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Union Bank of India Ltd
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Ladies and gentlemen, good day, and welcome to the Union Bank of India Earnings Conference Call for the period ended June 30, 2023. The bank is represented by the Managing Director and CEO, Ms. A. Manimekhalai. Executive Directors, Shri Nitesh Ranjan, Shri Nidhu Saxena, Shri Ramasubramanian S, and other members of the top management. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Sunil Kumar Jedly, Deputy General Manager, Head Investor Relations. Thank you, and over to you, sir.
Yes. Thank you. Good afternoon, ladies and gentlemen. I, [ Sunil Jedly ], Head of Investor Relations. Welcome you all for the Union Bank of India Earnings con call for the period ended June 30, 2023. The structure of the con call should include a brief opening statement by respected MD and CEO madam, and then the floor will be open for interaction.
Before getting into the con call, I will read out the usual disclaimer statement. I would like to submit that certain statements that may be discussed during the investors interaction maybe forward-looking statements based on the current expectations. These statements involve a number of risks, uncertainties and other factors that cause the actual results to differ from the statements. Investors are therefore requested to check these information independently before making any investments or other decisions.
With this, I now request our respected MD and CEO madam for her opening remarks. Thank you, and over to you, ma'am.
Good afternoon. It is my pleasure to welcome our analysts and investor community for the Union Bank of India's financial results for the quarter ended June 2023. We are grateful for your continued support and feedback that helps us to take informed decision. The banking sector performance remained strong, supported by the robust economic activities and resulting pickup in the credit growth.
Our bank's performance for the Q1 FY '24. We have achieved a good set of numbers in terms of profit and profitability, asset quality, capital adequacy, among others. The total business of the bank has crossed INR 19.5 trillion and the operating profit of the bank registered a growth of -- Y-o-Y growth of 32%. Net profit of the bank has grown by almost 108%. NIM has improved to 3.13% registering a 13 bps increase Y-o-Y. ROA has improved to 1% for the quarter ended June 23, registering 47 bps Y-o-Y.
PCR of the bank has also improved to 90.86%. We have significant improvement in our asset quality, but the gross NPAs come down by 288 bps. Our net NPA has come down by 173 bps. Total deposit of the bank has registered a y-o-y growth of 13.6% and credit cost of the bank has come down to 97 bps and the -- all my RAM portfolio, whether it be retail, agriculture or MSME have shown good growth over and above 12%. So I would like now to request my ED, Mr. Nitesh Ranjan to speak a little on the digital initiatives that the bank has taken. Thank you.
Thank you, ma'am. So I'll start from where we left in the last meeting that was on 6th of May when we were discussing the Q4 con call. And we shared some of the numbers that we are doing on the digital. I just extend that first.
So the last time when we were speaking about the new loans that we have done completely digitally, that was around 1.48 lakh accounts aggregating INR 2,200 crores. From there in 2.5 months, the account addition only through the digital is 20% growth in 2.5 months, and the volume is 15% growth.
Similarly, on the deposit side, since the 6th of May in 2.5 months, the account and volume accretion only happening through the digital is around 7%. So over the last few quarters, we have seen that 65% growth is there in digital FD creation. 53% growth is there in loan against deposits taking digitally. Shishu MUDRA STP is 38% to Y-o-Y growth and 31% of our personal loan portfolio is getting sanctioned fully digitally.
Along with that, we also shared last time that we have the digital renewal process for MSME loans up to INR 10 laks and the retail loans up to INR 50 lakhs. I'm very happy to share that as on date, 94% of MSME loans, small loans upto INR 10 lakh are getting renewed review digitally, and over 80% of retail loans are also getting reviewed digitally, which is creating a lot of customer convenience as well as saving on our OpEx and manpower.
As I also shared with you last time that we already have for the digital platform, the consultant onboarded. And today, we also have the SI system integrator onboarded for that. We have a 2- to 3-year road map for the entire digital transformation journey, but that will happen in 2 phases. And the first phase now that SI is also onboarded, the first phase of the first MVP is expected in the Q3 of the current year, somewhere between October to December, where we'll be launching many more journey, which will be on the mobile app, but be the best journey.
