Bandhan Bank Limited (BANDHANBNK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Q3 FY '21 Earnings Conference Call of Bandhan Bank Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Hiren Shah, Head of Investor Relations, Bandhan Bank Limited. Thank you, and over to you, sir.

Thank you, Janette. Good evening, everyone, and thanks for joining this conference call. We are glad to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter ending December 2020. We will take this opportunity to update you on the recent developments in the industry and Bandhan Bank during this quarter. To discuss all this in detail, I've got with me our Founder, Managing Director and CEO, Mr. Chandra Shekhar Ghosh; our Housing Finance Head, Mr. Sudhin Choksey; and our Chief Financial Officer, Mr. Sunil Samdani. Now I'd like to request our Founder, Managing Director and CEO, Mr. Chandra Shekhar Ghosh, to brief you all about bank's financial performance and development for the quarter ending December 2020. Over to you, sir.

Good evening, and Happy New Year to all the investors and analysts. This is the third quarter we are completed in the time of COVID. Though it is a period is in very much pandemic, but the vaccination has been started which has given that hope to ask if the future coming to the normalcy on that. If I go to the ground level, a couple of things we have learned, which I'd like to share with you. People's movement have been started fully. There is no restriction to enter the village. So that is now good. Meeting, we are organized to starting on that. This is a very good improvement we have been seeing in -- after the present situation. Second thing, we see that there is new to credit also has been picked up in the normal time also that before the COVID, the same situation has come and the loan demand also returning back. The Bandhan Bank working for a long time with the people. And because of the bank, our DPD to the program has been started in -- on 23rd August of 2015. And gradually, we are continued performance on that the deposit growth and retail deposit and CASA is very strong in this time, this quarter also we have seen that. The strong new vertical often called the third-party product sale, this is a very good noninterest income, which is fee-based income has come highest in the any of the quarter on that. And this is the quarter, we have been -- the balance sheet has been crossed to INR 1 lakh crore. We have been achieved on that, which is the achievement of the team of Bandhan. And AUM had been close to INR 1,50,000 crores. During this time, in the COVID situation, we are a little bit conservative to make the balance sheet and to account for some of the provision. You know that we are always taking it upfront if we feel that something is needed, we will take it to the note then, if at all we had to need them back. And this time, again, we have been taken...

Sir, I'm so sorry to interrupt. Sir, I'll be just reconnecting you from a different number. The audio is slightly not audible. I'll just call you back immediately. Requesting all participants to please stay connected. We are just trying to reconnect the chairperson back to the conference. Requesting you all to please stay online. Ladies and gentlemen, thank you for patiently holding the line. We have the chairperson reconnected. Over to you, sir.

Can you help me where I have been stopped and where I'd like to start again? So sorry for some system disturbance. If I come on that, the banks have been performed very good deposit to franchise, which is focusing in the retail and CASA. And this quarter also, we have been focused on that in that -- that is in third-party product sale. So we have been seeing that very good fee-based income has come to the bank, which has not come earlier any quarter on that, which is near to double of the last quarter. And the Bandhan Bank has been achieved INR 1 lakh crore balance sheet size and AUM has come about INR 1,50,000 crores. Within all this the situation, Bandhan always assess their asset risk. And it has been in at the AR provision may come back a little bit higher, which is not maybe a bit higher than totally actual thing on that. In this time, also, we have been a little bit conservatively assess that and see that AR provision in our balance sheet INR 1,000 crores extra in this quarter, and which is the total covering extra provision will come now INR 3,119 crores. Coming to the more performance point of view, the bank performance in this quarter, net interest income growth has come 34.46% and quarter-on-quarter growth has come 8%, which is a total NII we have been on in this quarter, INR 2,072 crores, which is very good amount in the bank. 38% of the total income growth has come in this quarter, which is INR 2,625 crores. 51% our operational profit has been done in the bank in this quarter and which is INR 1,914 crores and which is 18% growth in quarter-on-quarter basis is operational profit. Our NIM is 8.3%, which is also better than the last quarter. It was 8%. Gross NPA 1.1%, which was in earlier quarter 1.2%. And net NPA 0.3%, which was in the earlier quarter 0.4%. As I come into the advance growth, advance growth has come 22.60%, which is year-on-year basis. But quarter-on-quarter basis, it is at 4.75%. And total advances as for the 31st of December has reached from that INR 80,255 crores. And out of that, the micro-credit loan, which is the group loan, is at 59%. Though we have been done as the extra provision of INR 1,000 crores, but our ROA, return on assets, has come 2.4% this quarter and ROE 14.6%. Overall profit, if we've not done the provision extra INR 1,000 crore, that will be INR 1,374 crores, which is 88% on the year-on-year basis and 22% on quarter-on-quarter basis. So because of INR 1,000 crores extra provision done, so net profit has come INR 643 crores. Our collection efficiency, which we'll see that in a bit this for quarter, especially if it is say that the microcredit, it has come to the customer collection efficiency 94%. And if it is a value term, it is at 92%. And deposit growth has come 30%, which is our year-on-year basis. And quarter-on-quarter basis, deposit growth has come 8%. And total deposit has come INR 71,128 crores. And as a historical, Bandhan is focusing on CASA and retail deposits. In this time, we've also seen that a very good achievement has come by the team, 43% CASA, 81% retail deposit. And we see that 66% of the CASA, growth has come as a year-on-year basis, which is the highest in the bank life. Our bank has the banking outlet 5,190. Last quarter, we have been opened 490 banking outlet. Customer have been reached to 2,25,00,000, which is the last quarter, we have been added 17 lakh new customer. I like to mention in here, whatever the new to customer added in the bank, if I say that in a micro-credit level, it has been come nearly 3 lakh in the month of December '20 compared to the December '19 it was in 2 lakhs. So it means to see that the new customer acquisition or new customer demand for credit is growing -- coming such a way, which is more than normal situation on that. Bank have a staff 47% -- 47,260. So I hope that the -- you have some questions. I would like to explain on that. But overall, my views on that, that this quarter performance has come very good and gradually improved the collection efficiency also. We have the confidence on my team and my customer and the future, this means that this quarter, it will become very near to normal on that because the -- always the fourth quarter business growth is in highest in any of the quarter. When the business growth will come highest, automatically NPA or risk in the portfolio will come down on that. Thank you to all of you for your passion and time. Please.

