RBL Bank Limited (RBLBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to RBL Bank Limited Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I would now like to hand the conference over to Mr. Vishwavir Ahuja, Managing Director and CEO of RBL Bank. Thank you, and over to you, Mr. Ahuja.

Yes. Thank you. Good evening, ladies and gentlemen, and thank you for joining us for a discussion on RBL Bank's financial results for the second quarter of FY '22. I'm sorry for the slight delay in this call because we had some technical issues, which we were sorting out, but they have now been sorted out. So happy to proceed now. We hope that you and your families have been safe and in good health. As always, I'm joined on this call by other members of my team who, along with me, will address any questions that you have. Quarter 2 has been a story of 2 halves, if I may say. Till almost the first half or end of August, around the time we spoke to you last time, we were very cautious and still counting the costs of COVID-2, if I may put it that way. The second half or more specifically, September, has been a 180-degree turnaround in the mood and the energy levels. And I want to amplify that briefly. All our business sectors are now back on a positive trajectory. Slippages as well as the recoveries are both looking better than what we had anticipated in August. Therefore, we expect second half to be better and start normalizing. We had feared a loss of almost 10 weeks of card issuance owing to the embargo in Mastercard. But I think it's a tribute to our team and that of our partners, Visa and Fiserv that we started our issuance in 7 weeks. And our October run rate of new issuance is approximately 2 lakh cards, which is our lifetime best. Even as we have been addressing the environment, our long-term focus on expansion of distribution, whether in terms of branches, BC points, and technology-driven services, Project Abacus 2.0 have all continued apace. Our deposit base continues to grow on all the right metrics, lower cost of deposits, CASA growth, leading to the highest ever CASA ratio this quarter and more retail deposits. In fact, out of every INR 100 of incremental deposits being sourced, more than 80% is now coming in the retail category. So with this backdrop of a few positives, which are all relevant, I will now talk about our results for this quarter. In terms of the usual asset quality and related provisioning aspects, our GNPA was 5.4%, slightly higher than the last quarter, which was very much expected and indicated last time. And net NPA is 2.14%. So we've kept it around the same level over -- for a long period of time, around the 2% level as we had committed that we would keep taking more provisions to ensure that net NPA stays under control and does not show more elevation. In our last call, we had indicated that gross slippages in Q2 were expected to be similar to Q1 on account of higher balances in these delinquency buckets. Happy to report that the slippages in Q2 have been lesser than anticipated and have come out at INR 1,217 crores as against INR 1,342 crores in Q1 '22. On a net slippages basis, this quarter, we are 30% lower quarter-on-quarter at INR 747 crores as against INR 1,069 crores in Q1. We were aided by recoveries and upgrades this quarter at INR 471 crores or 39% of our gross slippages. We saw pullback from slippages in this quarter, and we expect this to continue in the second half, of course. This quarter was the peak of our GNPA cycle. Going forward, in line with our past commentary, we expect gross slippages to be lower, recoveries to continue to be high and therefore, significantly lower NPA position and, of course, net slippages. Of our net slippages of INR 747 crores in this quarter, the breakdown is on similar patterns as last time, INR 431 crores came from credit cards, INR 267 crores came in micro banking, INR 35 crores came from the rest of retail buckets, and only INR 14 crores from wholesale. Now we have seen several quarters of the wholesale book, showing very high-quality portfolio, hardly any sort of slippage or delinquency. And as we had said last time, it is extremely well positioned for the revival of growth in that area. And we'll talk about that as we go along. Even though that is not reflected in Q2, but it will certainly start showing up in Q3 onwards. We took total provisions net of recoveries of INR 652 crores in this quarter. In addition, we continue to hold almost 60% of our COVID provision, which we had taken in the last quarter. PCR is now slightly further improved to 61.66% as against 60.94% last quarter and 52.28% in Q4 '21. As previously guided, PCR will steadily keep creeping up, and we expect it to be more than 65% by the end of the year. As in the past, we have also given gross and NPA numbers for each of our business segments in our presentation. Our total restructured advances at the end of the quarter was 3.66%. Of this, wholesale was 21% and the rest was from the retail. Again, in retail, restructuring was largely driven by secured business loans and micro banking. We have, of course, taken requisite provisioning on the same. In terms of operating performance, our