IndusInd Bank Limited (INDUSINDBK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kathpalia, MD and CEO, IndusInd Bank Limited. Thank you, and over to you, sir.

Good evening, and thank you for joining this call. Let me start with some macro commentary and then get into bank-specific details. Domestic economic activity sustained momentum during quarter 1 after delivering a robust GDP growth of 8.2% in financial year '24. Manufacturing activity continued to gain traction on the back of strengthening domestic demand, while services sector maintained its buoyancy. In banking system, liquidity conditions remained in deficit, but improved marginally compared to the last quarter. Looking ahead, recent budget has maintained continuity while laying down the future policy agenda for new development towards the goal of becoming a developed economy. Adequate budget allocations have been made to support the rural economy, including allocation to the flagship NREGA -- MGNREGA scheme compared to last year. These, along with the steps taken pre-budget augur well for the rural recovery and rural spending would be outpacing urban segments. Coming to the quarter-specific developments, the bank navigated a challenging quarter where a typically seasonal weak first quarter was coupled with issues from heat waves and election-related disruptions. The key highlights for the quarter were: Healthy deposit growth. Our deposit growth accelerated to 15% year-on-year and 4% quarter-on-quarter. We maintained our traction on retail deposit mobilization with retail as per LCR deposits growing at 16% year-on-year, ahead of our loan growth. Increase in cost of deposits at 5 basis quarter-on-quarter also remain under control despite ongoing liquidity conditions. Loan growth trajectory. Our loan growth was at 15% year-over-year and was driven by 18% year-on-year growth in the retail loans and 13% year-on-year growth in corporate loans. We were cautious on disbursements in vehicle and microfinance during the election phase and run rates have already picked up this month. Corporate growth continues to be driven by mid and small corporates. Overall, the headline loan growth should see pick up going forward with seasonality benefits. New initiatives. Our digital banking offering, INDIE, continues to see strong traction and we now have 1.3 million customers on the INDIE app. Our liability initiatives of affluent and NRI banking maintained robust traction, growing at 23% and 33% year-on-year, respectively. Our home loan book grew by 31% quarter-on-quarter and now stands at INR 2,348 crores. Asset quality. Focus on collections resulted in gross slippages improving to 0.45% versus 0.47% year-on-year despite the external challenges this quarter. Our gross NPA and net NPA were at 2.02% and 0.60%, respectively, with healthy PCR of 71%. Our restructured book continues to run down to 0.34% compared to 0.40% quarter-on-quarter. We maintained a contingent provision of INR 1,000 crores. Robust core profitability. Our net interest margin was stable at 4.25%. We have not used any contingent provision this quarter. Adjusted for this, the core profitability remains resilient for a seasonally weak quarter. Our core PAT, adjusted for contingent provision and reversal, grew by 10% year-on-year and 2% quarter-on-quarter. Our capital adequacy remains healthy with CET1 of 16.15% and overall CRAR of 17.55%. Now coming to individual businesses, vehicle finance. Our vehicle finance disbursements grew by 15% year-on-year and 2% quarter-on-quarter. Vehicle disbursements for the quarter were at INR 11,260 crores. The quarterly disbursements were lower due to subdued demand during the election phase, extreme heat in most regions, and quarter 1 being a generally weak quarter. Within vehicle segment, we saw sequential growth in commercial vehicles, cars and construction equipment. Two-wheeler and tractor segments were weaker and degrew during the quarter. The gross slippages in vehicle finance improved to 0.75% versus 0.77% year-on-year, showing stable asset quality in spite of external disturbances last quarter. The restructured book in vehicle finance also reduced to INR 417 crores from INR 547 crores quarter-on-quarter and majority of the reduction was due to upgrades and recoveries. First quarter of the financial year has generally been a seasonally weak quarter and the second half of the year contributes larger share of disbursements as well as recoveries. With election-related uncertainties also behind us, we expect this trend to continue this year, too. The timely onset of monsoon and government CapEx push in recent budget has also augured well for the outlook of vehicle business. Overall, we have seen activity levels improving from July. We expect vehicle demand to pick up pace as the government spends resume post the budget and monsoon period gets over. We should thus see acceleration in the weaker loan growth as the year progresses. Bharat Financial Inclusion Limited. Outstanding loan book originated via Bharat Financial now stands at INR 42,350 crores, growing at 17% year-on-year with microfinance and merchant loan book growing at 16% and 25% year-on-year, respectively. Growth was driven by client acquisitions and active loan clients increased by 11% year-on-year. Share of non-MFI book stands at 13%. The collection efficiency was impacted during the quarter as mentioned earlier. The organization, however, prioritized collections over growth and was able to contain forward flows. The gross slippages from Bharat Financial were at INR 338 crores for the quarter. Total liability franchise source through BFIL now stands at INR 2,346 crores, driven by new customer acquisition, cross-sell of liability products, and now 93% of loan disbursements are done on IndusInd accounts. Microfinance. While quarter 1 disbursements