused on this follow-up monitoring. At every level, our people, we are alerting them on how they need to connect, how they need to own up each of the account. So we are reasonably okay, feel that there may not be big unforeseen hits under this segment.
The next question is from the line of Pranav Tendolkar from Rare Enterprises.
Sir, there is a little bit confusion. So in your results press release, you have mentioned there is a INR 175 crore onetime adjustment to wage. And then in the presentation, you have obviously said the figure that you mentioned, that is INR 135 crore for the wage bipartite agreement, and then there is increase from INR 45 crore to around 50 -- sorry, INR 71 crore in the retirement benefits. So can you just again explain? There is that press release mentioned INR 175 crore and why the values mismatch?
Pranav, yes, Natarajan here. The total -- the expenditure on account of this bipartite, in fact, it has 2 components, one is on the pay bill component and another is on the other connected benefits. If you see the overall, we have provided INR 175 crores towards the bipartite settlement. If you see the pay bill component, we have -- in our investor presentation, we have shown INR 135 crores. And the balance amount, we have provided by the way of the provisions. These are all onetime expenditure. We have taken into account all the possible -- the accounts, I mean the expenditure required for this, we have provided for that.
Okay. And this one-time provision is sitting where in the P&L and balance sheet?
Pranav, in the P&L, INR 135 crores is expensed as salary, staff expenditure, INR 40 crores is accounted under provision others, and it is held as a liability because it is subject to actuarial valuations and other things. So that reports will be actually finalized at the end of the year.
Pranav, actually, as of 31st of December, we have not paid. We have only provided. Only this quarter and the subsequent quarters, it will crystallize and then we'll pay. So that is why the INR 135 crores is debited and put it in the payable account. And the remaining amount is we don't know when it will crystalize. So that's why we kept it in the results -- I mean, provisions.
Okay, sir. So just a little bit clarity. So in the next year, your wage bill is going to be around what number?
See, 31st of March, our pay bill -- wage bill was something around INR 857 crores. And if you see 30th of September, if you annualize it, it is INR 868 crores. So we also -- our MD sir also mentioned, and the settlement -- the bipartite settlement impact is INR 56.16 crores per year. So if you roughly translate into percentage terms, it will be 6% to 7% only because of our wage bill.Over and above the current business.
Got it. So it's 6% to 7% above INR 868 crores?
Correct. Correct. That's what.
Okay. Okay. Sir, that's great. That's great. Sir, second thing is that also there is a little bit mismatch where, in your press release, you said that there is a INR 342 crores aggregate provisions for COVID. And then there is one value mentioned which is INR 300 crore if you go to the COVID provision slide. And then INR 165 crore you said is the available out of that in the contingency. But you have only actually utilized something like INR 14 crore and INR 57 crore as the 2 items from the existing INR 220 crore in the previous quarter. So -- and then you have provided, obviously, something extra. So can you just tally it?
Yes. Pranav, let's go through the numbers one by one. The INR 342 crores is the disclosure which is required to be made based on terms of our accounting, correct?
Correct.
So that breakup is very simple. INR 220 crores was already provided up to September. INR 80 crores is what we have provided towards pro forma slippages. And another INR 40-and-odd crores towards this restructuring, which came out of this moratorium book because of COVID stress. So that is number of INR 342 crores, which our auditors have mentioned as a disclosure in the financials. Am I clear?
Correct. Correct. So this is not INR 57 crore restructured provision, but it is INR 40 crore.
See that restructure is, like our MD sir was saying, there will be both components, one flowing out of COVID and one out of regular MSME package.
Got it, sir. Okay. So -- and where is the INR 300 crore coming from and INR 165 crore?
Now if you theoretically see INR 220 crores plus INR 80 crores because restructuring, the reply which I gave to earlier question, once the restructuring is done, based on current RBI guidelines, the restructuring provision has to be carried forward separately. These are the RBI guidelines, no. It is based on the performing standards of the account, which has to be treated separately, okay? So the COVID provision per se, including pro forma slippages, is INR 300 crore. Now if you consider INR 880 crores worth of slippages, pro forma slippages, INR 135 crores will be the outer limit for provisioning requirement on those accounts at roughly, say, 15% and all. So if you reduce the INR 135 crores from INR 300 crores, the balance left, which we are treating it as a buffer, is around INR 165 crore. And yes, to the earlier question, I think, from someone from HDFC, so this INR 165 crores is actually created and held on record, we still have room to create something which we will do in the normal course during the current quarter.
Correct. Correct. So that INR 65 crore additional provision that you made for COVID in this quarter is a part of that INR 300 crores and INR 165 crores?
