Canara Bank (CANBK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Canara Bank Q2 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sohail Halai. Thank you, and over to you sir.

Thanks, Aisha. Good morning, everyone. On behalf of Antique Stockbroking, I welcome you all to the call. Special thanks to Prabhakar sir and Canara Bank's management team for giving us this opportunity to host the call. Today we have with us, Mr. Prabhakar, MD and CEO; and Executive Directors, Mr. Rao, Mr. Mukherjee and Ms. Manimekhalai, along with other senior members from the management team to give us insight on the bank's performance and future outlook. Without further delay, I'll now hand over the call to Prabhakar sir for his opening remarks. Over to you, sir.

Thank you very much, and good morning to all. Let me first thank you all for joining this call. And Q2 results for Canara Bank is really encouraging. And first, let me talk about the liability side. As last time as we have given the guidance that we are consulting more on individual customers and customer service and customer satisfaction. So the results are visible now. Savings bank, we could grow at 13.38% Y-o-Y. CASA has grown by 14.47%. And retail term deposits, it has grown at 18.14%. Basically, these figures, I would like to highlight. Keeping in you that we are moving away from bulk deposits and high cost deposits, and we want to concentrate more on basic banking and individual customers banking. Now coming to the assets side. Yes, retail, there is good traction. The retail growth is about 9%. And under retail, housing, it is growing at 13%. Vehicle is growing at 6%. And overall, I think retail is growing well and even MSME Q-on-Q, if you see, we have given a growth of about 4.56%. Agriculture, again, Y-o-Y was 7% and Q-on-Q about 6%. Domestic gross credit, it has grown at 4.77%. Now coming to the income figure. We are happy to inform you that the cost of deposits, which plays a crucial role, we could reduce it from 5.55% to 4.75%. But at the same time, maintaining the yield and advances at 8.06%, which has resulted in a good NIM of 2.82%, which has grown from 2.47%, which was there in September '19. Now coming to operating profit. Y-o-Y, yes, we have shown a growth of 32.53%. And net interest income, we have shown a growth of 29.31%. We stand at INR 6,296 crores. This time, we have consolidated on fee-based income also because of which, during the current quarter, the fee-based income has reached a figure of INR 1,219 crores, which is 20.57% increase. Along with the business growth in terms of liabilities and in terms of assets, we have also concentrated on recoveries. Our gross NPA is at 8.23%, which is down by 187 basis points; and net NPAs at 3.42%, it is down by 230 basis points. 3 quarters ago, there was a comment that the PCR, the provision coverage ratio, of Canara Bank was not attractive. And 1 year ago, it was at 69%. So again, we have given a bit importance to this one. And now we have brought it to 81.48%. That is an increase of 1,188 bps. This is possible because of the recovery, especially the cash recovery, which was done during the last 2 quarters. During the current quarter, if you see, we have recovered about INR 1,504 crores as cash recovery and INR 657 crores as upgradation. And concentration was also there. Focus was also there on recovery in return of accounts. Last quarter, the amount was INR 259 crores. And this quarter, it is INR 449 crores. Why I'm telling these figures are, in the given situation of COVID, where in the last 6 months, there were many lockdowns, many branches were functioning partially. But these figures could have been achieved because of the strategy, which the bank has adopted and the active participation of all my staff, including officers and the clerks because of which these results are visible. Let me tell you what we did during this COVID time. When we have anticipated this problem somewhere in the month of Feb itself and then we have kept things in place in terms of contacting the borrower from home. When you talk about work from home, what we did is, our officers, they use to take the list of the depositors to contact them to give them comfort and also the borrower, borrowers especially the accounts which are under stress and also the borrower accounts which are written off, and they contacted them. They interacted with them and then they convinced them that being an NPA borrower will not survey any purpose. Better come out of this, there are many schemes which are available, where you can take the future funding. And that has convinced my borrowers and we could get about INR 449 crores in written off accounts, which directly helped to increase my balance sheet. Now coming to management of interest paid and interest received. Here also, we have had taken a very calculative stand. If you see the interest expenses, year-on-year, we have reduced by 11.94%. And quarter-on-quarter, we have reduced by 4.64%. Here, I would like to take you to the figures of our cost of deposit. Last year, it was 5.55%. And this quarter, we have brought it down to 4.75%. And that has helped us in reducing the, what I'd call, total interest that we have spent by 5.36%. Total expenditure has reduced by 5.36%. And total interest expenses have reduced by 11.95% year-on-year basis; and quarter-on-quarter, 4.65%. We have concentrated on fee-based income also this time. And because of the focus, which we have given on fee-based income, the fee-based income on year-on-year basis has increased by 20.52%. And quarter-on-quarter basis, it has increased by 30.93%. Now the fee-based income for this quarter is INR 1,219 crores. And trading income was also satisfactory. And noninterest income, if you see, quarter-on-quarter basis, it has increased by 19%; and year-on-year basis, it has increased by 12%. Here, one more aspect I would like to bring to all of your notice that there is a bipartite agreement going on. And settlement is going to take place very soon as far as the wage revision is concerned, where as per the market news, it says that there will be an increase in salary of 15%. We have provided whatever expenses are going to be incurred by the bank as on date. That is as on September 30. So even if the wage revision is there and an increase is there by 15%, bank is not going to have any adverse effect since all the provisions have been done. Apart from that, during COVID time to encourage our people and to have good customer service, we have plotted many schemes, which has also contributed a bit more under the staff costs. But we feel that it is worth spending some money during the COVID time on the staff costs. However, as far as the operating expenses are concerned, year-on-year, it is flat. But quarter-on-quarter, it has increased to 13% because, as you all know, when bank goes into an amalgamation procedure, expenses increases because of IT and other aspects, but increasing by 13% in a normal course and after completing or after taking the amalgamation process to a very advance stage, I think it is very reasonable. Now going to the future guidance. We are going to consolidate on individual customers. CASA will be our priority. Retail lending will be our priority. And then recovery, yes, we have started 1 campaign R&R, that is recovery and restructuring. This has gained a lot of momentum, and the results are very encouraging. And I can say that the recovery figures will be more encouraging in the coming days, and that is our guidance. And as far as business growth is concerned, we've projected business growth of about 8%, and credit growth will be about 6% to 8%. This is on a lower side, I'm telling, that this is a minimum target that we want to achieve it. And then gross NPA will be maintaining around 8%. Net NPA will be maintaining around 3%. Then provision coverage ratio, yes, from 69%, now we have brought to almost about 81-plus percent, it may increase about 2% to 3% going forward. And NIM, this quarter, we have achieved 2.82%, and our guidance is 2.75% plus will be maintaining at this level. Regarding capital raising during the current calendar year, March '20, we have raised about INR 3,000 crores type 2 bonds at 7.18%. And then we have raised last month about INR 1,118 crores of AT1 bonds at 8.30%. Now we are on the way of raising equity through QIP for about INR 2,000 crores. So this is all I would like to share with you. Now we are open for any questions from your side. Thank you very much.

