IndusInd Bank Limited (INDUSINDBK.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Mehta, Chairman; along with the management of IndusInd Bank. Thank you, and over to you, sir.

Thank you. Dear all, very good evening to all of you. I, Sunil Mehta, Chairman of the Board of IndusInd Bank Limited, welcome you for this quarterly results call. I am joined by our committee of executives, Soumitra Sen and Anil Rao, along with the rest of our management team. We will follow a structure similar to the last quarterly call for today's call as well. I will begin by highlighting some of the key developments at the bank, after which Soumitra and Anil will provide more detailed updates on our business performance and financial results. At the outset, we had two main objectives in this quarter. First, restoring trust in the institution as our prime and immediate responsibility. And secondly, ensuring continued execution of all core businesses of this bank. The Board and the management remain committed towards these objectives. The bank has implemented higher standards of transparency and compliance as also reflected through actions taken by the entire team at the bank. I will give further updates on some of the key developments for the last quarter. Number one, the decisive actions taken on all legacy issues. During quarter 1, the Board and the management have spent considerable time and efforts towards resolving the concerns relating to legacy treasury and microfinance issues as identified in the previous quarter. In treasury, we have stopped internal deals. Further, we have begun a process of upgrading the treasury Calypso system to the latest version with enhanced functionality of trade management, controls and monitoring. The governance framework for the microfinance subsidiary has been significantly improved, bringing in greater transparency. We continue to delve deeper to further enhance Board and management oversight and operational control over this subsidiary. The bank has set up a dedicated project management office tasked with the benchmarking of the bank's internal control processes and policies with the best practices and bridging gaps, if any, that exist. The rigorous exercise, which had been conducted in Q4 helped the bank Q4 of '24-'25 -- financial year '24-'25, which helped the bank to absorb these irregularities in the Q4 results of financial year '24-'25 itself. As you would have seen and in line with our assessment, we have delivered Q1 results for financial year '25-'26, without any carryover of the prior period irregularities. The financial impact of the legacy issue is thus now behind us. Number two, the leadership transition in the bank is now well on track. The bank has made significant progress on the CEO appointment. The recommendations were submitted within the prescribed time lines and are currently under regulatory approval process. I take this opportunity to make a clarification. There has been no change by the bank in its CEO recommendations as were submitted within the prescribed time lines to the regulator from what we had initially submitted. In addition, the bank has also actively identified, both internally as well as externally, top-quality talent for the wider senior management, and we will update you at the appropriate time on the development. Meanwhile, the Committee of Executives, which is known as the CoE, operating under the guidance of the Board's Oversight Committee, has done an excellent job ensuring seamless business continuity during this challenging phase. Under their leadership, the bank is effectively pursuing near-term priorities as well as laying and building on the foundation for a sustainable growth from here. We are confident of building a strong management team, which will unlock the true potential of this franchise, underpinned by robust governance framework. Number three, the key focus themes identified for the near term, apart from ongoing initiatives. Even as we await the new CEO, the Board along with the management have aligned on five key focus areas to be actively worked upon. These themes include: Profitability-first approach. We have taken measures such as reduction in savings account rates, deemphasizing growth in lower-return businesses through effective fund transfer pricing, et cetera, to restore the profitability of the organization towards its underlying potential. Stringent cost management. A robust cost management plan has been identified and is being implemented by all business units even as future-focused investments continue apace. The bank had over 20% OpEx CAGR in last 3 years, and we are now working towards containing OpEx to a single-digit year-on-year growth in the foreseeable future. Heightened focus on recoveries. We are scaling up our collection efforts to recover bank's dues from the accumulated slippages. We are targeting the upgrades and recovery run rate for the year to be comfortably better than the last couple of years. Building the One IndusInd Bank franchise. There are immense synergies between our diverse businesses. Management is working actively to ensure that the collective power and service of our whole bank is made available to our esteemed customers. We aim to leverage our existing customers, leading to a better risk-adjusted growth as well as improved self-funding proportion across the business units. Effective engagement with stakeholders. The bank has also continued a proactive engagement with all its stakeholders, including regulators, employees, customers, rating agencies and media. The bank has transparently shared all developments addressing their concerns and rebuilding the trust in the organization. We are deeply encouraged and deeply appreciate their support. I take this opportunity to express my special gratitude to the Reserve Bank of India as well as our 45,000 employees for their unstinted support during this difficult journey that we had over the last 3 to 4 months. The aforesaid themes represent the opportunities where we believe meaningful progress can be made, leveraging our existing investments and capabilities. In addition, a detailed strategic road map will be identified and implemented by the new CEO once in place. I will now spend some time on delivering on our business-as-usual agenda. Despite the overhang of legacy cleanup, we have collectively ensured that there is continuity in rest of the bank's businesses. On the asset side, our vehicle and consumer businesses maintain disbursement as per their usual trends. We were cautious on the microfinance business as is seen from the developments in the business in the industry. As regards the Corporate Banking business, we had calibrated disbursals, and they are now picking up. On liabilities, the retail momentum continues apace, with share of retail deposits as per LCR improving quarter-on-quarter. We have let go of bulk and certificates of deposits, which has helped us in the generalization of our deposit base. We had carried excess liquidity during the quarter ending June 30, which we have started deploying now in accretive purposes. The financial outcomes for quarter 1. The bank has returned to profitability, and I'm pleased to advise that the bank has returned to profitability on quarterly basis with a profit after tax of INR 604 crores. As mentioned earlier, the profits for the quarter are without any one-offs from the prior period. We have reported stable operating profitability metrics versus normalized Q4 metrics. The CET1 capital improved to 15.48% versus 15.1% quarter-on-quarter, with efficient capital utilization. This provides us enough fuel in the tank for growth in the foreseeable future. Overall, the bank has demonstrated strong resilience in getting past the unfortunate events we witnessed in quarter 4 of financial year '24-'25. We believe the financial return metrics are still below their potential due to the developments that we witnessed since the quarter of ending June 30, 2025. We have seen a steady recovery in our core businesses, and our aim will be to show consistent and predictable improvement every quarter on our financial metrics from here onwards. I will now hand over to Soumitra Sen to take you through highlights on the individual businesses. Thank you, Soumitra.

