AU Small Finance Bank Limited (AUBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the AU Small Finance Bank Q2 FY '21 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Prince Tiwari, Chief of Investor Relations and Financial Institutions Group. Thank you, and over to you, sir.

Thank you, Vikram. And good morning to everyone, and welcome to AU Bank's earnings call for the second quarter of FY '21. My name is Prince Tiwari, and I look after the financial institutions and IR relationships for the bank. And we thank you all for joining the call today and wish you all health and happiness for the ongoing festive season. Besides the IR team today on the call, which comprises of myself, Aseem and Ayush, today's call has been joined by our senior management, led by our ED, Mr. Uttam Tibrewal; our COO, Mr. Deepak Jain; our CFO, Mr. Vimal Jain; our Chief of Staff and Group Head for Strategy, Mr. Yogesh Jain; our CRO, Mr. Mayank Markanday; our Chief of Credit and Strategy for Commercial Banking, Mr. Vivek Tripathi; and our CIO, Mr. Ankur Tripathi. Also joining the call today from our Mumbai Corporate office are our Chief of Wheels business, Mr. Bhaskar Karkera; our Chief of Branch Banking, Mr. Rishi Dhariwal; our Chief Treasury Officer, Mr. Shantanu Prasad; and our Chief of Liability Products, Mr. Shoorveer Singh Shekhawat. Our MD and CEO, Mr. Sanjay Agrawal, is not there on the call today, and our ED, Mr. Uttam Tibrewal, will lead this call. Before we move on to the question-and-answer sessions, I hope that you all have received the investor presentations and the results that we declared yesterday. And we would like to make a few opening comments before we move on to the Q&A section. The opening comments could broadly be divided into 4 categories, where I will start with our thoughts on the overall operating environment for the bank for the last quarter and then move on to highlights, some of the key updates on the significant progress that we have made on the digital journey, the sustained growth we are seeing in our granular liabilities and the returning of normalcy on our asset businesses. First, I'll start by sharing the thoughts on the opening -- operating environment, which was prevalent during the last quarter and continues to be in the current quarter. Since our last introduction in July, when we discussed the Q1 FY '21 financial results, things on the ground has been improving on a day-by-day basis with shops and businesses slowly coming back to normalcy. The overall sentiment in rural and semi-urban India is that of hope. The optimism in sentiment is driven by some uptick seen in the rural income levels with agri economy doing extremely well and suitably supported by government's various initiatives and schemes. The current season also saw a record Kharif crop sowing, which was supported by good monsoon for a second year in a running. We believe this can lead to a record production of food grains this year, which, in turn, is likely to continue supporting the rural economy and demand in the rural areas going forward, which is very important for a bank like ours. Our experience of customer behavior and activities during the last quarter has been quite distinct in our urban and core markets. While in core markets, which generally -- we define core markets as local markets where there is a lower leverage and there is a high linkage to local economy, especially with businesses like agri and dairy. So in these markets, the business levels have been on a BAU mode, where activity has been very quite normal. Whereas in our urban markets, the focus has been more on sustenance, trying to protect their livelihoods and minimal spending has been on top of their agenda. However, even in the urban markets, what we have seen is there has been a greater focus on digital medium, whereby customer behavior has been more towards online purchases, online payments and home delivery services. Overall, the second quarter can be best expressed as a period of building public confidence, sustainability of our livelihoods and acceptance that COVID will stay here for long. The government and the Reserve Bank of India has been proactive in taking various steps like providing surplus liquidity to the entire banking system, allowing for deferments, announcing packages like ECLGS and restructuring schemes, which all have gone on to help ease the pain that a retail borrower today has found himself in because of once-in-a-lifetime pandemic. We also welcome the honorable Supreme Court-led intervention, whereby central government has issued notification, waiving interest on interest for borrowers up to INR 2 crores [indiscernible]. This will not only help the customers but has also brought clarity to the banking and the financial sector as a whole. Being into essential services, all our offices and branches are operational throughout the last 7 months, and we remain committed to serve our customers and society at large. The business continuity in the banks did get impacted, either due to some local lockdowns or there would be some team members or team leaders who might have got infected or quarantined and recovering with a lag. However, on an overall basis, we believe that the efforts made by the bank during these 6 to 7 months have not only helped us to hold our ground, but more importantly, it has given us the opportunity to strengthen our deposit franchise, test our underwriting strategy and make significant progress in our digital journey. As we move forward in second half of this financial year and prepare to say bye-bye to 2020 and welcome 2021, we continue to be watchful and hope that the reducing COVID cases, stronger case recovery percentages seen in the last few days and ongoing festive season will provide much-needed confidence for complete resumption of businesses and will help not only sustain the demand in core markets, which has been continuing, but also support likely revival of demand in the urban cities as well. We expect greater clarity on sustainability of some of these early positive trends to be more clearer by end December, early January. It is only then that we'll be able to predict the customer behavior and create demand in any meaningful manner. I now move to highlight the progress that we have made on our digital banking journey. As you all know, pandemic has acted as a catalyst for digital adoption in the country. If I have to track one marker, the monthly UPI volumes have now crossed 1.5 billion transactions for 2 consecutive months in August and September. And this is likely to cross 2 billion by December end. This fast track adoption, coupled with regulatory support in form of video banking, will catapult the digital banking sector journey for the entire financial sector. AU Bank has been fine-tuning our own digital strategy for the last 6 months and has been working on deploying various products and processes, which we have highlighted in detail in this quarter's investor presentation. Our digital banking journey is pivoted across [ 3x3 ] metrics of acquisition, deepening and servicing across assets, liabilities and payments. We have gone live on all payment channels like UPI, QR codes, other enabled payment services, FASTag, BBPS during the current quarter and also launched our video banking solution for digital onboarding and KYC as well as modules for savings accounts and FD accounts opening through online digital medium. The bank is also operationalizing on various other solutions for video banking across the [ 3x3 ] formats that I talked about earlier. One important thing to highlight here is that we are working on a digital -- assisted digital lending model or journey for our rural and semi-urban customers who are not really that tech-savvy, and we are trying to combine vernacular language, virtual RM and video banking all in one to support them with their digital journey. We have also recently piloted an end-to-end digital lending platform for personal loans, where we have integrated 48 