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

Good evening, everyone. I welcome all of you to Central Bank of India's 1Q FY '22 Earnings Conference Call and thank the management of Central Bank of India for giving us this opportunity to host the call. Today, we have with us Mr. M.V. Rao, M.D. and CEO; Executive Directors, Mr. Alok Srivastava; Mr. Vivek Wahi and Mr. Raj Puri; and CFO, Mr. Mukul Dandige, along with other senior members from the management team. First, I would like to take this opportunity to congratulate the management team on a good set of earnings. And now I hand over the call to Mr. Rao for his opening remarks. Over to you, sir.

Thank you for the spending your time. Though you are aware of the impact of the second wave, just, I would like to give you a brief on the first internal staff issue. First of all, all my 33,000 staff valiantly and untiringly served any number of customers during these trying circumstances. And thousands of our own staff got affected, and we lost a few of them. And as far as services are concerned, we have kept all our services in running mode and all of our ATMs are up and running, and all my [businesses] were also functioning with the full strength. And towards the vaccination, almost 71% of my staff is vaccinated with the first jab now and around 21 completed 2 doses. And as a commitment to the [propriety] to bring the awareness about the immunization, in the month of March, we started a scheme Immune India Deposit Scheme where we have offered a preferential rate of interest for -- higher rate of interest for the depositors as a commitment and also to bring the awareness in the society about the immunization. And you are aware that this time, second wave has more impact on the rural side and then our bank is having 62% of my network in the rural and semi urban in a similar way we got affected. And then in the first 2 months, it was very terrible. And then June, we had such an [earthquake] and July, we are having still -- you can say we are seeing a brighter picture. With this, and then coupled with this COVID and all those things, on the digital front, we made a lot of improvement. And then a lot of transactions have moved on to the digital channel. It was very positive. And then we have uploaded in our presentation the number of transactions that go on to the digital channel. Now coming to the performance of this first quarter of this financial year. You know that 2 months got affected, even then we have a little bit [indiscernible] improvement Y-o-Y basis in the total business from INR 4.97 lakh crores to INR 5.06 lakh crores, with a mix of deposits of INR 3.31 lakh crores and advances of INR 1.75 lakh crores. Notable thing is the CASA deposit and which was 47.30%. It has gone to the -- it has improved further with 190 basis points, and now it stands at 49.20% CASA deposits. And then in advances, if you see that there is a reduction in the gross advances, but if you see the retail, our growth was 6%. And agriculture is 4.09%, MSME 3.38%. And there is a huge reduction on the corporate book from INR 67,009 crores in June '20 to INR 60,611 crore in June '21. Let me give you the color on this. First one is in the previous interaction with all of you, we have given the guidance that, going forward, we will be rebalancing our credit book with 70%-30%, that is 70% will be RAM and 30% will be the corporate. In that direction, we are moving. So our RAM, which was there 62.03% in June '20, now it has gone up to 65.41%. And a further reduction in the corporate was happened because of the technical write-off what we have done in the month of March. And coming to the mandated targets. We have achieved all the mandated targets. Regarding total priority against a norm of 40%, we are at 43.76%. Agriculture, we are at 19.74% against a target of 18%. Small and marginal farmers, we are against a target of 8%. We are at 10.70%. And weaker sections are [against] the normal benchmark of 10%. We are at 16.69%. And most notable aspect is commission earned in the PSLC sale was around INR 134.73 crores during this quarter. And coming to the credit support, what we have extended under ECLGS 1, 2 and 3, it is INR 3,000 crores in the ECLGS 1 and INR 369 crores in the ECLGS 2. And it's a small amount in the ECLGS 3, that is INR 15 crores. Coming to the rating, the standard advances what we have. It is almost flat. Seventy-six percent of my total book is rated and it is investment grade. And only BB and below, there is an increase from INR 6,939 crore to INR 8,755 crore. And without naming the company, let me tell you that which was A rated has gone to D and then they again opted for the OTR and OTR -- and OTR was implemented in the month of April. So that's why that increase is there in the BB and Below [grade]. Coming to the retail segment. There is a Y-o-Y growth of 6%, in that home loan, which is a major contributor to the portfolio, has grown by 6%. And auto loans, though we have a smaller pay, we have grown at 9%. And personal loan has grown by 1.89%. And one thing I would like to make it clear regarding the personal loan, we are not extending to all the general public, only to those who have the salary accounts with us. To them only, we are giving the personal loans. And coming to the most important aspect of the restructured book. Now we have the standard restructured book of INR 3,326 crore. That is as per the pre-COVID schemes whatever RBI has allowed in. And during the COVID -- that COVID Resolution Frameworks, total restructured, we have INR 4,713 crore. So total restructured book, what we have is INR 8,039 crore. And the next is coming to the SMA. Because we have not given the June '20 figures because it was not comparable because of the moratorium and also hold on what we were having at that point of time on asset classification because of the Supreme Court judgment. So we have -- comparing with the March figures, which was 9.85% with the INR 17,422 crore. For the June '21, it is 9.14%, INR 16,016. It is a total SMA book. It is not only the above INR 5 crores. It includes both above and below INR 5 crores. And coming to the NPA classification on sector wise. In the Retail, we have 2.31%, Agriculture & Allied 8.65%, MSME 6.90%, corporate and other is 4.36%. And coming to the NPA, opening balance was INR 29,277 crores. Slippages, what has happened during this quarter, is INR 1,281 crore. And then total recoveries was INR 2,790 crore, and the gross NPAs was INR 27,892 crore. And the write-off, whatever we have given, it is a regular write-off that is INR 98 crores. It is not a technical