Thank you, Chairman. So I will now start off with the vehicle finance business, which is our mainstay. Our vehicle loan stands at INR 96,357 crores, growing 7% Y-o-Y and 1% quarter-on-quarter. The disbursements for quarter 1 were at INR 11,298 crores, remaining steady on a Y-to-Y basis. Quarter 1, as you always know, is seasonally weak quarter for the year. And the second half of the year contributes a large share of both disbursements and recoveries. And we expect this trend to continue. We have witnessed Y-o-Y loan growth across most product categories. And -- with passenger cars, construction equipment and light commercial vehicles registering double-digit growth. While tractor loans saw a decline Y-o-Y disbursements, but it's now picking up both sequentially and quarter-on-quarter basis following last year's consolidation and strengthening of the credit underwriting process. On asset quality, net slippages for quarter 1 improved to 0.58% versus 0.62% Y-o-Y. We expect slippages to remain range bound as the year progresses, supported by seasonality and benefits and improving economic activity. Over the past 6 months, we have not sold any NPAs to ARCs, choosing to instead focus on internal collections. This, however, led to the increase in period-end GNPA ratios for the interim period. The restructured book in the vehicle finance has now come down to immaterial levels of INR 85 crores from INR 417 crores a year back, with majority of this reduction being a result of upgrades and recoveries. Looking ahead, overall vehicle demand for the year is expected to be muted. However, we do see support coming rural uptick, with strong monsoons, government infrastructure spending as well as interest rate cuts. We remain watchful of region-specific weather disruptions, supply chain constraints and geopolitical uncertainties, which may pose operational challenges. Our diversification across geographies and vehicle categories should also help us sustaining a steady momentum and mitigating any risks. Now let me comment to microlending and microfinance. The total book loan under the microfinance and merchant business now stands at INR 35,712 crores, down 6% quarter-on-quarter and 16% Y-o-Y. Now if I just talk about the microfinance. We took a cautious stance on microfinance, monitoring industry trends while working on several initiatives aimed at strengthening internal processes through enhanced quality checks, such as revaluating all KYCs, improving underwriting standards and conducting loan utilization checks for all loans. While these measures temporarily impacted disbursement growth, they also provided critical validation and process enhancements and reinstilling the confidence in our ability to achieve sustainable growth in this segment going forward. As a result, the microfinance disbursements were down 36% quarter-on-quarter and the loan book by 8% quarter-on-quarter. Disbursements followed MFIN guidelines and focused on high-vintage customers with strong bureau and repayment records and high internal behavior scores. Slippages, though elevated from normalized levels, have declined meaningfully quarter-on-quarter. We expect slippages to stabilize by quarter 3, may extend to quarter 4, but right now the legacy stress subsides and new disbursements continue to perform steadily. The 31 to 90 days past due book was steady at 2.2% in June '25 versus at 2.3% in March '25. Now let's come to Bharat Super Store, the merchant acquiring business of IndusInd Bank. We are now around 6,49,000 merchant borrowers under this program. Our merchant book stands as of today at INR 7,304 crores, grew by 38% Y-o-Y. The share of non-MFI book now stands at 20% versus 13% Y-o-Y. So 1/5 of the book is now merchant acquiring. Total liabilities sourced through BIFL now stands at INR 2,160 crores. Overall, we are seeing improvements in terms of microfinance stress and slippages from elevated levels of last year. We continue to remain cautious on growth as well as asset quality trends. Our diversification efforts continue apace and steady scale-up in the merchant business. We remain confident that the long-term rural opportunity and the belief that we have on deep distribution network and calibrated distribution strategy will help us to achieve a sustainable growth in this line of business. Now let's come to the Corporate Bank. We continued our tactical approach of efficient balance sheet management for most of the quarter. This resulted in moderate corporate disbursements during the quarter. However, with the liquidity concerns now behind us, we have resumed disbursement growth from July. As a result, our corporate loan book has come down by 8% quarter-on-quarter and 16% Y-o-Y. The proportion of A and above rated customers are at 77% and has been steady quarter-on-quarter. The weighted average rating was 2.6% -- sorry, 2.6 versus 2.57 quarter-on-quarter. The gems and jewelry portfolio continues to reflect strong asset quality with no accounts at SMA-1 and SMA-2. However, growth continues to remain muted amidst the industry-level slowdown. The gross slippages in the CapEx stood at 17 bps or INR 245 crores, mainly contributed by 1 manufacturing account of INR 118 crores, which we have already provided 50% for and a few other granular slippages. Looking ahead, corporate slippages are expected to improve, supported by a healthier early delinquency profile. Our combined SMA-1 and SMA-2 book has declined to 14 bps from 24 bps a quarter back. Corporate restructured book has reduced to INR 132 crores versus INR 569 crores a year back. Overall, while we have temporarily moderated the corporate book, our long-term strategy of scaling up the granular and mid- and small corporate portfolio, along with selective exposure to the large corporates, continues to be actively pursued. The same should reflect in the coming quarters. Now let me cover the other retail assets. Our other retail asset grew by 18% Y-o-Y and 2% quarter-on-quarter. The MSME book under the business banking group is at INR 17,973 crores, growing by 8% Y-o-Y. The scale of home loan book continues with outstanding as of now of INR 4,996 crores, growing by 113% Y-o-Y and 11% quarter-on-quarter. The LAP book maintained steady traction with 12% Y-o-Y and 1% quarter-on-quarter growth. Credit card spends at INR 26,900 crores grew 15% Y-o-Y while moderating on quarter-on-quarter basis. Our market share in credit card spends was at 4.78% based on the latest available data. The asset quality trends have been range-bound in all the segments. And we don't have large exposure under the unsecured category of loans. The credit card stress remains elevated, but stable. The secured side asset quality trends have been comfortable. Overall, we continue to scale our other retail assets segment with a clear focus on diversifying the loan book and increasing the share of retail secured assets, particularly through home loans and MSME lending. Now coming to liabilities. Our deposit franchisee has demonstrated resilience after being put to test in early March. The deposit accretion improved during the quarter after a dip in March albeit it was -- it has not yet reached similar levels prior to the March disclosure. The retail deposits as per LCR at INR 1,84,634 crores grew by 6% Y-o-Y while remaining steady quarter-on-quarter. The share of retail deposits now stands at 46.5%, versus 43.7% Y-o-Y and 45.1% quarter-on-quarter. During the quarter, we continuously exited certain nonaccretive wholesale deposits, leveraging our comfortable liquidity position. As a result, total deposits at INR 3,97,144 crores declined 3% quarter-on-quarter. During the quarter, we consciously exited certain nonaccretive wholesale deposits. Sorry, I think -- with comfort on the stability of the deposit book, the bank undertook significant rate actions up to 200 bps on savings account and up to 100 bps on term deposits in certain slabs. We have also combined the affluent and nonresident businesses, considering the overlapping profile of the customers. The combined deposit stands at INR 74,300 crores, growing 5% Y-o-Y and NRV of INR 1,21,200 crores, growing 16% Y-o-Y. We let go of some CDs, the certificate of deposits, raised in the month of March. And thus, the CD reduced by around 12% quarter-on-quarter. Borrowings at INR 52,200 crores were down 3% quarter-on-quarter with share at 9.7% of the total liability book. We maintained a conservative liquidity stance carrying excess liquidity with an average LCR of 141% and average surplus liquidity of INR 52,700 crores in the quarter. In summary, our retail deposit franchise continues to assure resilience and we are pivoting towards growth as we now start quarter 2. We are not hesitating in cutting rates, and we do believe that there is further scope to cut both savings account as well as term deposit rates. Improving the granularity of deposits, along with reduction in cost of deposits continues to be our immediate priority. The liquidity ratios -- the liquidity measures announced by the Reserve Bank of India are positive and our journey towards building a more granular and a robust retail deposit franchise continues. Now let's come to the digital traction. Our digital business continues to scale meaningfully across multiple lines of business, as highlighted in our investor presentation. Our flagship mobile banking app, INDIE, has shown strong action this quarter, driven by customer adoption of the upgraded experience. The key performance metrics include monthly active users up 2.6x quarter-on-quarter. Across businesses, we saw robust growth from direct-to-client campaigns and migration from the legacy app. The FD bookings from INDIE app were up 220% quarter-on-quarter. New savings account via INDIE app was up 2.9x quarter-on-quarter. Mutual fund bookings through the INDIE app up 600% quarter-on-quarter. Loans disbursed via app up 37% quarter-on-quarter. Our MSME-focused digital platform, INDIE for Business also delivered strong results. The app now has over 1,00,000 MSMEs registered, with monthly active users growing 129% quarter-on-quarter, and tax payments and bill payments via app growing at 600% and 57% quarter-on-quarter, respectively. Now I'll turn over to my colleague, Anil, to take you through the financial highlights.

