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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 March 31, 2024. The bank is represented by the Managing Director and CEO; Ms. A. Manimekhalai; Executive Directors Shri. Nitesh Ranjan, Shri. Ramasubramanian S., Shri. Sanjay Rudra, Shri. Pankaj Dwivedi and other members of the top management. [Operator Instructions] Please note that this conference is being recorded. I now hand over the call to Mr. Anith Thomas Zachariah, Deputy General Manager. Thank you, and over to you, sir.
Thank you. Good morning, ladies and gentlemen. I, Anith Thomas Zachariah, Deputy General Manager of Investor Relations Department, welcome you all for the Union Bank of India Earnings Con Call for the period ended, 31st March 2024. The structure of the con-call shall include a brief opening statement by respected MD and CEO, ma'am. And then the floor will be open for interaction. Before getting into the con-call, I will readout the usual disclaimer statement.
I would like to submit that certain statements that may be discussed during the investor interaction may be forward-looking statements based on the current expectations. These statements involve a number of risks, uncertainties and other factors that cause the actual result to differ from these statements.
Investors are, therefore, requested to check this information independently before making any investment or other decisions. With this, I now request our respected MD and CEO, ma'am, for her opening remarks. Thank you, and over to you, ma'am.
Good afternoon to all of you. I welcome you all on behalf of Union Bank. And I also thank you for joining us today. We appreciate your support and valuable feedback. Despite the global geopolitical tensions, the Indian economy remained strong, supported by high GDP growth and sustained positive momentum. At Union Bank, our strategic focus has always been to build a sustainable business with a customer-centric approach.
Let me just give you a brief on what guidance that we had given for the year FY '24 and what the actual numbers are. We provided financial guidance at the start of FY '24, and I'm pleased to report that the bank is aligned well with the projections that we have made. We aimed for a Y-o-Y deposit growth of 8% to 10% for FY '24, and we ended the year with 9.3% growth.
The advances growth projected was 10% to 11%, and we could achieve 11.7% growth. The NIM guidance was at 3%, but we were able to achieve 3.10%. And our Y-o-Y basis, our NIM improved by almost 3 bps. We aim to reduce our gross NPA to less than 6%, and we successfully brought it down to 4.76%. Regarding gross recovery and net slippages, we exceeded our goals by keeping slippages below INR 12,000 crores and achieving a gross recovery of INR 18,554 crores.
Let me now quickly run through the highlights on our financial performance. Firstly, I'm happy to share that we have achieved our highest-ever net profit of INR 13,648 crore for FY '24, with an impressive year-on-year growth of 62%. Our operating profit of the bank reached INR 28,210 crores, registering a growth of 10.8%, largely driven by net interest income of 11.6% and a noninterest income growth of 10%.
The total business of the bank reached INR 21.26 trillion with a deposit base of INR 12.21 trillion and advances of INR 9.05 trillion. The RAM portfolio increased by 13.8%, and our RAM lending to corporate lending ratio remains at 55 to 45 ratio. The capital position of the bank is quite strong with 16.97% as our CRAR, and 13.65% as CET1 ratio.
The gross NPA has reduced by 277 bps, PCR increased at 235 bps with 92.69%. The ROA and ROE has -- is at 1.03% and 15.58%. Our operating profit has declined sequentially by 4.3%. And as all of you are aware, it is primarily due to the increase in expenses related to wage revision and additional provisions for pensions amounting to INR 1,334 crores.
Beyond the financial, this year was -- this year, the bank achieved many milestones. We raised INR 8,000 crores in equity capital, the largest among the public sector banks, and our market capitalization also crossed INR 1 lakh crore. We have received some upgradation from the rating agencies, and we've also been included in the MSCI Global Standard Index among our other achievements.
We have been taking many initiatives in the last couple of years to strengthen our organization, including to strengthen the underwriting and digital capabilities. Our bank is in the forefront of adopting advanced IT and cybersecurity systems. And we have also been adjudged as #3 in the EASE ranking of the -- all the public sector banks.
