Bank of India Limited (BANKINDIA) Earnings Call Transcript & Summary

Thank you, everybody. Ladies and gentlemen, good evening, and welcome to Bank of India's Q2 FY '24 Conference Call. I would like to thank all of you for taking up today -- taking out time today and joining us. We have with us Shri Rajneesh Karnatak, MD and CEO; Shri PR Rajagopal, Executive Director; Shri Swarup Dasgupta, Executive Director; Shri M. Karthikeyan, Executive Director; Shri Subrat Kumar, Executive Director; and other top management team from Bank of India. [Operator Instructions] I would now request Shri Rajneesh Karnatak to address this gathering. Thank you, and over to you, sir.

Good afternoon, everyone. Thank you, [ Fediya ]. Good afternoon to all the dignitaries, ladies and gentlemen, present in today's analyst meet. It is my pleasure to welcome you all for the interaction, post publication of the financial results of the bank for Q2 of FY '23-'24. Amidst different uncertainties grappling the global economy, another turbulence surfaced in the form of Israel-Hamas war in the Middle East. A rare trinity of factors, that is, soaring coal -- crude oil prices, surging U.S. bond yields and hardening U.S. interest rates, have emerged as proximate risk to the global growth and stability, posing significant macroeconomic challenges to the emerging markets. Global trade conditions to face significant headwinds, with expectation of a decline in growth in world trade volume from 5.1% in 2022 to 0.90% in 2023, as reflected in the IMF recent projections. However, macroeconomic outlook for FY '24 is bright due to resilience and economic activity on the back of strong domestic demand, increased government spending, improved industrial capacity utilization and modernization in headline inflation. The buoyancy in credit growth continues, whereas deposits are seen growing at a lesser pace than credit in the system. Against this revelant optimism, the bank is focusing on sustainable advance growth and garnering low-cost deposits, along with retail term deposits. The aim is new customer acquisition and retention of existing customers. The maintenance of asset quality and NPA management is of paramount importance with containment of slippages and reduction in SME. On digitization front, a new mobile app under the name BOI Mobile Omni Neo app has been launched with attractive features. A new credit card variant under RuPay scheme, RuPay Select, has been introduced. A new innovative debit card made from 100% recycled plastic, named BOI EarthSmart debit card, has been launched. Pre-approved personal loan, BOI PAPL, to existing customers has also been started. Other new initiatives taken are in formation of 18 emerging corporate credit branches to cater to the corporate needs in their specific area of operation; MoU with REC Limited to co-finance INR 30,000 crores worth of projects in power, infra and logistics sectors over the next 5 years; Star Channel finance scheme has been revamped at par with the peer banks; MoU with WDRA for financing e-NWR to boost the growth of agriculture sector; integration of our loan management system, LMS e-platform, with [indiscernible] portal; [ Versa ] banking solution introduced to provide additional channel to the customers and assessing different banking services; launching of NPA management solution, a dashboard made available to branches to facilitate better management of NPA portfolio, besides many more other initiatives. We have published the shared financial results of the bank for Q2 FY '24 on 04/11/23. I am not repeating the numbers for brevity's sake. I understand that you must have all seen our presentation -- the analyst presentation, which is already there on the public domain. We expect credit growth of 11% to 12% during the current year, though there will be pressure on NIM in the subsequent quarters. But by increasing yield on advances through RAM and corporate, we aim to maintain the NIM above 3%. With the bank's consistent focus on improving asset quality via better underwriting and containing fresh slippages, we expect gross NPA ratio to be contained below 6% level and credit cost to be around 0.60%. We will continue to strive towards better customer experience, asset quality, sustainable growth and a strong bottom line. Thank you so much. The floor is now open for questions and answers.

[Operator Instructions] The first question we have from the -- from Mr. Ashok Ajmera. Over to you, sir.

Compliments for a -- I mean a good quarter, because there were certain headwinds and as you also narrated, there's so many problems, global turmoil, war and everything. In spite of that, our results are good. Operating profit is almost equal to the last quarter only. Net profit has slipped a little bit, but then on the whole day, it's a good result. My first question is on, sir, a little bit of clarification. Last time also we discussed that our net profit, it is -- as compared to the profit before tax, become very low because of the higher tax element which is provided in P&L. I'm not talking [indiscernible] payment, but because of maybe DTL or DTA or whatever it is. But if you look at the total profit, it is INR 5,865 crores in the 6 months and the provision is INR 2,855 crores. So it eats away our actual book profit, this thing. So some explanation on that, that why this tax amount is so high as compared to the profit, which is almost I think more than 50% of the profit.

Yes. So thank you, Ajmera. Should I answer your first question or you will complete all the 3 questions?

Then I have a couple of other points for discussion, basically, just to get your views on. What is that, sir, you had launched the town hall concept and the outage and I think you said in the last meeting that 13 NBGs and all the EDs and GMs were asked to go out and -- out on the field and -- it has brought some good results also because our credit growth is good in the last quarter. So going forward, are we keeping the same target of 11%, 12%? Or do you feel that with that -- you said last time that your corporate pipeline was INR 40,000 crores; you are sanctioned for INR 30,000 crores. So all these are resulting into better credit growth. So would you like to revisit that or we stand there only? This is something on credit growth. Third is on treasury. Like, as you say that because of the international problems and everything now, the yields are going to be hardened there and it may have impact here also. So how much cushion do we have in our AFS, our treasury books? And are we -- how much are we insulated or are we going to get any shock on that front? This is -- the third thing which I would -- and then time permit, then I've got some specific questions after.

