Canara Bank (CANBK) Earnings Call Transcript & Summary

Good evening, everyone. We welcome you to the Q3 FY '25 earnings web call of Canara Bank. Thank you for giving us this opportunity to hold [indiscernible]. Here with us we have Mr. K. Satyanarayana Raju, MD sir. We have with us Mr. Ashok Chandra, Executive Director...

No, no, no. Ashok Chandra is not there.

Mr. Ashok Chandra is not there. He has gone already to PNB as MD.

Sorry, sir. Mr. Hardeep Singh Ahluwalia, Executive Director; and Mr. Bhavendra Kumar, Executive Director; along with other senior management team out here. Without any further delay, I hand over the call to MD sir, post which, we'll open the floor for question and answer. Over to you, sir.

Good afternoon to all of you, sir. So another consistent performance figures I would like to share with you further as on the December quarter performance. Our Global Business has grown at 9.3%, stood at INR 224.19 lakh crore. Our global deposits grown at 8.44%, stood at INR 13.69 lakh crores. Our global advances have grown at 10.45% as against -- and stood at INR 10.49 lakh crores. Our operating profit again regained, and it is reflected more than 15.15% year-on-year growth, which stood at INR 7,837 crores. Our net profit grown at 12.25% year-on-year and stood at INR 4,104 crores. Our PCR has reached the all-time high of 91.26% with a year-on-year improvement of 225 basis points. Our gross NPA has come down to 3.34%. Year-on-year decline is 105 basis points. Our net NPA has reached to the all-time low in the history of the Canara Bank to 0.89% with a year-on-year decline of 43 basis points. And we have grown the advances more than 10%, what we have given the guidance, double-digit at 10.45%, it was led by the RAM credit at 12.32%, and our corporate has grown at 8.04%. This RAM credit has led by again retail credit at 35.46%, mainly on the housing loan grown at 12.26% and vehicle loan grown at 17.26%. Our earnings per share stood at INR 17.59. This is against INR 2 face value. And our fee-based income shown a steady growth with a year-on-year 23.31% and stood at INR 2,185 crores. Our slippage ratio, first time it has come down below 1%. We were able to maintain that below 1%, and its year-on-year reduction is 28 basis points, which stood at 0.96%. Our credit cost, again, all-time low in the history of the Canara Bank to reach to 0.89% at 8 basis points. See, at the initial stages when we commenced out the financial year, while announcing the last March, last financial year results, we have given a guidance in the 13 parameters to the investors. The same 13 out of 13 for March, whatever we have given the guidance, out of the 13, 9 parameters already we surpassed or we achieved whatever the guidance we have given to achieve by the end of the March, we achieved well within that 3 months earlier only. Within 9 months itself, we could achieve that 9 parameters. These 9 parameters are: advances growth, then the gross NPA, net NPA, PCR, slippage ratio, credit cost, return on equity, earnings per share, return on average assets. These are all comfortably we have surpassed at March, whatever given the guidance. In 4 parameters, business growth and the deposit growth and CASA and NIM, I want to share it with you that though the growth is steady, but still here we are facing a constraint that the market is -- liquidity is still having a problem. We can garner the term deposits. It's not a big issue for that. It's not a concern for the bank, but only thing, at what rate we have to raise that. Since in the market the rate of interest of war is going on, it has become a costly affair. That's why last quarter, when we have 8% of excess SLR, instead of garnering the high-cost term deposits, we depended on window available with the RBI by pledging our excess SLR and raised around INR 40,000 crores, INR 45,000 crores. And that we could raise it at around only 6.5%. That is helping us in reflecting a better performance in the bottom line. That's the reason actually we have shown a growth of 8.4% in the deposit. That has indirectly impacted our guidance of 10% business growth to 9.3%. But we want to continue because, again, we have kept in mind that the LCR guidelines, what are the regulatory guidelines which is going to come from -- effective from April 1 onwards, that may impact our LCR to 12 to 13 basis points. At this moment, our LCR is 123% as against the regulatory requirement of 100% and well within the bank requirement of 105%. We are at 123%. But if you impact that as on date that guidelines are implemented as on today itself, our LCR would have been fallen from 123% to 110% or 111%. Just to bring it back to 120% in the December -- first week of the December quarter, we introduced 2 long-term tenure term deposits and offered a higher rate of interest, that is 2 to 3 years and 3 to 5 years buckets. And we offered at a 7.3 and 7.4 for general public. That has attracted a quite handsome of amount. We almost garnered INR 8,800 crores so far in the last 1 month. And we will continue to do that so that, so that will take care of our shortfall of the LCR. Whatever the guidelines we are going to impact our LCR, that 10 basis points, again, we want to regain by canvasing the deposits under these two buckets. That has cost -- that has impacted our cost on deposits to a little bit. That has -- also has impacted our NIM to some extent. So these are all the few glimpse of the performance I shared with you. Now open for all of you, sir. You can ask any clarifications. We are there to answer you.

[Operator Instructions] We have a first question from the line of Ms. Mahrukh Adajania.