write-off. So all together, you could see the gross NPA, which was 18.10% in June '20, now it is at 15.92%. And net NPA, which was 6.76% in June '20, now it is at 5.09%. So coming to the provision coverage ratio, which was 79.12% in June '20, now it has gone up to 84.28%. And slippage ratio, it is 0.95%. And the net interest margin, it is 2.84% now in June quarter. Regarding the NCLT accounts, RBI first list INR 868 crores, second list, INR 5,425 crores and others that is -- which is filed on solo basis or other banks which have filed to the NCLT, that accounts amount to INR 16,069 crore. Total, we have INR 22,364 crores under NCLT, for which we have provided 99.31% is provided. And coming to the capital ratio. This is a very healthy trend we have. In June '20, we're at 11.50%. Now it is at 14.88%, with the CET1 increasing from 9.22% to 12.94%. Leverage ratio well above the benchmark. Now we are at 5.13%. Coming to the financials. Total income, which was there INR 6,727 crore, now is at INR 6,246 crore. And if you go drill down to the further details of total interest income and also expenses and net interest income, INR 6,017 was the total interest income in June '20. Now it is INR 5,479 crore. So we have a reduction of INR 538 crore. Interest expenses is minus INR 527 crore. If you see the net interest income, which was INR 2,146 in June '20, now it is INR 2,135 crore. Let me give you further details in this. There was a one-off item of interest on the IT refund of INR 131 crores in June '20. If I take the same figure from the June '21 and equate similarly, then I will have a 5.56% of growth in the net interest income. So operating profit in a similar way, INR 1,291 crore and now it is INR 1,179 crore. If one-off item is accounted for on both the sides, then it will be almost equal operating profit, what I have from the June '20 to June '21. Nevertheless, let me tell you the interest income is having that the MCLR reduction what we made from previous year to this year, almost there is 90 basis points. It was 8 MCLR, which has come [down] 7.10 [basis points] at this moment. So there is a lot of reduction in the MCLR front and a lot of loans, which were moved onto the RBI repo-based liquid rates. That is also there. Combined effect, though, there is general reduction in the rate of interest so we would be able to maintain the similar levels in operating profit. Accordingly, net profit, which was INR 135 crore and then a loss in March '21, now we have come to INR 206 crores net profit. And we have a fee-based income. There is a small increase from INR 710 crore to INR 767 crore. That is 8% increase there from June '20 to '21. So similarly, in the total expenses, what I explained as on total, we have a reduction of INR 527 crores. Regarding the provisions. Total provisions, which was there INR 1,156 crore in June '20, now it is at INR 973 crore. Here are 2 things I would like to highlight. In the standard assets, this time, we are having INR 240 crores. This is because of -- I do not want to name the company, which is the NBFC from the eastern side, we are foreseeing some type of issues may come up. That's why proactively, we have cushioned our balance sheet with a buffer. So INR 240 crores is there for that. And for the restructured accounts, that is a major amount, which has gone into INR 328 crore, which is correlating with our OTR, which we have undertaken under the RF1 and RF2. That is the Resolution Framework 1 and Framework 2. So when we are coming to the financial indicators, cost of deposits, now it has come down to the 3.93%. Yield on advances 6.55%, yields on investments 6.12%. NIM, it is 2.84%. ROA. ROA Is 0.24%, which was 0.16% in June '20. Credit cost 1.16%, which was there in June '20 because the figures are irrelevant because of the hold at what we had. It is 0.17% now. Business per employee has improved quite little and operating profit is also a little bit reduced. Net profit, it has gone up. And coming to the investment portfolio. And mainly important what I would like to highlight here is from June '20 to '21, modified duration, which was 2.89% at that time now, it has come down to 1.74%, and we had a very conscious effort of shifting certain securities and P.V.01 15.85%, which was there in June '20, now it is 8.73%. In June -- going forward, in September, we have a further target of reducing further. So interest on investment. Yield on investment, it is 6.12% and then return on investment, including trading profit is 6.63%. And 10-year benchmark 6.02% in June. And with the things hardening now, we are protected up to 6.14%. In the digital transactions, I told you there is a lot of increase in the traffic in the digital transactions and Central Bank is one of the top most bank ranked by the Ministry of Electronics & Information Technology [indiscernible] among all the PSBs in giving the seamless service in the digital transaction. And in financial inclusions, we are maintaining our lead position. And all my group companies, whatever we have Central Bank Home Finance, Centbank Financial Services and our -- both the Gramin banks, one is in Muzzaffarpur Bihar and another one is in Cooch Behar, West Bengal, all our profit earnings. With this, I would like to -- before closing from my side, let me give you a slight color on the goals on which we are working. First and foremost is the rebalancing of our trade books. We are on track and we want to have 70%-30%. And then deposit growth, we would like to have 8% and advances growth 9% to 11%. And one more thing I would like to share with all of you that ours is the first public central bank, which has entered into co-lending arrangements with the NBFCs for the home loans and MSME loans and already integration on the technology front, almost over. From the next month onwards, sourcing of applications and then business through these whole lending channels will start. And business growth, 8% to 10%. NIM above 2.75%, that is guidance we are maintaining and that we are confident of achieving that. CASA also above 48%. That's the guidance will be there. And net NPAs, we are focusing for 2.84% for March. Let me give you the range that 2.84% to 2.95%, that range we would like to have. And PCR will be around 86%. Slippage ratio, on the higher side, we have given 2.00%, but our endeavor always will be for 1.25% to 1.50%. And the credit cost, it is -- almost it is maintained and then controlled. It will never cross 1.5%. And cost-to-income ratio, we will be bringing down to 54%. And this is from my side. And then welcome for any clarifications you require. Thank you.

