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

Ladies and gentlemen, good day, and welcome to AU Small Finance Bank Update Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Renish Bhuva. Thank you, and over to you, Mr. Renish.

Thanks, [ Aduja ]. Hello, and good morning to everyone. Welcome to the AU Small Finance Bank Update Call. From the bank, we have with us today Chairman of the Board, Mr. Raj Vikash Verma, Chairman of the NRC Committee, Prof. M.S. Sriram; MD and CEO of the bank, Mr. Sanjay Agarwal; and Investor Relations team. We will start with the opening remarks and then open the call for Q&A. I thank the management team for giving us the opportunity to host this call. I will now hand over the call to Mr. Sanjay-ji. Over to you, sir.

Yes. Thank you. Yes. Good morning, everyone. Hope you all are well. We released our update last evening, and I just want to reiterate the following key facts. First, about CRO. Alok joined us in the month of April '21. He was hired to replace Mayank Markanday, who is still in the bank since 2016. He now heads the Credit Card business. Entire risk team, which was built by Mayank, is still intact with not a single churn in the direct reports of CRO from last 5 years. Alok came from Mumbai, with assurance that family will move to Jaipur, which is, for us, is an important HR practice to ensure continuity and stability. However, COVID 2 was -- did change his personal circumstances, and he has decided to relocate back to Mumbai to be closer to his family. For us, risk remains very important function. Risk will play a very pivotal role in building a leading franchise business over the next decade. I'm confident that Deepak, our new CRO, will play an important role along with his team. He's highly experienced, professional and has been with the organization since 2010 as a CFO and then as COO. We remain in absolute compliance with all the disclosures and the internal processes around informing our Board and regulators. The second one is about internal audit. In terms of Sumit, it is a similar story. Sumit and his family suffered from the COVID in the month of April and May, and they belong to Delhi. And we all know about how Delhi faced that crisis in that time. And they actually survived that intense second wave there, and then he moved on to Jaipur. From day 1, he was not comfortable in Jaipur. And he's asked us that he can relocate to Delhi. And unfortunately, this and the CRO role belongs to Jaipur. We are in discussion with him to retain as far as usual HR practice. Sumit is also on the call to take any questions. Both Sumit and Alok have spent only a couple of months after May. It just -- this happened in June, July, post-lockdown. Right? I don't think there is an issue of culture because really 2, 3 months, they have worked with us. And incidentally, we have hired around maybe 50 professionals over the last 12 to 18 months and not much churn has happened there. Right? Our top 50 senior team has a vintage of 6-year plus with us. I also want to give you one more data point that whole control functions, which include CRO, Head of Internal Audit, Chief Compliance Officer, Chief [ Vigilance ] Officer, has remained stable for our first 4 years of us becoming a bank, from 2017 to 2021. It was just the start of this year when we were looking to strengthen our control functions for our next phase of growth, we started hiring these new people. I can only tell you that things did not turn out as we expected. Both these functions require the chiefs to be based out in Jaipur as our head office is here, and day-to-day regulatory supervisory framework is also run out of Jaipur. We have to take these 2 developments as an unfortunate event. There are things not in control of anyone. We need to respect their privacy, their personal well-being also. I also want to reassure that the bank continues to do exceedingly well as far as commentary in quarter 1 call. There is a lot momentum and energy with the month of July and August being far better than the quarter 1 in terms of business collection asset quality. I just want to invite our Chairman, Mr. Verma, sir, for his comment on this development. Over to you, sir.