During the current year, we have taken many new initiatives like for the CASA transformation, we have taken new initiatives. We are targeting the RUSU centers and growth hotspots to increase our right potential in these locations. We have also set up a customer service excellence cell to provide top-notch service to all of my customers.
Looking ahead, we see significant opportunity to drive business growth, although the operating environment may be a bit challenging due to the tight liquidity. We are optimistic that the bank will continue its effort to capitalize on the substantial opportunities that lie ahead of us. Thank you. And I'm now open for questions. Thank you, all of you.
[Operator Instructions] The first question comes from the line of Mahrukh Adajania with Nuvama.
Yes. Ma'am, so your annual slippages are within your guidance, but there has been a sharp increase in MSME, agri and retail slippage Q-o-Q in the fourth quarter, though, of course, the overall figure for the year is in line with your guidance. So if you could explain if there's any seasonality or any specific geography related issue or any segment related issue within these 3 segments? That's my first question, and I have 2 others.
Yes. See, as you are rightly told that MSME and agriculture, there is a slippages more on the last quarter. But you see, in historically also, if you're looking at it, around INR 1,000 crores are slipping every -- last quarter of every year in the agriculture sector because this is about the repayment seasonality, which coincide on that. That is the reason. MSME, it is normal, which is taking into account of our portfolio under the -- what is the slippage is happening. It is normal and we are closely monitoring those 2.
Sure. But sir, the growth in this quarter Q-o-Q is much sharper than the previous last few years. And then on a sequential basis, and also like when private banks say, they say that first and third quarter have seasonality in terms of repayment. So how is it different for state banks? Why is it more seasonally weaker in terms of repayments in fourth quarter like, say, relative to private banks, though I know that PSUs have a larger agri portfolio than private, but still asking just for understanding.
No, no, that is what we have -- public sector -- see the way we are having our agriculture portfolio that piece, if you're looking at it, our major are coming from -- even pan-India also, it is there, actually all over the India. And especially our concentration -- because of the branch network, our concentration is more on UP, Maharashtra, our Karnataka and Andhra Pradesh and Telangana.
So basing on the seasonality of the crops, these payment terms have been fixed by that. Then normally, we find that the last quarter, slippages in agri is a little higher.
Okay, sir. Okay. And then my next question...
One thing we should understand that as per the RBI guidelines also, the slippages in the agri portfolio, once the repayment comes in, immediately, we can give the loans also to these sectors. Now if you look at my agriculture portfolio, if I look at June to March, there has been increase -- in the last quarter, it has increased. And as ED also pointed out, it is because of the seasonality of the crops and also because of the geographical conditions in these locations.
But going forward, these slippages will be now converted into advances when the payment comes through during -- the payments usually come in this quarter and then the fresh -- we can make fresh advances also.
Got it. Got it. That's helpful ma'am -- and yes. And just in terms of -- so would MSME and agri be linked because there's rice processing in MSME, these processing units, so are -- the MSME agri slippages are linked or not really?
Ma'am, sometimes -- the food processing industry is either classified as agriculture or MSME based on, of course, the investment that is made in that sector. Most of the rice processing and dal processing industries are classified as agriculture only. Other than that, based on the investment, it is all classified under MSME.
[Operator Instructions] The next question is from the line of Ashok Ajmera from Ajcon Global.
Yes, ma'am, overall, if you see the -- on the overall year's performance, it's fantastic. And every guidance given by you, ma'am, has been achieved. The only concern is on the operating profitability, which is mainly, you said that because of the employees cost and pensions, but we have seen in most of the other banks that majority of this provisioning was done into the December quarter.
Now here, you see our employee cost has gone up to INR 4,829 crores in this quarter against INR 3,279 crores, which has had a major impact. Some impact has been offset by increase in the other income by INR 1,000 crores in this quarter. So going forward, what will be our run rate on the employees per month cost so that we can get a clear idea. And what is the reason or what are the exact calculations for such a high employee cost in this quarter, ma'am?
