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Karur Vysya Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of The Karur Vysya Bank. We have with us today the management team of KVB, represented by the MD and CEO, Mr. Ramesh Babu; President and Chief Operating Officer, Mr. Natarajan; CFO, Mr. Ramshankar; Company Secretary and Compliance Officer, Mr. Srinivasa Rao. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, to take us through the highlights of the quarter gone by, after which, we will open the floor for questions. Thank you, and over to you, sir.
Yes. Thank you. Good evening to all of you. I welcome you all to our bank's earnings call for the quarter of financial year '22. We trust that you, your colleagues and your family members are keeping well and are in good health. I am sure that you would have gone through our detailed presentation on Q4 financial year '22 performance. I would like to share my views on the performance of the bank during the quarter and our guidance for the year '22-'23.
I am pleased to report that there has been a consistent and overall improvement of the performance in all critical areas, business growth, increased profitability and improved asset quality. The financials are on the lines with the guidance stated in our earlier earning calls.
You will be happy to note that we have crossed milestone business number of INR 1,25,000 crores this year. Net profit for the year stands at INR 673 crores, which is incidentally the highest ever recorded by the bank. Beyond numbers, we are encouraged by the qualitative improvements that are taking place in the bank, which will strengthen our performance in the period ahead.
Taking stock of the year '21-'22, our improved performance across the board can be measured by these facts. We continue to maintain results, have improved our NIM by 11 basis points during the quarter and 29 basis points during the year to 3.79% despite competitive pricing environment prevailing in the market. Our consistent efforts to keep the costs on the lower side, coupled with higher recovery in NPAs and improvement in the yield on investments during the quarter as well as the year, supported us for the improvement.
About 28% of our loan book is priced at EBR-R. Repricing of such accounts in sync with the policy rates and also increased yield on investment portfolio will keep our NIM to be at 3.5%-plus levels during the current year, even after factoring the likelihood of increased cost of funds.
Net interest income has increased to INR 710 crores and is up by INR 97 crores from INR 613 crores earned during Q4 of 2021. Fee-based income has increased by 21% year-on-year to INR 205 crores, the same is up by 5% on a sequential basis. Majority of the increase has come from credit-related segment. Normalized employee expenses are lower during the current quarter as well as the current year as compared to the corresponding period of last year. This is on account of lower AS-15 provisions.
Employee costs for the current quarter includes an amount of INR 27 crores, which is the last installment of the amount amortized to meet the enhancement of family pension obligations. You are aware that RBI permitted banks to amortize these expenses over a period of 5 years. However, we have decided to expense the entire amount of INR 81 crores based on the actuarial valuations during the 3 quarters of the current financial year. And accordingly, it is now fully accounted for.
Our normalized employee cost for the current year estimated to be in the range of INR 1,050 crores, in line with the business target, which we have set for '22-'23.
Other operating expenses went up by 9.13% during the year. In view of the increased scale of operations, we have initiated various cost control measures and continue to closely monitor various items of expenses. We are working towards maintaining cost to income levels of around 50%.
Operating profit after recasting the depreciation on investment as per the revised disclosure requirements for the quarter ended increased to INR 441 crores, higher both on a Y-o-Y basis as well as sequentially, that is up from INR 401 crore earned during the third quarter of current financial year. This is on account of improved NIM and lower cost-to-income ratio.
Provision for NPA for the quarter was at INR 143 crores, while net slippages were negative. The provision requirements in respect of migration, aging needed to be undertaken and also to improve our provision coverage ratio further.
Credit cost for the whole year was at 1.25%. And for the year '23, we expect the credit cost will be around 1% of the loan book. In spite of increase in bond yields, there is no significant MTM provision on our investment portfolio on account of our conscious decision to maintain lower duration.
During the quarter, we have provided INR 32 crores towards depreciation, of which a significant portion is towards security receipts. Net SR book stands now at INR 146 crores at the end of the year.
Considering our low duration AFS SLR book, we do not expect any significant MTM losses based on the current yield structure. Investment portfolio includes interest-earning non-SLR bonds and debentures of INR 1,400 crores. In tandem with yield movement, there is likely to be some MTM losses, though not significant.
Net profit has risen to INR 213 crores for the quarter, registering growth across the quarters. For the whole year, profit earned was INR 673 crores, as I said earlier, which is the highest net profit earned by the bank so far during a year.
ROA for the quarter was at 1.06%, and for the whole year, it's at 0.86%. We are confident of maintaining ROA between 1% to 1.1% levels during financial year '22-'23.
Our CRAR continues to be robust and is at 19.46%, providing us a comfortable headroom for growth. Our liquidity is comfortable, and we continue to maintain LCR at around 200% levels. Bank has recommended a dividend of 80%, subject to the approval of the shareholders. Other business performance highlights are given in our presentation.
Now coming to the slippages and asset quality. Gross slippages were at INR 300 crores during the quarter and for the whole year at INR 843 crores, which works out to about 1.46% of our loan book. Our recoveries upgrades have surpassed slippages marginally during the quarter, resulting in net slippages being negative to a tune of INR 7 crores during the quarter.
It could be noticed that the negative trend continued in quarter 2, quarter 3 and quarter 4 of the current year. Technical write-off of INR 450 crores during the quarter has been undertaken, and there was no sale on SR basis during the quarter.
Our estimated gross slippages for the year ahead will be in the range of 1% to 1.5%, and considering estimated lower slippages and possible recoveries from the existing NPA book, we aim to achieve net negative slippages in the coming quarters also.
SMA 30+ balances at the end of Q4 stood at INR 470 crores, which is 0.82% of the loan book. SMA book includes jewel loan balance of INR 74 crores. So all of you must be knowing that, at one point of time, our SMA 30+ used to be at around 3.5%. Due to lower slippages, recoveries and technical write-off, gross NPA has come down to below 6% and now stands at 5.96%. Our aim is to bring it down to below 5% levels by 2023. Our net NPA level has further reduced to 2.28%, and it is our endeavor to keep this below 2% by 2023.
Coming to the restructured book. Our overall standard restructured book stood at INR 1,640 crores, which is 2.85% of our loan book. Details are available in the Slide #32 of our investor presentation. In terms of regulatory guidelines, we have provided INR 130 crores towards this book.
So growth, we have achieved a growth of 10% in CASA and total deposits increased by 9%. For the year 2023, we are planning to grow by 12% on deposit front, 15% growth is targeted on CASA portfolio. Considering the need for building up deposits to meet our asset growth and to reach 40% CASA levels over the next few years, we have made certain structural changes. We have created consumer banking division by merging personal banking liabilities and personal banking assets, which will manage branch banking business, which consists of retail assets, liabilities, third-party products and government business.
Shri. Dolphy Jose, who is looking after our NEO business, will head this division, and there will be national sales managers for retail, institutions and government business. We are strengthening the branch and sales channel to ensure acquisition and deepening are effectively carried out.
Our digital systems and partnerships will support the required growth further. During the year, we made a fresh loan disbursement of INR 13,242 crores as against INR 9,200 crores during last year. Jewel loan disbursements are not included under this.
