Kotak Mahindra Bank Limited (500247) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kotak Mahindra Bank Q3 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Uday Kotak. Thank you, and over to you, Mr. Kotak.

Good evening, friends and colleagues. First of all, I wish you all a very happy 2021. I'll start my initial comments in 3 parts. Part 1 is about the economy and the macro picture as we see in the Indian context. Part 2 is about specifics, some of the specifics on the bank and the group in the context of the quarter, which has gone by. And part 3 is more about how we see the broader strategy and the situation of banking and Kotak as we go forward in 2021. So with that, let me first start with the economy. I think the most important aspect of the economy in the first half of calendar 2021 is going to be the vaccine, the success of the vaccine, the effectiveness of the vaccine in terms of efficacy, how long it lasts and whether any mutations create complications. But the base case at stage for most of us is that the vaccine will work and will give protection at least for 9 to 12 months. And that is the basis on which we are working. At the same time, it is heartening to note that even independent of the vaccine, the number of active cases in India seem to have come down significantly and hopefully sustainably. So with this backdrop, where there is a very high probability of normalization on account of COVID happening in the first half of 2021, where, hopefully, most of us would have got vaccinated in this period, we could see a normalization of the economy and also potential areas of growth. The big question on the macro side is that as this normalization happens, what happens to the inflation and the interest rate situation? And how does this play out as we go forward. So in terms of the big picture, if the normalization on the vaccine happens, my assessment today is that we should, over the period of 2021, see by end of '21, the overnight rates come closer to the current repo rate, which will be give or take around 4% and the curve, the yield curve flatten a bit. But at the long end, it should go higher than the 6% mark. Now whether the range is 4% to 6.5% or around from overnight to 10-year is something which we are going to wait and watch. And we also are going to watch the inflation trajectory as also global interest rates and global liquidity. So lots of open questions. But broadly, the base case at this time is normalization of the economy through 2021, especially if the vaccine being effective. And that's leading to some pressures on the demand and supply side, putting some inflationary pressures leading to normalization of interest rates. However, we are not projecting a very sharp hike or a spike in interest rates of abnormal quantum in 2021. At the same time, of course, we are not discussing the what if question that is if the vaccine doesn't work, the pandemic continues to create challenges. And I consider the probability of that at this stage, relatively low. But of course, like every risk management aspect, we can never consider it to be 0. So this is a broad macro background on the basis of which we are doing this call today in January 2021. Coming to the specifics on Kotak Mahindra Bank and the group I would first like to share that taking on from where we stopped at the last quarter meeting, where I mentioned that we have seen loan growth coming back. I'm happy to come back and say that we have been warming the waters. And quarter-on-quarter growth is about 4.5%, which on an annualized basis comes to around 18%. We see a continuing warming of this water further, and we see that as a trend, subject to, of course, the other broader macro picture, which I shared with you. Therefore, a continuing momentum on the growth side on assets is something which we are seeing beyond December 2020. Our focus, as I mentioned, is more on the retail and the commercial side, more on the secured lending side. We are also getting some traction on the corporate side, especially at better quality corporates and in the unsecured consumer credit. We continue with our broader conservative approach though we are beginning to grow now at the higher end of this consumer unsecured credit in a manner which we are comfortable with the risk return metrics of the quality of customers. So this is a broad strategy on loan growth and asset growth, and we will continue with what we mentioned to you in October, and the water have started warming, and we do see a continuing momentum going forward. That brings me to the second aspect, which is where are we on the stress cycle in our bank and how do we see it at this point of time. And it takes me back to something which I have shared with you earlier. And that is that we see a much better -- we see a much more different picture between unsecured retail and secured retail and commercial. On the other hand, the corporate book continues to be very robust. Therefore, corporate lending impact has turned out to be much better than what we would have bargained for in April and May. And within the retail segment, on unsecured retail, just to share with you the numbers. Unsecured retail consumer in our book is about 6% of our loans, but the delta on pro forma NPS between September quarter and December quarter, the delta share of unsecured consumer retail is delta 40% of the delta, which means 6% of the loan book has given the delta of 40% of the difference between pro forma situation as of end of September versus end of December. So this is something which our approach on restructuring here has been that we will do it for customers who we believe will have the ability to repay in the future. Or else, we are taking the tough call and letting it flow into the 90-day plus stress basket. As a result of which, our total restructuring number is 0.28% between what has been restructured and/or invoked. So the combined number of both this put together is around 0.28%. And wherever we have seen the stress other than this, we will let it flow into the 90-day plus bucket. Further, our view on this 90-day plus bucket is that we have not used any analytical basis for deciding the pro forma stress. Our view is straightforward that if the Supreme Court deferment order was not there, and an account had crossed the 90-day mark, in normal course, we would have considered that to be an NPA. And we have done that fully in our entire pro forma calculation and made appropriate provisioning on that entire amount. We have further not done any sale to any ARCs out of our book. And in fact, we continue to see if we get opportunities to be buyers of potential stress where we think there is a value between risk and returns on that portfolio. On the secured side, however, we have found the book behaved much better other than a few pockets where there is some level of stress in the secured book as well. So within the commercial vehicle segment, in particular, we have found some stress in the bus segment. This, as you know, the bus segment within commercial vehicles gets used mainly for school buses or also for intercity and state transports. And that accounts for somewhere between 10% to 15% of all commercial vehicles. And we have found the levels of pro forma GNPA in that segment to be higher. The other thing which we have done is the entire amount of provision for interest reversal, we have taken it in our provisioning line and the full provisioning on interest reversal, including on pro forma NPAs has been provided through the P&L. So this is the broad fact on our current banking book. And we do see that a lot of the stress has already or significantly flown in the period post September 1 to December 31 and has gone and baked it into our numbers. So having said that, there is overall, some increase in the SMA2 book as well compared to earlier times, and we are watching it very closely. And the third point is the future of banking and future of financial services. And here, the first point, which we are very, very acutely aware of is that the benchmark for us in the future cannot be other banks. The benchmark for us in the future is any player who has the ability to come into the ecosystem play and be a competition. And of course, we, as a financial institution, are benchmarking ourselves much broader on the consumer place not just other banks. And that's how we are planning our strategy, including the digital strategy. And it reminds me of Jamie Dimon's recent statement that be better run scared, and I do share that if we have to really get our act to be significantly faster, sharper than ever before. At the same time, we also believe that financial services and banking is about culture. And there is the old world and there is a new world. There are a few things which we need to move to the new world, but there are some parts of the old culture, which need to continue. Culture cannot be a don mark. But change has to be with some areas, which remain fundamentally philosophically the right way of doing business. And we have seen what happens when financial institutions get disproportionately focused on only cross-sell numbers, at the referral of the customer himself or from herself across different parts of the world. And we are also dealing with many strategic questions as we go forward and are taking our call. Our view is on the future of branches. Branches may still be required but the density of branch networks will be less than what is required in the pre-COVID world of the past as digital takes a bigger shape. Our approach to branches from here will continue to be more measured and we believe that we have the much greater ability to reach out through technology and digital means versus disproportionately large physical infrastructure as we go forward. We are also doing a lot of work on increasing productivity parameters, including working from home and putting some of this in place in real life as we talk. We see productivity gains as an important part of how we think about the future. And finally, the internal mantra to my team, colleagues and friends is execution, execution, execution. We really get down to cutting-edge execution within the broader framework of strategy as we take the road map forward. With that, I will now request my colleague, Jaimin Bhatt, to take you through specific numbers and other aspects and my other colleagues on this call as we go forward. Thank you very much.

