Punjab & Sind Bank (533295) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Ganesh Shankanawar, the moderator for today's earnings call. I welcome and thank each one of you for joining us today for Punjab & Sind Bank's Earnings Call for Q2 FY '26. Please note that this conference is being recorded. [Operator Instructions] I would now like to introduce the management of Punjab & Sind Bank. We have with us today Shri Swarup Kumar Saha, Managing Director and Chief Executive Officer; Shri Ravi Mehra, Executive Director; Shri Rajeeva, Executive Director; and Shri Arnab Goswamy, Chief Financial Officer. I would now like to hand over the conference to Shri Swarup Kumar Saha, sir, MD and CEO of Punjab & Sind Bank for the opening remarks, after which we will have the forum open for the interactive Q&A session. Thank you, and over to you, sir.

Yes. Thank you, Mr. Ganesh, and good morning, everybody. And I welcome you all on behalf of Punjab & Sind Bank management for the Q2 earnings conference call of Punjab & Sind Bank. As we all know that the bank has been progressing steadily, and we are happy to state that yesterday, our bank's Board has adopted the Q2 results of the -- financial results of the bank, and we have already disclosed through the stock exchange and the presentation has been already uploaded. I hope many of you must have got the time to go through that. However, in terms of the today's earnings call, I would just like to set the tone with some of the key highlights of the bank's Q2 performance of Punjab & Sind Bank. The total business of the bank grew to -- by 12.19% Y-o-Y to INR 2,41,000 crores, and that showed a sequential improvement of 4.39%. The deposits grew by 9.42% and stood at INR 1,35,706 crores with a sequential improvement of 3.45%. The total advances of the bank grew by 15.97% Y-o-Y with a sequential improvement of 5.62%, and the gross advances of the bank stood at INR 1,05,566 crores as on 30th September. The retail, agri, MSME advances collectively grew by a healthy growth of 20.23%. And we also have seen various improvements in the efficiency parameters. First of all, I would like to touch on the asset quality. The gross NPA have been sequentially -- has further reduced, and it now stands at 2.92% as of 30th September. The net NPA has also substantially reduced by 63 bps Y-o-Y and stands at 0.83%. The PCR provision coverage ratio has improved by 332 bps on a Y-o-Y position and stands at 91.88%. The area of the asset quality, I would like to highlight that the slippages are getting contained quarter-on-quarter. If you see the traction of the bank's slippages over the last 4, 5 quarters, it has shown a good reduction track. And the slippages was contained to the level of INR 164 crores in the quarter of September. The recovery upgradation also continues to be supporting the bank's overall corporate objectives, and the recovery upgradations increased by 14.37%. In terms of the overall efficiency parameter, the operating profit increased by 10.26%. The net interest income increased by 8.82%. The net profit of the bank stood at INR 295 crores and increased by 22.92%. The capital adequacy is still strong. We have been growing. So it has shown a marginal dip from 17.90%, but we are still at a very healthy level of 17.19%. In some of the key highlights on the -- as on a half yearly basis, you will find that on Slide #14, we have highlighted some of the key highlights on the half yearly basis also. The gross NPA is down, net NPA is down. PCR has improved significantly. Operating profit increases by -- from INR 775 crores to INR 1,045 crores on a Y-o-Y basis half yearly. Net profit has also increased from INR 421 crores to INR 564 crores. Cost-to-income ratio has come down from 65.96% to 61.20%. The net interest income growth has been robust. There has been a slight dip in the net interest margin, which we understand the reasons for that, and we'll have your -- we'll answer the questions that you will have on this subject. And the rate of interest -- rate of return on assets also has shown uptick in the half yearly position. The SMA-1 and 2 has also shown improvement during this period. The slippage ratio has been contained to 0.17%. As I've already said, now the SMA-1 and 2 has been at INR 176 crores and INR 184 crores only compared to the earlier INR 679 crores and INR 408 crores in the last year in the same period of time. The capital adequacy stands at 17.19%, which is a very healthy capital adequacy. And yesterday, the Board has already approved the further capital raising plan of the bank with INR 3,000 crores of equity and INR 2,000 crores of bonds. That's around INR 5,000 crores over a period of 1 year, depending on the market conditions and in tranches. Additionally, the Board of the bank has also approved, if required, the mobilization of some more infra funds, and we have got approval for INR 3,000 crores for this period. Overall, the bank has taken various measures for improving its performance in terms of various customer-centric products. We are now offering various digital products on the retail and MSME segments. The retail -- we are already in the digital cycle of giving vehicle loans and housing loans under the retail segment, housing loan up to INR 1 crore and vehicle loan up to INR 50 lakhs. We have also increased the MSME digital lending from -- level from INR 25 lakhs to INR 1 crore. These are also showing good traction in the bank, and it also helps us to reduce turnaround time and attract young customers. We're also taking various initiatives on the expansion of the bank in various geographies. We have talked about this that we have a plan of opening 200 branches in the next 1 to 2 years. We'll continue to pursue that. Many branches are getting identified. Premises are getting finalized. Staffs are getting recruited. So we will see the traction of those branch expansion actually coming into reality from Q3 onwards. We also -- for our special focus on the MSME advances, we are opening various MSME cluster-focused branches. Recently, we did a big program of opening of the MSME cluster for sports industry in Jalandhar, Football Chowk. And wherein the Secretary, DFS also was there to inaugurate the branch. It was a big achievement for the bank in terms of spreading our wings in specialized areas in the state of Punjab. Punjab has a significant network for our bank. So we would like to continue our focus on Punjab, also as we give importance for expansion