are typically lower, we were also watchful for any upward developments due to election activity. Our average loan outstanding per customer at INR 42,031 was reduced by 4% quarter-on-quarter. The collection intensity continues this quarter and we aim to restore normalcy in the overdue book in a few months. We remain comfortable with our full-year microfinance credit costs to be broadly stable Y-o-Y. Bharat Super Shop. We now have 700,000 merchant borrowers under this program. Our merchant loan book stands at INR 5,304 crores with 25% year-on-year growth. Bharat Money Stores or the kirana shop model. We have 88,000 Bharat Money Stores, up 27% year-on-year, providing banking at the doorstep in remote areas. These merchants have sourced around 2.6 million savings accounts, registering a growth of 68% year-on-year. Overall, we focus on asset quality during the quarter to mitigate impacts of several external challenges. We are already witnessing center meetings discipline restoring. With good monsoon predictions and external disturbances getting behind the industry, we are well placed to participate in the large rural opportunity and our deep distribution network while transitioning from a micro finance to micro banking. Corporate Bank. The corporate bank book grew 13% year-on-year with growth continues to be led by mid and small corporates. Within corporate, large corporates grew by 10% year-on-year, mid corporates by 14% year-on-year, and small corporates by 22% year-on-year. The healthy growth in the mid and small corporates continues with increasing coverage focus on this segment and focus on selected industry segments. The diamond business too showed sequential growth after a few quarters of contraction due to weak global demand. The asset quality in diamond remains pristine with no NPA or SMA1, SMA2 customers. The proportion of A and above rated customers has been at 79% versus 76% year-on-year with weighted average rating improving to 2.48 from 2.6 months Y-o-Y. The gross slippages in corporate book were only INR 48 crores for the quarter, and net slippages were INR 4 crores only. Overall, we continue to progress on building Corporate Bank franchise focused on selective areas of competitive advantage with granular risk profile. Other retail assets. During the quarter, our retail assets grew by 23% year-on-year. Our MSME book under business banking is at INR 16,683 crores, which grew 13% year-on-year, and LAP book maintained a steady traction with 12% year-on-year growth. We tweaked our branch operating model last year to facilitate sourcing MSME asset customers. We have also redefined our SME branches with enhanced capability and upskilling of the branch staff. This is showing results in terms of increased contribution by branch-led origination. We are also revamping our onboarding journeys and credit assessment engines by bringing them in the desired digitization and database analytics in credit assessment and onboarding of the customer. With a focus on the brand sourcing and digitization in process and client capability, we expect MSMEs to become a meaningful growth driver for the bank. Our home loan product continues to scale with loan book now at INR 2,348 crores as of June '24, growing 31% quarter-on-quarter. We recorded healthy credit card spends at INR 24,019 crores, growing by 19% year-on-year. Our spends market share has further improved to 5% as per latest available RBI data. We have been cautious in maintaining share of unsecured card and PL share at 5% to 6% of the overall loan book. Overall, we continue to focus on growing our consumer assets, while improving the balance towards secured mix with the scale-up of home loans and MSME. Now coming to liabilities. We accelerated our deposit mobilization to 15% year-on-year, narrowing the gap with the loan growth. We also maintained traction on retail deposit mobilization with retail as per LCR deposits growing at 16% year-on-year. Share of retail deposits now stands at 43.7% versus 43.4% year-on-year. Cost of deposits increased by modest 5 basis points quarter-on-quarter, driven by the mix in favor of term deposits and some repricing. The bank opened its milestone 3,000th branch in Mumbai last quarter with a total branch count of 3,013 as of June '24. We continued to scale our initiatives on Affluent and NRI during the quarter. Affluent segment grew 23% year-on-year to INR 54,679 crores during this quarter. Affluent AUM was also up 25% year-on-year to INR 86,000 crores. The bank is slated to take the affluent banking to the next level with the launch of Pioneer Private Banking next month. This will be curated offering for customers with over INR 30 million net worth relationship value. We are confident that this addition will provide another growth leg-up for our already sizable affluent franchise. Our non-resident Indian that is the Non-Resident Indian segment continues to see robust growth momentum on the back of strong NRI deposit flows. NRI deposit grew 33% year-on-year and 9% quarter-on-quarter during the quarter and further achieved a milestone of crossing INR 50,000 crores of deposits based in July. Our market share in Non-Resident segment now stands at 3.7% as per last available data versus 3.3% year-on-year. We continue to invest in our brand. We saw a strong lift in our brand awareness during the quarter, driven by marketing campaign during the ICC T20 World Cup and where India was crowned as a champion. Our reliance on bulk deposits remains low with Certificates of Deposits at 2.5% of overall deposits and borrowings at 8% of total liabilities. The liquidity position remained healthy during the quarter with an average LCR improving to 122% versus 118% quarter-on-quarter, and average surplus liquidity at INR 43,000 crores for the quarter. Overall realization of liabilities continues to be the