DCB Bank Limited (DCBBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the DCB Bank Limited Q4 FY '22 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, Mr. Natrajan.

Good evening, all of you. Thank you for joining this call. I'm calling -- I'm talking to you from the boardroom, where we have Bharat Sampat, our CFO; Mr. Satish, who is our Deputy CFO; Ajit, who is our Treasury and FI Head; and we have Praveen Kutty, who is our Head of Retail Banking; Venkattesh, who is our Head of Operations, HR and Technology; then we have our CRO, Mr. Sridhar Seshadri, so we kind of have a slightly bigger team and their team members. In the first few minutes, I will give you some highlights of our performance and then we will open up to questions. First of all, our profit for the quarter is INR 113 crores, which is the highest ever that we have achieved in the last 2 years, probably in the history of DCB Bank, and we are very happy about that. We sincerely believe that the COVID-related challenges are behind us, although we still have to deal with some part of the NPA and the restructured book. But looking at the collection efficiencies of the book and looking at the way we have been performing on recoveries and upgrades, we believe that we are seeing a pretty strong momentum and performance. We are very happy to tell you that we have 400 branches now. And after some kind of a slow installation of branches during the COVID, we picked up some pace. And we will continue to operate in the 25, 30, 35 kind of branches per year. And our branches are continuing to show breakeven in about 22 to 24 months. So the model is intact. We have not changed our strategy. We have strong belief in pursuing small ticket secured retail, SME, MSME strategy. Given that COVID has more or less receded, we are seeing a definite uptick in demand in the products and segments that we are operating. And fourth quarter, especially February and March, has been pretty strong for us in terms of disbursal. And we are continuing to build frontline capacity to put the growth in a higher trajectory. Our intention is to double the balance sheet in between 3 to 3.5, maybe 3.5 to 4 years. That's the kind of trajectory we want to put on bank. One of the things that I want to highlight is that I will again go back to our call, maybe some of you were able to attend the call. When the pandemic first in March 2020, we said very clearly that we have absolute confidence in our customer segment. Our operating profit is strong. Even if we have to make higher provisions, we are confident that we don't need to raise capital, and we'll be able to withstand these challenges posed by COVID. I don't believe that any bank would have shown almost 100% or high. In fact, in fourth quarter, our recovery upgrade is 100% above the slippages. And the slippages has a large part of gold loans and gold loans is 100% secured. So barring gold loans, we are more or less back to similar level as pre-COVID in terms of the monthly slippages while we are continuing to do a strong performance in recoveries and upgrades. So that is where we are. Our capital position is strong. We were not able to -- in 1-year, RBI has said that the banks cannot declare a dividend. And next year, we took a conservative approach. This year, we have declared dividends of INR 1, and hope that the situation continues to improve for us. And we are confident that kind of activities that we have done and the kind of investment we are putting, we will continue to build from here on. So those are some of the few thoughts that I wanted to share with you. I'm happy to take questions.

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

Yes. Congratulations on good set of numbers, first of all. So a couple of questions. First is on the restructured book. Our restructured book is still flat on a sequential basis. So if you can just highlight, sir, how much proportion of the book has ended the moratorium, what kind of collection efficiencies are we seeing in -- specifically in the restructured book?

The collection efficiencies that we have presented to you in the press release includes the restructured book, which is built. Customers who are in various degrees of moratorium, 3 months, 6 months, 9 months, 12 months, they keep coming into the billing cycle. And we are still able to achieve pretty decent collection efficiencies, including the restructured and delinquent book. The restructure book under the RBI guidelines in COVID will remain as restructured even if they are continuing to pay the restructured installments or whatever the payment plan is. They cannot be moved to a normal book. I don't think there is any provision to move that into a normal book. If once they move into some kind of delinquency or NPA, they are treated like any other NPA and take them the provision recoveries and so on. So we are pretty confident about our restructured book. I don't have any concerns. We have not restructured any unsecured book. So as they become -- they come out to billing and so on, they've become NPA, that is not the case we have. We have only restructured secured kind of book, which is largely mortgages and SME.

Any number in terms of billing, if you can provide?

We don't give details on moratorium kind of book. All I want to say is that there are in different categories of moratorium 3, 6, 9, 12. Shorter moratorium for commercial vehicles, slightly longer moratorium for home loans.

Okay, understood. Sir, second question was in our GNPA breakup which you provide. I see SME GNPAs are up sequentially. Any specific...

