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Karur Vysya Bank Ltd
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Thank you, Janice. Good morning to everyone on the call. On behalf of Spark Capital, I welcome you to the 4Q FY '20 Earnings Call of Karur Vysya Bank. We have with us today the management team of KVB, represented by the President and COO, Mr. Natarajan, General Manager and CFO; Mr. Sivarama Prasad; Company Secretary, Mr. Srinivasa Rao. I now request Mr. Natarajan 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, Abhinesh. Good morning, ladies and gentlemen. I'm Natarajan, President and Chief Operating Officer. My colleague, Sivarama Prasad; and Mr. Srinivasa Rao, on behalf of the management team, I welcome you all for this conference call to discuss on the Q4 and financial year 2020. It's a testing time for the mankind. So millions of people lost their lives. And millions of suffering, and are in the process of recovery. And at this moment, we pray our Goddess Gayathri, the presiding deity of the bank, so that the blessings for the early recovery of the people who are all suffering. As far as our bank is concerned, 23 employees are so far impacted because of this virus. And 3 have recovered fully, and remaining people -- the employees are under the treatment. And I hope that, hopefully, they will come out at the earliest possible time. We have been issuing necessary advisories and guidance since the second week of March to take care of the employees as well as the well-being of the family members. And the banking being the essential services, so all the branches of -- almost 98% of our branches have been functioning and all the channels, including our ATMs, so wherever, the local administration is directing us to close down. So all the ATMs and other channels are functioning. And our -- immediately in the second week of March, our information technology department and our cybersecurity team and our operations team, we all discussed and rolled out the business continuity plan. And accordingly, most of the core offices across the banks, they're all working from home. So we have enabled remote access to secured remote access facility to all these employees so that the business is usual in the bank. With regard to the business. We have been -- during this 3 months period, as many of our officers, managers and employees are working from home, we have taken this opportunity to connect with the customers. We have been calling the customers from the Corporate Office side, senior management side, we have been calling and talking to virtual meetings and then understanding their safety and the business requirement. And even the branch managers, they're also doing the same thing. But the simple line today is, in terms of the transactions of the channels, during the recent past 10 days, we have already -- our transactions crossed to $1 million, $1 million to $2.2 million, $1.2 million was the highest average transaction fee COVID period. So that's which we have already achieved during the past 10 days period. So indicating that people are trying to live with this pandemic. And we are we are very careful. And particularly in the lending side, we are taking enough precautions and immediately in the month of March itself, we have tightened various -- the underwriting metrics. And we have been trying to find out the impact of the industries, our customers and to understand this impact. While we are all aware that Reserve Bank of India has been announcing series of measures to support the business enterprises as well as the individuals. And with regard to banks, they announced the moratorium of term loan installments to the business enterprises and the individuals as well as the deferment of interest in case of the working capital account. So I need not elaborate this. I think most of you are aware of what is all the scheme. But as far as our bank is concerned, as of 21st June, 41% of our portfolio in terms of value, is under the moratorium. And in fact, we allowed this facility from the month of March. So initially, the number was slightly higher, 52% to 53%. But subsequently, we have also advised our -- the branches to brief about what exactly the moratorium, how it is going to affect their cost. So all these things have helped us to reduce this number to 41% in terms of the value. RBI has also announced that the 10% provision has to be made on the stress account, which otherwise, would have become NPA as of 31st March. So we have worked out this amount to INR 195 crores. So RBI has advised us to provide 5 quarters in the -- 5% in 2 quarters and accordingly, but whereas, we have provided the entire 10% of INR 19.5 crores in this, the March Q4. And of course, RBI has also announced other measures like declaration of dividend, which my CFO will take you, once my -- I complete my speech. So considering the uncertainty situation -- and we have been continuously maintaining a very high liquidity coverage ratio. So as we speak, our LCR is more than 400% to ensure, so if any contingency, what -- in unlikely event, whatever is there, we want to be very prepared so that we are keeping a very high liquidity, about INR 6,000 crores of money invested as additional investments in government securities for the short-term maturities. With regard to the -- before we go to the Q4 results, I thought of taking you forward, some of the business transformation initiatives, which our bank has been doing for the past 3 years. And of course, our former MD and CEO has been briefing you and guiding you on these aspects and also updating in every conference calls and meetings. So the -- and the senior management under the guidance of the Board of Directors, we strongly believe that whatever the structural changes and other initiatives the bank has been taking during the past 3 years, this is going to take our bank into the next level -- next generation. So that is why the senior management is continuously focusing on these areas. And for the benefit of -- for all of you, we have listed out all these -- the contents in our investor deck. So you can see some changes. We want to ensure that, whatever new structural changes and new initiatives, we would like to brief you, because this is -- these -- all these measures are going to you -- take our bank into the next level. So if you see the point number, that is first -- Page #6, we have mentioned about how the business was done in the bank. In the prior to 2018 or 2017, the branch was the only source of business. So today, you have the multiple for -- we have created a corporate banking unit, we have created a business banking unit, and the new, the non-branch distribution and last quarter, we are mentioning about the precious metal division, which we have already set up the complete infrastructure, including technology, people, everything is there. In fact, we did some 2 transactions in the month of March. So during the current year, so we will be focusing on this once our logistic service, everything is normalized. The second slide, which talks about -- what are the new initiatives that bank has taken? For example, the corporate credit card, the channels -- so all these things are listed in the page, in the Slide #7. So in the Slide #8, we are talking about the transaction banking group. So last year, this transaction banking group, they did a business in the peak level a book size of INR 370 crores. And because of the uncertainty in the month of February, March, we have slowed down this business. So this time, because of the good customer base we have created, so we will be in a position to do much better business in this transaction banking. So the NEO, the non-branch distribution. We already briefed you during the earlier meetings. So we can visibly see in the last Q4, the number has slightly come down because many sanctions, they are not disbursed because from the March second week, understand -- we're understanding the market scenario. We have slowed on our disbursement in the second week of March. That is why the disbursements are low. But they are taking stock of the situation. And once the opportunity is definite -- opportunity is available, so once again, they will go for the business. But as far as the infrastructure is concerned, people are