DCB Bank Limited (DCBBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the DCB Bank Limited Q1 FY '21 Earnings Conference Call. We have with us today Mr. Murali M. Natrajan, Managing Director and CEO, DCB Bank; Mr. Bharat Sampat, CFO, DCB Bank, from the management team. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Murali M. Natrajan. Thank you. And over to you, sir.

Good evening, ladies and gentlemen. Thank you for logging in on this call. We will take questions after about 3, 4 minutes of my explaining certain details about the bank for this quarter, and then we can go on to questions. I hope all of you have got all the details, both the investor presentation and a very long press release. So let me just explain a couple of points, and then we can go into questions. Firstly, on the moratorium. There's a lot of stuff out there. So we tried to simplify it and put it out exactly what our situation is. In terms of the delinquent SMA accounts, which in our annual report you can see, was INR 1,908 crores as on March, as of July, reduced to INR 475 crores, which means that we have been able to make the rest of the portfolio nondelinquent or the account has got closed, whichever way we have been able to resolve it. The collection efficiency is picking up steadily. I just want to tell you that the disruptions in terms of lockdowns are not over yet because we do get time to time from different cities, different districts, where based on whatever infections and whatever control the government has to put, there are restrictions and lockdown that happens, which disrupts our business. Even then, we have been able to steadily improve our collection. If you look at business loans, again, if April was 51.6%, we are at 59.4%. Home loans, it was 56.9%, it is 67.3%. Even CV, which is a pretty difficult situation in portfolio, even there, we are finding success in terms of improving our collections efficiency. The other way we looked at our portfolio is as to -- in terms of value, what percentage of customers haven't paid anything to us, say, from March to July as well as from April to July. In business loans, we have 29.1% in value, who have not paid. It doesn't mean that they were delinquent. Most of these customers are current customer as on February 29. Similarly, in home loan, it is 21%, who haven't given us any installment between April and July. Commercial Vehicle, it is 48%. In SME/MSME, we looked at -- because we generally are the main bank, we looked at the churn. And we found that 91% of the customers have some credit churn in their account between April 1 to July 20. And of course, we have a separate portfolio team, which are in constant touch with these customers. MFI loans, again, we started collecting. We find that in about 79% of customers, we have been able to collect at least one installment. So the collection efficiencies are improving steadily. And again, all these have been achieved without giving any top-up or any additional facility or funding. In terms of the -- if I move on to the guarantee schemes, most of our portfolio in business loans category were individuals. So just like our bank, other banks and NBFCs have been demanding that if a business loan has been given to an individual, a sole proprietor, then we should be able to give the guarantee scheme. We are quite happy that, that has been announced by the government on August 4. So we expect about 40,000 customers, if all of them take it, to benefit out of this scheme. As far as the nonindividuals is concerned, we have already uploaded about INR 700-odd crores, INR 658 crores. 7,000-odd customers, and we have disbursed INR 75 crores. So we are hoping that in August and September, we'll be disbursing the rest of the amount for these loans. The other point I want to mention is, we have been doing structured telephonic discussions with our customers, our credit team has been doing. I had put up one findings on May 26, 2020. We completed our entire set. The findings are very similar to what we have put up in our website as well as in the stock exchange. So we have been able to complete almost 48,000, 49,000 discussions. And we find in several places, customers actually do not want additional facilities. They are quite happy with the change in their installment structure to match the current cash flows, which obviously has been impacted by the pandemic and the lockdown and so on. We've had to maintain a lot of excess liquidity. In the month of March and April, it was looking very difficult. So we built up a lot of excess liquidity. We made sure that we have adequately. We didn't know how much of loans will come back, what would be the moratorium impact and so on. So that has had an impact on our NIM, but that doesn't worry me too much because as we speak, we are reducing our liquidity. Liquidity is not something that one day you can keep it and next day you can return back because you have to take deposits at 6 months or 1 year kind of tenor and then you have to -- but the good news on our term deposit is, especially retail term deposits, whatever work we started about 2 years ago is still continuing, and we find that we are able to replace much of our bulk by retail term deposits. Retail term deposit has grown by a phenomenal 43% on a year-on-year basis because 51% year-on-year as on March. Now it is 43% as the base is increasing. We have 0 reliance on certificate of deposits. Last point on provisions. We are supposed to keep 10% provision on the INR 1,900-odd crores by the March -- what was in March. That is down to INR 47-odd crores. However, we already had made a provision of INR 63 crores in March. So we have taken an additional provision of INR 32 crores. Customers who had asked for restructure as opposed to any funding, we have done a restructure of customer. And there, we have taken a provision of INR 15 crores. Most of these customers were impacted by COVID lockdown. So that is why they sought restructure. In terms of NPAs, we normally recover almost INR 60 crores, INR 70 crores of NPAs on a quarterly basis. However, that has also been not easy in this lockdown. So we have taken additional NPA provision on account, which is another INR 22 crores and, of course, the usual NPA provision and floating portion. So that has only come to INR 85 crores. So in terms of business, we are focusing on home loans, gold loans, KCC, tractor, health insurance fee income. Fee income did take a hit. Processing fee was quite negligible in the first quarter, and we couldn't charge ATM fees. We didn't have CASA-related fees. So slowly things are coming back. On that score, we have been able to save quite a lot of cost. Our costs are down to INR 193 crores, usually averages around INR 220 crores, INR 225 crores. So we have been able to save quite a lot of costs. And as far as headcount is concerned, we are very slow in replacing the headcount that is they exit. So that is also helping us to reduce cost. So those are my thoughts. I'm ready for questions. Thank you.