cornerstone of our strategy and our balanced approach towards traditional as well as investments in new initiatives to support our growth ambitions. Digital traction. During the quarter, INDIE, the digital banking app of the bank, completed first full year of operational launch. We have now more than 1.3 million clients on the INDIE app, including 1.1 million new to bank and 200,000 existing clients migrated to INDIE. The migrated client has shown an increase of 35% in terms of liability per client and a 20% increase in transaction per client. We are in the process to soon open this app as a platform to all clients of the bank to manage their existing relationships while new products and services continue to get launched on the app and continuous innovation happens in parallel. We are also going to launch a revamped wealth management offering, INDIE for Business, and revamped experience for NRI clients on the INDIE app within the coming weeks. While we are building the new, the existing platform continues to scale up as well. IndusMobile has a monthly active user base of 3 million plus and registered a growth of 30% year-on-year in recurring bill payments. The rating of the app improved to 4.5 on the app Store and 4.3 on the Play Store. On Indus Merchant Solutions, we launched a new feature for merchants, whereby they can add or manage sub-users and delegate store operations such as collections to these sub-users. On WhatsApp Banking, we have registered base of 9.2 million and conversations and active users grew at 200% and 30% year-on-year. Indus Easy Credit, the flagship digital retail lending platform of the bank, continues to see scale and now 100% of personal loans, credit card, small ticket business loans and working capital loans happen digitally via the platform. The platform is now also integrated with the account aggregator and for MSP clients enabled with CGTMSE. Now coming to the financial performance for the quarter. Net interest income grew by 11% year-on-year and 1% quarter-on-quarter, with net interest margin remaining steady at 4.25% versus 4.26% quarter-on-quarter and within our expected range of 4.2% to 4.3%. Our cost of deposits increased by 5 basis points quarter-on-quarter, while our cost of funds increased by 3 basis points quarter-on-quarter. The increase was offset by a 2 basis point increase in yield on assets, maintaining margins steady. Our other income grew by 10% year-on-year. Core client fee, excluding trading income, too, grew by 11% year-on-year. Share of retail fee remains healthy at 78%. Our total revenue for the quarter was at INR 7,849 crores with 11% year-on-year growth. We continue to see sequential moderation in OpEx growth. The OpEx growth reduced to 20% year-on-year versus 24% year-on-year in the previous quarter. The sequential growth was curtailed further to 2% quarter-on-quarter. The cost to income, however, increased largely due to slower revenues due to seasonally weak disbursements in vehicles and microfinance. We should see cost-to-income improve as revenues pick up during the course of the year. The operating profit for the quarter was at INR 3,952 crores, growing 3% year-on-year. On the asset quality and the provisioning front. Collections and cautious disbursements were key focus areas during the quarter given the external disturbances. As a result, we were able to improve gross slippages ratio at 0.45% versus 0.47% year-on-year in an otherwise challenging quarter. The gross slippages by key segments were vehicle finance, INR 660 crores; Bharat Financial, INR 338 crores; corporate, INR 48 crores; and other retail, INR 490 crores. The restructured book reduced during the quarter to 0.34% from 0.40% quarter-on-quarter with the bulk of reduction due to upgrades and recoveries. The net security receipts were reduced to 32 basis points from 34 basis points in the previous quarter. Overall, the GNPAs and the net NPAs were at 2.02% and 0.60%, respectively. We have maintained provision coverage ratio of 71%. Our SMA1 and SMA book collectively is at 25 basis points. Total loan-related provisions are at 2.2% of loans and 106% of gross NPAs. The bank has not utilized any amount from the contingent buffer during the quarter. The annual credit costs were at 121 basis points for the quarter without using contingent provisions. We thus remain confident of achieving a full year credit cost of 110 to 130 basis points given a turbulent and seasonally weak quarter is behind us and with credit cost outcomes within our expected range. Our core profitability adjusted for contingent provisions remained robust during the quarter. Our core PAT adjusted for contingent provision grew by 10% year-on-year and 2% quarter-on-quarter. Our capital adequacy ratio remains healthy with CET1 of 16.15% and overall CRAR of 17.55%. Overall, to summarize the quarterly performance. Quarter 1 was a subdued quarter wherein a seasonally weak quarter got added disturbances from external factors. The disbursements are already picking up, and we remain committed to the PC-6 growth guidance of 18% to 23% growth. Our deposit growth is accelerating along with narrowing spread on deposit rates with larger banks. Our balanced approach on traditional and new initiatives would drive achieving our loan growth aspiration. The OpEx growth has started normalizing, and we should see revenues exceeding OpEx growth in a few quarters as the operating leverage and seasonality in key businesses play out. Our asset trends remain healthy, especially seen in the context of turbulent last quarter. Our quarter 1 credit costs were in expected range of 110 to 130 basis points without using any contingent provisions. We are thus confident of delivering higher growth and improved profitability in the rest of the year. With this, we can open the floor for question and answers.