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

Sir, I have one question. First...

Sir, sorry to interrupt. Mr. Mundhra, I would request you to speak a little louder, please. We're not able to hear you.

Yes. So first question is, sir, on notes per account in BSE, earlier, we have given the figure of INR 25,000 crores number, which are overdue and over in the morat scheme. So sir, can you explain what is this number?

Can you please repeat the question? There was some breaking in your voice.

Sure, sir. So sir, the notes per account number. Sir, in the BSE, notes per account number.

Sorry to interrupt. Mr. Mundhra, your voice is breaking. We're not able to hear you. I would request you to please come back in the question queue. [Operator Instructions] The next question is from the line of Jai Prakash from HSBC.

Regarding Government of India holding, currently, I see it at 78.5%. So in terms of a QIP or a equity raise, are there any chances that government is also going to participate in equity raise? Or are they going to reduce their stake?

See, if you see our QIP document, we said that we are going to raise about INR 2,000 crores, right? And generally, the Government of India, it will not participate in QIP.

The next question is from the line of Naishi Shah from Acko General Insurance.

Yes. Sir, my question is the fact that what -- do you think the NIM level, which is currently so high, do you think it is sustainable? And if now, if not, then what are your expectations going forward? Like what level would be sustainable for your bank?

Ma'am, as you know, the present NIM is we are at 2.82%. But in the last few quarters, it touched 2.47%, then it has come to 2.51%, then 2.84%. And our guidance is, as we said, we will be around 2.75%. And with the present growth in our low-cost deposits and also retail advances, and a few corporate advances and also the yield on advances at 8.06% and around 8%. I think we'll be in a position to maintain the NIM at 2.75% roundabout.

[Operator Instructions] The next question is from the line of Rahul Nair from SBI Mutual Fund.

Yes. I had a query on your restructuring, have we received any applications yet?

See Rahul, as far as this OTR is concerned, One Time Restructuring, now we have projected that about INR 13,000 crores to INR 13,500 crores of my loan book may be restructured under the OTR. That is our internal calculation. But however, we have received the requests only for INR 600 crores, which is already under the process.

Okay. Of this INR 13,000 crores, can you give me the breakup like corporate, retail?

