CSB Bank Limited (CSBBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of CSB Bank, 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 Limited. Thank you, and over to you, sir.

Yes. Thanks, Steve, and good evening, everyone. On behalf of Axis Capital, I welcome you all to this Q3 F '21 results conference call of CSB Bank. The CSB Bank management is represented by Mr. CVR Rajendran, Managing Director and CEO; Mr. Pralay Mondal, President, Retail SME operations and IT; Mr. B.K. Divakara, Chief Financial Officer; and Mr. Ganesan, Head of Credit Monitoring and Recovery. Without much ado, I now hand over the floor to Mr. Rajendran for his opening comments, post which we'll have the Q&A. Over to you, sir.

Thank you, Manish. Good evening, friends. It has been an eventful quarter for us in the backdrop of a VUCA world. It was a quarter when the full effect of withdrawal of regulatory forbearance with regard to asset classification benefits on moratorium availed accounts are being felt by the bank. Despite the headwind, I'm happy to note that we could post a profit of INR 53 crores for Q3, taking the 9-month profit to INR 176 crores, despite providing liberally for stressed assets. Let me briefly dwell on the main highlights. First, on the asset quality and provisioning. Our gross NPA has reduced from 3.04% to 1.77% quarter-on-quarter, while the net NPA has reduced from 1.30% to 0.68%. Quantum of net NPA is now only INR 90 crores, and as a percentage to net worth, it is only 5%. Provision coverage ratio has increased to 91% in Q3 from 84% in Q2. Now on the stressed assets. Standard restructured accounts increased from INR 64 crores to INR 81 crores. We have kept a provisioning of 25% on the standard restructured book. Accounts which would have been classified as NPA but for Supreme Court embargo, excluding the restructured accounts, totaled to about INR 195 crores. We are maintaining 25% provision on these accounts. Out of INR 195 crores, INR 136 crores or almost 70% are gold loan accounts, which are expected to be recovered without any hitches or glitches. Already, we have recovered INR 46 crores in this. SMA accounts, that is SMA 0, SMA 1 and SMA 2 altogether, excluding restructured accounts, totaled to about INR 335 crores. It is way below what was the SMA accounts in the last year the same time. It was more than INR 600 crores during the last year. It has come down to INR 335 crores during the current year. But even on this, we are providing a provisioning of 25%. Overall, we are holding a provision of INR 154 crores for stressed standard assets, and there is a significant buffer against contingencies. In Q3 alone, our incremental standard asset provisioning has been INR 89 crores. Collection versus demand for the month of December 2020 stood at 95%, almost it was the same for the past 3 months. As far as the revenue growth is concerned, in the 9-month period, NII has increased to INR 666 crores from INR 435 crores or by 53%. 9 months, the NIM has improved to 4.60% from 3.71%. Q-on-Q, net interest income has grown steadily by INR 22 crores from INR 229 crores to INR 251 crores, or by 10%. Decrease in the cost of deposits from 5.18% to 4.91% or by 27 basis points, and increase in loan book by 5%. Q-on-Q have been the main contributory factors. NIM has improved Q-on-Q from 4.49% to 5.17% during the current quarter. I feel our NIM has peaked now and further improvements will be challenging, especially since our aim is to build significant volumes in the coming quarters. Encashing on the favorable rate movements, we've booked treasury profits of INR 48 crores during the quarter as against INR 32 crores in the Q2. Now we are treading cautiously on treasury front and has cut exposures in trading book by INR 1,633 crores Q-on-Q. Trading book has come from INR 3,633 crores to INR 2,000 crores. It has come down further during the current month. Borrowings also have been reduced by INR 1,231 crores as we have unwound the trading positions. The derisking of treasury book is reflected in the improved capital adequacy with the risk-weighted assets' market risk reducing from INR 1,705 crores in September to INR 916 crores in December. Modified duration of our trading book has been reduced from 2.8 -- reduced to 2.85 years from 4.09 years in September. Noninterest income with treasury profits has grown from INR 65 crores to INR 69 crores or by 6%. OpEx, staff cost has increased by INR 24 crores from INR 104 crores in Q2 to INR 128 crores in Q3. AS 15 provisions have increased by INR 18 crores due to increase in pension provisions on account of expected DA increase, and this has contributed to the increase in staff cost apart from increase in head count. Head count has increased by 301 from 3,984 -- sorry, from 3,683 to 3,984 during the quarter. Payroll cost per employee per month has decreased from INR 54,009 in Q2 to INR 53,120 in Q3. Year-on-year head count has increased by 760 with the CTC employees increasing by 997 and IBA employees reducing by 237. CTC employees now account for 59% of the workforce. Other OpEx has increased by INR 8 crores to INR 58 crores from INR 50 crores due to mainly increase in depreciation, rent, AMC costs, and 2-wheeler service and dealer responses. This is mainly on account of upgradation of our technology and huge investment in the DR side, which we have built now. Operating profit. Bank has recorded an operating profit of INR 484 crores in 9 months of financial year '21, whereas operating profit for the last full year was only INR 281 crores. On a Q-on-Q basis, operating profit increased from INR 173 crores to INR 182 crores due to increase in revenue. Cost to income ratio for 9 months period has improved from 70% to 49%. But due to higher OpEx, CI ratio for Q3 has increased to 50% from 47%. Net profit. Net profit for 9-month period stood at INR 176 crores with only INR 72 crores in corresponding period previous year. For Q3, PAT has been 58 -- sorry, INR 53 crores as against INR 69 crores in Q2. While we have reversed INR 34 crore provision for depreciation of investments on account of favorable yield movement or exit. Additional standard as a provision of INR 89 crores has been credited to strengthen the balance sheet, as already described. Balance sheet growth. Deposits have grown by 16% year-on-year and 2% Q-on-Q. CASA deposits grew by 24% year-on-year and 5% Q-on-Q. Term deposit growth during the quarter was muted as the bank was having surplus liquidity and as a conscious decision term deposit growth was not given attention.