We achieved a growth of 9%, and we continue to follow the current mix of our loan book and plan to increase the loan book by 12% during the current year. So if we can -- if we add back the write-off portion of the loans what all we have written off during the year, the loan growth comes to around 10%.
Retail loans under the personal segment have grown by 8% year-on-year. This is predominantly on account of residential mortgages. As indicated earlier, we have made certain significant changes in our structure, and this will help us in building a sound retail book during the current year.
Our agricultural loan book, which consists mainly of jewel loans, grew by 13% year-on-year and sequentially by 5%, and we expect that trend will continue. Our overall jewel loan book has grown by 10% and constitutes 25% of our loan book. LTV stands at 68% with negligible NPAs, SMA 1 and 2 of the jewel loan book is at 0.52%. Commercial loan book has grown by 12% year-on-year. We are focusing on this segment very closely and plan to achieve 12% growth.
Corporate banking book has achieved a lower growth of 2%, but if we add back the written-off portion of the loan book what we have written off during the year, it comes to around 7% growth in the corporate banking book. Fresh disbursements during the year '21-'22 amounted to INR 2,451 crores under corporate banking. We are planning for a growth of around 12% in this segment during this current year.
On the NEO front, which we started in July '19, I'm happy to share that it is growing on the expected lines. AUM has crossed INR 2,500 crores as of March 31, '22, and is estimated to grow at 60%, 65% in '23. Delinquency in the book is low at INR 8 crores.
Co-lending business model is progressing well, and the loan book increased to INR 360 crore. Sizable scale-up will happen during the year taking into account new tie-ups with the NBFCs.
Our precious metal division has imported 11,550 kg of gold as against last year number of 2,920 kg and 36,000 kg of silver during the year. The metal loan book as on March 31 stands at INR 589 crores. We have launched account aggregator services and have integrated it with our digital loan origination system. We are now part of Sahamati umbrella for aggregator services.
Let me conclude by stating that the financial performance for the quarter as well as the year is on the expected lines and in line with our earlier estimates. I take this opportunity in thanking you all for the confidence reposed on the bank, and your enthusiasm and continued feedback will help us to achieve much better growth.
Now I'll be glad to respond to your questions. Thank you.
[Operator Instructions] The first question is from the line of Jai Mundhra from B&K Securities.
Am I audible?
Yes, audible. Please go ahead.
Great. So congratulations, sir, on good set of numbers, and thanks for arranging the call on the same day. I have a few questions. First is, sir, on corporate slippages, right, so this quarter, we have seen some quarter -- some corporate slippages, whereas SMA-1, 2 have been very benign for the last 1, 2 quarters. So just wanted to check if you can provide some more color on this INR 150 crores of corporate slippages. Where are they coming? And was this kind of an expected or sort of unexpected?
Yes. If you look at this INR 150 crores, nothing is chunky exposures. This is small, small exposures around INR 30 crores, INR 40 crores, these sort of things what all are there. So they were there. In addition to that, few are there on the borderline cases which we felt saying that, which may become this thing and all, so we thought it is better we identify them as an NPA and start the process of resolution rather than waiting for it to come back. So that is the reason we took a proactive call, and it's around 8 to 9 accounts together that way it has come and all, not a big account anywhere in this.
And sir, I also see there is some change in the restructuring of corporate restructured. So if the number has gone up versus last quarter, is there any movement in that?
No, I'll tell you. I'll tell you. What happened, so actually, if you look at it, there are around 6 accounts are there in the corporate, which have moved up. Out of that, there are 1 or 2 big accounts are there, where the construction, we have given some sort of an extension of the DCCO for the second time on account of that it has become.
But whereas if you look at the projects and all, everything is completed, and the rentals, everything is starting and all. That way, technically, it has come to that level and all, but within 1 year, within securitization and all these things and all, so it will be back. No need to worry about that movement of what all has come from INR 200-odd crores to INR 400-odd crores. So nothing much to worry. 2 big accounts, what all are there, both will be out after this normal tenure of this 1 year.
Okay. Understood. And sir, if you can comment on -- I mean, I think you have mentioned slippages of 1% to 1.5%. So would this include business as usual corporate slippages or...
Yes. Yes, everything together, everything together.
Right. Okay. And yes. And you would also accounted for some of the slippages from restructured book also, right, in this range?
Yes, yes, because that is also we are continuously monitoring. If you look at it overall, if we look at it, the overall slippages at around 19% coming to the restructured book that way. So rest of the accounts, what all are there closely is -- are under monitoring. We have taken them also as well as other things what all will come up. So within that only, we'll be able to manage within 1% to 1.5% absolutely.
Understood, sir. And second question is, sir, on your net NPA, right? So you are saying that we would be having negative net slippages, and you would still have, let's say, 1% credit cost, then your net NPA ideally should fall much lower than what you are saying at 2% versus 2.28% right now?
You are right. You are right. Actually, because all our efforts were towards the NPA. How much of effort we are putting on towards the business, more or less equal effort is we are putting on the NPA front, also on resolution. So though we say 2%, we may be much better than that because if you see, during this year, the net NPA has come down by 1.13%. So -- which progressively we have been working that way, we are at 2.28%. So it will be less than 2%, but that way we'll see how progressively we need to move towards the below 1% level, which we aim for over a period of time.
Understood, sir. And any reason, sir, why -- I mean the specific PCR, right, is clearly -- there are reasons, of course, that you have done some large one-off -- large write-offs. But the PCR -- specific PCR has actually declined a little bit. So if you can share your...
No, no, the response is also -- you only have given it because, we have sufficiently provided what all is there. The PCR because of the provision only it has come down. Otherwise, if you compare it compared to last year, the market PCR has gone up.
No, No. So I was asking, sir, how should one look at the PCR levels by FY '23?
Around. 65%, that level and all because if you look at it, that we felt that it's a reasonable number and all. We are trying to maintain at that level, we'll see that.
Right. Okay. And then I have a few questions, sir, on co-lending, if you -- I mean, I think you had mentioned that the quantum is around INR 360 crores.
Correct.
Right? This is the disbursement -- cumulative disbursement number, right?
It's the outstanding, outstanding.
Outstanding as on March 31, Jai, loan book.
Yes, yes. Okay. Anything, sir, I mean, on, let's say, specific to Chola, we have co-lending there. How much is that total disbursement? And how is that shaping up?
Yes, the Chola is shaping up well. Initially, we started with the construction equipment and commercial vehicles and other products are we're all discussing. As of now, roughly some INR 123 crores is the portfolio built through the Chola co-lending model, Jai. And going forward, we already tied up with 3 NBFCs for different products and the integration and other process is going on. So that's why we also mentioned that, going forward, we will be -- the portfolio will be gaining momentum.
Right. And lastly, sir, on your SME segment, right, commercial segment, which you are seeing 10% to 12% kind of a growth, in the last 2 months, there have been -- clearly, there has been input cost rising and there are some global supply side issues. Are you seeing any -- in your feedback with the commercial clients, is -- what are they saying in terms of this increased global tension and local input price increase? Is there any change in the business outlook there in your underlying customers?
