IndusInd Bank Limited (INDUSINDBK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the IndusInd Bank Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kathpalia, Managing Director and CEO, IndusInd Bank. Thank you, and over to you, sir.

Good evening. I know it has been a hectic day for you with a lot of banks declaring their results. So thank you for joining the call. And I will start with some macro commentary and then go into some bank specific detail. At the macro level, India has been through one of the most stringent lockdowns across the world. The country is however opening up in a phased manner since May. Many ultra-high-frequency indicators such as power demand, fuel consumption, E-Way bills, toll collections, et cetera, have shown rapid improvement in the last couple of months. The economic activity implied by these indicators is now down only 10% to 15% year-on-year. However, sales of the company may go -- may slow going forward as the pent-up demand due to lockdown eases and reintroduction of lockdown in some containment zones. Rural economy, nevertheless, continues to be faring better than the other side, and that is evident in our portfolio as well. Overall, trade board is hovering around 6%, and the issues remain due to risk awareness in the financial system from redemption pressure on mutual fund, lower appetite for top AA bonds, also due to some perception around credit fund. Credit growth may benefit with some shift of bonds market to bank, interest capitalization and [ MSCD ] scheme. I believe the government and RBI are taking a calendarated approach to assess the actual economic impact of COVID-19 and the measures announced so far. There is room for further fiscal and monetary measures depending on how economic activity pans out. The least variant financial support for MSME is a very good initiative with sanctions by the bank starting 40% of the target. Now turning to the bank specific commentary. During the quarter, we focused on ensuring minimal disruption due to COVID-19. 90% of our branches were operational at all times with no disruption in client servicing. Deposit mobilization, we saw 5% quarter-on-quarter growth with retail deposits growth of greater than INR 5,000 crore despite the lockdown. Building liquidity buffers. We now carry INR 30,000 crores, as evident in our balance sheet, of excess liquidity. Stability in operating profits, Q1 PPOP margin at 3.95%. Conservative asset recognition and provisioning, accelerated slippages by not allowing [indiscernible] and improve PCR to 67%. Raising capital to boost CRAR I will first talk about capital, and you all would have seen the Board has approved a substantial issue of capital of INR 3,288 crores or USD 440 million. The fund raise will add 125 basis points to our capital adequacy, taking our overall CRAR to around 16.5%. This improved the existing 15.16 plus 14 basis point points of current quarter profit, plus 1.25% from the capital raise. The issue saw participation from credited as well as long-term investments. The promoters of the bank are also participating in the fund raise to maintain their 50% holding, reflecting their continuous support and confidence they have in the bank. Shares to be issued to Route One, Tata, ICICI Prudential and AIA will have a 1-year lock-in being qualified institutional buyers while issue to promoters and Hinduja Capital will be locked in for 3 years being nonqualified institutional buyers. With stable and growing liability base and comfortable capital buffers, the bank is well positioned for growth and as well the economy recovers. In terms of some of the operational highlights, in this context -- in the context of COVID, we changed our approach from moratorium 1.0 to moratorium 2.0. In moratorium 1.0, we had offered a lockdown to all eligible retail customers and opted for corporate customers. In 2.0, we are following an opt-in for all customers across retail and corporate segments, except microfinance, which remains an opt-out due to the nature of the business. We continue to run educational campaigns on collections across the portfolio, notwithstanding the availability of moratorium. At the overall bank level, the portfolio and the moratorium is 14%, excluding microfinance. Of this, 90% is secured. As said earlier, microfinance is an opt-out model, but we are seeing good traction on collections. Adjusting for MFI customers who have paid more than 4 installments, bank-level moratorium will be 16%. These numbers are all by value of the loan. And if we use volume numbers for retail, then the respective would be 8% and 11%. About 92% of the customers in moratorium 2.0 have also availed moratorium 1.0. At the segment level, we have retail portfolio at 90% under moratorium and corporate by -- at 9% by value. A considerable section of our customer base is eligible for guaranteed emergency credit line and have cumulatively availed disbursement of INR 3,200 crores. However, less than 2% of the eligible customers have so far taken this facility amounting to INR 117 crore disbursement, implies comfortable liquidity position with these borrowers. We have seen sizable number of customers taking moratorium and still paying their dues. There has been numerous combination of customers who have taken moratorium for 1 or 2 months, adjust for interest or principal or paid money in the account, but not applied towards moratorium, et cetera. All these combinations create confusion, and I believe the right metric to look at is the trend in collection efficiency and by when it will get back to normalcy for assessing the recovery rather than just the moratorium number. Keeping that in mind, I want to share recent performance of some of our portfolios to give you broader color on how we are trending. A significant part of our portfolio is in rural, semi-urban areas, which are comprehensively less affected and hence have seen good recovery post relaxation in lockdown. Vehicle financing. We believe our focus on small road transport operators will keep us in good stead in this crisis as well. This being a largely owner-operator segment, it is not impacted by the lack of drivers that may impact fleet operators. Current slowdown in the CV sales is also helping the existing capacity with better utilization. We saw strong improvement in collection efficiency from a low of 30%, 35% in April to around 75% currently. We have over 30 years of operating history with more than 70% repeat customers. The credit scenario for 3 decades is unlikely to change due to a 3-month payment holiday. In my opinion, portfolio or moratorium -- portfolio or moratorium is less than 20% by value and 10% by volume. Microfinance. We kept constant engagement with our client base and did over 6 crore calls since the lockdown began. That helped us hit the ground running when the rural areas opened up in May. We have seen rapid increase in the collection efficiency every week as can be seen in the disclosure. The bank profile are better than what we had seen post-demonetization. Our collections are tracking well over 80% of the weekly due. Over 82% of our customers have started paying. And if we include customers who have excess issues, over 92% of our customers have paid some of their installments post-lockdown. The uniqueness of the portfolio in terms of geographic diversification, rural focus, ticket sizes and exposure much below the industry, weekly collection, professional management with years of experience are key differentiators that we believe will help us outperform in the industry in this crisis as well. Other retail products. LAP and business banking are well secured portfolios with low LTV and typically provide residential properties as collateral. The [indiscernible] accounts indicate activity level that the customer level is back to 80% to 85%, which means businesses are steadily returning to normalcy. Our credit card book is just 3% of the overall loan. About 15% of our customers have opted for moratorium and repayment. And resolution rate is at 70%. We continue to see recovery in cards, which are at 85% of the pre-COVID level. Personal loans and other unsecured portfolios are quite small and don't turn the needle for the bank. Corporate bank. Portfolio as a moratorium is 9%. Of this, large corporate segment has lower, while mid and small corporates have a higher proportion under moratorium. We have seen corporates opting for moratorium out of caution and preserving liquidity. Borrowers opting for moratorium are spread across multiple sectors. In terms of our specific sectors, in real estate, we have 10% of the book in moratorium. 