CSB Bank Limited (CSBBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to CSB Bank Limited Q1 FY '21 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Karwa from Axis Capital. Thank you, and over to you, sir.

Yes. Thanks, Nirav, and good evening, everyone. On behalf of Axis Capital, I welcome you all to the 1Q FY '21 results conference call of CSB Bank. From the bank today, we have Mr. CVR Rajendran, Managing Director and CEO; Mr. BK. Divakara, CFO; and Mr. PV. Antony, General Manager, Accounts. Without much ado, I would like to now hand over the call to Mr. Rajendran. Sir, if you can just give some brief opening comments about the results and your outlook. And then probably we can have the question-and-answer session. Over to you, sir.

Good evening, friends. As you know, the bank has done well. Half of the credit goes to the analyst population. We learned the banking only from analysts. That's why I always insist, in every bank, wherever I was there, I used to meet the analysts every quarter and understand the expectations and the nuances of the banking and what other banks are doing, all the information we get from you also. And we try to change our behavior according to the market expectation always. This quarter is very important for us because we have crossed many milestones, even to our surprise. Actually, the earnings per share has gone to INR 12.35 on annualized basis. And return on equity has also gone to 12%. And cost-to-income ratio has come below 50.26% which we never expected to happen during this short period. But we started journey at 103%, now it has come to 50.26%. Our net interest margin has also gone beyond 4% -- 4.06% is the reality. So even in the falling scenario, we were able to improve the yield on advances. And we were able to contain the cost of deposits and more particularly the cost of funds, which made it possible. So on NPA and other parameters, of course, there is a standstill and there is a moratorium. So this number should not be taken easily. But I will give the supporting numbers to make it comfortable for you. Not only we were able to bring down the net NPA, our SMA data, if you understand, has improved a lot. SMA 1 and 2, which was more than INR 125 crores, has come down to less than INR 22 crores and SMA 2 today is less than INR 4 crores. So this is the likely slippages, which are likely to happen when the moratorium is shifted. So excluding SMA 0, whatever numbers we are having, it was more than INR 400 crores at the end of February 29, which has moved to less than INR 126 crores. Most part of it is sitting only in SMA 0 other than INR 22 crores, which is sitting in 1 and 2. Even there, there is -- the collection is improving and we will be in a position to improve the data to a large extent and avoid slippages immediately. As far as the COVID data is concerned, our collection efficiency is around 61% for the entire loan portfolio -- loan book. And if you exclude the gold, then the collection efficiency is almost 73%. And if you look at only the moratorium book, excluding gold, it is 47%, which means we have given moratorium by default to everyone. Only 73% have not opted for moratorium, 27% has originally opted for moratorium. The initial stages, there are about 27,000 people opted for this. The second scheme, it has come down a bit by another 600, 700 numbers, almost 26,000 people are still on moratorium. Even if there is a INR 1 overdue, it is considered as the party availing moratorium. That is how we arrive at the data. The moratorium collection efficiency is improving quarter-on-quarter. And month-on-month, if you look at it, month of March, it was 61%. In the month of April, it moved to 54%. May is the worst month with 48% collection. June, we gained about 59%; and the July data is almost 78%. In absolute terms, in the moratorium accounts, demand made is about INR 397 crores, out of which INR 186 crores is collected leading to a collection efficiency of 46.85%. In absolute terms, about INR 210 crores. Exactly INR 211 crores is what is the amount demanded and not paid. Demanded in the sense, forget the moratorium original schedule wise. Demanded and not paid other than gold loan, it's only INR 211 crores. So as far as our provision is concerned, we already had almost INR 93 crores of excess provision in last year because of the accelerated provisioning policy. We continue to do the same existing -- same conservative policy. Today, we have INR 89 crores more provision than what is required as per RBI policy in regards of our containing versus accelerated provisioning policy. Apart from that, we have provided for INR 31 crores for the COVID provisioning. That is 1.5% of our assets, we have provided as the COVID provisioning. And as a whole today -- and because of the CSR and fraud provisioning, which is to be spread over 4 quarters, we take it upfront. That impact is about INR 24 crores. Overall, we have INR 144 crores of excess provisioning made. And if you reduce our tax impact, INR 108 crores is the excess provision we are holding in our books against the moratorium accounts overdue of about INR 211 crores. So we have enough and more provisions and collection efficiency is improving. Other than the SME accounts where we have given the COVID loans and still they are struggling to come back to the normal level of operations and collection is a problem for them, all other portfolios are doing well. Particularly corporate portfolio, 93% of the people have not opted for moratorium because they are -- mostly they are AA, AAA-rated companies. Only few MFIs and few small NBFCs have opted for it and 1 or 2 manufacturing companies. There also collection is improving. So by and large, the COVID impact on the bank is much less when compared to the industry level impact. So we don't expect it to have a major impact in the coming quarters. Because nothing will be revealed in September for any bank. December will show what is the collection efficiency of various banks. Everybody is releasing different kind of data. So I have all the data. If you want any further clarification on that, I'll be in a position to provide it. I think I will stop at this level. And we have given whatever you asked for in the last analyst call. These are all made a part of the presentation this side. If you want any clarification or more information, I'll be happy to answer.

[Operator Instructions] First question is from Jehan Bhadha from Nirmal Bang Securities.

My question is a bit from a long-term perspective. So if we just keep aside [indiscernible], so on a longer-term basis, what is the kind of credit cost that our asset profile that we have, so what do you expect credit cost to be, maybe, let's say, in a couple of years down the line?

As of now, our target is to contain the credit cost below 1%. But when we take the new verticals, you know that we have recruited a lot of people on the retail side who are likely to come in by October. And as of date, we are not on the unsecured business at all. But we will enter the unsecured business also with the new team coming in. And the new -- we have stopped retail lending for quite some time now. Even the market loans, housing loans, we are not aggressive at this point of time. We have started the 2-wheeler division last year, which has almost INR 100 crores of asset booked today. There's not much of NPAs at this point of time, but you are aware that 2-wheelers will have at least 2% as the credit cost. So when the new lines are coming in, the credit costs may go up, but substantially, the revenue will also go up. The MSME division which we have started in the month of April after the COVID, it started building up the volume now. And so only the yield is around 18% on the MSME book. The credit cost of 2%, 3% doesn't matter. It will get absorbed and MSME will be in a position to make good profits. The newer businesses which are little more riskier may increase the credit cost, but not immediately because these are all -- volume wise, these are all very small volume and whatever we are having already. So the impact will be known over a longer period. But in the meantime, the yield on advances will also improve substantially to absorb this additional credit costs.

I'm sorry, sir. I missed the credit cost, which you mentioned in the first line when you started.

Credit cost, as of now is 0.45%. Our credit cost target is only less than 1% always for the existing businesses. It's a gold loan business, 35%. So when hold on proportion goes down, naturally, credit costs is likely to move up along with the yield moving up.

Yes, sir. Okay. And sir, on the gold business, if you can comment on what is the yield? And what is the further scope, if we have any, going into the next 3, 4 quarters? Can we further increase the yield on the gold side?