Thank you, Sanjay. Good morning, everyone. I just want to be interacting with you all at this moment. At the very outset, let me confirm that under the risk control and governance aspects, the bank is very, very strong, and that's the top priority for the Board as well as all the committees. The management is a very good connect -- provides a very good and sound connect between the Board, committees and the rest of the teams. Well, I can say at this time, that it's unfortunate that both these officers, who were recruited very recently, about -- they would have spent about 3 months, as Sanjay, as the MD mentioned, have had to go through their personal problems. And it's totally beyond our control that we have not -- we're not able to retain them, though, however, the management tried their level best to give them options and to organize different alternatives, but somehow it has not worked out. And they're having to -- at least, Alok Gupta is having to shift to Mumbai for his own personal reasons. So we do have to respect that. But at the same time, we -- I give the assurance on behalf of the Board that in terms of control and governance, the bank is absolutely sound and very strong. It's on very strong footing, very firm ground. Bank is expanding, as we -- you all know. And we have steady expansion in the bank's portfolio with due regard to control functions, like particularly audit and risk management. These 2 departments are manned by professionals. And we have had very little churn in the sense that last the Head of the Risk Management Department, the CRO was -- still continues to be with the bank. And after 5 years, he was given an option. Actually, I mean he has to have his own career progression aspirations. So he did want to serve in other areas of the bank also and continues to be there. So we had that opportunity to induct somebody from outside. And all these issues were discussed, in fact, in our personal meetings, I mean, which the Chairman of the Board and the Audit Committee Chairman had with the individual candidates, and we felt that they were good as recommended by the management. And these issues were discussed. But unfortunately, the COVID second wave also had its impact. And as all of you know, that kind of shook the, I would say, the comfort or the expectations of the people who had joined. And as a result of that, they're having to decide on this change. It's unfortunate, I can say that, but the bank's business is on a very sound footing, and the internal control where we have as many as 7 concurrent auditors. Apart from the audit team, 50-plus people, we have 7 external concurrent auditors. We have the statutory auditor. And now we have 2 statutory auditors as advised by the regulator. So -- and the Audit Committee of the bank audit board -- Audit Committee of the Board is fully in control of the situation, and they are frequently, in fact, and fully adequately informed of the developments in the bank. We have a very strong audit team and will be in case the head of the audit, in case he decides to finally go, which he has not so far, we are probably in the process of discussion. And possibly, I mean, if all goes well, he might even stay back. We do not know yet. So -- but the Audit Committee and the Board are fully in know of everything, and it's been done totally in consultation and coordination with the Audit Committee, the NRC and the Board. So thank you very much as of now.

[Operator Instructions] The first question is from the line of Bhavesh Kanani from ASK Investment.

Since we -- and with the human resource angle here, I request you to share the manner in which you are managing the different cultures that come in as part of lateral hires from various competitors or entities. Everyone comes with a different cultural background, different operating style. How are you managing that cocktail of cultures, and on top of that, kind of imbibing them with the distinct AU culture? So that's the -- a detailed response on this, what all activity do you do to achieve that, I would appreciate.

Yes. Very important question because, Bhavesh, we -- I already commented in my previous narrative that after money, the most important asset in any bank is around human resource. So from last 5 years, once we started as a SME, as a bank, we were knowing that now with the whole system around HR practices need to overall, we need to be very forthcoming. We can't only do loan kind of company now. We need to build trust. We need to build relationships. We need to build entire ecosystem where people comes in and joins and really express themselves and all those things. So initially, we faced some challenges because the entire franchise was around Jaipur, but we shifted our own ED, Mr. Uttam Tibrewal, to Bombay, 2 years back, and we established a corporate office there and 3 functions, 4 functions to be very honest. One, the whole banking piece, we -- our [ old ] wheel business. We -- our home loan business and treasury is based out of Mumbai. So that allowed us to really hire people from that state, and we can be -- has a pan-India presence then, right? So that was one initiative we took 2 years back, and that is really working well for us. We actually hired not many people in Jaipur also, and we allow them -- we actually help them or facilitate them to get the kids' education in any school. We allowed them to build a ecosystem around them. We allowed them to remain in Jaipur because life is very easy here. So we have done a lot many things in last maybe 4 years. And that is why, to be very honest, we have grown from 6,000 workforce to now 22,000 workforce. And we remain as one of the most exciting franchise to join. We remain as one of the top workplaces in India. And we've grown our senior management team from 10 member teams to now close to 50 member team. And happy to tell you that in that 50 member team, nobody, not a single resignation is there on table as of now when I'm speaking to you. And this whole creation of our whole commercial side, whether it's salary, bonuses, the relocation opportunity through ESOP. It is there, right? People have really built their fortune around AU whole -- generally of last 10 years. So in that sense, of course, in my opinion, we have done all our efforts to really make this franchise the most attractive franchise for people to work. But challenges remain because, as you know, a lot of fintechs, a lot of new banks are also coming, a lot of existing banks want to scale up. So we need to -- and we built a successful franchise around our assets and liability. We are very natural approaching around for many people, right? So we have to do this as an ongoing basis and has to build more and more good HR practices. But I want to ensure everybody here that there's no culture mismatch or there is some kind of different environment in AU. It's very, very work I’ll call it, very, very purpose kind of environment. So -- and we are proud of that. That is why the performance of the team has been so different from many others in this business over the last 10 years.

And sir, if you can, in the same question, if I can add a little more. If you can highlight in detail the role of internal audit with the various important things that we report. If you can highlight that, that would be helpful.

So I will let Sumit answer this because Sumit is on the call. He is handling that portfolio. So Sumit, can you do this one?

