Axis Bank Limited (532215) Earnings Call Transcript & Summary

Thank you so much. We welcome you all to our discussion of the Axis Bank financial results for the quarter and financial year ended March 31, 2021. Apart from me and Puneet, we also have on the call Rajiv Anand, Executive Director and Head of Wholesale Banking; Ravi Narayanan, President and Head of Retail Liabilities and Products; Sumit Bali, President and Head of Retail Lending and Payments and [indiscernible] Chief Officer.. Financial year '21 was an extraordinary year for India. We at Axis adopted and persevered through a once in a lifetime crisis to fortify our balance sheet [indiscernible] operational performance. This fiscal, we witnessed strong sequential growth in deposits and advances with every passing quarter. This was driven by our strategy of delivering granular growth and a clear focus on staying close to the needs and aspirations of our customers. Further, our efforts are also getting acknowledged by independent parties as well. During the quarter, Axis Bank was ranked #1 and was the only domestic bank in the large corporate institutional coverage quality leader category at the 2021 Greenwich Excellence Awards. We were also named the Best Digital Bank in India by 2 publications, namely Financial Express and Asiamoney. We continue on a path of sustainable growth on the back of a positive change in culture, bigger aspirations among our employees and strong focus on execution. We are monitoring the macroeconomic situation and emerging health challenges of the COVID second wave in India. We have the requisite strength in the balance sheet and are well prepared for the future. We will continue to be prudent and bold. Before I go further, I would like to place on record my gratitude to all of my Axis colleagues and our partners who have gone beyond the call of duty during the year. They have been exemplary in their commitment. Our ambition to build a sustainable future-ready bank is defined in the 6 focus areas within the GPS framework. First is strengthen the organization core and quality of our balance sheet significantly; second, invest in technology capabilities to deliver on our transformation plans; third is act with relentless focus on making Axis digital; fourth, build granularity across all our business segments to drive sustainable growth; fifth, deliver strong operating performance with improvement in return metrics; and sixth, is to create significant value among our key subsidiaries. Let me now discuss each one of them in further detail. Strengthening the organizational core and quality of our balance sheet differently. Sustainability continues to remain the foundation of the bank's GPS strategy. In the last 2 years, we have taken concrete actions towards strengthening the core around policies, processes, controls and operations. Our risk management framework is more mature and broad-based today. And this is reflected, for example, in the strength of our credit underwriting processes. This conservatism extends to our accounting policies as well. We have made significant progress on legacy issues with the proportion of BB and below book having steadily declined over the years. The quality of new credit organizations has improved with 94% of the incremental corporate sanctions in financial year '21, coming from those rated A minus and above. We have been proactive and prudent, and we have built significant additional provisioning buffers with standard asset coverage ratio of 1.95%. The bank's strong balance sheet and healthy capital with CET1 of 15.4% and shows that we enter the cycle from a provision -- position of strength. We have moved the needle on processes, controls and execution rigor. The results are evidence of this, though we'll be the first to admit we have more distance to cover here. As far as investment in technology capabilities are concerned and where technology is at the core of future-ready access we are building, the plan that we have accelerated our technology investment plans. In the last 24 months, we have ramped up our OpEx and CapEx spends in technology by 79%. We are modernizing the core systems at speed, scaling up the cloud portfolio for supporting the Infra and real-time business models and building resilience in our technology infrastructure as we respond to the increase in transaction volumes and the newer digital lines of business. We have also shifted to an agile way of working with multiple pods and squads running the organization-wide transformation programs. We have also made significant investment in the Business Solutions group to deliver innovative technology solutions and build greater collaboration between business and technology. We started a multiyear technology transformation program this year that will accelerate our journey to place technology at the core of our future operating model. We have taken a cloud-first approach for our digital banking platform. Our 50-plus initiatives on cloud is an evidence of an early leadership in this area within the Indian financial services sector. We use this capability during the pandemic to enable one of the largest work-from-home programs in this industry with over 20,000 concurrent users who are able to work remotely with access to all the bank systems. We have signed up with a leading cloud service provider to collaborate on core modernization, reimagining customer journeys and adopting global best practices in this area. We have also invested heavily in the areas of IT security and data privacy as we transition to cloud. In financial year '21, we launched more than 220 high priority projects. We are broadly tracking to plan with 85% of the expected work finished and more than 50% projects fully completed. We intend to invest significantly in customer experience through an optimal mix of tech and touch. The execution of these transformation projects remains on track with positive outcomes in the form of reduction in turnaround times, improved productivity and better customer experience. Third was around making access digital. Digital, for us, is not about making incremental changes. We have set up a distinctive digital data banking team with the objective of not only taking a fundamental relook and reimagining end-to-end customer journey, facing propositions, but also transforming the operations and building innovative capabilities in the bank, which makes us ready for a digital future. During the year, we made 16 of these initiatives live, taking the overall digital offerings to 28. Of the other offerings we are industry first. For example, a cloud-native loan management system, which has been built in house. We have also started seeing traction in the new account acquisition, leveraging the video e-KYC platform. We have opened over 30,000 video KYC based accounts in March 2021 alone and over 1.35 lakh accounts for the full year financial '21. On Whatsapp banking as well, we have seen good traction with 5 lakh customers already onboarded in the first 2 months of launch. We have also launched a Buy now Pay Later product along with Freecharge, customers can now enroll through a simple 3 step process and spend at over 400 merchants, both online and off-line. We launched a couple of fully digital products on the Forex front. Customers can now send outward remittances in 100 currencies from our mobile app, fully digitally. Similarly, customers can also avail a Forex card from any of our digital channels. Fourth was around building granularity across all our business segments. On deposits, over the last 2 years, we have reoriented the structure to drive rigor and rhythm, fill the product segment gaps to leverage our distribution, including alternate channels to improve the customer acquisitions. These continue to reflect in the growth numbers. 1.8 million new liability accounts are opened in quarter 4, up 10% quarter-on-quarter, taking the overall number of new liabilities accounts opened in financial year '21 to 6.7 million. New savings and current account acquisition grew 12% and 7% quarter-on-quarter, respectively. Average retail savings balances for new accounts were higher by 11% year-on-year. New salary relationships added during the year grew 55% to 2,700 plus themes. The salary and NRI segments on a QIB basis grew by 24% and 22% year-on-year, respectively. Our Axis Virtual Center, AVC, where we have around 1,500 virtual relationship managers, managing relationship with our customers, existing customers and the affluent and other programs. It was always an important channel for us, but has become more critical given the challenges of meeting customers in person during the pandemic. Our customers have embraced our proactive approach to this channel, and we continue to make significant investments here. AVC expanded to 3 new centers across Mumbai, Aadhaar and Calcutta during last year, and it is now present across the country with 6 centers and multilingual capabilities. We have plans to expand this further in financial year '22. Today, we connect with more than 3 million customers every month through AVC. As a result of rigor and rhythm across branch banking, digital banking and AVC, we have seen significant uplift in the sequential growth trajectory of our granular QAB deposits. SA and CA deposits have grown sequentially on a quarterly average basis by 4% and 5%, respectively, for each of the last 6 quarters, as against an average of 3% for the last 16 quarters. Coming to advances, after many quarters, the growth in advances has come from all segments, retail, CBG and corporate. Focus, however, has been on quality growth across the 3 segments. The retail segment continues to see strong momentum, with highest ever quarterly retail disbursements during quarter 4. Domestic secured retail loans grew 13% year-on-year and 8% quarter-on-quarter. Secured segments like HL, LAP and SBB, continue to grow strongly, with 45% Q-o-Q, 51% and 42% Q-on-Q growth in disbursements, respectively. The overall quarter 4 retail loan disbursements were up 47% Q-o-Q, which is over 6x that of what we did in the first quarter of last fiscal. Our home loan log-ins and disbursements for quarter 4 financial year '21, touched highest ever quarterly numbers driven by improved rigor and rhythm and reduced term downtimes as a result of project initiatives we've undertaken in this segment. Our Geo strategy continues to progress well, with focus on expanding reach in rural and semi-urban areas. During quarter 4 financial year '21, we enrolled over 6,300 common service centers, CSCs, taking the overall CSC count to over 13,500. The disbursements from deep Geo branches grew 111% year-on-year and 61% quarter-on-quarter. Overall, rural loan book disbursements grew 47% quarter-on-quarter driven by farmer funding, gold and farm equipment loans. Our partnerships with agri corporates and rural local ecosystem and top equipment manufacturers for tractor and other farm businesses is helping too. On the commercial and the Corporate Banking segment, our CBG business is a strategic priority for us as we bet on the strength and the future of the CBG sector in India. It also remains one of the more profitable segments for us. We have spoken about [indiscernible] conservation program in CBG, projects on call which aim to reduce friction in customer journeys and improved sales productivity within the CBG business. The results of the program is reflecting in our performance in this segment. Lean and digitally enabled process streams across multiple customer journeys have reduced the loan approval time by 75% and improved the resource productivity by 2x. Further limiting the branch network and better collaboration between businesses, branch and operations team, has resulted in 2x growth in originations from branch network. The granularity of the business was reflected in 80% year-on-year growth in the number of new customers added. On deposit, the current account deposits from CBG businesses grew by 27% year-on-year. In the corporate segment, our focus has been to grow the book profitably, emphasizing on segments that offer high-growth of policies and better risk [indiscernible] on capital. We also remain focused on further deepening our relationships with better-rated corporates through our transaction banking offerings and leveraging one access capabilities across the access group. The corporate loan book, including TLTRO, grew by 16% year-on-year and 9% quarter-on-quarter, led by higher growth across our focus segments like mid- corporates, government coverage and MNC, that grew by 31%, 66% and 49%, respectively, on a year-on-year basis, albeit on a lower base. During the quarter, we have added 337 new relationships, taking the overall relationship added in financial '21 to 789. Our market share in mid-corporate space is not commensurate with our overall advances market share. Hence, growing this book remains a top priority for the bank. We have invested in building a strong team here, and we have created our operations playbook to deliver strong growth over the next few years in this segment. Our presence in the key business centers have increased from 15 to 20 cities and the plan is to expand further in financial year '22. During financial year '21, 62% of the loans in this segment were rated A and above. We have a unique capacity to provide a complete range of solutions to corporates, leveraging our corporate banking franchise and the strong capabilities of our subsidiaries. During the year, the advantages of the One Axis platform came to the forefront. Different businesses of the bank like wholesale banking products, trustee services, retail liabilities, [indiscernible], Axis Securities and Axis Mutual Fund came together to offer One Axis solution in 21 capital market deals executed by Axis Capital. These coordinated efforts are differentiating our value proposition and strengthening our relationships with the clients. Moving onto our cards and payments business. If you refer to Slide 27, you will see that we have rationalized nonprofitable and high-risk segment of commercial card business, impacting the overall market share. Our new card issuances have started to grow from quarter 4 financial '21 onwards, and we expect this to continue and will reflect retail spend share going forward. During the year, the bank's partnership with Flipkart, Google Pay and Freecharge resulted in sourcing of over 2 lakh credit cards that contributed to 21% of our overall card sourcing in financial '21. Flipkart Axis Bank credit card crossed 1 million cards in February '21. On the UPI space, the bank now has partnerships with all the major third-party UPI apps in the ecosystem, including Google Pay, Amazon Pay and PhonePe with over -- with more than 186 million customer repays, registered with us as on March 31, 2021. On the wealth management side, our wealth management business, Burgundy, continues to gain increasing traction with assets under management of INR 213 trillion (sic) [ 213,085 crores ], up 45% year-on-year across the regular and alternate investment solutions. Burgundy Private continues to scale up very well, up nearly 3x year-on-year to cross INR 50,000 crores in combined AUM. We now manage wealth for 1,666 families, up from 853 last year. As far as operating performance is concerned, in face of the adverse macro conditions in the first half of financial year '21, the bank's financial equity NII growth of 16% and operating profit growth of 10%, represents a healthy performance and demand states resilience of our operating model. This has been the outcome of our rigorous acquisition, execution of our deep Geo strategy over the past 2 years with initiatives I just highlighted in the earlier 4 themes. Puneet will provide details of the financial performance later. As far as the subsidiaries are concerned, we have spoken about our strategy to scale up our subsidiaries, so they start contributing meaningfully to the bank's performance. Our subsidiaries continue to deliver industry-leading performance during the quarter with total financial year '21 profits of INR 833 crores INR, up 75% year-on-year. If you analyze the second half earnings of these subsidiaries, it will support the INR 1,000 crores figure. The net worth and earnings of these subsidiaries have grown at a CAGR of 17% and 57%, respectively, in the last 2 years, even as the bank's investment in these subsidiaries stood flat at around INR 1,815 crore. During the quarter, we also completed a couple of transactions that will help us deliver stronger value to our customers from a life insurance distribution and retail broking businesses. We completed the Max Life stake acquisition earlier this month and now together with our subsidiaries, access capital and access securities, we own 13% -- 12.99% stake in the company. We are now a copromoter. We have shared a strong business relationship with Max Life for over a decade now. We will have a stronger strategic alignment with Max Life with this transaction that will make us more competitive in the fast-growing life insurance sector. In Axis securities, with the acquisition of Karvy's customer trading accounts during the quarter, Axis securities now has 3.6 million customer accounts and is the third largest player based on customer base. We see huge growth opportunities for us to activate these accounts and a possibility to cross-sell various banking and financial products to these customers based on their needs. The broking revenues for Axis Securities grew 122% in financial year '21 to an all-time high. Its financial equity '21 PAT was up 10x and ROE improved from 15.5% to 41% in the last 2 years. Axis Finance is poised for strong growth as a full-service franchise operating -- offering retail as well as wholesale lending solutions across the lending spectrum. Over the last 2 years, Axis Finance has been investing on building a strong customer-focused franchise. In financial year '21, disbursements grew 50% year-on-year. Around 25% of the incremental disbursals are coming from retail now, with retail book at 27% of total loans. Wholesale book composition has also undergone a massive shift over the last 2 years with focus on related companies and cash flow backed transactions. The overseas book quality continues to be strong. No accounts are required -- were required to be restructured under the COVID restructuring scheme. Net NPA stands at 2%. Axis Financials' Financial year '21 PAT stood at INR 211 crores, up 9% year-on-year, with ROE of 14.6% and healthy CR at 20.4%. Axis Capital continued to maintain its leadership position in ECM and was at the forefront of revival in capital market equity during the year. It completed 62 ECM deals, highest ever in the year to tap -- top the ECM table for the fourth year. In financial '21 PAT INR 166 crores. ROE improved from 16.4% to 36.3% in the last 2 years. Axis AMC. Over the last 2 years, our mutual fund business has strengthened its market position, invested in its leadership team and launched innovative products and equity savings portfolio, including some global and sustainability team based investing strategies. Axis AMC today is one of the fastest-growing AMCs for the last 3 years with average AUM growth of 42% and 134% in financial year '21 and the last 3 years. We have continued to leverage our distribution channels, including digital to acquire new investors and improve customer experience. Axis AMC's full year PAT grew 100% to INR 242 crores. And my concluding remarks, there is a trend of larger and better prepared players relatively doing better than others in almost every industry. In financial year '21, banking was no exception to this trend, a disruption like pandemic often redraws the baseline. We see this as an opportunity to invest and get ahead in the game. However, before I conclude, I would like to state that the spread of second wave of COVID has now intensified and throughout the country, the interplay of the pandemic and mobility restrictions will, of course, have an impact on economic growth in the short term. We are hopeful this will be short-lived with coordinated action and support from all the relevant authorities. We also believe that we have building blocks firmly in place. The rigor and rhythm that we have inculcated in our working is leading to a positive cultural change in the bank. Our investments in technology, digital and multiple business transformation initiatives have set us on the right trajectory to deliver sustainably higher growth than the market across products and businesses. We are quietly confident about our future. With that, let me hand it over to Puneet.

