State Bank of India
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State Bank of India
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Ladies and gentlemen, good day, and welcome to State Bank of India Q2 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Pawan Kedia, General Manager, Performance Planning and Review, State Bank of India. Thank you, and over to you, sir.
Thank you, Nirav. Good evening ladies and gentlemen. I'm Pawan Kedia, General Manager, Performance Planning and Review.
Sir, sorry to interrupt you. Sir, you're sounding a little distant from the phone.
Good evening, ladies and gentlemen. I'm Pawan Kedia, General Manager, Performance Planning and Review. On behalf of the top management of SBI, I extend a warm welcome to all joining us today on SBI's Q2 FY '21 Earnings Conference Call. On the call today, we have with us our Chairman, Mr. Dinesh Kumar Khara; Mr. C.S. Setty, Managing Director, Retail & Digital Banking, with additional charge of stressed assets; Mr. Ashwani Bhatia, Managing Director, Global Banking & Subsidiaries; with additional charge of commercial client group, IT and risks; and Mr. J. Swaminathan, Deputy Managing Director and Director of Finance.Before I request our Chairman to give a brief summary of the bank's Q2 FY '21 performance and the strategic initiative undertaken, I would like to read out the safe harbor statement. Certain statements in these slides are forward-looking statements. These are subject to -- these statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors.Thank you. Now I would request our Chairman to make his opening remarks.
Thank you. Very good evening to all of your friends. Thanks for joining the call today. We hope you and your family are safe and in good health. At the outset, I wish to thank all the frontline COVID warriors, medical fraternity and essential service providers, who have been working tirelessly to keep the country safe and going during these times of crisis. I would also like to thank all my colleagues who have been working through the pandemic and upholding the bank's commitment to service customers. It's a privilege to lead an organization that has been at the forefront of many pathbreaking and innovative changes in the Indian banking landscape.Coming to the quarter ended September '20, our assessment indicates an upward movement in economic activities. Most companies are suggesting that activity level are touching 70% to 80% of the pre-COVID levels. Vehicle registrations, including tractors, are increasing. GST collections for October '20 has crossed INR 1 lakh crore mark and is highest since February 2020. These are the [ tight tail ] signs that the economy is recovering. At SBI, we are witnessing visible uptick in the retail sanctions and the disbursements. I believe the analyst presentation is already available to all of you by now. The disbursements in the home loan as well as other personal segment loans during September '20 are significantly higher than the corresponding period of last year.Another key trend emerging during this period is that our asset quality is holding up well. Our total slippages for the half year ended September '20, including the pro forma slippages, but for the Honorable Supreme Court interim order, stands at INR 20,781 crores as against INR 25,017 crores of slippages in the first half of financial year '20. More importantly, we have been able to pull back almost half of these quarter 2 performance slippages of INR 14,388 crores during the month of October. Also, we have made adequate COVID-related provisions for all slippages during the quarter, and we do not envisage any pressure on our profitability, should these accounts get stamped as NPA.Another important feature is the strength of our liability franchise, a key determinant in protecting our NIM, even in the falling interest rate scenario as we have been able to raise adequate low-cost deposits. We have added almost about INR 1,85,000 crores of savings bank deposit on a Y-o-Y basis. We will also raise -- we could also raise Tier 1 and Tier 2 capital to the tune of almost about INR 20,000 crore at benchmark setting rates. We can proudly say that SBI's AT1 offering may well have revived the AT1 market in India.Now before we go into the numbers for the quarter, allow me to give some perspective into the long-term fundamentals of the bank and how the results should be read in that context. This is an institution unmatched in scale and with challenges that may not have been relevant to most other players in the industry. Even though we have been the dominant incumbent in industry, we have harnessed our opportunities to evolve, transform and create value for stakeholders. For example, let me take you through our evolution in retail lending.At our high base, we have grown the retail book at a CAGR of 20% over the last 20 years. Today we are the largest home loan provider in the country with very low risk weights, loans to salaried, first-time homebuyers primarily. As you would recall, SBI book under moratorium was just 9.5%. And the collection efficiency that is being witnessed is at an impressive rate of 97%, excluding agriculture. This indicates that the profile of our loan customers is very strong.Another shining example of our adapting to changing times is evolution as a digital bank through YONO. We have a registered user base of more than 28 million with close to 6,000 customers registering daily. We have a loan portfolio of INR 25,000 crore and a deposit portfolio of INR 60,000 crore, which has been mobilized through YONO. We are certain YONO will create significant value for all our stakeholders.The past 3 to 4 years have been a blip on the radar of Indian banking industry when -- which went through the most difficult phase of corporate asset quality cycle. However, we took out strong interventions to address the issue like improving our credit underwriting standards and managing risk profiles across asset classes. The returns have since started improving, and we are sanguine that we will see better ROA and ROE numbers in the near future. Another major achievement for the bank has been the evolution of its subsidiaries. Subsidiaries are also the leader in their respective businesses. All these subsidiaries have world-around partners and top of the board corporate governance and processes.Coming to the quarterly performance, our net profit for the quarter stands at INR 4,574 crores, which is actually an increase of almost 52% on a Y-o-Y basis. Operating profit for the quarter has declined slightly, but that is due to the onetime income of INR 3,484 crores in quarter 2 financial year '20 and INR 1,540 crores in quarter 2 financial year '21 for a stake sale of SBI Life. Excluding these one-off items, our operating profit has improved by about 12% Y-o-Y. NIM for the quarter at 3.34% has improved by 12 basis points Y-o-Y and 10 basis points over the previous quarter.Retail personal advances have grown by about 15% Y-o-Y despite a difficult first quarter, which indicates a strong rebound in the second quarter. While there are clear signs of rebound, it's early to conclude on the possible final impact of this once in a lifetime pandemic. We are watching the evolving situation very carefully and building up adequate cushion to absorb the impact without any volatility in our P&L and balance sheet. I'm sure you must have gone through the numbers by now and must be having a few queries on those numbers. I think it would be good for me to open the forum for questions.Thank you very much for attending this analyst call. Thank you.
[Operator Instructions] First question is from the line of Mahrukh Adajania from Elara Capital.
Yes. Hello. My question is on collection efficiency. Sir, could you breakdown collection efficiency of the morat and nonmorat book? And also definition. Is it September collections upon September billing? Or would it include overdues of past month as well?
Well, Mahrukh, I think when it comes to collection efficiency, the way we have looked at it is, it is the proportion of accounts where the payments are coming in. And we continue to see the -- actually this payment is in the context of what demand we have raised, so which means that whatever EMIs are due and how much payment we have received. So the comparative position of the 2 has shown up the collection efficiency. So when it comes to the moratorium and nonmoratorium book, we are not really tracking on those lines. We are tracking for all the accounts, whatever EMIs are dues and how much we have recovered. That is something which we have compared, and that is what has led to this 97% kind of a collection efficiency, which we have shown.
Got it. And that 97% is of September, correct?
This is for the quarter.
Okay. For the quarter. All right. And what would be the -- would you have any rough number for October?