[Operator Instructions] The first question is from the line of Ashok Ajmera from Ajcon Global Services Limited.

Yes. And compliments to you, sir, for a very good set of numbers. Central Bank was waiting for a long time for this kind of number in the results. And what is more important is the very candid disclosures giving the SMA [ 0, 1 2-figure ] of INR [ 0 ] 5 crore and above INR 5 crore both together. And also, you have the targets which you have given seems to be achievable and the kind of confidence which you report -- I mean, which you have shown is definitely very welcome. You've got a good team of -- along with you of Executive Directors also. Sir having said that, sir, I would -- instead of asking any individual questions on a particular number, I would like to know, sir, now that since your CD ratio is very comfortable and your CR already is also very comfortable, you may come out of the preventive measure from RBI also now after seeing the June results. So what -- where do you see this go for growing the bank? I mean, the growth in the credit side now having COVID, too, also gone? This is my question number 1. My question 2 is on a specific number of provisions for income tax. Out up the profit of INR 621 crores, you have shown a provision of INR 416 crore, which is almost about 65%. So I would just like to know a little numbers that how this provision for tax has been calculated, but for which the profit would have been much higher? My third point is how come the income -- the NII has gone up so high as compared to the March? The yield also coming to 6.5%, which has increased the total operating income and the other expenditure have come down substantially from INR 832 crore in March to INR 585 crore in June. So these are some of my questions and observations. If you can just please reply to that so that I can have some further questions if time permits.

Thank you. I think a whole gamut of entire presentation, you have covered whatever the questions. There is nothing left in that. Thank you for the compliments. And then coming to the advances growth, yes, your observation is right with our CRAR as a comfortable position we have, even if I take the floor rate of 11.556%. Whatever the surplus, I will be in a position to extend around INR 35,000 crores. That is a lendable resource that I will be having. But cautiously, we are moving on both the fronts. One is from our own channels and another is a co-lending channel. Co-lending channel will be baby steps we will be taking in the September quarter. And then further, we have our own plans for ramping up further. And further advance close what we have given 9% to 11%. And then from -- after September, definitely, we will be looking into these numbers [whether or for] revision is required. Otherwise, we will be [pegging] at around 11% -- 9% to 11%. And coming to the provision for IT. Yes, there are -- tax issues were there. I may ask my CFO to explain on this [indiscernible] of income tax calculations. Before ending, my -- this one regarding your third question about March financials regarding the interest income that also he will be covering. Yes, Mr. Mukul.

[indiscernible] Your question about income tax. [indiscernible] taken into account income tax [indiscernible] But we have to take into account [indiscernible].

I'm sorry to interrupt. This is the operator. We cannot hear the current speaker at all. He is sounding very different. May I request him to come closer.

Yes. Yes. He will come closer.

And if he can repeat himself, please. We could not hear anything.

Can you hear now?

Yes, I can hear now more clearly. Yes.

So for calculation of income tax, there are various aspects to be taken into account. One is how much is the provision that we are making on the NPAs. How much is the provision for terminal benefits we are making? How much is the deferred tax [indiscernible] benefit we have taken earlier? How much is the write-back going to be into the deferred tax asset? So because the deferred tax asset, I have to wipe out over a period as early as [indiscernible]. So taking into account all those things, income tax calculation of INR 416 crores has been [indiscernible].

And coming quarter, there should be a [portion out] providing 65%. It is a conscious decision anyhow [indiscernible] in due course, where whenever we feel that cushion is there, we are allocating more on that front. And that's why it has gone up to 65%.