different APIs in 1 system, including our own credit rule engine for credit underwriting and all the decisioning of these engines. We are one of the select few banks who have gone live with Maruti Suzuki for an end-to-end lending journey for buying personal cars. Using a completely digital platform with other OEMs is also in the works. Our revamped Internet banking and mobile banking platform for 130-plus feature is currently live for our employees and will be launched for general customers very shortly. We are also working on completing our payment ecosystem by bringing our own credit cards and prepaid cards into the market before the end of the financial year. Notably, for our credit card journey, we have partnered with Fiserv, which was erstwhile First Data, which is a global leader in credit card platforms. The technological integration for our credit card journey is currently going on, and we are launching this solution with Fiserv. The bank is also working with various other financial technology companies and lending platforms to pilot various rule-based lending journeys for consumer finance and consumer durables. Some of these journeys are already live. However, we are just waiting for a public go launch for -- as the things normalize post-COVID pandemic. At AU Bank, as we grow, we are integrating technology in our day-to-day working across functions and across departments. We wish to adopt digital as a way of life at AU Bank and provide a glimpse of our digital vision in this quarter's investor presentation. As a digital initiative for the IR team, our contact details at the end of the presentation today have been provided by way of a QR code, which you can scan directly into your smartphones. I now move to highlight the third theme of this call, which is sustained growth in our granular liability base. The bank has been functioning on building a retail-led granular liabilities business and has been taking various steps over the last 18 months, some of which have started showing promising results like the jump in CASA ratio that we saw in the quarter from 16% to 21% on a Q-o-Q and a Y-o-Y basis. This jump in CASA ratio has been supported by our highest-ever increase in savings deposits in any particular quarter. Our singular focus on quality over quantity has pushed the bank to make CASA acquisition and deepening of the customers as the primary driver of our customer relationship approach. Any and every strategic decision is being taken or executed, keeping this primary focus in mind. This retail-led focus has helped the bank to retire 2,000-plus crores of bank deposits in Q2 of FY '21, which basically means that we have not bid for these high cost deposits. This can also be seen from an 80 bps reduction in our overall cost of deposits on a year-on-year basis. On the acquisition front, one of the key pillars of our retail-led liability acquisition strategy is formation of specialized teams for our core markets, where we understand the customer requirements are different, and we already have a very strong dominant asset presence. Our aim is to be a top 3 liability bank in our core markets. We have also adopted a segment approach for various verticals like NR, TASC, enterprise salary, current accounts, et cetera, and also looking at profile-based sourcing for segments like retired pensioners, self-employed professionals, homemakers, and self-employed nonprofessionals. To support our liability strategy, we are also working on becoming a pan-India bank. We are currently live from Jammu to Bangalore and will soon be live from Jaipur to Kolkata with newer branches coming shortly in Bhuvaneshwar, Hyderabad and Kolkata. Similar to acquisitions, a lot of focus has also gone into deepening the existing relationship with our customers. Each new account is being monitored for 3 to 6 months for activation and balance accretion. Our recently launched AU Shopping Dhamaka has been a step in building the brand visibility and push for deeper engagement with our customers. AU Bank was probably one of the very few banks outside of the large banks to have a tie-up with Amazon during this festival season. This also in some way reflects on our ability to bring a diverse set of customers to a global platform like Amazon. While we have talked about specific numbers in detail in our investor presentation, the key highlight was an immediate fivefold jump in our CASA leads through digital channels in the week post the offer launch. As part of our deepening strategy, we are not only restricting ourselves to national brands like Amazon, Myntra, Swiggy, Grofers or BigBasket. But have also adopted a hyperlocal approach, whereby we can find -- we can provide offers on local city-based merchants and shops like LMB in Jaipur, which is a Laxmi Misthan Bhandar, one of the historical sweet shops in Jaipur. We are happy to inform that during this current festival season, we will have more than 1,000-plus offers live on our debit cards at one point or another. As we move ahead, the bank would continue to focus on quality acquisitions and engagement for CASA accretion and building a retail-led granular deposit franchise, thereby reducing cost of our overall liabilities. Finally, I now move to the fourth and final theme of the morning, where we are witnessing a return of normalcy in our asset business. As you will have seen from our quarterly numbers, recovery trends seen in June 2020 have further sustained in second quarter of FY '21, with improvement coming -- becoming more broad based in terms of asset classes, segments and geographies. Demand visibility, business continuity and activity levels have been improving with each passing day. And during August and September, we did witness some demand pickup in personal cars, secured business loans, home loans and business banking. Moratorium is now formally behind us, giving us a better visibility in the second half of the financial year. Our customer activation levels and collection efficiency ratios are near pre-COVID levels now in September and October, which clearly denote that the impacted customer and the segments are looking to move forward and have seen some resumption in their business in semi-urban and rural locations. Customers who had availed complete moratorium has reduced from 11% in June to 5.5% of gross advances as on 31st of August 2020 when the moratorium period ended. Further, 2.5% of this 5.5% customers have paid us 1 EMI or more in September and October and has become active again. This reduces the complete moratorium pool to about 3% of our gross advances. Most of the impact is coming from a few segments like schools, tourism, hospitality, where activity levels are still significantly below pre-COVID levels. Recovery to normalcy among these segments could take longer but we do not see any permanent damage to these segments. As schools will reopen, school buses will move, tourisms will return, marriages and events will happen, and hence, associated businesses will pick up. These segments will start turning around, too, and we also believe that most of these loans are for sustaining livelihood and income-generating purposes. And hence, it gives us further comfort that all these loans are fully secured with low EMI and backed by strong collaterals. We are tracking this key segment very closely and working with our customers to support them using all possible regulatory methods, including deferment and ECLGS, and believe that while there could be an interim slippage from this pool, we believe that the eventual recovery or resolution will happen and the [ rate ] cost would be contained. So this sums up our opening remarks. Just to sum up, the bank has come out with resilient performance amidst difficult operating environment, use this time to focus on fast-tracking our digital journey, building a sustainable retail-led liability franchise while protecting our core lending businesses. With this background, we now open the floor for questions. Vikram, over to you.