92 out of 98 projects have started construction substantially, while the balance are in resource mobilization mode and expect to resume construction soon. In NBFC and HFC, we don't have any clients on moratorium and there are no overdues as of June. Gems and jewelry. The portfolio continues to remain -- maintain resilience despite the current turbulence. The customer base is paying their installment except for a small sizeable exposure, which has availed moratorium. In mixed corporate, portfolio churn is at 85% to 90%, of the last quarter as is, indicating that the business operations activity across from the customers. Our exposure to affected sectors such as travel, tourism, education, et cetera, are small, but are being monitored continuously. We refrain from providing release to visibly weak accounts and have accelerated NPA recognition in such cases, which I will talk about later. I also want to highlight one additional disclosure on fund and loan-funded BBB rated book of the corporate segment of roughly INR 46,000 crores. We wanted to show you, one, the book at portfolios, which inherently get rated at BBB, but their credit behavior is superior, examples gems and jewelry, that has no NPA. Two, book is granular and then collateralized, example, real estate and lease rental discounting. Three, across the cycle, slippages has been steady at 1.4%. We do closely monitor credit behavior of this book, and our internal ratings are conservative compared to external rating. Credit outcome so far has been in a narrow range. We have completed our second stress test sensitivity analysis and reassessing our initial adoption. In stress test 2, we incorporated recent economic trends on recovery as well as borrowers' behavior and our feedback to fine-tune our earlier [ recession ]. We continue to believe that rural, MFI and retail finance segments will perform much better than the perception that is being made up. However, due to the sharp contraction in demand and based on our actual observation on the ground, we believe net incremental slippages due to COVID will be 92 basis points versus 83 basis points in stress test 1.0. Combined with higher PCR ambition, our incremental provision cost for the year due to COVID is estimated at 65 basis points versus 53 basis points in stress test 1.0. Please note that this is before locked in and default, i.e., realization of security with help of the lending. We have seen minor fluctuations in collections depending on certain areas get locked down again and that risk of COVID remains. We have made additional provision of INR 920 crores this quarter, taking our total COVID-19 provision in INR 1,203 crores, which is broadly in line with the outcomes of our stress test outcome. We remain conservative on our provisioning approach. And if required, we will make further provisions in the coming quarters if recovery remains weaker than expected. At this stage, we hold total COVID provision representing 90% of our provision required estimated in stress test 2.0. Next, I would like to come on the financial highlights of the quarter and full year. Quarter 4 (sic) [ Quarter 1 ] witnessed steady operating performance with revenues up by 1% year-on-year and operating profit at INR 2,950 crores, which is up by 13% year-on-year. Our PPOP over asset was healthy at 3.95%. Net interest income grew by 16% year-on-year despite loan growth of only 2% year-on-year. NIM improved 3 basis points of 4.25% to 4.28%, driven by a fall in cost of deposits sequentially. Other income was down by 9% due to lower client fees impacted by the lockdown and lower economic activity. Treasury income was strong due to surplus securities and lower rate. And this income was used to increase our provision cover. We still carry good NPA provision -- position and can monetize that an appropriate tax. We put traction on our deposit during the quarter of 5% quarter-on-quarter growth. We ramped up our digital acquisition during the lockdown, followed by resumption in the physical acquisition in June with relaxation in lockdown. Our June customer acquisitions were higher than the pre-COVID level. We improved the deposit mix as well as by reducing contribution of certificate of deposits to below 10% versus around 15% quarter-on-quarter. Our credit to deposit ratios improved to around 94%. Bulk of the value growth happened towards end May and end June once the lockdown was relaxed. While we are paying a tactical premium for our fixed deposit utilization maybe for another 1 or 2 quarters, our overall cost of deposits fell by 32 basis points due to repricing of old book and a sharp reduction in the corporate deposit rates. Further, as borrowings are also getting repriced lower, our cost of funds fell by 42 basis points quarter-on-quarter. After the event of last quarter, we have taken proactive steps to shore up our liquidity, and our quarter-end LCR was at 139% and an average LCR of 124%. We are carrying excess liquidity of greater than INR 30,000 crores currently in the form of government/AAA securities or bank balances. Our borrowing book of INR 60,000 crores has only 12% in short-term borrowings other than borrowing against our money market instruments. We've slowed our disbursement due to COVID-19 during the quarter and also slowed down some corporate loans, resulting in a 2% year-on-year loan growth. This resulted in the loan mix improving in favor of retail business at 58% to 42% for the corporate bank. This also has a benefit of slightly reducing the RWA intensity from 84% to 82%. Operating costs were down by 1% year-on-year, 11% quarter-on-quarter, resulting in the cost-to-income ratio of 39% from 43% quarter-on-quarter. The cost saving approved on account of lower disbursement, activity reflecting the variability in some business cost structures, and therefore, costs will go up on revenue pickup. Our total provisions were at INR 2,259 crores. During the quarter, we increased our PCR from 63% to 67%. We have raised COVID-19-related provisions to INR 1,203 crores from INR 283 crores last quarter. We have also made a further standard provision of INR 75 crores for the telecom sector in addition to the existing INR 75 crores standard provision. We have recognized and made provision this quarter on weak accounts, both in the corporate and consumer side. We did not take benefit of the [indiscernible] and have accounted the provision impact. Our 90% of the slippages are due to conservative recognition on standard accounts. These recognitions of SMA1; and two, overdue book of 70 basis points as of March 2020 gets reduced to 35 basis points. While GNPA is flattish at 2.5% despite accelerated slippages and denominator effect, net NPA fell 0.91% to 0.86% due to higher PCR ratio. We have fully written off our exposure to our large infra group at both holdco and SPV level. Our provision coverage ratio, including specific standard and floating provision, stand at 96% of the loan-related provisions. And the loan-related provision stands at 2.15% of the loan book. Our PAT for the quarter was INR 510 crores. Our capital adequacy improved to 15.16% due to lower intensity quarter-on-quarter. CRAR, including quarter 1 profit, would be 15.35% versus 15.04% last quarter. In conclusion, we have progressed on retailization of deposits, liabilities leading a growth and conservative loan recognition and provisioning. I think this balance sheet realignment coming at the right time and comfortable capital adequacy will position us for the growth revival likely in the second half of the year. Our retail division is already seeing initial signs of recovery. 2-wheelers, tractors and cars are quickly getting back to pre-COVID levels. It really should follow post-monsoon. Microfinance disbursement and volume terms are already at 86% of pre-COVID, but we have conservatively dropped the ticket sizes for now. We are fine-tuning our corporate towards working capital and granular loans. We aim to grow deposits by around 5% quarter-on-quarter along with the CASA ratio above 40%. So overall, we are executing the business build-out philosophy outlined in the quarter 4 analyst form. That's all for now, and we can open up the call for questions.