Point well taken, sir. About this, sir, expenditure -- the other expenses reduction from INR 832 crores to INR 585 crores, what is any one-off item in March quarter? Or how this almost about INR 270-crore reduction in 1 quarter in the other operating expenses?

INR 832 crore was there in March '21.

Anyway, sir. Okay. I'll take it later, sorry. Please forgive -- I'll take it later. [indiscernible] Instead of that, we will -- instead of that, we will utilize this time on just your co-lending. Sir, you are giving a lot of stress on this co-lending. What kind of a co-lending arrangement? And how much -- what kind of like business growth or the income the bank is expecting? What kind of co-lending with 1 company or there are several co-lending 2, 3 companies or some NBFCs? What is this arrangement, sir?

We have arrangement with the 3 NBFCs for the housing and MSMEs, which are backed by the collaterals, all our secured lending that we will be stepping into. And then most important aspect in our SLA that is our agreement, what we have, is NPAs are [indiscernible] 0.5% for the housing and 1% for the MSME to operate this model, where 80...

Which includes gold loan also? It includes gold also?

Oh, no. Gold loan -- we are not -- right now, at this moment, it is in negotiation only. It is not certified.

Okay, sir. One point around that A-rated -- I mean, your BBB and below rated [indiscernible] on account went from A to D and that OTR has been worked out. What -- will you throw some more light on that, sir? What is the amount involved and what is the position after the restructuring?

INR 1,500 crores.

Pardon, sir?

INR 1,500 crores.

And otherwise...

It is a group account having 3, 4 accounts in that. Yes, which is on the retail side.

But what is our expectations? I mean, this account will be -- will come back to -- I mean...

OTR is implemented. OTR is implemented and now it is under standard category. And then since it has moved from NPA to standard on account of OTR, 15% provision is also made in them.

The next question is from the line of an Anirvan Sarkar from Principal India.

A couple of questions, sirs. First of all, if you could share the breakup of slippages across your demand segment? That would be helpful.

Okay. This time, we have a slippage of, just a minute, INR 1,404 crore, where there was an increase in the existing NPA [around] INR 124 crore, remaining INR 1,300 crore. In that, INR 368 crore is from the Retail and INR 455 crore from the Agri and INR 429.25 crore from the MSME. This is the breakup and INR 151 crore is from the Corporate side.

Okay. Okay. So...

Until now already INR 189 crores got upgraded, out of which Retail INR 57 crore and Agricultural INR 24 crore and MSME INR 102 crore got upgraded. And another INR 140 crores gold loans because of wrong feeding in the software that has turned into NPA for the June. And for this -- in this month -- by this month end, it will get upgraded.

Okay. Sir, 1 more question on the MSME restructuring. Now of the accounts that you've restructured, could you provide some color on the kind of covenants you've there and how and when can we expect normalization in those accounts?

Sir, restructured. In my presentation, I have given the 2 tables. One is pre-COVID restructuring as per the RBI guidelines that were there in force at that point of time. Total in the MSME that was restructured in that is INR 2,060 crore, out of which, which is there as a standard till now is INR 1,670 crore. And we are not foreseeing any type of stress in those accounts. They are performing well. And coming to the RF1 and RF2, that is Resolution Framework 1 and Framework 2 in the COVID period. We have extended INR 2,304 crores in the RF2 -- no, no, it's not. MSME, INR 823 crores in our RF2 and only INR 15 crores is in the RF1. So main is INR 823 crores. It is in the Resolution Framework 2. And where we have gone for the opt-in model, it is not that [indiscernible] their blanket we have given that -- really find it is happening, but we are very selective whosoever has approached us and we did the outreach program also, whoever has for that release. After evaluation, we have extended that. That's why you can very much correlate with the slippages in the MSME in my June quarter [group] that is INR 429 crore. Otherwise, I could have awarded this INR 429 crore if I would extended this RF2 relief measures.

Sir, on the retail restructuring, could you provide the breakup of the segment [place] book for retail [with the team]?

Yes, sir, we have a Home Loan segment, INR 1,073 crores; and Mortgages, INR 224 crores; and Education Loans, INR 124 crores; and Vehicle Loan, INR 61 crores; [other sees] the remaining maybe around INR 23 crore.

Sure. Sure. Sir, 1 question, and this applies to the entire sector and not just our bank, is that in this cycle, we are seeing a lot of restructuring, especially in home loans. So while that's understandable given that there is some kind of an income loss in the economy, it has also to be noted that this is one of the sectors which have seen the strongest growth in the last 1 year since COVID and we saw a number of factors working in favor: interest rates came down; there was [indiscernible] in several places; there were certain changes in customer preferences. So I mean, what is the color on this restructuring? How -- what part of it would be from the home loans that have been discussed in the last 1 year?