Thank you, Amitabh. Good evening, ladies and gentlemen. Thank you for joining us this evening. I'll discuss the salient features of the financial performance of the bank for Q4 FY '21 as well as full year FY '21, focusing on operating performance, our capital and liquidity position, growth of costs, deposits and loan book, journey of becoming a more prudent and conservative franchise, our asset quality, restructuring and provisioning. We have consistently stated that this financial year has been all about strengthening our core businesses and ensuring that our balance sheet is resilient across cycles. I'm happy to state that we've been able to deliver on both objectives Amitabh spoke at length on the progress made on each of our businesses. My focus, hence, will be on our financial performance. For the full year -- full financial year FY '21, our key numbers are as follows: NIM stands at 3.53%, a Y-o-Y growth of 2 basis points. Domestic NIM stands at 3.68%, a Y-o-Y growth of 3 basis points. Our NII stands at INR 29,239 crores, a Y-o-Y growth of 16%; operating profit at INR 25,702 crores Y-o-Y growth of 10%. Operating profit margin stands at 2.74%. Cost to assets stand at 1.96% compared to 2.09% for the last financial year, reducing 13 basis points on a Y-o-Y basis. Cost-to-income at 41.7%, improving 80 basis points Y-o-Y. Credit costs at 1.87% improving 28 basis points Y-o-Y despite FY '21 seeing COVID-19-related stress and slippages. PBT stands at INR 8,806 crores, increasing 80% Y-o-Y. PAT stands at INR 6,588 crores, increasing 305% Y-o-Y. GNPA at 3.7%, declining 106 basis points and NPA at 1.05%, declining 51 basis points. The PCR stands at 72.4% improved 340 basis points Y-o-Y. In Q4 FY '21, we have made prudent additional loan loss, investment depreciation provisions aggregating INR 1,882 crores. This has adversely impacted the PAT and PBT for the quarter by INR 1,409 crores and INR 1,882 crores, respectively. The breakup of the additional provisions are as follows: INR 803 crores towards voluntarily improving the provision coverage of our CBG book from 58% to 80%, which aligns it with the higher PCRs we hold in other segments. The existing provisioning policy was fully compliant with the RBI directive, the changes made in the quarter relating to rates will now apply on a consistent basis on all future recognition of NPAs. We have also adopted a rule-based write-off policy for loans in this segment. INR 1,079 crores towards security receipts. With this provision, the balance -- with this provision, the bank has fully provided for all security receipts on its balance sheet, i.e., the carrying value of security receipts on the balance sheet of the bank at March 31, 2021, is nil. Against the provisions made in the last 2 quarters on security receipts, the reported NAV of the security receipts stand at INR 1,393 crores. In this backdrop, we will discuss our Q4 performance. The reported NII for Q4 stood at INR 7,555 crores, representing a Y-o-Y growth of 11% and a sequential Q-on-Q growth of 2.5%. Reported NIMs for Q4 FY '21 stands at 3.56% with a Y-o-Y growth of 1 basis point. The impact of interest on interest P&L interest waiver emanating from the Supreme Court judgment, estimated basis RBI directions and IBA input aggregate INR 163 crores, this amount has been debited to interest income. Our fee income stood at 3,000 -- INR 3,376 crores, representing a Y-o-Y growth of 15% and a sequential quarter growth of 16%. 64% of our fees come from our retail business, 36% comes from our wholesale business. Third-party distribution fee increased 43% Y-o-Y and 41% on a sequential quarter basis. Commercial banking business, which we've been investing in fees grew 26% on a Y-o-Y basis and 51% on a sequential quarter basis. Transaction banking fees grew 19% on a Y-o-Y basis. Forex fee grew 7% on a Y-o-Y basis. We have seen market share gains across our FX letters of credit and Forex flows. Trading income stood at INR 789 crores, growing 198% Y-o-Y and 115% sequential quarter. The increase in trading profits for the quarter is attributable, mainly to a sale of a strategic investment, which -- on which we recorded profits of INR 299 crores for the quarter. Other income stood at INR 503 crores, flat on a sequential quarter basis. The recovery from the written-off pool on retail assets which sit as part of our other income improved 78% Y-o-Y. This gives us comfort that recoveries could hold up even if there were fresh slippages though with a lag. Operating expenses for the quarter of INR 5,359 crores grew 8% Y-o-Y and 6% sequentially. 28% of the increase in cost on a Y-o-Y basis is on account of choices made for provisioning on the social security code. The balance in operating expenses growth Y-o-Y is attributed both to our higher business volumes and our investments in technology. Operating expenses to average assets stand at 1.96%. Cost-to-income for the quarter is 43.8%, lower 200 basis points Y-o-Y and 150 basis points on a sequential quarter basis. Operating profit for Q4 INR 6,865 crores, Y-o-Y growth of 17%. Sequential Q-on-Q growth of 13%. Our operating profit margin for the quarter stands at 2.84%, improving 22 basis points on a Y-o-Y basis. Provisions and contingencies for the quarter, including INR 1,882 crores for CBG provisions and security receipts were INR 3,295 crores, declining 57% Y-o-Y and 28% Q-on-Q. The bank has neither made not utilized any of its COVID-19 provisions for the current quarter. The reported credit costs for the quarter are 1.7%, representing a Y-o-Y decline of 107 basis points and a sequential quarter decline of 160 basis points. The more appropriate way of looking at the credit cost for the quarter is excluding the catch-up provisioning on recognized NPAs due to the change in provisioning rules of our CBG portfolio. The credit cost for the quarter, excluding CBG provisions, stand at 1.21%, representing a Y-o-Y decline of 156 basis points and a sequential Q-o-Q decline of 209 basis points. Annualized Q4 credit costs, net of recoveries from the return of pool and onetime catch up CBG provision stand at 0.99% compared to 3.02% for Q3 FY '21 and 2.34% for Q4 FY '20. Profit before tax, INR 3,570 crores, representing a sequential growth of 139%. Profit after tax INR 2,677 crores, representing a sequential quarter-on-quarter growth of 140%. The Y-o-Y picture for PBT at PAT is not comparable as we reported a loss in Q4 FY '20 on account of our prudent COVID provisions. Annualized ROE for the quarter stood at 11.72%, a 2.4x increase on a sequential quarter basis. The strength of our balance sheet is reflected through the cumulative non-NPA provisions, which now stands at INR 12,010 crores. The key components of the provision are COVID-19-related INR 5,012 crores, restructuring weak assets and other provisions of INR 6,998 crores. The standard asset cover defined as all non-NPA provisions by standard assets stand at 1.95%, up from 1.38% at [ March '20 ]. Our provision coverage ratio, all provisions for NPA plus non-NPA provisions by GNPA stand at 120% compared to 95% as of March '20. Our capital and liquidity position. The risk-weighted assets of the bank at 31st March 2021 stands at 64% as compared to 67% at March '20. This improvement in RWA is reflective of the quality of the business being done by the bank. Our total capital adequacy ratio is 19.12%, our CET1 is 15.4%. Our CET -- our capital adequacy and CET1 improved by 159 basis points and 206 basis points on a Y-o-Y basis. The prudent COVID provisions we carry at March 31, 2021, provide us with an additional capital cushion of 69 basis points over and above the reported capital adequacy. Our average LCR for the quarter was 115%. Our excess SLR stood at INR 57,915 crores. On growth across our deposit franchise. On the savings side, we are focused on premiumization and deepening of our deposit franchise. And that has been playing out well. Amitabh has already spoken about it in great detail. We'll request you to refer to Slide 23 of our investor presentation for further details. On the deposit side, we've taken a conscious choice not to renew FCNR deposits that matured in the quarter. This has impacted sequential and Y-o-Y retail deposit growth by 3%. We prefer to focus on quarterly average balances instead of month end balances for our liability franchise on a quarterly average balance basis, CASA grew 18%, Y-o-Y and 7% Q-on-Q. SA grew 17% Y-o-Y and 6% sequentially. CA grew 18% Y-o-Y and 10% sequentially. CASA ratio is 42.4% compared to 39.2% as of March 31 and 42% as of December 31. Our retail deposits grew 16% Y-o-Y and 5% on a sequential quarter basis. The month end balances, as is expected in a growing franchise, show better trends than quarterly average balances on most parameters, with CASA growing 45% -- with CASA at 45% on an NAV basis, growing 373 basis points Y-o-Y and 175 basis points on a Q-o-Q basis. Our overall loan book, including TLTRO Investments grew 12%, Y-o-Y and 8% sequentially. Our granular retail assets and high-quality large borrower relationships have been the key driver for our loan book growth. Retail advances constitute 54% of our overall advances. Domestic retail loans grew 11% Y-o-Y and 7% sequentially. 