DCB Bank Limited (DCBBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to DCB Bank Limited Q2 FY '21 Earnings Conference Call. Joining us on the call today are Mr. Murali M. Natrajan, MD and CEO, DCB Bank Limited; and Mr. Bharat Sampat, CFO, DCB Bank Limited. [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.

Thank you very much. Good evening, all of you for joining this call. I have my team in the boardroom of DCB Bank Corporate Office. For the first 5 to 7 minutes, I'll give some background about some of the key items that I would like to highlight for quarter 2 of FY 2022, and then we will open it up for questions. So first thing I want to point out is on collection efficiency. And what I would like to point out is that we are pretty close to pre-COVID levels in terms of collection efficiency. If I look at the bucket 0 collection, including the restructured portfolio, For LAP, we are at 97.2%. And in January of 2020, it was 98.9%. In home loans, we are at 98.8%, and we were 99.2% prior to COVID. So I can say that we are pretty much in line with what was our situation pre-COVID. Commercial vehicle is a declining portfolio. Since it's a declining portfolio, I don't expect our collection efficiency to be as good as the pre-COVID level. However, it is still in an improvement trend. If I look at delinquent and restructured portfolio, LAP has come to 95.8%. It used to be 97.5%. Home loans is at 98.1%. It used to be 98.5%. So I think looking at the current trend, and October numbers are not final yet, I believe that we should be same or hopefully better considering some holidays and so on, we should be in line with our expectations. That is on collection efficiency. I hope you had a chance to download the investor presentation. And I would very much like you to look at Page #13, which is on gross NPA movement. The slippages in comparison to quarter 1 was less by about INR 100 crores. First quarter, we had a INR 515 crore slippage. This quarter, we had INR 414 crores of slippage. Majority of the slippage is in mortgage, CV, some in SME and some amount in MFI loans. But that is not the important part here. The critical part here is our upgrade and recoveries is almost INR 396 crores. And out of that, very small amount is due to upgrade on restructuring from NPA. So we are talking about upgrade through cash and cash recoveries has been very strong in this quarter, and we believe that if the same trend continues, we should have a pretty decent improvement quarter-on-quarter as we go forward. And this kind of approach has resulted in actually [ regular ] reduction in our gross NPA percentage and net NPA percentage. We have not sold any portfolio to ARC in this quarter, and we have not done any meaningful write-offs in this particular quarter. So that is point number two. The next point I would like to mention is on the disbursals, new business disbursals. Please look at our press release and have a look at point #9 on advances. The total disbursal this year -- this quarter was INR 3,837 crores. If I remember my numbers right, last year same quarter must have been INR 1,500 crores, INR 1,600 crores, and even first year -- first quarter of this year has been similar levels. So we are making good progress. And I believe that, if there is no major interruption or disruption due to COVID-19 third wave or something, we should continue to improve on our performance on new business disbursals. The next point I would like to mention is on cost. We are consciously increasing our frontline staff in both deposits and loans. We want to be ready for capturing the business momentum that we believe will steadily increase over time. And because of that, we are building headcount. If you compare our head count, our head count is almost year-on-year, up by about 600, 700 kind of headcount and due to the conscious decision on our part, and we continue to do that. If I look at our CASA performance, it's been pretty good. We have kind of revamped the scorecard on the branches. We believe that we have done a very good job in terms of getting retail term deposits and making our portfolio of deposits very granular. Our top 20 deposits continues to be below 7%, and our reliance on bulk deposits continues to be improving both on interbank and bulk deposits, we continue to reduce our reliance on that. And of course, we don't have any series. So we are taking this opportunity to restack our resources at the branches to focus on CASA. We believe that this also will give us better results. All in all, compared to quarter 1, we believe that the situation and as well as put our efforts both in new business and collections, recoveries is started to yield results, and we hope to continue this momentum. With those comments, I would like to open up for questions.

[Operator Instructions] The first question is from the line of Akshay Chheda from Perfect Research.

Yes. I wanted to ask -- a lot of NBFCs are entering into co-lending agreements with PSU banks and foreign banks for MSME and housing loans in priority sector. So will it pose any competition to DCB Bank?

It won't pay -- pose any additional competition to DCB Bank. We have done very well on co-lending tie-ups. We had done a tie-up in the previous quarter, and that is starting to yield results. And that co-lending tie-up is on gold loans. We are exploring further opportunities in tie-up with NBFCs on co-lending. And we hope that by end of the year, we can, at least, sign up 1 or 2 more co-lending opportunities. So I don't see that as any additional problem for us.

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

My first question is on growth. So you had a fairly good growth this quarter. So what is the expectations going ahead? Could we expect the same pace to continue? And what would be, say, the -- a number for you, if any, for this fiscal?

So we don't give yearly growth targets. The way we are building our frontline capacity in deposits and in loans. We believe that if there is no unforeseen situation or COVID-19 kind of third wave, we should be able to double our balance sheet between 3, 3.5 years to 4 years. That's the kind of outlook we have at the moment. And as far as we are concerned, we have 2 challenges. One challenge is the gross NPA that we have to deal with. And I think in second quarter, we have done a pretty decent job of dealing with that. And if the growth numbers are starting to come back, especially in mortgages and home loans and the gold loans. So we do believe that the way we are functioning now, we should have a decent chance of delivering -- double the balance sheet in between 3.5, 4 years.

