Union Bank of India Ltd

NSE:UNIONBANK

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Union Bank of India Earnings Conference Call for the period ended March 31, 2023. The bank is represented by the Managing Director and CEO, Ms. A. Manimekhalai; Executive Director, Shri Nitesh Ranjan, Shri Nidhu Saxena, Shri Ramasubramanian S, and other members of the top management. [Operator Instruction] . Please note that this conference is being recorded. Now I hand over the call to Mr. Sunil Deputy General Manager. Thank you, and over to you, sir.

[Unknown Executive]

Yes. Thank you, Madam. Good afternoon, ladies and gentlemen. I , Head of Investor Relations. Welcome you all for the Union Bank of India Earnings Con Call for the period ended March 31, 2023. The structure of the con call shall 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'll read out the usual disclaimer statement. I would like to submit that certain statements that may be discussed during the investors interaction may be forward-looking statements based on the current expectations. These statements involve a number of risks or uncertainities and other factors that cause the actual results to differ from these statements. Investors are therefore requested to check the information independently before making any investment or other decisions. With this, I now request our respected MD and CEO, madam, for her opening remarks. Thank you, and over to you, Madam.

[Arumugam Manimekhalai, executive]

Good afternoon. It is my pleasure to welcome the analysts and the investors. We are grateful for your continued support and feedback that has helped us in taking informed decisions. Let me just give you a brief on the broad macroeconomic environment before I go to the performance of the bank. In the midst of the global uncertainty, Indian economy showing a strong momentum. The economy is expected to continue to perform well and will remain as the fastest-growing economy in the world. The banking sector has also shown improved performance led by a broad-based economic recovery. Our bank business and financials registered strong growth during Q4 FY '23, and we have achieved good set of numbers in terms of profitability, asset quality and capital adequacy among others. Now let me give you a brief on the highlights of our bank's performance. The operating profit of the bank reached INR 25,467 crores, with a growth of 16.4% during FY '23. Net profit of the bank has increased by 61.2%, YoY to INR 8,400 crores during the year. Net interest income grew by almost 18% Y-o-Y during FY '23. NIM has also improved to 3.07%, almost improving by 13 bps from FY '22. Gross advances has increased by 13.1%, while deposits has grown by 8.3%. Bank has registered a good growth in the ramp portfolio also, 17% growth in retail, 14% in agriculture, 13% growth in MSM Advances. Ramp share to the total advances is 56%. Gross NPA of the bank has reduced by 358 bps on a Y-o-Y basis to 7.53%. Net NPAs reduced by 198 bps on Y-o-Y basis to 1.70%. CAR improved to 152 bps to 16.4%. The PCR also, we have increased to 90.34% as this March 31, 2023. Our overall cash recovery and upgradation has crossed INR 20,000 crores. Slippages has been moderated at INR 12,518 crores as against the guidance that we gave to the market at INR 13,000 crores. During the FY '22, '23, the bank has taken many important structural changes, which is in the positive results. One among them was the large-scale digital transformation exercise that the bank has taken. Before I conclude my opening remarks, I would like to invite my ED, Mr. Nitesh Ranjan, to speak on the various digital initiatives that the bank has taken during FY '23 and also what we are going to do in the current year.

[Nitesh Ranjan, executive]

Thank you, Madam. Good evening, everyone. So like we have done very well in terms of business and financials for FY '23 as well as the Q4 of F '23. In the area of digital and technology also, we have taken several initiatives to further improve the customer service, increase the revenue and optimize the cost. If you look at our aspirations for the digital and that is in line with the consumer preference shift towards more and more digital services, also given that currently, the penetration of digital services entire ecosystem is very low, so which gives an opportunity for us to do more and more into digital. We have set an aspiration of having 50% of RAM loans origination over the next 3 years coming through the entirely digital channel, which will translate into around 15% of RAM loan book coming -- being fully the digital source loans.

And on the liability side, around 1 trillion quality CASA accounts, we'd like to acquire fully STP on the digital side over the next 2 to 3 years. And the third associated objective and aspiration of the bank is to create a great customer satisfaction score and customer experience through the digital and technology. For that, we have been continuously been building capabilities in the recent past in the core IT, digital, analytics as well as the cyber security. We have continuously been augmenting the IT hardware infrastructure to meet the requirement of increasing number of transactions in the system. We have implemented the state-of-the-art SD-WAN technology across all our branches and units. Currently, we are in the process of adopting the SDN software-defined network. We are amongst a few large banks in the country who have got PCI DSS satisfied for the payment channel. You are aware that every payment players have to be compliant with the PCI DSS, but bank has gone a step forward to get certified with the PCI DSS, which gives a lot of comfort to us as well as to our customers.