81% of our retail book is secured. Our corporate loans constitute 35% of our overall advances. The book, including TLTRO grew 16% Y-o-Y and 9% Q-on-Q. 38% of our book is of a tenor less than 1 year and 85% of that book is rated A and above. The SME book constitutes 11% of our total advances. The SME book grew 13% on a Y-o-Y basis and grew 10% on a sequential quarter basis. The book characteristics are well diversified 89% of it is secured and 71% of it is of a shorter tenure. We continue to see traction in our business sourcing as is visible through our disbursement numbers. Retail disbursements grew 47% Y-o-Y and 47% on a sequential quarter basis, driven largely by our secured business. The secured disbursements in retail grew 70% on a Y-o-Y basis. The secured retail disbursements for Q4 were 85% of our total disbursements. This translated to 12 percentage better secured mix and disbursements as compared to Q4 FY '20. This is not this is not a 1 quarter trend. We have seen this play out through all quarters of FY '21. Our brand sourcing on retail loans was at 59% for the fourth quarter. Wholesale disbursements grew 8% Y-o-Y and 48% on a sequential quarter basis. The commercial banking disbursements grew 147% Y-o-Y and 47 -- 49% on a sequential quarter basis. The growth in our overseas corporate loan book is primarily driven by our Gift City branch exposure. 95% of our corporate loan book is India linked and 92% is rated a and above. In FY '21, we have taken actions across accounting policy changes, NII reserve additional provisions around COVID, provisioning for estimated probable restructuring pool change in provisioning policy and provisions on security receipts. In terms of accounting policy changes, we implemented accounting policy changes in Q1 of FY '21. The cumulative full year impact on the PBT is INR 232 crores on account of policy changes. We have assessed and do not anticipate any further tightening of our provisioning rules or accounting policy changes in FY '22 that could have a material impact on our reported numbers. NII results have been utilized in the current quarter as it was created in FY '21. Our COVID provisioning continues to stand at INR 5,012 crores, despite a 50% reduction in the stress as per our SAS models that we recently assessed last year at the start of COVID pandemic. Restructuring under COVID-19 resolution scheme is at 0.3% of our GCA. We carry provisions of INR 499 crores against these assets against a regulatory requirement of INR 79 crores. The provision cover stands at 26%. The segmental picture is set out on Slide 50 of our investor presentation. Security receipts. The bank holds security receipts of an aggregate value of INR 1,681 crores, these are 100% provided. The onetime impact of the change in CBG provisions improved the PCR of the segment by 22%. Our asset quality trends are as follows: the gross NPA, Net NPA and PCR of the bank and the segmental gross net and PCR are set out on Slide 49. On a headline number basis, our reported gross NPA is 3.7%, declining 116 and 85 basis points on a Y-o-Y on sequential basis. Net NPA shows improvement at 1.05%, declining 51 basis points and 14 basis points sequentially. The gross slippages for the quarter were INR 5,285 crores. In line with what we had indicated in our previous calls, the gross slippage ratio declined 175 basis points on a sequential Q-on-Q basis. Gross slippages in CBG and retail moderated on a sequential quarter basis. Reported net slippages for the quarter are INR 1,822 crores compared to INR 5,831 crores in Q3 FY '21. Translating to a net slippage ratio of 1.28%. The net slippage ratio declined 273 basis points on a sequential basis. The asset quality of Axis Finance remains stable, with net NPA of less than 2%. I will spend a little bit of time clarifying the restructuring that we have done. The bank has been judicious around restructuring loans under the COVID-19 resolution scheme. At March 31, 2021, fund-based restructuring in growth by the bank stands at INR 1,848 crores or 0.3% of our gross customer assets. Of the amount involved to INR 623 crores has been implemented at March 31, 2021, translating to a 0.1% of GCA. To clarify, the cumulative amount of restructuring that we could do is capped at 0.3% of our GCA. The linked nonfund-based exposure, for which there have been no change in original terms pursuant to any restructuring stands at INR 923 crores. On a segmental basis, the restructured loans are 0.6%. For the wholesale banking group, 0.14%. For the retail Banking group and negligible at 0.02% for our SME book. Our restructuring over the COVID restructuring package under the MSME scheme stands at a nominal value of INR 335 crores. Collections, ECGLS outlook. The demand resolution for the retail portfolio was over 98% for Q4 FY '21, improving substantially from September 2020 and was higher than pre-COVID levels. The Check bounce trends stay marginally above pre-COVID levels. However, the same month resolutions have improved due to our focused and strengthened collection effort, both physically and digitally. The investments we've made in collections in FY '21, like building a 10,000-plus strong force, will help us better deal with any impact of COVID Wave 2. With the Supreme Court vacating its stay on classification, we should be able to pursue legal recourse, especially on our secured retail portfolio. However, given the onset of Wave 2, we will monitor progress on this front. Overall, approach to ECGLS was conservative. The total amount disbursed under ECGLS was approximately INR 10,400 crores, lower than our loan market share. We only granted ECGLS to our existing customer set post full credit assessment. ECGLS was given to approximately 26,000 customers across the bank. 99% of these customers were sanctioned under ECGLS 1. We have chosen to identify the stress early in our portfolio, use ECGLS and restructuring selectively and hence recognize larger slippages in FY '21, which places us well as we enter FY '22, subject to the extent of impact of COVID Wave 2. The BB book. The fund-based book -- BB and below book as a percentage of customer assets stands at 1.09%, declining 28 basis points on a sequential quarter basis. 38% of the BB and below book is rated better by at least one external rating agency. INR 419 crores, representing 5.63% of the BB and below book, could have been upgraded as it was proactively downgraded on estimated probable restructuring and the borrowers aggregating this value did not seek restructuring from the bank. The average ticket size of our fund-based loans across BBB+, BBB and BBB- is now down to INR 40 crores with no individual fund-based exposure that is 4-digit crore. During the quarter, in aggregate, we collected INR 1,404 crores out of our BB pool, upgraded INR 92 crores, INR 920 crores slipped, and we further downgraded INR 961 crores into the BB pool. We will request you to look at Slide 50 of our investor deck for more detailed commentary around aspects of BB net NPA restructure. As I close, allow me to resummarize the salient points for the financial year ended March '21. Our operating performance improved reflected in the PPOP growth and PAT growth of 305%, improving efficiency in our business reflected the reduction of our cost to average assets from 2.09 to 1.96. Legacy asset quality being proactively dealt with reflected in full provision of security receipts, PCRs improving by 340% Y-o-Y basis, gross NPAs declining 116 basis points and net NPA declining 51 basis points. Our prudence is demonstrated through the choices we continue to make to strengthen our balance sheet. The cumulative non-NPA provisions stand at INR 12,010 crores. The coverage on gross NPA now stands at 120%. The standard asset cover stands at 1.95%. Our granular retail deposit book has remained resilient. Our granular deposits growing at 16%, and we continue to focus on quarterly average balances. Our corporate book mix is improving. Along with 94% of new originations being rated A1 or better and short-term loans constituting 38% of our book. Amitabh spoke at length about our subsidiaries. Our return on investment on subsidiaries now stands at 39%. Axis Finance has a capital adequacy of 20.38%, an ROE in excess of 14% and amid restructuring. We reiterate our stance of stopping specific guidance. I will conclude by stating that our balance sheet resilience is visible through declining NPL ratios, improving provision cover and buildup of non NPA provisions. We maintain that based on facts today, the COVID provisions we hold are precautionary and are not reflective of the asset quality of our underlying loan book. We had taken a comprehensive accounting policy and provisioning rule review in FY '21. To get us to best-in-class practices, we do not expect any material changes to accounting policy of provisioning rules in FY '22. We continue to monitor the progress of COVID wave 2 across India, track, government and regulatory responses based on our internal preparedness as on date. We believe that we shall be more nimble in responding to positive or adverse changes our operating environment provides. With that, I come to an end of my comments, and we will be glad to take questions.