Yes.
Right, sir. Sir, third thing is if you go to the provisions slide, then there are -- there is one provision item, which is NPI, others including NPI. That saw a big jump to INR 63 crore. What is this?
I was surprised why nobody asked this question. There are 2 items there. One is the LVB write-off, which we had to do, but don't quote me again. No -- but everybody is aware of it. That will come in paper. Yes. So everybody knows, it is RBI published news that there has to be a write-off. So that is one. And the other one is...
LVB is Lakshmi Vilas Bank?
Yes. That's right. I abbreviated it. And the second one is what our President was reporting towards this pension benefits and other retirement benefits, which will happen now in this quarter, the front loading. So those are the 2 items.
So actually, that is not impacting PPOP, but it is impacting PAT.
Yes. Correct.
Okay. Okay. That's great. That's great. So that means INR 40 crore that you are saying is actually in PAT.
Correct. Exactly. That write-off thing don't, I mean, over play it.
No. No. No, sir. Sir, that is second thing. Third thing is that your other expenses actually are in control till now. So selling and administrative expenses, that is INR 210 crores. And I think I believe last year, same quarter, it was around INR 227 crores. So this -- is it a cost rationalization? Or is it that some -- I mean what -- how should we treat it going forward?
No. I will not say because though the efforts are there for the cost rationalization, but COVID also was there, on account of that also, first, second quarters and all. So a lot of costs has come down. But whatever it is on every line item for the purpose of this one and all advance, our income as well as expenses, so we are having a track now and all. So that I cannot straightaway say everything has been rationalized and all. But in the days to come, so we are going to have an eye on each of the item, so whether we are going to get a value for the money we have spent on.
Okay, sir. Okay, sir. Sir, next year provisions, sir, obviously, there will be some aging provisions on the -- around INR 2,000 crore pro forma NNPA that we have. Then we need to do some provisions for the incremental INR 300 crores slippages that you said that if you just subtract INR 880 crore from the 2.5% guidance, and that is INR 300 crores. That will be the new provisions. And then we will have INR 160 crores buffer for that, and some part of it will come from the recovery.So can you just guide on the recovery part of it? Because I believe that whatever disposals you provided in the past, there is a decent amount of security on the -- even COVID and -- COVID slippages and previously slippages. So can you just elaborate how will be the loss given default on new slippages and existing slippages moving forward?
See, Pranav, with regards to recovery, if you notice, during the Q3 also, in spite of the difficult conditions, we have recovered INR 161 crores. So accordingly even though we have given indicated the NPA guidance, and we are very much sure that definitely we'll be well within that. But if you take into recoveries, that net slippages will be substantially low. What we are talking about only the gross slippages. And the net slippages will be definitely -- you have seen during the past 3 or 4 quarters, our net slippage is always negative. Only -- maybe in March -- March also, we are planning for that only.
Correct. Correct. So upgrade and recovery of around INR 150 crores to INR 200 crores per quarter could come from...
That is what our -- historically, if you see, during the past 3 quarters, we are able to achieve this. But during the last quarter, we have activated the recovery team, and we are initiating a lot of other measures. Definitely, it will pay result. In addition to that, because of the COVID, there were -- certain regulatory issues were there. So particularly on the -- this SARFAESI and all, we are not able to take the possession of the properties, but all everything is lined up now. So once it is clear, there will be a good recovery from this segment also. And also, the large borrowal accounts also, we are trying to chase. That also will help us to reduce it.
[indiscernible]
Yes.
Sir, last question from my side. Sir, other income and fee income, so there are many components, like I believe you have a tie-up with one of the best health insurance company in India. And also, there are some efforts being done on life insurance and other fee income part. So can you just elaborate where are we in this progress? And what is the run-rate -- quarterly run-rate that we have right now? And what we -- what is the goal to if we stay in 12 months?
