Axis Bank Limited (532215) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Axis Bank conference call to discuss the Q2 FY '21 financial results. Participating in the conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent. Unauthorized dissemination of the contents or the proceeding of the call is strictly prohibited and prior explicit permission and written approval of Axis Bank is imperative. [ Operator Instructions ] Please note that this conference is being recorded. On behalf of Axis Bank, I once again welcome all the participants to the conference. On the call we have Mr. Amitabh Chaudhry, MD & CEO [ Technical Difficulty ] to Mr. Amitabh Chaudhry, MD & CEO. Thank you and over to you, sir.

We welcome you all to a discussion on Axis Bank's financial results for the second quarter of financial year 2021. We also have on the call Rajiv Anand, ED and Head of Wholesale Banking; Amit Talgeri, Chief Risk Officer; Ravi Narayanan, Head of Retail Liabilities & Products; and Sumit Bali, Head of Retail Lending and Payments. Domestic economic activity has improved in quarter 2, and October trends remain supportive. Key leading indicators, for example, the Purchasing Managers' Index for manufacturing, electricity demand, auto sales, et cetera, indicate that many manufacturing sectors are up to pre-COVID levels. GST collections and mobility indicators and the services' PMI also suggest that a broader recovery in the noncontact services segment is underway. These trends do corroborate to some stabilization of the macroeconomic environment. We continue to be guided by the 3 vectors of our Deep Geo strategy and have made solid progress over the last 21 months. While we remain conservative in our policies and processes, we continue to pursue growth wherever we see the right opportunities. We have taken methodical steps to grow each of our business segments and are seeking marked improvement and granularity across fees, deposits, advances and costs, resulting in strong operating income growth. We have also made significant progress on our data digital leadership ambitions with new launches and continue to gain disproportionate market share in UPI and mobile banking during this lockdown. Our One Axis strategy has started yielding results, and our key subsidiaries continue to gain market share and are delivering strong performance despite a challenging environment. For the last 7 quarters, we have consistently demonstrated our prudent and conservative approach when it comes to provisioning norms, accounting policies and rating downgrades. We want to be ahead of the curve in comparison to the industry, and our actions this quarter reflect the same. In quarter 2, we have proactively downgraded accounts in the BB-and-below pool and made further INR 3,143 crores of additional provisioning. 2 key reasons for the higher downgrades. Firstly, 25% is based on routine downgrades. And secondly, based on our conservative judgment and assessing all accounts into high and low likelihood of availing restructuring, we have proactively downgraded some accounts. Puneet, in his section, will provide more details. We have now built a provisioning buffer of INR 10,839 crores over and above our PCR of 77%, which improved 243 basis points quarter-on-quarter. On an aggregated basis, specific provisions, standard provisions, additional provisions plus COVID provisions, our provision coverage ratio stands at 124% of GNPA as at September 2020 as against 76% in September 2019 and 104% as of June 2020. We have further added to the NII reserve in the current quarter we had started in quarter 1. Now we have INR 223 crores of NII reserve as part of our provisions. During the quarter, we have successfully raised INR 10,000 crores that has further helped in strengthening our capital position. Our capital adequacy ratio of 19.38% and CET1 of 15.38% are now at historic highs, providing us a strong platform to grow faster once the economy gradually emerges from this unprecedented and challenging period. We have also been maintaining adequate surplus liquidity with average LCR ratio of 117% in quarter 2 of financial year '21. During the quarter, we had Subrat Mohanty joining us as Group Executive and Head of Banking Operations and Transformation. Sangram Singh has rejoined the bank to head the CBG business. With this, let me now offer key highlights of Axis Bank's quarter 2 financial year '21 earnings and a detailed update on our business performance. The bank's pre-provision core operating profit grew 18% year-on-year for the quarter. The strong operating performance this quarter was driven by NII growth of 20% year-on-year. NIM improved to 3.58%. Strong sequential pickup of 67% in fee income. And controlled OpEx growth of 5% year-on-year. On fees, we have been focusing on building granularity across our various fee-generating businesses and have seen positive momentum continue this quarter, with some fee lines doing even better than pre-COVID levels. In Retail segment, third-party distribution fee grew 38% year-on-year, with new highs for life insurance as well as general insurance fees. Card fees and retail loan processing fees recovered with 76% and 237% quarter-on-quarter growth, reflecting sequential pickup in spends and disbursements. Quarter 2 retail fees stood 100% of quarter 2 last year, while quarter 1 retail fees stood at 57% of quarter 1 last year. In Corporate & Commercial Banking segment, share of transaction banking and ForEx fees has been steadily rising and stood at 57% of total fees in this segment, which is the highest in the last 10 quarters. There has been strong growth in transaction banking segments like current accounts and cash management services that grew 21% and 39% year-on-year. ForEx fees for the quarter grew 29% year-on-year, as we continue our focus on bringing wallet share of trade and LC business through enhanced engagement with clients. On deposits. Our deposit franchise continues to remain strong, with healthy growth and stable and granular retail deposits. CASA and retail term deposits on a quarterly average balance basis grew 20%, improving the ratio by 536 basis points year-on-year to 84%, while non-retail term deposits declined by 16% year-on-year. The savings account deposits grew by 15% year-on-year, within which retail savings account deposits grew by 20% year-on-year, driven by our deepening and premiumization efforts. Deepening resulted in existing customers' saving balances improving by 17% year-on-year. And within existing portfolio, premium segment share increase improved by 200 basis points to 36%. Quality of new-to-bank acquisitions have also improved, with average balances in the premium segment up 23% year-on-year compared to 16% year-on-year growth in new-to-bank savings balances. Our salary savings account deposits grew 28% year-on-year, as we continue to work towards leveraging our corporate lending relationships with top corporates to gain higher share in salary segment. During this quarter, we added 6.91 lakh new SA accounts. We have recently launched Liberty Savings Accounts in industry-first offering of balance versus spend that provide customers host of value-added features. The Liberty Savings Account has achieved a strong response, with over 35,000 accounts opened since its launch in August 20. The thrust and focus on current account has also been extremely high within the bank. We have witnessed pickup in current account growth