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State Bank of India
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Good evening, ladies and gentlemen. On the occasion of the declaration of Q2 FY '20 results of the bank, it gives me immense pleasure to welcome the analysts, investors and our colleagues present in this hall. I also extend a warm welcome to the analysts, investors and colleagues who have joined this presentation through our live webcast. We have with us on the stage our Chairman, Shri Rajnish Kumar; Shri Parveen Kumar Gupta, our Managing Director in Retail and Digital Banking; Shri Dinesh Kumar Khara, our Managing Director, Global Banking and Subsidiary; Shri Prashant Kumar, our Deputy Managing Director and CFO. Our Deputy Managing Directors heading various verticals and the Managing Directors of our subsidiary are seated in the first row of this hall. We are also joined by our Chief General Manager of various different verticals business group.To carry forward the proceedings, I request our Chairman sir to give a brief summary of the bank's Q2 FY '20 performance and the strategic initiative undertaken. We shall thereafter straightaway go to question-and-answer session. However, before I hand over to the Chairman sir, I would like to read out the safe harbor statement.Certain statements in these slides are forward-looking statements. These statements are based on management current expectations and are subject to uncertainty and changes in circumstances. Actual outcomes may differ materially from those included in these statements due to a variety of the factors. Thank you.Now I request Chairman sir to make his opening remarks. Chairman sir, please.
Good evening to all of you. Today attendance is very thin because of Dhanteras and Diwali. And my greetings to all the people who are present here. I think the results and the presentation is already in your hands. I would like to make a couple of observations and then whatever questions are there.One is in terms of the earnings, in terms of the asset quality, in terms of the NPA management, this has been a very good quarter for the bank. NII, NIM, operating income, net profit, all are showing a decent increase. There is a onetime exceptional item there being divested 4.5% of SBI Life and approximately INR 3,500 crores has been taken in the operating income. And the same amount has been used for affronting of certain provisions. One was a case of a failed restructuring, where we have made provision not only on the funded outstanding but on the entire standby letter of credit of INR 2,600 crores. And in one instance, HFC's case, proactively we have provided for INR 900 crores. And the provision on that particular account is around 20%. So whatever performance is here, it is excluding this onetime because it has all been equalized in terms of whatever we have gained here, used it for provision. And what you can see that the provision coverage ratio, including our balance sheet NPAs, which is called OCA in our parlance. And without OCA, NCLT, non-NCLT and corporate book, all these ratios are more than what we estimate the LGD loss given deferred. In fact, bank is sitting now on an excess provision of a very substantial amount. It is only a question of timing that when do we get that money back.And the performance, 3 points which I would like to mention here is that, 3 shock absorbers we have built in the balance sheet and P&L. One is capital adequacy, which is now at 13.79% (sic) [ 13.59% ], and it does not include the earnings during this financial year. Second is provision coverage ratio, as I mentioned, more than what is required. The individual accounts, there may be some requirement here and there. But portfolio level, we are sitting on huge excess provisions. And third is consistent improvement in the operating profit quarter-after-quarter, consistently it is improving. And it is on the back of improvement in the NII and NIM, both. NIM, if I take only for the quarter, it has gone up to 3.22%. And the year-on-year, I think almost 40 basis point improvement. It is also the -- managing the -- our liability and asset side both and as well as the clawbacks, which happened when any account that's into NPA category retrospectively. And this year -- or this quarter, that impact is minimal.As far as the business growth is concerned, CASA, we are doing very well. Current accounts have grown by 12%, savings grown by 7.5% despite the fact that the interest rate which SBI's paying is one of the lowest in the market. And term deposit, again, it is a function of what interest bank pays. And currently, because we are in surplus liquidity position, so our interest rates are, again, one of the lowest on the term deposit. Advances growth, retail growth continues to be very good. Corporate, because the working capital utilization are at around 30% to 31% in the corporate book, as a result of that, what we are seeing is a subdued growth in domestic advances. But hopefully, this half year, it should pick up.