[Operator Instructions] The first question is from the line of Jai Mundhra from B&K Securities.

Sir, first question is on asset quality. So if I look at the MFI book, the collection efficiency is around 90 or 92, and we also have the pro forma slippages. So just wanted to understand what is the par portfolio risk in MFI book, which is outside of the pro forma slippages?

Okay. If I a little bit clarify to on that. The -- whatever the pro forma we have given, the 7.1%, so on the beginning, my statement, I have been given that we are very conservatively taken on that. Because whatever the total collection efficiency has come, other than microcredit, all are in the 98%. This is the first point. And next point on that, you see that the microcredit, out of 92% customers, who are partially given the installment, we are taking them as a waive, though it is not near to risk because these are the people because of the microcredit when they started the partial repayment, they only -- once upon a time they will be come to the full repayment and they will be come to the normal. Because in the -- today, we are calculating on that. For that reason, we are taken as a partial installment paid customer as a portfolio on that as it is. So that, it has come to the 7.1%.

Right. No, sir. So actually, I was asking that there would be some -- when you calculate collection efficiency, right, you would have the people who have not paid and hence, they have been tagged as pro forma slippages. So that would have reduced your collection efficiency. So if I were to bifurcate that as of December end this much is pro forma slippages and outside of this, how much is the portfolio at risk par?

So if you see my current customer, right -- the current customers that we have is about 73%, it is the nondelinquent customer. And then we have different bucketing of 30-plus, 60-plus and 90-plus.

Mr. Jai Mundhra, does that answer your question?

Sorry. So okay -- so I don't know. So -- okay, sir. And if you can quantify the 0-day par in the state of West Bengal and Assam, if it is possible?

That breakup we don't have. We have given the 0-day par at an overall level for EEB. And West Bengal and Assam anyway is about 60% plus of our entire portfolio.

[Operator Instructions] The next question is from the line of [ Amanjeet Singh from S Caliber Advisors. ]

Yes. Sir, I just wanted to understand, so the collection efficiency that we have reported, there has been a slight dip in the first 15 days of January. So could you let us know like what has changed? And what is your outlook on the coming quarter?

If you see that we are clearly trying to address to you on that. The Assam, there in government have been declared waive bill and also after that, there have been micro-credit loan waive. It was in first week of January. So when this news has come in the 1st January, at that moment, the customer has been -- there is a confusion about the customer. The -- who are the borrowers? And what is the criteria government will be set up for the waive off the loan. So there is a reason on that. For that reason, it has been a little bit come down on that, which was the net 88% my collection efficiency was in September, it has been -- sorry, December in Assam has come down 78%. But if I say that in the -- today after the 16th of January, today, it is not any further declining. Now it has been stopped declining. It has come improving on the -- onwards on that. So we hope that the next 1 month it will be coming to the earlier position. And by March, it will be more or less will be come to near with other states.

Okay. Sir, and I might have missed this point. So -- but what is the absolute 0 DPD for the entire book?

For the entire micro banking book, the absolute 0 DPD is 76%. I'm talking about the current portfolio, right, which is not overdue?

Okay. So how would we see that...

I'm not saying 0 plus, I'm saying 0.

Okay. Sir and -- so this collection efficiency excluding arrears, so the arrears is because of what the earlier -- how should we look at that?

Sorry, could you please repeat your question?

Sir, on the collection efficiency, it says into bracket, excluding arrears. So how would that play out, sir, on the arrears? Is that because of the morat?

No, no. Arrears means, we are not -- if you look at -- there are 2 things, right? One is the repayment rate and one is collection efficiency without arrears. The repayment rate includes the overdues of earlier months. If we consider that also in our calculation, then it is 100% plus. When we say excluding arrears, it means that we are only considering the current demand against current collection.

The next question is from the line of Karthik Chellappa from Buena Vista Fund.

I have 3 questions. Firstly, we had earlier guided for a credit costs of about 300 to 350 basis points for the full year. But now in view of the situation in Assam and the impending elections, we have taken about 560 basis points in 3Q. So how do you see your credit costs and NPL ratio playing out, let's say, for the rest of the year, in the fourth quarter?

See, firstly, we had guided for 3.5% at an overall level for the credit cost. Now with the new developing situation in Assam, what we have presented in the first 16 days, in fact, which we believe is, the initial impact is always high and then things kind of stabilize and sink in, right? So basis that impact, if we have to take the additional 2% drop in collection efficiency, so our credit cost guidance then go up at least by 100 basis points from 3.5%. So we believe on the all, it should be less than 5% basis the current situation.

Okay. Got it. And sir, last quarter, you had shared that 7.6% of your EEB loans by value and 12.3% of the loans by number were top-up loans. Can I get the corresponding figures for this quarter, both by value and number of customers?

This quarter, the top-up loan number had been very low. So we've not done because the top-up was more offered at the time when there was a moratorium in place and the environment was more about COVID. So post the moratorium, the regular loans have picked up. And if you look at the absolute amount, I may not have the percentage readily available, but in my investor presentation I have given that, the absolute amount is INR 920 crores of top-up disbursement.

Which was in the last quarter INR 2,370 crores.

So in percentage terms, last quarter about 25% of my disbursements were in top-up. In the current quarter, it is about less than 6%.

Okay. So less than 6% of the disbursements have been in top-ups this quarter compared to 25% or so last quarter?

Yes.

Okay. Great. And my last question, sir, is in January, you have actually undertaken a revision of your fixed deposit rates. And if I look at various buckets, your FD rates right now are almost at 6% or below 6%. But your savings bank account rates for INR 10 lakhs and above continues at 6%. And -- I mean, if it goes into INR 10 crores or so, it's probably even 6.55%. So in such a situation, it is natural for you to see some movement of funds from your FD to your savings account. But I'm just wondering why you have not reduced your savings rate as well, because right now, the arbitrage in the rates seem to be quite obvious?