[Operator Instructions] The first question is from the line of Kunal Shah from ICICI Securities.

Yes. So firstly, in terms of the -- when we look at it, the way the moratorium would have come off, maybe currently, you highlighted, it's around about 14-odd percent. So how has it come off from April and May level? And what would be maybe the overdues, which would be there, which are not as a part of a moratorium at this point in time. So maybe these were not recovered anything out there, yes.

I think, first of all, our moratorium with MFI book is 16% and moratorium without the MFI book is 14%. So I think I just wanted to -- and that is on value basis. And on volume basis, it is: excluding MFI, 8%; and with MFI, 11%. So that's something which we just wanted. We had almost half of the book in moratorium -- book in moratorium in the first part of our moratorium of which consumer was around 75% and the corporate was at 23%. Customers who availed the moratorium 1 have either started paying or have taken morat 2. Most of the customers who have already paid the March installment before moratorium 1 was allowed. We have also received some collections in April and May as well. So the actual impact of the moratorium 1 is only a delay in the collections of 1 to 1.5 months. This will get recovered over the tenure of the bond loan. Moratorium 1 as such is now history. And we have to see how many of our moratorium 2 had collection post that. If you look at it, in moratorium 2, 16% of the bank book is under moratorium, 19% is consumer, 9% is corporate, of which collections have started. I think the change is -- okay, overall change on the thing is about 34%. 46% of the consumer, that is achieved. And 14% in the corporate side. Of this collection target, 36% have started paying out of that in the change in moratorium 2 and 14% have started paying as the change -- of the change in the -- yes, you have to clarify. I just want to go through the number, because these things can be a little confusing. So in moratorium 2, 16% of the bank is in moratorium, 19% is from consumer and 9% is from corporate. So as far as corporate is concerned, the 34% -- we are down to 34% for the bank as a whole, of which 14% is corporate and all of them are paying, and they remain under moratorium. So today, we are at 14%. Out of the 46% in consumer, 36%, which is almost 2/3, a little more than 2/3, are actually paying. And only 10%, their collections have not started. So it's just the 10% now, which is the collection -- the list of clients who had -- who may take moratorium 2, because it's still available in August, or start paying dues or the collections may eventually slip into NPA. So it's a mix of 3 or 4 buckets [indiscernible]. Everything else is absolutely clear.

Yes. So on retail, sorry, again to touch upon. So corporate was down from 23% to 9%, correct? And retail was down from more than 17% to 19-odd percent in value terms.

75% down to 19%, right. That means 46%.

Yes. So that is -- yes, so almost, say, 75% to 19%, so that is almost 56-odd percent. Out of this, you are saying 46% are actually paying and 10% are where collections have not yet started, the breakup of this 56%. Proper? Yes. And on corporate -- so on corporate, again, from 23% to 9%, so there, in terms of the similar kind of a breakup, 14% -- what you highlighted out of this 14%, how much are paying and how much where collections are not there.

Corporate is 100%, Kunal. So it's really down from 23% minus 9% is 14%. And it stays at 14%.

Okay, cool.

And 23% minus 9%, which is 14% [indiscernible].

And all 14% are paying.

Yes. And as far as consumer is concerned, 75% minus 19% is 56%. And about 65% of them are paying and about 10-odd percent are not paying or not determinate yet as of right now. So this 10% of the portfolio is where customers will engage in August to determine whether they should move to moratorium or whether they will start paying, because the collection efficiency is going up. And a small percentage of that would also flow into NPA. So that part is the only part that is a little bit indeterminate right now.

And this would be -- this segment is retail.

Yes, that is 10% of consumer.

No. So within consumer, maybe 10%, which product segment would it be concentrated or is it across...

Across the segment, and it's not really different across the segment.

