RBL Bank Limited (RBLBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to RBL Bank's Management Update Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajeev Ahuja, Interim Managing Director and CEO, RBL Bank. Thank you, and over to you, sir.

Thank you. Thank you, moderator. Hi, everyone. Thanks for coming in at this hour, and we wanted to just get everybody together and share with you. I guess all of you are aware of the events of yesterday. But just to reiterate, the RBI has appointed Mr. Yogesh Dayal as an Additional Director on the Board for the bank for a period of 2 years, until December 23, 2023. The Board has also accepted the request of the erstwhile MD and CEO, Mr. Vishwavir Ahuja, to proceed on leave and appointed me. I'm currently serving as the Executive Director of the bank as an interim Managing Director and CEO, subject to, obviously, regulatory and other approvals. We all are very grateful for the significant contribution of Mr. Vishwavir Ahuja, whom you've all been interacting with towards the transformation of RBL Bank. And I want to reiterate, obviously, there's lots of chatter, confusion for good reasons. The bank and the current management team, led by me, has the full support of the Board and the RBI. And while there is obviously a lot of conflation of these 2 events, and that's natural, I just want to reiterate that these developments are not, in any manner, a reflection either on the fundamentals of the bank or the future strategy of the bank. As we've been talking to you in great detail in every quarterly reviews as well as many of the interim reviews we do as part of investor calls, the business momentum and financial performance trajectory has been improving ever since COVID 2, kind of dissipated, which as for what we had discussed. We've absorbed substantially all the challenges on our asset quality, which were largely due to the pandemic. And our credit cost expectation for H2 will be between 50% to 60% of H1, as we had indicated to you in our commentary in August and October. Our capital adequacy remains strong at 16.3% and will likely remain in a similar range this quarter. LCR, which has been an area of strength for the bank over the last 6 to 8 quarters was averaging about 155% for the September quarter. We still carry about INR 13,000 crores to INR 15,000 crores of liquidity surplus at any point in time. As I mentioned, our asset quality, our slippages issues peak in Q2, and we do expect them to keep improving this quarter and next. We ended September at about 2.1%, 2.2% net NPA. Our expectation is that we will go below 2 by the end of Q4, maybe even earlier, if feasible. And I think that will set up very well for a normalized journey from that point on. Q4, I guess, will be our normalized quarter post the COVID. Just to reiterate, there is no change in our guidance on our business portfolio and strategy as we have been conveying it to you for the last 2 quarters. Growth has come back on almost all fronts. However, obviously, microfinance being a little circumspect, but in almost all businesses, growth has come back. And we continue to build out our distribution in branches, technology and deposits. CASA was at an all-time high of 35% plus in [ Q4 ]. And we largely continue to keep building retail deposits. Our expectation is that in Q4 we should get to a 1% ROA, and that obviously assumes full reflection of the cards business in place and microfinance issues of COVID 2, largely done and dusted. And I think from that point on, we will have a base to keep improving our performance. Obviously, our performance will be positively impacted by the growth, which we see coming in more and more business segments. We have a lot of embedded operating leverage because we've continued investing in branches technology. And that should pave ourselves much better for in FY '23. I just want to end this preamble with summary that these developments are not on account of any concern, either on advances or asset quality or deposit levels. In fact, on all accounts, we have made substantial progress. And there's really no concern which anybody might have in this regard. We also have, as a management team and the board, the full support of the RBI. My elevation as from an existing member of the management team, having spent 11 years with the bank, to the interim MD and CEO role, is a reflection and a validation that our business trajectory, our strategy and smooth function of the bank is in the interest of all stakeholders, including the regulator. And the management team is also fully committed. We've had many dialogues since yesterday evening and we are fully committed to taking the bank forward. I think at the end of the day, these events, we have to see them in the proper perspective. We have a certain task given the challenges of last 2 years, specifically for us as well as in the environment and used by COVID, and the expectation of the market and the regulators to keep upping our compliance, risk management, governance processes, so they become robust and best of class. And that's our endeavor which I intend to continue driving and strengthening in the months and quarters ahead. And that's a task which we are continuously working along with the regulator as are other banks to ensure that we remain a robust financial institution and to address all the growth needs and opportunities, which we see on the horizon. I'll pause here and happy to take on any questions, which you might have.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions].Ladies and gentlemen, we will wait for a moment while the question queue assembles. [Operator Instructions].

Moderator, can I just make a comment, please.

Sure, sir.

Yes. I'm sorry, I just forgot to also introduce -- I have some of my colleagues on the call, Jaideep Iyer, whom you know. I also have 2 of our directors, Mr. Vimal Bhandari and Mr. Somnath Ghosh, who heads our Audit Committee. We were expecting another director to join. I don't know if he's managed to join, but we have indeed 2 directors on the call. Thank you.

Our first question is from the line of Kunal Shah from ICICI Securities.

Yes. So firstly, in terms of the induction of the additional director by RBI. So maybe in terms of this entire transitioning, was there a real need for RBI to induct someone from their part into the board just to ensure this similar transition? Or was there any other way out? And were there earlier also, maybe there were communications from RBI, which were sent with this respect for the entire succession? And how should the one look at this yes?

So Kunal, again, I don't want to attribute specifics to the regulator's action. See the regulator has a larger purpose and responsibility and for the system and for individual institutions. And as you're aware, this is something as an ongoing exercise, each bank follows depending on the situation. So I don't want to speculate. I only see this appointment as a reaffirmation of 2 things. One is, clearly, the regulator in one manner is interested in the continuation of improvement of our processes, compliance, risk management as well as to ensure that the transition from one to the other over the period is as smooth as possible. I also can assure you that in our conversations, they are -- they have expressed full faith in the processes within the bank as well as the financial performance improvements we have demonstrated. We've talked to you on what we expect in Q3, Q4. We've talked to you on likely NPA levels. And these are also commentaries, which we obviously share with the regulator in a lot more detail on a more frequent basis. So I don't think there we should attribute anything other than their exercise of their interest in the continued development of the institution as well as my elevation to the interim MD, CEO should also be seen, I believe, as their validation of affirmation that the bank is making progress and the bank is taking strong strides both financially and from a risk management and compliance perspective. Beyond that, Kunal, I don't want to speculate further. I think we have our work cut out. We have an opportunity ahead. We continue investing. I don't want to conflate beyond that. And it is what it is, and we take that as a matter of our stride and an affirmation of the things we are already doing.

Question is maybe in the past, whatever circumstances we have seen wherein RBI coming as an additional director into the bank [indiscernible]. But that has been let us say, some kind of a declaration in the financial performance or asset quality issues. But something I think here is -- in fact, it's on improving trajectory, but we had seen this action coming in from RBI. So that's where this entire disconnect seems to be, and...

So Kunal, again, I mean, I think, look -- I mean, you are justified in asking that question, and I, frankly, beyond a point, cannot step into the shoes of a regulator and answer that for them. This is not -- this is really frankly not something I'm in a position and willing to do. I can only tell you in all confidence and honesty and frankness, which we have shared with you at every stage, yes, there were expectations of succession. There were expectations of a smooth transition, which every regulator demands and wants to do. And that was something the regulator required. And to be honest, in our annual exercise, we do evaluate succession, we do evaluate, and that's shared with the Board and shared with the regulator. And the exercise of that, we -- I was elevated to that position. Now whether it's related to any of our prior performances or anything, I cannot even connected to. I can only say we've come out of a very tough time as a bank, as an industry and maybe for midsized banks, like us, it's been a little tougher, especially COVID 2, which had -- has set us back by a couple of quarters. We are coming out of it. I'm more concerned and more bothered and more actually optimistic on where we are and where we can be as a bank in terms of our performance, in terms of our delivery and execution, both from a growth perspective, quality of business, quality of risk and bottom line so that all our stakeholders are satisfied. And in that regard, if I have the support of the RBI nominee to carry that process along, I don't think that's an issue. I will obviously -- this is an event in time, but I have to see the future. I have to see what it brings as high-caliber people with a vast amount of experience. As long as we don't see anything wrong in the basic business fundamentals of the bank, and we are on the path of delivery and progress. I have to see it in that regard. And I'm seeing that in regard, notwithstanding how you all perhaps should rightly perceive, and I'm not complaining for that Kunal. But I see that differently, and I'm very, very confident that the RBI is not seeing the financial performance of bank in any other regard than what I am. They obviously have expectations, even if they are not on the Board of what we should be doing from a balance of our business, from the way we granularize our deposits. All the things which we've shared with you over the last 6 quarters are not just our priorities. It's the priority of the regulator, and it's the priority of the systems. So I think we are not doing anything different.