Yes, it will be 80-20.

80-20. So 80 would be the corporates?

Yes.

Any specific segment, which is -- which you are expecting mainly in the corporate?

See, when we analyzed our portfolio, we don't find that any specific segment or sector is going to get this benefit or they are going to apply. It is spread across.

Okay. I had 1 more question.

Please.

In second half, how much recovery do you expect from NCLT cases? Like -- or this year, we are not expecting much?

Yes. See, let me tell you one thing. If you see my guidance, which I have given when we come out with the March results, we said that our recovery will be more than our slippages. And we said that our slippages will be to the tune of about INR 10,000 crores. So our recoveries will be more than INR 10,000 crores. And as on date, if you see our recoveries, we have already crossed INR 4,500 crores in the last 2 quarters. So recoveries are good. And another important point is if you go through our recovery in return of it, the last quarter and the current quarter, it comes to about INR 700 crores. So we feel that this is overall recovery. And under this, the NCLT cases -- yes, under NCLT cases, yes, we may expect maybe about 25% to 30% of our recovery will be from NCLT cases.

Okay. And this is expected by March, right, 25% to 30%?

Now NCLT cases, they are in public domain. And the status of the, what we call, at what stage they are, they are also there. But the good thing is, every week, we are getting some recovery like INR 50 crores, INR 100 crores like that, which is really encouraging.

Okay. Also one last question. As a percentage of your AUM, what proportion of your customers have paid 0 installments till date, like even after the morat?

See, let me tell you one thing, to be more precise. One thing is now the moratorium, which ended as on 31st August, and all these things are back-ended now are backloaded. So as on date, I think it doesn't have much relevance. But even then to have a figure, what we did is to be more transparent and more logical, we said that the people who paid 3 installments and who have not paid 3-installment that figure we have already uploaded in the website and is about 25% of my portfolio.

The next question is from the line of Mahrukh Adajania from Elara Securities.

Sir, I had a question on your collection efficiency, sorry, I missed the initial part of the discussion. Sir, what was your collection efficiency in September?

Ma'am, collection efficiency, generally, if it is a term loan, then it comes. Generally, if you take the portfolio as a whole, including term loan installments as well as the CC and OD accounts, which are running regular, we are in the range of about 92% to 95%.

92% to 95%?

Yes, ma'am.

Okay. And sir, so if you remove -- your exit moratorium, you said was?

Ma'am, ma'am, ma'am, can I have your question, ma'am?

Sir, what was your exit moratorium?

Moratorium, it is 25%.

Exit moratorium, okay?

That is 3%.

How much of that have paid in September?

Ma'am, again, I'm not able to...

Sorry to interrupt. Mahrukh, your audio is not quite clear.

Can you hear me now?

Yes, sort of, it's much better.

Sir, my question was that on your exit moratorium of 25%, how many would have paid in September, October?

Okay. See, this, as on October, this figure might have gone down by maybe around of 3% to 4%.

Okay. So still around 20%, we did not have paid still?

It is -- the question is not the question of not paid. Now it is already back ended. So we'll take it as there is no demand.

Okay. So collections are 90% to 95%, that is [Technical Difficulty] go to 4%?

Yes. That is the correct one. Because ma'am, the DCB concept, which we used to discuss a long, long ago, demand collection balance, so it is applicable when installment to installment is taken care, because now in the IRAC norm and the IRAC category in SMA-1, SMA-2 categories, the calculations are a bit different.

The next question is from the line of Jai Mundhra from B&K Securities.

Sir, the moratorium numbers which you've given 146,000, this is as of which date?

This is as of 30th September.

So as on 30th September, 25% of the borrowers by value have -- they are still enjoying moratorium, right?

By value, they have paid 3 installments and not paid 3 installments because totally 6 installments.

So they have not paid September installment, right?

No, no, no. You had to understand like this. See, up to 31st August, 6 installments are to be paid and RBI has said that you need not pay 6 installments. It can be back-ended or it can be what you call FITL can be created for 3 fill-ins. What we did is to give a fair picture, we have taken midway. That is the people who have paid 3 installments and not paid 3 installments, right? And that criteria is that figure is 25%, which, as on date, it has gone down further. And all these installments are now back-ended as per RBI circular. So as on date, I cannot treat it as a demand.

[Technical Difficulty]

Yes.

So they need not pay for earlier.

Yes, exactly.

On the month of September and October, how many still have not paid?

That's what 92% to 95% were based upon the various sectors, our collection percentage was there.

And if you were to include, let us say, working capital, then this number will go up, right? [Technical Difficulty] would be slightly better than [Technical Difficulty]

No. The cushion will be better. Cushion will be better.