Last 1 year, we do not have such a bigger issue. To -- I can give you a broad picture because what -- the loans we have were disbursed or sanctioned 1 year or 2 years back. Those people who have availed this type of relief. That minute details, I have to get. Do you have?

Last 1 year, there has been growth up for roughly 6% in housing loans. But so far, none of those accounts are there.

Okay. These are all the old accounts you have?

Yes.

Okay. So those are all old accounts, nothing from the accounts [indiscernible], great. And sir, one question on your SMA book. So it's now -- SMA-1 and -2 now stands at 5.3% of loans. So what has been the earlier run rate on this book? And should we expect this to be a steady-state number? Or will this come down?

It will come down, sir. It will come down. See, let me tell you, even for the July figure, earlier SMA-2, if you are seeing INR 5,115 crore that was there for the June '21. For July, this came down to INR 700-something crore as on date. And going forward, another 3, 4 days are there, there are certain accounts. Perennially, they will service only on the last day. So we are not much worried after this providing relief under COVID under SMA-2. Whatever the figure that is there, it is under our control and within our estimates.

Got it. Got it. And sir, what is our recovery pipeline for the rest of FY '22 looks like? Are we expecting any large ticket recovery here?

Just a minute. Our recovery in charge will throw a light on that because we have aggressive targets. And then NARCL is also there and then some accounts, we may see some shifting from bank to the NARCL. And 1 of 2 big accounts which are in NCLT also may come for some type of resolution within December.

So all together, considering Phase 2 NARCL, our recovery efforts and through NCLT process, we expect a reduction in NPAs from INR 4,500 crores to INR 5,500 crores at the end of the year.

That's why I have given my guidance of drop NPA will be around 9.5% and net NPA will be around 2.8%.

Okay. Got it. Got it. And sir, one last question on [indiscernible] and GST that has been showing kind of strength. So what is the status there? I mean the status of payment and...

The status of payment in NCLT has given that almost a stay for all types of measures to be taken by the lenders. And whatever the escrow account that is maintained with the lead bank, whatever the credits they are getting, they are distributing. But whatever the distribution that is happening is around 60% of the interest to what I'm booking on a monthly basis. So that's why, as a prudence, I told you the amount what we have provided for.

Right. Right. So I know it's difficult, but is there -- do you have a time line in mind by which [indiscernible]...

Sorry, it's not clear, yes.

[Operator Instructions] The next question is from the line of Sushil Choksey from Indus Equity.

Thank you for the stable result. Sir, my first question pertains to the previous question you were asking about your co-lending arrangement, and I think it was interrupted. Can you reply on an elaborate basis, what is the arrangement and how we are working?

Yes. Yes, please go ahead, [indiscernible].

Co-lending arrangement. We have entered into co-lending agreements. Agreements have already been signed last month and these are 3 big NBFCs. And the co-lending will be done only on housing loans and MSME loans on the totally [ unsecured ] basis.

Why, sir, I understand the reply. The names are already public about the tie-ups that you have done because those companies are also listed, so they were announced. Sir, I was asking about 80%, 20% and will this loans be passed on to the books? Or how will the 80%, 20% arrangement work or whatever? What you -- I think MD, sir, was elaborating on that and then it got interrupted.

So the formula is as strictly as per RBI guidelines that were -- we have given our Board approved parameters to the NBFCs. The loans which fall in those categories, they will be proving those loans, and they will be sharing with us. Then, we will make our own diligence on those loans. And if we find them fit in our parameters, we'll be parting with the -- we will be limiting the 80%. So it will -- we're working like this. The escrow arrangement will be there with our bank only. So sourcing and monitoring will be the responsibility of the NBFCs.

Sourcing means collection or you're talking [indiscernible]...

Yes. Yes, it's collection also. So [indiscernible] collection of.

Sir, this announcement of co-lending was pertaining to 2 NBFC where housing [indiscernible] and one is pertaining to MSME. What about other retail section? What are we looking at? And what kind of tie-ups are we advancing?

Sir, right now, co-lending as per the RBI guidelines, it should be on the priority sector. So we the recently -- Ministry has also announced to bring the traders and the priority sector. We feel that the opportunity is there in the trading. Again, on the same basic principles of 100% to collateralization. That's the opportunity comes, we will examine.

Okay. Now sir, just touching up on the same that we have [indiscernible] guidance that RAM would be 60 -- 70% growth and [indiscernible] would 30%. So most of the co-lending would fall into RAM category as per my understanding?

Exactly. Correct.

Now if that is so, with 49 point -- I think we are one of the most efficient where CASA is concerned, besides Bank of Maharashtra and SBI may be even lower than us in CASA. And in private sector, there are 2 banks which are higher than us possibly. Sir, how are we capitalizing on the strength with Central Bank depositors who has empowered the bank to a fantastic competitive business because our cost of funds cannot be matched by 75% to 80% of the banking -- banks in India?

We are unable to figure out the crux of your question.

Sir, my question is that we enjoy 48%, 49% CASA on a consistent basis on all India for the last 2, 3 years.

