Canara Bank (CANBK) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone. On behalf of Antique Stock Broking, we welcome you to the 2Q earnings call of Canara Bank. We are pleased to have -- we are pleased to host the bank and the management. The management is represented by Shri L.V. Prabhakar, MD and CEO; Shri Debashish Mukherjee, Executive Director; Ms. A. Manimekhalai, Executive Director; Shri K. Satyanarayana Raju, Executive Director; Shri Brij Mohan Sharma, Executive Director and other executive team members of the call (sic) [ on the call ]. The format of the call would be we'll have initial comments by the management, and then we'll do a Q&A session. Without further ado, I would hand over the call to Shri Prabhakar, sir. Sir, please go ahead.

Thank you very much. Just I will take 3, 4 minutes to highlight the performance. Few attractive parameters I want to highlight. One is regarding the CASA growth. As we said, we are going to grow in savings bank account. We have grown at 12%. CASA as a whole, we have grown at 12%. And then as far as the retail credit is concerned, we have grown more than 10.4%, especially housing, we have grown at 14%. Education loan and vehicle loan also, we are plus 8%. Coming back to the main point of profit. This time, we have shown a net profit of about INR 1,333 crores, which is about 200% growth. Operating profit quarter-on-quarter we are showing a growth in comparison to Y-o-Y, about 20%. This time, it is about 22% at INR 5,604 crores. Next parameter is NPA. Net NPA, we have reduced by 21 basis points to 3.21%. And gross NPA also, we have reduced. It has come down to 8.42%, in absolute terms also, it has come down. Now coming back to the CRAR this time, we have done a very good, I think, performance. And it is at 14.37% as far as CRAR is concerned. And Tier 1, it is at 11.41%. There is a drastic increase in this 1 as far as the capital base is concerned. Slippages, yes, everyone is concerned. In this, excluding SREI, the slippages are around INR 3,200 crores. SREI, the exposure is up to INR 3,200 crores. As the regulator requires 15% provision has to be made in SREI, we made 50%. So in that way, we have taken SREI about this way, so that going forward, there will not be much pain. And since beginning, we are telling that our recovery will be more than the slippages. This quarter, the reduction in NPA is about INR 7,258 crores as against slippages of INR 6,800 crores, including SREI. Cash recovery is a bit attractive this time. It is at INR 3,717 crores, in which from a return of accounts, we have recovered about INR 715 crores, and upgradation is about INR 2,671 crores. Retail NPA percentage is less than 2%. And in housing loan, the NPA percentage is 0.97%. And education, vehicle and personal loans, it is less than 2%. So retail as a whole, the NPA percentage is 1.35%. And growth we have shown in terms of business, in terms of credit, it is about 5.8%. This is overall trade growth. Corporate, this quarter, we were a bit cautious whereas in the Q3 FY '22, we will be aggressive in corporate financing. And also retail, we are growing 10-plus percent, and we'll continue this growth going forward. Agriculture, we have grown at 14%, MSME quarter-on-quarter, we have grown about 2.9%, year-on-year, it is almost flat. And then corporate year-on-year, there is a slight growth quarter-on-quarter. There is some de-growth. But this quarter, we will be consolidating. With these remarks, I'm open for discussion and question and answers.

[Operator Instructions] To begin, we have a question from the line of Mr. Madhu Kela.

Congratulations to you and the entire team. I think our conviction and belief paying off in public sector bank, and I'm glad that Canara Bank is leading the pack here. So congratulation on good set of numbers. There are 3, 4 clarification, sir. One is the recovery of INR 1,700 crores of demand housing, which we are [ building on ]. How much of it has been taken in the P&L account and how much is being taken without P&L, sir?

Sir, as far as this INR 1,700 crores, which we got, we have again made aggressive provisioning. And in this quarter, INR 2,200 crores additional provisioning we have made as an what you call prudent measure. So basically, whatever we have recovered, we have again plowed back into the provisioning to make the balance sheet strong. Nothing else we have taken to P&L.

So nothing. So in our operating profit of INR 5,600 crores, there is no contribution of the demand housing recovery.

No, sir, rather from this, we have made additional provisioning of about INR 500 crores, additional. INR 1,000 from -- INR 700 crores plus INR 500 crores, INR 2,200 crores.

Okay, sir. The other thing, sir, which is very really perplexing, your tax rate is higher than the FERA companies 42%, 41% provision, which we are making. So can you help me understand why such high tax rates we are making provision?

My Chief General Manager, who is an expert in the tax of our bank. I request him to kind reply?

Yes, sir. Sir, this considering our operating profit and the lesser provision and NPA provision and more towards the unlocking of the capital as an overall view, we have increased that. We have contributed the more. We have debited almost INR 910 crores to the profit and loss account. Here, there are 2 things. So as -- since we have accumulated loss of more than INR 18,000 crores, there is impact. There is no -- as per our tax return, there is no outflow of tax. But now our DTA is one of the lowest amongst the peer banks. But if we have a long-term view of more than 10% of the CET. So any reduction in that the DTA will help us in improving our CET. And as a measure of capital unlocking, we have the -- and also through the overall tax management, we are making a more provision, more provision for the tax.

But will you continue to do that in the future also, sir, at 40% provision of the taxation?

No. As long as it is profitable for us in all assets from the capital -- unlocking of capital and other aspects, we are continuing to do that.

Sir, the other point is that indices have guided in the beginning of the year for the slippage of around INR 15,000 crores, which was just reiterated in the last quarter, after the last quarter numbers were declared. Now in the first 2 quarters, we have done roughly INR 11,100 crores of slippage, including the slippage of SREI. So are you still confident in that the INR 15,000 crore number will be maintained. I am confident that we will do it, but I just wanted to make sure that all of us know your mind.

