Yes Bank Ltd
NSE:YESBANK
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Yes Bank Ltd
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Ladies and gentlemen, good day, and welcome to the YES Bank's Q4 FY '24 and FY '24 Earnings Conference Call. On the management panel, we have with us today, Mr. Prashant Kumar, MD and CEO; Mr. Rajan Pental, Executive Director; Mr. Niranjan Banodkar, Chief Financial Officer; Mr. Manish Jain, Country Head, Wholesale Banking; Mr. Pankaj Sharma, Chief Strategy and Transformation Officer; and Mr. Sunil Parnami, Head of Investor Relations.
Mr. Prashant Kumar will give an overview of the results, which will be followed by a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Prashant Kumar. Thank you, and over to you, sir.
A very good morning, and thank you for joining us so early in the day for our Quarter 4 and full year FY '24 earnings call. On this call, I am accompanied by the senior team members of the bank.
Moving straight on to the results, YES Bank last fiscal, we continued to make consistent improvements across all the core operating in the crisis and progressed well on the key strategic objectives of improving the profitability of the bank. As I take you through the key highlights of the financial performance, across deposits and loan growth, NII and NIM, fee income, asset quality and provisioning, profitability and lastly, but importantly, of the progress made towards shortfall in the PSL sub-category.
You may also refer Page #6 to 14 of our investor presentation to get more detailed insights as to how the bank is working on each of the key business levers. But fundamentally, the key for us has been and will continue to be the disciplined execution towards the fulfillment of the stated objective.
Moving on to the key performance highlights. Fiscal '24, marks the third straight year of full year profitability for the bank since the year of reconstruction. This is yet another important milestone, particularly in the context of eligibility of the bank towards empanelment for government and PSU businesses.
Then reported FY '24 net profit at INR 1,251 crores, which is up by 74.4% Y-o-Y. Then ended the year with quarter 4 '24 ROA at 0.5%, again 0.2% in quarter 3 and quarter 4 FY '23. And this is despite incremental PSLC-related cost and stepping up of the PCR.
Full year FY '24, net interest margin came in at 2.4% against 2.6% in fiscal '23 due to negative drag because of the RIDF deposit placed for the PSL shortfall. This has further marginally inched up and now peaked at 11% of our total assets compared to 9% in March '23. This increase is due to fall related to prior period shortfall. However, in line with our guidance, in fiscal '24 itself the bank has made substantial progress on PSL compliance, and I'm pleased to share that from hereon bank would start seeing its gradual reduction in these balances.
The bank has concluded fiscal '24 with nil shortfall in the overall PSL and subcategories of small and marginal farmers and weaker section. Further, the shortfall in the non-corporate pharma subcategory has been brought down to around 1.4%. This was done through a combination of organic accretion as well as through purchasing of PSLs.
As a result, beginning fiscal '25 at an overall level, we would start seeing a reduction in the RIDF balances and bank expects that gradually, and by the end of fiscal '27, these balances would eventually further reduce to below 5% of our total assets, bringing this much closer to the average levels similar to that of some of our other large private sector bank peers.
With that, bank would also start seeing a reduction in its negative rates on our margins and profitability. Sequentially, NIM for quarter 4 was flat at 2.4%, with net spread marginally improving by 2 basis points compared to quarter 3. Net interest income for the quarter at INR 2,153 crores was up 2.3% Y-o-Y and 6.8% sequentially.
As regards noninterest income, bank saw strong momentum sustained across all diverse and granular fee income stream. In fiscal '24, net non -- net interest income has grown by 39% Y-o-Y to INR 5,114 crores. Over the last 2 years, the bank has seen a meaningful increase in its fee to average asset, which has increased from 1.1% in FY '22 to 1.3% in FY '24.
Within noninterest income, the share of retail fee has increased from 55% to 66% over the same period. The sustained momentum in our fee income was driven by strong traction in third party fees and continuing traction in other fee line such as trade and remittance, interchange and cash management. This momentum is expected to continue, driven by our strong customer acquisition engine, which is very well integrated with our spectrum banking and relationship banking channels. Our distinctive moat in our payments, API and digital and transaction banking leadership and also our refreshed YES BANK brand, and lastly, our service orientation and disciplined execution.