You see that this is very right way you have been at this, and I've taken this call as a consciously because when any FD make any bank that is in cost is higher than the savings. Because they have need to attend the customer and they may keep the printing of the fixed deposit receipts and again when he will become on that and withdraw for that and that is also needed, one of the time will be spent on that. It is better on that, that gives the freedom to the customer if it is even the 6% which is near to FD rate and they will be like to enjoy it on that easily. And senior citizen is more happy on that way. So that is the logic behind on that we are making it.

Okay. Great. Just 1 follow-up, sir. If I were to just look at the collection efficiency in West Bengal, that also dipped a bit in the first 15 days of Jan relative to December. Any disturbances or problems in collection efficiency that you're experiencing there at this point? That will be all.

No, that is not anything has been disturbance in here. It has always happened sometimes first week, second week and the fourth week, they are cover it on that. So that has happened on that, 0.5% or 1% fluctuate on that week-on-week basis. So because of the need of the month we have been making on that and a couple of holidays in the year -- in the first week. So that, it has been a little bit has come. And again, it will be come up in the closing of the month.

The next question is from the line of Rahul Jain from Goldman Sachs.

Sunil, coming back to the collection efficiency, you said 76 is 0 DPD. Can you give us a further breakdown of the 24%, of course, minus the NPL pro forma, NPL which is 5%? What buckets they would be in 0 to 30, 30 to 60, any further kind of breakdown can you give us?

So 76.54 is the exact number for the 0 DPD customer. If you talk about the 30-plus customers between 30 to 60, it is around 6%; and between 60 to 90, it is around 4%.

Sorry, I just repeat 30 to 60 is 6%. So that takes up to 82.5. And 60 to 90, you're saying is about 4%.

Sorry for the confusion there. So 30-plus -- 30 to 60 is 10%.

Okay. And 60 to 90 is -- hello?

Yes. Just a sec, just a sec, I'll just give you that number. And 60 to 90 is another 5%.

Okay. So that makes it up to 91% and then plus 7% NPL, and then maybe they would do -- okay. That is 98%. Got it. Second is, have you taken any interest income reversal also because of this pro forma NPLs?

No, that we have not taken so far, but that amount for us is relatively less because the way we allocate the EMI in our micro banking business, we first adjust it against the interest then the principal. So the -- our estimate is the total unrecovered interest, which is standing in the receivables is about INR 349 crores.

Got it. The other question is on the restructuring and then related to that is pro forma. So let's say, Supreme Court verdict, let's say, comes out hypothetically whenever. So these 7% will actually become NPA or you have the option of even restructuring these cases?

So we always have the option of restructuring this case. We have not done any restructuring till date, right? Our focus is always to connect with the customer and do the collections upfront. We have time till 31st March to evaluate that option.

Okay. Okay. Got it. And the last bit is on the Bengal part. So I guess, last quarter, sir had mentioned that as the local transportation improves, opens up, et cetera, this would swiftly get back up to 95%, 98%. Now in the backdrop of election noise and, of course, the neighboring state Assam is having this MFI loan waiver episode going on. Do you think Bengal is likely to remain on these levels, which means no improvement despite opening up of local transportation? Or this could actually drop in the wake of the local politicians getting involved in MFI loan waiver, et cetera? Anything that can impact the Bengal collection efficiency essentially the question.

No. Rahul, it is not a political issue or election issue. As you can see now, it is an issue of basis the people to the consumer demand has not come that much. If I give the one or two example on that, trains have been started, yes, but till now if the person will like to go to Assam or come from Assam, there is a need of the [ COVID test ] and they cannot be stay more than 24 hours. So this the position is now surrounding states where Calcutta is a business hub. So this especially, if I say that the readymade garments and the jewelry work and also, if you see that there is a [ Shaadi, ] there is a big hub of the surrounding of the city. And all this in the hub, the people have the manufacture, but the people in the other states are not coming, even in the heart, even in the train open, but they cannot get the sell -- seller, so if it is -- sorry, buyer. So if it is not, it is coming to the normal, so that it is a little bit conservative has come on that. So I feel that the -- and after the Puja, whatever that is they like to picked up in that point and that has not happened. So after that, what we see that is by December -- 15th of December, that, again, it has been started a little bit on that. So I hope that in the next couple of months, it will be like to very good position whatever I predicted earlier and you mentioned on that. So that is not the problem. And election, of course, is there, but election is not the matter for this collection efficiency and the growth of the credit on that.

Fair point, sir. Appreciate the clarification. But sir, as we've seen in the case of Assam, there's been a sharp drop within like a 15-day period. And while I appreciate you said that it is stable, it has not gone back up to 88% either. So what are you trying to do to educate the customer that they should sort of keep their balances current because that clearly is a risk even for your neighboring state Bengal, where we have a large exposure.

No, Rahul, see, while in the value terms, it is at 90%, that's because of the part payment customer, right? And as I said, we have not done any restructuring for any of our customers. The number of customers who are talking to us and are actively engaging with us and paying some part installments, that is still upwards of 94%. So we are not worried so much about -- clearly, there has been an impact on their income and they have been paying part-payments, making part in installments. So that shows their willingness, right? The question of ability as their income level goes up, they will repay faster. And in any case, they are doing part installment.

Got it. Just 1 more question, a follow-up question on this.

If you say that, Rahul, you are talking about the Assam issue on that. This is due to picking up on that because the people already started to talking on that. Can we go again to the moneylender to take the loan from money lenders? Who will keep the money to need to run the business during this -- even 6 months or 3 months? They understand really good on that. And second point, they say that, that "If I am not paying now, maybe in another 1 month or 2 months, so my credit bureau record will be like to damage. And whenever it will be come to the waive the loan, that time maybe I am not eligible. I do not know that, which criteria is eligible for get this credit waive from the government." So that they are removing that from that from their side. And next point on that, the -- whoever running business, they are not joining on that point. So that they are coming on that because when the first [indiscernible] has come, immediately a little bit is the impact. And gradually, it has been coming up on that. I have the confidence on that because we are -- in this time, yes, we are a little bit conservative and very selective. We are disbursing the credit in Assam. And our people are touching to every customer. And that is the feedback I have been given very latest one on that, so that they are returning back to the normal. I hope that another -- next month, it will be the different scenario as per my experience earlier and also experience from the Assam, Bengal and others because it's not in a very exceptional case. It's a normal case in the microcredit industry on that. And it sometime happened in the area of -- who's in corner, sometimes happened in the state level. If I say that a very good example is AP. Whatever happened, happened. We have now started the credit to the AP. And customer in the time of COVID, 99%, they say that we lost 1% this time, but we cannot be lost again. So that is a big realization also coming to this level of a customer.