[Operator Instructions] The first question is from the line of Kunal Shah from Citi Group.

Yes. So I was just saying, in terms of the growth advances, no doubt because of seasonality and disruption, you had cautiously slowed the disbursements, but getting towards 18% to 23-odd percent growth, how much time would it take? And maybe if growth remains at this level, we saw some kind of maybe resolution to raise the equity as well. You mentioned it's healthy capital adequacy, then what was the need for that resolution, yes.

So let me answer the second question first. It's only an enabling clause. We take it every year. So we take a clause every year. It's just an enabling clause. You're absolutely right, we're well capitalized as of now. And I think -- like we said, every 6 months, we assess our capital needs. And as of now, when we assessed in September, I really don't feel we have a need to raise capital as of now. Coming to your first question, which is our growth. Our growth remains -- we want to be at 18% to 23% growth. I think if you look at where we lost out this quarter was the microfinance. And I think there is enough growth headroom available there. We were very cautious because we wanted to make sure that our portfolio was pristine and we do not have so many flows, and we wanted to remain range bound in that flow. And of course, in the vehicle finance business also, because of the reasons as explained in the rural economy, our growth slowed down in the -- in fact, our disbursements were down to INR 11,000 crores instead of INR 13,000 crores to INR 14,000 crores. And I think we should come back next quarter in these growth areas. The second area where we slowed down was the unsecured business in PL and card. That was intentional, and we wanted to wait and watch, I think, the election results playing out. And I think that was an intentional decision to slow down a bit and see what is happening in the market before we do that. So I think we should see growth coming back. And I think we should be in the range of 18% to 23% for the full year. I cannot say next quarter or anything. I can't give that timeline. But I can say, for the full year, we will deliver 18% to 22% growth.

Okay. And secondly, if you can just share the color with respect to MFI, any particular states, any particular districts there has been disruption? And how the collection efficiency and the behavior of the pool has been given maybe obviously, there have been a lot of concerns out there.