Okay. Now [Technical Difficulty] you have already mentioned that we have INR 25,000 crores number, which respective amounts in SMA-1 is greater than SMA-2, what is this number, sir?

See, if you see the SMA-2 INR 5 crores and above, our figure is about INR 2,881 crores, which is hardly 0.037%. And in the notes on account, the figure which we have given, that is regarding the hold amount as per the RBI circular as on June. That amount was about INR 10,300 crores at that time, for which we have already made a provision of INR 1,030 crores. Now the INR 10,300 crores have come down to INR 4,000 crores as on date.

I'm asking for the number, which is of that, which is INR 25,000 crores and you have also given the estimate 0 plus 1 plus 2...

Yes. I got your point. On that date, when we have to show the hold amount, this INR 25,000 crores is the amount which is SMA, but they are not going to become NPA if that hold is removed. That amount out of this INR 25,000 crores as on 30 September, it is only INR 6,800 crores, which has come down to now to INR 4,000 crores.

No, no, my question is slightly different, sir. I'm asking this INR 25,000 crore number, SMA-0 plus 1 plus 2.

Yes. Yes, yes. It includes SMA-0 also.

Yes. INR 1,067 crores.

Yes, yes.

Why those numbers not exactly same. [Technical Difficulty]

So let me explain you. Now if you take this INR 27,000 crores, for example, the latest figure I can tell you. If you classify this as SMA-0, SMA-1, SMA-2, SMA-0 amount will be more because of the COVID impact, whereas SMA-2 and SMA-1 is less. That's the thing. So we have included all.

Sir, I am saying both numbers are the same, i.e. INR 25,000 crores and INR 27,000 crores SMA-0, plus 1 plus 2.

No, no, no, no. Please, please, please let me explain to. This INR 27,603 crores is SMA-1, 2, 3 as of 30 September, which we are giving. Whereas this INR 25,073 crores, this is relating to 31st August 2020. We have given in brackets, outstanding as on 31st August 2020. Whereas this INR 27,603 crores as on 30th September 2020. That is -- there is a slightly difference, sir.

Right. Understood, understood, sir. Sure, sir. And sir, out of your entire loan book, if you can roughly tell us how much percentage of the loans are not on monthly repayment? I mean, someone would have quarterly, 6 monthly, roughly 10%, 20% because then they would not be a part of SMA-0, 1, 2, right? Because they're not even dued in for the month of September?

Correct. Suppose, let me tell you -- let me give you a few figures, which are already on the net. For example, say, in retail, let us come to retail. We have housing portfolio of about INR 60,000 crores. So this housing portfolio, they are run monthly vertical installment basis. Then we have about INR 12,800 crores of vehicle loan. In vehicle loan, it can be monthly, it can be quarterly also depending upon the cash flows, what he is running. Then I have the education loan, which is also about INR 1,300 crores. Here also, again, there is a gestation period because of the study period. Then it comes, depending upon his job or business, whatever is there. Again, it will be monthly or quarterly. Then coming to the personal loans, which is about INR 25,000 crores. Again, personal loans, we have salaried, it comes every month. Like that, every sector is varying. If I go to the -- suppose say my corporate loan book. Corporate loan book, again, the -- what you call repayment is based upon the cash flows. Again, it varies. So that is why I cannot tell you exactly. But as a purpose and as a sector, yes, we have the, what you call, the methodology which has been adopted in calculating monthly or quarterly.

But at the entire bank level, would it be -- would the non-monthly repayment loan, I mean, broad -- I mean, a broad number would be about 10%, 20%, 40%?

I think that exercise, we'll share with you those figures.

Sure. And the last question, sir, if you have quantified the standstill slippages, I did not see that. I mean, what is the quantum, which otherwise would have dues...

If you see point #24 of the notes on account, as on 30th September, we have shown INR 6,826 crores as hold amount, which has come down to INR 4,000 crores now. Again as this, already, we are having a provision of INR 1,038 crores, right? So even if I say that in the hold amount of INR 4,000 crores, around 60% also slips, sir. It will be -- it will not be more than $2,500 crores to INR 3,000 crores. And INR 3,000 crores, if we have to make a provision of, say, 20%, it is around INR 600 crores, whereas already provision of INR 1,038 crores is available for this. So basically, I think our bank, Canara Bank, is in a comfortable portion as far as the hold amount is concerned.

Right. But what is the stands of slippages number INR 4,000 crores or INR 6,000 crores?

It is as on date, it is INR 4,000 crores.

Okay, okay. INR 6,000 crores was the number as in September, but now it has come down.

Yes, exactly.