Sure. And 1 last question, so maybe with respect to all these stakeholders. How are we again trying to build the confidence because I think there is some [ derailment ] because of this development. So be it with respect to depositors, employees, so how would we manage that, yes?

Yes. So Kunal, this is obviously -- I mean, this would cause questions, some anxiety, and we have to deal with it. We had an episode, actually a long-ish episode towards the end of March when COVID 1 happened and went on for quite some time. It was a far tougher situation with lockdown and pretty much business was shut. We came back very strongly. In fact, if you remember, I mean there was a very tough environment for most of us in the midsize space. But we came back very strongly. And since then, actually, our scale, our retailization, our branches have proceeded very, very, very well. I mean if you see the deposit growth between end March '20 and September, it's about almost 35%. And a large part of that has happened on retail LCR, which we keep sharing with you. And from a low of sub-30, we are now 40% loss at CASA, which is at least 3% to 5% higher. So on all these accounts, we are a far stronger institution. I'm not denying that there won't be any flutter. Perhaps, we have to deal with it. We have been having conversations right from my colleagues in the Mancom to our operations, to our technology teams as well as our branch banking teams as well as our institutional coverage teams on how to address this. We have developed at muscle Kunal over the last 18 months. We were battle-tested in COVID 1. We came out strong. And I think over the last 9, 12 months, in spite of a fairly uneven and volatile environment, including COVID 2, Kunal, when things were far worse, our growth trajectory and our business mix actually kept improving. So yes, we'll have to manage in the next few days, but I think we have the mettle, we have the experience, and we have the people to do it. And we are a far diversified institution with larger branch. Also, let's not forget, we have kept holding on to INR 13,000 crores to INR 15,000 crores of liquidity, which has been deployed in very high-quality assets. If push comes to shove, that's always there to manage a day or 2, it's not a big deal. And I think we'll have to watch the next 24, 48 hours, but I think we are solid from a mindset and execution and experience. And I can only say, and this is what I'm saying on behalf of the bank, my colleagues, and my conversations with the regulator, that the regulator is equally, equally, equally supportive of this new team and the bank and its transformation strategy. And I don't think there is any other reason to think otherwise.

May I come in for a minute?

Yes, Dr. Ghosh.

Kunal, I'd like to extend this conversation. First, Rajeev, beautiful, you are candid as always, honest as always, and it's very rare to find a person who speaks so well. So really congratulations. You give all the data, you hear all the facts, you haven't hidden anything. But I'd like Kunal to know that in the Board, I started the career with the Reserve Bank of India. My batch mates have some of them have retired as an executive director. We have in the Board Mr. Chandan Sinha, who has been the ED of Reserve Bank of India. So I have got some sort of umbilical cord relationship with Reserve Bank of India, which you people might think in a different way. So for me, it is a delight to have Mr. Vimal on our board, because I have served earlier in the Board of another small bank. And whenever there will be an inspection, I'd say look here, the RBI is over here, and we are going to get the best quality input, free of charge. So for me, from my side, thumbs up to the Reserve Bank, thank them a lot for giving us another quality personnel. So Chandan is there, and there also -- so there you are. So that's one part of it. The second part is about our faith in -- Vishwavir has done a fantastic job, absolutely fantastic. And along with him, came along Rajeev and his other team. Guru was there. There is also Harjeet Toor was there. They have done a phenomenal job. So it's a continuation journey. And you heard Rajeev. Very few -- I think there will be very few people in the banking fraternity who can speak so well, with so much amount of clarity, with so much amount of conviction, so much amount of honesty. No cutting corners, no hiding, nothing. So I will take this opportunity to say to the entire group over here that the Board is solidly behind Rajeev and his team, and this is for us a continuation journey. Thank you.

Thank you, Dr. Ghosh.

Next question is from the line of Dhaval Gada from DSP.

I had 2 questions. First was, Rajeev, if you could give some perspective around -- I mean, we've seen another small private sector bank, where the MD got a 1-year extension and then subsequently a 3-year extension, post sort of review of performance. In this scenario, it seems that that's not happening. So if you could just give some perspective around which were the areas where these code relatively less favorable from an RBI standpoint? And how are we addressing those issues? And the second question was, could you give some perspective around the road ahead in terms of succession? Is there a committee that is being appointed for identifying a sort of permanent [ MBNC ] or some clarity around that would be useful.

So look, again, I mean, I can only speculate. I mean I -- again, at the end of the day, the Reserve Bank in its full kind of responsibility takes a variety of things into account when they give extension or they don't give extension. So we can, again, put down. I think the -- there are some total of many things which go in. Obviously, there is also a need to blog different people at different stages of their professional experience in career. And all of that goes in. And by the way, Dhaval, these are almost yearly conversations with the Reserve Bank and their inspection team around the succession plan. And over the last several years, this has become a very important area. It's part of their effort to ensure solidity of the system and continuity of good practices. So I think a lot may have gone in. I'm not, again, speculating what did not work in our favor and what worked in the favor of maybe a few others. I only see this that we've had a good run for the first part of our transformation journey. We had an important learning lesson in 2019. We absorbed it. We did very well. And that actually portfolio wholesale bank is touch wood doing extremely well. COVID was unexpected. It was a challenge from many aspects, both sides of the balance sheet. And in some manner, it exposed some of the fragility of the bank vis-a-vis a portfolio composition, vis-a-vis practices around kind of processes, compliance risk because everything comes in terms of a very short period of time. I think those have been our learnings. We continue to invest in them. And in my view, I think the work is going to continue, irrespective of whoever is at we help. That's for sure. This process of portfolio rebalancing was started pre-COVID. We discussed it in our January call of 2020, if you recall, and we said we'll build secured assets over the next 2, 3 years. COVID delayed us, but we continue building it. We are very committed to balancing our retail book. We have a preeminent position in cards, no doubt. But cards is just not the only way. We want to build a secured retail asset book and now our cost of funds and our franchise affords that. So I think there are many learnings here, Dhaval. I don't want to go into specifics of why Vishwavir was not given an extension or what the others were. I have to look at the substance and the things, which were being done and need to be done and need to be enhanced. That work is cut out. Our team is well underway. And Dhaval, at the end of the day, you've known us for a while. There is a depth to the management. I mean everything is not done by the MD, CEO or the ED or all the senior most guys. We go 3, 4 levels deep. Unfortunately, many of those people are still within the bank. So I don't lay any claim that I'm extra special to be sitting here, talking to you as an interim MD, CEO. It's just that I've been with the bank. I have a certain background. I have a certain understanding of the strength of the people and gaps, which we have to fill. And that was recognized by the Board and which gave me the opportunity to lead this effort. Now what does it mean from the next stage? Again, I'm not the one who's going to answer. I mean, there are processes, which are governed by our regulator and our Board and the Company's Act, which we'll have to follow. But I can assure you, it will be done in a very professional manner, with the full requirements of the statutory requirements as well as what kind of person is required to lead the bank into a very different environment. Look, pre-COVID was a different environment. We had the best of every world till about March '19, Dhaval. After that, we learned a very painful lesson. COVID taught us many things. And COVID has also exposed us to some tremendous opportunities on digital, which we had been tinkering and experimenting for years. Perhaps a lot of this needs to be front loaded, along with an expansion of physical. So I don't want to sit here and say who will fit the bill, who will not fit the bill. Sometimes, the same person can fit the bill if they are able to address the complexity of the environment, both from a risk management and new opportunities. But I think the job is there. We have teams of people with a variety of skills, which are completing it, which are building on it, and that process will continue as it has, even when Vish was around and even as we do this transition. I'm sorry, this is a long answer, Dhaval, but that's all -- that's the only way I deal with these things, that's the only way the board deals with it and the management wants to deal with it.