Yes. Thank you, Ashok. To begin with your first question with regarding to net profit, so as you rightly said, our net profit, pretax net profit this time is INR 2,937 crores, if you see our numbers. For June, it was INR 2,928 crores. In a way, it is flat. But if you see our final net profit, which was INR 1,551 crores in June, it is now at INR 1,458 crores. So the reason for the reduction in net profit is also, as you rightly observed, also was the taxation. So what we have done in this quarter is that we have shifted to the new tax regime. Because of the shifting of the new tax regime, to the new tax regime, there has been some accounting treatment, because which the taxation number is higher on this quarter. So in this quarter, the total tax which we have done is INR 1,479 crores, which is nearly 50% of the pretax profit of INR 2,937 crores. So that is the simple reason. Now that we are shifting to the new tax regime, we'll be like charging a taxation at the 25% rate instead of the 35% rate which was there earlier. So that benefit bank will get. That is one big change, which we have come to further, shifting of the new tax regime. So if you see the September '22 numbers, our pretax profit was INR 1,462 crores and our net profit was INR 960 crores. So if you see the Y-o-Y growth in the net profit, it is 52%. And if you see the Y-o-Y growth on the profit before tax, it is 101%. So these are the basic numbers. And further, if you compare the H1 of FY '23 with H1 of FY '24, the increase in pretax profit is 152% and the increase in net profit is 98% on the H1 basis. So this is the number which we have. So the profitability part, we are quite comfortable. And with shifting of the new tax regime, this will another help in the final overall profit for the bank. As regards to...

Sorry to interrupt you, sir, but in the next 2 quarters now of the financial year, is it going to be the -- I mean because we are looking at the whole year for income tax, so whether -- I mean this high tax impact will be there in the remaining 2 quarters also?

No, no, that will not be there. As I told you -- I showed you in the ensuing quarters of December and March, we will not be at the high tax regime. So as regards our credit growth and other initiatives, which we have taken for the credit growth, yes, our town hall meeting concept remains. Already, the zones and our NBGs, which are field GM office, have been allocated to the Executive Directors, to all the Chief General Managers and the General Managers, and we are regularly moving to the field, all of us together. General Manager, CGMs, EDs and myself, we are all moving towards the field simultaneously. We are visiting zonal offices. We are visiting the NBG field offices and meeting the, not only the staff, but the customers also and trying to understand their problems, feedback, taking some feedback and also taking some policy and procedural changes wherever they are required. So as far as that is concerned, in this interim quarter, what we have done is we have also opened -- as you know, that 3 start-up branches we have opened. We have also now opened 18 emerging corporate credit branches, which are in centers other than the LCB branch centers. So that also we have started in there. Our focus is INR 10 crores and above fresh advances up to INR 250 crores. And if any other advance above that is there, also these emerging corporate credit branches can take care of that. So that another initiative we have taken in this quarter, that is something there. Apart from that 2 initiatives, others I have already read out in my opening speech. As regards the credit number, credit growth number, the guidance which we have given earlier is 11% to 12% of overall credit growth. That number continues with the simple reason that we want to protect our NIM in this increasing interest rate scenario. So we are, as I told you earlier also, we are leaving certain transactions which are repo-based for long term, because they will not be reading much on the NIM side and net interest income we need to protect. So for that simple basic reason, we want to keep our guidance at 11% to 12% and we are confident that the credit guidance of 11% to 12% of credit growth we will achieve. To give you just one more number, we have our credit pipeline of nearly INR 70,000 crores as we speak today. Out of which, around INR 14,000 crores is the RAM pipeline, which is retail, agriculture and MSME. We have certain pipeline in the international book also and the remaining is the corporate credit pipeline, which we have of around INR 50,000 crores as we speak. The pipeline includes: number one, the sanctions which we have already given, where the documentation is executed and where the drawdown has started taking place; number two, where sanction is given, where the documentation is yet to take place; and third is the numbers pipeline, where we have given the in-principle approvals and where the proposals are in different stages of preparation and sanction. So overall, we are very confident that there will be credit growth and with the busy season now kicking in for this quarter, Q3, so the numbers will definitely be looking better in the quarter ended December, on the credit side. So as regards to treasury, I would request our General Manager, Treasury, Sasi, to take this question.

Your question was that what kind of cushion we have in our AFS portfolio. I would like to say that for the month of September, my SLR portfolio did not have any MTM losses. It was, in fact, positive. So up to [ 725 ] levels, we do not have any issues, because the closing of September was [ 7.21 ]. So we were plus. And the modified duration, as shown in the slide, is 2.87 for the AFS portfolio of INR 47,001. That translates to a PV01 of 13.5. And we do not expect much of a hit, even if it goes to around [ 750 ] or [ 745 ] levels. But practically speaking, we expect the rates to yield to moderate at these levels, somewhere between [ 720 ] to [ 730 ] should be the level, which we should be seeing by 31st of December.

Sir, any specific reason for the modified duration to go up to 2.87 as compared to 2.37 in the past quarter?