So just a couple of questions, firstly that -- just in terms of the deposit growth, how do you plan to boost your CASA? Because you're already down to 30, right? I know there's a lot of competition. Traditionally also, your CASA was very competitive given your -- given that your geographical presence kind of match that low CASA. But now, at these levels, how do you boost CASA? And what is the tolerable level of LDR? As in -- as of now, the domestic LDR is already 78. So can you take it up to 80, 81? What is your comfort level of LDR? That's my first question. And I have two others.

Okay, madam. First question, first let me answer about that CASA, what we are doing it. We are recognizing our shortfall of the CASA. That way, the last 2 years we have come out with so many new products are targeting for the various sections of the people. But all those products have been deeply penetrated and it has attracted almost to 23 new -- 23 lakh new customers in those new products. It has contributed to us almost INR 17,200 crores incremental CASA deposits, savings deposits alone. But what the unfortunate part is, at this moment when we are introduced at that time itself, the market liquidities became a major issue and the market has gone beyond the computations, beyond the expectations. Under the -- simultaneously, industry started offering very high rate of interest. And you are aware that now presently, in all public and private sector banks, the payment platforms have been stabilized. Every individual can shift his surplus funds anytime to the -- either the term deposits or to the mutual funds, or whenever he wants he can redeem it and bring it back to his savings bank account. Under such matured payment systems, the customers' innovate is the tendency became that they are not retaining beyond their -- whatever the basic requirement of this CASA amount in the savings bank. Remaining entire surplus, they are shifting to the term deposits or even for the other income revenue sources. That is a major concern. But our trust will continue in the CASA, because recently also, in just 1 month back, we have introduced -- in the current month only, we introduced a Canara Crest to -- that is to reconnect with our existing high net worth individuals. This is also an innovative product, Canara Crest and Canara Crest Plus. This is targeting for our existing customers who are maintaining a well average balance -- daily average balance, a good, handsome average balance, we are making them as a customer of the bank instead of a customer of a branch. We are making them all 10,000 branches as a home branch for them. Anywhere if they visit, they get the same treatment in all the 10,000 branches. And we've made the branch manager as a relationship manager for the such high net worth individuals. We are meeting them, we are extending this facility, and the initial response is very, very high, so that whatever the steps we are taking in augmenting the fresh deposits, that will -- this initiative of retaining the existing customer and their balances will help in growing a little bit in the coming 2 months or 3 months. But definitely, it's a challenge to grow in that. That's why our innovation of products are targeting the sections will continue here afterwards also. And the second one is what the main is, you asked about...

LDR.

CD ratio. CD ratio. CD ratio, madam. We are already at 76.5%. We may reach at -- we are comfortable at 78% because the 18% is SLR, 4% is CRR. If you together, it's a 22%. If you remove these 2 things, the 78% is comfortable for us. That is our comfort level. Till that time, we will continue to grow in that. The 78% will be for us, psychologically, is the limit we can absorb it.

Okay, sir. And my other question...

It's a lower CD ratio.

Got it, sir. Got it. Sir, and my other question is, is there any one-off in interest income, because other interest seems to have gone down this quarter, and likewise, in your fee-based income, where you have 3 components, commission, service charge and miscellaneous -- you have 3. So the miscellaneous is a very big amount. It's bigger than the commission exchange and brokerage. And this quarter, it has fallen Q-o-Q. So can you break it down into components or explain why the miscellaneous fell so much, and likewise if there's any one-off in interest earned, interest income? And also in the provisions, there is an NPA -- sorry, an investment provision, NPA investment provision, right, of INR 4 billion. What is that for? Nonperforming investment, yes.

The first question...

First question is one-off in interest income.

Let me answer you, madam, first of all, the one of the interest income. Actually, the interest income, the -- if you look at the Q-on-Q or a year-on-year basis, interest on loans and advances is a considerable improvement is there because our advances are growing steadily. But the only thing, the last year -- whatever the last year and this year we used to get a benefit of excess liquidity, whatever available in our system we used to lend in the -- effectively in the overnight market or call money market, that benefit we are taking it in that, that is actually other interest income. But this time, since we are using our excess liquidity and increasing the credit growth, we are not lending more in that overnight investments. There, we have seen some reduction in that, the other interest income. The one-time interest is, the last quarter, we got some INR 320 crores benefit in the NPA account. On NPA account when we are resolving it, we got a recovery towards the interest on NPA INR 320 crores. That 320 one-time is not available this time. Even with these 2 conditions, still we could recoup because of our improvement in the interest on loans and advances. That is -- that's why if you see that sequentially only INR 200 crores shortfall is there in the interest income, but it is a bottom line with its base. Here afterwards, we strongly believe that quarter-on-quarter there will be a steady growth in NII. Then second, it comes for the fee income. Fee income has grown at 23.31%, madam. This fee income, it is -- one is commission exchange brokerage, whatever it is there, it's a steady growth only it is there. It's not too much growth, whatever it is there. But we are focused on nonfund-based business mostly. That -- earlier, it was a stagnant. But because now centralized, we are centralized, that nonfund-based business, entire thing, that has the initial stages mis-stabilization, it took some time. But now it has started giving the results. Again, while it is also -- we also started collection centers, cash management and collection centers, that is also giving some good income that has helped in giving that some INR 100 crores we got in that fee-based income. Earlier, last year, this vertical was not there. But this vertical is created in the second half of the last year, that has contributed good income. Regarding the miscellaneous income, it is -- miscellaneous income is only debit card charges. And that you have to see that miscellaneous income you cannot see from sequentially quarter-on-quarter. It has to be looked at to that quarter on -- year-on-year wise. Because many of the income, in 4 quarters, some incomes fall in one time measure of either September quarter or December quarter or March quarter. Let us say that CGTMSE fee collection that will fall in the September quarter. That's why September quarter that it looks that more it is there, and there is a fall in that. When you have to compare it, it cannot be compared in the sequentially. You have to compare only year-on-year basis. If you see the year-on-year basis, INR 570 crores became INR 747 crores with 31% growth. There, I feel that it is in line with the as-expected only. Then the -- again, the treasury income also, we got some improvement in the treasury income. That is because we are -- as for the latest regulated guidelines, every bank can sell their 5% of held-to-maturity, HTM, securities. First 2 quarters, we have not sold any securities because we want to keep it because we have sufficient incomes. Since the market is -- we are getting some benefit, we immediately taken some call, part of that 5% we sold in this quarter. And the remaining part, we kept it for the next quarter, the current quarter. That benefit also we got some around INR 300 crores. That has shown that some increase in the treasury income. Now regarding NPA, madam, when we are a resolution -- with the -- [ through ] resolution, when we send that, when we transfer our account from banks to NARCL, that will be -- we are getting 15% only down the cash payment. The remaining 85%, we get SRs. That SRs will be accounted in the investments. But the only thing -- see, even though it is a central government guaranteed accounts, we don't -- we cannot reverse that provisioning. So it is nothing but increasing the provisioning in the NPA, but to that extent decreasing the provision in the NPA. If you look at the overall, the provision is almost it is same as last quarter, except that there is no fresh investment is put to NPA. Hope I answered all your questions?