[Operator Instructions] We have a first question from the line of Bhavik Dave from Nippon India Mutual Fund.

A couple of questions. One is on your asset quality, you've provided around 278 -- INR 278-odd crores for the COVID-related provisioning. I just wanted to understand with the current scenario that we are in, we're closing to normalcy and the moratorium book is around 5.5% at the end of September. If you could explain with the current one-off gains that we had by [indiscernible], what was the reason for not providing extra during the quarter and building up higher provisioning on expected drawdowns that we could see in the subsequent quarters? That is question one. And the second question is on the liability side. This is, sir, basically, on the CASA, the granular, we've seen a reasonable traction quarter-on-quarter and year-on-year as well. If you could explain what is driving this. Like if you could give some granularity like what will be the number of customers that we are adding. How would that Royale picking up? And also, if you could just break down those granulares, what would be the number INR 1 crore and below pull out of this INR 4,000-odd crore number? So these are the 2 questions.

So on your first question regarding extra provision. So as in the opening remarks, rent has covered that our complete moratorium book, which was 11% as on 30th of June has reduced down to 5.5% when the moratorium ended on 31st of August. Now out of the 5.5%, 2.5% is, again, customers are active now and they have paid 1 EMI, at least, in September and October. So rest is 3% book where the slippages can happen. And since the bank already carries INR 278 crores of COVID-related provisions. So as of now, we do not look to create extra provisions, we will again review this in the third and the fourth quarter, if anything extra is required to be done.

Sure. But like the customer list on this customer activation in the 78 plus 4, which are partly paying, which used to be 85% normally, I understand. But in a normal case scenario that pull back from a 15% not paying would be far better than what we are seeing today, right? Like just on this -- how do we collaborate this 18% -- sorry, 22% customers not paying today versus their value? So is the value-add risk only 3% in our judgment?

Vivek here. If you look at 2 data sets, one is the customer activation, the other is the collection efficiency, right? So normal, if we look at our Q2 collection efficiency, and despite that, we're just coming out of this complete lockdown situation. So pandemic is still yet to be over, right, which is 96% vis-à-vis of 98% in my normal time last year. So the difference, if the pullback would have been very substantially different, this number would have been very, very different. And what we look -- when we look at our October data, which is further more encouraging. So it gives us a sign that these are coming back to the normalcy level.

Sure. And the question on the CASA, which Shoorveer, sir, can address.

Shoorveer [indiscernible] liability products. So in terms of the granular, some movement, which we have witnessed in the last 2 quarters, in fact, this is a result of the effort which we had started putting up since last year with the launch of Royale and the various other initiatives which you took. I think the most important change which we have brought is that we have actually focused more on the quality acquisition front. So from one of your points about the acquisition perspective, we have actually concentrated efforts more towards quality acquisition and have actually dropped net incremental growth in terms of what we were acquiring earlier. However, the larger focus in terms of activation of customers in terms of getting the customers to primarily transact using the AU Bank account by ensuring that we are providing all digital channels, we are enabling the customer to use all kind of digital mediums being available in terms of all platforms, which allow customers to transact digitally, offering them consolidated and strong offers for use of debit cards or by way of making payments to various channels. All those have started yielding results. Also, our calibrated approach in terms of on one end, reducing the overall cost of funds by reducing interest rates in lower buckets, however, carrying flagship rate of 7% in bucket of 10 lakh and above has also given us good yield. Primarily on the CASA side, on a customer acquisition perspective, we are driving 2 big themes. One is the safety and security which is insured through the DICGC burdens of up to 5 lakhs. So a bucket of between 1 lakh to 5 lakh is a bucket where the larger acquisition is being driven on that theme. And then 10 lakh-plus which is primarily a retail customer, but with a -- who has a surplus investment and is looking for better returns. So that 10 lakh-plus bucket up to 1 crore or 2 crores is another bucket where we are driving acquisition. Both these areas have yielded very positive results. In terms of Royale, we have seen good lift in terms of our monthly acquisition. One last point, which you made that in terms of composition, out of these 4,200-odd crores, what is the composition of greater than 1 crore bucket? So I think that is almost around 1,300-odd crores in terms of the value side. But in terms of numbers, the major acquisition is happening between 1 lakh to 5 lakh bucket and 10 lakh to 1 crore bucket, and that is where the entire focus is. But however, we are building a bank of which we are proud of in terms of ensuring that a customer uses AU Bank with pride across all digital and physical channels and becomes the primary account holder for AU.