Kunal, first of all, let me tell you, we slowed down -- so Orissa is one such state where we thought there was a lot of overleveraging happening. And we slowed down 2 quarters ago our business in Orissa. We actually reduced our exposure by INR 3,000 crores in Orissa at that point of time. And actually, we've slowed down. So I think that's one. In UP, too, we slowed down our business, in Eastern UP, and we saw that there were stresses and there was a huge growth, which was coming from other microfinance institutional lenders. We slowed down. In Punjab, if you would have realized that karza maaf andolan which had started, we actually started slowing down the business about 3 quarters ago. And we took the hit last quarter itself, and our business has now become very, very small in that area. Jharkhand is another state where we've little bit slowed down the business. We think that there is some issues which are developing there, and we started pulling out on that stage. Otherwise, if you look at the business, I think there are good places like Karnataka, I think we are seeing business. Some parts of West Bengal, we are seeing very good business. We are seeing good business in parts of Jharkhand, Rajasthan, and Maharashtra. So I think we are seeing very, very good quality business coming out in these areas. And we feel confident, we're range bound in our credit flow. So if you look at gross flows are 3.5% and credit cost is 2.5%. And if we think, that is the reason this is a big business, which delivers a very decent ROA for us. The success on this is to take early calls and see the drags. And I think the processes of Bharat Financial are so strong, they are able to see early drags and exit those businesses and [indiscernible].

And one data point just in terms of general banking fee, why is it up to such a large extent?

No, no. This has PSLC fees, which comes in the quarter 1, of INR 260 crores included into it.

Next question is from the line of Nitin Aggarwal from Motilal Oswal.

So Sumant, first question on like did I hear you right about saying 18% to 22% growth for full year?

Yes.

Okay. So like how should we look at the CD ratio then, like any compulsions arising from that? Because 18% to 22% will imply like 6%, 7% growth every quarter in respect to loan growth. So how should we look at that equation?

So if you look at the credit deposit ratio, we are at 86.5% -- 87.2% right now. And we always said that we will be between 88% to 90%. So we are well within that range. And I think also, please understand that stable funding is also very important. And I think our NSFR as well as LCR is well within the range. I also feel that we have enough initiatives and enough capability of raising deposits. We've now reached 15% year-on-year. We should see 17% to 18% this quarter. And I remain very confident of doing that growth which we have said in our call today.

Okay. Okay, sure. And secondly, on the LCR draft guideline that RBI came up with yesterday, any early thoughts as to what can be the impact, any broad range? Would it be possible to give any color on that?

We can't give any color right now, but I think we are assessing. And I think if you look at the preliminary, and this is just a preliminary, it will be in the range of 4% to 5% for us.

Okay. Okay. Sure. And lastly, like I'm just taking cue from another bank results call, wherein they increased the risk weight on the MFI loans after RBI increased the risk weight in November '23. So have we also done any change on the risk weight in respect to MFI?

There's no such guidance or any circular from the regulator to us to increase the risk weight on microfinance loans from 75%.

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

Congrats on the quarter. I just wanted to understand on microfinance. So I appreciate we are taking steps to curtail risk, but our NPLs keep rising and are significantly above some other players. So really, what's going on here? Are we not writing off loans? Is that the thing? Is our write-off policy very different from the others?

No. I think we write-off the loans and this is as per the approved policy of the bank. We don't keep retail loans more than 180 days to 240 days. So we never keep microfinance loans. The issue is, if you look at -- there are 2 things which have happened. One is that the base effect has come in. I think if you look at the disbursements have been lower, and as a consequence, the book has fallen down by INR 2,000 crores. And as a consequence, you're seeing a larger number out there. The second way to look at it is the gross flow. The gross flows in Bharat Financial has been INR 338 crores. And I think that's well within our reach of 3.5%, and we are very comfortable with that business.

And what was the same number last, if you could share the corresponding number for...

Yes, INR 331 crores.

Okay. That is useful. And just secondly, from Mr. Sriram, I just wanted to get your thoughts on where we are in the auto cycle, and not refer to the next 2, 3 quarters, but just in general, are we still in the middle of the cycle? Do we see that we are closer to the top of the cycle? I would appreciate his comments on that.

Heavy commercial vehicle, yes, as we said, like we are in the peak, like there is no further movement we are expecting, like it's more or less in the peak. But the rest of the segment, there will be at least high single-digit growth at least. And tractors, we are expecting a double-digit growth. Rest of the areas, at least high single-digit growth is our expectation.

Including cars?

Yes, including cars.

Next question is from the line of Abhishek Murarka from HSBC.

