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

We have with us today, Mr. Sanjiv Chadha, the Managing Director and CEO of Bank of Baroda. And he was joined by the bank's EDs and the bank's Chief Financial Officer. We'll start with brief opening remarks by Mr. Chadha. We have a brief presentation for you, and we'll follow that up with the Q&A session. Over to you, sir.

Thanks very much, Phiroza, and very warm welcome to all of you. Great pleasure to see after a long time. I think it's 3 years since we met in person. So thank you again for taking the trouble. Let me just begin by introducing my colleagues, with many of whom you might be familiar. So starting on my right, we have [ Mr. Jetha Nand ], who looks after retail products. To his right, we have Lalit, who you might be seeing for the first time. So Lalit was heading our U.S. operations and now handling our international operations and also a lot of the platform functions, including HR. To my left, Mr. Debadatta Chand, who is handling Corporate and also Treasury for us. To his left, we have Joydeep Dutta Roy who looks after Digital, IT and also...

Wealth.

Wealth, right. So its subsidiaries for us, right? And to his left, you have somebody with whom you are most familiar, Ian De Souza, our Chief Financial Officer. So I'll just, again, make a small presentation, not take more than 10, 15 minutes, and then open up to questions. Try to make sure that I cover enough ground so that some of the questions which we anticipate are addressed and then we can take it from thereon.

Yes. Can we have the PPT, please?