And by Q4 of the current financial year, we'll be transitioning our existing mobile banking platform to new platform -- digital platform of micro services led, and from there on, in FY '25, again, we'll be building on 350-plus journeys, and we'll be creating separate assets for the MSME customers, corporate customers, and also building further partnerships like ONDC and the OCEN.
As of now, we already have around 100 FinTechs in panel with us. And we are working close to 2 dozens of them on the various journeys. So on the ecosystem side, also, we have partnered with Reserve Bank Innovation Hub, and I'm very glad to share that even in the recently G20 Summit at Ahmadabad of the global finance ministers and the Central Bank governor, our KCC journey, along with the Reserve Bank Innovation Hub was one of the showcase there. As well, we have also been working with Reserve Bank of India directly for their CBDC project and we are one of the first set of pilot banks.
So broadly, if we look at our digital aspirations over the next 2 to 3 years, we are looking at 50% of RAM acquisition happening through the digital channels. 15% of RAM -- consequently, RAM book will come into the digital channels, 1 trillion of CASA is through the digital channel. And thirdly, we are looking at creating a digital enablers in such a way that will increase our customer satisfaction measured to see [ CSAT score ] for the various products and their services.
For that, we have already been strengthening and augmenting our core IT systems, applications and hardware. We have taken multiple steps in the recent past. Along with that, there is added focus on the strengthening of the cybersecurity. In fact, currently, we are in the phase of building cybersecurity center of excellence and many initiatives are being taken there in partnership with the best of the institutions.
And third is, obviously, we had just spoke about the digital platform, which has started -- got building, which will have 3, 4 key components of creating 350-plus seamless journey for various banking services, creating an omnichannel experience for the customer so that he can switch from one channel to another channel in a seamless manner. Since the customer segments that we are seeing are multiple and varied and every customer segment requires different kind of engagement and services. So we are also looking at creating a Hyper Personalized experience on our mobile app and also using the AI technology for the conversational AI.
Alongside, we are investing in a digital contact center, for which RFC is in very advanced stage and the time line for the completion of the project is 6 months from the onboarding of the SI. And hopefully, by -- in the fourth quarter, our digital contact center also will be up and running. The key differentiator from the current call center to the digital contact center will be that while the current call center is mostly responding to the in-bound calls, this contact center along with what it is being done, will actually be a sales and service center of the bank and will be kind of business strengthening for the bank.
We have rolled out during the last quarter with all the packages of the customer relationship management, CRM, which we have developed with [ Zoho Corp ] and the CRM is also now on the maturity curve in the next 6 months as also contact center comes, we believe that CRM will be a good tool for our business.
And the fourth part is that we are looking at leveraging the data for that, we are investing in data lake and building our analytic center of excellence. There also the RFP is in advanced stage and hopefully in the next couple of months, we should be having our partners on board working on that. So broadly, the idea is to create a digital ecosystem where we engage more and more with the customers so that we become the prime bank for the customer, which will aid in higher business, higher CASA balance, higher transaction and overall higher profitability as well as savings on the OpEx for the bank.
And today, as I speak, we have not only taken decisions but most of the things are already on board and into building and implementation stage. Thank you.
We are now open for interaction.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama.
Congratulations. Ma'am, my first question is on yield. So your yield on domestic loans has improved substantially this quarter. What are the drivers of the improvement? And is this margin sustainable now? I know you have guided to much lower for the year, but since you already overachieved, is this sustainable? And also in the breakdown of interest income, the interest turned on RBI balances looks much higher sequentially, so comment on that too ma'am please.
Good afternoon, ma'am. This is [ Kamal ] this side to your first question about the [ NIM ] and its sustainability. We have also earlier given the picture that we have around 90% of the loans which are [ floating rate ] loans linked to either around 49% linked to MCLR and [ EBLR rate ] so quite [indiscernible] percent of the loans where the interest rate transmission was pending that has been taking place during the quarter. So that was the reason why you would have seen improvement in the yield on advances. Of course, deposit rates have also gone up in the improvement on the cost of the deposit. But that has basically led to the improvement in margin.