There is nothing to worry about on that. In November 12 RBI circular, they have said that in the past, customers' debits and credits have to be matched at the end of the year in the balance sheet. They changed the norm in November 12 saying that every 90 days, it has -- every day for the past 90 days, the debits and credits have to match. So there is a whole process of educating the customers on this new norm of the - RBI. In fact, the regulation itself says, please educate the customers, and we have been educating the customers that on an everyday basis, they have to clear up the previous 90-day debit. So we have had some challenges on those kind of customers, but they're all in good shape. There is nothing to worry about on that.

Okay. Bharat sir, just 2 data keeping questions for you. If you can provide the breakup of provisions and yields and cost of funds for the quarter?

The NPA provision -- net NPA provision is INR 59 crores. As in every quarter, we have made INR 3 crores floating provision. INR 8 crores is standard asset provision, RBI mandated is standard asset provision. And from restructuring provision, there is INR 3 crores reversal on account we got close.

Okay. And sir, is there cost for the quarter? You have provided margins, but...

Do we provide those information?

Deals on advances is given in the presentation for the quarter.

That is for the full year?

Okay, okay, okay. So quarter is not given. Yield on advances for the quarter is -- also 11%.

What sir, 11%?

Yes. Yield on advances for the quarter is 11%. And cost of funds is 6.04%.

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

Congrats on a great set of numbers. Sir, just 2 questions. One is on the CV portfolio, okay? So our total exposure is pretty small [ 4% ], but when we look at the collection, it's been a little around...

We have lost you, Renish. We can't hear you.

Hello?

We can't hear you.

Could you repeat the question, please, Renish? We could not hear you.

Is it better now, sir?

Now better, yes.

Yes. So I was just saying that on the CV portfolio, while our total exposure is only 4%. But when we look at the efficiency of 85% have been sticky for last 4, 5 months. So can you throw some light on the current status of this book?

See, Renish, we are only originating INR 20 crores, INR 25 crores of new loans in commercial vehicles. So therefore, in some ways, it's a declining portfolio. In a declining portfolio, the good portfolio pays, the bad portfolio is stay. Despite that, our collection efficiency is coming at about 85%. Second point that I would like to tell you is that, more or less, the slippages versus recovery is matching on a month-on-month basis in commercial items. And what we believe -- what we believe is that as we see the portfolio, we do the reviews of collection and all. We do see that we should be able to do -- continue to do better in recoveries and upgrades, although there may be some slippages. 85% collection ratio is clearly on account of somewhat kind of -- because of the declining type of portfolio.

Okay. Got it. Got it, sir. And sir, second question is on the disbursement number which is provided in the press release. So I think under co-lending, we have disbursed close to INR 20 billion odd. So incremental growth in Q4 maybe largely driven by the co-lending. So if you can throw some light in which...

No, not necessarily. The co-lending part is largely gold loans. So gold loans, as you know, has a very high repayment rate, right? Our growth is showing up pretty well. Because if you look at our mortgage numbers, it is now almost INR 1,000 crores we are showing, and we are likely to do far better in the coming months if everything goes well, right? We also are likely to do well in the AIB products, which is KCC tractors and all because we have built some capacity. Of course, as you know, quarter 1 is always a kind of a not-so-great quarter for most banks because April because of holidays and so on. But the way we are building capacity, we are pretty confident that we are putting it in a good trajectory.

Got it. No, sir, I just -- I wanted to get a sense that I think it's a bit chunky in nature. If we didn't get this kind of disbursement business under co-lending in Q1, then there will be a risk on the growth. So I just wanted to get a sense on that.

See, co-lending is only one part of our strategy, it is not our main strategy. I don't believe that any one particular co-lending entity will contribute more than 5% of our entire portfolio, right? And co-lending, we are doing essentially at the moment in only gold loans. And gold loan itself has certain seasonality and certain characteristics, which it's not uniformly high or lower disbursement like that keeps happening in gold loans, right? You may have observed that in the gold loan companies itself, right? Therefore, see, co-lending is only one part of it. We have now -- see, co-lending and [ tax ] is the 2 important products that we have added in our suite of products this year. Mortgages continue to be our mainstay, and we expect mortgage currently, which is almost at 48%, including AIB, could well go beyond 50% to 54% by end of the year. That's the way we are thinking about it.

Got it. And sir, just the last question from my side, update on the strategy side. So we have now closed this year on a 1% ROA. What could we getting from this level of ROE over next 2 to 3 years, sir?