I think October would be in the same range. I don't expect that it will -- it actually is slightly better. It has improved to about 97.5%.
Okay, sir. Sir, just why would the MSME and Agri NPLs have risen this quarter sequentially? And wouldn't some of the MSME NPLs -- wouldn't you have been able to save them with the ECLGS?
Well, Mahrukh, when it comes to our NPAs -- just 1 second. See, when it comes to our SME book, there, of course, it is -- I would also like to mention that out of this INR 14,000-odd crore we have reckoned as the possible slippages, we have already pulled back about INR 6,000 crore. And in SME, also, we have pulled back about INR 3,000 crores. So actually as compared to INR 5,486 crores in the month of -- I mean, in the first half of '20, in first half of '21 we are showing it at INR 6,068 crores, but de facto in the month of October, it has come down to about INR 2,400 crores, INR 2,500 crores kind of a number. So we have actually pulled back SME.And also on the Agri book also, it was at INR 9,513 crores as on September 30. We have actually pulled back about INR 1,100 crores. So it has come down to about INR 8,400 crores. In Agri book, the fact of the matter is that during the COVID period, there was some kind of a restriction on the mobility of our field staff, and they could not visit the field and have the accounts reviewed or renewed. That is 1 of the reasons where we have seen this kind of a slackness. But I'm sure that as unlock is happening, the ability of our field staff to reach the customers will improve, and we should be in a position to improve the Agri quality also going forward.
Okay, sir. Sir, my last question, again, is on collection efficiency. Sir, did you -- have you seen any segment-wise difference in collection efficiency? Like have you experienced that the collections in, say, maybe the personal loan segment are better than mortgages? Any such differential that you could comment on?
Mahrukh, when you have 97.5% efficiency, the difference is very marginal, right? If you really ask me the highest collection efficiency is in our unsecured personal loans for obvious reasons because we give only corporate salary package holders. So in home loan slightly lower than the personal loan.
Next question is from the line of Adarsh from CLSA.
Congrats on great set of numbers. One question I had was on the operating expense, the employee provisions that we made. It has gone up in this quarter. Wanted to understand, are there any one-offs? Because we are having very strong NII and core fees bounce back, but a lot of that goes away in the employee provisions. So if you could just tell what -- if there are one-off, what is it?
There is actually a one-off. It is -- and that one-off is essentially coming from the fact that earlier we had made the provision at the rate of the salary increase of 10%. But somewhere end of September -- sorry, end of June or maybe August, we could have the visibility of the revised salary negotiation at 15%. So last quarter also, we had provided the difference of 15%. About INR 1,000 crore we had provided in the last quarter. And this quarter also, we have provided another INR 1,000 crores. And also the related expenses relating to salary cost, about INR 600-odd crores, which is essentially on account of pension provision, gratuity provisions, et cetera, has also been provided.So about INR 1,600 crores is the additional component, which we have provided for. So if you look at the provision for employees, it has gone up from about INR 4,545 crores in the month of -- in the second quarter of financial year '20 to INR 5,637 crores in the quarter 2 of '21. So that is the reason that -- why we have seen this kind of -- about INR 1,600 crores is on account of these onetimes.
Sir, is this onetime or will this continue in the third and fourth quarter? Does it stop next year? How should one look at it?
No. See, the point is that when it comes to this increase in salary on account of IBA negotiation, this is only onetime and it will stop. But yes, of course, there would be going to be an increased salary bill, which will be about another 2% -- 2% to 3%.
About INR 200 crores a month.
About INR 200 crores a month would be an increase for the salary bills for a month, about INR 200 crore a month. So which means that about INR 600 crores a quarter would be the additional cost.
Got it. But it's going to be lower than the one-off that we've provided?
Yes, yes, certainly, certainly.
Yes. So...
About INR 1,000 crore would be something which will be one-off.
Okay. Sir, the second question was when we go through the slides that you've given on the INR 60,000 crore of expected restructuring and slippages, these slippages are like in the second half going to be INR 20,000 crores and in the first -- so that looks a relatively very low number compared to the kind of pandemic we've had. I appreciate your comments on DBT portfolio. But it's still a very low number, less than a percent of problem in the second half when all the accounts will start paying all the installment. So is that a very -- I want to say is that a very aggressive number, a cautious number, because that's clearly -- if that happens, it will be a big positive surprise. So I wanted to understand from that perspective.
See, I think when it comes to this, I would like to draw your attention to the fact that in the last quarter, when we had provided for the loan loss to INR 9,420 crores, we had actually made a provision for 1 of the housing loan companies, about INR 3,420 crores. So de facto, that provision number was about INR 6,000 crore in the last quarter also. This quarter, this number -- comparable numbers are INR 5,619 crores on account of loan loss and other provisions. Actually, this -- the provision, which we have created in this quarter of 7,000 -- INR 4,000-odd crores, INR 4,083 crores, we could not have shown as a loan loss provision because we have not really stamped these accounts as NPA under the directions of the Honorable Supreme Court. So that is why we have kept it under other provisions. And if we add these two, INR 5,619 crores plus INR 4,103 crores it will come to INR 9,700 crores. And if you compare it with INR 6,000 crores, which we had made in the last quarter, this will come to about 60% more than what it was in the last quarter.Now your question relating to this INR 20,000 crores, whether it is something which could be a reality. See, our provision coverage ratio in the corporate book stands at about 88%. As far as the legacy book is concerned, we have already taken care of to a greater extent. There's hardly any -- I don't expect that we'll have -- we'll get to see some surprises. So that is something -- and in the past we have seen that our average -- the slippages are to the extent of about INR 10,000 crores. That is a normal run rate per quarter. So irrespective of the kind of book which we have, we are still hoping that we will -- I mean, we'll -- our slippages we have reckoned is to the extent of INR 20,000 crores.And that is 1 of the reasons why when it comes to slippages plus restructuring, we have identified this number at INR 60,000 crores. And if you really look at it, we have to make a provision of 15% on the INR 60,000 crore. The total provision will come to about INR 9,000-odd crores. And we have already provided for INR 7,091 crores. So with the INR 7,091 crores, we are de facto left out with a requirement of less than about INR 2,000 crores. And we have got 2 more quarters to go. So I think, overall, we have tried to assess the situation well. And as a strategy, we have decided that we should provide for upfront. That has been our policy, and we have sticked to that policy.
If I can comment. Just look at the numbers, if you see, what we are actually saying that INR 13,000 crores would be an additional restructuring book. INR 6,000 crores, we already have received the restructuring thing. INR 20,000 crores would be actual slippages. The slippage guidance and including restructuring would be 2.5%. And what we have done in the corporate book is that we have done a very granular analysis, went to the relationship manager level and asked them to look at their accounts and give us feedback in terms of what is the status of their account. This is from the grounds-up kind of assessment to give you comfort. It is not that it is a top-driven thing. We have taken the feedback from the operating level and consolidated this interest.
Got it. Sir, and the last question is your margin did go up again this quarter, a strong performance. We did have a pro forma slippage which is INR 17,000 crores, which we didn't stamped because of the Supreme Court. Are the NII reversals accounted for in the NII? Or how -- if you could tell, because that had Agri, which will have a lot of reversals. So if you can just tell how should one look at the NII once you account the...