concerned, everything is put in place. So the next slide, it talks about the precious metal division, which I already briefed you. So we are initially, we are planning for INR 2,000 crores of book size this year. But considering the market, on the safety side, we are toning down, and then we are planning for INR 1,000 crores business under this segment. Here the advantage is, many of the jewelers are currently banking with the bank. So we are giving the SBLCs, letter of credit, and they go to some other bank who are giving -- they are availing the metal loan. But this has been the long-term, long time requirement of our existing customers. So we are going to ensure our customers are availing the metal loan from our bank. So we have started the corporate credit card. Initially, the corporate credit card is given to our SME customer. And this year, we are planning for the personal credit card. But considering the market, we'll see the opportune time and then they will go for this business. But in the meanwhile, so we are in the process of creating a suitable infrastructure for the end-to-end digital process. So the Slide #12, which we have been talking to you about the robustness of our digital lending. So as we speak today, so our entire lending system, other than the corporate accounts, everything is through the digital lending. So the algorithms are very tightly designed and business rule engine is giving the support to the sanctioning authority to take the right decisions. So for example, all the retail loans are 100% today under this digital lending. And all the commercial loans up to INR 25 crores, everything is under this -- the new digital lending. The Slide 14 speaks about analytics. The analytics is giving lot of support to the business group as well as the collection team, is the new department which we have created. And a lot of cross-selling and upselling is happening in the bank today and a lot of cost has been reduced. For example, earlier we used to send SMS to all the customers that is wherever the installments are due. So today, we have the database. We are using our analytical -- and then understand that these are the customers where we need not SMS every month. So we have cut down that expense. So similarly, many things are happening in the analytical side. And the contact center is one of the brainchild of our former, MD and CEO, and this is a full-fledged 3 centers now. It's all functioning. And these are very effectively, these are all functioning. So the Slide 15 talks about DLite mobile app. That also we have been communicating to you. But the information is that during the last quarter, we have added many features. So every quarter, we are going to publish whatever the new features we are adding under this DLite app. Because in the long run, what we are planning is, we want to make it as a digital banking. So all the retail transactions should happen under this mobile app. I'm pleased to say that there are 1.94 million downloads have happened and 1.35 lakhs of accounts are opened without any advertisement, publicity, without any -- the manual involvement of any of the employees, this 1.3 lakh accounts are opened. But this year, particularly under this current environment -- so this app is going to be very, very big support to the bank's CASA growth. So from this week onwards, we have started our advisement campaign and the next 3 months, the entire team of the bank is going to concentrate in acquiring the new customers using this DLite app. So the next slide, which is the Slide #16 is a very, very important slide. In fact, our former MD and CEO has been continuously mentioning this point. So moving towards the granular book. So the 4 years, the data, which we have published in the deck, it's very clearly indicating the corporate has moved from 35% to 26%. So other less than INR 23 crores, the granular side of the advances are continuously increasing. We continue to focus on this area. So the Slide #17, which talks about the operation centralization. This is going to give a lot of support to the bank in terms of reducing the cost as well as reducing the number of employees working in the bank. In addition to that, we can mediate substantial operations risk by implementing this -- the operation centralization project. 85% of the project is already completed. In another 1-month period we will be competing the 100%. So in the last quarter, we have opened our -- the operation center in Coimbatore with almost 400 seats. So we want to centralize all the back-office teams, everything at Coimbatore. So it's already -- we have taken -- people are working there. It is going to give lot of support to the bank in terms of reduction of manpower. So this is what the new initiatives bank has done it. So in addition to that, bank has done -- there's a lot of the structural changes in terms of -- for example, risk culture. Today, the risk culture of the bank is completely redefined. So earlier, most of the things are happening on the relationship basis. Now there are -- relationship is there. But in addition to that, people are aware of the risk. So people are aware of what is the CMR, what is the bureau score. And this is definitely supporting the sanctioning authorities and taking the right decisions. In addition to that, to provoke people to improve the marketing abilities, we have been announcing different schemes. DSR, daily sales report is 1 of the scheme which we have implemented. It's very successfully working in the bank. These are all going to help us in moving the operations side of the people to the sales side. And now coming back to the Q4. I'm very glad to mention that -- our capital adequacy ratio on these difficult conditions has improved from 16% to 17-point -- 17%. Substantial portion of this is from the Tire 1. And very important, the feature I would like to highlight is, our cost of deposits. I think many of are aware that previously our cost of deposit has been continuously coming down over the past 2 or 3 years. But the biggest point is, if you have noticed the last quarter our cost of deposit was at 5.55%. So one of the lowest, but the silver line here is, the post -- during this current year, we have already reduced 30 basis point in the term deposits and 50 basis point in the savings account. So all these things is going to give a lot of support by reducing the cost. But we are aware that the advances need most predominantly, most of our portfolio is covered under the MCLR. So once our deposit rate is reduced, by default, automatically, this, the yields on advances also will come down. So this is why we are taking very calculative steps to ensuring our aspirational number, NIM of 4, to be maintained. But we are not very much sure about this year, but we'll continue to put our efforts to ensure that our aspirational NIM number of 4 to be -- will be achieved. And the second positive point I'd like to mention is, continuously for the past third year, so we are achieving our operating profit of more than INR 1,700 crores. So in spite of the difficult conditions, we have been consistently achieving this INR 1,700 crores. So it clearly demonstrates -- so the fundamentals, the capacity, the strength of the bank in this profitability. So we continue to maintain this year -- last year, maybe because of the higher -- partially profit, we are able to achieve this. But in the coming years, we will ensure that this INR 1,700 crores is maintained. So another favorable factor I would like to tell you is the net NPA. So the net NPAs 100 basis point has reduced when compared to the last year and because of the higher the provisions and recovery and accordingly, our PCR has gone up to 68.990. So in the next slide, in 22, it talks about the business profile averages. So the average business level is -- there is a reasonable growth in terms of deposits 6% and in terms of CASA, it is 8%, and in terms of advances, it was 3%. But if you -- the end of period, if you notice, so there is a flat or 1%, we have degrown in our deposits when compared to the previous year. So the previous year, all are aware, recently, there is the specific situation prevailing at that time. And because of that, whatever growth we have achieved up to the month of February -- so we lost in the month of March. But this