HDFC Bank Limited (HDFCBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the conference call with the HDFC Bank Management, hosted by Macquarie. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suresh Ganapathy from Macquarie. Thank you, and over to you, sir.

Yes. Thanks, Steve. Good afternoon, everyone. Welcome to the Macquarie Insights Conference Call with HDFC Bank. We are indeed very privileged to have with us today Sashi Jagdishan, the CEO of HDFC Bank; Srini, the CFO of HDFC Bank; and Ajit Shetty from Investor Relations. So Sashi, there is quite a lot of demand to listen to you. Close to 200-odd investors have already dialed on to the call. In fact, just now I'm checking, it is 220. That's the right number. So without any further ado, we would like you to give an opening remark for about 15 to 20 minutes, then we want it to be an interactive session so that all these guys can ask you questions. So over to you, Sashi.

Thank you so much, Suresh. Good afternoon to every one of you. First of all, let me -- these are unprecedented times. Our heart goes to the people who have had a lot of difficulty navigating through the pandemic through the year. We've also had some unfortunate incidents in the bank. So our heartfelt condolences to the bereaved. Well, we were on a roll when we started off April. We didn't realize that we would be struck with another kind of a surge in the health. The mobility indicators rightfully have come down sharply. I think it has created a lot of scare, not just to the government, but also the minds of people unlike in COVID 1.0 because I think the fatalities are much higher this time around. So the directions from the senior management of HDFC Bank to the rank and file here is that safety comes first, business is secondary because, ultimately, we want our people to be safe, and that is the kind of instructions we have given to the rank and file in HDFC. So the near-term expectations will be tepid. Probably for the first time in our so many years, we probably may not have any grip on what's going to happen. But I guess the leadership is so strong down the line that I'm sure they will book their best at the basis. So this is going to be one of the extraordinary times for us to confront in terms of where we see. But the platform is so good that whenever things do return to normalcy, which I hope and pray that it is reasonably soon, I think we will be well positioned to bounce back reasonably well. In terms of where we stand in terms of how the impact of COVID 2.0 has done, I think, whilst there may not be any nationalized clamp downs, but there are localized clamp downs, which in a way is actually reasonable or rather the livelihoods of some of these micro enterprises have been protected. The supply chain, as we see now, is not as impacted as what it was in COVID 1.0 to that extent. But having said that, I think people who were impacted in COVID 1.0, I think, the 2.0 will further accentuate some of the problems. So even from an asset quality in the financial system, I think you will see a stress emanating out of the people who took moratorium 2.0 or a restructuring in -- during that period. Corporate and SME largely should be all right. But the only difference this time around is the impact of the health in rural areas. In the first -- 1.0, I think we were reasonably insulated, but now we see a fair amount of concerns, health concerns in the remotest corners. And I think that will play, to some extent, in both business momentum and also in the recoveries. Collections on, as I mentioned, both -- we are not -- we're reasonably sanguine of the asset quality of the corporate and SME side. But from the retail, or the segment that I just spoke about, people who had -- who were stressed out in COVID 1.0, who have taken about moratorium, who had taken restructuring, I think they will continue to feel the kind of pain and stress. So probably these are the ones, which will sort of show a little bit of stress this time around. In addition to that, because we have sort of directed our people, including the agencies, to be safe, we will see -- and especially in the retail side, we will see a bit of a slowdown in collections, which will translate to some amount of higher delinquencies in the near term. But I wouldn't say that it's going to be dramatically high. It will be high, but we should -- I don't think this will be a loss. I think they should cover up in the coming quarters in terms -- it's more a timing difference, and we should see resolutions becoming on par with what we were seeing from March onwards -- back to the March levels in a couple of quarters' time. So this is broadly on the businesses. Unfortunately, the situation is such that there is a bit of a blind spot in terms of how it's going to span about? How the -- when are the vaccinations going to come? There is still -- people are struggling to get the availability of the vaccines. I guess this should be smoothened in a couple of weeks' time. And when that happens, I think there'll be far more confidence and buoyancy in terms of the outlook also. So as of now, it's a bit -- we are cautious, but in terms of -- and this is, I guess, is very temporary phenomenon, and we should see -- start to see buoyancy in a quarter or 2. I know a lot of people are very keen to know about technology. I think it's been, I would say -- I know a lot of people will -- in the bank may find very odd, but I would really thank the regulator for putting a lot of strictures on us because that has helped us to introspect and think beyond just incremental changes. I think a fair amount of work has happened ever since December. We still need some more time before we can control the issues on resilience, especially recovery of outages. So let me just explain some portions of where we are and what we are trying to do there. Yes, over the last couple of years, we did see about 3 or 4 significant outages, one in November 2018, one in December 2019 and then November 2020. These were very specific incidents. It is not saying that the first one was probably a design issue where we had some unprecedented volumes, which we did not -- we were not prepared. So it's all about how you launch new products. I mean there's a learning from where we have taken. The second one is how do you tighten processes when a vendor gives you a patch and you apply it in time. The third one is, obviously, the data center management, where if there are some unprecedented outages, how do you have better processes, even though you may have a lot of other vendors, but how do you still manage them and have control over that. Now the learnings are that whilst outages will be a normal phenomenon now and into the future, the recovery time is one of the keys. Whilst we have reasonable amount of investments that we have done over the years in stepping up capacity and having the state-of-art security infrastructure in terms of putting the digital platforms -- working on digital platforms, use simply well, but the fundamental parts where we probably could have done better is on the resiliency of what I would call when an outage happens, how do you recover faster. So these are some of the learnings. It's something that we are working. I think, hopefully, the strictures that the regulator has imposed on us has given us a window for us to run faster. I take that very positively. I think this is -- of course, it's not that I'm saying that we are not impacted. We are impacted. It is a blot on our reputation. It is a blot on the fact that we're unable to source new cards. But I guess, in the medium to long term, thinking coherently and having a much larger strategy on the technology side to be able to become better than what we are today and probably better than anyone else in the system, I think, is something that is what we have taken the strictures in our stride, and we seem to be extremely confident that we'll come out of it reasonably well. So let me -- I know a lot of questions will be asked, but so let me pause out here, and I would love to take some questions.