Sir, actually, thank you for the compliments. And with regards to the wage revision expenses, we have done this provisions every quarter actually. And every quarter, it was done. As you are aware, we have been talking about this. The additional provision to the extent of INR 1,334 crores is what we have done in this quarter.
This is mainly for pension, gratuity and leave encashment, that was what we have taken up. Wage arrears provision also we have taken close to [ INR 163 crores ], the total -- the additional provision that we have done. Additional impact on staff expenses is close to about INR 1,334 crores. So that is what has impacted our operating profit.
Okay, ma'am, point well taken. Sir -- going forward, ma'am, what will be our monthly or quarterly employee cost approximately because all this provisioning has been done -- the extra provisioning.
Yes. So because of the bipartite, every quarter, the increase in HR costs would be about INR 330 crores. So if you try and standardize the HR establishment costs -- say, for example, if you take the September quarter of this year, you need to add about INR 330 crores, and that is already reflected in this year's numbers as well.
So ideally, you should not see so much of an increase in the HR cost going forward. You might probably see about a 6% to 7% cost -- percent increase in the HR costs on an annual basis, and that is because of increase in expenses like dearness allowance, et cetera. but it's now kind of -- so very simply put, about INR 1,300 crores is the onetime hit that we've taken...
About INR 1,300 crores per month according to you, isn't sir?
INR 330 crores per quarter.
INR 330 crores per quarter.
Means approximately the monthly cost will be INR 1,250 crores to INR 1,300 crores. Isn't it?
No, no.
The monthly expanses will be close to about INR 110 crores with regard to the additional expenses of INR 110 crores per month.
Only normal month...
Sorry to interrupt, sir. I request that you return to the question queue for follow-up questions, sir.
No, I'm just discussing the point, my dear. Ma'am, what will be the impact of the RBI guidelines, which has come for the higher provisioning of the project finance loan?
Sir, as per the RBI guidelines, provisioning, we are not seeing much impact on -- to give you a small number, we are still calculating the numbers. There is a lot of clarity that needs to come. We have got about 68% of our loan book is completed projects. Out of that, project loans to corporate is about -- only about 28%. So we are not seeing much of an impact and which we will be able to manage.
Okay. Ma'am, I will take the point further. Some other points are there, but if the time permits, I'll come back again, otherwise, we'll meet later.
Sure, sir.
And just to answer your question, the quarterly cost as far as -- establishment costs or staff costs would be roughly about INR 3,300 crores to INR 3,500 crores.
Yes. So that's what I'm saying, maybe INR 1,150 crores to INR 1,200 crores per month.
Yes. Yes.
[Operator Instructions] The next question is from the line of Nitin Aggarwal from Motilal Oswal.
Congratulations on good results overall but for the high OpEx. So my first question is on the capital. Now if I look at because bank has raised capital very well over the year and has reduced government holding to the minimum [ INR 175 crores ] so how do we really look to deploy this capital better? Because the growth rates that you're targeting now is still like closer to where we have been, and our ROEs are significantly higher than the loan growth. So we will ideally keep on accreting capital. So how -- what's the plan to utilize this capital raisings better.
The capital raise, the deployment of these capital will be towards the CapEx for the bank. We -- you understand that the bank is looking forward to utilize a lot of CapEx on building the digital portfolio of the bank also. So that is 1 area that we are looking at.
Secondly, of course, for the growth of the bank, at least in the credit portfolio, we are looking at that. We have also seen a little bit of increase in our establishment expenses. That is also another area. We're also looking at growth in our branch expansion for the current year, but we are close to about 200 to 250 branches what we are looking at to grow in the current year. So these are the areas that we will be looking to deploy our capital.
Okay, ma'am. And second question is on the overall tax rate because we have been absorbing the DTAs and tax rate therefore is limited. And despite that, we have been able to deliver more than 1% ROA so what is the outlook there? By when do we plan to migrate to the lower tax rate? How much is the outstanding DTA remaining that are yet to be absorbed?