Got it. And while you highlighted the strong recoveries this quarter, what we also understand is probably the high slippages of last quarter, which were more short term in nature because of the lockdown, also partly contributed to a good recovery, and we have seen that across banks. So do you expect this sort of pace to continue? Or you could say slow down? And this could be transitionary because of the impact of first quarter, the recovery?

I think we have done far, far better than any bank result that I've seen so far. And that is because we are dealing with secured portfolio. We are dealing with mortgage and home loan portfolio largely, we are dealing with self-occupied portfolio. So current collection feedback trends indicate that we should be strong in recoveries and upgrade. I can't tell you whether it will be the same or different because sometimes holidays can disrupt some recoveries. Sometimes some other factors can affect. But on a trend basis, it looks like to me that we are on a good track.

Sure. And lastly, on the slippage front, last quarter, we had seen a few slippages from the corporate book, And you'd highlighted that those were very short term and should be recovered. So anything on that? Like that becomes...

On -- see, unfortunately, in corporate, usually, we are not the only lender. There are other lenders. So therefore, there is a lot of coordination that is required. And usually, we are a very small lender in comparison to the other lenders. Having said that, one of the loans that went into slippage has already been recovered. And the balance have we taken the hit. So all settlement NCLT, JLM all got over. The new investor came, money has been deposited in the bank and is all over. From what it looks like, we should have some upgrade or recovery in another account this quarter. So the work is going on. Sometimes, corporate account looks like they're going to close it just today, but it may just flip to another month or so on various factors. But the recovery on 1 or 2 accounts looks definitely positive.

[Operator Instructions] The next question is from the line of Rohan Mandora from Equirus.

Sir, if you could give some color on how is the business activity right now around restructure and overdue customers that we have?

So we have presented to you in the press release. I hope you had a chance to go through it. The collection efficiency includes the restructured accounts, yes? So including the build restructure, we have presented the thing. And as you can see, the -- definitely, the trends are looking quite encouraging. If there is no further disruption of any kind, we hope to steadily improve this and bring it to either pre-COVID levels or hopefully do better than that. That is what it looks. Customer feedback is encouraging. Customers are slowly coming back to some level of normalcy. The despair that was there somewhere in say, May or June and even for that matter, July, is slowly subsiding. And we are also in active dialogue with NPA customers to tell them that if your business has come back, try and borrow money from somewhere or bring in some capital and upgrade your accounts so that you can get -- at a later date, sometime down the road, you can get more money for expansion and all rather than remaining as an NPA customer. There are quite a few customers who are paying just 1 installment but remaining in NPA. So we are trying to encourage them to go and find the overdue balance and pay off to us so that they can get upgraded. So all in all, I would say that, barring certain customers who unfortunately have got badly affected by the lockdown, rest of it is coming back. So, yes, situation is a lot -- far, far better than what it was when I was speaking to you guys last quarter.

Sir, [ just want to understand ] the color of the recoveries that we have seen this quarter. So would it be fair to assume that most of them are from the regular repayment as the business environment has increased, has improved? Or is there also a component of, say, [ includation ] of SARFAESI or mutuals in onetime settlement? How would the mix be between say, regular business improvement vis-a-vis the other 2?

No, no. It's very difficult to say what has led to what. Frankly, the collections and recovery team are having a very strong analytics and strategy to go and approach each and every customer and find a solution for them to pay the debt, pay the overdues. SARFAESI and all takes a lot of time. If you do SARFAESI activity, it will take anywhere from 6 months to 12 months. And you do know that till August or something like that, most governments were very busy with dealing with COVID-related matters. So attending to SARFAESI notice may not have been their priority. So these are all -- while we will continue to send notices on SARFAESI option and all these things. But these are all based on one-to-one discussions and negotiations with customers and getting them to see the point of upgrading themselves so that they can have a better future for their business. And some of them, obviously, also in terms of the customer themselves agreeing to sell the property and squaring off the debt.

Sure, sir. And then, lastly, on the comments on cost-to-income ratio likely to stay slightly elevated in the near term? So just wanted to understand like what kind of branch additions are we targeting on, say, next 1, 1.5 years?

We have already mentioned that in our press release, right? In 12 to 15 months, we're targeting 20 to 30. So it is not just about branch addition. We are giving additional headcount to our existing branches. We have categorized the branches as we normally do into various performance potential and so on. And based on performance and potential, we are giving additional headcount to various branches so that they can grow their branch to a bigger balance sheet. There are many branches which are wanting to do more, but they don't have enough space. So we are helping them to get more space or relocate to a nearby place with a bigger branch so that they can perform better. So all those activities are going in full swing at the moment.

Sure, sir. And just on this cost thing further. So one would be like a normal capital addition, which is happening. And if we were to also include a new initiative like the technology expenses and other things. So in terms of incremental OpEx, how would it be split between -- the growth of OpEx would be split between new initiatives as it relates to capital addition? When [indiscernible].

We don't have those kind of breakup. We don't disclose those kind of breakup. All we can tell you is that we have put some [ 50-odd ] projects in our Mission 309 digital initiative. And about 20%, 30% of the projects are being done in-house. Some of the projects are being done in combination of in-house and external, and some are being completely done outsourced because we don't have the skills to do those kind of projects. Each project is being evaluated on its merits to see whether it can give us a breakeven within 12, 18 months type of the thing. And there is a complete project team that makes sure that those kind of discipline and governance is taken care of. All I would like to say is that the way we are looking at it now is that we see an opportunity. We see that we are in control of our portfolio. And we want to focus on steadily growing our front line, including branch network, as we have mentioned in our press release, to step up our growth. And our intention is to double the balance sheet between 3 to 4 years.