Yes, sir. Sir, only on that miscellaneous income, that's only debit card.

Sorry, madam. We have a lot of other participants waiting in the queue. If you could just... We have our next question from the line of Piran Engineer.

Am I audible?

Yes, sir.

Congrats on the quarter. Sir, firstly, you are one of the largest players in agri gold loans. And right now, RBI has been talking about some changes in that segment in terms of they have to be collateral-free. They have increased the limit from 1.6 lakhs to 2 lakhs. Just any thoughts on how this product evolves? Because I presume everything is collateralized. And if RBI wants it to be collateral-free for PSL benefit, how will this business evolve?

Sir, our internal audit by the RBI is concluded, and I have not seen any such comment from that RBI regarding our gold loan in the agriculture. So I don't see any problem at this moment from the -- any regulatory comments on that.

So this full 1.5 lakh crore book comes under PSL, it gets a PSL benefit?

No, sir. No, no, no. So INR 38,000 crores is retail portfolio. The remaining amount is under agriculture.

So that remaining gets PSL, 1.1 lakh crores?

Yes, sir. Yes, sir.

Okay. So there's no issue on that front with RBI?

No. So because of the current year audited, the RBI exit meeting also is over. There is -- we have not seen any comment that -- related to that particular area. That's why we cannot comment on that.

Okay. And just in general on the retail portfolio, RBI has been concerned about certain practices. You can't revolve without paying the full thing. They are concerned about bullet loans in gold loans. Any changes to the underwriting we are doing? And also the 75% LTV, is it only a disbursement or throughout the term of the loan?

So that LTV is throughout the loan. There is no question of -- at the time of the disbursement because the expectation is that whenever the rate of interest charge -- as and when charged, it has to be serviced. Regarding the retail loan space, we don't have any bullet payment type of products at all. It's all equated monthly installments only. And wherever it is there, if it is a bullet payment, the interest, as and when serviced, the charge has to be serviced by the borrowers. Without that, there is no such product is available in Canara Bank. Regarding the regulatory concern, sir, it's only unsecured loans. But unsecured loans is not so active in our bank, because we have only -- against the salaries and pension, it is a INR 15,500 crores as on date. So that is a very small amount compared to our total 2,05,000 crores to 2,06,000 crores retail product. It's hardly not even 6% or 7%. And in that, NPA is also less than 1%. We don't give any clean loans other than the salaried class and pensioners who draw their salary or pension through our bank. We don't give any preapproved loans. We don't give non-salaried class clean loans and all. So the concern is not there. Again, another concern by the regulatory is the MFI exposure. Our MFI exposure we reduced, even from 1 year back, it was around about INR 700 crores, now it has come down to INR 300 crores. And we are kept -- unless -- the maximum cap is only INR 40 crores for MFI, and we are not so aggressive on the lending to the MFI.

Okay. Sir, this was very useful. Sir, secondly, to the previous question, you mentioned INR 320 crore interest benefit. Sir, can you just repeat? I think last year, which I had...

Let me say that the last quarter our interest on NPA recovery is INR 780 crores. [ That's ] interest on NPA accounts for that quarter. But generally, on an average, we get every quarter, let's say, INR 400 crores to INR 450 crores. But last quarter, because one account resolution we got INR 320 crores towards the interest, we have taken that benefit in the interest income. But otherwise, the average income, average interest on NPA, every quarter we receive on INR 450 crores to INR 500 crores. This time also, we got around INR 530 crores.

And sir, that comes in other interest income line item, right?

Yes, sir. Other interest income -- yes, sir. Other interest income...

