Bank of Baroda Limited (BANKBARODA) Earnings Call Transcript & Summary

Good evening and a very warm welcome for the Bank of Baroda Q2 results for quarter ended 30th September. Without further ado, I request MD and CEO, Sanjiv Chadha, to give the opening remarks. After the initial remarks, we can begin with the Q&A. Over to you, sir.

So very good evening to all our friends. Thank you very much for joining us. And it's good to again see all of you in times which are improving, if not absolutely back to normal. So let me just begin by introducing my colleagues on the call, who will help me again in addressing whatever questions you might have. So we have on the left of the screen, Mr. Ajay Khurana, our Executive Director, who is in charge of IT, Digital Banking, including BoB World and also stressed assets. On the -- I think I don't see Mr. Khichi on the screen, but you might be able to see him. So our Executive Director in charge of Retail Banking, Mr. Vikramaditya Singh Khichi. On the right extreme of this screen, we have Mr. Debadatta Chand, Executive Director, who you might have met the last time as in charge of the finance function. He's now in charge of Corporate Banking, Treasury and International Banking. And we have a new colleague who is our old BoB hand, Mr. Joydeep Dutta Roy, Executive Director, who has taken over as the Executive Director in charge of all platform functions, including finance, risk, compliance, audit. So thank you very much. And we, of course, have your old friend, Ian De Souza, CFO, is also on the call. So thank you again for joining us. I'll just take 2 or 3 minutes in terms of some broad numbers which are there. You would have -- you have a copy of the presentation, so I'm sure you would have gone through that. But if you look at the current quarter, I believe that we have largely delivered on the guidance that we had given when we met last. We have been guiding that although the second wave has been damaging, particularly in creating stress on the MSME and the retail book, but the continued improvement in the credit cycle as far as corporate is concerned, will outweigh that. And therefore, on a net-net basis, credit costs will come to trend downwards and that will have a salutary impact on profitability. I think we have seen that play out during this quarter. We had also guided that we would be expecting our slippages to be around 2% and our credit cost to be between 1.5% to 2%. And if we are fortunate to trend towards the lower part of that range. I think that is something which we see in the numbers here. We see that the cost to income ratio actually has come down. We have given half 1 numbers because that actually gives a better perspective because there's a lot of -- last year, in particular, there was a lot of movement that happened between quarters, which distorted figures. So you had a large loss in one quarter and a large profit in one quarter, so we put H1 numbers here. You, of course, have the quarterly numbers with you. So we have seen the cost-to-income ratio come down. The operating profit improved substantially and the profit before tax has improved even more impressively from about INR 1,200 crores to INR 4,500 crores. And since we have migrated to a lower tax regime in the last quarter of the last year, that is when we took a onetime hit on that account, the net profit has gone up even more in proportion. So it has nearly quadrupled from INR 800 crores to nearly INR 3,300 crores. So all in all, in terms of most of the profitability ratios, I think we are reasonably well placed and that is because of again, the trends that we have talked up in the opening part of the conversation. Now going ahead to the large piece in terms of, again, making sure we protect our margins has been how we have handled our deposit franchise. We have been very clear that we would want to grow our deposit base in line with our advances because in the liquidity surplus situation, otherwise you might be borrowing at 5% and lending at 3%, which gives nobody any joy. So we have seen almost our entire growth come from CASA. So you see current deposits have grown 15%, savings by more than 12%. And bulk deposit which was the expensive part of the deposit book has come down by 23%. So all in all, we believe that we have been fairly disciplined deposit growth, and that has been a key part in terms of making sure that we maintain margins. On the credit side also, we have had a similar view that we would want to chase growth in a liquidity surplus situation, which can depress margin to a point where the risk-adjusted return becomes negative, which is why our corporate growth has been muted, although this quarter, I have seen a fair bit of recovery. And last quarter was about a degrowth of 10%, now we actually are on a Y-o-Y flat basis. But within the loan portfolio, our retail continues to grow reasonably well at 10%. Within that, we acknowledge that home loan is muted and needs to pick up. This is largely because of the fact that the -- there's a lot of refinance that happens in a falling interest rate regime. I think that should level off now, but that's responsible for the fact that net growth is low. But in other parts of the portfolio like auto loans, personal loans, education loans, we have grown significantly ahead of the market. So we are fairly comfortable in terms of the kind of advances growth we have seen. Going ahead, I think slippages is one piece, which is we had guided last time that we believe that the worst is over, that in terms of MSME and retail also, we should expect these to trend downwards and that is apparent in this quarter, where in MSME, the fresh slippages have come down very significantly as they have in agriculture and also in retail. In international, you might recall from our previous conversations last year, in particular, we had some one-offs which were there. And I think the current quarter slippage of just about INR 85 crores bears out the fact that overall, the quality of the international book is fairly good. So I think that is pretty much, I think, in terms of the key numbers, which we thought we would just sharply focus on. But we can now move on to questions. So thank you very much.

