Canara Bank (CANBK) Earnings Call Transcript & Summary

Good morning everyone. I hope everyone is safe and doing well. On behalf of [ INDY ] Stock Broking, I welcome you all to 4Q earnings call of Canara Bank. We have with us senior management of Canara Bank represented by Shri L.V. Prabhakar, Managing Director and Chief Executive Officer; Shri Debashish Mukherjee, Executive Director, Ms. A. Manimekhalai, Executive Director; Shri K. Raju, Executive Director; and other team members on the call. Without taking any more time, I will hand over the call to Shri L.V. Prabhakar for his opening remarks. Post which, we will open the floor for questions. Over to you, sir.

Thank you very much, and very good morning to all of you. Regarding the highlights of the balance sheet as on 31st of March 2021. First of all, I would like to discuss something about the liability side, then assets side, then recovery along with slippages and then way forward and also the impact of the COVID and also the outcome of the amalgamation of e-Syndicate Bank with Canara Bank. As far as the liability side is concerned, we have consolidated more on small deposits. That is CASA. And we have issued 13.95% of Y-o-Y, and now our CASA is at INR 3.3 lakh crores. Retail term deposits, another focus area, we have increased by 16.37% Y-o-Y. Now it is at INR 4.21 lakh crores. Bulk, we were discouraged, and we have reduced it by 2.82%. As far as overall deposit growth is concern globally, we have grown at 12.5%. And as far as domestic deposits are concerned, we have grown at 10.5-plus percent. Now coming to the asset side. As we have said in our earlier meetings, we have concentrated more on retail advances. When you talk about retail advances, it is in terms of retail housing, agriculture, MSME, which is otherwise called as RAM segment, and it has grown at 11%. Retail has grown at 12%, housing has grown at 15%, vehicle loans has grown at 13%, agriculture has grown at 17.4% and MSME about 2.5%. So put together RAM has grown at 11%, which is a decent growth. And in the earlier meetings, we have said that going forward, our percentage of RAM in the overall asset portfolio will be increasing. As we have projected, now we have achieved 56% of RAM and corporate advances of about 44%. Going forward, overall concentration will be more on RAM sector, along with the balanced concentration on corporate financing [indiscernible]. Regarding the growth in the retail sector. Going forward, yes, we see the growth will be there. And also, as of now, we are not getting any inquiries from the corporates for CapEx. However, we are getting good proposals on our infrastructure and also enhancement, in some cases, where we are aggressively participating. Now coming to the income side. I have -- I'm happy to share with all of you that the total income, especially the interest income, in spite of reduction in the base rate [indiscernible]. The reduction is only to the extent of 2% Y-o-Y, and we could maintain at INR 69,000 crores. And as far as noninterest income is concerned, we have done very good performance in that one and the growth is very significant. For example, if you see our fee-based income, we have grown at 19% Y-o-Y, 33% quarter-on-quarter. And as far as the recoveries in written-off accounts is concerned, here also we have shown a very impressive growth of 19.56% Y-o-Y; and quarter-on-quarter, of course, it is 185%. And regarding the other receipts, again, there is a growth of 45%. So total noninterest income Y-o-Y, there is a growth of 40%. Quarter-on-quarter, it is 22%, which is a very significant achievement. Now coming to the NPA. During the Q3 results of FY '21, we have uploaded the pro forma NPA also. And we said that our gross NPA as per the pro forma NPA as on December is about INR 60,000 crores. To be more precise, it is INR 59,776 crores. All this as of March '21, the gross NPA is [ INR 60,000 crores ]. We said that gross NPA percentage-wise, we are expecting about 8.95%. And actual audited figure as on March is 8.93%. Net NPS we have projected as pro forma net NPA is INR 24,800 crores. And in reality, it is exactly INR 24,442 crores. Net NPA percentage, we said that we may be at 3.93% and actual is 3.82%, lesser than what we have projected. Provision coverage ratio, we said, it will be 79.45%. It is at 79.68%. Credit cost, we said it will be somewhere about 2.28% and actually, it is 2.09%. Yes, slippage ratio is about 2.35%, taking into consideration our asset size of INR 6.75 lakh crores. 2%, it is coming to about INR 16,600 crores. Exactly, when you compare to the last year, that is FY '20, the slippages was to the tune of INR 22,600 crores. It has come down to INR 16,600 crores. And the recoveries, our total reduction is to the extent of about INR [ 18,000 ] crores. So basically, when you compare the absolute figure of gross NPA with March '20, there is a reduction of about INR 800-plus crores. And in the net NPA, there is a reduction of about INR 2,000 crores. Percentages, as projected, we have maintained those things. This is possible because during the pandemic period, when the people are working from home, we have given specific tasks to our people to be in constant touch with our borrowers and also the depositors and to explain them about the benefit in repaying and availing the fresh funding. So most of our borrowers have responded to that. And during normal period, the percentage of recovery are what we call collection efficiency is to the tune of 92%. Now in April, when the pandemic is now at peak, our collection efficiency is at 88.8%. So there is a dip of 2% to 3%. We are hopeful that going forward, once the pandemic impact is settled, we can make good of this whatever downfall is there. Now coming to the amalgamation aspect, as you are observing, very smoothly. Well before the given scheduled time, we have completed the integration of our software. And now we are working on the latest version of our software that is 11.8. All 10,400 branches and offices have been shifted to the new software. Integration of human resources have taken place. We have completed the promotion process. And successfully, we have declared the results on 31 March 2021. And the top management position also we have completed, and they are in place to discharge their duties for the coming 1 year. So there will not be any top level disturbances or top level uncertainty as far as Canara Bank is concerned. Regarding the infrastructure amalgamation, yes. We have completed the amalgamation of infrastructure. And wherever, as per the projected plan, the number of branches to be amalgamated are closed and the ATMs to be reshifted are closed. All those things we have executed as on 31st March 2021. And at this time, I would like to mention to all of you, the most important thing is regarding the operating profit. The operating profit, we could cross the 5-digit figure. That is INR 20,009 crores, which is really a very attractive figure. And this operating profit of 5-digit figure helped us ensuring a net profit of INR 1,010 crores, along with making ample provisions taking into account the future impacts. Let me share with all of you that we have already made in Q4, INR 500 crores floating COVID provision, which we will be using in the coming quarters. Apart from this, we have made INR 494 crores resolution provision. When the resolution takes place, the required provision already taken care in the Q4 itself, which will be used in the coming Q1 of FY '22. So as far as provisioning is concerned, PCR as of now is 79.68%. Apart from that, we are having a cushion of about INR 494 crores, which we can use going further. And other than this, we are projecting a very good, what we call, follow-up from our side so that the recoveries will be more than the slippages. Cost of deposits, another important point, which we'd like to share with all of you. Now it is at 4.52%, has come down from 5.42% last year. Cost of funds, now we are enjoying at 4.07%. Last year, it was at 5.05%. Yield on advances, as on March, we are maintaining at 7.73%. And NIM, last year, it was 2.51, now it is 2.75. All these parameters are after taking into consideration the impact of the COVID. As far as our ratios are concerned. CRAR, we are at 13.18%. Tier 1 is at 10.08%. So regulatory capital, we have sufficient and growth capital also we are having. But going forward, maybe in a week's time or 10 days, we are going to hold 1 board meeting, wherein we will be discussing in detail about the future business plan as well as future capital raising plans. However, I would like to mention that the future business growth will be more than what we have already shown in the financial year March '21. So with these few observations, I'm open for the question and answers. Thank you very much.

