Central Bank of India (CENTRALBK) Earnings Call Transcript & Summary

Everyone, on behalf of Antique Stockbroking, I welcome you all. Special thanks to Pallav sir and Central Bank of India's management team for giving us this opportunity to host the call. Today with us, we have Mr. Pallav Mohapatra, MD and CEO; Mr. Alok Srivastava, ED; and Mr. Mukul Dandige, CFO; along with other senior members from the management team. To give us insight on the bank's 2Q FY '21 performance and future outlook, without further delay, I now hand over the call to Pallav sir for his opening remarks. Over to you, sir.

Thank you, Mr. Sohail. And I welcome all the participants on this analyst telecall. A few of the highlights of the Q2, and then I will take you through some initiatives, which they are basically implemented during the second quarter, and that is on the qualitative aspect. And then I will open up the forum for questions by the respected participants on this con call. On the quantitative part, the bank net profit stood at INR 161 crores, showing a Y-o-Y growth of 20.15%. Operating profit grew by 42.16% at -- and improved to INR 1,458 crore. Total business of the bank, for the first time in the history of the bank has crossed INR 5 lakh crore. And it stood at INR 500737 crore to be precise. And as against INR 40073,080 crore in September 2019. The CASA trend is growing. And this particular franchise is doing really well in our bank. And the CASA percentage has improved from 45.82% to 47.72% in Q2 FY '21. The provision coverage ratio has also from 76.68% to 82.24%. Gross NPA has come down from 19.89% to 17.36%. During this current financial year, we have not done any technical write-off. This reduction is pure reduction through the upgradation and the cash [indiscernible]. Net NPA has come below the 6% mark. So it has come below -- come down from 7.90% to 5.60%. The retail, agriculture and MSME advances was at 64%. There was a slight, I would say, 1 percentage point improvement from September '19. And the potential which we have and the scope, which we have and the pricing which we are offering and the type of restructuring in the RAM we have done, both on the infrastructure and also the product point of view, we are expecting a very good growth in RAM, and especially in the retail segment. The cost of deposit came down from 5.18% to 4.45%. So the NIM improvement was mainly on account of reduction in the cost of deposits. I think most of the participants must be aware that our benchmark rate, whether it is MCLR or external benchmark, it is one of the lowest in the market. Despite that, we are improving upon the NIM. That means that we are improving upon the NIM not by increasing the rate of interest on the advances, but by having a very good CASA franchise, where we are getting low customer cost of funds. Operating profit improved. Net profit improved. Total income improved from INR 6,704 crore to 6,833. Cost-to-income has come down from 62% to 53.48%. And my aim is to bring it below 50% by the end of this financial year. On account of increase in the business, both advances and deposit the business per employee has also improved from INR 13.60 crore to INR 15.42 crore. These are the highlights on -- and the retail loans has also increased and shown a growth of 14.12% and stood at INR 46,887 crore. And now the retail portfolio is around 27% of the total loan portfolio of the bank. On the qualitative side, there are some major initiatives which have been taken by the bank. And these initiatives are both on the human resource front as well as on the technology platform practice and also the business model point of view. The first initiative where -- which was kick-started in this particular quarter was project Disa, which is basically how to use the analytics to do a business transformation and having a focus on the retail agriculture, MSME, and also on the cross-sell. Single data deposit, which is nothing but the data warehousing, is being revamped in the bank so that there is a one-stop solution for data analytics for basically the MIF availability to the decision maker. So this will be a single point as contact for the decision making to be done by the senior management, not only senior management across the bank. In this quarter, we after getting approval from Reserve Bank of India, we opened 50-odd MSME processing centers. The idea is basically to take out the processing from the branch level to the centralized processing center. We did this on the retail side last year and -- by creating, I think, 49 centralized processing branches. We have also created around 20 loan processing centers for the agriculture financing. So our objective is basically to take out the fright processing out from the branches and to put it in the centralized processing center, so that number one, the expertise is localized, number 2 is the quality of appraisal improves, number 3 is the branches are basically free to do more of marketing. So this is the main reason for centralization of the processing. On the HR front, a lot of initiatives have been taken and we are still continuing. And the basic focus is that how to make the HR a business outcome oriented HR. So our performance management system is undergoing a change on that. The -- I can say that this concept of HR audit, which most probably is not there in any PSP, at least, we have started with this HR audit. We have trained with the help of outside actual members, some officers within the bank, who will be conducting this HR audit, so that the performance of these HR managers across the zones, regions and administrative offices can be basically appraised, rated and analyzed. So that the focus on the HR to drive the business is strengthened. Then on the technology side, we have taken the initiative of this loan life cycle management system. And we there on loan origination system, which was quite old, so we have now moved to a system, which I can say this is a state-of-the-art technology in the sense that this is not only the loan origination system, but this will give the end-to-end solution in the loan. That is starting from the loan origination to account opening to even the paid monitoring and also the alert generation by opening up API with various domains. The other important initiative in the technology which we have taken, that is the enterprise risk fraud risk management system. And this will be fully implemented, if I am right, by the Q3 of this financial year. So it will be a proactive platform, which will give the alert regarding any unusual pattern which is being observed on the system. This is on the various initiatives. I will say, these are the various important initiative. Other than these initiatives, we have taken other initiatives, but these were worth mentioning, that's why I gave these initiatives in this address. So this is all about the opening remarks. Now I am open to questions.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara.

