IDFC First Bank Limited (539437) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IDFC First Bank's Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Saptarshi Bapari, Head Investor Relations and ESG. Thank you, and over to you, Mr. Bapari.

Thanks, Sanju. Thanks a lot. Hi, everyone. Good evening. Thanks for joining the call. We have with us Mr. V. Vaidyanathan, CEO of Bank; and Sudhanshu Jain, our CFO. So we'll start with the base financial update with Sudhanshu and then we can have some words from Vaidya and then we can open the forum for Q&A, okay? So I'll hand over to Sudhanshu.

Yes. Thanks, Saptarshi. Good evening, everyone. First of all, thank you for participating on a Saturday evening. I will start with -- in terms of sequence, I'll start with maybe the business side and then eventually cover the profitability segment. I would say that the business momentum was quite strong during the quarter. In fact, our customer business, which is your deposits plus your funded assets that has crossed INR 6 lakh crores during the quarter. And we saw a Y-o-Y increase of almost about 20%, both put together. . Individually, if I now talk about loan book, there also, we registered a strong growth of 20.6% on a Y-o-Y basis. and that book has now crossed INR 3 lakh crores to reach about INR 3.05 lakh crores. This incremental growth on the loan side was primarily driven by mortgage, vehicle, corporate loans and consumer loans. We have given a fairly detailed breakup on Slide 29 of the presentation. If I talk of the retail segment, retail agri and MSME book, that was at INR 2.4 lakh crores and the [indiscernible] book was at INR 64,000 crores at June quarter. The retail agri and MSME book grew by about 18% on a Y-o-Y basis. And in wholesale, we continue to power up and where the growth was even stronger at 30%. Just another data point, the MFI book was at INR 6,700 crores at June '26 end. We saw a marginal increase as against the previous quarter. Also another point which I want to put out is that 93% of the book is now covered in MFI through the CCMI coverage. With respect to credit cards, the cards in ports have now reached 4.8 million during the quarter. The book grew by about 19% on a Y-o-Y basis and was about INR 9,600 crores. The spend on the credit card grew at a healthy pace of 22% on a Y-o-Y basis. Moving on to the Wealth Management business. That where the AUM has now reached almost about INR 64,000 crores and it grew at 24% on a Y-o-Y basis. In the same [indiscernible], if we now talk of the asset quality, then again, on the asset quality, we saw an improving trajectory, both across GNPA, NNPA, SME and some of those ratios. Just to put out some numbers, the gross NPA of the ratio of the banks are further improved by 10 basis points from 1.61% reported in Q4 to 1.51%. Similarly, on net NPA, we saw an improvement of 4 basis points to 0.44% for the quarter. If I now give further details around the retail rural and MSME segment, there also sequentially, the gross NPA improved by 7 basis points to 1.4% and similarly, net NPA improved by 4 basis points to 0.52%. Moving on, on gross slippages. Happy to report that here, we saw a 2% reduction on a Q-on-Q basis. And on net slippages, we saw an improvement about 4%. Gross slippages if we have to compare on a Y-o-Y basis, then it's almost down with 30% and net slippages was lower by about 44% on a Y-o-Y basis. We know that last year, initial quarters, we also had higher slippages coming from MFI, but even if we exclude MFI slippage for both the corresponding quarters, the decline in gross and net slippage was 14% and 28%, respectively. In terms of translation to the overall slippage ratio, that further improved to 2.49% in the current quarter as compared to 2.68%, which we saw in the previous quarter. The collection efficiency of the bank continues to be quite stable. Now for many quarters, it was at 99.5% for the current quarter. Moving on to SMA 1 and 2 numbers. There, we continue to see improving trends. SMA was at 0.77% in Q1 FY '27 from 0.78%, which we saw in the previous quarter and 1.10% in Q1 of last year. We have given a fairly detailed breakup across segments in terms of how SMA and NPA numbers have faired for us. Similarly in micro finance, I would say things have largely got restored on the asset quality front. And the SMA 1 and 2 normalize to now only 0.71%. If I now talk of deposits, there then happy to report again that customer deposits now is just shy of INR 3 lakh crores. It grew by about 16.6% on a Y-o-Y basis and 5.3% on a Q-on-Q basis. If I see a total deposits, which is customer deposits plus certificate of deposits, then the growth was about 17.7% on a Y-o-Y basis and 5.9% on a Q-on-Q basis. Within customer deposits, CASA deposits, I would say, grew the fastest to CASA ratio for the quarter as a result improved by 1% to 50.8% in and average CASA ratio was above the 50% mark at 50.1%. The CASA deposits have now touched INR 1.58 lakh crores. So I would say the another