There are also certain advantage where still the interest transmission will be happening over the subsequent quarters. We have given a guidance to you to maintain a margin of around 3%, and we are trying very hard to see that the margin remains protected at the 3% level overall.
Towards this, we are also working on the deposit side to see that the deposit costs remain within control. Also, the CASA side we are working on various initiatives. So we are very much confident that we will be able to maintain a margin of around 3%. That's what the guidance we have given.
The second question was about -- what was that? I think that was -- additional income. That was additional interest income from the RBI balances and all that.
RBI balances and others pertaining to swap transaction we did and which has resulted around INR 600 crores to INR 700 crores additional interest income generated from the treasury operation madam.
Okay. But if you are guiding the margin of 3% and currently, we are at 3.15%. So we are expecting margins to come down during the course of the year?
We can't say exactly that madam because we have to see how the [indiscernible] rate hikes can all happen, then also what is the liquidity condition going ahead. As of now, it is positive because of the demonetization and other related matters and also credit demand has been not that aggressive. But going ahead, we will have to see how this liquidity on return also prevail. So we have taken some conservative estimates. So that's why we have given a 3% kind of a guidance madam.
And my last question is, sir, when do you think deposit costs will peak. Will they continue to rise? How much more can deposit cost, your average deposit cost rise from here?
Presently the cost of my deposits is about 4.97%. And my -- if you look at my deposit book, 27% of my deposit book is by deposits and 73% is retail and CASA. We hope to increase the CASA deposits and the local deposit numbers to maintain the cost of deposits, and we would like to bring it down much further and it also depends on my credit uptake. Presently, my LCR is quite good at 161%. I have got sufficient liquidity and I don't have to take well deposits from the market. If my credit increases -- outpaces, then I'm sure that I have to take [ well ] deposits from the market and that is where we will see a little bit of growth in my cost of deposits.
The next question is from the line of Ashok Ajmera from Ajcon Global.
Complements madam for yet another quarter of very good performance. Your operating profit, your profit after tax, cost-to-income ratio, credit cost, everything has improved substantially and the profit has increased in spite of the other income going down in this quarter to INR 3,903 crores against INR 5,269 in the last quarter, mainly because of the little less recovery in the return of account to only INR 692 crores against INR 2,954 crores in the last quarter.
So my first question is on that, that the recovery on the return of accounts going forward in the coming 3 quarters, what we see basically, which comes to the bottom line of the bank. This is one. My another observation and question madam is on the -- I think if you look at your Slide 3 of the presentation, I think something either I'm reading it wrong or it says June '23, already Actual versus March -- overall target of March '24. I think this 12.33% for last year, not for even '23 because in the June quarter, the credit growth is only 1%, so I think in this slide...
Ajmera, what we have given is Y-o-Y growth, Q-o-Q growth is 1.63%, that is there in the slide somewhere. But what we've projected -- what we have shown 12.33% is the Y-o-Y growth in advances.
Okay. So you are taking the last 9 months also, anyway. So this quarter, the growth -- credit growth is a little mute, I mean, at 1%, so going forward, are we meeting -- making the same target of 12% for the whole year in the 9 -- still quarters going forward, we will achieve that 12% credit growth. This is another one.
And ma'am just a small observation on our segment-wise results, which have been given. They are very distorting in this quarter. While the treasury income has gone up to INR 1,262 crores from INR 660 crores, it is acceptable. But if you look at the retail, other retail segment-wise profit to INR 1,580 crores against INR 232 crores, corporate INR 1,492 crore against INR 2,800 crores. And the other INR 494 crores against INR 296 crores and unallocated INR 303 crore against INR 8 crores.
So is there any change in the segment-wise allocation of the income of the bank or some -- I mean, the whole process because segment is also very important to assess. So if its [ Kamal ] or can -- can give some explanation for this. There why so much of variation in the segment-wise results in quarter. That is my third thing and to Mr. [ Kamal ], again, one on the DTA on the [ net revision ], our tax provision in this quarter has gone up to INR 1,937 crores against INR 1,105 crore in the last quarter. That is mainly because of the DTA reversal of INR 1,329, net provision of INR [ 920 ] crores and net credit of INR [ 333 ] crores. It means in actual effect, there is no tax in the real sense; has been given. Just want a confirmation on that.