[Operator Instructions] We have a first question from the line of Mr. Bhavik Shah.

Sir, first -- sir, last time, you had disclosed an exhaustive slide on restructuring. And this quarter, I could understand there's only outstanding MSME restructured from a BSE filing. And there is a restructuring in the notes. Sir, what would be the total restructuring as on 4Q?

If you see the results which we have given and uploaded in SEBI, MSME restructuring figures we have given, which we did on 1st January 2019. The number of accounts were 1.53 lakhs and amount is INR 4,800 crores. That is as of March 31 '21, as far as MSME, less than INR 25 crores is concerned. Now coming to other OTRs. Last time, we said that during the December results, that we are expecting about INR 10,000 crores of corporate loan to be restructured under OTR scheme. Under that, we have already made a provision of about INR 495 crores to take care about the 10% provision that has to be made. However, as on date, only INR 2,700 crores of corporate loan has been restructured under OTR. And 1 account, which is a public sector account, dealing with the steel manufacturing, has decided not to use this facility for which our exposure is about INR 5,000 crores plus. So we expect that under the restructuring package 1, as far as corporate loans are concerned, our book may be less than INR 5,000 crores. And as on that, it is INR 2,700 crores. As far as retail is concerned, the restructuring has done to the extent of INR 636 crores. That is already we have given our presentations. Then apart from this, I think we don't see much restructuring as far as the original restructuring package 1 is concerned. As far as restructuring 2 is concerned, yesterday, we had a discussion with the Board. And very soon, maybe in 1 or 2 days, we will be issuing the guidelines to our people in the field. And then we'll be finalizing the data in consultation with the borrowers to take up for the restructuring. And that figures will be available very soon. But what has happened, those figures are very clear before due. And what is going to happen, I think we will be sharing within maybe 10 to 15 days' time.

Okay. So sir, just to recollect, so around INR 5,000 crores of corporate income is expected, of which INR 2,700 crore has already been implemented and...

[indiscernible]

Okay. Okay. And retail is INR 636 crores and MSME is INR 4,800 crores.

That is INR 4,800 is cumulative from 1st January 2019 to latest. And for the present, if you see only MSME, it is at INR 1,770 crores. Number of accounts is about 55,000.

Okay. Okay. And sir, would you help me with NIMs for fourth quarter? So the PPT has cumulative NIM, I suppose.

NIM for the fourth quarter, it is 2.75. It is in Slide #24, sir. Last year, NIM was 2.51. Now it is 2.75.

Yes, sir. Sir, that is, I guess, cumulative for the whole year?

Yes. It is for the full year.

Sir, I wanted NIM for only for the fourth quarter.

Okay. We'll we be sharing with you.