Thank you, Uday. Let me take the stand-alone bank numbers first. As you would have seen, we closed this quarter with a post-tax profit of INR 1,854 crores as against INR 1,596 crores last year. But let me take the details. Our net interest income, we clocked INR 4,000 crores this quarter as against INR 3,430 crores last year same quarter, which is about the 16.8% growth from last year. Our other income, which comprises fees and services as well as the other part of other income. We grew that from INR 1,361 crores last year to INR 1,334 crores. The fees and services part has grown by 3% on a year-on-year basis and 11% on a quarter-on-quarter basis. The fees and services largely comprises distribution of mutual funds, our insurance products, our other investment products as well as our debt syndication and other activities in that area. So that has grown healthy on a quarter-on-quarter basis. The other part of other income, which largely comprises treasury and related areas, last quarter, we had talked about the fact that we had some treasury gains, including equity as well as we had some stressed asset realization. So from a number of INR 394 crores in quarter 2, this has dropped to INR 164 crores in quarter 3. So that has been a negative quarter-on-quarter as well as a year-on-year number. Our total overall costs, while the employee costs, as we talked about, the fact that both last year third quarter as well as the immediately preceding quarter, which is quarter 2 this year had some element of onetime pension costs, which have not been there this quarter. And to that extent, you'll see the employee cost a tad lower than even the previous quarter. Our other OpEx costs, as we see activity levels go up, some of these costs have come in. This quarter, we did spend on a decent amount of promotional expenses on advertisement activity as our asset book has started growing, also includes brokerage costs as well as collection and recovery costs saw uptick during this quarter. That brings us to the operating profit, which we closed this year -- at this quarter at INR 3,083 crores versus INR 2,388 crores last year, which is about a 29% jump. Comes to provisions, as Uday mentioned, and let me just take a little bit on that. As you all are aware, the Supreme Court in the interim order had said that banks and BFCs would not declare anybody any new account as NPAs from 1st of September. So to that extent, there has been no new NPAs in the current quarter. However, what we have done is notwithstanding the Supreme Court order, if there is any borrower who had even 1 account, which had a 90-day plus overdue, we treated the entire borrower as a pro forma problem and have provided on that borrower's entire balance as if we would have provided in the normal course based on either RBI or our policies, whichever is higher. Not only that, we have taken the entire amount of interest, which he would not have paid during the period since you stopped paying and have taken the interest which is not paid in the provision item. And just to step back on the interest part, considering the fact that you had a long moratorium period in between, anybody who had enjoyed the moratorium periods and who's thereafter falling into the 90-day plus overdue in this quarter would mean that the interest reversal is not just for 3 months. It could end up for somebody who's taken both the moratoriums, it could end up to be as long as 10 or 11 months. So that's the interest reversal also sitting in the provision number. As a result of it, you see the provision number on advances this quarter at INR 641 crores as against second quarter INR 345 crores. We, therefore, come to a pretax profit of INR 2,484 crores, which is a 27% rise on a year-on-year basis. Last year, in quarter 3, we have talked about the fact that we have got some favorable tax orders, which resulted in our tax rate in quarter 3 last year to have come down. And as a result of which, while the pretax profit has gone up by 27%, the post-tax profit, you see a growth of 16.1% on a year-on-year basis. Uday talked about the asset quality. We -- the declared GNPA, which is before taking the Supreme Court numbers into account, we closed at 2.26% and net debt 0.5%. However, if you take the Supreme Court thing which I described, we would end up with a GNPA of 3.27% and NNPA of 1.24%. Our credit cost on the optical side would be at 120 bps for the quarter. However, if the interest element was not adjusted in the provision line and was adjusted in the interest line, the credit cost for the quarter would drop to 86 bps. Our pro forma net NPA is -- we end the period with INR 2,646 crores against which we are holding provisions, including standard, COVID and all of that at INR 2,262 crores, and we do believe that we are adequately provided. We have not dipped into any of those COVID provisions either in the previous quarter or in the current quarter. As Uday mentioned, we have got no sale to ARCs during this quarter or anytime during this year. Our total approved restructuring as at 31st of December stood at 0.28% of our advances. SMA2 at INR 654 crores, which is 0.3% of our overall advances. Our net interest margin for this quarter at 4.51%. However, if I do the interest adjustment, which I talked about, and this interest adjustment is not just interest for this quarter, but for a lot of previous quarters also, the 4.51% would dip to 4.31%. Our overall CASA number at a healthy 58.9%. And as Uday talked, the overall loan book has shown a 4.5% growth on a quarter-on-quarter basis, annualized at 18%. Our capital adequacy continuing to be very healthy, with Tier 1 itself at 23%. I'd request Shanti to take on the digital and the deposits activities in the bank before we go to the other chat.

Thank you, Jaimin. I will start with digital. Our retail consumer business strategy is focused around customers, on acquisition, customer deepening and cross-sell and customer delights. Our digital strategy is focused around this whole business strategy. We have focused a lot on the acquisition side by digitizing acquisition, 811, biometric KYC and video KYC are examples of that, which help scale the acquisition site and broad efficiency. We move to deepening in process journeys using digital, and we have implemented many such journeys for assets, crosschecks and distribution products. We are working on customer delight. Digital and DIY journeys for everything that the customer engages with the bank across transactions to embed digital in every aspect of our core business around customers, be it channels, transactions, products and services. Coming to the highlights this quarter. We continue to see a surge in customers' usage of digital channels led by the mobile being the preferred channel. We enabled new digital journey to help customers transact with us. Example, on the asset side, we enabled Digi Home Loans for instance credit assessment and in principle sanction, no physical intervention. Digi Personal loans intervened 811 secured card being available to customers digitally. On mobile banking, we have a 5% share of mobile transaction value in the industry. Transaction volume is up 73% Y-o-Y and value 40%. We launched our new net banking version. All frequently used services have been simplified and dropped to 1 page in an enhanced dashboard and simplified login and faster features. Sole technology is based on micro services and containerization technology. On the service side, we have scaled capabilities to serve our customers across voice and chat bot, WhatsApp banking and other services. Our digital channels of mobile and net have 180 and 250 features, respectively, across banking, service, payments, shopping, insurance, loans and cards. Customers have used these channels extensively across term deposits, recurring deposits, bill pay, recharge, personal loans, insurance, amongst others. We launched Amazon in KayMall in December. We have 213-plus relationships in open banking to expand ecosystem participation across platforms, fintech and developers apart from digital solutions to our customers. Our 811 customers use our digital channels extensively, as you can see from the percentages in digital payment transactions, UPI continues to see a surge in both customer and merchant transactions. And interestingly, 92% of overall P2P and P2M transactions shared are in digital. Now I turn to liabilities. Q3 saw a return to normalcy across the branch banking network. In branch transactions have seen consistent months on months increase and was at 95% average pre-COVID levels, some locations, more than 100%. Cash transaction volume in December exceeded pre-COVID levels. We continue to see a strong growth in deposits. Average savings deposit growth YTD Y-o-Y is 29% and current account 13%. Focus has been on granular customer growth. Our customer acquisition saw month-on-month growth across all locations. And we continue to focus on significant acquisitions to the 811 platform. Our CASA ratio, as Jaimin mentioned, was at 58.9% as of December '20 versus 53.7% last year. CASA and TD below INR 5 crores comprised 92% of deposits versus 87% same time last year. These deposits comprised 8.1% versus 7.4% in Q3 last year and the cost of savings is at 3.81% this quarter, which is 5.27% in Q3 last year. Our customer contact center was fully operational across work from home and our centers. This enables us to serve our customers for the requirements and active engagement. Our distribution fee income continued to show strong growth this quarter, and we continue the use of analytics and CRM platform to deepen into our customer behavior. Digital adoption by all segments of our customers continue to surge as we enable many more digital journey. Moving on to consumer assets, mortgages, home loans. This was a focus area right through the quarter. Given the competitive rate and growth in core home loan demand, our disbursement increased month-on-month, and we had our best ever month on December. Our focus has been better penetration into the salaried segment and of course, the SEP, both of which are showing good results in terms of increased penetration. We expect this momentum to continue. Initial data shows that we are onboarding much better quality segment while significantly ramping up numbers. Last, volumes in December are back to pre-COVID levels, we continue to see demand from existing and NTB customers. This has always been a steady and stable business for us in terms of market share and credit quality. We intend to continue our focus to grow this business. MSME working capital. We have seen demand for credit pickup, and our new acquisitions have grown months on months and are almost at pre-COVID levels in December. We see our customers increasing their market share and customer demand for credit. With the economy opening up, we have seen improvement in utilization by our customers, cash flows increase and some amount of CapEx demand. We will continue our focus on building a quality franchise in the MSME segment. Unsecured lending, as Uday had said, we are growing our acquisitions months on months, but slower and lower than pre-COVID. We are pushing for growth in segments where we see better quality of credit, stable environment and that ability to grow based on robust risk models. Consumer durables/consumer finance saw good growth due to significant increase in consumption growth during the festival season. We have developed extensive risk forecasts, giving us the confidence to grow this business. About collections. Collection efficiencies have improved months on months and are back to pre-COVID levels in the secured assets and nearing pre-COVID levels in unsecured. We see a stabilization of collection metrics from hereon. With the current bucket bond stabilizing, we have actively changed our strategy and moving collections to late buckets and recovery. Our investments in technology, analytics and capacity enhancement in collection has helped us improve our resolution across products. We will continue to closely monitor and track collection across all metrics. I now request Kannan to take you through the commercial bank's business highlights.