in our bank's objectives in the other geographies of the country. We also have now implemented fully. We have talked about this earlier. We have committed from the bank side, the smarter acquisition of bank accounts through tap banking that has now been fully implemented in the metro and urban branches, and we are also slowly going to implement them in the rural and semi-urban. That gives us a new ways of customer acquisition on a paperless mode. The tap banking enables its staff to go to the doorstep of a potential customer to open the accounts on a paperless mode, whether it's a new to bank, whether it's existing customer opening additional account. So that's another important development that has been put on the ground. The savings account has been fully operational now. We are now going to very shortly in -- maybe in a month or so, going to start the current account acquisition also through this tap banking. So it will improve the -- not only -- it will not only give the bank a better perception of smarter acquisition of banking, but also -- will also take care of various compliance matters regarding KYC, et cetera, which the regulator wants us to be very careful about. And as we also promised earlier, we have also implemented to a large extent, our goals for the upgraded call center, which is now helping us to a large extent for collection efficiency at this point of time. And that's why you will find that the SMA -- particularly in the SMA-0 segment, this will go down slowly and slowly because we are getting a very good support from this latest technology, latest version of the call center. So they are making a lot of outbound calls on the SMA-0 and 1 customers, which is facilitating the branches to be much more proactive. And of course, nothing can be completed in the bank without the support of the human resources. So from that angle also, we have now engaged a global consultant for how -- for revamping our ways of improving the efficiency of the branches and improving the productivity of the branch, business per branch, business per employee. So that's in a very advanced stage of implementation, which will include not only scientific target setting, it also include the scientific ways of assessment of performance, and we can differentiate performance from nonperformance in a much more scientific way. The concept that is getting implemented in the bank is based on the best practices that have been implemented across the industry, across various banks. So with this [indiscernible] project, which we have named it, will help enable the bank to improve our performance at the ground level. And I'm very sure, the results of this project will soon be available to us going forward once it is fully implemented by Q3, and we will get the full benefit out of that from the next year onwards. Various other methods also, as we have also talked about the centralized trade finance that is also under a very advanced stage, we are going to implement that very shortly in Q3. The vendor is on track. Our project is on track to improve this objective of improving our ForEx business, which we are not in a big position now. So I think this will be a great enabler for the bank, of course, to improve the ForEx business. Apart from these initiatives, the bank also is now much more focused on customer centricity, customer grievances, customer experience also. So not only the call center -- upgraded call center, as we talked about just before, a few moments ago, will help the bank on the collections, it will also help the bank on addressing the various grievances that come, particularly in a very, very challenging environment on the digital ecosystem that is in front of us. So the customer grievances and also the call center will bring to the table the customer relationship management with AI tools, which will help the bank to do a lot of data culling out to improve our cross-selling, and also follow up on a very scientific manner, the leads that come through the various channels of the bank. So these were some of the elements of new developments that we are contemplating to implement. Yes, a one more factor, as we said in the earlier calls, we had made four new zonal offices in the bank in terms of improving our -- delegating more to the field. We have a lot of many branches in -- particularly in some zones for control. So we opened four zonal offices from April, which are already functional. And going forward, we have already got a Board approval for going ahead with four more zonal offices in various locations like Odisha, Chhattisgarh, Karnataka and Himachal Pradesh. So those are the four locations which in going forward, we intend to open zonal offices. As we expand our network in these areas, we will be able to get more and more business out of these areas as well. And various control measures, various system upgrades are happening on the IT front, on the cybersecurity front. We are revamping our -- continuously monitoring our cybersecurity mechanisms. We have integrated with I4C, where we are now also having a collaboration with RBI Innovation Hub for the various mule accounts identification and taking preventive measures for the same. So a lot of collaborations are happening also with various activities. And we are also now focusing -- great efforts will be now put on innovation as well. We will be very shortly engaging a very experienced person for innovations for the banks as an adviser. We'll let you know when the time actually comes. It is going to take place very shortly. Very experienced person in the market will join us very shortly as an adviser on how to do business innovation through AI. I think that's the area we are working very, very closely, and we'll continue to our journey on that. One more information finally is that the bank has also got the Board approval for the opening a branch in the GIFT City. And we are now moving to RBI for the necessary approvals. We'll await the decision of RBI. The correspondence has just been initiated. So we hope that going forward, if we -- if -- subject to the approval of the regulator, we will be in a position to open another branch in the -- we'll open one branch in the GIFT City, which will give us a good traction on the ForEx business as well. So that was in summarizing our performance for our Q2. Thank you very much for your patient hearing. And now I'm ready to -- our entire team is ready for the question and answers. Thank you very much.