And sir, I understand quarter-on-quarter, there has been a sharp decline in net interest income. So a part of this can be explained by the interest, which is INR 125 crores. So what has been the other part? And why it has declined so much?

Yes. Let me explain. MCLR, we have reduced from April '20 to April '21 by 50 basis points. And 1-year MCLR is at 7.35. So our aim was to transmit the interest benefit to our borrowers as maximum as possible. Second point is we have already reversed INR 125 crores of interest as per the Supreme Court's directions as an ex gratia, which is also factored into the Q4 interest income. Apart from this, we have reversed about INR 600 crores of interest. INR 400 crores in Q3 itself, we have made provision. Put together, around INR 1,000 crores of interest we have reversed to take care about the NPS that we have classified. In spite of this, there is a good interest income. And our interest is at what we call 7.73% yield on advances. And if you see the interest income on advances, last year, it was INR 51,000 crores. In spite of reversal and in spite of COVID impact, still, we have INR 50,000 crores of interest income. And interest on investments is almost stable, I can say. And overall interest, it was INR 70,800 crores. At this time, it is INR 69,240 crores in spite of discussing about all the, what we call, pandemic impact. However, I would like to request you to concentrate on noninterest income, which was our focus area. And we have compensated that by having a growth of 40%. From INR 10,800 crores, the noninterest income has increased to INR 15,285 crores. And quarter-on-quarter also, there is a growth of 21.86%. And the amount was INR 5,200 crores. So overall, if you see interest income, we have managed. Noninterest income, we have increased. Interest paid, we have reduced drastically to 10%. If you see Y-o-Y interest expenses, it has reduced by 10%. Quarter-on-quarter, it is 3.58%. Interest paid on deposits quarter-on-quarter, it is reduced by 4%. Year-on-year, it is 9.71%. So we have compensated on both sides. Whenever we are getting the interest income less, interest paid also we have taken care. And operating expenses, as you can see, we have controlled, and the increase is only 5% in spite of bipartite agreement where the staff salaries were increased by 15%. And other operating expenses, we have kept flat at INR 6,600 crores. Last year, it was INR 6,591 crores. So there is a reduction in total expenses by 6.3%. And also interest received is by about 2.5% to 3%.

Our next question is from the line of Mr. Sridhar.

Sir, first, congratulations on a good set of numbers. My question is, sir, on your proposed QIP. I heard you on the interview that you're planning to raise QIP. I'm a bit surprised, given the fact that the stock is trading at half book. Any QIP at this stage would significantly erode the interest of minority shareholders. And whereas Can Fin Home is trading at 2.7 book. And given the interest of private equity in the financial space, you can easily raise INR 2,500 crore, INR 3,000 crores just by selling Can Fin Homes and come back for a QIP, when your stock performance is much better. You're already seeing significant improvement. I'm just wondering why would you want to erode minority shareholder and the majority shareholder. The government also stands to lose. Why would you want to do a QIP?

let me clarify it. In the Board meeting, which we are going to hold maybe after 1 week to 10 days, we are going to discuss the capital raising plans, including QIP, AT-1 bonds and Tier 2s. So it is a plan that is going to be discussed and to have approvals. Whether we will execute it at what time, that depends upon the market conditions. We don't want to have an approval without having an approval for going for QIP or any other mode of raising the capital. It is only a provision enablement, which will be available to us at an appropriate time to use. Now the second point is our subsidiaries. I have about 9 subsidiaries. I have about 5 joint ventures and also what we call Grameena Banks, which is called associates. All are making good profits. And I'm expecting that going forward, their valuations will be much more attractive. So as of now, we are not in a mood to dilute the stake. However, option is open. At an appropriate time, we may take a call.

Thank you, sir. But it still looks for me that Can Fin Homes at 2.7 and possibly when -- if you do a strategic sale, you could get 3.5 book. That looks like a very high price-to-book multiple, and the Board should seriously consider that. Sir, my second question is on the credit cost or provisioning. You had provided about INR 18,600 crores for FY '20 and about INR 17,500 crores for FY '21. That's close to about a 2.5%, 3% credit cost. If you can give some guidance because you've been providing a very high number for the last 4, 5 years. So when do we see some normalization and some guidance of what we could expect for '22?

Regarding your first question and first suggestion, we have noted it. Thank you very much for that one. Now coming to our second question. When you have interacted with me during March '20, when I have taken in charge of this bank, the question was our provision coverage ratio was 69.8% or roughly it is about 70%. Compared to industry average, during March '20, our provision coverage ratio was very less. So our aim was, first of all, to strengthen the balance sheet, and our aim is to see that the balance sheet is ready for the future also. So we have started making provisions reasonably, very aggressively. And the provision coverage ratio would take it to 86%. Now it is at 79.68%, which is a decent PCR. And going forward, we would like to maintain somewhere around this percentage. Now another point is you might have seen the results and the presentations, which we have given in that we said that whatever price we have declared in Q2 and Q3, generally, there is a provision of dispensation to make provision in 4 quarters. And during the Q4, you have seen that we have made about INR 670 crores provision upfront for all the accounts which we have declared as fraud so that no carryover will be there. That means going forward, I need not worry for making any provision for whatever accounts I have declared as fraud, 100% provided. So in that way -- and another point is, as I said, INR 500 crores more floating provision I have made to take care about the future slippages in Q1 of FY '22. That is June. And also INR 494 crores additional provisioning I made for OTS. All these things give us a lot of strength to the balance sheet. And the balance sheet will be ready to absorb any unforeseen surprises, if at all, it will be there. And we can predict the strength of the balance sheet today about the tomorrows. So this is why we make more provisions. And as I said, once we have reached 80%-plus, that is a decent PCR and we'll be maintaining around that percentage.