Yes, sure. I hope I'm audible. Okay. So from an internal audit standpoint, our, we are governed by the Audit Committee of the Board. And our mandate is to look into the internal processes, procedures and the effectiveness of entire internal control mechanism with respect to risk management as well as the regulatory compliances. And as part of this job, we have a team, which is a mix of in-house team as well as the external CA firms engaged by us, which is similar to how it happens across the industry. And all of our outputs are closely reviewed, monitored, and the progress is seen by the Audit Committee of the Board. So the reporting and the visibility is at the highest level in the organization. In case your question is specific to some of the financials because you mentioned about the reporting piece, so statutory auditors are engaged separately by the bank, which is also under the oversight of Audit Committee of the Board. But that piece is, to the extent, handled by those CA firms. So earlier, it was S.R. Batliboi. And currently, bank has empaneled and approved the employment of Deloitte as well as G. M. Kapadia, 2 firms.

Next question is from the line of Nidhesh Jain from Investec.

Sir, in the earnings call and there also in the [indiscernible] poaching of employees, which is happening for the bank. But I think these 2 cases have had happened [ in the past ], but now it's not the case of poaching. So expecting...

Sorry to interrupt you, Mr. Jain, but we cannot hear you clearly.

From higher increase in the [indiscernible] sort we've seen in the bank? And how are we planning to stand that?

Sorry, I didn't able to understand your question.

Audible now? Am I audible?

So Mr. Jain, I apologize. Your voice is still breaking.

[ Okay ] now?

You can try once more.

Am I audible? Is it better?

Nidhesh, you're not audible...

We cannot hear from your line, sir. We'll move to the next question, which is from the line of Bharat Shah from ASK Investment Managers.

Yes. I really have no question to ask, but I just wanted to put 2 points. One, a sincere appreciation that you have chosen to be on the call and to highlight and respond to the issues. And especially so given fact that there has been a very critical, important medical emergency in your family and yet you've chosen to be on the call. So deeply appreciate. Second, more often than not people probably underappreciate a challenge of building financial services franchise out of a place like Jaipur, where a normal place for that should be probably Bombay. And even outside Bombay, it is actually difficult. This is something like trying to build a great investment franchise, out of Omaha, Nebraska instead of sitting in New York or Boston. So to that extent, I deeply appreciate banking franchise sought to be built out of a place like Jaipur, and just wanted to highlight both of these points. Thank you, Sanjay and [ the team ].

Okay, sir. Thank you so much, sir.

The next question is from the line of Sushant Bhansali from Ambit Investment Advisors.

Sanjay, I've been meeting you for now almost 9-odd years, and I've seen how you've converted the whole franchise from NBFC to a bank now. One critical question comes to my mind in terms of how you are building the organization is we all understand that when organization is into such a high-growth space, there will be change of culture, there will be systems and processes which probably will reinvent themselves over a period of time. How long do you think probably at the size of your balance sheet or in terms of number of years from here on, where it will be a much more structured place than it has been as part of your journey?

No. No. Thank you so much. And it's a very interesting question. So we have to break this in 2 parts. One, we have very old asset franchise, which is now close to 25 years, where the people are more settled, people know about the processes, the whole culture of AU is well laid down. And there, you won't see much of challenge because the entire ecosystem works very -- in a very organized way, right? But there are certain things which we are building as a bank, which is around liability franchise, which is around tax franchise and maybe now control functions. I would urge everybody to take this 2 incident as an unfortunate event because you can't control beyond a point. Our idea was to hire these people to have experienced bankers. Sumit is a 16-year-old experienced guy, who understand banking in and out, right? And our previous audit officer was not from the banking side. So our idea was to really get to a new guy who can actually build right kind of processes, right kind of things for next 10 years, right? And it's very unfortunate that Sumit was -- he just [indiscernible] and he suffered with COVID, very intense COVID. He survived actually to very honest. So and to his point, his confidence was not there because people need more time to really settle down, right? And we are on a high growth kind of trajectory. So my point is that there are certain functions we will get evolved with the time. There can't be any fixed tenure for that. But like I can say after 5 -- 4.5, 5 years that my liability franchise is now getting shaped up. There is -- there was a lot of churn there also in first 3 to 4 years. But now people have understood that how and what they need to be done to remain in AU or what is our overall philosophy there, right? So now maybe because as I already commented that our first CRO, still in the organization. Our first Chief Risk Officer is still in the organization. Our -- first, you are talking to Sumit on this call also, I still believe because we might able to retain him, right? You know why Alok has -- why he want to really move on, right? We have a similar Audit Committee head for the last 10 years. He remained with us since -- for 8 years. We've got all relevant response, and we ask some people to get us around statutory. We got response from every Big 4 of this country. So our Chairman remain -- chairmanship remain intact for last 12 years. So in that sense, wherever you have a seasoning in AU, there is a lot of consistency and sustainability, right? And whereas we want to build a new portfolio or a new vertical or new things, it takes some time, right? And that remains very, very strong in AU. So I would urge everybody there that allow us to do the right thing for the business and keep ourselves evolving with the times, right? And both these guys, Sumit and Alok, both are on this call. You can ask them whether it's a culture issue or it is about their own personal issue, right? So optically, it looks like that it's maybe a culture issue, maybe a governance issue. But I would with a lot of confidence and with my lot of transparency on this call, I want to ensure -- assure everybody that there is not a light of doubt on the governance, on the culture. Of course, we are -- not much a lot of purpose on the ground, right? So that might have a different ask from the people. That doesn't mean it's wrong, right? So I think in the journey, you will find that people are getting more stabilized, and we built one of the most emerging franchise of this country.