So Ajmera Ji, to start up with your first question, as regard to the recovery in the written off accounts. So recovery as were the last year focus area and is going to continue as a focus area. We are fully aware of the fact that the industry, the system has a lot of stock of the written-off accounts, including our bank. And whatever schemes and whatever efforts in terms of recovery we are putting. So we are focusing on the written-off accounts where it gives addition to my OP, so for that purpose, we have a nondiscriminatory NDND scheme that is currently also functional. It is available up to September, where we are able to settle loan accounts, borrowal accounts up to INR 5 crores, and we are able to give liberal settlement to our borrowal customers. And we are finding a lot of traction in this. And with the scheme coming to a closure, I'm sure in the remaining 3 months, we will be doing more settlements in these accounts.
And regarding the credit growth, Ajmera Ji, Ram Subramanian here, see against our guidance of 12% -- 10% to 12%. Our credit growth year-on-year is 12.33% though in a quarter, it was already -- madam has told it is 1.63%. We all know that the 12.33% growth, which we will be showing year-on-year. Out of that, our RAM portfolio shown a growth of around 15%. Corporate has shown around 9.4% growth year-on-year. Though corporate has shown less growth, we have already -- are having sanctions more than INR 25,000 crores, which are going to be disbursed during the current year, already sanctions are in place, and it will be disbursed. So we don't expect any problem in reaching our guidance figure, which has already been given around 12%. And for remaining your questions, someone will be answering these.
Ajmera sir, your first question was regarding the, I think, segment result, right? You can see the -- specifically to the Retail Banking, you asked that it is INR 1,622 crores, you see year-on-year versus the same quarter last year, it was INR 1,476 crores. Of course, in the March quarter, it was a bit lesser because there was some additional provisioning in that certain accounts, including certain agriculture advances, which also because it is less than INR 7.5 crores. So it comes in that Retail Banking operations. So because of some higher provisioning, [ profitability one ] lesser last quarter. Otherwise, if you see last year first quarter to this year first quarter, it is comparable.
The same way in the Corporate Banking also now Corporate Banking is actually becoming profitable, the reason being that the hedging provisions we have already almost taken care of. So the provisioning impact will be very, very less going forward. So Corporate Banking is gradually therefore making profitable.
Then about your second question on the [ LCA ] In fact, we have made a total provision of INR 1,900 crores this quarter. Out of that, INR 1,300 crores is towards deferred tax and INR 600 crores towards the current tax, that is what the -- we have -- during the first quarter, what is normally done is tax being provided on the estimated basis. What will be your estimated profits or estimated write-off provisioning for the full year, that is calculated and once done that it is provided. So this is again subject to future adjustments in the next quarters and all. So we believe that including the deferred tax, reversal and all our total tax liability would be something around INR 7,500 crores for the whole year, so accordingly that is provided. So that is -- so actually, this is the first year we are going to start paying the income tax last year -- up to last year that was brought to our losses, this year onwards we will be paying income tax so we have also provided current tax INR 600 crores in the current quarter.
Mr. Ajmera may I request you to join the queue for any follow-ups as we have several participants waiting.
[Operator Instructions] The next question is from the line of Rakesh Kumar from B&K Securities.
Ma'am, just a couple of questions. So just wanted to reconfirm, do we have any loan on EBLR, which is linked to T-bill??
To have loans to T-bill. We have TBLR linked loans -- loan portfolio and about 16% of our loan book is to the TBLR.
Okay. So did not we get any adverse impact since the yield came down, T-bill yield came down. So did not we get any adverse impact on the loan yield because of the reset?
See, literally speaking, it is near, they are not fixed actually. These are all floating only. It will be reset whenever T-bill changes, automatically it will be reset. So we only take the spread out of that.
Correct. So what I'm saying that in the previous quarter, in the Q1, the T-bill actually came down by around 42, 43 bps, 1 year T-bill, 364 days. So was there any reset done for the loan linked to T-bill or not?
