Bandhan Bank Limited (BANDHANBNK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bandhan Bank Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Mundra, Head, Investor Relations, Bandhan Bank. Thank you, and over to you, sir.

Thank you, Tanvi. Good evening, everyone, and a warm welcome to all the participants. It's our pleasure to welcome you all to discuss Bandhan Bank's business and financial performance for the quarter and year ending March '23. We will take this opportunity to update you on the recent developments in the industry as well as on Bandhan Bank during the quarter. To discuss all this in detail, we have with us our Founder, Managing Director and CEO, Mr. Chandra Shekhar Ghosh; Executive Director and Chief Operating Officer, Mr. Ratan Kumar Kesh, Chief Financial Officer, Mr. Sunil Samdani; Head Retail Banking; Mr. Shantanu Sengupta; myself, Vikash Mundra, Head of Investor Relations, along with other senior management team of the bank. We'll be happy to provide you with any clarity required from the current quarter numbers and way forward. Now I would like to request our Founder, MD, and CEO, Mr. Chandra Shekhar Ghosh, to brief you all about our bank's operational and financial performance along with the development for the quarter and year ending FY '23 strategies going ahead and way forward for FY '24. Over to you, sir.

Thank you, Vikash. Namaskar. A warm welcome to all of you to the results announced for the fourth quarter of the financial year '22-'23. Firstly, please allow me to introduce Ratan Kumar Kesh, who has joined the bank as an Executive Director and the role of Chief Operating Officer with nearly 3 decades of stellar experience. Ratan has a track record of leadership in operations, including some complex ones like the transformation, automation, customer experiences, quality improvement and other related functions. Coming to the results. I am pleased to state that the January to March quarter of this financial year was a good quarter for the bank. It was actually better than our expectation. We have seen growth across all parameters. On this, the quarter basis, if I analyze the full year, I think that it has been ended very strong financial year. All the asset quality has coming back. Within these circumstances, deposit growth has become very strong. And I feel that from '23, '24, very strong and sustainable growth will come to the future. In quarter 4, we see that the '22-'23, we -- bank have increased in the 3 core customers. Out of that, the 37 lakh new customer added in the financial year '22-'23, which is showing that the future growth is very potential for the bank. Coming to these advances. Advances to the first point I'd like to highlight to all of you on that, our secured book has come 42% in this financial year compared to the last year, which was in a 36% and we expected approximately by '26, we'll be like to go to this the secured book an advance 50%. Quarter 4, we have been seeing that as advance have been recorded a 10% year-on-year growth and asset quality, I'll come to the later also. Next point is there. Where this growth has come and how the diversification of the bank are maintaining. So we see that the personal loan, gold loan, 2-wheeler loan and auto loan, which is consist as a retail loan other than housing loan, has grown 233% year-on-year and 110% quarter-on-quarter. The commercial bank vertical, SME and NBFC lending, it has been seen that 72% year-on-year growth and 29% quarter-on-quarter growth. The housing finance book has registered a growth of 13% year-on-year. We have it a little bit one fact we'll be like to raise in here. The last quarter, the January and February, we have been shifted from old application of the Gruh to the new application, which is called the LOS system in the bank, which is a flex queue. So that is 2 months a bit challenges so that it has a little bit hit to my growth of the housing loan. But again, we have been seeing that the last month in the March and April has come back. So that we are expecting this financial year 22% to 25% year-on-year growth will be come to the housing loan. Now to deposit, deposit we've seen that the 12% year-on-year growth has come, which is amount wise of INR 1.08 lakh crores, which has seen that the total business of Bandhan Bank and the rest in this financial year, more than INR 2 lakh crores. I would like to specially highlight that MFI customers contribute is less than 4% of the total deposit. Due to our focus on the deposit, our CASA has increased 290 basis points higher, which is the 39.3% is in CASA ratio has come in this quarter, which was in the earlier quarter was in 36.4%, but the total CASA deposit has been increased to 6% and CAA increased to 35% year-on-year. If I come to this, another key point for our deposits, we are focusing to the retail. Retail deposit has come 71% of the total deposit which was earlier, it was in the 69%. We have seen a good improvement in the overall collection efficiency. For the bank overall collection efficiency excluding NPA stood at 98.5% in the month of March, up from the 96% in the March of the last year. A minor improvement from the 98% in December '22. So if I say that the December '22, we have been seeing that the March '23 has been 0.5% increase, which is we see that the micro credit industry, it is a 98.5% to 99% is a normal collection efficiency. I want to particularly highlight that traditionally, West Bengal and Assam have been our largest market for banking unit, which