In fact, I agree, but I'll tell you the quarterly run-rate, I'll not be able to share with you because directly that the third-party product cross-sell number is not readily available with me. But one thing I can share with you, and so we have been emphasizing on every partner as well as our own branches for improving this one and all. The question, what happened is a few other players where the IT integration is required. So we are actively working with them so that the policy will get generated straightaway in the branch. And immediately, after the transactions, they can print and they can give it. Most probably by the end of the month or something like that, either the issues from the partner or from our side and all, we are taking it forward. Once that is through, that will be better.And second thing is coming to the promoting these products, insurance and these things also, to some extent, it is subdued during this COVID period. As all of you know, when people are struggling for their income and maintenance of the families and all, so if our people are approaching them for a third-party and all, there is some sort of reluctance on their part because they want to save something for the rainy day. So that has, to some extent, dampened our cross-selling efforts, so which maybe this quarter, once normalcy restores, we will be able to get back the traction.And third thing is that we were not having a strong CRM. So that we are in touch with the service providers and all, Most probably by the end of this month or next month, we will be able to conclude that. Once the CRM comes, we will have a better tracking mechanism, particularly for the lead generation, follow-up, third-party, cross-selling, all these things. So that will further improve our position, which is a work in progress going on well and all. So when the economy is not doing that well and all where we are unable to push, we thought let us put this infrastructure in place and all so that we can take off once things are back in action.
The next question is from the line of [ Shri Shankar ] from InCred Capital.
I got a couple of questions. First is, sir, what is our CET Tier 1 capital?
It is -- I told actually.
[ 16 point. ]
16 point. I'll just tell you, 16-point-odd. We'll just tell you. One sec, yes. It is 16.46 something like that, actually.
I said Tier 1.
Tier 1 only. Because Tier 2 is 18 percent odd. Tier 2, you see, it is 18.52. Tier 1 -- the entire capital, Tier 1 capital and CET1, we don't have any AET1 borrowings.
Okay. And how much has been our lending under ECL and GECL?
INR 2,000 crores. So we have given -- GECL, we have given a slide. So it is INR 2,000 crores. We have disposed segment-wise also. We have a slide for that.
Which slide? I missed it. Which slide is that?
I'll just say. It is Slide #23.
Okay. Okay. 23. Okay. GECL portfolio. Okay.
Correct. Correct. Absolutely.
Okay. INR 2,000 crores. Sir, a significant amount of your restructured one is actually housing loans and INR 157 crores or something. And do you see housing loans mostly for the salary sector or the MSME sector or retail sector? What is the sector this housing loan contributes to?
Mr. Shankar, actually, you are aware that our retail loan, the vintage is very low. We just started a couple of years back. So our initial focus, we want to tap our existing customers instead of a new to bank. So if you see our existing customer pattern, most of our customers are self-serviced businessmen or self-serviced professionals. So in that way, our portfolio -- retail portfolio, also predominantly these self-serviced business people and the professionals. Of course, there are some salary sector also there. I can say from maybe 60% from the business and self-serviced professionals and 40% will be in the salary class.
Okay. Sorry, 60% from the business side and 40% from salary class?
That's right. That's correct.
If I can just clarify, you wanted Tier 1, Tier 2 capital?
Yes.
Our total CRAR is 18.52% for this quarter. Tier 1 is 16.46% and Tier 2 is 2.06%, okay?
Okay. Sir, in your Slide 26, what does it -- did you say that SMA 30-plus is 2.52%, and then you have this portfolio performance balance in rupees. This is in terms of absolute numbers, 3,400 -- I don't understand. That's the reason why I'm asking, Slide 26.
Yes. The Slide 26, we are just giving a trend. So we are not talking about any absolute numbers here. But if you talk about the absolute number, the SMA 30-plus is 2.36%, which we have indicated on the side bars. And in the graph, so what we assumed that in March 2017, if our SMA numbers are at 100, how the trend -- how it moves. So that is just to give the indication we have provided this graph. The first one is in terms of the value and second one in terms of the percentage, percentage to our advances.
And -- okay. Okay. Okay. And this is portfolio performance, when you say the same thing that SMA 30-plus...
Exactly. Exactly. Exactly. We take the SMA 30-plus numbers. And then we compare with the 31 -- that is March 2017 and we analyze the trend. So if you see March '17, now the trend has increased. Slowly it is coming down because of a lot of measures bank has taken. And because only -- if you see the September, it has come down drastically. Again, it is moving.
So my question is, what is the difference between these 2 graphs?
So number -- the first graph is in terms of the value. Second graph is in terms of the percentage, percentage to advances, our SMA to balances to advances.
The next question is from the line of Amit Premchandani from UTI Mutual Fund.
If we just remove the gold loan portfolio and the growth in gold loan, which is largely derived by the increase in the commodity price, the underlying growth in the loan book is still almost 0 or negative. When do we see underlying growth coming back?