Yes, I'll share with you. What happens, suppose if we have the exposure majority towards the textile, so we are continuously in touch with them. As far as spinning industry is concerned, because the cotton prices have become so volatile, earlier if they were maintaining a stock of 3 to 6 months, now they started maintaining for 15 days. And they are able to effectively pass on this pricing what all is there towards the buyers and all.
But whereas the problem is coming in respect of the garment manufacturers as well as the ready-mades, the buyers there, they are not willing to take this sort of additional load. But luckily, because the rupee is getting depreciated, they'll be compensated to some extent. So that way, there may be some lull in respect of the ready-made as well as the garment.
But whereas spinning is concerned, so they are doing well, though not at a full level of capacity utilization, a few of them, they have reduced it. But they are very carefully gauging because they expect the cotton yield, which is going to come in the coming years that way, that will be good and all prices are going to come down. So that way, more or less, the textile industry is concerned, the geopolitical situation in Ukraine, this didn't have much impact on us.
But whereas these localized issues like cotton, this has impacted to some extent and all. But because people are prudent and they are there in the field for a long time and all they are with us, they know how to handle and all. So we didn't find much issue. Continuously, we are engaging them -- with them on what's happening in the market.
Right. Understood, sir. I have one more question, if I may ask, or I can come back in.
Yes, yes. Ask, complete it. yes.
Yes. So sir, on growth, right? So you said we will be targeting 10%, 12% kind of growth. And again, it looks like a broad-based commercial as well as corporate growth. So I mean, I'm asking if you have any growth driver, right, let's say, within at least, let's say, commercial things are looking up or your corporate base is very low. And after so many decline -- Y-o-Y decline, it has now stabilized. So should not one think of slightly higher growth in corporate or maybe commercial or your overall growth guidance of 12%, how should one look at it? Is this -- I mean can you -- would you be comfortable or you think you can surprise? That is the main question, sir.
No, no, it's not the question of surprises. What all indication, what all is there, we have made, yes, I understand. So right for the last few years, our intention is to granularize the portfolio rather than going for a high-value corporate. So all of you must be knowing that [ INR 125 crores ], that's why we are trying to come below that one.
So to the extent possible, the first reference we are giving for the commercial where we have a strong hold when the yields are better. And the retail, we are trying. And agriculture also because we'll get the PSLC benefit. And with this, the portfolio also will be quite granular. If you look at our commercial business also, it's around INR 38 lakhs that way. That's granular, it is going on that way.
So now corporate is concerned, selectively still we want to grow. We have a slide on the movement of the ratings. So if you can look at it, how the BB and below rating accounts have come down in volumes and all, you can see that because with the earlier experience what we had, and that too, we do not find great green shoots in the corporate business and all. So we are going selectively there and all. But our focus would be more on the retail and selectively, we grow on the corporate, but not on the big accounts and all.
If we are taking big accounts and all, it's good rated accounts we will take. Otherwise, around INR 75 crores, below that, we'll try to grow. But we are focusing on the corporate also. Otherwise, if you look at it, so we were talking about earlier 3%, 4% corporate. This year, what we have indicated is around 12%. That itself is a good number. Overnight, if we increase it to 20%, 25%, again, it will lead to accidents and all, which we do not want to encounter.
The next question is from the line of Pranav Tendolkar from Rare Enterprises.
Sir, can you also guide for the total recoveries and upgrades for the next year? You have said that next quarter, it will be more than the net slippages -- gross slippages. But for the year, how it would be?
Yes. Pranav, in fact, that's what we were indicating. On one side, when we are told saying that our slippage ratio will be between 1% and 1.5%, naturally, the recoveries have to be shared above that to see that the overall net slippages are there. So -- but there are many imponderables, unknown, unknowns are there like many cases stuck in the courts and NCLT, which are at the fag end.
Suddenly, a few of them, they come forward and resolution comes up and all, a few big ticket -- big accounts, you may be able to get a clarity on that. So that way, while the other accounts where we have some sort of a hold, we are able to do that. A few accounts where we do not have, we will not be able to do, but we pursue that one.
So we cannot give straightaway number, but when we aim for a net negative slippages, naturally 1% to 1.5% when we are seeing, so it has to be relatively lower than -- higher than that, that the recoveries will be.
Right, right. So net slippages could be for the year near to 0, plus or minus a small amount?
No, no. That is our intention and aim. We are all working towards that angle only because when last 3 quarters, we are able to do with that aim, we could, to some extent, succeed. Now the team is more or less in the groove. So we need to take it forward on the same lines.
Perfect, sir. Perfect, sir. Sir, in terms of AFS book, obviously, you have provided the duration, but what is the kind of yield movements and sensitivity to this book in terms of treasury income for the year? So could you give some scenarios like if yield stabilizes for the year on an average, say, 7.6%, 7.7%, how much could be the treasury income or treasury losses for the year?
Yes, Pranav, see, if you have observed our treasury portfolio during the past 3 years, so consciously, intentionally, we kept our duration very low. So -- but our incremental investments, we have only either on the floating rate bond or very short-dated security we have invested. So that is why our yield also comes down from 6.3% level to 5.3% level during the last quarter. And this quarter, if you see, already, there is 13-point increases there in the yield. So it's only a beginning.
Because, for example, in these first 3 -- first 2 months alone, more than INR 1,500 crores of securities are getting replaced. So when you are continuously replacing our short-dated securities, and we are also hopeful that after June, there will be -- some sort of a clarity will be there on the yield movement. We thought that we'll replace these securities with better yielding securities.
So that's why we are -- when we're talking about NIM also, MD has very specifically mentioned that we're very confident of maintaining the NIM at the existing level. So what we expect is at least a 30-basis-point increase will be there in our yield during the current year.
Right, right. So there is a very low probability of having a loss in that item, that is what you're saying?
Even half of that -- in the current interest structure rates also, we don't have any significant MTM losses in the books. And only that our non-SLR book, there's some INR 1,400 crores portfolio we keep. So there, there will be some sort of MTM losses will be there. But anyhow, these are all short dated, these are all '24, '25 maturity. It would be notional.
Right. Sir, and also congrats that you have included that recovery and upgrade in that slide so that nobody has to ask now. Similarly, could you also add to the presentation split of other income, like the 3 major heads, fee income, treasury income and recoveries from the written-off accounts?
Yes, yes. we can do it. We will do it.
But treasury income is already there in that? It's on the other income breakup. Okay. Okay.
We'll do it, Pranav. We'll do it.
Right. So in terms of employee expenses, if we just adjust for the INR 26 crores of the family pension provision that you have done in this quarter, the employee expenses come to INR 197 crores. And is this a stable run rate? And there will be obviously 10% or 11% increase Y-o-Y, is this the right way to project employee expenses?