[Operator Instructions] First question is from the line of Sachin Hemnani from Perfect Research.

I have 2 questions, listing them together. Number one, how far does COVID pushout our earlier plan of reaching 14% ROE and 1% ROA? Next, what could be the possible impact on our NPA and loan book, if another moratorium is announced by the government?

It is very hard for me to say what would be the impact on our book on one more moratorium announced by the government. But looks like the government has now announced and the RBI has announced a restructure program and also have announced guarantee scheme for individual business loans as well. So I personally don't think -- and actually speaking, lockdowns are reducing. Although it is still a disruption, it is reducing. So I don't believe that there will be one more moratorium. If there is, we will see. However, when we are discussing with our customers, steadily, customers' businesses are coming back, not to the 100% that they had before March. Regarding your question on ROA, ROE. For the next 6 to 9 months, our focus will be on doing the guarantee scheme, making sure that our portfolio is in control, put all the efforts in collections and recoveries, build our book on home loans, gold loans, KCC, tractor and any little bit of business loan that is possible in this kind of environment and focus on fee income. So that is our current outlook on business.

[Operator Instructions] Next question is from Rohan Mandora from Equirus Securities.

Sir, I would like to understand like in terms of the number of customers who are not made any payments in April, so how do we read into that number? What is your interaction suggesting? And within this, like what portion would you be worried about?

Not paid in April?

In April, since April.

Yes. So what we are very happy about is that if you look at our collections on the delinquent account, that is one day past due to all the way to, say, 89 past due, from INR 1,900 crore, we have been able to bring it down to almost below like INR 400 crores, INR 500 crores. And hopefully, by August, it will be go down further. Customers who have not paid even one installment, majority of them were under no stress in February. We are in discussions with those customers. Many of them just say that, look, government has given moratorium, and we will start paying you from September. So if there is a moratorium, why the hell should you bother us? There are customers who have paid and even asked us back the money to say that, listen, I don't have money now. I paid you or paid my installment but I don't have the money, can you give it back? So there are multiple types of interactions that are happening. There could be some stress on that, who knows. Very difficult to say at this stage. When we come into September and we start collecting, we will see. But at the moment, I feel confident because these customers are in contact with us, and we have been in touch plus the additional benefit just in case the customer is in any temporary financial difficulty, we also have this new guarantee scheme program, which could be applicable to them, which we would use wherever customer requires. So that is how we think about it right now. Of course, we'll continue to make efforts to get customers out of moratorium, and the number has been coming down steadily.

Sure, sir. And sir, in the opening remarks, you mentioned that some of the customers indicated that they would look for change in the repayment structure to match the cash flows. So will the rescheduling of loans post moratorium take care of that? Or will these need to be restructured?

No. If you change the schedule -- if the customer schedule is changed, then it is restructured. Then we have to take a 5% -- this will be under the MSME restructure, okay? And we have to take a 5% provision on that customer immediately. If the customer is in bucket 0, then there is no NPV. NPV provision for the new schedule, of course. So it will be approximately 10% provision we have to take. So many customers don't want money. They just say, look, I am paying INR 28,000 installment. Can you reduce it to INR 24,000 or INR 22,000, and I'm happy to just work on the new schedule. Now that's fine. I mean if the customer -- of course, it will become a restructure for us. But if the customer is able to regularly service that, there is no issue on that. We make sure that such requests are processed only if there is actual business case, the customer is actually present, his business is running and the cash flows are sustainable.