We have next question from the line of Hiral Desai from Anived PMS.

I have some greeting of the season to you, Sanjay and everybody, at AU.

Sir, I'm sorry to interrupt. Your voice is not clear, sir.

Is this better now?

Yes, please go ahead.

6 Yes. So with some greetings of the season to you, Sanjay, and everybody at AU. So I had a question on the annual report where you mentioned about increasing the wallet share among existing customers. Currently, we are at 1.3 versus 4 products per customer for the large private banks. So can you talk a bit about the road map? That is my first question. The second is on the balance sheet, you, I think, had guarantees worth INR 750 crores. So which segment is this pertaining to? And what are the kind of fees that we make on such guarantees? So those are the 2 questions.

[Foreign Language], first of all. Thanks for spending your time to attend this call. So as we earlier said that we are focusing very much on per person. So our strategy towards that 1% should have at least 5, 6 products move forward. So we have at least 3, 4 products. Yes. So we are striving hard to drive that and with our own booking of our products, all asset products, all lability products. So every month, we are increasing that and striving that to have wallet share of each and every customer so that whole book is there and customer stays with us for a longer time. So that's one strategy. What was your second question on?

The second question will be for Vivek?

Yes. Bhavik (sic) [ Hiral ], Vivek, here. Typically, when we started our working capital book, when we started our banking operation in 2017, immediately that, we started also looking at customers who -- because these were the customers who were there with us even before we became a bank, right? And these -- most of these customers wanted some sort of bank guarantees. So largely these BG limits have been given to contractors, which are not the pretty large ones. These are small to midsized, small customers kind of working with various state government departments like PWB, irrigation or subcontractors of NITI, et cetera. But largely, these are either RFD-backed or security-backed facilities. So this is the kind of portfolio we've built along with the fund-based facility with a targeted -- specific targeted segment.

And the INR 750 crores would be like how many numbers? Like how many guarantees would we have given?

I can come back to you, but this -- off-line, I can come back to you that how many customers would be there. Maybe 700, 800 customers would be there in that amount. So we'll come back to you.

Hirel, some of these guarantees are also for various securitization transactions that the bank has done, where we have to provide some sort of credit comfort to the investors as per regulatory requirements. So we can provide you the breakup of both -- between these 2, the customer guarantees and our own guarantees subsequently.

Okay, okay. And I just have one more question, if I can just squeeze that in.

Sure.

So on the term deposit, just wanted to understand, so historically also, if we compare with some of the large private banks, the difference between TD rate for us, let's say, for a 1-year bucket versus some of the other banks was about 150 to 160 basis points. Now given that the base rate itself for some of these large banks have fallen to 5% vector, does it become easier now to acquire customer on the term deposit side, given that 160 on 5% is a much better proposition versus 160 on 7%?

So should we decide, in terms of customer is, yes, definitely, when you have the top 4 banks operating at a rate of around 5.1%, 5.3%, and if you are able to show interest benefit of [ 1.5% to 1.25% ], then obviously, the customer is more attracted towards you. But also primarily, if you see what AU has been following and which we have clearly expressed is that we are consistently committed towards ensuring that the cost of fund is optimized, and we have passed on the benefit of the repo rate revisions regularly throughout the last entire year. And if you see my current FD rates are also at a peak rate of that 6.75%, which is not very high as compared to the large private sector bank. And yes, it is a benefit definitely to attract customers from PSU and large private sector banks at this pricing.

And Shoorveer, what would be the retention rate in terms of retail TD, so the rollovers, the TDs which get renewed?

It is around 70%, and that is what typically is the industry average on the retail term deposit side.

[Operator Instructions] We have a next question from the line of Amit Premchandani from UTI Mutual Funds.

Thank you, sir, for a detailed presentation. In Slide #32, where you have shown the collection efficiency, can you just explain what can be the collection efficiency if -- given that many of the customer sets have paid more than 100%, which is basically more than what was demanded? If you just look at the current month payment and current month demand, what would be the collection efficiency?

So for my end side, see, this collection efficiency is based upon the month billing. And if you compare it with the normal times, it is 98% versus 96%, which was there. For normal month customers who have paid -- if we -- if it does not include the overdue, it would have been 85%.

So the 119 up practically 112..

Versus 78% in the normal times. So it was better in September.