Yes. So we have already migrated to the lower tax rate in the current year, which is March '24. However, you are not seeing the impact because we've had a write-back in terms of the deferred tax asset so that's the reason why you're seeing that the effective tax rate is higher in the range of around 35% or so. But in the current year, which is '24, '25, you'll see the effective tax rate in the 25% to 27% range. So you'll see that in the current year.
Okay. And so related to it, then what will be our ROA guidance as such for FY '25?
So we have given an ROA guidance, which would be higher than 1%, and we would stick with that.
The next question comes from the line of Kunal Shah with Citigroup.
Yes, ma'am. So with respect to write-offs and the recovery from that, so when we look at it this year, we have almost done like INR 4,000-odd crores kind of recovery from the written off accounts. And we are guiding for recoveries to continue quite strong getting into FY '25 as well.
But broadly, if you can just highlight maybe out of this INR 16,000-odd to crores of guidance for recovery, how much of that could be from the written off accounts and the pool out there, yes?
Last year, actually, our recovery in the technically written off account is around INR 4,000 crores. And also, we have recovered the dummy ledger interest -- dummy interest to the extent of INR 3,000 crores. So altogether, it is around INR 7,000 crores.
And we hope that this year also our total -- we are expecting the total recovery of around INR 16,000 crores. And our recovery from the technically written-off accounts will be more than INR 4,000 crores for the current financial year also.
Okay. That would be like more than INR 4,000 crores. And when you look at it in terms of the related question, maybe the dummy interest, which was accrued during this year, so is that the reason that despite maybe exiting the Q4 with this kind of a margin, we are still guiding for 2.8% to 3-odd percent margin? Or is it more in terms of the cost of deposits catch-up? And how much of repricing on the deposit is still left?
Repricing on advances you're asking?
No, no, so I was just saying in terms of the overall margins -- the exit quarter margins, which have been there, okay? The run rate, at least in terms of the guidance that we are giving is still lower. So is it to do more with respect to the further catch up in cost of deposits, which can happen? Or is it maybe the component of recoveries, which got accrued in this year that might not repeat next year, and that's the reason we are still seeing like 2.8% to 3-odd percent margin, yes.
No, margin -- 3% NIM. You're talking about the NIM, net interest margin?
So NIM, we exited at 3.1%. Guidance is 2.8% to 3%, okay. So is it because of cost of deposit repricing? Or is it because of a lower recovery even from the interest component, yes.
So yes. So this is basically because we are expecting some pressure on our cost of funds, and that's the reason why we've given a guidance of 2.8% to 3%.
Okay, okay. Sir, how much of repricing would still be left on the deposit side? We already see like we are at 5.2% overall cost of deposit.
No, it actually depends on the kind of liquidity that we are going to have in the current fiscal, of course. We have seen a good liquidity in the month of April, but in the month of May and June, we feel that the liquidity will be slightly under pressure. So based on the liquidity conditions, the cost of funds, so that is how we have repriced our -- we have given a guidance of 2.8% to 3% on -- but this is, of course, subject to review. As the market conditions improve, we will come up with better numbers, probably after looking at the liquidity position in the market.
The next question is from the line of [ Darshil Jhaveri from Crown Capital ].
Congratulations for a stellar set of results. Ma'am, I just wanted to ask what kind of loan growth and deposit advances do we look for FY '25? And will our GNPA decrease further?
Yes. My guidance for this year -- the next year guidance is that we will be close to about 9%, 10% in our -- 11% to 13% in our advances. Deposit growth will be of course 9% to 11%. And our slippages, we're -- we will be containing below INR 11,500 crores and gross recovery we are looking at INR 16,000 crores.
Sorry, ma'am, gross slippages? Sorry, could you just repeat that please?
Gross recovery will be INR 16,000 crores and slippages, we are -- we'll likely to reduce it below INR 11,500 crores.