We take the next question from [ Manojit Vara ].

Can you be slightly louder, please?

Yes. My first question is, sir, you did answer you're unable to say how much of stress might reside after September. But in your sense, do you think much of the book which has not paid an installment will go for restructuring? For example, business loan 29.1%...

I don't think so. Supposing the number that we have put out here was, let's say, I mean I have to check what the number was. The number that was put out, let's say, is 35 in April. If it is 35 in April, then it has come down to 20. This number actually is coming down steadily, right? And most customers who are in touch, their businesses are coming back to some level of normalcy. And they believe that since opportunity has been given for moratorium, there is nothing wrong in them using it because they are legally right in using the moratorium. And as the moratorium starts to end, they are confident that they will serve. There are customers who have heard the calls itself, who say that, guys, why are you bothering me? I'm going to pay you from September. There is moratorium. So I'm using that money for other business purposes. Simple as that. So that is why we have to see how things pan out from September. Yes. Obviously, there will be some stress that will start building from September. I've already said in my previous call also. I expect stress to last for almost 6, 9 months from September. But the good news is that we have now tools available -- intervention tools available for us to kind of help the customer nurse back to help in case they are in difficulty, which is the guarantee scheme is there. We can change the structure of their loan to suit their new cash flow. So all that opportunity is there with us.

Sure, sir. Sir, second point is these localized lockdowns, which are being again reinforced sporadically across geographies, in your surveys with your customers or talks with your customers, are you seeing, again, disruption to business activities? Is this a negative surprise incrementally for you?

No, it's a surprise for -- surprise in a sense, it is a problem for us, and it is a problem for them. So for example, let's say, I'm just giving you an example. In some state, let's take an example of Orissa. And we have given a target of some home loans or gold loans to a branch or a set of people. Now they have made their efforts and things are rotting, and all of a sudden, for 3 days or 5 days, that area is shut down, that disrupts the business for us as well as for the customers, right? Yes. Yes. So Bharat wants to say something.

So what happens is localized lockdowns impact much bigger supply chain. And those who are then dependent on the suppliers in this area get more impacted because suppose you are making a 2-wheeler and the 2-wheeler component hub somewhere in Tamil Nadu shuts down, then though rest of the parts are ready for you, you can't make -- complete the 2-wheeler and sell it as compared for us, the size of business, which we address, it is more localized problem for a shorter duration.

In fact, I have heard of a couple of calls anecdotally also where customers said that I am ready to start my business, but I just want disruptions to reduce because I don't want to start-stop and things like that. And therefore -- but I'm confident that we can restart my business. That is not an issue. So [Foreign Language]. The only worry that we should have, and that data will come through post-September is where customer is not able to restart their business for whatever reason. Now in our structured discussion that we have had with 48,000-odd, that number was very low single digit when we completed our discussion by end of May. So therefore, I feel that most of the businesses will restart at some point. And the exposure that we have for risky businesses like health care or hotel and things like that is very small. So we are not worried about that.

Right. Sir, one last question, sir, before I get back to queue. This cumulative provisions of INR 95 crores on COVID specific, what is the [ parameters ] that you have looked at? How are you calculating? And also, if you could mention whether this is sufficient or you build further cushion in Q2 as for the current framework? Some idea, you can give.

No, it's a COVID provision. It's based on looking at what kind of achievement we have had in terms of collecting our delinquent portfolio. If you look at it from that point of view, if July end, it is going to be, say, INR 475 crores, we need only INR 47 crores of provision. So I just think that we have made a prudent provision considering the existing situation. And in many case, I think by end of March or something, we have an opportunity to adjust this provision. And as a bank, we have always made more provision than required. You can see that historically, we have always made more provisions.

Right. But do you think this is sufficient to cover for the current stress we are seeing in the book? Or you'll further build on it?

No, no. As NPAs come up, you have to make more provision. This is not for taking care of all possible issues in COVID. That's not how it could be, right? It seems to be sufficient for taking care of potentially issues that might come up in the delinquent book that was there in -- as on February end.

Next question is from Darpin Shah from HDFC Securities.

First question is again on...

Darpin, sorry, you are not audible.

Am I audible now?

Yes.

Little better, yes.

Just a second. So again, continuing on provision things, what actually I wanted to understand is, will we continue to make additional provisions in 2Q as well to be safeguarded once moratorium is lifted and can see impairment increasing from 3Q, 4Q onwards?