See, even in a falling interest rate scenario, you might have seen my yield on advances is constantly moving up, okay, by and large. Only between the last quarter 4 and quarter 1 of this current quarter, there is a 12 basis point reduction. This is mainly because of the NBFCs and corporates have renegotiated the raise. Today, they are all able to raise the CPs at 3.5%, 4% and all, AAA-rated companies. Some of them have prepaid it. So that advances had a negative growth. Apart from it, some of them have reduced rates also. So in spite of that reduction, we were able to maintain the yield on advances at 10.74%. It is compensated to a large extent by the yield on investment going up, which I'll come to it later on. But our reduction in the cost of deposit is very substantial, okay? From 5.86% for the last quarter, it has come to 5.48%, which means about a 38 basis point reduction. So the net interest margin is expanding and we are confident we'll be in a position to increase the yields. We started the gold loan at 9.7% 3 years back and now our charging rate is around 13% to 13.5% for the gold loan in general. Agriculture gold loans are little lesser. Gold loan yield today is around 12.22%, okay, and it will improve. Now because of the increased lending rate, old loans are getting closed faster and getting a fresh loan at a higher rate. So for the current year also, gold loan yield will continue to rise. Whereas other portfolios, it is difficult to maintain the yield, particularly corporate portfolio yield will go down. On the blended basis, yield will be maintained or improved. That's what we expect.

Next question is from Abhijith Vara from Sundaram Mutual Fund.

So congratulations on a good set of numbers. I just have few questions. First question is, you had mentioned this INR 211 crores demanded and not paid on moratorium. I just wanted to get clarity. The total book under moratorium is INR 2,228 crores, on which the interest due was about INR 211 crores, which was demanded and not paid. Is that right?

No, no not interest due, interest and installment together.

Both together.

Okay. EMIs. Okay.

See, out INR 2,200 crores, INR 500 crores is roughly gold loan, okay, that I kept it out. Gold loan repayment is a little lower because what happens, people don't have money. So gold loan life is only 4 to 5 months. Now it is getting elongated because people are not having money to redeem the jewelry. Even otherwise, people redeem the jewelry normally only to attend the social functions. If there is a marriage in the family, they will redeem the jewelry and attend the marriage, come back and replace it. That is how the gold loan business is run. Now the social functions are not there, so redemptions is not happening. So anyway moratorium is given to them. They are continuing with the same gold loan. Now probably because of the increased rate, they will come back because they need more cash for taking a fresh loan by closing the old loan. I think this problem will be addressed. So I kept the moratorium gold loans out. Remaining INR 1,800 crores of our book. The demand so far is INR 397 crores, including interest, out of which INR 186 crores is collected.

Right. Sure. Sure. How much of the book under moratorium will go on the restructuring book, as per your opinion?

Initially, it was -- 27% was the moratorium book, okay? Now it has moved to 18% including the gold and 15% excluding gold.

Yes. But how much of this can get restructured as per RBI's restructuring guidelines which have come out?

You're talking now about KV Kamath committee restructuring, I'm not there because it is applicable only to the larger loans, INR 1,500 crores plus. I don't think there is any larger loan where we have a consortium. 1 or 2 consortiums are there, but they are all very good accounts. I don't expect it to show any restructuring. That restructuring, I may not do. But individually, some SMEs, if they approach us, even SMEs also, we have given the COVID loan. INR 120 crores is sanctioned, INR 85 crores is disbursed. So I'm confident that they may not need restructuring. But in case any one of them, for example, these hotels, resorts, all these people may look for some restructuring. When they approach, on a case-to-case basis, we will take a call on that. But they may not be very substantial number for us.

This SME emergency credit loan, how much was sanctioned and disbursed?

About INR 120 crores is sanctioned, out of which about INR 85 crores is disbursed so far.

Okay. Just one last question before I get back to queue. This RWA increase, can you please -- you have given out a comment saying this is because of TLTRO investment. So can you please explain...?

Risk weighted assets has gone up. We have explained in our, I think, investor presentation. What happened? I moved some of the investments from the HTM book to the AFS book to take advantage of the yield moment, okay? [indiscernible] contributed INR 30 crores more in the first quarter, mainly because HTM book is moved into the AFS and [indiscernible] booking. Not that entire thing is sold out. There are quite a lot of investments which are lying in the HFT portfolio under the AFS portfolio. When you move out of HTM, that become a risk-weighted assets, 50% is the risk-weighted asset added to it. That is why treasury book, the risk weight has gone up. That is one reason. And I'm the only small bank which has participated in the LTRO in a big way. I have taken INR 1,600 crores totally in the repo market from the RBI. First one about INR 700 crores came at 5.35% or something like that. That is without any commitment. Second round, almost INR 850 crores came with the commitment to invest in the NBFCs. That we have invested. That is also adding to the market risk. So one portion is AFS portion of the government securities and SDL. This -- duration risk is coming here. So credit risk has also gone up mainly because of the LTRO investment. Market risk has gone up mainly because of the AFS book growing in a big way. These are the 2 reasons for them to grow.

Is it possible to share MTM gains, which is not yet realized sitting on the treasury book?

We have given it in the standard presentation, I think. It is not added to the presentation. Probably that also you add it to the presentation. Okay. Add it and then make it available in the public domain. No -- nothing is available to anyone privately. Everything is available in the public domain. We will put it in the website itself today, right? We have the data on that. I'll put it in the website.

Next question is from [ Grisham Shah ] from CapGrow Capital.

[indiscernible] set of number. My question is regarding...

I guess we lost in the beginning. Can you repeat your question?

Yes. So my question is regarding the gold loans. So now every bank or NBFC is moving towards gold loans and getting little aggressive over there. So what is the competitive intensity? And what is our edge over the peers?

This is a question, which I always find it difficult to answer, one thing which I'm also searching answer all along. When I'm giving loan at half the rate, why Muthoot is growing at 24%, I'm not able to grow. The same premises I have seen. State Bank of India is there in the ground floor, and they have put an arch stating that we are giving a loan at 7.35%. In the first floor, Muthoot is -- Muthoot is there giving at 24%. Muthoot is growing at 40%, State Bank is growing at 10%. So this is a mystery for all of us. But what we understand is it's the package delivery and the customer care, which we give, okay? I've not reached the Muthoot level. That is why I'm not as successful as Muthoot is. But still, we have improved our service delivery to a large extent, okay? Our footfalls are less in the branch because the digitalization has reached a good level. Our number of customers are less. So our branches are not crowded branches. So the customer gets the service faster. If not the 3 minutes gold loan, which they are giving, I'm able to dispose of the customer at least within 10 to 20 minutes, depending upon the branch they were. So faster gold loan and good rationale because of the RBI new policy, we are able to offer competitive rates and reasonably good level of interest. I'm not as cheap as State Bank of India or Canara Bank, but still I'm cheaper. My market is not the public sector borrower. So my market is only the borrowers from the private lenders and the gold loan companies. So our market segmentation is very clear. So we are able to improve our business in that segment, particularly. In the past 3 years, almost, we are growing at 24% on the gold loan. In current year also, we should be in a position to grow at least 25%, if not more.

And on the unsecured side, which you will be starting in this year, so what is the strategy over there?

I will leave it now. Let the new team come and start the product. Nothing. No volumes will be generated during the current year. It is only product development, recruitment of the people, setting the team, setting the policies for the current year. Business will start only during the next year. The only business which has started is the 2-wheeler, which is doing well. A guy from Bajaj Finance has come and started. Absolutely no NPA till the COVID time. Only 1 NPA account has come. We are doing almost 1,000 loans per month before COVID. We almost reached the same level now with the partial opening also, our market share is improving. INR 100 crores is our book size now. MSME started only in April after the 2 months of COVID experience. So only those businesses which survived at that point of time, we have taken as our customer. So the customer selection will be good. All the bad loans are done only in a good time. All the good loans are done during the bad time. Now it is a bad time, better to do the good loans. That's what we thought. We started the MSME division. That is very, very small loans. It is all INR 3 lakhs, INR 10 lakhs kind of a loan. It takes time to build the volumes. So risk will not come into the books immediately, but the return is good there. The unsecured loans, I'm talking about, like business loans, which the banks are giving aggressively, even those banks have slowed down on the business loans that unsecured loans are causing some concern. So we'll not jump into it tomorrow. Probably, we'll assess the market. Let us see the COVID impact by March. We got the product and the processes in place and the systems ready. Marketing people ready and the launch of the product at the right time with the right modifications which we learned from this COVID problem.