Thank you, Shanti. I'll start with the commercial vehicle finance business. Sale of commercial vehicles in the goods segment during the quarter has been better than the previous quarter. Our disbursements during the quarter has been higher than the previous quarter. Capacity utilization in the goods segment is near normal, but operator economics are affected by increasing fuel prices. Collection efficiency during the quarter has been normal. Sales of passenger vehicles continue to be low. Passenger transportation continues to be an impacted segment and capacity utilization in the passenger transportation segment is very low. Our customers involved in staff transportation, school bus operations, et cetera, are impacting. Construction equipment. Demand for construction equipment has been good, driven by infra projects funded by government and government agencies. Demand for equipment in the mining segment is also good. Disbursements for the quarter has been better than the previous quarter, and collection efficiency in this business is back to normal levels. And I'll move on to our agri SME business. Our agri portfolio mainly comprises of SMEs involved in processing of agricultural commodities, nature of the business has ensured regular cash flows for our customer and our collection efficiency in this business has been normal. Demand for credit is gearing better as compared to the previous quarters. Our microfinance exposure is mainly in nonurban areas. Collection efficiency in this business also has been better and has improved from the quarter gone by as compared to the previous quarter. Disbursements are also getting better than the previous quarter. Tractor sales volumes for the 9 months ended December '20 is about 17% higher compared to the last year. Our disbursements in this business have grown both year-on-year and as compared to the previous quarter. Rural cash flows have been good, and our collection efficiency has been normal. Volumes are expected to be good in the coming last quarter too. I now hand it over to Manian to take us through the next.

Thanks, Kannan. So taking you through the corporate and the SME book. Uday mentioned earlier during the call that the asset quality has remained fairly stable, and it has been a big positive surprise. That has led us to be relatively more aggressive in the last quarter. So we've been able to grow the corporate banking book in the last quarter. And if you see the annualized growth rate is close to about 25% on the corporate book, and this is in spite of the fact that, actually, we've been able to get this in good quality corporates. And our RWAs have actually fallen during this period, RWA percentage. So effectively, meaning that with a better quality, we've been able to grow, and the spreads have remained reasonably stable. So on the SME side, for the first time after several quarters, we are again seeing some uptick in the book, both led by new acquisition as well as better utilization by SMEs. And actually, the SME utilization was also suppressed because of the ECLGS loans because many of them borrowed, but they essentially decreased utilization in the CC limits. But we are now seeing signs of growth in the book. And that's a positive sign, and we intend to build some share. So overall, I would say that we are beginning to get momentum in this. And in the corporate side, we remain focused on building a broader franchise with customers, with focus on overall account level write-offs, and we are finding good traction at that level. If you look at our exposures in sectors, we have grown our exposure in the NBFC sector, but that is largely led by growth in the HFC sector, which is, again, to a very high rated, a AAA-rated, housing finance company. On the LRD side, we have remained cautious on the office space LRD in the early part of this. But now we are seeing some stability there, but we have remained cautious through the last couple of quarters on the office space LRD. On the CRE, we are again seeing a good traction now. On the residential side, and there is a lot of demand on that at a high-quality -- with high-quality developers. But of course, during the last quarter, we remained fairly stable on that portfolio. And the other good development in the last couple of quarters was the ECLG Scheme. We disbursed close to INR 9,400 crores as a bank overall across the various divisions of the bank. And the current number stands at about INR 9,700 crores, which is close to about 5%, 5.5% of the overall utilization of the scheme, which is relatively higher than our share in the advances market otherwise. Also, the businesses facing the market have remained good. So both the DCM in the bank as well as the ECM part of the business in Kotak Mahindra Capital Company, the subsidiary, the investment banking running the investment banking business have remained good. On the DCM side, the revenues have been significantly better than last year as well as -- last year this quarter as well as 9-month comparison. And on the investment banking side, there have been part of several marquee issues and the traction on that remains good. And we have had a good mix of IPOs, QIBs as well as block deals. Advisory continued to remain stable. But overall, the investment banking business is faring much better because of the markets than we thought at the beginning of the year. Can I then hand over to Jaimin, please? Jaimin?

Yes. Thanks, Manian. At the consolidated level, we closed this quarter at a post-tax profit of INR 2,602 crores, which is roughly about 11% higher than INR 2,349 crores last year. Again, the post-tax numbers impacted by the tax benefit we had in the last year third quarter for the bank. If I take the pretax numbers for the bank and subsidiaries, the growth on a year-on-year basis is about 19.5%. Other than the bank, the contributors to the post-tax profit for this quarter, Kotak Securities brought in INR 184 crores as against INR 128 crores last year. The Life Insurance Company at INR 167 crores or about the same number as they had clocked last year. Kotak Mahindra Prime had the figure -- the total provision -- the total profit is INR 149 crores as against INR 187 crores last year. The mutual fund business, the asset management and the trustee businesses together INR 91 crores, again, the same number as we had last year. The customer assets at the consolidated level at INR 2,55,000 crores, up from about INR 2,47,000 crores, which we had 3 months ago. The capital and reserves at the overall group level at about INR 82,000 crores, of which INR 62,000 crores sits in the bank. All the companies are pretty adequately capitalized. And at the group level, we now have a capital adequacy of just over less than 25% overall, of which 24.3% is Tier 1, with a -- ending with a book value of INR 412 per share. I'd request Murli to take the insurance highlights, please.