Yes. The reason for that is that internally, we have held a view that the interest rates are nearing peak or more or less reached the peak. So this is the time for us to increase the duration and that is why you're seeing the M duration moving up from 2.37 to 2.87. So it's a conscious call and we would like to encash once the rates come down.

Sir, if you permit me, can I take one question on recovery, sir? We have a [ sharp ] recovery in this quarter in the return of account as well as the cash recovery also of INR 1,455 crores. So sir, little more light if we can get on the entire process of the recovery through NARCL through NCLT and what is going to be the next 2 quarters' scenario as far as the overall recovery is our concerns?

So on the recovery side, Ashok, if you see the data, we have done cash recovery and upgradation in this quarter of INR 1,638 crores. So if you include the written off also, so the total reduction in the NPA book was INR 2,876 crores, against which our fresh slippage plus debits in the existing NPA, that is the total addition, was only INR 1,650 crores. So we were able to net-net reduce our NPAs by nearly INR 1,200 crores net-net. So that is one number which we already have. So as regards to NCLT is concerned, in NARCL, our 2 accounts were given to the NARCL. And as regards to NCLT accounts, our 2, 3 accounts also, there was there in NCLT wherein the recovery took place in this quarter, in the Q2 of FY '24. So that is the number. And for the field, we have given a target, though, whatever the slippage, fresh slippage we have, of that, double we should do the recovery and the upgradation. That is the number we have given to the field for as a target. So that is the number we are chasing for the H2 of FY '24. So another important point on the asset quality, Ajmera, just I would like to state is that our SMA numbers, if you are -- if you see our SMA slide. So SMA number has come down above INR 5 crore SMA, from INR 14,000 crores plus to INR 5,700 crores. So that is a substantial reduction in the SMA, which we have had. So as far as asset quality percentage of standard advances to SMA, above INR 5 crores is concerned, it is only 1.24%. And further, if you see granular, so the SMA-2 number is only 0.24% of the total standard book. So that is number wherein we are very confident that we will be able to maintain our asset quality and the overall SMA numbers in this ensuing half year will be coming down substantially. And this is at the backdrop of the fact that we have started our zonal collection centers in the 69 zones, wherein the zonal staff is now moving to the branches and also meeting the customers for collection. So overall efficiency in the system, collection efficiency, has improved, number one. And number two, what we have started in this quarter is the [ e-nudge ] mandates. So [ e-nudge ] mandates, especially in the retail loans, has helped the bank substantially. And with this, we see that there is a substantial reduction as far as the SMA number in the retail book is concerned. So these 2 things will help the bank in maintaining the asset quality and further reducing the slippages in the coming quarter of December and March.

So we made good profit of selling to ARC. Are we continuing with that, in OTS or sell-off to ARC rather than relying on the other things like going to NCLT and all that?

Considering the book -- the NPA book we have, so it's a holistic thing which we are doing. We are trying to do some transactions through ARCs. If it is making any sense to us where the sacrifice is low -- if through the ARC sale our sacrifice is less, definitely, we will sell those assets through ARC. NCLT is another option which is always there, wherever the resolution under NCLT comes. And we have also launched 4 very aggressive OTS scheme in the bank, which includes OTS for the return of accounts, for the accounts which we already have written off. So all these things put together, we are very confident that the recovery in the ensuing half year H2 of FY '24 will be quite robust.

Next in line, we have [ Mr. Marsal ]. Over to you, sir. Sir, we'll come back to him. Moving up next, we have a query from [ Shizua ].

I'm [ Shisun ] from [indiscernible]. Sir, I joined late. I just want to double check. Did we move to a new tax regime? And is the new tax regime 25% from the next quarter onwards?

Yes, you want clarification on the new tax regime?

Yes. So is it from next quarter onwards, our tax rate will 25%?

Yes. In the new tax regime, we will be getting tax at the rate of 25% as against 35%, which is there presently.

Okay. So we have done all the adjustments in the deferred tax assets. And next quarter, we can expect a 25% tax rate. Is that right, sir?

Yes, the accounting treatment on the deferred tax assets will be given in this financial year. So as on 30th September, we have already done. So this has been certified by the CFO, that this tax implication of DTA has already been done on 30th September.

And most of those [indiscernible]. In our [indiscernible].

Got it. So if I adjust for -- if I look at this quarter's numbers, right, and then if I use a 25% tax rate, our return on asset is somewhere close to 1% already. So just wondering, going forward, what kind of ROA should we expect? Do we think that we can sustain this kind of near 1% ROA with the new tax rate?

Yes. So as far as the return on asset is concerned, if you see our numbers, our ROA was 0.47% in September '22, which has now improved to 0.67% in September '23. If you see on a half year basis, it was 0.38% in FY -- September FY '23. And now in -- for the half year, it is 0.68%. So both ways, it has improved by 30 basis points in half year numbers and by another 30 points similarly on the half year of this Y-o-Y number. So that is there. So as regards to the guidance on the ROA is there, so it should be at around 0.70% annualized basis in FY '24.

Got it. So the 0.7% annualized basis, that's assuming the new tax rate? Or does that adjust for new tax rate -- so what am I trying to get at is if I look at this quarter's number, if I just change the tax rate, it seems to be close to 1%, but our guidance is somewhere closer to 0.7%. Just wondering what's the pressure on the ROA from here?