on a QAB basis to 18% year-on-year. Growth has been broad-based, the growth in quarterly average balances across commercial banking, branch banking and corporate banking segments growing by 28%, 11%, 11%, respectively. The new customer account, customer acquisitions -- current account customer acquisitions improved to 29% year-on-year. Including TLTRO on the advances side, our loan book grew by 14%, with corporate loan book up 22% year-on-year, while the retail loan book grew by 12% year-on-year. In the retail banking side, we continue to see improvement in loan originations led by secured products, which has been our strategy. Quarter 2 disbursements tripled quarter-on-quarter and stood at 75% of quarter 4 financial year '20 average disbursement, of which disbursements in secured loans were almost up -- were almost 3x of quarter 1 numbers and stood at 88% of quarter 4 financial year '20. Segments like small business banking and rural portfolio, excluding MFI, showing good traction with 17% and 19% year-on-year growth in quarterly disbursements. Our Deep Geo strategy continues to progress well with 26% growth in disbursements. 88% of these loans are secured and 71% were PSL compliant. Disbursement trends in unsecured personal loans are still trending around 40% lower than pre-COVID levels. We do not offer any other variant of the vanilla personal loans with structured repayment options. Branches continue to be a major contributor to secured retail lending business with loan origination from branches in quarter 2 growing to 57% from 48% levels in quarter 2 financial year '20. This is again something we've been pushing to improve as a franchise. On the credit cards side, if you refer to Slide 23, you all will see that our retail cards spends market share has grown in the past quarters and continues to remain steady. Overall credit cards spends have rebounded with 49% quarter-on-quarter growth, led by retail spends that were up 51%. Since quarter 2 financial year '20, we have been consciously rationalizing nonprofitable and high-risk segments of commercial cards business while focusing on higher share of affluent business, which has improved 11.4% from 8.9% in the last 12 months. Our wealth management business, Burgundy, continues to be among the top wealth management franchises in the country with 24% CAGR growth in assets under management to 1.7 trillion across the regular and alternate investment solutions. Burgundy Private continues to scale up well, despite the current challenges, and its reach has extended now to 1,225-plus families with combined AUM of nearly 34,591 crores. On the corporate and commercial banking, over the last 21 months, we have strengthened the leadership across both coverage and product teams, reoriented the org structure and embedded rigor in our way of conducting business with an objective to deliver execution excellence. These changes are resulting in the transformation of the various coverage verticals, and we are steadily witnessing incremental wallet share gains. We continue to deepen our engagement with better rated corporates, focus more on working capital loans and transaction banking products and leverage on One Axis platform to offer a holistic product and service offering for our customers. The growth in loans to corporates rated AAA and AA was 102% and 9%, respectively, driven by short-term working capital loans that constituted nearly 45% of the disbursements during the quarter. There has been good traction across segments, with mid-corporates, and MNC segments up 54% and 56%, respectively, on a relatively small base. Within the Financial Institutions Group, our persistent engagement with over 90 financial sponsors, and One Axis approach has helped us open up newer opportunities across the bank. Deepening of relationships, along with new customer acquisitions in FIG, have resulted in current account QAB growth of 41% and advances growth of 23% in this segment. We have added 26 new relationships during first half of financial year '21, spread across large corporates, mid corporates, FIG and Strategic Clients Group. We have also revamped the org structure and service architecture of our Wholesale Banking Products Group. With improved product and service offerings, coupled with specialized talent inducted, we have strengthened our position as a transaction bank. Slide #30 gives you an outline of what we've been able to achieve so far. There is a lot of distance to go, but the start has been encouraging. Our GST payments market share has moved to almost 10% from 8% year-on-year. Market share in foreign LC issuances has increased by 410 basis points year-on-year to 7.5%. Our corporate customers are also adopting digital channels for payments. We have launched the digital CA onboarding that would help reduce the turnaround time. We are leading the way in biller additions in the Bharat Bill Payment ecosystem. During the quarter, the advantages of the One Axis platform came to the forefront, where in a few capital markets deal in the biotech, real estate, oil and gas sectors, we were able to offer a holistic solution to our corporate clients. The offering was helpful for the client and the bank also improved the relationship across the retail and corporate banking segments. In commercial banking, which is 11% of loans, we've been cautious in growing the loan book in the last couple of years and have a much derisked book now that is 90% secured by hard collateral. Though the overall utilization rates of working capital limits continue to remain low, loan growth picked up 6% quarter-on-quarter. We have also offered credit to MSMEs under the government ECGLS scheme and have so far sanctioned nearly INR 7,000 crores. We are looking to grow CBG business backed by reimagined customer journeys that would make the processes more effective and efficient, leading to faster loan disbursals, backed by data-driven credit decisions. During the quarter, we launched our tech transformation project that has helped to reduce service delivery TAT by 70% to 8%, reduced documentation by 60% plus, improved RM productivity by 2x and leverage on CBG's synergy with branch banking to enhance productivity and business opportunities going forward. I do want to spend some time on digital banking. We continue to invest heavily and make progress in our digital banking strategy. We are focused on select themes in our digital journey: to scale digital direct-to-consumer products, enable our staff digitally and to build and scale digital channels. Currently, across the bank, we have 800-plus people fully dedicated to digital transformation of the bank. We have built an in-house full stack team of -- tech team of 110 people who are developing the technology for us. These include design, front-end and back-end developers, DevOps, QA, et cetera. Over 75% of our digital comes from nonbanking backgrounds such as consumer Internet, fintech. Our digital products now contribute a significant proportion of the bank's sales with 73% of FDs, 72% of savings accounts, 58% of personal loans, 52% of credit cards and 48% of new mutual funds in first half being sourced digitally. We continue to maintain our strong positioning in the digital payment space. We have a 20% market share in the UPI ecosystem and 18% market share in mobile banking, with total debit and credit card spends up 49% quarter-on-quarter. We have also made significant progress towards enabling our