Sir, you have given a graph of -- there's a Q2 FY '20 table, where there is no collection efficiency, which is more than 100%. In Q2 FY '21, there are many segments where the collection efficiency is more than 100%, which implies they are paying more than what was demanded because they have not paid because of various moratorium earlier or they have been overdue. So if you leave aside that overdue amount, moratorium amount, which they have paid in Q2 FY '21, then what is the number of this 96%? Because this 96% is derived by this 110, 120 kind of -- which are not normal, which are the overdues of previous quarters or previous months.

Vivek here. That is why we've given 2 different set of data points. One is the collection efficiency and the second is the activation, right? And when we are saying activation, it is a percentage of gross advances, people. So if out of INR 1,000 crores, if INR 780 crore have paid at least 1 and more EMI. So that if you look at that number, it is 78% of my AUM has paid at least 1 full and more and 4% part. So if you put together, 82% customers have paid. That is what data -- this data indicates. And you would understand in the retail business, this is a normal trend because, in general, also 80% customers pay in full, 5% pays in part, and that's a rolling cycle for every month and that is how the retail portfolio behaves.

And sir, if this 72% paid in full, what is the normal run rate for that set of customers?

That's what I said, 80%. If I look at last year data set, it is 80% in full and 5% in part.

For Wheels also, the Wheels subsegment.

Yes, it's more or less same.

Your next question is from the line of Chirag Sureka from DSP Mutual Fund.

I wanted to know about your deposit strategy over the long period of time. Would you -- we may have growth coming back strongly next year. In which case, would you go back to wholesale deposits? Or is there going to be a permanent shift in the way you look at deposits? And this 70% in the same question -- it's the same question. On the 70% rollover, that you said that 30% you lose to whom? I know that -- where does it go to? Does it go to another bank, which is offering higher rates or NBFC? Where does it go?

Chirag, Shoorveer on this side. So your first question in terms of the long-term liability strategy, I think the answer is very clearly defined in our thoughts, is that the retail is the long way. The long-term strategy is to build the retail and granular deposit franchise, which is primarily led by the transacting customers and the active customers on the bank side. Also, digital seems to be the long-term strategy pivot. And we believe that everything, in terms of the deposit generation and deposit retention, will revolve around how well the bank is equipped in terms of their digital journeys. And we are doing considerable investment around this, whether it is account onboarding, whether it is in terms of self-onboarding journeys, whether it is payment platforms, whether it is products like credit cards, whether it is products like prepaid cards and various other payment solutions, which are available across and which are evolving in the -- on the deposit side. So digitally led retail granular franchise is the long-term strategy and to which all the efforts are being concentrated on. We believe that people's liability books can always be built around the retail depositor, and we shall continue to focus on same. However, we don't say that we are averse to wholesale deposits. If they are optimally priced and are available at -- for right relationships which are engagement-oriented, we shall always look forward for them. In terms of your second question, regarding the rollover remaining 30%, so usually, the trend is that around 15-odd-percent or 20-odd-percent of this amount comes back and rest into the savings accounts, depending upon the rate benefit, which the customer is getting. And the remaining 15% gets utilized in the planned expenses of the customer, which are typically for which the customer has been saving for. However, also during certain specific times related to the -- how the global or the macroeconomic situations are, the money gets spent or typically, it also -- if your rates are not attractive, definitely, you might lose it to competition. But in the current scenario, where our rates are [indiscernible] and our FD rates also continue to be very competitive in that situation, the majority of deposits -- 50% of almost deposits stays into savings accounts and the remaining 50% usually get spent on the customers' planned expenses or spend for which he has been saving for.

Okay, sir. Sorry, this is again going back to a previous question. I'm trying to wrap my head around this activation and collection efficiency point. So just to -- you said on the normal circumstances also 80% and that is 5% -- 80% pay full EMI, 5% pay part EMI. Does it reflect in 30 DPD and 50 DPD that you collected backwards subsequent months? Is that what you're trying to say?

Yes. So you always have a 1 to 30 bucket, 30 to 60 bucket and [ 60 to 120 ] bucket, right? So that's what reflects in these buckets. And the collection efficiency is always around in that range, 98% to 100%. It generally picks up towards the Q4 when it becomes more than 100%, in fact. But that is how the book breakup is always.

Your next question from the line of Pranav Gupta from Aditya Birla Sun Life Insurance.

Yes. Just a couple of questions, and sorry to dwell up on this again. But just wanted to get some more sense on the rollback from the activations. So in a normal scenario, say 80% is activated and now it's back to more 80%. But in a normalized scenario, what are the rollback rates from the remaining 50%? And where are we in terms of those rollbacks currently? Just wanted to get a sense on that. That's my first question.

So Mayank this side. As far as the rollback of others is concerned, we are regularly tracking it and since we have already reached to a close level of activations as towards the normal situations. So we are regularly tracking it and we are hopeful that by the third quarter, and the activities are opening up and the customers are getting activated month-on-month since our activation levels are increasing from last 3 months, so we are hopeful that this will again will be more towards 85%, 84% levels in the coming quarters or whatever the situation comes to normalcy.

Right. But what would the rollback be currently if I was to ask the question?

So on the rollbacks, see, everything after this moratorium ended off and the customers are deferred. So the things are -- as of now, things are moving forward from whatever is not collected in the bucket 1, they'll go to bucket 2 and all. So as I said to you, this entire portfolio of 18%, which is still to be activated, so once they'll activate, they might roll forward to a bucket 2 or bucket 3, but then they'll be rolled back again once they start paying the MIS.