Now if you look at the growth book, the degrowth Y-o-Y is there in the corporate segment, okay? But if you look at the commercial also, so you are able to see some sort of growth. Earlier -- as I was mentioning earlier also, up to March 2020, if you look at it, so all segments, more or less, we were having a degrowth only.So now if you look at it, so the growth started. If you do each of the segments, it can be housing, vehicle there and jewel loan, other things also we started growing. And jewel loan, anyhow you have told. SMA also, there is no degrowth. So that way, if you look at it, the degrowth stopped, and they started growing that way.And third thing also I'll tell you. Earlier, we were having IBPC. So the growth what all you were having up to the end of March was with IBPC of INR 800 crore. And in the December of last year, IBPC was much more. Whereas this year, the growth every rupee is only on account of our organic growth and all. We didn't go for any inorganic growth. So that way, everyone is more or less aware that they need to deliver. Even as I start telling you about the NEO. NEO, which was a new channel also, it has grown more or less by 40%, 45% during this year. But the problem is up to September ending, no one were coming forward, neither the borrowers nor actually the people also are going forward. So the actual traction has come only in this quarter.See, we have a slide, Slide #18. If you look at the Slide #18, retail segment growth we have shown, quarter 1, so INR 172 crores, so sanctioned as well as disbursed. We were giving INR 126 crores. So that INR 172 crores sanction, everything now in retail we are doing majority through digital only. So the INR 172 crores of first quarter has now moved to INR 555 crores. So this is excluding jewel loan and sanctions also INR 445 crores. So that way, you can see quarter-on-quarter, how the traction is going up.And another thing also earlier for one of the -- your analyst I was sharing, saying that whole hog, we are not opening the flood gates and all we are going because at the bottom, what is the position we do not know actually. So that's why I said we are growing, but we are growing. One good thing what all of you need to note is the degrowth has stopped, and we are growing selectively and keeping the safety in mind. So that way, we are better off compared to the earlier year. Now we are well preferred to take off from the next quarter onwards.
Sir, on the slippage front, if you can just break up the pro forma slippage for Q1, Q2 and Q3?
Yes. Yes. Because of the August moratorium, quarter 2, we have INR 30 crores of slippage, and rest of them, so we have identified and diagnosed -- that is we have recognized them in the third quarter. So that way, end of third quarter what all is there that INR 880 crores, INR 30 crores plus INR 850 crores.
No, INR 850 crores plus INR 30 crores.
Sorry, INR 850 crores plus INR 30 crores. INR 850 crores last quarter and INR 30 crores for the prior quarter.
And 0 for Q1?
Moratorium standstill was going on at that time.
And sir, your guidance of 225 basis point or 250 basis point of slippage is on an annualized basis, right?
True, true, true.
And sir, on the collection efficiency chart that you have shown, what exactly does it signify? 31 number slide, the term loan October '20 was 87.5%. That has moved to 97.5% in terms of efficiency. What exactly does it signify that you have collected 10% more this month?
Mr. Amit, see actually, what we are trying to mention here, you see the first time payment, whatever the first table, we have presented it when the -- the first time payment, this is the efficiency. For example, any mandate is there. If you press it on the due day, only 87.5% were honored. So remaining 13% were rejected. But you know that the second time, third time, we'll continue to make the payment only after talking to the customer. That is our normal collection measures, which normally it happens, not necessarily now, earlier also, it is like that.So the second table, what we are saying that, out of this -- the 87.5% is improved to 97.5%. For example, October, the 12.5% were not paid, but whereas, the same customer subsequently paid, and it's only 2.5% is outstanding. So what we're trying to say is it is not that the customer is still not paid, but subsequently has paid. So that is what we are trying to present it here.
Understood. And sir, the restructuring in the commercial book has been much lower. Is it likely to sustain commercial as well as MSME book? Or can we expect a pickup in the next quarter?
See Amit, again, if you see our pro forma slippages, again, substantial slippages comes from the commercial. So what we have consolidated -- what we have taken the decision is if the customer is not able to run the business and the cash flows are not visible, there is no point in continuing account under restructuring. So that is why we are forced to take a call that let us not consider restructuring. We have allowed the account to slip. So let the customer try to recover the money. So that is why our restructuring is low, whereas on the slippages side, it is higher.
A final question from my side. If you look at a 10-year trend, the biggest drag on ROA after credit costs have been the overall cost to asset ratio for KVB, and it has continuously moved up. And this quarter, we also saw fee income also being a negative drag in terms of growth. So how do you plan to deliver on levers to improve ROA, except the credit cost?
