Punjab National Bank

NSE:PNB

Earnings Call Transcript 2023-Q4

[Deepak Singh, executive]

Yes. Good afternoon, ladies and gentlemen. I'm Deepak Singh, [ DGM ] Punjab National Bank, welcome you all for the earnings con call of Punjab National Bank for the financial year ended FY '22, '23. Managing Director and CEO, Sri Atul Kumar Goel; Executive Director, Sri Vijay Dube; Sri Kalyan Kumar; Sri Binod Kumar and Sri M. Paramasivam Ji and other senior members of the top management.

The structure of the con call include an opening statement by MD and CEO sir, and then the floor will be open for interaction. Before getting into the con call, I will read out the visual disclaimer statement. I would like to submit that the statements given herein are not guarantees of future performance, and undue reliance should not be placed on them.

Such forward-looking statements necessarily involve known and unknown risks and uncertainty, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements.

Investors are therefore requested to check the information independently before making any investments or other decisions.

[Rakesh Kumar, analyst]

Sir, I think your voice is not audible.

[Atul Goel, executive]

Rakesh, am I audible to you?

[Rakesh Kumar, analyst]

Yes, sir. I can hear you, sir.

[Atul Goel, executive]

Properly?

[Rakesh Kumar, analyst]

Yes, I can hear you, sir.

[Atul Goel, executive]

Can we start with? Disclaimer you already read?

[Deepak Singh, executive]

Yes, disclaimer over. Thank you, and over to you, MD.

[Atul Goel, executive]

Good afternoon to everybody. I welcome all the analysts who are attending this con call of the Punjab National Bank, our bank. Yes. I am happy to share the result of the quarterly closing March 2023 as well as the whole of the financial year, '22, '23 of the Punjab National Bank.

And before I start, I think this quarter was remaining a very good quarter for the bank because if you see last 5 quarters, which we have published the results, this is one of the best quarter because the profitability has increased. [ Simultaneously ], gross NPA, net NPA has reduced drastically. Operating profit and net interest margin has also increased and -- as well as PCR also increased.

So I will give some of the idea of the -- whatever the -- we have performed last quarter and in last financial year. And gross business of the bank increased by 12.14% to the tune of the INR 11,65,000 crores. Then, gross deposits increased Y-o-Y of 11.77% to the INR 12.81 lakh crores. Gross advance increased by 18.68% at INR 8,84,681.

Savings bank, there was a growth of around 2.72% and is stood at INR 4,63,087 -- INR [ 4,16,987 ] crores. And CASA share is 42.98%. And the RAM share, out of the total advances, is INR 4,69,981 lakh crores, which is 55.3%.

Now come to the profitability part. The net interest income, there is a robust growth of 30.05% Y-o-Y, which used to be around INR 7,304 crores in the last quarter of the '21, '22 March quarter, has increased to INR 9,492 crores for the quarter ended March 2023.

Similarly, the operating profit, there is an increase of around 11.42%. The operating profit for the March '22 quarter was INR 5,265 crores, which has increased to INR 4,000 -- INR 5,866 crores.

As far as net profit of the bank is concerned, net profit of the bank in March 2022 was INR [ 202 ] crores, which has increased to INR 1,159 crores with a growth of 473.57%. As far as assets quality of the bank is concerned, quarter-by-quarter, there is an improvement in the assets quality. And one more thing important, in the every quarter from the June '22 to March '23, the recovery was much more than the addition.

GNPA, which used to be around INR 92,440 crores as of the March 2022 has reduced to INR 77,328 crores. And GNPA in terms of the percentage, 11.78%, March '22, has reduced to 8.74% by March '23. Net NPA, which used to be around INR 34,909 crores, March '22, reduced to INR 22,585 crores. And net NPA, which used to be 4.80%, reduced to 2.72%.

And we have given the guidance for the 9% for the gross NPA, which reduced to 8.74%. Similarly, we had given the guidance for the 3% of the net NPA, which reduced to 2.72%. PCR, which used to be around 81.60% by the end of March '22, improved to 86.90%.

And one more thing is, as I told you, the recovery and the recovery versus slippage. There was a lot of improvement in the recovery [ versus slippage ]. June quarter -- June '22 quarter, recovery was INR 7,057 crores, which increased to INR 8,565 crores in the September. And INR 6,035 crores was in December, and INR 7,439 crores was in the March. As against the target of around INR 32,000 crores for all of the year, we have recovered INR 29,096 crores.

As far as slippage is concerned, slippage is reducing quarter-by-quarter. In first quarter, June '22, slippage was INR 6,468 crores, which reduced to INR 5,979 crores in the September quarter, further reduced to INR 4,072 crores in the December quarter. And further, it is reduced to INR 3,996 crores in the March '23 quarter. Bank has done a very good as far as the recovery in the asset quality is concerned.

As far as capital adequacy is concerned, there is an increase of the 100 basis points in this year. It was 14.5% in the March '22, which has increased to 15.50%. And the Tier 1, which was 11.73%, increased to 12.69%. And the cost of deposit, which was 4.15% in the December '22, 3.97% in March '22, increased to 4.5%.

has also improved, which was 6.80% in March '22, improved to 8.05% in March '23, and it was 7.35% in the December quarter last year, '22.

And the cost-to-income ratio, there is an increase in the cost-to-income ratio from 46% to 54.59%. This is major on account of the increase in the employee cost. Last quarter, March quarter, we have made a provision of INR 278 crores for the wage revision, which is due from the November 2022. November and December, we have provided in the December quarterly result.