Okay, okay. Second question is on the CASA front again. So while I said that the large acquisitions were happening on the 1 lakh to 5 lakh bucket and 10 crore to 1 crore pocket. If you can give some more sense in terms of, apart from the new account offerings that you offered, why I'm asking this again is because this particular quarter, we have seen a huge jump. And I'm sure that these initiatives were on a few quarters back. So what has led to this huge downgrade on this specific quarter? Have we done something different? So what has led to this? This is what I'm trying to understand.

Pranav, Shoorveer this side. So one, definitely, this is the effort of last 3 quarters, which you have started seeing results on. We have actually worked on various areas in terms of CASA mobilization. One is building channels, which are in the right segments, like we started building the channels for NR, nonresident Indians, which is a good lucrative, regular sustainable and a good granular base on the savings side. We built up a [indiscernible] acquisition, which is again a good savings account, sustainable, granular book. We worked on product solutions around housewives, which is again a very lucrative segment. We worked around specific segments around retired pensioners. We came up with product solutions and SOPs around retired pensioners and senior citizens. We have been working towards building this Royale, which was launched in the last quarter of last financial year. We -- that was being worked very aggressively in terms of the channel management on the ground. However, also parallelly on the product and solutioning side. Also since last year September, we started building up our debit card offers, which were typically required for customer activations and transactions. That has started yielding very good results. There was a lot of effort which we emphasized during this lockdown period in terms of improving the sales efficiency and sales management processes. That has actually given us a lot of benefit in terms of improving the efficiency of existing people and improving productivities in terms of acquisition. So the results, if you see, they are coming from 2 sides. One is the existing book of customers have improved in terms of transactions. Just giving you 2 quick numbers. If you see my transacting customers have improved to 41% now, which is 8% growth, my average transaction per customer has improved to 11.8%, which if you ask me from an industry perspective, it is a very excellent number to have. There's a 98% on that side. My product per customer actually moved to 1.42. My number of customers who are doing greater than 4 transactions. And this is a benchmark, which we use to track transacting and granular customers with the bank. That has grown by 15% in this quarter, making a base of almost greater than 2 lakh-plus customers who are transacting with more than 4 transactions per month. All these efforts put together have been yielding results. Definitely, one large point because of which you are seeing these very good traction on the CASA side is also because last year entire year, we were focusing largely and which we have already -- which we had given in our guidance last year also that the focus was more in terms of building a foundation of retail term deposit. And this year onwards, we started focusing more towards CASA initiation, which has started yielding very good results, and we hope that we should be able to improve further.

Great, sir. Just one last request, sir. Over the last 2 quarters, some of the granular disclosures that you also gave in the PPT have reduced. If you can start giving those again, that will be great.

Okay. Sure. We take that feedback. I think generally, we have tried to tighten the entire presentation, but we take that feedback on board.

We have next question from the line of Mansi Sajeja from SBI Funds Management.

Sir, just on continuing on the total collection efficiency. What we have seen is that if you could give us in maybe rupees crore or as a percentage, that if you bear say 100 [indiscernible] in September 2019, how much did you collect in the 0 bucket? And how much you collected from the overs? And what would be the number is what you have -- what you have done in September 2020. Of course, we will say that September 2020 but the March, where some of the customers came out also longer moratorium. But it might help if you can give rupees crore that what was the bidding and what was the collection against 0 bucket and overdue bucket?

Mansi, Vivek here. You would have to appreciate one thing that whatever was the OD amount for these last 6 months, the varying degree of overdue of January and February or tied with that, everything has been deferred, right, as to the deferment scheme, which was available to the customer, right? So you don't have an opening OD per se for the month of September. Now that's why the data would not be comparable. Going forward, as we move, maybe we would have a similar bucket and then the data would be comparable. But if you look at -- that's why my side in the previous question that the collection efficiency from current bucket [ looks like a lot ] better from a current billing. Because growth actually no overdue available for collection team to request customers to pay, right? So that apple-to-apple comparison would be difficult because on 31st October, whatever was due has been deferred, right?

I said 1 month. So probably from 1st March, maybe 1 month of CMI was the overdue, which you would have asked for collection. I don't know what was the cutoff. The second one...

Mansi, I think we have given a very clear data point as far as collection efficiency is concerned, as far as percentage of AUM is concerned. So it gives you a complete clear picture, that 78% of my customers buy AUM value have paid me. And overall collection efficiency of that book has been 98%. So I would [indiscernible].

Okay. But it is not business as usual because of the reasons as you said. This was after 6 months of moratorium.

Yes.

Yes.

[Operator Instructions] We have a next question from the line of Bhavesh Kanani from ASK Investment Managers. We have next question from the line of Abhishek Murarka from IIFL.

So a couple of questions. One is this INR 278 crore of provisions that you have made, how much of that would be for the Wheels and how much of that would be for the SBL businesses, considering that 5.5% is practically all of Wheels and SBL?

So Vivek here, this is the overall provision. And there is no specific account-wise provision, which is where it can be bifurcated. But obviously, if the large part of your book is Wheels and SBL, the last part of this provision is towards those assets, right?

Yes. But I guess the LGDs might be different businesses. So I was wondering if you have made more provisions for Wheels looking -- considering they have a lower collection efficiency as well.