Thank you, Soumitra, and Chairman, sir. Good evening to all the listeners on this call, and thanks for your participation. Coming to the financial performance. Despite a challenging operating environment, we are pleased to report the bank has returned to profitability this quarter. So we are pleased that we are profitable this quarter. Our net interest income at INR 4,640 crores, and net interest margin at 3.46% remained steady compared to normalized numbers for Q4 of last year. Net interest margin was supported by improving cost of deposits on the back of rate cuts, particularly savings accounts for this quarter and higher overall retail loan mix. This helped offset the impact of excess liquidity, which the bank was carrying and lower share of MFI loans. The reported NIMs were higher by 11 basis points due to one past NPA recovery and a one-off interest on income tax refund which was received by the bank in the quarter. Q1 is typically a seasonally soft quarter for core fee income. This quarter, core fee income was further impacted by subdued corporate activity and lower MFI disbursements. We, however, had a healthy treasury and recovery income during the quarter. As a result, noninterest income was at INR 2,157 crores. Operating expenses were stable quarter-on-quarter and year-on-year growth was contained at 9%. So this is one of the objectives which the Chairman, sir, also mentioned and how we are managing and trying to control costs. The cost to income is elevated due to subdued revenues as we carried excess liquidity as well as seasonally weaker quarter. As we resume asset growth and with tighter cost control, we aim to reduce cost to income consistently throughout the year. Operating profit for the quarter was at INR 2,560 crores. In terms of asset quality, the gross and net slippages improved quarter-on-quarter to 0.74% and 0.61%, respectively. The asset quality trends in vehicle, retail and corporate banking was stable. Microfinance showed improvement quarter-on-quarter. However, slippages are still higher than the normalized run rates. The gross slippages by key segments were vehicle finance INR 743 crores, corporate INR 245 crores, other retail INR 692 crores and microfinance at INR 888 crores. Our SMA-1 and SMA-2 book improved to 14 basis points versus 24 basis points quarter-on-quarter. Net security receipts declined to 22 basis points versus 27 basis points quarter-on-quarter. Restructured advances declined to 10 basis points versus 12 basis points quarter-on-quarter. Overall, the bank returned to profitability on quarterly basis with profit after tax of INR 604 crores. Our balance sheet remains strong with a capital adequacy ratio of 16.63% excluding quarter 1 profits. Provision coverage has been kept at 70%. Average LCR of 141%, with excess liquidity of INR 52,700 crores. I will now handover to the Chairman for concluding closing remarks.