Yes. And Sanjay, no doubt, I think -- I don't think any of us have any doubt in your capability to hire talent or to invent or probably grow the organization. I think I was more about that -- because this is [indiscernible] which your bank is really high-growth rate, whereas you rightly said that from the asset side, you are now moving to strengthen the liability side, right? And as you will add more products over a period of time, probably more things and more processes and more people will need to be added. And...

Yes.

People-driven organizations have challenges all the time, right? We all face them.

Yes.

So the churn in the employee, I would say, is never a challenge, because organizations are built on processes, right, and not on people. People will come and go [indiscernible] right? So the question was more on to that can we look at more stable processes 5 years or probably when the balance sheet is about 1 lakh also.

Sanjay, I have [indiscernible].

Yes. Yes, please, sir. Please go ahead, sir.

Yes, that's a very, very good question. And this is something that is an ongoing process. It's always kind of work in progress. But let me assure the perception of the Board is clearly that the systems and processes are fairly stable and institutionalized. What we also keep discussing about is the flexibility, the agility of the bank and the nimble-footedness of the institution. So in these growing times and the way things are evolving in this sector also, given the mandate of the small finance banks and the constituency that they have to serve, it's very important that we have adequate flexibility in also our processes with due regard to the risk and control and governance. So the processes because of the special measure of the funding of financing, the very differentiated kind of banking from the normal banking, and the mandate that we have is reaching out to the financially excluded people, reaching out to the financially underserved or unserved people. So you need to have due regard to their requirements and the needs of their livelihood. So given all this, on balance, while these systems and processes are absolutely strong and stable, but at the same time, we also see urging the management to building adequate flexibility in our approach so that we can quickly and very swiftly move from one product to another product, depending on the experience and the needs of the people on the ground. So that kind of business flexibility is important. And all this is now getting on to a digital platform, which will give it more robustness, more sort of certainty and more stability. So that's the kind of approach of the institution. And as far as the culture is concerned of churning or the human resources, the bank has a very, very supportive culture towards their staff at all levels. And that's something which we have been very appreciative about at the Board and the committee level. And we know that all the stuff where we have had this for the past 1.5, 2 years, the kind of crisis, and that has been testing times for the institution also where the kind of support the bank has extended to the staff has been immense, and that's something which is actually exemplary. So on the staff culture side, on the systems and processes side, but also at the same time, the need for certain flexibility and quick response to the situation developing on the ground has been very important. So all this is kind of built into the bank's DNA, and it transforms into the strategy and the program for the bank going forward.

The best thing we like about you is being transparent and coming up-front and to resolve any things which are in people's mind. So thank you so much for your time, again.

Thank you.

The next question is from the line of [ Rasona Bilvash ] from BlackRock.

Sanjay, I'll probably state the 2 sort of optics, which are not looking very good and get your feedback on that. Number one is when the bank is talking about being digitally ready, why is location a problem? Why can't people be based out of Bombay or Bangalore or wherever and work in a bank like AU? And second question is how are the optics of -- I mean without going into the merits of the person, and I'm sure he's very experienced. Globally, it's not a great example when somebody who has been responsible for business lines, for example, in this case, the CEO, then becoming a CRO. Those kind of optics don't really gel well because one can always ask whether risk is the utmost importance or is it taking a back seat if somebody is coming from the business side and then taking over this responsibility. So these are the 2 sort of optics which I want you to address.