[Operator Instructions] The next question is from the line of Darpin Shah from Haitong Securities.

First is on the restructured book, is there any more pipeline which might come in 3Q? So we must have received some queries and you have worked on it, but it is not yet implemented?

So Darpin about 62% of our restructure is mortgages, both home loans and loan against property, okay? And less than 2% is on any unsecured loan. So I want you to know that first. Because our restructured book is not some MFI book for personal loan book and so on. So that is point number one. Then you have a smattering of commercial vehicle, SME, MSME, a small amount in corporate and some 1 or 2 construction finance and so on. So we are pretty confident about our restructured portfolio. Secondly, we are carrying a provision for the restructured portfolio, and I think that is also disclosed in our press release point number -- Bharat, what point is that? There's a point on provision. I don't know, I think point 20?

13.

You have that, okay? That is point number two. Point number three is in restructure, July was a difficult month because customers were not having confidence. And while we kept encouraging them to not take the restructure because of peer pressure and because their loan may have got restructured at some other bank or whatever be the case, was good. I mean it was the hype. August and September was pretty much low and October looks negligible. Having said that, there is some limited promise that has been made to customers where if they behave for 3 months, 6 months and all, we will review their account for restructure, and those will come through. But I believe from here on, restructure would be very limited. And on collection efficacy, what we are presenting includes restructured portfolio.

Yes, yes, I've seen that. And the second bit is in terms of -- our costs have gone down, cost of funds or cost of deposits have gone down. Yields have improved on a sequential basis, but margin improvement is very just near 6 basis points.

Yes.

So what explains this?

I think 2 explanations there. There is -- the restructure book causes some damage to the NIM because you capitalize some of the interest that has not been paid, for example, or partly not paid or whatever. That is one. Secondly, we kept carrying excess liquidity throughout the quarter again because we wanted to be very sure before reducing the excess liquidity. We hope to reduce excess liquidity in the coming quarters. And we wanted to make sure that our granularization of deposit is firmly -- on firm footing before starting to kind of reduce our deposit rates and all, so that has also happened. So I do expect some improvement in NIMs going forward, as long as we don't have too much of slippage over and above our recoveries and upgrades.

And sir, just 1 last data clearing question. Can I get the breakup of provisions?

P&L provisions?

Yes, sir.

Towards the NPA, INR 28 crores. [ Floating ] provisions INR 3 crores. Provision towards standard restructured assets, INR 69 crores. And net standard regular -- provision regular as well as additional provisions is running at minus INR 13 crores, that is utilization is up.

Sir, just to check one last thing. In the press release, the provision breakup, which you have given as on September, this INR 115 crores of floating provision is part of GLP -- is part of provisions that you calculate each year?

Net NPA, yes.

It goes in net NPA so it gets included in provision coverage ratio.

I don't have the number here, but Darpin, the pre-COVID NPAs, what we have would be almost 97%, 98% provided at the moment. It's only the fresh slippages that we are catching up on the provisions. And like I mentioned in the past, our loss given default in the mortgage is like 23%, 25%, and we probably have already provided 45% or something like that.

Fair. So sir, non-NPA related provisioning will be towards restructured assets of INR 265 crores. Contingency provisions of INR 78 crores, and specific standard assets of INR 24 crores?

Yes.

The next question is from the line of Renish Hareshbhai Bhuva from ICICI Securities.

Two questions. One on the -- our CV portfolio. So sir, what is the ground feedback we are getting because of the recent fuel prices? Whether transporters are able to pass on the fuel price to end customers or no, sir?

See, we are a small player in CV. But the feedback that we are getting from the ground is that, at least, the loads are improving, okay? There is no doubt about that. And many of our customers are guys who are getting the contracts from some bigger guys because our portfolio is of small transporters like maybe 3, 4, 5 kind of trucks. So what we have seen even in the past is the big guys don't easily increase the rate. In fact, they try to squeeze some of these small guys. Having said that, whatever cash flows that we are seeing and whatever recoveries and collection efficiencies we're showing, clearly shows that there is some pickup in demand as well as in terms of pricing. And that is the reason we are able to kind of recover these dues from the customers.

And sir, the next question is on the realization value of the mortgages. Of course, over the last 1.5 years, we have not been able to sell those properties. But whenever we are approaching the courts or maybe whenever we're approaching the agency, what sort of market value we are getting as of now, what is, let's say, pre-COVID levels?

So what is that 1.5 year point you made, because I'm not clear about that?

So let's say, during this COVID time, since courts and everything was not working, we might not be able to sell those properties, and we might have not approach valuer as well to get the value of the property.

No, no, no, no. That is not what I meant. So let me clarify. Courts were not giving repossession order, okay? But where we are approaching the customer directly and -- the customer doesn't necessarily -- some of the customers wait for repossession order before they actually react. But most customers as soon as they get legal notice SARFAESI and all, they start to react because they don't want to lose that self-occupied property, okay? So wherever we have seen we encourage the customer to sell themselves. We have not seen any loss given default problem. What we lose in those cases is some accumulated interest, some part has to be given up or some delinquency charges that we have charged them have to be given up or some legal charges that we have charged them has to be partly given up or given up completely. Those kind of compromise we have to make on this. In smaller properties, unless we have made a mess of the valuation at the time of originating a loan, we have not seen any decline in value. Where we have seen and our portfolio in this category is very limited, is where is the property, price is INR 1.5 crores, INR 2 crores. The demand also has been less. Also the realization is not that great, like you probably lose about 20%, 25% of the value. All in all, experience tells us that our loss given default is in the range of 23% to 27% in mortgages.