Okay. Sure. And the second question is on the corporate book. So in fact, when we look at it, largely, the rundown, which is there on the loan book, that's primarily on the corporate side. So what would be the reason for that? Is it like there are maybe the transfers, which are happening because our MCLR is much higher, maybe almost like 150, 160 bps higher compared to most of the other players? So are we seeing some kind of a business transitioning away from IndusInd to some other banks? And if that's the case, maybe how should we look at this entire portfolio? And given this kind of MCLR, what would be our stance in terms of the overall corporate growth? And given that on the deposits now, it's overall, we are seeing the accretion, so any plan to further reduce the deposit rates as well as MCLR, which we are not at touch much over last 2-odd quarters?

So let me answer this question. I think on the corporate book side, we had sold down our INR 3,600 crores of corporate exposure to bring our PE ratio down to less than 100%, and that is at 94% as of now. And we want to bring it down to between 90% to 95%, and that is our benchmark, which we want to maintain on the corporate side of the book. I think we also saw some repayments coming in, in the NBFC as well as gems and jewelry book. And I think these payments are important to be tracked, and I think we saw some repayment. Our disbursement has been slow right now. We were very cautious at this point of time in taking fresh disbursement or fresh approvals as of now. So that's -- there's nothing to say that we are not competitive in the corporate market. We know the segment which we want to operate in. And I think we are very good in those segments. And we will -- of course, it will become more granular, it will become more retail. But I think corporate book will come back. It's only a matter of time. We are just being cautious as of now in growing our book. On the corporate side, we just want to see how the COVID completely plays out. And if we grow, we are looking at AA and AAA rated breakup for the time being. What was the second question?

No. So in terms of the strategy on the deposits, the rates as well as [indiscernible], because we have been the slowest amongst all the private banks.

Let me tell you, Kunal, and I think you have a valid question, and we've been asked this question. I think we want to -- we have kept our term deposit rate on the retail side elevated, not on the wholesale side of the book, which is the bank deposits. We're as competitive as anybody on the fund deposit side of the business, which is the wholesale side. I think one of the reasons why we have to do it is, well, if you look at the Basel III disclosure in the LCR, we were low and a lot of people were being penalized or being low on the LCR side, which was at 35%. If I go back to the history of the bank, you know that the bank was set up as a business on a segment bank and our focus was to get to the business owner segment and we never focused on the individual segment in a big way. Over a period of time now, we feel that we have a relevant side, we must grow our retail side and be at these points of time. I think the best way to grow, which is the term deposit route and where we kept it elevated. And our target is to mobilize INR 30,000 crores of term deposits at a ticket size of less than INR 2 crores so that we actually mobilize a large number of clients and then start cross-selling it into them or savings accounts. During lockdown, we had no options other than to do that. Will we change our rate? I think I told you the number. Hurdle rate is INR 30,000 crores. As and when we reach that number, I think we will see where we are. And at that point of time, the retail LCR for us would be around 54 to 55, which is the best-in-class in the industry on the -- and the Basel III disclosure. We want to get to be in the top 3 or the top 2 players on the Basel III disposal. We want to get there. And I think we've chosen this way to do it. And I think over a period of time, yes, by 3 quarters away, you'll see the interest rate of deposits coming down.

Yes. Kunal, I just want to come back to the first question that [indiscernible] my table. So I just want to reconcile the number. Okay. So corporate was 23% moratorium 1, down to 9% moratorium 2, which leaves 14%, all of whom are paid, okay? So that's corporate. As far as retail is concerned, 75% moratorium 1, down to 19% moratorium 2. This means 56% is the change. 46% are paying and the 10% can go in 3 different directions. So just to reiterate those numbers.

The next question is from the line of Adarsh from CLSA.

Thanks for the disclosure on BBB book on the corporate side. So can you just clarify now, of the corporate moratorium, how much of that is from the BBB book, if you can just indicate that?

Maybe -- it may be slightly higher than 9%. I don't think we disclose that, but I think it's slightly higher than 9%. But it's not -- we have also disclosed that our -- over the cycle, our traded cost on that book or the total provision is not more than 40 basis points on that book. And I think we are not seeing anything different on that book as of now. So if you are saying that we are seeing -- that's why we gave the disclosure, because I thought there was a little bit of speculation, which was being done on that book. And I think we wanted to give the comfort to the communities that our credit scores in that book at the over cycle 40 basis points, and we are not seeing anything disturbing threat on the BBB-rated book as of now.

Got it. And this is useful in terms of what you've disclosed on retail gems and jewelry in LRD. Can you speak about the other 2 parts, which is the small corporate and the other exposure? And that forms like hardly 50% of this book, right? And it's a fairly large book again. So anymore -- this is -- to start off, this is extremely granular disclosure. But any sense on the other 2 parts, either in terms of sector...

Yes. So I think, look, the whole purpose -- it's impossible to give a complete breakup, so we try to break it up as much as possible. Just to recap, in gems and jewelry, we haven't had an NPA for years together. [indiscernible] real estate, no NPA. Nonfunded exposure very short term. Then you have the other 2 segments that you talked about. The small corporates, which has less than INR 100 crore ticket size, are pretty small. There were very, very small subsegments over there of maybe about INR 1,000 crores to INR 1,500, which is sort of in that, a little more stressed segment of education, travel and tourism and things like that. It's a very small exposure in the other 2 segments. But having said that, even in the other exposures, which are slightly bigger, where 24% of the BBB book is in -- is about 50 to 55, we have the entire exposure, almost 100%, 97% is collateralized. There is hardly any SMA1 or 2. And we have there -- I mean I don't know what more breakup we can give you. [indiscernible] 5-year slippage rate is only 40 basis point. Excluding that IMFS issue, the 5-year average is only 40 basis points. And I think -- let me also highlight it's extremely important to understand that we have seen in our credit committees the way that these portfolios are being rated, because this is the internal rating that we provide you. We have seen over a period of 12 to 18 months, the external rating of these borrowers, including in the 2 segments that we talked about, falling down to our internal rating. So what I'm trying to say is that the external rating of this BBB book will be between a notch to 2 notches higher in the external work. So we'll probably be in that A- to BBB+, on an average, if you were to do an external rating on this BBB book.