Yes. Yes. Sir, here Q1 FY '22, the slippages were INR 4,250 crores. Out of this INR 4,250 crores, INR 1,770 crores already, we have recovered and upgraded.

That's right, sir.

So the current quarter Q2 FY '22 is about INR 6,500 crores. So INR 6,500 crores plus about INR 2,000 crore, this is only INR 9,500 crores as on date. Because already what has been slipped in Q1, out of that INR 1,770 crores is already upgraded or recovered. So as we have given the guidance that the slippages will be maximum INR 15,000 crores, out of which as on date, INR 9,500 crores is there. So still there is a gap of about INR 7,000 crores. However, in the coming 6 months, out of this INR 9,500 crores also will be recovering. So keeping the slippages at INR 15,000 crores will be very comfortable we'll be doing. And as we said, our recoveries will be more than slippages. During the current quarter also, if you see, our recoveries are 7,000-plus, that is more than the slippages. So at the end of the day, we'll see that the net NPA and gross NPA in absolute terms, it will go down and that is what we are demonstrating quarter-on-quarter, including Q2 FY '22, sir.

So you remain confident that our slippage will not be more than INR 15,000 crores?

By March 31, '22, the slippages as on that day, we are projecting and confident that it will be less than INR 15,000 and recoveries will be more than that.

Okay, sir. Okay, sir. The other thing is on the other income, which was, let's say, in June '20 was INR 2,650 crores and it has been steadily rising. And in this quarter, it's just INR 4,268 crores other income. A, is there anything which we should read in the other income the way it has risen? B, do you think it is maintainable at this level? And if you can explain a little bit and what does the other income constitute at? What do we all include in the other income?

So if you see -- yes, yes. For example, if you see quarter-on-quarter, the fee-based income is increasing and the noninterest income is increasing because of 2, 3 parameters. One is fee-based income, which consists about our processing charges and other commission expenses, those are steadily increasing because now we are underwriting the big loan proposals where we are getting good commission. Because of this, the traction is there. And fee-based income, as you see, year-on-year, it has grown by 20%. Quarter-on-quarter, it has grown by 9.42%. Here service charges, miscellaneous, commission, processing charges are increasing and going to increase. So there we are not worrying. Second point is treasury income. Treasury income, it is doing exceptionally well. But as you say that going forward, sustaining this time of a income over a period of many quarters may not be feasible. For that, what we are doing is even if there is any shortfall in the treasury income because of various parameters that will be taken care by the recovery in return of accounts and also in other accounts. For example, recovery in return of accounts. This quarter, we have recorded over INR 715 crores, out of which INR 584 crores have gone for our what you call, other income. So this is going to be more coming quarters. Our emphasis will be more in recovering more and more amount from the return of accounts. The other point is regarding the receipts, other receipts. Other receipts consists of PSLC and other things. This is seasonally every quarter, we'll be getting something. For example, PSLC, last year, it was about INR 700 crores. This time, we already crossed INR 900 crores. And still there is a scope for us to make some profit in this one. And this will be every year in future. Again, in next Q1 FY '23, again, we'll be booking what you call, profit from the sale of PSLC certificates. And other income also nowadays, we are diversifying, and we are aggressive where we are going to get some fee-based income. So if you see the noninterest income from INR 3,100 crores, it has gone to INR 4,000 crores, March, again, March is a year where we'll be loading maximum charges. Again, in June, it was INR 4,100 crores, September INR 4,200 crores. And I think going forward, we'll be sustaining this 400-plus noninterest income with more emphasis on recovery in return of accounts and fee-based income. So we feel it is sustainable since in the last many quarters, we are continuing this. And we have a clear road map to increase this income, and we focus on that, sir.

Sorry, I'm just taking a little bit time. Sir, it is just last 2 questions.

No, no, no. It's a pleasure. It's a pleasure, sir.

One sir, on loan growth, obviously your loan growth has been very tepid in the last 2 quarters and -- but if I see the loan growth of private sector banks have been pretty healthy in the last 2 quarters. So can you help me understand what are your bank's plan to increase the loan growth, sir?

Our guidance is that minimum we will be growing by 7.5% as on March 31, 2022. And as on date, let me bifurcate the credit growth into 2 parts. One part is corporate, second part is retail. Retail, we said that we will be growing at 10% plus. Q1 also, we have grown by 10% plus. Q2 also, we have grown by 10.46%. And even agriculture, we are growing at 13.92%. So retail healthy growth is there. And the most important thing is in retail, our NPA percentage is less than 2%, housing loans, it is less than 1%. So we are very aggressive in retail growth. And even quarter-on-quarter, if you see the growth as far as the retail is concerned, it's more than 3%. So annualized, if you take, it will be 12% minimum. So my total credit portfolio, it consists of 57% retail and 43% corporate. So regarding the 57%, we are already growing more than 8%. Now, the question of corporate. Corporate, we have already a book of about INR 20,000 crores, which is underwritten and to be disbursed. And apart from that, this quarter -- last quarter, we have consolidated, in Q1, we have grown well under corporate. Q2, we have consolidated. We have consolidated on retail. And Q3, we'll be consolidating on retail and corporate also. And INR 20,000 crores, the book which is already underwritten and to be disbursed very soon that itself will give a credit growth of more than 7.5% going forward book as a whole.

Okay, sir. Okay, sir. One last question sir, can you tell me if there are any one-offs in this operating profit, like you have the family tension, you may have the SREI interest reversal, which would have taken place? Or is there any depreciation related items which are there, which you have accounted for? How much of that amount -- it will be great if you can give details of what the one-off items are.