milestone cost during the quarter was CASA going beyond INR 150,000 crores. Moving on to now the profitability section. Happy to report that we have crossed profit of INR 1,000 crores for the first time and the profit for the quarter stands at INR 1,075 crores, which is an improvement of about 132% on a Y-o-Y basis. During the quarter, all operating metrics continued to demonstrate an improving growth trajectory. For example, NII grew by 21.1% on a Y-o-Y basis. This, in fact, improved from 15.7%, which we saw as a Y-o-Y increase in the previous quarter. As a result, the net interest margin on an AUM improved by 3 basis points to 5.96% from 5.93% in the previous quarter. However, let me point out that the last quarter had a benefit of day count convention of about 8 basis points. And in this quarter, we had some benefit on account of interest on income tax refund, which contributed to 6 basis points. If I exclude these 2 line items from the individual quarters, then the NIM has shown an improvement of 5 basis points and adjusted numbers would look like 5.85% going up to 5.9%. This improvement was largely contributed by a reduction in cost of funds, which further came down from 6% to 5.96%. Moving on to the fee and other income. Here also, we saw a strong growth I would say, backed by disbursements, which almost increased by 25% plus on a Y-o-Y basis in Q1. And as a result, the overall fee income increased by 22.9% on a Y-o-Y basis, compared to 21.3% Y-o-Y, which we saw in Q4. The other streams of fee income, which is your trade in FX, which is your commercial banking and all these digit fees also continue to contribute strongly to the fee growth. As a result of the increase in the NII and the fee, the total income for Q1 on a Y-o-Y basis was 21.5% higher and versus about 17.1% what we had reported for the previous quarter. During the quarter, we had a good run on the treasury front. Of course, that was held by softening of the [indiscernible] yields to some extent and hence, we were able to get a treasury gain of about INR 181 crores in Q1. Moving on to OpEx. The OpEx for the quarter stood at INR 5729 crores, which grew by 16.4% on a Y-o-Y basis, and the sequential increase in OpEx, if we exclude the impact of the one-off road incident in Q4, then it was 2.3%. This increase of 2%, 2.3% on a sequential basis, corresponds to an increase in core income by about 4.6% on a sequential basis. As a result, the cost of income -- cost/income ratio, excluding trading gains improved by 166 basis points on a sequential basis to 70.7% and by 310 basis points on a Y-o-Y basis. We have also mentioned in the presentation that the job, which is the operating job between the total income and OpEx for Q1 almost stands at about 500 basis points, which, to some extent, has also translated into improvement in the cost-to-income ratio. As a result of all of this, the operating profit of the quarter, excluding trading gains has increased by 36% on a Y-o-Y basis. And even sequentially, again, there, I would exclude the impact of the fraud incident, that improvement was 10.9% on a sequential basis. So for last 2 quarters in a row, now we are getting an operating profit increase upwards of 30%. Moving on to provisions. This reduced by 31.1% from INR 1659 crores to INR 1,144 crores. On a Q-o-Q basis, if you see, it has remained at the same level. Last quarter, the actual credit cost was about INR 1,143 crores. During the quarter, we had received a claim of INR 514.8 crores under the CGF [indiscernible] against MFI portfolio. Here, I would just want to a data point that we believe that we applied in this quarter, and we got it in this quarter, which was quite fast in that sense. Another point to call with respect to provisions is that we have created a contingency provision of INR 515 crores, this is purely, I would say, voluntary and on a prudent basis, considering the evolving macroeconomic and the geopolitical uncertainties and the monsoon-related factor. I would again reiterate that the bank's current asset quality performance remains quite healthy across key retail ruble and SME portfolios with delinquency indicators largely stable or improving. And hence, this provision is purely, I would say, forward-looking and more prudent in that sense. In terms of credit cost percentage for the quarter, that further improved from 1.60% to 1.53% during the quarter. Moving on to the last section, which is capital adequacy and liquidity. The capital adequacy ratio stood at 15.05% at June with CET1 ratio of 13.33% we had an impact of about 30 basis points on account of op-risk RWA reset, which typically happens in Q1 on the CET1 ratio. On liquidity, I would say we continue to maintain LCR at stable levels. In fact, average LCR ratio for the quarter based on -- was about 116%. And this broadly around our guided range as we have indicated in the earlier calls. With this, I have tried to cover the key numbers. Maybe I'll hand over now to Vaidya for his opening remarks.