Thank you, Anil. While we close the opening remarks, I do want to bring in to focus some key messages. Number one, we have delivered without any prior period adjustments as committed in the last quarterly call. We take this opportunity to again assure the stakeholders on the thorough review done while finalization of the last quarter's results. We're progressing on building a sustainable bank in areas of our expertise. We are growing in vehicle, retail, mid and small corporates, granular liabilities, et cetera. We remain cautious on unsecured segments. Number three, the CEO succession process is well on track, and we are confident of a highly capable and a competent leader soon at the helm of this bank. The Committee of Executives has done an excellent job, as I had mentioned earlier, navigating through these turbulent times under the close guidance and engagement of the Oversight Committee of the Board, and of course, through the support of all the 45,000 employees. While the financials have returned to profitability, we all admit there is certainly significant improvement -- scope for improvement from here on. There are some near-term opportunities, which we are actively working towards, while also laying and building on the foundation to achieve our medium- and long-term aspirations. Lastly, the compliance and governance culture along with rebuilding the talent desirous of delivery remains the bank's primary area of focus. All our actions and communications are underpinned towards this objective. We are on a -- we have embarked on an exciting journey of rebuilding this bank towards a more sustainable and predictable growth. I -- in conclusion, I express my gratitude to the regulator and all stakeholders for continued guidance and support. I now open the forum for question and answers.