Yes, yes. If you look at it that way, we have projected around INR 1,040 crores for the employee expenses. So -- which is a usual run rate and normal growth of this DA, these sort of things and all. So that way, there will not be any abnormality in the employee expenses. That's why we have projected [indiscernible]. This year also, if you look at it, more or less, our actual expense are in line with what we estimated.
Right, sir. Right, sir. Sir, second thing is that on the SR book, how much of this SR book provisions will come next year, roughly?
Our SR book itself is total...
Net of provisions, the outstanding book is only INR 148 crores.
Maybe next 2 years it will be over.
Yes, by 2024, of course, the recovery...
Recoveries are coming. Pranav, recovery is also coming. Now, we are continuously engaging with the ARCs, because earlier last 2 years, the properties they have, but they were not willing to dispose of at a throwaway price because their skin in the game is also there in that. Now that the market is looking up and all, the demand is there for the real estate, they started moving out and scouting for the buyers and all, so the recoveries, what all will come also, maybe self-sufficient enough to provide for that. So -- but even then if you look at it, the overall on a scheme of this sort of balance sheet, if you look again, INR 146 crores is only outstanding, it should not be a major problem as far as SR book is concerned.
There are redemptions of INR 106 crores also in that.
Only redemption is INR 106 crores.
And this year, we didn't sell any other assets on SR basis also.
Right, right. Sir, just last question from my side, and I will come back in the queue after others are addressed. Sir, in the other income, you have provided the fee income, which is around INR 182 crores. Could you just provide how much of that is, say, a loan origination related fee and account maintenance fee? And how much of that is related to any cross-sell or third-party distribution related fee if it is possible for you to disclose?
Also, are we tracking product cross sold per customer because that will be an important [ matrices ] going forward? We have a huge customer franchise and those franchise are probably taking those products from other banks. So are you tracking that? Any qualitative information will be really welcome.
I will respond. You see credit related when we talk about, the processing charges itself, there is -- it's up by 40% year-on-year. Okay? So that's the main income, which we have got it and all.
So that way, the bills and other income also, if you look at it, is up by 20%. And LC income also has gone up. So that way, all 3 segments because we were mentioning about INR 2,500 crores of disbursements under the corporate, and likewise, the disbursements under the commercial also are pretty good this year compared to last year and all. So that way the processing fee, what all is coming, that is a major contributor in the other income.
Right.
So coming to next question?
Product per customer.
Product per customer is concerned, yes, Pranav. In fact, we started working on that. So initially, we started looking at the bank level. Now we have gone up to the next level divisions, and we are going up to the branch level.
Now that we have created a consumer banking division, just for the sake of clarity, I'll just share because earlier, the liabilities and assets they were independently working. Now then we thought saying that, so the interdepartmental coordination will be difficult if each one separately works.
So that's why we have created a consumer banking division with a head. So wherein both these verticals will be under him so that a holistic picture he'll be having. And we have -- now that we have got the government business also, the TASC, all these things, third-party also is a major focus. We are taking people from the market also who have expertise in this to push this particular area.
So our focus is there. With the creation of this consumer banking division, we'll be able to do much better, and we'll improve the penetration under that.
The next question is from the line of Anand Dama from Emkay Global.
Sir, can you provide some growth outlook and margin outlook as well? That will be great to start with.
Yes. Growth outlook is concerned, in fact, in my inaugural address, I have clearly mentioned saying that. So around 12% of the deposits and around 15% of the CASA, we are planning. And advances are concerned, vertical-wise, I have mentioned at that time, so around corporate 12% and commercial also 12% and around 10% or something like that in the retail segment and 13%, we would like to grow under agriculture. So that way, overall, we'll try to grow advances around 12% that way.
And coming to the margins, if we look at it, so despite the stiff competition from various players because of the liquidity, so still we are able to maintain our margins. Our NIM has gone up, and it is annual basis 3.69% and the quarter ending it is 3.79%. So it is not only on account of the cost of funds.
The cost of deposits is one part. And second thing is we are able to maintain our interest income despite this competition. And third thing is the recoveries, which have helped us. The reversal of the income also has come, what all earlier we couldn't book and all.
So all these things which have helped us, in addition to that, the yield on the investments what all is going up. So that way, overall, we feel we'll be able to maintain a NIM of 3.5%-plus despite these raising interest rate scenario, that's what we feel. And our focus still continues to be on the retail portfolio, where our margins are relatively better and our portfolio is granular.
But in your guidance, basically, you're talking about corporate growth at about 12%. Looking at the way the scenario is shaping up, it looks like the corporate certainly could grow at a slower pace. On the other hand, basically, you're talking about retailers growing at about 10%. You have set up a consumer banking division. So why not extract the growth on the retail side rather than depending a lot on the corporate side?
No, no, I agree. In fact, if possible we may grow even at 15% also on the retail front. So because consumer banking is because the unit needs to be set up and what other issues we need to work it out and all. So even with all these things also, you would have seen our home loan growth last year is around 11%.
So that way, last year, 2 products, which we didn't do, so we are planning to restart them. One is on the personal loan front. Personal loan front, if you look at it, so we have a database and all. We have scrubbed, and we have brought out some numbers. But because few of them or majority of them are under the self-employed category, we were a bit cautious till such time we've clarity.
We do not want to open the flood gates under the personal loans because earlier also, you were asking why you cannot grow aggressively in the personal loan so that it will act as a kicker as well as the pricing is concerned. So now we have made up our mind that way and all. So we have got the preapproved loans. We will try to push that particular segment.
And next thing also, we'll try to see how best we can improve the jewel loan component because last year -- before last year, because of the COVID, people have taken out their gold and all they have taken. And last year, many of them, they have redeemed. So now we need to focus on this particular segment also how we need to go ahead.
Anyhow, our focus on the mortgages like housing as well as LAP, this will continue. So that way, education loans also. Now earlier instead of doing their domestic loans and all, we entered into a partnership with a firm who have the expertise. And together, how to take it forward, we are working. More or less it's in the final shape.
That way each of the product what all are there, we are trying to work out. Even the retail credit card also, so which we have launched now, we have shortlisted a set of customers whom we can offer, and that also we'll push it this year. So that way the focus will definitely be on the retail. Anything...
Yes. See, I think I would like to add a couple of points here. See, as far as the retail is concern, your point is well taken. But only thing is, last year, we achieved a growth of 8%. So now we have done a lot of changes in our product structure, in the organization structure.
And then now we are going to start this business. Interest rates are retuned according to the market. So it will take -- maybe it will take some more time for them to stabilize and then achieve the growth. So that is why we're expecting 12% to 15% growth on the retail segment.
On the corporate side also, if you take that -- even at existing 7% growth, other than technical write-offs, many have -- we have existing customers also we have to slow down. So to meet the requirement of existing customer itself, we are confident, I think, 4% to 5% growth we will be in a position to achieve.
So that's why we are planning like that. But your point is well taken. And maybe in the next 9 months, 10 months period, probably our growth, we are expecting 12% to 15%. But going forward, in the years to come, I think we are planning for the much higher growth.