That amount is about INR 876 crores. We have identified that amount, but we have not done the reversal. And if at all we reckon this amount also, it will have an impact of about 5 basis point on the NIM.
So that will come in the third quarter, right, once you recognize all of it?
That's it. That's it.
It will come only when the account is stamped.
Yes, because unless and until account is stamped, the reversal cannot really happen. So that is the reason.
We have to wait for the Supreme Court judgment for that. And then INR 14,000 crores, it will be net of pullback only. Reversal will be for the net slippage.
Yes. Reversal will be -- yes because 14 -- as I was mentioning that out of this INR 14,388 crores, we have already done a pullback of about INR 6,000 crores. So for all purposes, there is a likelihood that this URI also may not have, I mean, so much of impact.
Probably 50%.
Yes, it would be about 50%. So about 400...
Next question is from the line of Jai Mundhra from B&K Securities.
I have a couple of questions. First, is sir on your BSE notes to account, wherein you have mentioned this -- the notes to account 12, where the INR 8 lakh crore number is there in the moratorium/deferment line item. So I believe this is the number which internally system has earmarked those accounts as moratorium, right?
Sir, just to clarify on this. The State Bank adopted an opt-out approach. So technically, all accounts who are eligible is treated as provided with moratorium. So the statutory disclosure, which is appearing in the notes to accounts, will be for the entire book. But as you would note, we have tracked the moratorium only on the basis of the payment track record. As per the payment, it was only 9.5% as we disclosed in the quarter 1, and that moratorium is also now over. So the INR 8 lakh crore has to be seen from that perspective that State Bank did not use opt-in, but used opt-out. So the entire retail book, which was eligible, is appearing there in the notes to accounts. So that is not a number which was actually under moratorium.
Right. No, no, sir, the question is now -- question comes now. That if an account which was this system has said as moratorium and because there was no demand which was raised till August end. And now in August, when the demand has raised for the month of September and the person has already paid, let's say, 3 or 4 installment, then in collection efficiency, in the numerator, does this 97% add 4, 5 EMI in the numerator, and denominator is the only September 1, which is raised?
Sir, very thank you, you asked this question. Let there be no confusion. When we talk about collection efficiency, it is a demand for the month and collection for that month. So it does not take into account installment that were prepaid earlier.
So not only that. What he is saying that during the moratorium, there was no demand, but the demand is not raised for the moratorium installments, when the moratorium got over by 31st August. When we talk about the efficiency, collection efficiency, we are only talking about those installments, which were payable. Not -- if somebody has exercised the moratorium and he is not due to pay, those installments are not taken.
Right. So that is very helpful. So in your 97% number, there is -- there will be no segment of customer where collection efficiency is more than 100%, right? I mean, mathematically, it could be 97%, but at individual customer/segment level it will not be more than 100%, right?
No. I can clarify this. What you are trying to say is that some customers may be paying more than the demand, whether it is reckoned in the collection efficiency. It is not. The way in which collection efficiency is determined is demand in each account and whether that has been serviced or not. If it is not serviced, then it will appear in the DPD. The DPDs over 7 days, as you know, is SMA-0 and you have SMA-1 and SMA-2. So we track it from the nonpayment in the individual account. If some customer has excess paid that number is not going to offset somebody who has not paid the installment.
Right. Right. So that helps. That's very helpful. The second question is, sir, so in this way, I mean, just to extend this, most of the customers then would have paid in full, right? I mean not -- this 97% would include some of the customers which may have paid in part. If you would have that number, so let's say, 80%, 85% are paying in full and the rest are then paying in part, would you have any such of numbers?
I think another -- just to give more clarity. This 3%, when we say 3% -- 97% means there are 3% gap, right. These 3% are the ones where the DPD is 7 days to 89 days. So it is answering your question. There could be somebody who has paid 2 installments, have not paid 1 installment or somebody has paid 1 installment, has not paid 2 installments. Everyone of them has been covered. So when we are saying 97%, that means the DPD is 0 in these cases.
Right.
I hope I've made it clear. Is it clear to you, or you want some more explanation?
Yes. Yes, it is very clear, sir. And it is a very detailed disclosure that way that you're not taking the arrears and neither the more than 100% for any customer.
We are not. Yes.
Sure, sir. And if I can ask 1 more question, sir, on SMA-1 and 2, as MD sir also mentioned that corporate and SME, probably they are out of stressed zone. So maybe the SMA-1 plus 2 number that go to we'll see, this may not be a reflective of stress because anyway higher than INR 5 crores customers are reasonably well placed. So if -- and some of the banks are showing the total SMA plus -- 1 plus 2 number, including all ticket size. If you have that broad range also, that will be helpful, sir.
Coming to retail, we have not put here. We can furnish that.
No, we can provide you that number because as of now -- we'll ensure that it's made available to you.
Next participant is Sameer Bhise from JM Financial.
Just wanted to ask what are the disbursements under the SME guarantee scheme?
ECGLS.
ECGLS...
ECGLS I think 1,74,000.
ECGLS, our total disbursement's at INR 22,000 crores. And the total sanctioned is INR 25,000 crores.
1,75,000 for total system level?
From the system.
Next question is from the line of Ashok Ajmera from Ajcon Global Services.
Congratulations to you, Khara saab, and welcome to you. The bank continues to be in a more stronger, good hand. And at the same time, congratulations to you for giving a very good results, even in this difficult situation. Having said that, sir, I have a couple of observations and some questions. Now taking this last question, I mean, last before question continuously further, in case of this moratorium, which was provided on the working capital interest where the borrowers were allowed to pay it any time up to 31st March 2021, the August -- up to August interest. Sir, can you throw some light on that? How much was that amount? And out of that, how much percentage or amount is regularly being paid from September onwards? And how many of them have opted for payment up to 31st March 2021?
Thank you very much, Ajmera saab, first of all, for all your compliments. And your specific details relating to the moratorium and how many accounts were in the moratorium and have they opted for payment until March, I'm just trying to get that required information.
Especially on this working capital only because others are the monthly installment or quarterly installment. But here, the option was given to pay the entire amount up to 31st March 2021. So whether it comes in your demand or when you talk about the efficiency or this amount was not demanded and the option was left on the borrower?
It was actually forming -- yes, yes, it was forming part of the demand. And when -- I think when it comes to collection efficiency, we have reckoned all our portfolios, but for agriculture. Agriculture is the 1 which is not subject to demand. It is on account of the seasonal repayment. But for that, we have reckoned all other specific segments. So it will be forming part of the demand, but that specific information we perhaps are not having right now. Maybe we'll have it for liabilities.
No issue, sir. No issue. I'll take it later. Sir, on this new -- this restructured, I mean, circular of August 6, I think, what is your experience? I mean how many people in -- can you throw some light on that, that how many people are -- how many borrowers are approaching? Because this restructuring plan has to be -- like have to be almost formalized by 31st of December and implemented by 31st of March 2021. So what is your experience, sir, of your people coming forward to take this restructuring facility?