Got it, sir. And just a last question, if I can just squeeze in. On the restructured book, let's say, of this entire INR 1,800 crore book, what percentage of book is up for billing I mean, is out of moratorium?

No, there are different categories in there. Some people we have given 0 moratorium, some we have given 3, some we have given 6. Some of the home loans, which is as per the RBI's existing guideline, we have even given 2 years also, right? So it's all in various categories. What we are seeing is, as a strategy, we have decided, irrespective of whether the customer has asked for moratorium or not, keep talking to the customers, calling the customer. We are encouraging a lot of moratorium customers also to say, look, why don't you start making some payments if your business has come back So I don't have that separate figure here because, let's say, last month, some people have come out of the moratorium, they would have already been part of this billing.

However in collection efficiency, the amount billed there is in a denominator and amount recovered against that is...

Except for those who are in...

Who are in Moratorium.

But every month, somebody is coming out of the Moratorium, they come into the billing cycles.

Billing side, Okay. Got it.

The next question is from the line of Bunty Chawla from IDBI Capital.

It seems to be our collection and recovery efforts are doing very well, which is reflecting in the upgrades and the recovery. So from that point of view, if you can share some data points. First is how much of the total employee count or headcount will be the collection team? And similarly, what proportion of the employee cost is related to our collection efforts? And what [indiscernible] in this quarter, there has been a slight increase in the total operating cost. So what -- how much increase is due to this higher collection effort we have put on?

Yes. So we don't -- first of all, I want to say we don't use any collection agency at all. Everything that we do in our bank is in-house, including some junior lawyers who are in our payroll to do all the work that -- legal work that needs to be done. So we have collection agency only for reposition of truck because we can't do that. Other than that, everything is done by us in-house. When we repossess a property and we have to put a security guard outside that property, there we use agency because we don't have that kind of manpower or skill set. So everything we do is in-house. So last -- since last year, I believe we would have added at least 150 people into collections, and that has been a conscious decision to do that for 2 reasons. One is the intensity required to talk to customers has definitely gone up for obvious reasons. And secondly, if you have to make sure that you have to really step up on the collections, then you need to have a lot more headcount and coverage. So therefore, we have increased our headcount. We don't disclose the number of headcount that we have on collection. But I think almost about 11% to 12% of our staff would be in collection. And this collection means telecalling collections, field collections, mix bucket collections, all types of collections, including supervisory staff.

So sir, total headcount, you are saying out of that 7% to 12% will be into this collection. So similarly, I can take [ this ] on the cost also?

10% to 12%.

Similarly in the cost side can we also...

Not necessarily because collection staff, the telecalling staff and what you call as field staff and all, are usually junior staff. So if you go by some average cost, you may not get the right number there.

Okay. And sir, secondly, as you have rightly said, the moratorium number for the restructure would be some 3, some 6 months, some 2 years. So roughly an average number, if you can share if it is possible?

No, we are not disclosing that number. We are disclosing the restructure number to you and also the collection efficiency.

The next question is from the line of Rakesh Kumar from Systematix Group.

Sir. Can you hear me?

Yes.

First question, like we have seen in case of some other bank also, like what is the reason that there is some volatility that in the NRI deposit, we are witnessing. Like is it industry-wide phenomenon? Or is it happening only to us?

[Foreign Language] There is one of the things that we have seen, some banks have reported very high numbers on NRI deposit growth. Our NRI deposit growth was predominantly dependent on NRIs visiting India during holidays. Our best months usually on NRI deposits used to be from say, September to January or February. As you know that because of fear of travel and restrictions and all, the inflows of such customers have been very limited, okay? And secondly, in our customer segment, we found that a lot of the customers have their own compulsions of -- supposing they're living in different countries, and they have their own compulsions of cash flows. They have not added too much to our deposit. So we have done an analysis. You don't find any one particular reason or anything like that. And given that we are pretty strong on this NRI deposit. We believe that over a period of time, this should start to build back again.

And sir, secondly, could you please explain like what is the characteristics of our CV loan in terms of customer segmentation, the ticket size, geography-wise breakup? If you can give some flavor around these 3 things it would be very helpful?

I mean we have a pretty small portfolio in comparison to the industry in commercial vehicle, right? And as I have mentioned in the past also, we don't do any strategic big ticket and all we don't do. Our ticket sizes are usually in INR 30 lakhs, INR 50 lakhs. So the -- between the used and the new, the breakup would be probably used is about 40% and new will be about 60%. And this is all first-time buyers, first-time user kind of portfolio. That is what we have. And we always find that the delinquency may be higher. But over time, as the trucks start to operate, our recoveries and collections starts to pick up, and we are seeing improvement in CV collection efficiency as well.

And sir, with the margin that we have for the first half for the quarter and the kind of credit cost that we incur, on a sustainable basis, what kind of ROA that you internally would have discussed that? Or what is the sustainable number that we can report on the ROA, ROE basis?