As far as this time operating profit is concerned, there is no one-off item. It is a normal item. So only, as I said, whatever we got, we have accounted for, and this operating profit...

No, no, no. Sir, one-off which have -- one-offs in terms of expenditure.

Sir, actually one-off item in expenditure, we have invested some amount in IT, again, where we are going for what we call data analytics and interest. See, there is a reversal of interest even then we could maintain that interest income as stable.

The question is how much is that amount will be sir? If I say what will be SREI reversal of interest income. So we know whatever we are operating which the bank has met?

The interest reversal is to the tune of about INR 280 crores.

INR 280 crores. And is there a family pension plan, which was -- which has to be accounted for, which was not accounted for in last quarter. How much will that amount be, sir, in this quarter, family pension plan provision?

INR 250 crores already we have accounted for, which is the required rate.

Sir, INR 250 crores is incremental, which was not there in last quarter, family pension right? So that's like INR 280 crores plus INR 250 crores?

Yes. As on date, we have taken care about family pension. We have taken care about the reversals of the interest of SREI in spite of all these things, we could still maintain a healthy growth in terms of interest income as well as operating profit, sir.

Is there any depreciation in the asset securities also which was taken sir in this quarter, which is one-off?

Not much, sir, not significant.

[Operator Instructions] Our next question is from the line of Mr. Rishi. Sir, please unmute yourself and go ahead. Mr. Rishi? Okay. I think there is some problem in the line. [Technical Difficulty] Jai Mundhra? [Operator Instructions]

Yes. Sir, I have a few questions. First is, if you can reconcile what is the total outstanding restructuring number as of 2Q. So if I -- correct me if this understanding is wrong, so you have restructuring 1.0 of where the outstanding is INR 2,139 crores. Then there is restructuring 2.0, where there is outstanding is around INR 13,700 crores something. And then you also have MSME restructuring, which is like INR 3,000-odd crores, right? So -- and then there is some overlap between restructuring 1 and 2, which is like some INR 500 crores. So should I add the 3 and reduce the overlap or there is -- I mean is this calculation right?

Let me answer. First, the resolution framework 1. It is INR 5,067 crores. Out of this INR 5,067 crores, more than INR 2,000 crores has been come out of the restructuring, and this is now in the regular accounts. And the remaining INR 3,000 crores, we can take it up. It is under restructuring, still continuing. Regarding the framework 2, INR 13,475 crores, which we have restructured, out of which retail is INR 10,000 crores, MSME is only INR 1,100 crores and agriculture is INR 1,300 crores. But under framework 2, out of this INR 13,475 crores, about 52% of the outstanding is under advanced repayment period. They have availed restructuring, but they are paying the installment. That is -- we are taking it as advance repayment period. So basically, if you have to calculate a restructuring, 50 -- 48% of INR 13,475 crores, maybe around INR 6,500 crores plus INR 3,000 crores under resolution framework 1 that is about INR 9,000 crores. So total put together, I think the net figure will be around INR 10,000 cores to INR 10,500 crores.

Right. And of this INR 10,000 crores sir the corporate restructuring number is around INR 1,000 crores, I mean the -- yes, please.

Initially, it was INR 4,287 crores, out of which already INR 1,500 crores have been come out.

Right. So INR 2,700 crores is the corporate restructuring outstanding?

Yes. In framework 1.

Right. Right. Okay. Because, sir, in your BSE table, it shows out of INR 2,000 crores, INR 2,100 crores, which is standard after all this repayment and NPA, INR 1,400 crores is corporate restructuring, is that right?

As I said, INR 2,000 crores, that is INR 2,100 crores. Now it is not under resolution framework 1 since it has fulfilled and come out of the resolution framework. So net balance, as I said, it is about out of INR 5,000 crores, INR 3,000 crores is there.

Okay. And out of that INR 3,000 crores, INR 2,700 crores is only corporate.

Yes, corporate in the sense, MSME is only INR 31 crores. It is not what you call a significant amount. The rest personal loan is INR 570 crores -- INR 596 crores. In that also, a portion is upgraded.

Right. Understood, sir. Okay. And secondly, sir, on your CET1, right? So if I see your presentation, then the capital has CET1 core equity capital has increased by around INR 6,000 crores plus Q-o-Q, of which INR 2,500 crores is anyway your QIP that you had done. But what explains the additional INR 3,500 crore increase in the capital?

Ramachandra?

Yes, mainly because around -- see there is a June profit of INR 1,177 crores and the present profit of INR 1,333 crores, it is around INR 2,400 crores plus because of the unlocking of capital by way of DTA, it has -- we have got around INR 1,500 crores. And there are -- yes, this is the major components.

Okay. So are you -- sir you are -- earlier, I thought the bank was not taking the interim unaudited profit, but this CET1 of 10.01% includes the first half profit. Is that the understanding?

Yes.

Here, 1 thing I would like to add. The Reserve Bank of India has given permission to Canara Bank to treat it the current profits also. A portion of that.

Okay. Understood. And sir, this capital unlocking of INR 1,500 crores from DTA. If you can explain, sir, how does this work? So as and when you provide more accounting tax provisions, your DTA will be unlocked, right? Or for the next 2 quarters, if you -- hypothetically, if you maintain at the same PBT level, and let's say, if you provide similar tax number, will there be further unlocking of this capital because of DTA thing?

Naturally, the DTA to the extent of 10%, we can -- taken under the CET1 if there is any excess of that, any reduction in the CET will result in unlocking of capital and increasing of CET1 capital.

Understood. And what is the outstanding DTA now, sir?

It is around INR 8,000 crores.