[ Thirty years on ], digital bank's leadership position continues. And we are doing exceedingly well as far as the front-end, consumer-facing application, YONO, is concerned. And as far as subsidiaries' performance is concerned, again, all subsidiaries are performing very well. For a few days, SBI Life, its market cap crossed INR 1 trillion which is very heartening. And there's [indiscernible], but I'm sure that it will be ready to maintain those levels on a consistent level.The change analysis -- and again, this is my request to all the analysts is that look at the long-term trend, look at the performance, what is for the half year and what is going to be the next half year rather than just going by the quarterly variation. We are a large bank. We have a large loan book. And when in some quarter something unusual happens, any large account slips, then the number doesn't look that good. And when such account is not there, then the number look good. But on the whole, the -- directionally, we are in a scenario where if there is any high-value slippage, bank slippage issue can go up to 2%. And if high-value slippage is not there, we can manage within 1.5% to 1.6% and correspondingly, the credit cost variation also happens. So it is just a matter of, I would say that, a range of -- as 0.4% to [ 0.5% ] above the -- what you would call a normal or a baseline scenario. So that cushion, we will always have to build in when we look at the quarter-to-quarter performance.And on the whole, directionally, we are in the right direction. Long-term outlook is good. If we continue -- last time also when I made that last financial year earnings call, we said that our preprovision operating profit, the target is INR 70,000 crores, which seems to be on the -- we seem to be on the track for that. Of course, this time, it will be a little bit of help through divestment in our subsidiaries. But if we grow at 15%, it is not impossible that in the next 3 years we will be touching 1 lakh crore preprovision operating profits.
Absolutely, yes.
CFO will confirm that, no?
Yes, yes, absolutely. Our aim is to reach the INR 1 trillion.
So there is a trend and that does make a -- it -- I think current rate, without taking into account onetime items, this is possible by just achieving 15% growth annually. And credit cost, as I said, that in a bad scenario, it can be around 1.6% to 1.7%. In a good scenario, 1.1%, 1.2%. In a very good scenario, it will be 0.8%, 0.9%. So we have to keep all the 3 scenarios in mind and don’t react or overreact to the quarterly numbers.So this is the central message I wanted to give, and all the presentations are before you. We have tried to disclose everything so that you don't have many questions to ask. But still, you are welcome to ask as many questions as you want. Thank you.
Thank you, sir, for your presentation. We now invite questions from the audience. [Operator Instructions] And the first question is from -- yes, mic, give them. Ma'am, name and company, please.
Sir, Mahrukh from IDFC. Sir, my first question is on the NBFC we've -- where you've provided [ INR 9 billion ] this quarter. What is the total provision on NBFC because you would have provided some last quarter also?
[ INR 5 billion ] earlier. So 14%, 20% on the loan.
So [ INR 5 billion ], so [ INR 14 billion ], okay. And sir, the other thing is that, that NBFC -- you know KPMG has come out with a draft audit report, and that's thrown up a whole of INR 22,000 crores. So most likely, I mean, if that's accepted and when the lenders go through it, most likely it will be declared a fraud, which means that you would have to provide for it. If at all it's declared a fraud, you will have to provide for it fully in the next 2 quarters. Is that the correct understanding?
There may be some difference of opinion on this that -- whether there will be a fraud and how much will be the fraud. So I won't comment on that. Only thing -- what I'm saying, again, is even if I have to do this, we are capable of taking that now.
Got it, sir. Sir, my other question is on the telecom exposure and also on the power exposure. Sir, the telecom exposure, you've shown a funded exposure of around [ INR 358 billion ]. Now what is the nonfund exposure associated with that? The reason I'm asking is that if you see last quarter's -- 1Q's Basel disclosures, the funded exposure's shown at [ INR 245 billion ], whereas if you see the presentation the funded exposure is probably [ INR 380 billion ]. So what is the...
This is the correct number which we have given here.
Okay. That's the funded. And what would be the nonfunded?
And it includes the NPA also.
Got it. This includes the NPA.
NPA also.
Okay. And what would be the nonfunded associated with this?
Nonfunded is how much, Prashant? 21,000?
Nonfunded for the entire sector is 18,000, which includes the exposure to public sector undertaking of -- like that.