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

Congratulations. I have a couple of questions. Firstly, could you give us the breakdown of slippage for the quarter? And has the number for the third quarter and even for the second quarter changed for slippage?

Thanks, Mahrukh, for the question. The slippages for quarter 3 have not changed. The INR 7,993 crores number that we report is the slippages under IRAC, we have provided for it under IRAC norms. The slippages for the current quarter is INR 5,285 crores, 64% of that slippage is out of our retail book.

Okay. And the other thing is that your core credit cost is around 1.2% for the quarter. Could we expect that? I know that there's a second wave. But since you've provided and already changed accounting policies and tightened new loan sanctioning policies, could we expect that to be a benchmark for the next few quarters?

Mahrukh, thank you for that question. Like I specifically said, we are not providing guidance given the onset of wave 2. We've consistently strengthened our balance sheet. And the performance that you would see on the slippage as well as the provisioning front should give you a good indication of where our credit costs could be.

The next question is from the line of Kunal Shah from ICICI Securities.

Yes. Congratulations for the set of numbers. So firstly, in terms of the growth, last time, we highlighted that on the corporate side, there is a lot of competition, which is there. And maybe it is slightly margin dilutive and we are looking at none at all. So has anything changed in terms of -- particularly on the corporate side, there is a good quarter-on-quarter growth as well as year-on-year. So should we say it is more a technical year-end effect? Or this is more kind of a sustainable maybe book which we have returned on the corporate side?