Mr. Rajendran, so sorry to interrupt, but we are getting a lot of disturbance from your line, sir.

Some disturbance is bound to be there. I will explain it after finishing this, right, I'll talk to you. From Q4 onwards, we will be focusing on the term deposit growth assets since the liquidity is now no longer in excess. CASA ratio has improved from 28.5% as on 31/12/19 to 30.4% as on 31/12/20. Advances have grown by 22% year-on-year and 5% Q-on-Q. Gold loans continued to be a key driver of loan growth posting year-on-year growth of 60%, Q-on-Q 14%. Average LTV for gold loan stood at 75% on a portfolio basis. For the month of December '20, the average LTV of loan disbursed stood at 82%. Tonnage-wise, gold jewelery pledged increase from 15.2 tons to 16.3 tons Q-on-Q. Our SME vertical has posted growth of INR 54 crores, and we expect the growth to pick up steadily in the coming months. Premature closure of a big corporate account has caused the corporate book to degrow by INR 57 crores during the quarter. Coming to our new asset verticals, which are expected to be the major drivers of business in future, agri and MFI have grown by INR 134 crores during the quarter; 2 wheelers by INR 32 crores; and the pledging MSME vertical by INR 24 crores. The new segments have contributed to a loan growth of INR 190 crores during the quarter. Other retail has been posting negative growth and as we plan to relaunch our LAP product, we expect growth to return to the segment also in the coming quarters. Capital adequacy. Our capital adequacy has improved from 19.7% to 21.02% due to retail market risk-weighted assets. Leverage ratio has increased to 7.7% from 7.5% since we have decreased our balance sheet size by INR 578 crores or 3% quarter-on-quarter. Balance sheet price has decreased due to the increase -- decrease in the borrowing by INR 1,231 crores Q-on-Q, as we already mentioned. Expanding footprint. We have opened 37 new branches in the 9 months period, taking the total network to 448. Of this, 27 were opened in Q3. We plan to open 52 branches in Q4 so that we end the financial year with 101 new branches. In January, so far, we have already opened 6 branches. Now we are all ears for your questions. As far as the disturbance is concerned, as you are aware, we introduced the VRS program. So our unions are demonstrating outside, opposing the move, nothing more, right? For some more time it will continue, but I'll raise my voice so you'll be in a position to hear.

[Operator Instructions] The first question is from the line of Haresh Kapoor from IIFL Asset Management.

Sir, a couple of questions. One, just this VRS scheme. In your notes to accounts, you've kind of mentioned that the VRS scheme will have meaningful impact -- material impact on the results for the next quarter, Q4. Could you please explain that? And what are the implications and what to understand from that?

There are 223 employees in the clerical cadre, who do not have the relevant skill set for the modern-day banking. So this is a target segment for this VRS. So if the VRS is implemented and all the 223 takes it up, it could amount to INR 80 crores of additional outflow for me. But the subsequent years, the benefit will be too big, and for each 1 of the employee resigning from this bank, I will be in a position to replace them with 3 employees. So we will force them to take it. Of course, there are a lot of resistance from their side as you are hearing. I'm not sure how many people will opt for it. Depending on the number of optees, it will -- the amount will come.

Sir, and this INR 80 crore is basically a onetime [indiscernible]. Sir and second, in terms of the gold loan portfolio, obviously, in terms of your loan book too, we are seeing growth coming from the gold loan side. The other portfolios still need to start kicking. You have done some hiring, obviously. But first, if you can give an update in terms of where you are in terms of starting growth for the other product lines? Second, if you can talk about the gold loan portfolio specifically, RBI had given that LTV leeway, which kind of runs out in -- in March -- in a couple of months. So how does that affect our portfolio and overall -- comments on the overall growth for the loan book side?

LTV leeway had an impact only for 2 months, probably August, September. Subsequently, it has slowed down. Traditional growth in the gold loan is also slow, even though the growth on year-on-year is fine. We used to do about INR 25 crores to INR 35 crores on this additional LTV for the next 2 months. Now it has come to around somewhere between INR 6 crores to INR 10 crores per day incremental growth. So growth has slowed down. But even though 90% is permitted, we don't give 90%. At the disbursement level, it could be 82% at the maximum for the 1-year product. And LTV at the portfolio level is only 75%.

Sir, my question was around this 82% that you're talking about LTV. Will any of that have to unwind? Or how does that really work?

No. I don't know how the RBI is going to unwind it. If they unwind it, they will say that from that day onwards, I cannot give more than 75%. The existing loans, which are given at 82%, will continue to have that full tenure. And once they are over -- mature, they cannot get the same amount, unless the price has gone up. If price is continuously going up, their eligibility is also going up. In case price remains steady, probably they have to repay the excess amount and roll it over or they will renew it. Normally, rates are all only 4 to 6 months life, right? So all the gold loans will get repriced, rolled over within the 4 to 6 months period.