Next question is Jai Mundhra from B&K Securities.

Sir, first question is, sir, on growth and the loan book size is an absolute number. So because the base is so small, so I don't want to get into the percentage growth, but how quickly or what is your sense that after 3 years what could be the loan book of the bank, either through organically or inorganically? Do you also have inorganic sense?

See, none of our investors meeting, we talked about the top line growth. Even during the IPO, we never discussed the top line growth. We don't have top line growth target at all, either internally or with the investors also, major investor also, right? We are a bottom line focused bank. To improve the bottom line to the extent we have projected, we need the volume growth. Without volume growth, we cannot improve only the efficiency and run a balance sheet. So we kept on changing the composition on the balance sheet, both on the liabilities side and the asset side, which has given results so far. So not that we have not grown. As I told you, that gold loan, we were growing at 24%. On the SME, we were de-growing at a much faster rate. We were exiting the wrong SMEs, which we are having in the books. Not that SME is not the focus, but particular segment, which we are exiting continuously. I explained in the previous meetings also gold jewelry we exited; cash flow, we exited; the resorts, we exited. And similarly, the steel trade we expected. Like that many businesses we exited. So the growth in the SME is not known outside because it is compensated by the degrowth, which has happened. Overall, book itself has degrown, which is additional limits also by about INR 1,500 crores. It is a change in the composition, okay? Now all the exit accounts formalities are completed. Maybe COVID is throwing more segments to be identified as exit account. We'll identify. So that is why growth is not visible to the outside world, but internally, we are growing. As far as the deposit is concerned, it is always optional for us. It is by invitation by us, not by people give deposits, I accept it. There are many, many of my large depositors who offer deposits, which we don't accept. Unless I have deployment opportunities, I don't get into the deposits at all. Even today, we are not accepting deposits. Our rates are very low. And even at the low rate, at the current rates also, branches are not permitted to accept the deposits. So deposit growth is constrained. During the current year, so far, we have grown deposits by 8%. At some point of time, we have grown 10%, and we called branches and fired them why you are growing. So they have degrown now. They have returned the deposits. And today, assets are growing. The book has grown by almost 3% in the loan book. Investment book has grown substantially. So we have some surplus fund still left out. Once we deploy, we'll grow the liability book. Liabilities was asking today, there are so much of surplus available in the market. Liabilities available at a much, much cheaper price, which is revealed by our cost of deposit going down faster. In fact, cost of funds is going down much faster. It is only 4.56% for us today because we have borrowed extensively in the repo market. At a moving rate, repo charge is only 3.35%. We are able to borrow INR 800 crores from the RBI. So we look at various options for liabilities. Deposit is one such option. If wholesale deposit is available, if CD is available, if borrowing is available at a cheaper rate, I go to the market. In your terminology, that is not reflecting in the growth. If you look at my borrowing segment has grown. So my liabilities have grown as a whole. It is not grown on the deposit book, but it is not available to grow the deposit book, but others are available at a cheaper rate. For example, if I'm able to raise a Tier 1 bond, Tier 2 bond tomorrow at 5.5% or 6%, I may not need capital. But only for the sake of liability, I may go and take it, right? So we keep on evaluating various liability sources and liabilities we are acquiring, even though deposits are not visibly growing. Similarly, assets we are acquiring. It is compensated by the de-growth in some other segments where we want to de-growth. And some of the assets have grown only on the bond side. Bond portfolio is very big. You might have seen the investment portfolio has increased. It has an impact on the investment yield also. A falling interest rate scenarios after booking so much our profits on the treasury, still our yield on investment is 6.64% as compared to 6.28% in the last quarter. So it is only asset buildup and the liability buildup, which you have to look at, not the deposit buildup and advances buildup.

And sir, your thoughts on inorganic growth, because I see there were some news articles suggesting in the media that we may also look at the inorganic...

I've made a mistake, I should not have made a statement like that, right? That media was a -- that guy was a very close friend of mine. We were having an informal discussion and that fellow has published it, right? It is not an official statement. But you have to take it as our statement of intention, okay? We are willing to look at the options. This is what everyone is doing, not only I'm doing. Everyone is looking for opportunities for inorganic growth. We also do it. We are continuously evaluating some options. So our conditions are that we need 51%, not my condition, our parent condition is that they need a 51% in any bank to acquire. Most of the private sector banks have a second opinion on giving 51% control. Public sector bank, that is what we wanted. We have expressed to the government. We had an opportunity. It's been the Prime Minister and team in the economist meet where I was also an invitee, wherein we said that this is how the privatization has to go and subsequently, there are some conversation between us and DFS and Niti Aayog wherein we have expressed our views. They might have calculated the views from many people. Probably they will formulate the policies. Now they are talking about 4 banks which may come into the market for a sale. We will be definitely a bidder for 1 or 2 of them, right? If it materializes at the price at which we think is the right valuation, we are there for it. So we are evaluating every single opportunity. At this point, we are not evaluating any MFI or NBFC because we'd like to wait till March to understand the balance sheet. Even the bank -- only market balance sheet will reveal the real position, but the process by the government will take up to March. So at the March, we'll do our own calculations and let them describe their process. We'll participate in the process. That is it, right? We are open to the idea. You have to take it like that. But organically, we are doing very well. We are planning to open 100 branches. Even in the COVID situation, we have opened 36 branches. Yesterday, I've opened 3 branches: One in Palem, one in the Karol Bagh, and one in [indiscernible] one rural branch. We have opened 3 branches. Some of the branches are doing extremely well. And we are seeing more nationalized banks are getting closed now. I'm told one south-based public sector bank is closing 3,000 branches. And the merged banks are closing many more branches. Landlords are desperate. So we thought this is the right time to take new premises, along with the furnishing if it is available. And probably whether we can start the branches new. So our 100 branches opening program will remain solid. We may exceed it also, if right opportunities are there. But this is the right time to open the branches. And organic growth itself will take us through all the projections. Inorganic growth is a bonus, if it happens.

Sure, sir. Very well explained, sir. And just on 2 things, sir. I mean, on gold loans, sir, how much is the retail gold loan? And how much is agri, roughly?

Agri is 30% of it roughly.

Okay. And we are still growing...

[indiscernible] target and we are selling agriculture also. So out of overall advances, it is about 21% is agriculture loans -- 23% is agriculture loans.

Sir, other banks, if the commentary suggests that they are not able to grow in the retail agri, but agri, gold -- I mean gold, agri has been reasonably healthy. So just wanted to check what is your sense? Are you -- I mean, we have been growing gold loan pretty fast. But...

Historically, we were dependent on gold only for reaching our agriculture target. But after my recovering, I'm very passionate about agriculture, to be frank with you. Okay. I have done quite a lot in my previous assignment. Being at Agra -- being at Maharashtra Bank, being at Corporation Bank. So I have done a lot of agri. So I've started agriculture division separately. We have brought the people from -- the head has come from Axis Bank. Some of the small finance bank also you've got. And we have brought the people from the new private sector bank setup because the conventional model of lending for agriculture doesn't work in this market. So with the new people, we have started building up the business there. And that is -- that has about INR 240 crores of nonagri -- nonagri -- I mean, non-gold agri portfolio has come so far during the past 1 year. That's a good growth. And Kerala is very good in agriculture. People do not know outside. Even I was not knowing outside. Kerala has so much of rice and multicropping pattern. And Kerala is good for lending. We are doing in Kerala, Tamil Nadu and Maharashtra at this point. Andhra is yet to start. If Andhra also starts, probably agriculture will grow on its own without depending on the gold loan. Sorry, one correction to the data, which I told you. Of the portfolio outstanding today, exactly 50% is agri gold. Out of INR 4,000 crores of gold, INR 2,000 crores is from agri.