No. Actually, see, this all was very short-term loans. We are not providing the T-bill rate for the long-term loans, actually speaking. So these are all maximum period with 90 days if you're looking at it. So automatically when the things are getting over, we will be -- what we are quoting it is basing on the competition in the market, again, that will be quoted. So there was -- actually, there's no loss for the bank out of this.
So have we run off like -- did not be renewed the book?
Yes. Yes, it was renewed. That's what my corporate growth is neutral on that.
So after the renewal, whatever rate we would have got that would be lower than the rate which was prevailing earlier?
Correct. That is the reason why we are not much aggressive quarters during the current quarter.
Okay. Okay. Got it, sir. Sir a couple of other questions.
There was a small rundown in the corporate book, actually.
Okay. Okay. So coming to the notes of accounts. So like in the PSLC, we accrued the income of INR 550 crores this quarter. What was the like-to-like number in the previous quarter and a year back, sir?
Last year, the income was close to about INR 120 crores.
Okay. This year, it is INR 550 crores.
Yes. We have seen a growth of almost 430 bps Y-o-Y in the PSLC numbers.
Correct ma'am, correct. And how much we are planning to sell ma'am in the remaining 9 months? Any number that we have in the mind, PSLC, how much we are planning to sell?
As of now -- if my -- the rate if it is good enough, then I will be doing it. As of now, I do not have anything in mind to sell off right now in this quarter.
Mr. Kumar may I request you to join the queue for any follow-ups as there are several participants waiting for their turn.
Just one question, last one question I have. Ma'am. So this sundry interest received is INR 303 crores. So what is the character of -- what is the -- like if you can explain on that number related to notes of accounts #18, what is that interest income number in the miscellaneous income?
That is income tax refund.
But that is in the other income line?
It goes in other income, right?
Not in the interest income line?
No, it doesn't go in the interest income. It's not a regular kind of -- it's not a lending activity. So whenever the income tax department completes assessment, they gives the refund, the small portion of interest also comes with that.
Okay. So we need to address the actually NII number could have that extent, correct sir, though it is in the other income, but we have to...
No, it is not a part of our net interest income. It is not a part of net interest income, because it's not a lending activity and such. So therefore, we don't consider that -- core business.
The next question is from the line of Jai Mundhra from ICICI Securities.
Congratulations on great set of numbers and 1% ROA. My question on home loan, actually, home loan and corporate loans, so both these segments which are probably more competitive, have been growing at a much -- at a much lower pace than system. Corporate growth, we have been -- if I look at last 2 quarters, has been more or less muted, flattish or actually marginal decline for the last 2 quarters.
At the same time, home loan, the growth is, of course, 10%, 11%, but which is much lower than the system number that we see from RBI. So is -- I wanted to check your thoughts, ma'am, from a medium-term perspective that how are you looking at both these segments, A, corporate in terms of growth and, B, the home loan.
I did told these 2 fields are very, very highly competitive. How we are now -- first regarding corporate loan, if I'm saying -- if I am doing that, we now look at the overall profit from each corporate. We are also having our collection services provided to them so that we can compete with the market where there is a very, very high competition is there in the rates.
At the same time, we are also looking at some of the few new sectors like your renewable energy and real estate where we can get a higher margin. So -- but we expect that we are also having -- as I earlier told we are also having large number of amount, which is already sanctioned and are in the various stages on disbursement of more than INR 25,000 crores is under disbursement. Hence, we don't see that any decline in growth in the corporate sector in the coming days.
With regard to retail, Yes. Though, we are -- as you told that we are lesser than the industry growth, but if you are looking at it, we are consistently growing in the housing sector. And -- now, last year, we have undertaken the verticalization of the entire retail portfolio and now everything -- underwriting is being done by retail loan points, though the delivery is at the branches. So now all the structure, everything is in place. And we expect that TAT will be improving, and we will be showing excellent growth during the current year.
Just to add on that regarding the home loans, what we have seen last year, a lot of centralization has given benefits to the bank. So home loan in one particular area is tying up with builders. So that we found that we need to actually improve ramp-up and what we have done this time that the builder project approvals are all centralized at the central office that itself will increase our penetration in the builders at new projects that are coming up across the country. And with that, of course, the home loan growth will be further improving.