And AS-15, we have made a provision of INR 1,244 crores, which includes the wage revision -- and wage revision on the gratuity as well as on the pension. We have also made a provision of PLI performance the incentive of INR 103 crores against -- out of which INR 79 crores was provided in the December quarter itself.

Because as per the bipartite settlement, if improvement in the 5% in the [ OP ], they are -- all the staff is [ entitled ] for the 5 days PLI. So this is the reason of the increase in the cost-to-income ratio.

As far as NIM is concerned, NIM domestic is 3.38%, and NIM global is 3.24% as against 2.86% in the March '22 and 2.76% global NIM in the March '22. AS-15, I have already advised you. As far as provision for NPA is concerned, March '23, we have made a provision of INR 3,624 crore.

Credit quality is coming 1.72%. It was INR 4,563 crores in the March 22, which was around 2.45% as credit cost. December '22 figure about INR 3,908 crores, which is coming 1.87%. Whole of the year, for full year, credit cost was 2.03%.

As far as the RAM is concerned, as I told you, it was 51.23%, increased to 55.31%. OTR restructuring is tendered outstanding as on its -- OTR1 is INR 3,174 crores, OTR2 is INR 7,760 crores. As far as SMA-0, -1, -2 is concerned, SMA-0, -1, -2 in March '22 was 1,75,391, which reduced substantially in the December. And as of March '23, the total amount is 70,762 , out of which INR 850 crores is in the SMA-2 only, and INR 5 crore SMA-2 in March '22 is [ hardly ] INR 82 crore.

As far as fresh slippage of INR 3,996 crores is concerned, it is [ agreeing ] around INR 1,253 crores; MSME, INR 1,337 crores; retail, INR 660 crores and on other INR [ 260 ] crores existing INR 478 crores.

As far as our pricing on the credit portfolio is concerned, around 85.20% is the floating, which is based on the MCLR around 35%, RLLR [ 26.3%]. RLLR ELITE is 12%, and TBLR, 10%. Fixed is hardly 7.16% or 4.3% in the foreign currency, et cetera, and remaining 3.3% is the base rate as well as the BPLR.

One more thing I want to highlight to all of you, this is fresh underwriting. We have taken a lot of initiative for the improvement in the underwriting as well as improvement in the collection efficiency.

I will give one [ data ] from the 1st of July 2020 to 31st March 2023. Around INR 5,72,539 crores loan we have sanctioned, out of which INR 5,18,257 crores we have disbursed. INR 4,16,638 crores is the outstanding, out of which the NPA is INR 1,178 crores, which is coming around 0.23%. So this, you will get the how the new underlining standard is being done in the bank.

The recovery from the NCLT in the last full year, first quarter was INR 693 crores, quarter 2 was INR 778 crores, quarter 3 was INR 730 crores. Last quarter, it was around INR 1,000 crores. So as far as the investment is concerned, [ STMA ] around 79% is there. AFS is around 20%. And the modified duration of the AFS and the HFT portfolio is 2.5%.

So this is my initial remarks to all of you. Now I would like to give an answer of your question. Thank you. Thank you. This last year was very good. And I assure all of you this '23, '24 will be a very good year for the bank. And I will give some guidance also.

Credit growth, we are giving the guidance for the 12% to 13%. Deposit growth, we are giving guidance 10% to 11%. And CASA CL, we are giving the guidance around 43% to 44%. Net interest income, we are giving around increased 10%. And the NIM will be around 2.9% to 3% because repricing of the deposit has not taken place fully in the last year.

Out of the -- loan repricing has done immediately, but the repricing of the deposit is to take place. Gross NPA, we are giving guidance, it will be less than 7%, net NPA will be less than 2%. And credit cost, which was around 2.03% last year, we are hopeful, it will further reduce. It will be around 1.5% to 1.72%. And the target of the recovery for the whole of the year will be around INR 22,000 crores.

So this is all my initial remarks. Thank you. Thank you very much.

[Rakesh Kumar, analyst]

Thanks a lot, sir. It's a very strong set of performance the bank has given, considering the rise in the margin, on a sequential basis, in the domestic margin. And also the asset quality has been quite good. Just one -- a couple of questions around on the margin side. .

So CD ratio, domestic CD ratio is around 68% currently for this quarter. So is there a scope to further increase the domestic loan deposit ratio from [ ASR ] because that would help us on the margin front?

[Atul Goel, executive]

It was -- if you see, it was around 69% as per our data. 69% was the CD ratio. So because we are having the excess SLR also, you all are aware. So definitely, we would like to use and without raising further deposit. Even we will be in a position to improvement in the CD ratio in times to come.

[Rakesh Kumar, analyst]

Correct. Correct, sir. Correct. And sir, ROA guidance that we have given for FY '24 would be, sir?

[Atul Goel, executive]

Return on assets. Return on assets, if you see, as on date is -- because the profitability was less. So I think next year, I think I will be in a position to give the guidance of the -- around -- it should be around 0.50 or 0.60 basis points -- percent.

[Rakesh Kumar, analyst]

Super. Great. Great. I would request Mr. Ajmera to unmute and go ahead with your question. Mr. Ajmera, please go ahead with your question.