Sure, sure. And last thing, sir, on SME detail that we have given, the SME moratorium at 13%, I just wanted to check because we have seen very broad range of SME loans under moratorium from as high as 50%, 60% at some of the smaller banks. And now you held 13%. So is there something to do with...

That is not right, sir. I said 15% is a total moratorium book, okay? So 18% is a total moratorium book. And 15% is excluding gold portfolio book, okay? Of course, SME is only 13%. Wholesale banking is [ 30% ].

Within the moratorium book, not the overall loan book.

18% is the total loan book...

Yes. So the question is, sir, how are you treating cash credit and OD in the moratorium? If this outstanding goes above drawing limits, then only you take as a moratorium? Or is it this the in principle if he has agreed?

What we have done is, we have extended the moratorium to all the people in the bank, okay, including data, okay, which means all the INR 12,000 crores is given the moratorium as per our [indiscernible]. My default, we have given to everyone. Whereas, even if there's overdue on INR 1, that is considered as a moratorium account for me. So most of the customers have not availed it in the first round. As I said, 73% have not availed it. That improved further later on. Most of the people who are delayed also has paid it back. And the SMA 0 SMA 1, 2 also improved. So default has come down a lot. Even though numbers remain almost the same, they come down by 600 numbers. Out of 175,000 customers, 25,000-odd customers have availed it in the first round. In the second round also, it remained a little less than that. So most of the customers have started paying. In the moratorium availed customer, 47% is the collection ratio. In the overall portfolio, it is 60%, 'excluding gold, it is 73%.

Next question is from V.P. Rajesh from Banyan Capital.

My question was in 3 to 5 years, how big will your gold loan be as a percentage of the total portfolio?

Gold loan will grow because my book is very small, even compared to my own competition like South Indian Bank and Federal Bank. In the absolute terms, I'm not a major player, okay? Their book is much, much larger. My balance sheet, my composition is more in favor of gold loan. So my gold loan book can grow much, much higher and continue to grow. And the bank growth, as a percentage, it will come down. In the composition of advances, gold will not continue to have 32% as it is there now. For the current year, what we thought during this uncertain times, we'll increase the gold loan. So we have taken the permission from the Board to take the earlier Board has given a restriction of 33% maximum gold loan. So now we have taken the permission to go up to 40% of the total advances as a gold loan, which may happen during the current year. But going forward, gold will continue to grow at 25%. But the composition, it will come down as the proportion because other loans will start growing with the new teams settling down.

I see. And then on the SME and corporate book, if you can give some more color about 2 things. One, what are the industries where you are primarily lending in? And secondly, in terms of this moratorium book of INR 2,200 crores that you talked about, how much is coming from these 2 segments?

So the corporate segment, about INR 3,300 crores is the book size, out of which only INR 1,800 crores is only from the NBFC. Most of them are AA and AAA-rated NBFCs, which have not opted for the moratorium. In the corporate book, the moratorium availed is INR 859 crores, is it? So INR 859 crores is the moratorium availed out of INR 3,448 crores. These are also some of the NBFCs, small NBFCs and MFIs who availed it and have taken some moratorium from us. Our corporate book is all loans above INR 25 crores is called the corporate book. It is not corporate in the real sense. As per the RBI classification now, this may all go into SME in the next round, which we are in the process of implementing. This is not a real wholesale book. These are larger SMEs, which are classified as wholesale book because they have borrowed more than INR 25 crores. Otherwise, corporate per se if you look at it, it's all basically NBFCs under the larger corporates, which we have not opted for the moratorium. If I remember correct 92% have paid on time and only the remaining 8% has availed the moratorium.

Okay. And in terms of the, let's say, the SME book that you have, what is the different industries that you have primarily lend to?

Out of INR 1,800 crores today in the SME, almost 1/3 of the book is to the textile and textile-related activities. It could be a spinning mill. It could be cotton processing, ginning, or it could be on the garment industry. Most of the exposure is in the Salem, Erode, Tiruppur and Coimbatore, okay? And the textile mills with us are almost 45 textile mills are dealing with me. These are all with us for the past 30, 40 years with us. Most of them do not have any or very less term loans. They have completed their CapEx and all. Once in a year, only balancing equipments or solar power like that they will come. Most of them have a captive power. By way of solar or by way of wind power. So they are all economically viable units, smaller unit, it could be 12,000 spindles to over 18,000 spindles like. So unlike other banks, I never felt the stress of this textile sector in this bank. Even though there are 1 or 2 accounts which might have slipped here and there. Otherwise, the textile segment is doing well. Current year is challenging because Bhiwandi market is not open, Ichalkaranji market is not open. These are the 2 markets, which yarn goes, the [Foreign Language] manufacturing centers. Only the Tamil Nadu market is open in the -- there is a place called Palladam, which is a weaving market. And Somanur, there is another place where is a weaving market. These markets, they are selling. In these markets, problem is the credit period is a little longer. So they may need a little longer working capital, probably this COVID loans will help them, but they are able to sell the product and they are all back in business. They don't depend upon the northern labor unlike the construction industry. They are all local labor. So they are able to come back to operations. So 90% 95% capacity utilization has come in these companies. Even the government companies in Tiruppur have started working to the capacity. So the revival has started. I think most of them will be out of problem. Remaining INR 1,200 crores is well spread out, not even industry where I have even 2%. It could be some in hospitality where we have some more hotels and resorts and all. Maybe overall, it could be about INR 200 crores. Some of them are very, very large ones. Like LuLu Group and all. LuLu Group is Gokulam Chit Funds Group. These are all the hotels which are with us. And because of their multiplicity of income, they have never asked for the moratorium. They are all servicing it. Smaller resorts lost the business completely. Probably this is the season for the smaller resorts. Normally, this is the month where the people come for treatment. You have to book in advance -- 1 year in advance to get treatment in the [indiscernible]. So that season is lost for these health resorts and the resorts probably. That is 1 segment where we may feel some heat. Otherwise, the retail business is also coming back. Gold jewelry, we exited in a large way in the past. So there's not much impact. That is one business, which has not come back. Even the textile retails and all are little bit struggling, but there is no repayment obligations. These are all OD accounts and they are servicing the interest. So there is no issue at this point of time. It will take some more time for them to pick up the volumes. So in the SME, only segment is the other manufacturing centers other than this textile and maybe some part of the resorts may create some issues for us. Anyway we will observe and we are discussing with these. Anyone who have borrowed more than INR 5 crores on of them might have discussed. I might have personally discussed in all the large accounts. Our advances team, our CFO, everybody is discussing with the various clients to find out the problem and give a tailor-made solution for them to -- that are preventive measures rather than going for a replacement. So my replacement may not be on a large scale. That is what the scope at this point of time. Let us wait and see. When you discuss the September results, we will give the right position.

Right. That's very helpful. Just one last question. Geographically, what's the plan to expand beyond Kerala? I mean, obviously, you have presence in TN and Maharashtra, but...