So thank you once again. We'll just start with the first slide. Yes, so I think I'll just harp back again to the beginning of the year. So we had started the year by saying that finally, it might be possible this year for us to actually both grow our book and also to have margins. The last 3 years were a challenge, but it shows either to grow or to retain the margins. And this year, you will find that we have delivered largely on both counts. If you look at loan growth, it continues to be robust, at about 20%. The good news, of course, is that now they seem to be spread pretty evenly across segments. There is no segment which is not growing in double digits. The standard performance is, of course, in retail, where organic retail growth is 30%. There is -- the most growing segment is home loans, which is now growing at nearly 20%. And unsecured personal loans, of course, are growing much faster. This is something which has positive implications for the composition of the related portfolio and also for yields as we go ahead. Now we have reached the stage where unsecured loans actually are contributing significantly, even in terms of composition to the retail portfolio. There's still a relatively small piece for us. And I believe that this is something which has -- hoped to grow, at almost an equal pace for a few more years before the growth really moderates. If you look at the growth in this slide, you will find that the disbursement growth is mostly significantly higher than the overall growth. So I think that would again bodes well for the sustainability of this growth in the future. What has worked well for us is that the gap that you see, with most banks between deposits and loan growth, is relatively small for us. So overall deposit growth is 17.5%, which is just a little bit short of the 20% in terms of loan growth. And if you look at the domestic piece also, there again, it is 14.5%. That has meant that the CD ratio for us continues to be moderate. In fact, the CD ratio now is not much higher as compared to what it was 3 years back. So it means that [indiscernible] the loan growth and deposit growth roughly stacks up. And it means that it is possible for us to continue to work for some time our loans at a pace significantly faster than our deposits. So because of the fact that we have been able to grow loans significantly faster, and most of the growth has come from the retail segment where you have got good pricing upside, margins continue to strengthen. We had guided last quarter that our margins were a bit overstated and they ought to be again about 3.17% on an adjusted basis. If you see that, then our margin improved by 20 basis points over the last quarter. Now this is because you'll find that the gap between yield on advances and cost of deposits is still about 20 basis points this quarter. It was about 40 basis points the previous quarter, it's about 20 basis points plus now. And I would believe there might still be a quarter or so when we can still profit from the lag effect between the repricing of loans and deposits as we go forward. In terms of profitability, you would find that the biggest jump has come in terms of net interest income, which is logically corollary of the fact that our loan growth is about 20%, and there is a margin improvement along with that. Fee income is a bit tepid because in terms of private sector capital investment and term loans that come on account of that, that it's still not where it would be when the cycle is completely back, and that should improve as that improves. You'd also see there is a third column in the operating profit and the profit after tax, there were some one-offs which were there. The operating profit difference is largely because of certain security receipts from ARCs where we think recommendation by the World Bank has changed and the provisions which were above the operating profit line have come below the line. And therefore, the increase in operating profit on an adjusted basis is about [ 37% ]. On the profit after tax, it is still on account of the fact that there were some one-off tax provisions, which were made, which meant that our effective taxation rate was a little higher as far as this quarter is concerned. But the good part is that if you look at the last line, it would seem to suggest that we should be able to sustain this improvement as we go ahead. The 9-month profitability, again, the amount [ states ] that what we have seen in this quarter is not necessarily again a one-off, and we have seen a full 9 quarters of significantly improved performance. All of this, again, the fact that you have profits to make sure that our balance sheet is strengthened has again affected the asset quality. So on the one hand, of course, the credit cost has come down substantially, much lower as compared to what we anticipated. This is because the corporate credit cycle is possibly in the best place possible. All NPAs are fully provisioned and also on account of fact there were enough profits to take care of any requirement that might have been there. So I would believe that we are now at that stage where we can again look at the existing book, and we reasonably reassure that there are no downsides there. In terms of sustainability of this improvement, to my mind, this is a slide that would give us reassurance. Now for the last 4 quarters, the SMA position continues to be very stable and improving. So therefore, I think there is nothing as of now on the horizon, which would suggest that there might be any serious issues with impairments or asset quality as we go forward. And the collection piece, again, is something which is now stabilized at a very high rate. Because of the strong internal pool, the bank's capital position continues to be good. You would normally have expected, with a 20% loan growth, there might be a requirement for external capital infusion. But the fact is this that, even with this loan growth, the internal pools are so strong that we will end up with a capital adequacy ratio at the end of the year which is better than what was at the beginning of the year. Now if we were also to suppose that there might be some moderation in loan growth next year and also that this kind of internal pools should sustain or improve, I think the bank is in a good position to also sustain its growth through internal pools in the coming year, to. So as of now, we do not believe that there will be a reason for us to approach the capital markets, accepting, of course, that the fact that growth is much, much faster as compared to what we anticipate today. Last couple of slides, again, we want to discuss again where do we stand vis-a-vis, again, peer banks. So I think there is a cyclical upturn which has benefited most banks. But I think there are also some factors which are particular to Bank of Baroda. Largely, it stems from, I think, how the -- please go back to the previous slide, if you don't mind. Yes, so largely, again, they stem again from the bank's own position. So what you will see is that our physical build actually, again, has not expanded. So a number of branches are much lower as compared to what they were 3 years back. Number of employees are lower, but there is very robust growth that we have seen. And this growth in some cases is understated because we had 2 years of very low growth. Now that we are growing at 20%, and let's assume that, that can continues and also, the physical build also largely where it was, you will see that there is an expansion of margins because, finally, we have been able to raise under what was the symbiotic link between costs and also in terms of revenues. So I think we should see an expansion of margins on account of the fact that we probably would be able to contain costs better than peer banks. Some of the impact in terms of what we are talking of is already visible. I mentioned that our deposit growth, again, is probably better than peers. So if you take the average of the top 9 banks which have declared results, our deposit growth is 3 percentage points higher. Advances growth is also 1 percentage point higher. So this should again translate into sustained outperformance. Again, moving on to profitability, which is a measure you look at. As compared to the same set of 9 banks, private sector and public sector, we outperformed competition by a significant margin, mentioned on the slide previous to the previous one, which is in terms of costs, where the gap between the cost -- OpEx increase between us and peer banks is the widest. Our OpEx increasing at half the rate, right? And as again, this current growth that we have seen, it sustains. You will see it getting reflected in profit margins even more as we go forward. Before I close, let me again address one question, which I believe otherwise might come from multiple sources. That's again our exposure to a large group, which again has been under discussion. So I'll just put 2 or 3 factoids before you. I normally refrain, again, from talking in terms of specific accounts, but I believe you have a legitimate right to ask a question about our portfolio. So I'll talk about in the context of our portfolio. So in the context of our portfolio, this particular group exposure does not figure among the top 15 by way of, again, exposure to groups as per LEF norms. Now as you already have known, the RBA take into account outstandings. They take into account nonfund-based debits, and they also take into account also undisbursed loans, right? Based upon the LEF norms, the group does not figure in the top 15 large exposures of the bank. That is factoid #1. Number two, as per the earlier framework, you can put out a certain percentage of your capital to a particular group. What we have put out is about 1/4 of what we can as per our capital, right? So that, again, would give some reassurance. Third, of the exposure that we have, 30% is either in joint venture with a public sector company or is backed by a guarantee of a public sector company. So therefore, I would want to again give you that comfort and reassurance that whatever you have seen in the previous slides, by view of performance, by view of profit trajectory, by view of credit costs, it's likely to continue regardless of the circumstances that we see either in the context of the last few days or in the next few months. Thank you very much.