[Operator Instructions] So our first question is from the line of Ashok Ajmera.

Hello? Can you hear me?

Yes, yes.

And it's very heartening to note that a lot of good new initiatives are, I would say, the bumper kind of initiatives are taken by the bank now and a lot of approvals you have in place from your Board to almost revamp the entire operations of the bank so as to make it at par with the many of the other PSPs. So that is very, very heartening to note, sir. Compliments for that. Having said that, and especially this initiative of opening an SBU in GIFT City, definitely, with the kind of audience, kind of customer base which you have, a lot of business from foreigners, NRIs, all can be fetched through this branch in the SBU in the GIFT City. I mean, you will have a very good prospect there once you have the SBU in place. Having said that, sir, coming back on the results, results are -- in this quarter are reasonably good, like unlike the last quarter when the growth was absolutely muted. In this quarter, you have done well on the credit front also, deposit front also. But sir, on the credit front, still that we are at around 5.18% of the -- 5.98% of the credit growth in the 6 months. And as per the target of 16%, 17%, I believe we'll have to go for anther INR 10,000 crores -- INR 9,000 crores to INR 10,000 crores of business. So how are we placed there? What kind of sanctioned pipeline or the proposals which are under consideration do you have? And whether we are growing all this organically or you have some co-lending models or through NBFC models? So how are we going to achieve this target of the credit growth, though you are comfortable on capital adequacy and deposit growth is also reasonably good. So that is my first question, which is generally there in every interaction with you. Having said that, sir, another one is that there is a little pressure on the operating profit, and I believe this operating profit actually has gone down in this quarter as compared to INR 540 crores to INR 505 crores, but mainly because of the noninterest -- because of the reduction in the noninterest income. And there also, it is mainly on the investment. Like on the investment -- profit on the sale of investment and the revaluation, there, as against INR 210 crores collectively, we are only INR 60 crores on this. So there is definitely a pressure on the treasury side of the profit. So on that, how do we see in the coming next 2 quarters, the performance here on the treasury front so as to bring back the operating profit at a good level? And thereafter, sir, the pressure on the CASA still continues. We are trying to basically go out of that 30%, 31%. But rather than that, we are slipping a little bit in every quarter on that. So of course, you are putting a lot of offers on that. So this is also, if you can throw some light, you have done well on the SMA front, on the SMA quality front. And one is -- last is that EASE framework of the digital, how it has placed? Last quarter, you had said that it will be fully in operations and it will start yielding very good results. So where do we stand on the digital front, sir? In this round, these are the few observations and some questions, sir.

Yes. Thank you, Mr. Ajmera, for your lovely questions. And I think this is all very appropriate. On the first part is, of course, your question was on the growth in advances. As you have noticed in our guidance in the Q1 itself, we had kept a guidance of growth of 15% to 16% in the advances side, and we continue to the last year -- last quarter, sorry. The last quarter, the advances grew by 13.92% and nearly 14%. This time, it is at 16%. This time, the Q-o-Q [Technical Difficulty]. So we are on track, and we are very confident that this 15% to 16% is really -- realistically achievable. So we don't see any challenge in that direction. As part of your question on your -- whether the growth is on the organic, on our co-lending, et cetera. Primarily, it is on the organically. The things are moving better nowadays. We have a portion of a co-lending, but the co-lending contribution to the growth is much less than the previous. So we are now more predominantly growing organically, while we are taking a bit of a support from the co-lending and the DA component. But the organic growth has improved quite well. That's why you'll find the reflection in the business per branch is increasing by 12.4% to INR 148 crores. So that shows how we are placing ourselves in terms of the growth story, organic or inorganic, and continue to focus on the organic growth primarily. In terms on the operating profit, yes, you are absolutely right. The operating profit has dipped compared to Q1, though it is -- it shows a Y-o-Y growth of 10% plus, but yes, it is because of the lesser contribution from the treasury. You have already mentioned the numbers, the Q1 and the Q2 numbers. So yes, the treasury was unable to -- and this is a common phenomenon across all the banks. You must have seen that because of the movement of the market in a bit of a reverse direction in Q2, the treasury contribution has not been to the extent of Q1, but going forward, I feel that this contribution is going to come back. And the recent market dynamics that is playing out post the MPC minutes that have been published 2 days ago and the overall global ecosystem, I think the treasury yields are going to be much more positive for the banks. The movement of the yields will be more positive for the banks. And therefore, I feel that the treasury income will come back in Q3 and Q4 very, very shortly. We will -- in our noninterest income, we'll continue to focus on recovery. That's a point also I'd like to mention here that one of the major component of the noninterest income is recovery in the T.W.O. accounts. And in this quarter, we felt a bit short of our expectations in the actual recovery in the T.W.O. account because of certain accounts which did not materialize, which we are very hopeful to come by 30th September, but I'm very sure those accounts, for some technical reasons, which we could not appropriate by 30th September, will come back in the Q3 quarter. And we expect that the performance in this quarter in the -- recovering the T.W.O. accounts will be more than what it is in the previous 2 quarters. So the noninterest income is a very important component, and we'll continue to also focus on core fee income and try to improve our businesses on the -- on nonfund business, prevent as much leakages as possible. We have zero tolerance on leakages now in the system. The systems are getting much more qualitatively robust in terms of recovery of the charges or the interest or whatever is a component of the fee income is there. And of course, we'll continue our journey in the collaboration on the third-party product business. So that's an area where we'll continue to focus very, very heavily in the bank in terms of increasing the noninterest income of the bank. Your third point was on the CASA. Yes, the CASA is -- and as we all know, the CASA has been a challenge in the entire banking industry. But what is noticeable in this quarter's performance of the bank is though our ratio has continues to dip slowly and slowly, but the average -- the growth of the CASA in this quarter has been 8.67%. I think that's a green shoot that we should -- 8.97%, in fact. And that's a green shoot we will be continuously working on. The incremental quantum of CASA has improved, while the ratio has -- will be a monitorable point for all of us. But as long as we get the CASA component in our bank in terms of volumes, it will help our cause in terms of reducing cost of funds. Third -- and fourth, of course, is your point on EASE Reforms. There, again, as I'll let Mr. Mehra to talk on this subject on our ease of doing business. There are two parts in it. I'll conclude by just saying that in terms of the Government of India initiative of EASE Reforms, we were the top improvers amongst all the public sector banks in the last version of the EASE 7.0. And we are expecting that we'll continue our journeys in that -- under that collaboration under EASE Reforms. As far as the digital journeys of the bank of ease of doing business, I'll request Mr. Mehra to touch on. And one more point was, of course, on the pipeline, on the advances, which Mr. Ajmera had asked. I think we have more than INR 10,000 crores of advances in the pipeline, which we can account for. Yes, Mr. Mehra.