Most of all, expansion is happening outside Kerala only. So we have identified 100 branches out which 10 branches are to be opened in Kerala. But that also, we are cutting down a bit, only 3, 4 banks are coming up in Kerala. We are closing equal number of branches in Kerala also. The Kerala, we had larger branches. Now it has come down. It is only replacement, when one branch is closed in one area. Thrissur, we're having more concentration, we'll close some branches. And open some branches in the northern parts to capture the liability part up it and gold loan part of it. Otherwise, most of the expansion will come in Tamil Nadu because gold loan is very potential there. There, our gold loan growth is good and our brand name is well-established in Tamil Nadu. Otherwise in Karnataka, Andhra, Telangana, Maharashtra is a growth area for us as of now. But when the new team joins, the new team comes from the northern belt actually, almost all of them are coming from the northern experience, probably that is the time where we'll open up further northern expansion also. We don't have a number exactly, this is what we have to do. What we told the Board is -- the Board was worried about one thing and even the analysts are worried about, when you are opening large number of branches, whether your costs will go up very substantially. But what I feel personally is that this is the right time to expand because the premises are available at throwaway prices. Every landlord is worried about letting out to a sustainable tenant. What they have given to the malls, what they have given to the shops, they're all not collecting the rent today. Only banks are paying the rent promptly today. So there is a preference for banks. So we are taking the buildings at a much, much competitive rate. As I told, a lot of bank branches are getting closed by the public sector banks because of the merger. These branches are available along with the furnishing. Yesterday I have seen a branch of one of the south-based banks, which is only 4 years old. Normally furniture life is 10 years. For them, the residual value is nothing once they decide to close the branch and they're not going to open it. They are cutting down on the branch network, it's a loss-making bank. So you take it up along with the safe room, along with the safe deposit door. And for them, it is scrap value. For us, the replacement cost is very high. So cost of the branch can come down a lot. So originally, our idea was 100 branches. But today, there was a Board meeting where we discussed about this, whether we can go beyond 100. Board said, "You complete 100 and come back to us, and we will give the permission," but they also have open mind. So I remember, HDFC Bank has opened 438 branches in one quarter when they are growing. And the branch licensing is free. In one quarter they opened. The same people are there with me today, right? And they know how to open it, how to man it and how to run it. So when these people are on board, the branch expansion will be one way of growing the business organically. Only thing is, we have to prove to you and to the Board that these branches will breakeven within 1 year, if it is semiurban and urban. And if it is a metro, it will breakeven within 18 months. That is the model which we are adopting. Probably if you're able to prove and the expansion will go on a large scale.

Hello. Yes. Sir, this is Manish here. The operator line has dropped. In the meanwhile, I just will ask a question. On this -- the participation in TLTRO that we did, is it still in our books? Or that has got repaid, as you had mentioned in the opening line? I'm just trying to gauge that. Would we still get the benefit of the margin improvement that we have seen going ahead as well?

Next question is from Amit Jain from SBI -- from Axis Capital.

I had a question on cost again. So your cost-to-income ratio has declined sharply to 50% during this quarter, which is very commendable. However, partially you mentioned that there is room for improvement in cost of branches. However, when you keep on adding new people and you keep on spending, do you see this cost-to-income ratio rising, say, over the next 1 or 2 years?

Sorry to interrupt you. Please stay connected. We are trying to rejoin the management back to the call.

Okay, sir.

Participants, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management connected back to the call. Amit Jain, may I request you to...

Right from morning, we have some connectivity issues because it's raining heavily here. So I was explaining the branch opening related policy. We feel that this is the right time to open because premises are available at a cheaper rate along with the furnishing also. And landlords are also willing to come down on the rent. So we may go beyond 100 also. Once this original 100 is opened and the business is happening as per our expectation and breakeven of one year promise is maintained, Board is also willing to open it up. It is option which we are looking at.

The next question is from Amit Jain from Axis Capital.

Again, I have a question on cost only, which you explained partially. However, just wanted to get a sense that your cost-to-income ratio is down to 50% this quarter. So on a sustainable basis, as you keep on investing in the franchise and people, do you see this increasing or, say, in a long-term, longer-term basis, could this improve? Would this go up by another, say, 3%, 4% types? And what's your view on that, sir?

Amit, I have also seen this 50% only yesterday, okay? So yesterday night only. Because we have become a listed company, they have not shown the results to me also, okay? So when I saw the number, I could not believe it. I checked it with 4 people to recheck it, to confirm 50% is right. We found out it is right. Okay. This is a surprise for us also. To be frank, for the entire management team, it is a surprise. Of course, it was 46% during the last quarter and it has come to 50% now. So maybe the income is a little at elevated level now. There are certain incomes which are windfall gains. INR 30 crores come from treasury because of the yields softening, which may not happen every time. Maybe this quarter, next quarter, I'll have it, but not on a sustainable basis. Similarly, this TLTRO has also increased my income to a certain extent. Because I'm one of the small banks which participated in a big way. We got more than INR 850 crores in the TLTRO and invested at the right time, probably on the Franklin Templeton melt down day, we were the major investor on that day. So the yields are very high on that day, we could buy good one. So this may be sustained for the next 6, 7 quarters depending upon the various maturities which we bought. So probably some of them will sustain for next 2, 3 months -- 2, 3 years also. One of -- this windfall gain may be confined only to 2, 3. So this has to be compensated by the volume growth in the days to come. If we're able to maintain -- 50% will be maintained. And it is our desire to go down to 40% over a period. You were also there in the marketing team when we were there in the IPO. We promised it over a period of 3 years. Original promise is above 5 years, is what we promised to come to 50%. Subsequently, we said, maybe we will be in a position to reach at 3 years. We are surprised that we are able to reach it in 1 year itself. Cost control is effectively used and, of course, the yield is also supporting us. Hopefully, we'll be in a position to maintain this ratio for the remaining part of the year. And over a period of 3 years, probably, we will try to bring it down to 40%, 46% -- 45%, 46%. That should be sustainable.

Sure, sir. And sir, just one small clarification. If I compare your Q4 presentation and the Q1 presentation, there has been some recalculation in the NIM. So some explanation there, sir?

That has come from the analyst community only. Some analysts have pointed out that our way of calculating NIM is wrong. So what we have taken, the interest portion we take, and we added the return of assets also to our assets to arrive at.

Interest-bearing assets...

Noninterest-bearing assets are also taken into consideration for arriving at the net interest margin earlier. Okay. So analysts pointed out, all the banks take only the interest bearing assets. Okay. So this line they converted into interest bearing assets and the cost data also, we modified accordingly.

And so going ahead, we will follow this policy?

Same practice, same practice, right.

Sure, sir. And sir, just a small question on these frequent lockdowns that are happening in Kerala and other southern states. Do you see the collection efficiency being impacted because of this?

I have given the collection efficiency, which seems to be reasonably good when compared to the numbers which we have seen so far. Kerala was not much affected so far. But you must understand, only 32% of my lending is in Kerala. 68% is outside Kerala. Okay? Out of the 32% also, major portion of -- is gold loan in Kerala. So Kerala is not the major bearing on the collection data. It's only outside Kerala, probably Tamil Nadu and Maharashtra has major impact on it. Tamil Nadu, in spite of COVID spreading in a very big way, the things are happening there. The lockdown is not implemented so tough, and they are able to bring back everything into business. So collection is good there. Maharashtra is one challenge where things are not opened up. Particularly, Mumbai city, we have a problem. Even our branches are not getting opened on a daily basis. So probably some inefficiency has come from the Maharashtra portfolio and portfolio in other places. Now Hyderabad is also getting affected. So there are -- this data keeps on changing depending upon the lockdowns implemented by the local government. But in spite of that, by and large, our collection efficiency has improved. As I said, even in the portfolio of moratorium, 47% is collected. So that is a good number. As on date, overall overdue other than gold loan is only INR 211 crores. For a portfolio of INR 12,100 crores, it is not a bad number.

Sorry to interrupt you, Mr. Jain, I'll request you to come back in the question queue for a follow-up question. Next question is from Gurpreet Arora from Aviva India.

Two quick questions. A, if you can highlight your assessment of the economic activity in our home state. You just mentioned we have a limited exposure of maybe 1/3 but still, if you can highlight what's the economic scenario in our home state? And is there any effect of the unfortunate floods on our portfolio and otherwise? That's one. And second question is, if you can spell out what percentage of our SME customers we would be sole bankers to them?