Thank you, sir. [Operator Instructions]. We also have a few people on Zoom. So we'll take a few questions from here, and then we'll go to Zoom as well. [Operator Instructions]

[indiscernible] but especially in this kind of situations, which are absolutely external-linked situations. Most of the banks are giving a little more explanation [indiscernible]. Is that true?

Not one for Tier 1 capital. The Reserve Bank of India allows you to lend a certain percentage of your Tier 1 capital. Whatever is the maximum allowed by the reserve bank, it is 1/4 of that.

Are they [ 3.5% ]?

Above [indiscernible].

So sir, these numbers are [indiscernible] and especially the [indiscernible]

So I think -- the fact is that this is the beauty of the LEF framework, and we must compliment the reserve bank in terms of how it has been devised, that this takes care of everything that you're asking, right? What is the current exposure? What is the nonfund-based exposure? What are the undisbursements? All of these are factored in. And on that basis, again, the Reserve Bank of India asks you again to limit your exposure. So all these things are there. I think the rest is, very frankly, a matter of detail. I think what is of interest to you and everybody else is that, could there be any future impact on the bank, it will be ultimately [Foreign Language]. So what I can assure you is that from the figures that I've given you, this should give sufficient reassurance that the kind of trajectory that you have seen from the bank in terms of improved performance, that will be sustained. There's nothing in terms of this exposure that can have any significant impact from that.

Okay, sir. How much percentage of your total credit do you export into this group?

How much? [indiscernible]

I give a pass to it. Sir, if you look at your composition of [indiscernible] [ 37% ] [indiscernible] and [ 42.2% ] is corporate. [indiscernible] 40-60 [indiscernible].

Indeed. I think it's a very fair point. And we have been conscious that while it will be -- it's a very good time to be a corporate bank. But corporate banking has again experienced cycles. And when those cycles are there, the impact on the bank is very large. So therefore, a granular portfolio is something which is to the benefit of the bank. To my mind, if we progress towards a 60-40 proportion, that might be a good place to be in. We have been guiding that whatever our growth should be in line with industry or better, A. B, of this growth, we would want our retail to grow at 1.5x. So which means that if we want our growth to be at 15%, retail should grow at 22%. And corporate should be 0.7x. So that while you take full advantage of the opportunities in corporate, at the same time, you are able to progressively achieve a change in the portfolio, which will mean that the kind of return that we are seeing are sustainable.

Sir, one point on recovery and another one on treasury. It's just small 2 questions. On the recurring trends [indiscernible] perhaps where do you stand on the recovery trend because [indiscernible]

Yes. Actually, as far as [indiscernible] run rate is concerned of recovery, it is almost same. In fact, it is a little bit improvement. But that [indiscernible] in our incremental book, which got upgraded, and there's some recovery. That is what we consider a gap between the last quarter and this quarter. Other than this, our run rate is improving month-on-month.

Sir, anything on NARCL front? How many accounts? What is the amount, gross or the net, or the realization and looking forward in the next quarter?

No. NARCL, so far, whatever they have identified and that we have gone, only one account was there, and there too, we don't have that. In other accounts or recoveries, it seems like we'll do anything in this quarter.

[indiscernible] quarter? And it should be [indiscernible].

[ Three ] aspects to it. One is with regard to the interest income in treasury, right? So if you look at the book increase quarter-to-quarter and year-to-year, my income growth has been higher than the booking piece. So in our assumed treasury scenario, typically, this is the base case scenario. I think I can generate more income than what I put in terms of investment. So that has seen a significant increase in terms of the interest income and investment. The second aspect is increase to the value sale. So as far as the value sale side is concerned, on the overall book, there was a write-back. But there is one investment where there is a treatment in terms of pushing that above the line or below the line. So -- because of that [indiscernible] and the treasury income is getting influenced better. So otherwise, effectively, the book is doing extremely well, and we are quite good in terms of increasing income, at the same time, continuing MTM impact going forward. With regard to outlook, what we see as of today is that, globally also here in India, if you take [indiscernible], possibly, the levels are inverted, now it is peaking out in that way. At the same time, there's rules also that people are looking at, [indiscernible], right? And there is also the [indiscernible]. So that way, there's some kind of reversal happening possibly at the end of this financial year. So if that progresses, the book looks quite good, and the MTM impact also quite manageable.

[indiscernible] duration...

Posting [ 1.7 ].

We'll just take a few online questions. We have -- hello? Mahrukh, I request you to unmute yourself and ask the question.