[Operator Instructions] The first question is from Rikin Shah from IIFL Capital.

I have quite a few questions but I'll try to restrict it to three, four and will come back. Firstly, in the opening remarks, there was a statement that there was interest on IT refund and interest recovery in one account. Would you be able to quantify the same? And ex of both these factors, what would be the core NIM in this quarter? That's the first one.

We explained, Rikin, that those two account for around 11 basis points on the margins. So you can back-calculate the quantum.

Got it. Okay. Secondly, it's on cost of fund. 12% of the CDs were run-down. So is it fair to say that a bulk -- a large proportion of the CDs that we raised in March are still being carried by the bank. And if you could also help us with the cost of savings deposits currently. Just trying to understand how the cost of fund trajectory evolves from the current quarter.

The CDs are still there, you're right, because some of those CDs were for 6 months. They will come up for renewal in this quarter. We have been -- we have not been actively issuing CDs given the rates that are there and the liquidity in the market that we are getting. So over a period of time, you will see CDs coming down. We have always kept CD at 3% to 4% of the overall deposit base. Today, it's slightly elevated and we will tone down as we progress. So that's where we are on the CDs. On the savings account side, we don't give the savings account interest rate, as you know. It has come off versus last quarter, our current run rate is lower. So there is still some benefit of last quarter's savings account rate cuts. It's yet to be fully reflected into the cost of deposit, but you will have to wait for another quarter until you see it. We don't give our SAAR rate.

Maybe qualitatively, a way of thinking about how much cost of fund benefit kind of flows through in the next couple of quarters given that there are multiple moving parts in addition to the steady-state business.