Yes. I'll just tell you one thing. So this year, comparing the income with that of last year, it is may not be that correct. The reason is the major heads where the income during the quarter also because first and second quarter, there are issues. All of us, we know ATMs were -- you cannot charge, and government has imposed some sort of restrictions and all, with all those things and the number of transactions also have come down, so processing charges.Now if we look at it, there's a dispensation for the balance sheet finalization also was given because of the COVID. So that way, the processing fee, which we were recovering earlier up to the third quarter, so it got slightly deferred, and it has been postponed to rest of the quarter. So even if you're asking the borrowers also, the balance sheets are not ready. We need to give -- even if something is really -- the estimates also they have to give. So the entire process, the process of the renewals and other things got delayed. So that is one point.Second thing, if you look at it -- processing charges is one. Second thing is the commission and the LC and BG. When the activity itself has subdued and not come back to the normalcy in full throttle, so the question of LC/BG opening have come down, which on the nonfund base earlier we were getting. And that has not come back as yet in this quarter also.So third point. Earlier, I was responding to one of your colleagues about the third-party products and all cross-selling. Because selling at this stage, when they were literally struggling from hand to mouth for maintaining and sustaining their families, at the time, if you go and tell them, you take an issuance and all, so the response level from them is not that great as we were having earlier.So with these things, we need to keep the ground realities in mind. So though we have been tracking how we need to go ahead and all, but it is not a point we are looking at it. Not only that, as I was telling earlier regarding the ROA, we are abreast of the situation and all each of the lever. So we want to have owners also within the bank and all. So periodically, we'll be reviewing this lever, how it moves and what is the bearing it will have on the total ROA and how to control the cost as well as how to optimize the income. This would be an ongoing process we will do with more trust, more trust. Earlier, what all was coming and going was going on. Now it is not so. It will be monitored by CFO personally, looking at each of the points and all on an ongoing basis. And we are very sure because we are well aware saying that ROE is one of the key factors which we need to take care of that and all. We'll work on that. Absolutely, I can say you on that.
Any guidance on ROA?
ROA, that's what I'm saying now -- okay, credit cost, as we were discussing, how economy pans out, [indiscernible] and all, we do not know. So if everything goes on well, so to some extent, we'll be able to improve much better in '21, '22. But whatever it is, next to next year, we'll have to cross 1% and all. So accordingly, every day, we are planning only keeping ROA in mind.
The next question is from the line of Rohan Mandora from Equirus Securities.
Yes. So on the slide of the portfolio performance, Slide 26, this data is excluding the pro forma slippages. Would that be correct?
Yes.
The 16 to 34 down which has happened does not include the pro forma slippages?
Yes. Yes.
Yes. Okay. And sir, secondly, in terms of the recoveries that we are getting in the last 3, 4 quarters, like is it more driven by the enforcement of securities? Or is it more because the improvement is in the businesses, and so they are coming back and repaying? If you could share some color? And incrementally also, like, how are we seeing the recovery coming, more from the improvement in business or from the enforcement of securities?
Mr. Rohan, see, if you have noticed during the 9 months period, the security realization is not possible because positive procedures, we cannot -- we are not able to proceed. So large advance also the IBC, everything is standstill. So whatever the recovery which we are displaying during this 3 quarters is only cash recovery and the one-time settlements and understanding the customer, talking to them...
Sure, sir.[Technical Difficulty]
We will request the participants to stay connected, as the line for the management has gotten disconnected. Thank you for patiently waiting. We have the management reconnected. Sir, you can go ahead, please.
Yes. Mr. Rohan, I was talking to you about the recovery processes. So what all you are seeing in the numbers, it is only a cash recovery on account of onetime settlements, and customers are paying. And also, wherever it is possible, customers are liquidating their assets and then making the payment.
Right. Right. Sure, sir. And sir, on this collection efficiency slide, the term loan and working capital bifurcation. So is this for the entire portfolio, excluding jewel loans? Or how -- what is the...
It covers the entire portfolio other than the loans and bills portfolio and small, small things. But by and large, it covers our entire portfolio other than jewel loan.
The next question is from the line of Jai Mundhra from B&K Securities.
Yes. Sir, just on collection efficiency slide and if I were to look at the SMA-2 number that you have disclosed at 2.5%. Now if I look at the collection efficiency, which moves the period and the December collection efficiency and the collection efficiency after 1 month, there is a 5 -- 4%, 5% kind of a difference as people pay with a lag. So this SMA-2 number that you have disclosed, 2.5%, is it December end or this takes care of the lagged payment?
Whatever it is disclosed as of 31st December, Jai.
Right. Okay. So as people pay with -- as you have shown that some of the customers will pay with a lag. So this SMA-2 number should have also come down, right, as people pay with the lag, right?
No, it's a ongoing process. Some forward movement will be there.