Fair point, sir. Just 1 last question. Sunil, this 7% of pro forma NPL, are you receiving any amount of money from these customers? And if yes, then what would that be as percentage of the loans? As in how much are they paying whatever is due installment?

No. As I said, right, this includes part payment customers because for part payment customers, DPD keeps flowing, right? They've been regularly paying part payments. So this is the impact of that as well. If I have to remove the part payment customers from this, then this number would fall to something like 3.5%.

And Rahul, next point adding on that are the part payment, they're actually returned back the discipline of the repayment. There's a very good sign on that. These people have -- they have the intention to not to repay, so these people will not come to this, given this even the part installment. So very good sign of this people will return back. Maybe 1 month extra or 2 month extra is needed for them.

The next question is from the line of Sameer Bhise from JM Financial.

Just wanted to ask when we have taken the view on credit cost and the excess provisions, does it reflect the state of affairs as on 31st December? Or you have kept some buffer for the worsening that has happened early Jan or what is expected to happen coming March or, say, before the elections? How does one take confidence there?

So Sameer, the provision that we have taken takes into account the situation as of today, right? And that is precisely the reason we have accelerated the provisioning. So this takes into account the developing situation of Assam as well.

Are you saying...

Sameer, your point is in, you will not keep in that mind on that the provision we have been made for election, no.

Sorry, I couldn't get you there, sir. Can you just repeat?

I said somewhere you have been mentioned some of the provision maybe we have been done for election, no. We have been not done anything because of the election because we have the best experience on the election. Election is not the matter for us.

Sure. Sure. I appreciate that. Secondly, when you say that 76% is the on-time repayment that you are getting currently. When you are looking at behavior of customers who are beyond 30 days, how do you differentiate in terms of what proportion of that is Assam driven and what would be West Bengal or other states driven?

No, Sameer, just to correct. When I say 76.54% or that is around of 77%, this is 0 DPD as on date. That is different from my current full paying customers, right, because moratorium ended in August, people started paying back from the September, people -- some started paying from 1st of September, some started paying from 1st of October, right? So these factors in those customers which started late, right? So they will still be overdue. If we talk about our current full payment customer, it is around 80%.

Okay. Okay. So basically, you mean to say that customers who are fully current and paying on time is close to 80% after the moratorium repayment started coming in?

Yes. So let's say, customers who started paying after 2 weeks installment, they would be overdue customers technically, right? But currently, the 80% of customers are paying on time and are regular. I mean the full installment, the rest are part installment.

Okay. And finally, just wanted to get a sense on how do you look at the situation that Assam would kind of have a bearing on other states or maybe West Bengal or some of the other larger states in terms of levering customers with waiver, et cetera? What are your thoughts on the same? That should be it from my side.

I think it's fair to connect Assam with any other states, right? I mean there is no reason to think that if it has happened in one state, it can happen in other states as well. Yes, we can think about it. But practically, every state has its own dynamic.

If you recall in the -- Sameer, when the AP crisis has come in 2010 -- in the '11 or '10, so that time, no other states have been implemented it, last 10 years. So it is not like to the replicable model on that.

Sure. Sure. And just 1 data point, what would be the write-off amount for the quarter?

0.

The next question is from the line of Saurabh Kumar from JPMorgan.

Sir, this extra credit cost of INR 700 crores you have provided over and above the earlier guidance, this equates to roughly about 8% of your Assam MFI portfolio. So fair to say at this point, your assessment will be 8% to 10% loss on that Assam business, at this point of time?

Yes, that is what we are seeing it today.

Okay. So -- and basis -- so effectively, you've provided for Assam or do you -- I mean, basis of -- I mean, if your current expectations pan out, do you think you need to provide more in Q4 or is this INR 700 crore in your assessment will be more than enough?

No, there will be some provisions in Q2. We'll have to see how much it is, but we don't want to take it beyond this financial year.

Okay. Okay. And sir, the second question was essentially you gave your stage 2 asset, so effectively 14% were in the stage 2. On a normal basis, what percentage will be in stage 2?

See, in a normal basis, we used to have a collection efficiency of 98%, 99%, so where is the question of stage 1, 2 and 3, right? This is the COVID impact, the -- and the moratorium and the delay in -- because when there is a stock for almost 3 to 4 months, starting March to August, right, and then you have to restart that exercise for the customers to come back to regular repayment, it takes a couple of months. So by that time, the DPD flows.

Okay. Okay. The third one is essentially, sir, in your reading that the Assam MFI will applicable to you? So my question is effectively, number one, is this the Assam MFI bill issue? Or in your view, if the political model has an issue? I mean, that's what I'm meant.

Second one. If you see that the Assam deal, whatever you say, it is not, as per my knowledge, whatever I saw in that, it is not applicable for bank.

Okay. Got it, sir. And sir, have you spoken to the government at all on this loan waiver or you have not spoken to them or talked on this issue?

Sorry, we couldn't get your question. Sorry, could you please repeat?

I'm saying sir, have you spoken to the government on this loan waiver issue because we were hearing that the microfinance industry, you're not part of it, but the industry is going to speak to them. But I was wondering if you have spoken to the government on this loan waiver issue?

I cannot disclose it publicly, sorry.

Okay. And sir, 1 final question. On this CASA sourcing which has gone up very substantially quarter-on-quarter, can you throw some light, what's driving that?

See, it's a mix of both, Saurabh. The new account acquisition which has gone back to pre-COVID levels and also the existing customer base increasing their wallet share. So that's what we are seeing in our CASA.