Okay. So 18,000 for telecom?
Yes.
Yes.
So telecom, our exposure is all AAA, AA, well-established groups, structured obligations, government undertakings for which we know that cabinet has approved a resolution plan. So whatever is happening in the telecom sector, definitely it's not a very happy situation, let me put it this way. From bank's perspective, our exposures are well secured, both in terms of the quality of the lending as well as the quality of the NIMs and the security structure around that.But again, I will repeat the same thing that for a bank of our size and the book size of almost INR 23 trillion of loan book, anything exceptional which happens in a year, they don't all happen together. So one is our baseline slippage and one is our exceptional slippage. The way we are managing it in such a manner that it offer 30, 35, 40 basis points, if any exceptional slippages happen, then it's not a good year for us, and -- but still, we are within that 2%.
Got it. But sir, just on the telecom sector, you have a large exposure to some of the entities which may be under pressure also because of negative rulings. So what will be your total provision on standard telecom assets? Or on standard telecom...
Right now, they all are -- as I said, they're AAA, AA. So we have done some small provision for telecom. But I have good amount of provision -- excess provision sitting my balance sheet. So don’t go by the sector. What is our provision coverage ratio and what is the excess provision on which I'm sitting? So it is not that it will not come back, it will come back. It will come back this quarter, next quarter, next quarter after that. And slippage is not going to happen so soon that also -- that is our analysis on the situation because the NIMs themselves are such that the chances of their defaulting on the obligations are minimal, but it happens. And on this, whatever excess provision I have built in the balance sheet that we'll take care.
And sir, if I may slip in just one last question, which is that a few banks say that Uttam Galva is again in default for them and it has slipped this quarter. Now I think the IBC requirement is that ArcelorMittal, if he has to win Essar Steel, he has to -- he cannot be in default on any other loans that he's associated with. So what is the implication of Uttam Galva being downgraded this quarter on the Essar resolution? Because...
I have no idea. Honestly, [ I'm fine ]. Because I think on the resolution date when the application was submitted, if somebody is eligible under Section 29A, they are eligible. Their eligibility otherwise has been confirmed by all the courts. Nobody has questioned. The eligibility issue has already been settled at the highest level, right? And this is, in my view, no question of opening the eligibility. The whole issue is all around distribution, not about eligibility, who gets how much and what, what the secured creditors get, what does the [ state track ] get, what is the operational credit. So limited issue in my view before the [ policies ], all about the distribution, not about the eligibility.So I don't think that any status change in Uttam Galva will now impact the resolution. But I'm not a -- like a legal expert. But this is my interpretation of the situation that when Supreme Court has accepted their eligibility, [ where is ] the question of reopening the eligibility issue.
Sir, Nitin Aggarwal from Motilal Oswal. Sir, I have a question on margins. Now to ask you, are you pleasantly surprised by margins this quarter, improving by almost 20 basis points? So how do you see this trending in? And is there any one-off in margins this quarter? And related to it now, we have also reduced SA rate recently. So do you think that we have more room to cut SA rate as RBI continues...
More room to cut?
SA rate further.
Savings bank. Savings bank [ rate ].
Savings bank rate, I think it may be difficult for us to go below 3% because at least still, whatever is the inflation rate, the savings bank depositors, we should not leave them in negative. But otherwise, wherever required and whatever needs to be done on the liability side depending upon what happens on the lending side because we are sitting on the comfortable liquidity position, so we will -- we take all this also on 2 considerations. One is the need to protect the net interest margins, and second is the need to protect the franchise. So both are the considerations. And debt balancing, we are able to do. I wouldn't be worried about this aspect about bank's capability to reduce the interest rate on deposits, if so warrant.
All right. And no one-offs on margins this quarter? Any one-offs in margins in this quarter?
One-off in the margins?
Yes. NII.
NII, no one-off.
No, there is no one-off.
There's no one-off. It is the normal.
Okay, sir. And secondly, on the tax rate now for us, we have not moved on to the new tax rate of 25% and our first half tax rate is in excess of 40%.
What is that, please?
The tax rate.
Tax rate. Tax rate.
Tax rate, yes.