Similarly, on the security side, we have one of state-of-the-art cybersecurity operational center today, and we are taking it to the next level into cybersecurity center of excellence, and we are working with the top class advisers and consultants and we're collaborating with many -- all India level institution to take it forward. Thirdly, we are building a digital platform, which will be a microservices-based infrastructure. And which will be aiming at creating, as I said, for the customer a seamless journey, omnichannel experience, hyperpersonalization for various segments and subsegments of the customers as well as using the modern AI, including the conversational AI technology for creating convenience to our customers and also investing in creating a data lake and analytic center of excellence, which will help us leverage our digital capabilities to offer good services to our customers.

For customer satisfaction and customer convenience, we have recently adopted and implemented the CRM solution, which has been developed in association with Zoho Corp. And now we have decided to invest in digital contact center, which has also been using the conversational AI, and it will be a one touch point solution for customer service as well as sales.

Now if you look at FY '23, what all we have done, and I would like to just highlight certain numbers, that we launched our revamped mobile app in November 2022. We today offer not only the banking services, but it has plethora of insurance, mutual fund as well as lifestyle services available on our mobile app, and we are continuously adding more and more features based on the market demand as well as the customer feedback. So far, we have already developed 10-plus journeys into retail agri and MSME segments for our customers. And these 10-plus journeys are completely straight through processing. So 4 of these are in -- 4 or 5 of these are in MSME segments, 3 segments of the Mudra, Shishu, Kishore and Tarun. Then there is a union Nari Shakti scheme and the GST gain is came up to INR 25 lakh of loans. And all these 5 are completely stayed through.

Then in agriculture, again, we have Kisan Credit Card loan KCC, which we have implemented in association with Reserve Bank Innovation Hub. We have been among the first bank to do that. Today, we are doing the pilot in the state of Madhya Pradesh and Karnataka in association of RBI act and that is completely safety journey. Similarly, on the retail loan side, we have the preapproved personal loan. We have gained a preapproved personal loan for the specific segment of customers, that is the pensioners. We have launched the straight through education loan for the premier educational institutions in the country. And as we speak today, we are looking at many more journeys in retail loans, including the housing loans and vehicle loans.

Also in tie-up with the OEMs, which will create a lot of convenience to our customers, and they can do the banking services from their comfort and convenience. So over the last 12 months in FY '23, we have serviced more than 32 lakh customers. And when I say these 32 lakh customers, these are not the branch based. These are completely digital service customers, and we have generated a business of INR 48,200 crores through these customers through the digital rules, which includes new loans to 1.48 lakh customers aggregating around INR 2,200 crores of sanction and deposits of over 30 lakh customers aggregating around INR 46,000 crores of loans.

You are also aware and we have been sharing with you in the past that for the review renewal of the existing loans in the RAM segment, which has been a very tidious friction-full branch-based process. We have changed this into the straight-through process digitally, where there's less intervention of the branch as well as hardly a click or 2 requirement from the customer. And these renewal journeys on the digital, again, is available for various segments of retail agri and MSME customers. Over FY '23, we have renewed digitally over 8 lakh loans aggregating to INR 42,000 crores of our RAM portfolio. So this is just the beginning. And as I shared to the investment that we are doing and we are almost at the final stage of onboarding our system integrators and vendors and partners will work with us. We are very much hopeful that our aspiration of 50% acquisition of RAM as well as 1 trillion new CASA customers to the digital channels straight through could be possible.

In fact, in FY '23 due to our bank was ranked #1 into IBA PSB reform agenda, which is under the title of EASE, and EASE is currently running into its fifth version. So the quarter 3 FY '23 results of EASE in that Union Bank has reported first rank amongst all public sector bankns. And you are also aware that EASE has actually 5 broader themes. And in 4 of the 5 themes, Union Bank has been rank #1. And 3 out of these 4 themes actually related to the area of technology, digital, cybersecurity, and we have been ranked #1 due to our initiatives. Even the -- one of the committed awards, which is given by the Indian bank of in the area of IT, last year, we have received 6 IBA awards, which includes best technology bank as well as best IT security amongst all the large banks in India, when I say large, it includes private as well as public sector banks.

So the recognitions are also coming, which motivates us to further invest and do more and more for creating customer convenience for more than INR 14 crores of our customers using and leveraging the technology and digital. Thank you very much. I'll take a pause here. And during the discussion, if you would like to know anything specific on our initiatives, we will be happy to address.

[Operator]

[Operator Instructions] We have a first question from the line of JaI Mundra from ICICI Securities.