Rajiv?

Yes. So if you look at what is happening on the corporate book is as far as the sort of the mega -- large corporates are concerned, there is a process of deleveraging, that is, in a sense, playing out. And there's an element of repayment, prepayment that is that is happening. It is certainly -- we've certainly seen that in Q3 and Q4 as well, maybe a little less so in Q4. However, what you're now also seeing with our corporate book is much stronger growth in some of the other segments. Amitabh spoke about the strong growth that we are seeing on our mid-corporate business, on our government business as well as the new focus that we've brought to the MNC sector. And that is sort of helping us in multiple ways. Yes, it is also -- it is one, providing us with new business models that we are, in a sense, going after; two, is derisking the business away from the very large corporates; and 3 and most important, Amithab mentioned the word granuality many times and the focus on building the mid-corporate business as well as our SME business is a function of bringing granularity to our corporate book. The average ticket sizes on the mid-corporate book, for example, for our existing customers is about INR 60 crores, INR 65 crores. For a new-to-bank customer it's about INR 30 crores, INR 35 crores. And that is really the focus that we have on the corporate side, building greater levels of granularity build the SME book and the other businesses like the mid-corporate business I just spoke about. It helps us in multiple ways, bring growth to us and growth to us at the levels of profitability that we are looking for and the levels of underwriting standards that we have set for ourselves.

Sure. So maybe given this initiative I know that like, at least if there is an opportunity, then we can keep on tapping them on the corporate, maybe on the mid-corporate and on the SME side. So that's going to continue for a while?

Let me -- it's very important for one to realize also that like every other industry, there is consolidation of the corporate banking business, particularly among the large corporates in this country. And there are 4 or 5 large banks who are participating in every one of those opportunities. We are one of those banks who are sitting at the table with each of those opportunities. Whether we want to take them or not is a choice that we are making based on pricing, based on underwriting, et cetera. So it is not as if we are walking away from some of the very large corporate business. Absolutely not. In -- we will continue to gain market share within that space, but we will support that through our new initiatives around transaction banking to support [indiscernible] in that category.

Sure. And last one on write-offs. So the write-offs have been quite higher. And we said like it's more or less probably rule-based policy which we have. So how should we look at it? Are we done with the major part of the write-offs, maybe the rules-based on which we are there currently? Or we can see this kind of a similar run rate going forward as well looking at what would we have guaranteed?

Kunal, the way I would request you to think about this is, we get to a provision of 100%. And then the rules kick in for a time-based write-off. So depending on the behavior of the underlying portfolio, you will see write-offs come through pursuant to those rules on every reported quarter for us. The quantum will depend on incremental slippages, the stock of NPLs, the mix of the book, et cetera.

Okay. But any way to gauge because this quarter, it was quite high. No doubt the last quarter slippages were also the accumulation of a couple of quarters. But -- so maybe how should we certainly give that because it was almost equivalent to the incremental slippage?

So Kunal, I think the way they would -- I would -- the question to think about this is for our unsecured business, we provide early. Like we said, we provide 100% on the 91st Day. And consequently, by the rule engine, the write-offs would happen earlier. By virtue of our secured business, the provisioning -- given the underlying securities, the provisioning happens on a time basis, and that will get to 100% later and consequently, get written-off later. So it's going to be a function, like I said, of the product mix of the slippage, and therefore, there is no ballpark number that we can provide for write-offs. What I would say is, there is no discretion left with the management team on write-offs on the SME as well as the retail business. It's all rule based.

[Operator Instructions] The next question is from the line of Anand Laddha from HDFC Mutual Funds.

Sir, am I audible?

Yes, you are, sir. Please go ahead.

Yes.

I had a couple of questions. I'll just repeat my question, and probably you can answer. So on slippages side, retail business, if I had to annualize for this quarter, they are approximately 4%. So as you mentioned, what are the retail slippages for the full year? Also on the retail slippages, if you can give some color like what is the breakup between secured, unsecured? Within unsecured, what would be the breakup between PGs and regard? And what we understand that we've been sourcing bulk of the unsecured customer from a whole internal customer. So is there any color or understanding or learning which you can share? This is another peer bank, which is a leader in personal loan and credit card, we haven't seen that much slippages in those numbers. Second question. On the employee cost side, if I see the growth has been very strong, so is there any one-off in this element? How should we read this? Third question. On the securities received, [ ECGLS ] part is 100%. Was it that you don't see any recovery chances in that, that's why it remains 100%? Or just sorry to say that, sir, we have been ultra conservative. So is there a rationale for being so ultra conservative? Just impacting our profitability for the full year and also as our book value? So -- and can you help me with any reason for being so ultra conservative? On -- and sir, fourth question. On the non-fund basis...

I'll forget the question by the time we have done. Let us answer the 3, no? Don't mind it. Now you asked us about the restructuring cost. You asked us about the retail slippages. I'll ask Puneet to answer, but I just do want to start by saying that please understand that in case of retail slippages, which have happened because of COVID or what we went through in this last year, we did not rely on restructuring or the amount of restructuring, which we've done on the retail side is minimal. So whatever has slipped had to slip because there was no other mechanism which we use to so-called manage that portfolio. So that's why slippages were quite high. That's one of the -- they've come down in the fourth quarter as we predicted, but there is nothing else in comparison to some of other players which you're referring to, which is out there. Now Puneet, can you just give the numbers and then you can talk about the security receipts. And Amit, if you want to add a little bit color on what kind of slippages you see.

So let me take the questions one at a time. On retail slippages, the annualized slippage is 3.73%. We don't provide a product-by-product slippage, but we did, in the past, say that there is a fair mix of secured loans in the slippage number. The unsecured slippage is dominantly coming from the cards book. So it's been digested. And therefore, one has to look at when you annualize, you're assuming that it is going to be continuous and consistent. No, that's not likely to be the case. Some of the slippages are onetime because that portfolio would have cleansed itself and moved on. Your next question was on employee costs, and the cost...

I will also add one more thing that we have not sold any portfolio to any ARC from a retail perspective. Just wanted to be clear. Less restructuring, no sale of any portfolio. Go ahead, Puneet.

Yes. And just to contextualize that answer in rupee crore terms, the total retail restructuring is 0.14% of the book. I think a good way to draw a relevant comparator analysis would be restructuring plus ECGLS to retail customers, plus slippages looked at collectively to give you an apples-to-apples comparison on market book. Please do note that our restructuring in ECGLS to retail is negligible. The number has to be looked at on a like-for-like basis. On the employee cost, yes, we have one-off items in the employee costs. You would recollect that we have taken provisions for the social security code. The cumulative provisions on account of social security code are INR 218 crores, and those provisions reflect in the growth of employee cost. The code isn't gazetted yet. And as I understand, we may be probably the only bank that has gone ahead and made that provision because it's provision for past service. So that's the increase in employee cost. On security receipts, well, one has to look at how security receipts are originated, and how they get serviced. We do both a quantitative assessment as well as a qualitative assessment of our security receipts. Like I said earlier, the quantitative assessment of our security receipts does provide us with a positive net asset value of roughly about INR 1,400 crores. On qualitative assessment and the fact that we said we will strengthen our balance sheet and make it resilient across cycles, the provision has been made, basis the qualitative assessment and make sure that we don't carry residual unknown risk into future periods.

Fine. Sir, last 2 question, if you permit me. Hello?

Yes. Go ahead. Go ahead.

Yes, please.

Yes. Sir, on the gross NPA, if you can share the nonfund-based exposure to the gross NPA? In the retail book, sir, you had indicated that 4% of the retail book is international exposure. What it mean to with geography? And sir, this quarter, recovery and upgrades are pretty strong. Any one-off in this recovery upgrade?

Go ahead, Puneet.

So in terms of recoveries upgrades, the BB book had an average ticket size that was larger in the past, and therefore, recoveries could be lumpy, but no one-off recovery upgrade to call out. Yes, we had one large account that resolved itself in the current quarter. Otherwise, it is BAU. Your second question was nonfund-based facilities to gross NPA. It's a very small number compared to the overall GNPA pool. It should be less than -- if I know the -- it should be roughly about INR 1,800 crores of nonfund-based facilities attributed to the GNPA pool.

And sir, on the retail book, 4% is international in that. So geography specifically, it is like?