So what is the, like, outlook for us on the tax rate?
So we will take a call before -- by year-end, okay? So when we are going to finalize our annual results, then we will take a call whether we need to migrate. Most probably, we'll migrate on the new rates.
Okay. And sir, lastly, on Mudra Loans. Overall asset quality has been very strong in terms of slippages. But are you seeing any signs of stress in the small MSME loans and the small [ tier of ] loans?
Well, whatever the numbers are there, it improves Mudra Loans and all types of loans, which are either in SME or it may be partly in agriculture. So the Mudra Loans, in any case, bank's portfolio is not very high. And the entire portfolio will be equal to 2 large accounts, so that all is there in SME and agriculture. So our -- all entire management is -- one is for the smaller loans also, the collection machinery has been geared up. And that is what we are seeing the outcome in the reduction in the NPAs, in the retail book also. But our own [ trial issue ] remains [ supported ] to a slippage of any high-value loans. Mudra is too small to worry.
How much is it, sir, if you can share the number in terms of how outstanding loans and GNPL's there?
Which one?
The Mudra Loans, outstanding loans and...
I'll give you, Nitin.
I think it is around INR 26,000 crores.
And gross NPLs in that portfolio?
In that portfolio about, I think, INR 4,000 crores something.
We can give you that...
We will give you that number.
Okay.
But it is the entire is just -- it is less than one corporate account.
Can I have a question?
Your name and company.
Yes. This is Rakesh, sir, from Elara Capital. Sir -- firstly, sir, this -- the discount rate on the pension and gratuity, so -- the discount rate on pension and gratuity, so -- because already the G-sec yield has fallen quite significantly from the -- March 19. So what is the estimated terminal benefits obligations for this entire year?
So if you look at our P&L and the -- on the expenses side, you will observe that our provisions towards pension liability has almost doubled as compared to the previous year. So whatever is the discount rate, there will be some treasury gains also. And on the other hand, the way it works is that every quarter, actuarial estimation is done. And accordingly, we provide. And this number is fixed for themselves that provision for employees -- how much is that, Prashant? INR 4,000 crores?
INR 4,545 crores against INR 3,100 crores last year.
INR 3,100 crores last year. So that is factored in, in our results.
Total is around [ 44% ].
44%, yes.
So what is the rate -- like actuaries -- your actuaries are factoring in right now?
So basically, they always work on the 30-year discount rate, okay? And there was a, say, positive movement for this. Only thing is that when we calculate the valuation of our investment, then sometimes there are certain investment where you need to do an NAV calculation, okay? So otherwise, on the discount rate, now we are in a very normalized situation. And going forward, on the pension side also, the same type of provisions would continue.
But bank has like a -- the -- there is no deficit as far as the funding of this liability is concerned.
Okay. Secondly, sir, on this -- because this quarter we had a very significant amount of treasury gain as well as cash recoveries. So what is the tax rate we are -- applicable there on the cash recoveries and the profit on set of investments?
The tax rate? [ Isn't that ] profits?
Tax rate is on the profits. Tax rate is not separately on the recoveries.
No, but there will be, I think, higher tax rate, right?
Not like this.
Not like this.
When we have the tax, we pay taxes on our profitability.
So this -- the stake sale, what we have done for SBI Life Insurance, so what is the tax rate applicable there?
That thing, 40%.
Okay.
But so far, it is because we are getting the DTA. Since we are getting the DTA, so the same 40% tax rate has been applied.
So there -- net DTA outstanding, which was around [ INR 102 billion ] March 19. So is there any adjustment to net DTA number until now?
No. DTA number is always adjusted because we have shown the profits in the first quarter, also -- in second quarter also. So corresponding to these profits, DTAs are adjusted. So we were having DTA of around, say, INR 10,000 crores at the beginning of the year, which has now come down to INR 7,000 crores.
This is Aakash Dattani from HDFC Securities. So SBI has not opted for the lower tax rate under Section 115BAA. So is there any -- so that section says that you can only opt for that rate in the event you do not avail of beneficial provisions under other sections. Is SBI availing of any of those sections?
We will do before March '20.