[Operator Instructions] Good evening, everybody. Mahrukh, please go ahead and ask your question?

Sir, what is the size of the restructured book now? So both restructuring 1, restructuring 2 and the MSME restructuring that you would have done in the earlier schemes. So what is the total size of the restructured book?

So thank you, Mahrukh. Good to hear from you, and good to see that you've beaten Mr. Ajmera on the first question. I wonder whether he is there or not. But I'll request Mr. Khurana to answer the question, please.

Yes. Total, in standard assets, our restructured book is INR 20,500 crores, which includes framework 1, framework 2 as well as old MSME restructuring.

Sorry, how much, sir?

INR 20,500 crores.

Got it, sir. Sir, there has been a sharp decline in yield on domestic loans, though the home loan piece has not grown that much. So would there have been a reversal on the NBFC account that's lived, what would explain the fall in yield during the quarter?

So I think, Mahrukh, you're right in your assessment. To some extent, that is the reason. So there was -- we were provisioning for the interest, we were booking on that on the NBFC loan because they will stay in terms of its classification. Now that figure has moved up from the provisioning line into the interest line. So that has had some impact. Otherwise, in terms of NIMs, between last quarter and this quarter, we'd largely be steady.

Okay. So this would -- so what would be the rough reversal of interest this quarter?

Ian, if you'd want to take that, please.

So the reversal would -- if you look at it on an incremental basis, they would -- it's a normal BAU actually interest reversal. But on an incremental basis, I would say there would have been an incremental reversal of around INR 300 crores.

That is on the quarter over the last quarter?

Yes. Sequential quarter-wise and incremental INR 300 crores.

The next question is from Amit Premchand. We will move on to next, Mr. Mahesh M.B.

So just a couple of questions from my side. One is -- just a clarification to Mahrukh's question. You indicated that the restructured loans was INR 20,000 crore this quarter. Sequentially, what was it in the previous quarter? Because I think I have a number of INR 25,000 crores.

So I think there are various ways of classifying, right? One is standard restructured and then there is restructured. So the INR 20,500 crore figure is the standard restructured.

Okay. And if I -- do you have a corresponding number for the previous quarter as well?

We can, I think, give that to you. My own sense is it may not have changed very much, but if Khuranaji has readily available, he can describe it.

Yes. From previous quarter, there's a little movement. Only INR 1,400 crores have been added.

INR 1,400 crores. Okay. Perfect. Sir, if I go to Slide #20 and if you just kind of look at the outstanding stock of your net -- gross NPL book today, what is kind of visibility you have in terms of the resolutions here -- from here onwards? The stock of loans is reasonably high here on the NPL line, just if you could give us some clarity on how you're approaching this book?

Khuranaji, would you want to take that?

Our total INR 59,504 crores of gross NPA, INR 18,769 crores is -- that is corporate. So where most of the accounts we are moving towards NCLT and going for that process. The process is going on. And where ever it is not initiated, recently added that also will be -- we're able to start. And other -- regarding this MSME and retail, I would like to tell you that our resolution and retail is -- those accounts which are added in March and June, there has been a good upgradation and recovery in those accounts, and we have been going for campaigns also, and there's a good movement there. So this is -- and for agriculture also, we are running a campaign that -- for these accounts. This is how we are moving. And for...

Just stepping here. Just wanted to do understand on the corporate side specifically, is there some visibility of how are you seeing for the second half of this year, given that there has been some resolutions on the ground. Are these completely a sticky ones that you will have to write it up? What's your assessment from here onwards?

These are not -- these accounts are -- we are hopeful of getting good recovery in NCLT, that is one. Second is some ODS has also been -- already been sanctioned. We are expecting a recovery from that also. So almost in this quarter itself, we are expecting close to -- we are expecting between INR 1,000 crores, INR 1,500 crores from these accounts only.