As of now, when it comes to the restructuring of advances, the number of customers who have approached us for restructuring, in all, the number of accounts are 42,000. But when it comes to amount involved, it's just about INR 2,488 crores. That is on the retail side. And almost about INR 4,000-odd crores is an amount for the commercial clients group, including -- I mean, the corporate.
Sorry. How much is that? Sorry to interrupt you. That commercial group, how much?
I mean corporate accounts would be about INR 4,000-odd crores, and the retail book is just about INR 2,500 crores. So that is the amount. And that's how it has stacked up to INR 6,495 crores.
So it's very meager as compared to your total. So on the -- so I mean it shows that the people are not, I mean, very encouraged to go for this restructuring. Rather they would -- they feel that some kind of stigma will be there if they go for restructuring. That is what is the general feeling among the people. And that is why they are not coming forward. But sir, my next question is that when you said that retail, this thing, on the retail only, if you look at the segment-wise results, while the revenue of retail is almost the same, INR 19,000-odd crores, the income from the HL business is only INR 1,000 crores as against INR 5,000 crores in the last quarter. INR 4,900 crores against that only INR 1,030 crores. So is that there's a more provision in the retail book? Or I mean, what is the reason of such a big difference in the income -- in the segment-wise reporting, sir?
Which page you are referring to?
So note number -- I think segment-wise reporting, the next page of your results where you report segment-wise reporting. Like your wholesale book, your retail book.
So actually, the fact of the matter is that our CD ratio is just about 61%.
So basically, sir, it does not include transfer pricing, so it won't be representative of the results in retail.
Mr. Ajmera, I'll request you to come back in the question queue for a follow-up question. Next participant is Anand Laddha from HDFC Mutual Fund.
Sir, just wanted to have a clarification on the employee cost side. You said INR 1,000 crores was one-off cost. Of that INR 600 crores was in the employee pension provisioning and balance was in the employee salary line?
No. Actually, it was not INR 1,000 crores. It was INR 1,600 crores is a one-off, which is about INR 1,000 crores is on account of the salary increase, which has been negotiated and about INR 600 crores is other long-term benefits. which should be available to employees post the implementation of this wage negotiation.
And sir, this one-off income, salary costs, won't be there from Q3 onwards? Or will it continue for Q3 and Q4 as well?
See one-off will not be there, but yes, of course, I mean, consequent upon release of the increased salary, the salary bill will go up, and which should be about INR 200 crores per month. For a quarter, it will come out to about INR 600 crores.
So from Q3 onwards, employee cost should come down by INR 1,000 crore?
Yes, absolutely. Absolutely.
Okay. And sir, if you can give some color. Like this quarter, we have some recovery from written-off assets of INR 1,500-odd crores. How do you see this trend in the second half? Also on resolution of some of the larger accounts, which are pending, 1 in the steel case account, we keep on hearing that Supreme Court will be hearing the case. If you can give some update on that account? As well as on other resolution in the NCLT?
See, we have seen some visibility in this quarter itself. One of the account has got resolved. And also, when it comes to the other steel account, of course, the matter is sub-judice. I will not be in a position to hazard any guess. And when it comes to what we are also attempting is, if at all, we can have the compromises activated. And for that efforts are being put in. As far as the NCLT process is concerned, I expect that maybe by end of this calendar year, perhaps this embargo will be lifted and we'll have a better visibility going forward in terms of the resolution to NCLT also. Now what we expect is as far as the recovery in the remaining half of the current financial year. In the first half, we have seen the recovery, almost about INR 4,000-odd crore. Maybe we might get to see a number which is about INR 6,000 crores to INR 7,000 crores in the remaining 2 quarters of this current financial year.
Double whatever we've achieved so far.
Yes, because, see, what has happened is that we did not see much of activity in the first quarter when it comes to recovery. But yes, of course, we have seen better traction in the second quarter. When it comes to the numbers, they are there with you. So we expect that it will further get accelerated in the remaining 2 quarters, and we'll get to see better performance on the recovery front too.
Sir, on the same question, sir. You said INR 6,000 crores to INR 7,000 crores of recovery from written-off asset in the second half?
Not written-off. I'm only saying that whatever is there in the stress assets group we are expecting, which would also involve the references to NCLT, and which will also involve our efforts to resolve through compromises.
Sir, a part of that would be from NPA movement and part of that would be from written-off asset?
Yes, that's right.
And this includes the steel account resolution as well, INR 7,000 crores?
Yes. Yes. Yes.
The steel account as well as the housing finance account?
Yes. That's right.
Next question is from the line of Dhaval Gada from DSP Investment Managers.
Two questions. First is on the corporate book. So if you look at Slide 27, the rating profile of corporate book A-minus and above share has come down to 75% from 78% last year, and similar level in FY '19 as well. So just what's driving this downgrade? If you could highlight any specific sectors where we've seen major changes. So that is the first question. And related to the corporate book, also, if you could comment a little bit around project pipeline and the growth potential that you see in the next 4 to 6 quarters.Then the second question that I had was on the Xpress Credit portfolio. So when we look at the zero data, things are gradually recovering. But in our case, the September growth was significantly higher than pre-COVID level with 50% plus kind of sanction growth. Just if you could give some comfort around this unsecured portfolio in terms of share of government accounts or any other cuts that you can provide to help us understand what kind of customers are we underwriting in this portfolio. Yes, those are the 2 questions.
Yes, sure. So when it comes to the corporate book and the rating profile, it was about -- AA and AAA were about 60% and from there it has come to about 57%. I think part of it is on account of the financial position of these corporates, and there's nothing per se, which is there. And when it comes to the visibility of the demand from the corporates, I would say that we expect the loan book from the public sector undertakings to really go up in the remaining 2 quarters at least. And we are seeing some sanctions, but there's always a lag between the sanctions and the disbursements. So that is something which we will get to see going forward. And when it comes to the home loan book and also the retail book there, in the personal segment, as of now, our 94% of our personal loan book is from the government servant. And we have got about INR 1.5 crores kind of the salary accounts with us. And current penetration level is just about 19%. There is a -- we expect that we can easily take it up to 25%, which means that there is a clear cut scope for another INR 30,000-odd crores when it comes to the personal loan book. And we would like to really tap this potential in the current financial year itself. And also the fact of the matter is that this personal loan, when we offered, it is linked to their salaries. And as and when there is an increase in their salaries, their entitlement also goes up. So that also gives us an opportunity for shoring up our personal loan book going forward.
Right. And sir, if I may just add 1 more point. Overall, in our retail book, what would be the share of government employees? If you would have that number -- approximate number.
In our retail book, when it comes to, I think in the home loan segment, it would be about 50% would be the salaried employees. And the remaining 50% would be...
50% would be government and 20% would be the well-rated corporates, and 30% would be the rest.
Yes. Actually, for all purposes, about 70% would be the salaried, whether it is from the government or from the well-rated corporates. And the remaining 30% of the book will be essentially coming from the businessman and those kind of...
But it's very high credit.