Okay, perfect, ma'am. And our GNPA, ma'am?
Gross NPA will be below 4%.
Perfect. Perfect. And just 1 more question, just with how the economic outlook currently, do we see any sector where there might be more pressure due to inflation or something, just like how is the economy doing well or some part where can be a surprising pressure?
In terms of -- first of all, when you say the economy is doing well, at the bank, we are actually focused more on sunrise sectors. But when you say inflation, as you would have seen, even RBI has been stating they are cautious about inflation eating into salary-led -- our retail-led credit growth, which is they've already tried to crack down on unsecured retail.
So retail is 1 portfolio with personal loans growth for the system at 27%, excluding margin effect at 16% to 17%. So broadly, retail is one area, which may come under pressure on account of higher inflation. Otherwise, on other corporate side, basically, we are actually witnessing -- the momentum is just started to pick up after 10 years and momentum may still continue.
Actually, my CA has already said, we are also looking at private CapEx in FY '25, a pickup in the private CapEx, especially in the telecom, the construction and the road and the railways, food processing. These are the sectors that we are really looking at where the government has also talked about hotspot, the growth centers in various locations like tourism and all those areas. So we are also focusing on these areas to improve our loan growth.
The next question is from the line of Rakesh Kumar from B&K Securities.
So my question is basically pertaining to one is that interest income on the IT refund. That number has taken -- doubled now to more than INR 1,000 crores for the entire year. So any expectation there that how it would be in next year, though it is slightly difficult to predict, but if you can tell us -- because the number is quite sizable.
Yes, yes. So obviously, IT refunds cannot be forecasted with good accuracy. So we would conservatively look at maybe about INR 500 crores of IT refunds -- interest on IT refunds.
And considering -- the second part was considering the flow of -- the run rate of the slippages for this quarter so would it be like the guidance that we have given credit cost guidance, so we would be able to stick to that number? Slippage number of INR 11,500 crores because the run rate has increased suddenly in this quarter.
Actually, if you look at my slippages of whatever we have had during the current year, of INR 11,000 crores and odd, out of that, INR 750 crores is a slippage from my previous year. That is because of the aging is what we have got. And plus, we've also got a recovery of close to INR 1,500 crores. But With that -- actually my slippage is around INR 9,665 crores only for the current year. So with this, I will be able to maintain my ratio that we've talked about -- credit cost ratio that we have talked about.
Okay. So credit cost number, how much you said ma'am, the guidance for '25?
We are at the same range. We are looking at -- the current year, it was about between 60 to 70 bps. So that is how we are looking at for the next year...
We're looking at a guidance of less than 1% in terms of credit cost.
The next question is from the line of Jai Mundhra from ICICI Securities.
I have a few questions. One is on project loans. The new RBI draft guidelines, you mentioned that -- just to clarify that you had mentioned that 68% of the project loans are already completed, and rest maybe 30% is under implementation, is that number right? And is this a part of your -- the entire INR 4 lakh crore corporate book? Or what is the absolute number here?
So my total corporate advances, as you have also mentioned, is about INR 4.07 lakh crores. Out of that, the -- if you take out the NBFC portion, the remaining -- out of the remaining portion, 68% of that is project loans. And out that, 68% are completed loans, and the remaining is in various stages of implementation.
Right, okay. Ma'am it would be great if you have the absolute number, but anyway, so ma'am, let's say, assuming this goes through, the rest -- I mean, only the 32% numbers -- 32% of the project loans, which would have some impact, right, on provisioning. The 68%, which are already completed, may not have any substantial markup.
The question is, do you sense that the 68% project loans, which are already complete, could there be any incentive for the bank to increase the prices here? I mean, what I'm asking is, under these guidelines do the operating assets can have higher pricing from banks.
See, this is the RBI draft guidelines that come for discussions and we are also having internal discussions with ourselves whatever things which we want to. RBI also called for our views on this. So we are also working on that. But if you are looking at it, in the corporate book -- the 28% is of the corporate booking we have under the project loans.