Advances [Foreign Language].

Advance is fair. But other interest income is whatever your overnight lending. You do it whatever the excess liquidity it is there. Whatever the excess liquidity you have, you will do that in the -- you deploy in the overnight or short-term investments, that income. That income has come down a little bit.

Sir, and just last year, it may be little early, but what is your deposit...

Piran sir, we have a lot of other participants sir. We have our next question from Mr. Jai Mundhra.

Sir, I have some questions, sir. One is, sir, apart from this interest reversal, the interest on NPA that was lower by INR 300 crores, was there any other reason that -- why the loan yields would have declined in this quarter? Any other product where you are seeing maybe that there is a pressure on yield?

Sir, if you look at our yield -- say it is quarter-on-quarter, if you see that earlier the September quarter, our yield is 8.77%. Now it is 8.79%. There is a 2 basis point increase in the yield. So literally, no product we are compromising in the rate of interest, and we are not reducing any rate of interest. Even let me share it with you that 1 year back our corporate portfolio of 4 lakh crore used to give at 7.1% to 7.20%. That's the yield, average yield. But now we are successfully, by remerging, rejigging that -- the exposures and all, now we are almost touching 8.5% in the corporate yield. So yield-wise, we don't have any concern. We already are in the highest level. But only our concern is, the only cost of deposit.

Okay. Understood. Secondly, sir, if you can provide the breakup of slippages for this quarter in outstanding restructured -- standard restructured book?

Sir, total actually, the slippage, sir, is INR 800 crore agriculture, INR 500 crores is retail. Near to the INR 1,000 crores is MSME. This is INR 2,300 crores, sir. No corporate account has slipped to NPA. Now, the outstanding restructuring RF1, RF2 under MSME restructuring, total now, as on date, standard restructuring is outstanding at INR 8,800 crores -- INR 8,600 crores. And already restructured accounts of INR 4,500 crores slipped to NPA. Total, it is INR 13,000 crores are outstanding in our books, the restructuring, sir.

Right. And lastly, sir, I think you partly answered on gold loan. So if I remember correctly, last quarter our retail [ world ] was INR 28,000 crores, which has increased to INR 30,000 crores, right? So that product is still growing in a decent way. Is that the right understanding? Is the number comparable, the INR 30,000 to INR 28,000 crores?

Yes. Sir, actually, it is growing decently because metropolitan cities, with the stringent LTV ratio, we created a product available to them instead of giving earlier ways to give for agricultural purposes with the documentary evidence. Now that we are discontinued, we have created, without any documentary evidence, if anybody wants to avail a secured personal loan, they can avail that secured personal loan. So that product has attracted the attention of the many metropolitan borrowers. That is giving a continuous almost 15% growth, sir.

Any changes that you have to make to the product in terms of, let us say, disclosure of end use or maybe rollover? I mean, do the customer rollover, they have to necessarily pay the entire outstanding...?

No, no, no. No sir. We are 100% complying the RBI guidelines, sir. No rollovers in these accounts.

We have the next question from the line of Ashok Ajmera.

Congrats on a good set of numbers. With regard to profitability is concerned, sir, operating profit is good. And in spite of the difficult times once again coming in the banking, you performed well on the profitability front because you manage it well. Now sir, my only concern, which is a general concern nowadays in the entire banking sector, is the growth in the business. You've answered in your initial remark only and especially the credit growth. Now, if you look at the current 9 months, I think both on deposit front, of course, we are almost half. And if you take out the -- I mean, if you calculate the total FY '25 and what is left now in the remaining 2.5, 3 months, then on both the fronts, how do you plan to meet the given targets, sir? Because then there will be a lot of pressure during this quarter, both on the deposit mobilization side also and the credit side also. And you already consumed a major part of your excess SLR also.

No, sir. Actually, let me say that even today our excess SLR cushion is still it is there, because partly we are even onward lending to the overnight deployment because we are getting an excess SLR of 6.5%. If the market is paying 20 to 30 basis points extra, we are lending there. That benefit, we are taking it. So if my credit growth is picking what we have given the guidance is 10%, we are growing at 10.45%, I'm sure that the 10%, 10.5% will be definitely here, we can easily achieve. So whatever the given target under the advances growth, 10.45% may not be a big issue for us. To meet that requirement, I don't think that, because we have enough cushion in the RBI window, we don't have any problem in meeting that requirement. But at the same time, I don't want to cross my CD ratio beyond 78%. That's why we are putting entire our energy again on the liabilities for this entire quarter. We are already giving the calls to them. And wherever we are addressing the people, we are expressing our concerns and we are giving a special trust on that, campaigning mode on the liability side. It's not that the only CASA we are focusing. We are even interested in the retail term deposits. So retail term deposits, actually September quarter, there was a muted growth was there. But the December quarter, we've grown at least INR 5,000 crores. And now as on date, we have grown at least to, say, INR 15,000 crores absolute numbers in the retail term deposits. We aim to grow in the retail term deposits as well as the CASA, sir. So we will continue to do that. I don't think it will impact my credit growth, because our given targeted growth is only 10%, we already achieved 10.5%. And business growth also 10%, it is all achievable. Because 8.4% deposit growth, if you can focus on that, if you cross the 9%, we will achieve the business growth also, sir.