So sir, is it fair to expect, say, around INR 12,000 crores of provisioning? Just to get some sense because, obviously, as you said, 17, 18, these are very high numbers, and you're happy that you've provided a lot. But we should we expect around INR 12,000 crores to INR 13,000 crores of provisioning for next year?

I can say the credit cost will be somewhere around 2.10 to 2.20.

[Operator Instructions] We have next question from the line of Rishikesh. We'll move on to the next participant. We have Amit.

Am I audible?

Yes, yes, you are audible.

Okay. Sir, first of all, congrats on good set of numbers. It's good to see that FY '21 performance was better than the guidance. Can you now talk a little bit about guidance for FY '22, specifically loan book growth, PAT, et cetera? That's my first question. And the second question is, how is the top management assessed on the performance from the government side? Is there any specific target that you have received for next year from Finance Ministry or government?

First of all, thank you very much for your compliments. Now coming to our guidance. Last time, whatever guidance we have given, we have surpassed in most of the parameters the guidance which I have given. And in other cases, we are almost near to that. This year, we are expecting that our performance will be better than what we have shown in the last year. Because last year, last time, we have experienced the pandemic, COVID, wherein we were not prepared well. Whereas now, we are prepared well with proper policies and proper operating procedures. Now we can deploy people to work from home. At the same time, we are able to see traction in the results. So last year, if you see the business growth, in spite of pandemic, we have grown it 8.23%, whereas our guidance was 8%. Regarding the deposits growth, we said that we'll be growing at 8%-plus. We have grown it 11.5%. Credit, retail, we said that 6% we will grow. Whereas in retail, we have grown it 12%. And the RAM sector, we have grown it 11%. Whereas in corporate, we have taken a conscious -- very conscious call to be more careful in extending. Hence, the domestic credit growth was at 5.5%. CASA, as we said, to save the interest cost, we said that we will be concentrating on that, and we are almost at 34.33%. NIM, we have maintained at 2.75%, which was our guidance. So all these parameters, which we have said, we have achieved in spite of COVID impact. Going forward, we are finalizing the guidance in the next Board meeting. However, I can assure you that our guidance will be better than what we have given in the first financial year.

We have the next question from the line of Mr. Madhu Kela.

First of all, congratulation, very, very good set of performance, considering what happened in the whole of last year. And I think we aspire a real -- a lot of confidence in tracking with you over the last 1 year, very, very clear thinking. So please accept all my compliments. Sir, I just want to build upon what Sridhar asked, actually. Sir, we are -- I'm personally a little perplexed that while you say that your valuation of your subsidiaries will go up, there's no doubt they will also go up. But if you are not wanting to sell our subsidiary at 3x book value and we are still contemplating to raise money at 0.5x book value, sir, either as a shareholder, it depletes any logic. So I just want a little more insight as to what are you thinking, what is the main thinking about this whole subject.

Thank you very much. Let me bifurcate your question into 2 parts. One is raising capital for the parent company and second one is selling the stake in the subsidiaries. As I said, all subsidiaries are doing very well and all are profit making. So as of now, I see that a lot of potential in my subsidiaries, in my associates, in my joint ventures, first. For example, I'll tell you one small thing. Apart from this housing finance, we have Grameena Bank also in Andhra Pradesh. It makes a profit of INR 286 crores. So Can Fin Homes makes a profit of INR 456 crores. So I see more potential in my subsidiaries going forward. However, as I said, we will keep the option open with the permission of the Board as the Board directs, and we are not closing the option. As of now, we don't have any idea of diluting the stake. Going forward, we may change our strategy depending upon the market conditions. So that option is always open. Second one is raising the capital. Last time we have seen, with the cooperation of all of you, we have come out with a QIP of INR 2,000 crores. And at that time also, I had many questions like this. And people have responded very well, and it was subscribed 2.5x, a public sector bank QIP. And AT-1 bonds, you have seen we have raised it 8.3%, which is a very [ concrete ] rate. Then we have raised it 8.5% also. So what I mean to say is we are very clear that all the options, we'll keep it open. As for the market conditions, we will take a call at that appropriate time.

Sir, I just want to get an explanation, but sorry at the cost of repeating. Sir, you will get the money -- even at INR 150, your QIP will get subscribed even 5x. That is the confidence it will have in you. But the whole question is, do you want to dilute at 0.5x book value and not sell the subsidiary at 3x book value?