Right. Right. Okay. Great. And second question is, sir, on commercial book. Now if we have given around INR 1,400 crores under ECLGS, right? And if I were to multiply that by 5, assuming that, let us say, INR 7,000-odd crore will be the portfolio outstanding. And if I remove that from the SME book of INR 16,000 crore, right? So around INR 9,000 crore is the number which have not taken ECLGS. And of them, INR 475 crores have already slipped. So I am trying to understand that from 12 months perspective, this commercial book slippages should trend much lower, right, because all the borderline cases are either have filled or they would have availed ECLGS. And hence, at least from 12, 18 months perspective, the commercial book, which was, let us say, a pain area, should show significantly lower slippages. Will that be a right conclusion or no?
We also feel so, Jai, because what you said is correct, which were there in many other bottle line cases, which were prior to March also they were fledgling and all, they are struggling. So all of them because that support structure has been suddenly withdrawn, so they had to break. So that way, weaker links what all are there, they have been broken now and all. So that way, we feel that in the days to come, those who are able to survive and sustain, so the good ones will survive and all. This level of pain, what we have undergone, so it will not be at the same level in the days to come. That's what we also feel.
Right. Okay. And the last question, sir, if I were to total your pro forma slippages, INR 880 crores, then your restructuring INR 680 crores and additional pipeline of INR 295 crores and SMA-2 number of around INR 1,200 crores something -- INR 1,200-odd crores, right, is there any overlap between all these 3? Because if someone -- from an external perspective, if someone wants to capture the residual stress, which is pro forma plus restructuring and, let us say, SMA-2, is that all 3 are additive? Or is there something overlap?
There is no...
INR 680 crores is cumulative. So during that year, it is only INR 480 crores.
Right. Yes. So but...
Other than that, nothing is overlapping. We have been independent on that. No, the pro forma INR 880 crores, definitely, it is not included in the SMA-2, which we have published.
Right. Okay. And the last data question, sir, if you have the net NPA breakup the way you have given for gross NPA, agri, commercial, retail, corporate?
Yes. I'll answer that, Jai. Our net NPA figure, which is there in the slide, is INR 1,263 crores. That can be broken up into commercial is INR 466 crores, retail is INR 68 crores, agri is INR 22 crores and corporate is INR 707 crores.
The next question is from the line of Anand Bhavnani from White Oak Capital.
Sir, you gave us a sense of -- about the recent quarter and a sense of outlook. In terms of your 3- to 5-year outlook where -- which are the areas where you kind of see major scope of improvement, and we'll have to kind of invest time and money?
Yes. If you look at each of the verticals, so we have enough scope. If we look at the retail segment, so each of the product, we can grow very well, home loans as well as vehicle loans as well as -- and the retail segment also, gold loan also, there is a provision where the yield is around 10-point odd. So that way, when -- we are better off as far as technology is concerned, digital booking is concerned. So that is not a problem.Coming to the commercial segment is concerned. So as I was mentioning earlier, now we are reconnecting our branches, all of them, and we have strengthened also by creating a business banking unit also. Throughout the country, there are 18 units or there are 16 units are there. So with these relationship manager structure, what we have created, so we are better off in having these commercial. In the earlier call also I was mentioning, our focus would be rather than on the corporate and we'll focus on the commercial front. Though the numbers may not grow in wholesale numbers how they grow, but the pricing power is relatively better here and all, you will be able to get some more better yields here. So that way, commercial is concerned, it is -- bank is in that, and we can revive that, and we are confident of that.Now coming to the agri gold loan portfolio. We'll continue to do that. I'm not saying that we will get out of that one and all. In a calibrated way, we will be doing that one, plus other factors also, we are looking at and other activities where like poultry, the green house, these things which are there in our command area. So we will try to do that and all. We are trying to grow in those areas. Separately, we are working product-wise.Now if we take out these 3, corporate, if you come. So corporate -- so we took a policy earlier itself that not to take more than INR 125 crores. But we will try to take much lower than that. And the quality also, we'll keep that in mind. The quality when is kept in mind, the book growth will be subdued. But even then, it is not an issue. We want to grow in sub-INR 50 crore segment there, where, again, the pricing power is much better. So we have already created structures 2 years back itself for this corporate unit and all. We need to activate them. So now that the pain is more or less coming to an end, so we can go back to the market and all, identify good accounts and all, we can grow under corporate segment also.Now coming to the nonbrand channel, NEO, what we have started some 2 years back. Conscious efforts, cautious call was taken during last 6 to 8 months. So not to go up to end of September, October and all. So when we -- from November onwards, they started growing. So last year, the total growth was around INR 500 crore -- INR 450 crores, INR 500 crores odd. And these 4, 5 months, 3 months, they are able to grow, 4 months by another INR 400 crore, INR 500 crore. So we are strengthening that structure, and that unit also must start giving us some sort of numbers.Now the last one is the precious metal. Precious metal, we have created a year back, so to take care of the gold financing business that is the bullion business. So that also we are activating that one, now that the normalcy is back. But the only thing is overall at a country level, if you look at it, the amount of gold we are importing has come down drastically. Volumes may be down, but there also we'll granularize our portfolio, and moderately, we'll grow under this.And another area, what we are thinking is on the co-lending. Co-lending, we are in touch with a few other NBFCs who are strong enough and who have their foothold and feet on street. So through that route, also, we want to grow well, so that at least where we do not have presence and where we do not have the capability for feet on street, so through their underwriting standards and our underwriting standards, if it matches, we want to grow under that particular segment too. That way, if we look at it, each of the engines we wish to fire, and we want to grow in the coming years.