So on the retail book, it is -- basically, it represents the loans given. It is a grossing up of the balance sheet. We had FCNRB deposits, and we have loans. So it's a balance sheet gross up. All of our retail book is domestic. It's only from an accounting perspective, we gross up the 2 sides of the balance sheet.

The next question is from the line of Adarsh Parasrampuria from CLSA.

This is a follow-up on the question. Historically, we've had a very high -- because of daily stamping upgrade and recovery that comes in with the slippage in retail. You did indicate a 3.7% number. Can you just indicate corresponding recovery and upgrade because that will give us a fair sense of the net number?

Sorry, Adarsh, could you repeat your question? I could not catch it.

I was saying that what is the recovery and upgrade percentage for retail? Because for our bank historically, you used to report the net retail slippages because of the lease stamping. We had a very high churn of accounts getting in and getting out. So just wanting the net slippages in the retail portfolio.

Net slippages in retail is INR 1,324 crores for the quarter.

Now if you can give this number for the full year?

Adarsh, I don't have it at the back of my head. I will circle back to you and give you that number.

Okay. Second question is on the margins. In fact is -- the fact that last quarter, we did have a large interest reversal, which would have been lower in this quarter. So what impacted the main performance because for majority of our peer banks, we've kind of seen a margin improvement of sorts, so?

Puneet, go ahead.

Adarsh, on a sequential basis, you've got to -- we reported last time that we had 8 basis points on account of interest on income tax refund. So if you back that out, we have a growth in our NIM on a quarter-on-quarter basis. That's one reason why you're not seeing a sequential growth. And the other reason why you're not seeing a sequential growth is, we've dialed up our average LCRs. And given the nature of the instruments that sit in the HQLA bucket, they typically have an impact on NIM for the quarter. So those are the 2 specific reasons why you're not seeing a -- while there is an improvement, you are not seeing as much of an improvement on a relative basis.

And sir, any views on outlook, given that corporate pricing is pretty weak, but rest of the segments are okay? Any sense on how margins -- because majority of the right interest reversals are kind of behind us. So any sense on margin outlook vis-à-vis our long-term aim?

Well, we are quite committed to continuing to push our margins up from where they are. We have talked about that for us to get to the 18% target ROE, one of the levers we need to work on is NIMs, and they need to be closer to 3.7%, 3.8% than where they are today. So obviously, this requires effort across all our businesses to get better NIMs. It does also require effort across our deposit transfers. It also requires effort from our side to reduce some of the negative carry we have because of PSL. So the effort has been made across each of those dimensions and our objective remains to get there. Now obviously, we have to ignore COVID, too, but otherwise, objective is to get there. And so we're working across each parts of our businesses, which can have an impact on margins either way to get to that number.

Adarsh, on the data point that you requested, the full year net slippage is INR 7,000 crores approximately.

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

So first question is on the incremental disbursals, which obviously look quite strong. So any color on where we are originating? I mean, previously, we used to do almost probably what 60% of processing through the -- through one of our subsidiaries, which was subsumed inside the bank. But given the structure of the market, which is changing, more digitization at various businesses, are we doing more businesses internally? Or are we looking at more DSA-based origination? And are we originating these businesses beyond like Tier 2, Tier 3? So any color on that will help. That's the first question. I'll take the second question later.

Puneet?

Yes. So as we had mentioned earlier, our focus on growing business from our retail liability branches continues. So just to give you some data point in the quarter 4, we originated close to about 59% of our retail assets from the liability branches. For the entire year, the number was 58% compared to 47% last year. So we continue to originate more and more business from our retail liability branches. We also had mentioned earlier about our deeper geography initiative. That initiative continues to scale up well, and we've seen good growth coming in there, which is almost 111% Y-o-Y and 60% Q-o-Q. So that remains our core strategy to mine more and more existing bank database, rely more on retail liability branches to originate customers and continue to expand our footprint in the deeper geographies.

Okay. Second question is on -- going back to the asset quality on retail. I mean all banks currently do a customer-based assessment. So 3.7% kind of what was mentioned, I mean, how much is it -- the customer, let's say, maybe a credit card customer has slipped, and therefore, you had a home loan, which left. Any color how that has behaved, specifically coming out of this COVID 1 and going into COVID 2? Related question, could you also have the net slippage on the SME which you used to provide earlier, both on Q4 and full year basis?

Puneet?

Nilanjan, give us a few moments. Why don't we move ahead with the conversation. We'll try and get you the data points that you requested for, for net slippages on SME.

Sure. The third question also, I guess, you will have to answer. Again, it's a question on margins. So if I look at the overall portfolio, the percentages of the mix has not changed between various products. In fact, even secured/unsecured also, there are only very marginal changes. Whereas, our overall cost of funds has actually declined quite substantially like almost, what, 90-odd basis points. So is -- there is beyond all these interest reversals and in those like 5, 10 basis points here or there. And I understand, I mean, you had discussed this earlier related drag at some point that would have come. But beyond that, there is still -- looks like a lot of softness on the overall yield on assets. Is it -- and I think that was the question I wanted to -- that was my sort of first question. Are we originating slightly differently, different kind of assets? Maybe because our underwriting policies have changed, and therefore, the yields are low. So sort of a tie-up between question one and question three. And therefore, what is the -- you talked about reaching a number on margin. What is that margin number that you think is probably reachable maybe in 2 years' time?

So it's not that this is something new. We have talked about the fact that for our 18% ROE target, we need to be between 3.5% to 3.8%, and we need to be higher end of the range to get there. And I said, 3.7%, 3.8% is what we are hoping to get to over a period of time. So that's something which we have shared quite openly. You also had a view that given the fact that there is not much -- yes, there is some pivoting which has happened to the secured portfolio in this year gone by. Even if you pivot, it takes time for it to get reflected in the portfolio. As you rightly said, the more you pivot to secure, the margins tend to be slightly lower, but we expect it to be a temporary phenomenon. I think there is a huge repository out there across the related asset classes, and we are focused on building out each of those businesses. It is -- the nimble play out as a combination, as I said, is a number of things. Product mix is one such thing. The deposit franchise and that kind of CASA growth we get. And all of that will ultimately impact our overall NIMs over a period of time. So it is -- which it was one thing. So there are 7 main themes at play here. We are working on each one in our own way.

Nilanjan, the data point that you requested for, SME net slippage for the quarter is INR 94 crores absolute. And for the full year, is INR 690 crores absolute.

Okay. And on that retail question, customer basis versus product basis? I mean, if you can give some color. Is it more like the...

Nilanjan, we would -- we actually don't comment on what is the linked exposure that's gone bad. Effectively, we'll put out a composite number. The way you may want to think about it is, some of our -- we've spoken about this that the cards linked exposure has come back. So yes, there would be linked exposure that does go back, but we don't provide that detail.

[Operator Instructions] Next question is from the line of Saurabh from JPMorgan.

Sir, two questions here. One is, on Slide 18, your credit fees is up 40% quarter-on-quarter on the corporate and commercial banking fee. Sir, given we understand in government and in large corporates, the fee number is not very high. So can you just say what's driving this? And secondly, on the LCR, do you have a policy of -- what's the policy you want to be in this 110%, 120% range? Or even the peer group obviously operates at a much higher number. These are 2 question, sir.

Rajiv, you want to take the LCR question, please?

I'll take both questions, Amitabh. And I think, to some degree, I'll try and answer Nilanjan's question as well because it's in a sense related. What we are doing on the corporate side, you've got to look at that in the context of the current situation that we are in. If you look at credit growth is at 5%, deposit growth is at 10%, and within that, credit to industry growth is flat. And so therefore, in that context, I think to have been able to hold margins, I think, is a pretty good show. And it is -- I mean, I think it's just a question of time before the industry starts to -- I mean, where we begin to see credit growth from the industry as well. And like I said, in an environment where corporate banking is consolidated, there is a strong likelihood that the kind of margin pressure that we are seeing today will, to some degree, dissipate. But having said that, the way that we are thinking about it is, like I said, from a portfolio perspective, yes, we want to participate in the relatively lower-margin businesses at this point in time. But having said that, because we recognize the fact that we've done some of this low-margin business, we have to drive to get other businesses from the corporate for us to be able to deliver the kind of target that we have set for ourselves at a segment level, at a corporate level. And that, in a sense, answers the next question that just come up in terms of why corporate fees are growing is because of this renewed focus on fees. And remember that this is not the lumpy fees that we used to be known for, this is granular fees on the FX side, LCs, BGs, cash management and such life. We are underrepresented. We are -- so we are, in a sense, getting to the natural market share that we should be in many of these products in foreign LCs, in GST payments, in FX. Even this quarter, we have gained market share, and we will continue to drive that as we go forward.