Sequentially, reported noninterest income at INR 1,566 crores has grown by 56% Y-o-Y and 31% quarter-on-quarter. Normalizing for interest on income tax refund of INR 118 crores, quarter 4 noninterest income has grown 21% quarter-on-quarter. For fiscal '24, cost-to-income ratio normalized for PSLC cost and interest on income tax refund was 72.2% against 72.6% in FY '23.
For full year FY '24 total cost of INR 9,824 crores included cost amounting to INR 377 crores incurred on purchase of PSLC certificates against nil expenses in FY '23. For quarter 4 FY '24, while on reported basis, cost was up 27% Y-o-Y. However, normalizing for PSL cost of INR 254 crores incurred during quarter 4, the Y-o-Y growth was 15.6%. The quarter 4 FY '24 cost also included a variable pay cost of INR 109 crores. The quarter 4 FY '24 cost-to-income ratio adjusted for PSLC costs and interest on income tax refund was at 71.2% against 70.9% in quarter 3 FY '24.
For fiscal '24, bank reported [ profit of ] INR 3,386 crores, which has grown by 6.4% Y-o-Y. The salient highlights pertaining to asset quality, slippages, recovery and [indiscernible] are as follows: Compared to quarter 3 FY '24, both the growth as well as net NPA improved 30 basis points to 1.7% and 0.6%, respectively. Residential momentum remained strong during the last quarter as well with recoveries and upgrade of INR 2,092 crores during the quarter. And for full year FY '24, the total recoveries of INR 5,978 crores in line with our guidance. Recoveries from security receipts and realization from ARC sale during the quarter were prudently utilized in further strengthening the asset quality net ratios as evidenced through more than 50% reduction in the net NPAs and net carrying value of security receipts as percentage of advances to 1.1% against 2.4% in same quarter last year. Nearly half of that reduction has come in quarter 4 alone.
NPA provision coverage ratio was stepped up to 66.6% against 56.6% last quarter and 62.3% in quarter 4 '23. Including technical write-offs, PCR now stands at 79.3% against 71.9% in quarter 3 and 72.3% in quarter 4 FY '23.
Non-tax provision cost for quarter 4 at INR 471 crores and for full year at INR 1,886 crores and as a percentage to total assets were in line with our guidance of 50 basis points. The gross slippage for quarter 4 was at INR 1,356 crores against INR 1,233 crores in quarter 3. Slippages net of recoveries and upgrades in quarter 4 at INR 370 crores against INR 574 crores last quarter.
Retail segment gross slippage for quarter 4 at INR 977 crores has come down against INR 1,051 crores last quarter. Net slippage at INR 567 crores also has come down against INR 644 crores last quarter. One account in Mid Corporate classified as NPA during the quarter has actually nil financial overdue. Gross slippage for FY '24 at INR 5,334 crores. However, the slippage ratio as a percentage of advances for FY '24 was flat at 2.3%.
Moving over to business balance sheet and other highlights. Bank balance sheet crossed INR 4,00,000 crore map registering a Y-o-Y growth of 15%. CD ratio improved to 85.5% from 89.9% in quarter 3. Robust accretion continued in deposit as it came in highest ever in the history of bank at INR 2.6 lakh crore, clocking a healthy growth of 22.5% Y-o-Y and 10% quarter-on-quarter.
For full year and quarter ended 31st March 2024, the CASA ratio came in at 30.9% as compared to 29.7% in quarter 3 and 30.8% in quarter 4 FY '23. During the year, the bank added 1.7 million new CASA accounts. We remain committed to judiciously expand our distribution and added 134 new branches since January '23 in CASA rich cluster. CASA balances at the end of quarter 4 were up 23% over quarter 4 '23 and 15% over quarter 3 of FY '24. The average daily current account and average daily saving account balances have also grown by 12.3% and 13.5%, respectively, in quarter 4. Retail and small business deposits as per the gross LCR definition at INR 1.17 lakh crores has grown by 18% Y-o-Y. CASA plus retail TDs are at 57.2% of the total deposits.
As we continue to leverage branches as a fulcrum of our business, the contribution of retail and branch banking deposits increased to 53.1% of total deposits compared to 52.1% in FY '23. For fiscal year '23, '24, the incremental CASA ratio was 31.5%, and the incremental CASA ratio in deposits posed by our branch banking channel was even higher at 37.5%.