Yes. So it will be at least 0.70%. This is what we are seeing from the management side. So it would be minimum 0.70%. This is what we are seeing.

Next in line, we have Mr. Sushil C. Choksey. Over to you, sir.

Sir, you asked -- answered most of my questions, but I would refer to your opening statement, where you had a little doubt on the treasury outlook. But looking at the Fed statement in the current week and the bond market today, don't you think that India rates also will have a different outlook in coming days?

No, it was not a negative outlook, Sushil, on the treasury side, but only we're trying to clarify the market situation, which is there. See the hardening of interest rate, which has taken place in U.S. and Europe, number one, and the tight liquidity position which is there in India. So even today, if you see the data, the liquidity was negative by around INR 75,000 crores, right, Sasi? So that was the number yesterday. So that there is always tightness here presently in the market. So that is what we are trying to say. If you see the T-bill rate, if you compare the T-bill rate in India 1 year to the U.S. bill rate, so the differential as on March '22 was 3%. It has come down to 1.75% as on 31st March '23. And if you see the differential between the repo rate and the fed rate, March -- September '22, it was 242 basis points. Now it has come down to 117 basis points only in September '22, the differential between the repo and the fed rate. For this differential coming down, what it will do is that the margins on the ForEx arbitrage, that have reduced significantly for all the banks in India. So the incomes which the banks were making by ForEx arbitrage, that arbitrage is not much there as on date with the books of the treasuries. So that is one indication which I wanted to give in my opening statement, because of the tightening liquidity situations here in India and the lowering of the gap between the fed rates and the Indian rates.

Second thing, sir, based on all your recoveries and measures for [indiscernible], your performance [indiscernible] but based on number of sanctions you have done, does retail business -- you are putting a lot of trust that growth happened, digitization you've already initiated. And the current management has already spent 6 months of time to build that, almost. So based on all the fundamental factors, which have been put in place, are we being conservative or you will rather beat the guidance with a better performance?

So Sushil, it is always better to beat the guidance, right? [indiscernible] So see, fundamentally, why we are saying 11% to 12% is that we are very much cognizant, as I have been telling in all my analyst meet, that we want to protect our margins. We want to protect our net interest income. So as I told earlier also, we are losing or we are leaving some of the deals wherein the rates are repo rate or where the margins are very low. So we are trying to shift our book towards the mid-corporate section, AAA-rated borrowers. Where the margins are low, we are shedding some of the advances, because of which -- because of the repayment happening more, we are just able to get an accretion in the credit and the credit growth that we are targeting at 11% to 12%, which we are giving. So this is the kind of scenario which is there because of the, via protection of the NIM, which we want to give. So as you are already aware, the 1-year T-bill -- you are aware at 7.15%; [indiscernible] 1 year is also at 6.84%. CD is going at 7.7%, if you see the CP. For the NBFC for 1 year, it is more than 8%. In this scenario, some of the AAA corporates still are asking at interest rate which is around 7%, 7.25%, 7.5%. That is a rate which we do not want to give. So we are leaving some of the transactions which are there in the market in AAA, which are very fine rate and which may create margins -- negative margins in the coming years in the long run. So that is why we are giving a guidance which is 11% to 12%, with a healthy NIM and a good asset quality.

Second thing, sir, on credit cost, what is your outlook at the year-end?

So credit cost, if you see our credit cost, which was at 0.6% in September '22, it had gone up to 0.79% in March '23. So in Q1, we had brought it down to 0.64%. Now in this quarter, it is 0.54% only. If you see the half year now, it has improved to 0.58%. This is the project cost which is there at present. So far, as far as the guidance is concerned, so we would be keeping it within 0.60% levels.

Sir, my last question, in current round, would you raise equity in current year or you'll wait based on your current forecast?

So as far as the equity is concerned, we'll be raising equity of around INR 2,500 crores in this quarter itself. So that process is already on. So we have to -- we have already taken board approval, as I had told last time also for INR 4,500 crores, to bring down the government of India equity to within 75%, which is the SEBI requirement also for which our date is 1st August 2024. In this quarter, we'll be raising INR 2,500 crores.

Next in line, we have [ Priti ]. Ma'am, over to you.

My question is on OpEx for retail loans. Would you please share the steps taken to decrease the OpEx?

Steps taken to decrease the OpEx?

Yes.