The next question is from the line of Anirvan Sarkar from Principal Asset Management.

Yes. I joined the call rather late. So I'm sorry, some of these have been answered already. But just wanted to know on the deposits front, we -- our credit deposit ratios are quite low now. So what's our plan? Do we plan to cut deposit rates sometime soon? Or how are we looking at this?

See, the credit deposit ratio is at 68% and if you see the credit uptake, in retail, as I said, we are growing comfortably, that is retail is growing at 9%. Under that retail, housing is growing at 13% and vehicle is 7%. So retail, I think there will be a good traction going forward. There will not be an issue. Now coming to the corporate. Corporate, yes, it is a bit muted because consciously, we have ensured that 2 corporates where the outstanding is about INR 12,000 crores. We have get rid of that account of those 2 accounts because almost INR 12,000 crores. Outstanding has come down. But accordingly, we have done further funding. So the corporate book is with line. But going forward, during the current quarter, corporate book will increase because we are getting good, what we call, inquiries and proposals, especially under HAM projects, which we have the HAM projects, the debt component will be around INR 500 crores, INR 600 crores, INR 800 crores. And also in food processing sector and I would call the infrastructure sector, we are getting the proposals. So I think the corporate book also will grow. And the funds which we are having today, we have mobilized from the individual customers, not bulk deposits, like savings bank, as you all have seen, we've grown at 13%. Then CASA, we have grown at 14%. Then retail, we have grown at 18%. So this growth and momentum we want to continue as far as the retail customers are concerned. Because they are the stable and solid business for the bank. Now increasing the corporate book is not a big issue for us. In the coming 1 and 2 quarters, there will be a good traction as far as the corporate book is concerned. And again, CD ratio will be above 70%. So we'll continue to take the deposit. And if you see our cost of deposit, even though our deposit is growing in retail, our cost of deposits compared to last year from 5.55%, we have brought them up to 4.75%. And the NIM, we are maintaining at 2.7% -- 2.82%. So I think the things are in right track, and this momentum has to continue. And bulk deposits, high cost deposits, we are saying no.

Sure. Sure. Also, any update on our capital base plan? Have you updated on that or...

Yes. I updated, but I'm happy to update you also. In the current calendar year, if you see in March, we have come out with INR 3,000 crores for the type 2 bonds, which have raised at 7.18%, which is a record. Then again, in the last 2 months we have seen, we have come out with AT1 bonds, and we have raised about INR 1,118 crores at 8.30%. Now we are coming out with QIP for INR 2,000 crores, and things are on track.

Okay. Okay. And just one last question. Have you disclosed your disbursements discussions under the ECLGS scheme?

See, our bank is one of the best-performing banks as far as the emerging credit line is concerned. And we disbursed to 4,22,000 borrowers amounting to INR 8,300 crores. Why I'm telling the number of borrowers is, we have already taken care about the 4,22,000 MSME borrowers. That means going forward for 1 quarter, 2 quarter, 3 quarters or further, there is not to be any issue for Canara Bank.

The next question is from the line of Mahrukh Adajania from Elara Securities.

Sir, just a bit further on Jai's question. So you had -- we had talked about numbers of INR 25,000 crore and INR 27,000 crore and how they match? I just wanted to check whether INR 25,000 crores relates to the moratorium book, right?

No ma'am. Both are different now. This has nothing to do with moratorium book. Moratorium book is 25%. That is different.

The next question is from the line of Parth Gutka from Macquarie.

Sir, just on the collection trend, can you just bifurcate between what has been your experience between the salaried and the self-employed customers? And then also, what share of your loans are towards PSU entities? Yes. Just some color on that.

Let me tell you one thing. First of all, our exposure under retail is maximum to the salaried people. Because of which, there is a regular flow of our recoveries. And that's why I said that DCB, if you take the demand and collection percentages, it varies from 92% to 95%. Corporate book, as I said, as on date, we have received request of about INR 600 crores as far as OTR is concerned, out of which only 80% is the corporate. So what we see is, going forward, as far as our book is concerned, there will not be much impact regarding the recovery. If you segregate our portfolio, about INR 1,00,000 crores is for public sector undertakings and public sector enterprises, where there is no issue. Then we have a gold loan portfolio of -- significant of about INR 65,000 crores. There is no issue. Then agriculture portfolio as on date, the things are fine. There is no issue for me. And I have about 60% in A and above A-rated corporate portfolio and 18% under BBB portfolio. So almost about 78% of my book is highly rated or very good. And the remaining BB and below that one, it consists about 22%. But in this, I have a portfolio where it is supported by collaterals also. And there are MSME units also. Generally, the rating will be BB, but they are doing okay. So that is why I -- going forward, I don't see any much strain as far as Canara Bank book is compared.