We are confident of crossing 100 basis points of ROA and 14% ROE in due course. I think the big needle mover on that will be as we start to improve our collection recoveries and start to reduce our NPA fresh slippages and all. We believe our credit cost would start to become more normal, which is what we had pre-COVID, which is more like a 50 basis point level. As we reduce our excess liquidity as the slippages starts to come down and as we keep reprofiling our deposit base, we believe that that should also help us to get some better NIM. And we are also planning to -- as you would have seen in our stock exchange disclosure, we are also planning to repay some of our sub debt. That also should help us to improve our cost of fund. Of course, some of the cost of fund will get passed on to customers. Our product mix is actually helping us to make sure that we have a sustainable proposition on our yield. If I was to divide the whole business into very low risk, medium risk and high risk, I would say that we are probably operating somewhere between medium risk to medium low risk. And therefore, our yields reflect that. We could very well go into some of the SME businesses where you could get 17%, 18% and all. We don't believe that that is a sustainable proposition. So NIM will start to improve for the reasons I said. And credit losses seem to -- will start to come off. And you can see that we are already performing quite well on our fee income, and we hope that it will improve further. As far as cost is concerned, in near term, costs will go up, and it's a very conscious [ decision ] for us to keep building frontline so that we can build on our balance sheet. Because we've had about almost 1.5 years of very kind of flat -- flattish kind of a situation. And we want to like start building on that. When -- and so in the due course means we are looking at at least 3 to 4 quarters down the line, numbers starting to really improve from here on. That's the way we are looking at it.

Great, sir. So around 100 bps of ROA and around 20%, 25% balance sheet growth?

I didn't say 20%, 25%. I said that we are looking to double the balance sheet between 3 to 4 years. And whatever that translates to is what. And that doesn't mean maybe 1 year we might do 18%, another year we maybe do 21%. It all depends on how the circumstances, but that is our ambition at the moment.

The next question is from the line of Gaurav Jani from Centrum Institutional Equities.

Congrats on a good quarter. So firstly, I just want to understand on the restructured portfolio. So how should we look at what proportion of the portfolio will sort of slip, right? Because rest of it [indiscernible] and obviously...

Gaurav, I'm really sorry. I'm not able to hear you well. If you can -- I don't know, maybe are you on speaker phone or something. I want to answer your question, but I'm not able to hear you well.

Is it better now?

Yes, far better. Yes. Now tell me what do you want. On recycle, what were you saying?

Yes. I was asking on the restructured portfolio. How should we look at the slippages from the restructured portfolio to the stress pool because a lot of it will be longer term? So it would be sticky because 60%, 65% is housing per LAP for that matter. So how should we look at it?

What does sticky mean?

No. I mean does the -- since the tenure of the loan would be longer, so repayments would also be that and, hence, we have probably given a longer moratorium on the restructure.

No, we are consciously in mortgage business. and 47% of our business is in mortgage business, which by nature, the ticket size that we do -- INR 30 lakh, INR 40 lakh by nature is a long-term term loans that we are giving. And we are -- that's the way we see risk and build that into the pricing, cost and collections and so on. So that's a model that we have. So we don't have any short-term loans. We don't have those fears, except for MFI loan, which is unsecured, we have very limited unsecured exposure. So that's by design, we are in this business. Now comes to restructure. The collection efficiency that we are reporting includes the restructured portfolio that is built in the denominator, okay? So if the NPA flows are happening, if customers are slipping either in restructured or in the normal portfolio, all are coming and reported as NPA. And that was about INR 500 crores and became INR 400-odd crores. Hopefully, we keep reducing this slippages as we go along. And hopefully, there is no interruption or issues that come up in the country. So that is the way we see it. Now there is a collections team, which is constantly in touch. And I kind of indicated to you that we are trying to step up on collections and recoveries. The same pool is what has given you these collections and recovery. There are customers who are coming out of restructure. There are customers who are coming out of moratorium saying that I don't need the moratorium anymore. And there are customers who are able to upgrade from delinquent situation to higher situation. So all kind of mix is happening at the moment. So -- plus ours is a secured portfolio, even if it is a long-term portfolio, it's a secured portfolio, it's a mostly self-occupied portfolio. And that is what we have been saying in the call repeatedly. So that is the way I see our portfolio. I don't know what you are seeing, but that's the way I see it.

No, sir, thanks for the reply. But I just was looking at -- I mean trying to get at that how soon could we sort of reduce our restructured portfolio? That is what I was sort of looking at. That's why I asked.

I mean, I am not too worried about our restructured portfolio. If it was an unsecured restructured portfolio, I'll be very worried. Even like I mentioned, guys who are in moratorium, I think about 70%, 80% of them have already been touched based by our bank. And because -- see if you give a moratorium, let's say, in June, I'm just saying April or June, now the June situation is different, October situation is different. We are saying, look, if businesses have come back why do you need to be in moratorium. Many of the customers are agreeing and saying, okay, give us time, we'll tell you what to do, et cetera. So I think if you have given an unsecured loan, which I've already told you, less than 2% of our restructured is an unsecured loan, it's a different. So therefore, I have a lot more confidence in our restructured portfolio. And we have also provided by the way, I told you INR 265 crores of provision has already been made on the restructured portfolio.

Sir, lastly, on the slippages to the recoveries upgrades. So this quarter, [indiscernible] had been fantastic. We've almost recovered all of our slippages. So at least in the next 3, 4 quarters, would this ratio hold or would this taper off a bit?

See, the collection team doesn't feel like that. However, I want to see month-on-month performance despite Diwali holidays, despite festival, despite Christmas, whatever be the thing. I want to see the performance before telling you whether -- but at the moment, the momentum looks encouraging. That's all I can tell you.