Year-end net advances excluding reverse repo has grown by 13.8% Y-o-Y leaded by sustained growth momentum in SME and Mid Corporate advances at 25% plus Y-o-Y and resumption of growth in corporate segment. As stated earlier, we expect that within advances, the ratio of retail plus SME segment advances to wholesale segment advances that is the Mid Corporate and large corporate would remain at the similar level of 62.38% from hereon over the near to medium term.
Within advances, while we would continue to rise steadfast growth in SME and Mid Corporate segment and further enhance our focus on profitability improvement within retail, we would expect corporate advances segment to grow in high single digits going forward. In quarter 4 FY '24, the bank's average quarterly LCR remained healthy at 116.1%.
Regarding capital position, while CET and capital adequacy at the year-end was at 12.2% and 15.4%, respectively. However, including the effect of the warrants exercised by CA Basque in the month of March -- April '24, the pro forma CET 1 as on March 31, including the proceeds from warrant conversion have worked out to 12.7%.
In other highlights, YES Bank has joined hands with Indian Olympic Association as principal sponsor for Team India for Paris Olympic 2024. This reflects our dedication and commitment to national pride and to showcase our commitment to support Team India in Paris Olympic '24.
The bank also launched a similar -- special savings account proposition, called Yes Glory along with the campaign, 'Milkar Jitayengey'. Another visible highlight was a partnership with its field players in payment ecosystem as the PSP Payment Bank reflecting the inherent strength in the capabilities and technology infrastructure of the bank. This partnership is expected to further aid our market share in digital payment ecosystem, merchant acquisition, current account balances and transaction banking flows and thereby resulting in some improvement to our fee income.
We have also launched YES Pay Next, a cutting-edge next-gen UPI payment app which provides a seamless, secure and smarter way to manage transactions. Further, I'm humbled to share that last quarter, YES Bank was certified as Great Place to Work by GPTW Institute India and is rated amongst the top 50 in India's best workplaces in BFSI 2024, and this is the second year in the row.
Bank has also received top award for Best Bank for promoting government schemes in the private sector, and we are also named runner cup for best MSME Bank in the private sector at MSME Banking Excellence Award 2023.
Lastly, we also became the first Indian bank to conduct export finance transaction at Receivable Exchange of India Limited and International Trade Finance Service Platform in India.
I would like to conclude that YES-B enters the fifth year of the journey of YES Bank of today, we remain focused on diligently executing the ROA expansions roadmap and remains absolutely resolved around our disciplined execution.
We thank you for your continued support. And with this, we can now take your questions.
[Operator Instructions] The first question is from the line of Rakesh Kumar from B&K Securities.
Congrats on the quite good set of numbers. So there are a couple of questions I had. Firstly, with respect to margin. So with the reduction in margin with the help of CASA and improvement in asset quality, we had a stable margin for this quarter. So how it is expected to pan out maybe in FY '25, if you can help us understand that, sir?
Rakesh, margins for us, we -- as we discussed it in the past as well. There are 3 drivers for us on driving margins. And I don't want to kind of give a very specific guidance in the very real term but talk about a more 2- to 3-year journey.
One, very emphatically, we've said that there is RIDF balances, which are causing a drag on the margins. And we've also actually given its pro forma number in our presentation to say the current drag on the stock is about 70 basis points on NII to assets. So that's one.
So as the balances of RIDF have come down and like Prashant mentioned in his opening remarks, we are fully compliant with the PSL requirement, even at a subcategory level. In fiscal '24, there's a marginal shortfall in the NCF category. But as a consequence, we will now start seeing reductions on a year-on-year basis, and that will start flowing into the margins over the next 2 to 3 years. As I said, the total stock hit is about 70 basis points.
The second point is what we are also doing is on our assets and especially on the retail asset mix. There is also a calibration towards moving into more ROA accretive products, which also inherently give better yields. So of course, this journey that we are pivoting towards means that the growth that's incrementally coming on this book is coming at a slightly lower rate. You would have seen retail has been growing at about 35%, 40% has kind of now coming to the 20s, and we should possibly see the growth deeper also to, let's say, the teens, right?
The point is in the process of that, we will, however, see improvement from a margin standpoint. As we speak, the retail disbursement actually are clocking at a yield, which is already 100 basis points more than the stock of the retail portfolio yield, right? So that is already an indication that on the margin, we are moving into better yielding products.