[Operator Instructions] The first question is from the line of Antariksha Banerjee from ICICI Prudential Asset Management.

I hope I'm audible?

Yes, Antariksha.

Hope all of you are safe and fine. Wishing you good health first. Sir, there are 2 questions I had on my mind. The first is in relation to the franchise and the customer set per se. If I'm not wrong and recall the numbers correctly, in your results this time, you highlighted a massive growth in your customer accounts, about 70 million-odd and 25 million of them -- sorry, 25 lakhs of them was salary -- corporate salary accounts. Are those numbers roughly broadly correct? 70 lakh and 25 lakh?

Yes. I think it's broadly right. I mean, I think we just acquired about 6 or 7 million accounts. Yes, you're right. I mean, this should be more or less...

Yes. So still, is this an extraordinary year that has been in last year? Or is this a roughly rate where you add about 20, 25 lakh salary accounts every year? And what's the total base at HDFC Bank as far as corporate salary accounts are concerned? And how much of penetration is already done in your cross-sell into these accounts?

Okay. The exact numbers, probably I'll have -- probably Srini to talk about it, but let me talk about the momentum. The -- a couple of years ago, we realized that there are -- there is a need to introduce institutionalized sales processes in the brand channel. So with new leadership and the fact that a lot of analytical based tools and better tools were made available to the branch, we -- that was one of our key strategy to reimagine the way a branch should be working on an institutionalized sales process, number one. So we were clocking about 3 million customer acquisitions or account acquisitions every year from this particular channel. I think, since 2020, I think we have doubled the acquisition run rate to about 6 million -- 5.8 million to 6 million. Now what is amazing is that, last year, being one of the most toughest years in terms of the branch, in terms of the lock down that is pretty prevalent for a large part of the initial -- the first half of the year, the fact that we had digital platforms, and we continued to harness energies, the entire channel, I think they could sort of clock another equally good number of about 7 million accounts even for FY '21. That's quite reasonably a fantastic achievement. And you're probably right, the numbers that have been disclosed in the press release, if we probably picked it up from there, I think the 2.5 million -- of the 7 million, 2.5 million could be the incremental salary acquisition accounts. We continue to be the largest salary bank today. We -- that is a thrust area. And in terms of -- the liability account, it is a very important part of our franchise, not only just building the core liability, the granular liability franchise, but also in terms of being a feeder to upsell on a need-based basis using better analytics on cross-selling. Now the point that you asked me is, what is the kind of penetration? There would be -- the penetration levels are reasonably low. It's still not at a level where we can say that we have fully penetrated the base. Depending on product to product, it could range between mid-teens to somewhere in the mid-20s in terms of the penetration to that salary base in terms of upsell product penetration.

Got it. Okay. So the other thing I was asking you, sir, is what would be the base roughly, right? Because like 25 lakhs is a big number. And for context, the largest bank that disclose the results, we have about 1.5 crore, 1.6 crore salary accounts in total on the peer. Are we at a comparable level because the percentage growth in a single year, if it's 25 lakhs, that looks quite large?