[Jai Mundhra, analyst]

My first question is on NIM, net interest margins. So this quarter, the loan yields are still rising Q-o-Q, but cost of deposits have risen faster and hence, we have seen a dip in the NIMs. Now going ahead, as we understand that the rates have almost peaked. So yields may still rise, but cost of deposit could still be rising faster than the loan yield. Then I believe there should be pressure on the NIM, right? So we are saying that the NIM -- our guidance is almost flattish. So just wanted to understand the thought process here.

[Arumugam Manimekhalai, executive]

Yes. Thank you. As far as FY '23 was concerned, we have improved our NIM from 2.94% to 3.07%, about 13 bps of increase. We have seen better credit uptake in RAM sector, and so faster asset pricing has helped the margins to improve. Going forward, there will be a slight pressure on the margins due to the liability repricing and slower deposit growth. That's what we feel. But however, we will be seeing -- it looks like there will be a call in the deposit rate. We have already seen that. CD rates have also come down by almost 40 to 50 bps from the mid-March level after RBI took a pause in the interest rate.

Going forward, what we feel is our NIM will be -- we will be able to sustain our NIM at 3% level. If you look at the portfolio of the bank, almost 50% is MCLR-based. Out of it just about 40% to 50% has been repriced, and the remaining 50% is to be repriced during the current year. So we assure that we will be able to maintain a NIM of at least 3%.

[Jai Mundhra, analyst]

And just a follow-up, ma'am, there on this NCLR book right? So this is essentially the corporate book right? And it should be repricing once in a year right? At least the reset period should be 1 year, if not lower. Then in the last 1 year, the entire book should have been repriced. Is that understanding right?

[Arumugam Manimekhalai, executive]

Yes, that is correct. But I will tell you, about 50% of the domestic advances is classified as NCLR as we already told you. If I can tell you that during '23-'24, Q1, we've got about 47,000 of our loan book to be repriced. And totally, we have got over INR 2,80,000 crores, that's the kind of numbers that we are looking at for repricing. So every quarter, we have some numbers. And so the repricing the reset will be happening every month, as you said. All quarters, we are seeing that this MCLR will be translated or the loan book will be repriced. And so we will have a better NIM.

[Unknown Executive]

Madam, If I may add, Mr. Mundra, what happened was actually it is not in the last 1 year. Actually, from September onwards, only the rates have gone up very high. So what madam was trying to say is, even from here to September, we have -- which are the assets which are going to be repriced. So we will be able to maintain the NIM of 3%.

[Jai Mundhra, analyst]

Right now, no. So I'm not asking that, sir. Maybe I mean you can do -- there a lot of variables. But what I wanted to ask is that RBI started the rate hike in May of last year. And then in your -- I mean, the cost of deposit -- I mean, your MCLR would have also started to reprice. So the entire corporate book should have been repriced, right? It looks like that there is a bit of a pressure on pricing also in corporate. Is that I mean

[Unknown Executive]

See, that is what I'm trying to say that. See, our MCLR is marginal cost on the rate, which is our cost that we are getting it. So if you're looking at it, the northward movement of the rate in deposit has happened from the second half of the last year.

[Jai Mundhra, analyst]

Okay. Okay. And sir, now when, let's say, this INR 47,000 crores of book comes for repricing in 1Q, considering there is a lot of competition, while the NCLR, the card rate may, let us say, rise up by 100 basis points or x basis points, do you think that the competition intensity allows you to pass on that risk, a pass on that rate hike?

[Arumugam Manimekhalai, executive]

Out of 250 transmission rates happening, the MCLR has grown by about 140 -- 140 competition, the market pricing. Everything has already been taken into account accordingly.

[Unknown Executive]

So just to add, the MCLR rate would be in a rise in all the banks. So we don't see the difficulty in pass on the increasing rate. Because right now, if you -- every bank has increased more or less around 140 or 150 bps.

[Jai Mundhra, analyst]

Right. Okay. Understood. The second question is on your notes to account 16, right? So this pertains to a previous June 7 circular disclosure that we disclose every time. I just have a small doubt so I wanted to clarify. The exposure is around INR 4,000 crores, of which around INR 2,500 crores has already slipped and the bank has made a reasonable provision there. I wanted to check that what is the nature of the INR 4,000 crores, minus INR 2,500 crores or INR 2,600 crores that these accounts are still standard. And can they slip in future quarters?

[Unknown Executive]

Now Jai Saab, these are perfectly standard loans. -- you are talking about the portfolio, which has come under June 7 circular, right?

[Jai Mundhra, analyst]

Yes, yes.