Exactly.

And it's possible that we may cross 50% even because the brand royalty to [ semi-bank ] and the kind of deposits which we are attracting, these are not metro-based deposits. They're from Tier 2 and Tier 3 as well MSMEs [indiscernible] last call with your office. So what I'm asking is when we have such elaborate spends on deposits, our cost of fund is low, how are we going to capitalize on our own branches with the same growth, which we can enable within our own employee sets?

See, here, because of PCA, our recruitment was truncated. And then first of all, suffering on this front was on the posting of good proposals and also to have an effective collection mechanism. To ride to faster -- to bring the business to a respectable level of improving the interest income, we thought now it is to the opportune time to work on the co-lending, where sourcing and collection management can be handled efficiently. Going forward, one book will build up on this, then on our own strength, other than private sector, we will be focusing. Now on the agri side, let me explain you on this -- on the agri side. Now CKCC, that is crop loan. Now we are not much interested on the crop loan side. We are now moving on to the agri-related industries like processing. And in my -- all my postal area, we have identified around 350 branches where we are bringing only aqua financing from the rural centers. So like that, we are segregating how to diversify our agri portfolio further. So for that, we will be using our whole infra.

Sir, I appreciate that your spent in agri has been superior to most of the bankers who are running business today. But will it be backed by some gold security like most of the agriculture finance? Or this would be pure financed on agriculture and [ birds ]?

Sir, it is -- our own financing that diversification will be happening on the agri and agri processing industries, horticulture industries and aqua-based industry.

So basically, you will be a great enabler of farming and horticulture is just concerned that as you visualize, and the bank would extend because your rural connectivity is good always?

Exactly. And one more thing that I would like to share, we have very good big spice of account where they procured all the raw materials from the farmers of different states. Already our people are on job and probably next month, first week, we will be launching on FPO connected program of bringing almost 300 farmers into that. So where ring fencing of cash flows is also insured.

Sir, will this be neutral with any crop? Or will it be specific crop, which you look at your [indiscernible]...

No. No, no. See, this particular account is the spices. It is in the spices business. They have turmeric. They have the chilies. They have the jeera. They have the pepper. And they are procuring -- this is from 6 to 7 states. And we have already taken that database of these farmers. Already, our people have contacted and they are ready to take the finance from our banks. So it is only that bringing them into our fold. And then on the other side, payments are assured because this is my own customers who is having the track record up more than 8 to 9 decades, 8 to 9 decades I'm saying.

Sir, I appreciate that effort. What I was asking is we are neutral to any crop in any part of the year? That's what asking.

Yes, any crop from wherever he is -- this type of companies are procuring.

Okay. So you hold great promise on agriculture finance system. And sir, why -- moving to the next question. Enabling your thought process on co-lending, RAM business, what kind of strength are we building with RBI restriction on hiring? Digital can support you as an enabler with current human resource or empowerment of current human resource, which is a great challenge in Central Bank of India. How would you enable the digital expenditure and digitization of the bank that you succeed over a period of next 2 quarters or 3 quarters or maybe 2 years, whatever maybe the time frame be done by?

Sir, let me tell you, as far as the digital channels are concerned, the bank has already embarked on this mission 2 years back. And then now we are reaching the finalities. And even certain products also, we have brought on to the digital lending platform. And going forward, this is one channel where we will be having growth contribution to the advances along with our physical channels of brick-and-mortar branches and through co-lending. So we'll have the 3 channels for the business improvement. And BCs anyhow, they are there, but will be coming through the branches. So we are not separating the BC as a channel. But primarily, we will have the 3 channels for improving the business.

So ultimately, what you're seeing in your branches, BC as well as co-lending, all partners will be onboarded into Central Bank digital system to have a turnaround time at the addition or your efficiency and credit deployment would be superior? That's what I understand.

Exactly, exactly. At the end of the day, it is only the tax that works in the market.

So what kind of tax figures can you assume if it's a retail product?

In co-lending, we have given the time of 7 days. We have given the 7 days and then to enable further documents moving digitally, even our advocates, lawyers also who are empaneling who are tech savvy.

So what kind of CapEx would we incur on digitization in the current financial year or the next year?

See, we have a budget of around INR 700 crores for the IT spending for this year.

Sir, this is the cost of it sir?

Yes. It is a too huge number. And then whatever the allocation that is required from the co-lending, it is only -- not even double digits in growth.

Sir, my next question is -- presentation shows that Uttar Bihar Gramin Bank will [ offer ] us a profit with 35% holding has moved from INR 11.39 crores to INR 107 crores. Anything specific in recovery or it's a fantastic growth that you have achieved, sir?

Sir, can you throw some light on this? Net profit -- which one is at this -- Uttar, we have, yes.

[indiscernible].

Uttar, we have Gramin Bank.

The recovery. Basically, recovery. We will give the final detail, sir. Initially...