Yes. But the only thing which I would like to also add here is that, invariably, our home loan borrowers are the first-time home loan borrowers. And the average ticket size is not very big. So invariably, they ensure that they're in a position to meet out their obligation towards the payment of the home loan.
Next question is from the line of Amit Premchandani from UTI Mutual Fund.
Congratulations for the appointment. Sir, again, the question on Xpress Credit. So you are saying this 32% Y-o-Y growth in Xpress Credit is with kind of organic nature without any reclassification. So the sudden increase in demand of these kind of loans on a Y-o-Y basis?
We -- see, as I mentioned that it is something which is linked to salary. Of course, these are unsecured loans, but we have got a check-off facility available. So to that extent, we are quite secure in this loan book. So long as people are getting their salary, that is something which gives us an assurance as far as the quality of this loan book is concerned.
So just to understand, it is linked to salary hike. So a person who is getting needs to apply for that loan and then he gets a loan, right? It is not automatically a working capital facility, which gets increased as and when the salary gets increased?
It's not a automatic facility. It is not the automatic facility. Only 1 thing which we've done is a pre-approved personal loan, which is actually we are running an algorithm. And with the help of analytics, we are only finding out the probable people who can be eligible for this loan. But as far as loan is concerned, it has only dispensed only on application. It's only a means for sourcing the better quality loan and nothing more than that. People have to apply.
And sir, moratorium applicable till August, almost INR 15,000 crores has slipped in this quarter, if we set aside the Supreme Court stay, largely by agriculture SME. Can you explain what is the issue on the Agri and SME side, specifically because Agri already had a very high NPL rate?
Yes. I would like to mention that out of this INR 14,388 crores, which we are showing in the additional performance slippages, almost about INR 6,000 crores we have pulled back in the month of October. So that way, it is just about INR 8,388 crores. And when it comes to your specific question in terms of the segment where it has seen, there -- just 1 second. Let me just pull off. See, in case of SME also, out of the INR 6,000-odd crores, which is seen as on -- no, sorry, for the quarter ending quarter 2...
INR 5,078 crores.
Out of INR 5,078 crores, almost for INR 3,000 crores we have pulled back. And agriculture out of INR 9,045 crores, we have pulled back about INR 1,100 crores in the month of October itself. So if you compare with this INR 5.078 crores with if at all INR 3,000 crores is pulled back, it is INR 2,078 crores in SME. In case of agriculture, yes, of course, I think there is a scope for improvement, and that is essentially on account of the fact that in this quarter the renewal and the review could not be done as it should have been done because on account of COVID there was a -- I mean, the mobility of our field staff was a bit restricted. So -- but that has been ensured now. In the month of October, we have already seen about INR 1,100 crores being pulled back. And when it comes to the corporate, the book has already seen the reduction. And per I think is also -- per also we have seen a pullback. So I think...
INR 800 crores has been pulled back.
Almost about out of INR 828 crores, which is seen, almost about INR 800 crores has been pulled back. So I think that's how the complexion is. And also -- let me also share with you. It so happens that because of this order -- interim order of the Honorable Supreme Court, we were not allowed to stamp these accounts as NPA. Otherwise, we have got a rhythm over there in the branches where the moment the account gets stamped as NPA, immediately or maybe if at all, it is stamped as SMA-1, SMA-2 also. Now our people on the ground immediately get into the recovery efforts. So that is something which could not be done because there was no visibility of these accounts getting into stress. So that is the other thing, which gives us a comfort that going forward we should be in a position to maintain this asset quality.
Sir, you have given a very interesting chart on the ROA and ROE of the bank from 2000 to 2015 and what happened post that. Are you...
Sir, sorry to interrupt you. Your voice is breaking, sir.
Is it fine now?
Still breaking.
Is it fine now?
A little bit.
Sir, you have given a very interesting chart on the ROA, ROE trajectory of the bank in 2000 to 2015 period and what happened post that. So just to take it from there, do you think that we are likely to move in that trajectory of 2000 to 2015 from next year onwards? Or what is the management thought process behind it?
We are hopeful because we have already seen an uptick and also the strengthening of processes, which have taken care when it comes to the corporate underwriting. This gives us the confidence that maybe going forward, we'll have the trajectory which move towards the earlier trend which you've seen. Maybe -- I mean, it would be difficult to predict that whether it would be by the end of this financial year or maybe in the next year, but it's a concerted effort on the part of the management.
Next question is from the line of Bhavik Dave from Nippon India.
Congratulations on a good quarter and on your appointment. A couple of clarifications and 1 question. One clarification is to an earlier participant, you mentioned that including the 1 large steel account and housing finance company, still our second half recoveries will be around INR 6,000 crores to INR 7,000 crores. What we understand is...
I must said it is not housing finance. It is the...
Only the steel?
In fact both of them are not there in this.
Sorry to actually -- both those major 2 accounts which you are mentioning are not part of the INR 6,000 crores to INR 7,000 crores what Chairman has mentioned. This is the clarification to earlier question also.
Sure. So it will be in addition to the 2 large lumpy recoveries and INR 6,000 crores, INR 7,000 crores over and above that, right?
Yes.
Perfect. And secondly, sir, on the Agri built, we've seen a far higher slippage this quarter, somewhat would be like an overflow from the first quarter, which is generally high on Agri. But if you could just talk about -- is this because purely the repayment are not EMI-led in the Agri portfolio, which is crop cycle related? So will that pull back be stronger in this quarter? And also going ahead, like rural economy has done reasonably well. So can we expect that second half slippages of the INR 20,000-odd crores, Agri will not be a large part of that INR 20,000 crores. Is that fair to assume?
No. Actually, yes, what you said is right because what is we are likely to see is that Agri -- part of it is a recovery and part of it is also the renewal of the accounts also. So if at all account is not renewed, then also it is actually tagged -- I mean at least to downgrading of the asset. So that requires the review and the renewal on the ground. So that is something which you'll get to see in this quarter and going forward also. So hopefully, we are quite hoping that maybe we'll get to see a much better picture in the Agri segment.
Sure. And sir, second point is on your corporate loan book. Are we seeing -- like are we able to be in line with the top banks when it comes to corporate in terms of market share incrementally because there are a few large private banks that have gotten reasonably aggressive when it comes to corporate business? Are we able to -- obviously, on the rates, we would be. But on the growth side, are we able to match them, not from a percentage perspective, but on an incremental absolute perspective? Are we able to match the large private bank?
When it comes to their growth rate because they have got a low base, maybe they will see a good growth rate. And we have got a book which is already stacked up, and we have got -- so as of now, I think if I may say so, they are probably eating into the market share of the public sector bank, and that is generally what the trend we have seen on the ground.
Sure. And sir, last question is on YONO. So you have put an interesting couple of slides on how YONO is contributing to the overall bank. If you could just talk about how is the profitability calculated. How do you think about YONO adding value to the overall bank in terms of cross-sell or better servicing of the customers, converting customers from like government to getting them on this platform and addressing the younger population of customer base that we have? So if you could talk about that.