Sir, could you give some color on what is the extent of restructuring you expect to be done? And what are the proposals received so far? Sir, that's my first question. Sir, my second question is that there is this government Ex Gratia scheme where interest on interest is credited to borrower accounts up to INR 2 crores. Now in that, sir, borrower do paid on time. Did they need to apply or they got automatic credit? Because I guess some banks are doing automatic credit, for some banks, applications are required. So I just wanted clarity on that. And then if you could give any guidance on your credit cost as well.

Okay. So the first question was on the restructuring. And that I presume you are talking about the latest REI instructions on the restructuring, where the account will not be downgraded to NPA, right?

Correct, sir.

So in that, whatever we have assessed, there in case of the corporate loans, both fund-based and non fund based, the total amount which is coming is around INR 7,500 crore but the proposals which have come to us, that's only a very, very meager amount. So this is on the corporate side. On the personal side also, we have taken all accounts, which were basically SMA-0, thinking that people may ask for the restructuring, but there also what we are seeing that not only people are coming forward for the restructuring, but they are also paying the installments. So we have created a portal where the retail customer, the corporate customers and the MSME customers can come and apply for the restructuring. But so far, the inflow of the request is very, very low. It may be because of -- it is a very, very new instructions. But in case of the PE segment, I think the time may be running out because this is applicable only up to 31st of December. But in corporate and MSME, it is applicable for 6 months, so let us see that what will be the traction in future. But as of now, the request, which is coming, it's very, very small, right?

So why you think that's the case, sir?

Pardon, sir -- pardon, ma'am?

Why do you think that's the case? Why are the request so low?

In case of retail, I can very well say that people don't want to avail restructuring. Because the moment they are restructuring because it will be reported to the CIC, and that may have the impact on their scores. The corporate where there is no other option available to them, they will avail. Like, the entire cash flow has been basically choked, so they may come forward for that. But so far, the number of applications which we have received both in case of the sole banking as well as in case of consortium are very few.

Right, sir. But in this INR 7,500 crores, what kind of corporate do you [indiscernible]?

This is the assessment which we have done. It is not the request which we have received. This is our internal assessment that may come. And this assessment is based on whatever is the eligibility given by the RBI.

Correct, sir. So sir, but what kind of corporates, most of these are consortium or your own Indian lender?

These are the internal assessment, whatever we have done includes every type of customer, whether consortium, multiple banking or sole banking. But under -- the invocation is done by the borrowers. So the first step of the what you call signing off ICA will not take place because the invocation is to be done by them.

Got it, sir.

The second question was Ex Gratia scheme. So one thing is, this is not based on the research by the customer, this is, I will say, on our own, which we have done. And we have also completed that size. The total amount which we have created is something around INR 40-odd crore. And so we will get it once the -- because here the nodal bank is State Bank of India. Once they give us the template that template, we will fill up the template and get it audited by our statutory auditor and hand over to State Bank of India because government will be funding the account in State Bank of India. And statement of India-based on the returns, which we submit to them, they will reimburse that amount to us.

So when does the reimbursement take place?

Reimbursement, I think as per the scheme, the last date is 15th of December or November? December, 15th of December.

By then you will get the reimbursement?

Yes. So it will not be -- so the amount which we have paid is not from the profit and loss account. This is from the nominal account or you can say, BTL account. So this has no impact on the profit and loss of the bank.

Correct, sir. Got it, sir.

And the third question was what, Mahrukh?

Credit costs, sir. Credit costs.

See in this quarter, you might have seen there is an uptick in the credit cost from 1.16% as on June to 1.98%. Though from the previous year, it is a reduction. We have done the -- we did the analysis as to how this has gone up. So if you go to page number 35 of our presentation, which has been uploaded on the system. If you don't have it, I will read it out to you. This quarter, the total provision was INR 1,555 crore. I'm talking about the gross provision. I'm not coming to the -- I have so far not come to the net provision. As against INR 691 crore of the gross provision in first quarter. Out of this INR 1,555 crore, INR 1,191 crore was the provision on account of aging, right? And out of this aging provision of INR 1,191 crore, INR 801 crore was the aging from Da2 to Da3. That means 50% jump, right? But the positive side of that is, though there was -- the provision was INR 1,555 crore, but because of the efforts made by our banks, we were able to write-back INR 699 crore of provision. So the net impact was only INR 856 crore of provision. So the efforts were doubled in this quarter so that the hit is not high, and we were able to do the tax recoveries and upgradation. So INR 699 crore of the provision out of INR 1,555 crore were reversed. So that's why from INR 496 crore to INR 856 crore is the provision increase. But the one thing I can tell you, Mahrukh, that whatever is the provision we did in Q2, if everything moves -- if there is no unusual thing happening, it is going -- it will be equal to the provisions that we will be making in Q3 plus Q4. So that is the benefit which we are going to get in Q3 and Q4.

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

Just a couple of questions. First of all, we have done very well on margins. So -- and this is in spite of us sitting on excess liquidity. So what should we expect going ahead from margins? Are we going to change our asset mix significantly? And will that contribute further to margin change? How should we look at margins going ahead from here?

So you are talking about the net interest margin?

Yes. Yes.

Sir, the net interest margin, my objective is, as a banker with 36 years of experience, not to increase the margin by increasing the rate of interest on the advances. Increase the margin by controlling the cost of [indiscernible]. So if you look at our NIM, the yield on advances has gone up by only 1 bps. But the cost of deposit has come down sharply, and that is mainly on account of CASA. So this particular approach will remain in the remaining quarters, number 1; number 2 is, the deployment in advances, whatever we want to do or whatever I would like to do, it's to an extent not happening mainly because that once we are able to raise more capital from the market, we will be able to do it. And to the extent possible, whatever capital we have we try to deploy in the best possible way so that the capital consumption in those investments is as low as possible. And this is this, you can see from the rated accounts, how we are moving from, in case of the investment-grade and also a and above, how we are moving, so that less of capital consumption is there. And this approach will remain because this way, we will be using our capital more efficiently and at the same time, earning the income out of it.