[Ashok Ajmera, analyst]

And yes, complements to Atul Goel sir and team for another set -- I mean, another quarter with a good set of numbers. Of course, the bank has still -- has to go a long way, because of the -- some past negative legacies. Still, our figures are not that very encouraging, though comparatively, yes, it is definitely better.

On many points, especially now -- just now we discuss about ROA, ROA of 0.32 in this quarter and 0.17 in the last quarter is very low, and even the target also of 0.50 doesn't inspire much. And similarly on some of the other data, if you look at -- though we are -- your target for bringing the gross NPA down to 7% and net NPA to 2% is definitely encouraging.

But finally, we would like the bank to come down below 5% in the gross and maybe below 1% on the net NPA. Many of the peer banks have started coming down to a net NPA to 0.7 or 0.5 or even 0.27, one of the small banks.

Having said that, sir, what are our plans to bring down these credit cost? Credit cost is very, very high competitively in our bank. And still, I think the target is also not being given very encouraging. So what exactly the bank is planning to bring the credit cost down, increase the ROA?

And the write-offs are also very high in this quarter, INR 6,000 crores. In the overall year, INR 16,578 crores. So going forward, what are our views on that? This is my first -- just a question on these three things combining together.

[Atul Goel, executive]

Thank you, Ajmera, for the compliment. As far as your question is related to the credit cost, the credit cost in the last quarter was 1.72%. If you see the whole of the year, credit cost was around 2.03%. And we have already given the guidance that it should be within the range of 1.5% to 1.75%.

And why we are giving this statement because you must have seen our quarterly number of the recovery as well as the addition. If you see the recovery, quarter-by-quarter is reducing and -- recovery, quarter-by-quarter increasing and the addition is reducing because if I will give the number, the first quarter, June -- you take the quarter of the June '22, that recovery was INR 7,057 crores.

And recovery was increased INR 8,565 crores in September, and INR 6,035 crores is in December and INR 7,439 crores in the last quarter. So if you maybe total, it was around INR 29,000 crores against the very robust target last year we have done for the INR 32,000 crores.

Similarly, this addition is reducing quarter-by-quarter. First quarter of the last financial year, it was, in June, INR 6,468 crores. And September, it was INR 5,979 crores. In December, there was a steep fall, around INR 4,072 crores. And in last quarter also, it's further reduced to INR 3,996 crores.

So if we are making more recovery, and if we are -- addition is reducing, the credit cost is bound to reduce because aging provision is also reduced because the 86% -- more than 86% we have the PCR.

So I do not foreseeing there will be -- but your point is very right that although we are giving the guidance for the growth in the NPA number, 7%, 2% for the net NPA number as you are saying that other bank has come down less than the 5% or the 1% in net NPA, I fully agree with you.

But because -- if you see from the -- from where we have started last year, 11.78%, we have reached to 8.7%. It means 3% we have reduced last year.and the -- from the number of the gross NPA from the 4.80% to 2.72%.

So last time, we have done a very good job in the recovery. And I'm hopeful, this year will be very good for the recovery as far as the addition will be further reduced. And the credit cost, which I'm giving you the guidance for the [ 1.52% ], it will remain 1.75%.

One more thing because I am giving the return on assets, although I told around 50 to 60, 0.50% to 0.60%, but even if you see, my net profit was around INR 2,507 crores. And we are targeting that it will be more than INR 1,000 crores every quarter. So if we take, it will be more than INR 4,000 crores for the whole of the year.

So even if I recalculate, then my return on asset will be around 0.40, to 0.42. Even if we are giving the guidance that it will range between the -- we will try to improve to 0.50. But I think when we are setting a target of the net profit, them I think you can take it 0.40 instead of 0.50. Yes.

[Ashok Ajmera, analyst]

No. I fully appreciate, sir. I mean, after such a strong team led by you, definitely, during your tenure, I mean, things have been improved a lot. Yes, you are carrying the past whatever is the negative legacy or whatever it is, you are definitely trying to improve these things. And we have a lot of expectations from you and this team sitting here.

Sir, now with this ECL now coming. Now the guidelines are not 100% clear, but is coming, is in offing. So the kind of report which you are sending to RBI or the kind of internal preparation which you must have done, are you prepared for that without any shocks or without any negative effect going forward? Have you worked on the numbers? And have you made some provision on that, sir?

[Atul Goel, executive]

Ajmera, I will give answer your question like this. Point number 1, this guidance of the ECL, point number 1 is the draft guidelines. And final guidance is likely to come. I think we should wait for the final guidance.

And moreover, in the draft guidelines, what will be the requirement of the additional provision? The RBI has proposed that they will give 5 years for this because ultimately, when we are talking about the ECL, it is only based on the expected credit loss. As [ on rate ], we are making the provision on the incurred loss basis.

The accounts which have turned to the NPA, we are making provision, but in expected credit loss and in ECL, expected credit loss. I have already given you the data of the last 2 and more than half year from the 1st of July '22 to 31st March, 2023, where I already gave that how we are behaving our new [ book ].

INR 5.72 lakh crore we have sanctioned. INR 5.18 lakh crores we have sanctioned -- disbursed. INR 4.86 crores is the outstanding, where the gross NPA number is 0.23 only because this is the purpose of the underwriting standard only because [ ECL ] is the only for the underwriting.

And the loan of the PCR is also in the ECL calculation because 81% to 86.90% we have already read. And [ CRAR ] also, there is a 100 basis points improvement from the March '22, which was 14.50% to 15.50%.