And gradually, the customer, the middle level and high net worth level customers also, confidence has come to the bank. Couple of the quarters, we are after the listing, they have been observed on that bank strength, bank quality of the portfolio and then confidence has been built up on that, then deposit is done. It's a normal, I feel that.

I'm sorry, sir, just one final question. So when that CAA, NRC happened last year in Assam, the total write-off, if you can confirm, was INR 270 crores on the Assam book?

Yes, around similar level.

And what was the bottom in terms of collection efficiency there?

If I say the -- just one point, maybe full figure, if not in the recall, whatever we have been done in the less than INR 200 crores. And this is the first time in Assam in the last 15 years of the Bandhan done this write-off. Not a single written-off done in the last 15 years in Assam. So that is the confidence on that customer is very good. Customer will be returned back again on that with the Bandhan.

Okay. So in 15 years you've not written off anything. Last year, you wrote off INR 270 crores, right?

Yes.

The next question is from the line of Amit Premchandani from UTI Mutual Fund. As there's no response from the current participant, we take the next question from the line of Kunal Shah from ICCI (sic) [ ICICI ] Securities.

So firstly, in terms of looking at this collection efficiency which is there at the 78-odd percent in Assam and 89% in West Bengal, how do we see the disbursement trend? Would we be cautious? And should we see that having the impact on the overall portfolio? Because maybe last -- till December, it was holding on pretty well, and we had seen this kind of a disbursement trend, but now we will get more cautious. And what would be our strategy with respect to both the portfolios in terms of getting it, no doubt, 5-year strategies there. But given the immediate risk, which is there in terms of collection efficiency as well as election, would we be extremely cautious in both the states? So that was the first question. Second question was in terms of the collection efficiency, again, when we look at other segments, be it commercial banking as well as affordable housing, there also from September to December, there is no improvement as such. It's at 98-odd percentage. So if I have to look at the breakup of pro forma GNPL across these 3 segments, be it EEB, commercial and affordable, if you can share that. And then one last question in terms of savings deposits. So if you can just share in terms of the customer profile which is leading to this kind of a gain. There is almost like 50% rise in the balances. And if you can share the distribution as to how much comes in 3% and how much comes in more than 6% of the overall portfolio?

So, Kunal, too many questions. If you can...

One-by-one, you can be like to speak.

So firstly, in terms of the disbursement strategy out there in both the states, given this immediate disruption which is there, okay, and there would be some disruption because of elections as well, so what would be the end -- could that have the impact on the growth because we would have not seen till December, but I think now the collection efficiencies are not that great?

No. Firstly, we'll have to differentiate between the 2 states, right? We can't bucket them together, right? We've given West Bengal because it is our largest state. And Assam, we've given because of the development happening, right? So we don't -- there is no reason for us to believe that both states are on similar lines. The answer is no, right? To your question on disbursement, Assam, clearly, we are cautious, right? And that has been our strategy in any challenge. When there is a challenge, the first step is to -- the first reaction is to step back, connect with the customers, go slow on disbursement, improve that connect quotient with the customer. And once we are confident, then start doing this. So a similar strategy will work here in Assam. West Bengal, we don't see any reason why we should think differently than what we were thinking some months back, right? So that strategy continues.

No, because Assam also, we thought that maybe we will hold -- we will be able to hold on to the collections, but Bill really disrupted. So I don't know whether that's cautious stance would be there. And the overall growth, I think, so on the MFI side, we will still be continuing with a similar kind of a momentum?

No. See, ultimately, it depends on the customer need, our assessment of customers and, of course, the overall position in the state. So for Assam, clearly, the stance will be slightly cautious. For other states, we don't see any reason for those customers who are regular paying and meet our criteria to worry too much here.

Okay. Sure. And secondly, in terms of performance of collection efficiency on commercial banking and affordable housing, that's been also flat. It's not going up. And so how would be the pro forma GNPL breakup across 3 segments? I think pro forma GNPL of 7.12% is for the overall book. So if you can just give it how much it is there in EEB, how much in commercial and how much affordable?

About 95% is EEB.

In absolute term, if you have to look at it. Okay.

Yes.

Okay. And -- okay. And lastly, in terms of savings deposits, so when we look at the balance, that has gone up by almost like 50-odd percent year-on-year, maybe average savings balance. And in fact, it is up quarter-on-quarter as well. So what -- maybe what is the kind of profile? Is it more like a government account out there? How would this profile of the customers would be? And secondly, if you can share the split between 3% -- what proportion of savings deposits are in 3% bucket and what is in more than 6% bucket?

Yes. So to your first question, what is the profile of our saving bank customer, it's largely retail, right? The reason we have seen a large pickup this quarter, clearly, that's an incentive that we have offered to our customers to stick with us and not go to competition who are offering higher term deposit rate, right? So here, what we are telling to our customers that you get a similar rate like term deposit and get a flexibility of a saving bank which you can use whenever you want, right? The alternate was that they might go to competition who are offering much higher rate because retail customers do look for rate. So in the bargain, we have seen the improvement in our CASA balances as well.

Okay. So then, is it negotiable than the -- maybe the table which we get in terms of INR 1 lakh to INR 10 crores and maybe INR 10 crores to INR 50 crores? So is the rate negotiable? Or this would be fixed and we negotiate in terms of the balances with them?

We don't negotiate. It is all fixed.

Okay. So rates are fixed. Maybe we would be seeing graduating from maybe the lower balances to more than 1 lakh balances. That is how it would be?

Yes. So the current customers who are interested in FD on maturity instead of going -- renewing it because here they get the same 6% and the flexibility to use it whenever they want. Otherwise, the option was they can go to competition who is offering higher rate.

Okay. And the split between less than INR lakh and more than INR 1 lakh or maybe 3% and 6% of the overall savings pool?

In value terms, about 67%, 68% of balance is above INR 1 lakh.

Is above INR 1 lakh.

Sorry, is less than INR 1 lakh.

Sorry?

67% is less than INR 1 lakh.

Okay. 67% to 68% of because average is any which ways 60-odd thousand, so. Okay. So that is less than INR 1 lakh and 32, 33 would be more than INR 1 lakh, which would be 6%.