advances were flat sequentially and were down 1% year-on-year. Again, this was as per what we had previously indicated. Retail advances declined 4% year-on-year and sequentially, whereas wholesale advances grew 5% year-on-year and 3% sequentially. In Wholesale Banking, our activity levels, as I said earlier, have reversed from where we were over the last few quarters, and we are increasingly seeing traction in credit growth. In fact, in the month of October itself, we have already disbursed more than INR 1,000 crores of incremental loans and which is over 4% of our total wholesale book was disbursed in the month of October itself. And we are seeing, as said earlier, continued traction in this space. In retail, while in Q2, we saw a reduction, for 2 reasons. One, we were -- of course, we continue to be cautious post the second wave as far as the micro banking business is concerned. And the second part is the fact that there was the Mastercard embargo on credit cards. So both were affecting the fact that the retail portfolio, and as it is, we had stopped the other unsecured businesses, which we have reported earlier. And therefore, that business was just about holding at its previous levels. But October onwards, we are seeing, again, positive growth traction even here, even in the retail space. Having said that, wholesale retail mix is now 45-55, retail 55%. So wholesale has cracked up a little bit in the mix because of the circumstances I've just outlined. Coming to revenue, year-on-year total revenue was up 12% at INR 1,508 crores. Of course, net interest income degrew 6% sequentially to INR 915 crores, impacted by interest reversals of almost a little over INR 130 crores on a lower retail book, especially in micro finance. As a result, NIMs for the quarter were at a low point of 4.06. Again, the impact of these reversals alone was 58 basis points. NIMs were 4.36% in Q1. We expect the trend to reverse immediately in Q3 and to the 4.3% range and exit the year close to the 4.5% range as far as NIMs are concerned. This question is asked in the Q&A, so I thought I'd address it upfront. Year-on-year, other income was up 42% at INR 593 crores, of which core fees themselves were INR 506 crores, up 46% year-on-year. Fee income was adversely impacted to the extent of INR 39 crores due to reversals, Otherwise, it would have been even higher. While year-on-year fee income from our retail business grew 51% to INR 426 crores. So out of this INR 593 crores, INR 426 crores came from retail, largely cards. Retail fee income to core fees was 84% this quarter. Year-on-year, our pre-provision operating profit grew 2% to INR 691 crores this quarter. However, as a result of the provisioning mentioned earlier, our profit after tax was INR 31 crores for the quarter. Now let me talk about the deposit franchise, the retail deposit franchise, in line with our key objective to grow granular retail deposits. Year-on-year, total deposits grew 17% and 1% sequentially, driven by CASA and retail deposit growth. CASA ratio reached an all-time high of 35.4% and has improved 170 basis points sequentially and 426 basis points year-on-year. CASA deposits grew 37% -- 33% year-on-year and 7% sequentially, well above the overall deposit growth. Year-on-year share of retail and small business deposits as a proportion of overall deposits increased 717 basis points and 195 basis points sequentially from 39.6% at the end of last quarter to 41.6% at the end of this quarter. Our focus on retail deposits through a combination of increased digital and physical footprint, improved brand recognition, network effect of branches are bearing fruit. The bank is focused on customer acquisition across all channels and products with a view to materially cross-pollinate various products, something which we have spoken in detail in the recent past, particularly the last quarter commentary. Our liquidity levels, of course, continue to be high with average LCR at 155% for the quarter. Our cost of deposits has been decreasing steadily and has come down 17 basis points sequentially to 5.01% in Q2. This has come down almost 92 basis points on a year-on-year basis. I think on the average, the industry has come down about half of that. So we've, in a sense, closed the gap a little bit, quite a bit. We expect to see more reduction over the remainder of the year while sustaining retail acquisition momentum. On capital, our capital adequacy ratio was as of September 30 was 16.33%, with a CET1 of 15.54%. While we continue to be well capitalized, this little decline, I'll have Jaideep explain later, for certain technical reasons, and we expect to claw it back. But having said that, while we are well capitalized, we are in the process of raising some Tier 2 capital to further augment our capital position in the very near term. On our distribution network, we ended the quarter with 445 branches, an addition of 9 branches in the quarter and 1,435 BC points, an increase of 13 in the last quarter. We expect to end the year with 500-plus branches and continue to grow each year from here on. I now hand over to Harjeet to talk to you about some details on the retail businesses for this quarter.