current year, things have changed, and we have already getting lot of term deposits. I think we will be in a position to compensate whatever lost in the month of December during this -- during the month of March, during this current year. And the CASA, because of the numerator and denominator effect, it has increased from 30% to 31%. But this year, the focus for the bank, entire bank will be on the CASA side. Using the digital platform we want to build up our aspirational number of 35%. So we'll try to reach at least 32%, 33% this year and next 3 years, we would like to achieve this -- the 35% number. And with regard to the third-party products, this Para banking business, the Slide #25. So where we have displayed this number. This year, as we are expecting the NIM, there is fall in the NIM. So we are planning to compensate this by doing this some noninterest income. So we have on boarded 2 partners this year. And these are the Bajaj Allianz for Life and Star for health Insurance, we on boarded this year. So all these players, we already had rounds of discussions with them one. So this year, using our digital platform, we would like to enhance our revenue from these businesses. So the Slide #26, this talks about the investment. The substantial revenue has come from this investment portfolio. So this is a very strategic move by the investment department. So you're all aware that before the 2 years back, we moved our domestic treasury from Karur to Bombay and ForEx treasury from Chennai to Bombay. Now we have a full-fledged integrated treasury is placed in Bombay. And there's a very senior person who's handling it. So strategically, we have been taking a lot of good decision. So fortunately, we are going in the right direction, and we are able to do a lot of journey in the resulting in -- substantial profits. And last year, there was a substantial profit and this first quarter also, this is very much encouraging. At the same time, so there's no dilution in duration. If you notice the [ PIF ] was 1.52 so as against the last quarter of 1.30, because, consciously, we have taken slightly the higher maturity. I mean -- so I think over a period of time, we'll be continuously maintaining this. And with regard to the loan book. So I'm very happy to mention that. We have been consistently growing in the gold loan segment. In the Slide #28, we have placed the number there. So there is 19% growth. And this year, this number is going to increase further. There are 2 reasons for that: we have completely digitized the lending process. The earlier it was completely the manual, so we have completely done away, and then we have implemented a digital process. In addition to that, we have implemented a new product. So wherein, the customers one time, they come to the bank and pledge the jewel and at the convenient time, they can avail the loan using our DLite app. So it is one of the very novel schemes. Of course, it's already some -- couple of NBFCs have implemented it, but still, there is a requirement for this product from our customers. And we have launched only 2 months back. There is a substantial growth in this portfolio. Here also, there is advertisement campaign we have started. Because under this -- the Banker-friendly environment, this type of product will be very helpful for the customer. So we are aggressively moving for that. In addition to that, particularly in Tamil Nadu, so there is a sufficient water is available. So people are going for the second crop. So there is good demand for the jewel loans. The first quarter so far, we are witnessing a substantial growth in spite of lockdown and other difficult conditions. So another success story of the bank has been our concentration on the retail side. And you could have noticed, so -- on the past 3 years, the retail loan segment is consistently increasing. But because of the current environment, we are completely reviewing our -- the underwriting standards and we've already taken some skills. For example, unsecured personal loan, we have stopped in the month of March and April, in the last week of March and April, and now we have completely reviewed the underwriting metrics. So now for example, the bureau score early, it was 750. So we have increased to 800. Like that, some tightening has been done. We want to ensure that people with good future cash flows, the loan should be given. For example, in home loan, so the earlier, it was a green channel. Once we had the sanctioning authority approved, it goes for the disbursement. Now we have ensured that the risk management department is eyeballing each and every application to ensure that -- because future cash flows are certain to that extent possible. So we are focused that, even though the numbers will may not be that much bright this year because at this moment, we are not very much sure about how the things will change. But we are waiting for -- we are just seeing the opportunity, wherever the opportunities are available. So we will take it further. And if you see over the next 2 pages, we have furnished, how the portfolio in the retail loan is behaving. And the Slide 33, it talks about the digital SME platform. This also we have been briefing you for the past 2 or 3 meetings. So [ varying ], the number is consistently increasing. The earlier, initially they had the issues. The people are not ready, the mindset is not there. Now people are learning and then going for more business. So in June, it was only INR 169 crores were disbursed, in September INR 311 crore, December, it is INR 419 crore. March because many sanctions we put on hold to review the sanctions, that is why the number is less. But now people are acute. The system is stabilized and our underwriting metrics also suitably, we have changed it. So we will be in a position to start this aggressively once the normalcy has restored. So the next 2 slides talks about the portfolio, the CMR, the buckets and all. And the Slide #36, it talks about 3, the corporate book. So as we have been telling the analysts that our exposure, particularly in the corporate side, we are continuously ensuring that it's capping at the same level. So it is indicating in this slide. So last year, you could have seen that the slide number -- Slide #37, our gross advances has degrown by 4%. So this fundamentally, even though a lot of disbursement had happened, there are 2 reasons for that. Only the [ IBBC ], if you noticed last year, it was around INR 2,000 crores. So this year, it is only INR 800 crores. So INR 1,200 crores, we have repaid. And we have now taken the fresh IBBC here. In addition to that, we have completely shut down our warehouse loan portfolio, by considering the huge risk in the business and also the price volatility is very high. So we thought that it is prudent to stop this business for a time being. So accordingly, we lost almost INR 450 crores to INR 500 crores in this warehouse loan segment. And if you adjust these things, taken the -- and probably taking the new disbursement, we have done a good growth under this, the advances segment. So next slides, up to 43, it talks about the different industry-wise classifications and the compositions. And the Slide #44 is a very important slide. It talk about the slippages. So the slippages for the year -- the entire year, it was -- showed something around 3.3% as against our aspirational number of 1.75%. But there are the reasons for that. We had the corporate book, stressful corporate books is there. And we have been continuously trying to recover and reduce this exposure. But I think during the 2, 3 calls, we have been continuously telling that, this is an end. In future, it will not happen. So don't want to comment at this moment. But we are very much sure that, it will be contained around the 2.75%, 1.75% to 2.5% because of the COVID and the unfavorable market conditions. And the next slide is the 45. So I was mentioning about the 41% of the portfolio is under the moratorium. The breakup details are furnished here. And if you noticed, Column #4, so where we have furnished to the SMA balance as far as our 29th February, that is -- as of current date balance for the SMA, of SMA 0,1,2. So it's, roughly, it's 1.23% of our portfolio. And Page #48, we have given the breakup for the provision. So wherein, we