Yes. So we have centralized many of the activities which are there on the asset side and the liability side and also on the control system side. So this is some very significant activity which we have done to contain the OpEx. As far as our -- on the asset side, if you see our credit underwriting in retail, MSME and agriculture, there are now credit underwriting centers where the entire underwriting is taking place. So branches are only sourcing now the applications to these underwriting centers. And these underwriting centers where compact team of credit officers is there, they are doing the underwriting. Because of which, there is more volume happening at -- with few credit officers over there. So the OpEx has improved as far as the RAM credit is concerned, which is typically retail, agriculture and MSME. If you see the corporates, there also we have done the concentrated the number of branches. So we have 10 large corporate branches and 18 emerging corporate credit branches where all proposals with respect to corporate credit will be handled. So there also, we have created a specific team who will be handling the entire corporate credit book, these 28 branches. As regards the NPA, we have already have 18 ARBs, asset recovery branches, where we have transferred the entire NPA book of INR 50 lakhs and above. Another 10 ARB branches will be opening in this quarter. So there will be 28 ARB branches which will be now concentrating on the 80%, around 80% to 85% of the NPA book of the bank. So with all these measures, the most of the underwriting, number one, and most of the recovery actions, which we are now concentrating with at around 400 offices in the bank, rather than 500 -- 5,100 branches. With this, lot of OpEx conservation of expenses we oversee. And as regards to the retail side, also similarly on the liability side, we are taking care of that also. And earlier, most of the branches were accepting bulk deposits. Now we have reduced the number of bulk deposit-taking branches to only around 100 plus. So that also we have reduced. And other things also we have done on -- as regards to the audit side also, the number of audit offices, which are there, the number of officers who are doing audit, we have all centralized and kept at 1 place, through which we are trying to control the OpEx. That is 1 part. The next part is with respect to the digitization. So a lot of journeys with respect to the asset and liability now we are taking through the digitization process. So sanctions are happening, fresh sanctions are happening through the digitization process, number one. Saving accounts are also getting open through the digital channel, number two. And number three, on the asset side, the renewals, in case of Mudra loans and other loans, MSME loans and even the agri loans, that is taking place through the digital channel. So a lot of staff at the field level is getting freed because of this digitization exercise and a lot of OpEx is getting freed and a lot of OpEx expenses in the ensuing quarters will be coming down because of all these actions which we have taken in the last 6 months.

We take the question from the line of Mr. [ Muldra ].

So my first question, while continuing this last question itself, like the MD has mentioned, like a very good action taken regarding this cost optimization and centralizing loan office. But we need to see it in terms of saving. Unfortunately, in the PPT, the list of -- sorry, yes, in the PPT, there is no slide which show the amount of spend about our headcount. Generally, all the corporates give, all banks give, how is the headcount faring. We have only 1 slide which says about branches. So I can see that during this quarter, 5 branches we have added. What should have been done? We all understand that employee cost is going up. We all understand that we have [indiscernible] because of the employee [indiscernible] with that, with the union. I'm not saying this one. We cannot just reduce salary. I'm not asking to reduce salary, but we must do, considering the centralizing -- good centralizing already taken by your bank, plus this transition, I think we need to free this -- I think we need to utilize this free employee for the new assignment, like whenever you open any branch or like subsidiary or joint venture, we need to deploy them there so that our cost reduce, because we can see that our employee cost has drastically increased. So like how and when it's going to be, like we can see it in the P&L number. Similarly, is there like our other [ expenses ] also, the INR 70 crores is we compared with that, to the corresponding quarter of last year. So can you please explain on this one. Going forward, can we have this slide on the headcount also in the PPT? And also, that like how effectively or how many headcount we already utilize for other jobs, or for other assignment, during the -- like this quarter.

Yes. As regards the increase in the staff costs, let me clarify that there has been no drastic increase in the staff cost, number one. If you see the -- whatever the increase in the staff cost is there for Bank of India, that is in line with the industry numbers. Industry, typically, if you see the public sector numbers and the increase in staff cost in the public sector banks, it is in line with that. It is not beyond that. It is well within that. That is number one thing which I would like to state, clarify over here. Number two, as regards the wage revision which is there. So the last 11th bipartite settlement which happened, that was at a load factor of 15%. Against that load factor, we have already started making provisions in each quarter. So we are making a provision with keeping that base at 15%. We have started making the provisions. That is the second part. Number three, if you see that the channels for delivery for us, for customer service and otherwise, 5,157 is only the number of branches. Beyond that, we have 8,000-plus ATM and CRM machines and also 18,000-plus DCs. So these are the total points from where we are giving the customer service. So when we say that we have done centralization of many of our activities, both on the asset side, the liability side and also on the control and the support side, the staff, which is getting freed at the branches and other offices, they are now being getting utilized for marketing more products, number one; for garnering more saving accounts, for more current accounts, for retail term deposits. If you see the overall balance sheet of the bank and see the total of the liability side of the bank, only 12% of our total deposits is bulk deposit. And 88% of our deposit is CASA deposit or retail term deposits. That is the biggest asset for the bank and this is the strength of Bank of India. Out of which, 44% of our deposit is CASA deposit. So the branches, the staff at the branches, are giving customer service. The staff which is free at the branches because of the underwriting, they are giving better customer service. They are marketing all kinds of products, which includes loan products, which includes deposit products, which include third-party products like selling of mutual fund, insurance and other things. And we are very cognizant of the fact that we have to improve the customer service, increase our customer base. Already, we have 11 crore customer base in the bank. So for catering to this large customer base which we have, these number of staff are required at these branches and all these channels are there for utilizing those services.

Sir, thank you for this reply and what I'm requesting and what it should be ideally is a professional corporate approach, we need to see this thing in terms of data, that how many staff were released from their existing assignment, existing job and like to which like new job they were reassigned and how many hiring of new headcount was avoided because of this internal reshuffling of the team. So if we can see this otherwise, sir, like you are sitting at the helm of the affairs. At the ground level, recently, I visited one of the branches, Bank of India, like -- so I could see that there, how many staff were there and what kind of service I got there, and literally, I could take it. So I'm not going into this detail. I'm only requesting that in the PPT, if you could kindly include a slide in the next time showing the number of headcount and all our distribute -- like delivery channels, all these [indiscernible] and other point, number one. Plus how many headcount of new, like hiring of how many headcount was avoided because of it, this shifting of, this like centralizing and so. So like by this, we can see that we see this is operational efficiency. Otherwise, it becomes a generic statement, sir. This is number one.