employees digitally. Our Bring Your Own Device program is live and working at scale with 36,000 frontline staff now fully enabled. Our suite of a 250-plus bots continue to grow and find ways to enhance the digital capabilities of our frontline. Data and analytics are central to our digital build. We have deployed petabyte-scale Big Data capability on Hadoop clusters. We now have over 100 AI-based use cases leveraging this data, many of them on real-time basis. We also built a number of credit models. Some of these take up to 2,000 attributes and deliver a 20% lift on Gini as compared with bureau models. For the festive season initiative, we have introduced attractive offers for our customers on our new launch Grab Deal proposition, including flat 5% cashback on Amazon and upto 15% cashback on 20 other brands. APIs continue to be an important element of our strategy, and we continue to make progress on this front. We have built and exposed several end-to-end product APIs across corporate payments, liability products, credit cards, loans, et cetera. Several of these are live with our partners too. This quarter, we launched credit cards with Google Pay and Freecharge. While Freecharge continues to focus on payments, it has started introducing financial services products like fixed deposits and insurance focused towards the millennials and small and medium businesses. Our partners include established companies as well as innovative new-age startups, including a neobank where we have made significant progress as well. We have also launched our developer portal in beta and continue to add new APIs to this, which we intend to scale rapidly. Very quickly on sustainability side. At Axis, we have been continuously working on the ESG initiatives that we have set for ourselves as an organization. We have further increased our focus on the same by creating a steering committee comprising of senior leaders from risk, HR, digital, Investor Relations and digital banking with Rajesh, our ED, Corporate Centre, leading it from the front and will continue to update you all going forward. So far to our credit, we have the first certified Green Bond insurance by an Asian bank in 2016 of USD 500 million. The bank has a lending portfolio of INR 6,450 crores in clean energy and other low carbon sectors. The bank's primary CSR arm, Axis Bank Foundation, primary program Sustainable Livelihoods has a target of reaching 2 million families by 2025 after touching 1 million lives ahead of plans in 2017. The bank is a constituent of the prestigious FTSE4Good Index for the fourth consecutive year ending calendar 2020, FTSE4Good Index is a well recognized and credible ESG index globally. And the bank's inclusion is an endorsement of its sustainability-linked policies and practices. Please see Slide 7 and 8 for more details. One of the key thought leadership programs we have launched under our Future of Work umbrella is the GIG-A-Opportunities platform. It has received phenomenal response with over 56,000 applications so far, of which 45% applicants are women and 40% from nonmetro cities, with diverse profiles for roles across traditional and new-age banking. Moving on to subsidiaries. Our subsidiaries have delivered a healthy performance in these challenging times and continue to scale up in the ranks as they keep gaining market share in their respective businesses and start contributing meaningfully to overall value creation for the group. The domestic subsidiaries reported a total net profit of INR 318 crores in the first half, up 59% year-on-year and already touching 67% of total subsidiary financial year '20 profits, driven by higher revenues as a consequence of market share gains and One Axis group strategy. Axis Capital was at the forefront of revival of IPO markets in the midst of the lockdown with launch of 2 highly successful IPOs in the biotech and REIT space and remains one of the top investment banks in the country. It has completed 21 transactions in the first half. Its institutional equities market volumes grew 32% in the first half against a market volume jump of only 18%. Axis Capital's first half profit was at INR 57 crores after the first quarter was almost washed out. Axis Securities has now evolved into full service broker, focused on building an advisory model with customer acquisitions for the quarter of 146% year-on-year, with highest ever booking revenues in quarter 2 of INR 106 crores. During first half of '21, it has introduced seamless digital account opening process with account opening possible in 10 minutes. Its managed account products, SmartEdge and [ SmartCase ], continue to scale up well. It has also entered into referral arrangement for investing in U.S. stocks. Axis Securities' first half PAT was INR 74 crores, which was over 4x its full year financial year '20 PAT. Axis AMC remains one of the fastest growing AMCs in the country across debt and equity product categories, with average AUM growth of 48% in the last 12 months in an otherwise tough year for the industry. The growth is driven by fund performance, and Axis AMC has improved its market share to 5.7%, up from 4.1% at the end of September 19. It successfully launched its first global feeder fund, which collected INR 1,180 crores. Axis AMC's first half PAT was INR 92 crore, up 207% year-on-year. The NBFC arm, Axis Finance, is very suitably poised to gain market share and grow faster than peers once things start to mobilize -- normalize, with one of the highest capital adequacy ratio, which remains comfortable at 23.8%, lowest net NPAs. Its GNPA and NPA stood at 3.9% and 2.1%, respectively, with 30-plus book, credit productivity book being one of the lowest among the peers. Cost-to-income ratio continues to remain lowest at 25.6%. The share of retail in the overall book continues to scale up. The retail business accounts now for 21% -- 20% plus of incremental disbursement. Axis Finance's first half profit was INR 75 crores. In conclusion, overall, the quarter has been good with various businesses of the bank contributing to the strong operating performance with granularity coming through in deposits and fees, continued value -- and continued value creation in our subsidiaries. We have continued to build on our conservative stance and upfront downgraded weak assets and now have a standard asset coverage of 2.2%, including the standard and additional non-NPA provisions. We believe the economy will gradually recover to pre-COVID levels as various segments of the economy have got impacted differently. And hence, we also remain cautiously optimistic. There are going to be a few challenges for the sector related to surplus liquidity, muted loan growth and general risk aversion and asset quality, but the situation has improved in the last quarter, and hopefully, the trend will continue. Amit will give you more details. But if I see over the last 6 months' bounce rates, they have improved significantly. Our demand resolution stands at 87% -- at 97%, in line with the best in industry. In such an environment, large banks with healthy operational performance, strong balance sheet and capital position, superior operational capabilities and digital prowess are better placed when growth comes back. We are confident of emerging from the crisis stronger and remain committed to achieve our medium-term aspirations. With that, let me hand it over to Amit to take you through the risk segment in more detail.