And the other part on the overall growth, sir, on the loan book, how is that going to kick start?

Corporate book, what has happened is because of the excess liquidity, all the NBFCs -- we had NBFC exposure in a large way. Almost 20% of the NBFCs portion, which has come to 11% to 12% today. Most of the NBFCs were asking for ridiculous rate, so we are not rolled over. There was a repricing auction every 6 months. So as the repricing auction came in, we have put in the auction, they have repaid the amount. Similarly, one large corporate also has repaid about INR 150 crores during the period. One large housing finance company has repaid INR 240 crores during the period. So naturally, the corporate exposure has come down slightly. Even though we have given large -- new addition, it is not reflecting in the books. On the -- my SME portfolio, again, we have a very tough exit policy. So many accounts that are safe picks and there are other banks, which are absorbing it. But on growth rate, they have grown by INR 54 crores for the last quarter, but now they are growing much faster. Both -- new proposal flow has increased and the one Mr. Shyam has joined. Shyam Mani has joined as SME head, and he is driving the growth. We are confident of growing the SME portfolio as per our original projections. As far as other retail loans are concerned, Neeraj has joined us. He has relaunched the LAP now and slowly adding to the broader portfolio. Probably from April onwards, we'll see the impact of retail growth going forward.

Sure. Sir, last thing from my end is, basically, you spoke about the standard restructure is INR 81 crore, even the SME number is around that INR 330 crore number. But you have obviously made higher provision during the quarter and you have provided for whatever might be the expected number. But if you can give a sense directionally now, how should we look at the provision line going into next quarter? And even the stress pool, if you could comment on that, anything which is not really counted in the number you've given out right now, and this could be part of negotiation or any other expectations on those stressed pool and provision side?

There's nothing which is omitted from the provision. So we are to provide only 5% for the restructured accounts. We have provided 25% on it. We are to provide only 15% for the NPAs to start with. We are providing 25%. Where we have to provide 25%, we were providing 40%, now we are providing 50%. We have recently amended the accounting policy, which will be available in the notes to accounts. In the doubtful accounts, when they complete 1 year, we were providing 60% as against the requirement of 40%. Now we are increasing it to 100%, okay? So our provisioning is -- in 2 years, we write-up almost the entire amount. That is how the provision policy is tightened. Because of the tightening done during the current quarter, we have taken an additional hit of INR 36 crores. In the prospective NPAs, INR 90 crores is from the -- sorry, INR 80 crores is from the other loans and INR 135 crores is from the gold loans. So gold loan [indiscernible] this time the monsoon withdrawal is delayed a bit. And as a result [indiscernible] so most of the loans will be repaid during the harvest season, which got delayed. So after January, January [indiscernible] till now. Out of INR 135 crores, INR 40 crores is already closed. So that shows that INR 135 crores recovery will come. But you remember that we have provided 25% provision on this INR 135 crores also as a uniform policy. So there is enough and more provision available. As far as SMA, as I said, it used to be about INR 625 crores for the last December, which has come to INR 300-odd crores during the current quarter. So there is a tremendous improvement on the SMA, which includes the 1 day default also; SMA 0, SMA 1 and SMA 2 together, we have so much. And on these INR 345 crores also, we have provided 25%. There is no need for provisioning. So today, our excess provisioning is about INR 277 crores, over and above what the RBI requirement is.

The question was where does the credit cost settle going ahead?

Not because we identified more stress in the portfolio. I told you what is the stress. And compared to INR 645 crores last year, we have only INR 345 crores today in the SMA book. But because of the uncertainty surrounding us, we thought we'll take a cautious start -- attempt and we have provided more. If there is no second round of COVID coming up, and if the businesses are back in the normal mode, then probably these provisions will get reversed in the next quarter or the quarter next.

Okay. Okay. That's great, sir. Sir, last data-keeping question. If you had to take a normal slippage this quarter, what would that annualized slippage number be?

That's what I said. INR 83 crores for the non-gold and INR 135 crores for gold. Together it is about INR 201 crores -- INR 205 crores.

[Operator Instructions] The next question is from the line of Nalin Shah from NVS.

At the outset, sir, I would like to congratulate for the excellent numbers. Right from Q1 up to Q3 and for the 9 months, excellent numbers. My question is, sir, that 2 questions. One is that you have provided excess provisions, as you explained. And this thing up to INR 154 crore is there in the provisioning. I just wanted to understand that when do you take a final decision on this, whether in the like Q1 of the next year? And then you decide if something is to be written back or something? Or how do you do that? So that is my first question. And second question is that you mentioned that your retail and SME team and the products are getting ready to be launched in the -- I mean in the last quarter. So hopefully, I think last quarter should see that, and particularly the next year should see the much greater, I would say that the business opportunities from those 2 businesses also. So can you throw some light on the growth potential or growth projections for the next year also?