have mentioned COVID-19 relief package. We have provided around INR 47 crores for this quarter. Out of this, the 19.5% is the 10% which I talked about initially. So the remaining INR 27.50 crores, we have provided additionally. So expecting some stressful accounts once our -- the moratorium period stops and regular repayment starts in the month of September. So further the balance sheet analysis, everything, our CFO will be talking to you. So as far as this year is concerned, so I have already indicated that we'll be focusing more on the liability side, the CASA and the term deposit, particularly using our -- the digital technology. And we have been continuously talking to the operation team. And maybe once the normalcy restores, we'll be aggressively going for this. With regard to advances, we don't want to commit any numbers because there are uncertainty movement. But the silver line is, our jewel loan is growing and the new business initiatives, particularly the transaction banking, the bullion business, the new -- everything is going to contribute additional business to the bank. As in addition to that, whatever the digital, we are waiting for the opportunity to see what best can be done here, particularly on the core lending side, very shortly, we are going to have a tie-up with a leading NBFC from Chennai. These are all going to give the additional business for the bank. We are hopeful of reaching 10% is aspiration number for the current year. But with a lot of uncertainty, we don't want to commit these numbers. As far as the cost is concerned, I already indicated that the cost of the deposit is going to play a major role in the profitability of the bank by the current year. So we continue to focus and ensure that the cost of deposit is kept at the low level. So in addition to that, we have already worked out lot of the cost control measures, particularly operations costs, the establishment costs, we have brought out many measures there. This is all going to support us in case the market behaved unfavorably in the next 2 quarters. As regard to the slippages or -- as we still -- we maintain our aspirational number of 1.73% but still, the market is not clear. Maybe in the month of September, October, November we'll be in a apportion to understand. But the way we are talking to the customer, we expect there will not be any major issues in terms of the slippages. Because only 41% of our entire portfolio is under the moratorium. And many customers are expressed willingness their willingness to pay in advance. Every day, some sort of transactions are happening. And I was mentioning that, we have been connecting with all the customers except some sector in the export side, we are not able to see or visualize any major impact on the other businesses as of now, the way our customers are responding for that. With regard to provisions, our aspirational number is at 70%. We already achieved around 69%. And this year, the recovery side, there are many NCLT cases in the month of March itself. Aggressively, we are taking steps and because of the environment at the time, we're not able to close it, we will try to close these issues now. So finally, we are aware that, we are not able to provide much rewards to the investor and the stakeholders. And the senior management is fully aware of it and the -- whatever the transformation, which our bank has done, it is going to translate into business during this year. So we will be in a position to demonstrate our strength in the coming quarters. Maybe the numbers will speak in the first quarter and second quarter. So with this assurance, I will conclude my speech. I request Prasad to say anything, if had...
Yes. See, I think we'll open the lines for questions. And because no enough time is -- now we have, I think, another 20 minutes or 25 minutes is there. So we -- I think we can open the lines for questions, please. Hello?
Sir, just one second. I think the operator has got lost. We'll get it reconnected by phone.
Janice, are you there? Just bear with us for a minute. I think there is a technical difficulty.Abhinesh it changed to some pages.
Is the connectivity lost, Abhinesh?
No. The operator, just got cut off. And we're getting back on line just now.
As we're waiting for the operator, I have a question from my end. Could you just comment on the moratorium Natarajan ji on the moratorium proportion? And how that is trending over the last couple of months?
See, Abhinesh, in the month of March, when you first implemented this moratorium, so the ratio roughly worked out, was 53%. So every month, because the numbers are dynamic so what we have -- because initially, customers are not fully aware of what exactly the moratorium, because we sent an SMS. So the option is given in the SMS. If they click, yes no. That type of things were happening. We were not able to explain properly to the customers. Now because the people are working from home, we made it a point to talk to this customer and explain the scheme. So if it is a term loan, how it is going to impact? Particularly the interest where, how many months it will go, further by time of maturity. So hearing all these things many customers voluntarily come forward to pay the amount. So that is why the number is continuously coming down. So it's all surprise to us also. Yes, it has already reached to 41%, 21st June. But every day, still, numbers are -- these -- the number is coming down.
Got it. So the trend is downwards and 53% in March, it's 41% currently?
Yes.
Right. Yes.
That is where it is? Yes. Janice, we can open the floor for questions, if you're back.
[Operator Instructions] We take the first question from the line of Aakash Dattani from HDFC Securities.
My first question is on Slide #39 of your investor presentation, where you have the ever could be graph. So in your commercial book there, if I look at this 6-month on book line, there is a spike from 48 to 57 , whereas the 12-month trend line continues to trend down. So could you explain, how that would occur?
See, this -- the commercial portfolio under particular quarter, there are certain 2 or 3 accounts is slipped. So I think this has also reflected in the slippages page, if you see, the commercial slippage is slightly higher. So because of that, so there is a movement. But still, I think within the expected lines.
Certainly. But could you sort of explain the divergence between the 6-month line, and the under 12-month line, as in, how would that occur?
6-month line under...
So in terms of the trend?
See, the 12 months cohort and 6 months cohort, so we are -- the behavior will be slightly different. So it is reflected in the graph below. So which is better. Actually, 12 months book is far better. The 12 months book is far better than the 6-month book. So then what happens is, in the 12-month, generally, the year-on-year, the numbers will be better. So that's why you find that there is a slightly better -- this thing as far as the commercial in 12-month power.
Okay. Secondly, could you sort of elaborate on the dip that you have seen in the current account balances this quarter?
No, madam. Actually, surprisingly, this quarter, both current account and savings balances is continuously increasing.
Okay. Sorry, I must have got that from them. And on the new -- on the government's MSME credit guarantee scheme, what proportion of your -- so firstly, what proportion of your book would be eligible? And how are you, as a bank, viewing this scheme?
See in terms of the scheme, this is the -- almost like a preapproved loan. So the customer has to opt out from the scheme. So accordingly, we have worked out, we have used our database. We did the bureau scrubbing, and roughly INR 2,200 crores disbursement we are expecting for the current year, if all the customers, as per our database, are availing this facility. But as of now, as we speak, something around INR 800 crores disbursement has happened out of this INR 2,200 crores. But surprisingly, there is not much enthusiasm from the business enterprises in availing these limits. So in spite of the fact that our branch managers are proactively calling the customers and briefing them about the scheme, so the availment is considerably less. So we almost completed 1 month period. So, so far we have done only INR 800 crores.