So thank you for the good questions. So first one, right? So you will appreciate that we have an office in Mumbai. We have office in Bangalore. We have office in Delhi, in Hyderabad, every location. We allow people to work remotely. We allow people to work from home depending on their own circumstances, right? These roles -- both the roles, the Chief of -- the Head of Audit and the CRO is based out of Jaipur because the head office is here, the whole regulatory framework is here, right? And you can ask with both the gentlemen sitting on this call that we offered them that they can work from Delhi, they can work from Mumbai, if they want some time to settle down, right? And -- but unfortunately, they also believe that because AU is in the journey of the stabilization, in the journey of growth. And their entire team is based out of -- our entire risk governance control group is based out of Jaipur. So for them, it will be so difficult to work from Delhi or Mumbai and control their teams here. I would rather ask them to explain their own stance here, but we are flexible enough. And this is a journey which we really all want to take in the next 2 to 5 years because we also need to build that system, controls and all those things. Because in a bank, once you start everything online or everything from home, it also creates a security risk because we are actually a custodian of public money also. So we need to take care of a lot of things. But in my opinion, the journey towards remotely -- remote working or work-from-home has just begun, right? And we have also taken various tests there. And it is the end state which we want to achieve in the next 2 to 5 years. You know, that's first one. The second one, Deepak Jain was never a business guy. He remained our CFO for 10 years. And as I already commented that he started rebuilding our entire team, whether it's for the back-end operations, whether it's for the risk control functions to really manage our future, right? And that is why Deepak was given the role of CEO so that he can manage IT and all those things in the back end. And we actually hired new people to really take care of risk, audit and where you saw men moving out from CRO to take care of the business function because he was a guy who handled business for -- who handled this for 5 years, and he was the right guy to really understand the whole risk around unsecured product. So that's the culture we want to build in AU, where we want people to learn, explore, express and move on in terms of their own career aspiration within the organization, right? And Deepak Jain, being a [indiscernible] content for the last 20, 22 years, remained with us for 10 years. This is one of the most important function of the risk management. Again, we don't want to go back to the similar position. We want to hire somebody, again, same-same challenges. So I think we just requested him that whether -- and we actually selected 3, 4 people around this. Chairman can comment on that. And out of that, we found that Deepak is the most eligible one to manage this because we have seen the, all the functions in the last 10 years of AU vintage. And I strongly believe that he will play a very important and fitting a role in building this function in near future.

Yes. I'll add to what Sanjay has mentioned. Deepak has been inside the Board and the -- all the committees of the Board have been very familiar with the profile of Deepak and his experience in the background. And he has been the CFO of the bank for a very long time and he has kind of been very, very seminal in contributing to the growth of the bank. So he had a good overview, has also the working experience in different verticals and a good overview and insight of the bank’s functioning. So that would be extremely complementary to his role of risk management. And we want a person who from the attitude point of view or from his disposition is somebody who is very, very detailed, a very detailed person, and that's the understanding of the Board and the committees. And by the way, I'd like to also convey that the Risk Management Committee is headed by a very experienced director, who is the former Managing Director of State Bank of India, Mr. V.G. Kannan. So we have, as far as both at the operating level, the department level, and at the committee level, there is a good amount of gelling as well as control and governance spirit. So that's -- given that it's -- we felt that on balance, though we interviewed, and we had interaction with some few other officers also. But we consider that given the span of experience and the span of activities which Deepak has been covering in his entire career and his overall approach and attitude, we feel he was the right person to fit this slot. So we have fully supported the management and the recommendation of the NRC to getting there as the Chief Risk Officer. It also helps -- I'd like to just indicate that the head office being in Jaipur is a bit of a challenge. There's no doubt, as all of you know, it's very obvious in getting people to relocate to Jaipur. But within the given constraints, the bank has been doing very well. And the earlier CRO, who we had and who continues to be with the bank, I think that will also be evidence of the fact that there is adequate continuity and stability in these functions. We have very good support team. So overall, it's a very, very supportive structure and which is stable, and that should inspire confidence. Thank you.

Yes. Sumit, Alok, can you put on that why we will opt for Bombay work-from-home or remote working.

No, I would say that the bank has been very supportive, and they had given me option of the same profile, CRO profile in Bombay, where I can update from Bombay with the flexibility as well as some other options. In case if you find that CRO position is not workable and if there are any challenges, you can also look for others over a period, right, if there are any challenges to looking in the bank. So I think I had all the kind of support that you would expect from an organization, all the kinds of support was there. But I think looking at my own personal things as well as the structure in the sense where the team was largely here, the risk management team because the type of construct we created a team, which was largely in Jaipur. These are few things which I thought, and I think -- and it's largely, my personal thing, which I thought of kind of -- which was I made the decision that I should continue with my decision. And I think that as far as organization is concerned, I think organization has been very supportive in giving me different options, either operating from Bombay as well as looking at different opportunities in Bombay.