Just I will put the answer in a different way. In the last 4 quarters, we have seen the performance of Canara Bank. People are observing, and they are observing very keenly. Maybe in terms of cash recoveries, recoveries in terms of written-off accounts, in terms of growth in CASA, in terms of growth in retail, especially in terms of noninterest income growth, all these things and the way in which we are aggressively making provisions and making the balance sheet future-ready, I think people see a lot of potential in this. And going forward, I think people will understand the actual potential of Canara Bank and this will be visible.

Absolutely. And that's a precise thing, sir. I have one small -- one question also. The last time when you read the QIP, at that time, you had said that for 2022 and '23, our ROA will be 0.4 and 0.8. Are we still standing by that guidance, sir?

Sir, if you see our ROA, we have already crossed our 3.6% for this quarter, 0.36, right? And year as a whole, we said that it will be around 2%, and it is at 2.23%. In the quarter, it is 0.36. So we are almost there, and we'll be there.

Okay. Sir, one last question, sorry. I'm taking a little time. Can you -- in the second wave of COVID, and these are like the whole 2 months have passed by, do you see any meaningful impact in MSME or the agriculture book of the bank? I know the corporate side is being completely cleaned up. Do you see new sets of problems coming because of the wave 2 of COVID?

It is a fact that there is impact. Nobody can deny that. And let me tell you, in terms of absolute figures, the collection efficiency was about 92% in March. Now it is at 88.8% for my bank. That means there is an impact of about 2% to 3%. The impact is there. But only 1-plus point is we are, I can say, sufficiently experienced to handle the second wave, since first wave we have experienced and successfully we have come out with that impact. So our people are ready with the, what you call, I can say experience and expertise to handle the second wave and to be in touch with the borrowers as well as the customers to see that the loan portfolio will grow and also the asset quality will be maintained. And wherever required, we are ready to help our borrowers in whatever way it is required as per the policies.

Okay. Sir, would you say that in the second wave, the kind of people who are getting in trouble, they are really genuinely good people? It is -- and it is only a timing mismatch rather than the account really going bad?

I think we'll be in a better position to assess the impact maybe in the first week of June. Because as of now, I think the impact, what we see is about 2% to 3%. But I think in June, we'll be in a better position to say what is the real impact based upon the collection efficiency and also other parameters, credit growth and all those.

And I sincerely wish the bank doesn't have to dilute capital at 0.5x book value because I'm sure, in your hand, we are going to see much, much better valuation in times to come.

Thank you, sir. Thank you very much.

We have next question from the line of Pranav Gupta.

Sir, just 2 questions. One is a continuation from the previous question. You said that your collection efficiency has dropped from 92% to 88.8-odd percent in April. But if you can qualitatively speak in terms of how MSME borrowers or agriculture borrowers are sort of behaving in this time. And secondly, if you can talk about any lumpy recoveries that we are expecting in FY '22 going forward.

This, I would call, drop of 2% to 3%, we are observing in MSME and, to some extent, in retail also. Agriculture, no, because this is not the time for agriculture to repair because this is the time for us to view the funds for the kharif season.

Yes. So no, what I was basically asking was that do you see any material impact for the, I mean from April to May, given that April end was where we started seeing lockdowns across the board? So has May qualitatively been resolved? If so, then how much?

As per the April data, which we have for our bank, as I said, the collection efficiency is now at 88.8%. So in June -- because total May in most of the states, lockdown is there, in June, there will be some impact. However, because of the Reserve Bank of India's restructuring circular which has come and which we're going to implement in the coming week -- yesterday, in the Board meeting, we have discussed about it. And maybe in a day or 2, circular will be issued to the people, and people will be on the job. This restructuring may neutralize the adverse impact to a larger extent.

Okay. And just the last question on. Are we expecting any chunky recoveries to come in like we saw Bhushan happening this quarter? Are we seeing any recoveries in the next couple of quarters?

Yes. One account is there in the public domain, which is an NBFC. I think in the financial year FY '22, that account has to be resolved. And if it is resolved, I think every bank will get a hefty amount of recovery at whatever discounted rate.

Okay. Any other [ affected ] or this is the only one, the large one?

As far as NCLT, just outside NCLT is concerned where RBI is directly involved, I think this is the account which we are seeing. And other accounts are there, naturally, those things we'll be getting. We are expecting that maybe around INR 2,000 crores to INR 2,500 will be recovering from the NCLT accounts, maybe in terms of liquidation or in terms of resolution.

[Operator Instructions] We have the next question from the line of Mahrukh.

Sir, my questions were -- that was your total SMA book including the ones below INR 5 crores, SMA-0, 1 plus 2 in absolute terms?

Yes. First, let me give you the data regarding more than INR 5 crores. SMA-2, it is about INR 5,023 crores, which is about 0.7%. SMA-1 is INR 10,559 crores, which is about 1.47%. Put together, it is INR 15,000 crores, which is 2.17%. SMA-0 is about INR 7,500 crores, which is about 1.05%. So put together, total, it is about INR 23,000 crores. It comes to about 3.22%. We are worried about this because these are the big accounts, which are more than INR 5 crores, where if they don't fit under restructuring, recovery is the only way. Whereas in the smaller accounts, the restructuring facility is available, and it will be taken care. And by -- in 12 months, these people, even if the lockdown and other things are over by the end of this month or maybe first week or second week of next month, they can pick up. So our worry is this INR 22,918 crores, which is SMA-2, SMA-1, SMA-0, which we are following it up very closely because it comprises of only 770 accounts. It is very easy to monitor. However, we are cautious about these accounts, and we are carefully handling these accounts.