Thank you, Jaimin. For this quarter 3, Kotak Life Insurance has shown a growth of 9% over the previous quarter and the numbers are INR 2,623 crores in Q3 compared to INR 2,401 crores in Q2. During this period, the share of traditional products for Q3 stands at 85% and our share of protection products has grown by 4.8% on an overall basis, and individual protection share has grown by 29%. Our renewal premium has shown a healthy growth of 22%, and our AUM as of 31st December has shown a 22% growth and stands at INR 39,800 crores. Our solvency ratio is in healthy at 3.01, and we have a strong solvency, and our profit for the quarter has been -- is INR 167 crores. Our focus on digital continues to be on empowering our distribution, energizing employees and a superior customer experience. Kotak Life has a significant share of agency in its overall business, so empowering and energizing their distributors, especially the advisers is a very important part of our digitization program. Smart measures were introduced for improving customer engagement and performance in our Boost, which is the mobile app for advisers. This really helps the Life advisers to improve their productivity. And we have now extended Boost to more of our front-end sale user groups so that we can improve visibility and improve business performance. Our digital onboarding of customers through Jaimin continues to be at 95%. KLI recruit a new digital adviser onboarding platform was launched this year. This will make recruitment of advisers much easier for us. Kotak Life has a significant share on term business and where payment of claims becomes very important. During this period, we launched Insta-claims primarily to settle group claims within 24 hours and improve customer experience. And we introduced a number of digital service tools and more number of services are added like policy document downloads and premium calculators to make the customer experience better. Now I hand it over to Jaideep Hansraj.

Thanks, Murli. Hi friends, I'm here to talk on the Kotak Securities numbers for the quarter ended December '20. Total income for this quarter was INR 474 crores. This would be compared with INR 409 crores for Q3 of 2020 and INR 516 crores for Q2 of '21. Profit before tax for this business is INR 245 crores. This is compared with INR 171 crores for the same period last year and INR 266 crores for the previous quarter. PAT for this quarter is INR 184 crores, which was INR 128 crores same period last year and INR 199 crores for the previous quarter. I'd also like to talk on some of the continuing regulatory changes which have been happening. The peak margining system introduced by SEBI effective 1st December. And this was coupled with the upfront marginal system, which happened in September, we all felt that this system would dampen the volumes a lot. There had been a marginal drop in volumes in the first month or so, but the drop has quickly recovered. This system would bring in a lot of transparency in the industry as well as a level playing field for all the players in the industry. The industry continues to open trading accounts with a lot of gusto and even last quarter, the number of demat accounts opened was close to 3 million. Kotak Security last quarter launched its trade fee plan in November. At the same point of time, it also launched the account opening platform where it allows customers to start trading in 60 minutes. Both have seen some amount of traction, but we need to wait and see how this pans out over the next few quarters. It's very clear that technology is the name of the game at Kotak Securities, and we realized this and have raised a sharp focus on this. With this, I'd like to hand over back to Kannan for Kotak Mahindra Prime.

Thanks, Jaideep. Kotak Mahindra Prime had a profit after tax of INR 549 crores for the quarter on NII and other income of INR 386 crores. Profit after tax was up 12% as compared to the previous quarter. Demand for cars has been good, and supply side constraints are visible in the fast selling models. Dealer inventories are comparatively lower. Our disbursements during the quarter has been higher than the previous quarter as well as the same quarter last year. Placement margins in the business have been good. And collection efficiency is back to normal. I now hand it over to Nilesh to...

Good evening. Calendar year 2020 was a roller coaster year for asset management industry with the headwinds of COVID-19. Kotak Mutual Fund grew total AUM by 22.5% year-on-year and 12.8% quarter-on-quarter in third quarter FY '21. We became fifth largest asset management company in India, managing AUM in excess of INR 2.17 trillion. Our equity AUM grew by 10.5% year-on-year and 12.8% quarter-on-quarter for the quarter ending December '20. Our market share in total AUM grew from 6.6% last year to 7.3%, a growth of 10% plus year-on-year. Our PBT and PAT remained flat on a year-on-year basis. However, it grew by over 8% on a quarter-on-quarter basis. Kotak Mutual Fund continued its tradition of being pioneer in responsible investing. We were the first Indian asset management company to find United Nations principle of responsible investment for ESG investment. This quarter, we have signed for Climate Action 100, whereby we will work with select Indian companies to implement Paris Accord on global warming. Across our asset management vertical comprising of mutual fund insurance, PMs and alternate investments, our total AUM grew by 19.6% to INR 3.15 trillion. Relationship value of our wealth management, including wealth priority and investment advisory business, grew by 22.54% to INR 3.75 trillion. We will continue to -- we are significant player in asset management industry, focusing on alpha generation and ESG investing. We will continue to be a significant player in wealth management space with focus on client first and open architecture. And I will hand it over to Jaimin.

[Operator Instructions] The first question is from the line of Adarsh Parasrampuria from CLSA.

Congrats on great numbers. I had 1 question on the ECLGS book in the use, we've been pretty active. We had a 5% share of the disbursement till now. Just wanted to understand what gives the bank the comfort that some of the ECLGS borrowers, who would have got 10% or 20% of their outstanding, will get into a good servicing mode next year, right, like how power? Because you seem to be pretty active, giving all the ECLGS loans. So what drives the comfort that this book should be all right next year?

I think let me just step back and first look at what ECLGS is, it's a government guarantee for any customer with the defined parameters, where the government has said that we -- the Government of India are giving guarantee for the 20% of the loan amount, that is how it was originally launched for this, this category of customers. And we -- the government made a clear indication that it is expected that all the customers were eligible under this since there is a sovereign guarantee. The banker's money is safe. Therefore, in many ways, it is a quasi-sovereign risk, which a bank is taking. Therefore, if you look at the COVID, especially the earlier periods, you were looking at how do you bridge the gap between a company having a possibility to save itself versus going down immediately. Therefore, ECLGS was introduced with the purpose of giving people a chance to survive. And the state stepped in and said, "I take the risk even if the bankers go out and give the money, it is my risk." And we want MSME category of companies to have a chance for survival. So if our risk is a sovereign risk and we are giving companies a chance of survival with the downside being taken by the state, we think that is a win-win for all. It is a win-win for the customer who has a hope for survival. It's a win-win for the bank because effectively that marginal lending is based on a sovereign risk, but also enables the bank to improve the quality of the customers' ability to survive. Therefore -- has indirectly got the advantage of helping the base loan itself because it gives the customer a chance to survive and of course, the state is protecting the economy from going under. So we think it's a win-win. As a bank, we have the security of a sovereign guarantee. And obviously, we are lending and getting people a chance to survive and making reasonable spreads on the way. Therefore, we think it's a complete positive for us, and which is why we went all out and did a pretty large share of the market.

Uday, just a follow-up here. I understand the INR 9,700 crores is backstopped by the government. But this would have got -- given out to, let's say, a loan book of INR 50,000 crores or INR 60,000 crores, right? That INR 50,000 crores, INR 60,000 crores was outstanding for us in Feb or March, which is basically saying that we've given them a chance to survive. That is -- that's not backstopped by the government. So I'm just trying to understand from a bank point of view, while obviously, it helps them recover out of COVID, but next year will actually end up being the stress testing of those customers. Is that a fair?

I think it's a completely fair thing, but that is the book. See, first of all, you can be superficial in terms of how you go deep into your book or if you go deep into your book and find out anyone and everyone who can take that loan, okay? And we did deep dive into our book and went deep to find out all the potential customers who could take a sovereign risk loan. Therefore, we did much deeper work on the portfolio, we believe. Number two, if we had not given this loan, these customers were more vulnerable than what they are now. And in many ways, the sovereign risk has not only helped the customer with reference to additional money, it has also given greater protection on our existing book. So it's worth double.