Thank you, Amitabh. Good evening, everyone. We hope you and your families are safe and healthy, and thank you for joining us today. Let me now give you some risk insights into the portfolio. We have been continuously strengthening the risk management framework over the last 21 months, having recalibrated the risk appetite, tightened underwriting and screening standards and implemented prudent policies. This, coupled with proactive risk interventions during the last 9 months, has helped the bank through these difficult COVID times. Having applied a COVID lens across all business segments, we have focused on portfolio protection and taken a cautious approach to new business with a significant shift towards better rated corporates and secured retail lending over the last 9 months. We have also extensively used the bank's strength in analytics to recalibrate our sourcing and collection strategy. Let us now look at each of the business segments, starting with wholesale banking. The wholesale banking portfolio continues to see a significant change over the last 18 months with tightening customer selection and underwriting standards. Over 82% of the book continues to remain in the rating category of A-minus-and-better, and around 95% of the incremental advances in the last 18 months have been in the A-minus-and-above category, with around 72% being in the AA-minus-and-above category. We continue to be selective in lending, focused at top rated corporates. In the Commercial Banking Group or the SME lending business, we continue to adopt a cautious approach in lending due to the external environment. The focus continues to ensure we have a diversified and granular portfolio targeted at better rated SMEs. Over 84% of the portfolio is SME 3 and better, which is the equivalent of A-minus-and-above for SME lending. The portfolio is spread over 35 broad sectors and geographically well diversified in over 120 locations across the country. The average ticket size in this portfolio is about INR 3.3 crores, with approximately 70% of the borrowers with exposures less than INR 5 crores. The government guarantee scheme, which is the ECLGS, has also helped the borrowers with short-term liquidity and helped get their businesses back on the ground. The bank has sanctioned over INR 7,000 crores and disbursed nearly INR 6,000 crores under the scheme to existing borrowers, and we continue to service such requests. Given the slow and cautious pace of unlock in most parts, we continue to adopt a cautious approach in the entire commercial banking segment. Moving on to retail. Amitabh mentioned the pivot towards secured retail in new acquisition. Our existing portfolio continues to have a significantly high proportion of secured products, with 80% consisting of mortgages, wheels and the rural lending portfolio. New acquisitions have seen over 80% being in secured products and primarily in mortgages in the last 6 months. Our retail unsecured portfolio is around 11% of the bank's total portfolio and 20% of the retail portfolio. And to reiterate, unsecured portfolio is targeted at salaried, credit-tested and existing customers of the bank. The salaried and existing bank customers with over 80% contribution have historically seen low default rates. We continue to remain cautious in the unsecured products, and sourcing is largely restricted to existing bank customers based on tightened risk frameworks. We are also leveraging analytics to capitalize on our partnerships, which provide good risk insights for new acquisitions. Let's now turn our focus to collections, recoveries and restructuring. During the last call, we had talked of increased focus on collections with extensive use of analytical models coupled with on-ground collections and is reflected in the improving collections parameters. We continued strengthening our collections infrastructure, which comprised almost 10,000 strong force now, 8,000 of which are on the field and a 2,000-member telecalling team equipped to operate from home. The check bounce rates are slightly higher in September and October compared to the pre-COVID period, but this is on expected lines, given that we are in the second month post moratorium and with the uncertainty around the court verdict in customers' minds on payments. As part of the collection strategy, we are proactively working with customers to ensure that they honor their commitments and help them get back to normal payment habits. Our early bucket resolution rate in September was 80% of the pre-COVID levels and improving this every passing month. The 30-plus overdue of the bank, which excludes GNPAs of the total portfolio, the bank stands around 2.3% as of 30th of September. We have also looked at [Technical Difficulty] versus collected or resolution as a key indicator, especially in the post-moratorium phase. For the month of September, demand resolution stood at 94%. And with October closing a few days away, we are on track for resolution around 97% levels, which would be just short of the pre-COVID levels. We have also increased our focus on recoveries from written-off accounts in the last 6 months, and the recoveries in the last 2 months have doubled compared to pre-COVID levels. On restructuring, we have put in place a Board-approved policy, and the approach is to be selective and provide this only for customers submitting adequate evidence of COVID impact on their cash flows, income and business model. As of September 30, the restructured amount was nil across corporate and retail, although customers still have time till the end of December to apply and request for restructuring. Based on our estimates, after speaking to borrowers, looking at requests being discussed with consortium banks and retail applications, we do anticipate the overall restructured book to be a small percentage of the overall book. And this is being adequately reflected in the provisions taken. Puneet will provide greater details later in the call. So based on this assessment, I would like to give you a quick update on the stress testing we've been conducting on the various portfolios. As most of you are aware, we did have severe -- we did a stress test exercise at the start of the pandemic. Just to recap, the scenarios were built considering the spread of the infection, time to peak for the infection, lockdown and the time to normalcy of economic activity. The model which incorporated multiple variables and combination was also subjected to external validation through a knowledge partner for design, scenarios, comprehensiveness and sustainability. We have since enhanced these models to operate these learnings, the change in the pandemic, review of the impacted industries. We've looked at job losses, impact, moratorium, benefit of the policy action. And also, we've looked at prompt payment benefit for nonmoratorium customers in the stress scenarios. The results of the updated stress tests have been encouraging, and the estimates show around a 25% reduction from our April estimates. In summary, the economic situation coming out of the lockdown seems to be getting better every passing month and is reflected in both new business and collection efficiencies. Our portfolio choices on selective corporate lending, cautious approach towards commercial banking or SME and pivot towards secured lending in retail with focus on existing customers provide comfort as we come out of the COVID crisis in the coming months. We do continue to monitor the portfolio closely based on the external environment. With that, I now hand over to Puneet for the financial update. Thank you.