Okay. And one last question. On the NBFC exposure, which slipped, can we -- just a clarification of what is the size of that exposure?

So that would be about INR 2,000 crores, I think, roughly. And just to again supplement what Mr. Khurana said that the NPA book also includes a certain proportion where accounts have been restructured. And there is a fairly positive prognosis on some of them, particularly if you look at the international book, where we have got about INR 13,000 crores of NPAs, I think about 20%, 30% is something which actually would be coming up for upgradation next year, should it perform as per again, the restructuring. So I think there's an upside which is there, a, by way of the resolution of NCLT cases, which is now gathering steam; b, in terms of the restructured account, which have been classified as NPA's, it will get reclassified, should they perform as per restructuring going forward. And third, of course, what we have seen is that at least there has been a fair bit of pullback which happened in accounts which had slipped simply because of COVID and the stress that was created on individuals on that account. So I think these 3 factors in aggregation give us, you might say, some visibility in terms of improvement in the NPA book.

The next question is from Gaurav Agrawal.

Sir, I didn't get the restructuring, the numbers which you discussed. Can you please share that again? If I remember correctly, last quarter, total restructuring, SMA framework 1 and framework 2 put together all of them was around INR 25,000 crores. So whether that Q1 number was correct, first of all? And secondly, if it is not correct, if you can give the Q1 number as well as the Q2 number?

So I think we just, again, repeat what we said. And then again, if there's any clarification, we'll be happy to give that. So we have just said that our standard restructured book currently is INR 20,500 crores, which is about INR 1,000 crores, INR 1,500 crores more as compared to what it was in the last quarter, right? And this includes SMA1 and SMA2 also. So if you have to add some figures, you will have -- and you're looking at SMAs also, then you'll have to take that out, right? So if you want to take...

How much would that be, sir?

SMA1, 2 is about INR 4,000 crores. We will give you the exact figures. So it is about INR 16,000 crores sans SMA1 and 2, INR 20,000 crores as the aggregate standard restructured book.

Got it. Got it. Okay. And sir, SMA1 and 2, you have disclosed above INR 5 crores. And if you can give some idea or some broad color how the situation is for your book, which is below INR 5 crores in size. Does it mimic the number that you have given for 1.7% something? Or is it higher? Is it lower? Because other banks who have given SMA1 and 2 below INR 5 crore, there the situation has become quite bad.

Okay. So I think we try to again make sure that we give the standard figures so that, again, the comparisons are possible. What you see in the CRILC outstanding SMA1, 2s is that there is a downward trend which is there vis-a-vis the previous quarter, right, which -- where the second wave actually affected badly. So I think what we can say is that we see improvement even on the overall SMA book also.

The next question is from Gaurav Kochhar. He has written the question in chat, I'm reading out to you, sir. What does the corporate slippages comprise of? How much was the exposure to Srei Group? Has it been 100% provided for? Any other large corporate accounts that slipped?

So as a general proposition, we don't talk specific names. But let us say that the account, which was under stay in terms of asset classification, that we had outstanding about INR 2,000 crores, which has now become part of the slippages for the current quarter. And in terms of providing for it, we have provided it to the extent of 50% currently. Ian, would that be in the correct position?

Yes sir, it would.

The provisions include INR 600 crores on some accounts, which one is this? What kind of recoveries do you expect or anticipate -- or anticipating from the second half of FY '22 and FY '23, if you can broadly call out?

Khuranaji?

This INR 600 crores, are you talking about in the standard assets or NPA?

Standard assets, sir?

Yes. No, that is mainly -- these are the accounts that mainly because of resolution -- this restructuring vis-a-vis that accounts had this -- additional provision has been given in the standard assets. And as far as recovery is concerned in NPAs, there is -- we do -- we don't expect any big account here, but our small book as well as in NCLT, we are expecting a good amount of recovery in those accounts.

The next question is from [ Suraj Das ].

I just had a question on the restructured book [Technical Difficulty].

Suraj, we've lost you. If you could just repeat again in case...

Yes, I guess, I guess I was muted by the host. But anyway, I was asking, sir, on the breakup of the restructured book. So you said that the all-inclusive total standard restructured book is something around INR 20,500 crores. If you could give the breakup of segment wise, like how much is agri, how much is retail, corporate and SME? That is my first question.