SME has started growing. As I told, we are getting a large number of proposals. Quite a few sanctions have been made. They are all in the pipeline. Only the retail has -- is yet to pick up. We will do that because in the market, the fear is about the retail and unsecured loans. We don't want to jump into it in a big way. That's why we started with the LAP today. And we will -- going forward, we'll introduce the other products depending upon the market conditions. There is also, as planned, agriculture and financial inclusion. Our MSME, 2-wheelers, all those things are growing very well. The growth really is good, but we don't ramp up in a big number, okay? Volume growth is very less because they are all small ticket loans. They will contribute to the profitability, but they will grow over a period. And SME will contribute to the growth during the current year, and we are seeing good demand coming from the corporates also. So gold will continue to grow. But as a proportion, gold will go down over a period. As far as the provision reversal is concerned, we don't have a definite time frame within which we will reverse the provision. It all depends upon how the situation evolves. There is no certainty coming about the COVID situation if it is not -- the repeat attacks are not there. And if everything is opened up, if the industry becomes normal, and that we will assess from our repayment track records and the slippages which are happening. So if that is happening, then we will reverse it in that quarter. But gradually, we will reverse it over 2, 3 quarters.

The next question is from the line of Mona Khetan from Dolat Capital.

On your SME accounts, where you've mentioned you have INR 345 crores. That includes the entire book or just accounts -- INR 5 crore and above accounts?

Entire book -- entire book other than gold loan.

Sorry, sir, I didn't get you.

Entire book other than gold loan.

Okay. So it includes SME accounts, which are less than INR 1 crore as well?

Everything, everything. Other than gold loan, everything is included.

And we have seen that your CD ratio [ is improving ]?

Yes. CD ratio is improving quarter-on-quarter.

Right. Right. So now it's at 80%, which is at par with industry, so what is the kind of CD ratio that you'd be comfortable with? Is that peaking out? Or is there scope for further improvement in that?

I will be comfortable with 110% given in the auction because borrowing seems to be much cheaper than the rating deposits in the market. So if you go through the borrowing route, you can improve your CD ratio further with low-cost borrowing. And anyway, ideally, it should be around 85% is the CD ratio, which you would like to maintain on an ongoing basis.

Okay. And on this standard provisions of INR 135 crores that you have, contingency provisions, how much of this is also used up in your pro forma net NPAs?

We are not used to standard provisioning at all so far. We are providing for all incremental NPAs and SMEs over and above what we had earlier. So we have not started using the standard provisioning so far. [indiscernible] pro forma NPAs, we have provided separately. INR 85 crores is the pro forma NPA for which we have provided. And INR 135 crores of gold loan pro forma NPA also, we have provided.

Right. So those provisions, is that included in the INR 135 crores?

That's included there -- INR 52 crores is included there, out of -- out of INR 143 crores (sic) [ INR 135 crores ], INR 52 crores is for the pro forma NPA, remaining INR 85 crores is COVID provision.

The next question is from the line of Abhijith Vara from Sundaram Mutual Fund.

First one I wanted to pick, you had mentioned SMA 0, 1, 2 of INR 335 crores. And there's also a number given in presentation, other standard stressed accounts of INR 381 crore. I just want to clarify this SMA accounts are included in the INR 381 crore number, right? I'm referring to Slide 27, sir, where you have given -- mentioned COVID provisions?

There cannot be 2 numbers, right? I will tell the right number, 3?

There are 2 numbers, INR 210 crores and INR 381 crores. I just want to clarify...

Sorry, SMA is INR 361 crore.

INR 367 crore.

INR 367 crore? Sorry. INR 367 crore, Abhijith.

This is part of the other standard stressed accounts, right? It's included in those, or this is over and above that number?

Come again?

Sir, in the slide, you have mentioned 2 numbers. Accounts which are standard OpEx category due to Supreme Court order, INR 210 crores, and standard stressed accounts, INR 382 crore.

Yes, that is separate. This INR 367 crores is SMA as per our original classification only; 0, 1 and 2, which might have become NPA is a separate classification, that is INR 85 crore plus INR 130 crore; 290 -- INR 219 crore.

And second question, sir, I wanted to pick, I know you don't have any unsecured loans, but in the standard stressed accounts of INR 380 crores, is there any unsecured loans or most of it is secured only?

No, 95% it will be secured. Maybe some security division maybe there, instead of 100% security, some may have a partial security. Otherwise, all of them are secured loans only.

Sir, what is the LGD expectation on this stressed account, INR 380 crores, LGD expectation?

So we don't expect, as I told you, last time it was INR 635 crore, now it has come to INR 300-odd. So not much will slip in this, in my opinion, as the situation is improving. There are delays because of the cash flow problems which the companies are facing today. But we are seeing many of them are regular delayed payment people, right? They pay with 1 or 2 installments with delay, that is what we are seeing. So we don't think anything to happen and the situation improves. But those if the situation, second lockdown comes, many of these accounts will get into NPA. There is a possibility.

[indiscernible] it will be recovered over a period of time along with other things.

Sure, sir. Moving on, my next question, sir, is on employee cost. Employee cost in Q3 has gone up to INR 127 crores per quarter. It used to be about INR 80 crores, INR 90 crores per quarter, then it has inched up in Q2 and Q3. [indiscernible].

One is we have recruited more than 600 people [indiscernible] and we are paying for them. The businesses are yet to pick up. And second thing is for the employee pension provision. For the pensioners, we have to buy DA annuity, for which we identified in advance this quarter. Last quarter -- last year, we might have bought it only in the month of February and March, it might have reflected in the last quarter. This time as CPI index has gone up and we could quantify the amount, and our new auditors are interested for actual valuation on a quarterly basis, so based on the actual valuation, we've started providing quarterly now. So in this quarter, we are providing INR 28 crores more.