Good evening, everybody. Sudhanshu covered the numbers, so I'll give the comments on that. The thing is that beyond the numbers, what the bank is really building is what we think is really what we're trying to build is a really high-quality customer first bank. And this goes core to the culture of the bank because when we say customer post bank, then it's just not a slogan, every policy of the bank, every product of the bank, every way of our employees interact with customers, how they give the customers benefit or doubt in the event of a complication or an area of opinion or different opinion. Everything has to reflect that. For example, we had to put astric in our addressment because we know as tics people don't see that, and they just get jumped into that is on the start taking to the product. This happens. For example, even after 4, 5, 7 years of talking about that, even now sometimes they're going to go to and meet any of our employees have seen some responses from our employees to some customers. I find it may not be customer first. And they'll be have dispute to customer because a small amount and negotiated unnecessarily. I do find such things, but it's a long process, but every product we put we try to bring that in. We try to see that we don't write fees and charges in such a way a complicated languages, customers want to understand, we don't charge fees just because the customer doesn't notice, just because you don't notice I can't bill you. So we do -- if somebody selling a mutual fund, we don't just pick a mutual fund that gives us higher commission and sell it to customer. We got to a deep, deep analysis using AI and sell mutual funds, which will give maximum return to the customer. Whether we get 0.7 or 0.8, 0.9 1% is all round of numbers. We don't really look at try to maximize that front. So this is what I mean by saying that we're trying to really build that that's 1 big part of the bank is building it to show in due course that -- so point is showing, I think that it's reflecting the numbers somewhere. But it will also show in due course. I can't -- so I can surely tell that every part of this is helping the bank in terms of P&L. It costs money to build a bank like this, but this is [indiscernible]. Second thing, I'd say that is governance, I can tell you that even during the most difficult times when we were starting the bank up 6 or 7 years ago when the posting loss of 3 or 4 quarters in a row for those bad loans, we did not have any [indiscernible] at all. In fact [indiscernible] like 0.5, 6%. Credit cost is to be 1%. So really, that left us with no profit on the core. Even then we didn't find cute solutions around our situations. We went through that boldly and dealt straight. So governance you'll not find us lighting if something happens, I don't know, but no 1 that I know of in our bank, and our Board, among our colleagues among senior management. anyone would ever talk anything or even a is something that can go about on governance. So you should rest assured that we sell 7 years, and many of you who know me for 2 to 3 years would know that we have looked like that and will not go. And that should definitely in good and bad, they should give you comfort that this bank will be a straight and deal right. The third thing is then comes down to its technology, I can tell you that tech is a big thing and our banks for many, many years have been making the right moves on technology. It's not really the cost. People think tech just cost money. It's not about costing money. It is about building the right architecture, having the right quality of people and building a stack for customer data platforms, our KYC platforms, digital onboarding, payment infrastructure, communications and the risk decisioning engines, API, data streaming, machine learning, artificial intelligence, the whole stack and UI, UX and everything, we really try to, let me say, even customer intelligence, every customer data platforms, everything is like we really put an effort in building that. And customers are using the bank services now, whether using our app, using a call center, they would have I'm quite sure they would have seen the experience. In fact, when I often go to conferences, if I have to speak a panel, et cetera, often ask people to put up their hands how many often have customers to the bank, and you'll be surprised I do find quite a few people. So the point is that we are trying our best to stay in the stay in the cutting edge of technology and governance and customer service have told you. The last thing is finally has to, of course, translate the numbers end of the day because from the market point of view, you track numbers and you should. But my sense is that whatever numbers we'll post, we believe it's coming