The third is really the focus on getting the cost of funding improved through better CASA, through making sure that you are not just putting rate from the table for accreting deposits. And again, if I just give an example, if you look at the fiscal '24 and if I look at, let's say, the blended savings account rate over the last 1 year, we would actually not have increased our blended savings account rate despite the backdrop of the tight liquidity and real struggle -- difficulties that the industry has witnessed on savings account, right?
And not only that, on the incremental market share, we've actually done better on savings account and we have numbers till December. We've actually done much more than what our stock market share is. So the focus on deposit and funding is also to make sure that relative to the market, keep improving the rates. So we don't want to just put rate for acquiring deposits. So it's a combination of all these 3.
There is, of course, we continue to see a reduction in our non-accreting -- non-accruing assets, which is the NPA stock coming down. That will, of course, also add to margins. But just the first two, which is the mix of RIDF coming down, and we do see a trajectory where in the next 2 to 3 years, it should be below 5% of our total assets. All -- and the retail assets mix. Both of these, we believe, will add to about 80 to 100 basis points of margin for the next 3 year period.
Great. Great. Sir, just to understand the CASA progression in this quarter. So like if we have to build this number to FY '25. So what is the sticky part, what is the one-off part, if you can help us get some clarity?
So Rakesh, what happens is we will -- we do see some transient flows that to happen in March. And to be honest, it is not peculiar to only this market, it's peculiar to almost every year-end that go through because there are also businesses who like to maintain cash for their year-end transaction. They also demonstrate a good amount of sales that kind of come through.
This year was also a little bit peculiar because, there were also holidays, there's weekend that kind of coincided some of our fintech partners also end up keeping certain balances on -- in excess to make sure that there is absolutely seamless flow of transactions. So look, I mean, you could possibly look at, let's say, a 5% adjustment to the number. But to be honest, as I said, the peculiarity of the CA balances to continue mostly all year end.
The next question is from the line of Jai Mundhra from ICICI Securities.
I have 2 questions on first, on recovery sir, so last year, we had set out a target of INR 5,000 crores and we very well achieved that. In your assessment, how should one look at recovery quantum for FY '25?
So Jai, this year we have done the recoveries and upgradation to almost like INR 6,000 crores. And we are quite confident that FY '25 also, we will see similar trend but definitely more than INR 5,000 crores.
Great, sir. So sir, just to understand, so hypothetically let's say, we achieved INR 6,000 crores of recovery, right? If I look at our current net NPA plus unprovided security receipts, that is like 1.1%, right? So that would mean that the excess of that would flow into negative provision. So you may have a negative provision for full year '25, is that the right understanding?
Absolutely, right. You can see the current net NPA net carrying value of SR is 1.1%, okay? And when we are talking about recoveries, the first thing the recoveries also improve the upgradation, right? But in terms of recoveries and the right base of provision would be definitely there.
The credit cost will also take into account slippages that we will have for next year and the consequent provisioning of that. Like we mentioned, we do believe that every time we get recoveries and recoveries well in excess, we keep strengthening the balance sheet. So in terms of our prioritization, we will make sure that our SR book is completely off. So currently, our -- the carrying value of our SR book is about 50 basis points. The reduction that will come through in fiscal '25, will make sure that, that balance becomes zero by the end of fiscal '25, right? That's the first priority.
The second is that the NNPA that we have in our book, which is currently at 60 basis points, adjusted for the slippages that we will have next year, we will want the PCR also to actually go past 70 basis points -- 70%, right? I think that's a broad endeavor that we have to say how can we further take the PCR in excess of 70 basis points. And also to be honest, the recovery rate that we do exhibit on our existing portfolio are actually much better than, let's say, a lock it up 70%. But I think it is just prudent to keep that right.
So both of these, if we add adjusted for the recovery that we'll get from SR, we do believe that the nontax provisioning that we will end up for fiscal '25 should again be contained below 50 basis points. Of course, the more recoveries we get, it kind of plays into the P&L. But at least and there is an endeavor to keep further strengthening the quality of our balance sheet. And just to clarify, when I say sub-50 basis points of nontax provisioning, it is to average assets just for abundant clarity.
Understood. Understood. And when -- I mean how should one look at the slippages? I mean earlier one, two quarters back, we had some slight uptick in the retail slippages, now this quarter and full year basis it is more or less I mean INR 5,000-odd crores of the total slippages that we have seen. How could one think of the slippages for next year?