Okay. Understood, sir. And last thing, sir, from my side, on this accumulated loss from Erstwhile Syndicate Bank, when do you -- I mean so while the accounting -- so there are 2 things. One is you are still paying accounting tax, but you have accumulated losses. And that is why you probably are not shifting to the new tax regime. So, a, by when do you think this should continue as in you can remain on the old tax regime and may not pay tax. Is there any understanding, sir, there?

See this carryforward loss can be availed up to 8 years. So as on today, I do not have a tax liability to pay as per the income tax return. So I -- see the first loss we have registered say, in 2018 up to 2023 first year profit of itself is available. So there is a up to 2028 theoretically, we are capable of carrying forward these accumulated losses. However, we will not go because we are capable enough to come out of this. And by paying more tax and reducing the DTA is the another process of strengthening the balance sheet so that whenever we want, we can stick to the -- we can shift to the senior tax regime. To have that comfort also it is 1 of the thought process of making provision of tax.

Right. So when do you intend to shift to the new tax regime, sir? Is it like in the next 1 year or maybe more 1 year?

Yes, yes, maybe 1 to 2 years, whenever we feel if we are confident that with the same tempo of our progressive growth, it is not far away.

[Operator Instructions] Our next question is from the line of Mr. Ashok.

[Technical Difficulty]

Mr. Ashok, I would request you to please turn off your video. I think there is a bandwidth issue. So please turn off your video so that your voice is clear.

[indiscernible] Yes, is it okay now? Is it okay now?

He is asking...

Yes, yes. It's okay.

Okay. Sir, most of the questions have already been answered. I've got just a couple of questions and observations. Sir, just in case of our DHFL recovery. We have also received the bond in addition to the cash. [Technical Difficulty]

Sir, we lost you, sir.

Sir, your voice is breaking. I would request you to please reconnect.

Is it okay?

Yes, sir.

So sir, what I was asking that if the DHFL recoveries.

Yes, shall we answer?

A part we have recovered in cash and part in the bond from Piramal. I suppose it is a 10-year bond. So what treatment has been given to -- what is the quantum of the amount of the bond? And what treatment we have given in the accounts as regard the reversal of the product because it was 100% return of account?

Sir, it is like this, that the bond -- because ours was a loan account, so naturally, the loan has to be adjusted, and we have taken that amount of bond now as an investment. So that is the treatment what we have done. So roughly around INR 900 crores was the bond and about INR 700 crores was the cash recovery. So total about INR 1,700 crores. So because the loan account got credited by creating an investment, so the cash recovery is total shown as INR 1,725 crores or INR 1,730 crores like that we have created.

So the entire INR 1,700 crores has been taken as the profit in this quarter?

Yes. As a cash recovery.

No, no. What I'm asking is that INR 900 crores of the bond, which we received, according to you, you have put it in the investment, have you provided for anything on that investment? While reversing the provision which you had?

It is considered as a normal investment and the MTM depreciation has been provided.

Because it is a new entity who has made this investment. It is not DHFL. So provision is not required. So because it is Piramal, who has invested. So no provision was required as such.

And DHFL is not a technical written-up account, therefore there is no question of taking into the operating portion of the profit of the bank.

So this INR 900 crore bond, which is 10-year bond from Piramal is you've taken at par in the value as far as the investment book is one, isn't it?

Yes, yes, yes.

And new M2M depreciation has been provided for.

Yes, that is what I'm asking. How much M2M depreciation has been provided?

Yes, that unusual account wise I may not have the detail we will come back.

New M2M provisions have been done there.

Yes. Anyway, sir.

But the treatment was like this, like I told you.

Okay, sir. All right. Sir, as regards note #7, all the accumulated losses have been adjusted against the premium of about, I think, INR 17,000 crores or INR 18,000 crores. So all the accommodated losses have been adjusted against the premium or still anything is pending?

No, sir, as on date, we don't have any accumulated loss and balance of accumulated loss is nil.

All right, sir. Sir, my next question is, sir, that this commission income from PSLC of INR 909 crores, which we received in last 6 months in the last 2 quarters. And since we have a very good book on the priority sector, is this phenomena is going to continue for the next 2 quarters of the year? Can we treat this similar kind of income in the next 2 quarters, sir?

See, next 2 quarters, we cannot treat the same amount of what you call processing charges, or commission we will be getting. But still, we have a scope of about INR 10,000 crore to INR 12,000 crores of book which we can, I would call sell as PSLC certificates.

So it amounts to I mean INR 909 crores we have already taken now for the whole year approximately, how much it can be considered?

I think if the demand is good, we'll be crossing about INR 1,100 crores.

Okay. So now only a small amount of INR 200 crores is more.

Yes. But here, the beauty is PSLC certificates again next year, again, I can sell it, total amount. So I have a scope of earning again INR 1,000 crores to INR 1,100 crores to INR 1,200 crores in FY '23 also.

Yes. Yes, sir. Sir, you said that your fee income was very good because you have underwritten some big ticket loans. But as you yourself answered some time back, the corporate book if you see has not grown in this quarter. So whether those amount of INR 20,000 crores, you are saying you have underwritten. So fees have already been collected on that pending disbursement?

In majority of the cases, since we have handed over this sanction letter, fee have been collected.

And that is why the income has come in this quarter?

And the sanctions will continue in this current quarter also. So the flow of fee-based income will be going. And now the corporates who are not earlier banking with Canara Bank. Now they are very much interested to start banking relationship with Canara Bank, which is a very good trend, which we are seeing.

So I believe, sir, you have started considering the construction loan for the residential to the builders and some of those areas where earlier for last 2 years, loans were not generally welcome. So is it that, that the bank is doing aggressive on because your NBFC book also has increased considerably?