[Unknown Executive]

These are perfectly standard loans and well performing. Only thing is that there is sometimes a delay in the resolution plan, therefore, that additional provision is addressed. But when the resolution plan ratification or whatever that put in place and no default in 6 months, those provisions get reversed. You see a few accounts also this quarter. Earlier, we made provision, this provision got reversed. So absolutely, there is no such thing. We don't find any reason that any of such account will be slipping. In fact, our corporate book portfolio is doing very well, and we don't see -- foresee any kind of account going to slipping there.

[Jai Mundhra, analyst]

Sure. And how much was the family pension that we absorbed in this quarter I think we have done for the...

[Arumugam Manimekhalai, executive]

Yes, we did -- we did about INR 1,100 crores -- we have observed during the current year, which actually we had a dispensation of 5 years. We have observed everything during the current -- during the FY '23 last quarter.

[Jai Mundhra, analyst]

So the entire has come in last quarter, right?

[Arumugam Manimekhalai, executive]

Yes, yes.

[Jai Mundhra, analyst]

And last question...

[Operator]

Mr. Mundra, I request you to come back in the queue, sir. [Operator Instructions] We have a next question from the line of Ashok Ajmera from Ajcon Global.

[Ashok Ajmera, analyst]

Thank you very much for giving this opportunity to me, and good evening ma'am and the other Executive Directors and General Managers and the CGMs and GMs of Union Bank of India. Ma'am, at the outset, yes, my compliments to you for the overall good performance of the bank for the FY '23 if you take the year on the whole.

My only concern is that in the last quarter, the Q4, our results are not that very -- like our growth -- credit growth is almost muted, 0.29% in the domestic. And even on the other front, also, if you look at the profitability and other thing, because the recovery from the return of account has come very high in this quarter, that is why we could increase our operating profit too. Otherwise, there was a pressure on our margins and our entire operating profit.

You have done very well in the bank for the last 9 months, you have set up 126 MSME loan points, 105 MSME first branches, 160 retail points, 1,331 gold loan points. And I'm sure they all will give the benefit in the time to come to the bank. Having said that, I got some specific pointers some questions and some data points. First of all, sir, Nitish Ranjan Ji, on the digital journey you have taken, and it's really commendable sir. You have put in a total capital employed if you go on the segment-wise result. INR 3,538 crores has been capital employed on the digital initiative, which has been now made compulsory for presentation by the Reserve Bank of India.

And if you look at that asset segment, you have created INR 42,263 crores asset and liability of INR 38,000. So net capital employed is 3539. Whereas the loss -- on the digital, which is reported for the first time is INR 102 crores. So this loss of INR 102 crores because this pattern is going to be set up for future, this is not to be included in the capital employed for the digital initiative. This will be in the normal overall, the banking operation going forward, loss or profit? In the segmentation wise report -- or it will be a total clear picture will be given where the loss is added to the capital employed and the profit is reduced from the capital employed. So what is the strategy on that? This is #1.

My second question is on the -- on our DTA and side that we have a DTA reversal of INR 3,632 crores and the net credit of INR 2,269 crores which you have taken. So how much of the DTA balance left and the net credit left for the bank, so as to assess the future numbers of the bank. If I may continue asking some more questions? Ma'am? Or will you answer this first and then I come back again for the second?

[Unknown Attendee]

Ajmera Ji, before we forget what you asked -- so let us answer that first, and I'll request our CFO to take on both the questions..

[Unknown Executive]

Ajmera Saab is asking that regarding the capital employed and lost momentum in the digital segment, okay? It's not actually a loss. We'll be retaining a bracket because it is within the retail banking segment. It's a subject on being the retail banking. That's the region we retain within the bracket. It's not a negative figure.

Okay. Number one. So there is no loss as such, it will be profit only. Okay, regarding the capital that has been allocated for digital segment is basically the assets, which the bank has created through the digital mode, of course the loan asset and another, we have to maintain the capital. It was a capital allocation now. So necessary capital has been allocated. The second question you are asking on the DTA and the the bank has taken?

Basically you know, we have also discussed in earlier quarters, the bank is contesting the question of applicability of public sector bank and is going to a special bank of the has been started. So we are quite confident that we have -- because the past decision has been taken in favor of the bank. So we are considering that in the case in term of the bank. So there will be no impact in terms of the reward card or whatever. So that is one part.

Second part is that there will be DTA assets. So after the INR 6,600 crore kind of reversal this year, we will have another INR 8,500 crores of DTA that will remain in our books. Since you know DTA created out of the timing differences, out of the provisions, and now it will accordingly be deciding the due course of time. Any further clarity if you want on this matter?

[Ashok Ajmera, analyst]

How much is as per income tax the carryforward losses at all for the past?