Got it. Got it, sir. Also, if you could discuss a bit about what are our medium-term loan growth targets, now that...

Sir, long term, I cannot give. If I go by the growth guidance for the current financial year, we'll be growing both on the deposit and advances almost at the same level of something shade above 8%. And out of this 8-point -- I would say, 8.92% we want to grow in the advances, but there the major growth which we are focusing will be on the retail of something around 11.5% and MSME of 13.17% and agriculture of something around 7.5%. Why MSME more percentage growth than others? The reason is very simple. Sir, this ECLGS was really a boon to the banking industry because this 20% of the outstanding as on 29th of February, so it's 100% guaranteed by the government. Now if it is 100% guaranteed by the government, then the risk weight on these assets, that 20%, it becomes 0. And the cash flow requirement for that also becomes 0. What can be a better product for a banker than this particular product? In case of the retail, we want to grow more on home loan, we want to grow more on gold loan. And during this particular financial year, there are 2 campaigns. The first campaign we ran as a monsoon campaign, but the monsoon campaign had a period of around 15 days of shradh month. So that was a little bit was dampened on account of that. Still then, we did well in the housing, the loan segment, and we also did well in the gold loan. I am quite hopeful that in this -- the second campaign which we are running for the festival season, that growth would be, if not twice, at least 1.5x, whatever we did in the monsoon campaign. So on the retail and agri -- retail and MSME, we want to grow good. In case of the agri, I'm trying to change the focus, move the focus more from the KCC oriented to the agriculture term loan orientated because government has under the Atma Nirbhar has come out with very good schemes and one good scheme is agriculture investment fund, where the CGTMSE cover will be substantial enough, I think 90%. Up to INR 2 crores will be how much? No, 90% will be by the government and 10% in the form of the collateral given by the borrower. So this also is a good scheme in the sense that there also the capital deployment will be very, very low. So we will be focusing more on this. And more on the warehousing financing. And also, we will try to do some accounts in the partner produce organizations. So this is the way, this the guidance I can give on the advances.

Sure, sir. Also something that I wanted to understand on the collection efficiency numbers that have been published by various banks. I'm thinking of a situation where you know a customer, let's say, he has paid -- where he has paid his EMI in April and May, for example, and then stopped paying. So in that case, since the entire -- let's say he was in moratorium and still paid in April and May. So in that case, is this the right way to think about it that anyway, since the moratorium period dues will be packaged off to a later period for redemand, will those payments count towards his dues for September and October? And how should we look at it?

Sir, once he has paid the installment of, say, April and May, now he wants to avail the moratorium, so he will be eligible for the moratorium of the remaining 4 months because once he has paid the 2 months installment, that cannot be taken as an advanced payment and taking the 6-months moratorium, right sir?

Right. What if he asked for the moratorium beforehand and then paid out? Let's say, he asked for the moratorium on 31 March itself, or 27, wherever it was announced...

So that we will see based on the merit of the case because so far, such case has not come to us. If there is a genuineness in that case, we will be open to it. There's no issue in that. What I strongly believe as a banker that the moratorium is much, much better than the deferral of interest because the moratorium 6 months will be basically back-ended, and this will take the residual period of the repayment from x to x plus 6, right? So by that time, when this x plus 6 happened, and in case of the housing loan, so this x would be 10 years, 15 years, 12 years, 13 years. So that is a long way. By that time, I think the certainty of the economy really bouncing back is very high. But in case of the deferral of interest, the issue is that this is to be converted into a term loan, and it should be paid by March 31, 2021. So how the economy is going to perform within 6 months, that may not be as certain as in the other case.

Perfect. Perfect. So where I was coming from is, is that across calls, we have been tracking what percentage of customers have not paid a single EMI. That is what we analysts have been looking at. But also one method to track that I really be that what percentage of customers have actually paid at the beginning of the moratorium and then stopped paying because that would mean that they came into stress later, and they present some kind of stress possible stress for the bank, which is not being -- which is being missed out in the noise of data that we have seen. So -- and you can...

So sir, I will give you one data. I don't have the data that who basically paid the first 2 installments are now seeking for the remaining 4 or asking for the all the 6 to be basically put in the moratorium. But when I look at the data, those who availed the moratorium, that's fine. Those who availed the moratorium is fine. But now since the moratorium entered in August, right? Of course, September, October, November, because of the Supreme Court order, the downgradation is not happening, but the moratorium is not there. What we are seeing is now the percentage of people who are not paying the installment is very, very nominal. I have the data. And when I see without agriculture, 2.09% people did not paid the installment in September. 2.05% borrowers did not pay the installment in October. This is excluding agriculture. In agriculture, 3.27% did not pay the installment in September and 3.18% did not pay in October. So this is the -- this percentage is of the total borrower pay. So what I'm seeing is, I don't know, is it a behavior change, now people are more concerned about reducing their debt or something? They have availed the moratorium that -- or moratorium is going to be paid after a certain period of time. But since after August, that moratorium doesn't exist. So they are trying to pay whatever is the due. That 97%, 98% are paying their dues.

Sure, sure. Just 1 more question. Have you disclosed the amount of loans which have not clicked only because of the Supreme Court order? Or -- I didn't see the data anywhere. Have you disclosed that?

I don't think that was to be disclosed.

[indiscernible].