Right. Just if you could give some perspective around succession. How are we taking this process forward? Some insights around that, that would be useful.

I'll just share a few words over here. Since I happen to be a part of the NRC, there is an NRC Nominations Committee. So I'm a member of that, as the Chair Audit as well as a member of this. My background is actually I'm the professor of human resources. So I -- what I can tell you is that we have a very elaborate process. This has been going on for quite some time, for about 6 months or so. We have -- there are so many parameters. We have done a thorough, thorough of what you might call checking of all the parameters. And it is -- so this is an ongoing process. And we had Rajeev as the person, who we had marked out as a person to succeed. So that's how it is. So this very elaborate process.

So Dhaval, I'll just complete the answer, which Dr. Ghosh gave. We will obviously share at the right time what processes we'll follow. But obviously, it's too early. And we have to follow the -- both the Company's Act as well as the RBI Guidelines. And that's something we've been doing very regularly. Obviously, my appointment is interim. I have a job to do. It could take several weeks and months, but I think the ship will stabilize. And then we'll deal with it as we have to deal with it.

Next question is from the line of Shreya Shivani from CLSA.

Most of the questions were answered in the previous one. Just a reiteration that when you talk about succession in the next step. As of now, once you've been appointed as the interim CEO, is there a time line for that? And the committee comes back with either a new name or your name? Or how -- what is the time line around this process? And is the decision the Board's decision or there will be an RBI influence apart from the nominal from the regulator?

Yes. So Shreya, I think the normal process is there is a committee for succession planning, which is a formal committee. Obviously, I'm an interim MD, CEO, I'm not -- not the full and final, so I have to respect that distinction. So there is a committee, which will be comprised of the members of the Board, which will be primarily NRC. They have a certain process. They have a certain prescription. They will do their analysis. And that committee will throw up the criteria and names, internal might be external. I don't want to sit here and speculate. And those are then debated and then sent to the Reserve Bank of India, which takes some time to evaluate all the candidate and then agree to the recommendation. This is the way I understand the process from the outside, because we've never obviously had the opportunity to see such a transition to a full-time new MD, CEO. But I guess we'll go through it. But look, I mean, at the end of the day, I know that these things are important, partly as who should be answering to the questions around and who is the symbol and who is the face of the bank? I do agree. I'd only want to say one thing very clearly that my work and my team's work is independent of that. We have a job cut out. We have a work cut out, even prior to this transition. So that will continue irrespective of whatever the search committee or that throws up. When we came to build RBL, the idea was not to just focus on the endgame of being the MD, CEO. This was a journey of professionalization of a small well-run bank, a highly, highly ownership-driven bank and to make it into a mainstream bank. We have succeeded partly. We've had some challenges. We recognize them. And our job as professionals is to ensure that, that continues the pace, whoever be the face of the bank, whether I be there or somebody else within the team or somebody outside. I have no idea, and frankly, I'm not even speculating on that. I just go back and after this call and talk to my colleagues once again, to prepare for tomorrow and day after.

So Rajeev. This is Adarsh. Just for 2 factual clarification here. One, there is no time line as to when a new CEO of the board has to a point. And two, there are no restrictions that it has to be an outsider, right? So these are the 2 clarifications.

Adarsh, again, I mean, I'm only -- look, this is -- I don't think there is anything hard and fast. Like I said, anytime you do a formal search, it's going to be a lot more expansive, including internal, okay? So end of the day, it might end up being internal, that's just the part of the process. But I don't think one can assume that it will always be internal, okay? And you've seen that in many situations that eventually it does become internal, but there are -- obviously, the expectation of the regulator is that we do a very objective assessment of the skills, the kind of competencies and experiences one needs to lead a bank in an environment such as this. And my view is that I think it should be expansive. I think it should be a proper search with a very objective criteria, should follow the regulatory guidelines and should ensure it's the best thing in the judgment of the bank to recommend to the regulator for all the stakeholders, customers, employees and you all.

Does that answer your question, Shreya (sic) [ Adarsh ]?

Yes, that's good from our side.

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

Rajeev, sorry to again ask on this, but I am able to understand as to what has changed since last results. And these are some big and unexpected developments. And we have seen better planned CEO succession, even in more precarious cases. While you said that it is not related to say, asset quality or the sense of liability franchise, but generally, we have seen RBI making such appointments only in very grave situations. So what has changed since last results like to see these turn of events?

Nitin, I can only talk what I know and what I believe in and what I expect to happen. I would love to also -- I mean, in your shoes, I'll ask the same question, and I would ask the same question many times. But look, I -- you have to see it in a larger fashion people at the helm of affairs of banks and have to respect the requirements of the system and the regulatory expectation. So I think it is for me to really say that, look, am I going to treat this nomination as anything like something very specific and something which I should take it a very negative ways, not at all. I have been basically told very, in clear terms, effectively, that we expect you to keep the progress of the bank and also ensure that the work on managing the business, managing the portfolio and that of development of your risk management continues at pace. So that's all I'm focused on. Now obviously, one can speculate. All I'll say is that the financial metrics of the bank are as per our last guidance, Nitin, and I don't expect any changes. Obviously, we have to deal with it once the quarter is over and we are in a quiet period. But as things stand today, and we took stock of it as a management team, we also mentioned to the Board that this is where we expect to land up. And I will reiterate that once again that all our financial metrics are on the right trajectory, whether that be the quality of our business we do, the cost of credit, the granularity, the retail LCR, the net NPA, the likely profitability in Q4 and eventually the growth. So I don't think any of that has changed. And I can only focus on what I can control, and I want to work on that basis and take any additional help of being granted or being required as a measure of strengthening our results to make this happen.

Sure. And secondly, while you indicated that the committee will look at both internal and external candidates, but fair to say that Mr. Yogesh Dayal would have been presented in yesterday's Board meeting, where your name has been recommended for the position of Interim MD and CEO. And so is it fair to say that your name, of course, is one of the strong like name for this post on a stable basis. And because I think all the investors and us, as analysts, have always seen RBL Bank in synonomous with -- always like either with Vishwavir or with you. And...

Sorry, you can please finish. I'm sorry, I interrupted you.

So that way, we still will be like looking at you leading the bank on a stable 3-year basis that possibility still exists, because when you say that someone external may also be looked at, is it possibility sort of not there or that you think conservatively...

So Adarsh asked me a very pointed question, and I wanted to give a complete answer. And I wanted to give a complete technical answer, which is regulatory the right answer to give. I mean at the end of the day, this is -- that is the most important way to deal with these things, Nitin. I can only assure you and ensure for all the stakeholders that the continuity of our strategy, the direction of travel we've indicated to you, both the near term and the medium term, and the commitment to the regulator and the market on many aspects of improving operations, digital risk, et cetera, which are in demand. And frankly, that's an area of strength of the bank relative to -- you know that is going to be my agenda along with my colleagues and the management and the wider team. Now what does this lead to as the outcome when the search does take place, when does -- what -- where do I fix, where do my other colleagues fix? So look, I mean there are another 5 or 7 people within the management team, who could actually step into my shoes or step into the shoes of as a full-time MD, CEO. I'm very happy that they should because that's the way our professional structure has been discussed and built from day 1. And I don't want to, in any way, impact that. The work will continue. And I can assure you that the work will continue in any manner. Yes, the process has to be distinct. The process has to be transparent. The process of search has to be objective, and a lot of things have to go in, which are not usually you take into account on a day-to-day basis. You do expect the people you're talking to, you're facing with to continue forever. But that should not be considered like ordain for life. I only want to ensure that even as this process continues and whether my name is there or not, that's not the most relevant thing. I think it's important for the process of build out of the bank and the claiming back of the opportunity, Nitin, which we always dreamt of, is really fair and square because 2 years, 3 years, 4 years, I should retire. I don't want to continue because the skill requirements of a bank of, say, now in the next 5, 10 years are going to be vastly different. It's a much younger consumer base, much more technology-driven, not all of us can cope with it and the pace. So many things will go in. But we have to get back to the bank to a level where we are very comfortable with the foundation, which had shown signs of challenge in the last 2.5 years, you know that. We have to ensure that the bank has the necessary framework and the body of control and process and risk management, which allows the bank to expand further. And that's in the interest of the RBI and that's in the interest of the stakeholders, I'm very sure.