Sir, my question was on the credit-linked fees actually. Why has it grown 40% quarter-on-quarter? I mean, is this a base impact or something else?

The fees that you're seeing there is an amalgam of credit fees, and that includes our LCBG fees as well. So that would be included in that. And the growth that we are seeing on trade finance has been very strong for us.

Okay. And on LCR, sir, what's the policy on the liquidity coverage ratio?

The liquidity coverage ratio, as you know, we are now back to maintaining 100% on a daily basis. Our internal limits are at 105%. Our ambition is to stay between 115% and 125% on a daily basis.

The next question is from the line of Manish Shukla from Citigroup.

So on wholesale, Rajiv mentioned that government and MC and CBG are the key growth drivers. These 3 segments put together would be what part of the corporate book today?

Rajiv?

Yes. Yes. Yes. Would be about -- between 15% and 20% would be the MC and government business. And our commercial banking business is today about INR 70,000 crores.

Okay. Sure. The other thing is that there is a good growth in SME and CBG both, yet the RWA density keeps trending down. So how should we read the two?

Puneet, do you want to take that?

Yes. Manish, the way you should think about it is, one, if -- like I said earlier, if retail growth is coming from secured and in mortgages, depending on the type of mortgage we originate, we do get a RWA advantage. So that's one part of the answer. Second, even in the SME business, our origination is of better quality. And where we have liquid collateral, we are able to offset. And third is on the CRG business, on a rupee crore-rupee crore basis, you see growth, but the composition is changing to higher-rated corporates. And as we move up the credit spectrum, the RWA intensity declines meaningfully. So it's a mix of the product mix in retail and the quality of sourcing in the wholesale that is giving us this net effect on RWA density.

Sure. Really last question. Amitabh, having concluded the Max transaction, what are your thoughts around inorganic opportunities, either now or over the medium-term across the businesses that you have within the group?

Well, as we have stated before, we'll continue to evaluate policies as they come our way, and not -- this doesn't just to Axis bank. It applies to the subsidies also. We will be prudent and very deliberate about it. We don't want to use our capital for -- just for the sake of acquisition, but there are opportunities which we have leveled, and we will continue to evaluate opportunities as and when they come out. So the strategy remains similar.

Your next question is from the line of Aakriti Kakkar from Goldman Sachs.

First of all, I hope you all and your families are safe. Two questions. Again, sort of coming back to the write-off numbers, sorry, to delever. But this year, particularly the number does stand out at about 2.2% of the loan book. Is it possible to get some more granular color across different segments? If you can provide as to how much was, let's say, in corporate, retail, SME, et cetera?

Rahul (sic) [ Aakriti ], thanks for your question. I hope all well with you, family and friends. I think on the segmental color, we don't provide a segmental color of our write-offs. But what I leave with you as a leading thought is, our unsecured business gets provided faster than our secured business. And because we have rule-based write-offs, that will be the part of the book that gets written off faster than the secured book.

Puneet, but would that be a majority part of this 2.2% number? Because of the overall book, then it would imply a very large number of the unsecured that's getting written off. That was the reason why I was coming back to this formula.

So I think -- look, 2 things. So if you look at how it will play out is, there are 2 effects at play. The first effect at play is, we are coming off on the back of a corporate cycle. And as those loans get provided through the books and as those issues get dealt with, those accounts will get 100% provided for and move through the system. The unsecured book gets provided for on an accelerated basis, and that also moves through the system. That's how I would think -- that's how I would request you to think about it. I could just leave you with one additional color on this and not provide further details. For the current year, you could use a proxy of 50% corporate, 50% retail on write-offs.

Fair enough. Just one more question, if I may. On this deposits and the LCR side, I remember when we spoke last time, it was a conscious strategy received LCR on the lower side. But now it seems that the policy has changed to 115% to 125%. So how should we reconcile the change of policy? And again, bringing the margin element, as you move forward over the next couple of years, the expansion or the improvement would be driven by, what, the liability side? Or it will be more asset side? I mean which part of the book will be more played, keeping in mind the new LCR target that we have on mind?

So Rahul, maybe I'll start the answer on LCR and then request Rajiv to add on to this. I think there is no change in policy around LCR. We've consistently maintained that we will have a margin of safety above the regulatory limit. And you would recollect that in the last financial year, the regulatory limit was down-ticked. We use the opportunity to optimize our balance sheet. Effective 1st April, the regulatory limit went up to 100%. And we have consistently maintained our LCR in that band of safety that we would like to operate in. So as the regulatory limit came back, obviously, our LCRs moved up in line with our safety -- so margin of safety. Therefore, no policy change, just to clarify on that point. Insofar as margins are concerned, I think we have both levers. The marginal cost of our deposits versus booked cost of our deposits, we still have -- if we have a supportive interest rate environment, I think we should get some benefit there. All in all, I think we have both a product mix lever. You will realize that we have a set of fairly priced business that is growing, which is our mid-corporate business, our SME business, parts of our retail business. So the asset mix as well as the deposit repricing, and all of the initiatives Amitabh spoke about granularity, better CASA, et cetera, would be tailwinds to the NIM. Yes, there will be pricing pressure in certain segments, and we've always called that out as a headwind. But on a net-net basis, we will have to work on both sides, the asset and liability sides to get our NIMs to the target range Amitabh mentioned earlier.

The next question is from the line of M.B. Mahesh from Kotak Securities.

Two questions from my side. First question to Sumit. Sumit, when you look at your retail portfolio and compare that with the credit bureau data, if you could just kind of broadly give us some color as to how are you positioned on each product, where you are better or weaker? That's the first one. The second question is to Rajiv. Rajiv, if you look at your yield on the corporate book, have you completed the repricing of the loan book completely? And the performance that you've seen on the current account side, has that also fully reflects the changes to the guidelines?

You can add, Sumit, if you want to.

Yes. Mahesh, so when we look at our portfolio and compare it with the bureau, it's in line with the peer private sector banks, both on the secured and unsecured side. So that's been consistently there, and we've been tracking it for a while. So it's pretty much in line with what we see for the peer size.

And this is for both secured and unsecured?

Yes, both secured and unsecured. See, there will be some amount of issue this year, given the kind of restructuring each one has followed. So it will be difficult to assess that. But we took all the -- as Puneet also mentioned in terms of restructuring, wherever we found that -- we were selective about it, we did a credit assessment before giving it. So to that extent, you may see some differentiation in numbers, but we feel we are in line. The data, which we had prior to that shows we were in line with the industry.

So as far as the current account circular is concerned, obviously, that circular is now 3 or 4 months old. The market is falling in line with that circular and so have we. As far as repricing is concerned, I'm not sure what exactly that means. I mean, in the sense, if you mean that have -- just -- if it is MCLR, then has it -- that is an ongoing -- or because we don't have much fixed rate assets, most of them are either linked to external benchmarks or to our MCLR, and that repricing is ongoing. So not clear what you actually mean by repricing.

What we see -- when you look at the MCLR data that is given by the RBI is that the incremental book that is being written is still happening at a yield which is lower than what the back book is carrying today. So just trying to understand as to whether there is further compression in yields that we'll have to factor into next year as well?

So this is not a new phenomenon, right? I mean we've seen -- in an environment where liquidity is this easy since April, loan rates have been actually significantly lower than bonds. And so therefore, even in that sort of an environment, NIMs have held up. You've got to look at it -- once again, we got to look at this on a portfolio basis rather than individual transactions. Yes, there will be individual transactions which have happened at low, or in some cases, no margin as well. But you've got to look at this on a portfolio basis. And I think on a portfolio basis, yields are holding up.

The next question is from the line of Jai Mundhra from B&K Securities.

Sir, just one question from my side. Most of the questions have been answered anyway. If I look at your core operating profit trajectory on Y-o-Y basis, and similarly, core operating profit registry Y-o-Y basis, I see that there is a lot of volatility there. So it has ranged from -- I mean, for the last 4, 8 quarters, it has ranged very wisely. Now part of that is because you have been very prudent in some of the quarters. You have taken some hit, which was on a prudent basis, even till operating profit line item. But I just wanted to check, as you said that from FY '22 onwards, there will not be any major accounting policy change, et cetera. And you have been building a fair amount of granularity and sustainability as a key theme. I wanted to check your thought process on the predictability of the core operating profit line. Yes, that is my question, sir.