Okay. Okay. Sir, just 1 more question on the employee part. This VRS will be concluded in how many months sir? What is the expectation?

By March, we have to conclude it. Then only we will take the benefit of writing off INR 400 crores. We'll complete it. That's how it is scheduled. We are giving only 15 days time for them. And in the next 15 days, they can be discharged. They are only clerical employees. They don't have any responsible positions in the bank.

Last question. [indiscernible] I think gold approval was still 40% of total portfolio. Now you have to necessarily slow down, right, gold loan growth?

We have to slow down the growth. We will increase the growth of the other products so that as a proportion, gold loan will go down. I think this is only about INR 6,000 crores. There is a big public sector bank, which has INR 70,000 crores of gold loan, right? So gold loan is a place to be in today. There is no need to tamper down the gold loan and our track record is good. Our audit inspection system is good. Our loss due to fraud and other misappropriation of data is 0.1%, when compared to the industry's 0.36%. So we are managing it well. And even though in percentage it appears to be high, in the volume, it is very less, even compared to many local competition. So we will continue to grow gold if there is an opportunity. But the only thing is the proportion we'll try to bring it down by growing other portfolios also.

Congratulations on improvement in cost of deposits, very commendable improvement; sequential also, year-on-year also. So any trajectory you will have in mind, sir, where will this cost of deposits settle?

Cost of deposits, we may not be in a position to maintain low forever because if the liquidity raises up, naturally, the cost will go up. There is another INR 4,000 crores of deposits, which are getting repriced during the next 6 to 8 months. Probably we'll get the advantage in the next quarter. But it cannot be sustained beyond the fourth quarter. And deposit costs will go up and the liquidity goes down.

The next question is from the line of Susmit Patodia from Motilal Oswal Asset Management.

I hope you're safe in the pandemic and now the VRS thing that you're doing. Sir, I just missed the number, how many employees you said were deemed for the VRS?

The eligible employees are 223.

Sir, just taking from the question on gold loan. There is this RBI paper on NBFC and some size restriction may come through. I mean that is what the expectation is. If that happens, then it may further improve your gold lending opportunity. Is there a maximum ceiling that you'll have, even if the opportunity is bigger?

To be frank, the competition has also increased. I have not seen public sector banks in such a big way in the business. And their rates are very low. Plus I don't think they are making money out of it, but that is how it is priced in public sector banks. And gold loan companies are also equally strong in the field. Their growth is also good. When the results come, you will understand. So it's not easy to get the market share. But we will continue to gain market share. So I don't have any discomfort in the gold loan growth as such, okay? So if you have anything you tell me, we'll slow it down.

No, sir, you are on the ground. No, but I'm just trying to understand, will there be like -- you will say not beyond 50, not beyond 55...

Board had [indiscernible] 33% they said, now they said 40%, which we are at 40% because we were expecting much growth on the other side, which has not happened yet. [indiscernible] team has joined and they are warming up. Probably from April onwards when they start running the marathon, gold may not be in a position to catch up with them, right? It will come down. It will come down in proportion over a period.

And sir, just 1 more question on the employee cost, you said INR 28 crores is for pension provisioning. So the net of that, the INR 100 crore employee cost is the number that you will be comfortable with? Because that now includes all the top management hires that you have done, right?

True, true. We are hiring a lot of new people. So the employee costs will go up in midterm, maybe for the next 1 year or so. The contributions will come later, okay? As a percentage, it will come down after a year or so.

Okay. Got it. And sir, in your presentation, in your strategic initiatives, you don't mention M&A, right? So -- but there's always a lot of news articles about how you will be in the core center of M&A. So I just wanted to hear your thoughts. Are you amenable to it? Or is there enough on the plate? And even if you are amenable, what are the kind of things that you will look?

So we don't spend much time on that area now, okay? So initially, we were -- Dhawan was very serious on that privatization. At the time, we were also looking at various options. Now new circular talks about the corporates also entering into the fray. If corporates are coming into fray and they want to buy the public sector bank, it is not worth paying that kind of a pricing, right? I'm not looking for a banking license. I'm looking for only the clientele base. So those who are looking for a banking license may be willing to pay a higher price, as there are a lot of rumors and lot of price quoted for various banks. So my interest has wagged away at this point of time. We may not be looking at it at this point. If anything comes at the right price and right fit, definitely, we'll look at it. We are open to the idea. At this point, the prospects are very low.

And sir, last question, somebody asked this question again. In your presentation, sir, you have put a standard stressed account, right, which is put in at INR 381.5 crores. Does this include the SMA 0, 1, 2 or this is separate?

SMA 0, SMA 1, SMA 2, all together, excluding the gold loan SMA.

Including reschedule [indiscernible].

Including reschedule, everything. All stresses.

So this INR 381.4 crores [indiscernible].

Yes, except gold.

Mr. Patodia, your voice is breaking up. The next question is from the line of Ravi Singh from Motilal Oswal Asset Management.

Sir, what is the loan book which is restructured under the RBI guidelines for COVID-impacted borrowers, which -- in the quarter ending December?

Certainly, we are not -- corporate accounts [indiscernible].

You're saying nothing much, but is there anything in the pipeline?

No corporate account is in the pipeline. No major account is in the pipeline. Small company accounts and some personal loans are coming. That is how it is close, about INR 13 crores is addition which we have made during the current quarter.