So your question is, will we continue to make more provisions?

Yes. And how much, if any thought process is there?

No. No. Like in which category are you asking in terms of provision? If there are more NPAs starting from, let's say, next quarter, we have to make provision for those NPAs as per guidelines, right? And if there is -- we will continue to -- if we build our book, then standard asset provision also will increase. But this time, it doesn't seem like we will be able to grow our book to any meaningful way, at least, for the next 2 quarters. So that may not increase. We will continue to make floating provisions. We already are holding close to INR 100 crores of floating provision, which we have disclosed to you. So the provision will depend upon how we see the outlook in our portfolio. But given our operating profit and our margin of safety, we are confident that we can absorb additional provisions.

Okay. Sir, second bit on the CV book. If you see we have almost 13%, 14% as restructured and around 6%, 7% as NPA. How much more stress can we see from that portfolio?

I think across the industry, CV is having stress. We have our Chairman, who also is part of a large company, which is into CV, and one of the director also is in a large CV business company. And I believe that we get very valuable inputs from them on CV business. What I like about CV business is that customer may not pay full installment. But once their business comes to some level, we are able to collect some level of payment from customers. The only problem that happens in CV is either the customer does not have the vehicles or it has been damaged or we just simply have no business at all. So I believe that as the lockdown and the disruption starts to reduce, even CV business will start to look better, but it will take time. It probably is one of the most difficult portfolio that we are dealing with at this point in time. I have no guess on what exactly would be the additional restructure or stress that will be there. But what is encouraging for us is that, if I compare with what it was in April, we have been able to improve our efficiency by almost 10%. And we are getting signals from collection that this number could keep going up.

Okay. And sir, one last bit. The moratorium number which you have given at 26%, so there is a sharp drop from 60% to 26%. How do you -- are you defining moratorium, whether you have seen...

I don't think anybody else could have defined it better than what we have done, how we have been able to define. I've defined exactly how we have looked at each and every portfolio we've looked at what -- which customers have paid us at least one or more installments from April to July, which means despite being a moratorium, the person has come out of the moratorium and starting to pay. And we looked at the portfolio. It is coming to 26%. The highest moratorium by their logic is only in Commercial Vehicle. Rest are all far below all these numbers. And I've shown you what is there in SME/MSME, how many customers are actually having credit churn. I don't think any bank would have given you this kind of disclosure. They would have given you some [Foreign Language] numbers on moratorium, which you guys would have printed.

The disclosures have been really very good, sir. Just wanted to understand the definition. So one or more EMI has been paid, so it moves out of the moratorium, correct?

No. No. It doesn't move out to the moratorium or not move out of the moratorium, okay? Moratorium, if a customer is in moratorium and he pays me the money, I have told you that only 26% has said they are in moratorium and not paid me anything. The balance 74% in the portfolio, overall, even whether they said they want to be in moratorium or not, they have paid us one or more installments.

Next question is from Rahul Masheswary from Ambit Asset Management.

First of all, you are the only bank, which have made it categorically really as a clarity that 26% of your loan book is not paid, and they are continuing in the moratorium. Very detailed presentation disclosure. Very much appreciated for getting the clarity, sir. Sir, 2 questions. First, on the LGD, which definitely, as you in your opening remarks, you said that the recovery is getting impacted by INR 60 crores to INR 70 crores per quarter. So in a normal course of business, what was the LGD, which used to get factored while making the provision? And going forward, in such a pandemic and stress scenario, will the LGD get into a higher rate and your provision where you find it would be taking a little bit at an elevated level? This is my first question. And second, sir, you, in your press release yesterday, gave that the home loan, you have started with an external benchmark rate at 8.16%. So no doubt, home loan stands in your mortgage book at roughly 38%. So how much impact do you think? No doubt you would be tapping into the more -- not towards the very high-end salary with very high home loan value, but any color on that? How much it can impact your margin going forward or it can be calibrated through the reduction of the term deposits -- of term deposits?