Thank you, Amit. Good evening, ladies and gentlemen. At the outset, our apologies to be slightly late for this call. Thank you for joining us this evening. I will discuss with you the salient features of the financial performance of the bank for Q2 FY '21, focusing on our operating performance, capital and liquidity position, growth across our deposit and loan franchise, journey of becoming a more prudent and conservative franchise and asset quality and provisioning. Strong operating performance is reflected through increase in NIMs, growth in granular fees, with some fee line items being better than pre-COVID levels, and strong growth in operating profits. We continue our journey of being a prudent franchise and strengthening our balance sheet. Net profit after tax improved 51% Q-on-Q and stood at INR 1,683 crores compared to a loss in the same quarter last year. Our operating profit for Q2 FY '21 is INR 6,898 crores, representing a Y-o-Y growth of 16% and a sequential Q-on-Q growth of 18%. Our operating profit margin, defined as operating profit to average assets, improved from 2.95% to 2.98% on a Y-o-Y basis and improved by 45 basis points on a sequential quarter basis from 2.53% to 2.98%. Our core operating profit for Q2 FY '21 was INR 6,092 crores, representing a Y-o-Y growth of 18% and a sequential Q-on-Q growth of 17%. Our core operating profit margin, defined as core operating profit to average assets, improved from 2.55% to 2.63% on a Y-o-Y basis and improved by 37 basis points on a sequential quarter basis from 2.26% to 2.63%. NII for Q2 FY '21 stood at INR 7,326 crores, representing a Y-o-Y growth of 20% and a sequential Q-on-Q growth of 5%. NIMs for Q2 FY '21 stood at 3.58% compared to 3.51% for the same quarter last year and 3.40% for the immediately preceding previous quarter. On a sequential basis, NIMs grew by 18%. The sequential increase in NIM by 18 basis points is attributed to 3 bps of capital raise that got concluded in the quarter, 5 basis points on account of lower interest reversal due to lower NPAs and 10 basis points to normal business and better liquidity management. We have started the practice of creating an NII reserve in Q1 FY '21. We have added to the NII reserve in the current quarter. The impact on Q2 FY '21 and H1 FY '21 NIMs on account of NII reserves is 5 basis points, i.e., the NIM would have been 3.63% had we not created this NII reserve. Noninterest income, comprising fee income, trading income and other income, stood at INR 3,807 crores, representing a Y-o-Y decrease of 2% and a sequential Q-on-Q growth of 47%. Fee income stood at INR 2,752 crores, representing a Y-o-Y growth of 4% and a sequential Q-on-Q growth of 67%. Third-party distribution fee income has reached 1.4x pre-COVID levels. And the income grew 38% on a Y-o-Y basis and 59% on a sequential quarter basis. Transaction banking fee and ForEx fee has reached 1.2x of pre-COVID levels. And income grew 24% on a Y-o-Y basis and grew 75% on a sequential quarter basis. Trading income stood at INR 769 crores, representing a Y-o-Y decline of 5% and an increase of 24% on a sequential quarter basis. Operating expenses stood at INR 4,226 crores (sic) [ INR 4,236 crores ] for the quarter ended September 30, 2020, representing a Y-o-Y increase of 5%. On a sequential quarter basis, the costs have increased by 14%, reflecting partially costs associated with revival of business volumes. The operating expenses to average assets ratio on September 30 stood at 1.97%, lower by 9 basis points as compared to 2.06% on September 30, 2019, and 3 basis points lower than what we reported on June 30, 2020. The cost-to-income ratio for the quarter stood at 38%. As was the case in Q1 FY '21, this quarter is also not a completely normalized quarter. Some part of the savings and costs are attributable to lower volumes, which will come back as the business environment improves. In recognition of the services rendered during these trying times, we have decided to roll out increments for our employees effective October 1, 2020. Credit cost for the quarter is 0.37% as compared to 1.89% for the same quarter last year. This represents 152 basis points decline in credit cost. On a sequential quarter basis, the cost declined by 189 bps as compared to 2.26% for the quarter ended June 30. We have made provisions on 90-plus DPD accounts not classified as NPA pursuant to the Supreme Court judgment at rates that would have applied to these accounts per extant provisioning rules for NPAs in the bank. The credit cost, including 90-plus DPD not classified pursuant to the Supreme Court judgment, stood at 0.61% as of September 30, 2020, compared to 1.89% at September 30, 2019. Our balance sheet strengthening continues. The cumulative non-NPA provisions at September 30, 2020, is INR 12,540 crores. The key components of the provisions are COVID-19-related provisions at INR 5,012 crores; restructuring, weak assets and other provisions at INR 7,528 crores. The standard assets cover, defined as all non-NPA provisions by standard assets, stands at 2.20%, up from 0.82% a year ago and up from 1.56% in the previous quarter. Our provision coverage ratio, defined as all provisions, NPA plus non-NPA divided by GNPA, stands at 124%. This reflects a 20% improvement from the 104% reported at June 2020 and a 48% improvement from the September 2019 number of 76%. Moving to our capital and liquidity position. Our capital adequacy ratio is at the highest level in the bank has ever seen, and we are carrying adequate liquidity buffers. We believe this places us in a strong position in the current uncertain times. During the quarter, we raised fresh capital aggregating to INR 10,000 crores. This added 163 basis points to our CET1 ratio. Our total capital adequacy ratio stands at 19.38%, and our CET1 ratio stands at 15.38%. Our cumulative capitalized adequacy ratio at September 30, 2019, was 18.45% and CET1 was 14.04% as at September 19. There is no component of our Tier 1 capital that matures over the next 12 months. During the quarter, we maintained surplus liquidity, which is reflected in our average LCR ratio of 117%. Towards the end of the quarter, in light of our outlook on funding availability, we reduced excess liquidity. We exited the quarter with an excess SLR of INR 34,763 crores. Growth across our deposit, franchise and loan book. Our deposits book remained resilient, growing 9% Y-o-Y and 1% sequentially on a reported basis. In line with our granularization strategy, our retail term deposit book grew 18% Y-o-Y and was flat sequentially. Our corporate term deposit book de-grew 26% Y-o-Y and 15% sequentially. We continue to prefer to focus on quarterly average balances instead of month-end balances for our liability franchise. Our total deposits on a quarterly average balance basis grew 13% Y-o-Y. Our CASA ratio stood at 44% against 41% on a Y-o-Y and Q-on-Q basis. If we decompose the growth in deposits, then on a quarterly average basis, SA grew 15% Y-o-Y and 2% Q-on-Q. CA grew 18% Y-o-Y and 3% on a Q-on-Q basis. CASA grew 16% Y-o-Y and 2% Q-on-Q. RTDs grew 25% Y-o-Y, 2% Q-on-Q. Corporate term deposits de-grew 16% Y-o-Y and 20% Q-on-Q. On the savings side, our strategy on premiumization and deepening are playing out very well. Amitabh has already spoken about it in great detail. You could find more details on it on Slide 19 of our presentation. Our overall loan book, including TLTRO investments grew by 14% on a Y-o-Y basis and 3% on a sequential quarter basis. Granular secured retail assets and high-quality large borrower relationships were the key drivers to our loan growth in the quarter. Retail advances constitute 53% of the overall advances of the bank. Retail loan book grew 12% Y-o-Y, 2% on a sequential quarter basis. Retail loans continue to be well diversified across products, 80% of the book is secured. Of our unsecured book, which is 20% of our total loan retail book, 100% of the PL book comprises salaried customers and 66% of our credit card comprised salaried customers. The LTVs on our mortgage business are in the range of 50% to 60% and LAP is 36%, providing us sufficient cushion on collateral. Our bank's strategy on retail assets continue to be centered on existing customers of the bank. 70% of retail assets originations by count in Q2 were from existing customers. 77% of the bank's credit card and 93% of personal loan originations in the quarter were from existing customers of the bank. We are seeing business traction in retail assets returning. The disbursements in our retail book were 3.1x of that in Q1 FY '21. The disbursements in our retail book reached 95% of disbursements for the same period last year and 75% of Q4 FY '20. In line with the bank's cautious stance, the profile of disbursements has changed in favor of secured loans, with secured disbursements accounting for 85% of disbursements in the quarter. The disbursements in Q2 FY '21 for home loans, LAP and auto loans stood closer to 90% of the disbursements for the same quarter last year. Rural loan disbursements for the quarter were up 19% on a Y-o-Y basis. Our Deep Geo strategy continues to progress well. And 64% of the sourcing of rural loans in the quarter were from our Deep Geo locations. On the corporate side, our One Axis strategy is gaining significant traction. Our corporate loan growth, including TLTRO, stood at 22% Y-o-Y and 2% Q-on-Q. 95% of our incremental sanctions in half year FY '21 were from A minus and above book, 71% of the incremental sanctions were to those customers rated AA and above. 