So Jai, if you would recall, again, last year, we did indicate that we would operate the slippages between a 2% to 2.5% range. That was the broad range and the range was slightly wider given the fact that we were seeing some turning points on the retail portfolio. I think what we kind of pleased to report is that while the retail slippages did go up during fiscal '25, but we are already seeing signs of that settling as we exit this fiscal '24, right?
So on a blended basis, this year, we were -- we did have a slippage ratio on the average loan book at about 2.4%. We do believe that for next year, the slippage ratio should be at the lower end of the 2% to 2.5%. I think that's really how we see. It might not come off immediately, but I think we have seen H1 should be closer to the higher range of -- higher side of the range of 2% to 2.4%. But as we exit, we should start moving into the 2% or below slippage rate.
Right. Yes. And Prashant sir, in your opening remarks, you mentioned something around that -- something related to asset quality Mid Corporate. I actually missed that comment, if you could please repeat that. I think you said something related to slippages or asset quality in the Mid Corporate segment?
Yes. So during the quarter, we had one account slip into NPA from our Mid Corporate segment. So this is actually an account and the road -- it's a road project, where -- because there is a date of commencement of commercial operation. If you don't meet that, then you slip into NPA. So this is a largely completed road project. In fact, there is no delinquency on this particular account, but it just started because it crossed the date, it had to be classified as an NPA. So that was just one call out that we wanted to make in the Mid Corporate segment.
Right. And then last question. So we have given a very good number, I mean, disclosure in terms of normalized. What would be normalized P&L assuming the PSL or RIDF spread settle. But in your assessment, the way PSL will work or the PSL requirement will keep coming down on incremental basis. But how should one look at the FY '25, '26 ROA progression from current levels onwards, considering the RIDF or PSL, they will not go away straight away. They will go very only maybe 3 years time out. So in the intermediate term how should one look at blended ROA.
So Jai, we actually -- as I said, we have not given a very specific guidance in the near term. We kind of refrain from speaking about that. But the trajectory that we maintain from an ROA perspective is an improving ROA. And we again, I'm happy to kind of take you through again on the 2- to 3-year roadmap that we have, which largely includes that our NII to assets should actually expand quite materially for the reasons that I mentioned.
There will be some room for improvement on noninterest income for us. So we currently operate at about at the full year would be about 1.3 -- 1.3%. We do believe that over the next 2 to 3 years, we will see about 8, 10 basis points of accretion, let's say, typically every year.
On operating expenses, despite the PSLC, we've been calling out that our operating expenses to assets should be contained in the range of about 2.6%, 2.7%. In fact, we have said it should be below 2.8%. However, adjusted for PSLC, we might end up at about 2.65% or something. And we do believe that we should operate at sub 2.6%. There are certain initiatives that we are also playing out on the operating expenses, we think there is a room of about 10 to 15 basis points over the next 2 to 3 years. All of that just, I would say, from an ROA perspective over the next 2 to 3 years, it's all flowing in materially from the NII. And as I mentioned at the start, it's about 80 to 100 basis points that we do see flowing in, into the ROA ultimately.
Right. Right. And sorry, last clarification, the PSL, we will not -- we are compliant on overall as well as sub-segment basis in all subsegments. And the incremental RIDF or PSLC [indiscernible] purchase. That should not be there from let's say, this quarter onwards, right? Is that the understanding?
So, I'll clarify Jai on that. So fiscal '24, we are fully compliant. I mean, again, I just want to -- for the sake of abundant transparency. There is a marginal shortfall in the NCF category, which is about 1.4% of the average net bank credit, which is nominal compared to some of the shortfalls we've had in the past. So which means that for fiscal '24, we will not get call to place deposits with RIDF or NABARD in subsequent year, right?
That does not mean that for fiscal '25, if I have to comply with PSL, we will not purchase PSLCs. So we will also purchase PSLCs to make sure that we are also complying with fiscal '25 requirements that the noncompliance does not trigger a -- rather than -- we do not get called for our RIDF deposits in subsequent years after fiscal '25.
So the compliance component typically is driven by 3 different ways. One is you purchase PSLCs and you can buy for the entire quantum or you can buy for a limited quantum, but it is completely a function of what is your organic accretion of PSLC. So first PSLCs, which we used as a total cost of about INR 377 crores in fiscal '24.