The next question is from the line of Mahesh M.B. from Kotak Securities.

My congratulations on a good set of numbers. Just an extension to the previous question. If I heard it correctly from Bharat, Bharat said that the provisions for restructured loans was INR 70 crores for this quarter, right?

Yes.

Okay. So essentially, would you say that this quarter, the provisions for bad loans was -- let's say, the provisions for NPAs was close to negligible?

Because the -- we would have [ to be reversal ] on INR 400 crores, and we would have made some provision on the slippages. The aging provisions will continue to happen. So let us say, we have an NPA already of stock of say INR 1,000-odd crores. As they age, that aging provision keeps coming up.

Perfect. So just trying to understand if next quarter, you do not have restructured loan provisions of the same level as what you're seeing today. That means the second half credit cost should be meaningfully lower?

We are keeping our fingers crossed, and we are hoping that we do a far better job on the credit cost in the second quarter than first quarter.

Perfect. And also just ECLGS, sir, while the sanctions have come through, disbursements have not moved much Q-o-Q?

We are very stingy on this. And frankly, I mean, I've been telling you and others many times also, customers who have taken a 12-year LAP. If you go and give them a 4-year ECLGS, he's saying that, I mean, why? Why don't you give me at 12-year? Why don't you just give me a top up because I'm not a delinquent customer, why don't you give me a top up on this and top-up is allowed. I mean not that we have done it because he has to show business performance for top-up. But -- so second thing is that I don't want to give ECLGS to fix our NPA issues and all. I mean, that's not the way we want to operate. So therefore, it is where they are. I mean -- and when I look at our RM, you tell the RM that why don't you disburse ECLGS. And the guy is thinking that I would rather find a new customer and make my business volume than go after ECLGS. [ You see ], to administer it, you need people, not to do the documentation and so on. And frontline is thinking that why don't I just do a new loan of mortgage or home loan or something rather than do ECLGS. So all these are a mix of things that is happening in this. So I'm not very worried about it. I think we are okay on that.

In the sense, the customer has been sanctioned, but he's still not utilizing it?

He has been sanctioned.

Why is it that?

The department itself has sent an SMS saying that your loan has been sanctioned. We have followed up with him. He's not interested anymore.

So overall, you said that, if you look at this quarter's performance, it's been good on growth, margins have held up, asset quality seems to be showing improvement. There are no major, let's say, headwinds that is sitting in front of you, except for any unexpected event hitting us as a [ sector ] as well. Is that a fair way to look at this point?

I think it's a fair way to look at it. I think it's also fair to say that how difficult the first quarter looks. Whatever has come out on second quarter, I'll take it.

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

Sir, most of the questions have been answered. Just wanted to get your comment on growth again. So I heard, and we have always been maintaining that the intention is to double the balance sheet over every 3, 3.5 years. But if I look at the last 6, 7 quarters, the growth has been single digit and for obvious reasons. But in this quarter, the growth, of course, in the disbursement, it looks like an all-time high. And that also flows through the -- in the loan book uptake Q-o-Q. At the same time, the collection efficiency, the table that you have shown in the second table, including NPA restructuring is showing 1 way uptick trajectory. So in the light of this thing, and I think you also answered to Mahesh question that this quarter is sort of a turnaround quarter if one were to say that. So maybe we did not give guidance in the earlier quarters because the visibility was -- may not be there. But could you -- I mean, can you help us understand, sir, over the next 12 months, could we reach the previous run rate in terms of growth? Or there is still some time before you will make that comment? So we want to check that when do we get back to that doubling of balance sheet phase? When do we reach there?

We have, based on what our efforts are going on, including headcount increase that we have done in frontline, including our branch expansion plans that we have set 20, 30 within 12 to [ 15 ] months, including the additional headcount that we are giving to branches, which are having potential and performance. We have every intention to double the balance sheet between 3 to 4 years. Now as you know, in a retail -- and we are -- and it will not be in corporate loans, okay? Our corporate loans will continue to be 10% to 11% of our total book. It will not in be some fantastic MFI loans because we believe that has the -- has a lot of risks which are unpredictable and can derail you from time to time. It will be mostly in mortgages, gold loans, SME/MSME, AIB. That is where we are planning to grow. And we believe those loss rates are very predictable. And the portfolio -- I mean, we were doing quite well on the portfolio till whatever, COVID hit us. And even there, my guidance has always been we are having self-occupied property mortgages, and we should be fine. That's what I've always maintained, and I continue to maintain that. Yes, we have to deal with our NPA portfolio, which is about 4.5-odd percent, plus we have to deal with our restructured portfolio. But again, they're all secured portfolio. So I think the efforts that are going on both on the deposit side and loan side, barring any major disruption that completely closes off-rail. We are, I think, on track to deliver double the balance sheet in between 3 to 4 years. That's how I see that.

Right. And second, sir, just a small 2 clarifications. One is the restructured loan that we have given. One -- I mean, if I were to calculate the gross restructuring book, then I should be adding back the provision INR 265 crores provision that the bank has done.

Yes.

And second, is the co-lending figure that you have given separately in disbursement? I mean is this given because this is a separate channel or -- this would also include these products, but the only difference is the channel. I mean, the co-lending disbursement of INR 885 crores?