So my question is again on this deposit growth actually. So if you see the proportion of retail deposits, the growth there has been tapering off in the last 3, 4 quarters. Now if you have to accelerate to 17%, 18% overall deposit growth, incrementally, where does this come from? And do you have to take any kind of rate increases? And then what is the impact on NIM of that. So just trying to figure out that relationship.

So Abhishek, this question has been asked to me 10 times now and I'm answering the same question. If you look at our NIMs, the NIMs are very range bound, and we've been able to manage our NIMs between 4.2% to 4.3%. And I think that's the range which we will be in. I can't say specific numbers, but it's range bound for us. And we've always been able to manage our NIMs between that range. Coming out to where's the retail, we would like to -- we've always said, our stated intent is to be between 48% and 52% LCR by the end of planning side next year, and I think we are focusing on that. There will be some quarters where the growth is slow and intentionally so, because we expected an interest rate reduction to happen. And we said that we will play 2 different games at this -- do different views at this point. And I think we see our processes very closely. We also don't want to be stuck with large retail deposits at a very high rate at some point. So we do play -- we do manage our book in a different manner because we have stable funding from developmental associations, which come in and our stable funding remain intact. Having said that, I think we do not see a risk to 18% to 22% of our growth. And I think we should be able to manage our LDR between the range of 88% to 90% going forward. And that's been our guidance and we are very comfortable with that.

Sure, sure. Understood. And the second question is on card fees. I think there was a fair bit of drop this quarter. Just can you share what's the way forward? And what led to the drop this quarter?

So there are 3 things that led to the drop this quarter. One, I think the regulator came back with a directive that overlimit fees cannot be charged and that was a INR 24 crore drop on the card fee as a consequence of that in a quarter. So that's an ongoing basis which you will see happening in the card fees. Second, our acquisition was lower, and I think as a consequence our card fees for higher-end accounts. And I think we slowed down the acquisition. And the third was the rentals. The interchange on rentals was eliminated and we've stopped doing the rentals on the card. And I think that was leading to delinquency, and that was also a INR 10 crore income for us in the quarter, and that dropped.

Okay. So this is all actually structured. So this is not going to revert?

I don't think so it will reverse, because rental yields have gone down, and I think rental interchange has disappeared. Overlimit charges have disappeared, and this is the third -- no, the third thing is -- we will build up the card business again. So it's not that we will stop the acquisition, and I think high-end cards are a priority for us.

Right. And can you just talk about the asset quality in cards. We've seen a bit of inch-up in NPAs. You've said previously, I think, on the previous call that you are seeing some stress there. Can you just give directionally how...

I think you will see some stress in the card business for next 2 quarters. Let me be candid. I think there is stress building up. If you look at the 60-plus and 30-plus, I think the 30-plus looks 7% right now. So it's not that it's not looking good. It is looking at that. So I think you will see some flows which will happen on the card business. But it's well under control and the ROAs are under control. So we have to just see how to manage it. We are putting all our efforts, but there is some stress on the card business right now.

Next question is from the line of Sameer Bhise from JM Financial.

Just wanted your thoughts on the draft guidelines on liquidity, which came off yesterday. Any initial comments there if they were to come in the current form?

See, I think it's very difficult to comment. I think whenever a regulator adds just a draft guideline, there is a lot of thinking which goes behind it. I think if you look at one of the regulations which have come in, I think they want to make sure that the banks are liquid and there is no run on the bank. And that's why they are increasing the LCR percentages or the flow from 5% to 10% on stable deposits, which is retail deposits. And they believe that through mobile or through electronic banking, these can be immediately moved. And I think the stability of the system and the liquidity is more important to them. And I think these are directed in the right manner. And I think it will only make the system much more sounder. And I think it's for the fortification of the balance sheet and the liquidity in the system. So I think it's -- to me, there may be some impact, 4% to 6% for us, but I think it's very, very important to make sure that I think we should not get bogged down and we should see how to manage this, and it will became a part of the BAU as we go forward.

Okay. And when we look at the credit cost guidance of 110 to 130 basis points, includes our prior comment on having excess provisions on microfinance and vehicle?

Absolutely right.

Next question is from the line of Anand Dama from Emkay Global.

So sir, one, basically there was a special deposit scheme which we had launched during the first quarter. Any impact of that is yet to come in the cost of fund, and because of which should we see some margin pressure going ahead?