So here, let me tell you. One thing is we are aggressive in HAM projects, we're aggressive in steel financing, cement, textiles and health sector. Health sector already we have a sanctions about INR 5,500 crores. And the disbursement is about INR 2,300 crores. Still there is a scope of disbursement. And as far as the real estate sector is concerned, we are calculatedly taking the exposure where real estate, home loans scope is there. In the sense, sir, real estate, residential is there. Because as you see our housing loan, we are growing at 14%. So suppose if I finance a real estate project, residential 1, I'll get raw material for a housing loan financing, and that particular loan will be liquidated automatically. So in that angle, we are concentrating where the project is RERA-compliant, and where we see that the promoters are strong and the project will be completed well in time. There, we are very happy to take exposures.

Okay. Sir, my last question, sir, is around [indiscernible] that first phase of the restructuring. Out of that, how much has slipped into NPA. I mean, excluded terms, how much was done and how much is slipped into NPA?

Less than INR 50 crores.

Only INR 50 crores?

Yes, less than. It is about INR 38 crores or INR 40 crores.

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

This is Sridhar from Enam. I have 2 questions. One is on your pre-provision profit guidance for the year. Is it fair to expect around INR 23,000 crores, INR 24,000 crores pre-provision profit for the current year? And my other question is on the provisioning itself. So what sort of provisioning number should we expect for this year? And maybe if you can guide a little bit for the next year also?

As far as rupee is concerned, as on date, you are seeing that it is INR 5,500 crores plus. And last quarter also, we have done very well. So if you -- if -- and 1 more thing is the way in which we are building up our loan book and also increasing focus and recovery I think going forward, in the coming 2 quarters, I think we should be doing better than what we did in the Q1 and Q2. So naturally, as you expect, INR 24,000 crores, I think that should not be a big issue, the way in which the trend is going on. And provisions, as you have seen during the current quarter, we have made INR 2,200 crores additional provisioning. For example, SREI itself instead of 15%, we made 50% provision. That means that we are taking care about the future provisions in the current quarter. So our strategy for making aggressive provisions will continue. At the same time, taking care about the other parameters also.

So when will we see a normalization? Is it fair to expect a 3 -- 4-digit provisioning number next year?

I think as on date also, I think it is on track to that figure.

Okay. Okay. Okay. Because annualized number works towards, say, around INR 14,000-odd crores provisioning for this year. So maybe we can expect somewhere in the INR 9,000 crores, INR 10,000 crores range next year?

Sir, here, 1 more point is there. Even though we are making INR 14,000 crores provision by the end of the year out of this, INR 3,000 crores to INR 4,000 crores provisioning may be netted off because of the recoveries.

Okay. Okay.

So that process is going on. So in a cumulative term Q1 plus Q2 plus Q3 plus Q4 may look like that. But at the end of the year, if you see the absolute netted off figure that will come down.

Okay. Sir, my last question on this 40% tax provisioning to help your capital given that you're also raising capital from the market and we under report the profits by providing higher tax. This also impacts the value creation in the market. So my suggestion would be from next year onwards, if you could come to a normalized tax rate that will help some sort of certainty amongst investors to gauge what sort of tax rates you will be providing? And it can help in future capital raising also.

Yes, we agree with you. We are open to that suggestion also, and we are working in that direction also, sir. It's only a matter of time when we'll take that decision.

Sir, but if you could guide the market in advance so that we are not always wondering whether it will be 40% or 25%. So it will help if that's sort of guidance on tax rate, which is not -- it's a certain number. It's not -- I'm not asking you to guide for some number about profit or something else where there are a lot of other parameters. This is a more certain number. And if you can at least tell us 1 or 2 quarters in advance it will help us to gauge some expectations in the market.

Yes, sir. Going forward, definitely, we will come up with that clarification.

To answer Mr. Ajmera's question about mark-to-market in those bonds it is around INR 200 crores and already provided for.

Our next question is from the line of [ Mr. Guo ].

So I joined late. So my question maybe answered. Just out of the slippages of about INR 7,000 crores, how much of that is related to SREI?

It is INR 3,200 crores, sir.

Oh, cool. And then of the cash recoveries of INR 3,000 crores, how much is Dewan?

It is about INR 1,700 crores. And 1 more point, sir, regarding the SREI. Out of this INR 3,200 crores, we made already 50% provision, 5-0.

Our next question is from the line of Mr. Aditya Singhania.

This is Aditya Singhania from Enam. I just wanted to clarify a couple of things on the Dewan accounting. So sir, what was the total exposure we had? And if you could sort of tell me whether it was in the form of bonds or loans?

Okay. We had about INR 3,600 crores in the form of loan, about INR 3,385 crores in the form of investments, right? So that was the original thing. Out of that, what I said was around INR 1,700-odd crores we received. So we still have a book liability where -- because our liability towards the guarantor still exists. So that thing, we are still keeping alive. So about INR 1,950 crores is there liability, which we are attributing towards the guarantors. So that call will be taken as to how and when we are going to take action against that.

Sir, if you could explain this guarantor thing, I was not -- did not know this aspect?

These are -- first of all, these are 100% provided. So no fresh provision is required. But in our books, this amount still exists, and we want to keep it alive for the simple fact that the liability of the guarantors also we are invoking. So that part is still there. But so far as DHFL Piramal, this issue is concerned, it is closed.

So is there a recovery possible on this INR 1,950 crores?

We will definitely try, as a consortium, we will definitely try.

Who's the guarantor, sir, in this case, if I may understand.

The promoters are there.

Okay. So there is personal guarantees?

Personal guarantee. Yes, yes, yes.

Okay. And so sir, just to understand your accounting a little confused, this INR 1,700 crores of cash recovery, that has been taken in the P&L, right?