Okay. And sir, lastly, could you sort of elaborate on the growth in agri loans that the bank has seen this quarter, please?
See, the -- predominantly, our agri loan portfolio consists of the loan against jewels. So probably you are aware that, if you see our -- the branch location, the substantial portion of the branches are in the semi-urban and rural branches -- rural places, particularly in the Tamil Nadu and other southern states. So there they -- generally, it's a practice, the farmers used to pledge the jewels and take loan for agricultural purpose. So predominantly, this portfolio consists of loan against jewels.
We take the next question from the line of Jai Mundhra from B&K Securities.
Sir, first, in terms of moratorium that you have put out, how are you calculating moratorium? Just to understand. So let's say, from March, April, May, June, roughly around 4 months, if one customer has paid 2 dues, 2 EMIs and has availed moratorium on 2 or one, will -- have you included that into moratorium or not?
No. See, how we are calculating is, if the customer pays all the dues, so the system is removing from the moratorium list. It's not that any partial payment if he made, we don't touch that. It will continue under the moratorium.
Okay even if he has taken -- even if he has skipped 1 EMI, he's under -- he's deemed moratorium.
Correct. Correct.
I mean, the system recognizes him under moratorium?
Exactly. Exactly.
In that way, sir, so out of this INR 19,000 crores people -- worth of loans which have taken moratorium, would you have any ballpark number as to how many of them have at least paid 1, 2, 3 EMI. So that will give you the number of customers value which have not paid even a single EMI, if you have that number? I mean so out of this INR 19,000 crores, a lot many people would have paid some partial dues, would that be correct or no?
No. See if any partial payment is done, it will be included in the INR 19,889 crores. You are right.
Correct.
And -- can you come again? What exactly your question is?
So I'm saying, sir, for example, in corporate book, INR 5,000 crores worth of loans are in the moratorium.
Right.
Within this, would you have data as to how many corporates have paid, let's say, 2 EMIs or at least have started paying in the June. So maybe they were not paying in March, April. But at least they have started because now there's -- some activities have also opened up.
Right. Right.
They have understood what is this. So they have started paying in the, let's say, May, June. Would you have that...
I don't have the data right now. Definitely, priority is a good point. We will come back to you.
We will come back to you later. Yes, there are some payments, but no, numbers we don't have. So we'll just have a look at that and come back to you.
Correct. Sure, sir. And kindly, sir, I mean, the addition, is this similar to slippages, or there is something else? So in terms of broad addition to GNPA, is this INR 422 crores for this quarter, or this is some net number?
For the quarter.
This quarter only.
Q4 is -- INR 422 crores is for the current quarter.
Correct. And we -- okay, understood. And this is comparable with last quarter number, right? There is no inter-quarter netting off?
No, no, no.
Sure. And sir, would you have the recovery upgrade number and write-off number separately, so recovery upgrade one number and write-off for fourth quarter and for full year?
The write-off number, that is -- the technical write-off is there, around INR 400 crores. And around, INR 9,200 crores is sale to ARC. Okay?
Okay. Sure. And just last two questions, sir. One is the gold loan. So you are seeing a decent growth there. But how much is retail gold loan? And how much is agri gold loan? And is the difference -- is there any difference in the growth?
This is 80% -- I think 80% is from agri only, Jai.
We have mentioned, Jai, in Page #29, actually, we have given under retail. How much is under the gold loan, gold loan has improved by around INR 270 crores year-on-year under the retail.
Actually, there are 3 classifications are there. One is the agri purpose, another is the trade, another is the personal. So the -- around 80% of our overall -- the book is for the agricultural usage. And the remaining 20% is bifurcated into trade and personal.
Sure. And last thing, sir, on MD, CEO succession, what is the status, sir, if you can tell us? I believe the name has gone to RBI. And what is the time line that you are expecting?
[Technical Difficulty] [Operator Instructions] Sir, we have the question from the line of Mr. Jai Mundhra.
We are talking about the jewel loan portfolio. I think you got your...
Yes, sir. Yes, I got that answer. And sir, just on previous question, sir, would you have a number that how many customers have not paid a single EMI. I mean, so they are, let's say, all 4 months or all 3 months, they have not paid any single thing.
So that would be -- currently, we have not taken the breakup. We will work out and we'll send it back to you.
But corresponding SMA 2 numbers, we have given, Jai. In the same page, we have given -- you can see that in the corporate book, we have given the -- SMA numbers we have given, just for an indication. But anyway, current, how they have paid the repayments, we'll just have a look at it.
Sure, sir. And -- yes, sir. And sir, I was asking on MD, CEO, what are the time lines, sir, if you can help?
Jai, actually the process is on. At the earliest possible time, we'll been in position to get some information. But the process is in advanced stage, that's what I can say.
We take the next question from the line of Renish Patel from ICICI Securities.
Sir, just a couple of questions. So one is on the recovery side. So as per Slide #44, the corporate recovery stands at or close to INR 500 crores in Q4. I'm sure, most -- bulk of it was due to sale to ARC. So can you please just explain this corporate recovery, please?
Yes. See, Renish, see, around INR 350 crores and odd we have done the technical write-off, okay? So then around INR 90 crores or something we have sold to ARC. So that is the recovery.
Got it. Got it. And sir, so this -- on this INR 90 crore of assets which we have sold to ARC, what is the ultimate write-off we have taken?
No. No.
Nothing, nothing.
In the -- specifically, in this...
Sold at par.
We could not have -- in this -- in the present sale, there is no write-off.
Got it. Okay. Okay. Okay. And sir, so next question is again on this deposit piece, which sir has explained that current account and savings accounts, our traction has been good in the month of June. But can you please explain what explained the -- a 5% sequential decline in the deposit base as on March? I mean is this the -- due to the interest rate cut which we have done it over last 6 months or this was due to some bulk deposit getting repaid and then we were not able to sort of renew at a higher rate? Can you please just explain that thing?