Good. I completely take the point that it helps take off the risk quite substantially. The only point is that it's still like versus a customer who required an ECLGS loan versus somebody who didn't require 1 the person who opted for it is a little more stressful, right? So in that sense I'm...

You'll be very surprised that there were many borrowers who not just have insurance. There are many borrowers who may not have needed it, but took it as insurance.

Uday, I think if I can come in, if you recall in my commentary, I did say that our -- in fact, initially, our utilization was suppressed because people borrowed in ECLGS and put the money into CC account. I made that remark in my statement. So it is not correct that people who need -- desperately needed it took it because the rates were low, actually, this loan was coming at a much cheaper rate than their regular borrowings. That's the reason they took it. So it's not correct to state that they were the more desperate people to borrow. That's not a correct assessment of the reality on the ground.

Perfect. No, this is helpful. Uday, so lastly, how would you assess, right? And the risk out of this portfolio, let's say, in '22, yes, I understand that we did give them a benefit backstopped by the government. They've come out, so things will be much better than if we didn't get it. But still, it remains a risk for '22, right? So how does one look at this portfolio in term how you look at it?

So I think the way you've got to look at it is you've got to come back to what happens to the economic activity in many of those cases. If economic activity comes back to normalized, the portfolio will be okay. However, if you take the very, very few that the vaccine won't work, COVID's not going to go away, the interest rates are going to be sharply up, and there are going to be shocks to the world then it's a different view. But if you believe on the fundamental that we are on a path to recovery, then these guys have a much better chance to survive than they had in March. So I would say I would watch the situation. I hear what you're saying. But I would -- I think, to give you a more sort of considered answer, maybe after a couple of quarters, we should get a clarity on how it goes.

Uday, if I may come in once more. You must also remember that we are talking of the same portfolio, the moratorium behavior and restructuring behaviors are there just now to watch as well. If that portfolio was that stressed, even that behavior would have shown up. While, of course, I agree with you that full impact of this will show up over a period of time. But if there was a stress in the portfolio, there would have been a much higher level of restructuring and moratorium request, which was not exactly correct.

Correct. Yes. Therefore, if you look at our restructuring, the restructuring numbers are very low, as you have seen.

Yes, this is good.

The next question is from the line of Rahul Jain from Goldman Sachs.

Just first, data keeping question. Is it possible to get the write-off number for the stand-alone bank, please?

Very small this quarter, negligible actually, very small.

Okay. Got it. Second is, is it possible to share the 30- to 60- and 60- to 90-day past due book in retail and below INR 5 crore SMEs?

Not that we would do it. We've not done it, and I don't think we would really want to share those words. I mean we do it, we track internally.

But any collative color you can give, Jaimin, how's been the behavior, particularly in the 60- to 90-day book?

The SMA2 number reflects that. That was, of course, as you said, INR 4 crores, INR 5 crores plus. So that has picked up to INR 654 crores. So -- but even at that level, at 0.3, our belief is we would still be lower than possibly the best in the industry still.

No. But in retail, how's been the behavior essentially I was trying to understand.

On similar lines, I don't think there's a big difference.

Rahul, I think trend is similar, and the trend now has stabilized, okay? The flows have all stabilized and the flows post stabilization are very similar to overall. So unsecured retail has elevated. Yes, so the secured retail is comfortable. And the corporate is pretty good. But the flows have all stabilized now more or like.

Makes sense. The other question is this Supreme Court embargo on this NPL classification. It's been going on for a while now. And of course, nobody can kind of predict as to when this will be lifted. And so do you think there is a moral hazard risk because of this, the customers would feel that the NPL classification wouldn't happen, particularly in the commercial retail and that could push up NPL in the fourth quarter.

Rahul, just keep one thing in mind. If you look at a customer who was, say, 30 days overdue on 29th of February. He remains 30 days overdue on September 01, okay, assuming it to both the moratoriums. Okay?

Yes.

September 1 to December 31, it would inevitably fall into an NPA category, 90 days plus. Similarly, somebody was even zero-day overdue. And have taken moratorium 1 and 2 on September 1, he would be 0 days. But by December 31, he would be 90-day plus. Before rather than using analytical tools, what we felt is if we take the 90-day plus as all as pro forma NPAs. To give you a very large portion of the flow-through, which would happen, which should have happened out of the moratorium.

Sir, no more incremental risk on. So essentially, there's no more incremental risk here.

No, no, I'm not saying that. I'm just saying that I'm just using the logic. Say the customer was 0 to 30 days overdue as of or even 60 days, 0, 30, 60 days. If he was overdue on 29th of February, the same position remains on 1st of September. But all these customers flow through to 90-day plus by December.

Makes sense. No, but my limited question, Uday, was -- does the banking system per se, not alone Kotak, phase the risk of a moral hazard a because the customer would just try and elongate the repayment period, et cetera, and who knows, could build up more stress in the system, particularly in the sub-prime retail and even just the prime retail because...

Yes, Rahul, I think it's a very important question, which you're raising. See, the first point is, we have, from a long time been saying that we see a vulnerable segment as the unsecured consumer retail. Now there are 2 situations which can be happening in the case of our bank. One is our underwriting may not have been as good as what the banking system may have or the financial system have. So that is one part. The second is, are we chasing reality, whatever may be the truth? I can assure you one thing, we are facing reality.

Okay. Got it. Just 2 more last questions. Do you foresee any more restructuring in the fourth quarter on retail side? Because Dipak did say that the flows have stabilized, so I assume you're not much...

I think very little. I don't think it's going to be significant. And our assessment is that it's not going to be dramatically more from the 0.28%, which we have seen as restructuring. And finally, restructuring is also what the customer wants and our view that it is justified. Our view of it being justified, number one, the customers wanting has not been as high as it was expected, okay? Number two, we are using a pretty simple analysis that by giving it, does it improve our chance of recovery or we face the fact that even if we have to restructure later, restructuring it by making it an NPA or a pro forma NPA, there is nothing stopping us from restructuring thereafter. Why should we be obsessed with accounting restructuring when we can do it any time, space get on with it, the customer has difficulty. If he's crossing 90 days, so be it. I can still restructure it if I think it can improve my ability to collect, let us not confuse quarterly accounting with the substance of what we need to do.

Rahul, MSME1 is still open until 31st March.

That's right. Yes.

So we'll have to wait and watch. But it doesn't seem to be an issue.

Okay. Okay. Got it. Just one last question. The final one, the distressed loans, do you foresee a big opportunity to acquire portfolios that are there in the market? And then if yes, what kind of economic benefits, one could possibly look at in IRR terms over the next couple of quarters or a couple of years. That's the last one.

Dipak, do you want to go for that? Because you also have alternate assets or...

For the -- that's one, Rahul, basically, since the NCLT process is at a standstill, you will see some lower degree of activity at this stage. Because typically, in acquisitions, one would rather have an NCLT order when one is acquiring, yes. Because that comes with a lot more other discounts and benefits. So you will not see too much of activity for, I'd say, at least another 3 to 6 months. But typically, what one has seen is when normalcy starts coming back, the level of bankers willing to sell-off of loans, which they have already accounted for and provided for, always is at a much, much higher level. The opportunity to acquire will be significantly escalated once we see NCLT. And the returns are pretty good. Even now, for example, on the retail side, we still are getting a pretty good return in acquisition. Even last quarter between the bank and the Phoenix transaction, we should have acquired the retail assets. But the corporate side, I think it was a cakewalk.

Retail right now looks promising, corporate, of course, could take some time because of the NCLT process.

Yes, correct, sorry, sorry.