is called the micro credit but now markets like UP and Bihar also have the significant promise and are seen in the top 3 markets, West Bengal, 36%, Bihar 14% and UP 10% and Assam 7%. So these are the micro credit portfolio consisting on that. Of the loan disbursement in the last 2 years, our on-time repayment rate is more than 97%. I am saying that the 2021 and -- 2021-'22 and '22-'23 whatever the loan we have been disbursed to the micro credit, on-time repayment rate means the same day they are paying the full installment, it is at 97%. But on other side, we saw that which at the customer received the loan is 93%, 94%, then all disbursement customers have been paid 99% plus of the repayment rate. It has been shown this OTR that the pandemic has been over and crisis has been over, now new way our credit growth is coming and quality is coming back. Bank has registered a net profit of INR 808 crores for the quarter 4 financial year '23 against the net profit of the last quarter, INR 291 crores. For the full year of the financial year '23, bank has registered a portfolio profit, INR 2,195 crores compared to the last year, which is the INR 126 crores. Our net interest income has shown an increased 19% quarter-on-quarter, which was -- seen that in the fourth quarter, it was in a INR 2,472 crores, but the third quarter, INR 2,080 crores. Our net interest margin has been increased 80 basis points from the last quarter, which is now 7.3% compared to the 6.5% result quarter 3. Total credit cost for the quarter 4 financial year '23 was in a 2.9% compared to third quarter 6.4%. Our gross NPA in quarter 4 stood at 4.9% and which is that the 7.2% in the last quarter. And the net NPA has come 1.2%. Last quarter, it was 1.9%. So it shows that the gross NPA and net NPA both has come down from the last quarter. We have already seen significant improvement in our SMA book, which has come down across all buckets. We have seen 1 percentage increase in our PCR at 76.8%, which was increased from the 70.4% in the previous year. Bank delivered ROA 2.2% and ROE, 17% in this financial year quarter 4. We have added about 14 lakh to the customer in this quarter. Coming to this the digital performance of the bank, 94% of the total transaction of the general banking customers have taken place in a digital mode. 53 crores transaction took place on UPI through Bandhan Bank. 31% of the retail deposits are coming from the online channel. And we have seen very successfully we have been launched new plus digital savings bank account. We have a debt that 30,000 of the debt used to open the bank account with a biometric. It has been seen -- shown us very good the way we are opening the account and customer will be like to board on the bank. And we are working on that, that is a digital sanctioning of the loan asset -- retail asset loans, and it will be also successfully running now. Strategy. We will continue to dominate our traditional basis in the East and Bharat. While building greater momentum in high potential and premium pan-India markets, through targeted geographic diversification, deeper market penetration, localized hiring and leveraging the Bandhan brand. Other than these, we are 3 products are focusing in this financial year, which is newly started in the bank. Commercial vehicle lending, loan against property and government business operation. Among others, these 3 are our focus area for this financial year. We are taking multiple steps to drive cross-sell and brand sales to grow the retail assets and liability portfolio. We'll fully utilize our brand's presence to increase our liability and asset portfolio and also increase productivity per employee is supported by digital and analytics. What is the way forward of '24? Coming to the outlook for the next financial year, that is 2024, '23-'24, we expected to grow our advances by nearly 20% and a little higher rate of deposit growth will come '24 and we feel that we'll be like to focus remaining strong on the retail segment and diversification. Our CASA ratio, we are targeted on that 40% will be like to full year, we find out. We see that our NIM will be like to 7% to 7.5%. We expected our credit cost around 2%. Over we expect an ROA 2.6% to 2.8% and ROE 18% to 20%. Thank you to all of you to listen patiently me, and you have some questions, I'd like to give my best experience share with all of you and confidence on us, and we are doing very good on that. Thank you.

[Operator Instructions]

Now I would like to request our CFO, Mr. Sunil Samdani, to give you some more details on the financial parameters during the quarter.

Good evening, everyone. I'll take a few minutes to take you to the highlights for the quarter to material event, which I feel needs discussion. Overall, I would say this was a good quarter for the bank with asset growth and the deposit growth was at a year high. On the asset quality side, particularly the bank did well. On the collection efficiency side, as Mr. Ghosh mentioned, we crossed 98.5%. The stress pool came down from INR 76 billion to INR 55 billion. On the DPD movement side, we've seen the overall overdue the 0-plus DPD in the EEB segment. Even without considering the ARC sale, we have seen a reduction of INR 518 crores. So the asset quality continues to improve. So this is the second consecutive quarter where we have seen the reduction in the DPD over the previous quarter. . So I think we are happy to take the questions. I'm sure you will have a few. Happy to take them. Thank you.