Yeah, sure. So I think Khuranaji can give you the figure. So I think...

Khuranaji, you are on mute.

Yes. So Khuranaji, you got the figure?

Yes, I have got the figure, sir.

Yes, please.

See, this INR 20,500 crores, which is total restructured book under standard assets, majority -- INR 7,400 crores is large corporate, INR 6,700 crores is MSME, more INR 5,400 crores is in retail and all others, including international is around INR 900 crores.

Okay. Understood. And sir, on the second question is, sir, on the Srei exposures that you said something around INR 2,400 crores, how much provision you are currently having on that NBFC account?

We said we had a 50% provision. It's around INR 1,900 crores. INR 1,900 crores to INR 2,000 crores. We have around 50%.

Okay, sir. Okay. And sir, on the recovery from TWO accounts, we have seen a large number here in this quarter. So does this include the Dewan recovery or the Dewan recovery has been included in the upgrades number in movement in GNPA?

No, that includes the Dewan recovery.

Okay sir, that is the basically Dewan recovery. And sir, if I may, on the amount as well here?

Total Dewan recovery has been INR 877 crores.

And sir, one last question on the recovery pipeline. So you said that -- I mean you have certain bit of expectation on the NCLT accounts as well as the granular accounts as well where you were expecting a fair bit of recovery going ahead. So broadly, sir, in the second half of this fiscal, how much recovery you would expect because in the first half, the recovery has been -- recovery plus upgrade has been pretty good to the tune of INR 9,000 crores to INR 10,000 crores. So are you expecting similar amount? Or I mean it will be like much higher or something like that, if you can give a fair bit of guidance there?

No. In the first quarter, 2 major things have happened, that is one is, of course, Dewan and other is the restructure upgradation. So those 2 things are not in this next half year. But still, we are expecting around INR 7,000 crores to INR 8,000 crores from the recovery during this half year.

The next question is from Saurabh Kumar.

So sir, first is on this Air India exposure. From what we understood, you had a provision of INR 2,500 crores. Will that get reversed next quarter if the transaction goes through?

So I think we'll have to wait for the exact structure of the transaction to actually see what would be the timetable in terms of any provisioning reversals. So I think in terms of having a definitive answer in terms of time lines, I think this possibly is premature. Maybe when we meet next quarter, we'll have a clearer view on that. But it is a fact that the resolution of Air India is something which is going to be of enormous comfort and benefit to the bank.

Okay. Okay. And this is -- this will not be a part of any restructuring or anything, right?

Absolutely. Absolutely.

Okay. Okay. Understood, sir. The second is, sir, on this family pension, on your notes to accounts, Note 11. We have -- I mean, we are effectively going to take approximately INR 300 crores right every year. Is there a view like SBI to just kind of front end it because your CET1 is already very good, or you will still continue with this policy of having this INR 300 crore odd every year for next 5 years?

So I think you have always tried to choose which -- where do we want to create extra provisioning buffers. So if there is an opportunity at some point in time, we might want to look at it. But as of now, we are going with the RBI dispensation, which allows us to spread over a 5-year period.

Okay. Understood, sir. And the last one, sir, is on again, this Note 16. So it says that accounts where resolution framework has been implemented. So the balance is INR 18,000 crores, of which INR 10,000 crores is NPA. So this INR 8,000 crores, which is there extra, will that have an overlap with restructured or no?

So I'll hand it to again Khuranaji and Ian. These are...

That is a part of total INR 20,500 crores. All restructure, whatever mentioned in our note of accounts that is a part of INR 20,500 crores.

Next question is from Ashok Ajmera.

Congratulations for yet another quarter of very good performance, both in the net profit front and also managing the asset quality. Sir, my main question is on the road ahead, sir. So what are your views, sir, for the credit growth in the coming quarters and the year about the bank? And are you -- now since you are comfortable on capital adequacy and other things, I mean, will you be looking at some of those sectors where you are going slow in the past, like the -- again, the real estate, construction, the NBFC. So where do you see the growth -- credit growth coming in from? And what is the pipeline, sir?