The next question is from the line of Nilanjan from Nomura.

I just want to go back to the NCLD question. I completely understand the point you are making. But let me ask it differently. I mean, the economy, at least the high frequency leases do have rebounded. I mean, it's a different question, how long -- how long do they sustain? But for this cohort of borrowers, how would you see their business is versus pre-COVID? I mean how much recovery have you seen from that?

I think 2 parts to it. One is the retail working capital side and the second is SME side. But Manian, do you want to go for this question?

Yes. So sure, at least the way we look at it from our portfolio. If we look at our portfolio, it seems to have been fairly resilient. I think we are -- like I said, we are seeing utilization of their limits coming back. We have seen significant drop in utilization in this portfolio in the early part of the pandemic. And now we are seeing utilizations come back. So I think this sector, by virtue of the support it got through ECLGS has done, I would say, at least looking at our portfolio, seems to have done reasonably well, much better than we thought about it when we were sitting in early part of the pandemic. And -- but finally, the good part is since the operates have not been affected that much. Finally, a lot of these SMEs are also feeding into the corporate as supply chain. And therefore, I think, by and large, I think this sector has been less impacted than most people thought it would be in the early stages of pandemic.

And you know to be honest, I think one of the best steps the Government of India to cost give the ECLG Scheme. It has really protected many, many small and medium businesses otherwise who would have fallen off the cliff in this pandemic.

No, Uday, that point is very well taken. Absolutely. Second question, it's a bit of a data point as well, but could you kind of tell you the gross NPLs of the Kotak Prime business? We always report the net NPL, but do you have the gross number? And has Kotak Prime also done some disbursals under ECLGS?

Jaimin?

Hasn't gone to ECLGS. So in a minute, I'll give you Kotak Prime gross number would be 2.46%.

2.46%. Okay, sure. And final data point. I mean, we used to get the TD less than INR 1 crore. I think we didn't give out this time. Would you have the number?

That's been a slow growth I think it is. Yes, Just give me a minute. Yes, I understand 70,000 roughly. Just one minute.

I think to a certain extent...

It should be up. Yes, sorry.

Yes, carry on, Jaimin?

Yes, it would be about just short of 70,000 or so.

So it's flat, flattish sort of a number.

That's right.

Yes. Just to give you an idea, TD is below INR 1 crore, 1 year is at about 4.75% Wholesale market, we are able to borrow 1-year money at 3.9%

Right. Right. And interesting against our overall SA balance at least the period at balances haven't grown, I mean, we don't see the need to acquire because maybe the growth is not...

No, no, we are continuing low-cost and stable liability continues. Our CASA ratio is 58.9%. We are not obsessed with what percentage it reaches, we'll keep on growing it. There may be little variations even within SA because what has happened is, even within SA, we have become more careful about wholesale money, which is liquid fund money coming into SA because of higher yields. So we are managing that challenge also because liquid fund returns are now lower than -- were lower than we were giving -- if you look at our SA structure, up to INR 1 crore, we are giving 4% and above INR 1 crore, we are giving 3.5%. So we saw -- when we -- till recently, we will be giving 4% above INR 1 crore deposits as well. And we saw a flood of money coming from the wholesale market, people moving money from liquid funds where returns drop to 2.5% to 3% to get purchase money into our SA deposits. So we tightened it and made it 3.5% in order to ensure that the pure granular SA, which is up to INR 1 crore that is from INR 1 lakh to INR 1 crore, which is a main bucket, which is the transaction bucket of SA, which is where we want the customer transacting and growing at SA. That is the only bucket we have kept 4%.

Right, right.

Sorry, it is very easy to show high growth in deposits, but you effectively land up paying disproportionately higher rates compared to what your operations are. And you want sticky customers, transacting customers, not purchase money or wholesale money, showing you much higher CASA numbers than what is the true quality of what a SA deposit should be, which is the transaction account of a customer.

Right, Uday. If I can, Jaimin, the Kotak Prime gross NPL that you mentioned, is that ex of SC forbearance or...

That is before the SC difference. Yes, that is like before the SC difference. That is without taking into account the SC difference, the declined GLPs and its upon it.

[Operator Instructions] We take the next question from the line of Jiten Doshi from ENAM Asset Management.

Yes. Congratulations to the entire team for a stupendous performance in a very challenging environment. My question pertains to where do you structurally see the interest rates going over the next 2 to 3 years?

Yes. In fact, Jiten, I gave some perspective on that at the beginning of the call. My view is that we see a gradual firming up of interest rates through 2021 in India. And we -- if you look at the current reverse repo rate at 3.35% and the repo rate at 4%, we -- and currently, even now some parts of the market operating at or below the reverse repo rate, we'll gradually see through 2021 by end of it us operating closer to the repo rate, assuming it is 4%. So around the 4% mark is what we think. Therefore, there's a steady increase in interest rates as we see it. The RBI would want to -- I would like to believe, do it gradually, but on the way up. And we see a flattening of the curve. On the long end, we see the 10-year in the range of 6% -- maybe if this is the way the reverse repo rate moves closer to the repo rate as the operating rate of the market at around 4%, our view on the 10-year is around 6.5%, give or take.

So how much more can we go down on our saving bank account interest rates that we offer our clients?

No. I think even now for a customer who comes and puts money in Kotak savings account in the bucket, INR 1 lakh to INR 1 crore, which is where we pay 4%. The 3 -- the big 3 banks offer comparative average, if somebody had INR 1 crore in a savings bank account, the big 3 banks in the private sector offers an average of 3.25%. So even now, we are 75 basis higher for a customer in the INR 1 lakh to INR 1 crore bucket compared to these banks. We've still kept it attractive for our customers to keep money with us and transact with us particularly the operating bucket of INR 1 lakh to INR 1 crore, where effectively, in that bucket, he makes 4%, while in the other big 3 banks, he makes an average of 3.25%.

So you see yourself shaving up at least 25 basis points in the next couple of months?

Jiten, we are in the business of looking at our overall cost of funds. And now we believe that we have a very, very competitive cost of funds position. And we've actually had a very, very significant sort of improvement in our cost of funds. And we see our CASA ratio now at 58.9%, and we are not excited on any number on that CASA ratio, whatever it may be.

[Operator Instructions] The next question is from the line of Mr. Roshan Chutkey from ICICI Prudential Asset Management.

So what is the performance going to of prime business this quarter?

I maybe take that Roshan. That would be about slightly north of 4%.

Okay. And how do you explain the provisions number in this business, if you have any comments to offer for this 9 months compared to the last 9 months, there has been a significant increase there, right? So...

Yes. So we take -- just as we've done in the bank, we've taken the full provision rates for all the accounts which are 90-day plus. So the same thing, the principle which we followed in the bank, we followed across the group, where the entire Supreme Court deferral 90-day plus, the full provision, the interest reversal, all of that is exactly on the same lines.

The next question is from the line of Mahrukh Adajania from Elara.

My first question is on the pro forma slippages for the stand-alone bank, you've given enough color, but could you quantify the number?

Mahrukh, it's like this. If you look at my pro forma GNPA for this quarter has gone up by about INR 1,500 crores. We've disclosed 7 months, 2.6 and 5.6. So that's about INR 1,500 crores there. No new GNPAs have got created because of the Supreme Court thing and my declared GNPA has gone down by about INR 400 crores, very little write-off. So you need to add that INR 400 crores out there, so it will be close to INR 2,000 crores. Around 2,000 crores -- slightly INR 2,000 crores or slightly over that.