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

Congratulations. Sir, firstly, what explains the flattish interest expense in the quarter? That's my first question. Also if you could give the absolute number of slippage.

Two things. One is our cost of funds has remained flat quarter-on-quarter. So that's one. And while we have seen in the slightly increased quarter-on-quarter, the interest expense, largely, we've done well because our cost of funds has remained flat quarter on quarter. . On the slippage side, our total slippages for the quarter, I'm talking about the gross slippages, is INR 1,118 crores. The recoveries and upgrades is INR 468 crores. So the net slippage is INR 650 crores which is that the bank as a whole. If we look at the EEB vertical, the gross slippages are INR 730 crores. Recoveries and upgrades are INR 200 crores, and the net addition is INR 530 crores.

Got it. Sir, just on cost of funds, everyone is seeing a lot of pressure on cost of funds. So what's a little different for you?

So our mix improved. If you look at our growth in deposits, the growth in CASA was higher than the growth in overall deposits. And even the share of current account improves. So that helped maintaining the cost of funds.

[Operator Instructions] The next question is from the line of Prakhar Agarwal from Elara Capital.

Two, three questions. First, you mentioned about your mortgage portfolio that there was some disruption on growth because of change in Gruh system. Is that activity planned for other portfolio as well? And in that context, would there be some discussion on growth? That is my first question. I'll come with second question.

As we discussed in the last previous few quarters, the bank is looking at an IT transformation. We are getting a new CBS, including the normal and the LMS system. As part of the transformation strategy, we first migrated our housing finance portfolio, which was in a different system, the grid system, which Gruh was [indiscernible] . And later on, sometime in Q2, we would look at migrating the other businesses, the entire other teams in the queue. Now for us, the reason -- 1 reason why we did it in these 2 tranches is because we wanted to first have a feel of the transformation, have that learning of transformation. And with this learning of housing finance transformation, we are confident that the larger transformation that will go through in Q2 will be relatively smoother.

So 20% growth that we spoke of includes of that particular disruptions if there are any?

Yes, because the disruptions, if any, are not a perpetual disruption, right? These are 1-month disruptions. So we can always cover that back. And given that now we have the learnings from the housing finance transformation, we are that much more confident now.

Got it. Sir, the second is on the Slide 7 that we spoke about.

Prakhar, Ratan would like to add here something.

So I'll repeat a little bit what Sunil said. First of all, we have a learning from the housing finance that we will utilize for the next tranche. More importantly, there are maybe disruption for a few quarters, but the transformation will more than offset that in the subsequent part of the year. And therefore, we don't see any disruption for the overall period of time for the whole financial year.

Got it. Just on the ED stress pool that you probably had about INR 55 billion outstanding as of March. When you look at your SMA-2 number in there, that number has not yet declined. Any particular reason as to why that number continues to be sticky? I'm just particularly talking about SMA-2 number in that pool.

It's at 2.4%, right? So it has come down. So to peak. But yes, and you will always see some forward flows.

That forward flows has declined or probably that intensity of that forward flow remains probably elevated number.

No. But when I say that SME 0, 1, 2 and NPA put together, we've seen a reduction of INR 508 crores without considering the ARC sales, clearly shows that the asset quality is improving and the forward flows are coming down.

Got it. Just one last question from my side. When you talk about CGFMU recovery, and you say that INR 11 billion is expected in Q1 and INR 6 billion in FY '25. Why is the timing different? And when you talk about credit cost of 2%, does that include this INR 11 billion that you probably expect to recover?

So as you're all aware that we can claim only once in a year. While the total eligibility for us stands at INR 17 billion, it depends on the timing. If I claim this in October month, I can claim the entire INR 17 billion together, right? But if I need to claim it in the first quarter, then the eligible pool is only INR 11 billion. So that's how we are spreading it into 2 tranches. What was your next question?

The credit cost that you guidance that you gave about 2%, does that include this INR 11 billion recovery that is expected in Q1?

No. So which means I'm not taking the benefit of this INR 11 billion.

The next question is from the line of Yuvraj Choudhary from Anand Rathi.

I have a couple of questions. So firstly, our EEB book saw strong growth in disbursements during the quarter. So were there any specific states, regions where the growth was from? Or was it a broad based growth across regions? Would be helpful if you could throw some color on that. And secondly, could be possible if we could provide average ticket size of our EEB book?