Okay. Sir, point well taken, sir. Sir, my second question is on recovery side. So both in the normal recoveries and also the recovery from the return of accounts. So what do you think now this quarter is going to be? I mean, is it -- because your major thrust, as you said, will be on the deposit side, [ will be a ] good quarter. On the recovery front, how do we spend this quarter in total FY '25 both from the normal recovery and the return of account recovery? And having said that, after that, on the SRs, like you said that 85% of the SRs and only 15% of the cash recovery and especially in case of NARCL, even if it is government guaranteed, we don't take it as an income. So in this quarter, how many such cases have taken place and how much amount of recovery in SR, which we have gotten, cash recovery in SRs?

Sir, first, let me say that about the recovery of the -- recovery steps what we have taken there, of course, NCLT is one aspect, but the SARFAESI is another aspect of. Major thrust is OTS, and DRT also we are pursuing it. See when you focus on DRT, SARFAESI, NCLT, ultimately people will come forward and settle -- try to settle the accounts under OTS. So our recovery is more -- through OTS is more compared to all other things. Even if you see that the existing recoveries plus upgradation total together in the current quarter, the December quarter we could achieve around INR 3,600 crores. If you see the cash recovery alone, it is INR 3,100 crores. Out of INR 3,100 crores, we got the benefit of NCLT, INR 653 crores. The remaining all we got it through other modes of recovery. And the same tempo if you have seen that we have shown to the -- earlier also that in September also, we were -- our recoveries are more than the slippages. Whatever our focus we are shifting to the liabilities is not from the recovery side to the liabilities. The recovery sections are separate, recovery teams are separate. We don't want to mix those teams into that liability side. But the marketing teams, whatever it is there for business growth, there, we want to focus, divert them into your liability focus, but the retail, the recovery and the slippages, 2 teams exclusively earmarked for these two parameters, we'll continue to work on that. And the March quarter also, we expect that the same type of performance, whatever we have shown on the December quarter, the slippages we could reduce it to below INR 2,400 crores. And recoveries should be more than INR 3,000 crores; that will continue. We are expecting even INR 2,000 crores in the technical return of accounts, the remaining is in the normal NPA accounts, the cash recovery, sir. And regarding NARCL shifting, the current quarter we are expecting we may get some INR 500 crores to INR 600 crores to benefit. They identified some accounts, but all consortium banks have to come forward. And everybody has to give the clearance. Then only it happens. But we are also -- wherever we identified, we are negotiating with the NARCL. In 2 accounts, we got a positive response. We are hopeful of that 2 accounts, if we do the 2 accounts, we may get a benefit of INR 500 crores to INR 600 crores, sir.

So this INR 500 crores, INR 600 crores, the outstandings, I mean -- are the recovery?

No, sir, it is not the outstanding. It is a recovery of what we are expecting. But out of that, again, cash recovery will be only 15%, sir. The entire thing will be in the form of SCRs.

Okay, sir. Sir, last point is on...

Sir, we have a lot of other participants, sir, in the queue. So we have our question from the line of Mr. Jugal.

My first question is regarding the bank's density for advances. And I just wanted to know how it is trending and the RWA density of our international advances portfolio.

Sir, actually, our total global CD ratio is around 76.5%. And we see that the, because CRR is 4% and the SLR requirement as on date is 18% total, together 22%, so we don't want to cross 78% in a normal condition space. Though we have support in the form of [ wound ] funds and even refinance funds and even infrastructure bonds and all those things, but still, in a normal course we don't want to cross our CD ratio beyond 78%. With that to the CD ratio, we are at 76.5%. At the present, our growth also projected is only at 10.5% to 11%, we will be well within that 78% for the March also. The global only, I shared with you. Domestic, maybe a little bit, 1% or 2% for -- here and there maybe happened, this is only for overseas.

Sure, sir. And what proportion of our total advances are externally rated?

Pardon?

What proportion...

Externally rated, actually, we have -- see, external rating is mandatory in our bank as per our policy. It is INR 25 crores and above. So in all those things, so 80% of our exposures are A and above.

Sure. And sir, if you could just guide on the impact of proposed RBI guidelines on LCR?

Sir, the proposed RBI guidelines of LCR is going to come -- expected to come effective from April 1 onwards. As on date, our LCR is 123%. And we have assessed that if we implement those things as on today, it may impact our LCR from around 11 to 12 basis points. So our LCR may come down to 110 to 111. But to take care of those things, again, we introduced it in the last quarter for raising the deposits at a longer tenure, that is the 2 to 3 years and 3 to 5 years buckets we introduced. And we offered a higher rate of interest at 7.3% and 7.4%. We already garnered more than INR 8,000 crores in this, and we want to continue to garner in those two buckets at least for next 2 months, so that again we can restore it back, my LCR, to around 115% to 120%.

Sure, sir. Sir, could you help us with the total exposure in HAM projects and also ethanol projects and other biofuel-based projects, per se?

Yes, sir, our exposure to that HAM projects is there around INR 2,500 crores to INR 2,600 crores. And everything is standard. We are most a financial -- we are a part of financial closures of 70 such projects [ we cased ]. But there, we have some internal policy that generally we take it up A and above-rated companies only. But now again, we are actually considering monetization of those HAM projects which are started taking the -- receiving the annuities. That is also is in the market. That also, we are actively participating in that. And ethanol also, whatever the actually it is there, it's more than INR 2,000 crores it is there. Compressor biogas also, we are actively considering that.