And out of the 28% of the corporate book, 68% of completed projects. But as per the RBI draft guidelines, even after completion of the also, I mean, in the operation phase, we have to have the higher provisions to be done till that 20% repayment has been paid back. So basing on all these things, there is a room, but it cannot be -- we will be closely -- once if it's being implemented, we'll be closely associating with the corporate and we will -- because the same thing we have done it in the NBFC also.
The NBFC also come in the December quarter -- in December when RBI introduced the higher provision norms. We engaged ourselves with all the NBFCs, and we improved the pricing. So same thing it will be done. It will not be like over the table we will not do it, but there is always -- with good negotiation and engaging ourselves and looking at the long-term business prospects, this always will be done.
Just to clarify, sir...
This is too early to have any speculation on the numbers right now, actually. The RBI is actually currently seeking a lot of inputs from the banks and various other institutions. And we've also given our feedback to them for the analysis. And we're very sure that the RBI will take a prudent view on this. So I think we should wait for the final decision before taking any view on the subject.
Right. Just to clarify ma'am, see, out of INR 4 lakh crores, 28% only is project loans and of which 68% is already completed, is that the...
Yes, exactly. Yes.
Okay. Second question, ma'am, is on -- guidance on loan growth, right? So we are seeing that 11% to 13% and within that, do you think that the RAM growth will be a bit higher than the overall growth and corporate growth will be a bit slower, as it is right now.
So we have projected [ RAM ] ratio of 55% to 45%. That is what we are saying. Corporate loan will grow at -- the ratio of 45% will be at the corporate loan. We are looking at a growth of -- the ratio of 55% growth in our in our -- sorry, in our retail portfolio will be and -- the RAM portfolio will be constituting 55% of the total. Historically, we are growing at 11% to 13% in our RAM portfolio. And similar growth is what we expect in the current year also.
Right, understood. And ma'am, on the recovery of INR 16,000 crores this year that we estimate, is there any breakup between, let us say, NCLT or maybe NARCL and I mean -- or this is going to be only granular retail MSME kind of a thing?
Yes. In case of the current year recovery target, already, the NARCL -- 11 accounts are under discussion with the NARCL amounting to almost INR 1,990 crores. As I already said, our target to recovery through the technically written off is in the range of the INR 4,000 crores.
NCLT also, the progress is quite satisfactory. Last year, we -- resolution happened in almost INR 3,200 crores in 8 accounts. This year also, we are expecting some good number of accounts where the resolutions are in progress and equivalent amount, also INR 4,000 crores, we are targeting for the current year also.
Okay. And sir, just -- Rudra, sir, just to understand this dummy interest goes to P&L, right? That is why it is called dummy interest.
Yes, yes.
And that INR 3,000 crores that we did in this year, you think that could be a similar number this year or this should come down as total recovery is also declining by...
That's what we have observed. In the previous year also, that is '22/'23 also, it was around INR 2,700 crores. So it is in the range of INR 2,700 to INR 3,000 crores annually.
Okay, understood. And last question sir or ma'am if you can comment on the unsecured personal loan, we had a portfolio of around INR 11,000-odd crores, what is the number right now? And if you can share any slippages in that book -- in the absolute number of the portfolio and the GNPA or slippages in that book?
With regard to personal loans, including credit cards, there is a very marginal growth actually. If you look at INR 12,587 crores was my last year's numbers and the present is about INR 12,983. And there is growth of just about 3%. And in credit cards, we have a degrowth of about 2%, not much of delinquency in these -- those books because it is given to all salaried employees, who have got accounts in the bank, we have not seen much slippages in my personal loan book.
The next question is from the line of Sushil Choksey with Indus Equity Advisors.
Congratulations for stable numbers, ma'am and the team of Union Bank. Ma'am, in your opening remarks, you highlighted that you're going to have a huge CapEx or a large number on digital and branch initiatives. Can you elaborate a little more what are the initiatives we're taking under that?