Got it. That is useful. The second question is on the fee side, right? So obviously, there was less activity. And so we saw loan processing and investment banking come down. I just wanted to understand from the corporate-free angle, which would be investment banking and loan processing, is it that this is just like a 2, 3 quarter disruption? Or given that there is a change in stance of what we are trying to do on the corporate side, structurally, one should not factor in like pre-COVID kind of fee momentum in some of these lines, right? So specifically, investment banking and part of loan processing, which was coming on the corporate side?

Like I told you, I think if you look at our fees, I think we were very balanced, as you see, where 50% to 55% of our fee should be consumer; 28% to 30% of our fees should be the global markets or the nonclient fee, which we call it; and 25% of our -- 20% to 25% of our fee would be corporate bank. And I think that is how we will see a -- I think we -- we like that model. I think if you are talking that the corporate fee was made out of structured finance, we have done that disclosure [indiscernible] presentation, it's only 2% to 3% of our fee. So it's not going to move the needle either way. I think what we will see is corporate bank will come back. And I think it will come back more in the [indiscernible] investment banking. The lead tables, we are very, very -- we are very cautious about the lead tables and the deal syndication and the debt syndication will continue to come in that lead table. But yes, our corporate exposure will be more granular, will be more transaction-oriented rather than term loan oriented. That's the only difference, which we are trying today. But yes, the fee, yes, may soften for 2, 3 quarters before they settle down, but it will start coming back. And I think the retail fee, I think, will go down, because you know why the retail fee went down. It was because there was no business activity, which was happening. You'll see a good momentum in the retail fee in the second quarter. And for third and fourth quarter, you will see it pick up growth, which is coming. Of course, COVID is the unknown factor, and we have to also see that the country opens up. There are certain states which are closed. And I think in my opinion, I don't see -- I think there will be -- our fee may be -- may not grow. It may be constant, but I think we will beat the levels of last year as far as the fees is concerned, and the mix will change. I think the mix is moving towards consumer a bit more. 55% of our fee will be consumer. 25% to 30% will be from the corporate, from the global market and 15% to 20% from the corporate bank. And that is how we see our fees coming. And over a period of time, I think it will then move again back to corporate being 25% of our fees; 20%, 25% coming from global markets; and 50% coming from consumer. But it is just a matter of time, because as I said, there's a change in stance from the corporate, and it's just struggling right now.

The next question is from the line of Akshay Jain from JM Financial.

This is Sameer here. Firstly, just wanted to ask, I can't see the weighted average risk score slide this time around. I'm sure these are uncertain times, but some commentary on that side would be appreciated.

The weighted average risk score, you're talking about the...

Yes, the vehicle finance book.

Yes. So there is DPD -- I mean, I can tell you that I was not sure whether we should put it into the investor disclosure, because there's a DPD freeze. But I can share with you that internally, I think it was 1.88 in the last quarter. And this quarter, it is down to 1.87. What we did was we ignored the moratorium period and rewinded back by 6 months to arrive at that figure. But putting that figure in the public domain would have just confused people, because of the DPD count. And that's why you don't see the slide, Sameer. But in fact, if I were to revise this month and look at the behavior of the customer, it's actually fallen by 1 basis points.

If you normalize to the previous conditions, there is an improvement in the behavior of the group.

Does that answer your question?

Yes, yes, that's helpful. And just, I mean, minor dip, but there is a Q-o-Q kind of tapering off on the balances. What would explain that, given that we've kept our rate steady, whereas the market table has been coming off?

2 things, Sameer. One is there was cannibalization of about INR 1,500 crores to INR 2,000 crores, which happened on the term deposits. And I think that's continuously happening, because we were going towards -- we're giving a good rate to those clients. And I think it creates stickiness. We've seen if a customer has a term deposit, the stickiness of the client increases. So I think there was a little bit of cannibalization which was happening. And then there were about 2 accounts, which were large value accounts, which had a little bit of a higher rate and we let them go. So that's all what is there. And I think we will continue to see that happening. I think it will come back in my opinion.

Sure. And just wanted to ask on the customer base.

What you should be seeing, Sameer, is the acquisition run rate. And I think the acquisition run rates are back to pre-COVID levels. And I think the savings account balance sheet will start seeing the growth now.

Sure, sure. And finally, on the customer base, 26 million, how is that split between the micro and nonmicro customer?

Yes. So micro financings were roughly around 8 million. Vehicle finance is 3 million. Liability, the [indiscernible] customer base is 6 million. The balance there are around -- which are stand-alone credit card, LAP, business banking customers.

The next question is from the line of Sagar Shah from SK Analytics.

My first question was, as of June '20, what is the amount of the -- what is the loan amount actually in which we -- the asset classification customers are concerned in the percentage of loan book?

I didn't understand the question. Can you repeat the question?

Okay. What is the amount actually of amount of the loan book to the customers to which, as on June '20, we had given the asset classification benefit as per RBI guideline?

Yes. Yes, that's 10%.

What is exactly for the loan book?

What is the amount of loan book, I'm saying?

That is INR 3,350 crores.

As on June '20, correct?

Yes. So about 1.6% of the bank's loan book.

Okay. So of that 1.6%, what percentage is the corporate loan book?

Very, very small. Very miniscule. I think it is made up of commercial vehicles, which is about 1,800, a little bit of a microfinance book and a LAP book -- a little bit of LAP and small credit cards and personal loans. We have a very small portfolio. The corporate book is [indiscernible].