So thank you very much Ajmeraji. We missed you at the beginning of the call. That's where we normally again meet you. But thank you very much for joining us. So I think when it comes to credit growth, I think we have tried to focus on the areas where we believe where we could have protected our margins. And therefore, we find that retail trade would have been 10% and corporate is largely flat. But corporate is a very large part of a book, more than 50%. And therefore, if the overall book has to grow, corporate must contribute. And that's something that we are hoping that, that starts happening now, now that there is some kind of recovery in place. Also, again, working capital limits, which were at a low level of utilization, we expect that to start improving. We also have seen a fair bit in terms of proposals for brownfield expansions, large players who are fairly dominant in their segment increasing capacity. So those are proposals which we already have, and we are actually in the process of approval or we have already approved. So these also should be getting disbursed. So we are fairly sanguine that over the next few quarters, the corporate growth should be significantly better as compared to what it was because the climate has improved substantially. But I will just hand it over to Mr. Debadatta Chand, who now handle the portfolio to give you a ground-level feel in terms of how he sees things.

Yes. See, if you look at the corporate growth on a Y-o-Y, it's at 0.31%, but sequentially, the growth is almost like 6%. So we built on the momentum now in terms of capitalizing on the corporate loan book growth. And as MD sir rightly said -- he said start of the business season also, and lot of unavailed limits are there, a lot of pipeline cases are there. So we are quite hopeful of at least growing at the industry average line and there's a quite -- can be quite a good possibility as far as the loan growth is concerned.

Sir, my extended question on this was the -- like covering the industries like NBFCs, even A-rated and this thing, which is still not being looked positively and some of the construction loan and also the co-lending kind of things by which you can penetrate to the lower segment of the society where the average size is INR 2 lakh, INR 2.5 lakh through these NBFCs and co-lending. So on that, any firm view on that or any policy decisions on that have you taken so that we can understand the kind of the growth which is coming in?

So I think one of the challenges that we had was that there was a point in time when our exposure to the NBFC sector was disproportionate as compared to other players in the market. So it was as much as 14%, 15% as compared to 8% average for the market. I believe the correction that was necessary has already happened. And therefore, for us, you are absolutely right, it is the right time to again look at NBFC growth and have good quality growth. And among the instruments that are available to us, of course, is to lend directly and also to lend again through co-lending pool purchases once we actually have some, you might say, clarifications in terms of the regulatory dispensation. But we are fairly positively in trying towards, again, looking at the NBFC portfolio and see how it can again return to growth mode.

Good, sir. Last question, sir, is on the -- our treasury has been performing very well. There are good amount of trading gains from the sale of investments also. Like almost about INR 2,200 crores in the last 2 quarters of the sale -- profit on the sale of investments and even treasury income recovery from the written off accounts. So what is the -- I mean, this pattern is going to continue according to you for the remaining 2 quarters of this year, the same trend? Or do you see some kind of decline in that, sir?

So I think the interest rates have started hardening. And therefore, I don't think there is any possibility that the kind of gains that we saw over the last 2 or 3 or 4 quarters, that we could see them extending indefinitely in the future. They will start trending downwards going ahead. But this is something which is part of the normal business cycle, that when the economic climate improves, interest rates tend to rise. And along with interest rates rising, your NII will start improving on your loan book, but the treasury gains will get muted. So we would expect that pattern to manifest itself.

The next question is from Manish Agarwal. What is the total standard restructured provision outstanding? Is there any contingent provision and floating provision in the book? If it can be qualified -- quantified?

Ian, would you want to take that question, please?

I said I'll just come back with the data, Manish, if you can reach out to me. Give you that data separately. I don't have it handy.

I'll just, again, broadly address the question for Manish. So actually, we are not carrying any specific core provisions on a book. But again, we have also pointed out in the past, and we might say that consistent with the fact that credit costs are coming down, right? You would normally provide when you expect credit costs to go up, we expect them to come down. The other part is that a bank, again, traditionally does provide at slightly higher levels as compared to the regulatory requirement since we provide at 20% for a substandard assets as compared to 15%, which the RBI requires. And similarly, also, there are certain other categories including unsecured loans, where we make higher provisions. So to that extent, we hold provisions which are more than the regulatory requirement.

The next question is from Rakesh Kumar.

So the first question is pertaining to the Slide 20. Industry-wise NPA in telecom sector, which has now become kind of a negligible number. So what -- was this completely provided and written off in this quarter? What is the status of on this, sir?

So yes, I think that would probably be repositioned, but I'll just request Khuranaji to take the question.

Yes, you're right, that is fully provided and we have written off.