Yes. So when we talk about the digital and IT, I'd just like to give a color that we have been continuously been augmenting our IT capacity to make it more robust and resilient. So if you look at our CapEx on the IT over the last few years, I think in FY '22, it was around INR 5 billion. FY '23, it was close to INR 6.5 billion in which we augmented significantly in the last financial year to around INR 11.5 billion.
And on top of that, this year also, again, the plan is of around close to INR 14 billion of CapEx related to the IT and which includes the core IT, the security, the analytics and the digital transformation project that we are underway. And it encompasses hardware augmentation, network capability and the security capability. So far as the digital things are concerned, you are aware that we have -- from the last year, we have started investing in digital capability, building the digital platform, which also includes the creation of the mobile banking platform on our own, which will be migrating to -- in the current financial year.
Simultaneously, we're also been building several digital journey, in which MD in the opening remarks alluded to. Close to around 12, 13 journeys are already there. And on the asset side, we have done the business of around INR 8,300 crores on that. And on the liability side, total of, I think, around 20 lakh customers have been able to open the liability side accounts to our mobile app and close to around INR 60,000 crores of deposits flow have happened through that.
Simultaneously, we are covering the low ticket size, MSME and the agri loans for the auto renewal on the digital side. That amount also and number of accounts is significantly higher. We have invested in analytics capability by building the data lake and the analytics, which is a work in progress. So overall, I think one part is that we'll continue to invest heavily into IT infrastructure. And the idea is that -- and we have been telling this earlier also that over the next few years, around 50% of our retail originations would happen through the digital channels and we're on track.
So this would lead to a reduction in cost income by how much?
So very difficult to say at this point of time. But if you look at the financial institutions, we have invested in digital, I think the impact on the cost-to-income ratio is, what we call -- it comes to the lag of around 3 to 5 years because the initial investment is pretty high. So not in the immediate year, but if you look at maybe 3 to 5 years from now, it can definitely have an impact of 2% to 3% on the cost-to-income ratio.
And this doesn't include any Union Bank shared service, which you are planning to or implementing, right?
No. In overall reduction of the cost-to-income ratio, obviously, the shared services will also have some positive impact.
Yes, but the expenses what you're incurring is only part of Union Bank balance sheet, not shared service?
Right.
Okay. My second question is, ma'am, as you are witnessing still tight conditions as an assumption of your forecast with India being included in various indexes starting from Bloomberg and JPMorgan. How are we prepared to capitalize on this opportunity with the bond market and the money market and the FX, which would emerge and through a big -- huge benefit to banks, specifically size of your bank, which can garner a huge money flow through various schemes and the security market.
Yes. The bond indexation news is already there in the market. That will happen during the June month. There will be expectation of $10 billion to $15 billion or $25 billion, indexation will happen. This will happen over a period of next 1 year. We will take this as an opportunity and include those corporates and FPIs in our folder and try to generate a custodian facility, which can be extended to those FPIs so that we can able to increase our fee income as well as trading activity in those segments. I just say that will be a plus factor for us very positively in the coming days.
Any quantifying or measures you have taken within the bank? Or...
We have an independent activity that will increase our volume and network so that we can able to garner those things very positively. As of now, it is in the initial stage. We will look for the opportunity in the coming days once the indexation includes -- inclusion happens.
But have we implemented anything in GIFT City or overseas branches?
We have already requested for getting the permission from Reserve Bank of India. It is in the final stage. We are looking to get the permission as early as possible. Once that happens, definitely, we will look for opening our setup at GIFT City.
Ma'am, what is your guidance on ROE and ROA for the coming year?
ROA, we said we will be above 1%.
Are we being conservative or?
No, we will be above 1%.
No, because I think the reason why we're seeing above 1% because we have been saying that our NIM would be 2.8% to 3%. So obviously, that could also have an impact on the ROA. And therefore, we're sticking with the guidance of greater than 1%. Obviously, we'll try to beat that.