But basically, it's not like we are availing any exemptions. Issue is that we are getting some DTA and MAT also, okay? So if we opt for the new tax rate, then we have to take care of the existing DTA and the MAT, which we are carrying in the balance sheet. So depending on our, say, numbers set by year-end, we will take a call whether it makes sense to migrate to the new tax rate or we continue with the existing rates.
So if I were to just evaluate this from, say, the tax outflow in terms of the amount that is paid, wouldn't it be a better choice to go ahead with this immediately, the lower tax rate, because the DTA and MAT credit outstanding would simply be a noncash item on the balance sheet?
No, the -- but the issue is that we have done our calculation. And at the moment, we have taken a call not to migrate.
Sir, Anand from HDFC. Sir, just want to understand, sir, of the gross NPA, what's the outstanding power sector NPA? And how much of that do you expect to get resolved over next 6 months or next...:p id="205272908" name="Rajnish Kumar" type="E" />That is on Slide -- [indiscernible] INR 25,000 crore, 19 accounts, 54% provision coverage ratio. And we have given the breakup also that what is status of these accounts.
So the total outstanding gross NPA deposit is INR 24,000 crore?
Yes, INR 23,343 crore.
And sir, when do we expect this resolution to get complete?
Quite a few in this quarter.
And do we expect any write-back, sir?
No. We have aligned our provisioning to the estimated loss. So no additional provision or write-back.
Sir, if I were to look at our fresh slippages this quarter, our agri slippages are still at INR 3,000 per quarter. So what's happening there? And when we think that it will get normalized?
Look, there again, this agri slippage has basically in this quarter also come from 2 states, okay? And they were the ones part of continuing slippages that we had in the first quarter also. And our understanding is that those slippages are now over. They were all connected with the debt waivers that were announced in those states actually. So going forward, we may not have this debt waiver-related slippages coming into the books, actually, and we should see a lower number there.
Sir, if you can quantify how much was the debt-related waiver?
So as we said it is, basically, 2 states from where these numbers have come actually. And what had happened there is that the government had announced the debt waiver related. So there was a lot of farmers who were not really paying the dues actually, because of which their accounts actually became empty. They were expecting more money to come from the government, but it didn't come actually. So now that the schemes are over, so we don't expect those slippages will happen.
So no, we should expect the INR 1,000 crore run rate going forward? Or...
We should expect lower number than what we have right now. Yes.
Sir, on the cost-to-income ratio side, it is still at 56%, and we had internally a target of 45% over next 2 years. If you can guide us, how do you see that moving in the second half or probably the next year?
What is that -- currently, we are at 53.77%, which is almost 250 basis point improvement. And what is impacting the cost-to-income ratio is all about DNS provision for terminal benefits. Rest on the overheads and expenditure side, our Y-o-Y growth is hardly 3, 3.5%. And so if I look at the expenditure side, there is not much scope to cut it down further. And provision for terminal benefits, not in our control. It all depends upon all the actuarial values. So where can this improvement come? It can come only from the enhanced income, right? And that is what is happening. If my income was INR 18,000 crore, operating, then we would have a cost-to-income ratio of less than 45%. So our aim is to take it to INR 18,000 crore per quarter and be at less than 45% [ cost-to ]. But whatever productivity gains we are having because of the digitization that are also reflected in the headcount. And April '17, when the merger happened, we were 270,000 -- 270, and now 249. But some improvement is going on. December and March quarter, again, this number will -- but every year headcount is reducing by about 5,000 people on net-net basis. And the YONO application, it is giving us very good outcomes in respect of creating the value through building up the loan books and many other revenue streams. And on the cost efficiency side also, there is a huge productivity gain. And that will all reflect. But ultimately, the key lies in improving our income.
Do you see -- foresee some more space for margin improvement going forward?
In?
NIM margin improvement?
They might think it's very difficult to go beyond what we are currently having. In the current scenario, it will be very difficult.
Well, like if you see the NIM for the current quarter, it was 3.22%. So it was a substantial improvement. And going forward also thus if we really -- if we have adopted, it will be only going upwards. So there is still some room, and there will be some improvement in the NIMs by year-end.