Yes. Anand, the one more point I just want to share. Corporate, when we talk about unlike bigger banks and all, in our case, any account above INR 25 crores comes under corporate. So that way, in a granular portfolio of INR 50 crores, these sort of things you see focus on that. So it will have the benefit of the pricing advantage as well as the granularization.
Sure. Sure, sir. And sir, secondly, I mean, you talked about the global crisis and impact and all, but close door, Tamil -- I mean, basically, Sri Lanka has seen -- is already into a crisis. Any of our corporates basically whom we would have lent would have exposure to Sri Lanka because I think...
Nothing much. Nothing much absolutely, we have seen that. So we do not have much exposure at all to Sri Lanka.
Okay. So you don't see any corporate NPAs or slippages coming in because of the problems in Sri Lanka?
No, no, no.
Not at all.
Yes.
Sure. Great to hear that. Sir, third thing is about our tax rate. Tax seems to be on a higher side. So any specific reason for that?
Yes. Our CFO will respond on that.
In fact, see we are -- whatever the normal corporate tax rate is around 25.16%, 25%-plus, that's what we are also on the same lines only. It's the normal phase, nothing abnormality which we can look at right now.
So we have moved to the new tax regime or we are still on the old one?
No, no, new tax regime. Last year itself, we have moved.
So then basically, we should have an effective tax rate somewhere about 25-odd percent, which is not the case?
I think this 26 -- the same range only. It is 25.16%.
Slightly higher because there are a couple of items which are not tax free. So we have not claimed the [indiscernible] benefit because the items are not high, so probably that is why there's a slight increase from the effective rate of 25.16%. I think it has come to somewhere around 26-plus percent something. If you see the quarter and the year, the year would be more closer to 26%, whereas the quarter will be slightly higher, because of the year-end finalization of accounts and the provisions that we have made.
Not a major variation, which we need to be concerned.
You can take it as 25.16% is our run rate for this year.
The next question is from the line of Mahesh M.B. from Kotak Securities.
Just 2 questions from my side. One is on the yield on investments, your portfolio carries a yield about 5.4%, which is comparatively extremely low. Any broad thoughts to it?
Yes. Mahesh, that's what I was responding to Pranav also. So if you noticed for the past 4 or 5 years, 2 years, we have sold a lot of securities, higher-yielding securities in HTM. And then we converted into the lower-yielding securities because we want to make advantage of the market. When the interest rates are peaked out, so we sold some HTM portfolio.
And then whether you have taken -- I mean invested in the low-duration securities. So that is why that the yield drastically has come down when you compare to the earlier years. But now, going forward from this, already it is reflected in the last quarter. But this year, we are expecting at least a minimum 30 basis point increase in our yield. So it's a strategic call we have taken. Now I think we will go back to the around 6% to 6.5% yield in this year and next year.
Yes, Mr. Mahesh, suppose if you look at on the other side, suppose has the yield been high and all, longer duration had we taken, now we are susceptible for these MTM losses. At least that we will be able to save. And that way, we'll be getting compensated to some extent to the call we have taken for a lower duration.
Okay. Sir, just one additional question. Again, this question has been asked many times. On the growth side, from your perspective, if the -- is the demand from customers still improving with each passing month or it continues to remain fairly subdued, there is going to be a little bit of a push to hit your 12% number as well?
It's both ways, demand as well as the push because our penetration is pretty low. So that way, because with the legacy what we have, the presence we have, if we deeply go and continuously pursue, many people are willing to come. That way, if you look at it compared in the commercial itself, so compared to last year, the disbursements have gone up by more than 50% compared to 2021. So that way the combination of both demand as well as push.
The next question is from the line of Sri Karthik from Investec.
Sir on an incremental basis, what are your yields on your commercial and corporate portfolio, sir, incremental lending?
Incremental around 9% odd we can say for the commercial. But corporate, we will not be able to quantify. The reason is it depends on the, because of the liquidity, if you look at it a few banks, they'll say that 5%, 5.5% also they will give, and few of them 7%.
So we look at the quality of the account and all. Suppose if the quality is so good and depending upon the funds what all are available and alternate sources of deployment, we will see. If you are able to make some more higher money in the corporate, we'll go for that. So that way, overall, if you look at it, 8% plus we can think of in corporate, but 9% plus is coming in the commercial.
Understood, sir. And the second question that I have is with respect to our commercial portfolio. Has there been higher churn as in people moving out for balance transfers to other banks and us sourcing more in the commercial portfolio in the last 2, 3 years?
I agree to some extent that is there, we cannot say no because -- so we are also conscious about the risk reward. So suppose if our pricing is not in line with the risk what we are taking, at least to some extent, we can given an allowance for the relationship, but not beyond that. So that means someone is quoting around 6%, 6.5% for a commercial also, we're allowing them to go. Likewise, few accounts where we wanted them to go, actually some opportunities there under these circumstance others are asking, we are allowing them to go.
But that way, overall, if you look at it, even if some prepayments are there and takeovers are there, despite that, we are able to grow that which implies saying that there is a demand is there and as I was telling Mr. Mahesh, push is there. So both ways, despite these takeovers and these things, this is not only for our bank. Every bank is having the same problem. But despite that, we are able to grow net-net.
Got it. Also, Slide 20, sir, our corporate book. About 41% of the portfolio is less than -- or BB and below. What is the mix and what -- how should one look at this portfolio and the risk associated?
No, no. You have to compare it over a period of time because you see from March '21, quarter-wise, when we have given, so how the movement is there, you see. So how the BB below and book has come down? And how it has moved to BBB and above.
So that way, consciously, when additional exposures we are taking, we are consciously focusing on good quality. And likewise, BB and all, when the renewal comes on the concessions we are withdrawing. And more or less, we are giving a message saying that below and all. So either you price it or you mend yourselves or you can leave. So that way, with various measures, we are seeing that not that the rest of the BB and all, all of them are quite vulnerable and all. We'll be taking a hit, but all of them, we are able to manage well. There should not be any problem at all. But our consciousness towards better quality assets have gone up and all. That is the reason the movement is there.
One more point, Karthik. When we talk about corporate, we talk about the INR 23 crores exposure irrespective of the constitution. It may be a proprietor, it may be a partnership or it may be a...
[Technical Difficulty]
We request all the participants, please stay connected while we reconnect the management.
Ladies and gentlemen, we have the line for the management reconnected. Thank you, and over to you, sir.
Sorry, Karthik, line got disconnected. I was talking. Am I Audible?
Yes, sir, you're audible, please proceed.
Okay. I was talking about the corporate account. So the -- unlike the other banks, the corporate account, what we talk about is INR 23 crores and above exposure, and the constitution may be a proprietor, partnership and all. So when you do the rating for a proprietor or partnership, generally, the marks awarded, the rate awarded is slightly lower.
So in that way, a trading firm consistently with the bank for many years, it's very difficult for them to get the BBB rating. So unlike corporate, this real constitution-wise corporate, where it is easy for them to get a BBB rating, BB rated customer slightly -- but otherwise, if you see the performance, all, everything will be good. But the challenge is only in the case of these trading accounts.