And in response to -- in order to continue on that if you're looking at it, our education portfolio, which has shown a 33% growth. See, you have to -- this thing is -- this is -- we are now focusing on high-value education loans where it is to the premier institutes or broad studies only where more or less, it is a very good job opportunities or it is fully collateralized, so we also find that this is a great avenue for the bank and also for the new generation customer acquisition also, it helps us on that.
Sir your yield on advances, right? This question was -- I think was asked earlier also, it has grown -- the yield on advances has grown by -- has increased by 40 basis points Q-o-Q, which is actually higher than what it was -- higher than the uptick seen in the last quarter. Of course, there is a floating loans getting repriced. The question -- there are 2 questions. One, A, do you think that because the repricing should continue in, let's say, second quarter as well. So similar kind of yield improvement is possible yield on advances. And, B, is there any some other factor also such as maybe the interest recovery on NPA, bulky NPA or something else, which may have helped this number, yield on advances, or this should be assumed to be...
Yes, my [ LCR ] book is close to 50% of my loan book. And during the current quarter, just about 25% of my MCLR base book has been repriced. So going forward, I do have a book of about INR 276,000 crores of advances, which are still to be repriced. And for the next 3 quarters, it will be repriced accordingly. Then I also have a recovery also I'm looking at in written-off accounts and where it is fully provided in those sector also, there will be an interest reversion. And I'm also looking at interest income coming from that portfolio.
Right. So 25% has already that got repriced in this quarter, right? That is first quarter?
Yes. Yes, June quarter, it has been repriced.
Right, understood ma'am. And lastly, on bulk deposits, so we have 25%, 27% of the deposits under bulk category. Is that the blended cost of bulk deposit either way is low -- I mean, lower than the TD cost? Or how has that behaved?
That will be a little higher between 20 to 30 bps than the retail cost of the deposit.
And is that the trend getting better there? I mean the bulk deposit -- isn't the cost moderating at a slightly faster pace?
Yes, it is moderating at the current level because both demand and supply matters and expectation of the rate cut in the coming fourth quarter of the financial year also looked into.
Sir, there is enough liquidity in the market right now. And so we are seeing a moderation in the rate of bulk deposits.
And I have last question, ma'am, on ECLGS, right? So we have mentioned around INR 16,700 crores sanctions. If you can share the outstanding number and as well as the NPA that is there?
Yes, the outstanding is around INR 8,700 crores and NPA is to the tune of 5.93%, but these are all -- there is a guarantee on these accounts, which has been given by the government. So we have no problems in recovering this amount.
5.93% is on sanctions amount, right, because that is how...
Yes. Yes.
The next question is from Ashlesh Sonje from Kotak Securities.
Congrats. Just a couple of questions from my side. If I look at the slippages breakup across segments, you've seen elevated slippages from the corporate segment this quarter. Can you give some color on what sector these slippages have come from?
Yes. We had slippages with the tune of INR 1,200 crores from the corporate credit and it is only 1 or 2 accounts, and that is only in the LRD segment that we have got about 1 LRD segment that we have got and others were small loans that the RBI has plugged off, but they have not asked us to classify that NPA, but we took a view to classify this accounts.
Okay. And secondly, if I look at the staff cost number -- sorry, the non-staff cost number that has declined by 7% quarter-on-quarter. What would explain this decline?
Ashlesh ji, if you see our Q4 numbers last year, there are some additional items like the PLI was there, the performance linked incentive provision was there. The family pension -- onetime family pension it was fully provided where we are supposed to amortize it over the next 4 years, we have provided the entire amount of INR 1,500 crores. So that was the main reason why the Q4 of last year's staff cost was higher. So that is now normalized actually.
Sir, I was more curious about the non-staff cost part, which has come around by 7% Q-o-Q.
Non-staff cost. Okay that's also normal -- basically, [ you are differentiating ] usual for -- in our first quarter kind of business. Normal OpEx used to be a lower side because most of the expenses -- the payments are made in the fourth quarter. So normally fourth quarter the OpEx used to be on a higher side. But otherwise, if you see on a quarter-to-quarter basis -- sorry, year-on-year basis, June '22, it was INR 2,300 crores -- INR 2,298 crores and June '23 it is INR 2,300 crore. So a slight increase on year-on-year basis.