Next question is from the line of Ashwini Agarwal from Ashmore Investments.

Rajeev, thank you for your opening remarks and reiterating your guidance and the fact that the financial performance of the bank continues to be on track of improvement and so on. So that's obviously all very good. And also thank you, Mr. Ghosh and Mr. Bhandari, who are on the call. So I just want to ask a very pointed question. Over the last couple of months, have there been differences with RBI on process compliance or risk management issues, which might have sort of culminated in the developments that we've seen yesterday?

So Ashwini, I think, look, I think this -- the dialogue and the work on process risk management is a continuous one. I don't think we can ever and we should ever have any difference of opinion with the regulator. It's a dialogue. But at the end of the day, the regulator has more than a bird's eye view of the systemic risk and the individual risk and a long-term expectation of the risk framework for the bank and for the industry. So I don't think -- yes, I mean, they can ask for certain things to happen. All we can request is, given the plethora of things, which are to be done, including COVID, because COVID has taken a lot of capacity, we have to do these things more efficiently. We do expect certain time lines. We do requests for things to happen. And at various stages, the regulator does agree to these requests, depending on the situation. So I don't think there is an argument at all. It's a discussion. It's a discussion for the betterment of the bank finally. We have to have to always agree that the regulator is not here to want us. They want us to be a healthy and self-sustainable institution and also to recognize where the problems were. So Ashwini, for the life of me, I cannot say we didn't have problems. I mean we have not been in extreme good -- this thing for the last 18 months in COVID and that's a reflection of some aspects of portfolio composition, some aspects of the environment. We want to build eventually a battle-tested balance sheet, which can withstand many shocks like this. I don't think that is an outcome, which the management is it any deviation from the regulator. So these things are discussions. There are obviously laid down rules. There are laid down policies, which the Board gets involved in, the management also gets involved and execute. And the regulator has a task and an objective to keep track on things. And these are done from a process of dialogues. We may have discussion points, we may present our views. But I don't think I will label them as conflict or arguments in the natural partners we agree with, I mean, which we talk about, that's the way we treat it. And I can tell you, even a regulator, however, it might appear this -- all this being a little bit out of turn has the same view on banks. I mean I can -- I mean, again, I mean, these are things which we have in private, but the general approach of the regulator is very, very constructive as long as the management is able to convey and does understand what the overall expectation from a regulatory environment are. And those are very clear. I'm sorry, I don't know, Ashwini, how else to answer you, but I don't see that in that prism at all.

So what I was saying, maybe I used the wrong word. I should have probably used the word divergence. The fact that RBI wants to help you and has nominated [indiscernible] Board of RBL, I mean, probably, someone who will help you do certain things. I'm just wondering, yes, not taking [indiscernible] that. I mean, this is why my question was relating more to the last 3 months. Has there been something with kind of where your compliance or risk management or a process or an asset quality divergence issue has led to this rumor that we've seen yesterday? It's a very specific question, and I would appreciate it if you could...

I'll give you as specific an answer as I can, Ashwini. So on asset quality, we've been extremely transparent with you and extremely transparent with the regulator. As far as I'm concerned, I don't see any divergences. I mean, obviously, this is not something I will like say forever, because there are matters of the regulatory interpretation. But a lot of that, frankly, if you see our results over the last 4, 5 quarters, we've been -- I mean, this is not a process which happens only on a particular point in time. There is a regular, almost a 24/7 engagement with the regulator. The regulator engages with us over a prolonged period of time, and they go through almost everything. So we declared our results in COVID 1, at the end of COVID 1, COVID 2. We took a large provision because of COVID 2. We said where will we be likely COVID in September, where we're likely to be in December and March. And these are with the very as clear as possible, Ashwini, understanding the way we will be and where the business is going. I mean for instance, August -- sorry, our expectation of recovery was not muted on all our businesses. Collections was very muted. We were still in a COVID-driven world. And September, you saw almost entire industry reported better collection numbers, barring maybe microfinance, which we also told you the microfinance will be fairly late to come back to a collection efficiency. And still it is, I would say, early days. Wholesale Banking, the books are all there. We've been discussing this for the last, I would say, now, 8 quarters. It's in very, very good shape, touch wood. And we are primed for growth, and we're seeing a lot of growth. Stocks is a business where we take most of the credit cost within 6 months. And that substantially is also done. A little bit will be left in December, that will be also done and dusted. Microfinance continues for 4 quarters. These are our large businesses. SME lending is a little bit of a different structure. And clearly, SME lending was impacted with especially the small business. I don't think there is anything which I see, which we've been told, which will be any different from the guidance we've given you on where we land up on cost of credit as well as our net NPA. Again, I don't want to sit here and prejudge the regulator on any aspect. This has not been a discussion with them whatsoever anything specific. Ongoing discussions on risk management compliance are almost every day. And I don't think I want to sit here and hold brief for the other banking institutions. But when I talk to my call -- my peers, it's a daily discussion with the regulator and vice versa because the expectation is of a very high order now, and we have to live up to it. So those, I would say, are normal now BAU, and we have people who are doing it. I don't think that can be termed as something which we were at point of difference with the regulator or vice versa, I don't think so. But again, I don't want to sit and answer for the regulator. I can only take their guidance, their direction and relay that to you and let you know with all my certainty and candor and frankness where we stand today and likely to stand in December and March.

So bottom line, what you're saying is that there has been no significant event, adverse event in process risk management. And there is no reason for you to expect that the trajectory that you shared with us at the end of Q2 should change for Q3 or Q4 and credit guidance should remain as before. So that's definitely encouraging. Thank you, Rajeev. Thank you for your comments.

Thank you. And I'll just reiterate, Ashwini. I don't -- first part -- process compliance is an ongoing thing. I mean I'm just saying this is never a complete job, okay? So -- but there's no conflict, there's no differing expectations. But don't hold me to it that we are done and dusted because it's a work in progress in every bank. Many aspects are taken care of, but this is not something you would believe that everything is done and dusted. It's an ongoing process. So I just want to be very clear on that because this is what I am carrying the mandate to continue building because for me, FY '22 is kind of already baked in. I will not be able to do anything more dramatic. But I want to get back to what we always aspire to be, albeit in a different environment in FY '23. And we have the capabilities. We have the starting position. We're doing the right investment. So that's my -- the medium term, starting with FY '23 is my objective. So the next 4, 6 months continues the way it is. And yes, we will improve our performance because of the natural trajectory of the business and the fact that we've upfronted a lot of our provisions, and we'll normalize the provisions.

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

Just in continuation of the previous question. See I wanted to understand if asset quality was not an issue, what conditions under which are you -- could you say that there was an extreme step where RBI had to put in a Director at the Board. I get this question from investors, and we don't seem to be getting a pretty good answer yet.