Yes. See, when it comes to YONO, we have a scenario, where we are serving the varied customer base. And the -- I mean considering that in mind, we have to have all our distribution channel in place and robust also. So to that extent, YONO helped us in engaging with the younger generation. And it has been created as a super app because when it comes to younger generation, they have got very different behavior. So that is the reason why it is beyond pure banking. And we have seen very good traction in terms of the registration. We have already -- about 29 million odd customers are already there with us who have registered. And we are opening about 21,000 odd such accounts on a daily basis through YONO, which has helped us in terms of reducing our cost.The [ PFO ] personal loan, which is essentially analytics-based, that also we have seen fairly good disbursements. About INR 5,000-odd crores we have disbursed through the YONO. And even in cross-sell also because it is beyond banking, we're in a position to offer the credit card, insurance and mutual fund. So all kind of products are being rolled out, which are -- where our subsidiaries are the manufacturers. And it's essentially the convenience, which is built in. And now we are taking YONO beyond personal banking. We are there in for YONO Agri. We are there for YONO Business and also YONO Global. So I think in order to have the mind share of the younger population, this has proved to be an excellent tool for us. On estimated profitability basis, so we have made some broad assessment. I think going forward, we will probably get to see the YONO becoming even more stronger. And so we'll certainly like to leverage this and also build up our connect with the younger generation.
Sure, sir. And sir, last question is 29 million customers. Will these be -- like what will be the average age of these customers? And obviously, this will be a subset of that 48 million -- 400 million customers that we have, right?
You're right. It is actually forming part of the 490 million customers whom we are serving. And the average age, I don't think I have got that kind of analysis with me. But I would say that we have seen the traction across the generations. Not that it is only for the younger generation. Even those who have got accustomed of using YONO irrespective of the age group and considering the convenience, they all feel very comfortable going to YONO and doing all kind of the banking and nonbanking transaction too. E-commerce is a very important component of the YONO and we are seeing a lot of traction in the e-commerce as well.
Next question is from the line of Nitin Aggarwal from Motilal Oswal.
So my question is again on YONO. We have seen significant efforts being invested in building and scaling of this app. And so over the next few years, do you see any probability or any thoughts of unlocking value in this digital capability that you are building?
At some stage, we will certainly consider and -- but at the material point of time, we'll certainly engage with all of you.
Okay. And sir, the other question that I have is on the current accounts. So after the RBI changed guidelines, do we see any benefit tickling to our current account growth in the coming quarters? Any color on how much can the quantum be?
I would not -- because these results are for the September quarter. So we have not much of uptick, which you have seen because there was some time line for implementation of those current account guidelines also, and it is all subject to review.
Has been extended by RBI.
And it has been extended by RBI. Those time lines have been extended. So I think we'll wait and watch. But nevertheless, our effort is when it comes to current account, we are actually trying to enrich our offering, and we have significantly scaled up our cash management product capabilities. And that will help us in shoring up our current account base as it is.
Okay. And sir, lastly, any thoughts on breaking up our capital base?
See, as far as the capital is concerned, I would like to draw your attention to the slide where we have captured our capital adequacy ratio. It is -- we're at about 14.72%. And if you look at it, we have recently raised the Tier 2 bonds and even AT1 also. And they have been raised at the pricing, which is perhaps the best. And as of now, we feel that the kind of a growth, which is likely to happen. And we should be in a position to take care of that growth with our plough back of the profit, where we expect that we'll have decent profit and we'll be in a position to plough back a substantial amount of that, which will shore up our capital.See, as far as the Board mandated capital requirement is concerned, it is at about 13.10%. 12.10% is a regulatory requirement, 1% over that. So we would like to keep it at about 14% when it comes to Tier 1 and Tier 2. So I think after -- even after meeting our obligation for some of the bonds, which are falling due in the last quarter, we should be having a reasonable buffer in our capital ratios. So for the time being, we are feeling that we should be in a position to take care of our growth requirement with the plough back.
Next question is from the line of Kunal Shah from ICICI Securities.
Yes. So again, coming back on this rating profile. So what we have seen in terms of the rundown in the corporate book of INR 20,000-odd crores, it's nothing to do that this rundown has been in AA category, and that is getting to a relatively lower proportion. But you are saying it's largely reflecting the health wherein we are seeing the movement in A rated corporate from 11% to 18%?
See when it comes to this book, the major movement we are seeing only in -- from AA from 34% to 32%. And -- sorry AAA from 34% to 32% and AA from 26% to 25%. And the remaining is in the BBB from 9% to 12%. So that is -- these are the major factors, which are I would say that part of it could be on account of the general health of the corporates also.
No, sorry, I was just referring on a quarter-on-quarter number. So when we look at the June number to September, A is going up from 11% to 18%, okay? And AA is coming down from 30% to 25%. So this quarter-on-quarter movement, which is there, is it because of the rundown, which we are seeing of this INR 20,000 crores and it was in AA? Or this is, again, like we have seen the rundown from AA to A in terms of the rating profile itself?
I think -- just give me a minute. Quarter-on-quarter also June '20, our AAA was 33%. From there, it has come to 32%. AA, our corporate book was at 30%, which has come to 25%. And A, it was 11%. From there, it has gone to 18%. So there's a slippage from AA to A. And also there is a slight slippage from AAA to maybe to A or to AA. So that is what it looks like. And when it comes to BBB, it was 10%, which has gone to 12%. So partly, it could be on account of rerating of the corporates also. So as such, when it comes to our portfolio, I don't think it has undergone a change, but our existing portfolio, if at all, they have been rerated by the rating agencies. So that will be something which will be reflected in this.
Another factor, which influences this composition, is the drawings from the accounts. Suppose the outstandings in a particular group goes down and outstanding -- because see these are all highly rated companies.
Yes, these are all highly rated companies, and many of the AAAs don't really raise the money from the bank. They would rather go for the market borrowing. So depending upon actually, today, when it comes to the large corporates, it's not -- they have an option of looking at the loan book plus the investment book. And also for the specified borrowers, there is a requirement of raising a given amount of fresh funding from the market also. So actually, these are multiple factors which will have an impact on this kind of rating movement and the portfolio color also.
Sure. And this is only corporate. It doesn't include SME?
Yes, it is only corporate.
Okay. And 1 more question in terms of fee income. So obviously, on the loan processing side, we have seen a sharp traction. And across the board, the overall fee income traction has been quite strong. So this is largely to do with the growth, which we are seeing on the personal loan side, and that's the reason. So how sustainable would this be? And is there any kind of a one-off with the loan processing which you are seeing? Or this is purely the disbursement number which is...
No, actually, loan processing charges is agnostic to the disbursement. Processing charges are as and when the proposals are taken up for the sanction. So I would say that it cannot be linked up with the actual credit growth. Actual credit growth is when the disbursement happens. If at all limits have been sanctioned, so then the loan processing charges are immediately taken from the system itself. So that is how it is. And as I was mentioning that many of the loan proposals, which have got sanctioned, perhaps people are waiting for disbursements. As and when they will have a visibility of the demand, perhaps we'll see the disbursements also going up.
This includes both corporate and retail.