No, precisely because there are multiple parts, we won't be able to say how much cost of fund is yet to come. But if I have to give you a ballpark, how much, let's say, current SAAR run rate versus where we closed last quarter, there is another 40 to 50 basis points reduction in cost of SAAR is possible. Rest of the cost of fund deposits, there are multiple moving parts. How much of that will in the end reflect into cost of fund reduction, that we will have to see how the quarter progresses.

Fair enough. The third one is on the fee income. Understandably, due to the business degrowth, the fee income has been weak, but the growth has collapsed across the line items. So adjusting for any volume or business uptick that we see from here, should this be considered a new normal base for the fee income?

See, last quarter's fee was not in a way comparable. You would have seen there was a lot of one-offs we had adjusted for. So please don't compare that. There were lot of transfers from NII to fee, et cetera. This quarter's base is something which you have to start your benchmarking from. So you're absolutely right. Whatever is what, this quarter's reported fee, that is the base from where we will start. Some of those fees are impacted because of the lower disbursements in vehicle, MFI, et cetera. Corporate, if the book degrows by 10%, the consequent fees also go away. So all those things are there. But there is no one-off in that, yes, I can say that.

Got it. And the second last question is on...

You also the see the quarter 1 is obviously a soft quarter, and you would see it from quarter 2 onwards, it will scale.

Got it. The second last question is on the asset quality. The fresh flows in MFI have actually again inched up in these last 3 months. And even in other segments, even on absolute and percentage basis, the NPAs have gone up. So do we still expect elevated slippages in the coming quarters? And this 200-plus basis point of credit cost, is there any scope for a meaningful improvement from the current levels?

See, MFI, we had said that it will take at least 6 months for things to normalize. We have come down from INR 1,600 crores of last quarter's slippage towards around INR 900 crores this quarter. So there is a meaningful reduction. But there is still -- it's elevated versus the normalized run rate, and it will take maybe 3 to 6 months more before we can say that. Sequential uptick is always there from quarter 4 to quarter 1. Plus there were some additional changes in terms of MFIN guidelines getting implemented, some of the state-level issues were there and you would have seen other MFI results. So it's a common phenomenon across the industry where overdue book has increased in June versus March, and we are no different. And we continue to have the same belief, it will take another 3 to 6 months for microfinance before we can say that stress is behind us. Coming to other segments, as we said, there is a minor 2, 3 basis points here or there increase in slippage, which is par for the course. I wouldn't read too much into it. Bank as a whole, ex MFI, slippages are stable. Only thing is the GNPA number that you see is higher sequentially as well as year-on-year, because we have not been selling to ARCs or writing it off. Given the limited operating profit that we have, the capacity to write off is also limited. Bulk of the write-offs are assigned towards microfinance, et cetera. So at some appropriate time, you will see the write-offs also coming in. GNPA as you know, is not the right indicator in the bank side. Slippages, the gross and net, is what we should look at. Most of the businesses have shown stable gross and net slippage.

Got it. Fair enough. And the last question is the notification of the fund raise. Was it just an enabling resolution? And what is the status of regulatory approval on increase in the promoter shareholding? Those are all my questions.

Every AGM, as you know, we take enabling resolution from the shareholders to raise both equity as well as debt capital. It doesn't mean we will raise. At appropriate time, the Board management will evaluate what is the right time and quantum that we have to raise capital. As you would have seen, our CET 1 is now in excess of 15.5%, and that too without accounting profits on quarter 1. So we have enough capital available. Growth is, as you know, it's in single digits or almost flat for this year, and we will have to see how the year goes. So capital-wise, I think we are now very well placed. We don't need capital. But Board and the incoming CEO as well as the management will evaluate when we want to raise capital. The shareholder resolution is just an enabling resolution, which we take every year. It's nothing out of ordinary.

Got it. And the regulatory approval on increase in promoter shareholding, what is the status of this thing?

No, we have not heard anything from the RBI. There might be discussions between the promoter and the regulator directly. The bank is not aware of any new development that which we are required to disclose.

Next question is from the line of Piran Engineer from CLSA India.

Just firstly, on the NIM front, or rather yield front, how much of the repo pass-through is done?

So different businesses are at different benchmarks. We have vehicle which is largely fixed MFI, which is largely...

No, no, EBLR. Sorry, let me just make it short.