No. That's been the normal trends. I'm not saying that this is anything extraordinary. I think the fact that they could do this even during pandemic it's quite commendable. Yes, the portfolio size, out of the 60-odd million customers that we have, roughly, I think, and I can reconfirm that probably later to you, I think somewhere around the 25 million to 30 million would be the salary base. But let me come back to you. I may be wrong by a couple of millions, but I would like to caveat that. Let me come back to you with the exact number of how much of that is salary accounts.

Okay. Sir, the second part of my question is actually relation to the technology part that we ended up in. So obviously, as you spoke about, the regulator has given us some breather of time to set things right, and -- I mean, the fresh credit card issuance where it stands. We have obviously some time lines in our mind, but in case that the process is not resolved within the festival season, and we have already loaded such a huge number of salaried people whom we are probably not being able to cross-sell additional credit card, what does that impact -- I mean, what impact does that have on the margin profile of the bank in the next 1, 1.5 years? Because if I'm not wrong, credit cards are the highest profitability driver amongst the cross-sell profile. And if you're not being able to cross-sell to such a huge large of incrementally acquired salaried customers, does that have a material impact on the margin in -- or profile of the bank for the next 1, 1.5 years?

Right. Number one is, first of all, let me tell you, we have, on the technology side itself and probably if that will answer, there is a plan that we have submitted for ourselves for people and for the regulator. And this is a plan which has been on -- and the implementation of that has been on track thus far. A large part of the action plan now comes in, in the near term from now to next couple of months. So where we will -- every passing day, with all these kind of implementations that we're going to be doing, we get a lot more confidence. So the fact that we are having a certain amount of plan, we are on track, we get a lot of confidence that we are on the right track, and we should be getting even stronger and stronger in terms of what is expected out of us. As I said, the key is -- the key issue is all about, "Hey, yes, we are in a world where, even to the best of corporations, you will have outages. But are you resilient enough to withstand these outages?" So there are 2 or 3 parts. Number one is, obviously, we have an existing legacy architecture, monolith architecture. So what is it that we need to do to be able to invoke a recovery mechanism within a reasonable time. So what are the tools that is required? What are the kind of redesigning that we need to do to the existing legacy architecture so that we are able to decouple them, and we are able to have the ability to invoke some of the applications within a reasonable time? So there is a plan of action for that. That is the key. But what -- that is -- if you really now need to look at scale, look at resiliency on a virtually near real-time basis, the way you see it in the Googles and the Amazons and the Netflix, then obviously, you have to hollow the core of the existing architecture. You convert it into microservices, you put into containers, and then you try and make it cloud-ready. The moment you make cloud-ready and you migrate to a different architecture, which is exactly the Plan B, which is part of the -- what we are trying to do, then the redundancies have in built, and then you will have the ability to, not only go on scale, but also be able to withstand any of these outages that keep coming about. But that's a journey. That's not going to happen overnight, which is the reason when -- I'm a bit cautious when I say that whilst we are on a path, it doesn't mean that I can say with confidence that tomorrow, if an outage were to happen, god forbid, it will be -- I will be able to recover quickly. No. All this will take time. There will be a point wherein we will say, we will come with our -- with confidence to all the stakeholders to say that I will be in a position to yank the systems, create a kiosk, create an outage and then invoke a DR, or still, I will not have any outages in the system. That will be the thing. That will happen, but that will take a little bit of a time. So we are working on both fronts. One, how do I bring in about the near amount of resiliency so that I can invoke the recovery mechanism within a short period of time, so there's a plan for that. How do I ensure that we are able to adopt newer technologies where you'll be able to have redundancies in-built on an active-active basis so that you don't even perceive any outages, so that's Part 2 that is happening. Now when we say that these are the -- when I said that I'm thankful to the regulator, it is just that we have been able to think faster much beyond than what we would have otherwise thought in terms of adopting those newer thought processes much faster than before. So yes, it has created a bit of an, what shall I say, inconvenience, and it has created a bit of a block to our reputation, a bit of a block to the fact that on the business side, your acquisitions and cards have been curtailed. But let's face it. It is something that we need to also accept the fact that if we are reasonably -- I mean extremely good in execution on the business side, I guess the regulator rightfully is asking us to be the -- wanting us to set gold standards on these matters as well. So yes, there will be a little bit of a jam at this -- a pain that we have to go through or we are going through now. But I think we'll bounce back faster and much stronger when we come out of this. As regards to your specific part 2 question, which is on the credit cards, it is -- it may not show now. In fact, on the contrary, I think your profitability will be much better because the acquisition costs will be lower. But anyway, that's a very parochial way of looking at things. That is too short term in way of looking at it. The medium to long term, yes, there will be -- the impact we'll start to see in the future, you're right. But will it sort of really change the margins, I don't think so because margins don't come in just from acquiring cards. When you have the cards being used -- so why do we sell cards? We sell cards for 2 things. Either we have customers who would want to avail credit and revolve credit, which is where the interest earnings comes in, which is where the margin kicks in, or we have transactors who uses convenience of the card and then you build balances. So it's a liability issue. So yes. So curtailing acquisitions now will have a bit of a pain in the future. But it's not that we have not been in this kind of a saddle ever before. We were the last entrants into the credit card businesses, if you recall in the -- we started our credit cards the early 2000s, when a lot of others already had this portfolio. I think, similarly, with the kind of energy that I see down below, which is the kind of depth that we have -- we see in the credit cards team, the kind of processes, kind of credit underwriting policies and algorithms that we see, I have a feeling that -- and what we're planning to do on the digital front, which is something that I've not spoken about, when you take the entire combine of that, I think we are reasonably sanguine that we'll bounce back faster before it starts to show as a pain for us in the future.