No, no, no, that we are talking about February 29 and March 31. No. No, he is asking because of the Supreme Court order -- I don't think that the disclosure was to be made. So basically, the disclosure was to be made if any account, which was SMA-2 as on 29th of February, but slipped into NPA as on 31st of March, [ IGI ] said that if you want to take the benefit of not downgrading those accounts, then you make a provision of 5% in March and 5% in June and disclose that. That we have disclosed. But this is a news, I will again recheck. Regarding the Supreme Court, I don't think there was a disclosure required.

No, there was no requirement. I just asked because mostly banks and NBFCs have been disclosing that amount, but it's fine, I mean...

So I will give the answer to you, though disclosure was not required. When just -- the -- as on 31st March, there was around INR 3,300 crore of slippage into NPA, where we took the benefit. That INR 3,300 crore, and since the 10% provision was to be made in Q4 and Q1, we made a provision of INR 305 crore. But out of that INR 3,300 crore, now it has come down to INR 903 crore. We are still working hard because the -- if suppose the Supreme Court order was not there. So this INR 903 crores would have stepped in September, right?

Right. Right.

So since a Supreme Court order was there, so it was saved. But we are still working on these accounts and most probably by the end of December quarter, this amount of INR 903 crore will be brought down to as low as possible. Because from INR 3,300 crore, if you have been able to bring it down to INR 903 crore, then definitely in the remaining 1.5 months, or I will say 2 months, we will be further reducing it. One is through pure cash recovery, the second is maybe recycling.

Okay. Fair enough. Sir, one last question. So our -- we have almost, I think, around INR 20,000 crore or INR 21,000 crore of NPAs in our NCLT. So what is the -- any visibility on that? Any color you could provide on when we expect to...

No, we have already provided -- in case of NCLT accounts, you will see that around 94%, if I remember correctly, 96%, the total, means RBLS 1, RBLS 2 and whether we have filed or others have filed, we have already provided 96% in those cases. It is Slide #29. Once again, sir, to be doubly sure. 26, yes -- 26, sir. Already, we have 96.13% provision on these accounts. So the hit whether it is a liquidation or the resolution on these accounts will be very, very nominal to the extent of 4%. If, suppose nothing is going to come. If anything more than 4% is going to come, that is going to basically come back to our charges. I need to say, profit and loss account.

The next question is from Rahul Nayar from SBI Mutual Fund.

Yes. I needed some update on the PCA status. We are still under PCA, right?

Yes.

So any guidance on that? Then we expect to...

Sir, the guidance, how I can give? That has to be given by RBI, sir. RBI prescription on the PCA was on 4 parameters initially. If I remember correctly, if I am correct, they dropped the return on FX, if I'm correct. So the remaining 3 are leverage ratios, capital adequacy ratio and net NPA. Now on all the 3, we are well above the -- whatever is the threshold fixed by RBI. Now if RBI wants to see for another 2, 3 quarters, they will see whether this is sustainable or not. So now this is -- this call to be very frank, I will not be able to take. The second point I want to just focus upon, though the tag of PCA is not good, right? But even when I come out of PCA, I mean the bank comes out of the PCA, the prescription which they had given, I will try to follow that particular prescription. Number 1 prescription is that you are not allowed to give a loan to below investment-grade account. So this is a good prescription, Rahul. The second prescription which they have given is that you will not increase -- you will reduce your number of branches. That is a good prescription in the sense that if the branches in the metro are lost 18 branches, then why is it continue with those branches? The third prescription was that you will not increase your manpower from that level of [ 31.03.17 ] if I am correct, that is also a good prescription. Now we don't need more of the manpower, we need more of the technical products. We need more of the digital banking and so that the turnaround time is improved, the customer service is improved and the accuracy is also improved.

Right. Okay. So currently, other than the NPA requirement, we meet all other criteria, right?

No, no, also on the NPA requirement because NPA requirement is -- net NPA requirement is below 6%, we are already signed for [ 6.0% ].

Yes. Right. Okay. So, we raised around INR 250 crores during the quarter. So are we comfortable with the current capitalization? Or are we looking for raising more?

Sir, we raised INR 255 crores or 53 -- INR 255 crore through the QIP. I just want to -- I'm waiting for the price to stabilize and my, basically, objective was to go for a SCO after that. I'm waiting for the stabilization of the prices. And I want to raise more capital through [ APY ].

The next question is from the line of Amit Mishra from Indus Equity.

Sir, can you comment on your housing portfolio and growth expectation and the asset quality are you seeing in housing portfolio?

Sir, housing portfolio as of now constitutes around 57% of our retail advances. Retail advances constitute about 26% of our total advances. So you can say around 34%, 35% of the total advances, more than 30% of the total advances are from the housing loan. As of today, the NPA percentage in the housing loan is 3.40%, am I right? Now this 3.40% is mainly on account of 2, 3 projects, where these got stuck up because of the builder. As I will not hesitate to naming one project that is under Pali, where we have some NPAs there. There is one in Bangalore and the other is in Kolkata. But if I take out these projects where we have NPA, I think the gross NPA percentage is below 2%. So as of today, I feel that the quality of the portfolio in the housing loan is improving. And if you have done some research on the housing loan portfolio, first of all, we have basically moved to a centralized processing center which is not only to do the processing, which is also to basically do the opening of the account, documentation and also the credit monitoring, which is end-to-end. Number 1 is -- the benefit to the customer is that they can go to only 1 outlet for doing it. Number 2, if you look at the rate of interest, the rate of interest which we are offering to the best of the customer is 6.85%, whereas the largest lender in the country is offering a 6.90%. We are having a cutoff of CIC score, plus our balance score card. Based on these both 2, we are rating the customer as the lower risk, medium risk, high risk. And the rate of interest which we are giving is 6.85%, 7.10% and 7.25%, which is the highest, where we don't, of course, want to do it. Even if you compare this medium rate of 7.10%, you tell me how many banks are giving a housing loan at 7.10%? We are getting, you won't believe, a lot of inquiries for takeover of the loans from other banks. So both on the pricing front, what I strongly believe is that, yes, I can compromise a little bit on the pricing. But I get a good quality and save on the credit cost, that is a sustainable growth of that product. So the home loan will be a major plant for which we would be growing our retail. Our retail guidance is around 12%. And I can say that a major portion of the retail growth will come from housing loan and the gold loan. And even in case of the gold loan, the key segment gold loan, our pricing is one of the best in the market. So what I strongly believe is, give the best offer -- pricing to the customer and try to get the best quality of the customer. Follow the turnaround time, and if we are able to follow the turnaround time, giving the best rate of interest, we will get the best of customers.