Got it. And my other question was on ECLGS. Most of the disbursals that have happened in the second -- in the third quarter because till the end of the second quarter, it was around INR 76 billion. Would that be under ECLGS 2 or ECLGS 1?

ECLGS 2 is a very small number. Most of it is ECLGS 1.

Okay. And I just have a last question, there was a discussion paper that the RBI has come up with, and they've said that if the bank can undertake a lending business, it should not be undertaken to a subsidiary. So in case, the discussion paper moves further and becomes a guideline, what would happen to Kotak Prime?

I think, Mahrukh, if you notice what RBI has -- there is still a discussion paper. What is being said is either it's -- therefore, it should be done either in the bank or in the subsidiary. Our car finance business is done by the subsidiary.

The next question is from the line of Mr. Kunal Shah from ICICI Securities.

Yes. So firstly, again, on ECLGS, in terms of the eligibility on our pool, how many customers or accounts, if you have to look at it, they would have got eligible and they would have got disbursed. And still, when we look at SME or commercial banking or maybe consumer banking, that's not actually growing. So now would that be like -- so what could be like first a reason for the rundown as well on the portfolio despite ECLGS disbursement. So now that was the first question. And second question was on the cost side. So maybe there was a rise and you highlighted, it was more in terms of the spend on advertising and promotion. But have you seen currently, it's like back to almost like flattish year-on-year and 20% growth quarter-on-quarter, similar to that of the loan growth. So how much of cost we would have actually cut because of all the efforts which we were highlighting we are doing to improve the productivity? These are the questions.

The first question Manian and second Jaimin. Manian?

Yes. So roughly, compared to eligibility, we disbursed close to about 50% to 60% depending on the type of business. Some businesses were lower on an average, about 50-odd percent would have been the disbursement. And I partly answered your question earlier. There were many cases in the SME side and MSME side where it did not necessarily lead to higher book because the money was taken because it was cheaper than their current CC, so customers took this money and actually suppressed their CC utilizations or other working capital limit utilizations.

Sure. Okay.

Kunal to take your next one, as I said, a lot of the cost increases this quarter also happens from some of the promotional expenses, whether credit card or advertisements and whatnot. And it also includes communication for customers and customer service. Stepped up activity, especially in areas which are consumer, including home loans. So the DMA charges and whatever we put out, we write-off, and we take the expense straight upfront. Similarly, you've had recovery costs, which have gone up this time. And also some amount of costs, which are linked to, let's say, my insurance cost shoots up as my deposit base grows because that's entirely linked to the deposit base and keeps going up. So you will see some of that is linked to activity and as activity has picked up, that has gone up. Overall, on the efficiency side, we've taken several measures. If I look at some of those. For example, on our premises cost and whatnot, we have done a fair amount of negotiation and reduction of rentals. And our focus has not just been on what we get immediately for a few months. But how do we get the benefit on a present value basis over the life of the contract. And that's something which we believe has helped us. You may not see the numbers immediately, but over the life of the tenancy which we have, you'll see those numbers coming in. A lot of the other things which we have got into, which is technology-driven and bringing in efficiencies are more where you'll see efficiencies coming in and productivity improve by the same number of people effectively doing larger volumes. So as volumes pick up, you will see some of that coming in and seeing on the P&L.

The next question is from the line of Sumeet Kariwala from Morgan Stanley.

Just had a question on margin outlook. How do you see that? And is just an update on the competitive intensity? How is that going in corporate banking secure and retail? And do you expect that to increase?

Manian, you want to take that?

Hello, what was the first part of the question? What is the outlook on?

Just a question for the outlook on margins going forward and an update on competitive intensity in secure, retail and corporate banking, is that picking up?

Okay. My view is that with a continuing competitiveness on our cost of funds and sustainable reduction in cost of funds. We believe we are extremely competitive in terms of our pricing power in the marketplace. And therefore, where we file our underwriting to be as appropriate, we don't believe we need to lose a business on account of pricing. Having said that, that additional cushion, which we have because of lower cost of funds will also give us protection on our margin. And keep in mind that our net interest income and other growth numbers which you have seen are in a book which has actually been flat to negative in the last 12 months. A lot of the monies have gone into relatively paper assets like government securities, where we are running significant surpluses above our mandated requirements, including for LTR purposes. So as we free up money out of those relatively lower-yielding assets and put it on the credit growth side, we think actually, margins should be in reasonable shape as we go forward because we are moving from lower yield to higher yield with credit risk as we move forward. Let me explain Sumeet in a simple language. If I had bought a 3-year G-Sec at, say, 4.5% or 2-year G-Sec at 4.5% versus a home loan at 6.75%, which is at the lowest end of this curve in some of the retail businesses, we still have a spread arbitrage in our favor. So our NIMs and NII currently is on a very large book, which is at lower-yield interest earnings safe assets. So as we move out of that and get into higher-yield assets, including on working capital and maybe some select corporate and unsecured retail gradually as we go up, our ease abound to improve on the book, which we start shedding from the lower yield, lower risk assets.

The next question is from the line of Venky Sanjeevi from Pictet.

I just wanted to just get a bit on your comment on the positive surprise on the corporate asset quality side. So what has been the further action from your -- the bit more reviews in terms of the risk management framework? Have there been any changes that have to be done in the as management that has been too tight in the past? The background, of course, is that especially you had in the past as well, that is a bank give a bit too conservative, especially while lending to large corporates and given the cost of fund advantage you have. Are there any changes which could have been done in terms of risk management here?

I think you asked a very good question, but the answer lies with all of you guys. If you look at the 3 segments of the marketplace, which is, say, corporate, commercial and consumer. The only place where equity markets have given money is to the corporate. Therefore, whether you are a theater owner or in an airline business or in a hotel business or in a retail mall business, equity capital markets have provided the capital buffer, which has flown through many of these guys in the last 9 months. And with that equity capital, which came in, in very large numbers, post March till December, has given a lot of corporates, even the so-called corporates is disproportionate cushion. To take the shocks coming out of COVID. So I think corporate sector has disproportionately benefited from the very benign capital markets over the last 9 months. The same benefit has not been available for the commercial segment or the retail consumer segment, where there is no access to equity capital available to these 2 segments. Therefore, on a relative basis, corporate sector benefited because of equity markets. The corporate sector benefited because of very sharp availability of liquidity through measures taken by the RBI to be able to get funding and liquidity in the interim and the corporate sector was very, very strong in rationalization of its cost. Some of it may be at the benefit of the organized sector, but at the cost of the unorganized sector, and these 3 factors have actually enabled the corporate sector to come out better. And obviously, we have changed our positions if you look at the October to December quarter, as Manian mentioned, our quarterly growth in the corporate lending business has been in excess of, I think, close to 7%, which is 28% annualized. So we are shifting the engine. We have the advantage of a very competitive cost of funds. And as we get more comfortable with risk measures, we are moving the engine. And we are spacing the -- we are clearly seeing the reality, which is why at the beginning of my comments today, I mentioned that we are comfortable with secured retail, working capital in secured as also with corporate sector. We are less comfortable with unsecured retail, though even there, we are beginning to let in the better quality corporate -- better quality unsecured retail, as Shanti mentioned.

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

A couple of questions. One is the coverage ratio on pro forma basis, which I think includes all the COVID provisions has risen up to 62%. So how comfortable we are with that? And do you think that we need to make some higher standard provisions for ECLG loans as well?

Jaimin, will you answer that question?