Thank you, sir, and a very good evening to all. I will outline for you our Q2 FY '22 experience and how we are seeing things as we move forward from here. Let me begin by talking on advances and disbursals. As was mentioned earlier, advances declined 4% year-on-year and sequentially. While we did see an increase in advances in cards, home loans and tractor loans, there was a decline in Micro Banking and Business Banking segment. Disbursals started again from September onwards across all business segments, and we are seeing good traction and seeing them grow in the third quarter. To talk about how we are seeing things today, in terms of markets, both urban and rural are not seeing any restrictions on account of lockdowns anymore. Resolution rates in terms of collections are better than pre-COVID levels across all buckets. Collection efficiency has seen a gradual improvement in micro finance. Overall collection efficiency was 83% in June, 88% in July, 89% in August and about 90% in September. On the non-NPA book, collection efficiencies have improved from 83% in June to around 94% in September and are improving every month. The book we originated in FY '21 and which, therefore, was not subject to any moratorium, is running at collection efficiencies of around 98.4%, which therefore gives us the confidence that the delinquencies are now restricted largely to our pre-COVID book. This new book accounts for around 53% of our total micro banking advances and this proportion should start increasing as the new disbursals pick up. On slippages, as mentioned earlier, the slippages in Q2 saw a 10% reduction over the previous quarter at INR 1,170 crores. Further recoveries and upgrades were much higher, resulting in sharp reduction of around 48% in net slippages, INR 733 crores in Q2 versus INR 1,104 in Q1. The worst of slippages in credit cards are now behind us, and we should see sharp reduction in slippages from Q3 onwards. We will also see a similar trend in business loans. In micro banking, as indicated, we saw lower gross slippages sequentially in quarter 2, though still higher than normal. As I had said earlier in our last call, collection efficiencies are improving, and we are seeing these customers stabilize in the existing delinquency buckets. As indicated previously, recoveries happened towards the end of the loan tenure as these customers do not typically catch up on missed EMIs and hence don't get upgraded or normalized. In terms of COVID restructuring, the resolution framework of 2.0 was largely centered around secured business loans and MFI. We did around INR 890-odd crores in the secured business loans and about INR 360-odd crores in the MFI segment. Restructuring in credit card was negligible at about just about INR 1 crore. The total COVID restructuring, 1.0 and 2.0 is around INR 1,700-odd crores and which is about 3% of the total advances of the bank. If I was to talk about a little bit on the business momentum. In credit cards, we launched the credit card issuance on the Visa platform from 13th of September. This was done in record time and much earlier than what we had earlier anticipated. We issued around 1.6 lakh cards in September '21 itself and expect to issue approximately 2 lakh plus cards in October. This should, therefore, take care of any shortfall that was originally expected on account of the embargo on issuance of new cards on the Mastercard network. Card spends also continued to show robust growth, and Q2 has seen a growth of 48% year-on-year and 21% Q-on-Q. We are now operating at our highest spend levels and have seen the festival uptick in spend kicking for October. We expect spends in October to be in the INR 4,100 crores range, an 18% increase over the immediate previous month. In terms of micro banking, we have slowly started scaling up on disbursals in micro banking since the beginning of October. The fact that our new book created in FY '21 is showing collection efficiencies of 98.4% gives us the confidence to now enhance disbursals. We have done a micro assessment of districts and branches where we are comfortable doing this. We have defined collection efficiency thresholds, which need to be reached before we allow disbursals in any branch. We've also been able to develop a scorecard in the micro finance business, which is able to differentiate between resilient and vulnerable customer segments. It is showing some encouraging results when we have back-tested the same on our portfolio. We would be deploying this in this quarter. On the other hand, business traction in home loans and tractor loans continues to grow as infrastructure and distribution is getting enhanced. I would now like to hand over back to Mr. Vishwavir Ahuja for his concluding remarks.