Yes. To reply specifically, we have noted your suggestion. It is a very good suggestion. In the December presentation, analyst presentation, we'll put some -- 1 slide specifically on the HR side, the numbers on the HR which we have. As regards to specific allocation to the zones and NBGs, you can directly get in touch with our CGM HR, Mr. Rajesh Ingle. For further details, he will be giving you the specific details of the staff which has been deployed at the zones and the branches and also the zonal offices, the NBG offices, which are headed by the General Managers, for further clarity.

Thank you, sir. let me supplement here. We have also worked in the corporate for like -- for so many number of years. And we could see that every year, we have to make -- each department was supposed to make 1 slide on the operational efficiency, including this point, where we have to clearly visualize the number and put the number there so the management can see it. So like -- so that's what I'm saying, we do not want to like a general thing, something in the PPT packet. Overall, looking at how many jobs like suppose our CGM HR would like, given like the [indiscernible] zonal offices, branches, everything, then they like this, because sir, like your comment, it was fantastic [indiscernible] and we really appreciate. But like on the expenses part, I think that like what I can say from my own experience that each branch has to nominate, they look at this much saving, this much saving in the operational efficiency and in the bank, the main cost is the employees and the rent, that is the upper line, we cannot let go much. Employees, we cannot fire, but the employees, we can utilize better. So in terms of that, it has to be translated into numbers, sir, that's my only request. It can take 1 month, 2 months' time, but you've still got 3 months to go for this -- our next analyst meet. So if our CGM HR, Mr. Rajesh, can take some -- like [indiscernible] asking, giving the accountability to each branch in terms of the -- like they were able to save this much on -- for the operational efficiency, including employees. So I think this will really help us to reduce our cost or to avert the new [indiscernible], sir.

Yes, yes. Your point is well taken. So let me just clarify from the bank side again, that whatever details what you are saying, these details, we already do and make a presentation to our Board on a regular basis, on a quarterly basis. Beyond that, we have a strategy meet of the Board twice a year. In that also, we made a detailed presentation. Only the thing is that we don't place this to the analyst presentation because of the paucity of the slide, because in 1 slide you cannot capture all these things. It needs at least 5 to 10 slides for to understand the entire gamut of the thing. But your point is well taken. We'll try to put some specifics right in the next quarter.

Thank you, sir. Sir, my second question about -- like regarding this, like income tax rate. So income tax rate, like during this previous question, it was clarified that you have made provisional funds for [ INR 1,460 crores ] DTA that you have done in this quarter. So because of that, our tax rate is 50%, it is better 50%, like we fully [indiscernible]. But this is not, I think something is still there because in the Q1 also, our taxes was 48%. So if I take my half yearly rate, my half yearly rate is coming 49%. So then if we have taken DTA full in this quarter as the [ NOR ] says. So then why our -- in the Q1, our tax rate was 49% -- 48%, sorry.

So in the Q1 and Q2, see, we had already started making up our mind that we will go for the new tax regime in this financial year. So for that reason in Q1 also, we had taken a higher tax number. As you rightly calculated, it is around 47% of the pretax profit. This quarter, it is nearly 50% of that. So let me further clarify to you, had we not gone to the new tax regime, in this quarter, our profit would have been around INR 2,150 crores. So since we went to the new tax regime, it has come down to INR 1,458 crores. Otherwise, we would have shown a profit of around INR 2,100 crores in this quarter itself.

And so you say, regarding NIM, like 3% NIM, like overall is 5%. I just noticed one point in our overseas NIM. In the overseas market, our NIM is currently 0.98 -- 1.22%. Let me give the numbers I input here. This kind of NIM used to be 2 years before. Like before the like Fed started to increase this reported and so and so [indiscernible] the started rate. But like now since the U.S. Fed has increased the rate to 5% plus and so and so. So now, like no commercial bank is doing business in 1%, because like we also have some colleagues working overseas who just like give us this kind of our like general discussion that the banks are charging 8% plus there, which was never the rate before, for example. So my second point is that our lower -- the reason for our main -- like the reason for our lower NIM is just because of that? Overseas NIM is only 1.22% during the September quarter. So what extent we are taking like to increase the NIM of overseas advances?

So 8% NIM, I don't think -- see, 8% that [indiscernible].

I'm not saying NIM 8%. Sorry, sir, see, I'm saying 8% they are charging, interest they are charging.

Yes. So we are also charging a healthy rate, but the overall NIM, if you see on the quarter 2 is 1.22%. But if you see on a half year basis, it is 1.29%, the overseas NIM, because as you are already aware, because of the hardening of rates in the international markets and the resources which we are able to raise from the international markets also has gone up. Because of which the NIMs have gone down, it is not a situation for Bank of India alone. It is for other peer banks also, the NIM has gone down substantially in overseas numbers.

Okay. So let me put differently, when, for example, they say like...

Sorry for interrupting, but for the paucity of time, we will come back to you. We will move to the next participant. Next in line, we have Mr. Jai Mundhra. Sir, you may now proceed.