strong from the core and if comes strong from the core, it's more sustainable. And on that front, let me just say that for the last many years, we've had -- we've been under the pump for the rise of cost-to-income ratio. I don't deny. In fact, the first 1 I got it wrong because we thought we'll fix it in 5 years. It's been 7 years, we're still dealing with it. But then I just realized that the issue was some out of income got wiped out because they wrote off a lot of bad loans. And along with that, income also went to way permanently. The amount of cost issues also came from the fact that we were really building while we may have got the cost income is your wrong, which I don't know told you, I admit. But then there are so many things we got right also beyond the normal, for example, we said there will be INR 1 lakh crores of retail loans at the end of 5 years or 5 to 6 years, we are sitting like INR 1.7 lakh crores, INR 1.8 lakh crores at that period. Today, we are INR 2.5 lakh crores. Like that's like INR 70,000 to INR 80,000 crore more than what we talked about. We talked up CASA of 30%. Now we're talking CASA of 50%. It was not planned. So there are many things that NRI deposit, -- now we're talking about INR 25,000 crores of NRI deposits in the bank. So we didn't factor for maybe for so many loans that came to that we -- so if we didn't factor for certain bad loans, find it's not a mistake, I don't deny it. But the fact is that starting of a bank, there are just so many expenses on compliance, on setting up the ticketing systems, the CRM systems. It's just an expensive proposition. And I must thank you that while in the phase of building the bank, let me say that the market has given us capital. We have -- again, our book value per share has gone up from some 31 to 32 to maybe 56 or 57 now financial physics now. And I agree that all of it has not come from raising profits. A lot of it has come by raising capital at a premium. And -- but even though our return on equity is to be relatively low those days 5%, 6% on average, the investors all of you have given us capital at about 1.5% price to go 1.6% to book, which has helped us build the network. So I don't deny you think they've all, but they've all come -- they've all come helped us in good measure because the -- but end of day net worth is net worth capital is capital and the book value pursue is book well per share. We have it now. Now our job is to grow return on equity. I mean, we strengthen the bank for capital raise, I agree. But now it's a job to -- now that we got adequate scale. We believe that the cost/income ratio will get fixed definitely. Actually, if you see our cost income ratio over the last 2 or 3 years, initially, it came down from 95.1% [indiscernible] Q2 FY '19. It came down to 85 upon merger because capital for came at 48%, and it came down to blended came to 85. From moved on to 72% right up to 72.8%. But in '25, in 26, 2 years in a row, it got stuck at 72.5% or 73.5%. So many people start worrying that look, maybe there is a stuck and maybe there's no scope to improvement anymore. I think that, that is not right. It got stuck because even during those days of '25 and '26 productivity gains were coming -- but the income was coming down because the microfinance book, we shrunk it and income in a way. after what is cost income, it's cost even by income. So income got stuck. I mean the gossan got reduced because the microfinance book reduced it. So that is let me say that as a mathematical thing. But there were productivity gains coming at that time, it kind of got obscured. But now that the microfinance issue is big the base case -- now we will start seeing improvement in cost/income ratio quarter-on-quarter -- sorry, year-on-year quarter I can't say for sure sometimes moving parts happen year over. But we say year-on-year, you should expect to see. And that phase that for 2 or 3 years, we got stuck we believe it will start materially moving down year-on-year now because it's all the base place now. So just moving on from the thing and from there, I talked about economics. So on the economics front, the last 3 people often say is that, listen, even well-meaning investors, long-term people who think long token say that, look, we like your model, everything is good, but still end of the day, until you're posting 1% ROA really, we can't look at you. That's the base case. Let me just tell you that when we do our math, we drop our spreadsheet, we know the income we're making, we know cost of points, the margin. And we stress this spreadsheet in the future let me just tell you that this is not going to stop at 1% ROA. Even this time 1% that we mentioned, there has got some kind of one, let me say, some amount of income tax, some interest income into it.