The second is we also lend to MFIGs and let's say, financial institutions who onward in turn lend to, let's say, some of the SMA for [ SGH ] category borrowers, right? So it's not a direct lending, but it is effectively the balance sheet that in turn will give you the PSL. It, of course, comes at a slightly lower yield than you would otherwise do organically.
The third, if you do it organically on the balance sheet. Again, there are 2 different models to that. You can do it through a business correspondence or you do it directly through your own branches, right?
Now in the order of what I mentioned, which is PSLC, then you have lending to MFIGs and IFIs, then you have a DC model, and then you have a direct model. In the order that I mentioned is where you have the -- from a cost of, let's say, ballpark 2.5% to an ROA accretive model of, let's say, anywhere between 3% to 4% is the spread that operates. And the endeavor is as we kind of keep building our skill set in this particular space, we want to move away from having the contribution made from PSLCs to actually having more and more organic accretion coming in from our organic businesses, right? So that the cost that we are paying today for PSL compliance, which is about, let's say, 2.5% that actually moves into not only recouping the cost but into an ROA accretive model of about let's say, 3% to 4%. So that's the journey that will play out also over the next few years. I hope I have answered that one.
The next question is from the line of M.B. Mahesh from Kotak Securities.
Niranjan just a question on the security receipt. Can you just give us an update. What is the tariff value, which got unbound in this financial year? And again, what was it in terms [indiscernible] for the full year.
What was the -- sorry, what was the carrying value that we unwound during the year what you're saying?
Yes. Because I think when you started off this journey you had about approximately about INR 5,000 crores if I have the numbers right.
Let me -- so I mean, I will just pull out the exact carrying value as of March '23, give me a minute but March '23, if I go back, Mahesh, our NNPA plus SR was cumulatively 2.4%. And against that 2.4%, the SR value was about 1.4%. And if I look at the -- just one minute. So that -- just bear with me, I'm just putting out the exact number. One second.
Fair enough. And while you are answering this, anyone else can answer. The provisions that we are carrying today currently at about closer to 70% on the SR book today. How much more does it have to go up or do you think this is more or less stands there?
So Mahesh, to be honest, just from a coverage standpoint, we don't need to have a coverage on the security receipts because we believe that the ultimate recovery actually is going to be more than that. The only reason we do end up carrying provisioning is because there is also a concurrent aging-related provision requirement that keeps coming in. And depending on how we kind of use the redemptions that we get, we ultimately, use it for making sure that burden of any aging-related provision actually is zero.
So just from a P&L impact standpoint, let me just answer that for fiscal '24, if I look at a net level, the P&L benefit that we would have got is about INR 700 crores, okay, during the entire fiscal '24. And a bulk of that actually has come through in Q4 fiscal '24. And this is on account of the write-backs that we would have had as well as led to the surplus that you would have recovered over the face value. So about INR 740 crores of P&L write-back is what we have got from let's say the security receipts.
Going back to the question that you asked, we had about INR 1,700 crores of face value, which was -- sorry, not face value, carrying value in our balance sheet as of March 31, 2023. That's come down to about INR 1,250 crores.
Okay. Perfect. Yes. And given that you had classified these in category A, B and Cs [indiscernible] when we had announced this transaction. How has been the performance of this book because the expectation was that if the recovery rate should be reasonably healthy on this particular portfolio given where it was sold at that point of sale. Those numbers still hold on?
So Manish, if we see the security receipt at the time of transaction, 45% of the security receipts have been resolved in 15 months. So I think that way we are seeing a very good progress. And the initial expectation was that the entire security receipts resolution would happen in period of say around 4 to 5 years. So if we see the 15-month trajectory and 45% SRs have been resolved, I think the progress has been quite good.
Mahesh, if I can also add. So the carrying value that we have currently on the security receipts, as I mentioned, as of 31st March is about INR 1,250 crores. What we have is our rating agencies that effectively give us an estimate of what the recoveries would be. These are -- I'm not putting management estimates, but I'm not relying on what the [indiscernible] estimates would be but rating agency ascribe a certain value and that value is about INR 5,000 crores.