And sir, anything on the gold loan side? Any restructuring due to COVID impact?

No, no. Gold loan, we are not doing restructuring.

Gold loan, we don't restructure. For personal loans, the school teachers, they are getting variable salaries. They want some minor adjustment in the repayment program. That is what we are giving. No major rescheduling on that is taken.

Okay. And sir, just to be clear, the additional provisions are part of your PCR calculation? Or are they additional to the PCR calculation?

No, no, they're additional to the PCR. 91% does not include this additional provisioning, which you have made on the stressed assets. Of course, accelerated provisioning what we are doing on the NPAs, that is included in the PCR. But what we are making for the COVID and the proposed NPAs will not be included in the PCR.

The next question is from the line of [ Shri Shankar from InCred ].

Congratulations for a good set of numbers and continuing the good job that you have been doing for quite a long. My couple of questions. If I look at your performance, especially for the yield perspective, that has been consistent and you have been able to maintain the yield while the cost of funds are on the decline. Thereby, your NIMs have got an expansion. Do you think these NIMs have peaked out? Or you will be able to continue with this NIMs yet again? That is my first question.

God was too kind to us during this last 2, 3 quarters. I don't think that can be maintained at that level for long. Our commitment is to maintain it above 4%. When the corporate portfolio grows, when the SMA portfolio grows, it grows at a much lesser rate. So when the overall volume growth happens, necessarily, this will come down. Similarly, on the deposit side also, we were not on a growth mode. We were not taking term deposit at all. So we were quoting much, much less than the market. We were not keen on getting deposits. We had excess liquidity. Now the excess liquid has completely dried out. If you are to grow further, if you have to attract deposits, probably we may have to offer a little more. So certainly, NIM will come under pressure, may not come in a single quarter but gradually, it should come down. Our effort has been always to maintain above 4%.

Okay. And if I take a step further and look at it, you would be having at, what, 5.17% during the quarter. So above 4% is the target place, and that's what you're looking at. Now coming back to your corporate portfolio, you mentioned about 1 corporate probably repaying the loans and kind of a scenario that you are developed. You have been aggressive in letting go some of the clients or some of the accounts, where you think it's not what you want to deal with. With the new people coming on, when do you think that, that will start having an impact or an effect in your entire book going forward?

So this has been a major challenge for us. We always feel risk is not priced correctly when there is excess liquidity. Even during this quarter, I lost a major SME account with me, which was with us for the past 35 or 40 years. Leading private sector bank has come in and offered the rate, which is 2.5% less than my rate, with a DD account, okay. I don't find any sense in retaining the account at that rate. I said, "Okay, you can close that and go." So this is not 1 case. I'm quoting 1 case, but there are many such cases where the repricing request comes because competition is willing to take it over at a much lesser cost. So we don't compete in the market. I never go for a price-based competition. I'm flexible on the pricing, but I must understand what is the risk behind it. If the risk is not properly priced, I would not like to be in the business. That is how we lose SME clients. SME, if you remember correct, we had about INR 4,000 crores when I started the business, now it has come to almost INR 2,000-odd crores. Only because all these kind of accounts were weeded out by the exit policy and by the pricing policy. So still, we are getting a lot of proposals at our price, at our acceptable rate. It is how we would like to grow. Growth for the sake of growth will not happen.

So what is the bank's estimate in terms of growing of your book over the next 12 months -- 12 to 18 months? What is the -- and you got any target that -- benchmark in terms of the industry growth rate -- industry growth plus 5% or whatever it is? Because we are 1 bank which is comfortable on the liquidity side, on the capital adequacy side, there are no issues with us.

See, we must grow minimum 25% year-on-year. That is our target. It will happen from next year onwards. In the current year, we may do that. Next year onwards, definitely minimum growth of 25%. Considering our base is very low and the skill set which you brought in are very high, the growth should not be a constraint, right? Once you've decided that we would like to grow. The new team is also looking quite -- setting up the processes in place, assistants in place -- people in place before launching the businesses, right? That is right way to do. If the market is not very conducive, so we will wait for that environment change. Once we start growing, minimum 25% and it can be much above if the opportunities are there and if all people are in place. I expect a higher growth rate in the years to come.

The next question is from the line of Kamal Melwani from OAKS Asset Management.

Congratulations, sir, on very good set of numbers and continued strong performance for the last 3 quarters. My question, you know, firstly is on the financial impact of the envisaged VRS scheme. If you could just throw some light on that.

That will be a great relief for us if it happens, okay? So we started the journey with about 2,715 employees. We got it down to 1,600, okay? We've weeded out a lot of them. This is the last [indiscernible] employees to move out. The remaining employees are young, energetic and well educated and computer savvy. Growth can be much faster. These are the people who are holding back the growth in many other branches where we are located, particularly in Kerala. We are not removing these employees. Of course, the resistence is also higher if you are hearing from the surrounding sound, but to what extent we are succeeding, that will decide our growth in Kerala territory particularly. If we are successful, Kerala will also become a high-growth area. Today, it is not a high-growth area as compared to the non-Kerala businesses. Financial impact is not much, okay? We already provided quite a bit of it. And additionally, it's only INR 80 crores, even if all the people go out, which you don't expect. We will be in a position to take it upfront in the next quarter. We'll have the comfort to take it.