[Operator Instructions] The next question is from the line of Rob Marshall-Lee from Brook Asset Management.

Hello? Can you hear me?

Yes, sir.

It would be helpful to understand how you see the credit penetration in your consumer base and corporate base at the moment. In terms of progress, do you see -- we're still kind of early mid-cycle in credit penetration. And how do you see that on a structural basis? I'm going to be kind of conscious that we've had a banking cycle and so on, but perhaps not a proper credit cycle in the conventional sense. So it'd be really interesting to understand how you're thinking about the development of the market in broader terms over the next few years.

Thank you. Thank you, Lee, for that question. I think with the kind of -- barring the kind of the impact of the pandemic that has had in the economy over the last 1, 1.5 years, and probably, it will have a little bit of an impact for some time in the future, say, 2 years, by the time, hopefully, we come out of -- in FY '22, we will be at a level where we were maybe in March '20. So we have lost out some amount of the economic growth, and hence, the -- and the collateral benefits that the economy should be getting out of that kind of a growth. So to that extent, it's a bit of a negative. But having said that, I think what we see today is that structurally, there has been a kind of a stable shift in the way people are looking at an opportunity in India. I mean, the fact of the matter is the government is very keen that they will continue to step up infrastructure. That is very clear from their policy statements. Two, the corporations have also -- despite the kind of pandemic, I think most of the corporate India has come up with very good results in most of the sectors, barring a couple of them. They have also changed, adopted newer technologies, how do you bring in cost efficiencies, and how do you -- are able to increase the gross value-added margins? Now because of which I think there is a lot of courage for all of them to reinvest that into newer projects, into newer areas of businesses and also to expand the capacities. But whilst nothing will be visible now, but at least you can see this coming over the next year or so. The supply chain, which is -- of all these corporations is also going to be benefiting out of this kind of the positive or the expected outlook in terms of what is going to happen in terms of pushing the infrastructure, pushing in the -- and the fact that the consumer demand, which is driving the corporations is also sort of moving up in terms of the demand, basic consumer demand. Barring the fact that you had a lot of people pare down their aspiration levels during this year and limiting their aspirations only to essential services and probably health care services, but I guess there is a pent-up demand, which we have seen in pockets even during the pandemic year when things were trying to become normal, I think people have this urge to spend. Now that is what has driven the Indian economy for a long time, but that is only [Audio Gap] population. But now with burgeoning [indiscernible] the fact that the rural population is also, thanks to telephony, telecommunications, media and mobility solutions, I think the world has become flat, and you are able to see far more applications coming down. The per capita GDP has also -- I mean, the fact that India has been less with a reasonably better GDP reports that we have seen vis-à-vis anyone else in the market in the globe for a continuous period for over the last 20, 25 years, I think that has also helped us to see newer pockets of mid-class coming about, which is also driving aspirations. So I think the country is having a latent -- the demand is not going to be an issue, but you are right, the supply is still an issue. I don't think the financial system or the banking system have penetrated enough. It has been going up, but it's still low compared to what you see globally. And that's the opportunity, not just for us, but the entire financial services system and the banking system in the country. I think we are probably in the cusp. When things become normal, where the pandemic is behind us, I think the system per se will be [indiscernible] to grow and the penetration levels should be increasing across the board. We are well positioned in that space. We have a fantastic management team, and with many levels of depth below our technology architecture, despite what we've been talking about, is not so bad, I think we exist 40x that to become even better and stronger, if not the best. You will see when someone -- if you ask questions and what we're trying to do on the digital side, that will also be quite exciting. There are a fair amount of thought processes and a lot of work that is happening simultaneously. And the fact that our distribution is large, and we are going to only increase the distribution because, even with this kind of distribution, even adopting digital technology, I think there is merit, especially in India, where demography is different to expand our footprint, but in a more smarter way as we -- and that is what we plan to do. So to summarize your question, I think [Audio Gap] not just for us, but also for the entire banking system, and we seem to be more well positioned in that space.