Yes. So let me answer the second question first. If you look at portfolio growth, while year-on-year, our book growth has been about 4%, home loan growth has been 18%. So home loan is not something that we are embarking upon today, a. B, 38% of our -- once second, Page 24. 30-plus percent of our book is home loans, and we have made some credit changes to attract some of the best customers possible in salaried as well as in self-employed category on home loans. And we believe that based on the term deposit rates that are likely to steadily come down, which is shown in our cost of deposits coming down as well as cost of funding coming down, we are confident that we'll make decent margin. I have already mentioned to you in many calls that don't look at margin in isolation. Look at margin and look at risk-weighted assets. The home loans that we do come at 35% risk-weighted asset, okay? So if I take even 2% margin, and I'm only using 35% risk-weighted asset, it's a very good profitable good ROE book. And in our portfolio, home loan is 38%, which was disclosed and paid 24 of last year -- last quarter result. So we are confident that we can balance our book by building on home loans. Currently, doing business loans, there is a lot of business loans available, but issue is on approval rate. If we go and source 100 business loans, our approval rate, we don't believe, will be more than 20, 25. Because to find a good customer who has not been on moratorium and whose business has bounced back to normal is taking us time to find. And this will be waste of our sales effort. So if you do home loans, the approval rates are more like 65%, 68%. So it's more productive for us to do that and balance our book than what we are working on, plus it will also make sure that our book degrowth is limited, okay. So that's the approach. And we are confident that this is achievable.

Sir, in RWA, that's very fantastic to hear. The RWA for home loan is 35%. Any number on LAP, which is the business banking...

Maximum will be 75%. In loan against property, this thing will be [indiscernible]. If you look at our -- it will be called regulatory retail. If you look at the -- this thing will be 75%. If you look at our risk-weighted assets, for the last 2 years, we have achieved phenomenal efficiencies in utilizing risk-weighted assets. Okay. Now what was your first question?

Sir, the first question on LGD, earlier, any color...

Now recovery is slow does not mean LGD is going to worsen, okay? So what happens? Recoveries, customers have to be contactable. They should have their -- even NPA customers’ business have been affected, right? That was affected. That is why he went into NPA. He probably is more affected. They want to sell the property. To sell the property, there are logistic issues because registrar is giving only limited number of tokens for registration or for finding the buyer and showing the house and all, there are restrictions on society. Society is not allowing even carpenters to come and work. So it is more a logistics issue rather than any LGD issue. Even the recoveries that we have been able to achieve, about INR 10 crores odd in the quarter, we have not had any LGD problem on those recoveries. So I think it's a matter of time to rebuild our recovery. We operate on small ticket loans. Property prices, the last month we checked on those, hasn't corrected practically in that category. In fact, even builders, to the best of our knowledge, have not reduced the price on those categories in any meaningful manner. That's what we understand.

And sir, normal LGD as per your previous commentary stands at 15% in your entire mortgage segment...

We haven't given any commentary on LGD. All I've said is that the loss given default because we are operating at an average LTV, which is also on Page 24, less than 50% of the thing, our average loss in any of these could not -- cannot be more than 20%, 30%. And I think Bharat has explained that more to justify the provision coverage ratio as opposed to -- yes.

[Operator Instructions] Next participant is Gaurav Jani from Centrum Broking Limited.

Firstly, sir, just fundamentally wanted to understand, since this new restructuring scheme has been made up by the RBI, so barring the corporate book that we have, I mean, the SMA restructuring -- SME restructuring scheme is fairly simple, but the other is sort of a bit complex. So if you could just break it down in terms of our book, what proportion would be eligible for the normal SME restructuring? And what would be eligible for the non-personal loan book restructuring? That is one. And...

So to the best of our understanding, reading the details of that restructure norms, we may not need that restructure for our portfolio. However, in corporate book, we are in multi-banking and consortium. If some other bank was to initiate any restructure, we will have to follow that, even corporate banking -- yes, I'm not able to hear. So even -- may I request people to put their phone on mute, please? Yes. So even in corporate loan, any account that was SMA in February, a lot of that has been recovered. And at any point in time, I've always mentioned that we have not had more than 2, 3 accounts in stress even prior to COVID. So if any other bank initiate some restructure, I think that will impact us in corporate book, which is, anyway, very small, which is only 12% of our book. The rest of it, when I look at the restructuring, we will see. One more option that is available to us, which we will use selectively is that our LTVs are below 50%. If customer is having some difficulty and needs additional funding, we are well within regulatory norms to give them a top-up within their ability to service the loan. So that option also we can use in the coming days. Because if you are just a personal loan, then there are no security available for you to do anything. We don't have that kind of book in any meaningful way.

Sure. Lastly, sir, if you can just quantify the amount of excess provisions we have on our balance sheet, barring the NPA provisions, that will be helpful. So COVID has been close to...

We have given you details of all provisions we hold. Yes, Bharat?