So I think we had launched 7.99%. And I think we saw enough traction. We mobilized about INR 7,000 crores of term deposits on that campaign during the T20 World Cup. It was during the T20 World Cup and for a specific duration. And we've stopped that campaign now and gone back to 7.75%. So I think we mobilized INR 7,000 crores of term deposits at that point of time within that 15-day period.

So the impact of that has largely been baked in, in the first quarter itself?

It's part of the thing. Yes. It's already baked in.

Okay. And when we look at our growth vectors, so basically, which are the segments -- I mean, you said that you're still looking at about 18% to 22% kind of a growth. So microfinance, obviously not doing as well, cards at 15%. So which are the segments which are going to deliver this kind of a high growth? Is it going to be a corporate book or the non-unsecured loans?

Our balance of book will remain tilted towards 55% to 56% retail and 44% to 45% corporate. We also continue to believe that our book on vehicle finance as well as microfinance, including merchant acquiring, will continue to grow. We believe that merchant acquiring and MFI business will continue to grow at 20% to 24% for us during this year. Our CFD vehicle finance business will grow at 18% to 20% for the year. Our retail business will continue to grow at 28% to 30% for the year. I think we've just seen a slowdown, and I think we will come back into that growth mode. In the corporate side of the book, I think we've always said that our mid segment and the smaller segment; mid (sic) [ smaller ] segment grows at about 18% to 20%, and our mid segment grows at 14% to 16%, while our large corporate is at 10% to 12%.

Next question is from the line of Chintan Joshi from Autonomous.

Can I ask a question on NII. If I look at the quarter-on-quarter growth, it is 0.6%. And when I look at the end of period average earning assets, that's grown 4.4%, and yet your NIMs are stable. Does this mean that a lot of the kind of growth is back ended in the quarter? And is there any other reason for weakness in NII? Any kind of one-offs or funny that kind of explains the NII weakness?

No, I don't think there's any one-off in the NII for us. There's no one-off in the NII.

It's just the averages which are playing out. I think you will see in this quarter this normalize. Some quarters, it happens. But over a 3 or 4 quarter period, it normalizes.

So can I take this that the weakness is purely management action to be cautious in a quarter where there is seasonality and elections? Is that the main message?

April and May were weak quarters, and June is when we started picking up the disbursements, even whatever disbursements we did in the MFI or in the vehicle finance business.

The higher yielding businesses like microfinance, cards, they have not grown in this quarter. So that's why there is an added impact on the NII versus the loan growth.

Understood. And my second question is on the GNPA on Slide 26. You've given a lot of color, but there's a general statement, in consumer banking, practically every segment is seeing increase. Is there something kind of worsening across the industry? Or is this a seasonal effect?

It's just a seasonal effect. I think the only thing that you should worry about is the card business. I don't think there is anything else which I think I'm worried about right now. And I think the 30 plus on the MFI is a little bit elevated right now. But we still believe that it will be between 3.5% gross loan and 2.5% credit cost.

And within others, personal loans, are you seeing any kind of deterioration?

Not at all. Not in personal loans, but I said cards.

Next question is from the line of Rakesh Kumar from B&K Securities.

So sir, just firstly, 1 question on LCR front. So we have improved on retail deposit composition over a period of time of, say, last 2, 3 years. But if you look at the outflow rate, there has been like no improvement as such in the outflow rate as per the LCR number. So what is the reason behind that?

Let's get back to you on this question.

Sure, sir. Secondly, on the general banking fee, if I see -- I don't know if you had responded to this question, sir. So there is a quite a lot of growth that you are witnessing here, either on the Y-o-Y or Q-on-Q basis...

There is PSLC fees which is included in this, which is PSL fee, which comes once or twice a year, and that is the PSL fee which has come in.

How much that number would be, sir?

INR 260 crores to INR 270 crores.

This quarter, okay. So is that a reason that like some of the PSL qualifying loan book, we are reluctant to write-off?

No, it's not that. I think we write-off as per the policy which is there. We don't tinker with the policy. And if the policy states that you have to write off in 180 days, we write-off. If it's 240 days, we write-off in 240 days. So we don't tinker with that book at all. The rules are set by the policy and the bank approved both policies. And we go with that policy.