38% of our book is for a tenor less than 1 year. Our total standard fund, non-fund and investments outstanding to NBFCs is INR 29,396 crores, 89% of the same is rated A or above, with none of them being granted moratoria. Our MFI exposure is INR 5,627 crores, and our retail real estate exposure is INR 16,556 crores, 57% of which is lease rental discounting. SME business. Our SME book is 11% of total advances. The book is well diversified. 90% is secured, 72% is for shorter tenor. Growth has returned to our SME loan book after the year of consolidation and recalibration of underwriting, sales processes and risks. The SME book degrew 1% on a Y-o-Y basis and grew 6% on a sequential quarter basis. We continue to take actions to enable us to progress on our journey of becoming a prudent and conservative franchise and operate in a manner that strengthens our balance sheet on a sustainable basis. In the previous quarter, we have taken actions across accounting policy changes, reserving for NII and additional provisions around COVID. Each of these themes is carried forward in the current quarter. NII reserve -- we have reserved derecognized interest in the quarter towards various items, including, but not limited to future derecognition. It should be noted that this reserving is done on income on standard assets earned during the quarter. The impact on our NIMs for the quarter on account of the NII reserve is 5 basis points. COVID provisioning. We discussed our risk models as part of our Q4 FY '20 commentary and provided an update on the same as of June 30, 2020. Our BIS model has assumptions that were conservative and the outcome of the model were in the right tale of a normal distribution. Our model updates indicate that our initial stress predictions were conservative. The bank, however, provided an incremental amount of INR 1,279 crores towards COVID risk during the quarter. With this, the bank at September 30 carries an overall COVID provision of INR 5,012 crores. A part of the top-up provisioning for COVID-19 risks in the quarter is attributable to making provisions on all facilities of the obligor not just limited to the facility for which moratorium was granted. Probable restructuring provision. COVID-19 continues to be -- continues to impact the economy, reflected in the GDP growth numbers and borrowers' stress across the banking system. The bank has not granted any restructuring as at September 30, 2020. Borrowers can, however, avail of restructuring till December 31, 2020. We have used a combination of a bottoms-up approach and risk models to create a current best estimate, I reiterate, current best estimate of the restructuring request that we may receive over the quarter. The total value of the estimated probable restructuring pool is disclosed on the slide that covers the BB and below exposure in our presentation. The estimated fund-based restructuring translates to approximately 1.6% of our loan book. There is a material overlap with the BB and below book in the proposed or potential restructuring book. We have created a provision for restructuring over and above our COVID-19 provisions for an amount of INR 1,684 crores, assuming that the entire pool gets restructured. This is a conservative assumption. Coverage on loans based on provisions made in the current quarter stands at 20% of this book, approximately. The exact number being 19%. We will update our provision assessment based on actual restructuring behavior observed as at December 31, 2020. Asset quality metrics. At September 30, 2020, our gross NPA stood at 4.18%, our net NPA stood at 0.98% as compared to 5.03% and 1.99% as of 30th September 2019, respectively. This reflects a decline of 85 basis points on gross NPA and 101 basis points on net NPA on a Y-o-Y basis. Our gross NPA stood at 4.72% and net NPA at 1.23% at June 30, 2020. This reflects a decline of 54 basis points and 25 basis points, respectively, on a sequential quarter basis. Absent the standstill to asset classification post August 31 pursuant to the Supreme Court judgment, the bank would have been required to report GNPA as per RBI's IRAC norms for asset classification. The GNPA per the said IRAC norms at September 30, 2020, would have been 4.28% and the net NPA would have been 1.03%. Even with this addition, this reflects a decline of 75 basis points and 96 basis points, respectively, on a Y-o-Y basis on gross and net NPA, and a decline of 44 basis points and 20 basis points, respectively, on a sequential quarter basis. The provision coverage ratio improved significantly to 77% at September 2020 compared to 62% as of September '19. We had a coverage ratio of 75% at June 2020. The bank's provision coverage ratio without technical write-offs and without availing of the standstill benefit also stood at 77% at September '20 compared to 62% and 75%, respectively, at September '19 and June '20. Each of our business segments has shown a considerable improvement in PCR percentages. Our Wholesale Banking Group improved the PCR from 65% in September '19 to 82% in September '20. Our CBG coverage improved from 46% to 59% in September '20. Our retail book is predominantly secured. Our PCR improved from 52% at September '19 to 64% as of September '20. The segmental GNPA and NPA and PCR for the bank's retail SME and corporate books have been provided on Slide 44 of our presentation. Gross slippages during the quarter were INR 931 crores. The gross slippage ratio was 0.64%. Gross slippage without availing the benefit of standstill to asset classification would have been INR 1,572 crores and the gross slippage ratio would have been 1.07%. The net slippages for the quarter were negative. I repeat negative INR 917 crores. The net slippage without availing the benefit of standstill to asset classification would also have been negative INR 661 crores. This was mainly on account of better recoveries and lower gross slippages. On a segment basis, our wholesale and retail businesses reported negative slippages for the quarter. Slippages in the quarter are not reflective of a normalized quarter. The slippages were due to multiple factors in the current quarter. If the aggregate of all provisions, NPA and non-NPA divided by our GNPA pool, I reiterate, now stands at 124% as against 76% as of September '19. Our BB and below book. During the quarter, we aggregate collected INR 416 crores from our BB and below book. In the current economic environment, the bank has not upgraded any borrower across fund based, non-fund-based and investments from the BB pool. Slippages from the BB and below pool to NPA for the quarter was INR 316 crores. Broken up as fund-based INR 98 crores and non-fund-based INR 218 crores compared to INR 2,007 crores in the same quarter last year and INR 1,041 crores for the previous quarter. During the quarter, there has been an increase in the BB and below pool across fund-based, non-fund-based and investments on account of 2 reasons: internal reviews and current best estimate of restructuring based on judgment and model outcomes. The downgrades into the BB and below book in the quarter were INR 3,025 crores from fund-based facilities, INR 1,531 crores from non-fund-based facilities and INR 385 crores from investments. 75% of the downgrades to BB and below are attributable to current best estimates of probable restructuring based on judgment and model outcomes, the balance 25% are attributable to internal reviews. Provisions held on BB and below and probable restructuring aggregate to INR 2,671 crores. We request you to refer to Slide 43 of our investor deck. It sets out a summary of our net NPA, BB and below and probable restructuring pool. As a result of the above, the fund-based BB and below book as a percentage of customer assets stands at 1.4% in September '20 compared to 1.1% as at September '19. The overall stress book of comprising of net NPA, BB and below and probable restructuring fund-based net of provision stands at 2.51% of net customer assets as compared to the BB and below fund-based and net NPA of 2.2% in the previous quarter and 3.1% as at September '19. As part of my concluding comments, the salient features for the quarter are: our operating performance was strong reflected in the growth in the operating profit ratio. Our capital position is the best the bank has seen in many years post the successful capital raised. We carry adequate liquidity buffers, which we believe places us well. Our deposit book remains resilient, granular and we continue to focus on month-end balances for our liability franchise. Our book mix is improving along with significant percentage of new originations being from better-rated and shorter tenor loans. Our prudence has demonstrated through choices we continue to make in derisking and strengthening our balance sheet through declining net NPAS, additional provisions and proactive recognition of stress. The cumulative nonperforming asset provision that we carry -- non-NPA provisions, we carry are INR 12,540 crores. Our standard asset cover stands at 2.2%, up from 0.8%, and our overall coverage far exceeds 100% at 124%. Amitabh spoke about our subsidiaries, delivering strong business momentum across capital markets, broking and asset management. The set subsidiaries continue to improve their industry position as demonstrated through strong growth. Axis Finance continues to maintain its cautious stance on loan growth. Its capital adequacy is at 23.8%. We reiterate our stance of stopping guidance till clarity on COVID-19 emerges. With that, management comes to an end of its comments. Thank you for your patience, and we'd be glad to take any questions you may have.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara Capital.