Yes, yes that has been taken as a cash recovery, our loan accounts to the extent of INR 1,700-odd crores. This is what I just explained.

Yes, yes. And this was not written off earlier. This was 100% provisioned account?

It is 100% provisioned account. Yes.

Okay. So the INR 1,700 crore comes in the form of cash recovery. Out of which, as you explained, INR 900 crores has been credited to bonds as an investment. And on that, you have made a INR 220-odd crores -- INR 200-odd crore mark-to-market provision?

Yes, exactly. It is actually exactly INR 191 crores, which we have provided.

Okay. And sir, so what I could not understand that Chairman mentioned that you have made an total INR 2,200 crore further provision using this. So if you could just explain that aspect?

Regarding this INR 2,200 crores, sir, aggressive provisioning, which we have done is in SREI instead of 15%, we did 50%. Accordingly in other accounts also, we have done additional provisioning so that Q3 can be taken care without much difficulty.

Right. Sir, so additional mean in addition to our RBI mandate right now?

Exactly. In addition to regulatory requirement, INR 2,200 crores additional provisioning we have made.

Right. And so all of this is part of INR 2,678 crores, which is provisioned for NPA plus what is INR 475 crores in others, sir?

That is regarding the RBI Resolution 2 framework under which we have restructured to that some amount has been done.

Okay. So that is against that, right.

Yes.

Right. Right. That's very clear. Just a second question I had on the DTA. So we understood that the DTA outstanding now is INR 8,000 crores?

Yes, around that.

Okay. So how much of that is not getting allocated to CET1 right now, sir?

Almost around INR 2,000 crores.

Okay. So INR 2,000 crores of further tax provisions in the books hopefully in the next 2 quarters will be added to CET1 as it gets used?

Yes. Scope is available for us to argument the capital by way of debt.

I understand.

Our next question is from the line of [ Mr. Rishi ].

Hello?

Yes, please.

Am I audible?

Yes, sir.

Yes, please. You are audible.

Yes. Sir, my -- I just wanted a clarification. So earlier when you're talking about provisions. So for this year, are we going to take provisions at around INR 14,000 crores?

Sir, again, as I said, every quarter, we are making provisions. But during the year, where we recover the amount from these accounts to that extent, provision will come down. So cumulative at the end of the year, I think it will be around INR 10,000 crores to INR 11,000 crores. It will not be more than that.

Our next question is from the line of Mr. Rakesh Kumar. [Operator Instructions]

Yes. Am I audible, now?

Yes, please.

Yes, please.

Yes. Sir, just 1 question. We had close to INR 10,000 crores of total net DTA as on March end. And now we have close to INR 8,000 crores. So just to understand the movement of this DTA and DTL. So basically, like the investment depreciation provision, what we have made, we would have got some DTL we would have got because of that. And if there is a provision write-back because of this DHFL thing. So that [Technical Difficulty] but if that understanding is correct let me know. And going ahead, as we say the NPA provision would be higher. So that would again lead to higher DTA number so -- and which will get deducted from the CET for the calculation?

Sir, opting for DTA or not is a bank decision is where our -- that is why we have -- this is providing more tax is the strengthening of the balance sheet. As long as I'm making a profit, I need not go for a DTA. It is an accounting window available to the bank. It is not a compulsory it is optional.

No, that I understood, sir. Just I'm asking that the movement of DTA from INR 10,400-odd crores from March end to INR 8,000 crores to September end. So this has -- this number has come down by around INR 2,400 crores. This is because of the reversal of NPA provision and because of the investment depreciation provision that we have made, correct?

See, there are different reasons for the reduction of DTA. See, when we are paying more tax and the provision of NPA is also reduced, all this agreement is resulted in the reduction of DTA. There is only the 2 components. There are 7, 8 components which we are taking into account when calculating the income tax provision. So all of this has resulted in the reduction of DTA, sir.

Our next question is from the line of [ Mr. Deepak Lalwani ].

Sir, the restructuring number in retail looks a bit high at INR 10,000 crores on a book of INR 1,20,000 crores. So where is this restructuring primarily coming from? Is it vehicle, home loans or mortgages?

In this major portion, the home loan people have availed this facility. But as you see the slide, 52% of these people have started paying in advance. So basically, they're housing loan people during the COVID time they thought that this is a good return, and we also encourage them and they will acclaimed the facility. However, now they have started paying their installments in advance. So it is basically a major portion is under housing.

Got it, sir. And sir, if you could highlight how much of the retail book is salaried and nonsalaried?

Basically, our retail book more than 85% is salaried only.

Okay. Got it. And sir, in the agri book, is it entirely backed by gold or?

No, no, no. It is a combination of a investment credit, KCC and also backed by gold, backed by agriculture land, mortgage, it is a combination of everything, and that constitutes about INR 1,61,000 crores.

Right. So how much would be secured in the agri book backed by gold or backed by the land of the...?

It is INR 82,000 crores.

Okay. Okay. Got it. And sir, lastly, on the restructuring number, do we have -- do you see any further restructuring accounts in the pipeline?

[Foreign Language] now, it is closed. Now there is a -- whoever opted, we have sanctioned and no pending issues are available.

And on the entire book, we carry the minimum 10% coverage, right?

Yes.

Our next question is from the line of Mr. Jai Mundhra.

Sir, I have few -- sir, 1 is, there was an RBI master circular that said that you have to -- there was a reclassification of other income recovery from write-off, recovering from written-off accounts from other income to netting of provisions. And I think even IDBI Bank has done that. And I think the other private banks and other banks have also done. So we seem to have not done that. Have you -- I mean, do you plan to do that in coming quarters or that is up to the bank to do or not do?