Yes. Right. Right.

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

Sunil, I wanted to check, you did say majority of the NPAs come from the MFI book. Could you just tell me -- could you just tell by the top 2, 3 states, right, like how much NPAs would that be in Assam and West Bengal at least for 2 large states, just to put things in context?

See, largely, it would flow with the quantum of portfolio we have in state -- so largely, yes. If you look at West Bengal, it is about 2,500, so roughly 50%, which is what our share in the total book is, 46%, 47%, yes, this is what the share is. So largely it reflects the overall portfolio with an exception of Assam, which is slightly higher.

You are saying Assam higher than the 7% number, rest assume each state to be at similar level?

I'm not saying. I'm saying it reflects the portfolio of that state.

Okay. Got it.

So my distribution of portfolio state-wise, largely, the NPAs are also distributed in a similar fashion with an exception of Assam, which is slightly higher.

Okay. And but -- would that be a little counterintuitive because, again, it -- at some point, has to mirror collection to some extent. And you -- I would imagine that even like in Assam, obviously, it's higher NPA ratio. It should be something similar in West Bengal, right, given that collections have lagged, right? So like if your rest of India portfolio is 94% collection and West Bengal is 89%, your NPAs also should kind of reflect a similar trajectory of higher NPA in your West Bengal portfolio?

That's where -- when we say probable NPAs, these include part payment customers as well, right? So collection efficiency considers part payment customers as well, right? So we'll have to differentiate between the 2 and then look at it, what is -- if we talk about number of customers paid, that is not very different state-wise.

Got it. My second question is related to the per account loans, right, because of COVID 6-month of moratorium, automatically there would have been a 10%, 15% increase in the outstanding of each borrower. As we get into next year, that should normalize, right? So because customer additions this year has been less. But because there was moratorium and interest got added to the account, the AUMs have grown nicely in the MFI portfolio. That should normalize next year, right? Is that a fair expectation to have?

See there are 2 things. One, as a policy, we don't charge interest on interest. The normal interest do get levied on our EEB though. And two, that impact any way got nullified to some extent by way of ex gratia, which was offered to the customers.

Look, what I'm trying to say is, let's say, pre-COVID, you were in an X cycle, let's say, cycle 5 or 3, you're offering a person INR 50,000 loan. Automatically because of interest and everything, his outstanding has become more. Next year, you're not going to lend him INR 70,000 straight, right? Because he's -- so I'm just trying to understand that next year he shouldn't get -- next couple of years, your ticket size growth could be quite low, right, in the MFI portfolio?

So there are 2 things. One is the next cycle disbursement, we look at disbursement amount to disbursement amount, right? So disbursement amount has not changed. That's point number one. And two, there is no automatic increase because the customer has changed the cycle. We do evaluate the customer as well. So there have been customers who've been at a similar range for last 4 years also.

Got it. And my last question is on -- to Sudhin on mortgages, where are we? We don't see the book accreting fast in terms of growth. Have we got to that inflection point we've reached enough branches of where we can start growing the book fast? What are the constraints because it's been some period now since the book has been more like consolidating?

That's correct observation which you have noticed. I think we had completed the merger and consolidation. Everything was through by March. Unfortunately, post-COVID in March, I think we had the first quarter almost blank, nothing major happened. And month-on-month since April onwards, there has been an improvement in the disbursements. And I think the last quarter we have seen quite a satisfactory growth in the disbursement. I think it is in excess of around 30%. And the new branches also which we had mobilized from the Bandhan Bank, there also they have started contributing. I think approximately 15% to 16% contribution has started coming from the new branches, which we have mobilized through the Bandhan Bank branches. And if you look at it, we have been analyzing it, the states where we were not earlier present, like the Northern States and Eastern States. I think if I would compare the figures, we used to get approximately 700 cases. I think corresponding to that, this quarter we got almost 3,500 cases. So I think we have been seeing improvement coming from all these new territories and the Bandhan branches. So I think going forward, I'm optimistic that there should be the growth reflected in AUM. One of the reasons AUM is not reflecting the growth corresponding to the disbursement is partly one is prepayment which was there throughout this 9-month period, whereas we had no -- not much of the disbursements during the first and the second quarter. Besides, we keep receiving the credit-linked subsidy from the government on the affordable housing of customers who are eligible for the CLFS. So that crushes the outstanding loan amount. So AUM growth doesn't reflect that. So I think these are the couple of factors which has not been showing the kind of the AUM growth which should show. And if the disbursement trend as we have experienced during the third quarter, if it continues, I think we will be able to see the growth in the loan assets.

The next question is from the line of P Subramanian from Jefferies.

I just wanted to ask on the collection efficiency, which you reported at 92%. Now if you look at the 7% pro forma, GNPA you said mostly it's from the EEB book, which means the EEB is seeing a 10% pro forma. So of this 92%, would it be fair to say that the remaining portion has largely or almost entirely been registered in the pro forma GNPA or is that a simple GNPA?

No, I didn't get your question. Could you please repeat?

I wanted to ask, since you are seeing a 92% collection, and the pro forma GNPA on the EEB book is 10%. So is the remaining book which you've not recognized, is that the entirely paid?

That is -- I think I'm not able to explain. We need to de-link between DPD and collection efficiency. The pro forma or the DPD customer does not mean that the customer is not paying today. These customers have missed earlier installment...

Okay. So let me just explain. So you said 80% is entirely paying, 10% is pro forma GNPA and 10% is part paying. Is that a correct way of understanding?

See, again, we are mixing number of customers with pro forma, which is a DPD position, right? What I'm trying to say is if a customer who didn't start the payment in the first month or the second month or the customer who's paying in part installments, in my collection efficiency calculation instead of 100%, that customer will give me 50%, right? So my collection efficiency will -- to that extent, shows a little bit higher. But in my DPD calculation, I know since it's a part payment customer, the DPD keeps moving. So we can't say a pro forma 10% NPA means it is equivalent to my 90% collection efficiency.

Yes, I get that, Sunil, yes. Okay. So 80% is fully paying and part paying would be 10%. Is that correct, based on what you said?