Mr. Karthik are you there?
Karthik, sir, if you're able to hear us, please respond. So it seems like we lost his connection. We'll move to the next question from the line of Suraj Das from B&K Securities.
I've a couple of questions. The first question is on the restructured book, sir. Sir, if you can share, I mean, how much of the book has already started billing or have come out of moratorium and how has been the collection efficiency in the restructured book specifically? And what has been the trend? Yes, that is the first question.
But restructured when we have given, we have given the NPA also there in the same slide itself.
Slide 32, if you see, we've given the both standard accounts and NPA accounts, both we have covered for March '22. And also, we have given our -- the segment rates also we have given.
Right, sir. But my question is, sir, I mean, out of the INR 1,640 crores of standard book, I mean is the -- I mean, the COVID-related restructured book is around INR 1,200 crores. So I mean how much of that book has come out of moratorium and started billing?
Suraj, are you talking about the Resolution Framework 1 and 2, which RBI gave a dispensation saying that we can [indiscernible] the interest and [indiscernible].
See, this substantial portion of these accounts are working capital accounts. So the working capital accounts, they have all the -- whatever the dispensation, everything is completed. And every month, their billing cycle already started. So in that way, maybe some 10% to 15% of the accounts, there is an element of stress is there. But otherwise, the billing has already started and repayments are coming in most of the accounts.
Okay. Okay. Understood, sir. And the next thing, sir, in your opening remarks, sir, you said that the 28% of total loans are EBR-R linked. So I mean, sir, what is the rest of the book? I mean, how much would be the MCLR linked, how much would be fixed-rate loans?
More than 80%, 85% is floating rate. Okay? Hardly fixed-rate is less than 10%, something like that. So other than that, majority is floating only.
And sir, out of that 80%, 85%, how much would be repo-linked and how much would be MCLR linked?
I can say of our approximately our loan book, already indicated 28% is the EBR-R, and MCLR constitutes 58%, and fixed-rate is 9.5% and remaining 4.5% is other category.
Yes, I can tell you, MCLR is around 57% is there. And the base-rate is around 2%, BPLR around 1%. So that way, majority, around 88% is on the floating rate. Around 12% is on the fixed basis.
Okay. Okay. Understood. And last question, sir, on the NARCL side, sir, have you earmarked any amount, I mean, that you would sell to NARCL in the first tranche? And what is your expectation, let's say, on the recovery side from that, I mean, sales or, let's say, what is the provision write-back amount?
We are yet to hear from them.
NARCL, the first tranche, we don't have any account. But there are some 5, 6 accounts earlier when the initial discussions were taking place, we have shared the data, but we are yet to get any response from them. Probably, we are expecting something in this quarter.
Sir, any ballpark amount, I mean, what you have identified in those 8, 9 accounts?
No, actually, initially, we have shortlisted some 6, 7 accounts at the time, INR 500 crores to INR 600 crores of loan book. But subsequently, 1 or 2 accounts we have closed. So now I think we have to check with them what are the -- their interest and then we should take it forward.
[Operator Instructions] The next question is from the line of Prashant Kumar from Sunidhi Securities.
My question is on funding side. Just you have told, sir, the deposit and CASA expected growth is around 12% and 15%. And due to current scenario, market scenario where the people have less savings and as we have saw that the CASA is also muted or even slightly declined, so if you have set this target and at current scenario, where do you see the cost of deposits? And I think so you will have to go aggressive on the interest rate hike. So if you could give some color?
Yes. If you look at the interest rates, if you look at our time deposit rates, more or less, they are comparable. They are shared better than our who are the peers. So that way, on account of interest rates we losing will not be there.
Coming to the CASA, if you look at it, so initially, I've mentioned saying that to have a greater focus, we are creating a consumer banking division. So under that -- so 2 verticals will be there now, the branch vertical, which was actually mobilizing the CASA portion. Now we are creating a sales vertical also, which will be aggressively on this particular job.
So that way, sales and branch together once we start getting, so then we expect some sort of a growth there. And next thing, if you look at it, we want to focus on the TASC segment also. So that is the reason, at a national level, we are going to create this sort of structure.
And above all, we have got the permission for the government business to doing. So that's the reason we are creating under this consumer banking wing, a government wing also so that where we can get some sort of volumes and these sort of things, we started working on that.
So that way, overall, if you look at it, the SA as well as CASA, so we want to grow at that level and overall deposits at this level. But if we look at the savings bank also, over a period of time, last 1 year, the average value of the account we started focusing rather than on a smaller, smaller accounts, where the labor and servicing will be more. So that way we see the average balance of an account which new acquisition is happening and all, that has improved. Now we can start working on the product per customer, these things with them. That way, overall, what we plan that 15%, we feel we'll aim for that to reach that particular number.
So though, that 40%, that is the reason I didn't give any indication for the CASA ratio because it is on account of the time deposits growth also, it varies. So the CASA -- individually, we want to work on the growth of CASA, rather than focusing on the percentage of the CASA. So we are reasonably confident that we'll be able to mobilize this level with the measures what we have taken for the liabilities.
Okay. Okay, sir. And the other question is on expenses side. Staff expenses continuously decreasing. And if you could give some color on IBA things? And obviously, operating expenses is good for -- because it's business related. And employee has also -- employee count has also decreased. So could you give some -- the incremental head count and what will be the expense on staff?
Yes, Prashant, yes, you are right. During the past 1 or 2 quarters, the employee expenses coming down. But there are 2 reasons. Last year, corresponding previous year, because of the onetime biparty settlement, arrears were there, it looks like that. But if you see the last quarter, the fall is on account of our lower AS 15 burden.
So because of the discount rate, the interest structure is -- I mean the interest rates are going up. So the discount rate is slightly higher. So that is why we are required to provide only lower amount. So that is the reason for that. But going forward, since that the interest rates are going up, I think the AS 15 burden will be less, number one.
And number two, with regard to the number of the employees is coming down, if you notice almost 400, 500 employees have come down. So the bank has done a lot of transformation process during the past 2 or 3 years. We moved a lot of operations from the branches, and then we have centralized these operations, so that, in the branch level, there should be lesser people to do the operations, but more people for the sales side.
So that is the need of the hour because technology and digital system, today, enabling that type of things are possible. So in that way, that is why the numbers are slightly coming down. But having said that, so this year, we want to increase the numbers. But whatever recruitment we are doing it, it is only on the specified required level, we are doing it. So in that way, going further, the number will be increasing it. But already, we indicated INR 1,040 crores establishment expenses for the current year.
The next question is from the line of Sri Karthik from Investec.
Sir, slide #19, the ECLGS portfolio. That's the outstanding amount or the disbursement number, sir?
Outstanding.
Okay. Awesome. And the INR 960 crores for corporate, does that have any chunky account in it?
INR 960 crores outstanding, maybe there may be there, but if you look at it, but INR 960 crores may be there. But if you look at the SMA 30-plus corporate is miniscule, so which implies saying that at that material time, they would have availed it. So -- but it doesn't mean saying they have a stress.