Can you hear me?

Could you hear me, what I said, sir, was I audible?

Yes. Yes, sir, definitely. Sir, as you're talking about retail portfolio, so can you comment on our profile of retail customers?

Profile means?

Profile -- how they're behaving during these 4 months or 2 quarters?

Sir, the 4 months I gave you that how many people have availed the moratorium. If I look at the retail, the retail, they -- 36.29% availed monetarium in April. It came down to 28.968, 29% in June. And it has gone up a little bit in August, which is 34%. Now since moratorium is -- has come to an end in August. So December end October, just because of Supreme Court order, the [ RH ] classification has not been changed, but the moratorium doesn't remain. So in retail, only 1.25% basically did not pay their installment in September and 1.22% did not pay the installment in October. That shows, I think, that the portfolio which we got is reasonably good enough.

Okay. Sir, 1 last question, sir, regarding this yesterday, RBIs notification. So any partnership with any NBFCs under co-lending? And sir, can you air it -- air the past loan growth?

We have done 1 partnership, but I think that's 6 months back. We are also exploring the possibility. See what happens in the partnership is now the [indiscernible] definition in case of the NBFC is different from the [indiscernible] definition for the bank, right? Now they have a different cutoff of where they can go for the [indiscernible]. Now if I do a co-lending with them, so co-lending means what? We are giving to the common customer, 20% is their share, 80% is mine share. If suppose some action is to be taken, then who is going to take what action? So some tactical difficulties come but we are trying to basically address those difficulties. We will be doing some co-lending in some other cases.

The next question is from the line of Ashok Ajmera from Ajcon Global Services.

Many of the questions have already been answered by you in such a big elaborate answer. Let me first compliment you, sir, for the continuous second quarter of giving good -- reasonably good profit. This time also, INR 161 crore, operating profit is also good, CASA, PCR, everything. Now sir, my question -- I have a couple of questions. One is that can you give some guidance, sir, on the gross NPA, net NPA percentage-wise because growth of advance you already given by March 31, 2021, that how much more you can bring them down, the gross NPA and net NPA percentage terms to the advances? That is number one.

Sir, on the gross NPA percentage, the target which we have set and with the approval of the Board is that to bring the gross NPA percentage down to 12%. So there in case of the 12%, what we are trying to do is that other than these onetime settlement and nondiscretionary, nondiscriminatory schemes, we are focusing also on the -- some lumpy accounts where we can think of selling to investors or the ARPs as per the regulation. And I'm quite hopeful that we would be able to do it. And the second is that our focus is also on, and we are very, very positive minded to be verifying and especially I that if any account can be upgraded through any process being adopted because it is easy to see in account to NCLT. It is very easy to basically file a OA in DRT. But the question is whether that is going to serve the purpose or not. So I'm open to do the resolution restructuring so that the account is upgraded. So my focus is on these points. And in this quarter, that is Q3, the entire process of the recovery, though the OTS and the ND schemes sort of continue, but from my side, my focus would be on these -- some lumpy accounts.

Sir, coming to this ARC, you referred that in the recovery of INR 907 crore, you said including the sale to ARC. So how much is that amount of sales out of the INR 907 crore to the ARC?

ARC sale in the first 2 quarters was very small, I can say that it will be something around less than let then -- both the quarters together will be around INR 70 crores, INR 75 crore. But in the third quarter, we are going to have a good number the sale to ARC.

Sir, now coming to...

In case of the sale to ARC, and the first quarter was totally gone in the sense because it was pandemic and interaction was -- the level of interaction was very low. But after this opening up of economy, we are seeing a lot of interest being shown by the ARCs and by the investors. So I'm quite hopeful in Q3, there will be a good traction on this.

Sir, coming to this provision breakup, there is an investment provision on investment of INR 221 crore. Even in the last quarter also, it was INR 282 crore. And in addition to that, there is a security erosion also of INR 122 crore INR. So how do you explain this, sir, this kind of...

So on the first part of in the investment, both on June quarter and the September quarter, it pertains to only 1 single account. That is the Suzlon. If you remember in case of the Suzlon, we reached the teamwork was concluded in the first quarter. So the restructuring was sustainable debt and unsustainable debt. When you do the unsustainable debt, there, technically, you have to make a full provision on that, right? So when any amount moves from the loan book to the investment book, so the loan book will get depressed. So the NPA in that will depressed. So that is for June quarter. Now in case of the September quarter, for the provision on that particular unsustainable portion in the investment book was done, which is reflecting as that provision in investment book. The third is erosion of securities. Sir, these are the cases which happen in case of small accounts. So it is not in case of the large accounts. It is in the case of the small account. And these are not very, very unusual features, sir.