Hello, can you hear me?

Yes, Mahrukh.

So my first question is, sir, when you talk about capital Tier 1. It's just stand-alone capital, right?

Is it stand-alone capital?

It's stand-alone [indiscernible]

Mahrukh, may I request you to state your question again?

Yes. [indiscernible] the exposure limits of your Tier 1 stand-alone capital, right?

So we are talking in terms of how the Reserve Bank of India defined that, right? So that would be in terms of a Tier 1 capital.

Tier 1, stand-alone. Yes.

Okay. Sorry, pardon me, yes.

The next question is from Adarsh. Please unmute yourself and ask the question. Yes.

Sir, Adarsh from CLSA. So you adequately answered, so the 25% of what was allowed under LEF takes care of undisbursed limits, nonfund exposure, overseas exposure as well. Is that a correct clarification, sir?

That's correct.

Okay. And sir, one more thing. Just wanted to check, right. One, it's about Adani being a group and lending to a particular group, right? I just wanted to understand there are various related parties, some SPVs around related parties, just wanted to check if you lend to any of them, that would be part of this exposure, if at all.

So I think I mentioned to you again that 30% of the exposure is by view of joint ventures, again, along with the group, right, also, some which are guaranteed. So all possible exposures which can be clubbed in groups will have been taken care of.

Perfect, sir. And sir, I just wanted to understand now -- the second question was on margins. The sector has seen a very strong improvement in margins. Next year, obviously, deposits will catch up. It's a little bit of a fight for gathering deposits. So with our loan mix improvement, assuming some normalization in credit growth, what will be a fair sense of a sustainable margin for the bank? And just to be a little bit on the conservative side.

Yes. So I think where we are now, I think, seems to be a sustainable level. As you said that there is some benefit that we have received this year from the fact that there is a lag effect between the repricing of loans and deposits. That is already diminishing. I mentioned in my opening remarks, that was 40 basis points difference was there, now that's come down to 20 basis point difference. That will also vanish over the period of time. But I think that when it comes to our book, there are some positives that should continue to protect us. Now one is, as we discussed at the beginning, the changing composition of the book, right? The fact that retail loans are expanding proportion and retail loans actually are benefiting from the change in interest rates very substantially. That is going to be by -- till such time that we actually go back into another cycle, that might be some time off. Within that, the composition, I think, is again something which is important. So you see that unsecured personal loans now are a very significant proportion of the retail book. It was almost nothing. Now it already might be 15% to 20%-odd, right, which is there. So our total unsecured personal loans are about 15,000 crores-plus probably. So I think that is -- and there's scope for this to improve. So I think the upside that you will get in terms of margins from the rising proportion of retail loans, a, and within retail loans, rising proportion of unsecured loans, I think, should help in margins as we move ahead. Third, in terms of the repricing of the corporate portfolio, that is still in process. It is still in process in 2 ways. One is loans which are benchmarked to 1-year MCLR, right? Over 1 year period, they get repriced. So that is improvement that will continue for some time. The second part is that still, again, you'll find that a lot -- most investments are coming really from the largest books who have great pricing power. So you are not still fully able to price, again, the new rates when it comes to lending to the best corporates. That, of course, augurs very well for the quality of credit. But in terms of the benefit of rates, I think it will continue in the corporate segment in the next year.

Got it, sir. And when you say sustainable margins, you're referring to the 9-month number.

I'm referring to the 9-month number. It's not very different from the quarterly number. So I would venture to say the quarterly number also.

Perfect, sir. This is super helpful, and thanks for the clarification on the group.

The next question is from Kushal Shah.

Yes. Kushal Shah from Credit Suisse. Sir, firstly, when we look at in terms of the overall corporate credit growth, a significant part of it almost coming [indiscernible] increase in this particular quarter itself. Are these short tenor or long tenor? And we have given some qualitative aspects with respect to NBFC, but do we expect the rundown also become [indiscernible]?

So I think what you're probably asking -- I think your voice was a little bit distorted, so let me just repeat what I've understood. I think what you're saying is that how sustainable the corporate credit growth might be because there might be some short-term loans, which again might actually run off, right? I think that's what I understood. So to my mind, actually, we are -- and we have tried to be fairly strategic about it, right? We are conscious that liquidity is still shrinking. Pricing power is likely to move in favor of banks as we move forward. Therefore, where you are getting the kind of pricing, which we believe is very fair regardless of where you are in the liquidity cycle, that would be something where you might want to make commitments which are longer term. Where you believe that still pricing power is not fully with you, right, and with certain sets of borrowers, that will be the case, you would want to make sure that, that exposure again is capable of being repriced as you move ahead in the cycle. So there will be some short-term exposures, but we see it again more as strategic intent to fully profit from the interest rate cycle.