I had a few questions. Partly, in terms of demand resolution, is that relative to March? Or is September collections upon September billing?

Yes, Mahrukh, you're absolutely right. It is September billing and September collections. It's got no correlation to March.

Okay. And just in terms of September collection, would you be able to segregate whether there are collection for September only or would someone has paid over dues as well like of the previous months?

So the way this gets calculated is it's basically the demand for September and what has got collected in September.

Okay. So there could be some past dues.

Yes, there could be some past dues. But the way we look at it is, like I said, the demand to -- resolution is basically whatever is built in September and what's being collected. That's right.

Got it. Got it. Now my other question is on credit cost. So now you have a very good COVID cover and non-NPL power. So can you expect credit cost to start normalizing from Q3 because you've already provided your best estimate on restructuring and would you start drawing down on our stock of COVID provisions now from Q3 onwards?

Mahrukh, Puneet here. Like we said, we are not guiding in the current environment. And as we said, we believe that we continue our journey to be a prudent franchise. We recognize early and provide early, and that's where I will rest my comment for the moment.

Got it. And just in terms of this INR 125 billion of non-NPL provisions that would include the standard asset provision of INR 0.4 billion, right?

The INR 12,540 crores that I spoke about includes standard asset provisions. Amitabh spoke of a number of INR 10,300 crores plus. That is excluding standard assets, pure additional provisions.

Sure. And I just have a last question. You've given a very good picture on probable corporate restructuring. Would you have any rough estimate or guidance on retail restructuring or any quantitative color -- qualitative color you can give on it?

Mahrukh, I would guide you to Slide 43 of our presentation, the footnote. We've quantified the number outside of the corporate portfolio. The current best estimate is INR 2,500 crores. It's stated as a footnote to the slide, please.

[Operator Instructions] The next question is from the line of Adarsh Parasrampuria from CLSA.

A question again on the Slide 43. One of the comments that made was 1.2% is the restructuring expectation of the bank and you have provided 20% or so. Now how should I look at it? So it's the non-BB probable pool plus some part of the INR 9,000 crores and the INR 5,000 crores. That's the constraint? Or how does one interpret that restructuring number as you said?

Sorry, I'm extremely sorry. I was unable to catch your question given the background noise, please.

Sorry.

Actually there's -- I'm sorry to interpret you, Adarsh, your voice is not clear sir. Can you please check your phone network?

Sorry. Hopefully, this is better. What I was asking is, you all mentioned about restructuring of 1.2%, right, broadly. I just wanted to understand how that's split between -- so you've indicated a non-BB restructuring corporate pool and then you have the BB, right? So basically some part of the BB and the non-BB probable restructuring pool. Is that how one should look at it?

The way one should think about it is that the restructuring is -- the downgrades in the current quarter that we have done, which we have disclosed to you, 75% of the downgrades in the current quarter to BB and below are on account of probable restructuring. So that's the pool that is sitting in BB and below. And the amount outside of BB is stated in the column separately on Slide 43.

And the provision of 20% you hold is also on CBG and retail restructuring.

The 20% provision that we have created is on the full pool.

Adarsh, I'd like to add, this is Amitabh here. As of September 30, we have not given any restructuring. There is 0 restructuring across our entire business. The kind of requests that you have received till now are negligible. So what we have done as a bank is that we have done our own internal analysis of accounts across corporate and CBG. And obviously, retail, we've done an estimate as to what the likelihood could be on a high, medium, low basis of the restructuring amount. And we simply wanted to be ahead of the curve. We have already made a provision. I do not want you people to surmise that somehow we already have this amount where a restructuring request has been made. This is our conservative estimate of what it could be. Because if I look at the requests today, there are none, very little exists. So we just -- because we wanted to be ahead of curve, we have gone and done on a proactive basis the modeling, and we've already provided for it. That's all we have done, just to be clear.

[Technical Difficulty] second more macro question and you kind of spoke about it refer to retail one is about the stress, which is usually asked. The other is on the historic growth, right, because eventually [Technical Difficulty] So given that disbursements, while we're picking up pre-COVID level, you require growth to actually build up loan growth, right? So I'm just [Technical Difficulty] what's your assessment there, not for the next couple of quarters, but let's say, for [Technical Difficulty] Any sense that what would be your analysis on...

Adarsh, again, you're not very clear. I'm trying to guess what you're asking. You're asking about the credit growth coming back in the system. Is that the question? So we have always maintained that we have the, as a franchise, the capability to grow at a faster rate than the system. If you recall in the past, we have said that we should be able to maintain a growth, which is 600 basis points better than the industry. I -- let's see how the industry growth pans out. But if you look at the data as it stands today and even on a medium to long-term basis, I don't see any reason why we would need to change that guidance which we've been giving on a consistent basis. As Puneet said, there is no guidance for this year. But since you're talking long term, that is something which we believe as a franchise, we should be able to maintain.

The next question is from the line of Nilanjan Karfa from IDFC.

So a couple of questions. Number one, on the SME, I mean -- I understand we have done INR 6,000 crore of disbursals. The net loan book has gone up by about a little above INR 1,000 crores. And we are saying that we are fairly confident in growing that book. Now INR 6,000 crore is essentially assuming whoever has taken up, let's say, 20%, that's like half of the book. Then what makes us so confident that we are suggesting that we will start growing that SME book? That's one. Second is we've seen a very sharp margin improvement irrespective of or in spite of that NII reserve. To what extent this was driven by the TLTRO distributing? And third, if we can get a broad clarity that the net increase in -- or sorry, the gross increase in BB and below and restructuring is roughly about, let's say, 2% of the loans, which I think is fairly low, but if it holds on, it's excellent. But what is the largest ticket size or the largest ticket size out there?

So let me try the SME question. I think the point that you're making is INR 6,000 crores is what we disbursed in ECLGS. Remember that the ECLGS piece also applies to our retail SBB book as well. So on the corporate part of our SME, it is about INR 4,000 crores. So what customers have done -- obviously, there has been an assessment of these customers, what customers have done is because of the uncertainty, particularly in the first 6 months, in a very large percentage of these customers, they have utilized the ECLGS money to be able to repay some of our existing working capital lines, et cetera. Because if not anything else, they're looking to reduce their interest costs. And as demand begins to come back, they will come back to draw down on their loans at this point in time. If you look at utilization, utilizations are down anything between 4% to 5% compared to March and about 1% to 2% even compared to the previous quarter. So therefore, I think what they have -- what we are seeing customers in the SME side utilize this for is for liquidity. And as demand begins to come back, we do believe that utilization levels will go up and, therefore, for us to be able to build the book.

Right. But Amit, if I can interrupt, I see that term loan part of the SME book has actually gone up just we have the CBG business.

Sorry, can you repeat that?

I'm saying that CBG business, if you look at from March to September, the term part of the CBG has gone up about 50%.

That's correct.

So if the liquidity is being utilized, should have been the working capital, right? I mean -- or am I thinking it wrong?

No, no, no. So what is happening is, they have drawn down on ECLGS and repaid working capital, right? So therefore, they have outstanding working capital lines with us at this point in time.

Got it. Got it. Got it. That makes sense. The second was on margins and third was on the gross increase in...

To your question on TLTRO having an impact on the NIMs. We had TLTRO for a meaningful portion of the last quarter also. On an incremental basis, TLTROs are not the drivers of NIM. Our NIM increase of 18 basis points is driven by 5 basis points of lower interest reversal on lower nonperforming assets, 3 basis points for the capital raise that we did in the current quarter and 10 basis points as...

Rate increases, yes.

Genuine spread improvement that we have in our business.

And the final question on the ticket size of the net -- of the gross increase that we have seen sequentially.

So your question was on ticket size of the probable restructuring book, if I got your question correctly.

Yes. I mean, what about INR 4,500 crores in funded and non-funded, which is addition to BB and below, and about INR 3,000-odd crores in the BBB book probably.