Puneet?

Yes. I think -- yes, with the granularization of fees and the elimination of incremental impact on account of any policy change. Yes, there should be stability returning to the core PPOP. Like I called out earlier, we've had exceptional expenses plus INR 235 crores of impact on account of policy changes that do impact it, yes. So all in all, I would agree with what you said that there should be stability in PPOP and core PPOP coming through in future periods.

The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities.

I have 2 questions. Firstly, are we done with the rationalization activity in the credit card segment? And what sort of incremental market share are we looking at in new card acquisitions? And related to it, in context of the card business, how do you look at the growth outlook and profitability construct of this buy now pay later product? And second question is Max Life. From the Max deal, post [indiscernible] and has status on Board also. So how do things change strategically? And what will be, say, unilateral focus areas now?

First let me answer the last question, then we can pick up the cards question. Well, we've just joined the Board. So we are, from a Board perspective, going to get more involved in Max Life in the next couple of quarters to come. Very early to say what is going to change now. It is ultimately -- it has a very solid management team, and it has been a very high-quality Board with them. So it's not that somebody we come and start making changes just because we are there. Sumit, you want to pick out the credit card question?

Sure. So credit card is an important product for us. It is a profitable product. We want to grow it. We also are clear that this product, we want to grow largely on the EPD customers and also with our partners, which are Flipkart and Google Pay. So on these 2 sets, we will continue to grow this business. There have been learnings from past one year, but all those have been built in. And if you see -- if I were to give you a bit of a granular color, last year, almost 40% of our card happened in JFM. That is because we were a bit calibrated in terms of opening up. Roughly about 90% of the cards still originate from our EPD customer base. And this will be a focused product for us. It's a strong engagement product. It's a very profitable product. And we intend growing it in a manner that it meets our risk and return aspects.

Okay. And on this, buy now pay later product, how do you see this in terms of growth potential and the profitability construct in the long term? I understand that it's very small as of now, but what sort of prospects do you look at for this?

Well, we have a large base of loan to the bank customers. We have a large base of existing customers. We -- our retail bank has obviously created this capability to see charge. We, obviously, will work really hard to make it a success, but too early to start commenting on what the size and shape of this could be. When we are ready to kind of share that, we'll let you know. But right now, it's a bit too early.

Sure. And 2 data points, if I can ask. Like, one is, we have mentioned that technology spend is rising 79% over 2 years. So if you can quantify this number. And secondly, the cumulative non-NPA provisions, as you have said, INR 12,000-odd-crores. So barring standard provisions, the entire amount is available for use towards any adjacencies in FY '22? Or like a part of it is only available?

Puneet, you want to answer the second one first?

Sure. So of the INR 12,000 crores, like we said, INR 5,000 crores is COVID. INR 6,900-odd-crores is weak assets plus standard assets. All of our provisions are rule-based other than the COVID prudent provision that we carry. And consequently, depending on how the portfolio performs alongside the rules, there will be a top-up or a top-down of those provisions. We can't manage those provisions because the rules will drive the outcomes. So if we have favorable outcomes from the rules, there will be a release of that provision. If there are unfavorable outcomes of those rules, they'll be a top-up to the provision.

Okay. Sure. So that INR 5,000 crores is a discretionary part of the total, which is like what we can play with?

There is no discretionary provision. Even the INR 5,000 crores is created for COVID risk. We have previously commented on the fact that we would like to basis our assessment of the outcome of COVID wave 2, sustainably carry forward balance sheet strength. Therefore, I would resist from stating that these provisions are discretionary. There will be rules around which these provisions will be sustainably carried forward, depending on outcome of the wave 2 assessment.

Okay. Sure. And lastly, the technology spend number, if you can share that?

We don't provide absolute numbers. The relative -- what I can say very certainly is the -- there is no low base effect for which the percentage was quoted. There is a meaningful CapEx and OpEx that was incurred in the prior year that has been topped up for all of the measures that Amitabh spoke about, distinction, resilience, advantage. And the view that we have is, we will continue to invest in digital, data and technology on a go-forward basis.

The next question is from the line of Anand Dama from Emkay Global.

I want to check the other retail portion that we gave in the -- particularly, the other retail book of about 8%. Can you provide some breakup of that? And does this include the business banking portfolio? And if yes, what is the amount?

Could you just please repeat the question?

Yes. So sir, we have the other retail portfolio. It is about 8% of the retail book. So what is the composition of that other retail book? Does it include business banking portfolio?

No, SCB is called quite out -- this is Puneet here. The SCB portfolio is called out separately. So our SCB portfolio, if you look at Slide 25 of our investor presentation, is 5% of the total retail book. Others typically would be our gold loan business, our education loan business, our loan against FD, those would be the dominant products that we have in the other segment.

Okay. And sir, earlier on, you had said that we would have a strategy to scale up our business, particularly into commercial vehicles. So any thoughts over there?

My apologies, if you could kindly repeat your question. We couldn't hear you very clearly, please.

Sorry about that. Sir, I wanted to check, do we have any strategy to enter into CV business or scale up that business, if we are already doing that in a way?

So we are into commercial vehicle and both -- commercial vehicle, land construction, equipment segment. And in commercial vehicle, our strategy has been to be funding more of the strategic customers. And that, by and large, have played out well even during the crisis time. And we intend to grow that business.

But can you scale out the portfolio, sir?

Pardon?

So what is the portfolio size of this?

So both commercial vehicle and construction equipment combined are close to about INR 14,000 crores.

Okay. Okay. Correct. That is part of the income [indiscernible]. My second, sir, basically, other question was about the SME growth. So this quarter, we have seen good growth particularly into the SME portfolio. Running into the second COVID wave, don't you think so that there is a lot of risk, particularly into the SME customers, which will be self-employed and the SME business is being impacted? And on the other hand, on the corporate banking front, where we are incrementally originating the better rated corporates, but we are still tightening our provision policy over there. So can you explain what is our thought process over here?

So on the SME side, the best way to look at it is that it is a diversified portfolio across about 35-odd sectors, and the business has been originated across about 120-odd centers across the country. Average ticket sizes would be in the vicinity of about INR 5 crores or so. So diversification is the best bet against this mitigation. And that is really what the policy that we adopt. Obviously, in these times of COVID, even in 2021, yes, with a little bit of help from the ECGLS schemes, et cetera, the portfolio has held up pretty well. And we continue to monitor it on a regular basis. And as and when required, the underwriting teams would look at each proposal, and if necessary, tighten as and when required.

Okay. So as of now, we are comfortable growing in the SME group?

That's correct.

Yes. And on the corporate banking, if someone can answer the question.

So on the corporate banking side, I think you've answered your question yourself. We continue to originate 94% of new loans at rating of A- and better. And that is the universe that we will continue to build that portfolio around. There would obviously be -- it's difficult to get A- and better in the mid-corporate space. And so therefore, whatever BBB assets we would do, would be within the mid-corporate space. And there, once again, like I mentioned to you, ticket sizes for new to bank would be in the vicinity of about INR 35 crores, INR 40 crores. And for existing customers, it would be about INR 60 crores, INR 65 crores. There, once again, the focus is on granularity.

So is that the key reason why we are tightening our provision policy because we are growing much into the mid-corporate? Is that the right interpretation?

No. I don't think so...

No. We have not raised the statement of our corporate -- why would you summarize that here?

Hello? Amitabh, your voice was garbled. So you may want to repeat your answer.

No, I'm just saying that -- all that what we have said is exactly opposite of the conclusion you seem to be hinting at. Absolutely not. Provisions are what we believe is required to create a conservative, sustainable franchise, and a lot of them are rule based. So depending on the rules, automatically, some of these provisions will get completed, and we have created a cushion accordingly. So no, it's -- we are not creating excess originations because we're getting into mid-corporate or things of that matter. Actually, you talked about SME. SME, the -- our slippages have been the lowest over a very long period of time. So we have been continuing to improve our portfolio and credit risk underwriting across all parts of our business.

Thank you. That was the last question. I would now like to hand the conference over to Mr. Puneet Sharma for closing comments. Over to you, sir.

Janice, thank you for managing this exceedingly well for us. Thank you to all the participants for having spent your evening, listening to our comments. We hope we've been able to answer all your questions. In case there are any further questions that remain unanswered at the end of this call, please feel free to reach out to Abhijit, and we'll try and pick those up and get you the requested answers. Thank you. It's been a pleasure interacting with you this evening. Stay safe.

Thank you.