Mr. Ajmera, with regard to the digital lending front, I just want to inform you two, three points. First is as informed by MD sir, we have already initiated the digital lending of car loan through STP journey and assisted mode as well and the amount of INR 50 lakh. For MSME, it's up to INR 1 crores, and housing loan is up to INR 1 crores. More importantly, during the -- since the day we have launched that on 4th of November 2024 till 30th September, approximately 60% of the vehicle loans are being sanctioned through digital journey itself. And around 35% of the home loans are also been sanctioned through this digital journey. Definitely, we are moving towards this ease of doing business and improving the customer experience as well. We are also going to add some other products in the digital part, like commercial vehicle and some other government schemes as well. So hopefully, the numbers are definitely going to improve. And what we are targeting is to take around this vehicle loan sanction to around 70% by this financial year end.

That's very good to know, sir, because this digital things has been a little issue a few years back in our bank. So that's a very welcome sign that some of our digital initiatives have started yielding results in the direct numbers and figures, it can be very frankly.

Yes. I'd just like to complement, Mr. Ajmera, what Mr. Mehra said regarding the future initiatives of -- under this factor is that we are also now very, very in advanced stage of implementing further products under this digital lending scheme. Yes.

Sir, commercial vehicle...

So can you just highlight that also?

Yes. Some other products are also there like commercial vehicle we are going to introduce, and MSME maybe going forward, once the things stabilize. The MSME sanction amount will also increase up to INR 5 crores shortly. Some of the other government-sponsored schemes, which are related to this lending particularly are also going to be on this digital platform.

That's very good to know, sir. Sir, if you permit one more this thing on this capital raise, where you have got the approval of INR 3,000 crores, I mean, we are -- still the government holding is 93.85%. So do you think that you will use this entire INR 3,000 crore opportunity in this financial year only or you may go for INR 1,500 crores and maybe later in the first half of the next year, some part?

Yes. It will be, of course, first of all, in -- as for the market conditions, number one, that's the bottom line. And number two, of course, it will be in tranches. So it can -- we will see after Q3, what is the situation that is in the market and where we are placed. We'd like to be much more conservative at this point of time in terms of the guidance of future. Maybe when we meet next time, we'll be have a much more concrete situation to tell you at least what is the appropriate time, which we will explore, but not in Q3, Q4. We are still to keep it that in our back of the mind, if possible, we'll look into it, but a firmer guidance maybe when we meet next time.

Let's meet physically in Mumbai, sir, next time.

Yes. Sure, sure, sure.

So our next question is from the line of Sushil Choksey. We will continue with the next participant. So the next question is from Sucrit Patil.

Am I audible?

Yes, yes, please.

Sir, my name is Sucrit Patil from Eyesight Fintrade Pvt Ltd. I have just two questions. One is to you, Mr. Saha. So -- and other is to Mr. Arnab, if he's there on the call today.

Yes, yes. He is there.

Yes, sir. So my question to you Mr. Saha is you have outlined plans to expand Punjab & Sind Bank's reach and improve the digital capabilities. What are the biggest execution challenges you foresee in scaling these initiatives, especially in terms of tech adoption, customer onboarding and regulatory alignment? How are you preparing the bank to overcome these hurdles while maintaining service quality?