So I think to your question on whether there is a lumpy exposure sitting there? No. The exposures are broadly granular. And they would be granular in the nature of low 3-digit crore exposures.

The next question is from the line of from Antariksha Banerjee from ICICI Prudential AMC.

Can you hear me?

Yes.

My first question is on the corporate loan portfolio. So as you've mentioned that the bulk of the growth has come from AA and above segments. I just wanted to ask what is the competitive scenario in this high-rated corporate pools? And if I see your net loan growth, I'm assuming, like your peers, you would have experienced repayments and prepayments from some of the large corporates as well. So the disbursement of these pools will even be larger. Does it make sense to -- I mean, does it make enough money at the current yields because you have reported a spread on the overall book, I'm not sure how the spreads attractive are in this segment. Can you comment around that?

Like some of our peers, we are also -- we've also seen repayments, which have been higher than the same time last year, particularly from some of our better-rated corporates. Having said that, I think it is a conscious strategy for us to grow within the A and better space. And within that, go even higher into the AA and better space. The way to think about that really is in an environment where liquidity is so abundant, there will be opportunities for you to be able to price appropriately. If you're not able to price appropriately, your ability to get some of the other businesses to shore up your RAROC which is the model that we use, certainly exists. And especially for a bank like us, where our relative share of wallet in non-credit incomes is even today still continues to be relatively low. Our ability to gain market share in these spaces is good. And we continue to gain there as shown by the strong growth on non-credit fees.

If I understand correctly, this strategy will remain till the time the security abandon continues. That makes money for the bank. Is that right?

I think it's fair to say that the abundant liquidity and the fact that there have been relatively smaller number of people borrowing. Remember, there is no private CapEx going on at this point in time. Pricing power will be limited. But at some point in time, in an environment where the fisc is where it is and inflation being where it is, it is likely that some of this liquidity will go away and some of this pricing power will certainly come back.

And the second question is on the current account. So basically, I just wanted your thoughts if you have -- I mean, devised any initial strategy or what your thoughts are on the new draft regulations and if they get implemented in the current form, how does that impact the bank?

So we've looked at the current account circular which comes into force really in the next week, 10 days. And we have 2 types of strategies. One is obviously where we want to have a defensive strategy of customers who -- of whose current account balances we already have, we want to certainly defend that, and there are various strategies that are adopting around that. But there is also an offensive strategy given our strong position, given our strong distribution, given the strong technology capabilities that we have on things like cash management, et cetera, we are also -- we also have an offensive strategy to be able to gain market share. So therefore, that is really how we are strategizing around this, how this plays out, we will know over the next, let's say, 3 to 6 months.

So on a net basis, Axis is looking to gain market share. Is that a fair comment to make?

Yes.

The next question is from the line of Amit Kumar Premchandani from UTI.

Sir, just a question on the fee income front. As per Slide 14, the third-party distribution fees has gone up by 38%, largely led by insurance. What is driving this sharp pickup in insurance fee income?

I think it is a question of putting the distribution strength behind it. I think in today's world, there is a reason to ensure that we are able to provide financial exigency planning for our customers. So the entire distribution footprint of the bank is focused on delivering that requirement to the customers.

Is there any addition of significant partner because 45% Y-o-Y growth is not met -- is not connected to the underlying insurance premiums that we are seeing.

So I think the way I would like to kind of articulate a response to that question is that it continues to be a distribution play, and we have brought to bear the power of distribution to ensure that we are able to cater to the current requirements of our customer. And that is how it has played out in terms of the results that you see.

I think it also partly reflects the rigor and the granularity which I've been talking to all of you about that we have been going about each of these things in a particular calibrated way. And while these numbers are what they are. I mean, but our hope is that this will become a permanent feature of how we work on our fees going forward and how the numbers pan out because of the way we are going about it. So it's not hopefully a onetime thing. It is how we are building this up.

And sir, just on the question on the provisions that you have created on account of COVID, especially. Is it fair to assume that you have taken into account the LED of the portfolio and created provision and hence whatever needs to be done on that morat book or related NPLs have been taken care of? Or as this slip going forward, provisions will kind of continue to move accordingly?

Like we previously stated, our provisions are an outcome of our risk models. And yes, the risk models have amongst many parameters, a few of the parameters that you have set out on the call.

Sure. And final, sir, just a clarification on Slide 13, in the NIM movement graph, the interest reversal is shown as a 5 basis point positive. Is it correct?

Yes, it's correct. The reason it's shown as a 5 basis points positive is, this is a comparison to the previous quarter. Our slippages in the current quarter are significantly lower than the slippages in the previous quarter. In fact, slippages in the current quarter are negative. Consequently, the interest reversal for the period compared to the previous period is lower, therefore, a positive variation on NIM.

Then what happened to the -- what is the -- what should be the reflection of the interest which you have not accounted for on a conservative basis this quarter?

5 basis points is the impact of the NII reserve created in the quarter. Had I not created the 5 basis points NIM, the number of NIM for Q2 FY '21 would have been 3.63%. And since I created 5 basis points in the same part -- a similar 5 basis points NII reserve in the previous quarter. Therefore, in the waterfall, you will see the prudence impact as nil.

I would request Mr. Premchandani to rejoin the queue. [Operator Instructions] The next question is from the line of Abhishek Murarka from IIFL.

So 2 questions and 1 just data point that is required. The first question is, if I look at the total incremental loans where you have estimated either probable restructuring or you have downgraded into BB and below. If you can give some color on those loans, which sectors, how many accounts, what really led to either the downgrade or estimation of probable restructuring? So that is question one. The second question is on cards. Now you've mentioned that you've been rationalizing your portfolio. But Axis sort of stands out when I compare it to other peers in the industry. So if you can be a little more specific as to why you need to rationalize? And what is that part of that portfolio maybe self-employed or whatever, which needs rationalization? And whether you are at the end of it or it's going to probably continue for some more time? And the data point I just required was the exact gross and net customer asset number, if you can share that, please.

Abhishek, this is Sumit Bali here. So on the card side, if you look at the granularity which we have given, last year, Q2, 39% of the spends are on the commercial card side. That number for this quarter is 14%. And given the softness in the economic environment, we had been pooling the limits. So that's how you see the reduction in the commercial card spend. On the retail card spend, the market share actually has gone up from about 6-odd percent to 7%. Trust that answers your question.

Sumit, I'm asking about the drop in the number of cards. If I look at the data posted by RBI, there's actually a 2.5% decline in the number of cards that you're also carrying. And everybody else in the industry is adding almost 0.6% to 1% on an M-o-M basis.

We've been cautious on the card issuance in the first 6 months. That's reflection of that. But if you look at our number Q-on-Q, they've been growing. Q2 is better than Q1, and we do see improvement going into Q3 also.

Okay. So incrementally, the additions would have sort of begun, you would have started sourcing more cards on a net basis.

Yes. So [Audio Gap]