So most of our SME customers, we are a sole banker. Okay? By and large, I don't join any consortiums or multiple banking, okay? If at all I am a party to the multiple banking, then I have separate collateral securities for my lending. It is a policy. So most of the cases, we are the sole lender. As far as the Kerala impact is concerned, we've seen flood has not affected the Kerala like the previous year. That's only in one incident of it did we see where some of the families are wiped out. There is no economic loss, but the life loss was very big there. Otherwise, there is not much of enough problem like last year, where a lot of the resorts, hotels and residences have gone under water. That kind of situation has not come for the current year, at least so far. So that's not a major problem. And agriculture is doing extremely level, not only in Kerala, across the country agriculture is doing well. So Kerala is basically an agro-based economy. Most of the people have agriculture as additional occupation. Even my own employees, 90% of them have an agriculture activity also. So as a result, we are an agro-based economy. Agriculture is good, and everything will be fine here. Even in agri, there are some areas affected. Poultries are doing very well where people are sitting at home and eating more meat. But whereas the milk consumption has gone down a lot. The dairies which we have given, the milk animals we have given. Maharashtra, the milk procurement price has come down from INR 38 to INR 22 today. So even the farmers who are in -- dairy farmers are affected. And even these dairy companies are not able to sell the product. Exactly, 50% of the milk sales is happening in Maharashtra, I'm told. So just sales has come down drastically because there are no restaurants, no hotels, no canteens, no offices and no migrant population. So milk has got affected. Like this, there are selected segments where it is affected. So the milk powder conversion has taken place. They have to push the milk powder. Normally in the winter, again, milk production will increase and come back to the summer. We have to wait for the next summer. So we have to understand one by one the problems of each industry and provide a specific solution. For the dairies, we have given a field loan facility now. They have store it in the cold storages until the season starts. So there is also [indiscernible]. So we have taken that kind of measures specifically. My assumption is that like what we have seen during the Lehman crisis, all of us were talking about it, but the economy rebound very fast, mainly because of good monsoons and agriculture doing well. This year also, agriculture is really doing well. Only thing is they must get the right price. That also, I'm sure, because most of the stock in the FCI godown and silos have been exhausted by giving free ration during this period, government has to procure, so they will get a reasonably good price. Production is good, price is good. The economy will revive. Forget what you and I lose, we are not the real spenders. We don't decide the economy. The salaried class is very limited. Of course, the industrial production to come back and revive will take time. And construction activity is picking up now. Only thing is labor is not available. It is a constraint. We are sending buses to Bihar and Gujarat and Rajasthan and Orissa to pick up the people from the south. So once the people are back in the field, even the construction will start. If construction starts, another 50, 55 industries will start doing well. I'm very, very optimistic about the rebounding of activities. So we will come with vengeance. And probably in the next year, you will see a great growth in India.

Your next question is from the line of M.B. Mahesh.

This -- in this quarter, improvement in gold demand or was there a reduction in gold demand? Second, how is the position of -- I think the customers, what is the kind of profile of customers that are asking for gold loans today? And if you could give some color as to what would be the end use today as compared to what it was probably pre-COVID.

Initially, all of us had a lot of gold loans getting closed in the beginning of the year. When the gold price has started moving, people redeemed their gold and sell it. There are many companies focused on that, helping the people to redeem the jewelry and sell it and get the money. But when the gold prices have started moving up continuously, people have stopped selling. So the degrowth has stopped for all of us, including gold loan companies, felt this pressure this time. This happened in the past also. Whenever gold loan prices increase, gold loans will be closed and gold will be sold. And it continuously started growing, people have stopped it, and we have also increased our gold lending rate. So they have started redeeming and repledging to get the additional cash. What they need is an additional cash. Normally, it is the lower income group, which is dominating. That is why you see about INR 35,000 to INR 40,000 is the ticket size in the gold loan companies. And in the bank, it used to be INR 70,000, INR 75,000. We have crossed the INR 1 lakh as a ticket size today, maybe partially because of the increase in the value of the gold. Tonnage wise, there is not much of an increase in the book, almost the same tonnage so far. But because of the value going up, we are able to increase our portfolio. But the growth has happened only in the later part of the 4 months. First 2 months, it was only a reduction in the portfolio. Subsequently, it started growing. For the past 7 days after the loan-to-asset value has changed, it is running fast. Probably we'll be in a position to build a good book now.

Sir, on that question, given the fact that there is still a very large potential which is available, why has that set of customers not demanded for loans? We understand one set of customers who sold their loans.

Problem is, people are [indiscernible] loan against gold. Conventionally, people like you and me, we will go and borrow on the credit card at 36%. That -- there's a fashion to do it, right? We will take the personal loans. We will take the consumer loans at a very high exorbitant rate, but we don't pledge the gold. In the middle class families, there is shyness about pledging the gold, which we have to remove. That is what Amitabh Bachchan and Revathi is working for Muthoot, there is nothing wrong in pledging the gold and taking [Foreign Language]. So they are selling the concept, we are trying to sell the product out. So first thing, we have to bring them out of the feeling. There is nothing wrong. It is one more asset class, which you can monetize when you need it, okay? So the sentimental attachment to the gold and -- in Gujarat or in Tamil Nadu, they say it's Lakshmi, we cannot pledge Lakshmi. That kind of feeling is there. That is why the middle class is not informing. So now we introduced a product called Akshaya Gold, where we said that you need not pledge the gold. Leave the gold for a safe custody with us, right? Because the bank lockers are not safe custody, as you're aware. If something happened in the locker, if your jewels disappear in the locker, nobody is responsible for it. Bank will not compensate to you. You pay a rent only as a lessee. It's a bailor/bailee relationship. Whereas in the gold, you leave it with me for safe custody, I'll give a certificate stating that I accepted this gold. And I'm responsible for it, I will ensure it, I'll give the value to you if anything happens to the gold. At the same time, I will give a credit line to you, which you can use it as and when required and pay for only what you have used. This product we have started selling. And this is picking up. Almost everybody has introduced. The cashless gold of gold loan companies is a similar product, but they cannot give a OD limit, which I can give today. This is with an intention to target the middle middle class, low middle class, say, we are trying to move to the middle middle class. We have a reasonable amount of success in that. But anyway lot of education has to go into it. Then only the monetization of gold will happen.

Sir, the question is coming from -- sorry, just to kind of just add to this question. The question is coming from the fact that gold loan was probably the only product which was open in the market in the last quarter because there was a fair amount of reluctance from lenders to get into this -- into other products. But yet almost all the lenders have kind of reported flat to declining loan growth on tonnage basis at least, suggesting that the demand actually was not there. Are we right in this analysis? Just trying to understand that part of the equation.

No, you are wrong. Kerala Chief Minister made a statement that people are not able to borrow even against gold in this tough time. That is what he said. So many of the banks have stopped the personal loans, you are aware of it, right? As analysts were all pulling down all the shares of, even the leading private sector banks saying that your portfolio is having a lot of unsecured personal loans. So unsecured personal loans and unsecured business loans are difficult to get in the market today. As a result, they all moved towards gold loans. Only thing is because of the lockdown conditions, gold loans are not easy to get. Gold loan companies are closed for quite some time. In lockdown, they were not allowed to open. Banks were allowed to open with a minimum staff. Right? You can run it with only 1/3 of the staff, they said. Minimum staff are sufficient only to meet the cash drawing requirement, cash accepting requirement. Gold loans could not happen. Okay. That is one reason. Even though there is a demand, we could not meet that demand. We don't have the infrastructure and people to execute it. Apart from that, some of the branches where gold loan has happened in a big way, my people are affected by COVID. It requires a lot of human touch, right? People are involved, we have to touch the gold. We have to appraise and appraiser touches the gold. People come and sign the document in our presence. It is lot of things. So probably there is some hesitancy on the part of the staff also to jump into it in a full-fledged way. Even today, there is an unmet demand to a large extent because this is the only loan which you can avail in the market without problem. Every other loan is difficult to get. I've seen a lot of SMEs have come back availing these loans now. In fact, my SME marketing guys and MSME marketing guys could not do much during this period. I asked them to go and sell the gold loans. In fact, they brought large ticket gold loans. That is why my gold per -- I mean ticket size has gone up because we have moved into the next segment automatically because no other loan is available. So the demand is there. It is only that we are not able to meet the demand.