Yes. Sumit here. Similar to what Alok just said, everything I have put on my papers been in regular touch. There has been a regular engagement with the organization in terms of a possible retention solution that can be worked out for me. Having said that, the core of the problem that lies as of today is that, like Alok mentioned, the entire team is based, both audit as well other functions, in Jaipur. And I -- my personal opinion is that if I, on an [ growing ] basis [indiscernible] probably the kind of value addition that I would want to bring on table would not be possible because of the geographical constraints. Other than that, there has been a regular engagement, and I'm thankful to the management for all the discussions that they have had around these last few weeks. And in terms of a possible resolution solution that we can work out in terms of how this continuity can be further continue in short. But so far, this is where it is. The concern in my mind is only in terms of the geographical distance away from my team and then ability to deliver what I am hired for.

Thank you, Sumit. Just one more clarification. Our NRC Director, Mr. M.S. Sriram, has to leave the call because he have to do some -- he has some classes at 9:15. If somebody want to really ask question to him, he's there for another 3, 4 minutes. Thank you.

The next question is from the line of [ Karin ], an individual investor.

I'm not only an individual investor, but a deposit holder. Myself and my friends have a very considerable 10-figure plus deposit at your bank, you see. We're also keen followers of the market and the kind of drop in the price and this news, which coming from 3rd March onwards, it was a bit spooky for us deposit holders. Forget us being investors, that's okay, we can manage. But as deposit holders having large 10-figure sums, it's a bit spooky. And yesterday, we withdrawn about half of it. So just for safety. So can you just give us some clarity? And how do we manage this? How do we manage our deposits because obviously, you are offering 7% on savings, and we have a 7.25% in FD, which other banks don't offer. So just needed clarity on that and how should we bring our deposits back to you.

So thank you for the support. And I'm really sorry for all this unfortunate events because sometimes you have to just bear it up because you can't control beyond a point. But I just want to assure you and entire facility there that your money is well saved. Because our performance around deposits, our performance around assets, our performance around collection, asset quality is supreme, honestly, because that's the way we are managing ourselves very well. And as I commented in my last investor call that bank is building up its entire base so beautifully, so well that in terms of everything, we feel more charged up, more energetic. And here, we have certain issues which need to be reported, it needs to be addressed, right? And as individual, as entrepreneur, as a [indiscernible] guy, I can just be part of the story and can work on the side. And I strongly believe that you need to -- you need not to be wary at all. We are working in the interest of depositors because I personally also believe that a bank belongs to depositor first and then the rest to the financial stakeholders. So there, I can again reassure that be there with us, and we will serve you -- serve with the core.

The next question is from the line of [ Kunal Merav ] from [ NLB ].

Sanjay, as a prospective investor in the bank, there was 2 things I'd like to get your thoughts on. One, when you talked about transparency, we struggle with the extent of transparency purely because there's been a significant lag in the disclosure of all the resignations. And they've been teed up pretty close to fundraising quarterly events. So help us understand how you're going to change that transparency going forward for prospective investors because I think it's a really big deal despite all the platitudes all the previous investors have handed to you. Second, Sanjay, in the recently concluded RBI audit, were there absolutely any exceptions noted or red flags raised by the RBI that you think investors ought to know?

Okay. And then the second one first. So I would say because as per the RBI regulation also, we need to disclose anything within 24 hours if they really want us. And this is already -- we already completed our 3-year of audit from RBI. And if we haven't published anything, you are rest assured that there was nothing very alarming or material to be disclosed because that is governed by the whole regulation, right? So I want to reiterate that we have already done 3 audit of ours, and nothing has come out. That is why no information is there in public, right? And the first one, about the disclosures, right? And you need to appreciate that if somebody goes -- in any of the function, I know the importance of control function, especially the risk in the audit. The first -- firstly is always we want to retain people. And in this case, the reason was just around that Jaipur is not an ideal position for them to work upon, right? And we were just in discussion. And you will appreciate that in the case of Alok, he actually started talking to us in the second week of July, right? And for this, close to one month, we were discussing with him about the retention and wherever, whatever way we can do for him. And he was also actively involved. And then once he decided that he can't stay on because of the all sort of reasons, we need to find new one, right? And then you need to have some kind of another maybe a week or 2 weeks, if you really want to look for because this is a very important function, and we cannot leave it just because we don't have a person. And I strongly believe that AU has a lot of talent where we can find people internally also. So I think that is why -- the exit date of Alok is maybe around October, right? So we proactively announced maybe a good 45 days early, where is the stipulation says that it needs to be on the date of exit, right, or maybe the date of appointment, right? So I think this is the usual HR practice. But to just to announce on date of his expiration will be difficult, honestly, that we go through every time and say that this is happening because then there will be a lot of operational help inside. In terms of Sumit, we haven't even accepted his resignation. He hasn't even made his mind, right? And something comes out new and we have to just come and explain us. But in my sense, we have done absolute compliance of regulation disclosures, and there was nothing to hide or nothing to -- on the governance. It is about a simple HR issue, and we were trying to resolve. The entire committees, entire Board was aware about it. Entire -- even the regulators are aware about it. So I think in that sense, we have done everything. But as we move on, we will learn from our mistakes, we will learn r from the feedback and we will try to improvise more and more on this.