Yes. So the way we are seeing -- I can only talk about how we are seeing it. We are making investments, and we will make investments, okay? And the investment will be in branches, which we already said 25 to 35 kind of branches. And we'll continue to add -- because we are doing granular portfolio, we will continue to add frontline staff, which is sales, credit underwriting, operations. Those kind of people will be continuing to add in our book, which always has some near-term impact on cost income ratio of cost to average assets and so on. So we expect -- and in quarter 1, given the interest rate movement, we may not have many opportunities in terms of treasury gains and all this year. I don't believe any bank would have that kind of opportunities. So I believe that we are on a path where we should be back to 50, 55 basis points on cost to -- cost of credit because we are seeing pretty decent performance in our recoveries and upgrades and the slippages on the main portfolios, which are essentially SME, mortgages and CV are pretty consistently kind of coming down. So we have a reasonable level of confidence in that. As far as the NIMs are concerned, we are confident that we will operate in the 365 to 370-odd kind of range. If you do a better job on recoveries and upgrades, we may see some uptick in NIM, but I don't want to keep betting on that. That is one of the reasons why you see a NIM to be pretty strong this quarter, right? And -- but when we are recovering -- because you are having a secured loan book, when we do recoveries, we are able to get the past dues in terms of interest as well, which helps our cost in terms of the interest income and NIM. So my viewpoint is that in 3 to 4 quarters, our intention would be to consistently deliver 1% ROA and at least 12% to 14% -- between 12% to 14% ROE. That is our intention as we see the whole thing playing out.

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

Congratulations on a great set of numbers. Just -- it is a similar question that we've been asking for the last few quarters. If you could kind of give us a perspective of, how are you seeing the customer segments in terms of the recoveries that we are seeing in the business? And also, if you could kind of give us that into FY '23, do you think that the cash flows have kind of fully normalized for the borrower segment that we are working with?

I will ask my colleague, Praveen, -- of course, we do a lot of hands-on reviews on collections. But having said that, Praveen, I mean, how are the cash flow? What are the kind of -- Praveen Kutty will help us.

Mahesh. So what we're seeing like now is that the bounces are slightly elevated as compared to the pre-pandemic level. However, we're clearly seeing the repayment to be at the pre-pandemic level. So across the self-employed segment, new vintage pre-pandemic book in the period in between, we are seeing that the cash flow has come back to what was the normal before COVID hit. In -- specifically in the secured products that we deal with, we mostly deal with secure products. So whether it's LAP, home loan and the CV that we currently do, we're finding it is -- it's coming back to normal. Equally importantly, the disbursals that we did, if you were to see the texture and the cash flow, which we have for fresh underwriting, we are saying that the kind of segment that we had is there it's pretty much the way it was the pre-pandemic.

And Praveen comment also on the demand that is coming in SME like enhancement kind of segment?

Yes. This -- you probably noticed anyways, but if you see the trades, the trades in our credit bureau is at a never before high. Accrual rates are not back to pre-pandemic levels across multiple products. But there is increased demand happening on the -- whether you take mortgage or you take -- practically every product you find that the inquiries have significantly shot up, but approval rates are kind of still lagging behind. And that seems to be a continuing theme as we go along.

And Ajit can comment on trends. I mean what kind of demand are you seeing in trend? Ajit is our Treasury and FI Head who tackles the bids in trends.

So one of our recovery, like -- indicative of recovery is a business that we get kind of business that get discounted on the trade. And that figure has been increasing during the last financial year. Like where when you make a best effort, you can discount a bit of INR 3 crores or INR 4 crores in a trade. Now with the best effort, now it comes to INR 6 crores or INR 7 crores. So this goes to show that we are having increasing sales and volume is increasing. So this is one of the surrogate indicator of recovery that is happening there.

Just kind of wrapping up this question. If looking at the fact that almost all the business seems to be kind of giving you fairly comfortable sense, you think that the acceleration of the loan book during the course of this year would be a little bit back ended? Or do you think that you are ready to kind of push the and get into a full year beginning next quarter itself?

See, as far as salespeople are concerned, everyone has put to the floor, like, they press the accelerator to the floor, without, of course, compromising on operational risk and credit parameters and so on. I have never seen in banking first quarter to be great, although we always try to define -- I mean, I don't understand why April cannot be like March. I've never understood in all these years. But having said that, we have, at the moment, no hesitation. I don't believe that credit is concern with any acceleration of loan book. Of course, we are not changing any parameters. We are not changing any credit policies. Other than we have usually keep tweaking based on our own analytics and so on. So we have no hesitation and just keep moving forward at the moment.

The next question is from the line of Uttam Purohit from Perfect Research.

Since we are -- I have just a couple of questions. Since we are on track in terms of ROE, cost-to-income ratio at improving trend. Can you throw some light on the long-term target to achieve, let's say, in our next 3 to 4 years?