The treasury gain.

Treasury gain is also there and some benefit clear and there -- but if you adjust for it, maybe it will come down to about 90 basis points as it is looking. But still [indiscernible], like touch and go. I remember in a couple of interviews even with CNBC during the depth of the crisis that took an interview. Just to assure people that things are well. And that is an interview of Lata Venkatesh. I was telling her we've been passing distance of 1% by end of the year. I'm just happy to share with you that we are not taking end of the year. We're already thinking distance with I think 0.9 is real real. And we think that it will move up from here, definitely stabilize from here, probably go up from here. And at least by this year, in fact, not just by the year ending, but hopefully, for the year itself, we should be able to post 1% is our belief as far as RH can see. So there's a bit of an upgrade, and that's coming in our mind because credit cost is better than expected. So all I can say is that all of you have been very supportive for us. We are very real thankful to you. We want to thank all our employees who have worked very, very hard in bringing up this bank from the beginning. And every one of our shareholders who supported us with capital I can assure you that things are looking up. And for those who have not yet -- who think that probably this is a 1-quarter thing. I'm pretty sure you wait for 1 more quarter, 1 more quarter, you'll get a confidence back. So thank you for that.

Andrew, we can open the forum for the Q&A session now.[Operator Instructions] The first question comes from the line of Akshay Jain with Autonomous LLP.

My first question is on margins. So like if I look at cost of funds, that is still improving with additional tailwinds from rate cuts if and when it comes. So that leaves us with the asset mix shift. So is asset mix expected to be so severe that your clean margins of 5.9% this quarter will turn into 5.7% for full year. So that's my first question.

Yes, thanks. For the question. Maybe should I respond to this? Or should we -- you want to continue with your other set of questions?

Anything you can say like maybe you can .

On to the margin question first. So on -- yes, I do agree in the previous earnings call, we had guided for a 5.75% margin, and we have come at 5.9% if you adjust for income tax refund, but now for the year, our expectation is that we could hit margin closer to 5.8%. So in that sense, we now see that margin could improve from 5.75% to 5.8%. If we see for this quarter, as I said, the margin was 5.9%. We still -- we got some benefits because we ran a lower investment book. So from here on, into the year, we see the margins could still slightly get impacted because of the asset mix change, which we've articulated in the previous call as well because we have been growing some segments of business which could be NIM dilutive, but still makes sense in my ROE sense, but still it could be a margin-impacting factor. Second, we feel cost of funds could stabilize, could stay very range-bound around the 6% mark. So that's the second factor and some normalization of the investment book, which may happen during the course of the year. So we feel that margins could broadly stay around the 5.8% handle now for the full year.

Okay. Sir. And any sensitivity have you done for how your margins will move in case of rate hikes? Any numbers you have done?

So I have not face rate hike when we are giving these projections, we'll see as it comes by. .

The second question is on credit cost. So again, for 1Q credit costs have been around 153 basis points. And 1 is typically the weakest quarter for the year. And if you're beating your guidance of 180 basis points, 190 basis points in 1Q itself. So is there any scope for bringing down the credit cost guidance. And number 2 is on the prudential provisions. Are you seeing any signs, early warning indicators turning negative because of the Middle East war or weaker monsoons?

So on the credit cost, here, to a surprise, Q1 has fared quite well. In fact, we spoke in the previous quarter, Q4 typically ends to be the much better quarter collection momentum is quite strong there. But from an asset quality front, we have seen all of this sort of flowing into Q1 as well, even and hence and we have said that all the asset indicators, which we have put on to the presentation, SMA, GNPA and NPA, all sort of product base is standing well. . We have, of course, created a contingency provision, which I would say is more on a prudent basis. We all know the uncertainties which we are currently dealing with in terms of the geopolitical factors which could play out. Monsoon, of course, rains have been improving, but still we felt that it would be prudent on our part to take into account some of these risks, which could emerge with the later part of the year. So I would say it's purely a prudent provision. Taking all of this into account, I would say, of course, as I said, there could be still some bit of uncertainty here and there. But on the credit cost guidance also, while we said 170 to 180 basis points in the previous earnings call, we feel now we would land up more with 150 to 160 basis points on credit cost. So we -- and that is coming on the back of a much improved Q1 and how we see at least the current quarter and some of these things could play out.