So the part paying will be 13% odd.

Okay. Okay. Yes, that's really helpful. And just one other question, if I can squeeze in. On the overall provisions that you hold, standard provisions, is any -- have you earmarked for Assam any particular number? I might have missed that. Specifically earmarked for Assam?

Sir, I would request you to please be online, we are just trying to reconnect the line. Mr. P. Subramanian, we have the management reconnected.

Hello?

Can you repeat the question...

Yes. I wanted to understand of the INR 3,100 crore of provisions we hold, how much is specifically earmarked for Assam, if you've given out that number?

This is based on the customer fee. We have already seen a drop in Assam collection efficiency. So accordingly, we have made the provisions in line with the collection efficiencies for the current rate.

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

Can you hear me now?

Yes, sir. We are able to hear you.

Yes. Yes, sorry, last time -- I just want to understand what are the key learnings for the management, given that last quarter you didn't provide enough for the COVID-related stress and kind of despite repeated kind of questions from analysts that why there have been underprovision and kind of you kept on guiding for the similar credit cost. And this quarter, we have seen that many other banking and financial results have come and most of them actually have reduced the stress estimate as compared to what they were guiding last quarter while you were the ones who actually have to increase the stress estimate. So what are the key learnings? And how will you guide going forward on these matters?

See, there are 2 things here. One is, till last quarter, whatever we had targeted in terms of collection efficiency, we've been hitting those numbers, right? We started with 60% in June, going up to 90% in September. So we were there till the time we had guided our collection number. What we have seen this quarter, the pickup which was to happen between September and December had slightly slowed down and it is taking longer. So that's one piece here, right? So that's why there is this disconnect. And secondly, most importantly, we will be the only bank which has 0 restructuring in our books today, right? If we were to do restructuring of the part payment customers, we would have been in line, right? Whether -- then I would have not required to take this kind of provision and also my pro forma numbers would have looked better, right? So our philosophy is very clear. We want to engage with the customer, get the collections to the extent possible and use these options only as the last measure.

Yes. But I would still think that despite adjusting for restructuring, the numbers have been much worse than what the management had guided last quarter.

That I explained as a response to my first point that till September we have been hitting the collection efficiency number. Between September and December, what we had guided is taking longer, and that's where this gap has come, right? But the number of customers paying still continue, right? I mean so -- what we see is, yes, there has been a slight -- we would have wanted more collection efficiency, but it's more of a timing difference. Of course, Assam, we have a different issue to deal with.

Just to understand, will you be more conservative going forward on provisioning?

We've always been. I mean, we've always taken any challenges and provided upfront, and we will be conservative.

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

Couple of questions. How do you compare Bandhan's collection efficiency in Assam and West Bengal to the overall industry because honestly Bandhan has always done better like amongst so many crises that you have seen. And when you say that trends are beginning to stabilize in Assam, are you witnessing the similar trends for the industry as well?

See, it's very difficult to comment on the industry, right? We will be more comfortable talking about our numbers and our process. But historically, we've always been better than the industry, and there is no reason why we would not be this time.

Okay. And how is the mix of Assam like a change in terms of MFI loans over the past couple of years?

Can you repeat it?

The mix of MFI loans in Assam. So how has that changed over the past 2, 3 years? Some color around that.

You mean the share of Assam?

Yes, yes, the share of Assam and outstanding MFI loans. How is this now and versus...

The share is 17%, which has come down to 14-odd percent.

Okay. And the other question that I have is on the deposit growth side. So just one clarification on the growth as to how much of this has coming from the Army accounts as we won this mandate recently? And are we paying more than the average rates on these deposits?

No, we have been not yet on that to [indiscernible]. We have been just if you find on that. My team is working on this. Hope it will become very good.

And here, the rate does not change. The rate will be the same. It's just the facilities, we will offer them more in terms of pickup facility, doorstep facility and so on.

Okay. So -- and what is the size of opportunity that we are looking at from these accounts?

Too early to say, but if it's a very opportunity. We have to first retain the number before we talk about.

The next question is from the line of Nishant Shah from Macquarie.

Couple of questions from my side. First, on the MFI deposit growth. So this quarter, there's been roughly a 20% kind of Q-on-Q growth in the average balances per MFI deposit or SA balance and there's also been like roughly about 10% odd growth in the customer count. So this works out to a 30% odd growth in the overall deposits in SA balances of MFI customers. So could you just talk about like how that comes to be in such a tough environment when collections are also dropping a little bit? And second question, what are your thoughts on the recent comments by the RBI Deputy Governor in November, talking about like looking at an overhaul of MFI regulations, looking at more activity-based regulation rather than NPT based. So clearly is alluding to doing away with the differentiation between the regulations that exist with banks and MFIs -- or NBFC MFIs. So those 2 questions first if you could answer.

Thank you, Nishant. To your first question, we'll have to do the math whether that 30% number is correct. But my reaction to the MFI customer deposits, at the activity level the business level of the customers increase, clearly the balances with these customers also go up. The COVID environment they used to dip into their savings to repay the installment, that has reduced now. That's one -- that could be one reason. The other reason, of course, the subsidy keeps coming into these accounts, whether it is PM Kisan or Garib Kalyan. So that also helps in increasing the balance. So that's on the MFI deposit. On the regulation side, I mean, we read it too much to many places. But I would not tend to read too much into these activity-based and the entity-based regulations as to what the regulator means. I know I would leave it to the regulator and their wisdom rather than judging it and stipulating it, right? But clearly, historically, there has been differences between NBFCs and banks. Banks are, in fact, more regulated than NBFCs, both in supervision as well as other regulation. So I'm not too sure how to read this and whether it is positive one type of entity or negative other type of entity, too difficult for me.

Okay. Fair. Now specifically because the comments included the fact that like he acknowledges that only 30% of the industry is now in an NBFC MFI format to which the 2010 rules supply, be it on spread caps or on ticket size amounts or on anything. And the intent is to just understand, like there are smaller, probably NBFCs who abuse the system by not counting bank loans in the overall indebtedness cap. So whether a common cap could be introduced, that was the way I was looking at it. Fair enough. Those are the only 2 things from me.