Sure. So -- and given the environment, how are we seeing the pricing on the corporate side? Is it like it has -- the competitive pressure is tough? Or is this still equally competitive, say, with the rating profile, which we are doing on NBFC side?

So every quarter is better than the last quarter.

Okay. Got that. And secondly, when I look at it in terms of the retail term deposits, in fact, that's down on a quarter-on-quarter basis. So again, what would be our strategy in terms of trying to -- I think a major part of the deposit growth has come by building up the bulk deposits over here. So what would be the strategy in terms of mobilizing the retail [indiscernible]?

So ultimately, you want to manage your costs to make sure again that you maximize this time period where you are actually getting some kicker from, again, the pricing differential. And also, you would want to put it yourself from the possibility that the present spike in rates may not be a permanent increase in rates. Therefore, if you look at what is the published highest rate of the bank, right, which you might see on the billboard when you drive through Mumbai, it is still 99 days, 7.8% to our senior citizens because we believe that we can be fairly sure that for the next 12 to 15 months, rates might be where they are. But there may be a possibility -- just when we talk of, again, the Reserve Bank of India possibly reappraising rates maybe a year from now, there could be a possibility that retail deposit rates. Also, the current again trend might again reverse or get stabilized. So therefore, you'll find that growth is coming, a, from this deposit scheme that we have talked of; b, it is coming again from wholesale deposit but also coincidently are a maximum of 1 year, right? So what we are trying to make sure again is that we do not commit to the bank to an interest rate cycle about which we are not confident today. And as we move forward, there may be, again, enough confidence for us to broaden the time segments where we believe we have fair visibility of again stable rates. If you again go back to 2 or 3 years back, most of our growth again came from long-term deposits, 3 years, 5 years because we believe that was a good time to lock into longer-term rates. So effectively, this works pretty much in a deliberate manner to make sure that you, a, take into account the uncertainties of the future and you also make commitments to the extent that you have visibility.

We take the question here from the gentleman.

[ Jalen Sharnani ]. At the outset, great transformation since last 5 years and very, very successfully, and you are being benchmarked among the best private PSUs, like Indian Bank, Canada Bank, PNB and among the best performances to date. Hats off to you and your whole team. Now a couple of very specific, very, very important questions. We have seen, in the last couple of days, major development, particularly the Finance Minister's speech on giving a major biggest impetus for infrastructure. It has been titled as a CapEx budget and the largest boost by government spending, 4.9% of the GDP. Here, a bigger push is required to get the private/public sector, which has been mentioned. So how do we see in this bank the push to infra lending? And would it be among the all-time highest growth, particularly in FY '24, because that is being addressed pre-election because it has to work together? And how do we see the risk management framework? Because infrastructure is we had to take long-term need, short-term need, short term in terms of last-mile funding, the Finance Minister talked about, for closure of over 100 projects and also long-term sustainable development, which takes about 15 to 25 years. And the risk management framework, looking at the asset liability mismatch also because of the period, of course, 1 year will be -- would be a -- could be a walk-through. And the risk assessment in terms of cash flows and business groups, and we have to address this. It gives us actually a tremendous opportunity. How do we look at it? Number two is the boost of savings, which has come, particularly in the last 2 days, the new default regime -- the new regime become the default. So after a long time, the banks have got what they wanted, level playing field. So is ADC and all suppose those are not discouraged, our Finance Minister talked about INR 35,000 crores [ of boost ] to savings. And do we see a big impetus to deposit growth because of that? Is this opportunity to [ ride ] from -- one, how do we see deposit growth particularly in post new default regime of our income tax? It gives us a great opportunity. Number two, particularly we talked about a few quantitative indicators like return on equity. How do we see -- because we are looking at the peer banks here, of course, SBR as well, so also, I think you will be seeing closely, that was missed out in the industry versus BOB and the other banks. Could we achieve an ROE of 20% as soon? And we see a lag. In the results, you have given very good new [indiscernible] and operating profit growth and lending also, but the fee bank's income is lagging. Normally, it was [indiscernible]. So are there any particular issues? And how do we intend to correct it in this coming year? And what do -- we are looking at it in this particular year.