Which loan account is that, sir?

So let's refrain from names, but I think there are no prizes for guessing them, right?

Okay. And so out of this total write-off of was around INR 5,300 crores. Any -- is there any other lumpy account apart from this number?

So I think there would be about an another account, which also would be a significant figure. But again, Khuranaji, Ian, if you might want to give any color on that please?

So there was a set of 3 accounts belonging to the same group, which collectively -- so there was a finance company in the group, a telecom company in the group. All of them together, it was around the INR 3,500 crores kind of out of the INR 5,200 crores. So a large portion of the INR 5,200 crore was just in 3 accounts.

Okay. And pertaining to the notes of accounts, #11 in the stand-alone entity, there is a INR 600 crores of additional provision that we have made in this quarter. So can you just clarify, it was also pertaining to the previous question asked by Mahesh. So what is the total stressed standard asset -- provisions that we have apart from this INR 600 crores?

So let me attempt to take the first question first. The second question will reply separately. The INR 600 crores is for 3 accounts that could potentially get downgraded in the next quarter or next quarter and half. So there are specific accounts where there are signs of excipient stress, and we chose to take a provision in these 3 accounts in this quarter. Whereas your more overarching question, I will get back to you. You can reach out to me separately and we can discuss that separately.

Hey, Ian, I can touch him there. In fact, INR 20,500 crores is the standard restructured book. And in the RF1 and RF2 and it was 10% provision. That makes it around INR 2,000 crores there. And in MSME, the old MSME restructuring, it was 5% provisioning and that comes to around INR 300 crores odd amount. So I think it's around INR 2,500 crores ballpark range.

The next question is from Manish Shukla. Have you reduced lending rates in any of the segments in Q2? The entire Q-o-Q decline in NIM is due to interest reversal of NPA? Or is there something else dragging the NIM?

So I think we have been having specific schemes where interest rates have been reduced as part of campaigns. I think in home loans, in particular, we have always had very competitive rates. We offer competitive rates even today. Similarly, in MSME, we are trying to reach out to good quality borrowers, and that's also where we actually have brought good quality accounts, good rated accounts, we have reduced rates. To answer your question about the net interest margins, if we were to look at the net of one-offs, right, including interest reversals on an account where there was a stay, our net interest margins would be broadly, broadly unchanged between last quarter and this quarter. But I think you can again reach out to Ian for the detailed calculation, but that is what the position is, that there is no dilution of interest margins if we were to take one-offs out of the picture for both the last quarter as well as this quarter. In terms of interest rates, I again request Khichi saab if there's anything else that he might want to add to what I said.

No, I think that's enough sir. I think you have articulated well.

The next question is from Prabal Gandhi. Please clarify Note 13 pertaining to 2 accounts amounting to INR 1,200 crores, where court has stay order? And the second question is, also we reported strong growth in corporate Q-o-Q, what drove this?

Khuranaji, would that note on account something that you might want to comment on?

Yes sir, these are the 2 accounts where -- actually, there are -- there is no repayment and their accounts are NPA. But because of court order, we are unable to make them NPA, but we have provided them full. It's almost 100% we have provided. So these are the 2 accounts. Because of that, this amount is mentioned.

And as far as corporate is concerned, I'll request again Chand saab if he would go to answer the question, please.

Can you please repeat on the corporate side?

So this was about the Q-on-Q growth again. How is it that after a degrowth in the first quarter, we had a fairly smart growth Q-on-Q.

So if you look at the corporate credit on a Y-o-Y, it is flat, but on sequential, it is are almost 6%. So there is a good momentum with regard to the growth in corporate credit. And now in Q3 at the start of the busy season with lot of pipeline cases we do have, we expect a substantial robust growth for this quarter, at least to the extent of the industry average.

The next question is from Jai Mundhra.

A couple of questions, sir. First, on this INR 600 crores additional provisioning over and above IRAC that we have done. Does this pertain to accounts, which are already NPA, but standard due to court orders? I mean, would that pertain to those accounts? Or this is something else?

So I think Khuranaji mentioned that these are accounts -- Ian I think mentioned that these are accounts which we believe are likely to slip. So in anticipation of the slippage we have made provisions, they are not constrained by any court order. Ian, would that be the correct position?

Yes, sir. Yes, sir.

Understood. And this INR 600 crores provisioning would be -- I mean this would cover what kind of provisioning there? I mean 30%, 25% just to understand what could be the...