Mahesh, look, I mean, I wish I can be very precise, very specific. I can be specific about many things, which I've tried to be. Look, I -- first of all, there is a relationship with the regulator of a regulated entity and the regulator. I don't want to go into and stand in their shoes and talk on their behalf. I mean they have a reason, they have a higher sense of, obviously, requirements. And I can only deal with it the way it has been dealt to me and to the team, okay? Now I can continue saying what I'm continue saying, and I'll continue saying that, that I do believe that the financial performance of the bank is on the write track, so far. And that our efforts of improving our governance compliance and our process strengthening is an ongoing effort. And I'm not shy to admit, we had fallen short, which is why we got a little exposed during COVID, okay? And as a growth bank in the first 5, 6 years, some of these investments get back ended, which is a big learning for us. So that's all right and important for the regulator to highlight. Now I can't take that into and say that's a change, difference of opinion or anything different. So to me, I can only focus on that. Unfortunately, I cannot be more helpful on their reasons, except I will reiterate that our performance, what we can control in our hands is on track. I only take a lot of strength and confidence in the appointment of Mr. Dayal as the Additional Director of the RBI. In my private conversations with the RBI, I get that confidence, that they are squarely with the bank. And that's all I have to take confidence in. Rest of the things will sort themselves on, Mahesh. I don't think the fact that we have an Additional Director should mean much beyond a point. And the fact that there is a transition from Vishwavir to me, at least for the interim, is something very dramatically spectacular. It will appear for a more short while, but then it should become BAU. Because to me, at the end of the day, these things are -- should be par for the course in a long-term journey of the bank that they should be transitioned and you should get better and stronger.

I think the problem with this answer, Rajeev, is that the most common question that we are also grappling with is that this set of comments that was made so far should be something similar to all the banks out there in the market. But yet you have this as a special instance where the RBI has come in and asked specifically to assign a director there. So -- and that's what is kind of worrying us at this particular point in time.

So Mahesh, all I can say, look, I think it's a very natural reaction, and I will not dismiss it. I can only tell you what I know, and I can only tell you what I am confident about and we have to execute on that. I mean, even by giving a reason, I don't know if that's going to address your concerns at all. I mean I don't know the specifics. I can only say that this is in the general direction of strengthening the banks and providing oversight, that's the reality. Now are there any other specifics? I have no personal knowledge. And frankly, what has been conveyed to me by the Board and by the nominee and other conversations that they will like us to continue the path we are doing, and we have 2 objectives: financial strengthening as well as strengthening our compliance and risk management process. So beyond that, Mahesh, I know this is not an answer which is very specific. But sometimes you need to just take the larger purpose and absorb it, adopt it and move forward. And that we've done already as an institution.

Perfect. Just one clarification. In the past, when RBI has conducted the stress test on the bank, there has been no, let's say, any divergence or any specific comments from the RBI on this issue? And whether this year's inspection has been completed?

I can only say that -- I mean we've completed a March '20 inspection. I don't recall, but I don't think there was any divergence because otherwise we'll have to report it. March '21 is still underway. And I also think nowadays the inspection is almost on a real-time basis. It's not -- I mean, obviously, it's done for periods, but the inspection is real time because that's the way the nature of the market environment and risk is. Again, I will reiterate what I told Ashwini, that our confidence on Q3, Q4 by way of our business dimensions, asset quality stands, so far. And I've not heard otherwise. If we hear otherwise, in any manner, we'll share with you. But as of we have not heard otherwise.

Perfect. Sir, just one clarification, just to end the question from my side. When we ended Q2, you had indicated that your tie-up with Bajaj Finance will be communicated at a later point in time. We have not heard anything on this.

Yes. So look, there is an auto renewal clause in all these agreements. That has been auto renewed. We were actually cleaning up the agreement. And for a variety of reasons, both their side and that side, the final inking of that got a little delayed. I think we'll update you as soon as it's done. The business continues, by the way. So there is no stoppage of business, and you can do an independent check with Bajaj Finance. I'm sure they will be able to affirm that. There's an auto renewal clause just to take care of these eventualities that the renewal agreement in its new shape and form is not done within the time. So it gets auto renewed. And that -- our expectation was it will get done in the first 10 days of December, but for a variety of reasons, it's gotten delayed, but hopefully, it will get done soon. But our business continues at pace, and I would just encourage you to do your own checks with them, so that you're also comfortable with that.

Next question is from the line of Nilanjan Karfa from Nomura.

Broadly, I think most questions have been answered. One, obviously not very satisfactory. But just one question. If, for example, your name were to be suggested for a full-time CEO, even that you already have the sort of approval given that there is RBI nominee and you have been put up as an interim one, would it be fair to assume that RBI will not have an exception in case your name is forwarded as the full-time candidate?

Nilanjan, this is one of the answers you may not be satisfied, but let me tell you what I can tell you. I am very happy to continue working, leading, being at the helm of affairs or even being part of the team to continue this, okay? And let me be honest, many of us are built with a different fabric and DNA, okay? We are first professionals, and then we consider titles are important, but professionalism is the first order of the day for us. So my only purpose, frankly, is to ensure that this transition, however, chaotic and unanswerable, as Mahesh said, it may appear, is eventually settling well for our customers, for our employees and for the community at large. Then there is a process which the Board will follow, the NRC will follow, and the regulator will opine on in due course. And that's I think it's a 4-, 6-month process because the Board takes time and the regulator takes time. Now in that regard, if I am asked to lead the bank, I will say, yes, I can only tell you that. If I'm asked to go back to my ED position, I will still say yes, because my single purpose is to get back to the aspirations we had at RBL in a very different environment, learning from the challenges of the last 2 years. So to me, that's the bottom line. If there is a more competent person who actually combines the skill for a new bank, to take the help of, I will very happily serve the cause of RBL and that person.

Okay. The second one, did you just say that March '21 off-site inspection is not yet over?

What happens typically, again, I mean, these are all private matters, Nilanjan, because some of these things get towards the end because -- but it does happen with the 6, 9 months, 10 months lag. Because once your results are out, that's the normal process. But like I said, we -- nowadays, many aspects of the inspection are 24/7. They're not done only with the financial year in mind. The financial year is very important, but many aspects of an ongoing governance and all are done on a real-time basis. And please do your checks with other institutions because I think it's the same process. We do our annual, but the ongoing ones is almost real time.

Right. And lastly, a very hypothetical question but I have to still ask it. Is it possible that if anyone other than Vish was there, the events that would have been avoided? Would you want to comment, share anything on that?

Look, first of all, Nilanjan, I do want to express that this is a journey we all started together, okay? I mean it's a turn of events. He's opted to go on leave for a variety of reasons. I have to respect that. And I also have to equally respect the partnership we all had in the first 10, 11 years, which brought us to the stage where some of us can take on the mantle of leading the bank. I think it's not correct for me to speculate because each of us is a bundle of many characteristics and some of them work at certain states, some of them don't. And some of them are contradictory at various points in time. So to the question if somebody else were there, would it have been easier? I cannot speculate because, frankly, each situation is unique. I can only say that when you start a journey, you have to accept the downs as well as when you plan for the ups. And it's only in the downs when you test it through mettle of the team, the depth of the team and the depth of the processes. And to me, those are the most critical ones over and above the mutuality and partnership, which we may have started it, because my responsibility and the team's responsibility is to our stakeholders, employees, customers, you all and the regulator.

Brilliant. That's good to hear from you, Rajeev. All the best.

Next question is from the line of Amit Premchandani from UTI.

Just [indiscernible]

I'm sorry, Amit, your line is broke. If you can speak again, please?

Yes. [Technical Difficulty].

I'm sorry, Amit, your line is very, very -- it's breaking a lot. It's not very clear, Amit. I'm sorry, I'm not able to -- unless the moderator can understand or anybody else can understand and raise a question. I'm sorry, I'm not able to understand. Maybe try once again, Amit?

Maybe he can come back later.

Mr. Premchandani, I would request you to please rejoin the queue and maybe connect from a different instrument. That might help. We'll move on to our next question, which is from the line of Bhavik Dave from [ Nippon India Mutual Fund ].