So yes, the growth firstly has been broad-based. Tactically, we've been slightly lower in terms of growth in the state of Assam. But other than that, we've been growing across all states. We've identified a few states, which are the growth areas for us. So particularly growth in those states will be higher. States like UP, Bihar, Telangana, Andhra, Madhya Pradesh and Gujarat. These are the states where we see huge potential, and we are opening branches in these states. So the incremental addition to new customers are also increasing in these states and that's how their share in -- Mr. Ghosh in his opening speech mentioned, that if we now look at the top 5 states, it's West Bengal followed by Bihar with MP and UP and then comes Assam. Two years back, you all remember, it used to be West Bengal followed by Assam. So that's how this diversification in the new states have.

And sir, if you could also possibly provide average ticket sizes of our EEB book?

So on the disbursement side, our average ticket size is about 50,000 for the group loan and about 120,000 for the individual loan.

Okay, sir. Sir, last question, sir, our CD ratio is now almost at 97%. So is it a target CD ratio we have in our mind?

Sorry, you're talking about CD ratio?

CD ratio, rate to deposit ratio.

Yes. So see, given our capital base and our portfolio which are eligible for refinance at an attractive rate, and we get a longer tenure funds also from these refinanced companies. We believe the CD ratios for us should be in this range of 95% to 97%.

[Operator Instructions] The next question is from the line of Rahul Jain from Goldman Sachs.

A bunch of questions. Just to start with other slippages. So Sunil, EEB, you said about INR 700 crores and the residual is INR 400 crores. So can you give me further split between -- within EEB, what's the group slippages and what's the individual? That's one. And second is within the non-EEB, which segment would be contributing to the slippages?

So firstly, the overall slippages in the EEB in Q4 was INR 730 crores. Split, I will get it. But broadly, I think the proportion of the portfolio that we have, the non-EEB slippages is INR 388-odd crores. And if I have to break it into the 4 key components, the SEL, the small enterprise loan, which is part of our commercial banking here, that stands at INR 66 crores across slippages. The recovery is INR 18 crores. The net slippages is INR 48 crores. SME, which is the BBG and the MMG together, the gross slippage was INR 68 crores, recovery was INR 49 crores. This was more of a technical in nature. That's why the slippages and recoveries both are higher. Housing finance because of the disruptions for 1, 1.5 months that we saw, we had, again, a technical slippage of INR 231 crores and the recovery of INR 191 crores. So because of that transformation, we had 1 month of slippages, but it again came back to normalcy in the next month. So retail is the balance small amount.

And this INR 191 crores is already part of upgradation and recoveries in this quarter within housing?

Yes.

Okay. That's helpful. Second is on the provisioning strategy that you talked about 2%, you're not taking the benefit of INR 1,700 crores. So that will be over and above 2% is what you're guiding for? What I mean to say is the income comes in and you take it in the provisioning line on top of it, you've got 2% provisions.

Yes. So -- but see, there will not be any P&L impact for that. So when the CGFMU money comes, right? I have to necessarily allocate it as provisions of NPA. So we will have to do that at the accounting wise, but the idea here is to not utilize that money and keep it in the balance sheet. So we will have to see how do we again reprovide it, whether as the standard asset provision or as the contingent provision. At that stage, the board will take that call.

Got it. Okay. So whatever INR 1,700 crores could be utilized towards building contingent provisions or standard asset provisions for future use. Is that understanding right?

Yes.

Okay. Just one more point I wanted to understand on what's the existing contingency provision that we have right now apart from the specific provisions?

So if you see, we have increased our PCR, right? That has gone up from 75.5% to 76.8%. So essentially, a large part of these provisions will be allocated to the customer accounts. So the additional provision other than the specific provisions will be a small amount of about INR 500-odd crores, which is the additional under asset provision over and above the RBI requirement.

Okay. Okay. That's helpful. Just 1 or 2 last questions. The sell down, I think, which you've done about close to INR 5,000 crores. Where -- which buckets would those be from. Of course, INR 2,500 crores is, I think, write-offs, but remaining INR 2,500 crores would be for what buckets? If you can just help elaborate that?

They were NPAs. Yes. So they were all NPAs. So we did INR 2,614 crores from the technical write-off bucket and INR 2,316 crores from the NPA bucket.

All right. I think that's very, very helpful. And one last question, a small bit you talked about the EEB loan portfolio, which now has West Bengal, UP and Bihar being the top 3 contributing states. If you can also help us with the mix of what is it as of today? And what was it, let's say, a year back? Just to get some color around the diversification strategy within the MFI book?