And on ECL, any numbers on onetime transition and steady credit cost? .

So on this, again, I think we have discussed this question also a number of times in the previous calls. But the position continues to be the same. Of course, the final guidelines have come in, we are fine-tuning some of the numbers. But our preliminary sense is that from a capital point of view on transition, there will be 2 impacts. Of course, we will be required to keep more capital aside for ECL. But there would be also benefits which would come from a reduced RWA application, both on credit risk and operational risk. So in a combination of both, we feel that the impact on capital would be quite neutral at the time of transition. So that is our current sense as far as ECL is concerned. .

Understood. And the last question, if I may, on FCNRB -- so if you can share some targets or what is the current mobilization -- and how are FCNR costs compared to normal TD costs?

So FCN also, we see -- we also see this as a good -- very good opportunity, and we want to capitalize to the extent possible. Like if you would have noted, we have given our NRI deposit book, right, which is about INR 25,000 crores. If you go and check the system is about INR 1.65 trillion, which means that our share is about 1.7% currently in the NRI deposit market. Of course, this is a book which we have started growing more so in the last 2 to 3 years and going at a much healthy space. . With respect to FCNR, we feel that through a combination of leverage and the SBLC structure, we are trying -- we are hopeful of garnering a share of about 2.5% or so. So that is how we are looking at it. You would have noted that on the FCNR deposits, we have announced a rate of 6.75%, which is quite competitive, and we feel that it's a very good opportunity which we want to capitalize.

The next question comes from the line of Param Subramaniam with Investec.

Congrats on the quarter. Really a strong bounce back from the issues we had in February. So -- and it happened so quickly to congrats on that. The first question is on the OpEx. So our guidance is 13% to 14% for the full year. I understand business is coming back strongly. So we still sticking to that sort of guidance, 13% to 14% OpEx growth through the year?

Param, thanks for the question. So I would want to state here that the business momentum continues to be very strong as we see now. Of course, we are cautious of the macro factors which could play out. And we would -- our endeavor would be to maintain that OpEx leverage, right, which is the 500 delta which we were able to achieve in Q1. So it all depends on the business momentum. What we see from here, but we are quite hopeful of maintaining this job even into the rest of the quarters. That's how we are seeing it. So there could be, I would say, a change in both the income side as well as the OpEx side, but we would want to still maintain this 500 bps at the minimum. .

Okay. Fair enough. So that's okay. So the main drivers of, say, ROA improved guidance is the 20 basis point upgrade you gave on credit cost guidance and on NIM, you said 5 basis points higher. So those are the main positive data.

Yes, broadly.

Okay. And going into FY '28, I know it's very early days, but -- and we I mentioned, 1% is not where we stop. So how to think about, say, how the ROA progress is going into next year?

Should increase naturally. Because next year next year, there'll be more -- see this thing, what Sudanshu pointed out. See, if you remember, we had talked about a 13% to 14% increase in OpEx with a 18% to 18.5% increase in income, right? Param. If you see Transcript of the last quarter, you see that.

Yes.

So now if this. It's 2 or 2.5. -- correspond later has some increase in OpEx also because see the market opportunities are growing, and we don't want to be missing out on them and just stick to 1 line item. But definitely, we feel like Santa said that mentioned to mention. Now if you pull the story -- but anyway, that's not the point. The point is that it is this 450 to 500 basis point different jaw opening. If you got based into next year also, which we believe it will happen next [indiscernible] also. And straightaway, you -- there is the cost income reduction of about 350 basis points. straight from these numbers. So -- and that -- when you do the math of it, you'll find it's quite meaningful to the P&L.

Yes, absolutely. I get that, yes, Okay. SP677689313 Sir, 1 last question, if I may. The fraud incident, are we beginning to see any recoveries from that? And if so, going ahead, where will we be booking that in the P&L. If and when.