The next question is from the line of Masira from FSSA.

Just a couple of questions. First on the technology piece. So when you talked about, on your legacy architecture, ensuring recovery times are robust, what does that mean practically? Is that building more data centers, building more servers? What does that actually entail? Second is, when you talk about this sort of migration to the cloud, banks like DBS and ING say they took 5 to 7 years to fully migrate to the cloud. So is that the sort of time line that it would take for HDFC Bank as well? And then third, just wanted to understand how you think about the buy now pay later market? So just sort of disintermediating credit cards, but still boosting consumption and any thoughts on those products.

Thank you, Masira. Can you repeat the first question? I couldn't hear the first part very clearly.

Yes, of course. So the first one was just when you talk about the legacy architecture and ensuring recovery times are robust on that, what does that practically mean? Like is that building your own data center? Is it -- what does that -- what do you need to do for that?

Right, right. Okay. Thank you very much. Thanks for this, Masira. A couple of things on the legacy. It's not as legacy as what people think to be. We are just a 25-year-old bank. So it's not so bad. But some of the systems, unfortunately, are coupled. So what is required is, suppose if I need to have a -- if there is a -- god forbid, there's an outage in one of those applications then we need to ensure that how do we decouple the other applications so the other applications can run. So what we're trying to do, it's not about -- what is necessary is that, a, we have a cleaner design so that's the first thing -- because the legacy systems are good. It's not -- it is serving its purpose. Capacity is not an issue. Third is, all we need to do is to ensure that the ability to identify transaction flows and have a telemetry to be able to find out and diagnose where is the problem, and then once you've diagnosed and identified the problem, to be able to repair it and recover is one of the main key things. To be able to have the telemetry in place, to be able to have the recovery process -- for example, we do have good data centers. I mean, yes. One of the things, unfortunately, was we wanted to migrate from an older data center to a new data center. We have done that in the -- during the pandemic. We need to have one more round of a migration of another data center to the state-of-the-art data center. But that's something that will happen so that is not something that is extremely -- is essential. It is something that is good to have, but, at the same time, it doesn't mean that we are constrained because of that. That's not the point. But yes, for an organization of our size, I think we need to think of a hybrid infrastructure. When I talk about hybrid, it's of having our own data centers and also trying to ensure that we leverage on the likes of the cloud infrastructure as well. So that's part on the data center part. But then when I'm talking about in the legacy systems, in the recovery part of it, we need to have good tools, which is being implemented to be able to diagnose, and we are able to ensure that the other systems are not impacted because of one system being out of form -- is an issue. And then when we try invoke the recovery mechanism, which is there, the infrastructure is there, but obviously, there are a lot of better tools that have come about, which ensures that the scripting, which is there on the production environment is the same thing on the recovery environment. These are process issues which now you have better tools to implement, to be able to implement these things so that the confidence levels of recovering very quickly is much better for us. So these are some of the implementations that are happening. I mean, you may ask why is it that something that we couldn't do it in the past? Yes. I mean, adopting newer tools is something was a plan of action. The embargoes that have happened has actually made us run faster. And that is what we are trying to do even better now. The second aspect, which you did not ask, but which I'm telling you upfront is that the legacy system are all in monolith application or modules. So the -- one of the key strategies that we are trying to do is trying to convert or decouple these monolith architecture into services, into microservices, and then putting them in containers on cloud infrastructure is one of the -- with an orchestration engine so that the ability to bring about scalability and resiliency is something that we will ensure. So we are not necessarily depending on neo architecture to step by, we are also going to take care of our existing architecture and converting them into a cloud-ready applications or databases, et cetera. So that is on part 1. Your part 2 is on the cloud journey. It depends on the vintage of your applications, your databases, your journey that has started. So what we have never spoken about is the fact that we have already been converting our existing applications into microservices for a long time. We have a state-of-art middleware, where we expose our functions or APIs. So obviously, the journey of making our applications cloud-ready is already -- has happened much earlier, okay? It is not visible to a lot of you, but it's already there. So -- which is the reason why we could sort of do a lot more digital transformation during the period of 2015 to now. But now we will be fast forwarding that much faster. Yes, nothing will take -- it's not going to be a journey that will happen overnight. It will take a lot of time. But it may not be 5 to 7 years, maybe much shorter is what I would think because that's a plan that we have anyways given for ourselves in our strategy that when we would be moving and migrating into the cloud infrastructure or when would we adopting newer applications on the cloud. So these are something that will be much shorter than what you spoke about because the journey had commenced much earlier as well. Your third question was -- which one, Masira? Can you repeat the third question?

Yes. It was on sort of the buy now pay later business. Recently these business models have done well. So curious about...