Now clearly, the bank will have its own estimates and as Prashant mentioned, we do see a good run rate of recovery, not only in terms of absolute recovery, it was also the percentage of recoveries that have actually been playing out. So I just wanted to make sure that -- so there's INR 1,250 crores of carrying value. The rating agencies have put out a recovery at estimate of about INR 5,000 crores that will flow into the security receipts holder.
Just one last question. Cost of funds seems to have stabilized this quarter q-o-q. Are we -- from the way you're seeing these numbers, would you say that they have kind of peaked out for you guys as well.
So Mahesh, I would say, yes, TD rates, we have seen some uptick from a TD pricing but to be honest, it also got offset by the mix on clients to collection. So I would say nothing material that we also expect at least as of now on the ground that will play out in the near term from a cost of funding perspective.
The next question is from the line of Srinivas, an Individual Investor.
Yes. My question is about acquisition of our micro-finance business, which is -- I mean, they are on the, I mean, radar of YES Bank, that have been there for quite some time. Any progress on that front? Do we see that forthcoming in this current financial year?
Then second question is like, as Prashant sir, mentioned like 3 years of continuous profitability. So what exactly is the kind of benefits like which the bank is likely to see from government and PSU bodies?
And the third question is like, what is the plan regarding the branch expansion whether the branches that we have added in the last 3 years or so, are they being -- contributing towards the operating leverage, has that started kicking in operating leverage?
So Srinivas, I think your first question in terms of MFI. I think we continue to exclude that part. But as of now, there is no progress, okay? But let's see if we are able to do something in the current financial year. My comments regarding -- this is the third year of profitability. We become entitled to do the government business in terms of the tax collection and the empanelment with the Central Government and other State Governments for doing the government business and at the same time, for almost most of the PSUs, they deal with the banks for their businesses if you have a 3 years profitability.
So I think this 3-year profitability would make us entitled to be qualified for empanelment with the Central Government as well as the different State Governments to do the tax collections as well as the small savings schemes and their other business, which would be beneficial for the bank both in terms of fee as well as in terms of the low cost deposits.
Your third question was in terms of expansion. I think we are continuously expanding our branch network through branches as well as through [ DCDO ] model. And we are seeing like with branches and these tax points are actually adding in terms of both liabilities as well as fee income. So I think this branch expansion would continue to be our strategy going forward also.
And my last question, actually, just every year profitably, has it improved our credit ratings, so as to enable us to acquire a refinance from lending institutions. Refinance, which is a cost-effective source of funds. Have we been able to do that from institutions like NABARD?
No. So I would not be specifically commenting about NABARD, but definitely the third year of the continued profitability and I think the momentum, which we are seeing in our performance. We are quite hopeful that it should result into some retail as well. And as you know there is rating upgrade, it also results into the lower cost of funding for the bank.
The next question is from the line of Chintan Shah from ICICI Securities.
Congratulations on good set of numbers. Sir, I just had a question on LDR. So LDR now is around 85%. So this is almost at [indiscernible] prior to the reconstruction, our LDR was higher than this. So I think even in the last quarter you mentioned the company [indiscernible] ...
Mr. Shah, I'm sorry to interrupt. Sir, your audio is not clear. Can you use your handset please.
Yes. Sir, so my question was on LDR. So our LDR is around 85 percentage now, which is almost at 5, 6 years low, even prior to the reconstruction, we had an LDR, which were higher than the current one. So any qualitative comments on how could the LDR move from current levels? Even in the last quarter, I think we mentioned that we are comfortable with LDR around 90%. Yes. So first question is on that.
It is at 90%, last time also what we were saying that we are comfortable with the LDR of less than 90%, okay? So I think this trajectory of vein between 85% to 90% depending on like what happens on some of the loan growth and the deposits, I think we are quite comfortable. But as a strategy, we would always like to have our deposit growth higher than the loan growth, okay? So I think this range of 85% to 90% is quite comfortable for us.
Sure. So sir, in that case, would we like to, if there -- if you are seeing surplus deposit inflow, then would we like to cut any of our deposit rates on the SA side or on the TD side, would that be okay?
No, I think naturally, it would also be a function of what happens in the market and how our deposits are coming but definitely endeavor of the bank is to continuously reduce our cost of deposit and cost of funding.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Prashant Kumar for closing comments. Over to you, sir.
Again, thank you all of you to join us for this call so early in the day and for your support. Thank you so much.
Thank you, members of the management. Ladies and gentlemen, on behalf of YES Bank, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.