[Unknown Executive]

There is no per carryforward losses. Bank doesn't create any DTA on carryforward losses.. So that is not there. The DTA is created on the timing difference on the better provisions and all, because entire budget make in the books is not allowed to be in the taxes. Therefore, there is a difference

[Ashok Ajmera, analyst]

No, no, it's all -- INR 8,500 crores is the DTA still the balance is there according to you, isn't it?

[Unknown Executive]

Yes, yes. Yes.

[Ashok Ajmera, analyst]

And how much net MAT credit is left?

[Unknown Executive]

The MAT credit as I told you, is basically whatever MAT we have paid, that equal amount But since we are saying that MAT is not applicable to us, so it will be nullified. So there is no implicate on this.

[Ashok Ajmera, analyst]

Ma'am coming back to the credit growth in our books because we were expecting it to continue the momentum, which was set up in the earlier 2 quarters -- how do you see -- where do you see the credit #1 coming from? Why the -- that our growth is muted in the last quarter? Is there any specific reason -- and if you are, again, having the target of 12% to 14% of the credit book for the FY '24 for 15%. Where is the credit going to come from the...

[Arumugam Manimekhalai, executive]

Yes. Ajmera Ji. The overall credit of the bank has grown by 13.3%, while the average credit registered growth of almost 16.74% and the CG ratio of the bank has also improved to 73%. It's not a muted growth, of course, because the base figure was lower and that's why the figures are shown. We are -- as per the system, we are at the same growth rate of 13.3%. We are looking at the system growth will be about 14% to 15%. Even in RAM portfolio, we have done well, retail has shown a growth of 17%, agri at 14% and MSME at 13%.

We have also grown very well in the gold portfolio, which is about 48%, education loan at 25% and vehicle loan at 31%. Now what we are looking at is a 10% to 12% growth in the coming years. The majority of the research report also says that the -- if you look at the GDP growth of about 6.5%, credit growth may hover around 12% to 13%. And that is the guidance that we are also taking. We are taking 10% to 12% growth on the credit portfolio for the year, '23-'24.

[Ashok Ajmera, analyst]

Okay ma'am, just last question in this round. On the SR INR 2,233 crores, which is fully provided for 2 SRs are added of INR 342.68 crores. So if the SRs are added recently, number one, what kind of -- is it from private ARP, NARPL...

[Unknown Executive]

These are all NARPL, it is fully provided.

[Ashok Ajmera, analyst]

What was the need of providing 100% if it is a fresh SR.

[Unknown Executive]

Ajmera Ji, this is through the NARPL sale which we have done. There are 2 accounts for which NARPL sale has taken place, where 85% is in SR form and it's though backed by government guarantee but still it is 100% provided.

[Ashok Ajmera, analyst]

It is 100% provided by the government, it must have taken in the recovery or the investment...

[Unknown Executive]

No. The value is right now been taken out that way.

[Ashok Ajmera, analyst]

This is as good as a very -- extra cushion for the bank because this money is guaranteed by the bank in any .

[Unknown Executive]

5 years plus 3 years part of guarantee and right now bank has taken a call to take a position once an additional -- you can take it as an extra guidance cushion on behalf of the bank.

[Unknown Attendee]

1 correction, 1 small correction. On the Digital segment, what you have mentioned is that the loss in detail, I want to make a correction. You are right, the amount of figure mentioned there on the segment loss on digital operations, we -- this is mainly because of the initial CapEx revenue expenditure because the bank is now building a lot of IT infrastructure and all. Therefore, the initial has been high. That's the reason why this is the loss, but we have ensured the output is going to -- the volume is going to increase in the future. So that will be the just now a lot. So starting for the correction.

[Ashok Ajmera, analyst]

Yes, sir, that's what -- that's why I raised this question that our revenue is [ 169 ] that I'm just clarifying ma'am. I'm just on to the point. Please permit me.

[Operator]

Please go ahead, sir.

[Ashok Ajmera, analyst]

Yes. So what I was saying that, sir, that our revenue is INR 169 crores. And the loss is INR 102, it means INR 271 crores is the expenses for earning INR 169 crores, which I can understand because it is the initial stage of the digital -- the entire segment-wise reporting and total digital initiative, which has to be reported separately. What was my point is that this loss, today it maybe a INR 100 crores, tomorrow there can be INR 500 crores or a profit of INR 1,000 crores, whether it should be adjusted on the capital employed on that particular segment. So that was one point which I addressed another one for the loss. Anyway you can take it the queue from that and can decide accordingly.

[Operator]

We have a next question from the line of Rakesh Kumar from B&K Securities.