Thank you, Harjeet. So to summarize, first point on slippages. In Q2, we have crossed the hump in terms of the impact of slippages from the second wave. In fact, slippages in this quarter were lower and will continue to trend downwards. NPA. Gross NPAs have peaked, and they will now trend down too. Our net NPA has been maintained around the 2% level all through the last year. We expect the trend -- we expect this year to end to bring this down to below 2% levels. On recoveries in PCR, we expect to see recoveries continue from the slipped accounts. On a net basis, 2/3 of our slippages would be accounted for in the first half of the current year and only, therefore, the 1/3 in the second half of the current year. Our PCR is 62% and will go above 65% in the second half. Growth traction has started in October and has been very good across all segments. Growth in the second half will be 7% to 8% range with credit costs being less than half of first half. Our own expectation on loan growth is at least mid- to high teens growth rate from FY '23 onwards or rather for FY '23 with significantly improved profitability metrics. Deposit traction, especially granule and retail will continue to be strong. There is some more room for further reduction in cost of funds in the second half, further enhancing our competitiveness as an institution on the lending side. On digital, Abacus continues to be a strong focus area, and we continue to make investments in scaling that up. Lastly on operating performance. NIM, other income, pre-provision operating profit will start returning to normalized levels in Q3, Q4. We are now more confident of the external environment, and we expect to exit with at least a 1%-plus ROA in Q4 and improve that further in FY '23. I'll stop here. I'll open it up for Q&A.

[Operator Instructions] First question is from the line of [ Zhixuan ] from Point72.

Am I audible?

Yes, go ahead, please.

Just a couple of questions. First on the slippages. So understand that we will start to see some declines in slippages going forward. Just want to understand, in the medium term, what's our normalized level of slippages?

Yes. I suggested a little earlier that the second half of this fiscal year will be half of what happened in the first half of the year. And if you're asking me a forward question, I would like to suggest that probably the credit cost next year would be half of the credit cost this year.

Got it. And is there a guidance for credit cost for this year?

Just answered that question.

Rest of the year looks like to be around half of the first half, yes.

So the half of first half is talking about credit costs and slippages, right?

Yes, yes.

Got it. Sorry about that. Just on the -- one more data keeping questions. On the total provision in P&L this quarter is INR 6.5 billion each, right? Is there a reclassification from -- of recoveries into this line? And if without that reclassification, what's the total provision number?

Yes. Sorry. Yes, there is a reclassification as per the Reserve Bank of India guidelines. And we have restated the numbers of the past as well based on the new classification, where recovery is now from technical write-offs and other write-offs go into the provision line. And that number for this quarter was approximately INR 67 crores, INR 670 million.

And on restructuring, is there any kind of pipeline left or the 3% book is the peak?

No, I think the guidelines essentially allowed the restructuring until September, so there won't be any more restructuring.

[Operator Instructions] The next question is from the line of Chirag Verival, Individual investor.

I want to understand what would be the ROA? What would you finish in terms of order, what would be the ROA percentage? Will you be able to do 1% over there as well?

We don't -- at this moment, I don't think we have given or are able to give segmental ROAs. Yes, I have given you a blended ROA indication for the last quarter of the year, exit last quarter and also, therefore, an indication for next year, which will be, of course, better than that.

Okay. And in terms of retail banking, can you provide us the information more about the home loans and how has that grown in terms of secured assets as compared to the unsecured assets?

The overall unsecured portfolio of the bank is lower by about 1% compared to the last quarter, yes. I mean in terms of the mix, the unsecured has come down by 1%. In previous quarter, also, it came down relative to the previous quarter to that. So it is trending in that direction, and it will trend down a little bit more as we go along. But please remember that we have now -- our micro banking, which is also unsecured on percentage terms, which used to trend 14%, 15% in the past is now going to be under 10% going forward. So there is a significant percentage proportion change there. But that will be according to us, likely made up by the additional exposure we will take on the card side. So where we see great opportunity and profitability going forward. And the other unsecured loans which we used to do in the past, which we have stopped, we had indicated last quarter also that, that part, we expect to be replaced by secured lending forward on the newer secured product lines that we have started i.e., home loans, tractor loans and so on and so forth, which are picking up traction steadily if not rapidly. So yes, moderation of unsecured, yes. But at the same time, mix changing slightly among the various product categories.

[Operator Instructions] The next question is from the line of Amit Premchandani from UTI Mutual Fund.

I had a question on the Tier 1. You mentioned in the early part of the call, you will explain what led to the decline. So if you can explain what led to the decline in Tier 1 and increase in the risk-weighted asset this quarter.