No. Because of the liquidity position, Renish, we have stopped taking bulk deposits, including certificate deposit for a long time. Particularly in the month of March, we are seeing the interest rates are coming down. So even for regular bulk deposit customers, we have started giving higher interest rate, that is one thing. And in the month of March, particularly the last weeks of -- fortnight of the March, people are little bit shaky and they want to have more liquidity so that the preclosures were slightly higher. And -- but the amount is kept in the current account, savings account like that. But first week and second week -- the second week and third week of March, you are aware that there's a specific situation prevailing at that time post to Yes Bank issues. There was -- the closure of deposit happened during that time.
Okay. But so let's say, in June 1, '20, when your -- till yesterday, the traction has been good, I mean, directionally on, I think, deposit base?
Traction has been good since April. Traction has been good since April. Consistently, the portfolio is increasing. And in addition to that, our digital DLite app, the number of accounts opening has also increased. Currently 200 accounts per day. The accounts are getting opened without any manual intervention, without any marketing effort. So people are aware of this product, and then it's getting opened. So that balance are also building up.
Got it. And sir, just last clarification on this CGTMSE scheme wherein you mentioned somewhere close to INR 2,200 crores sort of disbursement opportunity. So can you please highlight the total quantum of our book eligible for this? So let's say, this INR 2,200 crores is the -- at the rate of 20% or what percent of the eligible book?
No. See, the -- as per the...
No, the 20% is eligible book, Renish.
Correct. Correct.
What happens is, you may see total outstanding of the...
Maybe INR 12,000 crore.
Yes.
INR 12,000 crores you can say, Renish. INR 12,000 crores is eligible book side.
Got it. Got it.
So if you -- 20% if you workout, maximum amount I'm saying is INR 2,300 crores -- INR 2,200 crores. But in all cases, we are not giving the entire 20%. Instead, we are applying some logic -- some sort of assessment is there. So in case if we give the maximum so that the eligibility -- the disbursement -- disbursable amount will be INR 2,300 crores.
Got it. Got it. And sir, just last question...
In our SMA book...
Yes, yes, sir.
So that's it. Yes. But those...
See, now there are some gating conditions are there. So if you apply everything, it book comes to something around INR 12,000 crores to INR 13,000 crores.
Got it. Got it, sir. Sir, just last clarification again on the slippage number which you highlighted that our aspiration would be to restrict at 1.75. But in the worst-case scenario, it can go up to 2.5, is this the right understanding?
You're right, Renish.
Okay. Okay. Congrats.
Thank you.
Thank you, Renish. Stay safe.
Next question is from the line of Rakesh Kumar from Elara Capital.
Sir, just a few questions. Firstly, sir, for this quarter and the year, the credit book has actually contracted. And anyway, one -- in the presence of last MD sir, there was hardly any growth happening in credit side. So are we waiting for the new person to join? And thereafter, we will chalk down our plan and then go ahead? Is this the bold -- the bank's bold line of thinking right now?
No, Rakesh, actually it's completely wrong. So the business is as usual in the bank. In fact, in spite of the unfavorable situation prevailing, we have conducted our -- the business plan meet so wherein 60 participants were there. Instead of meeting personally, we had a virtual meeting. We have discussed about the business strategies. We have worked out the target numbers. And normally we measure the performance. We have Century scorecard metrics. So we have finalized the Century scorecard metrics. So business is as usual, but whatever the drop you witnessed the last year is purely because of the drop in the [ IBBC ] merger and the warehouse loan is a second. So third point is something around INR 700 crores worth of corporate accounts, the exposure is reduced voluntarily because you are aware that we put a restriction of -- cap of INR 123 crores per borrower. So wherever it is coming for the renewal beyond INR 123 crores, so we expressed our inability to continue at this level. We are trying to bring down to INR 123 crores in stages. It cannot happen in a single day. But we permit some time and then the portfolio will also come down. So there INR 600 crores to INR 700 crores we have -- consciously we have reduced. So that is the basic reasons for the drop. Otherwise, there are 3 or 4 slides we have published here. So it speaks about whatever the disbursements we are doing in each sector. For example, jewel loan, it's -- historically, it's very -- very highest growth we have achieved. Retail segment, yes, again, we have achieved. So only problem is within corporate and commercial so that consciously we are doing it. In fact, we have lost some -- couple of accounts because of the dilution of security figures. Now we have put a condition that whatever the value of the security, we are putting 15% haircut. So the existing customer is asking more exposure, so I guess security will be diluted. So we are not accepting it. We are asking him to give more security. So many cases -- or cases, the customers are not willing for that and then taking their exposure to some other bank. So that all we consciously allow. But the -- all the portfolio, whether it is a commercial, corporate, there are disbursements are happening. Even the quarter, I was mentioning about the jewel loan. We have not stopped our commercial loan. Even though we have tightened our underwriting metrics, it is not our -- the intention to stop. So there are disbursements are happening in corporate. Disbursements are happening in commercial. Disbursements happening in the personal segment.
Got it, sir. Sir, secondly, like our interest rate on retail TD is almost the same what City Union Bank is offering, at least for 1 year and 1 to 2 years maturity bracket. So what is the growth in deposits that we are expecting? That is the one point. Second point is that, what is the reason for such a drop in current deposit from Q3 to Q4? Yes, sir.
So this year, I was mentioning you that our main focus -- the agenda for the current year is strengthening our deposit base, particularly on the CASA segment. So internally, we discussed something around 12% to 15% growth we are planning for the current year and mostly on the -- from the CASA segment. That is for the -- this year. And last year, the current account...
See, Rakesh ji, see, whatever the current account, there was a dip in the last 10, 15 days. The everything has been regained in the first week itself. And almost there has been good growth in current and SB in -- from April onwards. There is a reasonably very good growth in CASA from 1st April onwards.
Okay. And do we plan to revise our SB deposit rate, like City Union Bank is offering now higher rate on the INR 10 lakh and plus ticket size on the saving deposit.
No. Only during the last month, we have reduced our rate from 400 basis points to 350 -- 4% to 3.5%, see, across all the buckets. We have not bifurcated. So there is no plan to increase it, definitely. No -- there is no plan to increase. But we will see the response and if any further reduction is possible, we are planning to do it, at least to further -- the lower segment of the balances.
Next question is from the line of Bhavik Dave from Nippon India. As there is no response from the current participant, we take the next question from the line of Rakesh Kapur from Kapur & Company.