Next question is from Haresh Kapoor from India Infoline Asset Management.

I just want to get some sense on a couple of things. So first is, advances part that you mentioned, obviously, you spoke a lot about the gold loan portfolio, that growing 25%. That's like 30% of the mix right now. But how do you see the entire book shaping up? How could the growth rate shape up on the entire portfolio for this year? And you also spoke about deposit side. And when I look at your rates on the deposit, obviously, it's kind of coming down. You're also on the savings side, you are at the lower end of the rates. And you're also kind of telling your branches not to take deposits. So is there a belief that growth this year will be muted significantly and you're changing the mix entirely, and you'll be at a lower single-digit this year? Or how do you look at that? And what is the deposit strategy overall because you're actually not taking deposit even at the branches, is the sense I got.

When compared to the first quarter, second quarter is growing. As on date, we have grown the deposit by 8%. Probably last month, we have grown by 10%. Subsequently, we have decided not to renew the short-term deposits, it has gone out. And advances have grown by 3%. So we are targeting...

This is a year-on-year number or from the quarter end is what you're talking about?

I'm talking from the March to now, okay? For the year, current year, 8% in net deposits and 3% in growth. But on the other side, you look at the non-SLR portfolio, which has grown very substantially. It has also come from the investments with the credit risk only. It has contributed substantially to the income during the current year. Bond market is -- has given opportunity at that time. Now the liquidity has spoiled the bond market today. But otherwise bond market at that time has given good thing. So total assets have grown. That was what that was explained in the previous case. Total assets and total liabilities have grown. My borrowing, when you look at it, how much is my borrowing today, it is very substantial. Okay. So assets are growing, liabilities are growing. Balance sheet is growing. Maybe deposits per se and advances per se may not grow. But even then, I can predict somewhat 10% growth is what should be possible, if everything goes right and better on both sides.

Okay. Sir, and second, if you can -- you spoke about acquisition. Obviously, it's a moving thing right now and maybe some of the PSUs will come to the market. We are seeing a lot of articles coming through. But even if you take some of these assets, just want to understand, I think the strategy for us to -- was kind of build retail portfolio, have a very smaller corporate exposure and AA, AAA-rated NBFCs or some of those category assets. But then the entire strategy and focus changes if you acquire any of these PSUs per se, and maybe the cost of acquisition will also be higher. I know there are some more nitty gritties that you would have to finalize. But then that changes the entire approach. So do you have some comments there because that -- just want to get some clarity on that?

Yes. I'm not -- CSB is not having any plan to integrate a bank and grow, okay? So it's not a part of my plan. My plans are all only for organic growth. At the Fairfax level, holding company level, they are looking for acquisition. Okay? If government is permitting them to hold it as a separate entity, they will hold it as a separate entity, I hope. If the government says that you have to merge it over a period of 3 years, probably, we'll look for a merger opportunity at that time. Maybe they will continue to hold it for 3 years if government permits. It all depends upon how the Reserve Bank and government acts upon it, okay. If they are not willing to sell 51%, Fairfax may not buy at all. So it's not that I -- will occur through my balance sheet. Probably it is in the Fairfax balance sheet or Fairfax funding me to buy this bank. This is the idea. These are all very preliminary ideas. So it is very difficult to incorporate into the planning at this point of time. Let us not go by that version. I don't want it to reflect on my price at any point of time. It is an inorganic growth opportunity, which everyone must be evaluating. I just made a mistake of making a mention, but everybody is evaluating, I'm aware of it. So every one which has the ability to raise capital is looking at the inorganic growth opportunities, and we are also evaluating. These are all very preliminary stuff. There's -- nothing has progressed so far. Interesting to anticipate but nothing more than that.

Next question is from [ Abhinav ] from Axis Bank.

So my queries are more or less answered. Right. I wanted to check like when you're talking about the gold loans, which is around 32% of you portfolio, so what is the LTV that you are lending considering the RBI guidelines of 90%? Are you going aggressive on that? And second is, obviously, like you are churning down your corporate book, which still holds around 25%, 26%. And it's more concentrated towards NBFCs where the moratorium numbers are also less. So if you can throw more color on that, the corporate book, you will wind down or reduce, so that will really help.

As far as the gold is concerned, 90% loan to asset value is the mix. See, actually, the lending is only around 78%. So one anomaly between the NBFCs and the bank lending is that in the previous circular, when they said 75% loan to asset value is applicable to both NBFC and banks, they have not disclosed one thing, which is a part of the circular. The NBFC, they can lend 75%, collect interest, whereas in the bank, they can lend only 75% less interest to be accrued for the loan period. If for 1 year loan, if I'm charging 10%, the 10% is should be deducted from the loan value. As a result, I was lending only 65% NBFCs were lending, 75% earlier. With this circular what has happened, we are permitted to give 90%. So my rates are, say, about 13% today; effectively, I lend 78% against the gold, not 90%. I still have that 22% margin on the gold on the valuation. So 22% is high enough. Even in the worst period, what we have seen in the history of gold which we have seen is only a 21% reduction in the prices, which happened in 2014, '15. At that time, our book size was INR 3,000 crores. On a INR 3,000 crores of a book when this has fallen, we were not very nimble footed in those days. So we have not gone for sales in an aggressive way like the gold loan companies. We have given a notice, we waited for 45 days, we have given a second notice, third notice, then only we went for the auction. By that time, we have incurred a loss of about INR 1.30 crores in those days, in the entire INR 3,000 crores portfolio. Out of this INR 1.3 crores, we recovered almost INR 70 lakhs subsequently. Ultimately, we have written around INR 60 lakhs on a INR 3,000 crores of our portfolio, and the price has fallen 21%. So there is worst of all we can ever see. Today, it has not fallen. The last fall, which has happened is almost 5% now, which you are seeing. So I don't think that we are sitting on a risk. But now we are -- improved our processes. We are much more nimble footed. I'll be in a position to sell the gold much faster. But as a policy, we feel gold is much more than value. Gold is a lot of sentiment to the people. It is my family jewelery, my papa's jewelry, my grandma's jewelry, I don't want to sell. So if you sell the jewelry fast, the people will not come back to you. We respect the sentimental values, we give them notices, and we'll try to persuade the customer to redeem it or even otherwise, you bring the buyer and sell it yourself instead of we selling in the auction, which will fetch a lower price. So these are all the policies which we continue, but still the entire process will come down to 21 days now. So within 21 days, we will be in a position to sell it. So that is a reasonable period within which you will be in a position to mitigate your loss. Even at this 78%, I don't see we are sitting on any big loss. We are in the business for 100 years. We understand it better. I don't think that 78% will bring more loss to us. Anyway, this is only up to March. Then again, the loan to asset value will go back.

Okay. Got it, sir. And second is, obviously, on the corporate loan book, where you said that the loans under moratorium is around INR 850 crores odd, right. And it's more about larger SMEs. And earlier, there was a lot of legacy issues, which have been already recognized, I understand. So if you can throw more light about like the composition of the corporate loan book will go down from further 25%, 26% or how exactly?