Sure. Sir, if you could possibly help us with the total exposure to renewable sectors like solar and wind energy, per se?

The exact figures, if it is required that our CRO will share it with you.

With regard to renewal, solar and energy together, our exposure is around INR 6,500 crores.

That is actually outstanding what he is telling about. But the sanctions are there around INR 15,000 crores. These are all projects funding. Gradually, depending on the progress of the sanction -- the progress of the projects, only it will be disbursed. As on date, outstanding sir, INR 6,000 crores, INR 7,000 crores are there, plus INR 2,000 crores ethanol is there. So total INR 9,000 crores is there. But the sanctions are there. Total sanctions, if we consider that exposures are more than INR 15,000 crores.

Yes. Makes sense. Sir, if you could help us with the exposure to Kerala and Telangana government and specifically the state PSUs, if you could help us out with the same.

It's specifically disclosing outside. It may not be correct. But we have state-wise risk rating is there. State-wise exposure limits are there. These are all the limits will be fixed by the boards and board subcommittees. We are well within that sublimits.

Sure, sir. Sir, my last question is on the potential impact of new RBI guidelines on operational risk and interest rate risk in banking book.

Our CRO will offer -- explain to you, sir.

See, the new guidelines on IRRBB is to be -- I mean, date is yet to be announced, but new guidelines has come. RBI is yet to announce it. And as per the guidelines, if the impact of interest rate change is beyond 15% of my Tier 1 capital, then to that extent, I have to provide additional capital in the Pillar 2 -- under Pillar 2. So as of now, with the rough estimate, it is below 15%. So we did not provide any additional capital as far as Pillar 2 is concerned. Yes. It's below that, below 15%. So there's no impact. As of now, there is no adverse impact once the new IRRBB guidelines is implemented.

We have our question from the line of Mr. [indiscernible].

Two questions. First one is in terms of subsidiary monetization, I mean, what is your plan? And the second one, I think, in terms of the subsidiary business overlap, what has been your response? And in case the current guidelines has to come in the same shape and form, what would be your action plan?

Sir, actually, the first subsidiary, disinvestment is -- already, we have proposed a disinvestment in 2 subsidiaries: that is, one, Canara Robeco Mutual Funds; and Canara HSBC Incidence Company. These two cases, already all regulatory required permissions we obtained. Now, we have communicated to that respective boards to take it forward for that coming out of that public issue. That respective boards have created some board committees and for close monitoring of this progress. They are all doing their job. And now at this moment, I think bankers have been appointed. So it is under as expected lines, and we are expecting that both the companies may be -- may come for the IPOs in the next financial year. The second one is, if the RBI guidelines, as for RBI guidelines, a common activity between the parent company and the subsidiary is only for us CanFin Homes. But there are no time lines to be stipulated by the regulator. We are watching that market. If at all we feel that we get enough pricing, we expect that our pricing valuation of that company should be in the 4-digit. Whenever we expect that the share price crosses the 4-digit, we may think of coming out of that.

We have our next question from the line of Mr. Rakesh Kumar.

Can you hear me, sir?

Yes, Rakeshji.

Sir, just I was a little confused with the numbers that you mentioned in other questions that you have changed the asset composition in favor of loans and reduced the cash balances number. And that is pretty evident in the number as well. But I am not able to see that the yield on fund has gone up. So that has not happened even though there's an increase in the yield on advances. So with the asset composition [indiscernible] what has happened?

Let me see that, sir. Actually, this exercise we have started from December last year, December to June. If when we have done this rejigging of that low-yielding advances have been -- we have taken it back, we started doing that high yield which is 8.6% to 8.79%. 19 basis points increase is there in that yield on advances. The 19 basis points is not a small amount. That has happened only because of these things. Otherwise, our MCLR -- our RLR, there is no change for the last 2 years. Then -- even then how the yield has increased, that increase in the yield is only because of that, sir.

I was referring to the slide information that we have. Anyway, I understood your point. Second thing, sir, last quarter, we had the LCR of 130%. Now we have -- you mentioned 120% or 123%.

Rakeshji, just one minute, Rakesh. Our CFO wants to share something to you.

Your question is when yield on advances have gone up to that extent, how yields of funds have not gone down, gone up, isn't it? That is your question.

A bit change in asset composition in favor of...

I'm holding my question so that we are reaching to that composition. I answered correctly. Now, tell me, sir, LCR -- related LCR, no?

Yes, sir. What I was saying, sir, that we have switched separate some of the...

See, the LCR, earlier 130 to 123, why it has come down, that is your question, sir.

No, no.

Generally, LCR will -- last quarter, we announced that 130.

Yes. So that has happened. What I'm thinking is that do we plan to further shift cash balances to advances, considering that LCR guideline, as you are mentioning, might come and we have LCR at around 123%? So do we have room for that to do it further?