Okay. Perfect. And just lastly, can you provide -- can you share the number of employees who are still part of the defined benefit pension scheme?
That we will provide you. Right now, that number is not available with me. I will provide you separately.
Okay. And just one last clarification, if I may. The YOA number, the yield number, which we've given in our presentation, would that be a yield on assets number or a yield on advances number for us?
Which yield your are talking? Yield on advances, right.
The Next question is from the line of Deepak Poddar from Sapphire Capital.
First I wanted to have a clarification. You mentioned about INR 600 crores to INR 700 crores of some additional income, right? What was that account of?
INR 600 crores to INR 700 crores additional income during Q1. No, we have not mentioned any such thing. In fact, Q1 there were some additional income. One was the PSLC certificate, sale of priority sector certificate which was INR 550 crores plus the income tax refund of INR 300 crores.
INR 300 crores is what?
Income tax refund.
INR 700 crores was recovery in write-off accounts.
Income tax recovery that normally we get.
So INR 550 crores was PSLC extra additional income.
Priority sector certificate sale.
Okay, understood. And sir, in terms of your cost to income, I think we have seen a big improvement, right, in this quarter. So how do we see that going ahead? And our ROA aspirations?
The cost to income, we will be something around 44% to 45% as we are trying to reach basically. So we are well placed to achieve that. The number 1 is that the benefits from digitization and other activities will come. And secondly, through our outsourcing -- through our wholly-owned subsidiary, UBI Services Limited, wherein we have been -- now a lot of marketing of the loan products as well as the back-office operations and all being outsourced, that expansion is also in a very good phase. So that will [ sale ].
Apart from that, whatever branch rationalization and all that we have done, that cost will be definitely continue to accrue to us. Apart from that, we have been focusing on the fee-based income which is basically this year, fee-based income, focus will be again on the transaction banking side, on the third-party income like wealth management, insurance product and all credit cards will be the primary focus on the fee-based income. So considering that, we believe that we will be able to have that guidance of around 44% to 45% cost-to-income ratio.
Understood and ROA aspirations for the medium term?
Yes. That was -- in fact, every time you were asking the same question when the bank is going to achieve ROA of 1%, we were always telling you it will be the 2025, but we will always -- as we were telling, but we are aiming to achieve it much earlier than what -- much earlier than 2025. So basically, there are 3 things to achieve this. One is that the credit cost, which is very important, and we are very closely taking that to our recovery cost and slippages control, which is one thing because that is the something which determines your ROA.
So we believe that our credit costs will remain under control over the next year -- this year and going forward also, credit costs will be under control. That is one thing. Then the noninterest income paid, we are very focused. And we -- last year, we have had around 30% kind of work. This year, also we have been focusing on that to have that kind of growth. So we are putting our best efforts to see that we maintain this. That is our endeavor sir.
Maintain this 1% ROA, right.
Yes.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.
My first question is regarding the provision. So our -- so you have mentioned that our gross NPA target is coming below 6%. What kind of target we have for the net NPA? And also the credit cost was substantially lower this quarter. So do you feel that for rest of the year also it will be in this range?
Last year also, we did a good recovery, though the guidance was around INR 16,000 crores. We did around INR 20,000-plus crores. This year also, the guidance which we have given for recovery is around INR 16,000 crores, and we have done in the first quarter, INR 3,500-plus crores, which we intend to better off in the remaining 9 months, and this we've doing better. So guidance for GNPA is around -- below 6% and net NPAs would be around below 1%.
Okay. And what about credit cost?
Same as I mentioned, we are very much -- taking very much very -- very concerned steps on these areas to save the slippages as well as recovery. And I think we have done aggressive provisioning in the earlier years that was in our provision coverage ratio is more than 90%. So we are therefore expecting that going forward aggressive provisioning is not required. And through our recovery mechanism and all, we are not expecting any substantial slippages, so that will keep our credit cost under -- much under control. So you will not see any surprises. I believe in terms of the credit cost, it will be in the similar range.
Okay. So 10, 15 basis points, plus or minus, but it will be in this range only, right?