Sir, most of my questions have been answered. But just one -- just one clarification. But you mentioned that the divergence reported asset quality review for the year is not out yet. But till now, we haven't gotten any instances where RBI seems to be unhappy or there is a large divergence from what we have been reporting. Is that a fair understanding that you were trying to...

Bhavik, first of all, I mean, look, I only mentioned about the normal process of inspection. And I'm also sharing that from an asset quality, cost of credit, our expectation, and we've shared that with you in Q1, Q2, and I'm putting it down that it is likely to be in the neighborhood of what we indicated based on our current estimates and the way the business is recovering, including collections. And if you step aside from a broader framework, most of the challenges on the credit quality for banks have been around wholesale lending, if you remember. We had our own challenges in 2019, which were pretty much taken into account and provided for and actually some recoveries have started happening there. So I think the retail portfolio, obviously, it's a matter of process, it's a matter of how you're accounting for things. Those things obviously are a little bit more complex. The wholesale ones where you typically see a lot of divergence in the past is something we have now that's squarely behind us. Now I can only say what I know as of today and what my estimate is that we are in the zone where we told you, I do not anticipate anything materially different from there.

Right. The question was regarding -- because if you look at the MFI portfolios right, like most of the MFI-based players have got impacted over the last couple of years, primarily because of the COVID. And we also used to have a large book, but nowadays is now [ 90% ] of the book. Is there anything very meaningful out there because you've already recognized reasonable amount of pain and provided for, right? And we also highlighted that there is some restructuring that we have done. This would maybe take its course over the next 2 to 3 quarters for it to normalize. So is there anything that would have...

No, I don't remember, Bhavik. And frankly, my recollection is most of our pain in Q1 was microfinance, if I recall correctly. And that -- and we had alerted that, that will be the slowest to come back, and it has been, obviously, and we've cautiously growing back that book. My sense is that if at all, anything is still left, it will be very modest in Q3 and Q4 on that book. There is a restructured portfolio, which, again, I don't remember the percentage, but it was very small. And actually, if you remember, I think we have been telegraphing on microfinance well before the general market had been and some of the some of the commentary. We had said we are concerned about the microfinance business, purely that in a COVID situation, the resilience of the borrower, especially when you combine health and no moratorium, becomes extremely fragile. And which is why we took that big lump in Q1 and that should have and has addressed most of the problems. Yes, something will filter in, in Q3, Q4. I don't have the numbers handy, but that's already part of our guidance.

Next question is from the line of Manish Shukla from Citigroup.

Just wanted to clarify, the exchange filing says that Mr. Vishwavir Ahuja has proceeded on leave with immediate effect. That means he's still an employee of the bank and a member of the Board?

Manish, I'm sorry, this is a very technical question, which I should have the answer for, but I cannot make any comment. But it's a fair question, I could say, Manish. But I will get back to you. I need to consult my secretarial and my compliance people. But I cannot make a comment on that. I don't want to overstate that.

Okay. Secondly, the filing doesn't give any reason. What was the reason cited by Mr. Ahuja to go and leave immediately?

Look, I mean, that's a personal matter. I mean, it's a variety of issues, a variety of maybe motivation objectives. I don't want to -- I mean, speculate beyond it. But again, like I said, my job is very straightforward, is to obviously, a, respect the new nominee, take that into consideration, continue the development of the bank. And along with my colleague, ensure that we turn out on the performance. Now beyond that, Manish, I have no conjecture on the reasons or otherwise. I mean, personal reasons, medical reasons, all a combination could be those frankly which could have caused. But again, that's not for me to opine about.

So the point I'm trying to arrive at is, if RBI had not appointed Mr. Dayal, would he still have chosen to go on leave?

This is a counterfactual, which I cannot answer, okay? I mean, I don't think I have the liberty to answer for him or for the RBI what would be their view. Look, at the end of the day, there is a succession plan, which was underway, okay? And that's something which we have to respect. And what if the nominee hadn't come and Mr. Ahuja had -- and Vishwavir had continued or not continued. I don't think it's now in the realm of any conjecture. It's a thing which has been established. It's been adopted by the Board and informed. We just have to move on from there, at least that's my view, Manish. I'm sorry, I'm being...

Sorry to harp on this, Rajeev, but he served MD and CEO for 11 years. Still, recently, he was seeking the 3-year term. I think as market participants, we ideally ought to know what was that...

I wish I have better answers. This is, again, I mean, one of those things where I can only relay the factual position as it is. And for me and my colleagues and the team and the bank at large, our duty is to move forward and to also relay and reconfirm the confidence we have in what we need to do, what are our priorities and that they align fully with the regulator and the business expectations we have. So look, I'm not dismissing your question on that of many others, it's one of those, which Mahesh and others call the answer is not very clear. But beyond that, I don't want to speculate because for me, this is something I need to carry and look forward to and use every element of the bank and its Board and the people around as a measure of strength. That is what is important for the future. And as long as we can deliver to the expectations we've highlighted, I think this will become an important period in the history of the bank, but frankly, going forward, not as material to what we end up doing.

Sure. And if Dr. Ghosh is still around, just a question to him. Are we likely to see any more additions to the Board in terms of either independent directors or executive directors?

I'll jump in before Dr. Ghosh answers. I think we are fully placed. We are -- again, the Board composition is a discussion with the Board. But I think right now, our hands are full. We have a job cut out, and we have enough counsel and enough strong and strengthen the Board for us to tackle the next phase of our journey. But if there is anything, which is relevant, we will come back to you, as we said, and Adarsh's question on search, we'll continue sharing with you as it becomes important to share and it's relevant. That's all I can mention. Sorry, Dr. Ghosh, I thought I'd just...

Yes, sure. No, I think you have answered, and there are some questions like I was -- while you were answering all these, I was thinking about -- I'm a professor, so I don't know whether my answers are going to be what the market will look for. But when Buddha would be asked, is there a life or is there God, Buddha would keep quiet. Buddha does not answer one way or the other. But my answer is, I've Vishwavir since I was -- he was also a Board member at IIM Kashipur. I was a professor. I was a Dean over there. I was also a member of the Board. I know him pretty well. He did an outstanding job. But there are phases of leadership. And the point is, as Rajeev pointed out, the microfinance sector. Reserve Bank was one of the banks which used to talk about that we should be lending to the poor and all those things, in this sector and all that, and RBI -- RBL has been doing that. But of late, it became a material concern. Then the credit cards, of course, we have been making good amount of money, but that from possibly from the regulator's point of view is a risk. As recently as the 29th of November, as recently, some of us went and we met the Deputy Governor and [indiscernible] perfectly all those things were there. So I don't see -- so as I said, my umbilical cord is tied with the Reserve Bank of India because I started my career there. It's like what you call the first love. So I have a lot of special relationship. So I look at it very positively. I look at it that you have got a person over here, who has got the experience and who will look at it from the point of view from the regulator, and what better thing could you have?

Next question is from the line of Alpesh Mehta from IIFL Securities.

2, 3 questions. First is just Dr. Ghosh pointed out, and in between RBI was also a bit vocal about bank lending to the high-yielding segment and putting the entire bank and the depositors at risk, and we have a higher share of MFI and the credit card. So was -- would that be a change in the strategy with the RBI, the nominee director coming on the board on some of the reservations that RBI has, that is first? Secondly, from a corporate governance perspective, over the last 2, 3 years, did RBI point out any major governance lapses and wanted you to work on the specific point, even at the time of Mr. Vishwavir Ahuja's reappointment for a year, and we would have given some specific time lines that within the time lines we had to get housing orders, some of the corporate governance-related stock because we have been giving a lot of confidence about the financial metrics, but there seems to be some divergences as far as the corporate governance-related comments. So would you like to touch base on this and lastly...

I think I should be answering that question.

Dr. Ghosh, 1 minute. I think he's still completing.

I'm so sorry, yes.