This RBI circular is really tricking on the format of the balance sheet, which is to be disclosed at the end of the March financial year. However, 1 or 2 investment depreciation and dividend on investments or we have taken into account. Recovering the written off the major banks, even the major private sector banks have also -- are also taking under the operating profit, other income only. So let us see us the first 2 quarters, we will take a call on that in accordance with the other banks, this service.

Okay. Understood, sir. And...

There is no impact on net profit.

Right, right, right. Okay. And secondly, if you can, so out of, let's say, INR 7,000 crores, INR 3,200 crores is 1 account, if you can bifurcate sir, corporate retail, MSME agri, the slippages for the quarter?

Out of the remaining INR 3,200 crores to INR 3,300 crores, INR 1,000 crores is in agriculture, about INR 1,000 crores is in MSME and remaining it consists of corporate and retail.

Yes. So how much would be sir, retail?

Retail, it is about INR 300 crores to INR 350 crores.

Okay. Understood. And sir, out of your non-PCR provision, sir, what is the stock of non-PCR provisions, which we are holding, including restructured provisions or any other -- or do we have any COVID buffer which is not restructured, not NPA provisions?

No. We don't have.

Right. What is the total restructuring provisions that we have, sir? I mean, stock?

Around INR 1,900 crores.

INR 1,900 crores?

Yes.

Right. Okay. And the last thing, sir, we have mentioned SMA 1, 2 and we have been reporting this number for quite some period now. This is currency reporting. If you were to put the number below INR 5 crore also, I mean, broadly, how much would that company share excluding below INR 5 crore number?

See, it will be including less than INR 5 crores, it will be around 3%.

3% of the total book?

Yes.

This would be SMA-2 only or -- sorry so...?

It is 1 and it is 2.

Okay. 1 plus 2 put together would be...

Including less than INR 5 crores and above INR 5 crores, it is about 3%.

Right. So the current number, which we have, SMA-1 plus 2 is let's say 1%, it will be 3% roughly?

So above INR 5 crores, it is about 0.98% and below, it will be about 2.1%.

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

Yes. A couple of questions. One is sir, just to comment on the family pension impact, if you can explain what was the impact this quarter? And what should be the run rate of the staff cost going ahead?

See, family pension per month on an average, only INR 10 crores to INR 12 crores outflow of funds may be there. However, RBI permitted us to staggering over the 5 year. As a prudent measure, we have made around INR 200 crores provisions this quarter. So the payment is not started because approval from the Board and other authorities is also request, but we have made a provision of around INR 250 crores towards the family pension and NPS.

Okay. This is going towards the corpus creation, right?

Yes, exactly. Other than NPS.

And what would be that corpus on the current base of employees? What's the...

It may be around INR 800 crores to INR 900 crores only for the family pension. So we started over 5 years that is a window available for us.

So INR 900 crores over 5 years, that's the net impact?

It's available for the banks, whether they avail or not is a different question.

Got it. Second 1 is you mentioned that about INR 2,000 crores of restructured loans have come out of the INR 5,000 crores in the first pool of restructuring. So wanted to understand that, as in, we thought that there is some criteria around repayment behavior being established for a couple of years after which you can upgrade the account. So I'm not sure how we have reduced the pool of restructuring there.

These accounts amounting to about INR 2,100 crores. So they have satisfied the condition because of which it has come out from the restructuring tag.

Okay. What would be these conditions, sir?

Ask him to come back.

As per the RBI guidelines.

And these are retail accounts?

[Foreign Language] it is a mixture of that.

Okay. And last question is, sir, some comment on the overseas loan book where growth rates have been higher than what we are seeing on the domestic space, so where is it coming from, which sector [indiscernible]?

See, actually if you see 1.5 years ago, we have shrinked our loan book as far as overseas is concerned, because of COVID and other reasons. But now once the economy is growing outside India, we thought that we should have a growth in the credit also. And basically, we are going for syndication of loans. And these loans are all high rated, because of that, now we thought that the loan book has to be increased, and we are projecting that in overseas we will be growing more than 10%.

These are like PCBs or what kind of loans are these sir?

Combination of, combination of everything.

Okay. Okay.

Basically instead of solo financing, we are going for syndication.

We'll take 1 last question from the line of Mr. Sohail Halai. [Operator Instructions]

Good evening, sir, and thanks a lot for the opportunity for hosting it. 3 questions please on the P&L point of view and 1 from the asset quality point of view. Sir, if I look at our CD ratio, is that still 66%, that is including gross loans. So first, how far are you in terms of raising the deposit rate, even if the liquidity tightens? Second, in terms of -- in this perspective, what is your outlook in terms of the margin going forward as you leverage more in terms of your balance sheet?

As far as credit growth is concerned, yes, today, we are at 66% less whereas growth under retail, which constitutes about 43%. It is growing at more than 10%, 9%. So that we will continue. Now the issue is how to increase the ratio by taking exposure in the corporate because in the last 2 quarters and before that, the corporates are very careful and the bankers are also very, very careful in underwriting the corporate loans, because of the pandemic issues. Now we see a lot of traction as far as the corporate loans are concerned. So we feel that with the loan book, which we have already underwritten about INR 20,000 crores plus the fresh financing which we are going to do. I think corporate will also grow at a rate of more than 7.5%. Retail growing more than 10%. So I think this percentage will be increasing to maybe 69%.

Okay. And its consequent impact on margins. Are you looking at subsidizing some of these loans and your yields will come in or common basically, you will go for the margins?

Margin going forward, I think it will increase. Why I'm telling is, as on debt, we are having a margin of about 2.72%. And the next quarter, we are hopeful that we should be able to cross 2.80%. The way in which we are underwriting the proposals and the interest income, which we are earning, I think 2.8% next quarter we will be comfortably achieving.