Yes. Mr. Anand in addition to our MD sir advised, see, during the past 3 years, we have invested a lot of energy and money in the scaling up a lot of infrastructure side, business side and all. Now everything has to be transferred into business. That is what now we are focusing it. The new initiatives, whatever our MD has mentioned, everything will be translated into business in the next 2 or 3 years. So that will be -- there will be a substantial business gain for whatever work we have done during the past 2, 3 years.That means the problem is changing the process because, as I was telling earlier, overnight, you cannot reverse what was happening earlier. Suppose the degrowth what all was there, we are able to successfully arrest the degrowth despite the COVID. So now we are at a stage with all the structure -- infrastructure in place, as President was mentioning. So we are well equipped to take out from this and all. We are reasonably confident that the team is totally energized now and all. They'll take it forward.
Sir, on this I had a question follow-up. You spoke about each an individual area in terms of lending, but the consequently missing was your strategy on costs, sir. I mean at this point in time, why isn't that a focus, given that it could be a low-hanging fruit cross-sell in terms of insurance or investment products?
No. No. I think you have misunderstood because earlier, one of your colleagues have asked this question, at length I have responded there. I thought in the positive of time, I didn't repeat that certain point. Otherwise, cross-selling is one of our core areas. I talked about the CRM, what we are doing, all these things I have explained earlier.
No, sir. So how do you -- my question to that is how do you kind of see this cross-sell evolving over, let's say, next 3 years? How do you internally measure it in terms of number of products sold or revenue per customer from cross-sell? What metrics do you track? And how do you anticipate these metrics evolving in next 3 years?
Using our analytics because a good analytics team is created, so 1, 1.5 years back. So by using the analytics team, which are the products which we can promote, actually, and keeping in view the profile of these customers, and that is being identified and all. As I told earlier, CRM is more or less on the stages of finalization. By the end of March, it's ready. So we effectively use that and to promote and push these leads to the branches and all for follow-up also. So the use of analytics and sensitization amongst the people for improving the numbers and all and the CRM together, so this should be one of the good levers for us to augment our income. Absolutely, we are on the job to get the maximum from this particular segment.
The next question is from the line of SivaKumar from Unifi Capital.
Yes. Sir, my question is with regards to the credit underwriting processes in the bank. So for the commercial segment, is it currently centralized, the credit underwriting, and the branches have no role to play?
SivaKumar, actually, we have been talking about the digital transformation. It's basically for the business transformation. But we took the decision 3 years before to granulize our lending portfolio. What we thought is the turnaround time and the scalability is the main issue. So that's why we went for the digital transformation.Today, in commercial banking, we are bifurcated into small business group and the business banking group and the corporate business. So the small business group, particularly up to INR 2 crores, it is completely digitalized and centralized. And earlier, these are all completely -- the judgmental basis are happening at the branches. Today, also they're happening at branches. But there are very clear underwriting metrics are built in our business rolling game, and everything should happen only through digitally.So in case of any customer needs to be accommodated because of the other reason, there is a clear -- they have to -- it has to be forwarded to the other higher authority for approval. In that way, we have completely moved away from that personal judgmental to the algorithm-based score built in the business rolling game.
Yes. The escalation there, if somebody wants to escalate something which has not gone through digital channel, that is very clearly laid down and tax has been defined for that also.
In addition to that, we have created a separate risk management department. And more than INR 50 lakhs, it has to be eyeballed by the risk management officer sitting across the division. So they are not connected with the business. They're all connected to the risk ahead.