And please understand, this does not mean that these are NPL, because collection rates are increasing. So this is just an overdue book at this point of time. And over the period of August and September, I think a significant collection will come back. It's possible that some of them may also take a moratorium.

Okay. My second question, sir, as you said in the -- as you said previously, about 9% of the -- of our corporate loan book is under moratorium as per the amount, correct? So of that, which are the top 5 corporate sectors, can you name, please?

No, there is no particular sector, which is heavy. It's all pretty spread out.

Yes. So can you name at least the top 5 sectors of the spread?

I think there are a couple of hotel projects, which are there, because the hotel industry has been, at this point of time, disrupted. So we have a couple of hotels. We have 1 or 2 steel companies, which had disrupted production starting back. So those are the kind of -- really if I look at the really large ones. Otherwise, rest of the market is spread across...

Okay. And just one suggestion, sir. If you see in our investor presentation, you have given the -- an exposure of our gross NPAs on the consumer finance side on the Slide #25. I would suggest if you give the -- if you can give the GNPA numbers from -- onwards from GNPA onwards -- GNPA numbers for our corporate side too on the sector-wise.

Your suggestion is noted..

The next question is from the line of Ritesh Badjatya from Asian Market Securities.

Sir, in your presentation, there is one slide in which you've given the breakup of other income, where the core fee income has declined by 52% year-on-year and 51% quarter-on-quarter. And mainly, the 9% decline is led by the securities only, where we saw 248% year-on-year and 119% Q-on-Q upside. So how this sustainable securities and other income going ahead as well?

See, let me answer this. First of all, you will see client income coming back. There was a moratorium and there was a lockdown. So business has actually got affected, and you can't do third-party products or some of the product businesses without meeting clients. And I think that's where the business got affected. But I think I told you that as the lockdown opened up, you would have seen that the business -- so April was a complete washout as far fee was concerned. May, we saw some activity. June, we really saw -- from July, we are seeing very good activity on the fee side. Again, there are intermittent lockdown which happened. Securities is a business where you can't predict. And we have said that before that we have -- there are mark-to-market gains and it depends on what -- at what interest rate and what duration of securities you hold at what point of time? And you can -- you have to transfer this into AFS and that's the time when you start realizing the gain. Arun Khurana who heads -- he's the Deputy CEO and heads the Global Markets, can also now give you a better data on how we sees the going-forward scenario on the securities and whether it's sustainable. Arun?

I think Mr. Kathpalia already answered that question, but I'll just supplement that. So I think going forward, we expect the yields to be soft. We have enough cushion [indiscernible] INR 30,000 crore cash pile in there, which consists mainly of parts of cash and parts of excess securities. And I think to manage duration, we will be seeing how the yields move. And if they're going to be soft, I think we've got enough ammunition to sort of capture that move going forward. Having said that, rightly so, it is not something that will move in one direction or unidirection. What we do is we do not -- so as is the mark-to-market portfolio, we only take [indiscernible] we do not take unrealized profits till the time they're realized. So this will continue. We think that it's appropriate to take on some profit. So I think that the trend will continue. I don't see that there's going to be too much of a problem. But yes, I mean, [indiscernible] not be as extraordinary as what they've been before.

So we are continuing to keep our [indiscernible] deals with us. We are not in a hurry to recognize [indiscernible]. We will see how the COVID plays out and we will [indiscernible].

The next question is from the line of [ Jaiprakash B ] from HSBC.

I just want to know the date on these percentages that were talked about for the moratorium. Like is that June end or as of today?

June end. These numbers are as of June end.

So after June, what is the traction of people opting for moratorium that we have seen till date? Like is there any rough percentage?

I don't think I have a data point right now, but I can assure you that the collections are only improving. And if you look at our commercial vehicles or you look at our credit cards, PL as well as our microfinance, we are seeing collections improving. So we are not seeing any deterioration in our collections. So if that's what -- and there is no new demand for a moratorium, which is coming in the corporate segment.

Okay. And have you given the option to all your customers? Or is there any selection that you have made for extending the moratorium 2.0?

So I have told you, moratorium 1.0 was an opt-out for all retail and an opt-in for corporate. In moratorium 2.0, we gave an opt-in to all except microfinance.

Okay. So -- and one more thing, why has the GNPA increased by 0.05%, sir, like any clarity on that?

Base effect of the loan book going down. That is all the difference is. The loan book was -- advances were INR 207,000, which was INR 100,019.. That's the effect.

Okay, okay. Right. And last question. Any guidance for loan growth for this particular year? Like is there any target or budget that you have in mind for the year 2021?

I just want to tell you that we love growth. And as I said before in my earlier commentary, we are seeing green shoots which are coming back in the retail part of our business, specifically in tractors as well as motor vehicles. I think we will continue to grow that business. We're also seeing green shoots in the rural part of our economy. And we believe that the microfinance business will come back. And it is the -- I think August and September, we'll see new disbursement level. And I think you will start seeing that. We are already seeing 86% of our -- in terms of numbers, so we have reduced the ticket size. We see how many districts come to the collection level, which you want to see, at an efficiency level and we start increasing the ticket sizes there. On the commercial vehicle side, the commercial vehicle, I think, will come back only by quarter 3. And we believe that, that could come back and there is a pent-up demand there, and it will start coming back. On the unsecured side, we are cautious. And by reason we are cautious and we will be continuing to be cautious on the business as of now. And on the MSME side, I think with the credit guarantee scheme, if it comes in and some capitalization of interest, which will happen on the unsecured as well as on the -- I think you will see some growth, which will happen. But I think overall for the year, you can assume that the consumer will grow at 8% to 10% and the corporate will grow at 4% to 6%. Overall, our growth will be anywhere between 6% to 8% for the year. We are not getting any guidance right now, but we want to be -- we will continue to want to stay and our guidance will come only after the quarter 2 when we see the moratorium playing out and still stabilizing at the ground level.