Sorry. And lastly, Rajeev, one question to you is, at the time of your appointment as an Interim CEO, any specific task that has been assigned to you over the next 6 months that -- because you have been continuously pointing out as a business as usual, but -- it would have been a business as usual. I mean all of us doubt that there would be an RBI Nominee Director coming on the Board, right? So there has to be certain changes that the RBI looking forward to, and it can't be business as usual. That is what we have been reading between the lines. If you can answer all 3.

Yes. So Alpesh, I'll take it first and then Dr. Ghosh, I'll seek your help, if required. But Alpesh, first of all, I think, look, we have ourselves pointed out in several of our commentaries that the need for us to build a secure retail book. And now we have the, in some sense, some affordability. But we are not saying we're going away from cards. In fact, we've been very explicit in our last commentary, where we won the cards business to be where we want the micro. We were actually more circumspect of microfinance for quite some time, okay? And we said we would not like it to go beyond 8% to 9%, max is 10%, but that's where we want it to be. And other than that, the need is to build secured retail assets. Now it is important to understand that -- and this is what I was saying, the learning over the last 2 years that -- and this is what the regulator has obviously been vocal in the recent weeks and months. And it's something that they have obviously a reason to be so that at the end of the day, if you're a deposit-taking institution, your volatility of your balance sheet and your credit cost should be in a range, which does not alarm the general depositor. And that's a very, very, very important outcome to have, which you need to basically -- maybe I mentioned you need to double hull your balance sheet. Now unfortunately, what happens is when you're starting out your journey, you don't have the same level of ability to do many things all at once. And this is also a question of the business environment you are being embedded in. I mean, so we took some early calls on microfinance when nobody else was taking. It worked out. It will still be an important part, but it cannot be the biggest part for us and neither can cards be relegated to the background. But on a portfolio basis, we are very clear that there is a need to build secure retail assets. We have a lot of customers, both from a technology, digital cards and branch banking, where there is a large element of cross-sell. We have enough, which is going to happen on business lending on a secured basis. So there are a lot of opportunities. Now I don't think I want to take that comment and just focus on one aspect. I think the regulator was saying from a portfolio and more in the portfolio, what is the zone of cost of credit volatility that can endure, which will not cause issues to the rest of the business of the bank. And that, I think, is a very, very relevant and important to us. And in some cases, younger banks, like us, have to go through the painful process of building it. And sometimes when COVID happens, I mean, hypothetically, if COVID never happened, then some of these questions become very different. But COVID happened and it did challenge us in many ways. So we accepted the challenge. Microfinance is already on the way down. And we -- for good reasons, we felt that COVID has actually exposed the informal sector a lot more than the formal sector. So if you have to make a choice in unsecured, we'd rather choose the more formal of the sector and even get adjust our risks to a very different level so that we can reduce the volatility. Now on a normalized basis, cost of credit and cards is well understood. But in COVID, it doubled and slightly more than doubled. So that's the way I would address, I'll pace that question. So if you give a 3-year view, the portfolio will be fairly balanced. We will have the affordability to fund it, both from a cost of funds and an OpEx perspective, and there will be tremendous value in cross-sell. Now your second point is on the corporate governance requirements. Look, I mean, again, corporate governance is a very broad word. I want to break it down. What are your best practices and processes, risk management, early warning signals? How are you looking at your business mix over time? How is the relationship with the Board and the management discussion, the depth of discussions? Are there points and counter points? All of this is part of the evolution of a bank or any institution. I don't think we can generalize and say corporate governance in 2 words and say, lack thereof. The fact is there are many facets of corporate governance, which evolve over time in which we have to grow into. And sometimes, the demand of time and the demand of a certain macro environment makes very, very high level of investment and processes in different kind of people. We have been investing in those people for the last 2 years. So if you see the most recent additions at the senior most level and the management committee, have been areas where process risk management improvement compliance are being given the due importance. So I would not be summarily conclusive on corporate governance being fantastic or lack thereof. I mean this is an evolutionary process. There always is going to be more and more stuff you need to do to reflect the regulators ask as well as the change in environment. Please understand digital payments, digital risk is the topmost agenda for now. Now this wasn't the case 2 years ago. Now it has become the topmost agenda. And by the way, just not us, there are many larger institutions who are equally challenged. So I would not put down in so black and white. Clearly, we have our task cut out. We have -- we have set out a process and we've been having a dialogue with the regulator as other banks have been. So I don't think we should see into it more than necessary. Obviously, I want to make it a point that this is our agenda. It is not just the regulator's agenda, and it is an agenda, we will continue building on. So I'll pause here. I know I just -- sorry, I missed your last question, Alpesh, I'm sorry, you had a third question.

My third question was at the time when Mr. Vishwavir Ahuja was given an extension for a year, were there any specific targets, which were given by RBI that these are the milestones that you need to achieve using a particular period of time. And after 6 months also, they would not have seen the progress and taken...

So Alpesh, again look, I mean, this is a natural question, but I don't think that it works that way, okay? I mean, I don't think -- I mean there is obviously -- every bank goes through a very specific review process, inspection process. There are gaps identified. There are conversations on how you complete those gaps. And also from an industry and regulatory perspective, many things are evolving, Infosec, digital risk, tokenization is one such element, which has just been given an extension. So I don't think there are -- there are obviously expectations of the regulator on how you achieve, when you achieve, in what manner you achieve. But at the end of the day, these are totality of efforts and outcomes which are measured, evaluated. And you make an assessment whether this management is truly and the Board is truly engaged with it, which I can assure you we have been, even if -- even COVID has taken some capacity, we we've been extremely engaged. So I don't think this can be, again, like in 6 months, please do this, in 3 months, please do this because I don't think the regulator expects that these are such binary and such predictable outcomes that you can achieve. Yes, some of them can be like a system implementation can be, that you automate, your NPA can be. But even then by the time you stabilize the system, it takes time. So I don't think I can sit down and go through in so much specificity that this could have been 3 months, this could have been 6 months and related to Vish's decision or otherwise. I can only say that this is -- as my second answer, these are always going to be WIP for every bank, okay? And perhaps for a small bank, these are very important to finish and then move on to the next level of requirements.

Okay. Rajeev, if I can squeeze in one more. This is related to the wholesale credit. Over the last few years, we have not been growing that very recently, and assumingly we had taken a lot of pay until 2019, right? And after that, whatever with the help of credit cost hit us. Over the last 2 years, your discussion with the RBI, are you still seeing some disconnect on the legacy portfolio, where there is a subjective -- where there is some subjective for classification-related issues? Or do you -- to be very precise, do you think so there won't be any [indiscernible] that will be coming out of the wholesale book?

Alpesh, we have been so candid on our wholesale book. I mean you know it. I've been through conversations with many of you. Some of you have been holding lists of charge filed against this credit way back middle of '19. I think we've come a long way. We've disclosed at every stage because we thought it fit because it was a challenge in July, August '19. We learned those lessons. We put a tighter underwriting. We cleaned up, and frankly, COVID when it happened, we were in a better shape. We've also told you that these are the 2 major part of the net NPA of our wholesale book, primarily the retail client and the coffee client. I mean we've given you those numbers. And our wholesale book is down so much and cleaned up so much from the concentration that I don't anticipate anything. I mean the 3 or 4 names which happened are all done and dusted in terms of our financials. And we are now seeing the top of the funnel grow in wholesale, and we think we'll be back to wholesale growth in the measured way we've decided to grow this business over the last 2 years. So I don't want to sit down and connect anything. That was a specific issue. And we learned those lessons. We put those things in place. They are being strengthened as we speak. And frankly, those very underwriting standards, which we learned to our costs, are now helping us leverage the opportunity, which we see in wholesale banking over the next 2 years. I mean, to be honest, when I see the competitive market for wholesale banking, I know that the economics for the top end of the risk start for us right now. But the number of banks which are able to offer 360-degree wholesale banking on a sustained basis to well-organized corporate, whether it's SME, mid-market or large corporates is still on 2 hands. So we have a substantial opportunity. We have taken the medicine, built our defenses and we are ready to see the increase of our business. And I can assure you it is happening even though the headline interest rate might not be the most attractive, but we are building very, very meaningful clients and all around relationships.