Yes, sir. Good afternoon, and thanks for the opportunity. And congratulations on good set of numbers. I have a few questions, sir. First is on yield on advances, which has gone up from 8.1% to 8.54%, which is like 44 basis point increase -- which is like 44 basis point increase. I don't understand how can the yields move up by 44 basis points in 1 quarter. So if you can explain.

Yes. As regard the yield on advances, if you see Jai, that our yield on advances was 7.21% in September '22, which improved to 8.10% in June '23, and you rightly said, it is now 8.54% in June -- in September '23. And if you see the half year number, it was 6.9% in September half year of '22. It has improved to 8.32% in the half year of FY '24. So if you see the MCLR of the bank, our MCLR. Our MCLR in September '22, 1-year MCLR was 7.70%. So it has increased to 8.75% as on September '23. So the increase in MCLR rate is 1.05% on a Y-o-Y basis. If you see our EBLR rate, which is the repo-linked rate, external benchmark, it was only 8.25% in September '22. It is presently as of 30th September, 9.25%. Here also, the incremental increase is 100 basis points. So on the MCLR side, 105 basis points, on the -- this ROI, this EBLR side, is the one with 100 basis points. So what has happened is the pricing with the increase in MCLR, the interest rates are also getting repriced on a monthly basis. So what we see in the book presently here is that all our MCLR-linked loan have been now repriced over the last 12 months. So because of which the yields are improving, this is the simple reason that the yield has improved from 8.10% to 8.54%. And some of the low-yielding advances which we had done earlier, wherein they were linked to repo rate or very fine rates, which were short-term loans, we have shared them. So because of which, if you see the -- not only our advance has increased, but also the NIMs have improved. Yield on advances have improved, to be more specific.

Right. But sir, is this only due to loan mix change and MCLR? I mean what happened in this quarter? MCLR repricing has been coming -- has been happening for the last 4 quarters. And this quarter, we have seen 44 basis point rise.

Yes. So let me explain further. See, yield on advances, there is another function of the NPA in that. So if you see our fresh NPA, which is happening, which is now coming down, because of which the earning assets are more now with the bank, right? With more earning assets, definitely, the yield on advances is going up. If you have more NPAs during the quarter, fresh NPAs, the more the earning assets come down and the yield of advances also come down. So that is a simple mathematics which is there. So that is one part. And other part is that if you see the repo rate. Repo rate was on 30th September '22, was 5.9%. Now as on 30th September '23, the repo is 6.50%, wherein the incremental increase is only 60 basis points. And on the MCLR side and the EBLR side, our increase has been 100 basis points and 105 basis points, respectively. So all these things are helping the bank to maintain the margins, which is the NIMs, improve our net interest income. And finally, also the yield on advances is better.

Right. And sir, if I may ask, what is the recovery from NPA account, which could have gone to interest on advances in this quarter? And was that a significant amount versus last quarter?

So I'll ask my CGM Recovery, if he has that number. Do we have that number?

Yes, the recovery, [ 1,638 ] that was the cash recovery [indiscernible] in total. As we saw, [ 2,800 ] is the total with the help of the resultant write-off. So that helped us. And presently, as at September '23.

[indiscernible] The question was regarding the recovery in return of [indiscernible]. So what we have taken into the P&L for recovery, return of is INR 560 crores. So our CFO will answer in more detail.

Mr. Jai, total recovery [indiscernible] account is INR 599 crores, out of which INR 560 crores came in cash recovery and balance, INR 39 crores, has come into net interest income.

Okay. So only INR 39 crores has gone in NII, right? So that is not a significant amount. Okay. So -- and sir, you believe that this kind of a yield uptick that we saw, at least some part should flow through in coming quarters or that may not be the case going ahead?

So yield on advances. So you are asking specifically about yield on advances?

Yes. Yes, sir.

So it will be maintained. We will be maintaining the yield on advances. Rate of interest is going up only. So MCLR, this month also, we increased the MCLR by 5 basis points. So now our 1-year MCLR is 8.75%. So it is further increasing. See, when the cost of -- see RBI formula is very simple on the MCLR calculation. When the -- this marginal cost of lending increases, when the marginal cost of funds increases, our cost of deposit is going up on a month-on-month basis because of which the MCLR will also increase. So we are passing it on. The transmission is happening. So definitely, we'll be able to protect our yield on advances.

Right. And sir, what is the bank's policy in terms of NPA recovery? So first, it gets to other income in terms of fee, NII and then principal? Or what is the waterfall for NPA recovery? I mean...

Should I answer? Karthikeyan here, Jai. First, when the recovery comes, it goes to the other charges, all the charges of the fees of lawyers and other charges for recovery and then only it goes to the principal. And it is system-driven.

And NII is the third line or this comes between other charges and principal?

It is the second one. Charges, interest and then principal.

Okay, understood, sir. Okay. And sir, then I have a question on your divergent portfolio last year that we had, some 4 accounts were doing reasonably well, and we had a recent provision there. If you can update what is the exposure now? And what is the provisions that we are holding on to those 4 accounts? And what can we expect for the rest of the financial year?

Yes. So our CFO will be responding to that. Kumar?