Sir, as per regulatory requirement, one has to maintain 100%. Within that our bank, we kept our -- our Board has kept an internal ceiling of 105%. As against requirement of 105%, already we are 123%. So even if the RBI new guidelines implemented, that will impact only 11 to 12 basis points, which may come down to 110 to 111. But we don't want to be -- play this business at such a smaller gap. That's why we have already taken initiatives to garner the more deposits in the longer tenured buckets, that is 2 to 3 years and 3 to 5 years, which we are offering the higher rate of interest. And we already started garnering the deposits. We garnered more than INR 8,000 crores in the last 1 month.

And last question, sir, is there any classification issue in the commission exchange brokerage income line?

No, sir, there is no certain -- miscellaneous income, you are aware that last year RBI guidelines have come that P&L interest should not be charged in the interest side. It has to be booked in that other charges. So that's the accounting standards have been changed a little compared to last year to this year. So that's -- to that extent, interest income has come down, and to that extent interest -- the miscellaneous receives are increased. Except that, the remaining things are only because of the business growth. Nothing else. That comes approximately INR 150 crores or INR 160 crores.

We have next question from the line of [indiscernible].

Congratulations. Sir, congratulations to team Canara for a very stable and positive result. Sir, you just highlighted that you are open to monetizing CanFin Homes. Now, if you're looking from a strategic [ period ], because you are saying that you are looking for 1,000 products in the current market condition, which is a little correction or a consolidation mode, whether it's housing finance sector or overall financial market. Are we open for a strategic buyer?

No, sir, actually, the -- because the RBI has given the guidelines and the subsidiaries that the common activity should not be there. But there are no -- for existing organization, there are no time lines for closing down those things. So since it is opened for the individual banks to take a call on that, for us, we know the internal strength of that company. We have 29.9% shareholding in that company. We feel that we have initiated something with the help of that board and that current top management. Some initiatives we have done in cleaning at the top level as well as in their functioning. That will start yielding the results in 1 or 2 years. We want to wait for that 1 or 2 years when the results are coming out, the real value will come out. When the real value comes out, then we may think about that this -- whether it has to be a strategic sale or whatever it may be.

Sir, but if somebody is working with a positive approach that you've done the cleansing, the value is already there at INR 1,000 to INR 1,200 or INR 1,100, whatever may be the fair value, and because we are offering 30%, which enables them to make an open offer to, so you can increase the sales from the market and the market would tender the shares. In such scenario we'll be a participant, or we'll wait for 1 or 2 years only?

Sir, it is -- actually, as an individual, these decisions cannot be taken as -- at this level. But generally these options will be discussed in the -- our strategy meet, it generally happens once in a year at a board level. And this year also, it is -- will be scheduled either in the March or in April. During that Board meeting period, it will be discussed thoroughly threadbare. Then as per the Board directions, we will proceed, and we will share it with you, sir.

Sir, next is on noninterest income. There has been very good performance when treasury was concerned and return of accounts are concerned. How do you see that panning out in the current quarter?

Sir, the noninterest -- the treasury limit, actually, whatever the benefit we got, it as a part of that 5% sale of HTM securities. That benefit we have taken -- because all other banks have taken earlier. We have not taken, we kept it pending. And now this December quarter also, we have not taken entire 5%, we have not sold it. Part of that only we sold it. The remaining balance we can sell it in this quarter. That benefit always will be there, that we will take the benefit out of whatever is the benefit is there. The second, recovery on technical return of accounts will continue. We are expecting this quarter also will be there around INR 2,000 to INR 2,100 [ crores ].

So what is the number outstanding on technical return of accounts?

We have around INR 68,000 crores, sir.

Okay. Sir, the yield on GSEC is in the region of 6.5% to 6.7%, the profit can match the previous quarters, or...?

We'll wait and watch, sir. Let us see that what will happen.

And do you anticipate to monetize your subsidiaries which you are already looking towards Canara Robeco in this quarter? Or do you think it will go into the next quarter?

No, sir, not in this quarter, sir, that will be in the next financial year. Already, the merchant bankers have been appointed. Now it is in their hands. Once they say that we are ready, then we will think about it.

Okay. Sir, I know you've answered the majority of the participants' question on CASA. If we move well on CASA, I think we'll outstand majority of the competitive banks. So what acceleration program other than what you've garnered in deposits, new schemes, can be done from the geography where we are present? Because it's a difficult geography where CASA is concerned because people generally don't keep idle balances because they are smarter humans. What can we do differently that will help us to grow better?

Sir, nowadays we are every year we want to open some 250 to 300 new branches. These new branches, we are planning to open where the CASA potential is there, especially where our presence is a little comparatively lower. And that's why the -- compared to the South India, we are opening more in the North and Eastern side of the branches. And last year we opened 211 branches. This year already, we've opened 180 branches, and we have targeted for 250 branches. This will continue for 2, 3 years, sir. And these 1,000 branches, if once opened, definitely create a mark in that. That's the strategy anyhow, it is continuing that, sir.

We have next our question from the line of Mr. [ Avind. ]

You mentioned about maintaining CD ratio below 78%. If the deposit environment continues to be constrained, we lower -- we continue to remain on CD ratio -- maintaining CD ratio below 78% or would we be flexible in that aspect? That is my first question. And the second question is on expenses, sir. This year, we have been able to manage expenses much below -- in a much more controlled manner. Can we expect expenses to be in line or closer to income growth next year, sir? These are my two questions.