Let me just add a bit to that, what Sanjay has mentioned. Let me assure from the Board side that there is a very, very strong compliance culture within the institution and which the Board is also very particular about. And we are fairly hands-on in terms of the compliance culture building right from bottom-up. So that's something which we'll need to -- we'll assure you about. And as far as the disclosure is concerned, compliance on disclosure also is ensured to the core, and that's a given with the institution. And from the Board committee point of view and the Board's point of view, we continuously monitor that on the compliance as well as disclosures. The retention policy -- there is a retention policy. The bank has a retention process, where they try to engage with the staff who have expressed their willingness -- or sorry, expressed their desire to move on. There is a culture of continuous engagement and the process which sets in and where they try to engage with the person and not knowing exactly what the problems are and then try and sort them out. And if that gets sorted out, he agrees to stay back. So it's a very gray area there. So disclosing something like that, which is in the process of maybe being sorted out and resolved also, could do more harm than good to the institution. So you have to take a call and which is a very fine sort of line. But as far as genuine disclosures are concerned, when we feel that this person has decided to go, and there's nothing we can do about it despite our best efforts, and then we take the call. And disclosure at the appropriate time is something which is a must and which is done by the institution. But the confusion -- or rather the, I would say, some degree of latitude, I mean, you need to provide to the institution because we have a culture of discussing, negotiating with the person, trying to know his problems. Because that's a big help to the individual as well as to the broader organizational culture.

I appreciate the clarification and the details. The only thought I would leave you with, at least for the prospective investors, because you certainly have a very loyal bench of existing investors. But for prospective investors, we struggle with while you're meeting the letter of the law, the spirit is not there purely because it has happened more than once. It has happened around critical times, and it doesn't sync up when we are trying to look at data about the bank's performance. So there is compliance with the letter of the law where you have 100 out of 100. There is compliance with the spirit of the law, which I think has shaken the confidence of a lot of us who are incremental investors. So I'll leave you with that as you identify areas for further improvement. But once again, I echo the sentiment that we appreciate the transparency, the efforts of transparency and the willingness to get on a call.

Can I just add on because it helps us because we are a new bank? We have -- are on the journey of for the whole corporate world, correct? So I just give you a data point like, I remain MD for the last 25 years, which is 26 to our journey. Our Audit Committee head, which is headed by our Independent Director, Mr. Rathi, sir, is there for 10, 11 years. My first lender is this bank. Still remains my highest in terms of the borrowings we do from that bank only. [ And it is the main thing ], which is CRISIL. So I believe that there are a lot of other data points also, which make us one of the most governed, most in terms of compliant organization, right? In this world also, what we're talking about -- because this is the only case. Last time in the last March, it was more of a -- just an error in judgment, right, because the Head of Internal Audit is not [indiscernible] officer, right? And as per RBI stipulation also. And in this time also, the whole regulation does not say that you, even you have to inform about Head of Internal Audit, neither the RBI, neither the -- your SEBI, right? So for us, when things are so much clear in the regulation, it’s so difficult sometime to comply on the spirit also, right? In case of Alok, we actually come 2 months before he's leaving us that he's there. He's leaving because of this reason. We have appointed a new one, and he'll be there for next 2 months, right? So I don't think that we are doing something which we won't -- we can do. But of course, there is always a scope of improvement, and we have learned again from this incident, and we will try to be more appropriate and accurate.

Certainly. Sanjay, I appreciate you taking the time and best wishes with the family regarding the health situation. Take care.

Thank you. Thank you.

The next question is from the line of Nidhesh Jain from Investec.