Yes. Thank you, Mr. Patil. See, the -- we are working on two areas, one is the expansion and one is the digital. We -- first of all, we are under a very strict regulatory environment. So there is no compromise and there's zero tolerance against any violation. So we have to -- we are very conscious of what we do in our bank and how do we go forward in our corporate goals. In terms of expansion, we are talking about increasing our network in the unbanked areas where we are not -- not in unbanked area, where Punjab & Sind Bank is not visible at this point of time, particularly in the areas other than the Northern region. So we are expanding far and wide in Maharashtra, Chhattisgarh, Karnataka, Odisha, Andhra, Telangana, Tamil Nadu and Northeast. And these are the primary areas of expansion. We have also opened new zonal offices in Varanasi, Patna, Agra, so there will be some expansion in these areas as well. So we will comply with the expansion. There's no, as such, any challenge in terms of expanding the network, what we need to do in terms of acquisition, ultimately expansion, because it means acquisition of new business. And every new branch that we open has to acquire a critical amount of business immediately so that it becomes an additional business opportunity for the bank in that area. So we need to deploy people well. We need to deploy resources in the proper direction. We need to have a proper -- our technology systems, our digital systems in a perfect balance. So we are -- we closely monitor our technology initiatives that we take in terms of various corporate goalpost. As I said in my opening remarks that one of the critical things that we have implemented is acquisition of accounts -- savings accounts through the tap banking system. So that gives us an opportunity to tap customers at their doorstep, particularly the new generation customers that we need to acquire in our bank. So more and more acquisition we like to have in the new gen customers that we can bring to our fold. And in terms of the digital areas, I think as Mr. Mehra has already called out in his statement that we have to comply with certain [Technical Difficulty] which we very much ensure that we do that in terms of the regulatory objectives. Particularly, we are very conscious that we are -- one sec, there is some audio issue. Just a second, please. Can you hear me?

Yes, sir.

So we need to ensure that customers we onboard in terms digitally on STP process instead through processing, our business rule engines are robust. And that's why, we have kept very strict BREs for the onboarding of such customers. And in fact, in our setup that we have done so far, we take a lot of feedback from the field and the feedback mechanism is very robust in the bank, and we try to understand what is going right and what we need to do, submit course correction. And from that perspective, we have done a business rule engine based on the best practices, and we find that the average conversion rate comes to around 35% of our overall leads that we get. That shows that the system is robust. So as far as the challenges are concerned, I think the one main thing is that how do we make our systems as robust as possible so that going forward, when we expand, whether organically or in a digital front, we are in the safe zone.

Fair enough. I think this is good guidance and which we will look forward to. My final question is to Mr. Arnab Goswamy, sir. Is he there on the call today?

Yes, yes. I'm in. Please put your question.

Yes, sir. With the rising competition and evolving credit demand, how are you planning to protect margin, while maintaining asset quality? Especially in segments like MSME, agri and retail, what are the financial controls or portfolio strategies are being prioritized to manage risk and sustain the profitability?

Yes, the strategy we are taking for the ECL provision, all these things.

So I'll just try to tell you is that the question is on the production of the NIM on the agri, MSME, retail. What is happening is that, yes, there is a pressure on the NIM, on the entire system as large. So what we are doing is that we are trying to cull out those products where we can revise our product range and focus on those products, which gives us better yields, particularly on the gold loan side, on the mortgage loan side, the personal loan side. So these are the products, which we like to focus on going forward. And if you find in our presentation, in the slides, we have shown the -- how our product mix is moving towards -- tilted towards these sort of products than what it was done earlier. In fact, in the overall, the credit portfolio also in the corporate side, you will find that there has been a slight migration from the AAAs to the AAs and from the -- and the AAA component is going down and the AA is going up. So we get margins from that side also. And also, we are very conscious on how do we do our risk-based pricing. We have implemented the RAROC system, the risk-based analysis on how we price our products. So whether it is agri, whether it is MSME, whether it is retail or whether it is corporate, the pricing of the products is very important. Pricing of the products is very important. And therefore, we are -- and also risk management team, our ALCO, continuously monitors the yields on the various products that we get in terms of quarterly, how our growth story is playing out, how our yields are against those advances, are -- will also work. So these are the things that we do for mitigating the obvious impact on the NIM that happens with the regulatory, what you call, changes that happen on the repo rate cuts that happen. So some of the areas that is -- ultimately, it is a product mix, which is very important and analyzing those products in a better way. So -- and more and more customized products are getting also introduced in the bank, which will -- which we are now having -- which we are not there earlier, we are having much more product. Every segment of the society has a specialized product. Like I'll tell you one example, equipment financing. On the MSME side, this is one area, which we were not there in a big way. So we have revamped our MSME equipment financing model and product, which will enable the bank to generate business with better yields. Food processing is another area, which is a champion sector identified for the bank in terms of sectoral areas, and we find a lot of traction happening in that area as well. So these are the things -- these are the products that will help us to understand -- to help us to mitigate and protect our margins.