One more thing, Karthik, we have to keep in mind, the arbitrage opportunities also made people to draw under ECLGS when the rate of interest on the cash credit is higher. So a few of them, they drew their and all, they have liquidated the cash rate, that way, they have got a benefit of 1% to 1.5% rate.
Could you quantify that amount, that was, in fact, my next question. Was it 30%, 40% of the people who have refinanced?
I'm not clear about the question.
The same thing, the arbitrage that you mentioned, what...
We'll not be able to say because anytime people drawing, it will be going into cash credit. So that much of discretely having a surveillance and trail, we may not have done that. But the fact that the delinquency or the stress is not visible in the corporate in respect of these accounts also, which gives us some sort of confidence saying that they are not vulnerable.
So only -- one point, Karthik, if you notice the pattern of availment, in such cases where they have availed the emergency credit line scheme, so many people are having a higher unavailed limits, the working capital limits. So they are not availing the full expenses.
So that gives an indication, I can say, 15%, 20% of our working capital accounts. The unavailed limit -- rate has gone up. So maybe on account of this loan, their day-to-day availment is on the lower side.
The next question is from the line of Lalit Deo from Equirus Securities.
[Technical Difficulty]
Mr. Deo, sorry to interrupt. Your audio is not clearly audible, so if you can take the phone off speaker, please?
Hello?
Please go ahead, Lalit.
Yes, sir. So sir, on the arrangement with Rupeek Gold Loans. So can you talk us about the partnership like in terms of risk sharing, yield and the yields which we make on that book. And this -- and can you also quantify the overall loan book, which we have generated from the Rupeek partnership?
The numbers straight away I will not be able to give, but compared to last year, the numbers have gone up. And more or less, currently, our gold loans is at 9.5%. So more or less, we are able to get a similar pricing there, too. So that way, the stress levels are also nothing much and all.
But compared to last year, there is a good traction this year for 2 reasons. One is the initial teething issues are over. And second thing is the number of locations where we were doing, we are slowly enlarging the locations. So that way, the numbers are going up, but I will not say that it's a great number and all. It is still in 2-digit number only going on. And this year, still, we want to ramp up to further locations.
Sure, sir. And sir, on the retail gold loans. So in this quarter, there was a sequential decline. So what would be the reason for the same? Is it because of the lower demand? Or is it because of a high competition?
It is a combination of both in the sense that, as I said, in 2021, because of the COVID, many people out of desperation, they have brought out the gold and all, they had to take the loans. But now the position has improved. The cash flows have improved and all. Many of them, they closed the loans and all, they have gone.
And second thing, if you look at it, competition is also there. We are not saying that way and all. So that way, when we see it, we wanted to more or less maintain our margins around 9% plus that way and all rather than bring it down to -- few of them may offer 7.5%, 8% and all. We don't want to offer those lines -- the pricing and all and to cannibalize our own agriculture portfolio also, which is growing at around INR 1,250 crores plus 8-plus percent. And also, we have the benefit of PSLC there. You would have seen that our PSLC, the income itself is we have got around INR 5.75 crores, something like that under the PSLC. So we wanted to maintain that agriculture portfolio, and we do not want to bring down the personal banking rate below that. So we are balancing that way. But whatever it is, they will look at this position now and how best we can reverse the position and regain the jewel loan business, we are working on that.
Sure, sir. And sir, in your initial commentary, you highlighted that there were certain cost control measures with which you are planning to improve the cost income ratio to 50%. So can you highlight more about -- can you give us more details on the same?
Yes, there are 2 things here. For the cost-to-income ratio, one is income, second is cost, okay? So our cost majority -- if you look at it, majority is coming from the employee cost on which you have your control is relatively less, though we are trying our level best to bring down the -- bring up the efficiency and all to improve the performance.
So that way, rather than focusing more on the expenses, I think we need to focus more on the income. So that is the reason we are improving the productivity. If you can look at our last slide also, the business per employee, which used to be INR 14.99 crore as at the end of '21 March has now moved to INR 17 crore. So progressively, we are improving the business, where granular portfolio with yield going up also, we are maintaining NIM. So that is one.
And second thing, coming to the cost front. So wherever these rentals, these things are there, we are negotiating, wherever ATM expenses, these things are there, we are renegotiating with the vendors and all for bringing it down. So every cost what all is there, vertical-wise, we are looking at it. Which is unwarranted, we are trying to bring it down.
But there are a few costs which you cannot do anything like that and all, suppose digital transactions are going up. Naturally, UPI and all the transactions are going up, you may have to pay more and all. So -- but whatever it is, wherever it is warranted, we'll go for that, but we will not reduce or contain the cost, which is going to give growth in due course.
Suppose we were talking about the liabilities. For that sake, the sales force we need to ramp up. It may increase the cost initially front loaded, but you are going to get the benefit of this in the years to come. So we will gauge in such a way in that where the business is going to accrue on account of this cost, we will work. Which is unwarranted and wasteful cost and all, everything we are trying to bring it down.
We take the next question from the line of Manish Dhariwal from Fiducia.
Very good results and a very good presentation with good disclosures. So my compliments on that.
Thank you, Mr. Manish.
I had a little longer term kind of a perspective that I was seeking. So see, basically, right now, if I look at your book, it's like 25% of the book is gold loans, which is good. But it's also a reflection of maybe at some level, reduced business opportunities and competitive thing that exists in the market today. I wanted to understand how are you visualizing the bank, say, over the 3- or a 5-year perspective? Say 5 years from now, where do you see the bank? How do you see the complexion of the asset book?
Yes. I'll tell you. The composition is concerned, we still wanted to maintain the more or less the same composition where the retail will take a bigger pie compared to the corporate. Corporate will be growing, but corporate, when we talk, we will try to focus on below INR 75 crores. You would have seen our corporate, the portfolio, the average ticket size is around INR 38 crores.
So that way, we will try to grow at INR 75 crores that way and all, but focus will be on the commercial, retail, agriculture and corporate. So that way, we will try to go for that. And the same composition what all is there, we will try to maintain. The reasons are many. Because we have a structure where we have the branch structure and the corporate banking unit, business banking unit, all these structures separately we have created, which are dedicated to mobilize this business, we need to fully exploit the potential of this.
That's the way we will go for these things, first thing. And second thing, the granular portfolio. And third thing is the yields much better we will be getting and all with the earlier experience what we had in respect of a high-value corporate if in our anxiety to grow the balance sheet, if we grow bigger accounts and all, so when things are good and all, it looks everything good. But -- so times are not good and all, again, you'll have to face the same thing.
So we cannot forget the past experiences what we had. So granular, we'll go. Likewise, the NEO what we had. So that also is pretty growing well. That is also a quite granular portfolio. So our focus will be majority towards retail. And so to some extent of the corporate because corporate, we call it as not a big corporate, that up to INR 75 crores.
So this is what actually we feel. And now coming to the profitability part, we have already indicated saying that, so we will try to maintain the 3.5. So that way, having come to this stage because last year, if you look at it, our ROA was around 0.5%. And now we have moved to 0.86% on an annualized basis and year-wise 1.06%.