That's where I'm coming. Difficult to give you at a bank level how much EBLR is passed on. The large part of the external benchmarking happens in corporate side. And on the corporate side, the yields are down around 20 basis points this quarter versus last quarter. So there is the bulk of EBLR repricing that you can see playing through in this quarter.

So -- no, sorry, the June -- so let's say, the repo rate cut happened in early June, when does that really get passed on? Does it happen evenly over the quarter?

No, no. Whenever it comes for renewal, there are different terms. Different loans have different terminologies on the corporate side. They have got various renewal processes. So it gets passed on over a period of time. In the end, there could be some lead lag but over 3 to 6 months, everything gets passed on.

Okay. Fair enough. Just secondly, on the fees bit, so I understand there were a lot of restatements last quarter and all. But even if we look at your card fees, card and distribution, and I understand there's seasonality in 4Q. But even on a Y-o-Y basis, it's like down 50%, 60%, whereas your book is kind of still growing on a Y-o-Y basis. So how do I reconcile this?

On the insurance business, I think, this you know, it's a seasonal business. So quarter 4 was the highest. And though there was events in quarter 4 of last financial year, we didn't suffer that. We did our distribution fees that way. On the card side, some part of the business, especially on the commercial side, we are letting go because it's not too efficient a business. So hence -- but you will see that, once we normalize this from quarter 1, you will see the growth coming back from quarter 2 onwards. But your profitability doesn't get affected because of this.

Okay, okay. And just lastly, you all mentioned you all are combining affluent and what was it, NR deposits? You mentioned something like that.

Okay. Yes, I'll take that. It's basically, see, the clientele, is exactly similar, and our client is also a HNI client. So we thought that, okay, the affluent and the NR, the client segment is the same. One is Indian, one is the NR. So I think we -- because the product program can be actually offered better. So hence, we have combined that for better client offerings.

Next question is from the line of Kunal Shah from Citigroup.

Again, coming back on the fee income side, if you look at fee to assets, that is now actually down to closer to like 1.1% on an average. Last quarter, you indicated, like, say, INR 2,400-odd crores to be the normalized number, and now you are saying that we need to reset to this level and then let's see, in terms of the growth. So where eventually will fee to asset settle, because I think that's going to be the key driver to ROAs. And this time, again, it has reset at a much lower level.

No, Kunal, if you recall, we did not say that's the base last quarter. I still recall that the number reported was normalized. And we always said that number will go up time down depending on the business mix. So this quarter, quarter 1, as you know, is a seasonally weak quarter compared to quarter 4 across the businesses, be it vehicle, microfinance, plus added impact of corporate. The retail side distribution fees are lower. Some of the credit card fees, et cetera, we have led to being selective. So we are cognizant of how fees are important from the in line ROE perspective, and the businesses are not letting go the fee ambitions. And we will start rebuilding our growth journey, keeping in mind both NIM as well as fees. If we were to give you a guidance or target where we would like to, we are...

How far can we optimize, yes? Because it said 1.1%. So can we even optimize still 1.5%, 1.7%, how would that be?

Kunal, we would be not in a position to give you any guidances on the specific numbers.

Okay, sure. And secondly, on maybe cost side, you mentioned it, I think the part of it is because of the credit card, because maybe it's not coming in the fee as well as it's not there in the OpEx. So if we add that, okay, and maybe the loss in the card fee income and with the overall overhead cost, then it seems to be like almost a flattish number, while employee cost has gone up quite significantly. So what would have been the reason for this kind of a jump in the employee cost in particular?

So there is no increase in the OpEx as such, but there were certain expenditures pertaining to employees that we have regrouped for the year. And we have restated that. So that would be basically permanent from now onward.

Kunal, it's Soumitra Sen. As this is change which we did, I think the accounting, line-wise, we have put it into the employee cost line. That's it. So if you see...

And then quantum will be?

For this quarter, it was INR 114 crores. So that has been done. And then basically going forward every...

It's a reclassification which we have done, so overall OpEx doesn't go up. But I think we have put in the right line, which is under the human resources group. So from now onwards, you will see that the human resources -- so the growth -- because of the reclassification, you're seeing a jump.

INR 114 crores you mentioned?

Yes, roughly, INR 114 crores.