Balance sheet wise, we have INR 99 crores in floating provision, INR 117 crores roughly in standard asset provision -- INR 120 crores in standard asset provision. Then COVID provision is INR 95 crores.

Rest is all NPA provision.

Rest is all NPA provision.

Next question is from Sri Karthik from Investec.

I have couple of questions. If I look at your moratorium number, you come to about 26%, sir. And when I compare that with your collection efficiency improvements from June to July, it feels as though by end of August, you might end up closer to 20%. How are you thinking about that number?

What will be 20%?

I mean if you look at the improvement to collection efficiencies you reported from June to July and simply use that to extrapolate for August end, looks like by the end of August, there would still be about 20% in the overdue bucket.

See, once -- you must understand one thing is that there are delinquent customers and non-delinquent customers. Delinquent customers have already come down from INR 1,908 crores to INR 475 crores, okay? Non-delinquent customers, if they are in moratorium and they were like bucket 0 or not any overdues in February 29, we personally believe that they will not have any excuse to say that they are in moratorium because legally, August it will end, unless and until, of course, one more moratorium comes, which I doubt if it will come, okay? So we have already had dialogue. It's not that just because they are in moratorium, we have not talked to those customers. That is how we have been able to reduce and get people out of the moratorium. So I personally believe that if it's a non-delinquent customer, our collection efficiency should go up further once the moratorium decline. That is why till we see the whole of September, it will be hard to say what exactly the customers who have chosen to be in moratorium will have an impact on the portfolio. It's very difficult for me to say, but we'll see. We are monitoring the situation.

Yes. And sir, my second question is specifically on the commercial vehicle portfolio. I wanted to understand the restructured amount of roughly INR 239 crores of roughly 13.5% of the CV portfolio. Is it part of the 40% collection efficiency or it's excluding or it's part of the portfolio where you've not been able to collect anything?

We don't restructure the customer unless they give us some installment to demonstrate that they -- see, supposing if I should just restructure, we don't restructure the customer. The customer has to demonstrate that he can pay us the money and only then we change the payment terms. Otherwise, no point in changing it because that is only just simply cause a problem for us down the line, right? So customers have to demonstrate that they are able to -- so many times, what happens when the customer says I can only pay you so much, we say, first, you pay the 2 overdue or 1 or show me that you can pay that you are actually willing to pay and your business can support and so on, only then we restructure. So on restructured portfolio, barring any unforeseen situation, I do think that it should behave quite all right.

And just the last one from my end. The current account regulations that have come up recently, would that have any impact on our ability to deal with these customers?

Deal with which customers?

So the restriction to open a current account, if you are a minority in the consortium.

So our loans are term loans, especially in business loans, ours are term loans. In SME, most of our customers are just banking with us and nobody else. In construction finance, they have to open a current account for -- with us only because that is where the escrow account is for that project. So there should be no issues.

And it will be also 20%.

And even in agri inclusive banking. If at all we'll have any challenge, I don't think there is, but if at all there will be any challenge, there'll be a handful of accounts that we'll have a challenge in corporate. We have already put a team together to see how -- which account will be impacted and how, and we will deal with that situation. So we are not going to be materially affected by this, in my view.

Next question is from M.B. Mahesh from Kotak Securities.

Just 3 questions from my side. One, have you reached a point on the deposit rate that you can cut it down even further, given that this year is going to be fairly slow? Or do you think this is the rate at which it is required to keep the balance sheet stable in differential to what the other banks are? That's number one. Second, to reach a point where the OpEx to assets has reached to, which I think is probably the rate at which you probably would want to keep in your business, have you reached this? Or do you think this is just a one-off given what the situation on the ground is? And the third question is, on the guarantee scheme, which you've indicated, you're putting a lot of INR 1,400 crores. Probably which segments are taking this? And if you could give us some color as to, is it a replacement of -- why is the customer taking this? Is this to restart the business? Or is he going to use this to replace an earlier loan?