Yes, Amit. So in the retail secured loan portfolio, typically, you need to have a certain criteria to get the benefit of the 75% risk weight in terms of turnover, et cetera. So I think that particular thing, including Udyam certificates, et cetera. So I think we fell short a bit in terms of truing up that. I think that should reflect again by the time we hit the next quarter.

So because of the challenges around COVID and other getting the Udyam certificate, it was a challenge across the industry. Other banks also faced it. We raised this issue through the IBA also. Now that being the case, there was a challenge temporarily, but I think we are sorting it out.

So we should claw back about 25 to 30 basis points like-to-like next quarter.

And another question from my side. The tie-up with Bajaj Finance on the credit card, when is it ending? And what is the negotiation going forward?

So yes, I think I can answer that question.

Yes.

Yes, the original agreement goes into next month is valid until end of November. And we expect a satisfactory renewal well within that time line.

And you will announce it whenever it happens, right?

Absolutely, we will.

[Operator Instructions] The next question is from the line of [ Siddharth Jain from Annual Group ].

Two questions from my end. So the credit card that -- so as you said that we have been issuing record credit cards in the month of October. So how much of these incremental cards are from Bajaj Finance tie-up and the rest from our side?

Normally, our breakup is about 70%, 75% Bajaj and the balance is non-Bajaj.

Okay. Okay. All right. And we see that our wholesale book has grown year-on-year. As understood from, I mean, other banks as well, a lot of these large corporates are continuously deleveraging. So I would just like to have a flavor of what kind of loans are we giving here. Are these short-term working capital loans? Or what yields are we kind of generating on this?

I think the yield chart is there is deck, in slides gives you the yield chart. And please take into context the fact that while the deleveraging in the industry is going on, we were also having an emphasis on granularizing our wholesale book. And also, we were derisking the balance sheet on the wholesale side. And you will see over last 3, 4, 5 quarters, how the rating portfolio of our bill book has been improving steadily and has literally reached a point where it is in very, very, very comfortable satisfactory levels from a quality perspective. I mean if you see the slippages from wholesale hardly, I mean, negligible to nothing and so on and so forth. For now a fairly long period of time. So this is a time last quarter we said that we are going to reposition this business for growth now. And the growth is coming from midsized companies and also some from the slightly larger businesses, customers, and clients that we have. I mean my point here is that we see opportunity. I think we are more competitive than before than we used to be because our liability position is far superior in terms of cost competitiveness, et cetera. And also these relationships we've always had. So it's just that we have decided that we are going to now penetrate deeper and also add much more clients because that granularity aspect is now uppermost in terms of our underwriting standards. So we have new risk filters, concentration guidelines, et cetera. So within that framework, there is no specific segment, it is across the board in the wholesale side.

[Operator Instructions] The next question is from the line of Mona Khetan from Dolat Capital.

My question is pertaining to the credit card segment, where -- so how much of write-offs we have had in the first half of this fiscal?

We would have written off about -- about INR 600 crores or so. So typically, in credit cards, Mona, we provide -- at 90 days, we provide about 70% and then take full provision by 180 days, and write it off automatically. However, as we have said in the past, recovery efforts continue on that portfolio. But that number should have been in the range of INR 600 crores.

Sure. And for the MFI book, you mentioned of net slippages of INR 264 crores. If I could have the gross slippage and the recovery upgrade that will help.

I'm not carrying segmental off hand, if you could just call us, sorry, Harjeet has the number. Yes.

Yes. So for the MFI, the gross slippage was 375 for this quarter. And the net was 266, the balance obviously the recovery.

[Operator Instructions] The next question is from the line of [ Arvind Balaji ], Individual Investor.

Am I audible?

Yes, please.

My question is regarding the home loan portfolio. What would be the quarter-on-quarter growth there?

See the home loan portfolio is extremely small. So the percentage has actually looked quite high. I mean the reason even ...

I just want us to know regarding last quarter, we mentioned about the database, which we have for credit cards being used to send out home loans.

Yes. So we haven't yet started on that initiative. So we are still doing it through our branches. So not yet.

Okay. So if I may say for this fiscal year end what would be the proportion of home loans in the total advances book in the guidance there?

We are today at about INR 1,540, INR 1,550 crores, I guess, add another INR 300-odd crores more.

INR 2,000 crores year-end.

Yes, close to INR 2,000 crores.

That would be with regards to MFI and credit cards growth picking up from here on?