So considering all these things, I think there should not be any challenge, whatever the guidance we'll be receiving from the RBI. We will definitely be ready for whatever the final guidelines will come.

[Ashok Ajmera, analyst]

Sir, coming to that on how much buffer overall, like standard provision, structured -- restructured book, COVID restructured book, other than the -- what is recognized there as far as RBI guidelines and norms, what additional buffer or the provisions we have overall in the bank?

[Atul Goel, executive]

Ajmera Ji, ultimately, look, what I'm trying to tell, first, two type of [ provisions ]. You were asking for the standard, what is the buffer in standard? Point number 1 is we should see how much buffer we are having in the NPA provision also. Last year, it was 81%, it is around 87%.

Standard provision, definitely, we have to provide as per the RBI guideline. So definitely, there is some buffer which we have provided for the -- as per the July 2019 circa.

If the accounts will be resolved, this provision will be reversed in the last quarter also because we have made a provision for the -- standard provision for the -- some of the account, which was falling under the July 2019 circa around INR 500 crores, INR 600 crores, but around the reversal in the March quarter itself. Even we are hopeful in the June quarter also because the account is under -- out of the [ regulation ] plan.

So definitely, you can think this provision which we have made, it will be really -- it is a buffer for us.

[Ashok Ajmera, analyst]

And my last question in this round is around treasury book. The treasury performance, of course, because of the upward trend going on till now, till March, performance is not good everywhere. There are some reduction in the profits or it -- somewhere, it losses also, MTM also.

So in our case, how do -- how our treasury book is placed? And how do we see now going forward, when the rates are softening up or sub-7 now 6.9, 10-year? So can we get some color on the -- our treasury performance in the coming quarters? And what are our -- basically our plans for that to extend the [ good ] profit?

[Atul Goel, executive]

As far as -- Ajmera Ji, our [ team ] is very active. We are having the good exposure in the investment side also. As your question is because it is a movement of interest rate, already interest rate has further fallen because if you see the 10-year [ interest rate ], it was around 6.95 to 6.99 in 4, 5 days also. And we've already provided mark-to-market, so movement further, interest rate will decrease.

Definitely, we can make the profit because we are running profit on daily basis also with this yield of the 2.99. And we are immunized also because if there is a risk of the interest rate -- because our modified duration is hardly 2.53% for the AFS as well as the HFT portfolio.

[Rakesh Kumar, analyst]

Yes, Ajmera, can I request you to come back to the queue? There are other personnel also waiting for the -- with their queries.

[Ashok Ajmera, analyst]

Oh, sure, so. Thank you. I'll come back. Thanks for giving me so much of time.

[Rakesh Kumar, analyst]

Bhavik, can you go ahead with your question? Bhavik, can you go ahead with your question.

[Bhavik Shah, analyst]

Congrats on good set of numbers. Sir, just three questions from my side. Sir, first, what would be the LCR ratio? And second -- hello?

[Atul Goel, executive]

Bhavik, your first question is LCR ratio, yes?

[Bhavik Shah, analyst]

Yes, sir. Second question, sir. So we saw a very strong quarter-on-quarter uptick in yields. So what drove that increase in yields? And is there any one-off there with respect to interest on income tax refund or some proportion of recovery from written-off accounts being apportioned to the NII?

[Atul Goel, executive]

Bhavik, first question is the LCR. LCR in the range of the 150%, it will keep on changing, it is within the range of the 150% to 160%. Your question is regarding the improvement in the yield, improvement in the yield on the 2,3 count.

First count is the recovery. Not only the recovery in the technical is [ enough ] it is not coming in the interest side because if we are recovering more than the principal in the return, then only the part is coming to the interest income.

But basically, the -- what is the USP of the bank, 43% we are having the CASA. That is one of the reason that our NII growth is there and the yield of advances is also increasing. So basically, recovery has the main factor. And even some of the account, if we are making 50 basis points, 25 basis points also, we are not allowing the opportunity to go, so this is the reason our yield of advances has increased.

[Bhavik Shah, analyst]

Okay. Understood, sir. So sir, on the NII line as in for the full year, there is no interest or portion from recovery from written-off? Or there is some?

[Atul Goel, executive]

There is no -- Bhavik, there is no -- some portion is there because we are getting the amount in the substandard or doubtful category. If we are getting some money, then we are also in the interest income.

But your specific question was that if some of the recovery on the technical written-off account was there. There was not there, but definitely, the interest income was very much there in the account, which was NPA. And the -- whatever the recovery we have made in the last year, INR 29,000 crores we have recovered, it is 8% to 9% gain movement, you are making the recovery.

So it will start earning the interest income, right, because as [ noted ], we are not earning anything out of it. So this is the -- when recovery has contributed to the improvement in the yield.

[Bhavik Shah, analyst]

Understood, sir. And sir, how do we look at NIMs, going forward? How much cost of deposits do you see rising from here?

[Atul Goel, executive]

Look, Bhavik, as far as yield over advance is concerned, 8.05 is the last quarter yield. So definitely, because some of the loan will be repriced, which was earlier on the MCLR, their tenure is [ lower ].

As far as cost of deposits is concerned, cost of deposit is 4.54 in the last quarter. It is bound to increase because entire repricing of the deposit will take at the time of the maturity of the term deposit.

Because most of the deposit is within the range of the 1 year to 2 year, so entire repricing of the deposit has not been affected. Definitely in the next -- meaning the current year '23, '24, cost of deposit will definitely increase.