As you talked about the CapEx-led budget in our [indiscernible]. So if you look at the infrastructure, our growth in terms of the industry growth has been the highest, right? And particularly 2 sectors doing extremely well: 1 was power sector and, secondly, the road sector, right? And going to also the kind of budget that we had where there is a substantial push for infra. And we, as a bank, typically move the economy, right? So in that way, the more the growth on the infra side, the bank would be, again, growing on those sectors. And the book is quite long and its outlook also quite long in infrastructure, right? On the second aspect that you talked about with regards to -- on the retail, I mean, on the money available for the retail masses and whether that will lead to deposit growth. It can lead to -- yes, it can lead to a deposit growth or can be convention-led, which is good for many normal loans or many retail loans and all. So we are quite positive both in terms of the outlook of the budget and that has the impact on the economy, at the same time, specific to 2 [ accounts ] like infra, yes, they are going to be long. With regards to the retail deposit, yes, they are going to supplement the retail deposit. Similarly, on the certain retail advances also because that would [indiscernible] more demand at the lower level and that could also -- would be good for my book in that way. I hope I answered all because it was long question in that way.

Yes. So one very important thing on the deposit side, [indiscernible] bank [indiscernible] a very good product vis-à-vis marketing [indiscernible] a retail-linked product where they are giving interest rates of [indiscernible] 8.3%, and which have you wondered when they are doing fantastic retail-linked product, and that ties to a certain class of depositors. So how do you look at such products? And these are very innovative, and this is what the market wants, particularly in terms of volatility in the interest rate of [indiscernible], which has become the norm, actually, now post COVID. And we are also looking at such a product, what is interest that we will offer for any category? And what do you feel could be the market size of such retail-linked products totally?

So it's broadly industry-level issue because you are talking about a 14-year deposit as compared to 14-year advances, right? So there would be the market for it. Annuities banks used to offer a variable-linked product also. But then they are more for a product with the institution than the retail. That is what our earlier experience is. So we'll just map it out. And if there is a requirement, we'll have a look on that. But currently, because of product cost save, there is a floating like our deposits are typically up to 1 year, right? So it gets reset at the end of 1 year. So the requirement of resetting the liquidity, everything would be mapped out, and we need to see that market developing. Although, on the loan side, these are all floating with deposit side, so doing 14-year deposits, but then you need to see the market on that.

We have one question, I think, at the back.

[indiscernible] can you just explain the provision [indiscernible] outlook?

Yes. So there was a [ reason ] for that [ from the ] RBI. That requirement [indiscernible] to do [indiscernible] loss assets. So we have already planned provision for the security receipts, but they have been held as part of the revaluation provisions, which we actually reflect above the line. So in this quarter, we reversed those provisions. And we provided for them in the below the line in provision for nonperforming investments. In addition, there was a one-off investment for which we took provision. So the net of the 2 is what you see there. And on P&L, only the impact is about INR 632 crores so -- because one is the reclassification.

Sure. And so my second question is [indiscernible] book. Any thoughts on that? And we see this will continue to [indiscernible]. Can you show some [indiscernible]?

So currently, the entire book, almost the entire book, is existing bank customers, right? We are considering that we should look at -- now that we have some comfort with the product, that we might look at new-to-bank customers, for the simple reason that what is your existing customer, right? A customer for whom you have data, which you can analyze. And on that basis, you can take a decision. Now that distinction in terms of data availability is potentially shrinking. Once you have comfort and confidence that you have a similar quality data available for a noncustomer, you might want to diversify that portfolio. But for the moment, nearly 100% of the portfolio is of existing bank customers who have accounts with us, and then you can analyze those accounts and then make them offers in terms of the kind of exposure you can take on them and also at what kind of rate. I think this is something which could grow again for some more time at a fast pace because, even for us, I think it might be -- current book might be, given the size of the bank, probably 1/4 of what is the potential side, if you would look at peers. So that's why there is some runway there.

Thank you. We'll take a couple of questions from the online audience, please. Thank you, sir. Saurabh Kumar, I request you to please unmute yourself and ask the question.

Sir, 2 questions. One is on this large group, have you been -- has been able to do any credit assessment over the last week? And sir, could you share your thoughts as to what is your view of the credit of this group and any related assessment that you've been able to do? Second is what is the total pool of restructured assets and the provision you carry now on the same? And the third is on the OpEx, is there any wage revision you've done -- provision for wage revisions you have done?