Okay. So my next question is a little bit on the strategy side. There are a couple of famous gold loan NBFCs that tend to grow faster than the rest of the market including the banks, including CSB Bank as well. Considering the cost of funds and hence, the cost of -- the pricing of these loans is much lower than the NBFCs, what is the reason driving that banks tend to lag behind in terms of growth vis-à-vis the NBFC, excluding the operational issues that some of these NBFCs actually go home and disburse loans, which is very important in the social construct in Kerala and Tamil Nadu?

That's mainly because of the delivery, the turn around time and the sales force. We have these things now with us. We have the sales force, which has come from gold loan companies. Many of the gold loan businesses in many branches are managed by gold loan officers who have come from gold loan companies. Sales force has also come from the same group only. So we are almost like NBFCs in the delivery. So that's why we are able to grow much faster than other banks. Of course, interest differentially is high when compared to the public sector banks. But we are still cheaper when compared to the NBFCs. Once this message is reaching the people, not only the NBFCs, even the private money lenders business, we will be in a portion to take it up. There are new branches, which I have opened during the last 1 year, where within 1 year, they have done more than INR 20 crores business in a particular location, right? So those kind of growth stories are also there. It is only how we are able to reach out. Marketing is not a culture in the gold private sector bank. Slowly it is coming in with the new people coming in. And likely, if the old people move out on VRS, that we'll expedite. And we'll be in a position to grow much faster than other banks and NBFCs.

Any plans to hire brand ambassadors to promote this business? Like -- the popular NBFCs that I spoke about are hiring big-ticket celebrities from movie industry, both Bollywood and down South.

It is very small now, right? If you hire a brand ambassador of regional importance, we can hire only in Kerala, right? In all other states, we have only minimum number of branches. Anyhow, we are increasing the number of branches very faster now. We are opening 100 branches during the current year. We will assess the 100 branches performance. If it is good, we'll go ahead. As per our plan within 4 years, we must have about 1,000 branches. Once we have reasonable presence in the states where we are operating, then we can launch the product with a brand ambassador, probably the impact will be better. That is what we are seeing. Otherwise, as of now, our advertisement expense is very low.

The next question is from the line of Mihir Ajmera from Enam Holdings.

I just had 2 questions. One is write-off portion of around INR 134 crores. Could you just like give some detail on which segments?

It is an accounting entry. It's not affecting the profit and loss account. It's a fully provided amount, which we have transferred to the write-off, right? Normally, we do it every year earlier. And later on in the capital adequacy -- this will have an impact on the capital adequacy, so we have not done it during the last 2, 3 years. This is either the full provision or partial provisions, which are holding for the NPAs, which we are interested to write-off during the current quarter. This we will do every quarter going forward, depending upon the recoverability. We will be writing off on an ongoing basis. It will not have any impact on the profit and loss account.

And secondly, just on the gold loan, obviously, is growing at a very good pace. So are we seeing any signs of market share gains from NBFC or...

We are still a small player. Our size is very small. We are not after anybody's market share at this point in time.

The next question is from the line of Jai Mundhra from B&K Securities.

Sir, first, 1 clarification, then I'll come to the questions. First is around restructuring, you had mentioned that you have received around INR 13 crores as a restructuring request. But of the stressed book, right, which is the pro forma GNPA plus other stressed account of around INR 590 crores, do you suspect any restructuring cases from this? I mean just to understand what could be the potential restructuring?

Maybe 2, 3 larger accounts are there, okay? The largest account is about INR 28 crores, which is always paying with 2-installment delay. So there is a consortium account with other banks also. If the consortium gives a replacement, we may have to go for it. May be -- like that, there are 2, 3 accounts in consortium, which may opt for it. At this point of time, neither the consortium has agreed nor the borrowers have approached us so far. So if it comes, we'll consider, there is no issue on it. If there are cash flow issues and if future liability is proved, we are for a restructuring any account.

But sir, it's safe to assume that now, even if the corporate wants, it cannot be restructured right, under the RBI window?

See basically it can be done by the bank on its own. Maybe we have to provide for 5% or 10%, whatever is required as per the RBI regulatory, which we'll do. So we can always do restructuring. RBI's team is not required. If the customer needs it, and if you are convinced about the liability, we will not do restructuring to postpone the problem.

But in that case, you may have to downgrade the asset first, right? If you do not -- if you do outside the RBI window?

It's simply, "What is the problem miss? Okay, we'll take it. Bye, bye."

So just to get it clear, right? So that is, of course...

We are open to the idea. If it is a deserving case, we'll definitely do. See, for example, resorts today and the educational institutions are suffering a lot. Most of educational institutions, even though they are conducting online classes, they are invested a bit into online classes. They are not able to collect the fees at all we are seeing. The teachers are paid half the salary, okay? So now teachers accounts are rephased. The educational institutions account will -- may have to be rephased going forward as the fees collection is not happening. Similarly, resorts, only you guys in Bombay all have gone for a holiday in December itself, but you are not coming to Kerala. As a result, Kerala tourism is affected to a large extent. So the bus operator, the resorts, all these things may come for rephasement over a period, which we'll consider. But our exposure is very negligible on all these areas.

Right. Right. So sir, actually, if someone wants to look at the stress pool at this point of time, and I think you've given a very detailed details that 1 is the pro forma number which is INR 210 crores, and then you have also put together all standard stressed accounts which is INR 380 crores, right? So the potential restructuring should be from this pool only, let us say, by and large. And then the SMA number that you had shared, INR 367 crores, that is also part of this pool only, right?