Co-lending is purely gold loans. And co-lending is a separate business vertical which we created about 6, 7 months ago. And we intend to build on that vertical. It is -- we are not interested in doing co-lending on mortgage loans or LAP. We are good at that. So we don't need any co-lending assistance on that. Even in gold loans, the co-lending is being done to a segment that we are not focused on. So again, we are very careful what we want to do. The segment that they are focused on, that NBFC's focused on is not a segment that we are focused on. That's the reason our pricing is acceptable to us. And you know that gold loan does not attract capital. That's the other advantage of that. We have also done TREDs. In order to drain our excess liquidity, we are actually participating in TREDs, which is also PSL and which is a short-term 3 months, 120 days kind of lending. So these are all the new things that we are doing and seeing how we can support our basic growth in mortgages and AIB.

We'll take the next question from the line of Darshan Deora from Indvest Capital.

Thanks for the opportunity. It's great to see the uptick in the CASA numbers. Just wanted to get some thoughts on where you see the CASA going over the next 12 to 15 months?

See, we have done a pretty decent job in the last 3 years, starting from 2018 on retail term deposits. The reason we did that was, I didn't know that PMC is going to happen. We didn't know that Yes Bank kind of problem could happen. We didn't know that COVID could happen. But we didn't want to continue where our dependence on interbank and bulk deposit is at a level which is like 17%, 18%. So we changed the entire scorecard and focused on retail term deposits. I thought we did a pretty good job. Now our top 20 deposit is below 7%. And we hope to bring it down to industry best like Federal Bank or ICICI, which is more like a 5% kind of thing over a period of next 1.5, 2 years. That's our intention. Now that we have done that, we have recently restacked our scorecard of the front line, which is the branches to focus on pure retail CASA, which means not institution CASA only retail CASA, which means natural person CASA. That is what we want to focus on. We have tweaked our pricing and all here and there to help that. So we see that as fungible between -- the pricing between term deposits and CASA as fungible. So we've done some tweaking on that. That is because we are in the market fighting IDFC, AU, Equitas, these are banks which are probably offering far better rates in CASA. But having said that, we hope to continue to maintain a pretty decent growth in CASA. I think our year-on-year growth has been about 20-odd percent, 25%. And that's a kind of growth we are aiming for. We have started this journey recently, or rather restarted this journey recently. Let me see 1 or 2 quarters, and then I can give you guidance on where we are going to end up on that.

Sir, that's quite helpful. And good luck, the results were great.

The next question is from the line of Akshay Chheda from Perfect Research.

Yes. Sir, I would like to ask that there is a common perception among investor community that is banking -- that banking is a scale game, and larger banks will keep getting larger and smaller private banks will be smaller. So what are your thoughts on that?

We have to discuss it outside this forum because this will take a lot of time of everyone. I have my views, which others may not -- the bigger bank may think that we don't have a chance, and we may think that we have a chance. So I don't know where the answer is. As far as I know, the kind of work that we are doing, we will continue to build our balance sheet and growth is what I know. Separately, when I meet you personally, we can exchange views on those.

Yes, sir. And another question would be, sir, can you throw some light on the threat from technologically advancements like Paytm versus the traditional banks?

I think technology is pretty common to everyone. Of course, Paytm has established a completely huge market for itself. There is no -- I mean we have to give it full credit for what they have done in the last 5, 7 years, right? But having said that, I don't see any bank technologically backward. And as you can see, we also have put together almost 500 projects which we are working on, which we believe will be very, very beneficial to the frontline and customers. And so we have to continue to work on it. It's not something that we can do and then forget about it. We have to continue to be focused on this aspect.

The next question is from the line of Rohan Mandora from Equirus.

Just 1 thing on co-lending. If you want to share what is the arrangement on that front? And what kind of an ROA differential we will see vis-a-vis the normal business in that co-lending?

We are very clear that we want to be in co-lending in a business or product that we are not ourselves doing or we will have a lot of costs in building that particular capability, okay? The model that we have chosen for co-lending is gold loans. Gold loan is very short term, anywhere from 3 to 6 months. And the pricing depends on what kind of ticket sizes they are giving. At the moment, they are giving us ticket size that we are not focused on. Our average ticket size is somewhere like INR 1.5 lakh, INR 2 lakh, their ticket price is more like INR 50,000 kind of ticket size. Gold loan does not have any capital charge. So therefore -- and there is no cost -- in co-lending, we don't have any cost. Except some few people in head office who have to take care of reconciliation, who have to take care of technology, who have to take care of the payments that are coming in, make sure that those are all accounted well and the relationship management costs are negligible on the entire initiative. So the margin, even if it is limited and capital is not there, you can always calculate. I think it's a pretty decent ROI business.

The next question is from the line of Roshan Chutkey from ICICI Prudential Mutual Fund.

I am sorry, I joined this call a little late. If you can just talk a little bit about the CEB growth? Where is the growth coming from?

Core fee growth.

Core fee income is coming from various categories, cross-sell of insurance, trade, ATM, processing fee. All these are contributing. Everything is contributing to the growth, and we hope to continue to build on it. There is no one any -- we don't have any [ sixer ] in this. Everything is contributing to it.

And if I look at your press release, the home loan segment, particularly, there is a statement, which says that the percentage of the portfolio on page 3 almost from April 2020 till date is above less than [ 95% ]. How does this reconcile with the fact that the collection efficiency if I look at the entire year of this calendar year, particularly?

Salaried home loan would be more in moratorium. So the 3%, 4% could be explained by the moratorium. I think home loan customers were more demanding of moratorium than LAP customers in some ways.

And the moratorium period have been fairly long?