And we have been giving an indication earlier also by '23 on a sustained basis, we will be having an ROA of 1%. Our intention is to grow ROA much better than what we are thinking. With the efforts what we are making, we'll be able to do that.
Another good factor, which is going to support us is progressively the good work what all has been done on the recovery front. So that's why you could see how the gross NPA and net NPA numbers have come in a particular 1 year, which is also first quarter was a terrific year and all for every bank and all. We are able to bring down our net NPA by 1.13%. If overall, if you look at it on a portfolio of around INR 58,000 crores, the net NPA comes to INR 1,261 crores, with the efforts and the traction what we have brought.
If we are able to bring something more on that front, and the provisions, what all we are supposed to make comes down and the yield, what I said in the retail goes up and all, with all these things, we feel that next 3, 4 years, with the past experience what we had, we will be able to do much better, that's what we feel and our President would like to add.
Manish, one more point I'd like to add. See, if you see the composition of our branches, 50% of our branches are in the unbanked rural and semi urban places where predominantly the jewel loan is the major activity for them. So that is why, as always, we are maintaining 20% to 25% of our jewel loan portfolio.
And particularly, again, in the semi-urban centers, so the traders love to have a banking relationship with our bank. So traditionally, our traders portfolio is consistently doing well and fully collateralized where yields are also better. So we are all continuously growing and nurturing the portfolio, growing that portfolio.
So the third point is the mid-core, so all the metro centers. So in the longer term, irrespective of 4 years or 5 years, because of the composition of branches and geography, we need to mix our portfolio according to the requirements. So our M.D. has already indicated about the NBFC co-lending partnership, the fintech partnership. So that we are giving more importance to push that -- the growth at the required level.
But sir, I just confess that sir, like everybody is doing the same thing today, because we interact with so many banks and we find that everybody is trying to chase the retail, everybody is trying to granularize their book and this -- the new fintech arrangement.
Now this fintech arrangement in specific is yet to give any results in the sense that costs are being incurred because the realty was, it's a new business, so like in the investment phase. But nobody knows as to how profitable or how remunerative it will be either in getting deposits or in improving the lending book? And obviously, the cost associated with that. So you also mentioned that there was 3 new NBFC partnerships that you are now actually working on. So my question here is that, on this co-lending -- of this partnership business, how are the risks mitigated?
Yes. See, as far as the -- you are very right. So as far as the fintechs are concerned, it's very completely uncertain, and we need to do a lot of homework. But as far as the co-lending is concerned, for example, we have built some 3 accounts, so the portfolio side something around INR 360 crores today. Very -- first of all, it's all very short-term exposure, number one.
And number two, we have been doing this business for the past 2 years. We have gained some sort of expertise in terms of technology. For example, if you take the Amazon, the BNPL program, so we are giving 99.99% uptime to them, and the millions of transactions are happening. So in that way, we have built a proper technology platform, seamless platform, which many of the other competitors doesn't have.
So we want to capitalize this opportunity. That is why we are working closely on the NBFCs where bank is getting the benefit. We don't want to do anything for fancy. So wherever the returns are there, wherever the values are there, we are associated with these NBFCs and then we are progressing well in that direction.
So sir, if I may ask, say, 3 years from now, sir, 2 areas, one is the fintech; and two, these NBFC relationships. Sir, say, over the next 3 years, your asset book, which is at INR 55,000 crores gross, goes up to say INR 85,000 crores or INR 80,000 crores, so what percentage of your book would be this fintech and this -- your NBFC relationships?
Yes. I just tell you, fintech, if you say there are 2 aspects. Fintech can be for the liability, all these things and on. But we have been in discussion with many of them. But wherever we find value that over a period of time, the resources, what we are investing, it makes sense, then only we are doing. That is the reason from the liability side, nothing much we have done that and all.
Coming to the co-lending, our President has already told saying that this is there, but it may not give huge numbers and all. Our current sales structure with the branch structure, what all is there, organic growth only will be the major portion. So this co-lending and this growth what all will be coming is only a tail, it is only just a kicker.
So that too, we are selective in identifying an NBFC or a fintech, their capabilities, how they are going to monitor and recover that is a key factor. Otherwise, financing is very easy, anyone can do. But tomorrow, follow-up and recovery is the key. So wherever they have a presence and we have a presence something like that, we are looking at it and we are going selectively with NBFCs. So if you look at it, it may not grow exponentially, the co-lending portion, what we are thinking of. It will be one of the channels where we can grow, but majority growth will be coming from our organic channel like sales structure as well as the branch channel.
Okay, sir. Okay. Okay. Sir, the last question. Sir, in fact, there is a fair amount of consolidation happening at least on the PSU or public sector bank side. They've already had 1 or 2 rounds, SBI got merged, and then the other 4 mergers took place. In the private sector side also, we see now small banks and payment banks and then like banks like yours who are -- have a very, very strong legacy, very, very deep inroads into the specific areas that you're present in.
And obviously, the larger banks, like banks like HDFC and all, they are still continuing to grow at 20% annualized, and they are demonstrating it. So what is your view as to how the landscape is going to be emerging over the next, say, 3, 4, 5 years in the private sector side? Are you seeing some sort of a consolidation happening in some private sector -- some segments of the private sector, banking getting merged, what's your view on this?
No, I'll tell you one thing. So this is an ongoing process. This unfolds, folds all these things will be there. But each player, they'll have their niche. So that way, if we can carve out what is our niche, and we are able to serve them, so definitely, you'll have your own space.
That is the reason, in every segment, what we are trying to look at is, we have to reinvent ourselves on which segment we can cater to. If there is a rat race and dog fight going on and all, there is no point going in between and getting crushed. So that's where we are looking at the products where we are confident, where the customers have confidence with us. That is one.
And second thing is whatever may be the bigger bank, whatever you may say, our experience, to some extent, is something different. So when the bank is smaller, their ability and agility to respond to the customer is much better. So we have seen a few of the customers who have gone out, within 6 months, they have come back to us saying that the comfort what they enjoy in expressing their problem and getting the issues resolved is much better in a bank which they can understand.
So that way, each bank, who is having a niche and all, so they will be able to play. This consolidation and all, it is a part of the job, it will be going on that way and all. But who can carve out their own niche, I think they'll be able to still continue, and they'll be able to run well.
As there are no further questions from the participants, I now hand the conference over to Mr. B. Ramesh Babu, MD and CEO, for closing comments. Over to you, sir.
From the entire KVB team, so we thank all the participants here for the interest they have shown even at this late hour. So when they are curious to ask many questions in detail, that itself shows how keen they are to know about what is happening here. We are again thankful to each one of you for the good wishes and the guidance, which made us to bring out these sort of results and all. We will try to live up to the expectations and all. We will take it forward, the journey, what we have done in the last few years, and it will be much, much better. That is our intention. Thank you once again, and good day to all of you.
Ladies and gentlemen, on behalf of The Karur Vysya Bank, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.