Okay. So it's the small business group, right up to INR 2 crores.
That's right. Up to INR 2 crores. Even for business banking also, we followed the same validations, demography and other validations are happening only through digitally. But finally, because it require some sort of additional eyeballing, so that is why we made it as manual. At the end of the process, again, it will become into digital. So in that way, our aspiration is we want to completely move away to the digital lending system in the bank. We already completed 100% in the small business group and also the business banking group. Currently, we are doing that the corporate business also. But it will be mixed. It's a mix of digital as well as the manual process.
No, what is called digital, that's the term used. So CBG -- I mean CIG will be a digital process.
Got it. Sir, but where does the credit division happen how for even the SBG group?
No, see, whatever the sanctioning authority, we have not disturbed. Only thing is the underwriting for earlier is a purely judgmental. The manager feels that they can approve the loan because it's only personal judgmental and always, we can put some reasons. But in under digital system, we have built a scorecard. If the score is less 30, we cannot approve. There is no way it has done the sanction. And if it is 30 and 55, it has to be eyeballed by the risk management. If it is 50 and 55 and above, it's a green channel. In addition to the -- the branch manager is supposed to meet the customer, do the PD, all things, all processes are there, but there is an additional digital sourcing system we have built in. So these are all completely -- complete digital environment. We are fully tied up with -- connected through APA with almost 14 fintechs. So it is working very well in the bank now.
Okay. So this is an internal score, which is generated by the system based on some algos, and the branch manager has no role to play in that.
Exactly. It's all completely back tested. And we have -- I think you remember sometime back, we onboarded Boston Consultancy Group (sic) [ Boston Consulting Group ]. And with their support and we have built the score cards for the different new to bank, existing customer, manufacturing, trade, like that there are 24 score cards are there. Accordingly, it is designed.
Got it. Sir, can you throw some light on this new channel? So that is also a digital channel wherein everything is taken care of by the system in terms of scoring and accreditation.
See, as far as the new is concerned, earlier our MD has mentioned that it's a nonbrand distribution channel, which we have created a couple or 2 years back. So the idea is there are certain products which we are not able to do it at the branches. For example, LAP product. So LAP product, we require a complete TD with the customer, so that there are special requirements are there. So that all, all these products, which are not able to do, particularly co-lending model, all these things we have centralized it. The team is sitting in Bombay, and different people are there. They go by the DSA model. So there is no brand support there. Only for our operations, the accounts are parked at the branches. So otherwise, sourcing, underwriting that our credit managers have posted in all the locations. These credit project managers, they go personally, discussed record. And of course, still we are not connected with the digital platform. We are in the process of doing it. So currently, the model goes on the TD basis. There is underwriting model is there. Currently, we're doing like that, but over a period of time, maybe in the next 6 months period, we want to that also to put it under our digital platform.
Okay. And sourcing of the business, you rely on the DSAs and co-lending partners.
Exactly.
Got it. Sir, one question on the restructured book. Given that much of the restructuring is coming from the retail side of the business and that too unsecured business, what is your own expectation of recovery of this book?
Yes. I'll tell you. So earlier also I was mentioning that regarding the stress, the texture of the stress what all was there and currently, if you look at it, so it's a question of only the time now. Earlier the stress was there and all majority used to be the unsecured. So now once the Supreme Court orders they are out, and you can start enforcing on the normal stress and restructured also. What we have done is, if you look at the numbers, there are very conservative numbers are there. Many of the cases where we didn't find any visibility of the cash flows or is ability to service and sustain, we straight away rejected those cases because we didn't want to postpone the problem. We wanted to bite the bullet.So these cases, naturally, we have to have a practical approach and look at their position and all. They were getting their salary or they're self-employed or some sort of sustainments they were getting earlier. And a few of them, they were getting their payments in time. If they have not got the payments in time and normalcy is going to be restored, it is the right time we need to support them. So keeping all these points in mind, and we have restructured this account. Wherever we are reasonably felt this is a deserving case, all those cases we have done. So we assume that with the economy coming back to a normalcy, many of them will be able to get back their money. That is one thing.Second thing, as you know, in India, the house, our home is close to the heart. Everyone tries to protect their home rather than surrendering it to a banker for an auction. So that way, the ability to recover a home loan is relatively better compared to unsecured a big corporate loan. So that point, we need to keep it. So that's why I told that the texture of these restructured loans is relatively better than those which were there earlier.
Due to time constraints, that was the last question. On behalf of Spark Capital Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you all. Thanks for participating. Thank you very much.
Thank you.