No, I was giving you the home loan growth. You asked me the home loan growth.

No, I am saying that INR 2,000 crores would be along with MFI also, I'm asking whether MFI growth will kick on from here on.

MFI will start growing. So if you see our MFI book has been degrowing because we were not disbursing. We -- that would roughly remain a little flat too and then start growing in the next 2 quarters once we catch up on disbursals.

The next question is from the line of Sameer Dalal from Natverlal & Sons Stockbrokers.

My question is regarding the provision guidance that you have given. So you said half of what has been done in the first half will be the second half. So we're talking of INR 1,000 crores provision in half 2. And even if you say, half of what has happened in the current financial year, that will be a total provision of INR 3,000 crores so half of that INR 1,500 crores in the next year. Given our loan book the credit cost still works out about 2%, 2.5% anywhere in between. My question is why do we believe...

[Indiscernible]

My question is why do we believe that the provisions would need to remain this elevated going forward? Are we seeing some pockets of stress somewhere? Where exactly that you're keeping provisions at this high level?

No, no, no, simple. Okay, go ahead. You answer it. It is the business model.

Yes. So when we look at cards, the usual run rate should be in the 5%.

5.5%.

5.55, 6% range. And as that proportion is now for us in the 20s, right? I mean, it will stay here, maybe marginally even grow. Similarly, microfinance, while we've seen high slippages, even the steady state should be in the 2%, 2% to 2.5% range. So it is a question of the mix also as we evolve. But with these credit costs, obviously, these businesses at those credit costs become fairly highly profitable because of the benefit around the income levels.

Yes. I mean my point is that if you take 25% of your portfolio at a 5.5% to 6% credit cost, and then you take another 10% of your portfolio at a 200 plus basis points cost, and then we also have built into our so-called indication, some additional countercyclical provisions, which are definitely there and already started putting them in place, and we have planned for that in our model next year. So some of that maybe 0.5% or more of that is also put into the system. That may not occur and that may turn out to be a benefit. But given the kind of event risks we have faced in the MFI business in the last 2, 3 years, even COVID and pre-COVID, we do feel that these countercyclical buffers need to be put in place. And therefore, we have planned for them. And so that, if anything, we come out better rather than worse compared to our, if I may say, indications or guidance even for our own functioning. So if you take this kind of a portfolio mix and also we are investing in certain new businesses, while we all keep -- we all hope that these are secured businesses, these are tested businesses, the level of credit costs are relatively lower. But for a bank like us, since we are getting into this business and it is the initial years, we also have to see how they pan out, how they -- so there is yes, a little bit of conservatism in what we have said, but I think given the environment we are coming out of, conservatism is important.

Fair enough. Second question is in regards to -- you said the interest reversal was how much? INR 130 crores, was it?

Yes. Yes.

So INR 130 crores interest reversal. Now my question, you also mentioned that a lot of these restructured books will probably not go into standard asset because most of these people don't come back and come to the exact tenure of what they were supposed to be paying. But by when can we expect any of this interest reversals to be -- I mean, to be adjusted back into our income levels? I mean it will not happen till the loans are fully repaid?

No. Sameer, I think 2 points here. Interest reversals happen when you have outside slippages which we have seen in the last 2 quarters because of COVID. As we see slippages normalize, we will -- and also, by the way, we don't even take -- we stop interest meter on restructured loans on a conservative basis. So as soon as slippages begin to normalize, which we expect should happen by Q4, these numbers on interest reversals should materially come down and go back to BAU levels, which is why Mr. Ahuja guided the fact that we should see upward trend in margins in Q3 and then getting back to somewhere in the 4.5% range for Q4.

Remember, I suggested that 4.06, which is for the second quarter, maybe closer to 4.30 next quarter and 4.50 the following quarter. So that automatically the math can be done, and you will figure it out.

Correct. Got it. And just one last question, if you may. You guided for a 7% growth for the remainder of the year in your loan book. Is that correct?

Yes, 7% to 8%, I suggested, yes.

7% to 8% and then you will be in the mid-teens in FY '23?

Mid- to high teens is what I suggested, yes.

Correct. Okay. Just wanted to clarify those numbers.

[Operator Instructions] The next question is from the line of Amaan Elahi from Investec India.

So sir, just a data keeping question. You had shared the breakup of the net slippages. If you can share the number for gross slippages for this quarter.