The next question is from the line of [ Vikram Raghavan from Moon Capital ].
Congratulations team on a wonderful quarter and all the best for the upcoming quarter. I just have 1 data-keeping question. What is the interest recovery or the dummy ledger recovery in this quarter? Last quarter, we did INR 995 crores.
Last year, we recovered altogether INR 3,000 crores. And as I said earlier also, on an average, we are recovering around INR 3,000 crores annually. So this year also we are targeting INR 3,000 crores of dummy ledger.
This quarter, we recovered from the dummy ledger about INR 850 crores.
The next question is from the line of Ashlesh Sonje with Kotak Securities.
Just a couple of questions from my side. Firstly, on the personal loans book, can you share some trends on what the GNP ratio on this book looks like? How it has strengthened in the last few quarters? And any observations which you have seen on the delinquencies?
Yes. The NPAs on a personal loan is to the extent of less than 1.5% actually. And I'm not seeing the trend in any of the slippages because as I said, these are all to my own customers, salaried customers, who are already banking with us and drawing salary from various authorities, but they're banking with us. Salary is drawn from my bank. So I'm not seeing much of a trend in this and problem in this portfolio. But however, my book is also very small. Less than INR 13,000 crores is my book. And I have not seen much of a steppage in this book.
Yes, our slippage is quite consistent. Even the -- I mean our March '24 slippage is consistent with what we reflected in the December '23 quarter as well for personal loans.
Sir, what was the GNP ratio, let's say, in the December quarter or in the March FY '23 quarter?
The GNPA ratio in the December quarter was 4.83% and in the...
Specifically on the personal loans.
Personal loans -- yes.
Yes, it would be similar.
Sorry to interrupt Mr. Sonje. You're not audible, sir, may I request to use your handset, please.
Any sense on what is the repricing left in the MCLR-linked loan portfolio?
It's just about -- if you can see the repo rate increased by 250 bps, but then we passed on only to the extent of 165 bps to the customers, still have a long -- I can pass on to the customer still further. And -- but then depending on the market conditions and the liquidity positions, only then I will be increasing the MCLR numbers.
The next question comes from the line of Rakesh Kumar with B&K Securities.
I have 1 question with respect to the borrowing strategy, like the treasury department, the way -- like the borrowing number has come down like year-on-year and sequentially also. So could you give some understanding like what is -- what we are planning and doing there on the borrowing?
Yes. As far as domestic treasury is concerned, we are having excess SLR, against which only we are borrowing. As far as our global balance sheet is concerned, we have tied up with HSBC, bilateral loan agreement of $500 million. So that will help to meet our requirement.
Other than that, whatever required, we will be doing those activity to either syndication loan or bilateral loan, depending upon the credit demand in the global market. India is concerned, we are having excess SLR, with which we will be able to -- whenever required to keep our CD ratio within the tolerable limit. We will take that chance. Otherwise, we will raise the fund by way of bulk deposits or CD to take care of the credit demand.
Excess SLR would be how much, sir, in the...
Now as on March, we are having around INR 65,000 crores to INR 70,000 crores excess SLR. That can be deployed for the purpose of credit requirement to keep our CD ratio.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you, all of you, for participating in the con-call. I thank you once again for your continuous support to the bank. The bank is on a sustained growth path. We are taking measures to see that we have strong fundamentals. And the compromise of our bottom line, we do not want to grow our top line, too. The various -- and the bank is also very much concerned and open to the compliance part.
The regulators' views are taken very seriously by the bank. And we are guided by the various RBI guidelines and the DFS guidelines and the various authorities. And we start to see that all our initiatives, that we have taken in the couple of years, has yielded a lot of results to the bank. And we continue to make newer initiatives to see that the customers are -- have the best of the products from the bank and also the right kind of services from the bank. Thank you, all of you once again.
On behalf of Union Bank of India, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.