I think you have given a very good guidance on the MSME part. I wish the entire team Happy Diwali and best of luck for the next Q3.

Thank you.

Our next question is from the line of Sushil Choksey. So our next question is from the line of Mr. Rohan.

Hello, am I audible?

Yes, yes.

Sir, sorry, I joined a bit late. But on the impact of the draft ECL norms, did you share some comment? And how are you structuring the calculation? How have you divided the loan book in various segments? If you can broadly give some color around that, the thought process on how you will approach the ECL framework?

See, the approach has now been more or less in the draft that has been announced. So there is not -- there is limited scope in terms of the approach. We will follow the guidelines. It has just come out. We are examining it. On the bottom line front is -- the bottom line answer on this would be that we don't see any significant impact on our overall scheme of things going forward. But in terms of the granular areas and exact quantum that would be -- that would impact, I think Reserve Bank has given us a lot of room for us to explore things. And therefore, we'll be able to share more color on this maybe in a subsequent quarter going forward, but on the bottom line perception of this is that it is much more easier than what we contemplated, and we think that will not have much impact on the bank's overall corporate rules.

Sure. Sir, just one clarification here. On the SMA provisioning that will come under ECL, the provision that you'll need to maintain, is it very close to the floor that RBI has prescribed or there can -- it's like different -- at a different level?

My CRO, Mr. Dheeraj, is here.

Dheeraj Gaur here. So at present, for SMA, there is nothing, right? SMA provisioning also is as per the standard account provisioning. So when we do -- for SMA in the ECL framework, certainly, the provision will be slightly different. But as -- see, as far as our preparation is concerned, we are -- development of all those granular models and all that is already in progress. And overall impact, as sir also said, it will not be like on the bottom line, the impact will not be significant. And the second advantage is like the 5 years glide path, which RBI has already provided, as already mentioned in the -- so that will make like things quite easy. And over a period of time, as overall asset size has improved significantly, like our net NPA has come down below 1%. So overall, my PD number and overall impact will be much limited. That is what is our sense at this point of time.

Got it. And sir, what will be your outstanding AFS reserve as of 2Q and 1Q?

That is INR 39 crores, sir, as in March -- September. The total AFS reserve is INR 39 crores as in September, sir.

INR 39 crores?

INR 39 crores, yes, sir.

And what was it in June?

It was -- exact figure, I'm not having, but yes, we'll share you separately, sir.

Got it. And sir, in terms of the PSL, sir, last year, certain PSU banks had reclassified agri gold loans to a retail gold. So I just want to understand, was there any provisioning requirement that came with that reclassification for the bank, incremental provision requirement?

No, I don't think so.

Nothing was there?

No, no. Nothing that we understand. No impact on our bank as such.

Okay. And no PSL or crop loans have been discontinued by the bank, all of them are continuing?

No, no. There are certain operative guidelines they have given how to do -- go about business in this area and that we are working on that, yes.

Got it. And sir, lastly, it's a slightly broad question. See, the PSB Alliance, which has been going on in the various EASE initiatives, if we were to look at the benefits that our bank has got in the last, say, 1, 1.5 years, like where can we quantify them? Or what is more structural in nature, if you can share some thoughts around that?

See, PSB Alliance is a company floated more or less as an alliance of all the public sector banks. And in fact, what the idea is that the collaboration amongst the public sector banks becomes easier through this company. Our bank also has taken a lot of initiatives through this company. In fact, a lot of technological and cyber-related changes that we are going to bring about in the near future has been done through the PSB Alliance. There is a process on that. I'm not going into details of that part. But the process -- whatever the process is that PSB Alliance has done, we are now revamping our IT, cybersecurity totally in a different -- an updated version in terms of SOC, ROC and other areas of technology requirement. Another area that we are doing in terms of PSB Alliance is on the product side. Now we are in a very advanced stage of -- yes, I missed this out in my opening remarks that the supply chain finance management, the financing of supply chain, we were not there earlier. So the PSB Alliance has got partners, which we can encash. So we are in an advanced stage. The UATs are going on. Approvals are in place, maybe in a very short time. In Q4 onwards, we'll be able to start the process of the supply chain finance. I think that's a very important area. So we cull out the things that we can do in our bank and accordingly move ahead. So they have a host of things they can be offered and we are also doing as one thing of asset recovery on BAANKNET, whether it is agri, collateral onboarding, monitoring, asset tracing means suppose we are having a defaulting borrower and we don't have -- we have some assets in our collateral maybe, but we are unable to recover the entire amount. So this company, there is a company allows us to trace the assets of the defaulting borrowers anywhere where it is registered. So we can fall back upon those assets also for asset tracing and the collateral -- agri collateral onboarding and monitoring platform also they are providing the digital supply chain finance. So BAANKNET is a platform for e-auction of various products. So I think we can -- we are also taking that benefit, and then certain other host of things that brings to the table. So there are a lot of things that we are taking advantage of through this company.