The next question is from the line of Sameer Bhise from JM Financial.

My question has been answered.

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

Sir, first question is about the Assam. So the loan waiver that the government or the political parties have actually basically talked about, sir will it be only applicable to the SHG loans or it will be also applicable to the micro finance loans? And if to micro finance loans, what percentage of...

Mr. Anand Dama, sorry to interrupt. Requesting you to please speak a bit louder. Sir, your audio is not very audible.

Yes, sure. Is it audible now?

Yes, sir. You may please go ahead.

Yes. Yes. So I was saying that in case of Assam, so we have seen politicians talking about the loan waivers. So do you believe that these loan waivers will be only applicable to the SHG loans or it will be also for the microfinance? And if for microfinance, our portfolio also will be eligible for that or do you think that there will be some cut-off in terms of ticket sizes or customer categories as such? Any color on that, if you can provide.

See that clarity will come only when the rules -- if this happens firstly, and then the rules are framed under that, only then the clarity will come. Otherwise, your guess is as good as mine.

Okay. But whenever these kind of waivers have been announced in any other state or if you have any past records to talk about, whether it is applicable to the SHG loans only or to the microfinance loans?

If we see that -- this is the first time one state has been declared only microfinance loan and agriculture. But earlier, all the states have been declared about the agriculture loans. And if you see that the long back on that the UP has been declared as a loan -- agricultural loan at that time. And after that, that is -- a lot of this type of loan that has come. But after that, when the people say that they are not getting anything on that because there is -- the criteria is different. So then again, introduced it in that Rajasthan and Madhya Pradesh. After -- then it was introduced, but no one has been listing about it on that. So we are not sure about it what list happen after that.

Okay. So yes. So basically, sir, in that case, so still, we will look for making -- so we are assuming that basically 10% of the portfolio could be at risk and possibly even more if the collection efficiency drops from here on. And Sunil said that basically, we will take up whatever has to be taken in the fourth quarter and then move on. So does that mean that we will take the write-offs in the fourth quarter move on because the loan waivers and all will really take time to be formalized once the government forms and all. So then, is it the end or like...

No, Anand. I mean, see, firstly, how much will it -- we are not suggesting that things will become worse from here, right? That's not what we are suggesting. Two, whether this farm loan will get implemented. If so, in what fashion. Because typically, if the farm loan waiver gets implemented, it is the government who has to pay to the bank, right? So technically, there should not be the loss to the impending institution. So we'll -- that how has been the case in case of a farm loan waiver. It's the first time we are seeing microfinance loan waiver being announced. So first, we'll have to see the applicability. And two, how it works. And we don't see any reason why it should be any different because they have announced both microfinance and farm loans, right, together. So technically, it's -- if they announce loan waiver, then they have to repay. The challenge in the microfinance industry used to take when the farm loan was announced, the local leaders used to influence the micro banking customer saying that your loan has been waived where they were not eligible because it was for farm loan waiver. So they -- so no one used to benefit. The customer used to lose it because their credit score is gone and the lending institution does not get reimbursed from the government. In this case, if it's a microfinance loan waiver, it has to be reimbursed by the government. Having said that, we'll have to look at the modalities and then proceed.

Yes. But what really -- if it is for microfinance, why would just 10% customer would not pay and basically of the portfolio not pay and would pay...

This is the initial reaction. When there is a newspaper headline, different people think differently. So these set of customers initially would have thought that I don't need to pay now. It's only when we meet, we make them understand, there is some clarity on the ground. With passage of time, things get normalized.

And this 7.5% of pro forma NPAs that we have, it has nothing to do with Assam as of now, right, because this is very new phenomenon?

Assam, right, because Assam efficiency has historically been lower.

Yes, historically, it has been lower. So any stress formation primarily because of these waivers been announced will be in addition to what we have at this point of time, that is 7.5%, right?

Again, Anand, what we've been saying that this pro forma number does not mean this is the level of stress in the book because the pro forma number does not consider the part payment customer, right? So we are not saying that this is the level of stress in the book, right? Pro forma number means these are 90 days overdue. And once the customer pays, instead of 3 months, they will take 6 months assuming this customer is paying 50%, this will again get upgraded to standard account.

Okay. But what are the maximum reasons that you would attribute that why these customers have not paid for 90 DPDs? Is it basically the willingness or customer risk from a particular segment of business.

So that's what I'm saying, right? If I have to remove part payment customers, then this number will drop to 3%.

Okay. Yes, and even for that 3%?

For customers who are paying part installment, the DPD of those customers are flowing, right? So let's say a customer at INR 100 installment, customer is paying INR 50 every week after week, right? So essentially, this customer's DPD will keep increasing. In 6 months' time, they will become 3 months overdue, right? So that is what that number is looking higher.

And any color on the customer segments? I mean, that 3%, 3.5% who is not paying single -- so they are basically 90 DPD and not even partly payment customers?

Yes. So that is what we are saying, right? About 5% to 6% of our customers are not paying.

So is it because of the willingness or what kind of business that they were into that they have got impacted?

It's a mix of all, right? Some customers have lost their business, right? Some customers have been impacted by floods. The floods have been impacted in the districts f Bihar, Assam and the cyclone in West Bengal right? You will always find 1%, 1.5% of the customers losing for consumption. Then there is no incentive for those customers to come back and repay. So it's a mix of all.

Okay. Okay. Sure. And you intend to do some restructuring, at least for the part paying customers by the 31st March. So any broad guidance as to like what would be that. I'm sure that you would have done some kind of back exercise in terms of what kind of restructuring that you might offer to those customers?

See, that depends on how many customers of mine still remains in part payment, right? Some customers would have completed their tenure by then. So those will not be eligible. So that call we will take at that point in time. But it is still the number.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sunil Samdani for closing comments. Over to you, sir.

So thank you, ladies and gentlemen, for your time and valuable input. Thank you very much.

Thank you to all of you, and keep confidence with us. We are in a business.

Thank you.

Thank you.

Thank you very much. On behalf of Bandhan Bank Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.