The next question is from the line of Mona Khetan from Dolat Capital.

Yes, I just had a couple of clarifications. So on the collection efficiency number of 92% to 95%, does that include the past arrears as well or only demand for the month?

So this collection efficiency, what we have said is for the total stock, and it includes the current figure as well.

Okay. So it will include any past overdues also paid by the borrower?

Exactly, exactly, exactly.

Okay. Got it. And on the rating composition that you have shared on Slide 12, I think that the A and above rated portfolio, there have been a sharp decline from 65% to around 60% now. Any color around why this has played out?

Ma'am, I think we should remember one thing. In the last [Technical Difficulty] downgraded drastically [Technical Difficulty]

Sorry to interrupt. I would request the management to come in front of the phone, we're not able to hear you sir.

Ma'am, are you able to hear ma'am?

Yes, sir.

Yes, so as I was telling that. Because of the COVID and the lockdown and other things, many good accounts have been downgraded by the rating agencies, keeping that particular scenario into consideration, if you see the Canara Bank downgradation, it is very negligible. Supposed BBB and A and above if you club together. It is about 68%. And in the last year also, if you see, it is 80%. There is hardly, there is a difference of about 3% despite of COVID impact. And now we are seeing that the accounts which are downgraded for a shorter period, now they are being upgraded also.

And against your reported GNPA number of 8.2%, where would that number be Supreme Court order was not in place, the gross NPA ratio?

The gross NPA ratio, which is at present as on 30th of September, naturally, it is -- we are here to receive the Supreme Court order. So naturally, it is not included there. But then as our MD sir was saying going forward also because we have given you a guidance of about keeping the gross NPA ratio around 8%. So that means we are having a vision as to how to control our slippages. And as to how to recover the NPAs. If naturally, when the -- as per Supreme Court orders, these are lifted, the stay is lifted. So naturally, some accounts will fall. So we have a mechanism in place as to how to recover them also.

And ma'am, apart from that, we made INR 125 crore growth in provision, considering there may be some slippages.

All right. Sure. And one last question. On Slide 8, you've made some disclosures around the SME portfolio ticket size around the ticket sizes. So if you could give some color on the collateral levels for the SME book also, that would be very helpful.

SME book, normally, the collateralization is pretty good in Canara Bank, by and large. Because in MSME sector, we take care that it is either collateralized or most of the accounts are covered under CGTMSE scheme, where collateralization is not there. So that way, the security issue may not arise. And if it arises, then we will go for recovery action as well as invocation of CGT. So that way, the collateralization is pretty good.

Okay. Sir how much of the portfolio would fall under the CGTMSE scheme?

Actually, the CGTMSE coverage, we can tell you roughly as a percentage, it is more than 25%.

Of the SME portfolio?

Of the SME, absolutely.

And what would be the typical collateral levels in the non-CGT SME portfolio? I mean, what would be the typical collateral? Is it hard collateral? Or is it inventory?

No, by collateral, we always mean hard collateral by way of immovable properties as well as plant and machinery in some cases. So typically, the percentage of collateral security, which we take is somewhere around 60% and above on an average. In many cases, it is more than 100%. In some cases, it is a bit less. So average, it is somewhere around 60%, which we consider to be pretty reasonable.

The next question is from the line of Anand Laddha from HDFC Mutual Fund.

Yes. Sir, a couple of questions, sir. Sir, we have written off somewhere around INR 4,000-odd crore towards a fraud account. Is it fair to assume this fraud account are largely the HFC, which is expected to see some resolution?

Yes, we all know about it. And -- but then let us tell you that we have fully provided for that particular account. What we were supposed to do next quarter, we have already done it this quarter. So that way, we are in a much more comfortable position. And of course, we are also looking forward to any resolution which happens in that particular account and in other accounts in general.

So this INR 4,000 crore was it a exposure to a single account, sir?

Yes, yes, yes. Yes.

Okay. And this is one way to assume a 40% or 30% recovery, that will flow through the P&L line item recovery from written off line?

We are also waiting for that, let us see how it pans out because at present, we are in the midst of some negotiation, which is going on.

Again, sir, you indicated that the standstill account because of the Supreme Court order are approximately INR 4,000-odd crore?

Yes. Present position. That is not as on September. It is the present position.

Okay. Okay. Okay. SO had the Supreme Court order not been there, we would have a slippage of INR 4,000-odd crore.

But at the same time, let us again remind you that our provision, which we have made, that is about INR 1,000 crore, which is still there. So that takes care of most of these slippages.