See for fourth quarter, kindly take a look at our results for the last 13 years, actually the last 10 years, if you like. Fourth quarter has always been very strong for us as compared to the first quarter. There are a couple of reasons for that. One is, in first quarter, we normally end up giving salary increase and all, which starts to impact us in first quarter itself. However, the balance sheet growth is not there to support that sudden cost increase. That is the first quarter. At times, we get benefit of treasury gains in the first quarter, which helps us to kind of offset this increase in cost in the first quarter. Fourth quarter is always very good because you have the full balance sheet thing and also some of the income get comes back ended, especially in the PSLC, which is the priority sector lending kind of income. So I would like to believe that the kind of trajectory that we are setting in maybe 3 to 4 quarters, consistently, we should be on a track to deliver over 100 basis points on ROA and in the range of 13% to 14% on ROE. Maybe there will be some aberration here and there in one of the quarters depending upon some items. Other than that, I think on a trend basis, that is what we are likely to see, if we continue the same momentum what we are building.

Okay. And we have grown our advances by 13% Y-o-Y. Could you help us understand, is it safe to assume similar growth going forward? And going forward, is it led by branch expansion or digital push?

It's a very big question. We have been investing in frontline people, salespeople, operations people, credit people. So we are building capacity. Our intention is to double the balance sheet in between 3 to 4 years' time, which means that we are trying to put the bank on a 20% growth rate trajectory. That is what our intention is without any -- I hope we don't get into any disruptions of any kind. Other than that, it looks like the kind of capacity that we are building now should help us to achieve those kind of growth level. It will be a mix of digital branch expansion, frontline expansion and so on. So I can't put a finger on exactly what will contribute to what.

The next question is from the line of Amit Mehendale from RoboCapital.

First of all, congrats on good set of numbers.

Thanks.

Yes. Sir, basically, if we look at last several quarters, that our understanding is that not only this quarter, but even COVID was handled very well by the bank. And like you said in the beginning that team has always been confident about the secured book and balanced trade out and probably this quarter is just a reflection of all the hard work that has been done in past quarters. My question is, although the operating performance has been good, markets don't seem to be as infused on the valuation side. So what would be managing with understanding of the situation in general? That is one. And secondly, do you think, is it partly due to slightly slower growth in the loan book in the past several years?

Neither we nor management, I believe, understands the dynamics of how market thinks about stock and understand these things. What we can comment is on our strategy and our performance and our opportunity. So friend, I'm not able to answer that question.

The next question is from the line of [ Jatin ] Kumar from Alpha Capital.

Congrats on the good set of numbers.

Thanks.

Sir, my question -- first question is on the capital we have put in the ability resolution to raise INR 500 crores. So I just wanted that, but...

Sorry to interrupt Mr. Kumar. But your voice is breaking, sir.

Yes. You would like to speak directly into the mic or something, maybe some distortion is happening.

Is it better now?

Yes, far better. Yes.

Yes, sir, I wanted to inquire about the capital raising plan. So we have change of capital [ emergency ] right now. So how urgent do we need that capital? Or is it just an resolution?

Bharat or Satish, would you like to answer that question?

These are enabling resolution. If you see last few year's AGM notices, we have been taking it every year because QIP resolutions taken and valid for 1 year. And if in the event, opportunistically, we want to raise capital, then we shorten the time to complete the transaction.

Bharat, would you like to comment on risk-weighted asset and the efficiency of that as well? Yes.

Also, if you see for the last few years, our risk-weighted assets increased in lower proportion as compared to the advances, which go up because a lot of our assets being secured coming at a lower risk-weighted assets. So capital utilization efficiency is very good and that we have targeted for the last 4, 5 years. For example, gold loans, which will do come in at 0% risk weight. Home loans coming, what, at 35%. Regulatory retail comes in at 75%. So all this helps us in -- I mean, we are not large in corporate and also not large in off-balance sheet transactions. So these help us to grow. But at the same time, not consume capital very fast.

Yes. So therefore, given the current capital adequacy that we are in, we are confident that if we maintain a growth trajectory, much of the accruals, profit accruals will help us to achieve the growth. However, we will look at raising capital in maybe 3, 4 quarters down the line.

Sure, sir. And sir, my next question would be given rates are going up in the system. So how do we think on the NIMs going forward?