You're right. You're right. So buy now pay later is a product, which even the bank has probably been one of the pioneers in that. We -- if you recall, we were probably amongst I wouldn't say the first, but one of the early adopters of buy now pay later. When anyone goes through the merchant to buy, I think the option comes about whether you want to convert that spend into a pay later kind of thing. So we have the rails in place. We have a reasonable amount of buoyancy there. But I do understand, and I agree with you that there are a lot of these fintechs which have come about, which are equally doing well. Partnerships is the key for us. Going forward, the amount of partnerships that we're going to do is also going to be extremely important. It's a part of an important strategy, whether it's with platform players, whether it's fintechs, et cetera. The fact that we are stepping up our strategy in merchant acquisitions over the next 3 years, the fact that we're going to be riding on expanded distribution, the fact that we're going to be exposing and integrating our APIs with platform players and also partnering with fintechs, I think a combination of all that, and one of the key products that is going to be exposed is buy now pay later. So this is a key product into the future. This is going to be very important. Of course, this will come in various tenors and sizes. We have a proven track record. The fact that we probably will have the ability to do even new to bank acquisition, which is the rails are already in place, I think we may be up the curve even on that particular front. So you're right. It may -- it's a product that we are already present. We have -- we see a reasonably large footprint in this particular product, in not just doing it on our own, but also in partnering with platforms and fintechs where we'll be offering our products on their platforms. So this is the game plan for us.

[Operator Instructions] The next question is from the line of Amey Sathe from Tata Asset Management.

So I have one question. So HDFC Bank has created 2 -- or they incubated 2 great platforms, PayZapp and SmartBuy. I'm a personal user of PayZapp. And whenever I talk to say, on the fintech guys or the users of PayZapp or SmartBuy or even some personal experience also, one common thread is that the areas of improvement is that -- probably that there is no user experience or user experience is sort of lacking. So how do you address this challenge in this new edge world where people are not just looking for a basic banking facility, which is sort of implied, but along with that, the experience of using those services is also sort of taken for granted? So how is it possible for -- how is it difficult for a bank of ours is to hire probably some top guys and create a product which can give sort of wow experience to users of this platform as well as even for our -- on mobile net banking app or the mobile net banking platform or even for HDFC Securities trading app? So any thoughts on that would be helpful.

Thank you, Amey. I think your points are extremely valid. I would like to acknowledge that the PayZapp and the SmartBuy platforms are extremely good from a thought perspective, from the content and what they're supposed to do, but the user experience is indeed very clunky. Obviously, and I'm not sort of apologetic to the fact that it's -- to call that is not necessarily a great success. It has done its job, but I think it is time that we reboot our thoughts, our designs and then come back with something which is better than that is available for -- today and even probably better than something that is available in a similar area in the market. So we've already started this. You will see that as a part of our -- the neo architecture that we've been talking about, one of the first products that we are working on is relaunching PayZapp into a much better product, which will be on par with some of the best in the industry. Plus, it will also have the kind of an added advantage or features that some of the payment apps don't show, and you will have a user experience that we will all be proud of. The fact of the matter is, I think, one of the things that we have learned is we should be trying a lot of experiments. Failures will be there, happy to sort of take the failures when they come. Yes, this was -- I wouldn't say great success. It was, I would say, bordering on a failure, both the PayZapp and SmartBuy. Yes, the applications and the user experience was not great. It was clunky. And is something that will be corrected when we launch PayZapp 2.0. It will be something that I think the -- our customers should be extremely happy and proud of. And this goes in the other applications as well. When we launched net banking and mobile banking in 2018, it should have been probably a thing which everyone should have been proud of because, of course, we're ahead of time at that point in time. But I think, over the years, the last couple of years, things have changed dramatically in the markets and it's -- we had a lot of constraints because of the kind of issues that we had wherein we were holding back some of the developments on that particular front. But now that with a mind which is decluttered, we have a clear road map of how we can make our engagement layer, which is either a PayZapp or a SmartBuy or a net banking or a mobile banking or even the trading app that you just alluded to, which will now be riding on newer technologies and neo architecture, which is -- the works are in place, at least for the PayZapp one. The net banking and mobile banking, we have a road map. We will be -- we are more or less in the final stages of having a new blueprint for the trading app as well. So not just here, but all our frontline engagement layers will see a dramatic change, a back shift in the user experience and also in terms of resiliency and also scalability as well. So the -- it's a learning. These are learnings. Sometimes you do well, sometimes you don't do well. These are some of the cases where we probably have missed a bit of an edge. But, in life, you can -- you have always an opportunity to catch up. We will catch up, and we will sort of -- I think when we do that, I think, it will be better than what we had ever conceptualized initially.