Sir, firstly, could you give us a detail of what were the slippages and the recovery for this quarter?
No. Slippage is INR 422 crores on the page -- Slide 44. The slippage number is INR 422 crores and the recovery is INR 634 crores. Total reduction is INR 634 crores. Consequentially, the gross NPA has come down to INR 4,213 crores.
Okay. And what have been the figure for -- on an annualized basis?
Annualized basis, that is around INR 1,600 crores is the slippage. For the -- so we are around 3.3%. INR 1,600 crores is the total addition and total reduction is the INR 1,800 crores. On the same slide, it is mentioned, Page 44.
Correct, sir. But sir, what are we envisaging for this year considering the extraordinary situation and the moratorium part? Are you in a position to set any target for this financial year?
See, at this moment, we are not able to exactly predict. But that's what I've been telling, the good -- because the good news is only 41% of our portfolio is currently under moratorium. So the remaining 51%, so hopefully, it's doing well, and we don't -- we aren't expecting any challenges in there. So here also, in this 41% also, we are not able to visualize any -- the major impact here. So that is why we -- our aspiration number of 1.75% is the slippages are expecting because much of our stressed account have already moved to NPA during the past 3 years. So -- and whatever the incremental business we are doing it, it's performing well. The slippages are very low. So considering the fact that maybe in the extraordinary situation, another 50 basis points or 75 basis points go up from 1.75% to 2.50%. So that is what -- as of now, we're having the numbers with us.
And what is our ROA target, sir, for...
Again, our aspirational number is 1. We have been telling that we are moving towards that number.
One. And sir, I don't have the slides right now. What have been for this March ending -- March 31, 2020, the ROA?
The point...
Slide #55.
He doesn't have the slides.
It's okay. It is...
0.32, Rakesh.
But 12 months -- see, the quarterly ROE is 0.46, and 12 months ROE is 0.32.
Next question is from the line of Bhavik Dave from Nippon India.
My call dropped out. So sir, my question is regarding your guidance that you're giving on your slippages. Considering our moratorium book is quite high, especially in segments like even retail, we have a 34% kind of retail -- moratorium number. Can you just share with us what gives us the confidence that the slippage ratio will be around 2%, 2.5%, 2.25%?
See, Bhavik, the confidence level is, I was mentioning you, the 3 months period, the entire team at branches, they have been talking to the customers. Even our senior management, we are conducting virtual meeting every week, talking to the customers to understand their -- the current business level and what type of problem they are facing it. So except some couple of sectors, we are not able to see any panic situation like closing down the business or running away and even the individuals wherever we are coming across, they have not lost the job, as far as our portfolio is concerned. So there will be some challenges. I'm not saying that nothing will happen. So at this moment, we are not able to predict. So wherever we are talking, we are not able to get any major negative signal. That is why we don't want to have any big numbers. But safety side, we are telling that 50 to 75 basis points more than our aspirational number. And one point you have to see that for the past 3 years, we have been suffering because of the delinquency and substantial slippages already been happened, so that today the portfolio is clean. And whatever the incremental -- the book, it's coming. These are all very, very choosy, and then we are very selective. So this is giving a confidence that this problem may not happen beyond 2.5%.
Sure. And sir, just on your retail moratorium, I wanted to understand, is this within this INR 3,700 crores, INR 3,800-odd crores, will the proportion of mortgages or how home loans will be very high because...
Yes. On retail side, yes, predominantly, the portfolio consists of home loans.
Correct. So even in the moratorium book, the major proportion will be from home loan customers, right?
That's right.
Correct. And just on this home loan front, if you look at your -- one of your chart that you gave where 20% -- nearly 20% of your book is to thin file or new-to-credit customers. So are you not worried about these customers because they are -- like that's 20% of your home loan book is reasonably large. So what gives you the comfort on this part of the loan book? Or what is the behavior?
See, Bhavik, see, earlier our bank was not -- the retail loans are not cup of tea. Only during the past 2 years, because we want to go from a granular advances, so we are -- our -- we are expanding on the retail side. So we have built a very robust the underwriting model, the system. We believe on this -- the system. So they're very choosy. For example, our sanction rate is less than 20%. So 100 applications are sourced, so we are sanctioning only 20 applications. So in that way, we are very confident that the portfolio will not go bad that much.
Sure. And last question, sir, in the housing, sir, INR 4,500 crores book, what will be the proportion of loans towards customers from the top 5, 6 metro cities? Will -- or what is the proportion of maybe Tamil Nadu in this housing book of INR 4,500 crores?
The last surgical bifurcation, currently, we don't have, Bhavik. Probably, we -- you are very particular, we'll send it across to you.
Bhavik, I'll come back to you.
But I can -- roughly, I can say that predominantly our semi-urban and urban branches are doing well in this segment. So the -- if I -- if my guess is right, I can say 50%, 60% is from the urban and semi-urban side, and remaining 40% lives in the metro.
But anyway, we'll check up and come back to you.
Next question is from the line of Pranav Tendolkar from Rare Enterprises.
Sir, I just wanted to ask that in terms of your portfolio, if you consider that it is much less elastic than a normal bank with respect to rate cuts and whereas you are able to pass deposit rate cuts to the customers. So can we see a NIM increase in next year? Obviously, regularizing for quarterly fluctuations, can we see a NIM increase going forward? Because your -- also your portfolio structure is moving towards retail who is above 11% yield or 10% yield?
No. I have my apprehension, Pranav. See, the point -- the problem is today, the substantial portfolio of our loans is the MCLR. Once you reduce the deposit rate, so automatically our marginal cost lending rate comes down, number one. And number two is the external benchmark rate -- because the repo rates are continuously reduced. So we have linked most of the retail loans with the external benchmark. So wherever the fixed rate is not there, we have to pass on the benefit to them. Because of that, at least for -- that is why we are -- our concentration is more on reducing the cost. Ultimately, we want to achieve the aspiration number of 4. So how are we going to achieve it? That's what we are working on it. Maybe we are trying to do more on the cost with deposit side then on the interest rate side. So another problem, we are -- I mean, another challenge we envisage is, so once the normalcy restores, the big brothers, definitely, they will go for the business, I mean, BTs. So where, unless otherwise, if you don't -- if you give competitive rates to our existing customers, it's very difficult to retain our portfolio. So in that way also, we expect that we may have to pass on certain benefits to the existing good customer for the retention.