We believe our business model operates on a NIM range of about 365 to 375 basis points. We want to reach that steady state. This quarter has been very good primarily because we've done a decent job on recoveries and upgrades, which also helped us in recovering some of the interest that we had to forward in the past. And also, we are doing a decent job in terms of the CASA growth, which is also helping us slowly bring down some cost of funds as well. So we believe that much of our portfolio is repriceable, barring, say, maybe gold loans and commercial vehicles, tractors. Most of our portfolios are either linked to EBLR or to MCLR, depending upon when they've been originated. So there will always be impact of raising interest rates, but we believe that we have gone through those kind of cycles in the past, so our NIM should be in that range.

Sure, sir. And any credit card guidance for the coming year?

We can't give you a credit card guidance for a particular year. But what we believe is that in a steady-state basis, hopefully in about 2 to 4 quarters, we will be on a 50, 55 basis cost to average asset, which is what has been our performance for many, many quarters prior to COVID. And at the moment, our PCR is at 68%. And if you back up the gold loan NPA, it's actually at 72%.

So that kind of PCR, we will like to maintain or what we want to increase it or?

We don't have any guidance on what kind of PCR we maintain. All we know is given our lock even default experience, we believe that we are in a very good position in terms of NPA coverage.

The next question is from the line of Krishnan ASV from HDFC Securities.

Go ahead, please.

So my question has to do with just competitive, I mean, positioning of DCB over the past couple of years and maybe that could hold an answer for what gives investors a little more comfort. Just on how DCB can stay relevant from a 3- to 5-year perspective? You're making a lot of investments. So you seeing evidence that a lot of that 20% growth that you're aspiring to is with existing customers rather than having to run on the treadmill to keep acquiring new customers? The reason I'm asking that is you do a lot of work with your clients. You do a lot of secured lending. You kind of cultivate that credit culture and then somebody is able to pull it away. Is that a risk you see for most midsized banks, including yourself?

That kind of a risk -- if that is a risk that kind of exist for a lot of NBFC and they will thin that we are eating their large after, they cultivate the credit. That's the way the ecosystem works if you want to call it like that. We have a very clear idea of what we want to target, and we have not traded away from that at all. Our ticket size is INR 30, INR 40 lakhs. We do see competition. We see competition of NBFC, we see competition of small finance banks. At times, we do see competition of either public sector, HDFC, ICICI and all. But given that the size of this segment, the SME self-employed segment itself is large, we have decent products, we have decent experience. We are continuing to improve our sales trend. We are pretty confident that we will remain relevant. And it's very difficult to answer these questions because they ask the same question in 2009, how are they relevant? We are now standing at INR 45,000 crores balance sheet and at the time our balance sheet was INR 5,000 crore. Maybe this question will be asked when we have at INR 90,000 crore 2 years down the line, we'll still answer the same way.

The next question is from the line of [ Rajeev ] Arora from Sterling Capital.

Hello. Yes. This is regarding this -- I just want to understand this segmental revenue in the corporate and wholesale banking, there's some INR 29-crore odd loss is there. So what -- have you made some extra provisions there? Or why is that item coming?

I'm great, if you look at the segmental thing, I don't look at it at all, okay? I just follow whatever RBI says in terms of how to classify all that and I present it, okay? So I really can't answer that question of yours. You can ask me any other question which is related to the press release and the investor presentation.

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

Yes. So congratulations on a great set of numbers, sir. I wanted to understand, a, if you can share the loan book breakup by benchmark, how much is fixed, how much is floating and how much is EBLR linked? If you have this.

We don't Present that detail, I'm really sorry about that. We have given you a flow chart on -- sorry, a pie chart on the various products. So you can safely assume that mortgages are either linked to EBLR or MCLR. Some part of the -- some part of the mortgage book would be fixed for maybe, let's say, 6 months or 1 year because we've just acquired and then later on, they will move to EBLR. As far as SME, MSME is concerned, they are linked to EBLR. Kisan Credit Card is linked to EBLR. Tractor, CV and all will be fixed rate. Am I right, Praveen? So fixed rate. So -- and MSI, DC will be -- MSI definitely is a -- DC portfolio is anyway a fixed rate. So that is how it is. So you can make your estimate on that basis.

Right. Okay. And sir, secondly, we have seen the 50% Q-o-Q and similar Y-o-Y growth in disbursement. But if I look at the fee, Y-o-Y, it has declined, the core fee and the Q-o-Q is only up maybe 5%.

Year-on-year, fee comparison may not be correct. Because in the first quarter -- in the last year, we had a lot of treasury gains because the interest rate was moving in the right divestment -- you want to talk about it?

No.