Differently, Nitin. On the pro forma basis, there is also -- if I take into account all the other provisions, which we have, the specific provision, there is SC deferral provision. There's also the COVID provision. Mind it, we have not dipped into any of those COVID provisions, which we provided earlier. That's all of INR 1,279 crores. Now if I add all my provisions, whether it is specific provisions, SC deferral, COVID, standard, all of that, as against the pro forma GNPA of about INR 7,100 crores, my overall provision number is about INR 6,900 crores. So we have reasonably provided on the overall GNPA.

And again, let me correct you. When you said on a pro forma basis, we are at 62%, that does not include the COVID provision.

That's right. That's only the specific and the SC deferral movements, yes.

Therefore, 62% does not include the COVID provision. If you added that, we are getting to well above 70%.

Okay. And one clarification, what percentage of home loan growth this quarter was balance transfer? If you can share the data point?

I don't think we just want to share that. Shanti, your thoughts?

I think we had a good mix of both new sales because if you saw this quarter across the industry, you saw a lot of developers were able to sell. So while we don't put out the percentage, there was a good quantum of new sales and BT. In fact, the new sales were significantly up.

Okay. And sir, lastly, if we can get your views on the recent RBI FSR wherein RBI projected a 600 basis point increase in system in GNPA and over 300 basis point increase for private banks by September. While I would not request you to mention any number just, but qualitatively speaking, how much like are you in sync with this sort of projection? Does this look too scary to you because and what can go wrong? Can it be ECLG loans or some certain sectors which can rise? Like what can drive the sort of rise in GNPA in your view?

See, I think RBI's put out a scenario. I think it's still to be tested. My personal view is that RBI has been very conservative in its estimates, it should be better than that. That is my personal view. Having said that, only time will tell. Having -- at the same time, for us to be sitting end of December, the Supreme Court, not allowing recognition of NPAs, various banks and financial institutions having varied policies on how you account for it, what do you show, what do you not show? I can understand the dilemma facing the entire financial sector on what is the truth. And this is a very serious question on what is the truth and what will be the truth as it pans out over the next 6 to 9 months. And we went through this dilemma ourselves. And we, therefore, took a view that whatever will be, will be. But whatever is happening, let it just flow through so that we -- both in our books and with our investors show the situation as we see it, if there was no Supreme Court deferral, what would we look like, which is the part which is looking more stressful, which is looking less stressful as things stand today. To be able to judge what will happen 6 or 9 months later, there are too many variables. But in general, I would like to say that RBI estimate is very cautious and conservative. And I would like to believe the banking system should do better than that.

The next question is from the line of Abhishek Murarka from IIFL Capital.

Yes. So a couple of questions. First one, sorry to go back to the ECLGS thing. But roughly INR 47,000 crores of your book has received ECLGS if you could explain how it is spread across different segments, that would be useful. And a question was asked, I think we missed out on that had the same one. Going forward, given that there was some sort of stress in this book, which required them to take ECLGS at least some of them. Would you consider making higher run rate of provisions, either standard or maybe just a higher provision on this INR 47,000 crores? So that's the first question. The second one is if you could give a sense of the disbursement growth in different businesses, that would be useful to judge the kind of momentum that's building.

Manian, do you want to answer that, Manian?

Yes. Two parts to your question. One is, how was it spread? It was across all the 3 businesses that is consumer, the small consumer businesses, small businesses that we run out of our consumer bank. The commercial bank, which is all the commercial kind of businesses as well as low end of the corporate, which is the SME business. So I would say it is broadly divided into 80% of that will be in the consumer and commercial and about 20% will be in the higher segment. That's broadly the breakup. On provisions itself, I think provisions are based on the fact of our risk perception on that portfolio or the behavior of the portfolio. Any concrete behavior of the portfolio. Neither of that currently makes us believe that we need to take any higher provisions on the book.

Okay. And on disbursements?

On disbursement, what was your question?

So just across the retail segment, how is the disbursements growth or disbursements momentum, if you could sort of give that?

We have given the whole thing, Jaimin?

Yes. Yes, we've given the SOH of how the stock has moved. But yes, you've seen a lot of that, the SOH moving in the mortgages and all, which is coming more from a disbursement during the quarter because your repayment of principal in any way is small amounts.

Okay. But okay, okay, I'll take it off-line.

The next question is from the line of Naishi Shah from Acko General Insurance.

My first question is, if you could give me an idea about the rating profile in the unsecured retail book? And also for the overall book that you all have? And sir, the second question is, I think I missed it, but how much percentage of the slippages are there in the unsecured book?

Sorry, just to take the second question, Naishi, Uday did mention about the fact that what we've seen as pro forma increased during this quarter. We talked about a number of INR 1,500 crores, which you see from $5,600 crores to INR 7,100 crores. Almost 40% to 45% has gone from the unsecured retail book, which is the credit cards, personal loans, business loans, consumer durables and the like.

And about the rating profile?

If I look at overall rating of what we have, almost about 86-odd percent would be falling in the investment-grade rating.

This is the overall book, right?

What do you mean by retail rating profile?

No, this is not the retail rating profile. Overall, sorry.

Yes. No, I think she wanted retail rating profile?

Yes, unsecured retail, the rating profile of the unsecured retail book?

No, I don't -- we don't define rating profile on the unsecured retail side. How do you define retail rating profile?

So I believe -- I mean, a lot of banks have an internal rating scale or probably they compare it with the external rating that a lot of companies have.

Retail, we don't normally have unless we securitize the portfolio only, then we'll get a retail...

We'll be able to take one last question. We take the last question from the line of Manish Shukla from Citigroup.

What do you believe would be the normalized levels of leverage for the bank stand-alone? And how soon can you get there?

Normalized levels of?

Leverage?

We have given -- we've shown our customer -- we have shown our loan growth, which is something which we have shown on a quarterly basis. We continue to believe the loan growth is reasonably good. The capital utilization really also depends on how fast we add risk-weighted assets organically. It also depends on how we at the same time, generate surpluses out of those risk-weighted assets as well as other schemes of income. And then, of course, that is the whole inorganic piece. So yes, we are running pretty comfortable and surplus on overall capital. Therefore, we are aware of that. We -- is something that we continue to see and evaluate various opportunities both organically and, of course, inorganically. And we will make best use of capital as we see that opportunity as we go forward.

So on the inorganic piece there, right, given the asset inflation, especially on the equity side that you've seen, do you see there are opportunities either at the bank or subsidiary level, which might be attractive enough for you?

See, there is always an opportunity which comes. And when it comes, we will certainly consider it seriously.

We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you very much, friends, ladies and gentlemen. We are sitting at a cusp of what I would define as the best of times and the worst of times. We are on the edge of having the union budget, new administration in the United States with a new philosophy and a new policy, expanded risk in the U.S. India going through its own different opportunities and challenges. And I actually, therefore, feel that the financial sector is in one of the most crucial time of history in India. And therefore, what I said with reference to best of times and worst of times applied as much to the financial sector. And I genuinely believe that the financial sector will sharply differentiate itself in terms of what different players do and behave and the outcomes, which come out of it over the next 12 to 24 months. And each of us has to work on it, has to be paranoid, has to be on the edge to look at what is right for each of us. There is no room for being complacent about past success. And with that, I would just like to end on this note of 2021 with a sense of optimism coming out of, hopefully, COVID being behind us, the vaccine, hopefully working. And the world hopefully being a more safe and a stable place and stable too with -- and hopefully, I'm not making any subjective judgments. I hope that the leader of the free world, the United States, would provide leadership for this transform 2021 and beyond as also each of us in our countries and our respective leaderships. But I do feel for the financial sector, we are truly in the best of times and worst of times. Thank you very much, ladies and gentlemen.

Thank you very much. On behalf of Kotak Mahindra Bank, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.