And this includes both corporate and retail.
Yes, yes, yes. Sure. And just 1 last 1 on Xpress Credit. So what would be the proportion of salaried within that?
Our Xpress Credit, 94%. 94% is -- are the salaried employees.
Actually, it is 100% salaried.
100% salaried, but 94% are the government and defense.
Government and defense.
Government and defense are 94%.
94% is government, okay.
Yes, government and defense.
Next question is from Sumeet Kariwala from Morgan Stanley.
I just had 1 question. Can you please share details with respect to collection efficiency in key segments? So retail, if you can share that for home loans, autos, personal loans, SME and corporate, it will be very helpful, sir.
We will separately share. We don't have that kind of a stack up available with us segment-wise, but we will certainly share with you.
Next question is from the line of Rakesh Kumar from Systematix Shares.
Can you hear me, sir?
Yes, we can hear you.
Sir, the 1 question I had with respect to difference of TBO and fresh value of plan assets that was close to around INR 14,600 crores as on -- in March '20. So -- and this is all-time high in the recent years. So where are we right now on this? And have we made any incremental -- have we -- any incremental provision for that?
I could not get your question. What you mentioned?
Difference between TBO and fresh fair value of plan asset for the terminal benefit obligations. Difference was around INR 14,600 crores as on March ''20. Where are we now and -- on that? And this number was like -- for gratuity and pension put together, this number was like In a couple of years, it is all-time high kind of number. So what is the gap right now? And so just wanted to understand.
See what happens is when it comes to the gratuity liability, we strictly go by what the actuarial assessment is. And I mean, not that we have got any backlog, which we have to take care. It is essentially on account of the yield movement, whatever is the additional provision which has been made. And as I was mentioning that when it comes to our additional provisions, which we have made for employees, out of INR 1,600 crores, INR 1,000 crores is only on account of the increase on account of the negotiated wage settlement, which has happened and which will be -- which is likely to be signed off. So that is something which is there and INR 600 crores are on account of the long-term benefits, which will accrue in this wage negotiation. So that is something which has happened. So INR 1,600 crores is essentially on account of that.
Can you hear me?
Yes. I can hear you.
So what I'm trying to understand is that, sir, this difference has been rising. So either we make provision or we keep more plan asset for that? So what is your thought on that?
Yes.
Yes, please.
I think we'll just give you the data. What had happened is that this gap was -- in March '19, it was INR 95,000 liability and it went to INR 1,09,830. But this year, because the discount rate is at 6.83 since March and even in September, so we understand that the gap will be less this year by March '21. This is what the actuary has told us that the gap would be like less than what the gap was at March '20. Because it is a function of 3 things, One is the discount rate movement. The second is the pension escalation rate as well as the salary escalation rate. So pension escalation rate and salary escalation rate will remain, which will require more provision. But the discount rate is the causal element for any fluctuation in this. And we understand as does the actuary that this year it will be less requirement in terms of the provision, which is required for filling up that gap.
Understood, sir. Second, very related question. Now we have share of alternate channel to total transaction close to around 93% odd. So why don't we free up some employees and put them into fee income and all because we are not witnessing any kind of decrease in the OpEx, either in the establishment costs or the overheads? So like is that a possibility?
Yes, we are actually very consciously thinking in terms of it. That we have -- we are increasing our employees on the -- in operations. So we are ensuring that we should be in a position to really ramp up our sales capability on the ground both in terms of liabilities as well as for our assets and also for the other income potential, which is available across the country. So we are all geared up to tap such opportunities, yes.
I'd just like to supplement that, see, in the banking, they have a ratio known as tooth-to-tail ratio, where the number of people who are in administration or control roles and the people who are on the sales roles in direct touch with the customers, this year, we haven't able to say sort of reject this equation. And around 20% people -- 17% to 20% people, depending upon the different layers of administrative officers, which we have, they have been transferred to the customer-facing roles. And some of the activities, which we are doing, we are also centralizing and using some sort of outsourcing also. So there is a major advance planned for increasing productivity and increasing more revenues from the staff, which will be going to the fields for marketing, recovery and other kinds of upselling and value enhancement kind of roles. So we have a proper plan for increasing the productivity of employees so that our income stream from each employee becomes better than what it is now.
Naturally, we are also intending to leverage analytics to really conserve cost of acquisition of new awareness. So that is something that is also what we are planning, and we will be implementing those plans very soon.
Next question is from Anand Dama from Emkay Global Financial Service.
Sir, the collection efficiency that we have mentioned of about 97-odd percent. Is it only for the term loans or basically this covers the corporate, the SME, the working capital, all type of loans?
It covers all kind of loan, but for agriculture.
But for agriculture. And this 97% is in value terms?
Yes, that's right.
Okay. Sir, is it possible to share the SMA-0 number and SMA-1 number?
We don't breakup as it is. We count in terms of DPD.
So actually, I think what you are saying is SMA-0 and SMA-1 for this collection efficiency.
Primarily just wanted to understand because if some of the customers, if they've not paid, then typically they would be sitting at this point of time into either SMA-0 or the SMA-1. Maybe SMA-2 may not look that inflated. But SMA-0 and 1 should be on a higher side, in percentage terms.
We have not really looked at it from that point of view. We have only looked at it from the context that if at all demand has been raised, whether it has been honored or not. So that is something which we have looked at.
Yes. Because, sir, again, that the way we have seen the economy coming down and then there is a disconnect that we see in terms of collections. So do you think that maybe at this point of time, customers are paying. But maybe next year is when possibly they will not be able to pay because there is an impact on the business, which would have -- they would have actually seen? And so because of that possibility, slippages might come up in the next year and not this year where we are all expecting?
See, the way I look at it is that it's -- with the unlock situation, things are improving. And going forward, I'm hopeful that it will further improve. So that is -- that kind of a scenario we have not yet really factored in. Maybe you would like to add.
Yes. See, additionally, you must also remember what has been our customer profile. I think we take a lot of pains to explain to everyone what is our target clientele. And in retail book, why this collection efficiency is high. See, if you see, I think a few minutes back, Chairman was mentioning in terms of our Xpress Credit, which is the unsecured loan product. 96% of the -- 94% of the customers are from the government sector and defense. So they are basically from the corporate salary package account. And we have seen that in the last 12 months, pre COVID as well as post COVID, none of them -- the salary has been impacted. The level of salary, which is being credited to this account, we just did the analysis. In fact, there is no impact on the salary, which is being created in their account. So we are of the view that in future also this is likely to continue. So there is not going to be anything different in terms of collection efficiency in the retail book.
Sure. So basically, I think retail is not really a worry for SBI because I think the book is -- though it is unsecured, but is more or less secured because of the salaried -- the customers that you have and more so from government. My more concern is about the SME book or the business banking customers that you would have or the mid-corporates operating into the impacted sectors like be it cinema, be it hotels, and tourism industries and stuff. So there, how -- I mean, will they be able to recover what they have lost in these past 6 months because they have still not been able to start the business?