Sorry. Yes. [indiscernible] moving in the right direction for us, right? So in this year, the onetime treasury gains are much less than what we had last year and probably in the coming year may not have anything at all. So if you back it off core fee income, including this quarter, is showing a very healthy trend for us.

No. So I was looking at the commission exchange in brokerage, so we can leave treasury and maybe exchange transaction. So even the core EEB is down Y-o-Y and is only up 5% Q-o-Q. So just wanted to check the disbursement that we...

But you had to remember that this year, first 4 months, there has been no disbursement at all, right? We didn't have any disbursement in the first 4 months, in the sense very limited disbursements we had. So to that extent, the disbursement number also, we can only compare quarter-on-quarter of last year as this year and last year for third quarter -- sorry, fourth quarter, still about 25 or 27th of March, we were still active before which the second wave started impacting us.

All fee is linked to disbursements.

Yes. And not all fee is linked to disbursement. So what I want to say is we have looked at the core fee trajectory. And we are pretty confident that it is mirroring the underlying business performance and the customer acquisition.

Understood. Understood. Sir, and just a general thought on we are clearly in the rising rate environment. And have you -- do you see a change in the behavior of your underlying customer in rising rates, particularly with terms of balance transfer, is it beneficial? Or is it just that you have to work more harder to -- for the customer retention?

See, we have managed this business in the last several years in driving rate, normal rate, declining rate kind of situation. And in every situation, there are some challenges come. Sometimes in a declining interest rate also, you have challenges there -- a customer wants to quickly do [indiscernible]. But in a increasing interest rate situation, you also get some benefit because term deposit guys you want to do a break of his term deposit and go to a higher rate where you get some benefit of the breakage. So all these factors are there. It is very difficult to kind of separate each of these factors. We have an anti-attrition team, which looks at the portfolio. If a customer wants to exit, we have intervention strategies by which we are able to retain a lot of the customers.

Right. And the last question is, sir, on this gold loan that we acquired through co-lending. I mean, who is the predominant co-lending partner? And what kind of OpEx or risk-sharing arrangement is there, if you can maybe broadly discuss? Maybe who is the predominant partner? Is it digital-only partner? Or what kind of OpEx or risk-sharing is there?

In co-lending, there can't be risk sharing. That is RBI rule. If you take 20% -- if you take 80% of it, of the loss also, we have to take 80%. There's no FLDG concept at all in co-lending, right? So we have one in gold loan business where we have very reputed partners and the OpEx is very, very limited because we are operating with about a team of 4, 5 people. And it is purely digital. When I say digitally, the entire loan comes to our book in a digital fashion. However, we have a number of checks and balances, which are done by physically to assure that the agreed process controls, everything is followed by our partners. That's the way we are running this model.

And would rupee be a significant partner here? Or this is...

No, we don't want to comment on any particular partner and all.

The next question is from the line of Sunil Jain from Nirmal Bang Securities Private Limited.

Yes. Congratulations are on a good set of numbers.

Thank you.

Sir, my question relates to -- you got a slippage of INR 378 crores. And you said that apart from gold loan, the slippage are now at pre-COVID level, whereas the gross NPA of gold loans are more of a similar quarter-on-quarter. So is that like a lot of loan gold split sales are during the quarter and got recovered also?

See, in gold loans, we offer overdraft facility, okay, which is a very unique product, which means the customer has to continuously keep servicing the interest, right? What happens is these are all small customers. We are talking about average ticket size of, what, INR 2 lakhs, right? These guys usually come to us from NBFC background, where they may not have been in the habit of paying their interest on a monthly basis. So there's a huge amount of education and SMS and messages and all that kind of things we have to do. Because for this flexible facility of the overdraft, they also have to bring the discipline of paying it on a timely basis. So that whole process is continuing. We have hardly ever had any losses in our gold loan. Gold loan, you make a loss only -- if you have made a mess of the valuation or you have accepted some [indiscernible] metal. Other than that, we hardly ever face any challenge on NPA. So some amount gets recovered, upgraded and then something else goes into the NPA, it just keeps happening on a regular basis.

Okay. And sir, this co-lending gross NPA and all are included in gold loan or where it is included?

I don't know where it is included, but we have not seen any dramatic problem with our co-lending NPAs.

The next question is from the line of Atul Mehra from Motilal Oswal Asset Management.

Sir, I have one quick question. Just want to check, sir, firstly is it possible for banks in India to do buybacks and with or without the permission of RBI or it's not really possible at all?

What is buyback?

Basically buying back your own stock from the market.

I have no idea about all this frankly. You're asking the wrong person. Ask about my bank and the performance, I'm happy to answer that.