So Param, there continues to be, I would say, progress on this front, if you go by the public news and so on. few more net have been made. ED has been actively looking into the case. They filed the charge sheet and so on, indicate some amount, which could be a potential recovery. But all of this takes a long time, right? So I say there is a proper process, which needs to be followed in terms of going -- like for example, going to the PMLA court, filing our claim, then these claims will be assessed for whether it's due to us in the right sense and so on. So a lot of work will have to be done. This is a totally, I would say, a legal process for process, difficult to sort of put out a time line for this. But at least, we are seeing movement on the ground, right? So it will be difficult for us to sort of commit to a time line in terms of what recovery could finally emerge from here, but we continue to be quite engaged on this front. .

Fair enough, Sudhanshu. Yes, very clear. Is there anything at all in the P&L in this quarter as a recovery of anything.

No, no, nothing else.

The next question comes from the line of Ankit Bihani with Nomura.

Good evening, everyone. Congrats on the quarter. So most of my questions have been answered. So I have a question on our tech investment priorities over the next 2 to 3 years. Basically, how is the bank leveraging AI and Gen AI capabilities across functions? And how do you see technology investments increasing from here? If we look at IT expense as a percent of overall OpEx it has come down a bit from 11% or to 9-odd percent now. Even the large banks are operating at that at these levels, could you please elaborate on this?

It's not, frankly, like I said before, it's not about how much you invest, what where you invest in. So I agree we are like 9% there. The thing is that we have built a really good architecture. So and a good stack and modern stack and cloud and API first integration and cloud native principles and event-driven platforms and micro services architecture. And we are following out the core as much as possible. We have real-time data streaming, it's all being built. I can really tell you that, for example, what people can't see, I think, generally speaking, is that they can't -- people can see ROA, ROE, but they can they can measure us today, but they don't know the quality of they've been built, what I can't see that below the ground. On that front, I'm giving you by making my comment to you that is truly really a fantastic modern architectures coming about in the bank. Now -- what is our approach to that. So in terms of -- this is a big enabler of many of our businesses that we are doing, many of the services are coding to our customers and the naturally payback in terms of revenue and robustness at which the bank will be able to grow, which means that I don't think this bank will stop even a say 3 years or 4 years from now, even with INR 6 lakh crores, so to say, in deposits, INR 5 lakh crores in loans. We can continue to grow on this platform. This platform is strong, our condition is strong. We can grow 20%, 20% more. who knows. I mean, of course, we'll put out the numbers at that point of time. But as far as I can see, the platform strong means the bank and grow for a long, long time.

Okay, sure. And just on the STM front, did we highlight we'll be able to capture -- we'll potentially capture 2.5% of the overall market share, right? -- that on the come?

Yes. So on the FC, I know there are different numbers which are sort of floating around, but assuming a $60 billion, $70 billion come in, and we are hopeful of getting about 2.5% of that tool.

Okay. till now, if you would like to give out any number how much we have mobilized? .

It has just started. I'm gaining steam. So Yes, maybe you can give an update next time. .

The next question comes from the line of Jai Mundhra with ICIC Securities.

Congratulations on a strong quarter, sir. -- so first question on MFI slippages, right? So I believe -- I mean we have not given separately, but if you can quantify how much was the MFI slippages? And how much was the MFI disbursement in this quarter? .

The MFI slippages was quite low in this quarter. and same was actually the case in the previous quarter as well. And hence, as I said that all the SME and all these numbers are indicating that sort of that to normal collection efficiency continues to be around the 99.5%, which we are seeing in the overall portfolio as well. So that's on MFI, sorry, Jai, what was the second question?

The disbursement, MFI disbursement.

Yes. So disbursement, if you see, if I sort of see the numbers from last year Q1, then we have seen almost doubling of disbursements as far as MFI is concerned. So we are hopeful while the book has not grown that very much in last 1 or 2 quarters, at least the decline has been elected. But through the course of the year, we feel that nothing disbursement are picking up, and we are hopeful of a quarter-on-quarter increase here. We feel that we could end up on a target book increase of 15% on a Y-o-Y basis.

Secondly, Sudhanshu, I see that [indiscernible] 6 basis points of IT refund, this would translate to roughly around INR 60 crores. Where do you book it because does it go to income interest on advances or -- and does it come on interest on balance with RBI and other study?

It would be the other line item, certainly doesn't come in advances, but -- and it would be the NII line.