Yes. I'll come to that. I'll get that number. But in the interim, I just want to extend the previous conversation on the ARC sale, right. The portfolio, we've so done the ARC deal in 2 tranches. One we did it in the December quarter and the other one in the March quarter. So just to give you an update how the recoveries are panning out on that pool, total recoveries that we have made on the portfolio that we sold in the month of December stands at INR 342 crores, right? We had taken INR 414 crores from the ARC and the investor. We've already recovered from the customer INR 342 crores. The reason this is important is because once we repay the ARC and the investors, along with the assure IRR, the entire recovery comes to the bank. So that update on the ARC pool performance in terms of how are we recurring money on that pool. Now to your question on what has been the share of proxy states, Bengal, UP, Bihar have versus last year. So let me tell you. In March '22, Bihar was INR 6,900 crores on a book of INR 62,400 crores, which is now INR 7,900 crores on a book of INR 66,900 crores. UP was INR 5,320 crores on a book of INR 62,400 crores in FY '22. Currently, it is INR 5,729 crores on a book of INR 56,800 crores. And West Bengal was INR 25, 315 crores on a book of INR 62,400 crores in March '22. Currently at INR 20,364 crores on a book of INR 56,800 crores. I don't have the percentage ready so instead of calculating in the interest of time I will be using approx.

[Operator Instructions] The next question is from the line of [indiscernible] from Aditya Birla Sun Life.

Just a couple of questions at my end. Firstly, sir, a few questions on the asset quality. Given you have highlighted that you are from the MFI book EEB we have seen slippages of INR 700 crores. So if you can just further give a breakup in terms of how much you are seeing from the incremental book and the existing stress book? How are we seeing those trends? . And secondly, from your total stress book of INR 55 billion, which has come down from INR 76 billion to INR 55 billion, some bit of apart from the ERC field as well, how we are going to see this increment in the coming quarters? So that's my first question.

So yes, coming to your first question, INR 730 crores is the gross slippages in EEB, about 99% is from the existing stress pool, which is SMA-1.

Okay. So hardly something has contributed from the new business from the recent business?

Yes. I mean unless it's a nonstarter case, you can't have a situation where a 0 DPD customer becoming NPA in 1 quarter.

That's the -- I just wanted to say how is the collection trends of the new business basically?

So that, Mr. Ghosh told in his initial update.

If I say that on the last year, whatever we are disbursed the loan. Last year, I said '22-'23, the out of those loan, they are paying us 99%-plus. So that means if I say that the this is a slippage has come, which is not from the '22-'23 disbursement customer. This is the 1 cost. And '21-'22 customers who received the loan and '22-'23 this is the loan, together, it is a 97% plus. So that very few people have come from this if it is come last to last year, not the last year.

Sure. And sir, on this pool of INR 76 billion to INR 55 billion, how one should expect this in the coming quarters, probably?

So see, directionally, we've seen distressed pool coming down, and that should continue. The good part is that there is no element of any doubt in terms of coverage there because of the INR 55 billion, we have INR 38 billion of coverage and INR 17 billion of CGFMU. So whatever we recover will help us reduce the pool -- other stress pool. So we are at a quite comfortable position here.

Sure, sir. Sir, second is on the growth when you're guiding for a 20% sort of loan growth in FY '24, where housing is expected to grow 23-25%. But what is in your estimates for the MFI business? And secondly, how much you are seeing this growth of MFI business will be contributed from the new borrower base?

If you see that the MFI growth will be expected in the 17% to 18%. And this is one. And second point on that, always we've seen that the new customer is coming to this the MFI book is in 10% to 12%.

Fair, sir. Sir, last question is around your deposits. So how are you seeing the retail deposit traction? And how one should expect these trends probably the CASA ratio, probably the retail deposits, how you are seeing the trends for the coming year?

So we have Shantanu Sengupta. I will request him to take this.

Thank you, Sunil. Thank you for the question. So look, our outlook for deposits for FY '24 looks quite robust because we have, over the last many years, seen consistent growth in our deposit book. We have done some specific interventions in the portfolio to make sure that our percentage of CASA goes up. And therefore, you can see that in our CASA ratio. So our outlook for 2024 remains quite strong in terms of growth. We would focus on granular growth because of the fact that we have network, which we are expanding and we believe that we will get value from those incremental branches. We also have invested in specific segments that will help us most of the growth on the savings and current account side. We also are looking at reinvesting into the business banking proposition so that we can focus on current account. So our outlook would be strong. We believe that the focus would be on CASA, current account savings account group, and that's what we're going to look forward in the coming year.