[Rakesh Kumar, analyst]

Sir, ma'am, one question was pertaining to the total called the restructured book, which is pertaining to your notes of accounts number 14, 15 and 16. So number comes to which is standard number, around INR 18,000 crores. So if you can indicate what is the total provision that we are holding against this outstanding? So non-NPA standard of INR 18,100 crores.

[Arumugam Manimekhalai, executive]

Now restructured book, as you said, is about INR 17,826, and we are holding provisions to extent of 10%.

[Rakesh Kumar, analyst]

10%. This 10% number, ma'am, INR 1,300 crores number, it is not -- you're not clubbing it with general and standard provision. So it is a separate number, correct?

[Unknown Executive]

Yes, separate numbers. Yes.

[Rakesh Kumar, analyst]

And secondly, ma'am, like we have seen quite a strong growth in overseas credit book this quarter. But if you look at the provision, what we are holding for the unaged foreign currency exposure, that number has actually come down. So like number is not significant at all, but just wanted to understand the thought process or maybe what is happening in the business -- like is that the case that in this quarter, even after having such a strong growth in overseas book foreign currency exposure, has it come down? That is why the provision in this quarter has come down from INR 26 crores to INR 17 crores?

[Unknown Executive]

This is actually there are 2 different things. As far as the -- all these advances are concerned, these advances given at the 2 branches we have 1 at Sydney and the another 1 is at Dubai. As far as the other one is concerned, it is the domestic exposure ForEx exposure that we have given.

[Rakesh Kumar, analyst]

And after the shifting loss that we have done, like we had around INR 97 crores, INR 98 crores of shifting loss this quarter. So how are we placed now? Because the modified deviation is still we have less than 1 year for AFS book, especially on the SLR side, and we are not changing it from the last quarter number. So what is the view that we are holding on the interest rate movement. As you said that certificate of deposit rate has come down, and that is a fact of the matters and short-term [ T-bill ] has also come down -- but we are not changing our modified duration on the SLR in the FS book.

So it is not -- things are not appearing to be in line -- so why don't -- why did not change our duration on the higher side when we see that rates are coming down?

[Unknown Executive]

Sir, shifting loss is pertaining to first quarter of 2022-2023 which has already been booked. Subsequent to that, whatever the investment portfolio we have added which mainly consists of treasury bills and other short-term securities, which due to excess liquidity in the system, we have placed this in treasury bills as well as 1- to 3-year duration. That is why we are having a duration continually maintained at the similar level. One, that is why we are having an average duration of 3.66%, which we will be able to encash over a period of time.

[Rakesh Kumar, analyst]

The question was basically on the AFS book. So total deviation is same at around 1.3 years, and SLR duration is at around 0.7 years. if you are seeing that rates are coming down, then are we changing the duration? Are we increasing the duration? or are we not increasing duration?

[Unknown Executive]

We are changing the duration over a period of time. This mainly portfolio consists of treasury bill, which is due to excess system liquidity available, which has been kept. If we withdraw that, our direction will come to around 3.65 to 3.66 in AFS book itself.

[Rakesh Kumar, analyst]

Okay. And how much we are planning to shift in the first quarter, coming first quarter?

[Unknown Executive]

To the extent of 5,000 to 8,000.

[Rakesh Kumar, analyst]

Okay. And the duration of that book would be like -- would be 2, 3 years? on the side?

[Unknown Executive]

Yes, 3 to 3.5.

[Operator]

We have next question from the line of Raju Barnaval from Antique Stock Broking.

[Unknown Analyst]

My question is on the corporate portfolio side. In the current quarter, we have seen a softer growth on the corporate side, while it has declined on a sequential basis. So what's your outlook on the corporate portfolio going ahead?

[Unknown Executive]

Yes. So we have taken a constant decision to keep, as you know, that we are keeping our corporate book and RAM at a particular proportion -- to have that proportion, and we should not go beyond that and to keep that ratio, we have remained the corporate group at that level. That is one part.

Second part is if we see what would be the growth next year, we have given a guidance of 10% to 12%, and we will remain at that level because we have got a lot of traction in different areas. So most of the sectors are now opened up, and we are getting proposal from most of the sectors. So it is not about a particular sector, but in all the sectors, there is a good growth.

Thirdly, we have got a pipeline of around INR 30,000 crores, INR 35,000 crores in the pipeline, which is under different stages of disbursement which we have given the sanction. So this may be disbursed over a period of, say, 12 to 18 months. So that disbursement will happen. And along with that, we have fresh sanction on approval of around INR 15,000 crores, INR 20,000 crores, which will come over a period of time, which will be sanctioned during the year.

And again, those proposals are that we are considering different branches will be coming to us. So that I have not taken, only I have taken this part. So we see constant move to grow decently during this year.