Sure. And sir, just to understand this slightly further. For the advantage that you get from PSB Alliance, while you have invested initially, is there anything on a recurring basis that you need to pay for the work that they are doing?

Yes, Mr. Rajeeva, my ED, will comment on this.

So yes, see, whatever services they provide, there is a system of -- they have a requisite fee that needs to be paid. And that is what all the banks are supposed to pay. Whether it is doorstep banking or any other service, it is on [Technical Difficulty].

Our next question is from the line of Sushil Choksey.

Sir, can you hear me? Congratulations on a stable numbers and best wishes for Diwali. You have spoken about a lot of initiatives led by digital, alliances, co-lending, various other initiatives, which you were working over the last 12 months and empowered by the new management team, too. Sir, if you look at today's RAM situation, which is 55-45, 56-44, how do you visualize between co-lending, trades platform, retail, the situation of the bank on margin front and on the proportion size?

Yes. It's a good question, sir. Actually, first of all, in terms of our guidance on the RAM percentage, we'd like to inch it up to by 57% -- to 57%, 58% by the end of the year. That's the overall macro guidance. In terms of the segments under which we will like to work on is that we will take the organic lending processes as well. However, the co-lending, whether it is under the revised guidelines, the revised guidelines are going to be -- we are working on the revised guidelines also, which is going to get implemented very shortly in another 2 months' time. So we are changing our products and systems accordingly. We are integrating our platforms also through the fintech partners that we have on board. So this is a area where we will be focusing very, very strongly also as well. As we do the organic lending, we find that there is a room for the bank to be in this co-lending platform for protecting our margins. So under various products, whether it is gold loan, whether it is MSMEs, whether it is LAP products, whether it is -- these are the three components. Of course, housing will also be there. But the first three products that I have mentioned just now is those are the areas, which will give us better margins. And we are spreading our NBFC partners as much as possible. You also talked about trades. Yes, if you'll find quarter-on-quarter, our exposure in trades is also increasing. We are also pricing of our trades and the exposure, on which we are taking on the AAs and the As are also increasing. Some BBBs are also we are doing. So that also protects our margin. The trades volume has moved to INR 2,000 crores -- odd crores by the end of September. We were not there too much 1 year ago. So now that also -- will also help us. So organically, branch performance, digital performance, digital lending, trades, co-lending, DA, this is -- it will be a cross-section of things. We have our own risk appetites put in place in terms of the Board governance, how much of the quantum we will go forward. However, we find that the traction so far has been very, very encouraging, and there is enough room for us to go forward in all the areas that we have just talked about.

Sir, are we doing trades along with insurance or without insurance? Second thing, digital lending on partnership co-lending will be yielding higher margin than what you would be doing as a bank. Is my understanding clear?

Yes, yes, yes. That's the idea. The co-lending partners' margin will be higher than the organic business growth.

Second thing, sir, we are working hard to improve our CASA with all the digital initiatives, account opening and various penetration programs, MSME reach out, whatever we may be doing. Do you see that our cost of deposit and reach out programs will improve our CASA situation by March or in next 18 months where the bank is concerned?

We have to be very realistic in what we say from our side. So what are we -- I will not -- in terms of the -- there are two components of CASA. One is the CASA volume, the quantum of it, and the other is the ratio per se. So there will be a stress on the ratio as such. But whether our idea would be to improve our quantum on an average -- on a quarter-on-quarter basis on an average cycle. So the idea is that improve our CASA based on a quantum amount more and more, let the ratio is a factor of the overall CASA retail, and now suppose I say, retail term deposits, we are growing at about 17%, 18% now, right? So CASA plus retail is now 75% to 76%, which we were at 71%, 72% 1 year back also, maybe 2 years back. So overall, ultimately, the banks require liability resources to fund going forward. We cannot depend more on the market borrowings and other forms as well. So this has to be a part of the overall scheme of things in terms of managing our LCR calculations as well. So CASA will be a challenge. To mitigate that challenge, the best way forward, as we have envisaged in our bank is to open as many branches as possible across the country. That will give it a mobility on the CASA front. And maybe going forward, on the ratio, improve the ratio as well. But as of now, if I talk of March, because branch expansion will happen, the things will move on, marketing will happen, it takes 1 or 2 years for any branch to actually give yield results. But those are future pipelines, future strategies that today we are sowing the seeds on, which will give us -- which will -- the bank will get the benefits, maybe in a 1-year, 2-year down the line. But on a short-term basis, the ratio would be impacted. So we will work on the volumes as much as possible in terms of the CASA amount -- quantum amount.

Sir, if I understand well the bank, to achieve a INR 10,000 crores to INR 12,000 crore growth in the next 6 months in credit, RBI has allowed you to increase the co-lending partnership with new policy guideline, you have already launched the digital initiative where onboarding is possible. Looking at all these aspects, now cross-border acquisition or a domestic acquisition financing, so many measures are there. Are we strategizing with some core team members, whereby whether it is trades or it is co-lending, because to increase -- if you increase your four, five AAA, AA partnership and if our systems, our throughput is right, I don't see why our RAM and credit growth at a reasonably -- like share advance is fetching 10%, IPO finance is fetching 10%, secondhand car is financing -- fetching 10%, minimum for a bank, NBFCs are charging higher. So I personally feel we are well placed. I don't know how we capitalize that what I would like to see over the period of 6 to 12 months.