It's at different stages. It is at 3 diverse companies. In 1 case, it would be probably 100%, in other case about 20%. So it really varies. It is a mixed bag.

Okay. And if you can specify the sector, sir, for these 3 groups where you are envisaging slippages going ahead?

No, no. These 3 companies is -- just 3 loan accounts, actually. So largely 2 out of the 3 are power companies.

Okay. And which is -- I think this power group or power companies has been technically NPA but has been made standard because of the court order, right? Is the same...

No, no, no, it's not court orders. It is just showing a bit of stress in the banking sector. And hence, it may slip is our prognosis.

Understood. And the second question, sir, is on slippages. So in your opening remarks, you mentioned that the endeavor would be around 2% kind of slippages. And if I see the fresh slippages without taking into account the debits to existing NPA, this is around INR 10,000 crores for first half, which would translate to somewhere around 1.5% of loans. So how should one look at the -- I mean, does this mean that the second half should be a very, very normal kind of run rate slippages to have the 2% run rate?

So I think we can look at it in 2 contexts. One is that the figure is possibly closer to INR 9,000 crores. I think what we have seen in the first half of the year. And within that, there's a figure of about INR 2,000 crores, which actually pertains to last year. right? Where we were making provisioning, but it was not classified as a slippage. So I think the guidance that we have given of about 2% should still stand. At worst, you might say it is going to be adjusted for what was the slippage of last year, but we are broadly in line in terms of where they are -- where things are. And you're right, we expect a better second half as compared to the first half. Understandably because of the fact that the first half, particularly for MSME and retail was averaged by the second wave.

Right. Understood. And just to clarify, I mean, in your slippages for first half, these are gross slippages for the quarter, right? We are not netting of interquarter...

These are gross slippages.

So net of pullbacks of the first quarter that we saw in the second quarter, the first quarter net slippage would be INR 3,374 crores.

Sorry, sir, I did not get this. So first...

So this is gross slippages. The net slippages will be significantly lower first in the first quarter. The net slippage is not INR 5,000 crores something, it is INR 3,300 crores as compared to gross.

Right, no, no, I'm saying the slippages for this quarter INR 5,200 crores, if you have recovered something from one -- first quarter slippages, that is part of recovery and upgrade, right? Not it has been netted from this quarter's slippages?

Absolutely.

No, it's not netted. Correct.

Sure. Great, sir. And the second thing, sir, on margins -- so if I see -- there was clearly some one-off in first quarter, and that is why the margins went up to 3% plus, which has now come back to 2.85%. If you have this -- if you can quantify that what was the one-off in 1Q, so that the Q-o-Q number does not look haywire, in that sense. I think there was some recovery or there was something else.

Yes. So we will give you the details in terms of what Q1 one-off and the Q2 one-off, which was the state account. And as I mentioned, if we would net off both, we would pretty much have a steady picture, but we'll give you the details just to again make sure that we get the arithmetic right.

On a normalized basis, our NIMs for both the Q1 and Q2 would be around little upwards of 3%. Domestic names I'm talking about, it would be a little upwards of 3%.

Okay. And last thing, sir, just to come back on restructuring. So it looks like that Q-o-Q, there was very small restructuring on net basis. If you have the gross restructuring, I mean, during the quarter, because otherwise, it looks like that the net restructuring on an outstanding basis is almost zero, right, or maybe even negative because -- or there was some inflow and there was some outflow, maybe some lumpy account went out of restructured. Is that the case or the gross restructuring itself was very small?

So Ian, do you want to take that or Khuranaji?

Yes, sir. See, from June to September, there is a INR 1,400 crores addition in restructuring. There is no reduction in -- big reduction. So this is -- the restructuring, this number is slow in second quarter. Whatever restructure has to happen, it has happened in Q1 or prior to that.

Next question is from Sonaal Kohli.

So the total restructured book which you gave of INR 20,500 crores. Does that also include the MSME or restructured book?

Yes.

Includes the old MSME also.

And sir, as far as Air India is concerned, is it part of your restructured book or SMA1 or SMA2 or NPA?

No. They are not part of -- they're not part of restructuring as well as NPA.

But they would be part of your SMA2 numbers?

Yes.

Sir, can you quantify your exposure because it helps us delete that number from the SMA estimates?