First, let me say that -- liabilities, sir -- liabilities for us also, earlier also I shared something against that, it is not that CASA we are finding it difficult to garner the more CASA, but liabilities, we are not finding difficult to garner it. Only thing you have to shed a higher rate of interest, which we are cost-consciousness. That's why whatever it is required, we are garnering that liabilities. When we have decided that our CD ratio is 78%, there afterwards our incremental deposit advances. We will ensure that we will match these 2 things by -- if at all, if necessary, we may have to increase the deposit rate. That's all. Otherwise, it is not difficult for us to garner the deposit. Only thing, we want to be cost consciousness. We don't want to shed the higher rate of interest. That's why when you have a surplus cushion in your system, we want to take maximum benefit out of it. Once that is -- if it is coming to the adjusted, then we may go ahead with that, offering a higher rate of interest and garner the deposit. But at this moment, I don't see any such issue. The second one is expenses. I don't see any further increase in the expenses suddenly. But annually, I suppose a 6% to 7% annual growth in the expenses is likely to happen. But that's only to that extent I'm expecting that. Otherwise we will continue that, the cost-to-income ratio around 47%, 48%.

Sure, sir. Just one more question from my side. Sir, like if we see, especially in the system level, the unsecured loans, personal loans, credit cards and these, are other segments where multiple companies have faced issues because of the higher growth, and people say like overleveraging the particular set of borrowers that led to issues that we can see in different companies. Like I have a similar question for MSME. Sir, like MSME in the system as well as what the bank has grown at a commensurate rate in the past few years. Do you see any signs of overleveraging or any issues there, which could be propping up there?

No, sir. I don't see MSME any such leverage. Last 2 years back, we have revisited our underwriting standards of all our MSME products. And we are centralizing the processing of those accounts. We created each regional office, 177 regional offices. We created a hub for processing the MSME loans. That has started giving the results. That's why slippages are under control. That's why gradually our NP under MSME is coming down. I don't see any -- that too much stress on that except to 1 or 2 small government sponsored schemes that are anywhere the stress is there. But that is well within our risk appetite only. I don't see anything on that. And we don't lend too much to -- we don't lend too aggressively in anywhere and we are not active in portfolio buyout of any portfolio. Our total portfolio buyout outstanding is the only -- entire bank, all including retail, MSME, everything together, is only INR 1,600 crores. Our exposure to MFI is only INR 300 crores. So our even co-lending is also less than INR 1,000 crores. So we are not too aggressive on that lending here. Instead of that, we are actually making involve our branches to generate the loans, and that this year we are expecting that we will touch the 10%. That's a double-digit growth in MSME. Last year, we were at 7%, 7.5%. This year, we are confident that we may touch 10%.

Sure, sir. Just one last thing, if I can squeeze in. With respect to recoveries and return of accounts, so can we expect similar [ recovery ] rate for next year, 2 years, also?

Yes, this current quarter also I already repeated -- reiterated earlier, whatever the last quarter we got, around INR 2,000 crores, this quarter also we are expecting that the INR 2,000 crores will be recovered.

We have our last question from the line of [indiscernible].

Sir, a couple of questions from my side. Firstly -- I'm sorry if this is a repeat question because I got disconnected in between. Firstly, if I look at the SMA-2 book, you had called out 2 accounts, 2 state government accounts in the last quarter in the SMA-2 book. One was the Andhra-based PSU in the steel sector and the other one was a state government account. What is the update on those accounts as of now?

Now as on date -- as on December 31, these 2 are appearing in the SMA-2. But as on date, these 2 has come out of even SMA. There's all now even not even in the SMA 0.

Even the steel account?

Yes, sir, both steel authority and Telangana, whatever it is there.

Okay. Got it. Sir, and secondly, the last participant was also checking about the outlook on recoveries for the next 2 years. Is there some sense that you have in terms of trend?

See, 2 years period is too long period to predict. But I can tell that the present Canara Bank side, I can tell that -- I cannot comment on the industry-wise -- because we are conscious, we are a little conservative in high-risk portfolios, next 1 year or 1.5 years, whatever it is there, I'm sure that our slippages will be less than our recovery and upgradation.

Sir, and just lastly, if I look at the trend on other interest income, that has been trending downward. You expect the same...

It has reached it to the bottom, sir. Further down, we don't expect in this.

Okay. Okay. Sir, just one last question, if I can squeeze in. The other OpEx seems to be a bit volatile in the last few quarters. What is the cause for this?

No, sir, actually, you may be remembering that last continuously 3 years, we are investing heavily on the IT. So when you are investing, though it is a CapEx, next year onwards it will convert into an ATS and all service charges and all you have to pay there. So that's the only thing except that nothing is there, sir. And we are also opening new branches. You can except it last year onwards. Previous year, we were not opening. Last year, we opened 211 branches. This year also, we are opening 250 branches. That also will add to our OpEx to some extent. When you want to grow in your CASA, you have to bear with that to a possible extent.

We will take that as the last question.

Thank you, sir.

Over to you for your closing remarks.

Thank you. Thank you, Anandal. We'll continue to perform consistently. That's what actually we always share, even at the beginning of the year. And even today, after 3 completed quarters, we have proved that we are consistent in our performance in all the key parameters. Thank you, sir. Thank you, Anandal.

Thank you, everyone. That concludes the call.