See, when we're saying that 3% of the book, which is where we -- which has availed a complete moratorium and not paid, that's the only book where slippages would come in, right, which includes Wheels, which include SBL, which include other businesses. So we talked about the complete 3% book only, which is under the sort of a close to provision.

I mean when you would have made the INR 278 crores, as you arrive at this is an adequate number, you could have done a bottom-up sort of how much might be required for Wheels or might be required for SBL. So I was just trying to get that break.

See, COVID provisions were made on the SMA book, which was there on 29th of Feb, right? And at book -- though that book substantially reduced in the month of June, but we still went ahead with the complete provisioning. And if you ask me today that the book has come down dramatically from that level to current -- around INR 430 crores. So despite the fact there have been a good recovery from that SMA pool and SMA pool has reduced, we still went ahead and created provisions because that's a general provision available for our book.

Okay, sure. Secondly, what is the buyout pool in [ green ]? There was a footnote which said it improves buyout. So what was that pool amount?

So that's a very miniscule amount, probably in a low teens. So yes.

Okay. And the third thing, sorry to sort of come back to this collection efficiency number. But [indiscernible] explain. I'm talking only about Slide 32 and in our collection efficiency formula, basically the [ total ] would have the collection against the months demand plus overdue. So I'm just trying to get that breakup. I think it's a common question. Everybody has that question. And if you can break up that 96% into what is collected against that month's demand and what is overdue, it will be very useful.

So Abhishek, this is Prince here. So if I can just try and sum that up. During the moratorium period, which was from 1st of March until about 31st of August, there was technically no billings, right? Most of the -- any consumer who is not paying his full amount was considered to be under moratorium singulatory. We had disclosed in our June quarter the various collection efficiencies as well as collection activations. In June itself, June month itself, we had reached a collection efficiency of 90%. And you're right, when we say collection efficiency, it's billing against that collection month as well as the overdue. But because of moratorium, there was no billing itself, right? So it was all assumed billing. And whatever money that we were getting, we were trying to adjust. So in June, we had reached 90%, assuming there was no COVID. That number continued to be upwards of all [ 90% ] on the subsequent months. And as we have disclosed, it was 96% for the quarter as a whole, right? Technically, September is the first month when billing has started happening. And that is where we are saying that against the normal time where 80% gets collected, we have collected 78%. I mean we have collected more, but full repayment has been 78% but against 80% in a normal time. And a part repayment of 4% against a normal time of 5%. The overdue itself does not arise because as Vivek just said, there was no opening overdue because anything which was deferred had got adjusted into the repayment schedules. Whatever was the opening SMA book as on 29th of February, part of that [indiscernible] book that has already got resolved to INR 430 crores, and there was a very miniscule amount. It should have come from that in September. So hope that clears.

So practically, most of this 96% you're saying is collection against the month-to-month?

Yes, against the monthly billing.

We have next question from the line of Nitin Aggarwal from Motilal Oswal.

Congratulations on good performance and starting to see all the initiatives taking to boost the business [indiscernible]. I have 3 questions. Firstly, on the disbursement rate, you have said that is back to 99% month of September. But on a medium-term basis, how do you expect this to sustain now? Specifically, if you can comment about the demand trend, the main vehicle business? And secondly, what sort of these things we're looking at over the second half? And how much has been the disbursements under ECLGS, too? And lastly, on the branch expansion strategy because we are seeing good pickup in branch count over the recent quarters. So what is the strategy there? And where do we want to reach in terms of branch count over the next 18 to 24 months?

So Nitin, Uttam here. So regarding disbursements, as we mentioned, that 99%, it's almost normal to pre-COVID levels in last September. So we are seeing that every month is better than last month. Q2 was better than Q1 and October was better than September. And November also is looking very promising. But still, I would say that still things are evolving. As such, also you know that festival seasons, this is Navaratri and Diwali, used to be good and it's again is good. But I think to my sense, the rural economy is buoyant, a lot of initiatives from government, RBI, a lot of subsidies are coming. Money is flowing to rural sectors. And agri is good, last [indiscernible] was good and Kharif sowing is also good. So as such things are looking better, but still, things are evolving. There was some disruption in September because of COVID. So we are still watching the things. But as of now, things are looking better. I think that until March, there should not be any negative towards adjustments. We might do good, but things will get clear by Q4, you can say that, towards all the products, not only these, our all asset products. And towards the CLC, yes, I think, Vivek, can you answer that?

Yes. So we -- cumulatively, till 30th of September, we disbursed close to INR 376 crores [indiscernible] year. So since our -- the legibility base was higher, but not many customers had approached us. We had given an opt-out scheme to customers, and we facilitate through our online channel. So until 30th September, close to 7,800 customers avail of our INR 376 crore of funds.

And what was the last question, third question.

No, I think before that, there was -- I think you also inquired about restructuring. So we have not done a single restructured case in our book. And we don't see that many customers are forthcoming for that. So whoever will come will definitely support our customer base. But we don't see that there is a surge of sudden increase in a lot of restructuring proposals to us. As of now, we have 0 cases.

So towards expansion of branch banking, we have opened 16 branches at 11 locations as per our earlier plan. And as I said, things are evolving. We'll have our clear strategy on further expansion by Q4, I think. But whatever plans we already have, we are doing that. We are opening these branches [indiscernible] branches and the other states who have pan-India presence. But clear strategy, I think, we'll get to know by Q4. It should be that, yes.