So there, actually, if you really -- I would like to draw your attention to our presentation on Slide 27. We have indicated our exposure to the most vulnerable sectors like tourism and hotel is just about 0.47%. Likewise, aviation and airport, also, it is at 0.47%. So I think that is the other comfort which we have when we look at our portfolio. So that is the reason that possibly we are not visualizing the kind of a stress which you have in mind.
Sorry to interrupt you, Mr. Dama. Request you to come back in the question queue for a follow-up question. Next participant is Shagun Verma from Goldman Sachs.
This is Rahul Jain. I just had a few questions. On the home loan portfolio, I just wanted to clarify the numbers. You said about 70% are from the government and the well-rated corporate and remaining 30% is self-employed. Is that correct, sir?
That's right.
And so then can you just tell us how's been the behavior on the bounce rates, zero DPD, et cetera, in this portfolio? I understand 97% collection efficiency, which is pretty remarkable. But just wanted to understand on day zero when the payments are presented, what's the kind of behavior are you seeing from these customers, sir?
So in terms of product-wise analysis, we will separately share with you. But we have not seen anything significantly different in this segment. So I think the collection efficiency product-wise, we don't currently have. We will be able to share with you separately.
No problem, sir. Just also wanted to check the payments that you collect from these customers, does it get routed through NPCI platform, NACH or you collect PDC or it gets internally cleared with your bank?
We have NACH. We are using all kind of options.
But predominantly, we have standing instructions, what we call, because we have the salary account. It gets collected from the salary account. And in case of the...
For the self-employed, yes.
Self-employed, it is either NACH or the PDC. But PDC is still very small in our portfolio. It is...
So NACH would be a large component?
Yes.
Got it. Sir, the other question is more in terms of understanding your outlook on 2 things. Number one, the interest rates. There's a huge liquidity in the system. And clearly I think banks have to cut deposit rate, which is the right thing to do. Where do you see the demand of credit is going to come from, if you were to take a 12-month kind of a view? Of course, I appreciate that situation is not extremely crystal clear. But based on the traction you've seen so far in the last, let's say, month or 2, which segments would SBI focus on in the next 12 months or so for its credit growth? And what kind of credit growth are you looking at internally?
As far as we hope that our retail engine will keep on performing as strongly as it has. And going forward, I would say that we might get to see some traction when it comes to the public sector undertakings when they will undertake the capital expenditure plan. That is the other growth area which we see. And road construction is another area where we have seen the activity. And also the renewable energy where we are seeing the traction. So I think these are few areas, which I feel are going to have -- I mean which will have a major role to play when it comes to the growth in the real economy. And I think apart from that, as we are seeing the revival of the demand, I'm sure FMCG, pharma, they are the other ones where we will have the recovery also -- I mean more availment coming. But typically, when it comes to pharma, there are not much on -- they don't have much of dependence on the bank credit. And -- but nevertheless, I think we will get to see better economic activity and -- which will give impetus to the growth in the economy.
So we don't need to really be a little aggressive on the rate front, right, I mean is what I was trying to get to?
No, I don't think so because rates we have scaled down quite a lot. And let me share with you when it comes to the investment decisions, people are not constrained by the rates. They are more looking at demand and their ability to convert their stock into cash. So I think that is what their effort is always. And for the right kind of credit risk, we are quite aggressive when it comes to the pricing.
Even on retail side, sir?
Retail side is -- we have seen that retail side our ability is essentially coming from our ability to deliver. And our pricing, as it is, is quite competitive on the retail side.
Got it. Sir, the other question is on the provisioning side. So clearly, I think the guidance you're providing on the stress loan formation, restructuring plus slippages put together, seems fairly manageable, and then I think a good job you and your team has done. Getting into the next year, would you have any sense as to what could be the loan losses that the bank might have to incur? Would you be normalizing next year itself? Or you might still want to build up more provisioning, et cetera, et cetera? So any sense you would like to give us on the provisioning front, sir.
See, as of now, our PCR stands at about 88%. And we have -- when it comes to our corporate book, we have started evaluating accounts on the granular basis. And wherever we are perceiving an effect, we are already accounting for as far as a provisioning is concerned. So I think this will continue to be our approach going forward. As and when we will see some stress or the likelihood of stress, we will be ensuring that we provide for such accounts, and we ensure that the balance sheet remains strong.
Got it. Sir, just 1 last question. Sorry for that. But for you, as a new Chairman, what are the top 2 priorities, let's say, over the next few months, a quarter, of course, beyond managing the pandemic-related stress? That is it, sir.
No. When it comes to the priorities, we would like to see that we are in a position to leverage analytics to its hilt when it comes to risk management, when it comes to sourcing weighness, when it comes to compliance. So to that extent, I would like to cut on the costs, leveraging analytics. And the other very important piece for me is to see that we are in a position to reap all the growth opportunities, which come our way.
Next question is from Roshan from ICICI Prudential Mutual Fund.
I just want to understand this. SMA-0 plus 1, plus 2 should be equal to 3%, just excluding the aggregate in the denominator. Is it the right understanding?
Yes. Yes. As of October, it is another 0.5%, so it is 2.5%.
Ladies and gentlemen, we'll take the last question from the line of Manish Shukla from Citigroup.
On the housing loans, are you seeing a good amount of balance transfer from other entities, given the rates that you're offering? And is that strategy that you wish to actively follow?
Yes. See, when in the market and being the -- being most competitive when it comes to the product, naturally, effort is to book the quality weighness, whatever is available. Maybe if it involves takeover, yes, why not.
But let me also say that predominantly our new customers who are key to us, number one. The migration from other banks is a continuous process. Takeover also we continuously pursue. But the good...
No. I'm just trying to understand, last 6 months, is it higher than normal run rate of takeover of loans?
That I don't. But nevertheless we'll just look into it. We actually -- if we look at -- we normally don't give specific emphasis on this. But nevertheless, if at all, there are opportunities, our field staff is always on the look out.
Yes.
Right. Going to -- moving to profitability, if you have to aspirational go towards 80 basis points, 90 basis points kind of ROA, what do you think would be your steady state credit cost when you directionally settle there? I mean whenever you want to aspirationally get to 80, 90 basis points of ROA from where we are right now.
Directionally, we will like to have our credit cost, of course, less than 2. Less than 2 is something which we would like to have.
Right. And last question on provisions for the first half of this year. Total provisions combined all together in P&L is about INR 22,600 crores, which includes COVID and contingency provision, et cetera, that you are doing. The order of magnitude for the second half, would it be similar or you expect the second half would be much lower given that a lot of charges are already taken upfront?
If at all, I look at it, our estimated -- I mean slippages plus restructuring of INR 60,000 crores. And if at all 15% provisioning is a requirement, then it will come to about INR 9,000-odd crores. And we have already provided for INR 7,091 crores till the second quarter. So we -- I expect that we should have a lower burden of the provisioning, but much of it will depend upon how the economy evolves.
Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing remarks.
Thank you very much for your patience. And also I take this opportunity to wish all of you very happy Deepavali and also wish that all of you stay safe, stay healthy. Thank you very much once again.
Thank you very much. On behalf of State Bank of India, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.