[Bhavik Shah, analyst]

Understood, sir.

[Atul Goel, executive]

As far as NIM -- NIM also you asked, NIM -- because the NIM was 3.38% in the last quarter, domestic, and global was 3.24% -- because we are also envisaging that cost of deposit will increase because the repricing of the interest, which were linked on the repo immediate return. So this is the reason we are giving the guidance for the next year, NIM will be between the range of the 2.90% to 3%.

[Bhavik Shah, analyst]

Understood, sir. So that's it from my side.

[Rakesh Kumar, analyst]

Yes. Go ahead, Jai.

[Jai Mundhra, analyst]

Hello. Yes, Hi, sir. [Technical Difficulty].

[Atul Goel, executive]

Jai Mundhra, we are not in a position to hear -- Rakesh, we are not hearing Jai Mundhra. Are you hearing?

[Rakesh Kumar, analyst]

Yes, I heard him, but now his voice is not coming.

[Atul Goel, executive]

Yes. Initially, I also heard.

[Jai Mundhra, analyst]

Yes. Is it better now? .

[Rakesh Kumar, analyst]

Jai, your voice is not clear. It is quite feeble. We can't hear you well. Your voice is breaking in between. Can we move to the next participant, Kunal, sir? Please go ahead with your questions. Kunal, are you there on the line? I think Kunal is not there. We'll request Mr. Sushil Choksey to go ahead with your questions.

[Sushil Choksey, analyst]

Sir, what's your credit pipeline visible in this current quarter?

[Atul Goel, executive]

Credit pipeline, as far as concerned, we have already told you that the growth we are envisaging 12% to 13%, around INR 1 lakh crores. INR 1 lakh crore loan is the already we have sense. They are in the pipeline for the disbursement at various stages.

[Sushil Choksey, analyst]

Are you seeing this more in infrastructure and corporate or you are seeing in some...

[Atul Goel, executive]

It is a mix of everything. It is a mix, not only everything in the infra.

[Sushil Choksey, analyst]

Sir, you highlighted that the treasury may have a substantial gain or a stable gain in coming quarters to come. Can you broaden the statement a little bit?

[Atul Goel, executive]

I just told the answer of the Ajmera Ji, up to last quarter. Because on account of increase in the yield, we were not in a position to make the treasury profit. Because if you see the last quarter from the March 2022 to March -- current date, March '23, rate it was 7.31%. If you see the 10-year G-SEC as on date, 6.98%.

So my answer was this because already, there is a reduction of 32, 33 basis points. So by reducing, okay, 32, 30 basis point, some of these securities, which were in the losses, are in the profit. So we can make profit also because it is a moment of the interest rate gain, 32, 30 basis points reduction in the 10-year G-SEC from the March to -- till date.

[Sushil Choksey, analyst]

Sir, my question was more directly related because the Fed has more or less indicated that it has topped out in interest rate. [ NBFC ] has already indicated. Today, RBI's remittance of dividend to central government is already figured at 87,000, which may be a surprise. So the borrowing plan so far, which people were thinking, would be huge. It will have an impact on money market.

Currently, the short-term liquidity tightness may be there because of various factors led by RBI mocking up dollars, various, maybe, reasons. But what I'm sensing, some of the peer banks have indicated that 10-year bond may head toward 6.75 in the year-end. So one is, has the rate cycle peaked?

Second thing is, are you seeing more credit in front ended in the first half? And are you seeing a sustainable treasury profit in 4 quarters or you're just seeing in Q1, Q2 itself?

[Atul Goel, executive]

It is a better of the booking also. Suppose I am sitting on the profit as on date, suppose let us take a hypothetical example, whatever we you are saying that 6.75% by the end of the current financial year, today, 6.98%. Suppose it is, as on date, 6.75%, I will be in the [ huge ] profit.

So every profit, I will not book immediately, I will book the profit on the quarter-to-quarter basis. So it will be scattered on the quarter-to-quarter basis.

And firstly, whatever the liquidity -- if there is a liquidity issue, whatever you are saying that some of this security, if we are having the lesser yield, definitely, we will sell, we will book the profit, and we will utilize that money for investing in the loan book so that we can earn more profit.

It is a mix of each and everything. It is very difficult to answer that whether you -- when you will book, when you'll use it. It depends on what is my liquidity position, what is the demand of the credit. Everything is interrelated.

[Sushil Choksey, analyst]

Sir, I'm not asking you whether you will book in Q1, Q2. I am just asking an estimate whether you're seeing front-ended profit for the second half. It's okay. I'll take this question offline. Second thing, sir, what is the digital spend on the current year?

[Atul Goel, executive]

What is that?

[Sushil Choksey, analyst]

Digital spend? Digital expenditure?

[Atul Goel, executive]

Digital -- if you see the IT expenditure, last year March 2022, it was 1,750 as compared to [ 1,100 ], increase of the 54.5%.

[Sushil Choksey, analyst]

Thank you for answering all my questions. All the best to PNB team for future.

[Rakesh Kumar, analyst]

Jai, please go ahead with your question. Jai, please go ahead with your question. I think again, there is some issue in his line. [ Ashlesh ] please go ahead with your question.

[Unknown Analyst]

Can you talk about the slippages that we are seeing? We saw 2% gross [ deficit ] this quarter, still [Technical Difficulty].