So Mahesh, let me answer the last question first, okay? On the 40,000 customers we are talking about, it is what we have determined as the eligibility based on this. The guidelines came on August 4. So we are talking about just 4 days into this. And it was actually published on the website only day before yesterday where some very long FAQs, which we have gone through and so on, okay? So we have just told you what is the eligibility within our portfolio where we can use this intervention to support the customer. That is the point one. Point two is when we have done structured discussions with about 49,000-odd customers, it appears that not more than 10%, 12% of them actually indicated that they want more funding, including salaried customers, okay? That 49,000 that we have had discussions include salaried customers as well, right? So it doesn't mean that all 40,000 would take it. Third is, we have put a special team in place to actually determine how and how this money will help the customer to fix his business and cash flows because there is a lot of pressure that, when I say not in a negative way, but there is a pressure from the department that has given the scheme to make sure that the money starts to flow to the customers. But we are trying to make some gatekeeping there to ensure that we only give it to customers where it really would be helpful, okay? So that is also -- I mean it's not that, okay, money is available, let's distribute. That's not how we are doing it. Otherwise, you can see that in the other category of INR 668 crore on non-individuals, we could have distributed the money quite easily, but we didn't. We are doing it in a very selective manner. So that is my answer to your question. So we'll see how it goes in the next 2 months. Regarding deposit rate, if you recall, there was some discussion on why our deposit rates are very high last time. And therefore, our deposit franchise is weak and so on. I already indicated that there is -- our deposit franchise is not weak. We are -- in the category of our bank, we are doing phenomenally well on getting retail term deposits plus now we have video KYC, plus we have called Zippi which is electronic straight through processing. 5 minutes at the comfort of your home, you can open a retail term deposit. All that is working well for us. I am not sure that 6.95%, which is the peak rate, I think, that we are offering is the final point. We could come down further. But there is a point beyond which if you reduce the deposit rate, customers are simply not interested. And they will probably not use -- choose term deposit at least with DCB Bank as the option. We are also finding that a lot of these customers who are opening the deposit are automatically giving us some money in CASA. And that is a far less risky CASA, and we are quite happy with that -- the thing. So I hope that answers that question.

Yes. The OpEx part.

The OpEx part. Okay. Now what we have done is that in-house, we have put together 359. Actually, it started as 309. But later, we have added 50 more projects. We have 359 digital improvement projects, some major, some large, some minor and so on. And we have put a team together. We believe that the cost that we have been able to reduce now is more like an opportunistic cost because of volume and whatever else. How do we make it into a sustainable 2.15% to 2.20% is what our aim is. And we are confident 18 months down the line, we should be in that range, probably better than 2.2% is what our aim is. 1.99%, which is our current this thing, I don't think is sustainable because it is on the basis of not having enough volumes.

[Operator Instructions] Next question is from Anand Dama from Emkay Global Financial Service. Next question is from Jai Mundhra from B&K Securities.

Sir, I wanted to check on, say, the overdue loans. Correct me, sir, if I am wrong, but I just wanted to understand the accounting part of it. So on September 1, these accounts turn NPA and part of...

No. No. No. So on February 29, let's say, somebody was 30 days past due, are you there?

Okay. Yes. Yes. Yes, sir.

On February 29, say, he was 30 days past due and assume that I have not collected any money from that customer. On September 1, he will be 30 days past due.

Correct. No, no, that is correct. But I think that the loans which are into standstill, those loans would become -- would turn NPA on the 1st September?

Wrong. Wrong. Wrong. I'm telling you. I'm explaining to you. So when you say delinquent, it means the customer has missed anywhere from 1 day to 89 day, okay? So if the customer is 89 days on February 29, on September 1, he will be 89 days. On September 2, he will become NPA. But that INR 475 crores is not all 89 days. That is not how you should read it. Majority of that is 1-day past due, 5-day past due like that. Now are you clear? Because this is very important that you understand this.

Yes. Yes. Clear, sir. And just one -- I mean in contrary to this, so the standstill loan, right, that we had reported in our annual report, that is very miniscule number, right? It is less than INR 100 crores. So that amount at least will become NPA on day first?

Not necessary. You're talking about that INR 89 crores?

Yes, sir.

That INR 89 crores is included in this INR 1,908 crores. And we have collected some money from those. So that INR 89 crores may not be INR 89 crores right now.

Correct. Correct. Sure, sir. So that is clear now. The second question is, sir, if you can comment on the Tier 1 because, as you said that the delinquency probably -- the loans and the moratorium, the outlook is not very clear on the collection part of it. So if you want to...

No, that is not what I said. No. No. That is not what I said. Things will become more clear on customers who are continuing to be in moratorium post September. It doesn't mean that the world will come to a major end or something in September. It is possible that delinquencies may increase in that, but we have intervention tools. We have tools like we can adjust our installment to suit his due cash flows, we can give them easy -- we can give them the money under the guarantee scheme to support his business. We can give them a top-up. Because we have very low LTV, we can give a small amount of top-up to support their business. Despite all that, if the customer is not able to support his business, then, of course, it will result in delinquency and NPA. Of course, if in the lockdown, the customer's business has completely shut down and he has gone out of business or gone bankrupt, that's a different story. We don't have that information at the moment.