Next question is from the line of Jai Mundhra from ICICI Securities.

Most of the questions have been answered. Just 2 questions. One is, if I look at the cash and bank balance as a percentage of assets, since COVID, we have been utilizing that and the proportion was coming down as a percentage of assets. But this quarter, that number has gone up. Is it like more opportunistic, as you said that you were cautious in disbursement and hence the buildup? Or this is something a new sort of...

It is just the loan growth is down. And once the loan growth comes back, it will be there, okay?

Right. And secondly, sir, on the wholesale side, we have been following the strategy of large corporate growth being slightly lower and growth being more driven by small corporate...

And mid-corporate.

Yes, mid and small corporate. But if I look at the yield on the wholesale side, I would have expected them to be stable, if not rising. But this quarter, they have actually declined. So is there any clarification, or this is like not so much of a...

See, it is the normal business which happens. And I think it's a 4 basis point decline. It just is a normal part of the business.

Next question is from the line of Rohan Mandora from Equirus Securities.

Sir, I wanted to understand what is the impact of the penal interest rate circular on NIMs this quarter?

I think there will be an impact of about INR 35 crores to INR 40 crores on the run rate on the penal interest -- INR 30 crores for the quarter. That's the impact. But we should be able to see what we need to do and increase the yield to manage that.

Okay. Okay. Sure. And sir, on the incremental disbursal yield, because I just wanted to get a sense on that. So product-wise, is it flattish Q-on-Q? Is there an increase? Or has there been a decline on incremental disbursement deals?

On which product?

Across the key products that we work like the vehicle finance category and LAP, MFI?

It depends on which product. I think we are very -- vehicle finance, we have an overall disbursement yield of 12.9% to 13%. And we've been consistent in that yield over a period of time, and we've been very stable on that. On microfinance, we have fluctuated between 20% to 33%. And we've been very stable on that. On consumer bank, our yield depends on the secured and the unsecured mix this quarter. We saw a dip on the disbursement yield because it was more tilted towards secure rather than unsecured. Otherwise, if you look at the yield, they disbursed at 13.4%, 13.5%. So that's what we are. And in corporate bank, it depends on the large, mid and small corporates, where we are very stable on our yields.

Sure. And sir, lastly, what will be 30-plus book in the vehicle finance?

Vehicle finance, we don't give that number. We disclosed our SMA1 and SMA2 for the bank, which is 25 basis points and that's what it is.

Next question is from the line of Manish Agarwalla from PhillipCapital.

Sir, I had a question on yield on investment. The yield has been increasing on a sequential basis. Anything to read there?

Yes. So I think some of our [indiscernible] was invested in CDs of various public sector AAA-rated banks, which led to a slight increase in that year.

And in terms of going back to the penal interest question, is that income now a part of fee income or commission/brokerage income?

Part of this is part of the fee income, which is already there, but part of it still has to start coming in.

Okay. Okay. And finally, if you can give some color about which are the geographies where you are witnessing stress in the MFI? Any specific cases if you want to highlight?

No. I told you that I think if you look at our MFI flows and the Bharat Financial flows, it's INR 338 crores for the quarter. So it's not that it's deteriorated. We told you that Punjab was an area where we were seeing stress. I think that's already done and dusted. In our opinion, I think we reduced our book in Orissa -- we slowed down our book in Orissa. And I just gave that answer.

Next question is from the line of Gao from Schonfeld Strategic Advisors.

Sir, just 1 question on your tenure. Are we definitely applying to RBI on extension, or given that we are only in the first quarter, it's too early?

So in my view, I think the Board will have to send a recommendation by September. That's the last date that they have to send a recommendation as of now. And I think they should apply whatever they have to apply by August end or early September. So I think that's where we stand. And I think we have to just wait for that announcement to happen as and when they do that.

Ladies and gentlemen, we will take that as the last question. I will now hand the conference over to Mr. Sumant Kathpalia for closing comments.

Thank you for participating in the first quarter call. If there are any questions or any further clarifications which are required, me and Indrajit are available. We can take your call and questions and get back to you. We have to get back to you on one question, which is on the outflow on the LCR. We will get back.

I mean, I don't have a comparative number right now, so that's why I didn't answer, but I know the outflows what they are.

So we will get back. And thank you so much, and thanks a lot.

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