So so long we have surplus, corporate is the only way to lend, okay? So if the asset growth is good and if there are good opportunities -- see, when we lend for the NBFCs, our average realization of the wholesale book was 9.5% at that time. Even with the leading companies, the AAA-rated companies, I was able to charge 9.5% and collect it. Okay. Today, the liquidity surplus have taken away the entire risk premium in the lending, okay? Today, they are raising the CPs at 3.5% in the market, which is just above the T-bill rate. So naturally, the bigger corporates and bigger NBFCs are not in a borrowing mode from the bank. So I expect more premature payments to happen in the NBFC portfolio, money will come by. If retail is not able to absorb it, if gold loan growth is not able to absorb it, then necessarily I have to lend it back to the corporates, either the NBFCs at a lower rate or better corporates, maybe BBB+ companies or A-minus companies. Then manufacturing industries require money, we can look at it. One opportunity coming up there is that because of the merger of the public sector banks, some mid-corporates and SMEs are feeling left out in this merger process, the bigger banks don't recognize them. So they are moving out of these banks. So some -- if you are choosing the right people, probably SME and mid-corporate can grow, we mean that. We don't have anything against lending to big corporates. Only thing is, we don't join the consortium where I become an insignificant partner. If I'm lending, it is a stand-alone lending and with the securities directly charged to me, not through the consortium route. That is the call which we have taken. We may grow the portfolio if there is surplus funds. If retail is picking up and the new team is coming now, 32% is on the gold and 13% is on the other retail. We have told them equal amount of 30% should come from the other retail other than gold. If 30% is other retail, 30% is gold retail, 60% will go to the gold. Now we have slowdown on SME, but anyway, SME will come back. India is a SME country. So naturally, at least 20% to 25%, will go to SME. Only 15% will be there in the ideal portfolio for corporates. That's an ideal portfolio, but there is no sacrosanct rule that you will have to confine only to 15%. It all depends upon the opportunities. Probably today, corporate banking is much more safer than any other lending. The only thing is it is not yielding the yields which we desire.

Next question is from Abhijith Vara from Sundaram Mutual Fund.

Thanks for the follow-up. Sir, you did mention in the beginning that INR 108 crores is the excess provision which the bank has taken. How much is included in PCR? And how much is outside, let us say, standardized portion? Can you just...

COVID provision is outside the PCR. The INR 31 crores is not part of the PCR. INR 12 crores, which we have made on the -- that is as per the RBI requirement. On the SME portfolio, you have to provide 10% is the RBI rule for COVID. So that also INR 12 crores is there. Observably, INR 43 crores has not gone into the PCR. Remaining INR 89 crores excess provision is acted by the provisioning policy of the bank, which is a part of the PCR because that is against the specific NPAs, whereas this INR 31 crores plus INR 12 crores is against the -- not against a specific NPA.

Sure, sir. And in Q4 call, you mentioned that bulk of the deposits will get repriced in the next 6 months. I wanted to understand whether most of the repricing has happened in Q1 or in Q2 also you will see some repricing of the deposits.

Second quarter also more than INR 3,000 crores is falling due, in the second half also. They will get repriced.

That benefit will -- it has to flow. Okay. Just one suggestion, sir. When you put up the slide on investment book and duration, et cetera, can you also discuss the yields on the books sir, how it has moved year-on-year or quarter-on-quarter?

But we have given the investment yield also, I think, in the presentation?

No, sir. Only yield on advances is given.

No. Yield on investment is 6.55% for the last quarter number 1, quarter 1 of the last year. 6.28% for the fourth quarter. For the entire year, it is 6.41%. Whereas for the current quarter, it is 6.64%. I will make it a part of the presentation also, this slide also.

Next question is from Haresh Kapoor from India Infoline.

Sir, I wanted to understand 2 remaining parts. One is your assignment income has kind of gone up. That's one of the other parts which has grown. Now could you just talk through this portfolio that you're buying or whatever, what are these, which product lines, et cetera? And other than the acquisition part, are you also looking at portfolio buyouts in the immediate term, if you have higher deposit growth and that is a strategy that you are planning to adopt because that will also help you? And third, if you can comment on how much -- what is the strategy on the investment book now? Obviously, you had the opportunity right now. If you can talk through how do you see rundown on that book? And also what is the strategy there on the investment book?

So on the DA transaction, it is mostly gold. Okay. Almost 80% of it is only gold. We have not gone for DA portfolio as a investment strategy, mostly with requirement other than gold. Gold is an investment strategy. Always we invested in the gold loan company as a DA. It went much faster because 3 months is the seasoning required. All the gold loan is only 6 months. So you get the money fast. So gold loan is a major DA portfolio. Otherwise, we have taken some MFI assets and micro finance assets because we are for the priority sector achievement purpose [Foreign Language]. Last quarter -- whereas on the fourth quarter of the last year, we have given almost INR 400 crores to INR 500 crores of sanction we got from the Board, but before we operationalize it, the COVID problem has come, so we have withheld all the sanctions. We have not operationalized them. And the one trend which we have seen during the current year is DA portfolio is paid back much faster. So whatever you are seeing, most of it run down already. DA portion has come down very substantially. Whether you have to reinvest immediately, I am not in a hurry. Let us see the numbers, how they are evolving. If the collection data is improving, micro finance companies are talking about 94% collection today. But overall, what is the impact we'll see. If they are doing well, again, we'll get back to the DA mode again. Of course, nobody needs money today. Liquidity is so much. So nobody is in a position to sell. If and all people are willing to sell, we will try to acquire.

Sir, on the other part, the investment book, if you can comment on and buyout of portfolio?

It happened just like that. We were not aggressive on the non-SLR portfolio. As the TLTRO has come, I thought it is a great opportunity. I was imprisoned because of this COVID problem. So almost 28 days, I was quarantined in Chennai. I went to Chennai for a business purpose on the day this was announced, and I was held up for 28 days there. So as a result, I was jobless, I just remembered I was a treasurer at some point of time. So we took the TLTRO, and I was personally started dealing with the brokers and market participants. Unfortunately, that Franklin Templeton happened on that day. That is the day on which I was traveling from Chennai to Kerala. So probably between the 8 hours of travel, we have done 80% of the deals on the day, okay? It is where the aggressive selling was happening, very good amount of Tier 2 bonds, the NBFC bonds. All those things we bought at a very good deal, a very, very good deal. Sitting on a very good profit also. But if you sell it again, you have to acquire it because the TLTRO requires that you have to hold the securities equal to it. INR 850 crores is the adjustment required. INR 20 crores, INR 30 crores is set to be done. Remaining amounts are already done, all at a higher yield, almost at the peak. So there's a good portfolio. Now we are encouraged. We have started recruiting people also. So for the bond portfolio management, we are looking for some people. And this is managed with the existing people from the credit department, myself personally and the treasurer, all, but we will develop a team for it within the next 6 months, and we would like to continue to operate in the bond market. So that gives a lot of opportunities, right.

Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments.

Thank you. Thank you for making it today. And in this situation, staying back up to 7 p.m. is a great honor for us. And we are as transparent as possible. Normally, whatever questions you asked in the last analyst meet, we have included everything in the presentation. Now we will include whatever questions are additionally asked during this period. This will become a part of the regular presentation, and we'll disclose how much -- whatever we can disclose to make your life easier. And if you need any further information, you can come back to us. We'll strive hard to maintain this kind of a performance in the coming days. And I assure you that COVID impact on this bank will be much less. Maybe some impact should be there on the growth, not on the bottom line. And the original projections of bottom line, we are holding on even today. And I think we'll be in a position to achieve it. Thanks a lot.

Thank you very much. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.