Sir, but actually, the other banks like BOB and PNB have given below INR 5 crores in their prospectus. So I just wanted to compare. Just as a comparative figure, if you could give the numbers...

We'll share with you, ma'am.

Okay. And sir, just one last thing. How many employees have been infected with COVID in the second wave?

Ma'am, in the second wave, as of now, about 7,000 people are infected. However, the good thing is more than 75% people have been recovered.

Okay. So current number of infection is 7,000 employees?

Out of this, 75% recovered.

Okay. But -- so the 7,000 is all second wave. What is the current number of infections, is that all you have?

You can minus that. That is the active infections.

[Operator Instructions] We have next question from Mr. Ashok Ajmera.

Can you hear me?

Yes, sir. Yes. Yes.

So first thing to the moderator that allow me some time because some of the earlier speakers have taken even 3, 4 minutes. I'm just asking for a few observations and questions. At the cost of repetition, sir, let me congratulate you for another set of very good results. The whole team, Arumugam Manimekhalai and now Satyanarayana Raju, I think you've all done a fantastic job, sir. Having said this, I have got some -- a couple of -- some information points and also confirmation and some queries. Sir, our profit for this quarter includes the sale of priority sector lending certificate of INR 84 crores and INR 790 crore. So INR 875 crore has been taken in the profit of this quarter. Am I right that this INR 1,000 crore of profit includes the INR 875 crores of profit?

No. It is only INR 85 crores.

INR 85 crores is included in this quarter. And is it going to be a consistent kind of a thing? What is the...

Here, let me share some facts and figures with you, sir. If you go through our priority sector portfolio, as per the [ NUMs ], 40% is required. We are at 52%. Agriculture, 18% is required. We are at 26.81%. Small and marginal farmers, 8% is required. We are at 19.48%. So this is the potential which Canara Bank is having to sell the PSLC certificates in the future, provided we get good rate.

Okay. Sir, my second observation is that you also said in the earlier answer that you have got almost about 9 subsidiary companies. And I see some of them are repetition, like now Syndicate Bank Services also and Canara Bank Services. So I want to just understand, any thought is given on the restructuring of this entire subsidiary portfolio to cut it down? And secondly, what this -- except these 3 subsidiaries, other side, we don't see any major because if you look at the total consolidated profit and the standalone profit, the total addition of profit is only INR 55 crores from all these 9 subsidiaries as against the huge investment in those subsidiaries and the efforts, which you are putting in even from the central office also. So any thought on this? Except I think Canara Robeco, which is 51%. And maybe I think you're factoring in -- so I just want to have some color on the subsidiary business, Computer Services?

Yes. Let me bring to notice some facts. We want to have subsidiaries and it is how best we can make these subsidiaries perform better and better every quarter. At head office level, we all started when separate vertical to monitor and to handhold these subsidiaries, which is headed by a very experienced general manager. Today, they may be giving us positive results, may not be much significant compared to the parent bank's performance. But however, once these subsidiaries already have started performing, they are in the way of giving the good results. Going forward, these subsidiaries will be giving a lot of vertical resources to the parent company. So our aim is to nurture these subsidiaries and to guide them. And in 3 of the subsidiaries, I am the Chairman. So I see the potential. And we are hopeful that going forward, all the subsidiaries are going to perform. However, as suggested by you, as and when required, in future, we may think of coming out of these subsidiaries, if required and if the market conditions are suitable for us.

What about Sir Canara Bank Securities?

If you just see the figures, Syn Bank Securities as on March '20, it was making loss. Once it has come into our holds, it has started making profit. So yes, everything is in our radar, but we'll be taking decision at an appropriate time.

[Operator Instructions]

One question. Just one question.

Yes. Ajmera, please carry on.

Sir, I have a couple. But anyway, I'll take it offline.

I'm available to you offline. Any time you can drop it or you can call me.

Sir, this -- out of this INR 50,000 crores, the COVID loan, which has been announced by the Reserve Bank of India, have you formulated your policy and what kind of interest do you see? Will you take it at the rate and equal amount of the loan which you disbursed, will you give it back, getting that 40 basis point benefit? Any thought on that? Anything has been done on that, sir?

Yes. We have done a lot of homework as far as medical services financing is concerned under this COVID loan book. And already, we have sanctioned more than INR 1,200 crores worth of loans for this medical loan book. And we are expecting that we will be comfortably sanctioning and disbursing about INR 4,000 to INR 4,500 crores.

Sir, will it include the NBFC for onward lending to the medical under this category?

It is our direct lending, sir.

But will you consider the NBFCs also for the increasing the amount for the onward lending under this?

It is there. But whatever figures I'm telling is the finance, which we are going to do directly from our -- Canara Bank to the borrower.

We have next question from the line of Mr. Pranav Tendolkar.