So we'll go in the wage revision. Yes, we have made a the provision, which has been required from -- of us, probably [indiscernible] November, right? In terms of the large group, you -- I think as I mentioned that for all our large group exposures, we try to make sure that it is as diversified as possible. In this case, so this would be spread over a number of companies, maybe a dozen of them. Also, I mentioned to you again that a significant proportion of that is in joint ventures. Also, I think there is nothing at all that would seem to suggest that any operating company, we should have any kind of issues. As I mentioned, we are the most comfortable time in terms of the corporate credit cycle. The environment is very comfortable. Third, in terms of where the bank stands, I think, in terms of the corporate credit cycle, I don't think there's anything for us to worry about. I would only want to reassure that both in terms of this particular exposure and also in terms of the corporate book in general, we are likely to continue to see the improvement that we are seeing in terms of lower slippages, lower credit costs and, therefore, more and more of the operating profit, getting back to the bank's bottom line.

Thank you, sir. The next question is from Jai Mundhra.

Sir, firstly, on this large group exposure again, if you can sort of specifically mention the exposure to bonds, right? So what you have mentioned is the total exposure. A, could there be significant difference between exposure and outstanding as of third quarter or later? And what could be the bond exposure? Could it be like negligible bond exposure? Or there could be still some sizable bond exposure?

So again, I think we're trading into territory, which are fair to trade upon, right? Because at the end of the day, we'll be getting into specifics. What I would want to, again, say is that, look, at the end of the day, we are here to analyze the possible impact of this or any other development on the bank, right? I don't think there's anything, which can significantly alter the trajectory we have seen of the bank. And all the questions that you asked, there is nothing in any potential answers which would give you any discomfort. Let me put it this way.

Sure. Understood on this, sir. And secondly, on -- I think CFO sir mentioned this [ NPI ] and MTM reversal in the other income, if you can quantify the nature of this [ NPI ], I mean, which was one-off, which was the usual [ NPI ], and the rest would be security receipts. And what is the -- and do we now -- and what is the PCR on security receipts now?

Yes. So first, let me just -- I think first refer to [indiscernible]. I think there was a question that you asked on restructured loans, right? I think which I omitted to answer, and then we'll pass around to the CFO.

Yes, restructure, I think previous -- there was a question. Total book is [ INR 16,700 crores ] and then [indiscernible], that is [ INR 2,000 crores ].

So the provision for the [ NPI ] that we took incrementally this quarter is INR 632 crores.

That is the usual nonperforming investment, not the security receipts, right?

No, no. This is for the investment. The security receipt reclassification was INR 680 crores.

And what is the PCR now on security receipts, sir?

It's 100%.

Sure. 100%, right? Okay. Last question, sir, if you can share the loan book by benchmark, I mean, MCLR base rate -- sorry, MCLR, EBLR, fixed, et cetera.

Yes. So the MCLR is almost 50%. In terms of EBLR, it's around 30%. And we have a very small proportion of 6%, 7% fixed rate. The remaining is floating rate but benchmarked to rates like [indiscernible] and et cetera.

Thank you. Do we have any questions here? If you can give the mic.

And while you indicated that we are not having a very normal rate cycle, which is why we are raising bulk deposits. [indiscernible]. So any intention that you would like to [indiscernible]?

So I think what we -- I think this is what we normally see, right? So whenever interest rates go down, the first thing that you pay off is your bulk deposits. And that's what you would have seen also, if you were to analyze our books, last 2, 3 years, that is what you might have seen. And again, as they move up, this is possibly a way of ensuring that your marginal rate in what you pay is a little different from what you might be paying on the portfolio, right? But it makes sense to do that. Now as again that difference between the marginal rate and the portfolio, it narrows, it probably will make a lot more sense to actually start focusing on the other part also. So I would believe we might reach that stage sometime in the coming financial year.

Right. And secondly, sir, again, on the large exposure. So not looking for any data point or such, do you think that there can be any refinancing risk, which can come to and the risk will eventually [indiscernible] to banks? Because a large part of the exposure is outside the banking loans. It's through bonds and the other ways. So that doesn't get renewed, so [indiscernible] eventually [indiscernible] the bank, do you think that is a positive there?

So look, again, at the end of the day, we can only look at our own books, right, given where we are in terms of point in time. To comment anything beyond that, I think it's just possibly not -- it's not feasible. When you look at our own books, I would only say that, look, our books are not related to anything which has changed over the last few days. We lend on the [indiscernible]. There's a leverage ratio that you accept. There is a certain cash flow that you accept to make [indiscernible]. That leverage ratio has not changed. The equity that we have assumed, again, that equity value has not changed [indiscernible] So therefore, as of now, I would believe that there should be very little reason. Also, whatever independent company that we have again heard, none of it would suggest that any of these things should really become a problem. So I think we are there. There is a lot of noise which is there. That noise is something that impacts certain parts of the financial sector more, certain parts less. I would believe that structurally, given the nature of the issue, banks are likely to be the least impacted. At least, we are very, very comfortable with our own portfolio.