This is Mona from Reliance Securities. Your guidance of 2% of slippages, does that include the probability of some of the large accounts slipping? And secondly, last time around, you had alluded that utilization in working capital limits have not picked up despite yields coming down. Has that scenario changed at all for you over the last 3 months?
October seems to be better.
This is [indiscernible] from Nippon India Asset Management. Wanted to understand our external benchmark rate that we have come up with, especially the housing finance, where we are growing extremely fast. The rates are very low when we compare it to our peers and including the largest NBFC, the rate -- differential in interest rate is quite high. Just wanted to understand what is your view on this? And will we be further, obviously, further cutting the rate [indiscernible]?
What we said [indiscernible] Bank of India. What we are doing is all the roads which are related to external benchmark, this is what we really said. So the next reset will be on 1st January. And whatever are the current rates or the premium over the benchmark rate, so we can't change that, and we will not change that. But we still have the option that in January we review. And if there is a need or a requirement and keeping in view what the competitors are offering, for all the new loans which will be given 1st January onwards, bank has the flexibility to do that adjustment. What we cannot change is the fixed cost and the risk premium for the existing accounts. And right now, the movement of the portfolio to the external benchmark is relatively slow, but we have given option to all the customers. And the way we are managing is, as I said, that whatever is the impact on the asset side so that will go on the liability side.
And just to understand, sir, how has the customer behavior been? It's been almost a month now. Have the old MCLR customers wanting to switch to external rates? Or they have...
Not many. But we have issued all the guidelines that we will have the option to switch. There's a very nominal fee for switching. But there are many customers we will continue at base rate. So consumer behavior is very difficult to assess. But from our side, there is absolutely no issue. Whoever wants to switch, they will be allowed to switch on payment of a very, very small fee.
And sir, second -- my second question is regarding SME. So we have seen one of the other PSU banks that reported, they mentioned that a large proportion of their SME book is eligible for restructuring as per the RBI guidelines. Have we done any of the restructuring? Or what proportion of our book will come under that eligibility of being restructured? And what is our view on the SME segment because that's going through a reasonable amount of pain? So what is your assessment of that portfolio?
See that RBI circular which had come, so it allowed restructuring of accounts which are SME as on 1st of January 2019. So basically, the stock of accounts where restructuring can be done is already frozen, and this is available up to 31st of March 2020. So in the process that whichever customers are approaching us for restructuring so that restructuring is already being done actually. Ultimately, the restructuring also depends on the viability of this customer also, whether he is actually willing to undergo the restructuring he is able to even sometimes get further orders or not. But wherever there has been any approach to ask for the restructuring, that is being done. A few accounts that have slipped into NPA also out of that already. But the restructuring is being done actually. I don't think that in terms of overall impact is not huge because the stock on which this is available is [indiscernible] actually.
But we are doing it, whatever accounts are eligible. And if they conform to whatever are the guidelines of Reserve Bank of India, so proactively we are doing it, but that portfolio is not very large in terms of outstanding amount or restructured amount. Number of accounts is quite significant because these are all small vendors.
And sir, lastly, on your corporate loan book. If you look at it on a quarter-on-quarter, it's declined a bit, but wherein some other banks have seen significant growth in the large corporate segment. Just wanted to understand your view on the large corporate segment. Do we intend to...
Large corporates, other than -- right up to 31st March, except in one account, which is large ticket, where we have already provided 20%. Other than that -- and if you look at our intercreditor agreement and SME book, so whatever is the normal distinct slippage every quarter, it won't exceed that.
My last question is on growth, on the incremental large corporate growth.
Advances?
Advances growth. Yes.
Advances growth, right now, it is muted because of non-utilization of limits. But second half is generally a busy half, busy season. And our estimate is that at least we should be able to touch 10% Y-o-Y.
Sir, just a few questions here. Sir, increase in CET number, does it increase in CET core equity capital. So have we included the profit there on the CET?
No.
So the increase is because of the risk weight density coming down? Or...
Risk weights have come down, plus we did -- I think that is the only reason.