If you can just reach out to us, I don't have that handy. We can just send it out to you.

Okay.

The next question is from the line of Abhishek Murarka from HSBC.

Just one sort of data keeping question again, what would be the weighted average cost of FAA now?

Weighted average cost of FAA should be, I think, just south of 6%.

Okay. Okay. And just going back to that capital consumption portion...

One minute, Abhishek.

Abhishek, sorry, correction, around 5.7.

5.7, okay. Got it. Got it. So just going back to the capital question. Can you say which portfolio was this for [Indiscernible]. And basically, if I see your 60 bps consumption of Tier 1, 30, 35 bps would be because of this regulation and that you expect to claw back next quarter. Is that the way to think?

Yes, Abhishek, it's business loans. So LAP and small business loans.

Okay. So instead of 75, currently, you're applying 100?

Correct. Correct. And also the other factor is that restructured loans are attract 125. So obviously, whatever secured loans we've restructured goes from 75 to 125. But that will not unwind, that will unwind over a period of time as and when they fall off.

Okay. And what is the criteria that has to be fulfilled to get this reversal?

So Abhishek, you need to have the demonstration of 3-year turnover below INR 50 crores or something like that or equivalent Udyam certificate to demonstrate that it is a small business loan, which also is a requirement for priority sector lending and which attracts therefore 75 percentage points.

The next question is from the line of Himanshu Taluja from Motilal Oswal AMC.

Firstly, need one clarification. You said the restructured book is around INR 17 billion. And somewhere in the comments, you also mentioned that as a percentage of the loan, it's 3.66. If I calculate, 3.66 is around INR 20 million. So if you can just...

No, that was retail, 1,700. The total I told you is 2,000, that is 3.66. And I also said 21% is wholesale and 79% is retail. So that 79% or 80% is equal to the 1,700 number.

Okay. Sure, sure. And sir, secondly, the credit cost guidance which you have given for the next year that it will be half of FY '22, if you can give some color on your credit cost, what credit cost you expect in the credit cards and the MFI.

[Foreign Language] Normally, the normalized level of credit cost in the card business is 5.5%, 6%. And for MFI, it is a little over 2%, yes, that is the normalized levels. Now we have been reporting our cost numbers and delinquency numbers throughout in the last 18 months, which are obviously much more elevated than these levels. Now they are normalizing towards these levels, yes? So yes, I mean, this quarter, our total credit cost is how much? 89, 90 basis points for the quarter.

Yes.

Annualized will be 3.5?

About close to 4, 3.5.

3.6 annualized.

Correct.

Yes. So that's the way it's working, right? At some point, in the midst of COVID, it had touched much higher levels.

Sorry, this quarter it is 1.18.

1.18. Previous quarter, it was?

2.55.

2.55 and so on and so forth. It's coming down rapidly, and that's the way to look at it. But normalized levels, for the bank as a whole, if you do a weighted average across the portfolio it comes to around 275 basis points to 280, 290 basis points in that rate for the year as a whole.

The next question is from the line of Avinash Tanawade from Dalal & Broacha.

I just have a question about our collection efficiency, excluding microfinance portfolio, what would be that number for the month of September?

Bank as a whole or retail?

Excluding microfinance, sir.

For microfinance?

Excluding microfinance.

If you go to Slide 39, you will see the retail loans collection efficiency.

But he is saying excluding microfinance.

Excluding microfinance.

Slide 39 has the answer.

The next question is from the line of Mona Khetan from Dolat Capital.

Yes, on the restructured book, what sort of slippages could one expect over time of the INR 20 billion book?

No. So I think just to give you a flavor, I think the finance restructured book will probably have higher slippages than, let's say, the secured retail, which is, by the way, the bulk of the retail. But I guess it's very difficult to put a percentage on this as we go ahead. All of that is any way a part of the kind of guidance that we gave on credit costs and slippages for, let's say, the rest of this year and next year.

Okay. And of this restructuring, how much is from the MFI book?

INR 363 crores.

Thank you. Ladies and gentlemen, we now conclude the Q&A session. If you have any further questions, please contact RBL Bank Limited via e-mail at [email protected]. I repeat, [email protected]. On behalf of RBL Bank Limited, we thank you for joining us this evening. You may now disconnect your lines. Thank you.