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

A couple of questions, sir. Sir, when -- in your opening remarks, you mentioned the credit cost at around 65 basis points. Sir, I just wanted to understand, are you including -- I mean this is the headline provisions number that you are expecting? Or this is the only loan loss provision that you are seeing, and this is excluding any contingency that you see? Or this is the only incremental from now onwards?

I think 65 basis points I mentioned is COVID incremental provisions, which we will be doing and which we have already done for our business as of now. This is [indiscernible] of 92 basis points on which will happen because of COVID-related issues overall our portfolio. 70% -- at the rate of 70% PCR, we have that it will be 65 basis points. 90% of our portfolio is secured. We have not said -- we have not taken the loan probability default of any securities getting in cash. But we said, let's be conservative and take that amount as of now. So that's what it is.

So sir, this is over and above your business-as-usual credit cost, is that the understanding, sir? Sorry for...

Yes, yes. This is over and above. So if you look at last year, we were at about 225, but that included a large component of asset, which is now 100% provided. So our starting point for this year is around 135, 140 basis points. And we already added close to 90% of our COVID costs that Sumant talked about, because it is going to be at 65 basis points for incremental data for COVID, 200,000, whatever that number will be at the end of the year 200,020, you're talking about INR 1,350 crores of incremental credit cost. And we have already taken INR 1,200-plus crores on that cost already. [indiscernible] most of it already.

Yes. Okay. And sir, secondly, you used to give SMA1, SMA2 numbers. Now I think in your earlier question, you have mentioned INR 3,350 crores. Is that the all overdue as of, let's say, June end? Or these are the outstanding balance of overdue and end of moratorium?

So I think if you look at the SMA1, 2, the DPDs have been frozen. So if you look at it after February 29, there is not much relevance to that, because DPD counters are not moving. So it's not a really comparable data. We have also, for example, during the previous comments, our MD has commented about having taken some of those accounts already not using the DPD [indiscernible] nonperforming assets this quarter. So that number will be much lower. But the real numbers will come in quarter 3 once the counters are back from September 1. Because there is some asset classification benefits, there are some payments. So at this time, that data would not be relevant. So we should see the data in September [indiscernible] because the DPD counters will be back after March.

Sure. So this INR 3,350 crores is the -- what is that number and current balance?

These are outstanding as of February 29.

This INR 3,350 crores, yes, they had...

This is one DPD on February 29 and above.

And they have taken moratorium. So if they're just continuing the DPD counter, what RBI, Reserve Bank of India saying that, they would have become nonperforming. But such asset classification benefit, we provide 10% [indiscernible]. So these are not nonperforming assets. These are clients-oriented benefits, and that's the reason you're...

It's just a conservative provisioning that the RBI wanted us to do, and we've done that. And it can be released by March 31 by the -- as per the RBI guideline, if we want to release them.

Understood, sir. So and sir, secondly, on this -- so some of the portions, 10% you said of the retail loans, which are out of moratorium, but probably we do not know as to what is -- as of now, they are not paying. Sir, technically, can you -- I mean, what percentage of this book could technically come under, let's say, MSME restructuring scheme, if you were to sort of implement that? Or have you thought of doing that MSME restructuring scheme if that is...

Yes. We have -- there's very clear guidelines on that, which is a guaranteed emergency credit, GECL, [ GCTC ] has given. So our eligibility as per that criteria of loans that we can exchange is about INR 3,200 crores, INR 3,300 crores across multiple borrowers. These are non-individual entities, like I mentioned. We have approved already more than 50% to 60% of these loans. The drawdown has been lesser for the clients that have not yet drawn down as [indiscernible]. But we have given the letter [indiscernible]. So we have already offered that. But there's -- if there's any change in definition, that book will go up, but that, yet, we don't know about that yet. So whatever [indiscernible] we have already approached our borrowers and given them.

Sorry, sir. Actually I was asking on MSME restructuring scheme, which the window is still available. So if technically, some of these consumer, let's say...

Yes. For the MSME scheme that RBI announced in January or February, GST registered, INR 25 crores borrower capacity across the system. We had -- whatever would have been one, we have done in the previous quarter. There's none really now that's eligible under that scheme, because GST registration, not everybody will be eligible. So the GECL is the other option now. That scheme, we are really not seeing, but has a lot of restrictions.

Correct. And wherein you have disbursed around INR 170 crores. That is the only amount that you have disbursed so far, right?

And they have picked up in the last 2 days, but really INR 130 crores, INR 150 crores, nothing material. Because the client is...

This is emergency credit, not on the restructuring...

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

Just a few questions from my side. I just kind of -- just put the questions in front of you, and you can just kind of take it forward. One is on the provisioning line. There's about -- if I just kind of exclude the provisions made for COVID [indiscernible], is about INR 350 crores still that you have made. If you could just kind of highlight what is...

Mahesh, voice is not clear at all. Can you just come...

Sorry, sorry, sir. Can you hear now?

Now, yes.

So you've made roughly about INR 2,258 crores of provisions. I'm just kind of looking at the provisioning out there when I do for retail, corporate, the COVID related provisions and for the account, which was declared, that comes to about INR 1,900 crores. There's still another INR 350 crores of provisions, which was done. If you could just kind of give some clarifications on what that pertains to.

That's the standard provision which you had to do for the 10% provision of a loan account, which was 1 DPD and above, which had to be done by as per the RBI regulation. Asset classification is INR 342 crores. [indiscernible], Mahesh.