Yes. I'll get in touch with Mukul, sir. That's no problem. Sir, your outlook, you've given a NIM CASA cost to income and gross NPA and net NPA. Now if I assume that all these challenges you have assumed with conservative outlook on the scenario with the global challenges, which are there within India, too, and the ongoing case of COVID, too, and maybe a third phase comes or not. Do you think the guidance is on a conservative basis? Or you can even do better than what you said?

I don't say it is conservative. It is a balanced figure what we have worked out. Thinking that after November, there will be a total opening up of all the sectors in the economy. And then least days, whatever the figures we are committed here, that is the least 1 quarter we will be achieving.

Sir, the next question is, if our economy does far better than what has been assumed by IMS in the report yesterday or our GST numbers or [indiscernible] rollout in July and GST collection, which is likely to come. And your interest rate scenario on GSAP is managed by government and RBI, well, and Central Bank tends to benefit. What is the treasury outlook is one? Second thing, if India GDP growth rate's almost to double digit, will it be advanced more aggressive within model outlook on corporate? Or we'll not look at corporate at all on my side?

[Foreign Language] Corporate, we will be cautious, sir. That's what this commitment to what we have to all the -- not only to our investors and to the market, but also to our stakeholders. If for now, there is any -- all the ring fencing happens on the cash flows, then we will go back to the Board and then we will have some flexibility. Before that, I cannot commit that we will be committed...

No. No, sir, I'm not asking you to commit to me. I'm just asking if Indian GDP, generally, typically 1.5x of GDP growth is about corporate credited. So if the AAA accounts, the names like Tata Steel, Steel Authority or BPCL, all these people take off on CapEx, it's the Government of India and everybody else is talking about. If that kind of CapEx cycle starts, will Central Bank do a little change in balance or that will...

That's [indiscernible]. See, anyhow, this are all we will be reviewing on a quarterly basis. And as and when river comes, we will cross it. We will see how we have to navigate. At this moment, it is too difficult to tell.

Okay. Sir, can you indicate -- Mukul, sir, answered on the tax percentage. But can you indicate on an annualized basis, what is the effective tax rate, which you will be paying based on all the parameters which we have to consider?

We have not -- Sushil, we are not going into the new tax regime.

No, I understand that. But still effective, based on the income, what would be the effective tax rate for the current year based on your deferred and other benefits [indiscernible]?

It is -- I mean, difficult to give flat tax rate because it has to take care of various factors, what around the allowances, what around the disallowances. So based on that, what exactly will come and how much of the DTA also we have to account for. So based on all those factors, then the tax payments will be done. And accordingly, I mean the tax rate would come.

So exactly 30% should be a reasonable rate? Or we have -- will it be abnormally higher than the system?

That will be the floor. Over and above as and when that cushion happens, we will ramp it up.

The next question is from the line of Prabal Gandhi from Antique Ltd.

Thank you for the opportunity. Sir, am I audible?

Yes, be a little louder, please.

Sure, sir. Sir, so my first question is on the MSME side. So we have seen a restructuring of 8% of the book. And if I also calculate the slippages from the numbers that you have given, around 5.7% of the -- on an annualized basis has slipped during the quarter. So the stress on the MSME side seems to be on the higher side. So I need your understanding on the color of OTR. So how is the restructuring taken place here, whether it is more on the moratorium side? Or how it has been in general?

In general, it is on moratorium. No other tweaking in that. It is only the moratorium that is also ranging from 6 to -- 6 months to 2 years.

Okay. And sir, any changes, restructuring proposal that we have seen from the [ slippages ] side?

No. No, we do not have that. Whatever the ECLGS, what we have provided, such accounts are not there in the RF1 or RF2.

Okay. Okay. Any color on the MSME restructuring, any particular segment, for example, textile or some other segments which are giving you a lot of proposals on the restructuring?

No. No, we cannot pinpoint on particular sectors here. Across the board, we have, and not specific to any geographical reason also.

Okay. Understood. And sir, similar has been on the retail side also. So we have given moratorium of 6 to 2 years and like that only?

Yes. Yes, exactly.

Okay. And no reduction in the EMI that [indiscernible]...

No, no, no. One thing is our profile of retail customers as well as housing is concerned, maximum or salaried people. And only those salaried from the corporates where the work from home was there and a little stress they were foreseeing in their [ yamal ] event, they won the approach and we have considered. And in general, we do not have anything, which is from the business cash flow servicing for the housing loans.

But sir, even then if I see the slippage number for the retail that's around 3%. So that is not what we used to have. So it's on a higher side.

Yes. Yes, that is there. Well, see, that's what I was saying. We have totally gone in further opting model. See, it's not that across the portfolio we have offered the relief measures. We have only gone for the outreach and whosoever is opted, evaluated, and then we have given them whatever the relief. Otherwise, the INR 368 crores. And even in that also INR 140 crore, that gold will be -- gold-related things will get upgraded by this month end. So [ maximum ], we will have INR 100 crores -- INR 220 crores in this.