[Unknown Analyst]

Okay. And some data keeping question. Can you please provide a breakup of the provision during the quarter between NPA provision and others?

[Unknown Executive]

The total provision during the quarter was INR 4,000 crores. Out of that, INR 3,567 crores was towards the NPA total provisioning was 4041 crores, out of that, INR 3,567 crores was towards the NPA .

[Unknown Analyst]

Okay. And what was the ForEx based income during the quarter?

[Unknown Executive]

Forex based income. Okay. Yes, yes, roughly from Forex transaction was INR 217 crores during this quarter, during the Q3. And for the full year, the ForEx based income crores.

[Operator]

We have a next question from the line of Ashlesh Sonje from Kota Securities.

[Ashlesh Sonje, analyst]

Just a couple of questions from my side. Firstly, on the recovery front, we have seen a healthy recoveries of about INR 20,000 crores during FY '23 against the guidance of INR 15,000 crores -- but for FY '24?

[Unknown Executive]

Sir, see, generally, we will try to maintain or else we want to improve our performance in the recovery according to that. The process is in place, we'll be more or less at the same level.

[Ashlesh Sonje, analyst]

And where do you think that this will be coming from? Any large...

[Operator]

Sir, we cannot hear you clearly. Can you use your handset, please?

[Ashlesh Sonje, analyst]

Is this better by any chance?

[Operator]

Can you speak?

[Ashlesh Sonje, analyst]

Yes As I'm saying, do you foresee any segment, any particular industry?

[Unknown Executive]

No, it is not like that. We have already launched a few schemes for -- actually for the onetime settlements we had -- some aggressive schemes have been launched which we are now able to get some of the accounts not any bigger costs, we are not any foreseeing on that, but it will be on a continuous basis, we will be able to do.

[Unknown Analyst]

So you some corporate kind of...

[Unknown Executive]

Not even if you look at it, we normally -- mostly we are expecting it from Agri and the MSME sector.

[Arumugam Manimekhalai, executive]

See, during the last year, that is '22-'23, we did about 2,19,000 OTS accounts and about 530 crores of recovery in that number. We also did quite a number of almost 8,000 and all on third-party, and we were able to recover close to INR 3,000 crores in that. So it is not a one particular sector that we are looking at. We are looking at recovery from every area.

We have also something lined up with NARCL, and we hope to see some good recovery from those centers also.

[Ashlesh Sonje, analyst]

Okay. The second question is, again, on recoveries from the return of accounts which we have seen in the fourth quarter. Can you shed some light on which were any particular large accounts?

[Unknown Executive]

See, the large account means, there were some of the accounts which have been fully provided and very old NPA accounts, which we have -- on a cash basis, we have sold to some of the accounts to ARC on a 100% cash -- upfront cash basis, amounted to around INR 930 crores, it has come on that. Other than that, as Madam also told you, we were very aggressive with the old NPAs with OTS. Some of the lower -- that is small accounts have been teamed up. That's why there are around more than 2 lakh accounts, which are very, very -- liabilities are very less.

We had entered into a settlement until we have cleaned the also. So that we are able to do this write-off in the account showing a better result in the last quarter.

[Ashlesh Sonje, analyst]

Okay. Understood, sir. And lastly, have we booked any recoveries in the interest income line during the fourth quarter? In the last quarter, if I remember right, we had about INR 685 crores in the interest income.

[Unknown Analyst]

For the entire year, it is around INR 2,600 crores -- INR 682 crores in the last quarter, INR 2,000 crores -- around INR 2,600 crores for the entire year.

[Operator]

We have a next question from the line of Sushil Choksey from Indus Equity Advisors.

[Sushil Choksey, analyst]

Good evening to Team Union Bank. Congratulations for a stable result. Listing to all the Q&A so far, I feel there is a change of hard strategy, between a balance in corporate and retail. So can you roll out the strategy points for next 12, 24 months, what Union Bank desires to do?

[Arumugam Manimekhalai, executive]

Choksey sir, we have a strategy that we will do 55% RAM and 55% of our loan book will be corporate. So we have got a -- as we have told earlier also, we have put up some strategic verticals. We have made like the retail loan points, the MSME loan point retail aggressively look at giving retail loans plus education loan, gold loan. These are all the verticals that we have come up with. And with regards to even corporate advances, we are not saying that we will be limiting to 45% alone if the projects that we get is better, so we are going ahead and doing it.

Even in large corporates, we have set up about 14 LCBs and 56 midcorporate branches, which will fuel this growth in the corporate advances. We have also set up about 14 corporate relationship sales across the country who will be also looking at building relationships with existing corporate for fee-based income and third-party products also.