So basically, it was in the connection that because we are tailing at a significant discount to the book, it is more in terms of efficient from a shareholder perspective to buy our own stock because like it's getting at a substantial discount? So it was in conjunction with that, sir.

If you believe -- or any stock you believe there is value, you should just buy it. That's all I can say. I can't talk about my stock or any stock for the matter.

No, no. What I mean is, can the company buy back its own shares?

I have no idea.

Yes. But Atul, for the bank, capital adequacy reduction, it will imply capital adequacy reduction, and you can't reduce capital adequacy without RBI permission. Even for Tier 2 which was you and you are going to redeem, you have to take a prior approval from the Reserve Bank before you redeem and I'm not talking about making a call, okay? If you don't really knew you will end up in a default, but still you have to take RBI approvals before you redeem. So RBI is not likely to allow a buyback of shares, if I understand that correctly. Or at least at the minimum, we'll have to go to them. I don't see that happen.

Got it. Got it. Because, sir, globally banks are very well allowed on the dividends or do buybacks. So...

Here, we are subject to Reserve Bank of India, sir.

Right, right, right.

Kind of regulatory and we say that we are in India, generally, banks are not known to do that. Like to my memory, the time when I'm working in treasury, I haven't seen it. So Bharat has answered that question. There is no likelihood of we getting.

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

Yes. Congrats on good set of numbers. The question is disbursement data that has been shared as we compute the repayment rates in mortgage, it comes from a 25% plus. So is that number, correct? Or is it something that we need to expect in that? And if...

In this call, we won't go into all those details. I have given you a plan saying the kind of capacity we are building. We are likely to double our balance sheet in 3 to 4 years. Whether the disbursement data, 25% [Foreign Language] repayment, [Foreign Language] 20% [Foreign Language]. We know that the way we are operating all our metrics teams to indicate that we will in the array of products and the mix of products, we are likely to be in a trajectory of doubling our balance sheet in 3 to 4 years, and we'll continue to build the capacity to achieve that.

And sir, secondly, we have added a branches in 4Q, but other OpEx is still broadly flattish Q-on-Q. So was the part of that already were then in terms of location for braches in 3Q? Or how should we look at the other OpEx trajectory going ahead?

I think the OpEx will increase. But what is -- I think last year, we probably had a one-off effect in the fourth quarter on buying of some agri PSL fee. We were short -- we were not short, but we wanted to be more than adequate on agri PSL fee, so we bought that. In terms of that debiting expenses, RBI rules has to -- you have to actually debit your expenses. So that one-off, if you move, you probably will come to a cost increase, which is fully reflecting the number of branches that we are putting.

The next question is from the line of Amit Mehendale from RoboCapital.

Sir, whenever we take equity in the future, is it fair to assume that dilution will happen only when the bank trades at least a onetime book? I mean, this is similar to the buyback question earlier.

So the way we are looking at it is that we are working this back towards the kind of metrics like doubling the balance sheet in 3 to 4 years, 100 basis point of ROA, anywhere between 13% to 14 basis -- 14% of consistent ROE. And hopefully, those kind of performance starts to reflect on whatever it needs to reflect on. At the moment, we are quite adequate on capital. When we see that the growth trajectory and our capital planning kind of comes in a situation where we need to raise capital, we will take a call at that point in time. Right now, I don't want to comment on what price you will do, what is the dilution. It's very early to comment on all this because right now, we don't have any plans to raise capital.

The next question is from the line of Hiten Jain from Invesco.

So I have 3 questions. First question is last 3 quarters, we're seeing a very healthy traction in CASA. Sir, exactly what's happening there? And how much of it is sustainable? Or is it driven more by a chunky current accounts?

We don't have chunky current accounts. Neither do we have chunky savings account. We don't work on chunky accounts because that will be detrimental to our health. So we are working on retail and natural for CASA. Praveen, do you want to comment on that? Yes, hold on, our -- Praveen Kutty will comment on our approach to CASA.

Effectively, our target market, both on the asset side and liability side, our SME customers. Mostly, these are proprietary shares, small-type businessmen who contribute to our savings account. We have -- we focus on individuals and proprietorships primarily for our current account and savings account. There are a few entities, LLPs and companies come in, but they are far and few in between. We focus on very granular secular, small ticket, large franchise customers to be acquired. And that's how our -- I mean that's the ideal way of growing our book. And now that we have presence in about 400-odd branches, that's where the momentum is coming from. There is very limited focus -- there's no organized focus on getting current accounts of large corporates in our scheme of things. The last -- the other thing we want to point out is that [ Delhi ] branch has been approved by industry finance and subsequently by the RBI. In the agency and government banking, we are given the [indiscernible] account, collection of CBDT and CBIC, essentially GST and your normal income tax, CDS, GT etcetera, and for working people. So work is underway to integrate with the and the CBDT and CBIC system, which will further enhance primacy of the bank account over multiples accounts.