[Atul Goel, executive]

Slippage, if you see, quarter-by-quarter, there is a reduction in the slippage. In the last quarter, it was in the range of the INR 4,000 crores, it was less than INR 4,000 crores. And quarter-by-quarter, we are of the view, definitely, there will be reduction in slippage.

[Unknown Analyst]

[Technical Difficulty].

[Rakesh Kumar, analyst]

Your voice is not clear. We could -- yes, it is better now please continue.

[Unknown Analyst]

Yes. So I was talking about the recoveries. You have guided for INR 22,000 crores for FY '24. Any chunky accounts that you expect recoveries over here?

[Atul Goel, executive]

It is a mix of all. I can give you some of the -- for the quarter 1 and quarter 2, what we are expecting from the NCLT. First quarter, we are estimating, it is an estimation, around INR 500 crore plus from the first quarter. And second quarter, we are hopeful that around INR 1,300 crores plus will be recovering from the NCLT.

So it is a mix of all. It is a small account. Also, some money will come from the sale of the securities through auction. Some money will come through the OTS also. And we have also floated for the scheme e-OTS, that is we are the unique in the team. And this e-OTS, the applicable for the amount, less than INR 10 lakh.

As on date, we are having a good number of accounts, 11,000 -- 11 lakh account of INR 11,000 crores eligible. Last year, we have [ recovered ] around INR 900 crores from these e-OTS.

Customer is not required to visit. They can make the payment sitting in their homes. And after making the payment, it is a NTN nondiscriminatory. In it, they are not required to negotiate also. And after making the payment, they can generate the No-Dues certificate from the mobile app only.

[Unknown Analyst]

[Technical Difficulty].

[Rakesh Kumar, analyst]

We can't hear you. Your line is not clear to us.

[Unknown Analyst]

Is this better?

[Rakesh Kumar, analyst]

Now, better.

[Unknown Analyst]

[Technical Difficulty]

[Rakesh Kumar, analyst]

Your voice is breaking. I would request you to go to a better reception area because we are not -- we can't hear your voice.

[Unknown Analyst]

Okay. [Technical Difficulty].

[Rakesh Kumar, analyst]

Sir, I think he is asking for the breakup of slippage, sir.

[Atul Goel, executive]

Breakup of the slippage, I can give the breakup of the slippage for the last quarter. The agri is around INR 1,253 crores. MSME INR 1,337 crores, retail is INR 660 crores, others is INR 268 crores. And in existing account, it was INR 478 crores. So INR 3,900.

I can give you for full year also of maximum slippage for the RAM only: Agreement for whole of the year, INR 6,542 crores; MSME, it was INR 5,836 crores; retail, it was INR 2,126 crores and the remaining was INR 7,600 -- INR 7,062 crores, and the existing was INR 3,178 crores.

[Unknown Analyst]

So talk about [Technical Difficulty] INR 270 crores the bipartite.

[Atul Goel, executive]

Yes. Provision, yes. You were asking slippage for the next year or this year also? Rakesh, because their voice was not clear.

[Unknown Analyst]

Wage-related provisions that you have made this quarter?

[Atul Goel, executive]

Yes, yes. I will tell you. Wage revision, we have made INR 278 crore provision in this current quarter. Last quarter also, we have made a provision of INR 181 crores. In addition to this, as provision, INR 1,244 crores, which is also having the impact of the wage revision.

[Unknown Analyst]

[Technical Difficulty].

[Rakesh Kumar, analyst]

Could I request Kunal to go ahead with your question? Kunal, please go ahead with your question. Yes, Kunal, please go ahead.

[Kunal Shah, analyst]

[Technical Difficulty].

[Rakesh Kumar, analyst]

We can't hear you, Kunal. Yes. Mr. Ajmera, would you like to go ahead with your question now?

[Ashok Ajmera, analyst]

Thank you for giving the opportunity, again. Many of the questions have already been answered by Atul Ji. But just some -- just discussion since I got this opportunity. One thing is that it's a point of basically complement only.

If you see the -- most of the other peer banks, the employee cost has gone up because of these 2, 3 provisions and also maybe the performance-linked bonus and other things, at least 10% to 20% the employee cost has gone up in this quarter. But in your case, it's hardly gone up by -- hardly INR 100 crores. Employees cost INR 4,570 crores as compared to INR 4,460 crores.

Similarly, the other operating expenses also, in our case, has gone up by only INR 140 crores. So what is the -- basically -- what have you done? I mean, what -- is that all possible provisions, which are required, have been made?

You already said about the wage revision that the provisions have been made. As far as the additional pension, which was already paid in the last year, any increment? So how this magic happened at -- total employee cost and the operating cost has been under so much of control?

[Atul Goel, executive]

No, no, no. Operating costs, look, operating cost is under control, no doubt about it, because there is no much increase in other operating expenditure. But whatever you are saying that payment to employee, if you see the March '22 data -- I think you are not seeing the data, please.

March '22, the employee cost was INR [ 2,158 ] crores only, which has increased to INR 4,570 crores in March '23, it is basically doubled. There is no magic -- whole of the year also. Whole of the year, '21, '22, the employee cost was INR 11,841 crores, which has increased to INR 14,810 crores.

So employee cost, definitely, in tune with the other banks, has increased. And we have also made a provision, as I told you, from the November to March, 278 in this last quarter, 181 in the December quarter.

And there was a lot of provision for AS-15 also, INR 1,244 crores we have made in the provision in the last quarter, March. A similar provision was in December also. Otherwise, this provision used to remain within the range of the INR 500 crores to INR 600 crores. It has doubled, Ajmera Ji.