[Operator Instructions] We have next question from the line of Manish Shukla from Citi Group.

So I was saying that could you have reconciled one number on Slide 34. You've said that there is about 3% of the book, which has not paid the installments and out of 5.5, 0.5 have paid. How should one see this number with respect to the activation rate of 78%? Because the activation rate is guys who have paid you in full. And here, you are saying that only 3% have not paid in -- paid 1 or more installments. So how should we reconcile these 2 numbers?

See, Vivek here. You have to understand there are 2 different things, that someone who did not avail a moratorium throughout this journey could have not paid in September, right? And this is a normal situation where a customer may skip because of various reasons. There is a -- you need to understand this is pandemic time. If the customer and family is down with the pandemic, the customer is not available at a business place or at a family place, right? So if the activity is close. So those factors would play. But we are saying that customer is not at a risk zone. The customers who are constantly not paying have not been activated in the month of September and October as well, that is where we feel that it is a risk zone for us, and we need to monitor that, right? So actually, these are 2 data points. The reflection is there, but it's not -- it should not reconcile apple to apple.

Which is a fair point. The point where I was coming from, that if there is a customer who never opted for moratorium and it was available. And now when economy is on demand, that customer is not paying you in September. Is it a segment to which you need to be more cautious about, in addition to the 3%, is how I was looking at it. Because this is a customer who never opted for moratorium for 6 months and now he's not paying you in September. That's how I see it.

No, but we've also given you a data point that in normal situation also, only 80% customers pays you every month in full. And that [ 8% ] are not constant bucket, right? This is a rolling number. So someone who paid you in September might skip in October and someone who paid you in October might skip in November, right? That is the characteristics of retail -- typical retail book. And someone -- and when you say that they are paying in October, you could pay both the MIs.

Okay. Fair point. Lastly, on collection, I get your point that there was no overdues because nothing was billed. From a customer perspective, then what is the incentive to -- for the customer to pay more than what is billed to him? For 6 months, you never billed the customer and then you risk a demand in the month of September. I'm just thinking from a customer perspective, why is the incentive to pay more than what is billed to the customer?

The customer who had cash flows, everyone understand the concept of interest and customer never wanted to pay extra interest on that because anyway, when -- if it is added to the principal, over the period, they would end up paying much more money. So people are conscious on the interest burden on that money.

Okay. All right. Last question for Shoorveer who has talked about disbursement briefly. Second half of last year was close to INR 10,000 crores kind of a disbursement number. How do you see, I mean, full year on a portfolio basis, second half of this year?

So Manish, as I said, that's difficult to comment, but I hope to not to have a negative growth, keeping one step towards that. But as I said, everything is getting better. Every month is getting better. So let's see, let's watch November and December, and Q4 should be good. But I don't know about the growth and all that, but I should not have a negative growth.

We have next question from the line of Renish Patel from ICICI Securities.

So sir, one, again, on this -- our stake sale. So on one hand, there are still sort of the percent of customer pool which are not paying. And maybe the sort of rollback we might have observed during difficult time in this time, that might be slightly different. So contingency buffer at 1% seems to be slightly on the lower side. And with our stake sale, generating almost over [ $4 billion ] sort of cash. So what is the strategy behind not utilizing this when there is still uncertainty prevails in terms of how things will pan out in Q3 and Q4, sir?

See, you actually bundled 2 questions. One is the -- our sale which is obviously -- we've given our disclaimers earlier also that we will -- as and when opportunity arises, we'll keep on disposing because between the 2 options of raising capital and this, we'll keep on evaluating at every point in time. So at this moment -- and that's an ongoing part. It's not that we've only sold it in this quarter or this month. This is -- we've been doing it for last couple of quarters, right? The second part on the provisions, we feel that our -- if you look at our historical credit costs across verticals, across product has been pretty good. And when we said that our pool which is our monitored -- gross monitored pool is close to 3%. And in fact, it is less than 3%, 2.75% to be precisely. So it is that book, which -- and going forward, we will provide as and when it is needed. But at this point, we feel that additional provision, what we carry in our book, is sufficient to have a good coverage on those assets, right? And these -- we need to understand that bank operates only on secured product. And there, we use SBL or other product. It is backed by security. And the chances of any sort of unexpected loss given default is abysmally low on this book, right?

Right. So you're saying it is fair to assume that the LGD at portfolio level would be around 30% to 40% of what it used to be.

No, we are not saying that. We are not saying that.

What we are only saying is, historically, we know the numbers and we keep monitoring how the situation is evolving over the next 3 to 4 months and see where it goes. But as of yet, I think 1% provisioning over -- on the book that we are currently monitoring seems to be quite sufficient. And then we keep monitoring the situation and look at how we are going to evolve in the future.

Right. Okay. Sir, just last bookkeeping question. So on the retail liability side, also if you can just give us the number sort of how much of the book will be below 50 like balance and how much of the book would be above 50 like balance?

Well, we can try and take that, Renish, off-line.

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

Thank you to all the participants for your interest in asking the questions and taking time out to attend this call. On behalf of AU's management, we also would like to wish you a happy festive season and happy Diwali. Look forward to seeing you at the end of 3 more months, and probably we'll have -- we'll continue to share better news with everyone. Thank you so much.

Thank you.

Thank you.

Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of AU Small Finance Bank, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.