Okay. Sir, this INR 1,000 crores, we made some additional INR 125 crores of floating provision.

This is over and above that. INR 125 crores is over and above that.

So effectively, we have INR 1,125 crores of floating provision with us?

You can say that, yes.

So if I assume the Supreme Court standstill is not there, this quarter slippages would have been INR 4,000 crores, which means annualized run rate of almost like the 3 percentage...

It is difficult to assume that. It is difficult to assume that because Supreme Court orders came as on 3rd of September. And that -- these are different accounts. These are the standstill account, which we took at the beginning of that when the moratorium actually started. These are the old accounts. So it is very wrong to say that if Supreme Court orders were not there, this would have all slipped. It is very -- it is wrong to say that.

And one more issue is that you are annualizing with a single abnormality, which is not correct. For example, say, this quarter, the slippages were only INR 300 crores. I cannot annualize INR 300 crores with 4 quarters and say that it is only INR 1,200 crores. Same way, INR 4,000 crores, I cannot multiply with 4 and say that we will be INR 1,600 crores (sic) [ INR 16,000 ]. It is an aberration or once in a different situation.

If you can give some color on this INR 4,000 crores, like what proportion will be in SME?

See, in that, as I said, even if I take 60% of that becomes NPA. So it will be about, say, INR 2,500 crores to INR 3,000 crores at the most. So for that, I have to make a provision of 15%. If it is secured or if it is not secured, I can go up to 20% or 25%. So for say INR 600 crores, for example, I have to make a provision of about INR 600 crores for this. Whereas I'm holding a provision of about INR 1,030 plus INR 125 crores. So as far as the slippages are concerned under this whole account, even if 60% of that slips there, still, everything is under control. And our projection is for the whole year, we said that we are projecting INR 10,000 crores slippages on a higher side. Already, only INR 2,000 crores have been slipped. Still, we have a cushion about INR 8,000 crores to take care and further educate provisioning and educate precautions have been taken. So it is why even if INR 2,500 crores further slips by the end of December. I think out of that, most of the amount we may be in a position to recover.

Perfect, sir. Sir, you also did some SME restructuring under the old RBI circular of GST registration having -- SME having GST registration number. So under that, we did approximately INR 4,000 crores of SME restructuring. So if you can explain on this restructuring, is it interest moratorium? Or exactly what we do and how much can you increase if we do?

See, let us differentiate between restructuring and OTR, One Time Restructuring. Both are different. So this figure, which you are seeing in our notes on account, this is the restructuring for less than INR 25 crores MSME accounts, which have started from last year, that is 2019 onwards. So it's the cumulative figure. And these things are doing good after restructuring. And for which the RBI has said that 5% provisioning has to be made, and that was already done.

Sir, the cost, if we believe, do they have principal moratorium as well? Or it is just...

See, out of this, how many have availed moratorium, that data we have not called out because since they are restructured and they are continuing, they are complying with the terms and conditions, we have not bifurcated each and every sector.

Sir, but generally, fair to say, this account will be restructured or remain as a restructured for another 1 or 2 years or when they will come out of these restrictions?

It depends upon individual account.

It depends. But by and large, what you say is correct. It will remain restructured in the coming 1 or 2 years. That is -- I mean, when we do restructuring, when we got an opportunity to do a restructuring, we normally tend to do a deep restructuring.

Got it. Correct. Sir, on our cost of deposits, they have declined very sharply. If I had to look at our saving account, it is at 2.9%. Is it fair to say on the term deposit side, we do have more space for the rates to come down?

See, cost of deposit has not reduced because we have reduced savings bank deposit. Basically, it has reduced because we have done away with the high cost deposit and bulk deposits. So that has, of course, savings bank reduction to 2.9% has contributed. But significantly, what we managed is the deposits, which we have taken at 7%, 7.5%, all those things we have not renewed. And we have paid back. And now bulk deposits, our rate is less than 3.2%, less than 3.2%.

Do we assume that based on the space for the cost of funds to come down in coming quarters? Or this is now the bottom?

Cost of funds, see, the way in which we are handling and we are growing in savings bank deposit at 13% and CASA at 14%, definitely, the cost of funds will go down.

On the employee cost side, sir, there has been a little jump on Q-o-Q basis. Is it because of the additional pension liability we have done it? Or...