[Ashok Ajmera, analyst]

Sir, we generally -- once we finish the quarterly discussion, we concentrate more on the quarterly performance only. So I was comparing only with the December quarter and the March quarter. And in that, there is hardly any increase.

[Atul Goel, executive]

You are very much right, you are very much right. December or March, there was not much difference. But December vis-à-vis September or the March 2022, we are worried how to reduced the employee cost.

[Ashok Ajmera, analyst]

No. So what I was actually drawing the point to is that in the coming quarters now, whether it is going to remain around the same INR 4,500 crores, INR 4,600 crores the employees cost, and the other operating expense is about INR 2,500 crores, so that we can have some idea about the future quarters? Or is there anything coming there?

[Atul Goel, executive]

Ajmera Ji, basically, in the employee cost, major factor is on account of the AS-15 provision also. And if you see the 10-year G-SEC movement, it is very volatile. I will give you the March '21, it was 6.18; March '22, it was 6.84; March '23, 7.31. And currently, as of date, it is hovering around 6.95 or 6.96.

So basically, if there is a reduction in the 10-year G-SEC, AS-15 provision immediately increase. If there is a harden in the interest rate, AS-15 provision reduces. So sometime it depends on the movement of the interest rate also.

[Ashok Ajmera, analyst]

Okay, sir. Now something, sir, on this NARCL. What is the status there? How many accounts -- whether any account has been settled during this last quarter, January, March or it's in offing? What is the status there, sir?

[Atul Goel, executive]

Ajmera Ji, as far as, in our bank, NARCL is concerned, around 38 account or INR 70,658 crore under discussion. Out of this one account of INR 447 crores, we have already assigned to NARCL. Another 2 accounts also, we have sold to the NARCL. But later on with some other ARC, they have increased the rate and -- which they have not met with 2 accounts sold to the other ARCs.

In addition to 38 accounts which I told you, around 35,000 accounts is also under discussion for an amount of INR 16,892 crores, where exposure of banking sector is more than INR 500 crore. And in this 35 accounts, we are the lead bank.

[Ashok Ajmera, analyst]

Okay. So many of these resolutions are expected in the coming year now, isn't it, sir?

[Atul Goel, executive]

Yes, yes, definitely, definitely.

[Ashok Ajmera, analyst]

And sir, this INR 447 crores which has been done in March, you must have received the SRs for the 85%, which are government-guaranteed SRs. So do SRs are also put in SRs provided for 100%?

Or a separate treatment in -- different treatment is given to -- like suppose the INR 447 crores account, this must have been settled for about INR 100 crore or something. So you must have received about INR 80 crores, INR 85 crores of SRs. I'm just guessing. I don't have the exact number.

But for example, so what treatment to this SR has been given? And that your SRs of INR 1,518 crores, that includes this SR also and whether it is the entire amount has been 100% provided for?

[Atul Goel, executive]

Yes. The -- and this is in addition to that, whatever the other SR available as on date that has 100% we have provided, this is a very small amount. And treatment is same. Only the difference in this security received different because they are being government-guaranteed, and they are being traded in the market also. The amount was very less in this account year.

[Ashok Ajmera, analyst]

Okay. But you will be giving the same treatment like any other SR providing...

[Atul Goel, executive]

Yes, you are right. On the basis of the [ NAV ].

[Ashok Ajmera, analyst]

Sir, the last, if time permits, is on your CASA. Every bank's little bit decline is there in the CASA in the last quarter because people are opting for more of the term deposits.

So going forward, do you have any specific plan or some scheme or something to increase the CASA of the bank because you are at a comfortable level, in fact, and you can go still further, Punjab National Bank being a National Bank, a Pan-India bank, very, very old bank? So whether any plan, anything is in place?

[Atul Goel, executive]

Yes. Ajmera [Foreign Language] I will tell you, this is one of the focus areas. This is the USP of the Punjab National Bank. As on date, if you see, 43% is the -- around the CASA of the bank. And we are having the 16 [ core ] customer. And we are trying to increase the new acquisition in '21, '22. Around [ 71.33 ] lakh accounts we have opened, which has increased in the last year, '22, '23, by 85.02 lakhs.

We are providing facility. We have provided [ TEP ], we have provided all the 10,000 branches [ TEP ], where they can open the account within 1 day earlier because the branches were getting the document they were sending to the back office. It was -- sometimes, it was taking 3 days, 4 days, sometimes 15 days also because they are raising the query.

So after these implementation of the providing of the [ TEP ], this process of the new acquisition has become very good. And we are hopeful that next year, definitely, we will increase substantial number of the -- not only the SA, also the CA.

[Ashok Ajmera, analyst]

Thank you very much, sir. And all the best to you. With such a strong team, I think you will deliver more than what you are promising.

[Rakesh Kumar, analyst]

Yes, [ Ashlesh ], do you have any more questions? Please go ahead. [ Ashlesh ], do you have any more questions? Mr. Choksey, do you have any other question to the management? Please go ahead.

[Sushil Choksey, analyst]

So sir, can you highlight something on your subsidiaries? What is your plan, going forward, as that may be bringing in good benefit to the PNB?

[Atul Goel, executive]

Subsidiary, I think, as on date, there is no plan to sale of the -- any equity in the subsidiary. As on date, no plan, yes.

[Sushil Choksey, analyst]

Sir, I'm not asking...