Okay. All right. The second question was, so while obviously, you're seeing a very healthy outcome on upgrades and recoveries. But in terms of flow slippages, the gross slippages continue to stay elevated. And even at time comment where you said outside goal loans, you're seeing all the other segments returning to pre-COVID levels. So even if I look at gross slippage pre-COVID, we used to be lower than what you are reporting this quarter and last 2, 3 quarters. So how should we understand this?

I don't know how you are calculating it. What is the base of your calculation, if you can help me understand?

Yes, sure. So the gross slippage number which...

Gross slippage for the quarter is INR 378 crores. How are you calculating tell me?

Yes, yes, I'll tell you. The gross slippage, just 1 minute, yes. So I'm just annualizing the gross slippages percentage of previous slippage advances.

INR 378 crores, take out some INR 150 crores out of that for gold loans, which comes and goes, comes and go because it's an OD product, right? And I told you that because the people have to fall in the habit of servicing it on a regular basis, this is fully secured. It's a 0 capital charge product. So even if it becomes NPA, next quarter, we just collect all 3 installments, it becomes upgraded, and we start operating the account. So the balance that is left would be about, 100 -- let's say, even if you keep it as 200, 200 multiplied by 4 is 800. 800 divided by -- currently, we are exiting at INR 29,000-odd crores. So that has been that we are in the range of some 2.5% annualized slippage, which is what it was before. And that is why I made the statement that barring gold loan, we are pretty much back to similar levels as pre-COVID. I hope my calculation sits with you.

Okay. I understand that. So what's happening in gold loans, sir, why -- I mean, you see this kind of...

I explained you. What is wrong with gold loan is because if I give a OD product, the customer has disciplined issues at INR 2 lakh kind of portfolio. So he doesn't service his loan despite calling, reminding and things like that. Then it comes in terms entire 3, 4 months interest and upgrade and the account will start operating it. So if we don't do that, we end up selling the gold in extreme circumstances and having the recovery, which we don't want to do because we want the account, we want them to continue to operate because it's a high-yielding portfolio.

Correct. And this product didn't exist earlier, pre-COVID?

Existed said earlier, it existed earlier. But what has happened is RBI has changed the norms on November 12. Previously, what RBI has said before November 12 is that at the end of the year, the debits and credits should match, not during the year. You can read the circular on November 12. It also said please educate customers on this particular aspect. So we are educating the customers saying that, look, on an everyday basis, you have to keep servicing every month, you have to keep servicing not just accumulate that. We have achieved a lot on that. Yet, we have to comply with the new guidelines. So on the OD product of gold loan, this problem is happening. We hope to link this in about 3, 4 months, then customers will be fully on board in terms of the practice of paying it on a regular basis. And to do OD process, I don't think you should annualize the INR 378 crore because it will be coming to wrong conclusions about our portfolio.

Correct. Understood. Understood. And the last question is on your restructured book. So while you said that different accounts have different moratorium. But is it fair to say that all the accounts are paying interest and moratorium is only on the principle?

No, no. The moratorium means the guy will not pay. If I give you a 3 months moratorium, you will pay nothing for 3 months. If I give them 6 months moratorium, you will pay nothing for 6 months. Then at the end of 6 months, they will come to the normal billing whatever we have agreed as a normal billing after the end of 6 months, they will start getting billed and the collection team will collect. In fact, we are actually collecting a lot of installments from moratorium customers also in advance and keeping it because those customers are -- see, many customers are saying, look, I want to remain in moratorium, but I want to pay the installment. So we are collecting the installment and keeping it. As they come out of the moratoria, we start buying those installments.

So what percentage of the restructured book has not paid a single EMI last quarter?

I have given you all the details on -- in the collection efficiencies. This is all we can disclose my friend. We can't disclose more than this. Any other bank discloses all that come to me and show me then I will try to understand whether we need to disclose that. Okay. Please refer to Item #10 on collection efficiency. We have given you enough data for you to go by.

[Operator Instructions]

Okay. If no one is in the queue, then we can close this call. Operator, thank you very much for your help. Thanks, everyone, for logging into this call. It will be a pleasure talking to you. Look forward to talking with you next quarter.

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