That's what, yes.
The next question is a follow-up question from the line of Ashok Ajmera from Ajcon Global.
Sir, I got one small -- I might have missed in between. This employee cost in this quarter has come down to INR 3,183 crores as compared to the last quarter of INR 4,412 crores whether the trend is going to be the same, around INR 3,200 crores every quarter [ inter-after? ] Or is there any provision to be done, which is left out?
No, sir, last Q4 was an exception because of the absorption of the onetime family pension costs. That was exceptional. Otherwise, there is nothing exceptional in the employee cost side. So normal increment and all will happen. So it will be similar only.
And sir, my another question is on the provision for the probably in ECL, expected credit loss. So whenever it comes, like the guidelines are getting now pumped up. So how much cushion do we already have? And how much direct provision we have done in anticipation of the future credit loss?
Sir, what we are doing is that based on the particular account, we make specific accounts, specific provisioning sometime, so what is required under the RBI IRAC norms, we tend to provide a little more in the accounts, that's why our -- you see our provision coverage ratio has gone close to 91%. That is one thing.
So we have not so far created any specific floating provisions which you are referring about to take care of the ECL. The reason doing that we believe that the ECL can be better controlled through the monitoring mechanism, through control of the SMA and all. Because on the NPA side, we have provided enough -- so nothing more should come from ECL side.
Any other buffer provisions or any other like COVID provision or any buffer which we have the provision other than the IRAC?
The COVID restructuring provisions are continued to be there in the book. So that is as per the RBI guidelines. What I meant to say is that the ECL provision, which we are mostly talking about is the differential is mainly coming from the SMA, stage 2...
SMA 2?
So that is basically we are very closely and critically monitoring and trying to reduce, and it has been [ reduced ] the last few years. We used to have [ SMA ] market double-digit, 15%, that has now come to below 4%. So we have been gradually seeing it has come in the -- in terms of ECL provisioning, which you will see further [ reduction ] also. So we are trying to control that. So therefore, we believe that there may not be very substantial impact going forward in maybe 1 year. Later on we will be actually moving to the ECL mechanism and we should be able to observe that.
Sir, lastly is on NARCL. Any color on that because we have stopped talking about that now. I think things are not happening there? Or we expect now in the coming 2 quarters, at least something to happen here, which were majorly bring in some money here?
So Ajmera ji, last year already 3 accounts have seen the settlement. They have been transferred successfully amount of INR 990 crores around was involved and recovery for the bank was around to the tune of 46%. Now we have, in addition to this, another 8 set of accounts, where the NARCL has given us the price and the process for accepting those bids are on the way.
Another 10 set of accounts are there, where the NARCL is doing their due diligence. And there in due course, they will be sharing the price to look at. So this is the thing and process is going on. 3 accounts already settled another set of 20 accounts, 25 accounts, we are seeing probably will be seeing the first recovery through NARCL.
The next question is from the line of Sarvesh Mutha from Antique Stock Broking.
I had one question. Can you give a breakup of fee-based income and treasury income?
Okay. That breakup is available. The treasury income is something around INR 700 -- INR 775 crores, comprising of exchange income of INR 261 crores received from the normal -- profit from the trading activity as mutual funds.
Then the other one you have asked sir.
Fee-based income.
Core fee-based income.
INR 2,133 crores.
The core fee-based income was INR 1,947 crores, INR 1,947 crores for the Q1 as against to INR 1,679 crores, the corresponding period of the last year.
No, within fee-based income, ForEx income or any other breakup within that?
As far as treasury is concerned, INR 775 crores, out of which ForEx income is INR 261 crores, remaining are sale of investment profit on SLR, non-SLR and mutual fund activity. That is around INR 500 crores.
Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing remarks. Thank you, and over to you.
Thank you, everyone. And we hope that we have clarified all the issues that you have raised here. We are very extremely thankful to the analysts for the positive things that you talk about Union Bank and we'll be closely interacting with you in the next few days also because the bank is in the process of raising QIP. So we'll be interacting with you more often. Thank you, and have a good day.
Thank you very much. Ladies and gentlemen, on behalf of Union Bank of India, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.