See, as far as staff costs are concerned, since we have sufficient operating profit and other things, we want to provide for amply. In the sense, bipartite agreement is going to take place. And in the bipartite agreement, 15% increase has to be given to the staff. So we have made ample provision. The day 1, when we have to make the 15% increase to our staff, I will not have any impact on the future balance sheet. Second one is during the COVID time, we have taken a lot of, what we call, employee benefit steps. Like what we did is, for every 6 days who worked during the COVID time, we paid 1-day extra salary. That has come to about INR 105 crores. We have paid that because what we thought is to have a customer satisfaction, there should be a staff satisfaction also. Unless the staff are happy during the COVID time, the customer service will get affected. And that has reflected in our savings bank growth and CASA growth in turn. And also, retail deposits have grown by 18%. So whatever provision has to be done for the staff cost, we have amply done. Apart from this 15%, we have made provision for gratuity, leave encashment and also pension.

And sir, last question from my side, sir, is the provisioning line item for depreciation or investment was INR 217 crore. So is it pertains to any corporate bond or like...

So it's a normal, not specific. Based on yield, we have done.

Because, sir, the yield is, in general, coming down for all -- even for bond as well as treasury. So I thought they should be mark-to-market benefit, but we have made a provision.

No, no, this time. This time, what happened is, as we told you that in one big account, we have made 100% provision. In that account, we have investments also, which we have to provide for that.

The next question is from the line of Abhijeet from Kotak Securities.

Slide 32 on the 7 disclosures, could you explain what led to the rise on the SMA-0 book almost double the pre-COVID levels now?

So actually, it is -- the SMA-0, you see even if there is a 1-day delay in payment of interest or installment, it will be booked in the SMA-0 category. So it is a bit -- it's -- a lot of it is transitory. We can say. This is not what will actually become NPA. So SMA books will keep on vary, especially SMA-0. So the moment it is paid, it comes out of SMA. So it is at a particular date, what we are seeing, it's 22,446, what you are referring to. So we feel that it is not much of a threat because these are all -- as I said, it is a transitory phenomena. It keeps on coming and going.

Okay. And sir, on the ECLGS scheme, could you tell us what's the underlying amount of the loan book where this benefit has been given?

See under this emergency credit line, we have disbursed about INR 8,300 crores, which is equal to 20%.

Okay, 5x of that. Okay. Hello?

Yes, please.

Yes, yes. And sir, then again, if I look at the SMA book, which is INR 5 crores and above, how much of this would be actually MSME loans? I'm just trying to understand whether MSME customers are sort of becoming SMA and still using the ECLGS scheme or if you see in cases where customers who've used ECLGS scheme have actually seen better repayment behavior and they kind of come out of the SMA book?

MSME outstanding will be less than INR 5 crores. A few accounts will be there, which will be more than INR 5 crores. So generally, the SMA above INR 5 crores, the amount will be from the as far as the RBI classification, corporates. Corporates means more than INR 5 crores. So in this particular slide, the SMA what we call 0, 1 or 2, the MSME component is very negligible, I can say.

I would now like to hand the conference over to Mr. Sohail Halai for closing remarks.

Hello?

Yes.

Yes, sir, before we close the call, just 1 question on this corporate credit of around INR 2.8 trillion, how much it would be related to the PSU or government-related companies?

Sir, INR 1 trillion is for PSU and PSEs.

Okay. Okay. Okay. And sir then this INR 11,500 crores is basically one has to look at from INR 1,70,000-odd crores of restructuring that you're talking about, right?

That includes everything. Even retail is also there.

Okay. You said INR 13,500 crores, right?

Yes, 80% of that is corporates.

Okay, okay, okay. Okay, sir. Sir, thanks for the detailed view. And I really thank you and the management team for allowing us to host this call. Before we close the call, would you like to add any concluding remarks?

Mr. Rao, our Executive Director, just...

Only 1 part, which is missed out in our interaction is regarding the amalgamation. Just I would like to give you some color on the amalgamation since this amalgamation in the 4 buckets, I would like to tell you within 2 minutes. What we have is the structural integration, HR integration, IT integration and business integration. And going with the business figures, the way bank amalgamated entity is performing, it gives the credence that there is a smooth transition as far as the business integration is concerned. And coming to the structural integration already it is completed, and many of us in the banking also aware that because of the COVID, there were so many hiccups. But this has helped us internally in our structural integration and HR integration, which is already done. Going with the IT integration, we have 2 steps here. One is the version upgradation because earlier Canara Bank were in the transition of moving to 6.7 to 11.8 version, just 2 days before, the entire Canara Bank now moved on to 11.8, right now Canara Syndicate. e-Syndicate was 11.7, it has to move to 11.8 version that will be completing in the next couple of months. So altogether, amalgamation process, we would like to see it as a seamless experience and best in the industry that we are hoping for, and we are confident we are going to deliver on that. Thank you.

Thank you.

Thank you very much.

On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us and you may now disconnect your lines.