Sir, anything that you want to highlight from a new initiative that you have taken to improve your ability franchise? That's my last question.

So 2 or 3 things that we have done. One, we are coming up with new branches as we mentioned last time. So that is coming up. We've already got -- we had a plan to open 551 branches. Over half of that is already done. We expect the balance to come in by end of this quarter or maybe spill over to the next quarter. So that's one. Two, we are also invested in the digital platform, and we believe that with the investment of account onboarding being completely digital, we expect and anticipate the growth to come on those lines. We believe that with good customer journeys, we will be able to get deeper into the customer wallet. So those are some of the initiatives besides what I already spoke about, which is on the new segments that you're looking at.

I'll add one just line with what Shantanu said. Given that we are going ahead with our technology transformation, the new core banking system will enable us to launch many more new products. which will not only improve customer experience and transaction capability, but the new product lines will build more stickiness and more hope for the customer to bring more deposits to us.

The next question is from the line of Param Subramanian from Nomura.

Congratulations on the quarter. So firstly, again, picking up from the last question. Mr. Ghosh, in your opening commentary, you highlighted that the government business is going to be a key area of focus for the next year. So could you highlight, is there something in the pipeline, especially on the deposit side since you put out a guidance of 24% of deposit growth for next year, which is substantially higher than this year. So yes, some color on the government business that you're talking about. That's my first question.

I ask that Shantanu would you like to give that detail.

Okay. So yes, government segment will be an important segment of growth. We have invested in our people. So we have created a separate vertical with expertise across the market. This is a specialized function and therefore, we have the right skills right now available. We have -- we are investing in our platform to make sure that we can act as agency bank for some of these government organizations. We've also seen some success coming into through -- in tandem with some of the government agencies across the country. So I think we have -- this is a great choice that we've made because this is one area that we do believe has quite a few upside. And I do think that this particular segment will add some value to our overall deposit prices. But just to add one more thing to this. We obviously will have fees and benefits for this particular segment. Some of that includes tax collections, et cetera. So the value-added proposition around this segment is something that we are also working on so that we get the right impetus when we go forward, specifically for the sector.

Got it. That's helpful. My second question is on the MFI portfolio. How much of this, so we took that rate hike around November of last year. So how much of the MFI portfolio has repriced upwards, some rough color on that? And how much more to go in terms of the lending yield picking up further on this book?

So we had taken a 300 basis point increase in the last financial year. Starting first April, we've further taken a 100 basis point increase. To your point on what percentage of the portfolio is repriced, typically, given our portfolio of about INR 57,000 crores, and the disbursement of the last 2 quarters, we -- I would say, close to 60% which has got repriced.

Okay. Okay. And we have 100 basis point further increase starting from April. Got that. And my last question perhaps. So on Slide 14, you called out this PD against FD or the overdraft against FD. So what exactly is that sequential uptick. If you could give some color on that. Yes. That's it for me.

So these pertains to few large deposit accounts where they had taken loan against fixed deposits at the -- right at the end of the financial year. These are very short-term loans. So that's why we wanted to highlight that this is not something which is a focused area for us, but it comes with customer requests. And I think this is a very short-term in nature. We thought prudent to tell. That's short term in nature.

Okay. So are these chunky accounts?

Yes. As I said, these are few accounts. So -- and -- but these have been with the bank for the last 2, 3...

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

If you look at your SMA-1, 0, 1, 2. So we are at about 5.6%. Given the collection efficiency is been ranging between 98%, fair to say that on a normalized basis, this number needs to settle to 3%?

Yes. But when do we reach that normalization? Is it Q3, Q4 is something that we'll have to debate. But you are right, if my collection efficiency is 98%, and all of this is full paying customers, then ideally, the delinquency should not be more than 3%.

Okay. I understand. And in your credit cost guidance, you would be assuming this 3%, right, in the next.

Yes.

Okay. Okay. And just last question, sir, how should we think about your noninterest income? And if you can give some breakout of your noninterest business this year?

So noninterest income, if you look at the key contributors, the top 3, 4, businesses -- So the highest for us is always the processing fee. In the INR 629 crores, INR 300 crores was the processing fee, followed by third-party product distribution of INR 134 crores. The third, now that we sold our portfolio to ARC, the recoveries from bad debt or the return of account, we can't account for it, we have to park it in the liability account to repay back to the ARC. But what we get is the collection charges on this portfolio. So the third contributor is the collection fees on account of collection from ARC portfolio, which is about INR 55 crores for the quarter.