Okay. So sir, just clarifying. So in terms of a -- from the growth perspective, you would not be compromising on the yield part of it, right?

See, it is a balance. If the account is rated AAA, naturally, the yield on advances have to compromise to some extent because AAA people will not pay. So we'll have a combination of BBB, A, AA and AAA also, so that at the end of the day, we'll be in a position to have a good margin.

And sir, in this 1 more thing that I note is basically in terms of your other -- or your OpEx, that has been flat for the last 5 quarter onwards. So do you think what is the kind of a cost growth that 1 should build in if the growth -- and whenever the growth come back because this could give you the benefits of operating leverage as well.

Corporate, sir, the growth, which I am projecting is, it will be more than 6% to 7.5%.

No sir, I was talking about more of on the OpEx side that has been flat from the last 5 quarters.

Yes.

Yes.

So what is the cost -- kind of a cost growth that we actually should use?

Yes, we're answering.

Yes, bank has been taking a lot of measures post [ double ] commission, a lot of cost-cutting measures, which is basically the synergy. As a result of that, rental savings is there. And employee cost also saving is there due to retirement and adjustment of employees in different specialty verticals. So -- and during COVID time, we have also found that whatever rental agreement I mean has come for renewal, there is a reduction as compared to earlier position where there has to be increase, steep increase. So thereby, our cost what you have said, OpEx has remained overly stable. So we expect this -- it to go in the same manner, maybe 5% to 10% increase maybe there going forward. But this is a pattern.

Actually, we are taking advantage of the present market conditions in the real estate sector, the low rates, demand for the commercial spaces whatever the existing or 12,000 lease premises, we have renegotiated. And many of those things, we are at a much lower price, and we are blasting for next 10 to 15 years. So there, we are saving a lot of money cumulatively numbers, I don't want to disclose it, but there is a considerable amount. We are saving that. That's the way we are controlling our operating expenses, but simultaneously just we are strategically some part of that, we are reinvesting in our IT area where we want to bring it the younger generation to close to our bank. That's why we are revamping our existing mobile app also and many such things, data dump analytics and all latest technology, we are introducing it. So some part of that, what we are saving through this real estate or whatever the lease rentals and all other things or even synergy. Actually, we have almost closed 800 branches because of the last 1 year. And we are planning to close wherever the possibilities are there in the next financial year also to some extent to take the advantage of synergy. We already got almost INR 140 crores in the IT sector also for the last 1 year. Like that in the real estate sector also is we have got INR 200 crores to INR 250 crores benefit this synergies. So these are all we have a continuous basis, sir, and we are -- quarter-to-quarter, we are working on that. And part of that in the strategically, we are implementing in the IT so that we can revamp our IT sector so that we are coming out with 150 new features in the mobile app.

And sir, final question, basically more of in terms of the ECGLS so any disbursement made during the quarter, the outstanding book and the portfolio behavior in terms of the ECGLS book that you are looking at right now?

See, ECGLS book is very good. And during the current quarter, we have disbursed about INR 180 crores. And put together, total my emergency credit line book is about INR 11,044 crores. And this book is doing good.

Sir, entire book has started paying or the part of it has started paying off?

See, actually, this is 20% of the outstanding which we had. So this 20% installment moratorium is also there and where moratorium is not there, they have started paying. But however, delinquencies, we observe very negligible in this particular what you call, vertical.

So sir, on that 80%, the normal principal and interest that are getting paid?

Here 100% plus 20%, it is 120%.

Yes, so in that 100%...

So regular account, unless until regular account is paid. Otherwise, both will become NPA.

Okay. Okay. Understood. Understood. So only on this 20%, it is the moratorium, rest is actually paying off on a continued mode. And just a final question, we have a very large pool of technical write off still at around INR 60,000 crores. So any view on that in terms of how do we look at the recoveries coming from that portion?

Actually, out of -- if you take that total portfolio of technically written off accounts, most of it are in NCLT, most of these accounts are in NCLT. So yes, gradually, 1 or the other big accounts are getting cracked. So we expect some recovery and then moreover, you see our this Q2 results here also, this technically written off accounts also, we have made a lot of recovery, about INR 700 crores. So there also is -- I mean, they are bigger accounts, there are smaller accounts also in this category. So though the bigger accounts fall under NCLT mostly the smaller accounts, we are getting steady recovery. Over the quarter, we are getting that as you are witnessing. Now so far as the other bigger accounts where we have not gone to NCLT or some other measures are being taken. We are following up for OTS also. We are open for that. So these are the measures which we are taking and -- on a quarter-to-quarter basis, we are getting dividends out of that. We are getting the recoveries. That is how we propose to continue.

And during the current quarter, as our executive director is selling INR 715 crores have been recorded from the written-off accounts. And this quarter, we are targeting about INR 1,000 crores to be recovered from the written off accounts.

And sir, plans for this national ARC transfer, how much we actually kept it out? And if you could just share how the accounting treatment would be done of this?

We have identified it to the tune of about INR 4,000 crores, which can be transferred.

And that entire thing, whatever the recovery is will come into the P&L.

Yes. Not P&L, provision will be written back. Because those accounts have not written off accounts, they are 100% provided for.

Okay. And if it is a written off account, then it would come in the other income line, right?

Exactly.

With that, as we are running out of time, I would like to hand the conference here. Thank you so much team from Canara Bank, especially MD sir, CEO and all the Executive Directors. On behalf of Antique Stock Broking, I'd like to thank you all, and thank you all participants for joining us. Have a great evening. Bye.

Bye. Thank you very much.

Thank you, sir.

Thank you.