Okay. Sir, on the -- this taxes erosion for taxes front also, I mean, what is the breakup of this taxes because our profit is only INR 161 crore and the tax is INR 993 crore of the provision. Anyone in the last quarter also, INR 181 crore of the provision on taxes. How it is possible? Like, you have a total profit of INR 300 crore, and your provision is more than INR 380 crore -- INR 375 crore in these 2 quarters on taxes?

It has to take care of operating profit. The [indiscernible].

Sir, if you don't mind, can my CFO explain this question because I'm not a taxation expert, so he will give you the answer in terms of the [indiscernible].

No, perfectly all right, sir. Even if now -- not now, then he can -- we can...

No. No, he is here. He will give the answer right now.

Sir, when [indiscernible] taxes, we have to take into account what is the level of operating profit, what is the provision that we have made for NPS, what is the terminal benefits provision for the employees. And taking into account all these factors, I mean, it is not simply that the operating profit and 35% of that will be the -- of the CBT and 35% of that will be the net tax liability. Then whether we are creating any DTA, all these factors come into account. If you want, we can send a detail to...

Yes, sir, because it is a little unusual because I'm comparing with so many other banks also. I'm very closely analyzing all the figures. But in this case, it is a little unusually high. So if you can -- I mean, you have my email address...

Ajmera, sir, one thing I can tell you, sir, the banks which are not making the provision which is part to be made in case of the provision because 100% of the provision which are made on these NP accounts are not tax deductable. So at some point of time, the income tax department may come back to them very, very heavily.

Okay. Yes, sir. Sir, my just last 1 or 2 questions. Sir, it is SMA-0, INR 2,390 crore, out of that, you said INR 903 crore are upgraded on 31st of October, but it's still this amount is very high. So what is the -- what do you see [indiscernible] and how?

I will tell you, sir. On these figures, I have told my team to give a figure in between, but they gave the figure as on the last day of the month. What happens is, last day of the month, the SMA-0 goes up because of the application of the interest. And normally, this interest is paid on the first or second of the following month. So in case of INR 2,000-odd crore or whatever we have said, that INR 903 crore has been upgraded. Now INR 903 crore has been upgraded as of 31-10-2020, so this also includes some of the interest because entire day as on 31-10-2020, which were paid in the first week of November.

Yes. So okay. I mean, you are comfortable with this? I mean, [indiscernible].

I'm comfortable. Out of -- I will give you the break up. Out of INR 2,390 crores minus INR 900 crores, saved INR 1,400 crores right? Out of INR 1,400 crores, an amount of around INR 1,000 crores in case of future group has moved to SMA-1 as has been basically repaid in the first week of November.

Yes, that is why it was looking very high. Sir, 1 last question from data at this point. Though you have explained earlier, in part, this working capital -- interest on working capital during the moratorium period for 6 months, that all interest together, either it was to be paid from September onwards along with the regular monthly interest, or the borrower had the option to pay on the last day of -- I mean, that is March 31, 2021. So have you done any exercise on the -- how much was the amount -- total amount of moratorium on the working capital interest? And out of that, how many of them have opted for March 31?

No, that how much -- how many of them opted for March 31, I don't have. But the interest amount I have, other than the agriculture, the deferment of the interest which has been availed is only INR 85.52 crore. The major portion of the deferment of interest was from the agriculture segment which is INR 424.58 crore. And what we are seeing is that since technically, this moratorium ended on August 31, so what is the behavior of these customers making a payment in September and October. What we are seeing is, in September, around 2.34% did not pay, and in October, 2.15% did not pay. That means more than 98% -- or say, more than 97% paid.

The next question is from the line of Sneha Ganatra from Subcom Ventures.

Sir, only 3 questions. First question is regarding any additional employee cost, which we need to provide considering the IBA and the wage rate hike? Second question is what is the outlook on the treasury income? And third question is regarding the NCLT case [Technical Difficulty].

Hello? Hello?

My fourth question is media article this government is trying to sell...

I think, between you got disconnected. Can you repeat, what was your -- one by one, I can respond to your question. What was your first question?

Sir, my first question was on the employee cost. Any additional employee cost we need to provide considering the IBA wage hike?

No, that we are providing. If you look at the provisions which we are making on account of the wage revision, the provision which we are making on account of the pension and the retirement benefit, that is in line with whatever is the negotiation. I would say, negotiations still going on because one particular union has gone to the tribunal for something. So I will say that whatever was agreed to in the last final meeting, so we are making a provision for that. So in case of the wage revision, I think we have totally made a provision of more than INR 800 crores for the wage revision. So that is sufficient enough to take care of any hike in -- on account of wage revision.

Okay. My second question is, sir, what is the outlook [indiscernible]?

Outlook?

And the treasury income for the [indiscernible] of considering the yield remains at similar EBIT?

This is -- this, I will say that in case of treasury income, what I see personally is now MD has to devote more of time in case of the treasury than in case of any other banking activity. The reason is very simple. The reason is simple in the sense that if you look at the yield, now the safest investments, which are considered at the T-Bills and GSAP. So the T-Bill yield is around 3.35%, 3.36%, which is close to [indiscernible]. The yield in case of the GSAP will be around 5%?

5.8% to 5.6%.

5.8% to 5.6%. And the yield in case of SDL, that is state development loans, is the highest. Now the question here is that when you invest more in the state development loan, so the tenure is higher. When the tenure is higher, that increases our modified duration of those investments. In case there is an increase in the modified duration, if the such investments are not very, very literate and the interest scenario takes a reverse turn, which took a reverse turn in the initial month of this financial year when it went up to 6.21%, right? Tenure defect went up to 6.21%, right?