And sir, on the retail, so you mentioned the salaried proportion is on the higher side. Can you specific any number there?

No. I do not have that particulars right now. But you can e-mail, we can ask our department to send you the details.

Sure, sir, I'll do that. Sir, on the collection efficiency side. So how has that improved from -- I know it would have dipped in April and May, but how has it improved now? And what are the levels currently?

See, July -- let me tell you, July, almost we have reached the pre-COVID level. And there is no issue as far as July is concerned, for the past 20, 25 days. Statistic shows, there is nothing of that sort. As far as June is concerned, when you go for the demand collection balance, this one, at that time, it was hovering around 88% to -- like that 85% to 88% in that range, it was set. April and May, really, it was very bad.

And the precorporate level, meaning what are the levels that we had in [indiscernible] over time?

It was around [ 95 to 96.4 ].

Okay. And is there some very -- some variation in different segments? For example, corporate would be doing well. MSME would have even lower...

Let me tell you, corporate and agri, we do not have any issue. And next, a little concern on the retail side, but we are confident because of the customers' profile. Only worrying and concerning portfolio is the MSME. And then lot of measures we are taking and also relief that the government has extended through ECLGS. And this is what the status right now.

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

Rao, sahab, I have one question on -- we have been hearing about the privatization of the bank. Is there any kind of signal or any message or anything or any preparation is being done by your bank so that we can understand something on this? Is there anything from your side on this?

Sir, as far as this privatization is concerned, I am also watching the same TV channel and also reading the same newspapers what you people are needing or watching. So more than that, I cannot supplement anything.

Okay, sir. My second question is, sir, on -- in ARP, the bad bank. By now, we must have crystallized everything, the number of accounts and the amount and...

We have 7 accounts amounting to INR 3,000...

INR 2,700 crores.

INR 2,700 crores.

INR 2,700 crores. And how much are we going to get, the kind of valuations or something has been worked out on this?

Around 18% to 20%.

18% to 20%.

18% to 20%. And 15% of that?

Yes. [indiscernible].

So we get -- about 3% maximum is the liquidity, which will come in.

Yes.

Rest, all the government guaranteed, this thing. So around INR 50 crores -- INR 55 crores, INR 60 crores you will get. Will it materialize in this current quarter?

December.

In December quarter?

Yes. Yes. We have [indiscernible] in our estimate, sir.

Yes, sir. Good, sir. Now sir, this -- the SMA-0, as we discussed earlier also, has gone up from INR 5,129 crore to INR 6,580 crore. Out of that by now, since 25 days are already over, some clarity might have come that -- I mean what is the recovery or [ regularization ] of this, almost everything, 90%, 95% of this?

Sir, let me give you one more aspect. We will be first focusing on the SMA-2 because that is the first hurdle what we have to cross. Otherwise, they will [indiscernible] we have the end of the month. So out of INR 5,115 crore, I told you that given the figure, INR 700-and-something crore is outstanding as on date in SMA-2. If nothing happens in the next 2 days, that will move into entry. But we are confident that many of the accounts, which they will be servicing on the last day, that amount will still come down. So as far as adding to the NPA [ cities ] from the SMA portfolio, focus more will be on the SMA-2 rather than SMA-0 because not many issues will be there in SMA-0.

All right, sir, I take back my question on that. Sir, just COVID. Just one question. I mean various schemes of RBI restructuring, especially, for MSME has been done. And because of that, the slippage numbers have come down or the NPAs center, whatever on the books is controlled. But is there any internal exercise has been done that out of the total restructuring in Phase 1 and now Phase 2? How much, internally, we think that account could have gone bad if this dispensation would not have come?

Right. That's what I was -- I told you, sir, earlier. We have gone for the opting model with [indiscernible] outreach. It is not that as a blanket relief measure we have extended across the MSME portfolio, whatever the government or RBI has given. Otherwise, my slippage of INR 429 crores in the June quarter, I would have avoided if I have given the blanket relief as given by the government that we are not given. So proper evaluation, we are doing upfront while extending the relief measures.

All right, sir. Sir, on the housing loan. I mean you have a very strong portfolio of home loans. Is there any breakup that how many accounts are amount about INR 10 crore or between INR 5 crores to INR 10 crores and INR 1 crore to INR 5 crore? Is there any such exercise or any figure numbers are...

Right now, we don't [indiscernible], sir, we will be sharing with you. I do not have that.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Sohail Halai for closing comments.

Thank you, everyone, for joining the call. And thanks again to Rao, sir, and the management team for taking time out for this call. Sir, before we close, would you like to add any closing remarks?

No. It's our pleasure to talk to you and then all of our analyst friends. Our endeavor is to give that clarity and also transparency in our working. And we will continue to put our efforts and then whatever the bad that was there, that will be the history for the Central Bank, and we will be moving on to the progress orbit now.

Thank you. Thank you, sir.

Thank you.

All right.