And is there any chance in the PSLC income recovers next year? Or...

We are not budgeting for it. There is always a possibility, but we are not budgeting for it.

The next question is from the line of Manish Agarwalla from PhillipCapital.

Congratulations. Just data-keeping question. Would you like to call out what is the outstanding standard asset provisioning apart from INR 500 crores which you mentioned?

Yes. So INR 488 crores.

And apart from INR 488 crores, INR 500 crores is the additional standard provision, including standard restructured, correct?

No. So standard restructure is part of INR 488 crores.

Okay. So INR 488 crores and additional INR 500 crores is the contingent provision, so called.

Yes. So what we do is -- So what we do is we provide 1% on the micro banking portfolio or the EEB pool. The regulatory requirement is only 0.25%. So when we say our standard asset portfolio, including a standard asset provision, including the restructured is INR 488 crores, we are considering only 0.25% which means 0.75% goes into the additional provisioning bucket, which is where it becomes INR 500 crores.

Okay. Understood. And coming back to the short-term loan on EEB. So in 1 quarter, if I were to look at, there's a huge jump, almost 6% to 7% of your retail EEB equivalent to that. I noted that you mentioned some chunky account. So are this nonretail accounts or these are retail accounts?

No, these are not retail accounts. So the balance here is more than INR 2 crores.

And I would understand that not any amount of this will be part of our current deposit in any which way?

No, not really. It's a loan which has moved out of the bank.

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

Yes. So as we have of INR 55 billion now, and if you look at the flow, which happen into the current NPA market, particularly in the current quarter specific, so the gap is just about INR 400 crores. So what extent of that is...

Sorry, Anand, I didn't get that question.

So basically, your SMA-1 and SMA-2 pool has been a profile which was there in the third quarter, but is what you look at now. So for last quarter, it was about INR 25 billion now it is INR 21 billion. So there is a reduction of about INR 4 billion that we've seen in SMA-1, and 2. I believe INR 400 crores are actually sitting in the current, right?

Yes. So see, you can't really pinpoint which customer has moved where. But if you look at overall positioning, as we mentioned, the 0,1, 2 and NPA put together, there is a reduction of INR 518 crores, without considering the ARC sale.

Okay. So these slippages from the pool would have been higher and then there will be a fresh flow of the -- to actually come into the -- is that right?

No. So the recoveries is also there because there will always be a normalized slippage. But there -- and there will always be recoveries from this -- from 0 -- from a DPD pool to the current pool. So the recoveries from DPD pool to the current pool is higher than the slippages from current to DPD pool. That's how one should look at.

Okay. And Sorry. I'm really staying basically...

Go ahead. Go ahead.

So asking the second question. You asked some -- you've been hoping for a recovery long, long now. So when it's really going to come. Is it going to come in '24 or basically we do not expect that to come anytime soon?

It's very difficult to comment on anyone else's behalf. So -- and since -- as a bank, we were very clear, this is a kind of -- this is not a right for us, unlike CGFMU or ECLGS, right? This is kind of a grant. So we have not budgeted for it. But we are positive that money will continue to flow from Assam government. Quantum and timing is very difficult to estimate.

But is there any procedure difficulty from the inside or from the bureau side that basically government is willing to -- or right now, they are not budgeted and that's reason they are not ready?

I mean, as I said, I'll not be able to comment because I'm not in a position to know that.

The next question is from the line of Jai Mundra from ICICI Securities.

I just wanted to get that number of total provisions outstanding. So we have a specific provisions of around INR 4,000 crores. And we have given some numbers, which includes restructured and some contingent. So I just wanted to check what is the total pool of specific, I think we can calculate this INR 4,070 crores, but what is the number outside that?

INR 5,080 crores is the total provision in the books.

Sure. And sir, if you can also specify -- we have the total net NPA at INR 1,228 crores. How much of that would be -- just to understand that once -- yes, so what is more or less done and what is remaining?

So typically, we have a 84% kind of a PCR ratio in EEB, but I'll still check the correct number for you in terms of net NPA.

And the last question is to Mr. Ghosh. So sir, we have added Mr. Kesh to the board. I mean the bank has added one executive director. I wanted to check if there is any plan to add more? Or if there is any -- yes. So that is the question in the near term, do you envisage any more changes at the board level from management perspective, management executives perspective?