Sir, first of all, in terms of fresh slippage, if I consider whatever was considered in pro forma last quarter and then what we consider what is classified as slippage this quarter, I see that actual slippage is just INR 4,000 crores, right? Fresh slippage -- it doesn't mean fresh slippage from all the pro forma NPA difference, we have to subtract that from INR 14,495 crores figure that you have reported. And that the difference was around INR 10,000 crores. So actually, this quarter slippage seems to be only INR 4,000 crores, am I right in that?

Exactly right, sir. Because if you see over the September and December slippages, it was hardly INR 300 crores, INR 395 crores because of the Supreme Court's direction. And during the Q3 results, we have already declared and what we call uploaded in the website, the NPA, which we are not classifying because of the direction of the honorable Supreme Court, otherwise would have been NPA. It was so transparent. And if you take that into consideration, your calibration is 100% correct. Slippages are under control. And including everything, full year, it is only INR 16,639 crores.

Right. So that is one question. Question 2 is that you had actually -- importantly, I remember INR 1,903 crore, INR 1,903 crores of COVID provisions. Now in your notes, your accounts, you seemed to have taken INR 863 crores out of that in this quarter provisioning in P&L. You utilized INR 863 crores. And you have done INR 500 crores plus provisions for the COVID for 2, 3 quarters.

Yes. Yes.

So actually, the provisions for COVID that are outstanding for the next quarter is INR 1,903 crores plus INR 500 crores minus INR 863 crores. Is that right?

Here, there is some, what you call, clarity has to be given. It is wherever required, we have made aggressive provisions accounts-wise also. And over and above that, what it is for the next quarter, taking into consideration whatever slippages may be there, we have made about INR 500 crores COVID provision and INR 494 crores for resolution, for OTRs. And we have also utilized about INR 670 crores to make full provision for whatever accounts we have declared as fraud in Q2 and Q3. So basically, what we did is, we have seen that the provision coverage ratio, account-to-account is increased significantly. Over and above that, this INR 500 crore and INR 494 crore, we are having which can be utilized in the coming quarters. Apart from -- for delayed RPLs, we have made about INR 447 crores. And others, we have made about INR 120 crores. And INR 125 crores, again, we made for this interest reversal also.

Sir, outstanding COVID provision other than -- restructured INR 494 crore that you're saying, other than that, there is no provision buffer remaining for future, right?

As of now, if you have to say, it is a clear provision which is available is about INR 500 crores plus INR 494 crores. Apart from whatever we have already adjusted or accounted for account to account, which could have been done next quarter, but we did during the current quarter itself.

Right, sir. Sir, so you gave a guidance -- yes, last question from my side. 2% of slippage guidance that you have given, right? So around INR 14,000 to INR 15,000 crore for the next year?

We are anticipating about INR 14,000 to INR 15,000 crores year as a whole, [ slippages ] and our recoveries will be more than that.

Our next question is from the line of Ms. Saumya Agarwal.

Your press release mentioned that you'll be setting off the accumulated losses against the share premium account. So just trying to reconcile the numbers here. The accumulated losses were around INR 9,200 crores as of FY '20, and it now stands at around INR 18,500 crores. Could you please give some color on what has led to this kind of increase? And secondly, how much will we -- how much share premium account outstanding as on date?

Very good question, ma'am. Ma'am, I request my CFO to kindly interact with you, ma'am. Please, Ramachandra?

Yes. Out of INR 18,000 crore, INR 9,000 crores...

Switch on the mic.

Out of INR 18,000 crores, INR 9,000 crores is of Canara Bank. And after the merger of Syndicate Bank, it has increased to the balance amount.

Okay. Okay. And how much would be the share premium account as on date?

Yes. I'll come back, madam, for that. Share premium account, I will come back.

Okay. And sir, just one more...

I remember it is INR 30,000 crores.

INR 30,000 crores. INR 30,000 crores, is that right?

That's right.

Okay. So sir, just wanted to understand the thought process while I know this is meant to clean up the balance sheet, but how comfortable are you that this exercise will not lead to accumulation of losses in the future? I just wanted to understand your thoughts on that.

By adjusting the accumulated losses from the share premium account, there will not be any deterioration of the -- any of the financials. It is only the -- include our distributable surplus for the AT-1 bonds. Otherwise, there is no impact on the financials or anything.

Our next question is from the line of Mr. Anil Bang.

This is Anil Bang from Marshall Wace. You have given some clarification on net interest income. Just wanted to understand properly, reported net interest income for the fourth quarter is INR 5,600 crores approx. You mentioned there were 2 reversals of INR 125 crore and another 1 of INR 600 crore. Does that mean that the underlying net interest income in the fourth quarter should be around INR 6,300 crore odd? That's first, just to confirm that. And should that be a good starting point for the June quarter onwards?

Here, the INR 600 crores, which are reversed, that is because it has to be reversed since we have classified the accounts as NPA. That is an accounting procedure. So it has to be excluded. And that is ex gratia, which is to be given to the borrower where the outstanding is more than INR 2 crores. For that, we have reversed about INR 125 crores due to the concerned eligible borrowers. However, the amount is coming to about INR 104 crores. So however, we made an interest reversal of about INR 125 crores.