Right.

So in those cases, the possibility of mark-to-market loss is higher. So the bank has to play a very, very balanced role, where to invest, how to invest. And I can share with you that every day, around 30 minutes to 45 minutes, I'm devoting on this.

Okay. Okay. Okay. Sir, my third question is regarding this NCLT recovery, post COVID, are we seeing there is a further rate cut up from the investor point of view?

Ma'am, just I can say that whatever recovery was in the RBI list 1, the recovery percentage has come down in RBI list 2. And recovery percentage has further come down in other than the RBI list. The liquidation cases are going up. And so the average recovery percentage has really come down in the NCLT. Now the question is, then why one should go for the NCLT, right?

Right.

The -- why one should go for the NCLT is, if the investor is more comfortable to have a quasi-judicial process to take over the account, he will always like the banks to take it to NCLT. If we investor is comfortable to do something outside the NCTL, there the recovery percentage will be higher and the -- then it can be done. The third point is doing the restructuring with the existing promoters. Now there's the question which, as a banker, I will always refer. It doesn't mean that my preference will work in all the cases. I will always prefer that there is a reasonable amount of skin in the game of the promoter, if we are doing the restructuring with the existing promoter.

Okay. Got it. Sir, my fourth question is, any plans to sell off your subsidiaries?

Yes. One, you must have seen the RFP. So that is quite obvious. So it is in the public domain and most probably, we are going to do it. Till that deal is concluded, I cannot make anything public. But since we came out with the RFP, RFP process is almost done. So most probably in 1 subsidiary, we can see.

Okay. And my last question, India article showed that the government is planning to sell office taken in some of the [indiscernible]. Any [indiscernible] Central Bank and the government regarding this?

Central Bank of India, I don't know -- that inform -- I'm not privy to that information. So I will not be able to comment on that.

Okay. Okay. Okay. And last, I would be repetitive, just wanted to know your credit cost outlook for the second half?

Credit cost?

Outlook on the second half?

See in the initial remark or in reply to someone's question, I said, in this quarter, the provision was higher, mainly because more than 70% of the provision was movement of the NPA from D2 to D3. When there is a movement from D2 to D3, the provision requirement goes up from 40% to 100%. I think there is a 60% uptick. So what we have seen is the amount of provisions which we have to make, we made the gross provision -- I'm not talking about the net provision, net of recovery or upgradation. The gross provision which we made in Q2, in all likelihood, unless there is something unusual happening in Q3, Q4, where -- which is totally unforeseen, the Q3 plus Q4 additional provisioning will be almost equal to the processing which we did in Q2. So that is a positive side.

Okay. And the slippages, [indiscernible] it would be a little bit higher than the first half number?

Ma'am, your voice is breaking.

I'm asking about the slippages number would be higher than the first half numbers than the second half, I'm asking.

I won't say that because wherever we will see that the chances of slippages are higher, we will definitely try to do the restructuring. Now if we do that resetting, there will be additional provisioning of 5%, right? [indiscernible] will have a provision of 5%, in case of P segment and other exposures, RBI without downgrading, RBI regulation says 10%.

Sir, any number you can expect on the restructuring, any number, ballpark number you can give?

Ma'am, as of now, the requests which are flowing in because the invocation for the restructuring is to be done by the borrower. Now the invocation as such, which is flowing into the bank is few and far between. But whatever we have done internal assessment that any account, which is SMA-1 or 30 days default, we have basically prepared a list of that, both in case of retail as well as in case of the [indiscernible]. MSME, we want to do because I MSME, we have been doing this restructuring starting from first of January. So in corporate and retail, we have prepared the list, and we will be open to restructuring. Especially in some sectors, definitely, there is no choice but to do the restructuring. One sector is definitely airlines.

Right. And to [indiscernible] hospitality?

Pardon?

Also hospitality also will be there.

Yes. We don't have that much of exposure in hospitality. One exposure in the airlines we have, which is not jet, which is [indiscernible].

Okay. And sir, how is [indiscernible] going on the retail demand regarding the...

What we have seen is, after opening of the economy and also some measures taken by some state government by reducing the stamp duty or leading the stamp duty, there is a good uptick in housing loan. That is one, that is -- people are going -- many people are going for their first houses. As of today, second house, more of the people are not going because second house is always treated as investment. People don't want to invest their surplus amount for investment in the houses, right? So first house buyers, the demand is high. And since our rate adjust as of now in case of the housing loan is the lowest in the market, we are getting a lot of requests for taking over their...

Yes. Okay. And sir, [indiscernible] collection efficiency is on date?

Pardon?

Collection efficiency is on date?

Collection efficiency, it will be the right question if this question is asked after Q3 because the collection was basically impacted by the moratorium by the Supreme Court order. So I don't think that this is the right time to ask on the collection efficiency.

[Operator Instructions] The next question is from Sushil Choksey from Indus Equity Advisors.

Congratulations on stable numbers. Sir, where do you see a sustainable margin, if I take a 12-month outlook on the trajectory, which is very upward journey right now on Central Bank led by CASA?

Sir, the margin you are talking about, net interest margin, right?

Yes. NIM, which is at 3.35% in this quarter, 3.0% previous quarter?

On a yearly basis, something around 3% to 3.05%.

Okay. And I sense that our treasury and corporate book treasury definitely been contributing. Retail is growing well. We have a potential to grow retail at a much larger and a better pace. And I see a recovery in income coming from corporate book. What's the sense which I can read from this presentation?