You alluded to highest [ posting ] from the banks during earnings call. We also do an [indiscernible] to that. So in a specific segment, we are seeing that higher [indiscernible] from the past. Or do we expect some more recognition moving forward? That is clearly the [indiscernible] is strong, but [indiscernible] continues to come up. That creates a lot of volatility inside the bank.

I'm sorry. I'm not able to understand your question.

First question, you're saying...

Nidhesh, your line is still not clear. Why don't you SMS me or what's happening, print here, and then we'll answer that follow-up.

Okay.

The next question is from the line of Abhijeet Sakhare from Kotak Securities.

More generally, the bank has been seeing high levels of attrition. So it seems like most of it is driven by mid- or junior level roles given that you mentioned top 50 have not seen much of resignations. So do you think it is a hiring problem at some level at the bank or people are not able to cope up with expectations and targets generally?

Again, I would say that if you go back and see the verticals which are more stabilized, you will see not much less attrition there. And the verticals or function, which we really want to build every month, every year, in whatever way, because of our whole business expansion, we will see a lot of churn there. Sometimes new territory, like we have ventured out now in east or in the south, you will see a lot of churn for next 3 to 4 years. But once we stabilize as a brand, once when we stabilize as a organization, people generally stick with us. And that is why I'm saying that if you would have in the last 5 years also as a bank, if you ask me one question that how many people at the top level, maybe top level, how many people would have left us, I would say, not more than 20 people, right? So that number is quite exciting, honestly. And so we are -- we don't think that we are doing anything unnecessary due pressure, unnecessary -- the culture, we've been told that the culture is very different. But I think the culture is about working. The culture is to do something every day. The culture is about the purpose. So I think that's -- that is why the AU is very special place to work, to be very honest. And we really want to be like that. Again, I want to repeat that this is 2 very unfortunate events and which we don't have any control. These 2 gentlemen are sitting here, they can reply more on that. But to take some close action here is not advisable.

Got it. Got it. Sir, second question is, like, Sanjay, when we look at the profiles of the senior management team, there seems to be some level of constant changes in their functions over the last 3, 4 years. To give some examples...

Yes. That is our strategy because I strongly believe that banking is not about rocket science, apart from your tech team. So the people -- and people generally should know how to do risk management or accounts management and operation management. And they should also be allowed to work in a different functions or different verticals because at a point of time, they are prepared to take any kind of role. And that makes them also very excited and get out of the boring kind of routine. So I think that remains a key fact for us for last maybe 20 years. And we have got a lot of success because of that only. And that is why people always remain very excited in AU that they might be playing one role as of now, but in coming years, they might be playing a different role. So again, we want to stick with that.

Sure, sir. No, we would have thought that probably they need to spend a few years to kind of adjust. For example, the CRO role has moved across 4 people in the last 5 years. So it seems a little bit odd.

No. No. No. Can I be right on data point? Before '17, the idea was to have 2 risk officers, one risk officer other than the credit risk. So that was Mayank Markanday. He was appointed in the year '15. And he remained with us as a CRO till March '21, and he's still in the bank. He's heading our Credit Card business. The other 2 guys, which you're talking about credit risk, they were once under Mayank. So there was no change. Our credit risk guy day 1 is Vinay Vaish, and he’s still reporting to Alok. So there is no change there. Again, there is no change in risk structure from '15 to 2021. It was the alignment on the basis of regulatory advice.

Operator, I just have one question from Nidhesh, who was -- whose line was unclear. Nidhesh is from Investec. His question is, in which segment are you seeing higher attrition? You mentioned that poaching has increased at the bank during earnings call of Q1.

So I would say it's across that. Our asset customers are good asset employees, are good poaching ground for NBFCs and new banks. Our tech team is a poaching ground for many of the fintechs. And our liability team is a poaching ground for many new entrants in the field. So it's across that. And -- but I think we also remain very excited, a very exciting franchise. So we also are getting a good number of people from across board. And so it's remained challenged, but it is not overly worried for us because we are in the different tangent there in terms of no legacy issue, no asset class issue, nothing there sort of. So people feel very comfortable once they join and remain with AU for first 1 year, right? And that then afterwards can be very different. So that is there. Other than that, I don't think much of issues are there.

We will move to the next question, which is from the line of [ Nishal ] from Motilal Oswal. As there is no response from the line of [ Nishal ], with that, we will conclude the conference.

Yes, please.

I would now like to -- for the closing, any closing remarks, sir, from your side?

Yes. On behalf of the AU team, we'd like to thank everyone for joining us. Please -- and ICICI for hosting us. Please reach out to the Investor Relations team in case you have any further queries. Thank you.

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