Okay. And just the last data point. What would be the proportion of the wholesale deposits both on the CASA and the term side as of now?

Again, maybe Jaideep, if you can get back separately. I don't have it handy. But I can tell you, our retail LCR is between 41%, 42%, if I'm not mistaken.

Yes.

So it was sub 30%, I think, March '20. We have been consciously reducing our wholesale deposits, Alpesh. And all the growth, in fact, we made a comment that INR 80 out of every INR 100 growth in deposits has happened in retail. So the proportion is very, very, very skewed towards retail. And that's an objective, by the way. So we need to get to a 50% plus retail LCR in the not-too-distant future.

Next question is from the line of Pankaj Agarwal from Ambit Capital.

Yes. When was the last official date for Mr. Ahuja as CEO?

When was the sorry?

No. Officially last date of -- as CEO of Mr. Ahuja?

Pankaj, I would guess as of yesterday. I mean, again, I mean, I'm sure because I was made the interim MD, CEO, so it has to be yesterday. And Jaideep, that's the correct.

[indiscernible] in the Board meeting.

No, no. As the MD, CEO, you said?

No, no. His tenure was extended till June [indiscernible]

June 30 next year, yes.

Yes. So he was leaving before January ending. It was his own decision or Board's decision or RBI's decision?

Pankaj, I think -- I'm sorry, I don't want to brush that question. We have discussed this. Look, it's a choice he has made to step away for personal and a variety of other reasons related to him. We should just leave it there. I'm -- my only objective and the bank and the Board's objective is what's the point forward. And I'm very clear what the point forward is. I don't want to unnecessarily speculate what was the cause, what did he want to do, what he didn't want to do because that's, frankly, of no relevance, except to also appreciate what he's built for the bank, what he got the bank to be. And the bank has to be seen in a stabilized manner, in safe hands with the Board and the attention of the regulator and the continuity of management, which he helped build over the last 10 years. So sorry, Pankaj. Again, I'm sorry, I'm giving you the other answer, but I don't have answers to the questions you have raised.

Next question is from the line of Utsav Gogirwar from ICICI Prudential Life Insurance.

My question is just with the liabilities. Because of the recent events, do you expect any pressure on the deposits, especially bulk side? And if there are any outflows, how do you plan to manage that?

So Utsav, I mean, fair question. And I think, like I mentioned earlier, this is a scenario we always test and build. And like I said, we were "battle-tested" in COVID 1. April, May, June was quite challenging. We came out very strong at the end of the day, and the retail has built up. Yes, this is something to be watched. I can tell you that many combination of things work in a depositor's mind. It's not always a binary issue. Yes, there are certain segments which work like that. But we have a variety of depositors and a variety of approaches and relationships to manage that. And over and above, we have a large liquidity pool, which is lying in high-quality liquid assets, which can always be used to manage any deposit maturities or pre-match. I think we'll have to take it as it comes. Like I said, what we had seen on 31st March 2020 was perhaps one of the toughest occasions in my personal career. But our team came together. And within, I'd say, a month to 40 days, we were back and more from where we started. Fortunately, we are in a much stronger position, much stronger distribution and, frankly, a lot more strength to the balance sheet. We'll deal with it as it happens, but I don't think it's easy to just foretell. But I think we are ready to the task. And I'm quite confident that after the initial flutter, we will be settled.

Sir, my second question is with respect to capital raise. So at your -- at the time of your opening remarks, you mentioned that the capital adequacy ratio will be steady in quarter 3. But do you -- in what scenario you expect the net capital in the next 1.5 years?

So first of all, I think we have to see meaningful growth opportunities coming, which we do see, frankly in FY '23. And our need to continue investing in front-loading distribution, retail, secured retail, et cetera, technology, compliance included. So I think many of these determinations will happen. I think we also have opportunities to raise Tier 2. Again, I don't want to preempt that, but those are active conversations. So preference is that we will probably exercise Tier 2. And then we'll see what to do about common equity, but we'll always be very, very strongly equitized as a bank. That's our objective. And in a meaningful manner as we clear Q3 and Q4, I think it should set us up well for to reflect and convey to the market that if we raise capital, what is it going to be for, and how many quarters or years of growth and investment would it suffice? So -- but I don't want to take any kind of give a specific comment here because I think we'll be pretty okay for the next several quarters. We'll talk about it when we discuss our full year results, hopefully, with a lot of things behind us, and we'll be able to give you with more specificity. But yes, as a bank, looking to get back to some meaningful growth, which we do expect to average between 15% to 18%, 20% starting FY '23. We do expect we'll raise capital at some stage.

Ladies and gentlemen, we will take our last question for the day today.

Yes. Sorry, guys, I'm sorry. If you have more questions, you can always -- I have a flight to get back to Bombay, as you can imagine. Bombay is going to be the action tomorrow. So if we can just stick to one last question. I mean, all of us, including the families at the door, but I don't want to rush you, but I'm happy to talk to you again, hopefully, with a little bit more breathing time between that. But please, one last question, whoever has one.

Sure. Yes, we'll take a last question from the line of Sri Karthik from Investec.

Rajeev, your guidance on asset quality is well taken. But one of the aspects that is always recurring in all the previous instances is a pretty high overdue position. Could you clarify your current overdue position so that gives us additional comfort at a right level, of course. And secondly, there's a [indiscernible] by one of your unions that's been going around. Could you clarify on that, too?

Yes. So see, I think the last question, I don't want to particularly address right now. I think, obviously, these are reactions in the moment. We've had a very, very constructive dialogue with our colleagues for several years. And I'm sure we'll be able to meaningfully address any concerns, and the concerns often in these situations are managed, but I don't want to go beyond it. I'm unable to answer your question because I don't have the data at hand. But Jaideep, do you want to take a stab at it even if it's qualitative or directional.

Yes. So I think I think all those numbers are trending down, and therefore, in line with what we mentioned earlier in terms of our credit cost and slippages, which will be the second half being roughly 50% of the first half. So naturally, all the overdue positions are in line with that.

Yes. So Sri, just to clarify, you see Q1 COVID, without the moratorium did not leave many options, but to have overdues across all -- almost all products, barring wholesale. So microfinance, credit card, I mean, it was almost like perfect storm for our clients and borrowers. So I think you've seen that depending on the portfolio composition across the industry, microfinance and many other even secure areas because suddenly, there was a stop of business. I think as that has started correcting all the overdue positions have started reflecting more normalized markets. And I think barring microfinance where I still maintain that the resilience has to move up from where we saw it, I think the others have stabilized. And I think if this continues, I'm very sure in Q4, we'll reach normalized levels of what the product metrics should be from a cost of credit and overdues of any.

Thank you very much. Ladies and gentlemen, due time constraints, that was our last question. I now hand the conference over to Mr. Ahuja for closing remarks. Over to you, sir.

Thank you. Thank you, moderator. And look, guys, thank you for your patience. It's a Sunday. You have more exciting things to do. I'm sure a lot of you are in holidays with family. But really, really appreciate your candor and your questions, which I take with all humility are very important. You've been big supporters of us. We have a job to do. The job is undergoing. The job does not change with a change in the face and the leadership. The job will continue to strengthen the bank. The job will continue to becoming more and more relevant and reseeking the place we always aspire to be. We held for a very brief while prior to '19. And I hope FY '23 will be that on the foundations of the learnings of the last 2 years. So thank you once again, and we will be -- continue to be in touch. And if there are any specific questions, please do reach out to Ramesh and Jaideep, we'll be happy to answer with some little breathing time. We will certainly get back to you. Thank you.

Thank you very much Mr. Ahuja and members of management. Ladies and gentlemen, on behalf of RBL Bank, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.