Yes. Sir, my second question is the slippages that you're doing on the corporate side, could you just kind of give us some color as to -- do they mostly go out of the BB and below portfolio? Or have you seen tendencies that it moves outside the BB as well? Just trying to see whether the grading kind of moves internally across the segments and then goes into NPAs?

You're talking about -- sorry, you're talking about the slippages, Mahesh?

Yes. So for example, you've done INR 1,225 crores of slippages this quarter in the corporate side and about INR 1,250 crores in the quarter before and INR 1,237 crores the quarter before that. How does it move internally on the ratings?

So it goes down the chart, it goes down the chart. For example, in the current quarter, more than 90% of the slippage is on standard accounts, which we have conservatively recognized. These accounts did not start as BBB. They started -- I mean, you are quite well aware that we've been trying to extricate ourselves from some of these accounts related to the diversified group, the media group or some other groups. We have talked about this in the past. There's also a [indiscernible] group, as you must be aware. These guys -- for example, the [indiscernible] group was not a BBB, but I think at a point of time, there were some very unfortunate sort of circumstances. There's also a health care group that shifted very quickly. So I think all of these have actually emerged from outside the BBB. But as a consequence of the stress, we have sort of taken the entire -- almost the entire INR 1,200 crores were sort of taken into -- they were taken into NPA, even though they were standard. But if you're talking about how we'll take more -- and if you're not seeing a movement in the ratings profile, that is because we had already moved below investment grade in our rating profile in the last quarter.

Okay. Perfect. And my final question, in this balance sheet, there has been about a very sharp jump in the balances [indiscernible] roughly about INR 28,000 crores. If you could just kind of give some color on that.

Yes. I just told you that we have excess cash with us. And when you do a reverse repo transaction, you actually move back in balances of the bank. It's not for the balance of the RBI, but as per accounting style, shows in balance of bank. In the reverse repo of INR 22,000 crores, which we get, because we had excess liquidity -- we are sitting on excess liquidity.

Actually almost INR 24,000 crores.

INR 23,900 crores reverse repo and another INR 20,000 crores, right, of excess -- another INR 13,000 crores of excess...

And this is as per the accounting policy, Mahesh, and we followed the accounting policies. This is how it had to be shown in the balance sheet.

Okay. Just confirming, because it doesn't come as investment. It just goes straight away to the balance of the bank.

It doesn't go in the investment at all. Reverse repo doesn't come in the investment.

The next question is from the line of Nitin Aggarwal from Motilal Oswal.

So a couple of questions. Like, firstly, what would be the promoter holding after this equity issuance and outstanding warrants...

[indiscernible] up 15%, diluted [indiscernible] including warrants.

Including warrants. Okay. So the warrants that we have issued, is it kind of bottomed [indiscernible].

Yes. That stays, Nitin. It is not due until early next year.

Okay. Okay. And secondly, there is a little projection of credit cost in respect to COVID. Is it possible for you to share some color on what assumptions are we working with across business segments? Because 65 basis point is quite a manageable number, given the profitability that we have. So what are the assumptions that we have used to arrive at this number?

Sure. This is Rama here. So what we did, we had farm-out data [indiscernible] second revision that we did -- which we did in the month of June. We had more data on collections across the retail portfolio, across where the economy is opened up data. So for the retail portfolio, we use this data along with all the other economic data and the feedback from the ground and how we contacted the customers in their estimation. And yes, the [indiscernible] corporate portfolio, the relationship managers had reached out to most borrowers. We had reviewed all the names. We [indiscernible] these names based on whether they're COVID impacted or their [indiscernible] record is poor. All such names have been taken into account by sector. For example, if there was a sector hotel, we have an exposure to hotel LRD, we've looked at them closely. And accordingly, wherever the stress was emerging or likely emerged, this has impacted [indiscernible]. We also took into account that likely dominated the rating profile of many of the borrowers due to COVID, because of which RWA will go up and capital requirement will increase. That was also factored in. All these together is how we arrived at this number. We will continue to revise this data based on [indiscernible] June. There is some more lockdown that happened during the course of July. We will finally evaluate this data. We'll also come to know, by the end of August, what the Reserve Bank of India's plans are on moratorium as well as restructuring, having been talked about. And we'll reassess and rework our structure based on all the data we have internally as well as external environment and the Reserve Bank and [indiscernible] right data and then make -- it requires more [indiscernible].

Okay. Sure. And lastly, what is the outstanding BB and below book, if you can quantify that? And now as we consolidate our wholesale advances, where would we like this to settle?

The investment-grade book has fallen quarter-on-quarter. Right now, it is around 5.5%. It also includes the one large telecom account. Excluding telecom account, the [indiscernible]. So -- and that kind of [indiscernible] book is pretty consistent with the credit cost that we have delivered. So I think that's the level where we will be across the cycle. And we have been the kind of -- new originations that we are doing, I think there, these are to a higher-rated revenue portfolio. So I think we are bottoming out in terms of the investment-grade book.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Kathpalia for closing comments.

Thank you. Thank you for participating in this call. I know that this was a hectic day. We will -- we are open to questions and we think if you feel that you need further clarifications on our business. But I just want to tell you that the business is back on the liability side of the balance sheet is fixed. In our opinion, we'll continue to see us being very comfortable on the liability side of the balance sheet. I think the capital raising, which we wanted to keep quiet and we wanted to do a preference share, it has been done. And you will see the capital coming back -- coming. The AGM is on August 25, and you will see the capital coming up in the first or the second week of September. I think growth, we are cautious about -- we are cautious, but we also want to grow, and we will evaluate growth. This is what is happening in the economy. And I think you will see us getting back on to our growth phase cautiously, but surely. Thank you for your time and stay safe.

Thank you very much, sir. Ladies and gentlemen, on behalf of IndusInd Bank Limited, we hereby conclude this conference. Thank you for joining us, and you may now disconnect your lines.