[Atul Goel, executive]

Actually we want to increase the valuation of this subsidiary rather than to sell the subsidiary because all the -- most of the subsidiary, they are getting the dividend [ rate ]. As on date, there is no plan on sale of the -- sales invested in the subsidiary.

[Sushil Choksey, analyst]

So sir, I'm not asking for sale of any holding from any of the subsidiaries. But as times may get better with PNB Housing, MetLife and various other arms, the profits can shore up and support on cross-selling between PNB, customer bids and other company. And that is the reason I asked you about digital spend.

I suppose, as on today, you're not even penetrating 2% or 3% or 4% of your customer base with your products. Can it go to 5%? Like yesterday, in one of your peer large banks, they had aspiration for $1 billion of other income. Do we have some number? And what kind of cross-sell will we do for our products and external products?

[Atul Goel, executive]

You are very much right. Definitely, we are taking all this steps how to improve the working of the subsidiary of the associate also, sold at whatever the dividend sector we are getting, that should be improved. So my balance sheet in the consolidated number will also increase.

And we'll also utilize the subsidiary for the other purpose also. We are having one of the subsidiary where we have got the approval from the regulator to do other activity also, which will be beneficial for the bank. We will use that subsidiary as our marketing [ Technical Difficulty ] for generating the lead for the housing, generating a lead for the -- even for the retail side also.

[Rakesh Kumar, analyst]

Sir, there are some questions which are in the chat box. Firstly, starting through the question from Jai Mundhra, breakup of INR 70,700 crore SMA number into SMA-0, -1, -2. If we can provide the breakup, sir?

[Atul Goel, executive]

Yes, I can provide the breakup. Out of the INR 70,762 crores, the SMA-0 is INR 52,622 crores, SMA-1 is INR 17,290 crores and SMA-2 is the INR 850 crores. The maximum is in the SMA-0 only. And there is an accounting issue also, which we are also addressing.

[Rakesh Kumar, analyst]

Got it, sir. Second question is from Kunal sir, with respect to EBLR MCLR and fixed route book. Breakup is already there in the presentation. So the second question from Kunal sir is pertaining to the behavior of MSME restructured portfolio, if you can elaborate, sir, please.

[Atul Goel, executive]

The MSME in OTR1, I will give you the -- only for the MSME. In OTR, amount is around -- implemented was INR 670 crores. In the standard, outstanding is INR 343 crores. And if you see the OTR2 also, in OTR2, the MSME was around -- outstanding is INR 4,587 crores, out of which standard is INR 2,657 crores. Some of the account definitely in the OTR1 and OTR2 also, has moved to the NPA. Out of this OTR2, around INR 1,931 crores was the NPA.

[Rakesh Kumar, analyst]

And sir, I missed the total provision on the restructured book that we have, sir, standard restructured book, total provision that we have.

[Atul Goel, executive]

Total provision on the standard book, it includes the -- if you are asking the OTR1 or 2? In OTR1 and OTR2, we have already given any note to account, which is 10% of the outstanding, but restructuring is there, some provision also, which we have to make the provision as per the 7th July 2019 circular also. Although that is not restructured, but we have to make the provision also.

[Rakesh Kumar, analyst]

Okay. Okay. And sir, one thing I noticed, compared to higher deposit growth number on a Y-o-Y basis, NDTL growth is around 7%. So have we reduced like the borrowings from the book? Or what is the reason for lower growth in the NDTL on a Y-o-Y basis as compared to deposit growth?

[Atul Goel, executive]

NDTL, actually, it is the combination of the deposit and the other liabilities also. So maybe some of the other liabilities has reduced. But normally, it keep on changing on a quarterly basis also because some part of the deposits on the bulk side also, so it keep on changing also.

[Rakesh Kumar, analyst]

Okay. And sir, there is a question from Bhavik pertaining to the SMA details, that we have already given.

[Atul Goel, executive]

From where you have taken this data of the NDTL? If you see the NDTL is on the same line, I'm not seeing any difference. If you see by December '22 number, it was 11,000 -- 11,52,000. And even if you see the March '23 number, 11,75,000. So from where you are saying theres' is a difference? It is not decreasing, you are saying decreasing?

[Rakesh Kumar, analyst]

No, no, it is not decreasing. But in the Slide #16, sir, we have given investment portfolio and the NDTL number, Y-o-Y variation is 6.93%. And if I look at deposit growth number, that is global deposit...

[Atul Goel, executive]

11%. You are comparing with the deposit number also, 11% and 7%. Sometimes it is on an average basis also because in -- some increase in the deposit in the last that is also -- yes.

[Rakesh Kumar, analyst]

Got it. Correct. Got it. [ Ashlesh ], do you have a question? Your hand has raised, do you have a question, [ Ashlesh ]? Please go ahead. I think that is all from our end, there is no more questions. There are no more questions, sir, from our end. I think we are done with the questions, and there is no further query.

[Deepak Singh, executive]

Thank you. Thank you very much.

[Atul Goel, executive]

Thank you very much, Rakesh. Thank you. Thank you to all the persons who have joined this con call also from my side. Now over to Deepak.

[Deepak Singh, executive]

Thank you, Rakesh, and we can log off. Please log off, Mr. Rakesh and team.

[Rakesh Kumar, analyst]

We would like to thank everyone, PNB management for giving us a privilege to host. And thanks, everyone, and we can log out.

[Atul Goel, executive]

Thank you very much.