You know that earlier also mentioned we repeat on that. It isn't last year, Board have been decided that 2 executive director will be like to taken. One for the nonbusiness, one for the total business. So nonbusiness already, we have had Ratan Kumar Kesh already joined on that and we are now processing for the next one, which is the total business looking by one executive director, which helps us to future growth of the bank.

Right. And it should be, let's say, 1, 2 quarters -- should be in this financial year, let's say or is there any time soon?

No, this is in this financial year.

[Operator Instructions] The next question is from the line of Pankaj Agarwal from AMBIT Capital.

Am I audible?

Yes, Pankaj, go ahead.

If I see your total stress pool in MFI, definitely, it has come down by around INR 400, INR 500 crores. If I look at 0 to 90-day DPD, it seems there is a forward flow, right? So there is a INR 500 crore reduction, but there is a INR 500 crore of forward flow as well, right? Now even that now recoveries are picking up and we are seeing a lot of customers are paying, partially paying or fully paying. Don't you think this forward flow should have stopped?

Ideally, we would have loved to have a 0 forward flow. But in any business, there will be a steady state credit cost. And as we have highlighted that the 2% would be a credit cost, what we are looking at for this financial year. So accordingly, the slippages from the current pool to the delinquent pool is well within that guidance range.

So if I look at the reduction in this 0 to 90-day DPD, since half is forward flowing and half is basically going out of the pool. So fair to assume that out of remaining INR 3,200 crores, half of this could flow to NPA next year?

No, it's not that straight calculation. It all depends on the environment, our ability to go convince the customers. We are focused. We would want to -- and we are seeing the environment improving, customers coming back. We don't want to put that number today. We've given a number on the credit cost side. So we'll stick to that. But the endeavor is always to be closer to customers and collect as much as possible.

Okay. And second is on your OpEx. I see your OpEx rate has gone from 3% to 3.5% over the last 1 year with cost to income going to up to 43% now. Do you think it's the peak or it has further scope to go up next year?

I would say this is peak. But for it to come down, it will take a year or so because we are still in investment mode, whether it's transformation, brand expansion, new business development. We don't see it going beyond 42%. But to go back to that 35%, will take a year or two.

Do you think this business can be done below 40% cost to income ratio, on a sustaining level?

Yes, it can.

[Operator Instructions] The next question is from the line of Prakhar Agarwal from Elara Capital.

Two things. One is in terms of when I look at what you said in terms of funding cost being steady on a Q-o-Q basis. When we see -- last quarter, when we saw a decline in size, there was a rationale that probably a lot of guys have moved from SAR to retail TD. So what has changed in terms of customer particular from bank side that we saw such a large accretion SAR-based essentially? And second, how do you look at funding costs moving from here on?

So let me start, and Shantanu can add. Now firstly, nothing materially changes in 3 months. But what has surely changed is the pace of conversion from SAR to TD, right? Typically, when the interest rate environment turns, those rate-sensitive customers want to move from saving bank to the time deposits. And once those rate-sensitive customers move, the incremental flow towards TD from SAR reduces, right? The pace of flow reduces. And this is what we have seen in Q4. So that's how I will look at it. Shantanu, if you move on to.

No, I think you've covered that, yes.

So that's about it.

And the second part, how do you see funding cost moving forward? Assuming that other does not make any changes to the system base? And how do you think your funding cost moves from here on?

So directionally, it will go up in this financial year, right? And we are looking at the end I don't -- actually, it's very difficult to put a number, but I would say directionally quarter-on-quarter till next 2 quarters, the cost of funds should go up because the repricing of TDs, if that happens will happen at the current rate, which is a higher rate. And from there on, we will have to see how the interest rate environment goes and accordingly, the cost of funds should move. But on the same side, our yield on funds will also go up. See the good part is, we faced the difficult time having 70% portfolio on a fixed rate. So in an increasing interest rate cycle, you tend to lose because the cost of funds go up faster and the yield on advances relatively remains flat. So when the cycle turns, we would be the beneficiary of it, right? And so it's -- let's see when the cycle turns, and that should help us.

Got it. What is our rate on MFI after the rate hike that we have seen after April 1 also, we have taken 100 basis points of rate hike. What is the sort of rate that we are talking on MFI?

22.95.

Are we still the lowest or probably -- because we'll be going at one point in time that we are the lowest in terms of that?

Yes. So these are the lowest.

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

Thank you, ladies and gentlemen. Thank you for your time. Good luck and good evening. Thank you.

Thank you to all of you. Thank you.

Thank you very much. On behalf of Bandhan Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.