Sure, sir. Thanks for correction, sir. But I just wanted to check -- I mean wanted to know your thoughts on the capital -- Tier 1 adequacy at this point of time or maybe are going ahead.

I think we have a pretty strong Tier 1 plus Tier 2 put together at 17.91%. We are utilizing capital efficiently. If I book home loans and gold loans and small ticket loans, hardly any capital is going to be utilized this year. Our operating profit is strong. Despite the fact that we have lower fees and lower NII, we have been able to adjust our cost to create a reasonably strong operating profit to absorb additional provision. So we are confident.

Currently, the capital adequacy does not include the profit...

Of the current quarter.

Ladies and gentlemen, we'll take last 2 questions today. Next participant is Aditya from JST Investments.

So I have a qualitative question. So I want to ask you that when the situation normalizes, what are the segments that will drive the loan growth for the bank, say, for a time period of, let's say, 3 to 5 years?

I am very not sure how to tell you about 3 to 5 years, standing where we are at the moment. I can tell you for 6 to 9 months, we are concentrating on home loans. There is a lot of opportunity for home loans. It may not give you great margin, but it is pretty decent business from a risk as well as utilization of capital. Second, we are doing gold loan business. Given our limited network, we are doing whatever gold loans business possible. We are continuing business on agri and inclusive banking tractors and KCC, we are continuing. And wherever businesses have been not impacted, we are doing loan against property and SME business there as well. So all these businesses are continuing. I can't give you a sense of what will happen 3 to 5 years from now. I am able to see only how things may pan out in the next 6 to 9 months.

Next question is from Mona Khetan from Dolat Capital Markets.

Firstly, on the collection efficiency number. So this number will include more than one installment paid by any borrower for that particular month. Is that correct?

No. No. It doesn't work like that. The -- let us say, we build INR 100, we got INR 59.4. That's how it is, right? And this...

Yes. But if a particular customer...

No. No. Wait, let me finish. Let me finish. So from June onwards, that is the first moratorium got over March, April, May, June onwards, we are presenting all EMIs unless and until specifically a customer has requested that his EMI should not be presented, okay, which is less number. So we are presenting all EMIs except specific request because second moratorium, we did not make it as automatic. Now what is your question?

Sir, my question is if, say, a particular borrower has seen in my view as on July and he manages to pay 2 of the EMIs, would that be included in the reported collection efficiency number?

We were reporting -- to the best of how we have calculated here, we are reporting that month what we built versus what we collected.

Got it. And just to clarify on the moratorium number of 26%, this implies that for the April to July period, for 26% of the book, there have not been any installment payment?

From April to July, yes. And majority of those customers -- majority means super majority of those customers are current customers as on February 29.

Got it. Got it. And lastly, on the CASA part, if I just ignore the ratio and focus on the CASA level, which is around INR 6,500 crores or thereabouts for you, from a year-on-year perspective, it has been declining for the last 2 quarters vis-à-vis an increase for the industry. And you've highlighted earlier that your share of...

How will it increase for the industry? Madam, we don't focus on CASA at all. We are focusing on retail term deposits. Those customers bring in CASA. That is the only CASA we are focusing on. We don't believe it is cost efficient to focus on CASA. Banks that have shown you very high CASA, you have knowledge on what happened to them on liquidity and margin and so on during the stress period. The CASA that has declined for us is not the retail CASA. The CASA that has declined over a period of last 1.5, 2 years is CASA, which are on large ticket CASA. And I don't know what you're saying about the industry. Whatever data I have seen on industry from March, it appears to me that customers are using their CASA to -- I mean like as they are using the CASA for the liquidity because there's hardly any business and all that happened. So I don't believe that CASA in the industry has increased. I will recheck my number again.

Sure, sir. I was referring to the year-on-year period, not from March. But yes, that's helpful.

Last question.

That will be the last question for today. I will now hand the conference over to Mr. Natrajan for closing comments.

No. No. There's one more question, right, that is left in the queue.

No, sir. That's the last question.

Okay. Thanks a lot. Thank you, everyone, for your patience and on a Saturday spending time on this call. And if there are any further questions, very happy to receive your question. And we'll try our best to answer that as well. Thank you very much.

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