Yes. Absolutely, Mr. Choksey, you're absolutely right. Bang on, on whatever you just said, is that we -- there are enough opportunities in the market to collaborate, and NBFCs is one of the areas we will collaborate. We are now -- as far as our teams are concerned, we are now creating a digital lending team in the bank. While we have a digital lending cell, now we will like to create a digital lending team. As things move forward, as we increase the portfolio, we have internally already decided that there will be a digital lending team, who will work on this collaborations in a better way so that there is a one-touch point solution for all the partners that we have. So we are working very, very strongly on that area, and we will explore all the partnerships, good partnerships, as you just said, for the collaborations and co-lending under the new guidelines, of course.

Sir, what's your outlook on treasury? And I'm sure with all your initiatives, cost-to-income would be heading towards 50% from where we stand?

It should be, we are hopeful. Maybe that's a bit aggressive guidance. I'll stop here at this point in terms of saying that the treasury looks very, very -- the future treasury performance looks very robust in the next -- this quarter and the next 2 quarters. And we hope that we will encash as much as -- I will only speak at this point of time instead of speaking on the numbers. What I can foresee, I will only speak, I foresee a very, very robust treasury performance Q3, Q4, and maybe something going forward as well. So -- but consciously, we'll also keep in mind that the potential rate cut that is being discussed about around 25 to 50 bps, so that mitigation also we need to work out in our internal assessment of things. But as far as treasury is concerned, I think we have a huge opportunity to encash the market situation that is coming before us very shortly.

Sir, congratulations and best wishes for the year to come.

Thank you, Mr. Choksey.

Next question is from the line of Jaya Mundhra.

Sir, I think you answered partly question, but I wanted to check, sir, out of your INR 1,05,000 crore loan book, how much is SMA-1 and SMA-2, all ticket size? We have given the currency number, but what is the total?

See, SMA overall, including SMA-0, is around 5% of the entire book. That's the overall SMA book.

Okay. And that is 0 including?

That is 0 including, as 0 is predominant.

Right. Okay. So would you have the number, sir, separately for 1 and 2 because I think that is what will...

1 and 2, 1 is 1.15% and 2 is 1.46%, including 0.

Okay. So SMA-1 is 1.1% and SMA-2 is also similar number?

Yes, yes, yes.

And 2.5% roughly is the SMA-0.

2.5% is the SMA-0, yes. See, if you see our traction of slippages, while SMA-0 also, that 5% is also a bit -- the numbers, it is a bit high because out of that overall 5%, a lot of -- SMA-0 of 2,500, 50% nearly is on the 1-day default -- 1-day overdue category. Or maybe legacy-wise, we have not put the correct due date demand in the system based on the cash flow of the individual or the company as far as salary is concerned. Suppose we have given a loan on 20th -- 25th of a month, we have put the first demand on 30th itself and the salary comes subsequent [Technical Difficulty], 50% of that 0 is that 1-day category. So though it inflates my numbers to that extent, and we are trying to reduce that. And a lot of work is going on in that direction as well to reduce that number by -- and that's why this call center is helping us in a large extent on this SME-0 front to contact the borrower, come back to the bank and do some bit of a understanding with them to put the correct feeding in the system. But going forward, we are much more conscious of this. Now things are -- the new accounts that are getting opened, we open it with a lot of PBU. So I think the -- and the slippages are coming down. If you see my SMA also, there's a large component of retail, which is SMA, but the slippages also in retail are coming down quarter-on-quarter basis. So we don't foresee that in the long term.

Okay. Sir, last question is, sir, there was a lot of floods in Punjab, Haryana and some of the geographies where bank is predominantly there. Do you had any restructuring or any residual impact, which is yet to come?

Yes, we have a lot of floods, but whatever the policies under this matter, the state takes on natural calamities, the districts are very limited, and we don't see too much of -- there will be some impact, of course, we cannot say there will be no impact. There are people who have been grossly impacted. But in the overall scheme of things, if you see our agriculture slippages also and September is a very critical quarter for us in terms of slippages, you will find in our presentation that the slippages of Q2 also is going down compared to the previous quarter. So though we are a big presence in Punjab, but the districts that are impacted in Punjab are less. It is not that all the districts are impacted. And from their perspective, though there will be some here and there impact, but I don't think any major impact on the bank.

Thank you, everyone. As there are no further questions from the participants, we now conclude this conference. Should you have any further queries, please reach out to Ganesh Shankanawar at 773-868-8746 or [email protected]. Details are mentioned in the Webex chat and analyst invitation sent to you earlier. On behalf of Punjab & Sind Bank, I thank each one of you for joining the conference today. You may now disconnect your lines. Thank you. Have a good day ahead.

And wish you all a very happy Diwali. Thank you very much.