Sure, sir. And sire, lastly, on the -- while you talked about the [indiscernible] that the bank has been making, have you also worked out the [indiscernible] pension liability? And what are the plans to provide for that?

Ian?

Yes. Are you talking about the family pension liability? Or are you talking about the wage areas?

The pension in respect to the wage hike -- potential wage hike.

So as you remember, we have started taking [indiscernible] for the estimated wage hike. We will, in due course, look at the pension also, a possible pension.

Thank you. We'll take the last couple of questions. If we have [indiscernible] here, then we'll go to online. Okay, I think we can ask a couple of online questions. [indiscernible], I request you to please unmute yourself and ask the question.

Sir, regarding the large group exposure that we're talking about, I just want to confirm that this includes the investment book in the domestic and international entities, right?

Confirmed.

The next question is from [ Rakesh Kumar ].

Am I audible, sir?

Yes, you are.

Sir, just one question with respect to loans proportion on MCLR. So have we increased the proportion on MCLR? Or incoming quarter or so, are we further going to increase the MCLR proportion to enhance the margin?

Yes. Let's say, if you look at the composition, just prior to that, there was a bigger component in terms of [ external-linked ] benchmark under the corporate, like [indiscernible]. So now it's been happening to MCLR. So going [ for the company ] would technically go up.

Sir, just a related thought, would the regulator wish to discontinue the MCLR? And is there a possibility that the corporate loans also being benchmarked to some external benchmark? Is that a possibility in the near future?

No, we have no idea. Currently, the regime is [ MCLR ], so that is continuing. So absolutely no idea, right?

And even as Chand has said, the choice is available to the borrower, right, that what is the benchmark they might choose. So even today, the choice is there. And ultimately, the borrowers determine what banks do.

No. But sir, like in the case of floating rate loans and the retail and MSME, we are mandated to give loans on EBLR. So if there is a similar kind of guideline coming from the regulator, then we don't have any option.

Yes. As per the regulatory guidance, we have to act on that. So [indiscernible].

Got it. Got it. So because like maybe after some time, not now, we will stabilize the interest rate and then we will set into the declining rate scenario, so -- and MCLR will help us in that scenario, but if there is a change in the regulatory guidelines, then situation can be different.

You're right. Absolutely, you're right on that.

The last question is from Adarsh.

We have some here, right?

[indiscernible], you'll have the last question. Okay. We'll just take one last question from [indiscernible], and then we'll close.

Sir, just one question. Sir, as we are seeing that 4Q because the kind of Q-on-Q margin expansion that we are seeing, probably there's another quarter where there's some bit of margin expansion. But FY '24, where your cost of funds will catch up, but can we say like in FY '24, margin would be closer to the average of the full year FY '23 because of the product mix improvement towards unsecured and some bit of retail share improvement can drive that? If the margins for the full year, for FY '24 would be closer to the average of what we are able to deliver on FY '23.

So I think really, it's -- we're getting into speculation. I can only say that we have tried to exercise discipline even when the environment was unfavorable to make sure that we don't compromise on margins, right? So now that when the environment is more favorable, pricing power has finally returned to the banks in some measure after 3 years, I think particularly in the corporate group where we -- which is nearly 45% of the book, I think there is scope for some expansion in margins there. And that will flow on account of 2 reasons. It is because, as was mentioned in the previous question, the normal cyclical player, the MCLR, which will continue to happen. Number two, as I mentioned, there are still large groups where, again, which have great pricing power, great bargaining power, and I think, to some extent, there's still a bit of a redress of balance sheets [indiscernible]. So I think we remain fairly confident that the improvement in margins that we have seen should continue. Certainly, where we are nearly some scope of improvement as we go ahead.

Thank you. I'd like to now invite Mr. Ian De Souza to please give a word of thanks.

So good evening, everyone. Thank you all for making it to our first physical event in over 3 years. It's a real pleasure to see all of you here. And for all of you who participated online, thank you as well. If there are any further questions, due to [ possibly ] time, we couldn't address them, please still reach out to me and my team. We're happy to interact with you off-line. Thank you so much.