INR 367 crores includes only default also, right? About INR 190 crores or so is -- more than INR 200 crores is only from SMA 0, okay, which will be regularized. With some delay, they are all remitting. So I don't think that major accounts will slip in this category. As I told you last December, this number was more than INR 600 crores. It has come to INR 300-odd crores during the current quarter. There is a substantial improvement year-on-year. But as the situation is bad, we want to be cautious, nothing more. There is no indication in the account that this is likely to become NPA in the near future.

Right. So maybe outside of this INR 200 crores, the rest you would have taken in standard stressed accounts. Is that what you mean, sir? I mean when you -- when you have given the INR 380 crore number? This will probably be not SMA 0, but SMA 1, 2?

No, no, it is SMA 0 also. This includes SMA 0, SMA 1 and SMA 2. More than 50% is only SMA 0.

Sorry for that. Okay. That helps. And second, sir, if you can talk about the FITL quantum in the INR 2,000-odd crores SME book that we have and the ECLGS money that we would have disbursed or sanctioned?

Sanction-wise, around INR 150 crores, we have sanctioned, but availment is about INR 100 crores now. And FITL is INR 12 crores I think?

FITL not much.

Very negligeable number. Maybe INR 10 crores, INR 12 crores, nothing more than that.

INR 35 crores we have done it and repayment has taken place in the remaining 3 months.

INR 35 crores is what we have done to start with in September. But most of them are to be repaid within 6 months, so substantial recovery [indiscernible] all to be paid before March. So most of them are paying as per the schedule.

All right. Sure. And sir, just on SLR portfolio, now is this the right reading that the yields are 10%, 11%? I mean is -- any...

Yes. Not the SLR.

Non-SLR. Sorry, sir.

Non-SLR is yes, right, true.

So what explains this -- such high yield, sir?

See, one bank -- private bank -- leading private bank was available at 19% if you have bought it, on the day, okay, Franklin Templeton Day, even the SBA bond was available at 11% plus. We bought it on the day. A lot of bonds, we bought it on a single day, and [ an issue was there ]. So the yields are very high. I cannot disclose all the names, but all of them are AA plus companies, where the yields are somewhere between 13% to 19%, we got it on the day, a substantial portion. This is a TLTRO investment.

Okay. Great. And the last question, sir, probably on the retail side -- retail asset strategy. And so, we are launching new products. And I think we have also, in your commentary, you have suggested that probably you are going ahead with secured product first, starting with LAP. But if you can give some 2, 3 years kind of a roadmap as to where -- I mean how the strategy would work out in terms of the origination? I mean the sourcing, the branch -- I mean the state wise, where would it be? And probably the size, I mean what could be this number maybe 2, 3, 4 years down the line?

Whole team in Bombay is waiting for this question, okay? So I'll let Pralay answer this. Pralay?

They have to open the line. Moderator has to open.

Moderator, you have to open that line for Pralay.

Yes, sir. Mr. Pralay, your line is in talk mode. Kindly unmute yourself if you have muted yourself.

Yes. So thank you for your question. I think you're talking about the retail growth and the retail perspective for the next 2, 3 years. So when we look at retail, it's just not assets or liability. We have to look at the customer franchise growth. And along that, both liabilities, fees and assets all will come. So the way we would put the strategy together is that we will put a very strong acquisition engine around the branch distribution to acquire more customers. In parallel, we -- as Mr. Rajendran just said, we will, in addition to the SME LAP, et cetera, which we'll do immediately, some of the other products, channels, distribution, manufacturer tie-ups and also even for credit cards, we will have tie-ups at this stage until we launch our own product. And on the wealth side of the business, we'll also work both for mutual funds and insurance, anyhow we have tie-ups. So all of this, when you have a full suite products to the customers, then you will get larger share of the wallet of the customers. So as of now, immediately, we are doing very well on gold loans. We will grow the SME and the LAP and some of these other businesses. Agri in terms of numbers, MSME, 2-wheelers, et cetera, that is growing. But when you look at the larger asset growth, that will only happen when you have the home loans and the vehicle and those other businesses, that's the time. But those are franchise business, and those franchise business will only happen when you have the right customer set and when you have the right distribution and channel partners. So that's the plan. We are putting those processes. We need to create the right [ Swiss ] framework. We need to create the right technology processes, straight-through process, engineering and everything like that and operations, et cetera. So those are the kind of building blocks we'll create in the next 1 year. And after that, those businesses will start scaling up. So that's broadly the plan. I cannot comment exactly on our numbers, but obviously, the value and the volume will come primarily through SME, LAP and those kind of products and those products will -- and the rest will get build over the next 1 or 2 years.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.

Thank you for making this. It's an extraordinary difficult year for all of us, but managed to do reasonably well. We are very conservative in our policy [indiscernible] income for the current year. Most of the provisions made are slightly overcautious provisions. I'm sure over a period when there is more clarity on the asset quality and the economic performance, we will be in a position to reverse a substantial portion of it and [indiscernible]. And we'll strive hard to live up to your expectation quarter after quarter. I hope that we have fulfilled the promises so far, whatever we have made. We'll continue to do so in the future. Thank you.

Thank you. Ladies and gentlemen, on behalf of CSB Bank, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.