Right, right. So the best case is that NIM will be maintained and growth will go up in retail.
And Pranav, as President has mentioned, so we have cut the deposit rates. And what happens is the -- there may be a lag effect on the cost of deposit side. So then we have to expect some further reduction unless -- otherwise the rates go up because of the inflation going up. In the current scenario, we expect that the -- and the improvement in CASA that has happened from April onwards. And also the rate cut on the deposits what has happened in the last quarter, last 2, 3 months, that should have some effect on the cost of deposits also. All the things together should help the NIM. And also the commercial book also is growing because of this emergency lending scheme where the rates are reasonably at 11%, so that should help us -- sorry, that is at 9.2%. So that should help us as far as the NIMs are concerned.
We take the next question from the line of Sri Karthik Velamakanni from Investec Capital.
Sir, I wanted to check the reason for the increase in Tier 1, sir. Because we've added only about INR 235 crores of internal accruals, which is 50 basis points. But our Tier 1 increased from 14.1 to 15.1, sir, almost 100 -- more than 100 bps, sir. What led to these jumps?
You see the credit risk, no? See, there has been a reduction in the credit risk because of fall in advances. So that has also helped besides profit getting added.
Okay. So what will be your risk-weighted assets, sir, as on date currently?
I'll just give you, yes, because Pillar III we are just uploading within 0.5 hours. We'll just come back to you, Karthik.
Yes. Yes. No problem, sir.
Entire things are there in the Pillar III. Otherwise, also I'll come back to you.
Sure, sir. Sir, the second question that I had was with respect to your disclosures on SMA book. It was -- we've been asking for you to disclose that number. And finally, you've done that. Sir, what would that number be as of December because this is seeming to be very, very low compared to what some of the other banks have reported. So I just wanted to see whether this is a normal level itself or there has been any peculiarity with this number.
So you are talking about the numbers which we published in Page #45?
Yes, sir, INR 598 crores. What was the number for December.
The INR 598 crores number is not our overall SMA number. So it's as of 29 February whatever the SMA outstanding, the current balances we have, it is reflected here. For example, if you see the agriculture, INR 2,200 crores was mentioned. This -- predominantly, these are all jewel loans. These are all closed. So the balances of these accounts, whatever, the earlier rate is 72. So it's not a SMA as of date. So our SMA normally 30-plus we disclosed is something around INR 1,600 crores, which comes to 3% of our bookings.
Karthik, see, the credit risk is INR 34,126 crores disclosed -- that is a credit risk, risk-weighted.
Risk-weighted assets.
Risk-weighted, total credit risk. I'll just give you the comparison also from the last quarter. And also, we want to add to what our President has told. See, the -- even in December quarter, our SMA 1 and 2 bookings around 3.2%. SMA 1 and 2. And in the -- which is there, actually, in the last year's slide of Page 23. See now we have given the 29/2 position because 31st March position is not going to exactly reflect because of the moratorium. Because otherwise, the trend we are maintaining is at same level.
And again, this is not the numbers of 29th February. The 29 February SMA number, what is the current balance.
I see. So you are saying that even compared to 29 February -- compared to a level, it is actually further reduced materially from there?
See, every month, there will be some additions, there will be some deletions. So that way only the numbers we maintain. But here in the -- that's why I'm saying, roughly 3% of our portfolio is 30-plus.
Right. And that has come down to almost INR 600 crores as of current date?
Exactly. Exactly.
Correct.
We take the next question from the line of M.B. Mahesh from Kotak Securities.
So just a couple of questions. One is to just add on to the previous question that Sri Karthik asked. This slide essentially says that, for example, in agriculture, I have INR 2,289 crores. INR 72 crores of this were the ones which is sitting in SMA 0, 1 and 2.
You are right. See...
Correct. It doesn't mean that INR 598 crores is SMA 0, 1 and 2?
That's right. See, as of the 21 -- we actually -- for example, agricultural loan you are talking about, so other than the 72, either it was closed or would have become standard.
Or there would have been a SMA 0, 1 and 2. They wouldn't have taken moratorium.
Yes, maybe. Because what we have mentioned is only under moratorium.
Correct. Perfect. Perfect. Perfect. Just on the other slide, which you -- where you guys kind of mentioned, which is in Slide 39. This portfolio which has seen substantial improvement in terms of origination over the last 4, 5 years, when do we actually see that reflecting in slippages because you continue to show roughly about 400-odd levels in terms of slippages, why is that trend not coming here in this line?
See, Mahesh, you understand because we have given the breakup in that particular page, so where the substantial portion of it is from the corporate. So the corporate portfolio, wherever -- of course, only the silver line is, earlier the balances are on triple digits. So today, this INR 252 crores is consist of maybe 10 or 12 accounts. So that is the reason. But the -- we are seeing some tractions as numbers are coming down. But going forward, the slippage definitely will come down. So that is why we are confidently saying that the 1.75% number...
2.5%.
Yes, 1.75% normal course and an extraordinary circumstance because of the COVID environment, it may go up to 2.5%.
And my final question, what is the outstanding security there, sir, because if you've added a substantial number this quarter, when I look at Slide #47, there the next...
INR 687 crores as of March 31. There are certain redemptions also there. So the balances as of 31st March is INR 687 crores.
INR 687 crores. And this is provided -- what will be the gross value? Or do you have to make any provisions again?
So around -- see, now as per the RBI circular, Mahesh, see, now the -- even on the SRs also, you have to make an aging provision like the account -- the advances, the same way we have to make a provision even in SR as per the latest guidelines. Even for that also, we had made a provision of around INR 15 crores in the current quarter. So the total provision for this is around INR 100 crores plus. So the net will be around another INR 100 crores minus.
Well, ladies and gentlemen, due to paucity of time, that was the last question for today. I would now like to hand the conference over to Mr. Abhinesh Vijayaraj from Spark Capital for his closing comments. Over to you, sir.
Thank you, Janice. On behalf of Spark Capital, I would like to thank the management team of KVB, represented by Mr. Natarajan and Mr. Prasad, for taking time out and patiently answering all the questions. Good day, and thank you.
Thank you, Abhinesh.
Thank you, Abhinesh.
Thank you.
Thank you.