No, basically, there are 3 factors why it has, like, improved. One is the risk weights to total asset. That has come down. Second thing, like, because the DTA reversal, so the DTA portion has also added. And Reserve Bank of India has also reduced the risk weights on the consumer credit, from 125% to 100%. So these 3 factors have helped us in improving the CET ratio by at least 60 to 80 basis points.
Okay. And sir, secondly, the number of employees on the DBS right now, Defined Benefit Scheme, who are retired and who are on the payroll, separately, the number of employees?
So it has come down to almost 58% now to our...
Currently at 58%.
It is 58%.
It is 58%. As on 31st March 2020, it would come down to 52% because of the retirement census.
March 2019?
March 2020, coming time. At present, this is 58%. And by March, it would come down to 53%.
Of the total employee base?
Yes.
This is Udit Gadia from Khazanah Nasional. Referring to Slide #28 on power sector exposure. If I look at the overall exposure, it has remained same quarter-on-quarter, but the unrated exposure has increased from 10% to 22%. So any specific reason there?
The unrated exposure, maybe some of the DISCOMs may not be rated, state DISCOMS, quite a few of them are unrated.
But any reason for the increase sequentially? Because the overall exposure remains similar on quarter-on-quarter levels.
Yes, let me see those slides.
So basically, what is happening if you see there is, say, resolution of the existing accounts, the repayments on the existing account, and when we are taking exposure to state DISCOMS, which are unrated, so naturally, their percentage will grow.
Okay. Secondly, the fee income growth for [ house ] has been quite tepid for last couple of quarters. Do you see any levers for the fee income growth?
Fee income growth. If you look at various components, one of the major component is, of course, the recovery in written-off accounts. So the performance depends on that. Second is, of course, fee income. Say, for example, this year -- quarter, there was a sale of SBI Life shares. So that is also appearing in other...
Other income.
Not in exactly fee income. But fee income, loan processing charges are on upswing, commission on LCBG, then account maintenance charges are going down for obvious reasons, then -- overall, I think in this -- there is nothing which can give you any huge gain if you look at the breakup of the fee income. And this account maintenance charges because we have [ deduced ] that impacts also progressively will come down because we are living -- now reaching a level which will be quarter-after-quarter we would be able to maintain.
Sir, in terms of your -- while your overall corporate growth may be subdued, there is very strong growth in power, telecom, roads and NBFCs, which happen to be very sensitive sectors at this point in time. Now I understand that in telecom, you would have lent to the most competitive company. But in power, there is some large growth even in the SEB segment. And NBFCs, there are so many NBFCs which are AAA or AA rated, and they fall straight to a very low rate...
Not all of them, only one. I hope that rating agencies are now more careful when they give AAA.
Right, sir. So sir, don't you see forthcoming risks? And would you -- are you -- would it not be constraining your...
Again, micro-level credit quality, right? One is the sector and another is micro credit quality. And there [indiscernible] there is no [indiscernible] despite their not-so-good financial condition, but there is no history of default by DISCOMS, and these are all, again, very distributed kind of exposure. It is not that one DISCOM and you give a huge amount of money. And power sector, otherwise, the biggest problem was with the independent power producers that all is reflected in our NPA. And rest is all money to central government PSUs, targeted corporate. So overall, these are the -- not cheap, telecom is still -- we are not overexposed in [ line ]. And whatever exposure growth has you rightly mentioned that these are AAA-structured obligations. And in the power sector, again, it is mostly now to the either center or the state government undertakings. There is not much of growth.
75% growth in power sector has gone to the central government entities.
Right. But the SEBs like off and on there are articles...
Why are you worried? [Foreign Language]
Okay, sir. Sir, and the other question I had is in your corporate bond exposure that has gone up. Is that largely because of securitization? Or...
Corporate bond [Foreign Language] exposure?
[indiscernible]. These would be mostly AAA PSUs. These are not securitized exposures.