Sir, now in this Q3, I am basically focusing on the recovery in some large accounts, chunky accounts, because our internal target is to bring down the gross NPA to something around INR 22,000 crore. Though in the first 2 quarters, the lower targets were capped because of pandemic and other issues. And therefore, Q3 and Q4, unless I do some either sales to ARC or recovery or upgradation, whatever is there, or the resolution, in some chunky accounts, at least 5 to 10 chunky accounts, it will be difficult. So I am focusing on that. And I am hopeful that around 5%, I would be able to compete complete in Q3.

Sir, any details, I have been persistent in asking this question, CASA growth, which we are seeing is not from the large metros, but we are giving them mid -- tier 2, Tier 3 towns and even interior India, which is granular and giving of big support to Central Bank India [indiscernible]. How are we taking -- we've taken many initiatives as I've heard in the previous call. Are we seeing any traction with this CASA and cross-selling and other things that are [indiscernible]?

Yes. I do agree, Choksey, that CASA growth -- because around 49% of our CASA is coming from rural and semi urban which is -- which I think is a good thing. But beyond a point, increase in CASA happens only when you are giving some additional facilities to the customers. And additional facilities, whether can be through digital products can be through the cross-sell or the combination of both. Cross-sell will have much up demand because now even in the rural and the semi urban, they are concerned about their future income when they become old, whether it is through mutual fund, whether it is through life insurance products, whether it is by selling the unit, whether it is Atal Pension Yojana, so we are trying to do this, and this will be based now on the analytics model, which our initiative transformation initiative Disa by doing the analytics, the scope, the availability and the potential available, we will be basically focusing on the cross-sell of these products in the rural and semi urban, where the customer base is large. The bank was not doing the mutual fund, but we mostly have come out with the RFP or going to come out with the RFP, number 1, number 2 is I'm not sure that in the rural, whether investment in the capital market will be -- there will be a lot of demand or not. But at least in semi urban, the demand has picked up. And we are going for RFP for 3 in 1 account. So these things, which are missing in the bank, all these things we are trying to do. And I'm quite hopeful that this will give a new face to the bank.

Sir, you are experienced in cards and various of the fields in retail have been great. The bank had opportunity to capitalize and it has still time to capitalize on. Do you think with the CASA, that productivity can be initiated in your tenure?

Sir, now the tenure -- leftover tenure is only [indiscernible].

But your experience the card business can be a growth business this kind of CASA...

See, that is the reason -- see, the card business, which we are doing within the bank, frankly speaking, we do not have the expertise, the great card business. So the option which was available to me was to hire the expertise from the market or go with any other company, which is doing well in the credit card business. So I chose the second option, because there was a pressure on the cost on the bank. So hiring these people because these people who are in the card business, they are very high cost people. So going with the car, so there, it is not only giving the best of services, giving the best of opportunities, giving the best of products to our customers. But also, there will be sharing of the revenue by LBI card with us. So that will be another source of noninterest income to the bank.

So your strategy on pricing has paid off so far. [indiscernible] and interest income is very visible. Do you think our retail book can become 35% of our total advances over a period of next 1 year?

Yes, definitely. And not next financial year, this will become during this financial year. Both this financial year since the time left is not much, so both organically and also inorganically, this will become more than 35% of the total book.

So what kind of -- you have spoken in the previous quarter call and today's call that you're spending too much time on treasury which has been very productive along with the team at treasury.

Treasury, why I'm focusing more time on the treasury? If you look at the treasury operations during the last 2, 3 months, it has become a little bit complicated. Now if I don't involve myself in this treasury today, there is every possibility it may go out of hand. Number 1, there was some increase in the yield, which we saw in the first 2, 3 months, which could have basically had some sort of a mark-to-market loss to the bank. But our portfolio is such that we were able to churn it fast. You won't believe, sir, from 16% of modified duration -- not 16, around 5% of our modified duration, we brought down the modified duration to 2.5% so easily. And in the process, it is not basically selling at throwaway prices, we earned a trading profit. So I suppose what I'm trying to do is, is suppose today, the interest income and investment is basically down on account of so many external factors, which is not within my control. So if I'm able to do the journey and also able to invest. So that my trading income and plus the interest income is not being impacted. I think that is a better way.

We'll take that as the last question. I would now like to hand the conference back to Mr. Sohail Halai for closing comments.

Thank you for the detailed view, Pallav, sir. And once again, congratulations on a good set of numbers.

Thank you, sir.

Before we close the call, would you like to add any concluding remarks?

No. No, I will ask only 1 question to all the honorable participants here. Just look at the price-to-book value of our shares. And I don't know, but sir, with the CASA deposit, with the government support, with the type of loan book where the investment or the investment rated portfolio is so high, where the recovery is being made, where everything is transparent, how the price-to-book can be 0.40? So this was only the request that, okay, if I am not doing well, then you pull me down, no issue. But if we are trying to do whatever are the constraints during this particular period. And even when I explain that in case of the investment, even during this adverse period, if we are able to maintain our trading profit plus interest income on the investment, I think we are doing whatever is the best possible way. So I'm only request not to the analysts, also to the investor, also to the market, have some positive look at the Central Bank of India. That is the only closing remark I want to make.

Thank you, sir. Probably, the market conditions are not that great, but we have been working in terms of improving our CASA and even a lot of levers available. I'm sure that basically, the analysts and the investor community will get up with us. Thank you, sir.

Thank you. Thank you, sir. So we are logging off?

Yes, sir. So that concludes the call, sir.

Okay.

Thank you very much.