[Sushil Choksey, analyst]

Okay. Now just relating to that, so you're not aware that 55, 45 as a situation, it's just a matter of thinking that we will drive retail and wholesale...

[Arumugam Manimekhalai, executive]

Yes, yes. Absolutely.

[Sushil Choksey, analyst]

And it is more of an initiative because you spend so much on digital. So I want to elaborate on that question. Seconding thing, some of the banks which have declared results are guiding that -- the rates have peaked in U.S. and rates have peaked up in India also based on RBI guidance. How do you position yourself not only AFS and HTM, but if bond rates are headed to 6.75% at the year-end as what is indicated on pricing of your loans, MCLR and your treasury operations.

[Unknown Executive]

Good afternoon. As far as treasury operation is concerned, already interest rates have peaked up as you told. However, depending upon the inflationary condition and U.S. market, there may be either cut or stagnant for a long period of time. That is the case. Accordingly, we have positioned our HDM and AFS book to take care of this requirement, and we will definitely be able to generate a substantial and MTM free position over a period of next 1 year, sir.

[Sushil Choksey, analyst]

Sir, regarding MCLR repricing. As earlier in the conversation, we have told that during when it is coming for the repricing time, it will be appropriately done sir, considering the present market conditions. Because I could sense from Madam comment that the deposit rates are already coming down, which means our MCLR has also peaked or the system MCLR is peak, let's put it that way -- my understanding is right?

[Unknown Executive]

Sorry, yes, you can say like that, but we are just waiting and watching for this MCLR, the pricing mechanism, it will also depend upon the competitiveness in the market also. So maybe there are some more increase may be expected on that.

[Operator]

We have a next question from the line of Chintan Shah from ICICI Securities.

[Chintan Shah, analyst]

First of all, congratulations on good set of numbers. And thank you for the opportunity -- so firstly, on the LCR front, I had a question. So in terms of if you look at the LCR is roughly 193% against the regulatory comment of 100%. So any reason for carrying such excess LCR? And if we reduce the LCR then should that help on the margins front? Any benefit on the margin front can be expected from that?

[Unknown Executive]

So good afternoon. This is actually a last day number. So that's the reason it is 192%. But if you took the -- if you take the average of the quarter, it is around 167%. And that is because we have a good chunk of excess SLR, and that's the reason it is at a comfortable position.

[Chintan Shah, analyst]

Ok sir, do we plan to reduce it around this level?

[Unknown Executive]

That will depend upon the market conditions and how is the opportunity in the credit market? How is the cost in the deposit market as well as opportunity in .

[Chintan Shah, analyst]

Now secondly, on the term deposit rate. So I was looking at the term deposit rate. It is around 6.5% is the peak if I look at a term deposit rate. Also, sir, what would be on this rate -- the highest rate in the past 5 years of 1 year or 1 to 2 years range, highest TD rate in the past or is it around the highest rate as of now?

[Unknown Executive]

That current is the highest rate.

[Chintan Shah, analyst]

Okay. So current would be the highest rate in the past 5 years, right?

[Unknown Executive]

Yes.

[Chintan Shah, analyst]

Sure sir, any plans of exhibiting this higher rate, just to garner more deposits that given that there is quite a fight on the deposits front, so are we planning to raise any rate on this since we are starting from 2.75 to ?

[Unknown Executive]

So the saving deposit portfolio is not so rate sensitive is what we understand and what that reality is also. We are rather looking at other initiatives to see how the savings portfolio can be enhanced in the bank. So what we have seen, we have studied that the saving share. Our salary share in the savings portfolio is lesser. And we are far below the industry benchmark.

So we are working on that part. We have come out with the improvised salary product and we have created a vertical for salary accounts, mobilization in the bank, and with those kind of initiatives with our mobile app, having enhanced features, 350-plus features and having more engagement with the customers, having more SB accounts where the Union Bank account becomes the operative account. These are the kind of initiatives we are trying to take and increase our savings rather than the pricing part of it.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to you.

[Arumugam Manimekhalai, executive]

Thank you, everyone, for your continued support. We are sure that with the various initiatives that the bank is continuously seeking, we will be showing better results in the quarter -- next quarter also. The bank has also taken many new initiatives, especially in the lateral recruitment side, we created a lot of new verticals like the wealth management, the digital marketing, transaction banking, call center management, and we are recruiting a lot of people from -- experts from outside to the bank. with all this and the digital Mr. Nitesh Ranjan has also spoken to you, we would like to be seen as a more digital [indiscernible] bank in the future. Thank you, all of you.

[Operator]

On behalf of Union Bank of India, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.