[Operator Instructions] The next question is from the line of [ Prasoon Agrawal ] from [ BlackRock ].

Last year was a pretty challenging year and sort of unprecedented in terms of the lockdown that nobody had expected or seen. But despite that, I must first congratulate the team for -- in terms of numbers, sort of giving us a year as if there was no COVID. This time, it seems that the impact is higher, although there's no pan-India lockdown. So how should we think about FY '22 broadly in terms of our slippage credit cost trends, in terms of the growth outlook, both on the corporate as well as retail side? And more specifically, because there is no moratorium given by RBI, is there a sense that the restructuring number could be pretty relatively higher versus last year?

Yes. Thank you, [ Prasoon ]. First of all, you're right. I mean, COVID 2.0 has really taken all of us with surprise. I think the impact has been much more than what we saw in 1.0. Obviously, as I mentioned at the beginning of the conversation, I think health is more important, especially of our people. And we don't want to expose the same kind of risk even to our customers. So the message that I have given to the teams is that you will be -- because we are also essential services under the government regulations, so we have to keep our offices open and that will be at a minimal level with a lot of rostering methodology, but I still feel that it's sad that there will be people put to risk. But I guess we are taking all the precautions to keep them safe on that particular front. But a large part of the organization has already -- is working from home. So as long as we are able to run businesses working from home, engage with customers digitally and then procure businesses digitally or including collections, we are all right. So you're right. As we speak today, there's a lot of uncertainty. It will be on a best effort basis. If this continues for a longer time, this kind of an uncertainty will be there. But it appears that there is some hope that you will see normalcy coming back. I'm not even talking about whether there will be a COVID 2.0, hopefully -- 3.0. Hopefully, by then, a large portion of the population should have got vaccinated. It doesn't mean that it is -- people are going to be protected. But at least the impact, hopefully, will be much lesser than what if they have not got inoculated. So FY '22, the -- we are -- if things were normal, if -- as we exited March, I think would have had really point FY '22. But the situation that we are in as we speak on this day today, it is -- they will be on a best effort basis. There could be slightly more tepid procurement of businesses because it's not just about our willingness, but also the willingness of customers. They should have the mental frame of mind to want to buy products or to elect for our products. So when people are going through a lot of trauma in their homes, I don't think anyone would like to want to do anything beyond essential services and medical care. So the aspiration levels are probably being bottled up. So this is a question that is very difficult for me to answer in terms of if you're expecting me to tell you a particular number or range, whatever it is, I have no clue. All I can say is that if this continues for a longer period of time, the --- there will be incremental slippages. It's not about the good customers because the good customers, the customers we have acquired are of top quality because they are in a tighter policy conditions. It's the stock of people who were there, who provide -- who went through some livelihood concerns and then adopt or elected the moratoriums or even the restructuring packages, they obviously aren't -- weren't paying. Now things were looking reasonably well until March, but we did see that some of them would have a bit of an impact. Your check bounces probably has gone up. I think this was mentioned in the call in April, but may have been reasonably on par. But my expectation, and you're right, is that this is a time that we need to support people who are already in pain, whether I classify this in NPA and then restructure, whether they are eligible for restructuring or not. Yes, some amount of increase in NPLs. But I don't see -- this kind of an unprecedented time an increase in NPLs within the range bound is, I think, reasonably acceptable so is the restructured amounts going up from a 0.4% or 0.5% to slightly higher within the range that we've been talking about. I think that will happen. That is something reasonable to expect. But broadly, the franchise is intact, the energy levels are intact. In the medium to long term, I think we are well poised to bounce back faster and better than ever before.

[indiscernible]

I know we're running into the hour. So I'll just make it very quick and simple. Is this about the organizational change that was announced? I guess, my question here is about whether -- I mean, whether there's been any changes to the incentives that you've laid out for management and the key performance metrics in line with the organization restructure?

Sorry. My apologies, I couldn't sort of hear you clearly. You were talking about reorganization, which I understood. Are you talking about, will this lead to changes in incentive structure -- or compensation structures? Is that what I heard right?

Yes. So just, I guess, some -- most times, these things come alongside. So just wondering whether there's been any changes to the way you incentivize your leadership team. I suppose the whole environment also changing, it's not just the challenges around COVID, but your peer group is also improving as well. So I guess the kind of targets that you're setting your leadership team would be -- and how you incentivize them would be quite interesting to know.