Okay. Got it. Sir, the INR 600 in provision -- was in the line of provisions on accounting-wise?

That INR 125 crores we have reversed and we have kept aside, which has been now adjusted to the extent of INR 103 crores to INR 104 crores. We have credited the customers' account and the remaining balance is available.

Okay. And another INR 600 crores which you have reversed, was that in the provision line, that is why it should not be added back to NII?

No, no, no. That is -- as per the accounting standards, we have to reverse since the amounts are classified as NPA. Interest booked as far as those NPAs are concerned, that has been reversed.

Yes, that's why I was saying, like for next quarter, this item won't be there. So the underlying net interest income should be higher?

Yes. Yes, you're right.

Next question is from the line of Mr. S. K. Agrawal.

Basically, I don't have any question, only expectation. My first encounter with Canara Bank was in 1979 as a professional encounter. And I found the people to be very disciplined, committed, hard working, ethical, and I had a very high opinion of Canara Bank. And same way, the only bank in my home town was a Syndicate Bank. I found people from Canara Bank are really true banker. But now as a result, I put in my whole life saving into the bank as a retail investor, I hold about 50,000 shares. My family put a pressure to sell it off. But I'm very sure one day, I will say Canara Bank can lead with HDFC Bank, and that's my expectation. And tow, whenever you dilute your equity, it should come at a right issue rather than QIP. That is all, sir.

Your suggestion is well taken, sir. But one thing I can tell you in the last 5 quarters, if you see quarter-on-quarter, each and every parameter, we are strengthening the balance sheet. And we are becoming more and more transparent, so that everything -- every analyst and the investors can go through it and understand how the balance sheet is going to behave in the coming quarters. Thank you very much, sir, for all the confidence you have.

Next question is from the line of Ms Mona Khetan.

Am I audible?

Yes, ma'am. Please go ahead, ma'am.

First a clarification on one of the previous questions before I move on to my question. So the interest reversal of INR 600 crores that you mentioned, INR 400 crore of this is already taken in Q3, if I'm correct, right?

Correct.

Okay. So this quarter, the impact was only to the extent of INR 200 crores?

No. Ma'am, it is INR 415 crore plus INR 600 crore. It is about roughly INR 1,000 crores. Since in Q3 -- for Q4 expected slippages, we have made provision. That has helped us. In the same way for the next quarter also, we are making around INR 500 crores of floating provision, which we'll take care. That's the thing, ma'am.

Okay. So INR 600 pertains to the slippages only for this quarter because previous quarter, you had already made the...

Yes. Yes. Yes.

Okay. But sequentially, your pro forma slippages have come off. So a little surprising that your interest reversal amount is higher for this quarter versus previous quarter?

Pro forma NPA, which -- whatever we have projected in Q3, for that, we have made a provision of around INR 415 crores during Q3. Now in Q4, apart from that, other NPAs also we have recognized. And total amount reversal is coming to around INR 1,000 crores. So additional INR 600 crores we have reversed.

Okay. And my other question was on your deposit rates. So is there any scope for further reduction in the TD and the [indiscernible] for you? Yes.

Ma'am, as on date, if you see, we are very conscious about the inflation also. So that my retail depositors, especially retail term depositors doesn't leave us. That is why we are maintaining good interest rates. And we are showing -- we are experiencing a growth of about 16% as far as retail deposits are concerned. Since savings bank is increasing, our cost of deposits is slowly reducing. And in bulk deposits also, we have managed a lot, where we are not accepting any bulk deposits at higher rate. All the high-cost bulk deposits, we have already paid. So that is how we are managing the cost of deposits, and it has come down to 4.52%.

Okay. So my question was coming from the fact that your CD ratio has declined from, say, about 69% for the consolidated entity as on March '20 to about 63% today. So with that kind of a credit to deposit ratio, maybe even a further reduction in deposits will not harm because you have a lot more deposits than the kind of lending that we are doing.

Ma'am, if you see the CD ratio, it is not 63%. It is 66% -- almost 67%. Now the issue is, in retail, we are growing at 12%-plus. In RAM segment, we are growing at 11%-plus. Only in corporate, we are a bit cautious. And once the economy picks up, we require resources that are low cost to finance the AAA, AA and other corporates when the uptick will be very huge. At that time, if you don't be ready with your low-cost resources, especially deposits, you'll not be in a position to compete with the market to lend to the highly rated customers. So as I said, we want to be future ready. That is why we are accepting the deposits, however, at a reasonable rate and also to how the retail depositors to bank with us continuously.

Okay. Got it. And lastly, if you could share the breakup of slippages for full year of about INR 18,000 crores.

Ma'am, in this, about 30% to 35% is MSME; agriculture is about 20%; and retail, again, 30%; and rest is corporate and others.

Okay. And would it be possible to have the same numbers for last fiscal slippages, which is FY '20?

Why not? We can share with you.

Due to time constraint, we won't be able to take any more questions. I would like to thank every participant for asking the questions and joining the call. If you have any further questions, you can reach out to Canara Bank Investors cell. On behalf of India stock broking, Prabhakar, sir, I thank you all and all the senior management team for giving us this opportunity. Thank you so much.

Thank you.