We are done? This is from? The webcast, Rahul Jain, Goldman Sachs. Likely resolution plan of the troubled HFC and the other against regional -- the same [indiscernible] from the telecom, what do you think would be the likely impact for lenders?As far as the resolution plan of the troubled HFC is concerned, maybe we should wait for another few days, what happens. But as I mentioned that in terms of our provisioning and capability to absorb the shock, we have already taken steps. And about the case which is submitted in the Delhi High Court. So I don't know on what grounds and footing it is. So that may continue. But it won't be appropriate for me to comment on the Delhi High Court code because company has their defense and some missions and the petitioners have their own arguments. About the telecom sector, yes, it is a matter of concern for the telecom industry and, in turn, for the lenders, but one, the time frame has not been yet decided and it is also not clear that how is the government going to recover this money from the telecoms, given their current state of finances. So let us wait. And immediately, I don't see a default situation in our portfolio. But that is a sector which we have to and everybody has to keep an eye. Then when do we expect ROA of more than 1%? I want it to be next quarter, but it is not happening. So -- but consistently we are working in that direction. And it will depend upon now: one, our ability to maintain the momentum around the improvement in the operating income; and second is our credit cost, which again, this quarter has gone slightly above the expectation. And I think by March '21 next year, we would be in a position to reach this target.
[ 1% ].
Because this year we are expecting pre-provision operating profit of INR 70,000 crore. And after credit cost and all that 0.5% or 0.6%. So next year, March '21 hopefully.And then [ Darshana Manek ]: Is a fall in SME slippages on account of comfort provided? No, this is not the right analysis because the restructured book which is as per the guidelines of Reserve Bank of India. The amount is not huge. And these are the normal slippages and run rate. Then Jefferies: Can you explain the movement of standard year where ICA is being expected? Movement means existing or future because...
Sir, details we have given on slides.
Slide 27. How has it declined in both amount as well as number of accounts? It could be because of both the reasons, either the slippage to NPA or rectification. So that breakup, I think, we will have to -- we will separately, if you can give this breakup. But it would be a function of both. One would be definitely slippage of the restructured asset in this quarter. That itself was INR 1,200 crore fund-based outstanding. But still we will give you that detailed breakup. And similar question for NPL accounts as well. This -- about this question, I'm not very clear because on Slide 25, we have given the analysis opening level of NPAs, what are the reductions, what is the recovery, what are the -- what is the net closing level of gross NPAs. So if you have anything specific on this, I would be happy to answer.
And sir, there is one question from Adarsh from Nomura. And the question is once you migrate to new tax rate, whether the new tax rate would be stabilizing at 25%. So definitely, once we migrate to the new tax rate, it would be as per the tax rates, and it would be around 25%. And the second question is that whether the patient provisioning that has increased this year is unlikely to recur next year. So should not cost-to-income ratio would improve materially. I think our patient provisioning is now normalized, and it would be at the same level. There would not be any incremental increase. And as Chairman has already explained, any improvement in the cost-to-income ratio would materially come from the improvement on the income side.
Sir last question here. [ Sushil Choksey ]. When are we likely to list SBI cards?
Next quarter.
Next quarter. And sir, seeing the...
January.
January, most probably.
Seeing the pulse, retail pulse is first loan to SBI and on other banks, do you think Navaratri and Diwali, where housing loans and auto sales are concerned, doing well or they are moderate?
No, they are doing well.
No, we are doing well, but the sales, your market share may be higher.
Yes. But I read some analysis that housing sales have improved everywhere.
Overall? Or you're saying...
Overall, overall, overall.
Okay. So you are seeing some regular...
The situation is on the -- particularly on the housing on the residential that good builders, they are able to sell. What is not still selling is the luxury segment, or there is some reluctance on the part of the buyers also to buy now projects which are under implementation. But if it is like completed property of this, so sales are picking up. One of the builders in NCR told me that his sales are improved by 25%, 30% because their reputation is good so his property is selling very fast.Okay, okay. Thank you, everyone. And Happy Diwali, once again.
I trust all the questions have been addressed. Since we have no more questions, let me end the evening with thanking the Chairman, the top management team, the analysts, ladies and gentlemen. To rounding off this evening, we request you to join for the high tea, which is arranged just outside this hall. Wish you all a very happy Diwali and a great extended weekend ahead. Thank you.