Can we tell you that number offline?

Sure, sir. Sir, lastly, sir, if you can give some idea from your overall SMA1 or SMA2 book whatever is feasible for you and the improvement you have seen it from the June quarter because the trend in the smaller accounts and the large corporates may be very, very different. And this doesn't give us a good picture of how the asset quality looks like.

So let me say that the trend that you see in the CRILC accounts in terms of the reduction in the SMAs is also reflected if not exactly in the same measure in substantial measure in the overall book.

Sir, but would it be fair to say that your SMA1 and 2 in below INR 5 crores account would be significantly higher than your above INR 5 crores SMA?

I think now we are getting into specifics which maybe beyond what, again, is part of our standard presentation, right? We can always discuss some things offline. But the improvement in the trend vis-a-vis the previous quarters is extends beyond the CRILC account.

We will now take only the last 2 questions of the evening. The next question is from Amaan Elahi.

So again, on the corporate front, so you have already expressed your view that you're expecting growth to pick up from here. So just wanted to understand where is this growth going to come from? So you mentioned some pipeline of brownfield expansion, et cetera. So are you expecting better utilization on the working capital front? Or are you expecting better CapEx demand coming in, in the coming quarters. And again, just to set some context, could you also share what is the current working capital utilization there?

So I think it's pretty much what we discussed that we should see working capital utilization level start improving. We will give you the exact figures, right? That's, I think, with Ian can supply you, that's not an issue at all in terms of where we stand. As far as CapEx is concerned, we are seeing brownfield expansion, which tends to get reflected sooner in terms of growth. When you look at greenfield projects even if you have sanctions now, it will take a few quarters for that to get reflected. And I think when it comes to the private investment cycle, given where capacity utilizations are, we still might be a few quarters away from really having a robust growth in terms of demand. So in the short to medium term, that's why we believe that the improvement in corporate credit will come from, again, the brownfield piece and also the improvement in the utilization of working capital. In terms of what the current utilization levels are, we will supply that for you.

Okay. That was useful. And the other one was, sir, we have seen around INR 4,000 crores of upgrades and recoveries during the quarter. So how much of this would be on account of some of these stressed accounts getting restructured?

Khurana saab?

Sorry, in this quarter, there is no major upgradation due to restructuring. Whatever was there, it was in Q1.

The last question from the -- for the evening is from Kush Shah. We have a fairly large SME restructured book, how is this performing? And how do we think of slippages from this? Were the corporate loans driven by short-term loans? And do we expect some of this to reverse? What are the yields on this book?

Yes. So I think in terms of the MSME piece, I think it's unarguable that there is stress. There has been restructuring and I think it is going to play out over the next few quarters, which I believe, too early to really have any -- very high degree of confidence in terms of predicting what the stress is going to be and how it will play out. But I think what is important, and this is what we have been emphasizing is that if we were to look at the proportion of the book and the proportion of the corporate book, it is the improvement in the corporate credit cycle which will have the impact which will probably outweigh whatever negative impact is going to come from the MSME book, which is why, again, we have been guiding for the last few quarters that we expect credit costs to keep on trending downwards over the next few quarters. And we stand by that commentary. Now in terms of the corporate book, I think the quality of the growth is fairly good. I don't think there's too much growth which might be volatile and therefore, would get reversed. We expect steady growth going ahead. We're not seeing spectacular growth because we would still like to keep discipline in terms of making sure that our margins remain intact, but we would -- we expect to see steady growth. But I'll again hand it back to Mr. Chand again to give more color on that.

Yes. Typically, the corporate, as MD sir rightly said, we as a framework are slightly more RAROC sensitive and also NIM sensitive. So saying so is that we believe in more capacity creation and sustainable loans rather than any troublesome loans. So that's the bias and that would continue.

Thank you, sir. So that was the last question. I now request our CFO, Sri Ian De Souza, to give the vote of thanks.

Thank you, everyone, for joining us on this call. It has been an immense pleasure addressing you. We've had a very good quarter and look forward to many more. And thank you for your support on an ongoing basis. Many of you have joined us in analyst calls in the past and look forward to hearing from you. If there are any questions that remain unanswered in this call, please do feel free to reach out to me on my e-mail ID. And thank you so much. Back to you.

Now this is a wrap for the evening. Thank you, ladies and gentlemen. Have a pleasant evening. Bye-bye.