Okay. Thank you so much. Yes. Let me first just talk about reorganization. The reorganization was something -- is to make -- to bring about sharper focus on some of the key priorities and strategies that we had already implemented over the... [Technical Difficulty] Thank you. Sorry about that. Well we face technology issues here as well. As I was explaining on the reorganization, there was a certain -- we had implemented a lot of strategies and priorities over the last couple of years. All I did was to sharpen the focus and align the groups in clusters towards these priorities so that there can be a sharper accountability to meet the vision, et cetera. So that was the main focus. So that -- to ensure that people have a smaller, more smaller domains to be focused on. Size is not something that -- it also conveys a message size does not matter. Three is, it sort of brings a lot of other new people to the floor in terms of the number twos. And then it's sort of -- what happens is it sort of provides a lot of vibrancy to the entire organization. The moment you do this kind of reorganization, the entire pyramid below is able to move around into multiple areas into the future. And that sort of creates new leaders in the organization. So there is a fair amount of excitement and energy that's created, and that is exactly what we want to do when we are at an inflection point where the best of the bank is surely going to come. So this is the thought process of that. In terms of compensation, which is what you ask. The compensation as it is for the mid- to upper middle-income is already benchmarked vis-à-vis the market and that is what we do. Including long-term incentives, I think the bank has one of the best compensation structures across levels and then across competition as well. So I don't think there is anything different that we are trying to do. But the main objective of the reorganization was to ensure that we have sharper focus, we align our -- the people and the responsibilities vis-à-vis the strategies that we have laid out. And we are not just looking at the business objectives. But on a holistic objective of trying to ensure that all these leaders try and grow the business in a very wholesome way, in terms of ensuring that the compliance to regulations is adhered to, to the key. In terms of ensuring that the people, the army is taken care of, they nurture and care for the army, furthest to ensure they espouse and evangelize and write ethos, the value systems in their various organizations. And last but not least, they try and improve the customer service. We are -- we have been reasonably good that we have a lot of room to improve, and we would like to ensure that, that is taken on top priority. The fulcrum on which they will ran the business is on the digital and technology platforms. They need to ensure that along with the tech teams, they plan their businesses for future so that what they are planning is to ensure that they have the best-in-class user experience, the best-in-class in terms of availability, resiliency and scalability as well. So this is the new paradigm at which the new organization, the reorganized leaders will be working with. And this is something that I'm very confident that the bank is going to march ahead reasonably well.

We take the last question from the line of Prashant Kothari from Pictet.

Just to -- yes, I mean, it is ironical that we had kind of an outage during the call itself. But just going back to our own issue, when you are talking to the regulators, and we have this short-term plan, medium-term plan, long-term plan, all of that, to what plan do they kind of subscribe to in the sense of giving you the approval to restart the cards business again? And also, I think you mentioned during the earnings call that there was this regulatory audit going on in the final stages. Do we have any outcome from that yet? Or are we still waiting on that?

No. The audits have happened. The report will be -- is -- I believe, is being examined by the regulator. Two is, Prashant, we have a job to do. I -- as I said, we have our plates full. We want to get this right. We want to be the -- to set gold standards now even in these matters as well. We have prided ourselves to be a great execution engine on the business side, but we want to do this even here. So I -- frankly, if you ask me, I'm not to -- not even sort of asking them when are we going to do this because, ultimately, as a CEO, and -- I need to be comfortable that we have control of the destinies of what we're putting in place. I would rather prefer to go to the -- if at all, I need to go to the regulator when I have the ability to say with confident that, yes, remove it. But as of now, as I said, a lot of things are in progress. It's going as per plan. There is milestones. You cannot do everything overnight. So till that happens, I think it is something that we would like to continue to focus on. I don't want to be distracted to say that when the regulator is going to open or not open. We're all right. We are -- it's not that we're not doing anything. We are parallelly bringing all our -- the -- whatever I spoke about in terms of our existing enterprise infrastructure, in terms of what we're building on the new digital transformation infrastructure, all that is being done. It is going to be -- is key -- will be kept ready and when it sort of gets removed, I think we will launch it. As regards to cards, whilst new acquisition, yes, it's something that will pain into the future, as I mentioned. But let's face it. The card's team is running, which -- like never before. There's a large set of cards, which they are trying to see how to activate. They're coming up with new strategy to see how they can make it even more robust and more vibrant in terms of the portfolio. So there are a lot of activities which are happening, which is the reason why we seem to be reasonably sanguine in terms of our business performance. But when the regulator is going to remove the embargo, what are the thought processes, I think it's best that we hear from them. We are not sort of -- would like to even comment on what their thought processes are or when they will remove the embargo. I think we would prefer to just focus on our jobs at this juncture.

I now hand the conference over to Mr. Suresh Ganapathy for closing comments. Over to you, sir.

Thanks, Sashi, for that very insightful session. And it's really glad that you could take out time and address all the investor queries so succinctly. Thank you so much, Sashi, Srini and Ajit for doing the call with us.

Thank you so much. Thank you to all the investors. Thank you.

Ladies and gentlemen, on behalf of Macquarie, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.