Sorry.

The moratorium period have been fairly long here, more than 2 years?

They will always say give me 2 years and all. It depends. Like you see we make it -- I would say, difficult. We make it more what -- systemic with the customer because if you ask about details of the customer, saying, give me your bank statement, give me your income statement and all, he himself realizes that it doesn't require a 2-year kind of moratorium, right? So not in MSME, if you say, okay, 2 year, automatically you give them, it's -- that's not how we have done it. We have a collection team that has worked with each and every customer to figure out what is their cash flow. Some people may sound very desperate. No matter what my friend has got 2 years you have to give me 2 years, then probably we can't do much because by law, they can demand that.

Then they also understand that -- we also make them understand that 2 year upfront doesn't mean 2 years at the end. And we...

Minimum 2 year. Can be 4 year at the end.

It can be 4-year at the end. Sometimes a person who is not aware, may just think that I get 2 years relief now and I'll have to pay 2 years in the end more.

It does not like that -- sorry.

So it just accumulates.

So operator, I think I'll take the last 2 questions.

The next question is from the line of Sohail Halai from Antique Stockbroking.

Sir, first, just on the entire macro thing. In terms of we look at it, the system has had excess liquidity. The entire lending pie is not growing much. So perhaps the yields will be under pressure. When do you think that the situation would reverse and we will move back to a normal range of margins?

What is normal range of margin?

Sir, probably, you operate in a bandwidth of 3.5% to 3.75%. And for most of the time, you have, in fact, surprised us by being closer to 4%. So do you think that once the recovery starts improving, we could move to closer to those range in FY '23?

I think instead of looking externally, the pressure on yield has always been there. I mean, now I -- going to be in 6 months, I'll finish 13 years, pressure on yield has always been there on the thing. So it's not looking at the external environment, I would say that where we are seeing possible improvement in NIM is as the NPA starts to come down, slippages and all starts to come down. That is one that will help. As we start to not do any more restructure, that will definitely help. Third is, I think we are steadily improving our deposit profile. And if we improve our CASA ratio, that also should help the thing. And fourth is, like I mentioned to you that we are going to do take the call option on the Tier 2 bonds, which is about INR 250-odd crores.

INR 230 crores.

INR 230-odd crores. Then next point is that I told you that we are maintaining excess liquidity. And as a bank, we have decided that we will start to reduce that. So all that should start to steadily help. So we are confident on a steady-state basis, we should go about 350 basis points. But I think it might require about 2, 3 quarters, maybe 2 quarters, I don't know. That's how it looks right now.

And sir, in terms of asset quality, just one thing. In terms of we saw an upgrade of INR 300 crores this quarter. And perhaps in your commentary, you also did mention that in terms of some of these court related cases, or the DRTs, it's taking time. So is it fair to assume that if the current environment continues, probably you will be in net negative slippages in FY '23? How do you read into -- basically in terms of the trend going forward?

No, listen, I am confident of our collections effort and the momentum that we are seeing. I don't want to make any prediction by the way, I'm going to be net negative and all. Our intention is to steadily reduce the NPA ratios as we move forward. If you ask me whether I would be -- whether we would be in this kind of situation at the end of June, I may not have thought that this was possible. But as we started working on as the environment started improving and as we intensified our approach, we got some better results than we planned for. So we hope to sustain this. Let's see 1 or 2 more quarters before we decide how it looks. So at the moment, the momentum is quite all right.

And sir, any color on the current quarter of upgrades? Like how granular it was and what led to these upgrades?

Everything in our bank is granular. We don't have any -- Like we don't have any corporate INR 100 crores update and -- we don't have those kind of things. Even if a corporate upgrade, it would be like INR 5 crores, INR 6 crores. So I mean it's very granular. So everything is granular, this quarter also it looks granular only.

But anything due to restructuring that got upgraded during the quarter?

Means what?

That you would have implemented the restructuring and it got upgraded during the quarter? Or it is entirely outside the restructuring?

It is minimal. See we don't encourage that. It is minimal. We encourage the customer to pay us something for us to do something, right? Unless the customer like really becomes very stubborn and not want to corporate, that's a different matter, okay? So that is minimal. Most of the upgrades and the recoveries that have happened is cash increase. So last question, operator.

The next question is from the line of Amit Premchandani from UTI Mutual Fund.

I just had a question on the slippage number, although the overall trend of asset quality has improved significantly. But if you look at the gross slippage trend, it is still at significantly elevated levels. So when do you think that will [ correct ] to more normalized 2% to 3% slippage number? And is this 6.5% kind of number likely to be significantly lower in the second half?

I think if the situation continues to improve in the environment, and we continue to do the work that we are doing on collection recoveries. Quarter-on-quarter, I expect some improvement in the slippages because you can see from INR 500 crores is INR 400 crores, and we are looking at the slippages. I think even our MFI book is starting to show some improvement and lower slippages. So barring any unforeseen situation, quarter-on-quarter, I think we should see improvement. If I want to take a guess, maybe give it another 2, 3 quarters before it comes to some normal kind of level assuming there is something called normal. Thanks, everyone, for your -- I mean, I know that we always do this call on Saturday evening and probably messing with your evening on Saturday. My team certainly thinks that I'm messing with their Saturday. To compensate for that, I'm taking them out for a drink today. Unfortunately, I can't invite some of you because of COVID protocol. Please enjoy your evening. Thank you very much for participating in this call. Look forward to talking to you again. Bye.

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