So I will refer to our notes to account, #12. There we have given what is our [indiscernible] in our 07/06/2019 circular, where we clearly mentioned that, what is our additional provision came. Last thing also, got diverted funding on account of this 07/06/2019 only, but [indiscernible] standards of provisioning. So this particular thing wherever [indiscernible] second half are also kept in the same manner. Accordingly, we clearly mentioned that as of now, we've got the provisioning of [ INR 2,438.9 crores ]. On this current quarter, we are [indiscernible]. So this is the [indiscernible] clearly mentioned there, notes to account #12, sir.

Understood. Understood. And sir, if you can give the total SMA, right, for the book, for the bank, including below INR 5 crore accounts also. We earlier used to give, but if you can give for September month, SMA-0, SMA-1 and SMA-2 for the all bank including below INR 5 crores.

Okay. We'll share it separately with you.

Sure. And last question, sir, is we earlier had a guidance of 13% growth in operating earnings. So we are doing reasonably well on NIM, growth has picked up. But at the same time, OpEx cost has also gone up a little bit and probably it will remain elevated. So are you comfortable in still maintaining 13% Y-o-Y growth on operating profit? That would mean mathematically that we had INR 13,000 crores of PPOP last year and we are at INR 3,700 crores, INR 3,800 crores run rate, which would mean that the run rate will go up to INR 5,000 crores. I mean does that look realistic at this point of time?

Well, considering the fact that cost of deposits is going up, definitely, the operating profit is under pressure for all the banks, not only for Bank of India. So the operating profit for financial year '23 was 34%. And for Q2, it was around 35%. But overall, for the financial year, the operating profit guidance we are giving at 13% to 15%.

Now we have Ashok Ajmera next.

Yes. Thank you for giving this opportunity again. I have a couple of some questions and some data points. Sir, we have touched upon this revision in the family pension, where -- and wage revision. So in case of wage revision, our total provision, including of this quarter, is INR 643 crores so far. And you said about 15% will be [indiscernible]. So what will be the balance amount estimated balance liability on this account of wage revision?

So around INR 100 and some crores is left out of that. Final liability -- so CFO is clarifying it.

Actually, this particular provisioning is -- it comes only from personal [indiscernible]. Kindly refer to notes to accounts, file #9. In file #9, we clearly mentioned that the proposed bipartite agreement on wage revision which is effective from 1st November 2022, bank as per the estimated provision, it is only an estimated basis. Every quarter until that wage revision effort happens, that settlement happens, we are estimating on a quarterly basis and we are keeping this provisioning accordingly from 1st November '22, where this wage revision falls, we started keeping provisioning. But as on 30th September 2023, we are holding around INR 643 crores provision in our books for -- exactly for this particular quarter, if you ask us, we have kept INR 189 crores provisioning for 30th September. So this will continue till the wage provision, this settlement happens. When the settlement happens, we'll stop keeping this provision. We are estimating on a 15% basis, 15% basis [indiscernible].

That is okay. I also read the note #9. Yes, so I just wondered that whether this trend of INR 189 crore, INR 190 crore per quarter will continue until you say that the final decision will be taken, isn't it?

Yes, correct. Correct sir. [indiscernible] So until the time they get concluded and a final number is arrived, we'll be continuing to make this provision on a Q-on-Q basis.

Yes, point well taken, sir. This resolution of stressed assets, note #12. There, total amount -- outstanding amount is INR 7,304 crores and domestic -- and the provision is INR 824 crores, I think. So any idea that approximately how much is actually -- this may be provision as per the [indiscernible] but how much amount generally as per our experience gets lifted from the stressed assets?

Yes. Our CGM Recovery will be clarifying.

Sir, actually, this 07/06/2019 circular is only a cost requirement of about INR 1,500 crores above only, sir. It's only a provision, we kept it. Whenever resolution happens -- doesn't happen, this [indiscernible] year, hardly, if you are having 100% of the cases, doesn't slip hardly, if it happens, 1 or 2 cases, it slips. Because it -- kept the provision only because of resolutions are not happening. The day -- once the day, it gets into slip also, so that way, this particular account is slipping into the NPA category and because of that, I have to keep provisioning is very [indiscernible]. But however, if it happens, as it happens, in 1 or 2 percentage.

So Ajmera, let me further supplement what our CFO has said. This 7th June '19 circular, we have to provide based on the industry RBI guidelines, right? And these accounts are not the sole banking accounts. These are all industry accounts, wherein other lenders are there typically public sector and private sector lenders are there. Only when the SMA appears in the CRILC report, do we have to make a provision and go through that ICA process and all other things. So normally, what happens is the waiting period is 180 days as per RBI guidelines. If in these 180 days, no resolution is required by way of restructuring or anything. And the automatic care -- cure takes place in these 180 days, then bank with the understanding with the central auditors, we are able to reverse this provision. So this provision keeps on coming in the books of the bank at the end of the quarter. So some accounts come into that provision and some accounts go out of that provision. So this is a regular exercise which goes on quarter-on-quarter basis in all the bank's balance sheets.

As there are no further questions, I would like to hand the conference over to Shri Rajneesh Karnatak for closing comments.

Thank you, [ Fediya ] for everything, and thank you to all the analysts who have joined today for their good questions. And hope we have responded to them. And further, if any clarification is required, we are open to that. You can give your query by mail or through phone call. We will be responding to those queries. Thank you so much and wishing you all a very happy Diwali.

Thank you, sir, for the insights. Also on behalf of Bank of India, I announce that this conference concludes. Thank you for joining us.